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Operator: Ladies and gentlemen, thank you for standing by. Welcome to Hua Hong Semiconductor Fourth Quarter 2025 Earnings Conference Call. Today's call is hosted by Dr. Peng Bai, Chairman and President; and Mr. Daniel Wang, Executive Vice President and Chief Financial Officer. [Operator Instructions] The earnings press release and fourth quarter 2025 summary slides are available to download at our company's website, www.huahonggrace.com. Without further ado, I would like to introduce you to Mr. Daniel Wang, Executive Vice President and Chief Financial Officer. Thank you. Please go ahead. Yu-Cheng Wang: Good afternoon, everyone. Thank you for joining our Q4 2025 earnings conference. Today, we will first have Dr. Peng Bai, our Chairman and President, provide an overview of our fourth quarter and full year performance. I'll then take you through our financial results in detail and offer guidance for the upcoming quarter. We'll then open the floor for a Q&A session. With that, I turn the call over to Dr. Bai. Bai Peng: Thank you, Daniel. Good afternoon, everyone. Thank you for joining our earnings call. Fourth quarter 2025 sale revenue for Hua Hong Semiconductor reached an all-time high of USD 659.9 million with a gross margin of 13% for the quarter, both in line with our guidance. For the full year of 2025, the company reported sales revenue of USD 2.4 billion and a gross margin of 11.8%, both achieving year-on-year growth and meeting management expectations. Against the backdrop of the global semiconductor market being driven by demand for AI and related products, coupled with the recovery in consumer demand led by the domestic market, the company maintained full capacity operations throughout the year at an average capacity utilization rate of 106% which ranked among the leading levels in the foundry industry. By optimizing product mix, reducing costs, and improving operational efficiency, we achieved strong performance across various specialty technology platforms, especially in stand-alone NVM and the power management area, effectively supporting the company's revenue growth and margin expansion. In 2025, the company continued to advance its strategic plan for capacity expansion. The first phase of capacity construction for the second 12-inch production line in Wuxi, we call Fab9, exceeded expectations for completion. And the Shanghai 12-inch manufacturing base, Fab5 acquisition progressed as planned. Looking ahead, the company will maintain a strong focus on developing world-class specialty technology platforms with innovation and through rapid generational iteration while deepening collaborations with strategic customers, both domestically and internationally. We remain confident in our ability to seize growth opportunities amid changes in the global semiconductor industry and are striving to meet shareholders' long-term expectations. Now I would like to hand the call over to our CFO, Mr. Daniel Wang, for his comments. Yu-Cheng Wang: Thank you, Dr. Bai, for your inspiring comments. Now let me walk you through a summary of our financial performance for the fourth quarter, followed by a recap of our full year 2025 results. I then provide our revenue and margin outlook for Q1 2026 before opening the floor for the Q&A session. Now first, let us review our financial results for the fourth quarter. Revenue reached another all-time high of $659.9 million, 22.4% over Q4 2024 and -- Q4 2025 (sic) [ Q4 2024 ] and 3.9% over Q3 2025, primarily driven by increased wafer shipments and improved average selling price. Gross margin was 13%, 1.6 percentage points over Q4 2024, primarily driven by improved average selling price and cost reduction efforts and a 0.5 percentage point dip from Q3 2025, primarily due to increased labor costs. Operating expenses were $130.2 million, 17.7% over Q4 2024, primarily due to increased labor costs and the depreciation expenses and 29.6% over Q3 2025, mainly due to increased labor costs. Other income net was $34.1 million compared to other loss net of USD 40.5 million in Q4 2024, primarily due to foreign exchange gains versus foreign exchange losses in Q4 2024, decreased finance costs and increased government subsidies. It was 92.1% over Q3 2025, mainly due to decreased finance costs. Income tax expense was $8.1 million, 22.3% higher than Q4 2024, primarily due to increased taxable income. Net loss for the period was $18.7 million, narrowed by 80.6% compared to Q4 2024 and the widening of 159.9% (sic) [ 159.5% ] in loss from Q3 2025. Net profit attributable to shareholders of the parent company was $17.5 million compared to a loss of $25.2 million in Q4 2024, and a profit of $25.7 million in Q3 2025. Basic earnings per share was $0.01. Annualized ROE was 1.2%. Now let's take a closer look at our Q4 2025 revenue performance. From geographical perspective, revenue from China was $539.3 million, contributing 81.8% of total revenue, and an increase of 19.6% compared to Q4 2024, mainly driven by increased demand for power management IC, MCU, flash and CIS products. Revenue from North America was $72.8 million, an increase of 51.3% compared to Q2 (sic) [ Q4 ] 2024, mainly driven by increased demand for power management IC and MCU products. Revenue from other -- Asia was $28.4 million, an increase of 9.1% compared to Q4 2024. Revenue from Europe was $19.3 billion (sic) [ $19.3 million ], an increase of 35.6% compared to Q4 2024, mainly driven by increased demand for MCU and IGBT products. With respect to technology platforms, revenue from embedded non-volatile memory was $180.2 million, an increase of 31.3% compared to Q4 2024 mainly driven by increased demand for MCU and the smart card ICs. Revenue from stand-alone non-volatile memory was $56.6 million, an increase of 22.9% compared to Q4 2024 mainly driven by increased demand for flash products. Revenue from power discrete was $168.9 million, an increase of 2.4% compared to Q4 2024, mainly driven by increased demand for general MOSFET products. Revenue from logic and RF was $80.4 million, an increase of 19.2% over Q4 2024, mainly driven by increased demand for CIS products. Revenue from analog and power management IC was $173.8 million, an increase of 40.7% over Q4 2024, mainly driven by increased demand for other power management IC products. Now turning to our cash flow statement. Net cash flows generated from operating activities was $246 million, 29.5% lower than Q4 2024 mainly due to increased payment for suppliers and the increased receipts of government subsidies, partially offset by increased receipts from customers. It was 33.6% over Q3 2025, largely driven by increased receipts of government subsidies. Capital expenditures were $633.5 million in Q4 2025, including $559 million for Hua Hong 12-inch and $74.5 million for Hua Hong 8-inch. Other cash flow generated from investing activities was $61.7 million in Q4 2024, including $36.6 million receipts of government grants of equipment, $13.6 million interest income and $1.2 million receipts of disposal of equipment, partially offset by $3.6 million investment in the equity instrument. Net cash flows generated from financing activities was $1.3611 billion, including $919 million proceeds from bank borrowings, $594.6 million from other financing activities, $12.1 million receipts of government grants for finance costs and $4.7 million proceeds from share option exercises, partially offset by $136.1 million of bank principal repayments, $32.8 million interest payments and $0.4 million lease payments. Now let's move to the balance sheet. Cash and cash equivalents was $4.961 billion on December 31, 2025, compared to $3.9047 billion on September 30, 2025. Other current assets increased from $739.7 million on September 30, 2025, to $787 million on December 31, 2025, mainly due to increased value-added tax credit. Property, plant and equipment was $6.6764 billion on December 31, 2025, compared to $6.162 billion on December 30, 2025, primarily due to capacity expansion in Hua Hong manufacturing. Equipment instruments designated at fair value through other comprehensive income increased from $381.3 million on September 30, 2025 to $478.8 million on December 30, 2025, primarily due to fair value gains recognizing equity instruments. Interest-bearing bank borrowings increased from $2.3975 billion on September 30, 2025, to $3.1908 billion on December 30, 2025, primarily due to increased drawdowns on bank borrowings. Total assets increased from $12.5117 billion on September 30, 2025 to $14.4538 billion on December 31, 2025. Total liabilities increased to $5.2895 billion on December 31, 2025, from $3.5026 billion on September 30, 2025. Debt ratio increased to 36.6% on December 31, 2025, from 28% on September 30, 2025. Here is a recap of 2025. Revenue was $2.4021 billion, a growth of 19.9% over the prior year, primarily driven by increased wafer shipments. Gross margin was 11.8%, 1.6 percentage points over 2024, primarily driven by improved average selling price and cost reduction efforts, partially offset by higher depreciation costs. Operating expenses were $425.6 million, 7.9% (sic) [ 17.9% ] over 2024, largely attributable to increased research and development expenses. Other income net was $54.2 million, 146.4% above 2024, primarily due to decreased finance costs and foreign exchange losses and increased government subsidies, partially offset by decreased interest income. Loss for the year was $110.8 million, narrowed by 21.1% compared to 2024. Net profit attributable to shareholders of the parent company was $54 million, 5.6% dip from 2024. Basic earnings per share was $0.032. ROE was 0.9%. Finally, let's discuss our outlook for the first quarter of 2026. We expect revenue to be in the range of $650 million to $660 million with a projected gross margin of 13% to 15%. This concludes my financial remarks. We'll now begin the Q&A session. Operator, please assist. Thank you. Operator: [Operator Instructions] The first question comes from the line of Leping Huang from Huatai Securities. Leping Huang: Dr. Bai, congratulations for the robust results and the successful acquisition of Huali. So beyond the contribution to Hua Hong's revenue and profit, could you elaborate the strategic resource Hua Hong got through this acquisition? And what's your plan to leverage this resource to accelerate Hua Hong's future growth? Bai Peng: Thank you. First, basically, we acquired Fab5, what we call Fab5 within the Hua Hong system, is a 12-inch fab. It has 55-nanometer, 40-nanometer based specialty technology, quite a bit of the technology platform have overlap with what we already have at HHGrace in Wuxi. I think we look at the acquisition from the following points. We think that that's going to be favorable to our long-term growth. One is that we certainly grow the scale of our company. Through this acquisition, we added about 40,000 capacity, that's already in production with existing customers with -- the scale is one factor. Another one is with Fab5 joining HHGrace, we can do a better job optimizing the distribution of our different specialty technologies across all the capacity, all the manufacturing capacity. This will show up in higher efficiency for our TD activity, should also show up in higher efficiency and lower cost for our entire manufacturing base. So basically, we view this as definitely a strategic acquisition, will accelerate our growth both in terms of revenue and as well as our ability to -- profitability, ability to be more profitable. Thank you. Leping Huang: Okay. My second question is about the -- I want to -- about the supply-demand relation of the 8-inch and 12-inch mature fab business this year. So we noticed some foundry, including the largest one, just recently announced to exit some 8-inch business or sell their -- some 12-inch fab to the memory makers. So what's your view on this supply demand balance of the 8-inch and the 12-inch business globally this year? And what's your impact -- what's the impact on your ASP? So I also noticed that there are some reports that you have some price adjustments in the end of last December. So what's your view of this ASP trend of Hua Hong this year? Bai Peng: Okay. We also noticed some of the reports talking about some of our foundry competitors might be selling some of the capacity to other people. If you look -- if they just change the ownership from one company to another without actually reducing the capacity, then it doesn't really change the supply/demand situation too much. With respect to some of the logic capacity moving to memory because the memory certainly is in high demand nowadays. That certainly will reduce the supply in the logic side. But overall, it's a positive thing for us because we are mostly in the logic foundry business, although we do have some flash memory business as well. But overall, that would be a positive sign. I think overall, because of the AI-driven growth in the overall semiconductor market, we think -- we view that as overall positive. It might show up differently in different market segments. It might show up differently in different technology platform we have our capacity in or our product in. But overall, we view that as a positive development for us. In that context, if the supply gets tighter, it does give us more opportunity to increase prices. We have been doing that over the course of last year. Surgically, it's not across board increase by any means. But surgically for some certain area where we think that we can really meet the supply, so we take the opportunity to move up the prices a little bit, that also show up in -- some of them already show up in 2025 results. And we expect that in 2026, we might still have some room to go (sic) [ grow ], especially on the 12-inch side. 8-inch, the supply/demand is more in balance compared to the 12-inch. So even if we try to -- we would like to increase prices as well in 8-inch, but our room probably is going to be limited. But overall, we do -- we are cautiously optimistic that we might be able to do something in that area as well. Thank you. Operator: Our next question comes from the line of Ziyuan Wang of Citic Securities. Ziyuan Wang: Firstly, I would like to wish you all a Happy Chinese New Year. [Foreign Language] I have 2 questions. And the first one is, as we can see this quarter, the capacity utilization rate declined slightly. And what are the reasons for that? Are there any uneven or unbalance on the different platforms? And can our capacity be reallocated between different platforms quickly? That's my first question. Bai Peng: The change is fairly small. It's probably almost a calculating error. But I think the main reason is Fab9 will rapidly bring the capacity online. There's always a little bit of lag between how fast they get the equipment installed and get the capacity online versus when you have the loadings and the order for that capacity. So there's always -- as you -- that's a typical case in a ramping fab that especially when you ramp very fast, there is a bit of a lag between the capacity. And because the loading is based on what's the capacity brought online, so that's the reason there's like a couple of percent decrease. Ziyuan Wang: Got it. That's very clear. And my second question is about our future performance drivers on the demand side. How much of driver will the AI-related product be for the company's future revenue growth? And also, as we see the localization trend, do you think any -- which kind of product categories will be the most significant boost by the localization? And could you provide a ranking or list -- priority list for these products? Bai Peng: It's actually -- this is a complex question. Let me try to kind of see whether I can answer very clearly. I think if you look at from end market standpoint of view, clearly, AI-related products are increasing fast. What does it mean for us is that AI-related product actually cut across quite a few of our technology platform. For example, the AI-related products in power management area is growing fast, is increasing. MCU, not so much, but there's also a little bit of impact. And power -- discrete power devices also have some impact. But the power management is one area we clearly see strong growth related to AI. So in that regard, if you stay at this end market dimension, is now AI is one growth area. Other areas like autonomous driving, automotive, the car related, all the new robots is also growing, all the green energy-related end market also show growth. All those end markets, the growth area do cut across -- in somewhat a complex manner, cut across different technology platform. So if I look at our technology platform in that different -- in that dimension, if you just look at our 2025 results, you already see that the two biggest growth area is power management and MCUs. So we -- and those 2 areas and plus in addition to the discrete power devices, constitute the 3 largest technology platform that we have from the revenue standpoint of view. So going forward, I expect the power management area, the BCD platform we have, will continue strong growth. MCU, where Hua Hong HHGrace has a great advantage, has a great competitiveness, very competitive in this area, is also going to be an area that it's going to grow fast. And there, I will just take this opportunity to do some marketing. We also have new technology problem in 55-nanometer and 45-nanometer all coming on strong. So that should be also a strong growth there. In the end, I think if you look at our distribution, our revenue distribution, I will still continue to see MCU, probably one of the biggest power management segment, discrete power devices probably going to -- we'll be more stable. Growth is not as fast, but it will remain #3. The other 2 in terms of logic and RF, we like that to grow a little bit faster. And stand-alone, we actually -- stand-alone memory will also I think will grow reasonably fast. Some of the memory shortages mostly in DRAM, it's probably going to have some spill over into -- we probably already spilled over into the NAND memory area, but I think it's going to fill a little bit over to the NOR flash area, so that we should also benefit. So that's how I view the market going forward. Ziyuan Wang: Okay. Can I add a little question on that? How -- Dr. Bai, how do you view the sustainability of this current memory cycle? And is there -- what's the impact on Hua Hong and what kind of measures will we take? Bai Peng: That's a good question. If you look at historical pattern, memory tends to go through boom and bust cycle. Although this time around, a lot of people think because AI is a different beast, that maybe this cyclical nature of the memory market will be a little bit different. I don't have crystal ball. I do believe that eventually, it will be going to a cycle. Maybe this time, the boom cycle will last longer. It probably will heavily depend on how the AI -- is mostly driven by AI, this latest cycle, AI, how long this cycle is going to last. But I think in the near future, certainly for 2026, there's no sign that's going to slow down. Maybe in year 2 or 3 that if you go by historical pattern, it should start to come down somewhat. I should add that right now because of the AI-related area driven up DRAM prices so much, it does have a little bit of a depressing effect on the consumer market because a lot of the consumer product probably can't afford this high DRAM prices. Therefore, they might push out their product refreshment cycle a little bit. So that might -- will come across as a negative for some of our product as well. But overall, I think the growth area still outweigh the area that's going to be somewhat impacted -- negatively impacted by this super memory cycle that we seem to be in the middle. Operator: [Operator Instructions] Our next question comes from [indiscernible] from [ Guosen ] Securities. Unknown Analyst: [Foreign Language] I have 2 questions. The first question is about the price. So considering the rising cost of the raw material, we also can see some products such as power device raise the price, but the demand just now, Dr. Bai mentioned, is structural. So how do you see the sustainability of the price hike? So this is the first question. Bai Peng: Okay. In terms of raw material, by the time they get to us in the fab, we call that direct material or indirect material, we do see a few areas where the raw material prices start to show up in the semiconductor materials that we use. I'm trying to think like a copper is probably one area that will add a little bit of a cost to the copper cable, should we happens to be building a fab, which is where we are. We do see that. And we also see some of the other -- some other raw material increases affecting a little bit of our -- the material we buy. But I would say, by and large, I do not see this as a significant factor for our cost structure. There's going to be some places that -- there's going to be increases, and there's also going to be some decreases. And overall, I do not think it's going to be a significant increase. Another factor is that we -- over time, we use more and more domestically produced materials. And in general, their costs are better. So overall, I don't think we're going to be looking at the situation, the material will be a cost increase for us going forward. Unknown Analyst: Very clear. And my another question is about the utilization. Since we are in good position, but some 12-inch foundries are not yet at full utilization. So how do you see the cycle? So can you give us a little bit of your perspective? So where are we today? And is that possible maybe there is some potential order shift of our customers maybe after we increase the price? Bai Peng: Yes. So the fab utilization are affected by a few factors. There are 2, probably one is how competitive is your technology offering. That includes how -- whether you have a complete offering of the solutions to the customer for what a customer needs. That's one factor. Another one, of course, is pricing. If you price too high your utilization, you will lose customer on one hand. On the other hand, you can -- there's always -- if you use -- if the prices, you are willing to go down the prices, it does tends to increase your loading. So for those 2 factors, for example, on technology front, HHGrace is well positioned. We are a premier foundry in China. And lot of our technology platform, I would say we are probably #1 domestically and very competitive even internationally, not all of them, but some of them so clearly. So especially in this specialty technology area, which Hua Hong has -- HHGrace has been working on for the last 3 decades almost. That's one factor. Another factor is that some of our international customers, especially the European ones, and now we start to see American company as well that have this China for China strategy, that they try to move some of their product that originally were manufacturing overseas to be manufactured inside China. So that's another factor that will help our loading. When those companies looking for a partner in China, they clearly want to have somebody who is technology-wise is in a good position as well as they want a more stable company, the bigger company. So we are usually being viewed as a first choice many times -- many, many -- in many cases, we're the first choice for their Chinese -- as their Chinese partner. So we do benefit from that factor as well. I think this trend will probably going to continue giving the whole, the world, this geopolitical situation and the world semiconductor market is evolving. Thank you. Unknown Analyst: Looking forward to a better performance in the coming year and Happy Chinese New Year. Bai Peng: Thank you. Operator: Next comes from [ Scarlett Ku ] from BNPP. Okay. Otherwise, we will move on to our next questions. One moment, please. We have follow-up questions from Leping Huang from Huatai Securities. Leping Huang: Dr. Bai, I have a follow-up question. What's the current status of Fab9? Is it fully completed? And I noticed the CapEx this year -- last year is $1.8 billion, which is down slightly versus 2024. So how we should model the CapEx for 2026? And when you plan to initiate the next phase of the expansion? And what's your plan on this? What should I say, the Phase 2 of the Fab9 or the new fab? Yu-Cheng Wang: Look, let me address the question. Basically, the total capital expenditures for this project Fab9A is at $6.7 billion, okay? So by end of last year, we spent about slightly over $5 billion. So we spent another $1.3 billion. Basically, these are the POs, I mean we have basically issued not completely spend from cash flow perspective, okay? So I would say, basically, there's another about -- to get to $6.7 billion, there's probably another $1.2 billion to $1.3 billion on cash flow -- from the cash flow perspective, okay? So most of POs have been issued for that project. So I would expect the cash will be spent mostly this year and some probably remaining in 2027. Bai Peng: Mostly this year because this year, we're going to reach the peak capacity for Fab8, the first half of Fab9. Your second part of the question is on Fab9B, which is our next project to fill up the remaining, the other half, the empty half of Fab9. That project, we got all the approval, all the necessary paperwork. We plan to start the actual engineering construction work after the Chinese New Year basically in March. So we should get -- we should be able to start getting the equipment in by end of this year, probably October time frame. The spending obviously is going to be mostly in 2027. So in 2027, we start another capacity ramp on the Fab9B, and we hopefully can complete that ramp even faster, in a velocity that's even faster than Fab9A. Fab9A we ramped very fast. In 2 years, we pretty much get to the peak. And output will take a little bit longer because, as I said, there's always a little bit of lag between the capacity in place -- being in place versus when you get the wafers out and turn that into revenue. But in terms of the capacity -- construction capacity in place, using that as a milestone, Fab9B will start in 2027, and we should get that done in less than 2 years as well. Leping Huang: So this year, 2026, the CapEx will be slightly down and 2027 will be up significantly? Is my understanding correct? Bai Peng: Correct. That's correct. Operator: Our next question comes from Ziyuan Wang of Citic Securities. Ziyuan Wang: Okay. I want to have a follow-up question on that. And in terms of our equipment localization rate, will Fab9B have a higher rate than Fab9A? Bai Peng: The fab, yes, you're talking about the fab utilization rate, they are already a little bit above 100. So it's not going to be significantly higher. Ziyuan Wang: I mean on the equipment localization ratio. Bai Peng: Yes. So the answer is yes. The general direction, as the domestic equipment industry become more and more capable every year, that we -- every new project we have, we tend to have a higher procurement of domestic equipment. We obviously still going to be making our procurement decision based on what is the best, both technically as well as commercially for the company. That's the decision criteria. But the reality is that the domestic produced equipment are becoming more and more capable. And commercially, they tends to be, not across the board, more attractive, a lot of players dependent on individual equipment, they can be more attractive. Then end result we expect is that the Fab9B project, we will end up with a higher domestic equipment content. Operator: Ladies and gentlemen, that's all the time we have for questions. I'll now hand back to Mr. Daniel Wang for closing remarks. Yu-Cheng Wang: Well, once again, thank you all for the -- for joining us today and for your wonderful valuable questions. The year of horse is right around the corner. We would like to take this opportunity to thank you all for all the support and trust you have given to us and wishing you and your family a very joyful holiday season and a healthy and prosperous New Year. [Foreign Language] We look forward to catching up with you very, very soon. Thank you. Bai Peng: [Foreign Language] Happy New Year. Operator: Thank you. Ladies and gentlemen, that does conclude the conference call. Thank you for your attendance. You may now disconnect.
Operator: Welcome to ABN AMRO's Q4 2025 Analyst and Investor Call. Please note this call is being recorded. [Operator Instructions] I will now hand the call over to the speakers. Please go ahead. Marguerite Bérard-Andrieu: Good morning, and thank you for your patience. Welcome to ABN AMRO's Q4 and Full Year 2025 Results Presentation. I am joined today by our CFO, Ferdinand Vaandrager; and our CRO, Serena Fioravanti. After our presentation, we will open the line for your questions. But first, let me start with the highlights. It has been an important year of progress commercially, strategically and operationally, and Q4 capped out with a solid performance. We executed as we committed to, staying focused and disciplined in delivering on our strategy. I will list some of the main financial performance indicators before elaborating on the strategic progress underlying these numbers. Q4 delivered a net profit of EUR 410 million, supported by strong NII and fee income. During the fourth quarter, our market share for new mortgage production rose by 21%, resulting in a net increase of EUR 2.5 billion in mortgage volume. Client assets increased by around EUR 7 billion, driven by strong net new assets, but also the high integration and market performance. NII benefited from an elevated treasury result and full year NII ended in line with our guidance. Costs landed at the lower end of our guidance, underlining our disciplined execution. Credit quality is solid with EUR 70 million of impairments in Q4. We made significant progress on optimizing our capital position, reducing RWA by close to EUR 8 billion, further strengthening our capital position. We are proposing a final dividend of EUR 0.70 per share. And following our capital assessment, we are announcing EUR 500 million in additional distributions. Let me go into more detail on how we are progressing on the execution of our strategy. During 2025, we made significant progress in our priority of achieving profitable growth. Mortgage performance showed significant strength reflecting clear commercial choices and focused execution. We secured a solid top-tier market position with a gross production of EUR 14 billion, 1-4, resulting in a net increase of our mortgage portfolio of EUR 8 billion. Both Personal Banking and Wealth Management delivered on the deposit growth ambitions, jointly bringing in a total of EUR 8 billion new volume in Q4. Wealth Management has taken a big leap forward in 2025, with client assets up by EUR 44 billion due to the HAL acquisition, but also good market performance and strong net new assets. Corporate Banking closed an SRT in December, which is an important milestone to provide additional capital headroom for future profitable growth. New10 is our brand, which offers SMEs a modern online lending solution. And there, we demonstrated steady growth, reaching EUR 1 billion in financing provided to 10,000 entrepreneurs since the launch. Clearing is strengthening its top 3 position, showing higher fee income during the fourth quarter. Now returning to our cost base. Through simplifying the bank and reducing run rate costs, we are delivering on our promise to rightsize our cost base. In 2025, total FTEs reduced by 1,500 across the bank. We transitioned some external staff to internal positions in order to internalize critical roles within the bank. To build the necessary future commercial capabilities, we are also reallocating resources towards these activities. And even including the HAL integration, total FTE levels declined by around 300 of the year, marking the significant progress we've made. Overall, we achieved around EUR 160 million of cost savings, mainly in commercial optimization. We are also progressing on simplifying the organization and streamlining the IT landscape, which is contributing to further cost savings. In our efforts to reduce IT complexity, we retired more than 200 applications during 2025. We are also on track to effectuate the legal merger of our mortgage entity later this year that will simplify our organizational structure. Overall, we've made significant progress during 2025 toward our strategic goal of optimizing our cost structure and streamlining the bank. This quarter, we also made excellent progress in capital optimization. Overall, RWA declined by EUR 7.7 billion during Q4. The decline is partly attributable to seasonal effects within Clearing, but it is primarily a result of delivering on our strategic goals. More than EUR 4 billion of reductions came from RWA optimization measures, including the partial reintroduction of the SME support factor and further data and quality improvements. Corporate Banking realized EUR 3 billion of RWA optimization during Q4, so they are well positioned to achieve the EUR 5 billion reduction target that we set. Portfolio optimization advances are due to the continued wind down of Asset-Based Finance International, which accelerated last quarter. The new SRT transaction provided EUR 1.5 billion in RWA relief for our active portfolio management. We are on track with our commitment to lower the share of allocated RWAs in Corporate Banking to approximately 50% by 2028. Now turning to capital returns. Starting with the final dividend. We propose an amount of EUR 0.70 per share, which combined with the interim dividend of EUR 0.54 per share equates to a dividend payout of 50% of our reported net profit. In addition to the regular dividend, we today announced further distributions totaling EUR 500 million following from our capital assessment. In this assessment, we took into account the expected capital impact of the NIBC acquisition, which now stands at around 80 basis points. This additional distribution will be split evenly between a cash dividend of EUR 250 million and a share buyback program of EUR 250 million, which is subject to regulatory approval. Once this approval has been granted, we will start the share buyback program. The additional cash dividend of EUR 250 million will be paid at the same time as the final dividend. Overall, this means that over 2025, the payout ratio amounts to 87%. This reflects our strong commitment to shareholder returns. Before I discuss our fourth quarter financial performance, I will briefly highlight relevant developments in the Dutch economy. The Dutch economy remained resilient in 2025 with housing prices continuing to rise and unemployment at record lows. Domestic spending remains a key driver of economic activity, leading to robust mortgage activity and stable credit quality. Inflation is gradually declining, with the rate for 2026 expected to be about 2.3%. Manufacturing demand is somewhat weak, however, and industry is facing elevated cost pressure. Policy measures from the new coalition could support the industry despite the government's minority position. Overall, the Netherlands is expected to head into a period of slower but stable growth despite geopolitical uncertainty with gradual disinflation and a strong fiscal position. Now turning to our financial performance over the fourth quarter, starting with client assets and liabilities on Slide 9. Our strategy to grow our deposit base is leading to tangible results. Total client deposits increased by EUR 8.3 billion in Q4, primarily within Wealth Management and Personal and Business Banking. Wealth Management generated around EUR 2 billion in core net new assets during the fourth quarter, mainly thanks to new cash inflow, partly offset by outflow of securities. We saw limited outflow from HAL as they managed to retain their clients during the acquisition process. During 2025, but especially during the latter half of the year, we have seen conversion from cash into mandates and services such as DPM, private markets and advisory services. These flows demonstrate the increased commercial focus of our wealth franchise, growing the client base through targeted offerings, followed by conversion into fee-based services. Moving to our interest income. Commercial NII continued to benefit from mortgage and deposit volume growth. Mortgage margins are slightly declining due to the ongoing interest from clients for mortgages under the National Mortgage Guarantee Scheme. Corporate loan margins improved modestly, supporting overall commercial NII. Other commercial NII increased due to an incidental provision release of EUR 16 million, underlying the performance was stable compared to Q3. Residual NII increased by EUR 66 million from a strong treasury quarter. Incidentals of EUR 10 million have supported the overall results. Due to foreign currency transactions, treasury shows a temporary revenue shift from other income to net interest income. For the full year, NII ended in line with the guidance and reflected our disciplined execution of our strategy. Moving now to fee income on Slide 11. Fee income rose by 2% quarter-on-quarter, reflecting progress towards our objective of growing revenue with scalable, capital-efficient business segments. Wealth Management fee income improved from a structured project campaign in France and positive market developments, mainly in the Netherlands and Germany. Clearing benefited from increased trading activity due to higher market volatility. Fees at P&BB normalized after higher seasonal payment activity in Q3. Other income remained subdued with both Corporate Banking and Treasury performing below trend this quarter. Within Corporate Banking, equity participations booked a loss, while treasury booked negative other income of EUR 40 million during Q4. As I mentioned, due to foreign currency transaction, treasury shows a temporary revenue shift from other income to net interest income. Now turning to costs. Underlying expenses increased in Q4 due to seasonal and nonrecurring items. These costs totaled approximately EUR 40 million and will not carry over into the first quarter. Full year costs ended at the lower end of our guidance. We booked EUR 60 million in restructuring costs in Q4, a bit more than what we had guided for as some reorganizations have been brought forward. So far, a total of around EUR 100 million out of the EUR 400 million restructuring cost has already been taken. For next year, we expect somewhat higher restructuring costs, although the precise timing of the various projects makes it difficult to pinpoint the exact figure. Cost discipline remains central to our strategy, and we have a clear plan on how to achieve further reductions over the coming years as we work on delivering our 2028 target. Now turning to our credit quality. Credit quality remains strong with a Stage 3 ratio of 2.1% and slight increase of the coverage ratio. After 2 years of limited net impairments, we had EUR 70 million of impairments this quarter. These were mainly related to new and existing individual corporate files across various sectors. We continue to monitor potential impacts of macroeconomic and geopolitical developments on our loan portfolios. So far, however, we do not expect material impact, reflecting the high quality of our loan book and our prudent risk management. Full year cost of risk was 1 basis point, that is to say well below our through-the-cycle guidance of 10 to 15 basis points. We expect cost of risk to gradually move towards the low end of the through-the-cycle range by 2028, consistent with the normalizing macro environment. Now turning to our capital position. Our CET1 rose to 15.4%, driven by the substantial RWA reduction that we achieved this quarter. In our capital assessment, we took into account the impact of our intended acquisition of NIBC. Note that this impact on our capital ratio is now around 80 basis points. This higher impact to our capital ratio is due to the fact that our current RWAs are now almost EUR 8 billion lower. The total payout for 2025 is around EUR 1.8 billion, equal to an 87% payout ratio. This includes interim and final dividend, the EUR 500 million additional distributions and the share buyback executed in Q2. Going forward, our capital assessment will be performed in light of our stated capital policy with total distributions up to 100% of net profit. Before I wrap up, let me reiterate the financial guidance we gave at our Capital Market Day for this coming year. At our CMD in November, we already provided our outlook for NII and cost for this year, and this outlook has not changed. We expect commercial NII of around EUR 6.4 billion for 2026. This year, we will have the full year contribution of HAL in our NII. The interest rate environment is in line with what we communicated in November. Some curve steepening is bringing forward improvements to the NII we forecasted. Current yields will lead to a gentle tailwinds to replicating yields this year, potentially leading to a small improvement in liability margins. Furthermore, we expect continued growth of the balance sheet, but with some margin pressure on mortgages, partly offsetting volume growth. Costs are expected to increase to around EUR 5.6 billion, reflecting the inclusion of full year HAL costs. Now let me wrap up. Today's results show we are delivering on what we said we would do. Q4 closed on a strong note with EUR 410 million net profit, supported by solid commercial momentum across the bank. We continue to grow where it matters, EUR 2.5 billion in new mortgage production, a 21% market share and around EUR 7 billion was added in client assets during this quarter. A major highlight this quarter was a EUR 7.7 billion decline in RWAs, which is a significant step forward in optimizing our capital allocation and executing on our strategic priorities. We also announced EUR 500 million in additional distributions between dividends and share buyback, underlining our continued commitment to disciplined capital returns. With a 15.4% CET1 ratio, we maintain a strong position to keep investing in our strategy and to support our clients. So across all 3 of our strategic pillars: profitable growth, rightsizing our cost base and optimizing capital, the evidence shows clear delivery and strong momentum. We are focused, we are committed and we're delivering on what we promised. I thank you very much for your attention. And now we open the call for questions. Operator: [Operator Instructions] The next question comes from Delphine Lee from JPMorgan. Delphine Lee: I've got 2 very quick clarification and then just yes, another one. And so if we start with just on capital, on the RWA reduction this quarter, so the SME supporting factor, I think you previously guided to something like EUR 3 billion, if I remember this correctly. Has that now completely taken in '25, and we shouldn't expect more positive impacts going forward in '26? And then on your cost base, so you mentioned some nonrecurring items, which are not restructuring charges or incidentals. Just if you could just quantify that, that would be great. And then my last question is just more generally speaking, given where your CET1 is above 15% compared to your target of above 13.75%. I was just wondering why have you not decided to distribute a bit more and have additional buybacks or dividends and then pay out closer to 100%. I know you did flag it wouldn't be 100%, but I'm just wondering what's holding you back? Marguerite Bérard-Andrieu: Thank you very much. I will take your first question on RWA on CET1, and Ferdi will guide you through the various nonrecurring items in costs. On RWA, we're right, the total impact we expect from CSME support factor will be probably up to EUR 2.5 billion to EUR 3 billion. And as I said, we only partially reintroduced CSME support factor this quarter, i.e., we only took EUR 1 billion of RWA relief coming from there. So you're right, it's partial, and the rest will come in coming quarters. That's one. On our CET1 position, you're right, we're very happy with the progress we made this year. We have a strong capital position. And in our capital assessment, we also took into account our intention to acquire NIBC. This will impact our CET1 ratio as of the second half of the year, probably Q3. But we start our strategic plan with a very strong position. We are committed to the policy we shared with you in terms of the distribution at our CMD, i.e., up to 100% of our net profit between '26 and '28. And you're right, we had also shared that in Q4 that will -- in Q4 '25, that will be not up to 100%. Ferdinand Vaandrager: Maybe Delphine, on cost. So number one, if you look at Q4 operating expenses, underlying, we take out the EUR 59 million in restructuring and the EUR 135 million in levies. What we've guided for that you always see a cost increase in Q4. For us, we translate that in roughly EUR 40 million nonrecurring and seasonal cost that was specifically related to M&A-related cost for the intended acquisition of NIBC. And what you always have in Q4 is some retention and variable payments as well as marketing expenses, which are higher. So basically, the underlying plus 4% is fully in line with what we expected for Q4. Operator: The next question comes from Namita Samtani from Barclays. Namita Samtani: My first question on the replicating portfolio. Is it still EUR 165 billion in size? And just looking at the replicating income portfolio slide on Page 21, is my interpretation correct that the October curve, you're expecting the income to inflect in the middle of 2026, that on the January curve, we should consider it already inflected and to be up from here quarter-on-quarter? And my second question, I just wanted to ask on the RWA allocation in the Corporate Bank. It was around 51% in '25, and that's excluding Clearing, but the target is 50% in 2028. I just was wondering if you were willing to go below the 50% allocation? Or how do you think about this? Marguerite Bérard-Andrieu: Ferdinand will take you through replicating portfolio. When it comes to RWA allocation to the Corporate Bank, I mean, first, bear in mind that in the effects we described of our RWA decrease, you also have some seasonal effects that's important, especially at Clearing. So that's an important one. The second one is our Corporate Bank has moved fast in order to also free up capital headroom for future profitable growth. So we are not changing our intentions or guidance, i.e., bringing our total RWA allocation to the Corporate Bank at circa 50% by 2028. But we are moving fast, I agree with you. Ferdinand Vaandrager: Namita, on the replicating portfolio, indication is still around the same size of what we said previous quarter, EUR 165 billion, of which 40% to 45% reprices within 1 year. If you look at Slide 21, the sensitivity, this is really the replicating income, looks to be more positive from recent steepening we've seen. Do keep in mind that the sensitivity only shows the replicating portfolio income. So this excludes changes to client savings coupons. But overall, with a further steepening, it looks a bit more positive. But be mindful, this is just a point in time. And at the end of the day, it's always a balance between positive accretion of the replication with volume margin on the back of competition and potential mix shift. So for now, we just stick to our overall guidance on NII. Operator: The next question comes from Giulia Aurora Miotto from Morgan Stanley. Giulia Miotto: I'm afraid I will go back on the capital. You basically already have 100 basis points above the 13.7% pro forma for NIBC. So is the next excess capital distribution decision coming with full year '26 results? Or given the level, could we expect something sooner? Or perhaps there is some M&A that you're looking at that leads to holding back some capital. So yes, some clarification on why holding such a big buffer above 13.7%, please? And then secondly, on the forward look for '26 guidance, given the steeper curve, and I mean, I hear you Ferdi, when you say, well, yes, but this doesn't include deposit costs, okay, but I don't expect banks to increase the savings rate anytime soon, unless I'm wrong. And then on costs, given what you printed in the quarter, it seems like there could be some upside on your EUR 6.4 billion for commercial NII and also on the cost guidance for '26. Can you give us any comment on perhaps if I'm correct on how conservative your guidance is struck at the moment? Marguerite Bérard-Andrieu: Thank you. So I will let Ferdi take your question on forward-looking, and I will take your question on capital. Let me reiterate because we have given a very clear outline on how we think about this during our CMD, that was 2.5 months ago, and we haven't changed the way we look at it. First, we will communicate always the outcome of our capital assessment annually with our Q4 results. So we are not changing that. Number two, with respect to M&A, as we also shared at our CMD, we are in the process of integrating HAL. We have also -- we are between signing and closing for NIBC. And we are not right now considering additional M&A, so there is no M&A buffer. This being said, we are, I would say, happy with the fact that we've moved fast on some of our commitments and that we start our strategic plan with a strong capital position that therefore, gives us confidence in our distribution policy of up to 100% between '26 and '28. Ferdi? Ferdinand Vaandrager: Yes, Giulia, on NII and on costs, let me start on NII. Commercial NII guidance for this year is EUR 6.4 billion. Underlying trends, liability NII, we expect growth, both from the replicating and underlying volume growth. Asset NII is still slightly lower, specifically pressure from mortgages margins, only partially offset by volume growth and other commercial NII at similar levels. And we also said this excludes investments and divestments as the exact timing of NIBC is not known and also the closure of Alfam is not known. So we are comfortable with that guidance. Yes, if you look at the forward curve, as explained during the CMD, we have conservative assumptions, and we expect stable margins for interest-bearing deposits. So that's for savings and for term and only the current accounts to move in line with the replicating portfolio. So that is roughly 25% of our total deposits. So that's EUR 65 billion. So yes, on the back of the more steepening, it looks a bit more positive, but let's see what happens overall on the volume margins and the mix there. On the cost, sorry, Giulia, moving over to cost. Overall, if you look at 2026, EUR 5.6 billion. We are making good progress on our cost savings measures, but we also expect some pressures for 2026. Number one, you need to include the cost of HAL for a full year, and it was only half year included for 2025, so that adds EUR 135 million. Secondly, we have -- our CLA is ending at midyear, and we have included in our plan an overall inflation of 2%. And also, you should expect to start seeing some more cost, for example, in terms of integration costs for the HAL acquisition. So we stick to our overall cost guidance of EUR 5.6 billion, excluding restructurings for this year. Operator: The next question comes from Johan Ekblom from UBS. Johan Ekblom: Just 2 questions, please. So first, when we think about organic capital generation in 2026, can you give us some guidance on how to think about the RWA trajectory? I get that there are some seasonal impacts in Q4. I think you mentioned EUR 1 billion roughly in Clearing. But taking kind of the measures that you're implementing in the Corporate Banking business and potential for future SRTs, et cetera, more SME support factor, just any kind of guidance on sequential or trajectory on RWAs would be helpful. And then just picking up on one of the comments you made that one of the reasons for the weaker other income is reflected in the better treasury results. So when we think about 2026, do you expect that to remain the case, i.e., should we be assuming a continued good treasury result but a weaker other income? Or is that expected to be more normal in 2026, please? Marguerite Bérard-Andrieu: Thank you for the question. So I will let Ferdi elaborate on both items, but just a couple of points from my side. But as I said, we're happy with the good progress we've made so far, especially on RWA optimization. Bear in mind that, yes, there is some volatility -- seasonality, I mean, seasonality in this RWA. And also, we have front-loaded some of these optimizations. So basically, the rest will be more spread out over time. This is what you should, I think, keep in mind. There are additional optimizations coming, more spread out over time. Ferdi, do you want to elaborate on that and also take the question on treasury results and... Ferdinand Vaandrager: Johan, specifically on RWA, yes, the Corporate Bank is now around 51%, where we had below 50% for 2028. But you should take into account, as Marguerite said, there's always some seasonality at Q4 of balance sheet steering. We still have in plans a growth of EUR 3 billion overall for Clearing. And for the rest on the other side, we have significant business growth expected for mortgages. Also for full year 2026, as said, the impact of NIBC and also the small relief from Alfam, you should take into account when looking at 2026. Further RWA actions, yes, we might have front-loaded or accelerated, but we still expect the second part of the SME support factor and potential benefit from external ratings. Then to your residual NII, overall, for the full year, it is in line with what we overall expect between the EUR 0 and EUR 200 million. It was more pronounced now at Q4, and that was specifically in ALM. It was higher money market results, and this includes also the economic hedges or currency swaps we use for our non-euro funding. So this was more pronounced in Q4 because there was more volatility in the FX. And this is the normal sort of balance between cross-currency swaps where you book in NII and FX swaps in other income. And we do expect some of that to reverse in Q1. Operator: The next question comes from Benoit Petrarque from Kepler Cheuvreux. Benoit Petrarque: So the first question is actually to come back on risk-weighted assets. You've got now EUR 135 billion end of '25. You target EUR 145 billion by end of '28. Is your EUR 145 billion still up to date? Or you think there's maybe upside to that number? I mean, lower risk-weighted assets potentially and lower risk-weighted assets outlook for '28 based on your strong achievements. On the calibration of the distribution for '26, so if you run the -- you take NIBC, you take out the seasonality, you have some capital generation, you could end up '26 at 15.5% CET1 ratio. So the calibration, will that be exactly on 100% of net profit? Or could that be potentially higher at the end of '26? And just on other income, it's a bit weaker also linked to the private equity revaluation this quarter. Do you have still a kind of EUR 100 million quarterly run rate for other income? Marguerite Bérard-Andrieu: Thank you, Benoit. I think on -- I would say, all of the above, I would say we are not changing the guidance and the indications we gave at our CMD 2.5 months ago. So yes, our RWA trajectory is good. We have, I think, moved fast. And at the same time, as we shared, there is also some seasonality in these figures. And there is also some capital headroom we have agreed for Corporate Bank for additional profitable growth. So we are moving fast at the beginning, but this is -- that doesn't lead us to change our guidance in terms of final RWAs for '28, just to make things clear. And the same applies to our distribution policy. The fact that we start the year with -- and of the strategic plan with a strong capital position gives us confidence for our distribution policy of up to 100%, and we are not changing our policy, certainly not 2.5 months after our CMD. So there's no change in that. You take the question, Ferdi, on other income. Ferdinand Vaandrager: Yes, Benoit, I know the around EUR 400 million, yes, if you strip out volatile items and you look at history, that is roughly right. If you look overall for the full 2025, the impact was specifically from economic hedges and hedge ineffectiveness at ALM at EUR 74 million negative. And also now for the first quarter, we had some impact specifically related to our equity participation portfolio of around EUR 50 million. There were also this year, a few one-offs in there, for example, fair value revaluation of loans within the mortgage portfolio as announced in Q3. So you're right, the EUR 400 million, if you average it over the last few years, but we don't provide any specific guidance for other income. Operator: The next question comes from Chris Hallam from Goldman Sachs International. Chris Hallam: Two questions from me. The first is a follow-up really to Benoit's and Giulia's earlier questions. So just to stick on capital. Just to sort of get some clarity on this. Should we really think that 100% is the hard ceiling? I appreciate at the Capital Markets Day, you said you intend to distribute up to 100% of net profits. And then you said in a scenario where our quarter 1 remains significantly above 13.75%, additional distributions could be considered subject to reg approval. Should we now just actually think it's really a hard ceiling at 100%? And if that is the hard ceiling at 100%, and clearly, we're already well above the 13.75% on pro forma, there's already the integration of how the closing of NIBC. You said there's no M&A right now. Growth and cost optimization is already in the plan. Given all of those, it's going to be difficult to see how we do comfortably get down to 13.75%. So in that context, could you commit to the ROE being above 12% irrespective of where you end up on CET1? That's the first question. And then second, consensus commercial NII is EUR 6.6 billion for '26 and the headline cost consensus is EUR 595 million. I appreciate your guidance is on a slightly different perimeter. We can try and bridge between how you guide and how consensus is collected based on how we think about NIBC or the phasing of restructuring. But could you just tell us whether you're comfortable with those consensus numbers? On my sums, I think you're sort of steering us to a commercial NII number, which is a little bit below EUR 6.6 billion and a cost figure, which is maybe more meaningfully below that EUR 595 million. Marguerite Bérard-Andrieu: Thank you very much for your question. I will let Ferdi bridge the gap on how we look at commercial NII and with the consensus. Let me take your question on capital. We stick to everything we said at our CMD. So yes, our CET1 target is above 13.75%. Yes, we are committed to a distribution policy throughout the plan of up to 100%. And yes, we will annually review our capital position. And to the answers we gave at the CMD, subject to regulatory approvals because no bank can announce anything in that respect without regulatory approval, we will look at where our capital position stands in comparison with our CET1 target. This is an important one. We are also committed and confident that we will reach the above 12% ROE by 2028. This is also a very strong and firm commitment. So I wouldn't call the up to 100 a hard ceiling throughout the plan, but what I'm just saying is that we gave you a clear indication 2.5 months ago, that was yesterday at our CMD on how we look at things. We are happy with the progress we are making. So we think we have a very strong start in the plan. So this is a positive, but we are not changing what we shared with you at our CMD. Ferdinand Vaandrager: Yes, Chris, on NII, for me, it's difficult to comment on consensus expectation. I will check with the IR team. But in our guidance of EUR 6.4 billion commercial NII, we have not included investments and divestments as there, the timing is still unknown. Expectation is we can close NIBC in the second half of the year. And the NII for 6 months, if you look at the account of NIBC, is roughly EUR 160 million. So I'm not sure if that explains part of the difference. The other part might be in our more conservative assumption on the pass-through on interest-bearing deposits, where in our assumption, we have taken into account a full 100% pass-through. And with the recent steepening of the curve, some might become a bit more positive. But as we said before, it's wait and see and the replicating effect will be more '27, '28 and '26. Operator: The next question comes from Alberto Artoni from Intesa Sanpaolo. Alberto Artoni: I just have one question on the cost of risk. Could you please give us more color? Is my understanding correct that the slightly higher cost of risk this quarter compared to the previous one is mostly due to a limited number of corporate files and actually, the trend remains very supportive with very good indication of asset quality for the firm. Is that correct? Could you please give us more color on the asset quality dynamics? Marguerite Bérard-Andrieu: Thanks. Your understanding is correct, and I will let Serena give you more color. Serena Fioravanti: Thanks, Alberto, for the question. Indeed, we booked EUR 70 million impairments that is mainly related to individual files across many sectors, across geographies and they were partially offset by some management overlays releases. So when I look at the entire credit portfolio, it's still really strong, and we still believe that we have a very solid performance and progressively going towards our through-the-cycle cost of risk. Operator: The next question comes from Anke Reingen from RBC. Anke Reingen: Just a small follow-up questions, please. On the NII, you mentioned the headwind from divestments. Can you -- I'm sorry if I missed it, but did you quantify those? And then -- sorry, just a small other one on other commercial NII. The previous guidance was not other NII, it was EUR 0 to EUR 200 million. Given the comments you made, should we be thinking more towards the lower end given the reversal of the Q4 strength? And then just lastly, on the mix of extra distributions, everything above the 50%, how are you thinking about the mix in terms of cash dividend and share buybacks? I realize there's a withholding tax element. But aside from it, how are you thinking about the mix? Marguerite Bérard-Andrieu: Thank you very much. I will let Ferdi guide you through NII, I think probably the point you have on divestment refers to Alfam, if I... Ferdinand Vaandrager: Yes, Anke, that is Alfam. Also, we expect around Q3, the full year NII of Alfam last year has been around EUR 60 million. So just to take that into account in the mix, that has not been part of our overall guidance for this year. Marguerite Bérard-Andrieu: And on the mix of our distribution, as we shared, the additional distribution we are announcing today is basically evenly split between EUR 250 million in cash dividends and EUR 250 million in share buyback. The way we look at it is also indeed by taking into account the impact of the Dutch dividend withholding tax. So this is really how we how we plan it. If you want more color on that and how the Dutch dividend withholding tax is calculated, I can let Ferdi dig into that because it's one of his favorite topics. But basically, we are, I would say, making sure that this is an optimized mix. Ferdinand Vaandrager: Yes. So we don't specifically guide for this. And as Marguerite says, it's a bit complicated for this call the underlying dynamics, but the impact of potential tax has increased with an increasing share price. So increasing our cash distribution may reduce the risk of not meeting the cash hurdle of a 7-year average. So this is -- we take this more into account, but we don't specifically guide upfront what the mix will be between cash and share buyback. Operator: [Operator Instructions] The next question comes from Farquhar Murray from Autonomous. Farquhar Murray: Two questions, if I may. Firstly, just coming back to the RWA point, just on the point of detail. Is it fair to conclude that you're now likely to exceed the RWA optimization target outlined at the CMD? And I ask that because if there is another EUR 1.5 billion at least from the SME support factor still to come on top of the EUR 4.2 billion this quarter, then I think we're looking towards more like EUR 6 billion rather than EUR 5 billion. And if so, what's going better? Or are you suggesting something reverses within that bucket? And then secondly, what's driving the margin pressure in mortgages that you're citing? And I ask that because in a way, some peers aren't really referencing that. I just wondered if it's specific to you and whether you could give us a sense of magnitude. And then very finally, just one point of detail, if it's at all possible. Could you give us a ballpark sense of the withholding tax threshold? Or is it too difficult to actually frame that at the present? Marguerite Bérard-Andrieu: Thank you very much. I will let Ferdi answer your questions first. He will take you through the various buckets of our RWA trajectory, then the mortgage margin and then how we look at the dividend withholding tax. Ferdi, you start with RWA. Ferdinand Vaandrager: Yes, Farquhar, overall optimization in the specific bucket within Corporate Bank was EUR 3 billion because part of the SME support factor is part of personal and business banking. So yes, there is still further upside. There's some front-loading. But as I said before, we're also looking at additional optimization, for example, sourcing external ratings. And the second part was... Marguerite Bérard-Andrieu: Margin pressure... Ferdinand Vaandrager: Yes, the margin pressure in mortgages, we expect that to continue. Number one, what we do see here is that almost 70% of the inflow is either Dutch-guaranteed mortgages or low LTV. And of that, the margins are lower, but the overall ROE are higher because it's less capital against it. Number two, what we have seen is LTVs have come down because we automatically adjust the risk premium if you get into a lower LTV bucket. And we also still see some outflow from higher-yielding mortgages. So overall, our expectation is that roughly EUR 8 billion growth last year. We expect the growth to continue, but it is offset or almost more than offset with our current expectations on margin development. Marguerite Bérard-Andrieu: Yes. And the last question, Ferdi, but I don't know if we can get more specific into the breakdown between share buyback and... Ferdinand Vaandrager: No, Farquhar, as I said, that's very difficult. There's always a point in time where you try to optimize this, and you always need to have a forward-looking view on this and many things play in the mix. You're just looking at a 7-year average cash. And if you do a share buyback, if you pay less cash in a certain year than the average, then what you put in the share buyback, you need to pay the 17.75 withholding tax over that. So we're not guiding on that. This just reduces the risk our share buyback will be subject to dividend withholding tax. Farquhar Murray: I'm not asking for a guide on the mix. That's totally understandable. I'm just asking whether you can give us a sense of the actual threshold number at all in terms of how much cash you move in a year... Ferdinand Vaandrager: Yes. Okay. Farquhar, I have the spreadsheet in front of me because I always keep track of that. But this can be picked up by Investor Relations after the call because it's more complicated, you need to strip out the highest and the lowest of the average 7 years. So let's do that after the call. Operator: There are no more questions at this time. I will now hand the word back to the speakers for any closing remarks. Marguerite Bérard-Andrieu: Well, we thank you very much for attending our call this morning, and we wish you all a very good day. Bye-bye now.
Mike Bishop: Hello, everyone, and welcome to Atomera's Fourth Quarter and Fiscal Year 2025 Update Call. I'd like to remind everyone that this call and webinar are being recorded and a replay will be available on Atomera's IR website for 1 year. I'm Mike Bishop with the company's Investor Relations. As in prior quarters, we are using Zoom, and we will follow a similar presentation format with participants in a listen-only mode. We will open with prepared remarks from Scott Bibaud, Atomera's President and CEO; and Francis Laurencio, Atomera's CFO. Then we will open the call to questions. If you are joining by telephone, you may follow a slide presentation to accompany our remarks on the Events and Presentations section of our Investor Relations page on our website. Before we begin, I'd like to remind everyone that during today's call, we will make forward-looking statements. These forward-looking statements, whether in prepared remarks or during the Q&A session, are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the Risk Factors section of our filings with the Securities and Exchange Commission specifically in the company's annual report on Form 10-K filed with the SEC on March 4, 2025. Except as otherwise required by federal securities laws, Atomera disclaims any obligation to update or make revisions to such forward-looking statements contained herein or elsewhere to reflect changes in expectations with regards to those events, conditions and circumstances. Also, please note that during this call, we will be discussing non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in today's press release, which is posted on our website. Now I would like to turn the call over to our President and CEO, Scott Bibaud. Go ahead, Scott. Scott Bibaud: Thanks, Mike, and good afternoon to everyone. In Atomera fourth quarter, we made great progress moving existing customers forward in our targeted segment, achieving very strong technical advantages, commencing new customer engagements in nontraditional areas and made our first foray into the world of government-funded collaborative developments, all positioning us strongly for commercial execution in 2026. Today, I will give you an update on all of our activities as we set the table for our business prospects in the new year. Technology news recently has been dominated by the rapid advancement of artificial intelligence and the associated semiconductor challenges that AI entails from the allocation of limited GBU supply, the enormous stresses put on our energy infrastructure and the associated surge in memory prices. Atomera's technology is positioned to assist with each of these industry issues as we deliver materials, which help to relieve each pain point. So let me start off with our recent exciting progress on Gate-All-Around transistor technology, which is the foundational architecture used in AI GPUs, CPUs and bleeding edge network components. The challenges with manufacturing these next-generation transistor devices at 2-nanometer and below are widespread and a concerted effort by the full ecosystem of industry players is required to manufacture them at scale with economically viable throughput and yield. This has been the focus of our recently announced strategic partnership with a large equipment OEM. Target customers or TSMC, Samsung and Intel, who are in production and [indiscernible], a new Japanese manufacturer, which is deep in development. Atomera's MST technology delivers some very compelling solutions in this space, in particular, for diffusion blocking. These tiny Gate-All-Around on transistors require extremely high phosphorotoping levels constrained to a very small area in the source and drain of the nanosheet. Under the intense semiconductor manufacturing environment, it's difficult to keep these [ dopant atoms ] in their proper positions and just a small amount of migration into the channel can severely impact performance, efficiency and yield. Atomera's MST is uniquely well suited to hold these roving phosphorus atoms in place. Although this MST characteristic is well proven in older technologies, implementing MST in devices that are around 2 nanometers, while maintaining its efficacy is something that industry players insist must be validated on silicon at real world scale, and we've been working hard to do so. Our target customers have been looking into two results to prove high-volume manufacturability. First, that MST can be effectively deposited into the actual nanosheet structure. And second, that the diffusion blocking characteristics are better than other methods, the industry is currently evaluating or using. Obtaining these results is not straightforward and requires access to advanced structures that are not generally available are very expensive and frequently proprietary. But we've been able to make steady progress with the help of Gate-All-Around customer and our strategic partner. Just in the last month, we obtained very exciting silicon results in both targeted areas, which we believe provides the definitive proof to drive adoption of MST at all four of the world's Gate-All-Around customers in the future. Not only can MST be deposited into those structures using existing tools and standard gases but it is a far superior diffusion blocking material than those currently used by the industry. We anticipate that we will be able to implement this technology with leading industry players over the next few quarters. Of course, we're quite excited by these recent results since our advanced node, our Gate-All-Around business segment has extremely high revenue potential. But we're also making convincing progress in our other customer areas, so let me provide a short update there. In DRAM, the technology road map is at a key inflection point as DRAM finally follows other logic and memory architectures in making better use of the vertical dimension. We are getting involved in offerings to enhance the performance of next-generation architectures in addition to solutions for products currently in production by the major memory suppliers. During the last few months, we have had two major solution offerings that we're working hard to validate since their market potential is very high. Notably, these are both wafer-based solutions, which are easier to adopt and test, avoiding many of the integration complexities required in some of our other applications. And with the current robust market for memories, we believe our potential customers will have a generous R&D budget to pursue these ideas. Atomera is currently conducting many wafer runs with our various customers. Most of these are processing through their fabs, so we will expect more information soon. One customer has just gotten preliminary results, which look promising. But we will get a better view when the final data is available in about a month. If the results look good, we'll be pushing for a joint development agreement and a license to advance this technology to production. In the RF-SOI space, our offering is very strong, considering that it can provide performance improvements for multiple important areas, including for the RF switch and the low-noise amplifier. Because we are working with so many of the key players in this industry, including foundry and fabless suppliers, we hope to drive adoption broadly. Again, in this space, our solution can be implemented with a wafer-based solution, meaning our customers can choose to deposit it on wafers themselves before starting their full manufacturing process or they can even buy RF-SOI MST wafers from a third-party supplier. Our license structure supports both of these approaches. In power, we are working with some very large players to ultimately be incorporated into their product offerings. Although we had a setback with ST last year, we continue to work with them on MST solutions across multiple business units. In addition to our traditional BCD business opportunities, this quarter, we had several other inbound interests emerge for power applications. Through our own internal analysis and modeling, we have uncovered an opportunity for MST entrench bets, which are an important component in optimizing energy efficiency in AI data centers. Our simulation show the potential for MST to improve performance by more than 40%. We got this to result after Christmas and already have a customer interested in kicking off development. Similarly, using our MST [indiscernible] simulation capability, we have demonstrated how MST can improve HBT devices, which are high-speed transistors frequently used for amplifying and switching signals in RF communication systems. Discussions are underway with a potential first customer in this application as well. In GaN, I'm happy to report that our first customer -- commercial customer has now started running wafers for GaN on silicon with MST technology. For many reasons, this is exciting. This large customer can grow their own GaN wafers and manufacture electrical devices on them, which means they can move even faster than our in-house work with Sandia National Labs in Texas State. So we expect that we will actually move ahead of our own internal development efforts over the next few quarters. Second, they are exploring GaN in both RF and power technologies. These independent efforts by multiple industry and scientific partners frequently can accelerate time to revenue, which is what we're hoping to accomplish. Last month, we announced that our GaN on Silicon concept paper had been approved to move to the proposal stage for a project with Power America to advance the state-of-the-art and wideband GaN materials. We announced this for a variety of reasons. First, we wanted to show the widespread interest from customers, the science community and industrial organizations for an MST solution for GaN on Silicon. Indeed, we've already received several letters of support for multiple future customers showing interest in this solution. Second, this concept paper was our first application for outside development funding. And although the funds sought for this first effort are modest, they put us in the pathway for a variety of future material development funding opportunities, which can provide us assistance going down the path we are planning to travel anyway. By engaging in these joint development opportunities, we are promoting our technology, receiving financial assistance and assuring a customer base all in one project. To summarize, the past few months have been an incredibly productive time in terms of technical development and the buildup of a variety of new customer opportunities that I believe will lead to business deal announcements later this year. Finally, as we close out 2025, let me give you a thought on -- a few thoughts on our accomplishments. Last year, we took our early development and simulation results on Gate-All-Around and converted it into what I now believe is our greatest company opportunity. We did that through working with a lead customer and with a strategic partner who is also a major equipment OEM. This is a significant departure from how we've approached the market in the past. The industry has a long history of relying on this OEM to deliver them material solutions for their problems. So we truly believe that their influence will help us to convert our recent strong technical results to licenses and revenue. We made technical breakthroughs in our other core markets to enable tiller applications like LNA for RF-SOI, a new architecture for BCD and next-gen DRAM solutions. Using AI, our development team has gotten better results more efficiently than ever before. We kicked off a record number of wafer runs without leading customers, initiated several new projects and solidified the business talent on our team, which should lead to further contract announcements over the course of this year. And much of this work was done, emphasizing wafer-based products, which we believe will result in faster time to revenue. In short, 2025 efforts have set us up well for commercial announcements later this year. With that, I'll turn the call over to Frank to review our financials. Francis Laurencio: Thank you, Scott. At the close of the market today, we issued a press release announcing our fourth quarter and full year results for 2025. This slide shows our summary financials. Revenue in 2025 was $65,000 and consisted of NRE fees for wafer deliveries and MST CAD licensing. Our GAAP net loss for the year ended December 31, 2025, was $20.2 million or $0.65 per share, compared to a net loss of $18.4 million or $0.68 per share in 2024. On a non-GAAP basis, 2025 net loss was $16.1 million or $0.52 per share. And 2024 net loss was $15.4 million or $0.57 per share. GAAP operating expenses were $20.9 million in 2025, which was an increase of approximately $1.5 million from $19.3 million of GAAP operating expense in 2024. The main driver of the increase in GAAP operating expense was a $1.1 million increase in stock compensation expense due to a change in our executive equity-based compensation. In Q1 2025, we implemented PSUs for executives which vest based on the performance of our stock price as compared to the Russell 2000 Index. These PSUs vest over 3 years whereas the options and time-based RSUs that had been granted to executives in prior years, vested over 4 years. Although the vesting period is shorter, executives only vest in PSUs based upon our stock price performance. With the exception of stock compensation expense, the drivers of GAAP and non-GAAP expenses are substantially the same. And therefore, the rest of my remarks will only refer to non-GAAP results. Please refer to the slide presentation for a reconciliation between GAAP and non-GAAP expenses. Total operating expenses in 2025 were $15.9 million, an increase of $429,000 from $15.4 million in 2024. R&D expenses increased by $794,000 from $9.4 million in 2024 to $10.2 million in 2025, primarily due to a $676,000 increase in outsourced engineering as we utilize various new device fabrication vendors replacing TSI semiconductor. G&A expenses decreased by $272,000 from $5.1 million to $4.8 million, primarily due to a $421,000 decrease in compensation expense, offset in part by $118,000 increase in professional fees for legal, IP and audit fees. Sales and marketing expense decreased by $94,000, reflecting lower head count but offset by some recruiting fees. Company-wide, our compensation expense, again, on a non-GAAP basis, excluding stock compensation, declined by $582,000 in 2025 compared to 2024. The reduction in compensation expense reflects our Board's pay-for-performance discipline. While we achieved important technical milestones in 2025, the Compensation Committee determined that payout of the full executive bonus was not justified by commercial progress made during the year. Therefore, the committee withheld approximately $669,000 in executive bonus compensation affecting the full executive team. The withheld amount may be earned in 2026, based on achieving rigorous commercial objectives. Turning to our quarterly results. Fourth quarter 2025 non-GAAP net loss was $3.3 million or $0.10 per share, compared to a net loss of $4.4 million or $0.14 per share in Q3 and a net loss of $3.9 million or $0.14 per share in Q4 2024. Non-GAAP operating expenses decreased by $1.1 million to $4.3 million -- sorry, from $4.3 million in Q3 2025 to $3.2 million in Q4, primarily due to the reversal of our bonus accrual, which occurred in Q4. Our balance of cash, cash equivalents and short-term investments on December 31 was $19.2 million compared to $26.7 million at the end of 2024 and $20.3 million at the end of Q3 2024. We used $14.9 million of cash in operating activities during 2025, $3.2 million of which was used in Q4. During 2025, we sold approximately 1.6 million shares under our ATM facility at an average price per share of $5.15, resulting in net proceeds of approximately $7.6 million after commissions and offering expenses. As of December 31, 2025, we had 32.4 million shares outstanding. After year-end, we've raised an additional $3.2 million of net proceeds by selling approximately 1.3 million shares at an average price of $2.47. For Q1, we expect to recognize revenue in the range of $50,000 to $100,000 from shipment of MST wafers to customers. Consistent with our usual practice, we are not providing revenue guidance beyond this quarter. Our 2025 non-GAAP operating expense was $15.9 million, which is well below the guidance range I provided last quarter. That's primarily due to reversing $669,000 of accrued bonus. For 2026, we will continue to aggressively control costs, and we've limited our expense growth to those areas directly related to revenue and near-term commercial progress. Those increases mainly consist of adding two senior go-to-market leaders. The first of those was our VP of Sales, who came on board in October, and the next will be a new Head of Marketing. The comparison of our planned spending in 2026 versus 2025 looks distorted by the potential payout this year of the executive bonus withheld from 2025. And because withheld amount will have to be accrued this year on top of accruing 2026 bonus. As a result, we expect our non-GAAP operating expense to be approximately $18.5 million in 2026. Now on paper, this is a 17% increase. But if normalized for the timing of the executive bonus accrual, it is more in the range of 8%. I would point out also that earning back deferred executive bonuses as well as earning 2026 bonus will require us to execute against aggressive, commercially focused milestones. With that, I will turn the call back over to Scott for a few summary remarks before we open the call up to questions. Scott? Scott Bibaud: Thank you, Frank. The entire focus of our efforts in 2025 is getting to commercial agreements. The work we've done up to now have positioned us well to close on those opportunities and I look forward to sharing our successes with you as the year progresses. Mike, we will now take questions. Mike Bishop: [Operator Instructions] And right now our first question comes from Richard Shannon of Craig-Hallum. Richard, go ahead. Richard Shannon: Great, Mike. Can you hear me? Mike Bishop: Yes. Yes, we can. Richard Shannon: Okay. Great. I'm in the airport here. A little bit of noise, so apologies for that. I don't have a ton of time before I got to run to my plane here. But let me ask just a few questions here. Scott, some really interesting statements regarding Gate-All-Around here. If I caught your comments correctly here, you said that you're expecting some -- I forgot the exact language you used, but some sort of important next steps here in the next few quarters. typically, you've been reticent to give somewhat definitive time frames for getting to major milestones and that you are here. So maybe give us a sense of why you're saying this. Your confidence level is clearly quite high. So help us understand this level of confidence and why? Scott Bibaud: Yes, I would say on the Gate-All-Around technology, let me -- do you mind if I just share this slide to answer your question, Richard? Richard Shannon: Please do. Scott Bibaud: Okay. On the right-hand side, you can see where MST is deposited around the source and drain structures. That is an incredibly hard thing to do. We've been talking with our Gate-All-Around customers about using MST to block dopant diffusion like where these little red arrows going to 1 of the biggest problems that people have is that the phosphorus opens get into these channels here. And the channels can only handle a couple of phosphorus atoms before they really start to agree very significantly, which affects yield and performance and so forth. So all along, they've been saying, okay, that's interesting. We know MST can block the phosphorus. But first of all, can you even deposit it in these tiny little structures that are -- they're 2 nanometers. And just to give you an idea, it takes about 100,000 nanometers to get to the width of a hair. That's how small these are. And so we had to prove that, and we spent a long time in the lab building devices like this to show that we can deposit MST with high quality there, and we have done that. Second thing is when we put that tiny layer of MST, does it really still block the phosphorus in that very, very small space because they're using something else right now that isn't very effective at blocking it, but are we better than that of the thing? And the answer to that question is, yes as well. We've recently just gotten the technology -- gotten the test data to prove that. And so it's early days. We've gotten that in the last month. We haven't been able to get out and talk to each of the data all around customers yet, but with our partnership, with our strategic partner, we really think we're going to talk to those guys, and they're going to immediately want to start testing that and trying it. So I'd say that's why my confidence is much higher. I would say we've rarely been as excited about some technology results inside the company as we are by what we have right now. Richard Shannon: Okay. Great deal. I'm sure I'll follow up a little bit on that one. Second other -- second question here is, you mentioned some -- you mentioned two things you have to prove, you are better than alternative solutions. We haven't really heard you talk about what other -- what your potential customers are considering here. Any way you can describe what those are, whether they're internal developments or something looking from other research organizations and to what degree you have visibility into how well those are doing as well? Scott Bibaud: Yes. So they're not -- we're not really talking about some lineup of other technologies. But what the industry has tried using in the past is silicon arsenic, and silicon arsenic is effective at just putting a spacer between the phosphorus and the channel, but it doesn't really prevent the dopant diffusion very well at all. And so we've actually done a lot of testing of our MST technology against silicon arsenic and proven that we have vastly better diffusion blocking results. And the second thing is that the industry does not like to use arsenic in its manufacturing process -- that can help it. It's expensive to use and dangerous and therefore, offering a solution that removes that material is probably considered good by the industry. Richard Shannon: Okay. Fair enough. Very interesting here. My last question before I've got to run here, Scott, is you talked about a number of inbound calls here in the power space, which I know it's a space that you've been pushing for a while. And obviously, STMicro was aiming towards that before it's, call it, set back. You'd characterize this in the RF-SOI space a few years ago about having significant coverage, I think, more than half of the market share of the space here. Anyway to characterize how much of the power space you're covering with -- when you add up all these new companies that are coming to you? Any way you'd characterize that? Scott Bibaud: Yes, it's a little bit harder. I think on RF-SOI, it's a pretty compact group of companies, and we feel very confident that we're working with the vast majority of them. On power, it's a much bigger market. It's a much more diverse customer base. So I wouldn't say we're working with most of the people, of course, -- we -- like we talked a little bit about the work we've done in TrenchFET when we did do some work on TrenchFET. We reached out to the leaders in TrenchFET and some other folks that we know are interested in advancing their technology and started talking to them and that worked well and the same thing with HBT. And so yes, I think we're expanding -- and then a lot of the GaN work that we're doing is in power as well. So we're talking to a lot of companies working in the power space, but I can't really give you -- I can't really say it's the vast majority in that case. Richard Shannon: I wasn't expecting the vast majority, but since the power space is very large. Well, I thought if there was -- I mean, if you even had 10% or 20%, that would be a pretty good coverage there. But I appreciate that characterization. I've got to jump out of line, Scott. Scott Bibaud: All right. Thank you, Richard. Mike Bishop: All right. Thank you, Richard. We have some questions coming in on the Q&A line. Although I will start with one, Scott, do -- can you give an update on the progress for your Vice President of Sales, Wei? Scott Bibaud: Sure. Wei joined in October, and he's been coming up to speed and generally very, very helpful. I'm super enthusiastic about having someone who's pushing the team as hard as he is on the sales side. He's not only driving our efforts very specifically with existing customers and helping us find some new ones. He's also targeting a bunch of relationships that he's had in the past that he's bringing in with us and that does allow him to -- for us to engage with customers from kind of a different angle, and that's been very positive. So I think so far, so good. Mike Bishop: Great. And a number of questions about wafer activity at the fab. And as it relates to general activity level, how would you characterize that? Scott Bibaud: Yes. So I think just starting earlier in the middle of 2025, we started to get a lot of customers coming in with wafer run simultaneously, which is quite busy for us to get them into our fab and deposit MST on a very high-quality basis and they get it back out, so they can start running the wafers. Today, we're still running things in our own fab, but for the most part, we've shipped out a lot of that stuff out to our customers. And now we're kind of in a waiting game, it takes 6 to 9 months for customers to run their wafers once we send them back to them and then get the test results, and then we'll review those and we'll figure out the next steps from there. But we really feel confident that what we have done in these runs is good stuff. We use MST CAD simulation software to figure out what we expect the outcome of these runs to be and we're really hopeful that our TCAD has been accurate. And if we get the results that we hope for, that our customers want to move forward into a productization effort. Mike Bishop: Okay. And generally speaking, I have a question here, and I think we've covered it on prior calls, but can you describe why selling blank wafers makes it easier to go to market? Scott Bibaud: Yes, absolutely. Okay. I just showed this graphic of a Gate-All-Around device, and that is a really, really hard device to integrate into. But you can imagine when -- if we're trying to integrate into that device, the customer starts a starting wafer, they build up a whole bunch of structures. And then at some point, they make a hole in those structures and they say, okay, put your MST in here. And then we'll have to figure out how to fill around it and all of the different layers that surround it affected, right? That's called integration engineering, it's very challenging. But for many of our applications, we talk about wafer-based products, that would be when the customer buys a wafer, and they put MST on immediately, the blank wafer. And then they start processing their -- all of their -- the rest of that process on top of it. Therefore, we don't have to work through all those challenging integration issues that we would have for something that where MST gets deposited in the middle. So today, I talked about a couple of applications we're looking at for DRAM that would be wafer-based products, where we're shipping them to wafer. I mean, obviously, we won't be wafer manufacturers, but we would help the most solution that would go right on the wafer. RF-SOI, our solutions that are wafer-based products and also our gallium nitride, our GaN solutions are wafer-based products. So we've talked about it before. We're excited about those because they're easier to integrate, and therefore, we think faster time to revenue. Mike Bishop: Okay. Great. Here's another one. Can you please explain more about power saving in AI than how MST can help achieve that? Scott Bibaud: Yes. So it's a lot of ways. I just showed you the Gate-All-Around transistor. So fundamentally, in semiconductor manufacturing like that, if you can bring a performance improvement, you could also probably trade that off to get lower power if you chose to do so. So that's one way. Another way is with our power solutions like on our BCD products or our TrenchFET products or our GaN products. Those are targeted for the type of electronics that will be developed that go into AI data center to help lower the power in the racks. So I'll give you one industry dynamics that we're tracking in AI data centers. They have historically used a 12-volt power supply on the rack. But recently, the industry is moving away from 12 volts and they're moving to 48 volts because 48 volts is 4x more efficient at saving power when you're providing power to the racks for all of those servers. The 48-volt power supplies use a lot of TrenchFET devices. That's the primary device that they use in there. And so we are trying to offer solutions for TrenchFET, so we can help to address that. The other thing is gallium nitride obviously, a very power-efficient devices. Those of you who have the small power supplies that go into your backpack or suitcase like they weren't able to do before you understand that those are much more efficient, and that's why we're trying to engage in gallium nitride. Mike Bishop: Interesting. Thank you. Okay. Can you give us an update on your JDA1 and JDA 2? Scott Bibaud: Yes. So and JDA 1, I have to be careful that I'm not kind of divulging too much about what they're working on. But we continue to have to be working with JDA 1, and I'm hopeful that some of the technologies that I talked about today will kick them into high gear to -- in a business unit to kind of move that forward towards a production development effort like we've been waiting for, for -- honestly, for a little bit too long. JDA 2 is one of the customers that is currently running wafers with us. And so I can't say too much about exactly where they are right now, but they're running wafers. Mike Bishop: Great. And going back to the Gate-All-Around, is MST being evaluated at the customer's fab at this point? Scott Bibaud: Yes. So we mentioned that we're working with one Gate-All-Around customer today who helped us -- so when I showed that structure, and I showed that we had to do deposits inside there, you really need to work with someone to get access to those wafers to try out things on those structures. And the good news is we have been working with one of the Gate-All-Around potential customers to evaluate MST today. So yes, we are in one of them. I hope to be in all four of them. Mike Bishop: Okay. And when do you expect an evaluation to be completed of the wafers. Scott Bibaud: For Gate-All-Around or? Mike Bishop: Yes. For Gate-All-Around. Scott Bibaud: For Gate-All-Around, it's very hard to say with some of the customers we're planning our visit to show them all this data that we have. We believe that the data that we have is good enough that they may not even require us to do deposition inside their Gate-All-Around structure because we've proven that we can physically do it. And then what we'd be trying to do is to convince those customers to install MST in their fabs and have their R&D team take over and start implementing this. How fast that will happen? It's hard to say, but I will say the people that are working on Gate-All-Around are working very fast -- and if they adopt, they're going to be pushing us as hard as we ever been pushed by a customer in the past. Mike Bishop: Okay. Great. And just one last question here is on how MST can help or improve quantum computing. Scott Bibaud: It's interesting. That's something we're working on right now. I don't really -- I can't really talk about the way that our MST technology will address quantum, but I can tell you that's something we're working very hard on right now. In the past, we had a theory about MST's ability to improve the purity and availability at a cheaper price of Silicon-28, which is a critical wafer type that's used for quantum wells. But we -- yes, that really just didn't pan out. So we're working on other technologies right now. And I hope we'll be able to talk to you guys about that later this year. Mike Bishop: And Scott, you can proceed with any closing comments. Scott Bibaud: All right. Well, I guess -- I want to just thank you all for joining us to hear the progress being made here at Atomera. Continue to look for our news, articles and blog posts, which are available along with investor alerts on our website atomera.com. Should you have additional questions, please contact Mike Bishop, who will be happy to follow up. Thanks again for your support, and we look forward to our next update call. Mike Bishop: Thank you. This concludes the Atomera Fourth Quarter Conference call.
Operator: Good day, and thank you for standing by. Welcome to the Instacart Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, the Vice President of Investor Relations, Rebecca Yoshiyama. Please go ahead. Rebecca Yoshiyama: Thank you, Carmen, and welcome, everyone, to Instacart's Fourth Quarter and Full Year 2025 Earnings Call. On the call with me today are Chris Rogers, our Chief Executive Officer; and Emily Reuter, our Chief Financial Officer. Before we dive in, I want to provide an update on our approach to earnings communications. Beginning with Q1 2026, we will not publish a quarterly shareholder letter and instead, we will move to an annual shareholder letter. We believe this approach allows us to better reflect the long-term nature of our strategy, step back to assess our progress more holistically and focus on the sustained value we're building. We plan to continue to provide regular updates through our quarterly earnings call, a detailed earnings press release and supplemental materials. Now on to today's call. We will make forward-looking statements related to our business plans and strategy, developments in the grocery industry and our future performance and prospects including our expectations regarding our financial results. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. You can find more information about these risks and uncertainties in our SEC filings, including our last Form 10-Q. We assume no obligation to update these statements after today's call, except as required by law. In addition, we will also discuss certain non-GAAP financial measures which have limitations and should not be considered in isolation from or as a substitute for our GAAP results. A reconciliation between these GAAP and non-GAAP financial measures is included in our shareholder letter, which can be found on our Investor Relations website. Now I'll turn the call over to Chris for his opening remarks. Chris Rogers: Thanks, Rebecca. Hello, everyone. I hope you've all had a chance to read my annual shareholder letter. I am incredibly proud of what we delivered in Q4. We closed out the year with our strongest GTV growth in 3 years, ads and other revenue grew 10% year-over-year. And based on our strong conviction in how the business is performing, we repurchased $1.1 billion worth of shares in Q4 alone. Looking ahead in Q1, we're guiding to the strongest year-over-year GTV growth we've ever provided as a public company, and we're doing it while continuing to expand profitability. The performance gives us confidence not just in the quarter ahead, but in our ability to drive durable, profitable growth over the long term. It's clear that we have real momentum. And today, I want to focus on what's driving that. It starts with the category that we operate in. Grocery is massive, still early in its online journey, highly fragmented and one of the most operationally complex categories in all of retail. Those dynamics have historically slowed online adoption, but they're also exactly why our differentiation matters and why we're continuing to extend our lead. Because we stayed relentlessly focused on grocery, we have purpose-built technology, deep retailer integrations and ongoing systems designed specifically to handle that complexity at scale. Just as important, these systems work together. So our advantage is compound with every order we fulfill, which is now up to more than 1.6 billion lifetime orders. That's why, as I said in the letter, we're now in a position to press our advantage. Our strategy is clear, be the platform consumers trust for all of their grocery needs, provide the technology grocers rely on to power their omnichannel business and be the advertising ecosystem brands prefer on Instacart and across many other services. And with generative AI accelerating execution across our platform, we are increasing our velocity, compounding our advantages and driving greater efficiency, all while strengthening the value of our first-party data. Our momentum is showing up across multiple engines for growth, starting with marketplace. Today, more than 2,200 retail banners spanning nearly 100,000 locations are accessible on the Instacart app or instacart.com. As we've expanded selection, we continue to raise the bar on convenience, quality and affordability. And because our marketplace fundamentals are strong, we're able to reinvest in marketing and incentives efficiently, driving even more growth in operating leverage. Enterprise is our next growth engine. Enterprise is not just another channel for us. It's how we build deeper, more durable partnerships with retailers. This includes custom integrations, shared planning and road maps, joint OKRs so that we're aligned on what success looks like with real mutual upside. And today, we now power more than 380 grocery e-commerce sites, and we see a lot of runway ahead, both to launch with new partners and to expand with existing partners as they adopt more of our solutions. Costco is a great example of how this progression works. We started with our marketplace and storefront experience, building trust and driving growth and from there, we upgraded Costco to Storefront Pro and to Costco business centers and launched additional fulfillment options like priority delivery. More recently, we worked together to launch a benefit for Costco executive members who are their most valuable customer segment, and we expanded internationally with the launch of Costco's first-ever same-day site in France and Spain. Sprouts is another strong example. We began by launching e-commerce on our marketplace and by building a storefront on sprouts.com. From there, we expanded fulfillment with curbside pickup, where we put our picking technology directly in the hands of Sprouts associates. As the partnership deepened Sprouts upgraded the Storefront Pro with Carrot Ads unlocking new incremental revenue streams. Today, we're leaning in even further together with in-store experiences like Caper Cart and FoodStorm, and we're now getting ready to launch AI solutions starting with Cart Assistant. And these examples are not isolated cases. We see this again and again. Partnerships start with e-commerce capabilities, they expand through fulfillment and ad monetization and they deepen with in-store and AI capabilities over time. Each step helps retailers accelerate growth and allows us to participate in that growth as well. In addition, Enterprise unlocks system-wide value for us in the same way that marketplace learning drives enterprise innovation, enterprise also makes our entire platform better. We can start with whatever our retailer needs and we can build from there. And as our partnership deepens, consumers get a better experience. They engage more, they place more orders. And that scale lowers our cost to serve and improve efficiency across marketplace and enterprise allowing us to invest even more in the shared technology that powers the entire platform. This is why our enterprise platform is a growth engine and why I'm so confident that we have multiple years of profitable growth ahead of us. Our growth and momentum across Marketplace and Enterprise also strengthens another part of our business, our ads ecosystem and our data solutions. Brands and agencies want strong performance and they want measurements that they can trust at scale and that's exactly what we deliver. In addition to ads on Marketplace, we've expanded our advertising technology and demand to more than 310 retailer-owned sites through Carrot Ads, up from 220 a year ago. As our reach has grown, we've pulled in more demand. In Q4, more than 9,000 brands advertised on Instacart, up from 7,000 last year. And this diversification makes our ads ecosystem stronger and more resilience. We're also starting to unlock advertising inside physical stores through shoppable display ads on Caper Carts. Early engagement has been encouraging. For example, a simple got everything you need prompt is driving a nearly 1 percentage point lift in basket size on average. And this is just one data point that reinforces our belief that Caper will be one of the most powerful in-store advertising platforms over time. We're also investing in incremental advertising and other revenue opportunities built on our first-party data. For example, with our off-platform partnerships, where we can help brands reach consumers beyond Instacart, whether that's through search, social, recipe or video and in many cases, connect that activity back to real purchases on our platform. We're also creating additional ways to monetize our data, including with the consumer insights portal, which now has a dozen paid subscribers in just a few months. Finally, I want to spend a few minutes on AI because it's no longer about just about making teams faster or more productive. We're seeing fundamental shifts in how work gets done and how platforms create advantage. AI shifts may pose a risk to certain businesses, but we believe these shifts favor platforms like Instacart, that combine technology with real-world operations and unique data at scale. This is where we win and why we think we will excel and be a net gainer in an AI-driven world. Grocery isn't a digital-only problem. It's physical. It's operational. It's relationship-driven, and we operate at that intersection with deep retailer integrations and experienced shopper network and a constant presence inside stores. That operating model gives us one of the richest grocery data sets in the world. For example, our orders on average, include at least one replacement. That means we don't just understand what people buy we know what they intended to buy and what's acceptable when that item isn't available. And those insights can only be earned by having a network of shoppers inside stores, solving real-world inventory problems at scale. Put simply, our physical operations make our data better, and that data makes our technology smarter, more unique and more effective, exactly what's required to succeed in a category as complex as grocery, and it underscores why we win as the leading grocery technology partner for the industry. Internally, we're also leveraging AI to accelerate our execution. Over the last year, we invested heavily in connecting our tools, data and infrastructure. So AI can operate across our systems, not in silos. As a result, our teams are using AI not just to move faster on a single workflow, but to solve broader problems and execute across multiple initiatives in parallel. You can see the impact in how we're executing. Over the past year, average output per engineer is up nearly 40%, which includes 10% of our team increasing output by 80%. This momentum is already accelerating into 2026. And for new projects, we believe AI is now enabling us to build production-grade software more than 4x faster than before. And we're doing all of this while improving quality. System reliability is up even as engineering throughput has increased significantly. That's not incremental improvement. It's a fundamentally different pace of execution, and it's fueling momentum across our business. For example, on our enterprise platform, we're onboarding more retailers faster while delivering more customized white glove solutions at scale, which was not possible before. You can also see it in the breadth of what we're delivering from improvements in quality and fulfillment efficiency to new customer experiences like our Smart Shop technology to our white label AI assistant, known as Cart Assistant, to building physical AI capabilities in-store with Caper Carts and Store View and to expanding retailers' e-commerce capabilities internationally. And then on ads, AI is powering more relevant consumer interactions and simpler, more efficient tools for advertisers. It's fair to say that we are using AI across the board to accelerate and improve all aspects of our business. Overall, 2025 was a defining year for Instacart. More than 26 million customers trusted Instacart and engagement continues to deepen with approximately 10 million customers placing at least 1 order in December alone, a new high for the company. That's a clear signal that our strategy is working, our operating fundamentals are strong. Our teams are executing at a high level across our growth engines, and we're well positioned to be the clear winner with AI. And as we look ahead to 2026, my mindset is clear. This is the moment for us to accelerate. It's time to press our advantage, extend our lead, further scale our platform and unlock new opportunities to drive long-term profitable growth. We're still early in the omnichannel transformation of grocery. Instacart's earned the right to lead it, and I'm determined to make that happen. With that, I'll turn it over to Emily to walk through the financials. Emily Maher: Thank you, Chris, and hello, everyone. Our business is operating with tremendous momentum across multiple growth engines powered by a strong operating foundation and Instacart's distinct advantages. That foundation and the large underpenetrated market ahead of us is exactly why we're continuing to invest across a balanced portfolio of short-, medium- and long-term growth initiatives to extend our category leadership. We're doing this with discipline, guided by clear guardrails, return expectations and deliberate trade-offs across investments. And we continue to drive efficiency and leverage across the P&L. We've been consistent with this approach and it's working. Over the past few years, we've accelerated GTV growth while expanding adjusted EBITDA. That track record gives us confidence in our strategy and our ability to deliver even more profitable growth over the long term. Now let's dive into our Q4 results. We ended the year with momentum. GTV was $9.85 billion, up 14% year-over-year, marking our strongest growth in 3 years. This performance was driven by orders reaching $89.5 million, up 16% year-over-year. And as we expected, average order value decreasing by 1% year-over-year, reflecting growth in restaurant orders. Transaction revenue grew 13% year-over-year and represented 7.1% of GTV, which was flat year-over-year. This was driven by investments into affordability to drive customer engagement, largely offset by increased fulfillment efficiencies. As a reminder, we manage multiple levers across our P&L, so transaction revenue may fluctuate quarter-to-quarter as we intentionally reinvest in growth. Advertising and other revenue grew 10% year-over-year, reflecting our strong GTV performance, our onboarding of more Carrot Ads partners throughout the year, diversification across more than 9,000 active brand partners and the extension of our data advantage through off-platform partnerships and new data solutions. This momentum helped Q4 advertising and other revenue outperformed our expectations even as certain large brand partners continue to navigate macro uncertainty in their businesses. Some of our advertising and other revenue growth is also driving higher payments to publishers, which includes what we pay certain Carrot Ads partners for the benefit of advertising on their sites and incremental ad budgets that we optimize and deploy on behalf of brands on certain off-platform partnerships. While this shows up as higher cost of revenue, it's intentional and incremental growth by design. That's because these initiatives deepen our relationships with brands, unlock additional ad budgets and strengthen the broader platform by delivering value to retailers and consumers. While payments to publishers scale throughout 2025, we expect its year-over-year growth to moderate in 2026. In Q4, we also continued to demonstrate financial discipline and operating leverage. GAAP net income was $81 million, down 46% year-over-year. This decline was primarily due to higher G&A expenses related to nonrecurring legal and regulatory matters, including a $60 million settlement with the FTC. Absent these nonrecurring expenses, Q4 GAAP net income would have increased year-over-year. Adjusted EBITDA grew 20% year-over-year to $303 million. We also generated operating cash flow of $184 million, up 20% year-over-year. Because of our confidence in the strength of our business today and in our ability to keep investing, scaling and pressing our advantage, we opportunistically repurchased $1.4 billion of shares in 2025. This included $1.1 billion of repurchases in Q4 alone, which included our $250 million accelerated share repurchase program. We ended 2025 with approximately $1 billion in cash and similar assets and $671 million of remaining buyback capacity. Now on to our Q1 outlook. We're encouraged by the momentum we're seeing across the business and are starting the year from a position of strength. We anticipate GTV to range between $10.25 billion to $10.275 billion. This represents year-over-year growth between 11% to 13%, with GTV growth expected to outpace orders growth as we lap the full launch of our $10 minimum basket feature for Instacart Plus members in the prior year quarter. We expect advertising and other revenue to grow 11% to 14% year-over-year reflecting the ongoing benefits of diversification across supply and demand across our platform, in addition to a positive start to the year across large, mid-market and emerging brands. We are also guiding to Q1 adjusted EBITDA of $280 million to $290 million, up year-over-year by 15% to 19% and down quarter-over-quarter, primarily due to advertising seasonality. As we look ahead to fiscal 2026, we remain committed to steady annual adjusted EBITDA year-over-year growth at a rate that outpaces GTV growth. Similar to prior years, we expect this rate of expansion to moderate year-over-year as we reinvest to accelerate across our multiple growth engines and lap some of the more significant operating expense efficiencies realized in 2024 and 2025. Overall, we finished 2025 strong and are off to a great start in 2026. Our momentum is building, and we have multiple engines for growth and levers in our P&L to drive durable, long-term profitable growth and accelerate omnichannel grocery adoption for the industry. With that, we'll open up the call for live questions. Operator, you may begin. Operator: [Operator Instructions] Our first question comes from Douglas Anmuth with JPMorgan. Douglas Anmuth: You discussed in the letter how grocers come to you for technology and not just as a demand channel. How should we think about the scope of the opportunity here in terms of both marketplace as well as enterprise adoption? And how do you think about kind of the addition of new retailers versus deeper penetration with existing? Chris Rogers: Yes, that's a great question. Thank you, Doug. I'll explain how we think about these -- the marketplace and enterprise side of our business. And I'll start by saying both of those have been growing and both are healthy. We do see enterprise as a real strategic advantage and also, in my view, a very underappreciated side of our business. And I know I made many of these points upfront, but I want to reiterate why enterprise is such an important part of our growth story here. It's, first and foremost, Enterprise enables much deeper strategic conversations and much deeper technical integrations with retailers. It's ultimately what's getting us on the same side of the table, and it's becoming the foundation for the relationship that we've built with retailers. So we're truly innovating there. We plan together based on everything that a retailer is trying to achieve. So it helps us drive growth through their owned and operated but also helps with the overall relationship back on our marketplace. So that -- the enterprise relationship that we have leads to improvements in the consumer experience that are felt on both sides. And I would say the other benefit of enterprise, which I want to call out is that is driving overall efficiency for us. It's increasing our order volume and density, it's lowering the cost to serve through shared infrastructure. It's allowing us to reinvest even more in share technology and capabilities that benefit everyone. And as far as future opportunity goes, I believe that there is significant future opportunity on the enterprise side in 2 ways, even though we've launched so many new partners on Store from Pro in 2025, we launched 70 versus just 30 the previous year, we're at 380. I do believe that there's quite a bit of room headway here, including internationally. We just launched our first partners internationally with Costco in Spain and France. So there's expansion opportunities with new retailers, signing and launching them but also by expanding with more products and services with existing retailers. That's the Costco example that I provided in the Sprouts example, where we call it land and expand internally where we have the opportunity to continue to serve solutions to retailers to drive growth for both of us over a longer time period. So our focus is really to grow both marketplace and enterprise, and we believe that there's substantial runway ahead. Operator: Our next question, Nikhil Devnani from Bernstein. Nikhil Devnani: Nice to see the GTV numbers and order growth. What do you think has driven the acceleration in the business as you look across core metrics from users to frequency and retention. And then related to that, maybe you could just step back a little bit. There's obviously a lot of focus on competition right now from Amazon, DoorDash and others, but your business is improving. So -- what are you seeing on the ground in markets where there is more competition? And are we just at an inflection point in grocery e-commerce adoption right now? Is that what you think is helping here? Chris Rogers: Yes. Thanks for the question, Nikhil. I'll start with some of the drivers of our Q4 results because we're certainly very proud of our results. As mentioned, GTV was up 14% year-on-year, which is the strongest we've delivered in 3 years. From a consumer perspective, we are seeing growth in demand for our service. And look, the core drivers of our Q4 results were strong user growth and strong engagement with our customers. Last year, in 2025, 26 million customers used Instacart with approximately 10 million unique customers placing at least 1 order in December, which was a record. In addition, GTV from our 2025 new customer cohort was the largest that we've added since 2022. And what we're seeing is that we're retaining those customers at higher rates year-over-year. So we saw very strong new user metrics and at the same time, we deepened engagement with existing customers, converting annual customers to quarterly and quarterly to monthly at faster rates year-over-year, and we steadily increased spend per customer through 2025. But when I back up and look at the kind of the total picture of what's driving growth, it's not just one thing. The performance is reflecting multiple growth initiatives working together, including continuous enhancement across products and selection, quality, affordability, convenience. We also have real momentum with the enterprise platform, as I just stated, and we also have momentum in the club channel, including deeper integrations with Costco with our executive member benefit and with new and existing partnerships, which drove growth for us, including with restaurants, our restaurant integration with Uber Eats as well as our embedded experience in Grubhub. So it's really not one thing that's driving our performance, a compounding effect of a strategy that is working across multiple vectors, and we're executing very strongly against that strategy. From a competition perspective, I'll start by saying none of the competition activity that we're seeing surprises us at all given the size of the market opportunity for online grocery. And also, I have to say, I think that the sentiment around the competitive impact to Instacart is very overblown. Obviously, we monitor competition extremely closely. But if you take a look at the facts on the field, as you mentioned Nikhil, our GTV growth accelerated through 2025. Q4 was our strongest quarter in 3 years. And we guided to 11% to 13%, our strongest guide. That's despite all of the Amazon headlines and expansions and despite restaurant delivery marketplaces expanding with grocery retailers. We continue to have the leading share among digital first players. We are exceptionally strong in large baskets which is 75% of the market. We lead in large basket activations. We lead at converting small baskets to large baskets and look, we do pay attention. We are watching what others are doing and others are going to have their strategy. But there is definitely a market for us here, and we feel good about our points of differentiation, including our leading experience across selection, quality, affordability and convenience and with the entire enterprise platform, which, really, it's a part of the market that others just aren't participating in and is actually helped by intense competition as retailers that we partner with or force to react. So overall, I'm confident in the size of the market opportunity for online grocery. There's lots of room to grow. I'm confident in our ability to compete in this market in the long run. Operator: Our next question comes from the line of Jason Halsen with Oppenheimer. Charles Larkin: This is Chad on for Jason. Advertising came in a little bit stronger in the fourth quarter than maybe kind of initially feared. Could you maybe talk about the puts and takes of that? Was -- were you able to drive better adoption? Or was like kind of macro impacts better than expected? Chris Rogers: Sure. Thank you for the question, Chad. So yes, we did deliver strong adds and other revenue performance at 10% in Q4. And I'll pull apart the drivers here. So first of all, we are growing GTV, which does help fuel investment from brands. That strength was coming from all segments, emerging, mid-market and large accounts even though we had highlighted some uncertainty around large brands on our last earnings call. But overall, if I take a giant step back, I think it's fair to say that our diversification strategy across supply, meaning new surfaces where we place ads and demands with more advertisers and larger budgets from existing advertisers, that is working. Carrot Ads expanded to over 310 partners, which is getting us to really significant scale. We now have over 9,000 brands advertising on Instacart. As of Q4, that's up from 7,000 a year ago. And all of that diversification makes our on-platform add stronger and more resilient. And at the same time, we're continuing to scale our off-platform ads and data offerings. So we're now partnered with Meta. We're now -- we're partnered with the Trade Desk, Google. Most recently, we partnered with Pinterest and TikTok, and we are successfully gathering incremental budgets for campaigns on these surfaces where CPGs can use our first-party data to target our high-intent audiences, measure their performance and drive conversion back on Instacart. So overall, I would say our stated strategy of building one of the most powerful and relevant ads ecosystem is working, and we're executing well against that strategy. Operator: Next question that comes from the line of Shweta Khajuria with Wolfe Research. Shweta Khajuria: Let me try 2, please. The first one is on international growth. As you think about medium to long term, how are you thinking about unlocking that opportunity? And are those markets structurally different when you think about grocery delivery? That's my first. And then second is on local commerce. So is there an opportunity and an unlock in addition to smaller baskets where perhaps you add on local merchants in addition to grocery, that could be the next leg of growth? Chris Rogers: Thank you for the question. I'll start with international. Yes, what we're finding is the markets are -- they do operate differently, but we continue to be very excited about our plans to take our technology to new markets. And we believe that it's a promising future growth vector for us, which we've been busy validating. So the more time that we spend in new markets, speaking to retailers, the more convinced we are that this product market fit for our tech because retailers in these markets abroad are all trying to solve the same problems as retailers in North America. Meanwhile, in many of the markets that we visited, grocery e-commerce is still quite underdeveloped. Many retailers don't have an online presence at all or their current website isn't shoppable and retail media is just getting started in many of these markets. We're also seeing interest in our -- for our in-store solutions in markets abroad like Caper and FoodStorm as retailers look to digitize their in-store experience. So as we've learned more, we're feeling really great about our stated approach. Our approach to going international as we're exploring major markets, the top countries in Europe and in Australia. We're entering with our existing enterprise technology like Storefront Pro, Caper Carts, FoodStorm. We're not building a new suite of technology for these markets. We're leveraging the best-in-class tech that we already have and localizing it in a way that we believe will be scalable. Our Costco launch in Spain and France is a great example of that approach. Spain and France are attractive markets. It's Storefront Pro. It's a trusted partner with Costco. All of that said, I will also say that while we have ambitious expansion plans, we're also extremely focused on being disciplined on expenses. So that we expand in a way that aligns with our profitability objectives and our ability to deliver annual EBITDA progression. On your second question around local commerce, we, as of today, we already serve all use cases. We excel in big baskets, but we're also quite strong in small baskets as well. One of the things that we did a prior year was we reduced the minimum basket for Instacart+ users to $10, which is a lead offering and that is to attract smaller baskets. In terms of merchants and the types of merchants, our primary focus is grocery. It has always been grocery. We do offer other types of retailers on the platform for the convenience of our customers, but we are primarily focused on the grocery industry. Operator: Our next question comes from the line of Bernie McTernan with Needham & Company. Stefanos Crist: This is Stefanos Crist calling for Vernie. I just wanted to follow up on the international expansion. How many of your other partners like Costco have international business? And is that the main strategy? Or are you also approaching new customers as well? Chris Rogers: Yes. Great question, Stefanos. So it's a mix. Many partners that exist in North America also exist in Europe, Costco is not alone in that. Many of our partners have a presence there. And it would be easy to kind of like look at which ones those were. For us, we're doing both. We're talking to existing partners about expansion like what we did with Costco because that's -- we've already got established trusting partnerships and we think that, that's strategically wise and oftentimes, North American retailers are looking for expansion plans because other markets are less developed from an e-commerce perspective, but we are also in these markets, meeting new retailers, selling to new retailers, making new relationships in the major markets in Europe. A great example of that was we spent time with Morrisons on in-store technology and now we're launching Caper Carts very soon in a Morrisons pilot market. So yes, we are -- we do have a sales presence in the market. We are talking to net new retailers and it's a big part of our strategy. Operator: Our next question comes from the line of Josh Beck with Raymond James. Josh Beck: I wanted to ask a little bit about price parity initiatives. Certainly, it seems like when grocers have adopted this pricing philosophy, you've seen a real nice elasticity benefit. So maybe how those discussions are progressing? And then you obviously shared a lot about agentic, which I felt very helpful. How do you think about the tailwinds to your business with respect to maybe on platform, so maybe easing the creation of large baskets? And then how do you think about perhaps the economics and opportunity off platform? I would assume there's a potentially much larger pool of customers. I just would really like to kind of hear your thoughts on those topics. Chris Rogers: Thank you for the questions, Josh. I'll start with price parity. So we work closely with retailers on all strategies, including on their pricing strategies. In the case of price parities or not applying a markup, we do work with retailers on that because we believe it's in their best interest, and there's a positive short- and long-term ROI for them. We consistently see price parity retailers outperform marked up retailers on Instacart. We see better retention price parity retailers. And this is important not just because we have a very large platform. Retailers obviously want to win share on Instacart, but also because they don't want to lose share to some of the largest digital players who are increasingly vying for market share. So we talk to our retail partners about -- the full strategic approach when it comes to digital, pricing is one of those. We think it's strategically wise for retailers to consider this. We've seen some movements so far this year, Hy-Vee just went to price parity, Rales just went to no markups as well on the platform. So we have seen traction. You're going to see us continue to focus on that going forward. When it comes to AI and the influence of agentic consumers, so we're innovating here, when it comes to agentic experiences. We're focused on building agentic experiences directly on Instacart in a seamless way that's very additive. We're designing agentic shopping experiences and deeper personalization that's driving better end-to-end outcomes for customers. In fact, we think that we can build the best and most relevant agentic experience because of our -- the unique data advantage that I talked about upfront. And it's not easy. Grocery is extremely complex as a category. It is highly personal, especially for the big weekly basket. You can imagine how many preferences or dietary restrictions come into play when you're working on a family's weekly shop. But we continue to believe that we're in the best position to solve for that complexity directly on Instacart and with our first-party data from 1.6 billion lifetime orders and our understanding of the grocery consumers. So you'll see us continue to do that. We're also partnering off platform with third-party platforms like OpenAI and Google and Microsoft to be wherever customers want to shop. So the example was with OpenAI, we were the first grocery partner to launch native checkout directly on ChatGPT and we see this as a channel to attract incremental demand and make it easy for customers to find Instacart, land on Instacart, transact with Instacart. That's our approach there. Operator: Our next question comes from the line of Eric Sheridan with Goldman Sachs. Eric Sheridan: Maybe a few just on Instacart+. Any update on the adoption rate you're seeing in terms of people coming into the program? How do you think about investing incrementally in growing Instacart+? And any differences you're starting to see or that are widening in terms of frequency, engagement or cross-platform usage from Instacart+ users? Chris Rogers: Yes. Thank you for the question, Eric. Yes, we continue to be pleased with the results of Instacart+. Instacart+ continues to represent the majority of GTV and orders on our platform. Paid Instacart+ members continue to grow, and Instacart+ customers are more engaged and they retain better than nonmembers. And all of that strength we reflected in our overall operating fundamentals that we shared, where we're seeing user growth and strong new customer retention metrics and deeper engagement with existing customers. From a strategy perspective, to the second part of your question, Instacart+ is designed to unlock customer value and drive engagement anchored by the $0 delivery but as well as several additional benefits like the $0 delivery minimum, which we lowered to $10 for grocery and $25 for restaurants. Also access to new use cases and services like restaurants with our Uber Eats integration, New York Times cooking, Peacock Premium. We expanded family accounts to 3 members. We also have in-app credits through select Chase partnerships. I'll also mention, which is relatively unknown, that the value of Instacart+ member extends beyond just our marketplace with the majority of our storefront retailers also using Instacart+ and offering $0 delivery there as well. So overall, Eric, we're pleased with the performance of the program. And yes. Operator: One moment for our next question, comes from the line of Colin Sebastian with Baird. Colin Sebastian: Great. I guess first, maybe just a follow-up on competition. I know you said that you studied this in a lot of detail. So I guess, are you seeing that there are distinct use cases for consumers on Instacart compared to how they may be using the traditional retailers or e-commerce platforms for grocery? Or is it just that the market is so large and online penetration is so low that there's just room for multiple players. And then my second question is actually on Caper Carts and sort of in-store monetization and maybe ultimately that ties as well to enterprise. But given the lift in basket size from the prompts on Caper Carts and even beyond that, I mean, what is the appetite you're seeing for advertising within the carts or demand for the carts and ultimately, the pipeline for that? Chris Rogers: Yes. Thank you, Colin. On the competition point, Yes, I do think that some of the competition is pulling in incremental use cases, small basket use cases. We continue to perform well in small baskets and large baskets, but we do continue to win where it matters most, which is big baskets. Baskets over $75 represent 75% of the digital market. And given the nature of some of the other offerings that we're seeing out there from Amazon and others, I mean, Amazon is an example, in their same-day experience, there's a few thousand SKUs and 4- to 5-hour delivery windows. To me, their experience is inherently geared towards smaller fill-in orders and not the weekly shop with over a dozen items. And we see that play out in the data that we see some of the same-day grocery baskets appear to be well below $50. And also, we are seeing that as Amazon has ramped up their same-day perishable expansion. The biggest source of their grocery customers are coming from in-store and it's not a share shift from us. And on that point, I do want -- I don't want to underestimate what that means for our business because as companies who -- as a company that works with hundreds of retailers that compete with some of these large players, it's the ultimate rallying cry for the rest of our partners. The rest of the market needs a technology partner to help them compete and win, and we are that trusted partner. From an in-store perspective, at the highest level, we believe deeply in the opportunity for technology in the physical store with e-commerce at low double digits, the vast majority of transactions are still happening in store for the foreseeable future and there's a massive opportunity to modernize and digitize that experience with seamless operations and advanced personalization, wayfinding, advertising to help customers discover products and to help customers save money while they're shopping. From a Caper perspective, we think Caper is an ideal solution to this, and it's an ideal way to engage the consumer. We're seeing great momentum. We have thousands of cart commitments with retailers, big and small. We're now live in nearly 100 cities across 15 states. We launched new pilots in the second half of 2025 with Sprouts and Wegmans and globally with Coles in Australia. And as I mentioned, with Morrisons in the U.K. From a scale perspective, we're also continuing to expand with Wakefern, where we're now live at about 20% of their stores and where we've recently launched shoppable display ads, which is our first foray into the ads business. So overall, our learnings are that customers love the experience. Retailers love it for the operational benefits and the potential to digitize their customers and turn them into omnichannel customers. And then, of course, we're all encouraged by the early signals we're getting from an ad revenue perspective. So I remain optimistic about the future of Caper and incredibly focused on accelerating our momentum here. Operator: Our next question comes from the line of Andrew Boone with Citizens. Andrew Boone: I wanted to ask about your ChatGPT partnership. Now that Instant Checkout is live, can you talk about the advertising intensity that you're seeing with those orders? Is there anything that we should think about as we think about the evolution of retail media now as those channels start to mature? Chris Rogers: Sure. So when it comes to ChatGPT, maybe I'll just back up and say our approach with the AI platforms right now is to ensure that we are served up in a high-quality way in a way that respects our data, but we are anywhere where a consumer wants to shop. And so our -- in fact, our goal is to help define what grocery shopping looks like across the next generation of digital agents, including Adiform. So we want to show up while we want to help kind of co-create the experience. on OpenAI, our partnership with OpenAI allows for consumers to shop, pay and now transact directly inside ChatGPT's app experience. So no switching or additional steps are required. We were the first company to do that. But we're also partnering with others. We're partnering with Google and Microsoft. In fact, we expect every generative AI company will connect into our grocery engine to drive demand for our retailers. From an ads perspective, I think like our immediate priority here is going to be to make sure that we're discoverable wherever customers choose to shop and that, that experience is incredible and that we're able to drive more users to our platform. And we think if we nail that there will be lots of opportunities to monetize that down the road. But more broadly, we are very excited about the opportunity of AI and ads together. That intersection, we think, long term, is going to be a benefit to our business. And there's a few reasons for that. One is on Instacart. So as you know, we're building conversational commerce and agenetic experiences. At the exact same time, the ads team is innovating alongside our consumer team who are building those genic experiences, and our ads will be directly informed by how consumers engage in agentic shopping. So our overall agentic ad strategy here is to build trust and utility with consumers that leverage everything that we've already learned from online in-store and in store. And the other thing that we're doing is we're using AI to improve all aspects of our ad technology, including behind the scenes with ranking and relevance and personalization. We're making all sponsored product ads more relevant, driving stronger engagement and more items added to the carts. That we're improving advertising to tooling and efficiency, making it easy for advertisers to manage and drive performance of campaigns, especially when it comes to emerging brands. Most notably, we've expanded our set of AI-powered recommendations for advertisers. So for example, where in a campaign is there headroom to raise your ROAS target while delivering your campaign goals or where can you increase new-to-brand coverage within the campaign? So we are highly engaged. We think we can be a leader here, and we look forward to the role that AI can play broadly in our advertising product down the road. Operator: Our next question comes from the line of Deepak Mathivanan with Cantor Fitzgerald. Deepak Mathivanan: Chris, obviously, I think grocery is one area where the way consumers shop can have a meaningful change with all the AI tools. I know you launched Cart Assistant basically for cart planning and things like that. And you also have integrations with ChatGPT and others. Are you seeing meaningful change in how consumers are doing grocery shopping, maybe starting with what they need for the week or for a specific recipe instead of kind of like staying with the typical routine for grocery shopping. And when do you expect some of the cart assistance and other AI experiences to be more broadly available? And then perhaps one more question on competition. What are you seeing specifically on retailers where Uber and DoorDash rolled out in the last few months. Are you seeing any consumer behavior changes? Chris Rogers: Yes. Thanks for the question. What I would say on all grocery engaged agentic experiences is, first of all, I'm a believer that consumer behavior is going to shift over time, but it's still very, very early here. If we look at some of the referral traffic that we get from outside platforms, it's all very -- it's all kind of like not material at this point in time. We are investing because we do believe that consumer trends are going to change over time. So we want to make sure that we're there. However, it's still very early days and very -- relatively small relative to the size of our overall business. We are extremely excited about Cart Assistant, which is being built on top of our kind of very large and proprietary data sets, which is key here. We're making progress, significant progress. We're not racing to get this out the door. Our goal is to make our Cart Assistant the absolute best. The most relevant experience for consumers, especially since we're going to be extending this on to partners like Sprouts and Kroger. So in our view, many early genetic experiences are going to be limited in scope, operate as single step interactions which can potentially create friction. Our goal is to have a comprehensive agent out in market. We're in beta testing now, Deepak. We're moving quickly. We're learning a lot. We have plans to roll out on Instacart marketplace by the end of Q1. To the second part of your question on Dash and Uber specifically. So look, when it comes to retailers sitting on other marketplaces, marketplace expansion, first of all, is not unexpected at all. And again, we grew despite to use the DoorDash example, DoorDash and Kroger launched at the beginning of Q4, we just had our best quarterly growth in 3 years. And these launches to us really reinforce what I've been saying all along, which is when a retailer goes non-exclusive, that's steady state. We see other platforms growth plateaus and their basket size stays small, it's under $75. We remain the share of sales leader versus digital first players on these retailers. And we're also now seeing that as other marketplaces add retailers, the incremental growth that they see from each additional retailer diminishes. Their growth is increasingly coming from other retailers on their own platform. So at the end of the day, I don't loose sleep over any of this because our marketplace is strong, our enterprise platform makes us even more resilient. And it gives us a seat at the table with retailers that a stand-alone marketplace does not have. And if you look ahead, although I mentioned last earnings that 80% of our GTV already comes from non-exclusive retailers, I just want to be clear that our model has always assumed that retailers would sit on multiple marketplaces. That dynamic is fully embedded into our guidance and into our long-term strategy. Operator: Our next question comes from the line of Ross Sandler with Barclays. Ross Sandler: Great. Going back to advertising, you guys, I think, said that for 1Q as you're going to grow 11% to 14%, which is a nice acceleration off of a 4-point tougher comps. So could you just talk about what you're seeing thus far in the quarter and then the pipeline? Are we finally through the rough patch with large CPG? And then Emily to bring you in, you mentioned that COGS might leverage in 2016 on the publisher fees. So could you just talk about that leverage there? And then is that material enough to have an impact on overall incremental margins in 2016? Chris Rogers: Yes. Thanks, Ross. I'll address advertising, and then we can pass it over to Emily. So yes, we are very happy. We're off to a very strong start in 2026. As you pointed out, we just guided to 11% to 14% for Q1. What I'll say is that we believe we have the right strategy here and we're executing well against it. We're already a top 5 retail media network and we're continuing to expand our scale and our reach across our growing marketplace across our expanding Carrot Ads footprint, off-platform and with our data solutions. So our strategy is sound. Looking ahead, we're not providing guidance beyond Q1, and there's still some macro uncertainty that we're seeing in the market and some ongoing changes in consumer preferences as an example. But overall, our plan and our approach is to focus on driving strong year-on-year growth by continuing to diversify in terms of supply and demand and ensuring that we're building the largest and most effective ads ecosystem. We have a very clear set of building blocks, which involves continuing to innovate on platform with advanced personalization and relevancy and all of the AI tooling I described, driving exceptional performance and measurement for brands as our goal and then extend all of that innovation to Carrot Ads, which is again, we're at 310 Carrot Ads partners now, which gives us real scale and then extend in-store on Caper Carts, which we just launched, and I continue to believe that this is going to be one of the most interesting in-store advertising opportunities out there. And then we're going to use our first-party data to extend off platform. We're still early with off-platform, but we've built a strong foundation here. We have the right set of partners, and we're excited to scale that further. So with the strategy, like we're confident in this space and our ability to deliver our long-term targets here. But we do believe that we're -- I am optimistic about what we can achieve in ads. Emily Maher: Ross, thanks for the question. So just to get a little more specific on what I was trying to call out is that if you look at adjusted cost of revenue through the course of last year, you did see a little bit of a modest step-up in Q4 related to cost of revenue. And so I wanted to call that out because while the majority of cost of revenue is going to be from credit card transaction payments that do sort of scale relatively with GTV. There is a component of cost of revenue that we do call out in our filings, which is payments to publishers. And so I wanted to specifically give some context of what that includes. It's effectively 2 things. One is what we pay certain of our Carrot Ads partners for the benefit of advertising on their surfaces, as well as the budgets that we get where we're optimizing and deploying ad dollars on behalf of brands for certain of our off-platform partnerships. So it's not all of our off-platform partnerships. Now to your question around, is this going to cause sort of overall impact to margins at large. What I'd say is that first of all, what I wanted to highlight is that while payments to publishers specifically did scale throughout 2025, we do expect that year-over-year growth to moderate in 2026. Now when I think about the P&L as a whole, I would say 2 things. So first of all, that was a relatively modest impact. And we think that we have multiple levers across the P&L to drive profitability over time. And you've seen us drive that pretty effectively over time. Now we did say that our expectation is that the expansion of EBITDA, while we look to continue to expand EBITDA, grow EBITDA faster than GTV through the course of 2026, that rate of expansion we do expect to moderate, and that is because you've seen quite a lot of OpEx leverage as one example over the course of the last couple of years. We do have a number of great opportunities to reinvest in growth that we're seeing in terms of both short, medium and long-term bets. So I wouldn't necessarily tie those 2 thoughts together. I think we have great opportunities to drive growth. and continue to have many levers at our disposal to turn that into profitable growth over time. Operator: Our next question comes from the line of Michael Morton with MoffettNathanson. Michael Morton: Maybe if I could just follow up what we were just talking about, and I really appreciate the detail on the cost of revenue. Could you maybe speak a little bit about the contributors to advertising growth between on-site and off-site in the guide. Does that imply maybe some improvement in the on-site growth rate because we were trying to do some of that math that you talked about with the publisher payments as well? And then also, I think, probably for Emily, could you quantify the contribution that you're seeing from Kroger's decision to change some of the fulfillment because business models, I would say, and what will then flow to cart and maybe how much of that is included in your guidance? Emily Maher: Sure. I can jump in and Chris, feel free to add any detail. So in terms of contribution to ads from on-site versus off-site, so we think of on-site, just to clarify, as a combination of the ads that we serve on our marketplace as well as through Carrot Ads. If you come to Instacart to advertise and you deploy dollars, those are deployed across that full suite of services. And so just to be clear, while we've talked about off-platform because there is something that stands out specifically in the cost of revenue line, really, what we're talking about is an ads business that is primarily comprised of that on-site or we call it on-platform internally, ads revenue, and we're continuing to see growth driven by on-platform. So off-platform is a smaller contributor overall, but it is something that is starting to see some growth and some benefits, so definitely worth calling out. In terms of specifically quantifying contribution from Kroger, we don't call out sort of specific retailers, but we're definitely happy to see that what we're able to provide in terms of same-day logistics, something that we thought was always a really critical benefit in terms of understanding the desire from consumers to get their groceries when they want it, when they need it, which in the majority of cases is on demand that we're able to step in and provide that service for our partner. Operator: One moment for our next question comes from the line of Mark Zgutowicz with Benchmark. Mark Zgutowicz: I was just curious how you see the time line for the ads opportunity in Europe developing given the lack of 1P data in the region? And do you anticipate the incremental ads benefit here to come largely from net new brands or your existing global partners? Chris Rogers: Thank you for the question, Mark. Our approach to Europe, when we take a step back and we look at which technologies we're taking to Europe, we're primarily focused on Storefront Pro, which oftentimes has ads embedded directly into it. So we'll have ads capabilities over time. Caper Cart, which is also -- has an advertising surface area that we think is going to be monetizable over time and then FoodStorm, which is our catering software. So our approach is going to be take our technology, work with retailers, start to solve complex problems and start to build new relationships with retailers abroad. And then advertising will be like a fast follow-on once we have the service areas that are at scale to advertise in those markets. Operator: Thank you. Ladies and gentlemen, this concludes our Q&A session and conference for today. Thank you all for participating. You may now disconnect.
Operator: Good afternoon, and thank you for joining Airbnb's earnings call conference call for the fourth quarter of 2025. As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Airbnb's website following this call. I will now hand the call over to Andrew Slabin, Vice President of Investor Relations. Please go ahead. Unknown Executive: Good afternoon, and welcome to Airbnb's Fourth Quarter of 2025 Earnings Call. Thank you for joining us today. On the call, we have Airbnb's Co-Founder and CEO, Brian Chesky; and our Chief Financial Officer, Ellie Mertz. Earlier today, we issued a shareholder letter with our financial results and commentary for our fourth quarter of 2025. These items were also posted on the Investor Relations section of Airbnb's website. During the call, we'll provide some brief opening remarks and then spend the remainder of time on Q&A. Before I turn it over to Brian, I'd like to remind everyone that we'll be making forward-looking statements on this call that involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under forward-looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances. You should be aware that these statements should be considered estimates only and are not a guarantee of future performance. Also during this call, we will discuss some non-GAAP financial measures. We provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. And with that, I'm pleased to turn the call over to Brian. Brian Chesky: All right. Thank you, Andrew, and good afternoon, everyone. Thanks for joining. I'm going to start with a quick recap of our Q4 results, and then I'm going to spend a little more time on what's driving them because that's really where the story is. Now in Q4, we delivered strong results across the board. Revenue grew 12% year-over-year to $2.8 billion, exceeding the high end of our guidance. Gross booking value grew 16% year-over-year to $20.4 billion. This was our highest growth quarter in more than 2 years. Nights and seats booked grew 10%, our strongest quarter of the year. But what matters most is the momentum that we're gaining. In a marketplace, reaccelerating growth isn't as simple as stepping on the gas pedal. It's more like turning a cruise ship. It takes time and discipline, and you don't always see it from one quarter to the next. The acceleration that you're seeing didn't happen by accident. It's a result of a deliberate path that we've been on for the past few years. So let me walk you through it. Airbnb grew incredibly quickly in the years leading up to our IPO, faster than we'd ever imagined. We were like a public -- we were like a company built to be a 2-story house. But we went public, we want to keep building, but you can't add 10 floors to a house that wasn't designed for it. You need a stronger foundation. So we rebuilt our tech platform. We rebuilt the app cab by cab. And over the last few years, we improved nearly every part of the guest and host experience. So rebuilding the foundation wasn't enough. We also need to innovate faster. Now when I look back at what drove Airbnb's early success, it wasn't just the idea. It was how we worked. In the early days, Joe, Nate and I would sit in our apartment and obsess over every detail. We'd shift something, learn quickly and double down on what worked. That cycle, focus, shift, learn, scale is what compounded our initial growth. As companies grow, they often lose that speed and focus. So 2 years ago, we made a deliberate decision. We are going to recreate the same innovation formula inside Airbnb, but at a global scale. We called it Project Hawaii. We created a small elite team and gave them a really clear mandate, make it easier to find and book a home on Airbnb. We start with the little things that make booking harder than needed to be, simple improvements like better search filters and small tweaks to the booking flow. When those changes work, we went bigger. We improved how we convert high-intent visitors into long-term users using simple web prompts to drive more app downloads. We made search more flexible, helping guests discover homes they wouldn't have seen before. That drove an even greater impact. Eventually, we tackled bigger opportunities like completely redesigning the checkout flow to make bookings simpler and more intuitive. Now these are just a few of the hundreds of improvements the team shipped, driving hundreds of millions of dollars in revenue in 2025 alone. And we believe Project Hawaii will deliver hundreds of millions more this year. Now once we saw this blueprint work, we began applying it across the company. So what I want to do is highlight 4 areas where the Hawaii innovation model is driving growth. The first is pricing. Hidden fees are one of the biggest friction points in travel. So we created a pricing team with a clear goal: make pricing simple and more transparent. The first major step was showing the total price upfront to guests. In the U.S., we are the first major travel platform to do this. The price transparency was just the beginning. We launched dozens more updates for more flexible cancellation policies to better pricing tools for hosts. These changes stacked. Then we made the biggest move of all, Reserve Now, Pay Later. For the first time, guests in the U.S. could book eligible stays paying $0 upfront. The response is immediate, driving booking acceleration in Q4, especially for larger high-priced homes. We're now expanding this to new markets, and it's a key part of the strength we're seeing in Q1. Now we believe that pricing initiatives will drive as much revenue this year as Hawaii and will remain a strong tailwind for years to come. Next up, supply. Most of our supply growth is organic with hosts coming directly to us. But we've also built a supply engine that lets us be surgical about where we grow. And the best example is how we lean into large events. For example, in Paris, we added over 40,000 listings for the 2024 Summer Olympics. Now we're repeating that same playbook for the biggest event on Earth, the 2026 FIFA World Cup across 16 cities in North America. At the same time, we're also improving quality. We've removed over 0.5 million low-quality listings, while guest favorites, the very best listings in Airbnb grew 30% in 2025 compared to 2024. And in Q4, guest favorites made up nearly half of all bookings on Airbnb. We also apply the Hawaii model international growth. Airbnb operates in nearly every country in the world, but roughly 70% of our revenue comes from just 5 countries. Now that's a massive opportunity, and we're unlocking it by going deep in a small number of priority countries. And Brazil is a great example. A few years ago, Brazil was a smaller market for us. We put a focused team on it. We introduced features that we know matter to the Brazilian market like interest repayments and local payment methods, and we leaned into the cultural moments like Carnival. We also invested in local campaigns to build relevance. The results have been incredible. Brazil moved from a top 10 market to a top 5 market on Airbnb. In Q4, it was our second largest contributor to first-time bookers behind only the U.S. This shows what happens when you pair global scale with local execution, and we're applying the same playbook to our highest priority countries in every region. Finally, we're applying the Hawaii model to new businesses. We launched services experiences globally in May, but to better scale them, we're taking a city-by-city approach. We're going deep in one place, reaching product market fit and expanding from there. We started with Paris for experiences in L.A. for services, and we're really seeing great results. We're also starting to test new services like grocery delivery and airport pickup to make each trip better from the very beginning. And to capture even more trips, we're bringing boutique and independent hotels onto the platform so that no matter what kind of stay a guest wants, they can always find it on Airbnb. Now it's still early, but the opportunity with hotels is massive, and we plan to share more about our approach later this year. But the big idea here isn't just building a bunch of stand-alone businesses. These are all part of a much larger vision, the Airbnb trip. We are one app and one brand, where every part of the trip makes the other parts stronger. There are multiple entry points in Airbnb and multiple ways to drive more bookings. A guest might book a service or experience, then discover a home for the trip or they might book a hotel for a business trip, then come back here for me to book a home for a family vacation. Each part of the trip reinforces the others. The final piece that accelerates everything we do is AI. Now we've taken a really intentional path here. While other companies rush to build chatbots into their existing apps, we started by solving the hardest problem, customer support. We built a custom AI agent trained on millions of our support interactions. It's already resolving 1/3 of the support issues without needing a live specialist and resolution times are significantly faster. It's live across North America, and we're planning to roll it out globally. But that's just the beginning because we're building an AI-native experience where the app doesn't just search for you. It knows you. It will help guests plan their entire trip, help us better run their businesses and help the company operate more efficiently at scale. That's a big reason we brought in Ahmad Al-Dahle as our CTO. Ahmad is one of the world's leading AI experts. He spent 16 years at Apple and most recently led the generative AI team at Meta that built Llama models. He's an expert at pairing massive technical scale with world-class design, which is exactly how we're going to transform the Airbnb experience. This approach is also our strongest defense against disretermediation. A chatbot can give you a list of homes, but it can't give you the unique points you find in Airbnb. A chatbot doesn't have our 200 million verified identities or our 500 million proprietary reviews, and it can't message the host, which 90% of our guests do. It can't provide global payment processing, customer support or insurance. By layering AI over the entire Airbnb experience, we believe we're building something that's impossible to replicate. So you can see why we're so excited about the year ahead and our guidance reflects that. We expect revenue growth to accelerate to at least low double digits in 2026. We expect adjusted EBITDA margins to be stable year-over-year. And we'll do all of this without investing billions or tens of billions of dollars. We don't need massive capital investment to grow. We don't own homes. We don't operate experiences, and we're not building data centers. What we're doing is finding small wins and scaling them profitably. That's why we've been able to generate free cash flow at nearly 40% of revenue and nearly $19 billion of cumulative free cash flow since our IPO. It gives us the ability to reinvest back in our business while strengthening our balance sheet and maintaining healthy margins. Now as you look ahead to 2026, we can't predict every quarter with precision. Travel is influenced by everything from currency to macroeconomic conditions to global events. But what we can control is the speed of our innovation. In the long run, that's what leads to more growth. So in summary, we rebuilt major parts of the company. We adopted a new blueprint for innovation, and now we're seeing increased momentum. That doesn't happen by accident. It's a result of an incredible team growing in the same direction at global scale. So to everyone in the Airbnb team is listening, thank you. The business is stronger because of you. With that, I'll turn it over to Ellie to walk through the financials in more detail. Ellie Mertz: Thanks, Brian, and good afternoon, everyone. As Brian just shared, we're seeing increased momentum in our business. I'll start with Q4 financial results, and then I'll cover our outlook for Q1 and the full year 2026. Q4 was a great quarter for Airbnb. Gross booking value grew 16% year-over-year to $20.4 billion, driven by strong growth in both bookings and price. Nights and seats booked increased 10% year-over-year, an acceleration from Q3 with strength seen across all regions. By region, Latin America grew in the high teens. Asia Pacific grew in the mid-teens. EMEA accelerated in the high single digits and North America grew in the mid-single digits. Now going into the quarter, we expected a tough comp given a particularly strong Q4 in 2024. And as the quarter played out, we saw a slightly better macroeconomic environment than anticipated. But more importantly, our product road map delivered material lift to the business. As Brian shared, we've been steadily making it easier to find and book a home on Airbnb. In Q4, a few updates in particular helped drive our acceleration. The launch of Reserve Now, Pay Later, updates to our cancellation policies and the beginning of our migration to a simplified fee structure. Reserve Now, Pay Later saw significant adoption among knowledigible guests in Q4. It's also led to longer booking lead times and a mix shift towards larger entire homes, especially those with 4 more bedrooms, contributing to the increase in ADR. And as Brian mentioned, given the positive results, we've decided to roll it out to more guests globally and to cross-border stays in the U.S. Our updated cancellation policies and simplified fees also contributed to both NIKE and GBV growth in the quarter. As a reminder, beginning in October, we started simplifying our fee structure, which we believe will help our host price more competitively. We began migrating our API host to a single service fee and now plan to migrate more hosts in 2026. Hosts on a single service fee can adjust their prices to maintain the same net earnings while guests continue to see the full price upfront. In total, we estimate these 3 features delivered over 200 basis points of growth in NIKEs book and roughly 300 basis points of growth in GBV in Q4. In 2026, we'll continue iterating to simplify pricing, improve transparency and help our hosts stay competitive. Now turning to our Q4 financials. Revenue was $2.8 billion, up 12% year-over-year and exceeded our guidance, driven by the impact of our product updates. In terms of profitability, we generated $786 million of adjusted EBITDA, representing a 28% adjusted EBITDA margin, also exceeding guidance. Finally, net income was $341 million and was negatively impacted by roughly $90 million of onetime non-income tax. For 2025, our full year effective tax rate was 20%, including onetime discrete items that increased our provision for income taxes in Q3. Now starting in 2026, we expect the One Big Beautiful Bill Act to materially reduce our effective tax rate to the mid- to high teens, primarily due to how foreign earnings are taxed, which will benefit our consolidated earnings. Next, to our balance sheet and cash flow. We continue to generate significant cash in Q4, delivering $521 million of free cash flow. In 2025, we generated $4.6 billion, representing a free cash flow margin of 38%. At the end of Q4, we had $11 billion of corporate cash and investments as well as $7 billion of funds held on behalf of our debt. Our strong balance sheet allowed us to repurchase $1.1 billion of our common stock in Q4, up from $857 million in Q3. And in 2025, we repurchased $3.8 billion of our common stock using over 80% of our free cash flow. Returning capital to shareholders remains a key component of our capital allocation strategy. Since introducing our share repurchase program in 2022, we've reduced our fully diluted share count by about 9%. Now let's shift to our Q1 and full year 2026 outlook. We're encouraged by the momentum we've seen so far this year and excited about our road map to drive growth in 2026. In Q1, we expect to generate revenue of $2.59 billion to $2.63 billion, representing year-over-year growth of 14% to 16%. This includes an approximate 3-point FX tailwind after factoring in our hedging program. We expect gross booking value to increase in the low teens year-over-year, driven by high single-digit growth in nights and seats booked and a moderate increase in ADR due to price appreciation and FX. On profitability, we expect Q1 adjusted EBITDA margin to be approximately flat year-over-year. And for the full year 2026, we expect year-over-year revenue growth to accelerate to low double digits with an ambition to grow even faster than that. While FX tailwinds should fade as the year progresses, we're encouraged by healthy demand and execution across our growth initiatives. We're also excited about major events this year, including the Winter Olympics happening now in Milan and the FIFA World Cup coming this summer. Cities continue to look to Airbnb to help meet demand around large events, and our global supply positions us well to support that demand. Overall, we believe continued progress against our product optimization pilots and new offerings, together with broader macro conditions will support incremental growth in 2026. And finally, across the full P&L, we're continuing to drive efficiencies in our platform. We plan to reinvest most of these efficiencies into marketing, product and technology to support our growth. As a result, we expect our 2026 adjusted EBITDA margin to be stable year-over-year. And to close, 2025 was an exciting year, and I'm incredibly proud of what the team delivered. We're carrying that momentum into 2026 with an ambitious set of goals. We'll continue strengthening our core business while accelerating innovation to drive growth. And with that, I will open it up to Q&A. Operator: [Operator Instructions] Your first question comes from the line of Richard Clarke from Bernstein. Richard Clarke: I guess AI is the topic du jour, and you gave some helpful remarks about why the AI bots today can't match what Airbnb do. But given the sort of speed of innovations going on, why do you think those AI platforms couldn't launch a short-term rental platform over time? And maybe secondly, do you see any risk that you'll have to share your economics with an AI platform at some point going forward? Or do you expect you'll be able to retain the same level of direct traffic you have today in an AI world? Brian Chesky: Yes. I mean it's a great question. Let me start by saying this. The vast majority of what is Airbnb is not the app that you see. First of all, we have a whole host app, which is really critical, and we've built this over 18 years. We handle more than $100 billion in payments through the platform. Customer service is one of the most difficult problems in Airbnb. We don't have SKUs. People -- we need to adjudicate between people speaking different languages. We provide insurance and protection for everyone. We do a lot of verification. 90% of people who book on Airbnb send a message. You can't send a message without verified ID. We have 200 million verified IDs, which is more than U.S. passports in circulation. The vast majority of our homes and our unique inventory is only on Airbnb. We're adding more offerings over time, and we think people are going to want to put them together into an itinerary that they could bring on in their phone with them when they're traveling. I think these chatbot platforms are going to be very similar to search. They're going to be really good top-of-funnel discoveries. And in fact, what we've seen is I think they're going to be positive for Airbnb. And I'm very, very deep in this space. And what we see is that traffic that comes from chatbots converts at a higher rate than traffic that comes from Google. But the other thing to know, and this is the most important point, is that these models are not proprietary. The models in ChatGPT, the models in Gemini, the models in Claude and the models like Kiwi are available to every single company. And so pretty soon, every company becomes an AI platform if they make the shift. We will be able to build everything everyone else will have if we use their models. And we believe specialization will win in travel because if somebody wants to find an Airbnb or have a trip, we can take their model, the same model they use, we can post train it and tune it based on our million interactions. We can connect it to our customer support agents. We can connect it to our host. And that's fundamentally what we think. It's why we've hired Ahmad Al-Dahle, one of the foremost leading experts in AI. Ahmad Al-Dahle, in fact built one of the models. He built the Llama model. And we want to build a team to make our company much more of an AI-native company. So I think that for chatbots or AI companies to win, we don't need to live in a world where everyone else has to lose. I don't think that one company is going to own everything. I think we're going to be able to work together. And these companies will be very helpful top-of-funnel traffic generators for Airbnb just like Google. Operator: Your next question comes from the line of John Colantuoni from Jefferies. John Colantuoni: Okay. I wanted to ask one on Asia region. NIKEs growth was still strong at the mid-teens and mid-teens, but did moderate from recent quarters. I know it's your smallest region, but I was hoping you could talk to what drove the slowdown and how you think about growth -- the growth opportunity in Asia Pacific over time. And second, I was curious on the services and experiences, have you seen any signs that they're helping you acquire new customers that you can convert to accommodations given that over half of your experiences weren't attached to an accommodation bookings. Ellie Mertz: Let me start with the Asia question. So when we look at our performance on APAC from a destination perspective, overall growth has been, I would say, relatively stable over the course of 2025. That being said, we see a tremendous amount of opportunity in terms of future growth for the region. What I would say in terms of APAC is that, obviously, there is different pockets in terms of where we have seen substantial growth. As you're probably aware, we have relatively high levels of penetration in Australia, which we factor into that number, whereas we're relatively nascent in some of the, I would say, continental countries, in particular, places like India, Southeast Asia, Korea, et cetera. What we shared in the letter is that we're seeing nice performance in those markets that we have begun focusing on. So in particular, what I would call out is domestic Japan. That's a market and segment that we began our expansion playbook back in Q4 of '24 and have seen some nice results. Second, I would call out India, which we mentioned in the letter, a huge market where we are seeing really substantial growth. So 50% growth in the last quarter, very strong, and we see opportunities to accelerate that growth in '26. So the broad story in APAC is stable. We are seeing some very positive signs in particular markets that we're leaning into, and it's the focus of our international markets expansion strategy going forward. Second question. Yes. I mean what we called out in terms of the dynamics of where we are finding experience booking, the call out in the letter that we provided is about 50% of our experience bookings today come from guests that are unattached to a homes booking, meaning they are not already staying with us in a home and therefore, attached to the trip an incremental experience. They may be staying in a hotel in that market. They may be not traveling at all. And what I would say there is it's a very exciting opportunity for us in a couple of forms. One is it provides a new segment of guests that we can, in the future, convert to home guests. It also gives a sign that with these new products and offerings, we have the opportunity to have a higher frequency guest usage beyond just a big trip. So for example, something that we see in Paris is that there's been a really nice uptick in terms of, in particular, our Airbnb original experiences by local Parisian, which tells us that, that category of inventory, albeit highly differentiated, is a great opportunity for us to attract global crowds to our app. Brian Chesky: Yes. I think one of the things that I called out in my opening remarks is we're seeing a lot of momentum about getting new offerings off the ground and piloted. And our basic idea is it's not dissimilar from Amazon in the late '90s where they started as a book retailer. The unifying idea of Amazon, though, probably was the cardboard box. In other words, everything that you could send in a cardboard box. And so you could send all these different things and they added one category at the other. I think the unifying idea for is the trip. We take a very, by the way, broad definition of the trip, including 30-day stays and even longer. But there are so many different components that we can offer. And the basic idea is we want every new offering to be strong enough to stand alone, but better together. And so the hotel is a great example. There are some people that only stay in Airbnb. There are some people that only stay in hotels. Most people are [indiscernible] and some trips are better in Airbnb and then some trips, if you need a last minute stay, you're traveling for business, you're doing more night, it's really good for hotels. So we think that all these components can make the overall offering better. There's a lot of synergies. Lee Horowitz: I guess can you give us a sense of how Reserve now, pay later cancellations have been pacing relative to your expectations, perhaps particularly in the face of weather disruptions in the 1Q? And then how you're thinking about baking in cancellation expectations to your full year adjusted EBITDA guide? And then secondly, in the past, you've talked about how AI search will preclude your deployment of sponsored ads. Can you maybe just unpack that a bit more and explain how AI search particularly may help you bring sponsored ads to market a bit more quickly? Ellie Mertz: So first, on the question of Reserve now, pay later and the impact of cancellations. If we stack up for a moment, before we launched Reserve Now, Pay Later in the U.S. back in the summer of 2025, we extensively tested the product to ensure that by the time the cohorts opting into the product had reached their check-in date that it was net beneficial to the business, meaning that the growth in bookings was larger than the net increase in cancellations before check-in. We're doing that level of testing for each incremental segment. We are considering expanding Reserve Now, Pay Later out to ensure that the net benefit is obviously positive for the business. What I should say is that in the segments that we have launched this offering, the cancellation curves have been very close to what we saw from a tested perspective. And so we feel frankly, quite good about the progress and the performance of that offering. In terms of its impact over the full year, obviously, there is a bit of a pull forward in terms of when people make their bookings, but we are already absorbing the elevated level of cancellations from that product. I think one piece of perspective is that in terms of the aggregate nominal increase in cancellations rate, it's approximately 1%. So an average of maybe 16% cancellation rate historically going to 17%. It's obviously higher within the cohort that chooses that product, but it's not hugely material relative to the broader cancellations on the platform. Final thing I would just note on Reserve Now, Pay Later, as we've called out, it is lengthened lead times, which we think is good from a competitive perspective. And second, it has a modestly positive impact in terms of increasing ADR as consumers who don't need to extend a huge purchase on their credit cards are more likely to choose a slightly [indiscernible] listing. Brian Chesky: Yes. And then on the AI search and how would it impact sponsored listings, I've been asked quite a few earnings calls about sponsored listings. And one of the things that being really clear with the -- after the launch of ChatGPT was that traditional search was going to become essentially conversational AI search. And that what we wanted to do is really design AI search, really see how that works. And then if we are going to do sponsored listings, we design that ad unit in that form factor. So we're focused, first and foremost, on the most perishable opportunity, which is AI search. Actually, funny enough, we are doing tests as we speak. So AI search is live to a very small percent of traffic right now. We're doing a lot of experimentation. The way we do things with AI is much more rapid iteration, not big launches. And over time, we're going to be experimenting with making AI search more conversational, integrating it into more of the trip. And eventually, we will be looking at sponsor listings as a result of that. But we want to first nail AI search. Operator: Your next question comes from the line of Brian Nowak from Morgan Stanley. Brian Nowak: Brian, maybe to go back to that last question on AI search. Maybe as you sort of another bigger picture one. As you sort of sit here in early 2026, if we're sitting here a year from now, what are the areas you're most focused on or seeing improvements to the platform using AI this year? That's one. And then two, maybe one just on the P&L impact. Any help at all on how you're thinking about the impact on gross margins from increased AI investment this year versus last year? Brian Chesky: Yes. I can answer -- I can answer both of them. And I'll start with the second one. I think one of the great things about Airbnb is that we have a very, very cost-efficient innovation model. So unlike other companies, we're not building models. We do not have a huge CapEx cost base. So our investment in AI will not affect the P&L. I don't think you'll see it in the P&L. That's number one. Number two, it's a year from now, if we're successful AI would it be seen, I think 3 or 4 things. Number one, let's start with customer service. Right now, nearly 30% of tickets in North America that are English-based are handled by an AI agent. A year from now, if we're successful, significantly more than 30% of tickets will be handled by a customer service agent in many more languages in all the languages where we have live agents and AI customer service will not only be chat, it will be voice. You can actually call and talk to an AI agent. We think this is going to be massive because not only does this reduce the cost base of Airbnb customer service, but the kind of quality of service is going to be a huge step change. Not only can you get responses in seconds, but the agents using AI are going to be significantly more productive. That's number one. Number two, it's going to make our engineers and everyone at Airbnb significantly more efficient. More than 80% of engineers are now using AI tools. That soon will be 100%. But of course, that metric is a bit of a bandy metric. The real question is, what's the culture of the company? Are you a start-up? Are you highly adaptable to the changing currents of AI? And I think Airbnb, certainly within our space is the most adaptable. We are designed to adapt to not move like a cruise ship, but to move very nimbly. So that's partly why we hired Ahmad Al-Dahle. We wanted to be on the frontier of AI, at least for the non-native AI companies. And I think you're going to see a lot more productivity and a lot more innovation velocity. The third is you're going to start to see AI through the booking experience and the listing experience. AI search will eventually -- I can't put a time line on it because AI is obviously highly unpredictable. But we want to be -- we would love to be the first company in e-commerce that really nails AI search, conversational search. I think it's really hard not just to travel but all e-commerce. One of the reasons that chatbots are really hard for commerce is because they're very visual. They're photo forward. You need to be able to compare. You need to be able to open different tabs. So a text forward chatbot interface is not the ideal. So we have to actually innovate on the user interface. We're also using AI across the board, like being able to list your space much more easily. So if we are successful 1 year from now, in summary, AI customer service will be voice and chat across all languages. It will penetrate many more ticket types. That -- it will be -- it will massively accelerate our innovation and will be as AI native as any other company in our space or more. And then finally, the experience for guests and hosts will be materially better. Operator: Your next question comes from the line of Doug Anmuth from JPMorgan. Dae Lee: This is Dae Lee on for Doug. I have two. First of all, looking at the 2025 revenue acceleration guide, could you help us think through the acceleration drivers across the core markets, expansion market services and perhaps any tailwinds from major events like the World Cup and Olympics? And are you anticipating any top line benefits from some of these AI innovations that you discussed? Ellie Mertz: Certainly. So when we think about the growth outlook for 2026, we are certainly taking into account the momentum that we've seen coming off the launches that we've mentioned driving the Q4 results. We anticipate those will continue to benefit the top line in the beginning of '26, and we're obviously looking to expand upon them. Beyond those that I mentioned, we're obviously continuing to invest in several other growth levers. In particular, we're investing in incremental supply. We're investing in our expansion markets and several other key initiatives. In terms of the back half of the year, we'll obviously be comping some of the launches that we had in Q4. So we'll lap those, but intend to have incremental growth levers throughout the year to support that. You asked just about the major events. Obviously, the Milan Olympics is happening right now, and we're looking forward to FIFA this summer. I would say those two events, in particular, they are large events on the platform, but in scale are very small portions of the overall business. So we're looking forward to them. They will be additive in the quarters that they hit. But I would say on the larger events, the benefit of those events is not just the bookings during the period of the event instead of the benefits we get from increasing overall awareness of the brand, driving incremental supply in those markets and more broadly, the brand halo we get from connecting our brand with such beloved global events. What we've seen actually for the current Olympics and the past Olympics is that guests who know of the brand partnership between Airbnb and the Olympics have a more favorable impression of the brand. So many reasons that we do those only one is the in-period impact to the business. And then in terms of the contribution from AI, I would say, as Brian shared, we will be -- we are currently piloting AI search. We have nothing baked into our outlook in terms of the benefit from that deployment. Operator: Your next question comes from the line of Lloyd Walmsley from Mizuho. Lloyd Walmsley: Two, if I can. First, just on hotel. When we talk to hotels and connectivity partners, we hear like an enthusiastic response on working with you guys, but there's also -- it sounds like a lot of friction with the connectivity APIs and sort of supporting multiple rates. It seems like there's a lot of friction today. Just wondering, are you sort of committed to building or rebuilding those connectivity layers? And what other things are you guys doing to sort of build foundations on hotel? And then second question, just stepping back, opening up the aperture of inventory, whether that's more mainstream hotel or experiences, it would seem like you could unlock significant TAM by just going a bit more mainstream. Brian, how do you feel about having more of that type of content on the site and the trade-off between sort of keeping things unique versus addressing bigger and bigger portions of the market? Would love to just hear how you think about that. Brian Chesky: Yes. It's a great question. Again, I've gone back to Amazon as a pretty good reference point for us. They started with one category books. They became synonymous with that single category and eventually, they rebuilt their platform to expand in many categories. That's our strategy. And so the answer to your question, yes, we are opening the aperture. We're opening the aperture and accommodations. We're opening the aperture beyond accommodations and beyond places to stay. One of the reasons we are able to do this is AI allows us to personalize. Some people come to Airbnb and all they want to see our unique homes. And before AI, like personalization was a little more primitive. So if they saw a hotel, it might be jarring. Now we can really personalize. So people who just want to see Airbnbs can see Airbnbs. People just want to see hotels, we can eventually personalize, they can just see hotels. If people want to see both, we can know if you're booking last minute, night, then we're going to show you a hotel. If you're booking a family of five in Italy, we're going to show you a home. So it really goes back to personalization. The more personalized we are, the more types of inventory we can offer. So this then, I think, goes to our broader strategy. What is our strategy for hotels? Our strategy for hotels used to be that we thought of them as filling in network guests when a home is booked and when homes are high occupancy, you can get a hotel. What we've now evolved to is a much bigger strategy, a much more expansive strategy. It turns out, obviously, as we spend a lot of time with our guests that a lot of guests love to book homes and hotels. And we ran an ad campaign, some trips are better on Airbnb, but it also means some trips are better in hotels. And so if you're booking last minute, if you're booking 1 night, if you're booking for business, if you're staying for a conference, this might be a really good reason for the hotel. But also, we're really focusing on boutiques and independence and a large percent of the inventory -- in the hotel inventory in the world are boutique and independent. They're providing threat hospitality. I mean these hotels really fit the ethos of the Airbnb brand. And these are not niche. This is a huge percentage of the hotels in the world. And as we spoke to these affiliates, they've been very, very enthusiastic. They want to list another channel. They like their local mission. They love the merchandising. We love the type of travel work we have. So we think as we get more aggressive hotels, not only do we open up the aperture to a huge TAM of hotels, it actually strengthens home. Operator: Your next question comes from the line of Stephen Ju from UBS. Stephen Ju: Great. So Brian, can we revisit the halo effect that you might have seen following the Paris Olympics and how that might have helped you from either an awareness or greater user, I guess, experience or comfort perspective and how that might ripple through after the World Cup here in the United States. And Ellie, even at the low end of your revenue guidance to keep margins flat, you have to figure out a way to spend some $800 million more year-over-year. So just wondering where the larger spend buckets are going to be for this year. Brian Chesky: All right. So let's start with the Paris Olympics and how it may -- what it might portend for the World Cup. The Paris Olympics was massive for our business, not just in Paris, but really all over France and globally. One of the things that happened was events are likely the very best way for us to add new supply. And one of the great things about adding supply for events is it's usually everyday people listing homes that are often exclusive to Airbnb. So this is really, really compelling. And in fact, this is how we started Airbnb. As many of you know the founding story, we started to provide housing for events. And we've designed and built our platform for -- from the very beginning. The great thing about events in Airbnb is a lot of people have no intention of becoming a host. They have no intention in doing this year around. But an event comes to town and they want to make money 1 week and they list their place and they introduced the concept of hosting and they realize they like it and they continue hosting. 40,000 people who list their homes in Paris have continued hosting, and that's been really, really powerful for us. So the other thing was really powerful from a policy standpoint I think Airbnb goes from sometimes a problem cities have to deal with to a solution to the problem. And what we know is these large events, hotels can't accommodate everyone. So it's a bit of a reset moment where we can actually come and tell cities that we actually can be a solution to your challenge. And it is just a great way to experience Airbnb because it's a great way to bring cultures together. And the thing about the World Cup that's so powerful is, obviously, as you know, it's in 3 countries. And so it allows us to handle really important markets, not only important markets in the United States, but like Toronto and Mexico City, 2 of our most important markets in the world. So I think the World Cup will be massive. We have the Milan Olympics happening right now. The Milan Olympics was not only great for Milan, not only great for Northern Italy, but was great for our relationship with the Italian government. And I think that we don't just need the World Cup. We don't just need the Olympics. We actually can work with smaller events like Lollapalooza. We can work with really local events. So the event strategy scales from big global events down to local events, and we think they're one of the best ways to recruit supply, and that's what we're going to do to grow our supply in Airbnb. Ellie Mertz: Let me answer the second question about EBITDA. As we look at the construction of the '26 P&L relative to '25, obviously, the top of our P&L in terms of cost of revenue and cost and support will scale somewhat linearly, we'll have some efficiencies there, but they will scale somewhat linearly with obviously, the growth in revenue. where you will see some incremental investment to drive growth is obviously in sales and marketing. This is both in the form of programmatic marketing, but more so in terms of our go-to-market efforts. What this means is all of our efforts around acquiring supply, not just homes, but obviously also for experience services and hotels. And then we will also continue to grow our investments in product development to allow for a greater accelerated pace of innovation. I would say more broadly, talking about the '26 P&L, hopefully, it was clear in our opening remarks as well as in the letter -- our ambition is to accelerate the top line, and we're giving ourselves the flexibility within the stable margins compared to last year to invest to achieve that acceleration. We're quite proud of the level of profitability that we have achieved historically. And the focus right now is, again, accelerating growth within those very strong stable margins. Operator: Your next question comes from the line of Justin Post from Bank of America. Justin Post: Brian, in your prepared remarks, you talked about app improvements and obviously improving supply. Are you seeing any improvement in repeat rates or customer service scores? Or what kind of feedback are you getting on that? And then, Ellie, maybe you could talk about the U.S. room night growth. It definitely has got back to mid-singles. What's your outlook for that as we look forward? Brian Chesky: Yes. I mean I could start with -- one of the things we noticed is the repeat rate of Airbnb is pretty much -- you can simplify it down to the satisfaction of the guest. The satisfaction of the guests first and foremost, the satisfaction of the home and then if something goes wrong, the satisfaction of customer service. That's why we focus, first and foremost, on host quality. Now that guest favorites are approximately half of our bookings, the quality -- the trip quality, which is a score we look at, has gone up significantly. That means satisfaction has gone up. That means that repeat use is stronger -- is really strong, and I think that explains a bunch of our re-acceleration. And customer service is better than ever. We track NPS, and it's the strongest it's been since the pandemic by far, and it's accelerating. And I think, again, it's not just the hard work the team is doing. But again, I think the quality of the management of our marketplace, all the supply management we do. We think it's unprecedented in our category, what we do. We removed more than 500,000 listings via guest favorites. We're really, really tight on quality control. And then the customer service that we have, which is best-in-class, we think, in our category and with AI supporting it, I think it's going to continue to improve. So yes, it's been a huge tailwind for us. Ellie Mertz: Speaking to the U.S. or more broadly North America, certainly, at the beginning of '25, so Q1 and Q2, the growth in that region was quite modest, low single digits. We're excited to be able to accelerate that in Q3 and then once again in Q4. That is a byproduct, I think, one of a slightly stronger macro, but more importantly, the product changes that we have discussed in the letter and on this call. I would say heading into '26, we continue to see great momentum for North America at large, and it is one of the underpinning points of our optimism around '26. Operator: Your next question comes from the line of Mark Mahaney from Evercore ISI. Mark Stephen Mahaney: Two questions, please. When do you think -- what's a realistic expectation for when hotels will be big enough to actually start moving the needle in terms of that revenue growth acceleration? Or do you think that, that is one of the factors behind the revenue growth acceleration this year? And then secondly, could you just talk about the take rate dynamics in Q1? What's embedded in your guidance here? Your revenue growth is sort of accelerating versus Q4, but your room night growth seems like it's slightly decelerating or similar growth and your bookings growth ex FX is slightly decelerating. So is there something that's boosting take rate in Q1 that caused that revenue growth to accelerate? Ellie Mertz: Sure. In terms of hotels, just to size hotels today, so as of Q4, hotels was a single-digit percent of total nights booked but growing nearly double that of the overall platform. So it will take some time for that business to scale to have a meaningful contribution to growth, but the current momentum is quite strong. We'll be -- as Ryan shared previously, we'll be expanding the hotel supply over the course of the year and intend to exit '26 with hotels being a meaningfully larger percent of the overall business going forward. In terms of the take rate expansion in Q1 and what's going on with the, I would say, high level of growth in Q1 relative to Q4, a couple of dynamics. First is the impact of ADR and FX. As we called out in the letter, the realized tailwind of FX in Q1 will be quite strong at nearly 3 percentage points. We're also getting the benefit of earlier lead times of bookings in Q4 that will realize in stays and hit revenue in Q1. And then in terms of the implied take rate, it should be modestly above where we were in Q1 of last year, mostly due to some timing consideration. One other small component to give you the laundry list is Easter this year is on the kind of in the middle effectively, it's on April 5. So you don't see as big a quarterly swing as we have seen in prior years when Easter moves materially in and out of Q1. But we anticipate it will support about 50 basis points of incremental revenue in Q1 and 50 basis points less revenue in Q2. Operator: Your next question comes from the line of Jed Kelly from Oppenheimer. Jed Kelly: Just, I guess, going back to hotels. And I get how the company was built, unique supply. But can you just talk about like why not lean into more brand hotels just because it could give the user and open up more supply and potentially bring in more new users to the platform? Brian Chesky: Yes. I mean, we're -- a large percent of the hotels are boutiques and independent. And we want to just start there. We're not saying what we will or will not do in the future, but we think that we want to like just start with a huge number of boutiques and independents that are typically paying a higher commission than the chain and have been really aggressive with us reaching out saying that they would love to have another channel. So that's our starting place. We're not saying where we're eventually going, but this is where we're focused right now. So we're focused on our top markets in the world where there's a proliferation of great boutiques, great independence. We have more than 100 hotels in New York with more than 20,000 rooms available on the site just in New York City alone. Operator: Your next question comes from the line of Kevin Kopelman from TD Cowen. Kevin Kopelman: Great. I wanted to ask about the new all-in commission structure for PMS connected host. What are some of the benefits you're seeing from that change? And could you see Airbnb moving all of its hosts over to that structure longer term? Ellie Mertz: Yes. So I think you're probably aware of our historical structure. The business was set up with a dual fee structure where there was a 3% host fee and then variable guest fee on top of that. What we found over time is that, that dual fee structure makes it difficult for hosts to effectively price their listing. It's frankly a little bit complicated. And in particular, for those listings that are cross-listed and in particular by property managers, it often leads to incorrect pricing, meaning what the guest sees is not what the host intends. And in many cases, that means that a listing can sometimes be more expensive on Airbnb when it's cross-listed somewhere else. So from the migration that we completed back in October, which was to migrate all of our API connected hosts to the single service fee, we've seen great results. Number one is we obviously very delicately manage the communication with our host to ensure that they did not perceive this as a fee increase. And in making the migration, what we found is that many of the hosts did not take up their rate. Instead, the effective ADR to guests came down modestly, which obviously you can conclude is really great from an affordability perspective as well as elasticity and that is the reason that has been a driver or contributor to growth in Q4. We are currently piloting in certain countries a further migration for our individual hosts, again, from the dual fee structure to the single service fee. We think a more expansive migration, number one, allows it to be easier for the host to understand what they should price. It allows us to make sure that we are pricing all of our listings competitively. And we also think it's a foundational move that will allow us to, one, be more dynamic with our pricing tools as well as our fees. Operator: Your next question comes from the line of Ken Gawrelski from Wells Fargo. Kenneth Gawrelski: Two, if I may, please. First, with on loyalty. Brian, could you talk a little bit about -- you on past calls, have talked a little bit about a different approach to loyalty. It really hasn't come up as much, I don't think on this call, and I apologize if I missed it. But could you talk a little bit about your vision for loyalty and how that spans across the different products and services that you aspire to offer on the platform? And the second thing is maybe referring back to the shareholder letter where you talk about the speed and I think you called it the Project Y in terms of the speed of decision-making and new product releases, will this impact at all the way you think about -- you've been on a bi-annual or every 6-month cadence for new product releases, consumer -- either to the consumer or to the host. Could you talk a little bit about how maybe what you've learned or the experience you've had with this new more efficient decision-making has could inform the product release going forward? Brian Chesky: Yes, sure. Maybe I'll start with the second question and over to the first. So we're still going to do biannual product release moment, but our methodology is going to be a little bit different. Last May was kind of a onetime like rebuilding of the platform. We had to basically rebuild our app from a home platform to a platform you can book any part of your trip. Hence, the now you can book more than -- you can need more than Airbnb. Basically, every tab in the app changed. What we're now doing is we're not waiting for a release to shift. We're really shipping every minute in every hour of every day. So the teams are shifting. We still will have the May release where we'll showcase the stuff we're doing, but we're not holding stuff back. When they're ready, we will shift them. And we use May as a bit more of a showcase of what the product improvements are you can expect this summer. So if that makes sense, it's more of a essentially marketing showcase, a product marketing showcase versus us holding back features. But we still do think telling a story a couple of times a year to our guests, our host and our shareholders about the improvements in innovation we make is a really good thing. I think releases are a really good way for us to tell the story. But again, why it means that we don't wait for release to shift. We shift the moment it's ready. And especially in the age of AI, giant moments aren't the way to do it. Do you want to iterate consistently. I think the second question was on loyalty, right? That was the first question. So yes, so we -- I think the thing that I would like to point out is the results we've had without loyalty and without sponsor listing. So I think that with loyalty, we think that could be a massive accelerant for our company. We are absolutely looking at this. I've said before that if we do a loyalty program, we wouldn't want to do an out-of-the choose points program. We want to do something much more unique. And we are actually testing a lot of different tracks. So we're testing different benefits that could be in the loyalty program. And based on the results of those tests, we'll eventually package them and release the loyalty program. But right now, we are in testing. So I think that was the last question. I think now we can go to closing remarks. So we are at time. I just want to thank everyone for joining us today. I just want to say also, I'm incredibly proud of what our team here at Airbnb delivered in 2025. We develop a blueprint for innovation that we're now using across the company, and you're starting to see that in our results. As this momentum builds, we believe the opportunity ahead is even bigger than what you're seeing today. I look forward to seeing you next quarter. Thank you. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and thank you for joining us for Rivian's Fourth Quarter and Full Year 2025 Earnings Call. Today, I'm joined by RJ Scaringe, our CEO and Founder; Claire McDonough, our Chief Financial Officer; and Javier Varela, our Chief Operations Officer. Before we begin, matters discussed on this call, including comments and responses to questions, reflect management's views as of today. We will also be making statements related to our business, operations and financial performance that may be considered forward-looking statements under federal securities law. Such statements involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are described in our SEC filings and the shareholder letter we filed with the SEC. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of historical non-GAAP to GAAP financial measures is provided in our shareholder letter. Just before the earnings call, we published and filed our shareholder letter, which includes an overview of our progress over the recent months. I encourage you to read it for additional details around some of the items we will cover on today's call. Following our prepared remarks, we will be taking questions from sell-side analysts. In the interest of keeping the call to 1 hour, we would ask these analysts to limit any follow-on questions to one. With that, I'll turn the call over to RJ. Robert Scaringe: Thanks, Chip. Good afternoon, everyone, and thanks for joining us for today's call. 2025 was a year focused on execution at Rivian as we laid the foundations for scaling our business. Our team progressed the development of our technology road map in R2, while simultaneously driving continued improvement in our customer experience and our path to profitability. In founding Rivian, I wanted to demonstrate how a clean sheet technology-focused vehicle could eliminate long accepted compromises and provide consumers choice. Our goal with the launch of our R1 products was to establish the Rivian brand by delivering a combination of efficiency, on-road performance, off-road capability, functional utility and product refinement that simply didn't exist in the market. The first vehicles established Rivian as a brand that enables people to do the things they love, enable adventure as well as transcend different segments, form factors, use cases and geographies. In the fourth quarter of 2025, the R1S was the best-selling premium electric vehicle priced above $70,000 in California, New York, New Jersey, Oregon, Virginia and Washington, D.C. And it was the best-selling SUV EV or non-EV, over $70,000 in the state of California. Now I'm excited that we are months away from starting customer deliveries of R2, our first mass market vehicle. One of the things that's often overlooked around EVs is that there is a surprising lack of high-quality choices at prices around or below $50,000 for a new vehicle in the United States, there are only a few compelling EV choices as compared to hundreds of internal combustion or hybrid options that have a wide range of form factors and design aesthetics. From the lens of the customer, if you want to buy a midsized SUV with robust technology, autonomous capabilities and a reasonable price point, you've really only got one choice, and it's been that way for a long time. This is a reflection of a market that's being underserved. We believe R2 is going to change that. R2 is an extension of the experience we delivered in R1 with design elements and performance to inspire adventure, but in a smaller form factor and importantly, at an attractive lower price point. Launch Edition R2 variants will be well equipped with a dual motor all-wheel drive setup that provides more than 650 horsepower and over 300 miles of range. In mid-January, I was thrilled to drive our first R2 manufacturing validation build off the production line in our factory in Illinois. As you've seen from the extremely positive, media reviews of our preproduction vehicles over the last few days, R2 is an exceptional vehicle, and I believe will be a game changer for our customers, our company and the industry. One reviewer said, the R2 is an exceptional vehicle, quite possibly the best all-around electric vehicle I've ever driven. We look forward to getting investors and more media in R2 for demo drives so they can experience the capabilities of the vehicle. We plan to provide additional product, pricing and lineup details on March 12. Turning to our AI and Autonomy Day. It was great to see so many of our stakeholders at our offices in Palo Alto this past December. We were excited to showcase our innovation across our vertically integrated hardware, software and autonomy teams and unveil RAP1. Developing our own chip was driven by the need for velocity, performance and cost efficiency and is a key development of our autonomy platform. Near the end of last year, we released universal hands-free, which expanded our advanced assisted driving capabilities for Gen 2 customers to more than 3.5 million miles of roads across North America. Since its release, customer utilization of our autonomy features has doubled. Rivian is also making significant progress in making software and AI core to everything we do from the way we design, develop, manufacture and service our cars to the way our customers interact with their vehicle. This is enabled by the Rivian Unified Intelligence, a common AI foundation that understands our products and operations as one continuous system and personalizes the experience for our customers. It also defines how applications will integrate in our vehicles in the future. We were excited to demo the Rivian Assistant at AI and Autonomy Day and expect to launch this feature early this year. Finally, we continue to see the extensibility of our electrical hardware and software platform with the work happening in our joint venture with Volkswagen Group. I'm very pleased that we have delivered vehicles for winter testing for multiple Volkswagen Group brands, 13 months after the formation of the joint venture. In closing, 2025 was a foundational year for scaling Rivian, and I could not be more excited for the year ahead. I believe 2026 will be an inflection point for our business. As an American automotive technology company that develops and manufactures incredible electric vehicles, we believe that the future of the automotive industry will be fully electric, autonomous and AI defined. I've never been more confident in the opportunity ahead for Rivian than I am today. I firmly believe Rivian's technology, along with our direct-to-customer ownership experience, position our company to build a category-defining brand with a strong mass market product portfolio for the U.S. and global markets. With that, I'll pass the call over to Claire to discuss our financial results. Claire McDonough: Thanks, RJ, and good afternoon, everyone. As RJ discussed, we believe 2026 will be an important year as we scale our business. Launching R2 will extend our brand to the mass market, and we expect R2 will drive meaningful automotive segment growth and profitability over time. Now before I dive into the quarter, there are a few key financial metrics that I'd like to highlight for 2025. First, on a full year-over-year basis, we delivered nearly $5,500 of improvement in average sales price due to the introduction of our second-generation R1 quad models, a higher mix of R1 units and increased base prices for the 2026 model year. Second, on a full year-over-year basis, we achieved an approximately $9,500 improvement in automotive cost of goods sold per unit due to material cost reductions and operational efficiencies. Finally, the improvement in unit economics in our Automotive segment, when combined with our strong software and services performance, resulted in greater than $1.3 billion of improvement in full year gross profit, making 2025 our first full year of positive gross profit. Additionally, our gross profit performance, coupled with our focus on cost management, enabled our adjusted EBITDA for 2025 to be at the favorable end of our guidance. All of these metrics represent our continued progress in the operational efficiency and profitability of our business, which sets a strong foundation for 2026 and beyond. We expect the gross profit per unit for R1 and the commercial vans to be further enhanced as we ramp up production and deliveries of R2, coupled with the gross profit contribution of R2 over time. Turning to the results of the fourth quarter. Our consolidated revenues were approximately $1.3 billion. Consolidated gross profit was $120 million, and our gross profit margin was 9%. Gross profit included $108 million of depreciation and $26 million of stock-based compensation expense. Adjusted EBITDA losses for the fourth quarter were negative $465 million, $137 million improvement from Q3 2025 due to higher gross profit and lower operating expenses. Now looking at our Automotive segment. During the fourth quarter, we produced 10,974 vehicles and delivered 9,745 vehicles from our manufacturing facility in Normal, Illinois. This was the primary driver of the $839 million of automotive revenue. Automotive gross profit for the fourth quarter was negative $59 million, a $71 million improvement from Q3 2025 due to a higher mix of commercial vans, which resulted in the lowest cost of goods sold per unit in our history. Our Software and Services segment reported another strong quarter with $447 million of revenue and $179 million of gross profit. $273 million or approximately 60% of software and services revenue was attributable to our joint venture with Volkswagen Group. We also experienced strong growth from our marketing and vehicle repair and maintenance. Looking at our balance sheet, we ended the year with approximately $6.1 billion of cash, cash equivalents and short-term investments. In 2026, we expect to receive an additional $2 billion of capital as part of our joint venture with the Volkswagen Group. $1 billion is an investment subject to the successful completion of winter testing, which RJ discussed earlier and $1 billion is nonrecourse debt, which we expect to receive in October. Finally, for our 2026 guidance, we expect to deliver between 62,000 and 67,000 total vehicles across R1, R2 and our commercial vans. We expect total deliveries of approximately 9,000 to 11,000 per quarter in the first half of 2026. We plan to start production of the R2 launch variant with a single shift and expect to add a second shift towards the end of the year. While we believe our gross profit will increase year-over-year, we expect the complexity of a new vehicle launch to negatively impact our automotive gross profit in the second and third quarters before becoming a benefit to our overall operations in the fourth quarter as we ramp production and deliveries. As a reminder, we believe this is a transition year for the Automotive segment's profitability. Delivering a strong exit rate for R2 production and deliveries will be a key focus for our team. For 2026, we expect an adjusted EBITDA loss of between $2.1 billion and $1.8 billion. Our adjusted EBITDA guidance also includes a step-up in R&D spend as we accelerate investments in our autonomy road map and look to deliver LiDAR, our first RAP1 chips and limited point-to-point functionality for our customers by the end of the year. We believe autonomy will be a key fundamental long-term differentiator for our business. We also plan on the continued growth of our SG&A, driven by the expansion of our service and sales footprint as we scale with R2. Finally, for 2026, we expect capital expenditures of $1.95 billion to $2.05 billion related to finalizing construction and tooling for R2 and normal, kicking off vertical construction for our greenfield plant in Georgia and the continued build-out of our sales, service and charging infrastructure. In closing, thank you again to the team for delivering a great 2025. As we look forward to 2026, we remain steadfast in our belief that R2 and our technology road map will be truly transformative for our growth and profitability. I'd like to turn the call back over to the operator to open the line for Q&A. Operator: [Operator Instructions]. Our first question comes from Emmanuel Rosner with Wolfe Research. Emmanuel Rosner: My first question is on the cadence that Claire, you just highlighted with the 9,000 to 11,000 units per quarter in the first half and then obviously, 62,000 to 67,000 on a full year basis. Is that 10,000 per quarter or so, is that your expectation for R1 plus EDV for this year in 2026? And then the upside in the second half would be essentially delivering the R2? Claire McDonough: Thanks, Emmanuel. As you think about the cadence, as RJ articulated in his prepared remarks, we expect first deliveries to begin for R2 in the second quarter. Like any ramp, the number of deliveries will be rather small as you think about the Q2 impact of R2 contribution to the 9,000 to 11,000 units per quarter that we anticipate in the first half of the year. And then as we get into the second half of the year, we expect to see the continuation of the ramp of R2, coupled with the ongoing deliveries of our commercial van as well as R1. So on a full year basis, you can think about the R1 commercial van being roughly in line with our 2025 total volumes. Emmanuel Rosner: Okay. And then another one on the cadence side, but more from a financial point of view, I think in the past, you had targeted, I think, by the fourth quarter of this year, some level of profitability on R2 to sort of like demonstrate essentially the potential. Is that still the expectation for this year? Claire McDonough: Yes. As I mentioned, we expect 2026 will be a transformational year for our automotive gross profit, and we expect that both R2 [Audio Gap]. Operator: Our next question comes from Dan Levy with Barclays. Dan Levy: First, I wanted to start with just a question on the R2 volume assumptions, which you just talked about a moment ago. As you're going into the launch, do you have a feel for what the aggregate demand is? And maybe you could just talk to the question of your confidence on people wanting to take delivery of R2 before the new ADAS platform or hardware is put into the vehicle? How much of a current the lack of that new hardware will be on deliveries? Robert Scaringe: Dan, thanks for the question. With regards to R2, I've had chance to spend a lot of time in it over the last several months and really over the last month or so, driving our validation vehicles that are produced in our plant off of our manufacturing validation build. And the vehicle is just absolutely incredible. It's the combination of features, the packaging, the vehicle dynamics, the steering wheel, we're incredibly bullish on. And as I talked about a lot in the past, we ultimately think the market is really hungry for some choice in this segment. As I said in my opening remarks, just the lack of choice that exists in and around this $50,000 price point has led to very high market share concentration of one vehicle. And so this is the first time there's going to be a real alternative. And this is important for folks that are in internal combustion vehicles today, midsized SUVs and looking for something that fits their form factor needs, their aesthetic needs, their packaging needs. And so we're very, very focused on putting this together. And with that said, we have a lot of confidence in the overall demand of course, that's why we leaned so much into the program and lean so much into what we're about to launch. Dan Levy: And just the issue of the ADAS platform, people taking it before the new hardware comes in? Robert Scaringe: Yes. With new technology, there's always -- especially for us as a business, given that we've got an enormous focus on developing new technology, there's always something new coming and recognizing that there are a lot of customers that are just waiting to get a great midsize SUV. And so given the enormous backlog of demand we have as well, the short period that we have where we'll be launching with essentially an upgraded version of our Gen 2 autonomy stack before our Gen 3 autonomy stack comes -- we don't think that's going to be a significant issue for those that want to wait for it, they certainly can and for others that are going to be excited the vehicles in a short time frame, be available prior to that. Dan Levy: Okay. Great. As a follow-up, I wanted to ask about partnership or licensing deals with other automakers. And maybe you could just give us a sense of the tone or tenor of discussions on licensing the network architecture to others. And you said at your Autonomy Day that one of the opportunities on your in-house processor was not only that it could be used for your vehicles, but you could also sell this to others. It's a better, what you said, bang for buck. So I know it's early days, that still isn't out and the initial units of that process are going to need to be for you. But what types of discussions are you having with automakers on potentially selling that or licensing that to them? Robert Scaringe: So as I said in the opening remarks, we've had in the first 13 months of establishing a joint venture with Volkswagen, we've testing on multiple VW Group products. And I think the true demonstration and existence proof, if you will, of the scalability of our technology in terms of being able to work across multiple form factors, different price points, different brands and importantly, be productized into a platform that can go across a large existing OEM. This relationship is really important for that. And so that's our focus. But of course, we have relationships with a broad spectrum of other manufacturers. And I've said this in the past, but I deeply believe that over the course of the next several years, every manufacturer has to make the decision as to whether or not to get to a software vehicle or they're going to develop it themselves, secure it from a third source of which we will be the only demonstrated example of having scaled this technology outside of our own products or accept that without the technology, you will lose market share. And so we're quite bullish on the potential for this technology platform, and we see it as really an important part of our portfolio going forward. Operator: Ladies and gentleman, we are having further technical issues, please standby, we will resume the Q&A as soon as possible. Thank you. [Audio Gap]. Our next question comes from Ben Kallo with Baird. Ben Kallo: Congrats on all the progress so far. Maybe first, can we talk about just the VW relationship and there was an uptick in revenue from that. And just if you give us a sense of how that progresses and the potential to expand the relationship or how we should think about it growing? And then the second question is just around Georgia, the DOE loan guarantee, how you're looking at that and maybe just liquidity in general as you start working on that. Robert Scaringe: Thanks, Ben. And I spoke a little bit about this in the previous response, but I understand we've had a few technical difficulties here. So at risk of repeating myself, I'll just say -- cover a few things that I said earlier. The Volkswagen relationship continues to progress. We're now 13 months since the joint venture started. We've -- with that, we've started winter testing on several different Volkswagen Group products. And of course, we're working towards the first launch of those vehicles in 2027. And the relationship has been very, very strong. We had a great session, in fact, coincidentally last week with a broad set of the Volkswagen Group leadership team. And seeing this be used and deployed across not just vehicles of similar price point to Rivian's vehicles, but across the price point -- across a wide band of price points and across a range of form factors is really important. And it really demonstrates the scalability of the technology. And so ultimately, we're going to continue working towards delivering multiple Volkswagen Group products, but this does, of course, open the door for opportunity with other manufacturers as well. Claire McDonough: And then to put some of the financials behind the software and services outlook as a whole, we anticipate seeing that we'll approach about 60% year-over-year growth in our software and services business, and it will be a significant driver of our gross profit outlook as well with margins that we expect to be in the mid-30% area as a whole. Then as your second question, which was on the capital road map, as I mentioned in my prepared remarks, we ended 2025 with $6.1 billion of cash, cash equivalents and short-term investments. We expect that we'll receive another $2 billion from Volkswagen Group throughout the course of 2026. There's still roughly another $0.5 billion payment associated with the original joint venture transaction as well that will happen, we anticipate in 2027. And then as it pertains to our broader capital road map, we'll continue to remain opportunistic as well on that front. On the DOE loan question, similar to what we've shared in the past, we certainly share the President's desire to bring jobs back to the United States. We're excited to keep up our work on creating new American manufacturing jobs. We'll be adding approximately 2,000 new jobs at our Normal, Illinois plant for the ramp-up of R2, an additional 7,500 jobs at our future Georgia plant as well. And similar to the comments RJ just made, Rivian is working to help drive innovation and technology leadership in the U.S. automotive industry for consumers and also associated with our joint venture with Volkswagen Group, enabling this technology for the industry as a whole. Operator: Our next question comes from George Gianarikas with CG. George Gianarikas: As it relates to your guidance for vehicle sales this year, to the extent you see a strong conversion in your backlog for the R2, could you see upside to that? Or are there certain production bottlenecks that you'll have to work through towards the end of the year? Robert Scaringe: Thanks, George. The process of ramping a vehicle is something we've spent a lot of time talking about in this forum, but certainly internally, we're really putting a lot of effort on making sure we have a very smooth production launch and then associated ramp. And we often think of the plant as being the bottleneck for the ramp. But in fact, we have to remember there's hundreds of other companies that are providing components into Rivian that ultimately really contribute and are a key part of the ramp. And ramping our supply base is something that we're very focused on and planning around. And you can only ramp as fast as your slowest part, so to speak. So with that said, we've -- as you heard earlier, we're starting with a single shift. We're bringing on a second shift that will be happening near the end of the year. And then in 2027, we'll be adding our third shift. And this has been very methodically laid out to make sure that we're ramping consistently and evenly across the supply chain. And so certainly, and as you alluded to, there's going to be a large demand backlog that we're working through and a tremendous amount of excitement for the R2 vehicle. And as more reviews come out about it and more people get exposure to it, we expect that to continue to expand and grow. It's worth noting some of the preproduction reviews that came out last week, the feedback has been universally super positive. And so we're acutely aware of that, but we are working very carefully to coordinate the ramp and coordinate the growth of output with our supply base. George Gianarikas: And maybe as a follow-up, as you sort of crystallized your selling prices and your cost structure for the R2, can you just maybe speak to the guidance you gave at your Analyst Day last year about reaching EBITDA positivity in 2027 and your long-term vision around having 25%-ish gross margins and high teens EBITDA margins? Claire McDonough: Thanks, George. As prepared -- as discussed in our prepared remarks, we believe that 2026 is going to be a transition year for the automotive gross profit segment. And our North Star for the normal plant is going to be getting our production and deliveries up to about 4,000 units per week. While there's a lot of execution required, as RJ just walked through from the team in order to achieve that outcome, if we're successful, we believe it would put the company in a strong position to achieve our adjusted EBITDA goals. And as we look at the broader outlook, we certainly see there being 20% gross profit target for our automotive segment. As we think about the overall contribution of software and services, there's many outcomes or licensing deals that [ Rubin ] could do that could allow gross profit to be much higher than the 25% in our end state as well. Operator: Our next question comes from Joseph Spak with UBS. Joseph Spak: Just a couple of questions. Claire, I know you said the second shift starts in the back half. Does the guidance contemplate like exiting the year at a full 2-shift rate for the R2? I just want to sort of understand how we should think about a jumping off point for '27. Claire McDonough: Sure. As you can imagine, Joe, we'll be in the process of ramping up the second shift. So as you think about the exit rate of 2026, we won't yet be at full production across 2 shifts. We'll be getting there as we continue to progress all of our operational efficiencies and get the team ready to ramp up throughout the course of 2027. Joseph Spak: And then I guess, RJ or Claire, just you mentioned more details on March 3. I'm assuming that's also when reservation holders will be invited to configure. But is there any update you could give us on that order book? And then on the pricing side, one of the things we've seen, again, not Rivian specific just to the industry and the world really is the cost side between metals and memory. So curious to sort of wonder how you're thinking about that impacting either your pricing for the vehicle or whether that's contemplated in the EBITDA guidance for the year? Robert Scaringe: Yes. So on March 12, we'll be providing the full picture around the overall portfolio of products that will exist for R2, and that will include the launch configuration, which, as I've said, is a dual motor performance variant with a premium trim. The different combinations of trim, powertrain performance and battery size are what we'll be describing in detail on the 12th. And then along with that, allowing customers to start configuring their vehicles and allows us to start getting ready to be making deliveries later in Q2. I think important here, as you think about the overall demand profile for the vehicle, we've put a lot of time into thinking about the different combinations and recognizing what different folks are going to want and having the benefit of having lots of conversations and also the benefit of seeing what are the most popular trims and configurations in R1. And so we're really excited to go through that, but it's something that we do want to go through as -- present it as the full meal as opposed to giving little bits and pieces. So other than talking about the launch configuration, the rest of the configuration is going to be something we talk about in detail in about a month. Claire McDonough: And then Joe, our adjusted EBITDA guidance does contemplate some of the increases that we've seen in raw material costs and the current supply chain backdrop as well. Operator: Our next question comes from Mark Delaney with Goldman Sachs. Mark Delaney: I was hoping to speak more about automotive COGS. Maybe you can help us better understand what led to the reduction in cost per vehicle, both sequentially as well as year-over-year. And then as you look forward, clearly, you just alluded to some of the supply chain challenges around DRAM and other input costs that are embedded into your guidance. But where do you ultimately think the R2 cost can get to? And is the 50% reduction in the BOM cost compared to R1 still the right level to think about? Claire McDonough: Sure. For Q4, we were able to deliver $92,000 of COGS per unit, and that was about a $4,000 per unit improvement relative to the third quarter. One of the key drivers was associated with the mix shift. So we had higher penetration of commercial vans in the fourth quarter relative to the third quarter. And then beyond that, the ongoing operational efficiencies that we continue to execute across our normal operations as well that also contributed to the reduction in our COGS per unit. As we look at the full year-over-year improvement, the biggest driver that we saw was associated with the reduction in our material cost, that was both the transition for us to move fully to Gen 2 vehicles. We also, in addition, saw a significant step down in terms of a lot of our raw material costs and importantly, a step down in the cost of our lithium prices that was another contributor for us as well as we looked over at the full year-over-year step down in terms of COGS per unit, coupled with the ongoing operational efficiencies that we continue to progress throughout the course of the year. As we look forward to R2, one of the key factors for us with R2 is the opportunity for us to have also over the course of the last year, started to see some meaningful benefit from our joint venture -- joint sourcing opportunities associated with our low-voltage electronics that we're sourcing for the R2 vehicle. And that's really been a key enabler for us to continue to progress the material cost trajectory of the R2 product as well. And then as we approach the Georgia plant, we'll have further opportunity to drive additional synergies or efficiencies as we start to source future vehicle volumes as well that will share the fundamentals of the midsized platform as a whole. So those are a couple of the puts and takes. The other callout that I would highlight as well is we do anticipate seeing a reduction in terms of our tariffs per unit. So we didn't have the full benefit of the Section 232 offsets for the entirety of the fourth quarter. So we'll see further benefit from a tariff per unit standpoint as we progress forward, and R2 will also benefit from that in the future. Mark Delaney: My other question was on EDV, and I understand probably flattish volumes there for 2026 based on your comments earlier on the call, but you did speak to a plan for some additional variants, including one with more range for Amazon. So maybe help us better understand when to expect that new product for the commercial segment and what that might mean for van deliveries and the broader commercial opportunity going forward? Robert Scaringe: We do expect some growth in our EDV demand in 2026. And as you called out, there's an all-wheel drive version of the van and a larger battery pack variant as well. And both of those are to help unlock specific use cases within the Amazon network. We're working really closely with Amazon in defining the requirements of those and excited to get those launched. And the relationship with Amazon continues to be very positive. And certainly, the EDV continues to perform extremely well. Operator: Our next question comes from Chris Pierce with Needham. Christopher Pierce: As you talk about adding the second shift, then adding the third shift, can you kind of just walk through setting up hiring for these workers in the normal area? I'm just not sure if we should think about that as a barrier or a burden or just kind of -- is it already in motion? Or do you already have these and you kind of move people from one shift to another? Just kind of any detail around that, please? Unknown Executive: Yes. Chris, thank you for your question. Hiring process is in place, is proceeding according to plan. We have enough candidates. At the beginning, it was even spontaneous candidates that wanted to work for us. So we are good from that end. There's part of the team that will populate the R2 line that is coming from the existing flows, but it's an important part as well that is hired from outside. We have reinforced our training programs. We have even before hiring the people pre-hiring activity, just to let them know what is working in the lines and what they should expect there. And so far, we are very happy with the response of the talent pool and the people pool that we have seen there. So... Christopher Pierce: Perfect. And then just -- I guess, I just kind of want to understand, you've had the reviews this week. You're kind of flipping over the card as far as first trim and other trims in a month. And then we could see initial deliveries sometime in the second quarter. I guess I'm just kind of curious I'm just thinking about maybe Apple and the iPhone or the iPad, and it's just sort of boom, here it is, you can buy it now. I guess I'd just love to hear about why the spacing? Is there a psychological effect or it just comes down to what you can produce, when you can produce it at the plant, but just the timing of the cadence as you move towards the launch. Robert Scaringe: Well, thanks, Chris. One of the amazing things about the R2 program is there's an enormous backlog, but that does create a challenge for us with making sure essentially how do we select who receives our vehicles first and having a processor on that. And so opening up the reservation or opening up the configuration process allows us to start taking this demand backlog and organizing around when we make deliveries and who gets the vehicles first. It's not as if you could like press a button and instantly have thousands and thousands of vehicles available. So we start producing, we are ramping production, but the demand will outpace our ability to produce. And so that process allows us to organize in a thoughtful way and learning a lot from some of the past launches we've had, how do we prioritize and how do we sequence deliveries to our broad base of customers. Operator: Our next question comes from Itay Michaeli with TD Cowen. Itay Michaeli: I wanted to actually ask on the universal hands-free. Curious how initial feedback has been since December, how we should think about feature improvements and OTA updates this year? And maybe what you're also assuming for paid subscriptions this year? Robert Scaringe: We're really excited to talk about this. This is a huge effort within the business and autonomy and AI was, of course, focused on all the work that we're doing here. But our Universal Lands Free is really think of it as the first step in a whole series of steps that expand the capability. And so Universal Lands Free expanded the number of miles where you can drive with hands off the wheel, but eyes on the road. It's around 3.5 million miles, essentially any road with marked lanes. And later this year, we'll be unlocking the ability or enabling the ability for the vehicle to drive point to point. So you put your address into the vehicle and the vehicle navigates to that address. And then the next steps ultimately are driving towards what we think of as personal Level 4. But between point-to-point and personal Level 4, we'll have hands-off eyes off, so you'll be able to take your eyes off the road and do other things starting first on the highway and then expanding from the highway. And then following that, we'll have our first Level 4 applications within a geofence area to start, but ultimately expanding over time. And our view and really strong conviction is that over the course of the remainder of this decade, we're going to see autonomy go from something that today with hands-off capabilities certainly is a nice feature to have. But as we start to move to hands-off and eyes off and then ultimately to Level 4 where the vehicle can operate itself entirely on its own, including driving empty, it really creates a whole new customer experience, and we think it becomes a critical part of the purchase decision. And this will -- this is going to drive significant change in how we think about the business model. It's going to drive significant change in how consumers think about what vehicles they want to purchase. Itay Michaeli: That's very helpful. As a quick follow-up on the financials, any sense of how we should think about working capital flows this year, particularly as you go through the initial R2 ramp? Claire McDonough: Sure. We will see working capital be an outflow of cash for us over the course of 2026. And that in part is driven by the buildup of our inventory balance associated with the launch of R2. Operator: Our next question comes from Andrew Percoco with Morgan Stanley. Andrew Percoco: I actually just want to come back, RJ, to what you just said on autonomy really driving the value proposition and driving experience over the next few years. And I guess I'm just curious, like can you share your thoughts around whether or not there will be a retrofit opportunity for existing or new R2 customers that don't have Gen 3 with LiDAR and existing R1 customers? And any thoughts of when you'll introduce LiDAR onto R1 production? Robert Scaringe: We're not -- in terms of retrofit, this isn't something that's contemplated or planned. Certainly, there will continue to be over their updates for our Gen 2 vehicles, our R1, Gen 2 vehicles and our launch R2 vehicles. But in terms of hardware upgrades, those are not planned. The hardware upgrades that we've talked about in the past, we talked about at our autonomy and AI Day, these are going to be on vehicles in the early part of 2027. And certainly very, very excited about those. But the capabilities and even the demo that we had at our Autonomy AI Day, which was a point-to-point demo, that's being done. That demo was on a Gen 2 of our R1 vehicles. So that's -- that will be available on any Gen 2 R1 vehicle as well as the R2 vehicles we'll be launching with. Andrew Percoco: Got it. Okay. And can you get to -- is the plan to get to eyes off point-to-point with Gen 2? Or is that something that's going to require Gen 3? Robert Scaringe: I think the important thing to keep in mind on our upgraded architecture, which is, as I said, coming in '27, is that has a few really important purposes. One, of course, is it raises the ceiling on what's possible. So it grows the opportunity to add even more capability beyond point-to-point, but it also serves as an even more enhanced part of our data flywheel where we have enhanced cameras, higher level of inference in vehicle, but importantly, we add a LiDAR, as you referenced, which turns essentially every vehicle into part of our ground truth fleet, which is really helpful for training our end-to-end model. And so the way that the model continues to improve is we're benefiting from the thousands and thousands of drivers that are on the road and the vehicles that are on the road, pulling interesting and unique events back off the vehicles and allowing us to feed that into the overall training loop that we have for what we call our large driving model. Andrew Percoco: Got it. Okay. And just one quick clarification. When you say Gen 3 will be available early 2027, will that include R1? Or is that just still R2? Robert Scaringe: This is for R2. Operator: Our next question comes from Edison Yu with Deutsche Bank. Yan Dong: This is Winnie on for Edison. Can you guys hear me? Claire McDonough: Yes. Yan Dong: My first question is on the relationship with VW as it matures. I was wondering if the topic of how to best utilize vehicle data come up. And more asking this in the context of VW naturally having a much larger fleet and Rivian being able to potentially benefit from getting access to that data for training. So just curious your thoughts on that topic. Robert Scaringe: The Volkswagen fleet and what ultimately we're delivering to Volkswagen from a technology platform doesn't include our autonomy platform. So it's our embedded software platform, our topology of ECUs, including our zonal architecture, but it doesn't include our self-driving architecture. Yan Dong: Got it. And then maybe just on the RAP1 chip. Curious to hear your maybe longer-term inspirations for that. Is this something you think that will be limited to Rivian? Or do you envision maybe this being used by some of your partners or other OEMs and whether it could be potentially applied to nonautomotive products like [ humanoid? ] Robert Scaringe: I guess I'll answer it really broadly. This is -- when we think about our self-driving and autonomy efforts, this is an enormous focus for the business and represents our most significant area of capital investment from an R&D point of view. And so when we look at this through the lens of the next several years, we do believe that as we continue to demonstrate progress and work towards that growing capability set that I talked about before, ultimately culminating in Level 4, this is a platform that certainly beyond Rivian has applications. And so we do envision a world in which this becomes something that we can monetize through a few different ways. We can monetize it through increased market share and growing number of vehicle sales. We can, of course, do that through new and unique business models and new ways of thinking about consuming transportation, and we can do that through selling and providing the technology to other manufacturers. Now specifically to our RAP1 processor as well as its future variants of that processor, we do see applications for vision-based robotics well beyond the vehicle. Of course, the vehicle is a great near-term vision-based robot. But even within Mind Robotics, which is a new company that we created, that is also an example of a great customer application and a great use case application for our RAP1 processor. Operator: Our next question comes from Tobias Beith with Rothschild & Co. Redburn. Tobias Beith: May I ask what Rivian's management's latest thoughts are on captive battery cell manufacturing and assembly are considering the recent development in the price of lithium salts. I know that this activity was contemplated at one point at your forthcoming plant in Stanton Springs. Robert Scaringe: Well, thanks, Toby. We've found great working partnerships with our battery cell suppliers and have taken a very active role in securing and sourcing some of the upstream precursor materials. So you called out lithium. That's a really great example of an area that we, from a sourcing point of view, spend a lot of time on. But being able to work with these key battery partners and leverage the investments they've made in production capacity and in their own cell construction and cell design has been really helpful for us in terms of efficiently deploying capital. Operator: Our last question comes from James Picariello with BNP Paribas. James Picariello: Can you hear me? Claire McDonough: Yes, James. We can hear you. James Picariello: Great. [ Vista ] curious on your thoughts regarding R1's potential to see additional demand from one of your major competitors announcing the end of its 2 high-end models next quarter, right? We're talking about 20,000 annualized units essentially up for grabs in the U.S. It just seems like the R1 can be a natural home for many of those buyers. Just curious your thoughts. Robert Scaringe: Yes. The Tesla Model X, which, as you said, will stop production, at least what's been said is next quarter. The Model X is a really important product from an electrification point of view, and it was one of the first more at-scale products to show customers how exciting electrification can be. And so as that leaves the market along with the Model X, it does create an opportunity. There's -- I've talked about this a lot in the context of R2, the lack of choice, but this also is true in the case of R1. And R1 as it stands, our R1S is -- I called out in my opening remarks, it's an enormously successful product in this premium price category. So it's the best-selling premium SUV, electric or nonelectric in the state of California. And then it's the best-selling premium electric SUV in the United States and the best-selling premium electric vehicle, SUV or non-SUV in a number of states across the U.S. And so with even less choice now in that price category, it does represent an opportunity for us. But I'd just say very broadly that the overall lack of choice, and this is really true in the price category of R2, we think is an enormous opportunity for us to capture market share and, of course, provide something really exciting to customers. James Picariello: Yes, makes a lot of sense. My follow-up, just for the strong gross profit contribution slated for this year, can you help dimension at all what the expected contribution might look like from VW as we think about that 60% year-over-year growth? Claire McDonough: Sure. As you think about the Software and Services segment, roughly half of our revenue comes from revenue streams associated with our joint venture with Volkswagen Group, and we expect that to largely remain true as we look ahead to 2026 as well. And it is a more disproportionate share of the overall gross profit dollars that we earn out of the [ Safran ] Services segment as a whole. Operator: This concludes the Q&A section of the call. I would now like to turn the call back to RJ Scaringe for closing remarks. Robert Scaringe: Well, thanks, everybody, for joining the call, and we apologize for some of the technical difficulties that we had at the start. But -- we are -- hopefully, a takeaway from this is just how excited we are about R2. As I said, I've had a chance to spend a lot of time in the car and in a variety of ways, whether it's taking my kids to sports games or loading up the back with gear, and it is just such an incredible embodiment of the Rivian brand and captures so many -- so much of the essence of what makes R1 a special vehicle, but at a price point that, as we said, starts at $45 and will allow a much larger number of customers to access the vehicle. And so as we think about the next couple of months, we, as a company, remain incredibly focused on the launch ramp of this vehicle, along with the continued development of the technology we're building, both on the software side, which we talked a bit about, but certainly on -- also on our autonomy side. And so with that, thanks again for joining the call, and we're looking forward to a lot of folks being able to experience the R2 themselves.
Annie Bersagel: Good morning, and welcome to the presentation of Orkla's fourth quarter results. My name is Annie Bersagel, and I'm the Head of Investor Relations and Communications. So we're going to begin our presentation with a summary of the quarter from our President and CEO, Nils Selte. After that, our CFO, Arve Regland, will present some more details on the financials for the quarter. Nils will come back with some concluding remarks before we go over to the Q&A. Just to remind you on the Q&A, we're going to first have a video Q&A with our analyst community. And after that, we will turn to questions from the web. So you're welcome during the presentation at any time to submit your questions via the web, and we'll take those afterwards. So with that, I will now leave the floor to you, Nils. Nils Selte: Thank you, Annie and good morning, everyone. I will begin with the Q4 results before reflecting on the full year in my closing remarks. Organic growth for the quarter was 4.5% with contribution from both price and volume mix. Underlying EBIT adjusted for the consolidated portfolio increased by about 17% with all portfolio companies contributing on the positive side. Adjusted earnings per share improved 25% year-over-year, reflecting increased profitability in the consolidated portfolio as well as in Jotun. Organic growth in the fourth quarter of 2025 was the strongest since the fourth quarter of 2023 with an increased contribution from volume mix. Most portfolio companies delivered volume/mix growth during the quarter. This included all of the larger portfolio companies with the exception of Orkla Foods, they still have work to do in certain markets. This was the 12th consecutive quarter with underlying EBIT adjusted growth. The uplift in Q4 came from bottom line growth, cost reduction and some periodization effects and nonrecurring items in comparison to last year. Most portfolio companies delivered double-digit EBIT adjusted growth during the period. We will go into more details, but I would like to highlight a few developments driving our results. Jotun delivered another strong quarter with underlying operating profit growth of 28%. In 2026, Jotun celebrates 100 years since the company's founding, and we are proud to have been part of the journey for the past half century. The Board of Jotun intend to propose an ordinary dividend of NOK [ 7 ] per share. This translates to Orkla receiving approximately NOK 1 billion. Orkla Snacks ended a challenging year for the chocolate market with an impressive fourth quarter of 16% underlying EBIT adjusted growth. Orkla Food Ingredients delivered 14% underlying EBIT adjusted growth with contribution from all 3 clusters, capping a successful turnaround in Sweet Ingredients in 2026. On a rolling 12-month basis, the consolidated portfolio delivered an EBIT adjusted margin of 10.6%. The margin improved across the portfolio compared with 2024 with the exception of Orkla Health and Orkla Snacks. I will close this overview with an update of the 3-year financial target for the consolidated portfolio that we set out at the Capital Markets Day in 2023. Underlying EBIT adjusted continued to compound above the target range, increasing 6.6% for the year, following 17.3% in growth in 2024. The EBIT adjusted margin was 10.6%, placing us in the lower end of the target range. And the return on capital employed improved to 12.4%, driven by higher EBIT across the consolidated portfolio. I will now hand over to Arve for more details on the financials. Arve Regland: Thank you, Nils, and good morning. So operating revenues increased with 2% to NOK 18.8 billion in the quarter while reported EBITDA just came in at NOK 2 billion, up 12%. The group figures are influenced by lower sales in Orkla Real Estate compared to last year. Other income and expenses were minus NOK 151 million, and these include restructuring costs in 3 portfolio companies and IPO-related expenses in connection with the Orkla India listing. These were partially offset by the gain from the sale of Orkla Food Ingredients Icelandic operations. Profit from associates, which is mainly Jotun was NOK 505 million, up 36%. And the NOK 301 million estimated gain reported in discontinued operations relates to a positive outcome in a tax dispute for one of the sold hydropower assets. And as Nils said, adjusted EPS was NOK 1.74 per share, an increase of 24%. We recorded cash flow from operations of NOK 7.8 billion in 2025, a NOK 0.3 billion reduction compared to last year. Increased EBIT growth was more than offset by higher net replacement investments in the portfolio companies. During the quarter, we received an additional dividend from Jotun of NOK 438 million, bringing the total dividend received in 2025 to NOK 1.4 billion. Cash flow before capital allocation ended at NOK 6.9 billion on par with 2024. Turning to the capital allocation bridge, and I will comment on specific developments in the quarter. Expansion CapEx is around NOK 700 million year-to-date, of which NOK 250 million in the fourth quarter. This relates mainly to investments to expand production capacity in Orkla Food Ingredients. Cash flow from sale of companies was NOK 2 billion, primarily from the listing of Orkla India and the sale of the 2 Icelandic companies in Orkla Food Ingredients. And Orkla maintains a robust balance sheet with a net debt of NOK 14.2 billion, equal 1.4x EBITDA and 0.9x if excluding Orkla Food Ingredients. And moving to some more details on the portfolio companies, starting with Jotun, which ended the year with another strong quarter, as Nils mentioned. Operating revenues grew by 8.4% in the quarter adjusted for negative currency translation effects. Top line was driven by volume growth and increased share of premium product sales in the decorative segment. Volumes increased in all segments, except powder. And in terms of geography, Northeast Asia was the largest contributor to sales growth due to high marine new build activity in China and Korea. Operating profit growth was 28%, excluding negative currency translation effects. And the main contributors were higher sales volumes and higher gross margin from lower raw material costs. Orkla's share of net profit increased by 36% to NOK 505 million. And in addition to the EBIT growth, net financial items improved due to lower interest expenses, currency hedging gains and the sale of Jotun's share in an associate. In terms of outlook, Jotun forecast a flat development in raw material prices in the first quarter. For the year as a whole, Jotun expects sales growth to continue to outpace market growth. At the same time, they expect that intensified competitive pressure on selling prices will weigh on margins. Currency translation effects are also expected to continue to negatively impact reported results. Organic growth in Orkla Foods was 0.4%, divided equally between price and volume mix. Volume mix growth in Sweden continued and the ERP challenges in the Czech Republic from Q3 were resolved and volume mix growth was positive. The volume mix development was negative in Norway, and this was due partly to lower campaign activities. At the Capital Markets update, Orkla Foods presented their prioritized growth platforms, which amount to about 60% of the portfolio. Organic growth during the quarter was higher in these platforms. EBIT growth was 3%, positively influenced by periodization effects for SG&A versus last year. And market input costs continued to rise during the quarter and cost improvements only partially offset this impact. Inflation was most pronounced in meat, marine raw materials and berries, and we expect this development to continue into 2026. Organic growth in Orkla Snacks was 7%, primarily from price in the Chocolate segment. And I'm pleased to see that volume mix growth was 1.7%, rounding off what has been a challenging year. Both the Snacks and Confectionery categories drove the growth, while biscuits contributed negatively. The main driver for positive volume/mix growth within Confectionery was the BUBS U.S. rollout. Volumes continued to decline in the Chocolate segment. All 3 categories experienced EBIT growth. The main drivers included volume mix growth in the snacks category and from the BUBS U.S. launch, operational efficiency improvements in the biscuit factory in Latvia and continued cost reductions. Orkla Snacks expects a favorable development in input costs in 2026. Organic growth in Orkla Home & Personal Care was minus 2.8%, reflecting a onetime destocking on a Norwegian customer. This was partly offset by volume growth in Sweden and contract manufacturing. Market shares nevertheless increased across Norwegian, Swedish and Finnish grocery markets. Underlying EBIT grew 4%, driven by lower fixed costs. Organic growth in Orkla Food Ingredients was 8.3%, supported by solid price growth across all 3 clusters as well as positive volume and mix development in Sweet and plant-based. Underlying EBIT increased by 13.6%, reflecting continued volume mix growth, disciplined price management and improved operating leverage. All 3 clusters delivered positive underlying EBIT growth during the period. And the Sweet cluster ended the year with cumulative cost reductions in the high double-digit million range, in line with our previous guidance. Organic growth in Orkla Health was 5.2%, and this was driven primarily by price in response to rising input costs in the food supplements category. Wound Care also contributed positively, while sales declined in the Functional Personal Care unit due to lower contract manufacturing related to a contract that will expire in Q1 2027. A decline in sales to B2B customers in the Oral Care segment also contributed negatively. EBIT adjusted growth reflects a comparison to a challenging quarter last year. And input prices for Orkla Health are expected to continue to be negatively affected by the price development for cod liver Oil, which is a key input for food supplements in the omega-3 category. And please note that in Q1, Orkla Health will meet strong comparables. Orkla India's organic growth was 8.1% for the quarter, led by volume growth of 10%. Price development was negative due to continued reductions in key raw material costs. The Convenience Foods category recorded high sales growth. In the spices category, volume growth continued to outweigh the effect of price reductions following lower raw material costs. Underlying EBIT growth was 14.7%, led by volume growth, cost management and lower advertising expenses due to an earlier festive season. In The European Pizza Company, all businesses delivered positive same-store revenue growth with overall organic growth of 8.1% and consumer sales growth of 9.7%. Marketing activities, menu innovation and increased distribution were the key drivers. Underlying EBIT improved by 37%, supported by higher consumer sales and receivables write-off at New York Pizza last year. Lastly, Orkla House Care reported negative organic sales related to volume mix in the U.K. and Benelux. Underlying profitability was positively impacted by lower costs and increased share of sales from higher-margin products. In the Health and Sports Nutrition Group, organic growth from direct-to-consumer platforms was partly offset by lower B2B sales versus last year. Underlying EBIT growth and cash conversion remained high. And with that, I'll hand it back to you, Nils, for the closing remarks. Nils Selte: Thank you, Arve. Reflecting back on 2025, we delivered organic value creation across the portfolio with 3.5% organic growth and positive volume mix development. This translates into 6.6% growth in underlying EBIT adjusted, and we maintain our focus on cash generation and ended the year with cash conversion of over 100% for the consolidated portfolio companies. During the year, we continue to actively shape the portfolio, completing the sale of the hydropower assets and Pierre Robert Group in Q1 and listing Orkla India in November. The Board intends to propose a total dividend of NOK 6 per share, including NOK 2 in addition to the extra -- in addition to the ordinary dividend, reflecting the high cash generation and a solid balance sheet. In addition, the NOK 4 billion share buyback program announced at the third quarter presentation is ongoing. We have acquired shares for a total of about NOK 1.6 billion so far. 2026 is the final year of our current 3-year strategy period. Our priorities remain unchanged, drive value in the existing portfolio and reduce complexity. We have stepped up our evaluation of value-adding structural opportunities. But as I have said before, we are also committed to walk away from any transaction that is not in the best interest of Orkla's shareholders. Entering into 2026, we are preparing for the next strategy period. And I would like to invite you to save the date for our Capital Markets Day. We will hold the event here in Oslo on December 1 this year. Our objective is to set out Orkla's strategic direction through 2030 as an industrial investment company focused on brands and consumer-oriented businesses. With that, Arve and I are now happy to take your questions. Annie Bersagel: Welcome back. We are now ready to begin the Q&A. [Operator Instructions]. Looks like the first question is from Petter Nystrom in ABG Sundal Collier. Petter Nystrøm: Yes. I jumped somewhat late into the call. So sorry if this has already been addressed. You mentioned some positive phasing effects, some lower SG&A costs across some of your portfolio companies. Is it possible to quantify these numbers? Arve Regland: Yes. So -- we had some specific one-offs in Orkla Health and The European Pizza company in Q4 '24, which was also mentioned in the pre-close information. In addition, we had phasing and periodization effects in some of the portfolio companies between quarters. So -- but still, I would say that the clear majority of the EBIT growth is represented by underlying profitability compared to the same quarter last year. Annie Bersagel: I'm not seeing any more video questions. We have a question from the web from Ole Martin Westgaard in DNB Carnegie. It appears to be the same, asking to quantify the periodization effects and nonrecurring items. Any other questions? It looks like there's a question from Hakon Fuglu in SEB. Hakon Fuglu: Could you please quantify the sales effects from BUBS in the U.S. and how that progresses going forward? Nils Selte: I think, first of all, we are very happy with the launch. We are working very closely and good together with our partner, Mount Franklin Foods in the U.S. And we have got a broad nationwide listing of BUBS through the largest retailers in the U.S. So in Q4, we saw a bit better performance than we guided through Q3, but we will not quantify at this moment. Having said that, we will continue to invest behind BUBS in the U.S. We think we see a great potential for that product in the U.S., and we will kind of invest behind it. So as we said in Q3, we will not -- we do not expect to see major impact on the EBIT performance for Orkla Snacks for the coming quarters. Annie Bersagel: Are there any other questions on video? That appears to be the last video question. And it looks like there are no more questions on the web. So before we conclude, let me just remind you that our Annual General Meeting will be held on April 23, and we report first quarter results on May 20. So with that, thank you for joining, and please enjoy the rest of your day.
Andre Parize: Good evening, everyone. I'm Andre Parize, Investor Relations Officer at XP. Thank you for joining us. It's a pleasure to be here with you today. On behalf of the company, I would like to welcome you to our Fourth Quarter '25 Earnings Call. Today's presentation will be delivered by our CEO, Thiago Maffra; and our CFO, Victor Mansur. Both will be available for the Q&A session immediately afterwards. [Operator Instructions] Simultaneous translation into Portuguese is available during this conference call. If you would like to activate it, please click the button below. Before we begin, please see the legal disclaimer on Page 2 of today's presentation for additional information on forward-looking statements. The presentation is available for download on our Investor Relations website, and more information is also available in the SEC Filings section of our IR website. To begin the presentation, I'll hand it over to Thiago Maffra. Good evening, Maffra. Thiago Maffra: Thank you, Andre. Good evening, everyone, and thank you all for joining us today for our fourth quarter '25 earnings call. Before delving into the numbers, I would like to comment on the recent shareholder change we have just announced in the 6-K. As announced, myself and Jose Berenguer, CEO of XP's Wholesale Bank, will become holders of XP Control LLC, alongside Guilherme Benchimol, who is still the main controlling shareholder; and Fabricio de Almeida and Guilherme Sant'Anna. This is part of the ongoing process of strengthening corporate governance, long-term alignment and the company's management model. Now to the results. In 2025, we continue investing in key areas of our business. We enhanced our core processes, scaled financial planning, deepened our segmentation strategy and launched new products. We also celebrate the fifth anniversary of our Wholesale Bank, an important milestone that demonstrates the strength and integration of the ecosystem we have built. This platform drives the evolution of service for our corporate and institutional clients in addition to create cross-selling opportunities across our ecosystem. Despite its relative short history, we have established a top-tier franchise that keeps growing in a consistent manner and contributing to our results. Alongside these structure advancements, we continued our agenda of better serving our clients. We launched a new campaign focused on empowering clients through the power of choice. We are the first investment firm in Brazil to offer transactional fee-based and RIA models. We believe there is no single ideal model. Rather, different models are best suited to different client profiles. By having these different models, complete product range, focus on excellence and the most qualified team of advisers as our main advantage, we became the largest investment network in Brazil. Today, we oversee approximately BRL 2.1 trillion across AUC, AUM and AUA, supported by a nationwide network of around 18,000 advisers serving approximately 5 million clients. Our presence spans almost 800 investment centers across 23 Brazilian states and the federal district, combining scale with local reach. We ranked #1 in traded volume on B3 and processed nearly 50,000 fixed income transactions per day. We had some challenges last year, but by strengthening our business fundamentals, we have positioned ourselves to capture future opportunities. With a robust platform, disciplined execution and a fully committed team, we are starting 2026 ready to grow whatever the market scenario. On the next slide, we will explore how our ecosystem transformed over time and how that transformation brought us to where we are today. This slide captures where XP stands today. We are entering a more mature phase, while we're retaining the disruptive DNA that has always defined our journey. Our evolution has happened in waves. The first wave was focused on democratizing access to financial products that until then were not largely offered by incumbent banks like equities and third-party funds. The education of individual investors was an important pillar in the first wave; and through that, we fostered the development of the investment advisory industry in Brazil. In the second wave, we scaled, broadened our distribution and built a comprehensive ecosystem, consolidating XP as one-stop shop financial platform. Now we are advancing to a third wave, a move that democratize the wealth services model. We are taking a holistic and agnostic approach to give clients true freedom of choice. We have always put clients' power of choice at the heart of our strategy. We remain committed to leading the market forward, guided by our long-standing belief that we play a key role in society by continuously improving the way people invest, manage and think about their money. Our ultimate goal is to help clients achieve their dreams. Now moving on to the next slide. Our transformative track record has brought us to where we are today. We have built a distinctive business that delivers profitability while maintaining a conservative capital structure, giving us the option to operate in a broad range of scenarios. We posted gross revenues of BRL 19.5 billion in 2025, up 8% year-over-year. As I mentioned last quarter, we expected double-digit growth on the second half of 2025, and we managed to achieve that level. In the second half, we grew slightly more than 10% versus second half of 2024, showing that the initiatives we implemented during the year and earlier are responding positively. Year-over-year, EBT grew 10%, reaching BRL 5.5 billion. Adjusted net income in fourth quarter '25 was BRL 1.3 billion and BRL 5.2 billion for the full year, representing a 15% expansion year-over-year. Regarding balance sheet and profitability, we achieved 23.9% ROE in 2025, representing a 94 basis point expansion versus 2024. Our year-end BIS ratio was 20.4%, a very comfortable level even after the payment of BRL 500 million in dividends and BRL 1.9 billion in share buybacks executed in 2025. Finally, our adjusted diluted EPS increased by 18% during the year. Now that we covered our platform, our disruptive profile and the highlights of the financial results, I would like to go in more detail on our business strategy. We have spent the past 2 years developing our service excellence agenda. At first, we focused on building the foundations, systems, incentive models and sales force training. In 2025, we took the next step and began to scale this model. At the same time, we refined our client segmentation, offering tailored servicing models and value propositions for each segment. supported by multiple pricing structures. It's worth mentioning that today, approximately 23% of our retail AUC is already under a fee-based model. We continue to adopt this approach, recognizing that there is no single best model but rather, the most appropriate model for each client. We have also developed different ways to objectively track adherence to this way of serving. One of the most important tools we have is the XP Service Model Index. It incorporates metrics such as financial and wealth planning, quality of client relationships, and adherence to recommended asset allocation. Initial results are tangible. Clients above the index target show meaningfully better financial outcomes with 21% higher revenues and more than double the net asset inflows. As we roll out this agenda, different KPIs will move accordingly. Currently, clients above the index target make up 39% of our AUC, and we expect this number to continue expanding. We will cover this topic in more detail on the next slide. Two important pillars of our foundation are financial and wealth planning and our expert allocation model. We support our clients with a holistic approach based on financial and wealth planning. We help clients navigate complex and highly personal decisions with clarity and confidence. Our work goes beyond investments, encompassing succession, state and tax planning, always tailored to each client's objectives, family structure and long-term vision. We offer financial planning for our clients with at least BRL 300,000 in AUC and comprehensive wealth planning for clients with invested assets above BRL 3 million. We were truly pioneers on democratizing access to these services in Brazil at a time when they were largely restricted to a small group of very wealthy individuals. Additionally, we developed in-house technology that allow us to go beyond and scale the offering of financial planning while maintaining governance and quality. And this is something no other player in Brazil can do. Our second pillar is the expert allocation model, which is a proprietary tool based on algorithmic intelligent design to propose a smart asset allocation. The use of this technology goes hand in hand with our advisory capabilities and considers multiple variables such as available products, liquidity, client profile, the structure of the current portfolio, among others. Through it, we combine the best of both human and technological capabilities, data intelligence, complemented by the depth of human knowledge and strong client relationships built by our advisers. To track the development of our agenda, we measure how usage of these tools evolves over time. Currently, 21% and 12% of targeted clients track their financial and wealth planning with an adviser. Additionally, adherence to the expert allocation tool has been rapidly growing across all segments, and December 2025 was a record month for allocation using this tool. Besides the fact that we are democratizing this service, we can also see on the right-hand side of this slide, we are delivering positive performance to clients. Looking at the number of advised clients' portfolios, 39% achieved returns of more than 110% of the SELIC rate. 23% had returns between 100% and 110%, and 28% obtained returns between 80% and 100% of the SELIC rate. This means that 90% of the advised client base is registering returns of 90% and higher than the SELIC rate. Given that technology is a key component of our business, we will explore in greater detail on the next slide. Technology is a core pillar of XP's growth strategy. Our proprietary platforms and AI-driven capabilities enable scalable expansion while maintaining strong governance and improving adviser productivity. We believe in what we call an augmented adviser, which is an adviser whose capabilities are enhanced by AI. This improvement can be seen in different aspects. First, relationships. We are now able to monitor the frequency and quality of advisers' interactions with clients, providing us with data and intelligence that will ultimately be used to make the advisers better equipped to serve their clients. Second, asset allocation. Technology and AI play a central role in asset allocation supporting portfolio reviews and personalized recommendations aligned with our expert allocation framework. Third, automation. By reducing the operational workload of advisers, automation allows them to focus on higher-value client relationships. By augmenting advisers with AI across relationship management, operations and allocation, we can increase account load and adviser productivity while improving client satisfaction. By monitoring and scoring client interactions, we ensure strong governance, consistent service quality and scalable growth. To close this section of the presentation, I would like to talk about a core part of XP, our adviser network. XP basically created the modern investment advisory role in Brazil, and that role has continued to evolve over time. What began with education and access to equity products has grown into a highly professional, scalable adviser model that supports increasing complex client needs. While we offer a unique value proposition to clients, we also have a differentiated value proposition for our advisers. We equip them with proprietary tools, data and intelligence that enhance their productivity, improve advice quality and strengthen client relationships. This combination of technology, training and incentive alignment is something no other platform offers at scale in Brazil. By continuously investing in the development of more than 18,000 advisers, we reinforce the strength of our distribution network, enhance client relationships and the quality of the service delivered while ensuring the long-term sustainability of our model. Finally, this powerful combination of service excellence, strong client relationships and financial performance together with a sales force that has aligned incentives and robust capabilities corroborates our conviction that disciplined execution backed by governance and technology will drive the performance of our segments towards our strategic objectives. Now let's move on to the next slide to explore our retail investments strategy. This slide summarizes the results we are achieving across our core segments and shows how our strategic investments are producing concrete outcomes. Starting with retail. This segment continues to represent a significant opportunity for us. While we have faced market share pressure and margin compression over the last 2 years, we have taken decisive action to redesign the way we serve these clients with the objective of improving efficiency. The current scenario already reflects early signs of progress with a new value proposition grounded in goal-based investing and managed portfolios. We already see strong initial improvements with margin accretive dynamics. Our strategy now is to expand these initial tests to other client layers, using technology, process and governance as key enablers to scale in a profitable way. In high income, our core segment, fundamentals remain very strong. We have folks most of our investments here. And it's where our competitive advantage stand out the most. We continue to see solid growth supported by our multi-model service approach. As previously shown, financial planning, wealth planning and expert allocation remain at the center of this strategy, reinforcing client engagement and long-term value creation. In Private Banking, we are seeing the results of our recent investments. The segment is transitioning into a full wealth management model, covering both individuals and corporate clients' needs, supported by a robust product platform and a highly skilled team. Growth has resumed with market share gains and expansion in credit and cross-selling within the XP ecosystem. We are still investing in this segment, and we expect to see further market share gains accompanied by margin expansion. On the next slide, we will share our consolidated client assets figure. In the last quarter of 2025, our total client assets combined with AUM and AUA totaled BRL 2.1 trillion, representing a 22% growth year-over-year. This was an important milestone for XP, crossing the BRL 2 trillion threshold. On the right hand of the slide, we show how net new money related to client assets evolved during the last quarter of the year. In 2025, one of the most frequently asked questions for XP was around net new money. To clarify some of the questions we received, we'd like to exceptionally give a little more color on this metric. This quarter, we once again achieved BRL 20 billion in retail net new money and BRL 12 billion in corporate and institutional, totaling 32 billion for the period. As we have been saying in the previous quarters, retail net new money has been impacted by the dynamics of SMBs. In the fourth quarter of 2025, small and medium enterprise withdrew BRL 3 billion in investments from our platform. On the other hand, inflows from individual clients in all our segments totaled BRL 23 billion. While we posted positive figures this quarter and met our soft guidance, we still face a challenging environment for 2026. We are investing in different initiatives to support our future growth. But for now, we remain expecting retail net new money reaching BRL 20 billion per quarter. Retail cross-sell has been one of our focus to diversify revenue streams over the last few years. In 2025, we achieved important milestones in this business vertical. As a result, we have observed higher engagement from our clients across different products, across insurance, cards, consortium, retirement plans and new loans are driving market share gains and record contributions. For 2026, we will continue to innovate and expand our offering, improving the integration of these products in financial planning and enhance the customer journey through a better digital experience. For instance, insurance, we will launch new products, travel, home and credit line insurance. And in life insurance, we will expand our product range with new coverage. Taking cards into consideration, the new loans we had during the year made it possible to increase the share of spending while increasing penetration among target clients. In 2026, we also be launching new products to enhance our cross-sell offering. In the first half of 2026, we are rolling out a proprietary dollar-backed stablecoin, targeting clients who seek to diversify or hedge against FX volatility while providing true 24/7 liquidity. This stablecoin launched Clear proprietary digital currency strategy, and we will expand the portfolio over time. Finally, we will reintroduce crypto service that are fully integrated into our platform with XP operating as a virtual asset brokerage. This ensures a seamless and a trusted experience, fully embedded within our broader investment ecosystem. Overall, this stead evolution in cross-sell products strengthens client relationships, increased share of wallet and diversifies recurring revenue. Let's move ahead to the next slide and review some KPIs from our cross-sell products. Let's start with credit card, where TPV rose 11% year-over-year to BRL 14.6 billion in fourth quarter '25. In 2025, we launched new products, offering unique value propositions for high income and private banking segments. Life insurance written premium grew 25% year-over-year in fourth quarter after we enhanced our offering, including new coverage. In retirement plans, our client assets posted 17% growth year-over-year in fourth quarter, reaching BRL 95 billion. Cross-channel campaigns and client initiatives led to positive inflows. In 2025, we had, for example, record inflows in the defined contribution pension plan with 17% growth year-over-year. Other new products, which include FX, global investments, digital account and consortium collectively grew 21% year-over-year, generating BRL 258 million in revenue this quarter. It's worth noting that these products were built from the scratch only a few years ago and already account for more than BRL 1 billion in revenues per year. On the next slide, we will cover the evolution of our Wholesale Bank. We are operating a complete ecosystem where our Wholesale Bank has become a key pillar of our strategy. Just a few years after we started our wholesale banking activities, we have grown into one of the -- Brazil's largest players. As our retail platform scaled, it generated increased flow and liquidity demand, enabling us to grow our Wholesale Bank by leveraging our global markets and market-making capabilities. What started as a client facilitation has evolved into a sophisticated wholesale banking franchisee, integrating investment banking, institutional access and other capabilities. Through the combination of strong retail distribution with wholesale and market-making capabilities, we have built a powerful ecosystem that improves execution quality and liquidity for clients. In fact, we are leaders in equities, futures, options and ETFs, representing roughly 50% of these markets. Additionally, we have created a complete investment banking, offering a full range of capital market solutions to our corporate clients. This robust structure benefits us in several ways as it not only diversifies our revenue streams but also generates multiple synergies with our investment business. We have been gaining relevance in DCM, for example, and we will continue to invest in strengthening our franchise in the coming years. Finally, in credit agribusiness receivables, we are a leader in distribution as well as in real estate funds. Our Wholesale Bank has posted strong results over the past few years, and there is much more to come as we keep investing in our franchise. Now let's move on to the next slide and see more details on our progress agenda. Looking ahead, over the coming years, we will continue working on different business opportunities. At this stage, we understand that XP is ready to address and capture share in new markets being credit and SMBs, the main prospects in the long-term agenda. In SMBs, we will leverage Brazil's largest adviser network to expand our reach and deepen relationships. Moreover, we will broaden our product portfolio beyond investments and FX to generate more engagement and address SMBs' day-to-day financial needs more holistically. When it comes to credit, we see opportunities for both individuals and corporates. For individuals, credit acts as a catalyst for our investment business, helping us move toward greater primacy. Expanding our tailored solutions, particularly for high-income segments, will be central to our agenda. For corporate clients, we remain focused on structured solutions and expanding our corporate product offering to improve competitiveness, including receivables, government-sponsored funds and real estate solutions. Overall, our strategy is to expand our credit offering while maintaining the conservative, prudent approach that has long defined our business. These opportunities are once again medium to long term. I will now hand the presentation over to Victor, who will discuss the quarter and full year financial results. Thank you. Victor Mansur: Thank you, Maffra, and good evening, everyone. Before I start, I would like to do a quick recap of some achievements and commitments for the past 2 years. First, corporate restructuring. We are now entering into the final phase of our corporate restructuring, in which we will further concentrate activities in XP Bank, materially improving our capital and funding costs. The new structuring has increased our competitiveness, optimizing our warehouse strategy during the year. We already captured part of these benefits in 2025 with reduction in funding costs, plus the reduction in cost of [ which ] to do the emission of subordinated notes. And we expect to have another positive impact in 2026 and the following years. As a result, we see the expansion of both our financial margin and EBT margin for 2025, and we expect to keep this pace for 2026. Second, our balance sheet management. In 2025, both our EPS and net income grew faster than our total assets and total risk-weighted assets. Combined with our disciplined capital allocation and distributions, this drove our ROE expansion of approximately 90 basis points, even though our BIS ratio is higher than 20%. Third, efficiency. Our continued technology investments are delivering operational leverage across many business fronts, allowing us to keep our investment pace, while we keep a stable efficiency ratio year-over-year. So now starting with total gross revenue. In our fourth quarter, total gross revenue reached BRL 5.3 billion, representing a 12% increase year-over-year and 7% sequentially. For the full year of 2025, total gross revenue was BRL 19.5 billion, growing 8% compared to 2024. The performance highlight was Corporate & Issuer Services with a strong second half of 2025. When we compare to gross revenue breakdown on the right-hand side of this slide, in 2025, retail maintained 75% of total revenues and Corporate & Issuer Services gained in this space. Now let's move on to the next slide with more details on the different business. In the 4Q '25, retail revenues totaled BRL 3.9 billion, up 8% year-over-year and 4% sequentially. For the full year, retail gross revenue reached BRL 14.6 billion, increased 8% versus last year. Retail revenue growth in 2025 was supported by float for both investments and checking accounts, new verticals with credit card, retirement plans and insurance leading the way; and as a new initiative, international investments; fixed income performance, with a strong first half of 2025 and decent figures for the second half, supported by warehousing strategy. So now let's turn to Corporate & Issuer Services. In the fourth quarter, revenues reached BRL 895 million, representing a 49% increase year-over-year and a 23% increase sequentially. This was the strongest performance in our history for this business, both in Corporate & Issuer Services. The strong performance was driven by a robust activity in the DCM space, reaccelerating from a softer first half. In addition, our ability to cross sell and deliver a broader set of solutions to our corporate clients, such as derivatives and credit continued to support revenues, leveraging on our strong distribution capabilities across the platform. For the full year of 2025, Corporate & Issuer Services revenue totaled BRL 2.7 billion, up 19% compared to 2024, making a new level of corporate revenues and consolidating this segment as an important business line for XP. And now let's move to our SG&A and efficiency ratios. SG&A in the fourth quarter amounted BRL 1.7 billion, growing 10% year-over-year and 4% quarter-over-quarter. For the full year, SG&A totaled BRL 6.3 billion, reflecting continued investments in technology such as AI and CRM and also our expansion of our adviser network. As I mentioned earlier, it is the operational leverage capture from technology and innovation developments that will allow us to keep our elevated investment pace in different areas of the business while keeping the same efficiency level. Additionally, the efficiency ratio in 2026 should remain broadly in line with 2025 levels without any material change. As we can see on the right hand of this slide, our last 12-month efficiency ratio for the fourth quarter stood at 34.7%, stable compared to 2024. Our adjusted EBT reached BRL 1.5 billion in the 4Q '25, increasing 20% year-over-year and 16% quarter-over-quarter with an adjusted EBT margin of 31.3%, an up 252 basis points year-over-year and to 271 basis points quarter-over-quarter. That means that we have reached the range of our guidance margin during this quarter. For the full year of 2025, adjusted EBT totaled BRL 5.5 billion, growing 10% versus last year with an EBT margin of 29.6%, expanding 52 basis points year-over-year. On the next slide, we will see our adjusted net income. Adjusted net income for the quarter was BRL 1.3 billion, up 10% year-over-year and stable sequentially. Our net margins were 26.9% in the 4Q '25, 9 basis points lower year-over-year and 166 basis points lower sequentially. For the full year, adjusted net income reached BRL 5.2 billion, growing 15% compared to 2024 with 28.3% net margin, 173 basis points expansion in the period. Let's move to the next slide to talk about capital management. Starting with capital returns. In 2025, we returned BRL 2.4 billion in capital to shareholders through dividends and buybacks. We also continued to have our BRL 1 billion share buyback program currently open. On the right-hand side of this slide, you can see the evolution of our payout ratio over the years, including last year, we had a close to 15% payout, considering both buybacks and dividends. Now talking about earnings per share and ROE. Once again, we would like to highlight that our earnings per share continues to grow faster than net income, driven by our consistent buyback execution just like we explored in the previous slide. Adjusted EPS in the fourth quarter was BRL 2.56, growing 15% year-over-year and 4% quarter-over-quarter. For the full year, adjusted EPS reached BRL 9.81, increasing 18% versus last year. Only in 2025, we have retired more than 24 million shares, approximately 4% of the total share outstanding. Now looking at our profitability, ROAE and ROTE. We see our adjusted return on equity for 2025 reached 23.9% and 94 bps expansion, while return on tangible equity was 29.5%, a 78 basis points expansion versus 2024. This reflects our capital disciplines that allow us to consistently return capital to shareholders while simultaneously growing and investing the business to further differentiate ourselves from our peers. Finally, on capital ratio and risk-weighted assets. We closed the quarter with a BIS ratio of 20.4%, with the CET1 ratio at 17.3%. In 2026, we operate the business with a high BIS ratio during the year. We are comfortable with getting our BIS ratio to our target range of 19% to 16% toward the end of the year for capital distributions while still maintaining a comfortable capital buffer. Additionally, we ended the year with a CET1 ratio of 17.3% compared to our peer average of 12%. If we were running the business at the same CET1 of 12%, ROAE would have been above 13%. Now looking at the right-hand side of this slide, you can see our RWA breakdown by category. Risk-weighted assets totaled BRL 119 billion, growing 13% year-over-year and 11% quarter-over-quarter. As we expected and communicated in certain occasions, total RWA growth was lower than our net income and EPS for the year, even with a strong performance from the wholesale business. In parallel, our total assets adjusted for assets under management from retirement plans grew 8% versus 2024, also less than our bottom line. More specifically, during the quarter, we increased the warehousing of fixed income securities, mainly corporate credit, aligned with strong DCM activity, our growing capacity to originate corporate deals and market timing opportunities. Lastly, because of this increase in warehousing, our value at risk from which important companies' credit risk spread went to BRL 39 million or 17 basis points of [ equity ], stable on a year-over-year perspective and 4 basis points higher sequentially but still in a very conservative level. We expect to distribute a portion of these assets at the beginning of 2026. This level of warehousing capability was only possible due to the development of XP Bank's funding structure, as previously highlighted. With that, I end my presentation and hand it over to Maffra, so he can make his final remarks. And then we'll go to the Q&A. Thiago Maffra: Thanks, Victor. Before the Q&A, I would like to quickly go over the strategic foundations directing our priorities for 2026. Excellence is our main growth pillar. Over the past years, we have invested heavily in scalable process, governance and technology. And in 2026, we begin to see these investments maturing and is starting to translate into results. This is reinforced by a skilled and well-trained sales force with aligned incentives ensuring consistent execution across the organization. We continue to invest in a highly disciplined manner, particularly focused on wholesale banking and the B2C channel while refining our segmentation to ensure a clear and accurate value proposition for each client profile. This will enable us to grow with quality in a profitable and sustainable manner. On the capital front, our priority is to sustain strong and consistent returns backed by a conservative capital structure. This discipline provides the flexibility to operate across different market scenarios, maintaining resilience and readiness to capture opportunities. Together, these foundations ensure that we enter 2026 with a solid business structure and disciplined capital allocation. Lastly, before starting the Q&A, I would like to address an ongoing topic within the financial system. First of all, we would like to express our deep concern regarding everything that has been reviewed in recent months involving Banco Master and the extent of irregularities identified. We also want to acknowledge the important and diligent work carried out by the Central Bank as well as the responsible media coverage that has helped Brazilian society better understand with greater transparency what has occurred through ABBC and FEBRABAN, we are actively supporting structural improvements aimed at preventing situations like this from happening again in our financial system. The Central Bank has been advancing in the right direction over the past years, although we understand some relevant adjustments are still necessary. That said, this change must be implemented responsibly so that Brazil does not risk reversing the significant progress achieved in recent decades in terms of competition and a broader and more efficient access to financial products and service. We should be careful not to adopt measures whose unintended consequence would be to reestablish excessive banking concentration or to enable business models built on consumers' lack of information or as Director Galipolo rightly pointed out some months ago, products that function as a reversing Robin Hood. For more than a decade, the Central Bank has consistently pursued an agenda to increase competition and improve both quality and the cost of financial service through initiatives such as BCPs. Digital banks and investment platforms have played a central role in this transformation, expanding access to banking service without fees and reducing long-standing asymmetries in traditional investment products, such as Poupanca saving accounts, [ PIC ] and titulos de capitalizacao. 25 years ago, we helped transform the system by building the first open platform in Brazil, giving clients across all income levels access to financial education and high-quality investment products. Over time, we have contributed to reshaping the market by fostering competition, improving product quality, reducing costs and ultimately, delivering better outcomes for our clients. We do offer proprietary products, but we have always distributed third-party solutions, including from competitors. Choice, transparency and alignment with the client always come first. We do not charge abusive or opaque fees, and clients pay nothing to open or maintain an account with us. Our mission is simple: to improve people's life by helping them invest better. This principle guides every decision we make and remains the foundation of our work as we continue to support Brazilians in managing their money, investing responsibly and planning for their future. Andre Parize, we will now start our Q&A session. Andre Parize: Thank you, Maffra. Now we're going to start the Q&A. The first question is from Eduardo Rosman from BTG. Eduardo Rosman: I have 2 questions for Maffra. The first one is regarding the ambition to become Brazil's leading investment platform by 2033. Can you provide a little bit more detail why 2033? What's the metric that you use to define that, that being a leading firm? Is that market share? Do you see revenue client base or something else? And do you believe that doing more of the same but better will be enough to reach this goal? Or would you require more powerful banking and credit capabilities? That would be the first one. And the second one, regarding your entry into the controlling group. Practically speaking, what does that change mean to you? Thiago Maffra: Thank you for your questions, Rosman. The first question is when we say that we want to be leaders in investments in 2023, it's about market share. Okay? So that means that we have our internal plans here. Our long-term view is to become leaders in 2033 in market share, and that's the -- it's '33 because our plans -- every plan that we have gives us that we can get there in 7 years. Okay? So that's the number -- the reasons when we look how much money, net new money we have to bring in the next years by different channels, by different segments. The plans, they point out that we can get there in '33. How we get there, first, with the third wave. Okay? So as we mentioned in the past earnings call, in all the conference, we have been investing a lot on the third wave, on democratizing wealth planning for retail clients in Brazil, so democratizing the service that only private banking clients or even multifamily, obviously, clients have in Brazil. So that's the main point here. It's -- a lot of people don't get how big is the change here because most of the financial companies in Brazil and banks, they still have like the model of pushing products. Okay? It can be a basket of products and investment portfolio, but it's a product-driven approach. We have been changing that for the past 2 years. We have changed incentives. We have changed the way of serving clients. We have done a new segmentation in the company, new value propositions, and we are seeing big improvements in all the numbers, churn, EPS and all -- a lot of other metrics here. So we are very excited with the next years when we look at everything we have been doing on foundations and changing -- almost changing the business model in the past years for the future. Of course, we have different strategies for different segments. We have been investing a lot on the private banking platform in the past 3 years. We have been gaining market share in the past 2 years; and last year 2, 2025 it accelerated. And we believe that we can grow faster here on private banking. On the middle, the affluent clients, it's more of the same with more intensity, with more technology, with more process with the new value proposition of more services, more wealth planning. And when we go to the retail clients, we have found a new way of serving more goal-based, low human touch, so a completely different value proposition. That is becoming a reality, I would say, in the last year and that we are very confident that we can accelerate in the next years. So different strategies for different segments but all based on the third wave here. So of course, as you mentioned, the full ecosystem, the banking part, insurance of that reinforce the value proposition for investor clients. And as you have seen in the past quarters and past years, we are, like every quarter, every year, like better on the cross-sell products, and we have a big road map for the next quarters here, so -- but we are ready to accelerate in the future. Okay? About the second question, the control, being 100% honest with you, for myself, nothing changed. I've been with the company for 11 years. I was a partner in a different way, but I was a partner. I have always acted as owner of the company, so nothing changed on the way I behave or the way I see the company. But I believe it's even a stronger alignment between the executives that are running the company, Jose Berenguer and I, alongside Fabricio Almeida and Guilherme Sant'Anna, so 4 executives that run the company on a daily base, and of course, Guilherme. So I believe it's a stronger alignment for the long term, but nothing changed the way we manage the company here. And besides that, Gabriel, Bruno and Bernardo, they continue to be a shareholder in the company. They continue on the Board. So it's a natural evolution here, a natural process, so there is no big change here on the company. Andre Parize: Okay. Next question is from Thiago Batista, UBS. Thiago Bovolenta Batista: Hear me? Andre Parize: Yes. Thiago Bovolenta Batista: I have one question regarding the recommendation that CVM released yesterday about the internalization of orders. In my understanding, this should be a little bit positive for your RRP business. But do you have any view if this really positive or not for XP? And the second question on the taxes. We normally complain when the taxes were low. Now we're complaining when the tax increased. But my question on the taxes is trying to understand if this hike in the taxes in this quarter is related to the change in the quality of structure and also, if this is linked with the consumption of the tax on tax losses carryforward. You reduced by BRL 700 million, BRL 800 million of those tax credits only in 1 quarter, if all those things are correlated. Thiago Maffra: It's Thiago here, so I will take the first question. It's a very positive news for us. Once you don't have the cap and you can include other assets, so it's very positive. Okay. You remember that we were the first company back in 2015, I remember it was the one responsible for building RRP back in '15 here for XP and until 2019 was, I would say, a big journey to make the product regulated. So -- and today, seeing the product like evolving, not having cap, going to other assets or other type of instruments, so that's very positive because we are the largest market making in Brazil for retail clients. So it's positive for a business. It's positive for the market, for the clients, so -- and of course, we'll generate more revenues and more results for our market making. So it's positive. Victor Mansur: Thiago, this is Victor. First, about taxes. I think we talked a lot about that in the past. Our base tax rate is something near 15%. If the business is more toward the banking activity, investment banking, DCM and broker dealer, we're going to pay a bit more. And if the business is more towards market making, we're going to be a bit less. If you look at the revenue mix for the quarter, the main highlights was issuer services and corporate banking, both, of course, made in the -- inside the bank and the broker dealer, and that's why we are paying more taxes. Also, those revenues are less heavy in terms of commission. Those assets were not distributed to retail clients. So the EBT margin associated to those revenues are also higher. Talking about the quality of structure, this change will only happen in 2026. It did not happen yet in 2025. So it has nothing to do with the taxes. The taxes are an effect of the revenue mix. I'm sorry, what was the other question? Thiago Bovolenta Batista: Was if this was -- the higher tax was the cause of the reduction in the tax losses carry forward. Victor Mansur: It's not because of that. It's the revenue mix that explain both revenue, tax and EBT. Andre Parize: Okay. Next question is from Gustavo Schroden from Citi. Gustavo Schroden: I'm going to do 2 questions as well. So the first one is regarding the reimbursements by the FGC to the depositors of Banco Master, so estimated in BRL 40 billion. So how has XP been performing? So I believe that the company has designed a strategy to capture these volumes -- part of this volume. So any color on that would be great, if you should expect any positive impact in the first quarter '26 regarding it. And my second question is regarding the NPS. We saw a decline in NPS to 65 points from plus 70 points baseline. So could you elaborate on this? What's behind this decline and how the company is addressing this decline in NPS? Thiago Maffra: Okay. Thank you for the question. I will start with the NPS question. It's -- the drop is related to 2 events that we had on the fourth quarter. We had the Ambipar structured notes, and we had a lot of news and noise about Banco Master back especially in December. So there is a selection bias for clients who were impacted by these 2 events. They are more propensed like to respond the NPS than clients that were not impact by the events that happened. So when we look at margin, we see the NPS improving again. So we believe it's going to be temporary affected by the 2 events that I just mentioned. And to give a color that the impact is not that material, usually, when we have big maturing of fixed income, for example, inflation, government bonds or like big corporate maturing bonds in Brazil, usually, we retain 70%, 75% of the amount because usually people take the liquidity to pay bills or to do something outside of XP, so give or take is 70% the retention rate. Okay? And when we look, Banco Master today is above 85%. Okay? So it's higher than a regular maturing event. So I'm not sure how we are going to disclosure the net new money for Q1, but somehow, we will have like to show these numbers. So there's a huge inflow of money from Banco Master as we are keeping more than 85%. But not sure yet how we're going to disclosure, but we'll disclosure between net new money and the retention. Andre Parize: Okay. Next question is from Guilherme Grespan from JPMorgan. Guilherme Grespan: My question is just on the outlook for 2026, and this is the environment that we are seeing. Fourth quarter still showed similar trends, right? Issuer services, very strong. Corporate solutions, very strong. Fixed income, a little bit weaker. Equity is recovering a little bit but still timid. But my question is more going forward. Like question maybe, one, do you think this performance of Corporate Solutions & Issuer Services is sustainable in the beginning of this year? And question #2, if this environment that we are seeing year-to-date, it's a good performance of risk assets but it's mostly led by foreigners, right, we don't see a huge change on the local dynamics, if you believe you're benefiting much from this environment or, no, you don't benefit as much because it's mostly foreigner-driven, this good performance? Victor Mansur: Guilherme, thank you for your question. Victor here. First, talking about corporate, I think our corporate business is in another [ part there ]. We evolved a lot in terms of product, cross-sell, clients and do so. I think we can -- we are able to keep this pace over 2026. And talking about the performance of the other risk assets, as you said, it's still too soon to say that this will reflect in take rate. If you see volumes both in fixed income and acquisitions from retail clients, they are not going up. The movement is mainly driven by foreign clients. I think if the performance keep this way over the year, we may see a bit of trading activity coming from individuals. And of course, they will be reflecting in actual revenues, but it's still too soon to talk about that. Also, in terms of fixed income, I think we need to see the Central Bank delivering the cuts that we have in the interest rate curve. If that happened, we may see the compression of the duration in fixed income, or something that we talk a lot about over the last 2 quarters. But again, we need to see the marketing going in this direction, both in equities and fixed -- and rates to be able to see something reflecting on revenues. Andre Parize: Great. Next question is from Marcelo Mizrahi from BBI Bradesco. Marcelo Mizrahi: Congratulations for the results. Two questions. First is regarding the guidance. So if you guys plan to update the guidance to 2026 with the environment that we are talking now, first, second, the guidance of revenues and the guidance of margins. Second question is regarding the perspective to have -- I think it's better just to talk about the guidance, please. Thiago Maffra: Mizrahi, yes, the guidance holds. We have no reason today like to change the guidance. We believe 2026 is going to be a stronger year than 2025. As we have been talking in the past quarters, we are projecting to get very close to the guidance. Margin is there already. Okay? And when we look revenues, if you project, we are very close. So there is no reason to change the guidance right now. Marcelo Mizrahi: I remember my question. So my question is regarding the RWA. So we saw an increase of this -- the leverage, so definitely because of the offers. So looking forward, how much this leverage, so the RWA could increase? So you guys have some cap on that or some targets that you can share with us? Victor Mansur: Thank you. Thanks for your questions. First, as usual, we bought assets for our warehouse book in the fourth quarter to have assets to sell to our clients in the first. That is exactly what is happening. I think what we can say about RWA is the same we said last year. We are very confident that net income will grow faster than the risk, and that will be the case for 2026. Marcelo Mizrahi: Any perspective of adjustments on the payout policy to increase payouts or to reduce the payouts with that? Victor Mansur: We have our BIS ratio guidance for the end of the year. We -- as we said during the presentation, we're going to pass the year of more strong capital base, but we are confident that we're going to be inside the guidance by the end of 2026. Andre Parize: Next question is from Tito Labarta from Goldman Sachs. Daer Labarta: Following up on Mizrahi's questions on the guidance just so I'm clear, make sure I didn't miss anything. The guidance you had given was back at the Investor Day where you guided for gross revenues of BRL 22.8 billion to BRL 26.8 billion. I mean, even at the low end, that would imply almost 20% revenue growth year-over-year. Just to make sure that's the guidance we're talking about. And that would be a big acceleration from the 8% growth that we're seeing here this year. And you also mentioned net inflows, you expect to remain around BRL 20 billion, so we don't see an acceleration there. Just to make sure that I'm understanding the guidance on the revenues that we should be thinking about. Thiago Maffra: Thank you, Tito. Yes, we are talking about the same guidance. So the number to get at the bottom of the guidance this year is 17%, the growth for revenues for 2026. So as we have been talking, it's not going to be easy, but if we miss, it's going to be by a small percentage. So there is no reason like to change guidance for 3 years if we miss by a very small amount. So -- and again, we believe we -- it is possible to get there. Okay? So -- and about net new money, we don't see any reason today to change the -- it's not a guidance, but we have been talking about the BRL 20 billion level. It's what happened in the past 3 quarters. So there's no reason to change for the next quarters. But again, for the -- our ambition to get to 2033 as a leader in investments, it will have to accelerate at some point in the future, but we don't see that happening on Q1 or Q2 for all the reasons we are -- and numbers we are seeing here. Daer Labarta: Okay. No. That's good. Good to hear as well. And I guess the driver of the acceleration, I mean, you're saying first Q, 2Q, maybe you don't see it, so second half of 2026 as interest rates come down, I think -- I mean, equity and fixed income are still like the biggest portion of your revenues. You think that should accelerate, I guess, as rates come down? Is that the right way to think about that? Thiago Maffra: No, we're not considering like a better take rate here or like a market improvement to get there. They are like all levers that we control. So we are confident that we can grow this year at higher pace than 2025. Daer Labarta: Okay. But it is back-end loaded, right, more second half of the year, if I understood the comment earlier? Thiago Maffra: We always have seasonality. This year was lower than the past years, but usually, we do 40 -- 45 and 55 of our results on the first [ half ]. It was a little bit more flattish in 2025. But yes, usually, we accelerate more on second half of the year. Andre Parize: Next question is from Pedro Leduc from Itau. Pedro Leduc: First question on SG&A. Here, you grew for the full year about 8%. I understand you're going through an investment cycle. So here, I'd like to hear your thoughts on what the priorities will be in 2026. What are the pains that you're trying to solve with investments? And you mentioned in the call, I believe, stable efficiency for 2026. Now we're talking about high teens revenue growth. So help us reconcile that SG&A, really understand what priorities you are doing and where we should look for signs of success of these investments. Victor Mansur: Thank you for your question. I think our main investments will be, as always, in our core business. So we're going to be investing in adviser expansion over the year the same as the last years. We're going to be investing in technology. So we have a lot of technology investments in AI. Those technologies will be used to customer relationship management and adviser productive. Both focus on having more account load with more quality and more NPS. And I think that's the way that we're going to measure that. And also, we have some investments in our international platform and our [ PME ] platform, cash account, bank account, every product around the companies, the companies that we're going to provide over 2026 and '27. And I think that mostly those are the big chunks of investments that we're going to do in 2026 the same as we did in 2025. Pedro Leduc: Okay. And with the efficiency level, you mentioned flattish that talks with the mid-teens revenues. Victor Mansur: Yes. As Maffra said, we are confident that we are going to pursue our guidance level, and that implies the efficiency ratio and the expenses we're going to grow. And of course, we have some kind of maneuverability here in the number if the revenue doesn't come, if they are faster than what we expect. But the number is around that. Pedro Leduc: Okay. And sorry, just to be picky on this part on the revenues, we understand you're going to go through some structured changes that would change also income tax and revenues. So when we talk about mid-teens, high teens revenues, that's excluding any accounting changes that will happen as you transfer these operations, correct? So be comparable. Victor Mansur: If you look at 2025, we did a lot of restructuring over the group. When we send some companies through the bank and we start changing the way we look at indebtedness in the company, we lost something around BRL 500 million in revenues over 2025 that went through the net interest margin. And we said nothing about that. So I think the growth of the revenues in the area, we're going to have a lot of mix the same as we have in 2025. If other companies going to the bank, we're paying some corporate debt and changing for banking debt, then therefore, going to reduce their revenues, and we're going to have some positive effects also. And I think in the net, we're going to be delivering the numbers that Maffra said. Pedro Leduc: Okay. No, that's very clear. The overall message is very clear. Andre Parize: Okay. Next question is from Antonio Ruette from Bank of America. Antonio Gregorin Ruette: I have 2 questions on my side. The first one is a follow-up on taxes. I understood that you should have an average tax rate of close to 15% and higher than that if revenues are more skewed to banking. And now if I'm looking here in your tax withholding in funds line, I see a very sharp decline Q-on-Q and this line very below your historical average. And it does not look related to the revenue mix. So if you could please explain what's related for. And thus also a second one, AI. I think it's an important topic, particularly when you are shifting between business models. So you are looking towards migrating towards B2C model. I understand that this is an opportunity to grow in the B2C with lower expenses, lower investments. But also it's a trap, right, because it's a model without in-person interaction, and that could be mimicked by AI, by another player. So how do you see your strategic shift right now considering AI? Victor Mansur: Antonio, I'm going to take the first question here. First, it's very hard to talk about the results of individual entities in the group. And as we said before, it's -- you cannot explain the performance of one business or another looking at the [ guidance ] or the quality of performance. Also, after 2026, if the restructuring of the group, we're not going to have [ default ] tax anymore, and we're not going to disclose this number. So I think the important thing here, if you look at the mix, if you look at the accounting levels, you're going to see the same things we are looking at the managerial level. You're going to see the banking revenues, banking fees, credit fees, fees from DCM offerings, and that was the strong part of the quarter, and that's why we are paying higher taxes than before. Thiago Maffra: The second one, so I'm not sure if it was clear on the presentation, but we do not believe in taking the financial adviser, the human out of the equation here. Okay? So it's always using technology, using AI to improve, to make the adviser better. Okay? So we have different AI agents here to help the adviser to have more relationship with the clients, to take the operational workload out of -- from -- out from the adviser. We have a lot of tools that we have been creating in the past 2 years to help the advisers to perform better, to increase the account load, to increase productivity, to increase the level of service that we deliver to customers. But it's always how to improve the human. Of course, when we talk about the -- remember that I said we have 3 big segments here. Of course, we have some other in between segments but 3 big ones. Of course, for the BRL 0 to BRL 100,000 segment, here, we can do 100% digital. Okay? But we don't believe or we don't -- we don't like the idea of having like a BRL 1 million client or BRL 10 million clients going only through like an AI. It doesn't help. It doesn't happen because it's a trust business. Okay? So people like to tell to people when they are talking about their lives, their dreams, so they want to talk to someone. So the whole idea here is how we use AI to improve the performance, to improve the service that we deliver to our customers. So we have been developing a lot of initiatives here. It's -- some of them are very promising. For example, today, we listen. We read. So we have governance over all the interactions that our B2C internal advisers have with customers. We classify 100% of them. So we know everything that's happening. We give advice for the internal advisers about what they are doing right or wrong. We give broad advice. We give advice of interactions with customers. So we are very excited with the results that we are getting from AI on the company, and -- but again, it's not about replacing the human or the human adviser. It's about enhancing the adviser. Okay? So that's the idea. Andre Parize: Okay. Next question is from Daniel Vaz from Safra. Daniel Vaz: I want to try to understand the aftermath of Banco Master, right, episode, both for XP internally and for your client base. So trying to break this down in 2 parts. First, for you, any way -- any changes in the way you filter your products to distribute? I mean how did that episode was discussed in your Board of Directors? So are -- is it -- got to the point that you discussed like are we going to distribute these types of products again? So how is the filter that you want to do after it or if there is any that you want to put additionally? And to your client behavior such as the ones that were involved probably, you mentioned, I think it was in the past presentation, about clients going to more risk-averse CDs. Kind of 50% of your marginal allocation in fixed income was little more to high liquidity products and less yields. So I want to try to understand like what has changed into the third quarter so far to the fourth quarter so far in terms of investment decisions by your clients and mainly on the aftermath of the episode of Banco Master. Thiago Maffra: It's important to remember that our clients, they -- 99.9% of them, they're like under the FGC, the FGIC -- Brazilian FGIC coverage. So our clients, they didn't lose any money. On the opposite, they made an investment that had a good return. Okay? So our clients, they didn't lose any money. We don't recommend Banco Master over FGC, as we don't recommend for any bank below a certain threshold of our internal rating. Okay? So of course, every time that something like that happened, we look for our internal controls, our credit analysis to see what we can improve, and we are improving. Okay? It's part of the journey. But remember that we have more than 50% of market share of all middle-sized and small-sized banks in Brazil, so -- because remember that the traditional incumbent banks, they don't rebuild third-party CDs. So it's basically only the independent investment platforms. And we are the largest one in the market. So for -- and remember that, in some other cases, [ Gicaza ], [ Bejica ], we didn't distribute the Portocred. We didn't have the products on our platform. Okay? So our credit analysis was good in some events in the past. When you have frauds or the kind of events that everyone is raging on the news right now, it's almost impossible. Otherwise, no one would lose money on credit. No one would have lost money on Lojas Americanas or Eike Batista companies or other frauds. Okay? So when you have this type of problems, it's hard to get. But of course, we have to look inside, see what we have to improve in our controls. But again, we have only distributed products that we believe they are suitable for our clients on the right risks for the right customer profile. We have internal controls today that we cannot allocate more of any type of fixed income products with credit risk above the threshold for that rating for that type of client. Okay? So we are very strict on controlling that. And again, our clients, they didn't lose any money here on Master. Okay? So that's important. About the changing mix after the event, we don't see any big change, okay, to be honest. We don't see -- of course, you have one other name that we're involved on the same problem. For those names, they are not even on our platform for a few months or even years. Okay? So -- but besides that, we don't see big change for other type of small or mid-sized banks. Andre Parize: Okay. Our earnings call is coming to an end. Thank you for your time. We see that there are more people who want to make questions, so IR team will be more than happy to attend to you. Just contact us, and see you soon. Thank you very much.
Operator: Greetings and welcome to HA Sustainable Infrastructure Capital, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Aaron Chew, Senior Vice President of Investor Relations. Aaron Chew: Thank you, Operator, and good afternoon to everyone joining us today for HA Sustainable Infrastructure Capital, Inc.'s Fourth Quarter 2025 Conference Call. Earlier this afternoon, HA Sustainable Infrastructure Capital, Inc. distributed a press release reporting our fourth quarter 2025 results, a copy of which is available on our website along with the slide presentation we will be referring to today. This conference call is being webcast live on the Investor Relations page of our website where a replay will be available later today. All of the comments made in this call are forward-looking statements, which are subject to risks and uncertainties described in the Risk Factors section of the company's Form 10-Ks and other filings with the SEC. Actual results may differ materially from those stated. Today's discussion also includes some non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is available in our earnings release and presentation. Joining us on the call today are Jeff Lipson, the company's President and CEO, as well as Charles W. Melko, our Chief Financial Officer. Also available for Q&A are Susan D. Nickey, our Chief Client Officer, and Marc T. Pangburn, our Chief Revenue and Strategy Officer. To kick things off, I will turn it over to our President and CEO, Jeff Lipson. Jeff? Thank you, Aaron. Jeffrey A. Lipson: And welcome to our fourth quarter and full year 2025 call. We are very pleased and proud to report that 2025 was an outstanding year for HA Sustainable Infrastructure Capital, Inc. With meaningful progress in all aspects of our business, and a particularly strong finish in the fourth quarter, with a higher volume of transactions closed than in any previous full year. Level of client development activity remains elevated, and the demand for project-level capital is extremely strong, creating continued tailwinds for our business, as evidenced by both our 2025 results and our outlook for the next several years. Our climate clients asset strategy continues to thrive as we execute on closing attractive climate-positive investments with programmatic clients supported by project cash flows from high quality offtakers. Turning to slide three. Not only was 2025 the strongest year of results we have ever recorded, on virtually every metric used to monitor and assess our performance, but the underlying fundamentals of the business have been enhanced establishing pathways to future continued success. Notably, nearly every facet of our business is operating at a high level right now, including new investment volumes, returns, profitability, and capital efficiency. These higher volumes are supported by a new paradigm of load growth in the United States, rising demand for third-party providers of permanent capital, and HA Sustainable Infrastructure Capital, Inc.'s competitive advantage. We closed $4,300,000,000 in new transactions in 2025, 87% more than 2024. Our pipeline has continued to grow from more than $5,500,000,000 at the end of Q1 to more than $6,500,000,000 at the end of 2025. Not only have our investment volumes scaled meaningfully larger, we are also increasing returns on these investments. For the second year in a row, yield on new investments has exceeded 10.5%. Meanwhile, our bond spreads continue to narrow, and our senior unsecured term bonds are trading with a yield below 6.25% today. These attractive margins have been a key factor in driving adjusted EPS growth, which was 10.2% in 2025. We have also made significant strides enhancing our business model and capital efficiency. In 2025, we issued our inaugural junior subordinated hybrid notes. With access to this new segment of the bond market, along with our investment grade ratings, and our CCH 1 co-investment vehicle with KKR, we have become significantly more profitable with each new share. We are issuing fewer shares to grow our business. It is also noteworthy that we upsized CCH 1's equity commitments by $1,000,000,000 in the fourth quarter. This combination of 1) large volumes, 2) increasing profitability, and 3) improved capital efficiency have combined to push our 2025 ROE above 13% and our incremental ROE above 19%. The next few pages, I will further expand the discussion of these three items. Turning to slide four, I want to particularly highlight the enormous year we had in closing new investments in 2025. Of course, the $1,200,000,000 investment in the SunZia project we announced on our last quarterly call was a big contributor. But even without that investment, we closed more than $3,000,000,000 in new investments last year. This is a testament to not only how strong the underlying demand is in the US, but also the important role HA Sustainable Infrastructure Capital, Inc. is playing in the market and the strength of our business model. Importantly, we have accomplished this with no change in our risk appetite or the general range of returns on the investments. Our asset-level investment strategy continues to be well received by our clients and is driving attractive risk-adjusted returns. Of note, historically, we have reported one figure covering the total transactions closed volume including both the securitized and on balance sheet. However, going forward, we are going to break this out separately. In the dark blue bars, you can see our investment volume retained on our balance sheet and included in one, totaled $3,600,000,000 in 2025, up approximately 140% year over year from $1,500,000,000 in 2024. On slide five, we display our diverse pipeline, which remains in excess of $6,500,000,000. Virtually all of our markets remain active and opportunities to invest continue to grow. Ultimately, our business is driven by fundamental economics, which outweigh policy changes as it relates to development activity. The underlying demand for power and the cost effectiveness and development cycles in our asset classes combined to create an attractive investing environment. The economics of this development continues to improve, as PPA rates have increased more than 40% over the past three years. In our behind-the-meter business, the trend towards more third-party ownership and leases results in more opportunity, as we have always focused on providing capital to lease portfolios. The increase in battery attachment has allowed for an increase in customer payments, and a corresponding increase in our investment opportunity. Our grid-connected business is benefiting from the significant growth in the renewables pipeline primarily driven by solar and storage, which now exceeds $230,000,000,000. Renewables now comprise 99% of the projected capacity additions in 2026. And our FTN business remains a growth engine as RNG production is forecasted to more than double by 2030 and will benefit from the trend of increasing gas production and the existing infrastructure. Turning to slide six. We emphasize the diversity of our platform as an underlying strength of the business model. The chart depicts different asset classes achieving the highest volume in various years. Notably, after several years of minimal volume, onshore wind investments were 33% of the volume in 2025. Our ability to pivot as opportunities arise among a diverse set of asset classes from a large pipeline is a key factor in the consistency of our financial results. Turning to slide seven. We recap the last five years of adjusted earnings per share. Again, I note the resilience of our business model and the outstanding execution of our team. This five-year period included a pandemic, supply chain challenges, elevated inflation, a rapid rise in interest rates, policy disruption, permitting and transmission difficulties, client bankruptcies, and many other challenges. Despite these obstacles, our team remained focused on sourcing, closing, and effectively managing large and diverse volumes of high-quality climate-positive investments producing these consistently outstanding results. In fact, our 10-year compound average growth rate in adjusted earnings per share is also 10%. Turning to slide eight, we emphasize that each dollar we invest has become increasingly more profitable as measured by incremental ROE, which is a metric that Charles introduced last quarter. This metric is measured by the change in adjusted earnings divided by the change in shareholders' equity. On this basis, incremental returns in 2025 exceeded 19%, as the combination of higher yields, lower debt costs, and balance sheet efficiency continue to enhance our profitability. On slide nine, we provide an illustration of our tremendous progress achieving improved equity efficiency. Prior to CCH 1, $100 of proceeds from new equity issuance resulted in $300 of new investments. The additions of CCH 1, modest debt on the CCH 1 vehicle, and our hybrid offering have collectively produced an outcome such that $100 of proceeds from new shares now results in $1,350 of new investments. This represents an improvement of more than 400% as measured by the earning assets that can be originated from each dollar of equity. Turning to page 10, we emphasize two large investments we closed in the fourth quarter. On the left, a joint venture with our longtime partner, Sunrun, totaling $500,000,000. Residential solar and storage continues to benefit from increasing utility rates and consumers' desire for affordability and resiliency. The unique structure of this joint venture enables ITC transferability in a programmatic and efficient way, allowing Sunrun to scale its business providing an attractive risk-adjusted return to HA Sustainable Infrastructure Capital, Inc. And on the right, we reemphasize the SunZia project with Pattern that we discussed on the third quarter call. Our largest investment ever, this is the largest onshore wind project in North America, and remains on schedule to fund in the second quarter of this year. Operator: On page 11, Jeffrey A. Lipson: we reflect an update and extension of our guidance. Our consistent results allow us to once again extend our guidance out three years, until 2028. In that year, we expect adjusted earnings per share to be in the range of $3.50 to $3.60. We are shifting to a nominal EPS guidance range from an EPS growth rate so that we may provide more precise updates in the future. Additionally, we expect our adjusted ROE to exceed 17% by 2028, driven by the profitability and efficiency discussed a few moments ago. Regarding our payout ratio, we discussed at our Investor Day in 2023 a trend of utilizing slower dividend growth and correspondingly more recycled retained earnings to reduce the payout ratio to 50% by 2030. We are now ahead of schedule on that trend and expect the payout ratio to be below 50% by 2028 and below 40% by 2030 as capital recycling also adds to the equity efficiency of our business model. To summarize, our three-year plan underscores our confidence in our ongoing ability to achieve our profitability objectives. Now I would like to ask Charles to discuss our financial results and funding activity in greater detail. Charles? Thank you, Jeff. Charles W. Melko: Turning to slide 12. As previously highlighted, we have experienced meaningful growth in our transaction closings. And our results in 2025 are a good indication of our ability to convert incremental closings to attractive returns. Our business model continued to deliver a 10% adjusted EPS growth rate up to $2.70 per share in 2025. We have been successful at building our recurring earnings that serve as a solid foundation for our future earnings growth, with adjusted recurring net investment income of $362,000,000, an increase of 25% from the prior year. Our fees and income earned from managing assets in CCH 1, and securitization trusts increased to $49,000,000 in 2025, growth of 32% from the prior year. In addition, our securitization business continued to deliver with gain on sale contributing $65,000,000 to our adjusted earnings. Our adjusted ROE is beginning to reflect the growth achieved in our profitability as we have been able to maintain the recent increase in yields while also growing fees from CCH 1. As a result, our adjusted ROE rose 70 basis points from 2024 to 13.4% in 2025. With our recent junior subordinated note offering, we expect to further increase our profitability on each share of equity issued and to meaningfully reduce the reliance on new equity issuance to achieve our growth targets. Our GAAP results were impacted by volatility that can typically occur in calculations of HLBV relative to our true economic returns in any given period. And, also, as a reminder, the GAAP-based net investment income does not include the earnings from our equity method investments, which are a growing portion of our portfolio. On to slide 13. The foundation of our recurring earnings and growth in adjusted EPS and ROE is our managed assets, which grew 18% to $16,100,000,000 at the end of 2025. Our portfolio has grown to $7,600,000,000 and improved its earnings power, with an increase in the portfolio yield to 8.8%. A key strength to the overall quality of our portfolio is its diversification, our investment strategy. As you can see, our portfolio continues to not be concentrated in any particular asset class. And additionally, our investment strategy has contributed to our minimal level of losses, with an average annual realized loss rate of less than 10 basis points. Specific to CCH 1, we recently expanded the total equity commitments by $500,000,000 each between HA Sustainable Infrastructure Capital, Inc. and KKR, bringing the total to $3,000,000,000. We expect that the remaining capacity, after considering CCH 1 level debt and reinvestment of cash collections, will get us through 2026. And we fully expect that we will either extend the existing vehicle or create a new one that will continue as a source of funding additional investments while earning asset management fees. On slide 14, growth in our managed assets is helping increase the ongoing reliable earnings from our adjusted recurring net investment income. It provides a stable level of income we can expect into the future and produces steady growth in our earnings from year to year. Adjusted recurring net investment income is the largest component of our earnings, and as you can see by this graph, the largest driver of our earnings growth. Jeffrey A. Lipson: However, Charles W. Melko: gain on sale is also a meaningful component but its contribution to adjusted EPS has been changing over time. If it were not for the impact of gain on sale per share, the growth in our adjusted recurring net investment income would have translated into even faster EPS growth over the last few years. As a result, we are focused on building our recurring income streams to provide a base level of earnings year after year. And despite the impact of the changing contribution of gain on sale, we can rely on it every year as a great source of additional returns with minimal capital investment needed. On slide 15, our liquidity and capital platform has been a key strength to the resilience of our growth as well as our ability to optimize returns after considering our cost of capital. Liquidity has grown to $1,800,000,000 and is scaling with the growth in our business. We have grown the diversity of sources of capital over the years, and continued to do so in 2025. We have increased the commitments in CCH 1, expanded our bank facilities, obtained our third investment grade rating, and issued our first junior subordinated notes. Enhancing our options has allowed us to lower our overall cost of capital, effectively manage liquidity and refinancing risk, and reduce the need for equity to grow the business. Specific to our recent $500,000,000 junior subordinated note offering, the rating agencies provide 50% or more equity credit in their leverage ratios for this instrument. This allows us to reduce equity issuances to fund our growth while remaining within the rating agency leverage targets for our investment grade ratings. Starting this quarter and going forward, when we report our debt-to-equity ratio, it will include an adjustment consistent with rating agency treatment. We intend to continue issuances in this market especially given our focus on reducing the need for equity issuance to grow the business and accelerate our ROE. I will now turn the call back to Jeff for some closing remarks. Jeffrey A. Lipson: Thanks, Charles. Turning to slide 16, we display our sustainability and impact highlights, noting our cumulative carbon count and water count numbers reflect the significant impact of our investment strategy. In particular, I want to highlight that 2025 was not only the first year that the avoided annual CO2 emissions estimated from our new investments exceeded 1,000,000 metric tons, but that it rose to a record 1,700,000 metric tons in 2025, increasing the total annual CO2 emissions avoided from all of our investments to date to 10,000,000. Now let us conclude on slide 17. 2025 was in many regards the strongest year of operational and financial results in our history. Investment volumes nearly doubled, return on equity increased significantly and is well positioned for future growth. Our diverse capital platform is working as designed for maximum efficiency and minimal cost. And our three-year guidance reflects an expectation of future meaningful growth and profitability. I would also note we have made significant investments in our own platform, particularly in talent and technology, which have positioned the business for further scale as we now exceed $16,100,000,000 in managed assets. These platform investments in our own infrastructure have created the foundation for additional expected growth. In closing, I would like to thank our talented team, and in particular, I would like to recognize and thank Steve Chuslo for his outstanding 18-year tenure as our Chief Legal Officer, during which time he made an outsized contribution to HA Sustainable Infrastructure Capital, Inc.'s success and our culture. As previously disclosed, Steve will be transitioning to a Strategic Adviser role in April. Thank you. Operator, please open the line for questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. Participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. And our first question, we will hear from Christopher J. Dendrinos with RBC. Christopher J. Dendrinos: Yes. Good evening, and congratulations on the strong quarter and strong year. I guess maybe starting out here, on the 2028 outlook and you have highlighted that basically you all are outperforming historical levels basically on all the metrics here. So what gets you to grow above a 10% CAGR? And it seems like maybe you are on pace to do that. So just kind of walk us through the guideposts here that we should be measuring you against to maybe outperform that over time? Thanks. Jeffrey A. Lipson: Sure, Chris. Thanks for the questions. And, again, this business, we are very proud of the fact that over a 10-year period, we have had a 10% CAGR in our adjusted EPS, and I think the resiliency and the consistency of the business is quite admirable. The other thing we have really focused on is management credibility as it relates to guidance. So I think—I do not think, I know—we have hit guidance, every guidance that we have put out. That is very important to us as well so we maintain that credibility. So the $3.50 to $3.60 is our guidance. As with any guidance, there are pathways to beat it. And, you know, in our case, there would be things like more volume, better yield on the investments, lower debt costs than we have otherwise modeled would be the primary ones. There also may be discrete events like some strong monetization at some point and other scenarios in which we beat guidance. But, again, we are very focused on being intellectually honest with the Street and our management credibility. And so $3.50 to $3.60 is our guidance at this point. Christopher J. Dendrinos: Got it. Thank you. And then maybe just on the immediate kind of near term, you know, I noticed it did not look like you all provided any kind of outlook for 2026 specifically. Could you provide any kind of color—how should we be thinking about this year? Thanks. Jeffrey A. Lipson: Sure. So I think we have been consistent over the last several years in putting out three-year guidance, and not necessarily speaking to the first two years. The primary reason for that is the lumpiness of the gain-on-sale business that makes forecasting shorter periods a little bit more difficult. But what I would say is there is nothing about 2026 that we would call out either negatively or positively as related to the trend. And I would ask Charles to see if he wants to add anything to that. Charles W. Melko: Yes. I think, Chris, the one thing that I think we did put in a slide, just looking forward to 2026: given the success that we have had in our volume closings in 2025, specifically with SunZia driving us up to $4,300,000,000 of transaction closings, while we are expecting meaningful growth and, you know, are seeing it come through in our pipeline, raising our pipeline to $6,500,000,000 from $6,000,000,000 that we reported last quarter, you know, given the SunZia transaction and the size of that, you know, we would not, at this time, necessarily expect to be at $4,300,000,000 of transactions again. We will be higher than, you know, historical closings. But, you know, do not expect a $4,300,000,000 number necessarily. Christopher J. Dendrinos: Got it. Thank you very much. Operator: Our next question, we will hear from Davis Sunderland with Baird. Hey, good evening, guys. Can you hear me okay? Jeffrey A. Lipson: Yes. Thanks, Davis. Charles W. Melko: I apologize for any background noise. First of all, let me congratulate you and say thank you for the time and outstanding results in Q4 and 2025. My questions are actually somewhat of an extension from Chris'. I wanted to go back to just the change in the guidance strategy and the messaging here and I wondered if the switch to a point guide or a range of point guide for '28 is at all related to you guys having maybe increased confidence or increased visibility? Or maybe tied to deal sizes getting larger or just any other thoughts you could provide on the why now as to guiding in that particular way. Jeffrey A. Lipson: Sure. Thank you for your kind words, Davis. And I would say the primary reason that we switched to nominal EPS guidance from EPS growth rate—everyone can do the math—is very simply it allows us in subsequent quarters to perhaps be a little more precise in adjusting that guidance. So what you have seen from us over the last several years is to have a guidance number out there and then to affirm it quarter after quarter because we were generally still in that range. And then, of course, we did meet that expectation. Here, we may have a little more flexibility to adjust those pennies a little bit here or there to allow disclosure of a little more precision as to where we are headed. So that is the primary objective here. Davis Sunderland: Thank you for that. And maybe just a second question about investments and any other large deals that may be in the pipeline, such as SunZia, that may blur the average, if you will? Just how we think about the normalized run rate for full year going forward, if there has been a structural change in the business, closer to $3,000,000,000 or certainly not run rate in Q4 instead into future quarters. Any thoughts on just how we contextualize that into your pipeline? Thank you. Jeffrey A. Lipson: Sure. I am going to say there is no structural change in the business. Larger investment opportunities do materialize from time to time. And I will let Marc perhaps talk a little bit more about our pipeline. Marc T. Pangburn: Sure. I think Jeff covered the primary point that when we look at our pipeline, it is highly consistent with the transactions that we have been closing recently, both in terms of risk profile and yield. There is no SunZia-type project to call out in the pipeline, but that being said, even if there was, we likely would not tell you until after it closed. And then you brought up project sizes. We are seeing project sizes increase. And that is, I would say, due to two primary items. One is, of course, just these larger grid-connected complexes that are getting built. But then also whether it is grid-connected or behind the meter, the storage attachment rate going up quite significantly and the focus on storage driving more capital deployment opportunities as well. Davis Sunderland: Super helpful. Congrats again, guys, and thank you. Jeffrey A. Lipson: Thank you. Operator: And our next question, we will hear from Noah Duke Kaye with Oppenheimer. Noah Duke Kaye: Alright. Thanks for taking the questions, and good afternoon, everyone. Maybe to get at this from a slightly different angle, you know, so the pipeline was $5,500,000,000 or greater than that last year. Now it is $6,500,000,000, a little under 20% growth. I guess do you feel like that is proportional to the growth in the TAM in the different sort of sandboxes that the company is going to participate in? Really, the spirit is, have you been able to take some share, or do you see some ability through both platform investments and partnerships to take a greater share of the pie. Jeffrey A. Lipson: Thanks, Noah, for the question. I would say that is a difficult question to answer with precision in our markets. There is not necessarily great data on things like market share. But in general, I think directionally, the answer is yes. We do feel like we have increased our market share. We do feel like there has been some pullback from certain players who have been capital providers, and we have been able to absorb a little bit more. We feel our penetration with our own clients has improved. And, you know, therefore, we would probably have increased market share, although there is not a strong way to prove it. I would also make that comment without necessarily precision. So when you see our pipeline go up 20%, I would not claim our market share has improved by necessarily 20%. But I would say, directionally, we have increased our market share. Noah Duke Kaye: Yeah. And thank you, Jeff. And the related question is really about leverage. As it was alluded to earlier, you do have some increase in individual project sizes. You also spoke before about ongoing investments and kind of capacity within the organization. Just wondering how the capital efficiency versus individual project size versus just pure operating leverage plays into driving the incremental ROE going higher and the ROE targets for fiscal '28. If the question makes sense, basically trying to do some attribution here on, you know, what drives the inflection. Jeffrey A. Lipson: So maybe I will start, and if Charles wants to add anything, I would say the building blocks are on slide nine in our deck. And you can see there it is not—equity efficiency is not entirely taking on more leverage. A big chunk of that equity efficiency is KKR's equity capital. So it is not entirely a play on leverage, but I think the proportional improvement of the dollars of investments we can close with each dollar's equity is displayed there. So, hopefully, that somewhat answers your question. Those are really the building blocks of how we get there. Noah Duke Kaye: Yeah. I am sorry. I was not being clear. I was not thinking about, like, debt leverage. I was talking about, like, operating leverage in terms of—you know, you grow your headcount, you grow your organizational capacity, but are you growing, you know, revenues and, you know, profit on those revenues faster than you are growing the organization? That is the third question. Yeah. I am— Jeffrey A. Lipson: Okay. I am sorry. I answered a different question. So the answer to that question—I appreciate it—is also yes. We have been growing our revenues faster than we have been growing our expenses. And we are highly focused on improving our operating leverage. I did talk about towards the end of the call making significant investments in talent and technology, and we are doing that and we think they certainly will pay long-term dividends to the company. And we have made some of those investments already. We will continue to make those investments in 2026. But on a trend basis, we are—we are and have been and will continue to grow revenues faster than expenses. Noah Duke Kaye: Very good. Thank you. Jeffrey A. Lipson: Thank you. Operator: And moving on, we will hear from Brian Lee with Goldman Sachs. Brian Lee: Hey, guys. Good afternoon. Thanks for taking the questions. A couple of big picture ones. Just if I look at the slides, you have had a really good presence in the residential solar market. It looks like it is expected to grow here into 2026. So first question would just be around—you alluded to the traditional PPA lease product and you guys having good exposure there. Does this prepaid lease product that seems to be trying to make its way into the market to maybe offset some of the volume loss from, you know, the cash loan customer market over the past few years—what does that do for you guys in terms of financing opportunity or returns? Are you going to be involved there? Just maybe give us a sense of what that has in terms of implications for your resi solar business model? Jeffrey A. Lipson: Sure. Thanks, Brian. And I am going to ask Marc to answer that specific question. But as a preamble, I would reinforce what a success story resi solar has been for us as a long-term meddev provider with several partners over many years. Our SunStrong joint venture that has worked out very well. Our most recent transaction that I talked about in the prepared remarks with Sunrun, I think it has been a real success story in resi solar, and we expect it to continue to be an important component of our business. To answer your specific question around the prepaid lease product, I am going to ask Marc to answer that. Marc T. Pangburn: Brian, we have seen over the past 10 years or so that we have been in resi some prepaid leases. But as it relates to your current—the comment on the current trend, we have not seen any transactions using the prepaid lease structure to evaluate right now. But we would certainly look at it, likely to the more traditional lease and TPO products. Brian Lee: Okay. Fair enough. Appreciate that color. Brian Lee: And then maybe just one kind of related. I guess there was some recent news that maybe there is some tightness in tax equity markets. I mean, I guess we have been kind of hearing that over the course of the past few quarters. But I guess the recent attribution was around renewables financing having maybe a little bit of tightness tied to policy uncertainty, whether that is foreign entity of concern or other issues that have not been finalized, in terms of guidance—in this case Treasury guidance—does that have any implications for you guys? Are you seeing that? Is that actually an opportunity maybe? But just wondering if that is something that is impacting the marketplace as you see it and what it means for HA Sustainable Infrastructure Capital, Inc. Marc T. Pangburn: Sure. So what we have seen is the deployment of transferability structures to be more frequently used. And I think that is in part due to some simplicity, but also could be driven by some of the tax equity items, which I think you have attributed it correctly to FEOC and some of the desire for clarity. I do not think it is more than that, though. It is really just the market looking for clarity, and in the interim, the transferability structures have been deployed quite frequently. And I think a good example of that is actually the two transactions that we highlighted with Sunrun and Pattern were—you know—use the transferability structure. Brian Lee: Okay. I appreciate that color. Thanks, guys. Operator: Thanks. Thank you. And next, we will move to Maheep Mandloi with Mizuho. Hey. Thanks—thanks for calling. Maheep Mandloi: So I was just on the Treasury guidance. I think it probably came out half an hour ago here. But it is another question on that, but just like high level as you think through 2028. Any thoughts on how FEOC kind of impacts your portfolio here or the projects you will be bringing over the next three years? Jeffrey A. Lipson: Sure. Thanks, Maheep. The guidance was issued literally while we are sitting in this room, so clearly, we have not read it. But to answer that question a little more generally on FEOC, I am going to ask Susan to speak to that. Susan D. Nickey: Yeah. Thanks, Jeff. And, you know, the good news is that getting—starting to get guidance out on FEOC and any of the guidance that continues to remain is important and helpful to give clarity around the rules. So in the interim, as we think—have talked about over the last few quarters, our clients have generally safe harbored under the prior guidance before that was effective through December, for several years ahead of their pipeline of projects. So the current guidance is really more—is obviously focused on 2026 incremental safe harboring or start of construction. That is not really impactful for our current pipeline and most of what our clients had already planned for. Maheep Mandloi: Got it. Appreciate that. And maybe a different question. On some of these older vintage renewable projects which you might have under your portfolio? I keep hearing from some of the developers that they see—or some of these projects are up for the negotiations. As that happens, how does that impact your earnings power? How should we think about that it is impacted either the GAAP income or the adjusted net income for you guys? Jeffrey A. Lipson: Sure. So I am going to let one or more of my colleagues jump in on that. But I would start out by saying that we have seen a fair amount of PPA renegotiation in several of our projects recently, and we work closely with our sponsors on those renegotiations. And given where PPA prices are now, those have been positive renegotiations as it relates to the long-term cash flows we expect from those projects. And where that shows up for us on a non-GAAP basis is in portfolio yield, which is the summation of all the individual yields and all the individual projects. And so when there is a new PPA, that is a new fact. And we would rerun the yield on a project. Let me ask if—is anyone—okay. I am getting a lot of head nodding that that was a sufficient answer. So hopefully, that answers your question. No one has anything to add to— Maheep Mandloi: And, yeah, it is almost something that it feels like the capital needs for any concessions would be pretty low, right? So is that—is there something like, does that accelerate your EPS growth beyond '28? Or think about this 10% CAGR here, especially with more renegotiations happening? Jeffrey A. Lipson: We lost the beginning of that question, but I think you asked do these PPA renegotiations potentially result in higher EPS than our guidance in '28? Was that really the question? Maheep Mandloi: Yeah. Yeah. And then it seems like these are pretty less cap intensive, right? Like, the higher yield from these negotiations. I am just curious how that accelerates the EPS kicker. Jeffrey A. Lipson: Well, sure. So I think our EPS guidance includes our best information at the moment and our best forecast as it relates to future energy prices and future PPA renewals. And so that is part of our forecasting process and is included in these guidance numbers. To the extent things trend better than that, that, as you know, is an upside to the guidance. And, you know, I talked earlier to Chris's question around upside to guidance. But, yes, that is another one of many—if on many of the underlying projects PPAs are negotiated at a higher level than we have already put in our forecast. Maheep Mandloi: Got it. I appreciate that. Thank you. Jeffrey A. Lipson: Thank you. Operator: Next, we will move on to Praneeth Satish with Wells Fargo. Praneeth Satish: Thanks. Good evening. So clearly, a lot of capital flowing into data center development power infrastructure. With your investments starting to become larger, just wondering if you have any updated views on how you are approaching or would consider approaching data center financing? I guess, what is your appetite to invest there? And to the extent that you have looked at it, I guess, how do the opportunities in that segment compare to your other investment opportunities on a risk-adjusted basis? Jeffrey A. Lipson: So I would say a couple things. One is we are indirectly, obviously, very involved in data centers in that it is the data centers driving so much of this demand that we keep talking about that in turn is driving development. So many of our projects are derivative of that demand, and therefore, we are already indirectly in the data center business. In terms of being more directly in the data center business, what I would say is really not too much different than we said last quarter. We have had conversations around the data center ecosystem with developers and other power providers to data centers. We are determining if there is a role for us, if there is a piece of business there that makes sense. And we do not really have anything to report just yet on that, but it is an area that we continue to evaluate what our role may be. Praneeth Satish: Alright. Thanks. And just going to your payout ratio and kind of the long-term guidance here. So payout ratio moves below 50% by 2028, and potentially 40% by 2030. I guess in the context of that, how should we think about your long-term dividend framework? Does that kind of create some flexibility for potentially a faster pace of dividend growth in the outer years? Or is there kind of a preference to take the payout ratio even lower over time? Jeffrey A. Lipson: I think it is more the latter. You know, we are not going to comment past 2030 where the dividend may go. That is already, I think, several years into the future. But I think the long-term trend of starting out as a REIT and with a 100% payout ratio and, you know, by, call it, you know, 17 years later, having that payout ratio down to 40% or less is a reflection of the evolution of our business and the notion that we believe the business is more valuable and can grow faster if we recycle more capital. And we are doing that in a way we are still increasing the dividend every year, as you have seen us do. But we can increase it a little bit each year and reduce the payout ratio because we do have such strong earnings growth. So I know, I am not going to comment past 2030, but I think this trend is very clear as to how we think about the dividend and why we think this is the optimal way to run the business. Praneeth Satish: Gotcha. Thank you. Jeffrey A. Lipson: Thank you. Operator: And our next question, we will hear from Jeff Osborne with TD Cowen. Jeff Osborne: Thank you. Good evening. A couple of questions on my side. I was wondering—more financial oriented—but I think you had a step up in receivables outside of CCH 1. I was wondering if you could just touch on what drove the higher investment income, if this is a level we expect to continue from here. Jeffrey A. Lipson: Actually, I am going to ask Charles to respond to that. Thanks, Jeff. Charles W. Melko: Yes. Hey, Jeff. Yeah. So as you likely know and understand, many of the investments that we make are now going through CCH 1, but there are various assets that we may close that are directly onto our balance sheet that could show up as receivables. If they are in through CCH 1, they come through as equity method investment, of course. But, you know, we did have an investment that we put directly on our balance sheet. And the yield that we are earning on that is consistent with our new asset yields. Jeff Osborne: And just as a follow-up, is this like a level you expect to continue with the expansion of CCH 1 in '26 or the recent expansion? Like, how should we think about the mix between CCH 1 and the legacy HA Sustainable Infrastructure Capital, Inc.? Charles W. Melko: Yeah. I think you will see more growth in the CCH 1 and equity method investments than you will on the receivables. Jeff Osborne: Got it. Got it. And then is—along that lines, I think you had a cash flow benefit from equity method investments this quarter. Is that along the same lines that you were just answering? Or is there something else that drove from a timing perspective? Charles W. Melko: Oh, it—yeah. It is a couple of things. It is along those lines that, you know, we are getting cash distributions out of CCH 1. But overall, with our portfolio, we are seeing an uptick in operating cash distributions that we are receiving. But we are also within our equity investments do from time to time have certain activities that occur where we get distributions such as refinancings that might occur within the portfolios. So, yeah, we are seeing growth in our equity method cash collections. That is a combination of an uptick in operating cash, but also CCH 1 related. Jeff Osborne: Perfect. That is all I had. Thank you. Charles W. Melko: Thank you. Thanks, Jeff. Operator: Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.
Operator: Good day, and welcome to the Franklin BSP Realty Trust Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Lindsey Crabbe, Director of IR. Please go ahead. Lindsey Crabbe: Good morning, and welcome to FBRT's Fourth Quarter Earnings call. Thank you, Megan, for hosting our call today. As the operator mentioned, I'm Lindsey Crabbe. With me on the call today are Richard Byrne, Chairman of FBRT; Michael Comparato, Chief Executive Officer of FBRT; Jerome Baglien, Chief Financial Officer and Chief Operating Officer of FBRT; and Brian Buffone, President of FBRT. Before we begin, I want to mention that some of today's comments are forward-looking statements and are based on certain assumptions. Those comments and assumptions are subject to inherent risks and uncertainties as described in our most recently filed SEC periodic reports and actual future results may differ materially. The information conveyed on this call is current only as of the date of this call, February 12, 2026. The company assumes no obligation to update any statements made during this call, including any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Additionally, we will refer to certain non-GAAP financial measures, which are reconciled to GAAP figures in our earnings release and supplementary slide deck, each of which are available on our website at www.fbrtreit.com. We will refer to the supplementary slide deck on today's call. With that, I will turn the call over to Rich Byrne. Richard Jan Byrne: Great. Thanks, Lindsey, and good morning, everyone, and thank you for joining us today. Before we begin, I'd first like to share some important management updates with you. We announced all of these the other day. First, I'm pleased to announce that Mike Comparato, who many of you already know very well, has been appointed Chief Executive Officer. This is effective immediately. Mike currently leads our commercial real estate practice at Benefit Street Partners and has been instrumental in building and scaling that platform to what it is today. He brings deep commercial real estate expertise, a strong command of capital markets and, of course, a proven track record. Concurrently with that, with Mike's promotion, Brian Buffone will assume the role of President. Brian is a seasoned real estate veteran and a long-standing member of our investment team. His experience, institutional knowledge and investment acumen will continue to be invaluable as we execute our strategy and serve our investors. Together, these appointments represent a natural progression of FBRT's leadership, and I am excited to say, leave the company well positioned to execute its strategy in a dynamic market. I will remain actively engaged as Chairman, focused on strategic oversight and supporting Mike and Brian through this transition. So with that, let me turn the rest of the call over to Mike. Michael Comparato: Thanks, Rich. Good morning, everybody. And before my prepared remarks, I want to thank Rich for his years of service as FBRT's CEO. Rich has been an integral part of the company becoming a middle market leader in the commercial real estate finance market, and we all appreciate his dedication over the years to the company's success. I also want to take a brief moment and congratulate Brian on being promoted to President of FBRT. Brian has been a long-time leader within Benefit Street and will now be playing a much more prominent role in FBRT. Now on to the company. For several quarters, we have discussed our earnings under covering our dividend. After a thoughtful analysis, we decided it was no longer prudent to sacrifice book value to pay that dividend. Accordingly, management has recommended and the Board has approved a reset of the quarterly dividend to $0.20 per common share beginning the first quarter of 2026. The company continues to have earnings power to support a meaningfully higher dividend than $0.20. That has not changed. But in the near term, rather than returning capital to shareholders by over distributing, we want to stabilize our book value and better match our current earnings to our dividend. Our priorities are sustainable dividend coverage, book value growth and building more consistent durable earnings. The dividend reset is driven by several factors. The recent declines in SOFR, the timing of our originations and repayments and the overall size of our loan portfolio has impacted short-term returns. In addition, spreads are at multi-decade tights, which means that new loans coming into the portfolio are generally making lower returns than loans that are paying off. REO liquidations are taking longer than originally anticipated, keeping equity locked in underperforming investments. We continue to make very good progress on the REO liquidation front, unfortunately, just at a slower pace than desired. Lastly, but most importantly, with our acquisition of NewPoint, we made the intentional decision to no longer be a pure-play mortgage REIT. Today, we are a commercial real estate investment platform. This means a lower overall dividend yield, but significantly more earnings stability and stronger long-term book value growth. This cannot be overstated. We are a different company today than we were 6 or 9 months ago. In acquiring NewPoint, we have intentionally traded some higher near-term returns from credit investments for steadier recurring servicing and fee revenue. This type of revenue typically trades at a lower yield than pure-play mortgage REITs since it produces a much more consistent and predictable ongoing cash flow stream. When looking at our company and dividend yield today versus where we have been, the overall picture should be viewed based on a blend of our mortgage REIT operations plus that recurring revenue stream business. As we scale NewPoint, its contribution over time will continue to increase and be accretive to overall earnings. We have also recently made a few strategic investments in commercial real estate equity investments. In the current market environment, equity investments yield lower current returns in credit investments, but should provide longer-term growth and upside in earnings. An agency servicing platform and select equity investments are key to a strategy that delivers stronger long-term growth in book value for our shareholders over time and creates a company where the total return should be more meaningful than just our dividend returns to shareholders. We fully recognize we must demonstrate FBRT's repositioning to the market, and the team is working around the clock to do so. Again, FBRT should no longer be compared to pure-play mortgage REITs. We are positioning the company with a differentiated mix of dividend yield, stability and growth, which traditional mortgage REITs do not provide. Looking ahead, our focus is on balancing attractive current income with disciplined book value growth. We believe this approach strengthens the durability of our model and better aligns our yield strategy with the business we are building. Before turning the call over to Jerry and Brian, I want to take a minute just on overall market conditions. Market conditions overall continue to improve. Liquidity is abundant and virtually any capital markets transactions from CMBS to SASB to CRE CLO is met with a deluge of orders, driving spreads tighter. As a result, we are witnessing spreads that are the tightest we've seen since pre-GFC days. We are also seeing regional banks slowly return to the market, primarily in the multifamily space. Their financing quotes typically come with large depository relationships and recourse, but we are hearing about banks quoting whole loans with the same pricing as AAA-rated bonds on CRE CLOs. We are reluctant to chase spreads to the levels that are currently being bid in the market today for commodity multifamily loans. The returns are anemic. And if SOFR continues to fall, they only get worse. However, saying all of that, given the breadth of our product offerings, we are still able to originate ample loans that fit not only our credit criteria, but also generate returns that are significantly more interesting for our investors. Brian is going to address a few of our watch list positions as well as provide some updates on the REO portfolio. But first, I'll turn the call over to Jerry to walk through our financial results in more detail. Jerome Baglien: Great. Thanks, Mike. I appreciate everyone being on the call today. I'm going to go through the financial results for the quarter. FBRT reported GAAP net income of $18.4 million or $0.13 per fully converted common share. Distributable earnings for the quarter were $17.9 million or $0.12 per fully converted share. Turning to distributable. We had earnings -- we had distributable earnings, which included $9.8 million of realized losses. Now $7.7 million of that was related to debt extinguishments and the balance to REO sales. If you take these out, our distributable earnings was $0.22 per fully converted share or nearly flat to where we were last quarter. Timing was the primary driver of the quarter-over-quarter change in distributable earnings. Early in Q4, we completed a $1 billion CLO, FL12 that increased our nonrecourse financing capacity. With this transaction, we called several older CLOs that were past the reinvestment periods, which produced a debt extinguishment charge that I mentioned of $0.07 per share. The new CLO should lower financing costs in 2026 and additionally add meaningful origination capacity. We grew the core portfolio slightly in Q4 as originations outpaced payoffs. The principal balance rose modestly as we originated about $528 million of new commitments while receiving roughly $510 million of loan repayments, a small, but important reversal from Q3 when the core portfolio declined as we conserve liquidity for the NewPoint acquisition. During the quarter, we recorded a net CECL benefit of $4.8 million. However, that included $3 million of loan-specific reserves for 4 watch list loans. One of those loans was subsequently transferred to REO and the associated specific reserve was charged off. Importantly, we continued our share buybacks in Q4, repurchasing $14.4 million of common stock, which contributed $0.05 to book value. Subsequent to quarter end, our Board reauthorized the company's share repurchase program, providing $50 million available for future share repurchases through December 31, 2026, to further support the stock price. Book value per share ended the quarter at $14.15, reflecting our dividend outpacing our earnings. Net leverage remains well within our targets, ending the quarter at 2.5x with recourse leverage standing at 0.81x. We have ample financing capacity and liquidity with reinvest available on 2 of our CLOs. As we redeploy the capacity created by our financing actions, we expect earnings to benefit in 2026 as our core loan portfolio grows and we see a more stabilized contribution from NewPoint. Turning to Slide 11 for updates on NewPoint. NewPoint contributed modestly in Q4. This was expected given a lower origination cadence in the quarter and paired with higher tax reserves at the TRS that reduced NewPoint's reported earnings in Q4. We expect NewPoint's distributable earnings contribution to operate at a run rate of approximately $25 million to $33 million per year. Agency volume came in at $1.1 billion of new loan originations in the quarter. We expect agency volumes to be between $4.5 billion and $5.5 billion in 2026. At quarter end, the MSR portfolio was valued at approximately $220 million and generated $8.8 million of income in Q4, reflecting an average MSR rate of approximately 82 basis points, and the implied life of that portfolio was 6.4 years. NewPoint managed a servicing portfolio that was $47.8 billion at quarter end. The NewPoint BSP integration work continues to move forward. We've made significant progress on the migration of BSP's loans and that servicing book onto NewPoint, and we're on pace to complete that transition by the middle of the first quarter. The addition of the BSP loans will increase NewPoint's servicing book by approximately $10 billion and help to contribute to the increase in earnings power of NewPoint in 2026. We remain confident NewPoint is very accretive over the long term as origination and servicing volumes grow and integration synergies continue to build. With that, I'll turn it over to Brian to give you an update on our portfolio. Brian Buffone: Thanks, Jerry. Good morning, everyone. I just quickly want to start by saying thank you to Rich and Mike for their kind words and support earlier. And as I step into this role, I look forward to continuing to execute our strategy alongside Mike and the broader FBRT team. I'll start on Slide 15. Our core portfolio finished Q4 at roughly $4.4 billion with about 77% of our loans backed by multifamily assets and very limited office exposure. During the quarter, we originated 37 loans at a weighted average spread of 284 basis points with multifamily representing 76% of our new loan originations. Our pipeline is robust, but given current spreads, we are selective on pacing, as Mike mentioned earlier. Our conduit business had an incredible quarter, one of the largest in the history of the company, and that reflects an improved CMBS market liquidity and healthy investor demand. Our pre-rate hike book represents roughly 32% of the total loan commitments of $1.3 billion in multifamily or 82% of that pre-rate hike book. Credit mix remains steady. 76% of those legacy loans are risk rated 2 or 3 at quarter end, and we're continuing to work through the positions that need extra attention on the watch list. Importantly, the office loan exposure is now only $57 million across 3 loans with an average loan size of $19 million. That's down from $130 million in the prior quarter due to 2 office loans paying off in full during the fourth quarter. Credit quality across the portfolio remained stable with an average risk rating of 2.4 at quarter end. And during the quarter, 2 loans were removed from the watch list. One was repaid in full and the other was taken as REO and subsequently sold while 2 new multifamily assets were added. Borrower engagement remains high, and we are actively working towards resolution on each position. A notable change on our watch list was the Georgia office loan that was extended 18 months in exchange for a 5% principal paydown. That original loan amount of $27.5 million has now been paid down to $21.1 million, and the borrower continues to make monthly debt service payments. That loan will stay on nonaccrual. On Slide 19, I'll cover our foreclosure REO portfolio. Our foreclosure REO balance declined to 7 positions at quarter end, down from 9 in the last quarter, reflecting continued progress resolving those legacy assets. During the quarter, the team moved 3 assets off the REO list, selling them at our adjusted debt basis. Remaining reserves related to those assets were charged to distributable earnings this quarter, which contributed to our realized loss. We added a new property to our foreclosure REO in Q4, a Texas multifamily asset. However, it is already under LOI, and we expect resolution to that asset in the first half of this year. We remain highly focused on resolving the remaining positions so we can redeploy that capital into our core loan portfolio. And with that, I'd like to turn it back over to the operator to begin the Q&A session. Operator: [Operator Instructions] The first question comes from Matthew Erdner with JonesTrading. Matthew Erdner: Rich, congrats on a great run as well and Mike and Brian, you guys also. I want to touch on spreads and kind of the compression there. You guys have mentioned or kind of hinted at laying off the gas a little bit there. It looks like conduit was pretty successful. So how should we think about capital allocation this quarter if the core portfolio has, I guess, muted originations somewhat? Michael Comparato: Matt, thanks for the question. I don't want to take the prepared remarks out of context. We have the pedal to the floor on origination. Our goal is to get assets up to a level where we're meaningfully growing earnings, and we can only do that by closing loans, obviously. I think the point of the message was we are not actively chasing the commodity 88-mile an hour fastball over the part of the plate, multifamily loan. We're kind of focusing on the other aspects of our business where we can originate as well, whether that's construction lending, some other areas that we're active. So we've got -- I think we've got a $1.7 billion under application pipeline. So we are by no means slowing down. We're just kind of changing the mix of what the origination looks like so that we aren't dropping to the tightest spreads that the market is. We have to selectively pick a few where we compete there. But generally, we're trying to play a little bit wider. Matthew Erdner: And then I guess turning to kind of the dividend reset, should we kind of expect that to be a good baseline for run rate earnings going forward? And then I guess within that, following up on the last question, what's an ideal portfolio size that you're looking to get that core back to by the end of the year to get back to that $0.20 coverage? Michael Comparato: Well, we're at -- we're above $0.20 today. And so let me answer the question backwards. I think our goal by year-end would be to have the book -- our core book between $4.8 billion and $5 billion overall. With respect to earnings, look, we fully expect this to be 1 or 2 trough quarters, right? That is the earnings potential of this company hasn't changed, right? We laid out the path to getting back to $0.35, $0.36. We still believe with conviction that we have that earnings ability to get back to that level. The issue is it's just taking us a little bit longer to get there than we had hoped. So I'm expecting that we are fully growing earnings over the course of the next several quarters on this path back to that kind of mid-30s. We just did not want to continue shrinking the size, the balance sheet of the company paying out cash over distributing because it just makes it even harder to get back to that level. So we've talked about for several quarters, the borrower behavior and the unpredictability of borrowers. The same, unfortunately, has been true on the REO disposition. We have made tremendous progress. And just when you think you're selling another asset or 2 or 3, a buyer zigs instead of zags. So we're navigating what I would say is a significantly better market than what it was 2 years ago, but it's still just taking us a little longer than we had hoped. So very long-winded answer. I apologize for that. But no, I would not view this as the steady-state earnings of the company. I think earnings are going in one direction from here, and that is higher. Operator: The next question comes from Steve Delaney with Citizens JMP Securities. Steven Delaney: Congratulations on all the promotions that we heard about last night, well deserved. Just looking at the -- where you're trying to allocate capital, and I hear you loud and clear about the excessive competition and maybe traditional bridge loan products. You have -- you're primarily a lender, I guess, as we think about it, while some of it is maybe more like the multifamily and doing the NewPoint business like maybe like a WD or somebody like that, I think that's certainly value added. But the one -- you have one investment REO -- is that going to be a one-and-done thing? Or should we expect that going forward, you will have some percentage of your capital in direct real estate investments or the carry plus the potential capital gain? Michael Comparato: Thanks, Steve. A lot there. Let me try to answer it. So we actually have more than one equity investment on the books. We bought 2 large assets, I think, both in 2025 that are in joint ventures. So they might be booked slightly differently, but I believe those -- I believe we have roughly $400 million to $500 million of gross assets that own. I don't know the percentage off the top of my head, but we do have more equity investments on the book today than just that one Academy Sports distribution facility. We appreciate you pointing out Walker & Dunlop, and I think that's part of my message in the prepared remarks, they're trading at a 4% dividend yield. So what we're trying to get the market to view us as really this conglomerate within the commercial real estate, right? Like let's put a dividend yield of 4% or 5% on the NewPoint operations. Let's put a dividend yield of 8% to 10% on our mortgage REIT operations, and let's put a dividend yield of 4% or 5% on the equity investments that we have because that's where equity REITs trade, but those also are positions for growth in the company. It's going to take us time to educate the market on that front and let them see that, and we have to prove it, and I think we'll do that. But yes, we are primarily a debt shop. That said, we do make a lot of equity investments in other vehicles outside of FBRT. I think we bought close to $1 billion of commercial real estate assets in the last 18 months. So again, a longer-winded answer here. But yes, I think that you should expect to see a slightly higher allocation of the book to some equity -- select equity investments over the next few years. Steven Delaney: No, that's very helpful. And it was a twisted kind of question to begin with, but I appreciate the color on the -- especially on the investment side on the investment REO. Michael Comparato: Yes. And I would just add, you're not going to wake up one morning and see FBRT have 25% of its equity invested in equity investments, right? That is not happening anytime soon. Could we have 5%, 10% a few years from now? Possibly. But yes, we are not on the path to Starwood. I think they're at like 50% equity investment. That is not the goal or expectation. Steven Delaney: You're still going to be a finance company primarily. And on your agency business with NewPoint, will we be -- I have not -- forgive me, but I haven't been through the deck yet. But will we be able to kind of look at that operation in terms of its origination sale and servicing business to Freddie and Fannie, et cetera. Will we see sort of what your little WD component of the company looks like in terms of the TRS? Michael Comparato: Jerry, do you want to take that? Jerome Baglien: Sure. Yes. There's a page in the Supplemental deck, and there's obviously going to be more information in the 10-K that will give you more segment information on the details within that operating segment for us. So you'll be able to see some of the volume information. We break out the income by component, servicing, gain on sale, and you could see the cost structure as well. So hopefully, that should be helpful in answering some of the questions. And additionally, we gave kind of a high-level range for volume and expected income contribution in '26 as well to just help put a guidepost out there for kind of where we see things. Steven Delaney: Well, congrats on the progress, and we applaud what you're doing. We've got 22 plain vanilla commercial mortgage REITs, and I think that's enough. So it will be exciting to see how you guys position the company over the next year or 2. Operator: Our next question comes from John Nickodemus with BTIG. John Nickodemus: First of all, Rich, all the best in your role as Chairman. Congrats, Mike and Brian, in your new roles. Earlier in 2025, you estimated that there was $0.08 to $0.12 of DE per quarter that could be unlocked from reinvesting equity tied up in nonperforming loans in REO. Based on progress your team has made since then, where do you estimate that figure stands today? Michael Comparato: I think we're actually slightly higher than that today. I don't know if I have the number, Jerry, I don't know if you have the number at your fingertips. But John, I think you've hit the crux of exactly why we concluded to a dividend cut is that it's -- that earnings is there. It's black and white. It's not questionable. It's just a matter of when do we recoup it. And unfortunately, it just taking a little bit longer than we had anticipated. So Jerry, I don't know, do you have the number? I know obviously, we have the numbers, but I don't know if you have them at your fingertips. Jerome Baglien: We have the numbers. I would say the range has not substantially changed, and Mike is right. It's been -- it's not that the quantum has necessarily changed. It's the timing to unlock that the balance of that earning power, whether its resolutions have taken longer, we've kind of cycled through additional assets as we kind of work down through the balance of our legacy portfolio. Our ability to kind of take that back and redeploy in our core portfolio is still there. We're really working with time more than we're working with a change in potential earnings power with that equity that's there. John Nickodemus: Great the timing being the key driver makes a lot of sense. And then, Jerry, something that you touched on earlier just about the 2026 full year guidance for the volumes and distributable earnings contribution from NewPoint. I noticed the volume had come down a bit and then the earnings contribution had come up from the deck you put out in September. Just curious what was driving those changes as we look toward 2026 NewPoint. Jerome Baglien: I think we were guiding '25 before. And in '25, I think we're kind of middle of that range. So essentially, we bumped it up a little bit from where we are today, kind of what we hit in '25 kind of based on all the scaling that we've talked about plenty of times on our calls over the last year or so. The range is also, again, it's up a little bit from where we were this year. I think this year, we were at the high end of what we provided for everybody on a 2025 year-to-date total. Obviously, it's a little chunkier in how it came in the 2 quarters. And one of the reasons we give annual projections is because this business will have some chunky quarters, right? We wanted to kind of give a bit of a range there. And then the reason we kind of simplified it into 2 line items is just the mix can obviously change quite a bit in terms of the end distributable performance. So rather than kind of be overly specific, we want to put a decent range on there to kind of cover the various outcomes. I think in terms of one of the other upsides is the servicing integration that I mentioned, putting that $10 billion of our own book on to the business is going to be a pretty big driver in terms of additional income growth that we should see through the balance of '26. Operator: Our next question comes from Timothy D'Agostino with B. Riley Securities. Timothy D'Agostino: Congrats on the quarter and the promotions and transitions. Looking at the results for '25 at Fannie Mae, understanding kind of that multifamily volume was a lot higher this year compared to years past. I just wanted to get the overall sense of how that business is progressing year-to-date in '26, if that momentum from '25 is still carrying over? And if you could provide any color on kind of how you're feeling about the year ahead in that channel. Michael Comparato: So I think, unfortunately, we're living in a world that is highly, highly tethered to rates and the slightest of move. I mean this is probably more so than ever in my career. I was talking about this with someone the other day when the 10-year is at 4.25%, I said, if the 10-year dropped to 4% flat, I think you would see volume just go through the roof. And if you see the 10-year go to 4.5%. I think things are going to come to a screeching halt. And it's just shocking that a 25 basis point move in either direction could have that outcome. We are in an incredibly rate-sensitive environment, and everybody has been sitting and waiting and waiting and waiting for rates to go lower. And if they go lower, I think you're going to see just a massive, massive amount of volume come through the market. And unfortunately, if they go higher, we're going to see the opposite. So if you could tell me where the 10-year is going for the next 6 to 12 months, I could give you a much better answer. But it is just incredibly rate sensitive at the moment. And I think that's for all of our businesses. Timothy D'Agostino: And then sorry if I missed it earlier in the call, but regarding the loan portfolio, payoffs persisted at a pretty high rate. However, funded volume obviously came in just above that. Are most of these repayments behind you? Do you think we could still see some higher figures in the first half of '26? Just kind of any color on repayments of the portfolio. Michael Comparato: Yes. So repayments are obviously a blessing and a curse. We are cycling through the legacy portfolio. I think we are head and shoulders above the balance of the industry in terms of addressing that legacy portfolio. As Brian mentioned, I think we're down to 32% of the portfolio being backward looking. And look, honestly, I think this is just where the market is completely mispricing and misunderstanding FBRT. We talked about it a few earnings calls ago. But the market right now is looking at a dividend yield, albeit a lower one given the cut, but it's just not factoring in the overall return. And if you look at the company as a collection of loans, if you took a loan portfolio of this quality out to the market today, it would trade at $0.97. Look at ARI. I mean, look at what they sold, what Athene bought ARI loans for. The disconnect between our book value and our share price is it's inexplicable. So we will just continue to do what we do. We will continue to deliver on the REO portfolio. We will continue to just recycle out of those legacy positions. But we re-underwrite this portfolio and risk-rate it every single quarter. And short of a black swan event that I cannot predict, there is absolutely no way that the book value disconnect is anywhere close. It's not even a fraction of what the losses we will realize as we cycle through this. So we're going to have to show it to the market, which we plan on doing in 2026. I have the highest of conviction that we are right in that regard, but we got to get through it, which we will do in the next few quarters. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Lindsey Crabbe for any closing remarks. Lindsey Crabbe: We appreciate you joining us today. Please reach out if you have any further questions.
Operator: Greetings, and welcome to the Bright Horizons Family Solutions Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Michael Flanagan, Vice President of Investor Relations. Please go ahead. Michael Flanagan: Thanks, Paul, and welcome to Bright Horizons Fourth Quarter Earnings Call. Before we begin, please note that today's call is being webcast and a recording will be available under the Investor Relations section of our website, investors.brighthorizons.com. As a reminder to participants, any forward-looking statements made on this call, including those regarding future business, financial performance and outlook are subject to the safe harbor statement included in our earnings release. Forward-looking statements inherently involve risks and uncertainties that may cause actual operating and financial results to differ materially and should be considered in conjunction with the cautionary statements that are described in detail in our earnings release, 2024, Form 10-K and other SEC filings. Any forward-looking statement speaks only as of the date on which is made, and we undertake no obligation to update any forward-looking statements. Today, we will also refer to non-GAAP financial measures, which are detailed and reconciled to the GAAP counterparts in our earnings release. which is available under the Investor Relations section of our website at investors.brighthorizons.com. Joining me on today's call are Chief Executive Officer, Stephen Kramer; and our Chief Financial Officer, Elizabeth Boland. Stephen will start by reviewing our results and will provide an update on the business. Elizabeth will follow with a more detailed review of the numbers before we open it up to your questions. With that, I let turn the call over to Stephen. Stephen Kramer: Thanks, Mike, and good evening to everyone on the call. I am pleased to report a strong finish to 2025, closing out a year of solid growth and continued progress across the business. In the fourth quarter, revenue increased 9% to $734 million and adjusted EPS increased 17% to $1.15 both ahead of our expectations. For the full year, we delivered revenue of $2.93 billion, up 9% over the prior year and adjusted EPS of $4.55 representing 31% growth year-over-year. These results exceeded the expectations shared at the beginning of the year and highlight the continued evolution of Bright Horizons into a diversified, integrated solutions provider of employer-sponsored education and care. The improvements in our business mix throughout 2025, combined with our growing impact on families and employers, reinforce our confidence in the durability of our model and long-term opportunity for growth. Let me now walk through the segments. First, back-up care again delivered strong growth and earnings contribution in Q4 as it is done over the course of 2025. In Q4, revenue increased 17% to $183 million. Driven by solid utilization across center-based, in-home and school age programs. Utilization during the quarter reflected a combination of unplanned CAGR when regular arrangements were disrupted along with more predictable care needs such as scheduled school breaks and holiday coverage. For the full year, back-up care revenue grew 19% to $728 million and sustained strong operating margins. Our service reach spans more than 1,100 employer clients and millions of eligible employees globally. Importantly, our existing clients had double-digit growth in backup users even as their eligible populations remain relatively flat, meaning growth was driven by deeper penetration into the eligible population, underscoring the value of the benefit to an increasing number of working families. Looking forward, our focus remains on scaling the backup business by expanding unique users within existing clients, increasing frequency of use among those utilizing care and continuing to retain and add new employer clients. This growth relies upon an unmatched delivery model that combines owned capacity across our full service centers and backup operations alongside a broad third-party provider network. We still well less than 10% penetration within existing clients we have a significant opportunity to further expand active user adoption and utilization through targeted marketing, expanded capacity across use types and our One Bright Horizons initiatives to increase awareness across our services. We remain confident that back-up care will continue to be a durable source of growth in earnings while also strengthening broader employer partnerships across Bright Horizon services. Turning to full service. Revenue increased 6% in the fourth quarter to $515 million, with growth driven by a combination of tuition increases and enrollment growth tempered by our continued portfolio rationalization. We added 6 new centers this quarter, including 4 client centers, 3 of which were transitioned of management for Stormont Vail Health and Cone Health. These additions extend our leadership in employer-sponsored child care and reaffirm the critical role on-site care plays in supporting working families and their employers. Enrollment in centers opened for more than 1 year increased approximately 1% in the fourth quarter, and occupancy averaged in the mid-60% range, broadly consistent with seasonal patterns we typically see in the back half of the year. Underlying enrollment dynamics remained similar to what we saw throughout 2025, with solid demand in many geographies, countered by more muted enrollment growth levels in some of our more challenged areas. We are pleased to see continued progress, particularly in our lower occupancy cohort, were centers operating below 40% occupancy declined from 16% to 12% of the portfolio in the fourth quarter year-on-year. Specifically in the U.K., our full-service business continued to make progress and delivered positive operating profit for the year, a significant milestone post pandemic and a meaningful turnaround from the $30 million of annual losses we absorbed just 2 years ago. This progress reflects higher occupancy, more consistent staffing and improved affordability for families aided by expanded government supports. Looking ahead, our focus remains on serving families where they work and live, continuing to invest in the quality of our services and strengthening the long-term economics of our portfolio. We will continue to operate in locations that are important to our client partners, are strategic in delivering back-up care and in areas with strong supply-demand dynamics. At the same time, we'll continue to rationalize locations where these characteristics are not present. Turning to ed advisory. Revenue increased 10% to $36 million in the quarter. and for the full year grew 9% to $125 million, both ahead of our initial expectations. College Coach led the growth in margin performance as more families engage with our college counseling services, while EdAssist also continued to expand its participant base. During the quarter, we added new employer clients to the portfolio, including launches with [indiscernible] Estee Lauders and Becton Dickinson, among others. Before I turn it over to Elizabeth, I want to take a moment to recognize an important milestone. 2026 marks the 40th anniversary of Bright Horizons. When our founders launched the company in 1986 they, believed employers could play a meaningful role in supporting working families. And then doing so, we benefit children, parents and employers alike. Over 4 decades, Bright Horizons has developed thoughtfully alongside changes in the workforce, employer priorities and the needs of working families. Central to that evolution has been the development of our back-up care business. and the expansion of our services to support families and employees across life and career stages, broadening our impact to a much wider population. That progression reflects our ability to listen to clients adapt to changing needs and invest in ways to maximize impact, all while remaining grounded in our mission to support children, families and employers. We are proud of what this organization has built over 4 decades. Deeply grateful to our employees whose dedication make it possible and appreciative of our client partners and customers who place their trust in us. In closing, 2025 was a year of solid financial performance and meaningful progress across many dimensions of our business. We grew revenue 9%, expanded adjusted operating margins 200 basis points and delivered 30% earnings growth. We strengthened our balance sheet, repurchased $225 million of shares and position the company for long-term success. As we look ahead to 2026 we are optimistic about the opportunities in front of us and look to build on the momentum we saw in 2025. Elizabeth will walk through the guidance in more detail, but at a high level, we expect revenue to be in the range of $3.075 billion to $3.125 billion and adjusted EPS to be in the range of $4.90 to $5.10 per share. With that, I will turn the call over to Elizabeth. Elizabeth Boland: Thanks, Stephen, and hello to everyone who's joined the call tonight. I'll start with our financial highlights. Revenue in the fourth quarter was $734 million, representing 9% growth year-over-year and modestly ahead of our expectations. The quarter reflected solid execution across the business with continued strength in back-up care and steady performance in full service and ed advisory. Adjusted operating income rose 14% to $91 million, with operating margins up roughly 60 basis points over the prior year to 12.3%. Adjusted EBITDA increased 12% to $123 million representing an adjusted EBITDA margin of 17%. And lastly, adjusted EPS of $1.15 per share, ahead of our expectations, grew 17% over the prior year. . Breaking this down into the segment results. back-up care revenue grew 17% in the fourth quarter to $183 million, driven by solid demand over the fall and holiday season. As Stephen mentioned, utilization continues to be driven by both predictable and planned needs as well as unexpected care disruptions. Operating margins remained strong in the quarter at 32% and in line with our expectations for the higher volume of care that we deliver in the second half of the year, while also reflecting our disciplined expense management and a favorable mix of utilization. Full service revenue of $515 million was up 6% in Q4, mainly on pricing increases, modest enrollment gains and an approximate 175 basis point tailwind from foreign exchange. Centers we have closed as part of our portfolio rationalization since Q4 of '24 partially offset these gains representing an approximate 200 basis point headwind. Enrollment in our centers opened for more than 1 year increased approximately 1% and occupancy levels across our portfolio averaged in the mid-60s for Q4. In the specific center cohorts we have discussed on prior calls, we continued to show improvement over the prior year period. Our top-performing cohort centers above 70% occupied, improved from 39% of those centers in Q4 of '24 to 40% of centers in Q4 of '25. And as Stephen commented, our bottom cohort of centers those sub-40% occupied, improved from 16% in the prior year period to 12% of the total population this past quarter. Adjusted operating income of $20 million in the full service segment increased roughly 45 basis points to 4%, up $3 million over the prior year higher enrollment and improved operating leverage, particularly in our U.S. and U.K. operations helped drive the growth in earnings, while higher benefits costs partially offset some of these advances. Lastly, our revenue in the educational advisory segment increased 10% over the prior year to $36 million with operating margins of 30%, consistent with Q4 '24. Net interest expense ticked up to $12 million in Q4 of '25, also consistent with the prior year quarter and totaled $45 million for the full year. Our non-GAAP effective tax rate was 26.4% in the quarter -- in the fourth quarter, bringing the effective rate for the full year to 27%. Turning to the balance sheet and cash flow. For the full year 2025, we generated $351 million in cash from operations compared to $337 million in 2024. Capital investments totaled $91 million in the current year 2025 as compared to $95 million in the prior year. And with the continued cash build specifically free cash flow generated in Q4, we repurchased $225 million of stock in 2025, including roughly $120 million in the fourth quarter. We ended the year with $140 million of cash and a leverage ratio of roughly 1.7x net debt to adjusted EBITDA. Moving on to our 2026 outlook. In terms of the top line, we currently expect 2026 revenue to be in the range of $3.075 billion to $3.125 billion or growth of 5% to 6.5%. Looking at this at a segment level, in full service, we expect reported revenue to grow in the range of 3.5% to 4.5% on enrollment gains and tuition increases offset by approximately 200 basis points in headwind from net center closings. In back-up care, we expect reported revenue to increase 11% to 13% and driven by the continued expansion of use. And in ed advisory, we expect to grow in the mid-single digits. In terms of earnings, we expect 2026 adjusted EBITDA, EPS, excuse me, to be in the range of $4.90 to $5.10 a share. As we look specifically in Q1 '26, our outlook is for total top line growth in the range of 6% to 7.5%. The segment breakdown would be full service reported revenue growth of 5.5% to 6.5% back-up of 11% to 13% and ed advisory in the low to mid-single digits. In terms of earnings, we expect Q1 adjusted EPS to be in the range of $0.75 to $0.80 a share. So with that, Paul, we are ready to go to Q&A. Operator: [Operator Instructions] Our first question is from Jeff Meuler with Baird. Jeffrey Meuler: Can you help us with how you're thinking about the full-service margin outlook, including as you close these centers that are a 200 basis point revenue headwind on average, are they at a loss? Or just how should we factor in the different drivers of full-service margin outlook? . Elizabeth Boland: Yes. Thanks, Jeff. So as we look at 2026, we had, obviously, good performance this year and are building off of where we ended 2025 into '26. We mentioned a couple of things on the prepared remarks, including about 100 basis points of enrollment gain in the year. That will contribute some continued performance in our U.K. business, which had a certainly a strong year in 2025, and that velocity will be -- continues to grow, but it will be expanding at a little bit lower pace than it was able to this year. So we're looking overall at about 25 to 50 basis points of margin improvement in the full service business in '26. That captures some effect of these closures as you're highlighting, most of them are in a loss-making position, yes, because that's the reason for underperformance leading to a closure decision. There is some tail to those costs even as the center ceases operations if we're running dark and/or we're not able to fully exit the lease are paying off multiple years of lease expense in advance. So we are having some ongoing effect of that, but it does add modestly to the operating leverage as we are exiting these underperforming centers. But overall, full service 25 to 50 bps. Jeffrey Meuler: Got it. And then just given the headlines and new stories, can you just comment on health and safety protocols, any changes that you're making or considering? And then just how you think about any sort of like local market or licensing risks or a private public partnership for UPK opportunities that could be impacted from those issues. . Stephen Kramer: Sure. Thank you for the question, Jeff. As you'll know, and those who interact with know, our #1 priority continues to always be delivering high-quality care and education for families and ultimately for the clients that we serve. When we have any incident at a center. We take it incredibly seriously. What I would say is that enrolled families at other centers tend to focus on the experience that they are having at their individual center. And the relationships that we enjoy with our clients. We focus on transparency and also strong communication so that we can express to them exactly what has occurred. And then ultimately, the actions that we are taking to make ourselves even stronger going forward. So overall, to be very direct with you, we continue to see strong retention of families in our centers. We continue to see stability in our client base. And so overall, while we take these incidentally seriously, from a business impact perspective, I would say, at this point, our view is that, that is not the case. You referenced the relationships that we may have with UPK, so for example, in New York City, in particular. And what I would say is that we enjoy contracts in the majority of our centers for UPK . We have received feedback from the regulator. Having visited almost all of our UPK centers in recent months that we continue to perform at a high level. There is never a guarantee that contracts will ultimately be renewed over time. On the other hand, we feel confident in our position at this point within the New York City market and our ability to continue to deliver for the large number of families that we do. Operator: Our next question is from Manav Patnaik with Barclays. Manav Patnaik: Elizabeth, maybe just firstly on the guide, if you could help us with the assumption on pricing and enrollment growth in the full center business? And then also just if you want to just knock out the margins for the other two businesses in 1Q and the full year. . Elizabeth Boland: Sure. So overall, we're looking at price increases, which would vary as I'm sure most on the call know we make individual localized decisions on this. But on average, the price increases for '26 are approximately 4% and we are looking at overall enrollment for the year plus 100 basis points give or take. So the two of those are the two primary components there. The price increase reflects what we see in the wage offsetting around 3% or so range against that 4% for wages. As it relates to the overall margin in the other businesses. So back up, we would be looking at our long-term average. Just to reiterate that, we would expect to be 25% to 30% operating margin over time. We certainly have been performing well against that, and we would look in '26, we would look to be seeing that in the upper half of that range. So call it, 27%, 28% to 30% for the year. So that's what we're seen in back-up care. And then in ed advisory business similar to this year overall in the low 20s . Manav Patnaik: Got it. And maybe just back to New York City, I guess, with the new mayor and the free child care proposal. I wanted to just get your take, if you've spoken to the administration, you're involved in there. Just some color on what your New York City exposure is? I know in the past with pre-K and those kinds of things, you benefit from wraparound care, but I'm not sure what these proposals look like. Stephen Kramer: Sure. So as I shared, we -- as the majority of the centers that we have in New York City proper, we participate in UPK and that is a good relationship with the city in terms of a good demonstration of the power of private public partnerships. It's an environment where the city funds at a level that supports quality and likewise, is an environment that is open to working with private providers like us. So New York City has been, in our opinion, a really good example of where UPK can work well both for the city, but also for Bright Horizons and the families that we serve. The expectation going forward is there have been conversations about moving to younger age groups, so the twos, so 2k and there is an indication that it would likely look similar to the UPK program that's in place only for younger age groups. The expectation also is that they are going to be starting with a pilot that is focused on the neediest areas of the city and then potentially expand in the way they did previously to a much broader aspects of the city. In terms of the relationship, yes, I mean, I think we as one of the largest providers in New York City or UPK, we certainly have a good and ongoing relationship with the folks that manage those programs and continue to feel like we have a good sense of how this may unfold over time. Operator: Our next question is from Andrew Steinerman with JPMorgan. Andrew Steinerman: So Bright Horizons continues to have strong backup cap growth as employees at the corporate clients engage and use their additional use cases of their backup benefits. I was wondering how do the corporate clients feel about that kind of the increased spend that comes as employees realize and use their backup benefits more and do you see any tightening of backup benefits in terms of like use cases that are allowed by corporate clients? . Stephen Kramer: Sure. I'm happy to answer that, Andrew. So first, it's fair to say that we're very pleased with the 19% growth that we experienced this year. And that is in addition to the last several years of very strong growth. And as you all know, the majority of the revenue that we derived is directly from the employer support of these programs because there's really a limited co-pay that goes along with it at the employee level. But I think that we have done a really good job of articulating to employers the value in terms of productivity. That backup provides to their employees and then ultimately accrues to them as employers. And so I think that strong ROI has really held us in good stead as it relates to the continued investments that they're making. I would also observe that within the benefits portfolio that HR manages, backup is still a pretty modest line item, especially as it compares to some of the more traditional and larger benefits that they manage. And so while the increases are significant for us and obviously for the progress that we have continued to make from any one employer's perspective, it's still a pretty modest line item despite the fact that on a percentage basis for them, it is growing more significantly. But again, I think our teams have done a really good job of ensuring that we are focused on -- and secondly, the feedback from employees around the backup benefit continues to be incredibly strong. Operator: Our next question is from George Tong with Goldman Sachs. Keen Fai Tong: You mentioned occupancy averaged mid-60s in 4Q. Based on your guide for this year, can you describe how you expect occupancy to unfold over the course of 2026 by quarter roughly? . Elizabeth Boland: Yes. So the seasonal pattern would be pretty consistent where we see a lift in enrollment in the first half of the year, particularly in Q2 is where it would be peaking in the -- it was in the high 60s in 2025, so being picked up -- it would tick up a bit above that. And then in the second half, it would be back down into the mid-60s for the second half of the year, Q3 and ending the year similar to Q4 as Q3. So it's a lift in Q1 and Q2 and then similar to the pattern you saw this year. Keen Fai Tong: Got it. So by 4Q this year, would you expect it to be better than mid-60s from 4Q last year? Or do you think you've reached the steady state and mid-60s as a reasonable year-end? . Elizabeth Boland: Yes. It would be still in the mid-60s exiting '26 because with a growth rate of just 100 basis points in a year. We're we're making headway against that gradually, but it wouldn't be getting beyond the mid-60s by the end of the year. Still growth to come though. We are heartened by the continued interest, and we have the overall number of enrollment in the 100 basis point range is masks the improvement in the middle and lower cohorts, which are growing low to mid-single digits because they're more under enrolled than the top cohort, which is very well enrolled. And in fact, can't really take any more enrollment and may see some cycling. So overall, we're pleased with the ongoing momentum, it's modest, and it's year-by-year, quarter-by-quarter, but we are seeing growth and think that, that will continue to allow us to move beyond the mid-60s over time. That won't happen, we wouldn't expect in '26, but certainly have the opportunity down the road. Operator: Our next question is from Toni Kaplan with Morgan Stanley. Toni Kaplan: I was hoping you could start maybe giving additional color on the closures. Just wondering if there are any sort of commonalities on why the centers got up to a higher level of utilization and I'm sure there were a number of things that you tried. And so just wanted to understand the reason for that. But were there a number of leases that came up this year? Just trying to understand also like how to think about closures for maybe '27 as well. Elizabeth Boland: Yes. Yes. So I think the common theme is probably the centers that have been circled up for closure. And in fact, we have closed already in '26 close to half of what we would expect to close for the year. we'd expect to be in the range of 45 to 50 or so closures this year overall, and we've closed more than 20 already in this quarter. And that the circling up of those has been a combination of the things that you mentioned, Toni, which is some were within a year or 2 or 3 of the end of their lease. And so the underperformance, the lagging enrollment and the overall economics of operating compared to covering the fixed cost was not sensible. And so we were able to in many cases, move the families and the staff to other nearby centers and to accommodate the needs of everyone in that way. And so that's obviously the best case scenario where we can rationalize portfolio and retain the enrollment and the staff as well. Also, there certainly were some cases where the underperformance is so significant and there is no particular lease action, the lease is not coming up for still several more years, but we have elected to stop operations and do this either combine or just stop operations because the demand is not sufficient. The operations are quite -- the operating performance is quite low, and therefore, we are shutting down operations and may have some tail of costs that carries on for a couple of years if we are not able to sublease the space, we will certainly work to do that, but it's not the most amenable market for that. But I think it's just a decision point of persisting looking at the client relationships, is there client interest in full-time care? Is there a client interest in back-up care? Is there a landlord negotiation that can get us a more tolerable occupancy cost? Are there other -- and of course, the main ones, which are can we enlist more enrollment by more parent awareness and more marketing conversion, but that's all of those things go into a decision, which is a tough one to make. Toni Kaplan: Great. And then for my follow-up on back-up care, I guess, anecdotally, we're aware of at least one employer who added days during COVID and now is cutting back on days going back to sort of pre-COVID levels. And so I wanted to understand if that is just a one-off situation or if they're is sort of a larger trend of cutting back on days? And what I'm trying to get at is if you're seeing any changes in the drivers of growth in back-up care like going forward versus like recent years, are you seeing sort of more growth from new employers signing on as opposed to those adding days or any difference in usage, et cetera. I just wanted to understand directionally the back-up care drivers and if that is something that is changing. Stephen Kramer: So Toni, what I would say is now the drivers in 2026. And moving forward, we expect actually will look very similar to the last several years. So the vast, vast majority of the growth comes from the existing client base. Of course, we continue to add clients, but that is not a large source of growth given the maturation that is required of a new client, and it takes time for the benefits to become known and then ultimately used in a more mature way. So when we think about the drivers, number one, is continuing to increase the number of unique users. And so as I shared, we grew that at sort of mid-double-digit rate and so getting more penetration within our existing base is a really critical component. I would say that to the question around program design and policy changes, it was not actually the norm for most of our employers to change their program parameters even during COVID. We had a select number that really had some outsized programs that have come back into more of our normalized program policy. But the reality is in the current operating environment, most of those who use do not use their full bank, whether it be an outsized bank or even a more traditional sized bank. So again, it's this combination of continuing to drive users continuing to drive their frequency of use, understanding that most do not use their full bank, and those become the two most important determinants of the continued growth algorithm. Operator: [Operator Instructions] Our next question is from Josh Chan with UBS. Joshua Chan: I guess, around your expectation to grow enrollment 100 basis points which is similar to kind of the exit rate in Q4. Have you seen kind of a solid or pretty stable fall enrollment season during Q4 to kind of inform you of that? Just I'm just wondering how the enrollment season kind of progressed. Elizabeth Boland: Yes. It was -- I would say that we had a bit of a slowdown in the second half of the year. We were a little faster growth in 1H of '25, and then it tapered in the second half. So it was -- the momentum coming through the fall was and into the rest of the year was similar to what we had expected and stable going into next year. I'd say that the maybe the notable element as we're looking ahead is a little bit of an uptick in younger age group enrollment. The mix is it's not dramatically different, but it's an uptick in younger age interest. And so that's always a positive, of course, for just growing the younger children into the older age groups as they stay with us. So that's one of the elements of positive outlook that we are seeing. And we talked last -- throughout 2025, it is last year, and we're talking about Q4, but some of the supports that we are seeing outside the U.S. has certainly helped to improve affordability to families in the countries that we operate, where government funding for child care is available to all families. It's means tested, but it's available to all families at some level, and that enables more families to afford care. So that has driven some good stability also in the enrollment outlook. Joshua Chan: Okay. That makes sense. And then in terms of your center count, I guess, how many centers are you aiming to open next year? And at what point do you feel like you can get to kind of net neutral center count in the future? . Elizabeth Boland: Yes. So in '26, we'd look to be opening plus/minus 20 or so. And I think I mentioned closing 45 to 50. So we would be in the net closure position as you say, in '26. It will go a long way, closing getting underperformers closed throughout the rest of this year. We'll go a long way toward addressing that bottom cohort. We mentioned there's 12% of centers in the bottom cohort about just under 90 of those or so are P&L centers that we control the bottom line. And even after the closures in the early part of this year, it's already ticked down meaningfully to -- in the neighborhood of 70. So we will be in a good position to have made progress through many of the centers, but I'd still say we would -- we'd probably be in another year beyond '26, '27 before we're meaningfully net positive. . Operator: Our next question is from Stephanie Moore with Jefferies. Stephanie Benjamin Moore: Hi, good afternoon. Thank you. I was hoping you could talk a little bit about what you're seeing from just an overall pricing standpoint, general appetite from parents and customers on tuition increases, how you view kind of pricing going forward now that inflation is kind of arguably a bit under control, labor is in a little bit better positioned. So I would just love to get your kind of updated view on general pricing trends. Elizabeth Boland: Yes. I mean it's obviously the economy has been in many families have been quite stressed with the whole of inflation in general over the last many years. Child Care has, for many years, been a higher than inflation cost service, mainly because of the labor intensity that goes into it and the pandemic really added some fuel to that with significant increases to the labor cost as some significant wage steps were made early on in the pandemic. And then we continue to do increases, but they're much more market level increases over the last couple of years. So I think the parents are understanding that the cost of care is very much driven by personnel costs. We mentioned benefits costs on this call, in particular, because it is one of the important cost wage and benefits is an important element of the total rewards package for our teachers. It's one of the things that's attractive to them about our employee value proposition and why they work here, but it is a cost that we need to be continuing to bake into the overall cost structure and the tuition recovery over time. So we feel like our algorithm will continue to hold. Parents understand where the increases are coming from and the I think that our measured approach to tuition increases that tries to balance the economics, covering costs in the center as well as attracting enrollment, retaining enrollment and bringing as economic value to families and to our client partners as we can will ultimately carry the day. So we're always looking for ways that we can be effective in making the cost of care affordable to families but transparent about the fact that it does increase with -- primarily with those personnel costs each year. Stephanie Benjamin Moore: Absolutely. No, I think that's fair. And just as a follow-up, and I do apologize if I missed this, but wondering if you guys could give an update on getting back to 70% enrollment or what you view as an optimal enrollment level, just kind of update and time line there? . Elizabeth Boland: Sure. So we're in the mid-60s right now across the portfolio and about half of our centers operate above 70%. And actually, they operate above 80% on average. And so I would say that our target would still be to aim for 70% many centers performed just fine below that, 60%, 70%, it doesn't -- it's not a magic number, but it is certainly one that we aspire to in terms of critical mass in the center of the right kind of mix of age groups that bring the operating efficiency that is natural in a childhood center where this labor intensity is as high as it is. And so our view at 100 basis points a year of enrollment gain, we will be making headway on that and getting closer to 70%. But the other factor there is as we continue to rationalize the portfolio, and we have fewer centers that are operating sub 40%. We will naturally be drifting up, if you will. But it's really having the enrollment that's the most important factor. And it's -- the top group is doing well. It's doing great. They're sustaining enrollment above 80% even as the natural age up and cycling happens. So that is the most heartening part of it. It's that middle cohort of, call it, 40% of our centers that have the real opportunity to be adding 5, 10, 15 basis points of children -- 5, 10, 15 percentage points of enrollment to really get us closer to that 70% average. Stephen Kramer: Great. Well, thanks again for joining us on the call and wishing you all a good night. . Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
Operator: Good afternoon, and welcome to the Ultragenyx Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] It is now my pleasure to turn the call to Joshua Higa, Vice President of Investor Relations. Joshua Higa: Thank you. We have issued a press release detailing our financial results, which you can find on our website at ultragenyx.com. Joining me on this call are Emil Kakkis, Chief Executive Officer and President; Howard Horn, Chief Financial Officer; Erik Harris, Chief Commercial Officer; and Eric Crombez, Chief Medical Officer. I'd like to remind everyone that during today's call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. Please refer to the risk factors discussed in our latest SEC filings. I'll now turn the call over to Emil. Emil Kakkis: Thanks, Josh, and good afternoon, everyone. 2026 is poised to be a significant year for the company as we reach key inflection points across multiple programs. This includes 2 potential approvals in MPS IIIA or Sanfilippo Type A syndrome and Glycogen Storage Disease Type Ia and the pivotal data readout in Angelman syndrome. These programs are excellent examples of our mission to bring important first-ever treatments of patients and families while also delivering meaningful long-term value to shareholders. Just last week, we presented updated data at the WORLDSymposium from the UX111 for MPS IIIA program. The new data reflects an additional year of follow-up and continue to demonstrate sustained and significant further separation of early treated patients in multiple neurologic end points including the Bayley, cognitive and communication scores when compared to the decline observed in MPS IIIA natural history. The data also show a significant and durable reduction in the toxic substrate heparan sulfate [ in ] other disease cause biomarkers that show a restoration of lysosomal function regardless of age or stage of disease. This reduction in CSF HS can be effectively measured by any of a number of different assay methods available, and all HS measures correlate significantly to stabilization or improvement in clinical function. These results in human and animal models were thoroughly discussed substantiate and ratified by highly trained and qualified academic clinician and industry leaders that are the internationally recognized expert in this field at a Reagan-Udall convened workshop in 2023. For the entire UX111 study program, we now have more than 8 years of follow-up. And overall, these data continue to support a clinically meaningful and durable clinical effect of UX111 regardless of age or stage disease all supported by consistent improvement in multiple relevant direct measures of disease activity, including CSF HS. We resubmitted the UX111 BLA to FDA late last month, and earlier today, we received [ a ] complete response letter. We had provided complete responses to each CRL item, but now the FDA is requiring additional details within supportive documentation on the CMC CRL responses made and their impact. This information is typically provided during the inspection, and we were prepared to do so, but we'll not provide the supportive documentation as a part of our BLA resubmission. Our efforts to bring these transformational therapies to patients are supported by our established and still growing commercial business, which again delivered significant 20% year-over-year growth in 2025. We're now bringing treatments to patients in more than 35 countries, each of which contributed revenue in 2025. This commercial infrastructure will power our growth into 2026 and beyond as we leverage the investments expertise and relationships we have established around the world to commercialize 3 additional treatments over the next 2 years. Eric Harris will outline for you our results across [ programs ] last year and discuss our vision to expand and deepen our global commercial footprint in the coming years. As noted in our press release earlier today and following the UX111 CRL last year, and the data from the UX143 trials, we made the necessary decision to implement a strategic [ construction ] plan to reduce our operating expenses and ensure our resources are squarely aligned with our highest impact opportunities going forward. Howard will now go through some of the details, but these actions were necessary to keep us on path to profitability in 2027, while still advancing a meaningful pipeline of new products. Howard Horn: Thank you, Emil, and good afternoon, everyone. Before I go through our financials and our guidance, I want to expand on the objectives of our strategic restructuring plan. The plan refocuses our head count and expenses on our near-term value drivers, while reducing internal and external spend from areas across the business, including manufacturing, clinical, early stage research and G&A. It is an important part of our broader strategy to become profitable in 2027, together with continuing to grow our base business of 4 commercial products and investing in 3 successful launches for UX111, DTX401 and GTX-102. Today, in connection with the restructuring, we announced a 10% workforce reduction impacting approximately 130 full-time employees. Reductions in force are a challenging part of operating a business, and we are grateful to these colleagues for their contributions to Ultragenyx. Now turning to the financials. I'll focus on the full year 2025. Please refer to our press release for details on the fourth quarter. For 2025, we reported total revenue of $673 million, representing 20% growth over 2024 and exceeding the upper end of our guidance range. Crysvita contributed $481 million, including $275 million from North America, $177 million from Latin America and Turkey and $29 million from Europe. In total for Crysvita, this represents 17% growth over 2024 and also exceeded the upper end of our guidance range. Dojolvi contributed $96 million, which represents 9% growth over 2024. Evkeeza contributed $59 million, representing 84% growth over 2024 as demand continues to build following launches in our territories outside of the United States. Lastly, MEPSEVII contributed $37 million as we continue to treat patients in this ultrarare indication. Total operating expenses for 2025 included cost of sales of $109 million and combined R&D and SG&A expenses of $1.1 billion. For the year, net loss was $575 million or $5.83 per share. As of December 31, we had $738 million in cash, cash and equivalents and marketable securities. Shifting now to guidance. I'll start with revenue. Total revenue in 2026 is expected to be between $730 million and $760 million, which represents 8% to 13% growth over 2025 and excludes potential revenue from new product launches. Crysvita revenue is expected to be between $500 million and $520 million, which includes all regions and all forms of Crysvita revenue to Ultragenyx. This range reflects growing underlying global demand offset partially by expected timing of ordering patterns in Brazil that we anticipate will normalize in 2027. Dojolvi revenue is expected to be between $100 million and $110 million. Turning now to R&D and SG&A expenses. With the implementation of the strategic restructuring plan I discussed earlier, we expect 2026 combined R&D and SG&A expenses to be flat to down low single digits versus 2025. This guidance nets the restructuring reductions from the restructuring with severance and other onetime nonrecurring restructuring costs and targeted launch investments in UX111 and DTX401. We expect 2027 R&D expenses to decrease from 2025 levels by 38% or approximately $280 million, driven by the completion of clinical and manufacturing spend on multiple Phase III studies and the reduction of early-stage research efforts. 2027 SG&A expenses are expected to increase in support of new product launches and our existing approved products. On a combined basis, R&D and SG&A expenses are expected to decrease at least 15% in 2027 versus 2025. With that, I'll turn the call to our Chief Commercial Officer, Erik Harris, who will provide detail on his team's efforts in 2025. Erik Harris: Thank you, Howard, and good afternoon, everyone. I want to begin by expanding a bit on Emil's earlier comments about the strength and durability of our existing commercial business, which continues to deliver strong performance across markets and products. Since 2017, we have built a portfolio of 4 marketed products across multiple therapeutic areas, all of which continue to deliver strong growth and meet or exceed guidance year after year. That consistency comes from careful planning, disciplined investment and repeated strong execution in some of the most complex rare disease markets globally. Crysvita remains an important part of our base business. Our partnership with Kyowa Kirin in the U.S. remained strong, and we continue to find and treat commercial patients across Latin America and Turkey. In Latin America, the Crysvita business is anchored in Brazil and Argentina with solid reimbursement growth in Mexico and Colombia over the past year, translating into meaningful revenue contribution from those countries. Additionally, we continue to respond to MPS request in other LatAm markets, a testament to the growing underlying demand for this product. This steady progress is due to the thoughtful investments we have made, paired with strong local execution. As I have mentioned in previous earnings calls, we continue to expect some variability in revenue driven by uneven ordering patterns. This is particularly evident in Latin America, where Brazil's Ministry of Health places the largest orders in the region. This pattern is reflected in the 2026 Crysvita guidance range, Howard mentioned earlier and includes growing global demand growth partially offset by the expected timing of ordering patterns that we expect will normalize in 2027. Moving on to Dojolvi. 5 years post launch, the product continues its steady growth with more than 100 start forms in the U.S. for the third straight year. In EMEA, we have seen continuous NPS growth across the region, while also achieving 2 regulatory wins last year, namely early marketing authorization in Kuwait in September 2025, and approval of the early access pathway in the U.K. in April 2025. In Japan, last year, we announced Dojolvi was granted conditional approval, and we look forward to the full approval and launch of the product in Japan in the second half of 2026. Finally, with Evkeeza, which is another powerful case study of Ultragenyx' ability to drive growth in a relatively small market through relentless patient identification and effective commercialization pathways. We began commercializing in our territories outside of the U.S. with formal reimbursement approvals in just the last couple of years. In the EMEA region, we now have patients on reimbursed therapy across nearly all major markets with approximately 350 patients across 20 countries who are receiving Evkeeza today. In December, we achieved a significant milestone with the registration of Evkeeza in the Kingdom of Saudi Arabia, reinforcing our commitment to bringing life-changing therapies to patients globally. We also commercialized Evkeeza in Japan, where we've seen sustained steady progress since the initial launch in January 2024, positioning us not only to launch additional new products in Japan, but also to serve as a foundation for broader APAC commercialization opportunities. Over time, we expect Evkeeza will continue to grow meaningfully and add to our expanding revenue base. In summary, we entered 2026 with a proven commercial infrastructure and an experienced team that consistently executes with discipline and precision as we launch and scale complex rare disease therapies globally. With 2 potential gene therapy launches and pivotal Angelman data ahead, we are well prepared and confident in our ability to deliver the next phase of growth required to reach profitability. With that, I'll turn the call to Dr. Crombez to share the clinical and regulatory milestones for the coming year. Eric Crombez: Thank you, Erik, and good afternoon, everyone. I'll spend a couple of minutes to highlight the upcoming clinical and regulatory catalysts for 2026. I'll start with DTX401 for the treatment of glycogen storage disease type Ia. We completed the submission of our rolling BLA at the end of December, and we expect to have a PDUFA action date in the third quarter of this year. Next, UX111 for the treatment of Sanfilippo syndrome type A. We recently presented the encouraging long-term data at the WORLDSymposium that Emil mentioned earlier in the call. In response to the [ IRR ] we received earlier today, our manufacturing and regulatory teams are urgently working to provide the detailed support of documentation that will allow us to resubmit our BLA as quickly as possible given the critical need for this life-changing therapy. For UX701 for the treatment of Wilson disease, we completed enrollment of the 5 patients in the fourth dosing cohort last year and we expect to share data from all 4 cohorts later this year. Lastly, GTX-102 for the treatment of Angelman syndrome. We are continuing to treat patients in the 48-week Aspire study and continuing to enroll patients in the support of Aurora study. We expect to share Aspire Phase III data in the second half of 2026. I'll now turn the call back to Emil to provide some closing remarks. Emil Kakkis: Thank you, Eric. By implementing the strategic restructuring plan we announced today, we are focusing our resources and energy on the highest value opportunities in our commercial and development portfolio. The development team will support patients and investigators who are participating in our clinical studies around the globe, work through the 2 BLA submissions and prepared to read out Phase III data from the Angelman study. At the same time, the commercial team will continue expanding the geographic reach of our 4 commercial products and prepare to launch 3 more programs. All of these efforts continue our mission of leading the future of rare diseases with first-ever treatments. With that, let's move on to your questions. Operator, please provide the Q&A instructions. Operator: [Operator Instruction] Our first question comes from Joon Lee with Truist. Joon Lee: The primary end point for your Phase III Angelman study is Bayley-4 cognition, while that of Ionis is the expressive communications domain. Was your decision to use cognition over expression -- expressive communication based on the greater probability of success or because that's higher on the list of parents desirability or priority list? And are you able to share what percentage of the patients coming out of Phase III have opted to roll over into the long-term extension portion of the study? Emil Kakkis: Right. So the Bayley cognition is a fundamental activity. And by the way, you can't have communication without cognition as well. It's all intertwined. We think the Bayley cognition is a core, an important function of these patients. And we are demonstrating substantial rise in that function. Expressive communication is clearly important, but takes more time. It has to develop and evolve, and we feel while we are evaluating expressive communication in our program, and we'll have data on it, we didn't think it made sense as a primary endpoint given its heterogeneity and the complexities of this development. Now our own trial though will not only depend on Bayley cognition, we also have allocated some of the power of the study to the multi-domain responder index, which will give us a combination of cognition, receptive communication, sleep, behavior and motor function, which will give a broader assessment, which is very important to parents as well. So we think the combination of what we have will provide the important insight in how their patients are doing that will be [ important ] in both the patients and doctors and will include all information, including things on expressive communication. Regard to -- your second question, which was rolling over, we had very few -- I don't even know how many dropouts in our program. Everyone has continued on treatment. I don't know, Eric, if you want to comment on the extension or rollover of patients? Eric Crombez: Yes. Similar to what we saw in Phase I and II. The Phase III studies do have a very high retention rate, including patients electing to continue in a long-term extension study. I think parents really do understand this is the opportunity for their children to grow, develop and gain and learn new skills, which isn't something you see by natural history. Operator: The next question comes from the line of Maury Raycroft with Jefferies. Maurice Raycroft: I'll also ask one on Angelman. Wondering if you could just talk more about the patient baseline profile, now that you have the study fully enrolled relative to your Phase I/II enrolled patients. And what specific parameters in the baseline data do you expect to influence control arm performance on cognition? And what are your latest expectations for what you can show on cognition in the treatment and control arm? Emil Kakkis: Yes. Well, if you remember, Maury, in our Phase III trial, we did an expansion trial. That trial was intended to look at 8 countries where we're going to run the Phase III. So the point of that was 50 extra patients and potentially evaluate Phase III patients type patients from all the different countries. The baseline data that we saw and presented on cohorts A and B, which is the ex U.S., is pretty reflective of what we're seeing in our Phase III program. So we're comfortable with that. That what we're seeing in Phase III is comparable to what we saw in the expansion program, which is what the expansion was about, again, at least giving us a sense for what the broader population would be in multiple countries, not just U.S. With regard to the cognition and control, we assume both -- [ there's ] the natural history in randomized control [ phase ] is only 1 point or less cognitive change in the Bayley. It's a very rigorous measure. It's very hard to move. It's not something [ prone to ] placebo effect. We are taking great care in the conduct of this and where possible, we actually have a central firm that's providing the testers on the patients with Angelman in our study, that helps assure quality and of the assessments, so they're done in a very consistent way. So we feel pretty comfortable with the amount of change we'll see in the control group. It's small. We don't think there was a placebo effect. But of course, there's always variation, this is neurology. And we have a study we think of an appropriate size to help manage variation. But what we also have done is built in the multi-domain responder index, which gives us another opportunity to look at these patients in a broader way with more power. Operator: The next question comes from the line of Anupam Rama with JPMorgan. Priyanka Grover: This is Priyanka on for Anupam. Can we get more color on how Ultragenyx is planning to achieve profitability in 2027 when burn in 2025 was around $466 million. And can you remind us how many drug launches will contribute to the 2027 top line? Emil Kakkis: Sure. I think Howard went through some things about major cost reductions that are occurring based on the progress of programs. And I'll let him tell you the details in one second. The combination that the base business of growth is going to be a real important part of where we get to. Certainly, there's some contribution potentially from the others. And Howard, maybe you can provide a little more reiterate some of the clarity of how we're making that move in [ pathway ] toward profitability. Howard Horn: Yes, happy to. I'll go through it now. Also, I'll note there's some -- there's a page or two on this in our corporate deck if you want to refer to that later as well. But our pathway to profitability assumes a few things. Emil mentioned that on the revenue side, continued growth from our current products in the double-digit range, plus contribution from some of the upcoming launches. On the expense side, we -- or I mentioned a little bit ago, 2026, we should expect combined R&D and SG&A to be flat to down low single digits versus '25. And in '27 for combined to be down 15% or more. We have as part of our sort of cash plan, we have the $735 million that we noted today, we are also considering 2 PRVs as part of our plan to get to profitability. Maybe I'll also note that while we're in launch mode, some of the dynamics of the P&L that are also important to consider would be things like R&D trends or rather tends to be reduced due to capitalization of manufacturing costs post approval. Also gross margins tend to be elevated given prior expensing of pre-approval inventory that's being sold during the launch. So those are some dynamics to think about as you go through your modeling. So I think I'll stop there. Emil Kakkis: And I think it's important that part of the expense in '26 are building that inventory that's launched. And so what's really happening, some of the expenses you're talking about now are actually building inventory that will be launched. So those combinations hopefully give you a magnitude of effect that will push us there. We do need to get 2 approvals. We do have the PRVs and our 2 PRVs and our financial plan. But we think with the cuts we put in place today and additional things we're working on will put us in a good position to be -- keep 2027 profitable. Operator: The next question comes from the line of Joseph Schwartz with Leerink Partners. Will Soghikian: This is Will Soghikian on for Joseph Schwartz. I have one on Angelman and then a quick follow-up. So for GTX-102, the company has consistently stated that it is the most potent ASO in development. We're just wondering, is this claim based on the ATS knockdown or perhaps it's mRNA or protein increases preclinically? And can you just remind us what type of relationship you've seen between knockdown and protein expression? And then I have a quick follow-up. Emil Kakkis: Well, obviously, knockdown and expression can really only be monitored in an animal model, right, because we're not doing brain biopsies in our patients, right? So to be clear, those estimates have to come from nonhuman primates. Now because our ASO is identical to the nonhuman primate sequence, we conduct an experiment in the nonhuman primate for example, that Ionis can't conduct because they do not have homology in nonhuman primate. So our experiments in nonhuman primate have shown that we are knocking down the antisense transcript substantially across the brain and or inducing UBE3A expression. And we do it at levels of around 1 to 2-milligram dosing over a few doses. So a relatively low dose that would be in the range of let's say, 10 to 14 milligrams translated into humans. We know now also that based on our ASF presentation last year that we showed an effect on Bayley cognition [ in ] other end points. And that Ionis showed a similar effect in Bayley cognition in a 6-month time frame, though they didn't show our higher level of benefit over time. And that is happening at doses in our study that are in the 5 to 14 range, while they are using 40 to 80 milligrams and Roche used even higher doses. So we're achieving daily cognition comparable in substantially different doses. So that substantiates what we found in nonhuman primates before that what we predicted was true and that our effect we're seeing in on nonhuman primate translates to humans with a potent effect at a lower dose level. Will Soghikian: Great. And then just one quick follow-up, if I may. I think the DTX301 program completed enrollment about a year ago now. So just wondering if you could give us a quick update on what's going on there. Emil Kakkis: Yes. So the DTX301 program, which is a gene therapy for ornithine transcript amyloids, or OTC, is the Phase III is continuing and we expect to roll out data from the ammonia endpoint sometime this year. Operator: The next question comes from the line of Kristen Kluska with Cantor Fitzgerald. Richard Miller: This is Rick Miller on for Kristen. For the IRL received for 111, would you characterize the issues raised there as expected? Is there any insight you can give us there? And then looking more broadly at the gene therapy pipeline, how should we be thinking about how the strategic restructuring impacts your priorities there, if at all? Emil Kakkis: Yes. So on the IRL, the list of issues on the [indiscernible] are known to both parts to [ FD ] and us, obviously, we had the same list. But the question is, what do you put in the package? And we put in with answer to how we're handling each thing, SOP changes, [ cap ] agreements, things that we're doing, put them all in there. So they understood all of it. They actually want all the supportive documentation like the SOPs and the follow-ups on effectiveness, et cetera, which we normally wouldn't think be part of a BLA, but the FDA has requested that we provide these. We believe we have the answers to what they've requested. I think these are important issues, certainly, and we have addressed them before, but we'll provide them the full documentation, which is a substantial amount, but we'll provide full documentation as properly as we can in a resubmission for the BLA. With regard to the restructuring and gene therapy pipeline, we obviously have a big footprint in gene therapy with 2 gene therapies, right, at the BLA stage at this point. We have a third gene therapy OTC that's in Phase III and a fourth the Wilson disease that's in Phase II currently. We have another IND stage program for CDKL5 that is on the sidelines. With the restructuring, we were hoping to be able to move forward one more gene therapy into the clinic. But right now, the main purpose is to get what we have in play, they are late stage out and approved that open the door to us and doing more. We don't plan on decreasing our future in gene therapy, but we don't plan on our future being only in gene therapy. So while we have another gene therapy program, we also have 2 other INDs, for example, they're teed up there, not gene therapy. Because we do want to be a diversified company and don't want to be all in one place. So the restructuring will actually enable us to put more of our early stage programs into play as we finish up our Phase III program. We'll continue some work in gene therapy, but it won't be [ an exclusive ] place for our pipeline going forward. Operator: The next question comes from the line of Allison Bratzel with Piper Sandler. Allison Bratzel: Maybe just a quick one, going back to setrusumab. I think you previously discussed a hypothesis that Orbit missed. You guys treated patients felt better, became more active and that's more likely to fracture. As you dig into the data, I guess, are you seeing a clear correlation between increased physical activity levels and fracture rates in the treated arm that could support that narrative? Or is there any way to validate that hypothesis? Any more insights on that would be appreciated. Emil Kakkis: Well, as we said, we are continuing to evalute the data deeply. What we presented before showed that the treated setrusumab arm in orbit had improved activity in function reported and decreased bone pain, so they clearly did feel better and we're doing more. Establishing how that directly results in refractures is something we're looking at. We don't have any information to provide. We're continuing to do the evaluation. And at this point in time. But certainly, data suggests that patients were reporting they had better physical functional less bone pain. So it's consistent with that. We continue to evaluate data on the program, and we'll provide more information with a definitive answer for the program is determined. Operator: The next question comes from the line of Salveen Richter with Goldman Sachs. Elizabeth Webster: This is Lizzy on for Salveen. Maybe just another on Angelman following up to the question before. Given you are using a different endpoint than Ionis, I guess what is the regulatory bar and how confident are you that's kind of established going into [ that ]? Emil Kakkis: Well, I realize as many people making a point about the differences, I actually think both programs have a lot of the same end points. In the end of the day, whatever is primary, whatever is secondary. You talk about the commercial, it's going to look at everything. It's not going to just decide the commercial future will be decided on what endpoint or not. The regulatory bar is defined by the pharmaceutical design here, which is basically a randomized [ sham-controlled ] trial that will have a continued variable analysis of daily cognition. The FDA appreciates that we believe the magnitude of clinical benefit is around 5 to 6 points, but we don't have that built into the primary endpoint. We're essentially looking for a continuous variable change. And what we know is we can see changes single-digit size changes. We had some patients that get in the double-digit range for improvements. So there is [ a variation arrange ]. We presented on this before of [ whoever they ] respond. Our expectation is we can demonstrate a statistically significant, clinically meaningful change in cognition, which is what we observed in the A and B cohorts and presented before, that, that will be sufficient to be able to get approved. Now in addition to that, we believe, though, that other endpoints will be successful and the multi-domain responder index is our way to take a broader view of the disease and capture more of the benefit. For the FDA, it's a new type of endpoint analysis. However, they've allowed us to put it in there and include an alpha allocation. We do think it's a way forward for neurology with heterogeneous diseases. And that bar is something we're setting for each endpoint based on what the clinical [ meaningful ] changes, what are the minimum change for what's considered an important change for disease. Those things we have discussions on with the agency are setting those in understanding with them will provide validation data that comes from the Phase III to help substantiate the regulatory bar of a responder for the MDRI. So the combination of both of those things, the continuous variable analysis of Bayley cognition and then the minimally important difference driven changes in the MDRI will put forth what we think is clinically important in regulatory sufficient data to achieve a filing for this disease, assuming the trial is successful. Operator: Our next question comes from the line of Yaron Werber with TD Cowen. Unknown Analyst: This is Stephen [indiscernible] on for Yaron. Couple of questions here. We've got the opportunity for 2 PRVs coming in 2026. Any sense of how soon you'll be able to monetize assuming it kind of all goes well? And are you planning to engage potential buyers beforehand, maybe an update on time line? And then separately, on the UX701 program, I think you previously mentioned a first half of this year update on the cohort with the highest dose as well as on the prior cohorts as well. Is that being pushed out to later given the full year '26 time line? Or are we misreading that? Emil Kakkis: Right. On the 2 PRVs, well, first step is you have to get both products approved so you get the PRV issued. I don't know if -- Howard, do you want to comment on our timeline for dealing with PRVs and sale? Howard Horn: Yes. I think I'd say we would monetize them promptly. And whether we would pre-monetize them with an option agreement or we'd monetize them the normal way after they were in our hands remains to be seen. Emil Kakkis: Right. So on the Wilson program, the timeline for data is highly dependent on how the patients are progressing. We believe that we needed at least 6 months of time. And what we showed before is like [ 6 to 8 ] months of time in their first cohorts to show the effect on copper efficiently. So we're just providing less precision on the timeline there to give ourselves the opportunity to continue to see what goes on with those patients. But it's not meant to be an important change. It's just being less specific as we want to watch how these patients do with the higher dose that were provided. We also want to make sure they have enough time to have their standard of care withdrawn if they achieve the proper [ copper ] context. So [ it's ] just being a little less precise but not a fundamental change. Operator: Our next question comes from Tara Ahmad with Bank of America. Tazeen Ahmad: Okay. I think that might be. I wanted to ask a couple of questions. First, can you just clarify, and I'm sorry if I missed this earlier. But with an IRL, when you resubmit, can you just define what timelines are possible on review the final decision from the time that you now resubmit the responses that the agency is looking for? And then a question on 401 for GSDIa. Do you have any updated thoughts on what pricing could look like there? And do you have a sense on what kind of potential launch trajectory would you expect? Would it be kind of slow and steady? Or could it be steep from the outset? Emil Kakkis: Great. So on the IRL timeline, so what we just submitted was a resubmitted BLA to the complete response letter that we received. So what's happening here is that we have to resubmit that resubmission essentially. So the timeline is similar to what we had before, we would resubmit with the additional information not built into the BLA, and we'd expect a couple of weeks for them to determine if this has all the pieces of documents in it that they want at that point, then a PDUFA date would get set approximately 6 months after the original submission. So the question how long it takes to get there, we're -- we haven't determined yet how long it takes us to get the documents together and put it in, but we're working diligently and putting that together. Now the other question with regard to GSDIa launch, is that correct? Unknown Executive: Yes, and pricing. Tazeen Ahmad: Yes, that's right. Emil Kakkis: Yes. GSDIa is a very urgent disease in the sense that patients are drinking starch every few hours all day long, all at night, right? So there's a lot of urgency. [ We expect ] there to be a lot of interest early on. But I would say that, that market is probably going to develop in a little more steady fashion than, for example, MPS IIIA, where the patients have an urgent, absolutely must get treated immediately to try to stave off loss of brain, right? So MPS IIIA will happen probably more urgently [ than ] GSDIa. But we do expect there'll be a strong steady demand, but I wouldn't expect to be like all at [ once ] at the beginning. Now with GSDIa, we haven't set pricing at all, but we have talked about a $1 million to $2 million range of pricing, whereas with MPS IIIA, we've talked about a $2 million to $4 million range. Operator: Our next question comes from the line of Maxwell Skor with Morgan Stanley. Maxwell Skor: So regarding the Aspire study, can you just describe what site training looks like for uniform conduct of Bayley-4? And are there any practical considerations or added complexity when administering the assessment in, let's say, older pediatric patients versus younger ones? Emil Kakkis: Very detailed technical question but an important one, because conduct of the Bayley is very important. First off, as a company, we've always put more emphasis on endpoint design valuation training than most any companies. We have an entire department that does this activity that you're talking about, which is our endpoint development strategy group or EDS group. That group is run by a senior PhD and there's a group of who are basically experts in trial design, endpoint design and as well as training and evaluation. So we developed a comprehensive training for all the sites. In addition to that, for the Bayley cognition, Bayley score specifically, as many sites as we could, we have installed a centralized company to provide the Bayley scoring with experts who are knowledge about Angelman and how to conduct the Bayley in an Angelman patient. And we're providing those testers where as many sites as we possibly can to help assure the quality and consistency of the evaluation of the Bayley. We think that will have a substantial amount of consistency to what we're doing in addition to our own training program. But you're right, this is a very important area, and we've done a lot to do that. And I would say, I don't think there's any other company that has a department of people that actually do this very activity. So I want to thank Dr. [ Shreiner ], who runs our group. All the work she've done in putting this together on our Angelman program, it took her and her team a lot of work to get it done. Operator: Our next question comes from Yigal Nochomovitz with Citi. Yigal Nochomovitz: I just had a follow-up on OTC. Can you just describe a little bit more about that study. It's not one that you speak about much. Is it sort of a lower prominence in your expectation set around success or not? And what would you need to see for the study to hit? And then with regard to the IRL, Emil, you mentioned that some of these requests were -- would have otherwise occurred during inspection. So does that mean that the inspection would be limited or not occur or be different? Emil Kakkis: Yes. So the OTC program with Phase III, we try to prioritize what we discussed just all the time, and we have so many different programs. It's definitely a burden for everyone to put everything on everything that's going on. But it's there and it's continuing. And I think OTC is a real important disease, [ and there's ] a really serious need for better treatments. What we have -- the Phase III trial which enrolled around 37, I believe, the randomized controlled trial and the data we'd be looking at was on the change in ammonia between the treated and control groups. That ammonia [ member ] in the trial people [ would have ] variable ammonia. Some are normal at the beginning, some are high. We're looking at do we control ammonia better as the primary endpoint for the blinded portion of the study. Then the second portion of the study, we'll look at whether a patient can get off standard of care or not or how well they get off standard of care. It is an important program, but it's not our top priority program. So we are pursuing it. We'll get the data. It gives us another opportunity for us as a company, another valuable available asset going forward, and we'll read out data this year on it. With regard to the IRL, I have no doubt the FDA will come and inspect as well as they should. I think providing the documentation is to provide them greater confidence upfront that we have actually done everything they want. We've described the answers and what we've done, but they actually want to see the materials of the things we've done, right? Not just describe changes and SOPs, but actually show me the SOPs, et cetera, and all the parts of that go along with that. They were requests that are important in developing a quality manufacturing program. We have done the work. So now we'll provide them a more comprehensive complete set of supporting documentation, which is a very large volume of information, by the way, and a lot of documents, but we'll provide it to them upfront so they can see that we have done everything they've asked. Operator: Our next question comes from Luca Issi with RBC Capital. Luca Issi: Great Maybe, Emil, kind of going back to the FDA, maybe a little bit bigger picture. I guess, what was your reaction to the REGENXBIO CRL the other day? It sounds like the FDA has some reservations around using serum biomarker compared to natural history for ultrarare disease. Is that just a one-off related to their program specifically? Or is the conclusion at this point that this FDA has essentially raised the bar for all the companies developing drugs for rare ultra diseases? Again, any thoughts there, much appreciated. And then maybe, Howard, a quick one. When you guide $730 million to $760 million top line for 2026, what is the simple kind of back of the envelope math or what proportion of that is cash versus noncash? Emil Kakkis: Very good. So with regard to the REGENXBIO decision, look, we put in our script today that heparan sulfate data presented at the Reagan-Udall meeting are definitive in demonstrating a relationship and that how you measure spinal fluid heparan sulfate can be done by multiple different methods that give very similar patterns of response and are, I believe, equally predictive. The FDA's ruling there would appear to show more pushback toward the biomarker. We received also in our review, more emphasis on our clinical end points than the biomarkers. But we believe that the biomarkers are disease cause measurements and are an accurate way of measuring disease and efficacy, and we continue to support them with the FDA and publicly. Are the FDA pushing back? They appear to be more resistant to the biomarkers than had been agreed upon at the Reagan-Udall meeting. They have said publicly, though that they are supportive [ of its IRL ] approval in rare disease products. And it would be important to see that those statements turned into action for all the patients that deserve these treatments for diseases like Hunter that [indiscernible] worked on as well as Sanfilippo and other neurologic diseases that are waiting for their first ever treatment. The biomarker is an extremely important way to really tell what you're doing and how effectively. So while there may be pushback and the bar may be raised there, we do need to make sure that the FDA cares what the needs of patients are and can appreciate the science behind biomarkers we have chosen and why there are meaningful ways to measure disease and predict appropriate clinical outcomes. Operator: Our next question comes from Sami Corwin with William Blair. Samantha Corwin: I guess I was curious what you're modeling for the potential sale of the priority review vouchers internally. And if the recent renewal of the rare PDS disease PVR legislation change those assumptions at all? And then just how much a change in price could impact your path to profitability in 2027? Emil Kakkis: Okay. So you got that PRV and path to profitability, Howard. We just didn't answer that other question. I just noticed on the... Howard Horn: We'll follow up and [ look you up ] offline on that one. But as it relates to PRVs, we were not modeling what had recently been seen, meaning not modeling the $200 million range. We were modeling something a little bit north of $100 million. We were very excited to see that the legislation was reapproved. I think that gives us an opportunity to not only get the 2 PRVs that we've mentioned for the gene therapies, but for 102 and for other programs in the future. And right now, we continue to have that just north of $100 million is our base modeling assumption. So anything that would exceed that would add to our balance sheet. Operator: This now concludes our question-and-answer session. I would like to turn the floor back over to Joshua Higa for closing comments. Joshua Higa: Thank you. This concludes today's call. If there are any additional questions, please contact us by phone or at ir@ultragenyx.com. Thank you for joining.
Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 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. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the call over to Nu Skin Enterprises, Inc.'s President, Treasurer, and Investor Relations. B.G. Hunt, please go ahead. B.G. Hunt: Thanks, Tanya. Good afternoon, everyone. I am joined by Ryan S. Napierski, President and CEO, and James D. Thomas, CFO. We are excited to share Nu Skin Enterprises, Inc.'s 2025 results and provide guidance for 2026. Before I turn the time over to Ryan, let me point out that on today's call, comments will be made that include forward-looking statements. These statements involve important risks and uncertainties, and actual results may differ materially from those discussed or anticipated. Please refer to today's earnings release and our SEC filings for a complete discussion of these risks. Also during the call, certain financial numbers may be discussed that differ from comparable numbers obtained in our financial statements. We believe these non-GAAP numbers assist in comparing period-to-period results in a more consistent manner. Please refer to our investor website, ir.nuskin.com, for any required reconciliation of these non-GAAP numbers. I will now turn the call over to Ryan S. Napierski. Thanks, B.G. Good afternoon, everyone. Thanks for joining the call. I am pleased to report that we delivered fourth quarter and 2025 results within our guidance range with a strong improvement in earnings, which resulted in a 40% increase in stock price for the year as we continue to focus on improving shareholder value amidst our strategic transformation. This past year was very important for the company as we worked to realign the business following the successful transaction of Mabile, which further strengthened our balance sheet and has enabled us to more assertively pursue our vision of becoming the world's leading intelligent beauty, wellness, and lifestyle leadership opportunity platform. We have worked hard towards this by investing in the build-out of our intelligent wellness in preparation for the introduction of Prism IO to the world, which is now underway. We also initiated premarket operations in India this past November in preparation for a formal market opening anticipated in late 2026 as we work towards expanding our footprint into this and other future growth opportunities in emerging markets. While transitioning our business to enable these strategic priorities has come with some inherent switching costs in 2025 and into early 2026 as our company and channel realign business practices, we believe these shifts are critical to our mid- to long-term success to enable our return to growth by 2026. 2026 represents a pivotal year for Nu Skin Enterprises, Inc. as we accelerate our transformation towards our vision. We are entering this new chapter with three strategic priorities. One, to focus our business on the burgeoning $6,800,000,000,000 wellness revolution currently underway with the launch of our Prism IO intelligent wellness platform. Two, expanding our global reach into India and other critically emerging markets in years to come. And three, improving our operational performance and efficiencies. We are clearly defining the future growth trajectory of the company, which we believe will lead to a stronger core business and a return to meaningful long-term growth. First, let me dive into Prism IO, our truly intelligent wellness platform. Building on our Euromonitor-acclaimed position as the world's leading beauty and wellness device systems brand, we have developed a revolutionary technology which we believe will play a vital role in the rapidly expanding intelligent wellness market, empowering people around the world to more accurately measure, track, and improve their nutritional health. Prism IO represents the culmination of decades of nutraceutical-grade science and research and development across the integrated beauty and wellness industries. We have been working towards establishing ourselves as the intelligent beauty leader for the past several years with the introduction of ageLOC LumiSpa iO, WellSpa iO, and RenewSpa iO. We are now taking these IoT-derived learnings and combining them with proprietary science and technology behind our Biophotonic Scanner. This enables a much greater scale and depth of intelligent wellness in the introduction of Prism IO, a noninvasive carotenoid measurement device that provides intelligent insights into nutritional health across four critical domains of diet, fitness, lifestyle, and nutritional supplementation. We have now amassed a nutritional health database already containing nearly 400,000,000 intelligent wellness data points from 21,000,000 scans of more than 10,000,000 people in 50 countries around the globe. These data points are repeatable signals tied to real consumer behaviors that indicate profile and context, behavior and habits, and repeatable engagements and activations over time. All of this data compiled into a single source represents what we believe to be the world's largest database on carotenoid health. In combination with our other beauty and wellness IoT-connected devices, where we have gathered more than 1,000,000,000 data points and insights, this trove of data will better inform consumer decisions and purchasing habits. It also provides us with far deeper aggregated insights into the needs of our customers in order to empower personalized wellness journeys, improve customer engagement, and lead to greater customer lifetime value. Our next chapter is now underway as we power these data insights with AI in our proprietary new intelligence database to inform three distinct applications. First, intelligent scoring, which will leverage AI to compare personal results against our database of 21,000,000 scans. Second, intelligent insights, which will provide customers with personalized recommendations for their diet, fitness, lifestyle, and nutritional supplementation. And third, intelligent product recommendations, which will be based upon a customer's intelligent insights through which we provide nutritional supplementation options to help them in their wellness journey. All of these insights culminate in Nu Skin Enterprises, Inc. developing a proprietary wellness biomarker based on skin carotenoid levels that we are calling the Nutritional Health Score, a universal score that gives customers insights into their nutritional health. We have long understood the importance of eating a healthy balanced diet, including fruits and vegetables, avoiding harmful pollution, and making critical lifestyle choices. But until now, consumers have been unable to noninvasively measure at scale the impact of these choices. This revolutionary biomarker offered through Prism IO provides critical nutritional health insights to consumers, something that has been missing in the wellness space until now. You deserve to know with Prism IO. From a business perspective, the unit economics are compelling. Prism IO serves as a powerful customer acquisition tool for our sales force, combined with subscription-based revenue that provides more than six times greater customer lifetime value. For 2026, we are aiming to place more than 100,000 Prism IO devices by the end of this year since the introduction in late 2025. Looking further into the future, we envision Prism IO becoming the leading platform for consumers to gather deeper, more intelligent insights into their personal and family's health. We have set an internal aspiration with our global sales force of bringing this cutting-edge wellness platform to 10,000,000 healthy households by 2030 as we partner with our dedicated sales force in nearly 50 markets around the world to accomplish this goal. Our go-to-market rollout strategy is deliberately designed to maximize long-term success. We are currently engaging, aligning, and activating our sales force in 2026 as they acquire and place Prism IO devices, followed by consumer launches around the world beginning in the second half. This approach prepares and aligns our dedicated channel as we scale the full consumer availability throughout the year. This is only the beginning for Prism IO as we delve deeper into the vast dimensions of intelligent wellness, including its impact on beauty, which we all understand begins from the inside out. Our second strategic priority focuses on broadening our emerging market footprint with our formal opening of India anticipated in late 2026. With more than 1,400,000,000 people and a rapidly growing middle class, India represents one of our most significant long-term geographic growth opportunities. Our ongoing growth in Latin America, where we have built our emerging market model, is providing greater insights into how we will expand our global footprint into new emerging markets. This refined operating model for India includes a localized product portfolio priced for India's growing middle class, a modified compensation plan, and a digital-first infrastructure through our partnership with Infosys. We began premarket entry operations in mid-November and are currently focused on three key areas. First, establishing operational infrastructure, including high-quality local manufacturing and effective market-wide logistics partnerships. Second, building robust digital-first infrastructure across the market to enable fast, simple, and scalable business processes. And third, acquiring customers and brand affiliates to begin building brand awareness and demand generation ahead of the formal market opening. Early learnings to date indicate that the market is advancing quickly towards a more developing status with strong digital-first aspirations, though local infrastructure still has room to improve. Also, India consumers and micro-entrepreneurs are highly aspirational but financially conservative, with beauty and wellness being more aspirational categories for the broader market, leading to typically longer sales and activation cycles. Nevertheless, we see great mid- to long-term potential as we scale investment and operations along the way to our formal market opening later this year. So in summary, in 2026, it is all about accelerating our evolution towards our intelligent beauty and wellness platform vision as we launch Prism IO around the globe and expand our emerging market footprint by continuing growth in Latin America and expanding into India in late 2026. As we pursue these strategic growth priorities, we will continue to drive our third critical priority of improving operational performance and efficiency to return value to shareholders, which James will discuss in just a moment. Together, these initiatives advance our vision of becoming the world's leading intelligent beauty, wellness, and lifestyle leadership opportunity platform and create a powerful foundation for sustainable growth. Our dedicated global sales force plays a crucial role in our strategic transformation as awareness generators, intelligent wellness consultants, and community and network builders. We are empowering them with greater intelligence consisting of data and insights into their business as we transform into a technology-enabled intelligent beauty and wellness platform. Our near-term focus remains on engaging, aligning, and activating our sales force around these transformational opportunities, while maintaining disciplined execution and financial performance as we seek to return to growth by year's end. I will now turn the call over to James D. Thomas to discuss our 2025 financial performance and outlook for 2026 in greater detail. James? James D. Thomas: Thank you, Ryan, and thanks to everyone for joining us today. Before I walk through the quarter, I want to begin with the full-year story because it best reflects our execution in 2025. On an adjusted basis, we delivered $1.27 in earnings per share, up from $0.84 last year, representing about 51% growth. That improvement was driven by gross margin expansion throughout the year, ongoing selling expense optimization, and disciplined G&A management. Importantly, we achieved this while also strengthening our balance sheet and generating free cash flows to provide meaningful returns to our shareholders. I will now cover fourth quarter results, then come back to a few full-year highlights, and conclude with our outlook for the first quarter and full-year 2026. I will be speaking to adjusted non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found on our Investor Relations website. For the fourth quarter, we delivered revenue inside our guidance range at $370,000,000, with approximately a $1,000,000 headwind from foreign currency. Earnings per share was $0.29, in line with expectations, which closed out our annual performance near the high end of our original guidance range. Our gross margin for the quarter was 70.7%, compared to 71.4% in the prior year. The decrease was primarily due to revenue mix of RISE entities and Nu Skin segments. Within our core Nu Skin business, gross margin was 77.6%, up 100 basis points from the prior year. Selling expense was 35.5% for the quarter, down from 37.1% in the prior year, primarily reflecting mix between our core business and RISE, as well as the prior-year period including Mabry. Within the core Nu Skin business, selling expense was 40.8%, consistent with our compensation plan alignment and continued progress in leader engagement. General and administrative expenses remain well managed and aligned with our efficiency initiatives, and operating margin for the quarter was 6.3%. With that view on Q4, let me step back to the full-year results. For the full year, we generated $1,490,000,000 in revenue, landing within our original guidance, with a foreign currency headwind of approximately $13,400,000. Within our core Nu Skin business, gross margin finished at 77.4%, an 80 basis point improvement over the prior year. We delivered sequential improvement through the first three quarters and, as expected, gross margin was modestly lower by 10 basis points in the fourth quarter due to a higher promotional period, overall seeing the benefits of portfolio optimization and product mix improvements, and we believe with our current inventory levels there remains opportunity to expand gross margin further in 2026. Core Nu Skin selling expense for the year was 40.3%. Looking ahead, we expect selling expense in the core business to remain around 40% as we continue to drive adoption of our enhanced compensation plan and focus investments on initiatives with the greatest impact on supporting top-line growth. On G&A, we remain committed to managing overhead in line with revenue while maintaining an appropriately scaled cost structure. These actions drove 26% growth in operating margin compared to the prior year. Adjusted operating margin was 6.7%, up 140 basis points from 5.3% in the prior year. Below the line, we benefited from an R&D tax credit, which reduced tax expense by approximately $8,100,000, resulting in a reported effective tax rate of 18.8%. Finally, adjusted earnings per share was $1.27, excluding the Mabli gain and other items, compared to $0.84 last year, excluding restructuring and other charges. Stepping back, the actions we have taken have strengthened our foundation and improved the flexibility of our cost structure. We are better aligned to our revenue base, and we will continue to right-size expenses and prioritize investments as trends evolve. With that foundation in place, we are focused on execution and building long-term value. Now turning to the balance sheet and cash flow. We continue to strengthen liquidity and improve flexibility through disciplined capital management. We ended the quarter with approximately $240,000,000 in cash and reduced outstanding debt to $224,000,000, resulting in an expanded net cash position. For the full year, cash flow from operations was $80,300,000, reflecting disciplined working capital management and improved profitability. We also returned capital to shareholders, including approximately $11,000,000 in dividends and $20,000,000 of share repurchases during the year. We have $142,300,000 remaining under our current share repurchase authorization. Our capital allocation priorities remain consistent: investing in innovation and growth, maintaining a strong balance sheet while continuing to delever, and returning capital to shareholders where appropriate. Looking ahead, we remain focused on executing on our strategic priorities to drive growth by 2026. The launch of our Prism IO intelligent wellness device remains on track for full consumer launch in the back half of the year, representing a major milestone in our transformation towards personalized AI-powered wellness. We are also encouraged by continued momentum in developing markets, particularly Latin America, which remains a strong performer, and by our upcoming full market opening in India, where we are laying the groundwork for an expansive opportunity for our brand affiliates. For our RISE segments, we are projecting year-over-year growth supported by expanding capabilities and capacity for manufacturing. We are also evaluating opportunities with LifeDNA to maximize our return on investment. With those priorities in mind, let me share our expectations for the full year 2026. For 2026, we project revenue in the range of $1,350,000,000 to $1,500,000,000, including an estimated foreign exchange headwind of $13,000,000 to $15,000,000, or approximately 1%. We anticipate earnings per share between $0.80 and $1.20, reflecting an expected tax rate of 35%. We project first quarter revenue between $320,000,000 and $340,000,000, factoring in an expected foreign currency headwind of approximately 1%. Reported earnings per share is anticipated to be in the range of $0.10 to $0.20. As a reminder, Q1 is historically our lowest quarter due to the seasonality of our business. So to wrap up, 2025 demonstrated the strength of our execution. We delivered meaningful earnings and operating margin improvement, generated solid cash flow, strengthened the balance sheet, and returned capital to shareholders, all while continuing to invest in the initiatives that position Nu Skin Enterprises, Inc. for the future. As we look to 2026, we are focused on advancing our strategic priorities, driving continued profitability, scaling our momentum in developing markets, and progressing our innovation pipeline, including the Prism IO launch, which we believe will meaningfully strengthen our affiliate value proposition and enhance their ability to attract and retain customers. While we remain mindful of ongoing top-line pressures in certain markets, we believe the operating foundation we have built gives us the flexibility to invest where we see the best returns and deliver long-term value. And with that, Operator, we will now open the call for questions. Operator: Certainly. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. And our first question will be coming from David Joseph Storms of Stonegate. Your line is open. Ryan S. Napierski: Hi, David. I wanted to start with diving into Prism a little bit more. We are very excited for that to come online at the end of the year, but would love to get a little more color around maybe a revenue guide or any of your thoughts on what Prism can really contribute to the top line. It sounds like there could be a lot of recurrent revenue there. I would love to hear more thoughts around that. The way I was discussing it, we are looking at the key to Prism, as we envision it, as the placement of these devices that will lead to subscriptions from customers over time, and so that really is the unit economic model that we are driving here. As I mentioned, we have the 100,000 estimate that we anticipate placing through year's end, and of that, subscription uptake—which we are still really learning, David, as it is so early; we are only a month into this—what that will actually be. So we are not really yet at the point of saying exactly what the revenue conversion will be. I think one way to look at this over time is that we have historically, on a revenue split basis, had roughly half of our business in beauty and half in wellness, with wellness leading much more towards subscription revenue, and so we see Prism really leading us more and more into the subscription realm for the wellness side. Then, of course, as we apply it into beauty later on, we see it playing there. So we are not giving direct revenue guidance on it yet for Prism, although I think the math for just the device is pretty simple. I think the market value right now per device is around $300, and we have the 100,000 units, so that would be like $30,000,000 in devices, but how we then monetize that through subscriptions, we will be learning that. James, anything you would add to that? James D. Thomas: David, I appreciate the question. I think as you are thinking about it from a modeling perspective going forward, it is going to be centered around the timing of the full consumer launch where we would start to begin to see scale, with the placement of units through our leaders in the first half and then full consumer launch towards the back half of 2026 is how we see that coming in. We are looking at a stronger back half forecast in Q3 and Q4 2026. Ryan S. Napierski: That is great. I really appreciate that. I have a second question here in a similar vein around India. Maybe just a little more around your thoughts of what a bull case or a bear case could be there. It sounds like if you get the infrastructure set up, there could be a lot of room to run early there. Maybe just how quickly you could get that set up, what key hurdles could be. Anything like that would be very helpful. India for us, we do see very good long-term potential or mid- to long-term. As we mentioned, we are really focused on getting all of the local infrastructure set up properly. Local manufacturing is one of our top priorities there because import duties are so high, and we want to ensure high-quality, great products at the right price there, and so that is our big focus now. Logistics throughout a pretty diverse market are critical, and then, of course, the digital infrastructure. 2026 is very much about that. We do not anticipate the formal launch being until late in 2026, so we are being very conservative from a revenue input perspective on the actual impact for the year. James, any more detail? James D. Thomas: No. India for us is exciting for our sales leaders. It is an opportunity to go in and expand in a region that we have not been a part of. For the year, we are being a little bit cautious in how much we are actually forecasting in India, so we have tailored that back, but we believe in the high long-term potential of that market and our ability to go in with the developing market strategy to penetrate into India and look forward to that even beyond 2026 into 2027 to see how far we can go. Ryan S. Napierski: Understood. I appreciate that commentary. James, I did have another question here for you. I would love to get your thoughts on some of the puts and takes in the guidance and where you see key spots of leverage, whether that is the G&A or just your thoughts around guidance. James D. Thomas: I appreciate that, David. Looking forward to 2026, we are modeling, as per our guide in the release, about 1% growth on the high end of our guidance and down 9% on the low end of guidance as we look to the timing of the launch of the new product introductions towards the back half of the year, looking to exit 2026 with growth towards the Q3 to Q4 time frame against our compares in 2025. Starting at the top line of revenue, when we come down, we look at gross margin, and this last year, even starting in 2024, we started to see expansion in our gross margin. We had five consecutive quarters of gross margin expansion and growth until this last quarter in Q4, which is a higher promotional period. We believe with the way we are stacked in inventory and some of the moves that we can make around the globe around our distribution and supply chain, we can continue to expand that. From a modeling perspective, I would look at what the gross margin expansion was in 2025 and replicate that into 2026 as a good barometer for how to treat gross margin. Selling expense, we go between 40–42% on given years where we have certain events associated with our sales leader base, but we try to target that around 40–41% on any given year, so that will stay somewhat consistent. Then our G&A, we are working to bring our costs in line with revenue. As we go throughout the quarters in 2026, we will continue to work on our overhead, and we are continuing to refine that to get to levels that are in line with our top line. The one last thing I would call out from year over year is 2025 we benefited from an R&D tax credit, which created a lower tax rate in 2025 than we believe we will see in 2026. When you are looking at earnings per share, you have to take into consideration a 35% tax rate that we are looking at right now as we forecast and project out the year. That creates, from $1.27 in 2025 to where we model out at $1.20, we are actually showing in 2026 an operating margin improvement but a slightly lower earnings per share just because of below-the-line items on tax. That is how I would look at it forward in your model. Ryan S. Napierski: I appreciate all that color there. One last for me. There is a lot of excitement around Prism and India for obvious reasons, but I do not want to lose track of the rest of your portfolio. I know mainly in China, the U.S. had nice quarter-over-quarter revenue growth. Any other storylines that we should be keeping an eye on as we start 2026? Any geographies or thoughts around that? I am glad you mentioned the other portfolio. One thing that we did not discuss here is the restaging and rollout of Tru Face, which is our premium skincare line that has really been reformulated and restaged with sustainable packaging. It is doing really well, getting very good reception as it rolls out around the globe in different geographies. Areas where we continue to be interested in seeing improvement: Latin America continues to do really well, and looking forward, we are excited to see what will happen there as we continue to learn about the broader segment of emerging markets around the globe; improvements in China; improvements across Europe; markets within Southeast Asia—happy to see those things improving. Japan and Korea, I think our focus right now is ensuring we have China, Japan, and Korea, and then North America, improving through Prism IO and the adoption of that as well as the Tru Face line from the beauty side of the business, continuing to perform better as we move forward. David Joseph Storms: That is great. I appreciate you all taking my questions. Congrats on the quarter, and good luck in 2026. Ryan S. Napierski: Thanks, David. Thanks, David. Operator: As a reminder, to ask a question, please press 11 on your telephone and wait. I am showing no further questions. I would now like to turn the conference back to Ryan S. Napierski for closing remarks. Ryan S. Napierski: Thank you very much for joining the call. Our roadmap is very clear as we move forward towards our vision of becoming the world's leading intelligent beauty and wellness platform powered by our committed and dedicated global sales force. With the launching of Prism IO in 2026, we believe that the world will continue to learn more and more about their nutritional health and that we will be the proprietary company providing that capability to them. We will continue to focus and update you on India and our progress throughout the year as we prepare for our launch towards the end of this year. We will end this call and look forward to chatting with you in the next quarter update. Thank you. Operator: This concludes today's program. Thank you for participating. You may now disconnect. Your Q4 2025 Nu Skin Enterprises, Inc. earnings conference call.
Operator: Hello, everyone and welcome to American Well Corporation's conference call to discuss their fourth fiscal quarter and full year 2025. Joining us on the call today are American Well Corporation's Chairman and CEO, Ido Schoenberg, and Mark J. Hirschhorn, American Well Corporation's CFO and Chief Operating Officer. Earlier today, a press release was distributed detailing their announcement. The earnings report is posted on the American Well Corporation website at investors.amwell.com and is also available through normal news sources. This conference call is being webcast live on the IR page of the website; a replay will be archived. Before they begin prepared remarks, I would like to take this opportunity to remind you that during the call, we will make forward-looking statements regarding projected operating results and anticipated market opportunities. This forward-looking information is subject to risks and uncertainties described in the filings with the SEC. Actual results or events may differ materially. Except as required by law, we undertake no obligation to update or revise these forward-looking statements. On this call, we will refer to both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in the earnings release. With that, I would like to turn the call over to Ido. Ido Schoenberg: Thank you, operator, and good afternoon, everyone. 2025 was a pivotal year for American Well Corporation. We sharpened our focus, executed a major transformation, and entered 2026 with clear visibility towards a goal of cash flow breakeven from operations in Q4. Today, I will cover three areas: the market trends driving our strategy, our 2025 execution highlights, and our plan for 2026. Mark will then walk you through our detailed financials and guidance. After that, we will take your questions. The health care landscape entering 2026 is defined by a clear shift towards operational efficiency. Payers and health systems are aggressively pursuing platform consolidation, guaranteed ROI, and industrial-strength automation. Managing countless point solutions—one for diabetes, one for MSK, one for mental health, another for wellness, etc.—creates massive administrative overhead. It creates security vulnerabilities, and it creates disjointed member experiences. It forces sponsors to act as system integrators, a role for which they are often ill equipped. The pressures are mounting. The Medicare population is aging rapidly. Pharmacy costs are surging. Overall health care costs keep climbing, especially in behavioral health and GLP-1 usage. Clinician shortages are worsening. Subsidies are evaporating. Payer margins are compressing rapidly. Technology-enabled care is no longer optional; it is essential. The promise of hybrid care is now clear. Combine automation with smart use of clinician time to reduce costs and improve outcomes. AI is accelerating this shift. It is transforming engagement, intake, decision support, care delivery workflows, risk stratification, and outcomes measurement. It creates tremendous opportunity and real risk that must be managed. Payers and health systems get this. They are adopting technology-enabled care not as an experiment, but as their primary lever for cost reduction, better outcomes, and meeting patient expectations. And increasingly, they want to deliver through a unified platform. A technology-enabled care, or tech, platform delivers clear advantages. Sponsors keep their brand front and center. They have full data access. They own the relationship and get credit for the value they enable. Patient engagement becomes more efficient and effective. Our tech platform enables an API-first ecosystem. It allows sponsors to consolidate the digital stack on one infrastructure. Clinical programs can be added, swapped, or retired quickly. We facilitate vendor rationalization, the process of auditing digital health partnerships and aggressively cutting underperforming programs. Vendor management gets simpler. Vendor sprawl, with its fragmented IT strategies, data silos, and day-to-day inefficiencies, is reduced. Outcomes tracking across whole person and cohorts becomes actionable. This platformization reduces integration costs. It unifies data lakes for better analytics. It enables risk stratification to identify and intervene with high-risk members early. And it drastically improves the member experience by providing a single, simple, personalized, and familiar front door for all care needs. With AI, and especially AI-powered clinical programs multiplying rapidly, the ability to experiment and iterate is critical. So is ensuring that authorized clinicians govern the care process through smart integration. In 2025, we made a decisive choice: focus exclusively on offering the best tech platform in the market. The benefits flow to every stakeholder. For patients, personalized, simple access to a growing array of AI-powered care programs. For payers, employers, and government sponsors, reduced costs, improved outcomes, and exceptional experiences while staying agile to improve ROI as programs evolve. Member experience becomes critical in 2026 as ACA subsidies expire and drive member disenrollment, adversely impacting payer risk mix. Sponsors also obtain robust ROI using American Well Corporation’s proven platform-native clinical programs—urgent care, behavioral health, and virtual primary care—with the flexibility to integrate any third-party solution. It also allows payers to maintain network adequacy, especially in behavioral health services where the supply-demand gap is reaching new heights. The effective integration of partners like Vida, a digital companion to combat GLP-1 inappropriate utilization, or SOAR to manage MSK costs, are great examples. For health systems, they can extend remote to their own providers. They can offer services through our platform beyond their catchment area. And they can augment their care with third-party programs. All sponsors can use their tech platform as required infrastructure to unlock federal funding—programs like ACCESS, BALANCE, or the rural health transformation. Finally, resilience is now a key purchasing criterion. Payers are looking for partners with zero-trust architecture and proven resilience. American Well Corporation’s contract with the Defense Health Agency serves as a powerful validation. It demonstrates that our platform meets the most stringent security standards in the world. With tech as our sole focus, we are building deeper, long-term relationships with payers, government, and health systems. We completed our transformation from a telehealth provider to dependable, trusted enterprise infrastructure. The American Well Corporation platform has become an essential utility. It solves existential needs for our customers by effectively enabling consolidation, automation, and clinical ROI. This aligns our success with our client success and creates a path to higher-quality, higher-margin growth. We expect our high-quality growth will be fueled by the powerful secular trend of tech adoption. As AI reshapes health care, we offer our customers a consistent, safe, and effective framework to adopt it while remaining flexible and agile. Following our focused commitment in 2025, we moved quickly. We divested noncore activities. The sale of APC is one example. We restructured our company and dramatically reduced our cost base. We realigned our roadmap and go-to-market investments. Clients and prospects responded. 2025 brought significant commercial momentum. In the payer segment alone, we executed over 15 payer contracts renewals representing the vast majority of our existing payer subscription revenue. Coupled with our new logo wins, we validated our platform strategy, strengthened our recurring high-quality revenue base, and positioned us well for same-store expansion. Examples include the DHA renewals last summer, Blue Cross Blue Shield of Florida going live this January, and most importantly, our three-year renewal with Elevance. As we enter 2026, we have responsibly reduced noncore, lower-quality activities. Our 2026 top line is smaller, but now it is primarily high-quality, high-upside, sticky revenue. This gives us clear visibility to reach our cash flow breakeven goal in Q4 of this year. In 2026, we will deploy with strict fiscal discipline innovations that widen our competitive advantage: AI-enhanced patient experience, faster third-party integration, better clinical data utilization, and faster, easier deployments. We have assembled a strong and fresh leadership team—experienced executives with proven track records from world-class companies, united and energized around our clear mission. We have a focused execution path and a market that clearly values what we offer. We start 2026 with healthy cash reserves, no debt, a strong and dependable recurring revenue base, and a clear path to multiyear growth. Our journey was not short or easy. My deep appreciation goes to our team members, clients, and partners for standing with us through this journey. We carry this trust with us as we execute and deliver in 2026 and for years to come. I will now turn the call over to Mark for the financial results. Mark? Mark J. Hirschhorn: Thanks, Ido, and good afternoon, everyone. On today’s call, I will start with a few highlights from our full year 2025, then walk through our fourth quarter financial performance, and finally, provide an update on our initial guidance for the first quarter and full year 2026. Starting with the full year, 2025 marked an important period of refocus and financial progress for American Well Corporation. Total revenue for the year was $249.3 million. Importantly, subscription revenue continued to be a larger and more durable component of our business, representing 53% of total revenue, up from 45% in 2024. This deliberate shift reflects our strategic emphasis on higher-quality, more predictable SaaS-based revenue streams. From a profitability standpoint, we made meaningful progress. For the full year, we reduced both net loss and adjusted EBITDA losses by approximately $100 million each, driven by disciplined cost actions and a more focused operating model. Turning to the fourth quarter, we delivered solid results across revenue and adjusted EBITDA, reflecting stronger subscription retention, increased visit volume in specialty care and virtual primary care, and meaningful cost efficiencies driven by the successful execution of our transformation plan. We also began to see early benefits from AI integration across our operations. Overall, our fourth quarter performance reinforces that the actions we initiated at the start of 2025 are translating into durable financial improvement and accelerating operating leverage. Starting with revenue, total revenue in the quarter was $55.3 million, representing a 22.1% year-over-year decline. Subscription revenue was $28.8 million, down 22% year over year. The decline was driven primarily by the step down in our DHA contract this past summer, churn that occurred earlier in 2024, and to a lesser extent, our reprioritization of certain parts of the business to focus on our core payer and government markets. Amwell Medical Group, or AMG, visit revenue was $23.7 million, down 18.7% year over year, reflecting the sale of APC as well as some remaining churn from 2024. In terms of volumes, paid AMG visits were flat at approximately 340,000 visits in the quarter. Total platform visits were 1.0 million visits, down 28.4% year over year from the 1.4 million visits in 2024, which is consistent with the portfolio changes I just described. Cost of goods sold in the quarter was $27.0 million, resulting in a gross profit of $28.3 million, which was down 17.6% year over year. Gross margin was 51.2%, representing a 280 basis point decline year over year. While we experienced some near-term margin pressure, we continue to see our revenue mix shifting toward higher-margin SaaS offerings, which we believe will support margin expansion over time as our scale improves. Turning now to operating expenses. Total operating expenses, excluding depreciation and amortization, were $55.3 million. That is a 30.7% reduction year over year. Operating expenses as a percentage of revenue improved meaningfully to 96.7% compared to 108.7% in the fourth quarter of last year, reflecting the benefits of our transformation actions and continued cost discipline. Adjusted EBITDA for the quarter was a loss of $10.3 million. That is an improvement from a loss of $12.7 million in 2025 and a 55% improvement from the $22.8 million in 2024. Net loss was $25.2 million compared to $30.7 million in the third quarter, representing a 43.5% improvement year over year. Turning now to the balance sheet. We reported cash burn of approximately $19.0 million in the fourth quarter. We ended the year with approximately $182.0 million in cash and marketable securities, and importantly, no debt. Now I would like to turn to guidance. For the full year 2026, we expect revenue in the range of $195.0 million to $205.0 million. We expect AMG visits between 1.32 million and 1.37 million visits, adjusted EBITDA loss in the range of $24.0 million to $18.0 million, and for the first quarter of 2026 we expect revenue in the range of $48.0 million to $53.0 million and an adjusted EBITDA loss in the range of $7.0 million to $5.0 million. Based on our current outlook and continued execution, we expect the company to achieve positive cash flow from operations in the fourth quarter of this year. This guidance reflects our expectations around continued subscription stability, visit volume trends in specialty care and virtual primary care, ongoing cost discipline, and incremental benefits from automation and AI-driven efficiencies across the business. In closing, 2025 was a year of refocus and progress. We concentrated on our core markets, payers and government entities, while positioning the company to return to delivering durable growth. At the same time, we made meaningful progress reducing cash burn and losses by nearly $100 million, putting us on a clear path forward to achieving positive cash flow from operations by the fourth quarter of this year. These results would not have been possible without the hard work and dedication of our entire team, and I want to sincerely thank them for their efforts. We look forward to keeping you updated on our progress this year. With that, I will turn it back to Ido for his closing remarks. Operator: Ido? Ido Schoenberg: Thank you, Mark. We are encouraged by the progress we made in 2025. We successfully sharpened our focus on our tech platform, validated strong market demand, and meaningfully improved both our efficiency and cost structure. We enter 2026 with clear visibility into continued performance improvement, positioning us well to achieve our goal of cash flow breakeven from operations in Q4. Equally important, the changes we have made have strengthened our revenue quality. We now work with clients who extract even more value from our partnership, leading to longer-lasting, stickier relationships that generate higher margins more reliably and offer significantly greater same-store growth potential. With AI-driven clinical programs growing exponentially, and payers, government, and health systems increasingly in need of infrastructure to deploy them safely and effectively, we believe American Well Corporation has reached an exciting inflection point. We look forward to an important year ahead. With that, we will now open for questions. Operator? Operator: Thank you. Press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. We ask that you please limit yourself to one question. Our first question comes from the line of Stanislav Berenshteyn with Wells Fargo Securities. Your line is now open. Stanislav Berenshteyn: Hi. This is Corey on for Stan. It is encouraging to see progress toward free cash flow breakeven despite retention challenges. Stanislav Berenshteyn: As we think about 2026, how should we think about when existing client contracts would be up for renewal? And do you have any additional color related to your government opportunities? Thanks. Ido Schoenberg: Hi, Corey. As I mentioned earlier in my prepared remarks, in 2025, we saw 50 contracts, most of which are renewals. And in that, we really secured our recurring revenue base to a great extent. Therefore, the amount of open renewals in 2026 are significantly lower, with one important exception, which is the DHA renewal that we expect to have this summer. We are very pleased with the value that we generate with the DHA and the traction and are optimistic that our performance and our strong relationship position us well for multiple-year renewal also in that important segment of the market. Operator: Thank you. Our next question comes from the line of Jailendra P. Singh with Truist. Your line is now open. Jailendra P. Singh: Yes. Thank you, and thanks for taking my questions. Jailendra P. Singh: Ido, you talked about 2026 being a year of operational efficiencies. You spent a lot of time on AI. Clearly, AI is going to be playing a big role here, and you have been one of the early adopters. But what are your thoughts on some of the new AI companies and trends which are seeing opportunities here in terms of having the impact in health care? And clearly, they are all trying to make a big push given all the inefficiency in the system. How do you see the competitive landscape evolving considering these new entrants in the market? Ido Schoenberg: Thank you, Jailendra. We are very bullish and optimistic about the impact of AI on health care, with the obvious asterisk and exceptions of risk management and so on. But overall, the trend is very powerful. AI can do many things, and in American Well Corporation, we implemented AI liberally across our entire workflow and operations and inside our own product. Having said that, the ability of AI to impact the most for our customers is in clinical programs, and they typically focus on one therapeutic area at a time, whether it is MSK, GLP-1, diabetes, blood pressure, and so on and so forth. The integration of those AI programs and the ability to integrate, switch, and maintain multiple AI programs turned out to be a very big challenge for our customers. And you need to connect them into a consistent, highly regulated infrastructure. So, for example, as you develop an entry point, a digital door for your digital assets, and it works for your own members, you want to make it consistent, and you want to not rebuild it each time whenever you change an AI program versus another. And that is really our role. Our role is to match the regulated baseline infrastructure with a tsunami of AI programs reliably. We are not aware of many, or even any, companies that do exactly that right now. And very importantly, we are now already implemented with a new platform with a very big market share footprint right now that is proving to work very effectively, and the opportunity is really to use AI and to add AI to this infrastructure rather than replace it. So, in summary, we believe that AI will be endorsed and adopted quite a bit across our client base, and we believe that our platform would be an important utility as our clients do that. Jailendra P. Singh: Great. Thanks a lot. Operator: Thank you. Our next question comes from the line of David Larsen with BTIG. Your line is now open. Hi. As we look towards 2026, David Larsen: can you talk about some of the headwinds and tailwinds that could cause either an increase or risk to the guide? Thanks very much. Ido Schoenberg: Hi. This is Mark. I think the Mark J. Hirschhorn: most likely tailwind would be an earlier adoption of our technology-enabled platform from options. We are participating in all 50 states’ RFIs and RFPs right now. We have a significant opportunity in a few other government segments as well. We expect to hear in the second quarter—so only a few months from now—as to how deep our participation will be and when those revenues will commence. While we have not built any of that revenue into our current 2026 plan, we certainly believe that as a result of the pipeline being larger today than it has been in the history—in all the past history—of American Well Corporation, much of that will convert into some backlog that we will see come to fruition in 2027. As far as any of the headwinds, we do, of course, have a renewal with the DHA this summer. We are extremely confident that that will be renewed again and hopefully for a longer term. But beyond that, our other material contracts are not up for renewal in 2026. David Larsen: Can you remind me for the DHA renewal, you mentioned a step down in the DHA revenue. What was that related to? And then could you win that back in the summer? And if you did, how much of a step up in incremental revenue would there be related to the DHA on the same annual run-rate basis? Thanks. Yep. So you are correct. We Mark J. Hirschhorn: experienced, unfortunately, as a result of DoD’s elimination of our digital behavioral health and automated care programs in the summer of 2025, we had initially rolled that out to a select number of locations. It was doing extremely well. The uptake on those programs was very strong, but as a result of an overall cost efficiency mandate, they were not renewed as the contract and the base contract was renewed. We certainly feel very, very positive about the status of that contract and the opportunity to revisit adding those two programs to the base platform renewal coming up this summer. As far as materiality, it is significant. It is material. While we do not disclose the total value of the contract, I think we did suggest in the past, and we would going forward, that adding those two components would certainly be material. David Larsen: Thanks very much. Mark J. Hirschhorn: You are welcome. Operator: Thank you. Our next question comes from the line of Craig Hettenbach with Morgan Stanley. Your line is now open. Craig Hettenbach: Yes. Thank you. Ido, just Craig Hettenbach: teeing off your comment around kind of smaller top line, but higher quality and stickier. Do you think about 2026 as a baseline in terms of the ability to resume growth? And then with the business as it stands in 2026, what does the long-term growth look like? What type of growth profile can you generate with this business? Ido Schoenberg: Hi, Craig. You are absolutely correct. In fact, two years ago, we sold so many products to so many market segments. The market-product fit was different between one versus another. As a reminder, we had APC, and we played psychiatry, sometimes in person in hospitals. We did very big hardware business, inpatient solutions, competing directly with EHRs, and things of that nature. While we have some of it left, and we are going to always serve our clients really well, we really essentially have now reduced all those many products into one platform—the technology-enabled care platform—and connected it to our own native services and a growing array of third-party services out of which you can add even more. When you look at the markets right now, and I mentioned in my prepared remarks the incredible importance and value of diverting clinical demand from brick and mortar into technology-enabled care, everybody is convinced. You need to really have this infrastructure. So we fully expect our sponsors, our clients, to invest in encouraging their members to use it more and more often—in marketing and in cost attractiveness and things of that nature. So there is a strong secular trend that is not going anywhere in the next two years to have people use our platform, not only for urgent care, like in the early days, but really across the entire care continuum. The infrastructure that we built is big and deep. You do not change it every day. Our sales cycles take, for a reason, nine to twelve, sometimes more, months. But once implemented, they are really connected to the financial and clinical backbone of the sponsors, both in the way of incoming traffic and in the way of outgoing analytics and reporting. However, the middle ground, the area where you have all those AI-driven clinical programs, is growing extremely rapidly. And there is real motivation to add more. And as that happens, we are going to benefit from high-margin revenue for us. I will give you just one example. I do not recall any CFO leadership with any payer customer that we have that is not incredibly concerned about GLP-1 spending. The ability to very easily add Vida or other programs to the existing integrated Craig Hettenbach: infrastructure is extremely attractive Ido Schoenberg: for our customers to do, and we make it incredibly simple and easy for them to do that. To summarize, we believe that the same-store growth presents a meaningful revenue opportunity for us. In addition to that, as you know, we invested very heavily in penetrating the very hard-to-penetrate government markets. I am very pleased with our performance there. And there are many other large opportunities that are very similar to the one that we presented with the DHA. Mark J. Hirschhorn: So we do believe that the government sector Ido Schoenberg: represents an incredible growth opportunity as well, both in way of net new logos and even in same-store growth, like the example that Mark gave recently, to really reinstate our behavioral health and maybe other alternatives. The success that we have with our existing clients is not lost on others. And many of them are really under pressure to add those programs, but they do that today with an infrastructure that is much smaller. A lot of the IT departments in payers are much smaller today because of cost pressures, so their ability to serve as an integrator for all those programs and then to match them with a different ASO is becoming much more difficult. American Well Corporation and the American Well Corporation platform present themselves as a very good solution both for them and, obviously, also for those vendors that can accelerate their penetration and offering into those highly regulated clients through our infrastructure. Thank you. Operator: Our next question comes from the line of Eric R. Percher with Nephron Research. Your line is now open. Eric R. Percher: I would also like to dig in a little bit more on what comes from the improvement in revenue quality. When we look at what the guidance for this coming year holds, it sounds like some deemphasis—I know there were also divestitures that you had considered. Can you give us a little bit more on what you are deemphasizing and why the revenue is running lower than we might have expected? And does that not include any of the divestitures that you have looked at? Would those be ultimately incrementally beneficial to bottom line while perhaps taking down top line from here where we spend 2026? Ido Schoenberg: Sure. So, Eric, what we did really is to centralize our offering around one offering, which is the American Well Corporation platform. And it does what we described earlier and does it really, really well. As you know, we had other offerings in market segments where the product-market fit was not great. We divested the APC, and we deemphasized other areas that are noncore. Essentially, our one product right now is still a very good match to all the market segments that we operated in before, but there is one product across the segments versus many products across many segments. The value proposition to payers and government is very strong and very sizable. A very big part of our revenue is derived from there. And since it connects millions and tens of millions of individuals that are motivated to use the platform more and more across the ecosystem, that also presents the most important growth opportunity for us. Having said that, many health systems are now bearing risk. Many of them want to participate in different government programs like ACCESS. And in order to do that, they really benefit from a platform like American Well Corporation, because you can add all those very efficient clinical programs to their current offering in a way that is integrated out of the box and is done very efficiently. So that allows us to really be very efficient on one highly attractive and differentiating product, benefit from secular demand that is growing, with a lot of cost to grow it. Once we are implemented, adding programs and seeing more traction is much less expensive than creating the platform that we have done over the past few years. And, of course, there are not too many of those in the market. So we fully expect that the example we gave recently with Blue Cross Blue Shield of Florida is not going to be a single rare one. Mark, I do not know if you have anything to add. Eric R. Percher: I should have been more precise. Does the 2026 revenue and EBITDA reflect full exit of the business as we discussed could be exited Ido Schoenberg: I think so. There is some residual, but it is diminishing in percentage points and in proportion, until a point where it is going to be negligible over the next two years. Eric R. Percher: Thank you. Operator: Thank you. Our next question comes from the line of Ryan MacDonald with Needham and Company. Your line is now open. Ryan MacDonald: Hi, thanks for taking my questions. Ido, Ryan MacDonald: great to hear that you got the 15 renewals done, obviously, and the large three-year renewal with Elevance. I am curious if you could talk about how those renewals or those discussions in those renewals are informing your go-to-market approach for net new opportunities? And as you think about 2026, if you look across government, payer, provider, where are you skating to the fastest, or where are you really focusing those go-to-market efforts in terms of bringing in net new logos to the business? Thanks. Ido Schoenberg: Absolutely, Ryan. I am pleased to share that all of our renewals, as it relates to the payers that we and others work with, were related to the same offering—the new American Well Corporation platform. And in many ways, while they are technically renewals, since the offering is so different than what they had in the past and our role is so different, you can consider them in many ways a new sale or almost a net new sale. You need to remember also that when people renew and migrate into the new platform, that comes with deep integration into financial and clinical backbones. So you do not do it very quickly. You do it as a long-term investment. The value of existing customers is now demonstrated really well, and when we implement the new customers, it is really a very similar workflow. So reproducing it becomes much easier and simpler and much more efficient going forward. As I mentioned earlier, when we look at multiyear growth, the most obvious and impactful area is same-store growth, benefiting from more programs to more people that will use it more often and more efficiently, and really benefiting from those secular tailwinds. In addition to that, as Mark mentioned earlier, we have the largest pipeline we have had in our history, I think, that I remember, at least, for now, and it is all about this. There is nothing else. It is about our one platform and its clinical services and the value it should generate as an infrastructure to adopt more and more AI-powered clinical programs. We have a lot of proof points, a lot of success points in very large scale. If I look at the segments, commercial payers are our sweet spot—Blues and others. But there is no question that our advantage in the government is even bigger. And the reason is that that is a really high barrier-of-entry segment when you think about cybersecurity, regulations, things of that nature, and we have that right now. We spent enormous amounts of time and effort and resources getting there, and it performs really, really well. So we fully expect this to grow meaningfully over the next few years, and lastly, we believe that health systems will participate, but in proportion, probably their contribution is going to be smaller than the first two segments I just mentioned. Operator: Thank you. I am currently showing no further questions at this time. I would now like to hand the call back over to Ido Schoenberg for closing remarks. Ido Schoenberg: Thank you, operator, and thank you, everyone, for joining. We really appreciate your support of American Well Corporation, and we look forward to talking to you very soon. Have a good evening. This concludes today’s conference. Operator: Thank you for your participation. You may now disconnect.
Operator: Good day, everyone. Thank you for standing by. Welcome to the Vistagen Therapeutics Fiscal Year 2026 Third Quarter Corporate Update Conference Call and Webcast. Please note that today's call is being recorded. At this time, I'd like to turn the call over to your host, Mark McPartland, Senior Vice President, Investor Relations at Vistagen. Mark? Mark McPartland: Thank you, Lisa, and good afternoon, everyone, and welcome to our conference call and webcast. Earlier this afternoon, we filed our quarterly report on Form 10-Q and issued a press release for our fiscal year 2026 third quarter, which ended December 31, 2025, and provided an update of our progress across our clinical stage neuroscience program. We encourage you to review the PR and 10-Q which are both available in the Investors section of our website. Before we begin, please note that we'll be making forward-looking statements regarding our business during today's call based on current expectations and information. These forward-looking statements speak only as of today. Except as law requires, we do not assume any duty to update any forward-looking statements made today or in the future. Of course, forward-looking statements involve risks and uncertainties, and our actual results could differ materially from those anticipated by any forward-looking statements we make today. Additional information concerning risks and factors that could affect our business and our financial results are included in our fiscal year 2026 third quarter Form 10-Q and for period ending December 31, '25, and in future filings that we make with the SEC from time to time. Again, all of which are available in the Investors section of our website or, of course, on the SEC's website. With the formalities completed, we warmly welcome our stockholders, sell-side analysts and others interested in our programs in progress. I'm joined on our call today by Shawn Singh, our President and Chief Executive Officer; Josh Prince, our Chief Operating Officer; and Nick Tressler, our Chief Financial Officer. Shawn will provide a brief business and clinical update, and Josh and Nick will be available to provide additional feedback during the Q&A portion of our call. After our remarks, we'll take questions from the sell-side analysts participating on the call. A replay of the webcast will be available in the Events section of the Investor page of our website. With that taken care of, I'd now like to turn the call over to our President and CEO, Shawn Singh. Shawn Singh: Thank you, Mark, and good afternoon, everyone. It's been an important quarter for our team with the completion of the randomized portion of our PALISADE-3 Phase III trial in social anxiety disorder, as guided, and focused efforts to learn from the study's results and drive high-quality and efficient execution of our ongoing PALISADE-4 Phase III trial. We have reviewed available data from PALISADE-3 and implemented moderate refinements, including retraining, site rationalization and operational enhancements to PALISADE-4. We've also been working with third-party collaborators on the implementation of innovative approaches to analyze the available data sets, not only from PALISADE-3, but also from the fasedienol studies across the PALISADE program, including both the randomized and the open-label trials. Our objective is to better understand the drivers of both fasedienol and placebo response using the substantial data collected from these studies to potentially inform optimized statistical models that consistently incorporate covariants and explanatory variables across all PALISADE studies, which could anchor future weight of evidence discussions with the FDA. The analyses are ongoing with our collaborators and involves the use of their proprietary artificial intelligence and machine learning technologies to identify nonspecific responses and understand and predict susceptibility to placebo response and likelihood of response to active drug in the context of the public speaking challenge study design. Overall, the full complement of ongoing work is focused on delivering practical operational understanding, predictors of response and enhanced statistical models with the potential to impact both PALISADE-4 and our regulatory strategy based on the totality of data from the PALISADE program. The open-label extension portion of PALISADE-3 and PALISADE-4 remains ongoing and is designed to evaluate the safety and tolerability of repeated as-needed intranasal administration of fasedienol in adults with social anxiety disorder, but in real-world daily life situations. In addition to safety assessments, the study includes exploratory longitudinal measures using validated instruments such as the clinician-administered Liebowitz Social Anxiety Scale, or LSAS, and the patient-reported Social Phobia Inventory, or SPIN. While open-label data are inherently in controlled and exploratory, the OLE portion of the PALISADE-3 Phase III study could provide important context on patient experience with repeated use over time in real-world anxiety-provoking situations the patients encounter. Together with our broader analytical work across the PALISADE program, insights from open-label studies should contribute to our enhanced understanding of fasedienol drug effect and usage patterns. Once again, we'd like to thank the patients who participated in our PALISADE studies as well as the clinical investigators, the site staff and our contract research organization for their ongoing dedication and professionalism as we complete PALISADE-4 and advance our broader analytical efforts. As we've previously stated, PALISADE-4 is successful, together with PALISADE-2. In the broader body of evidence generated across the PALISADE program, these data may support a potential new drug application submission to the U.S. Food and Drug Administration for the acute treatment of social anxiety disorder in adults. The significant unmet need in social anxiety disorder, where effective treatments are very limited, continues to guide our work and our long-term focus. Turning to our women's health program. We received an official USAN adoption statement, designating PH80 as refisolone. Refisolone is our hormone-free, nonsystemic intranasal product candidate with potential for the treatment of moderate to severe vasomotor symptoms, commonly referred to as hot flashes due to menopause. We believe refisolone may also have therapeutic potential across other women's health indications. We are currently preparing to submit our U.S. Investigational New Drug Application, or IND, for refisolone to the U.S. FDA and with a planned submission in the first half of 2026. This IND is intended to support further potential Phase II clinical development of refisolone in the U.S. for the treatment of moderate to severe vasomotor symptoms due to menopause. Building on a previously completed placebo-controlled exploratory Phase IIa clinical trial conducted in Mexico by Pherin Pharmaceuticals, which is now our wholly owned subsidiary, and that trial demonstrated clinical benefit in the vasomotor symptoms indication. We believe that indication in women's health represents a significant area of unmet need, and we remain committed to advancing refisolone as a nonsystemic, hormone-free product candidate with a disciplined data-driven approach as we prepare for the potential next phase of clinical development. Turning briefly to our financial position as of December 31, 2025, we had $61.2 million (sic) [ $61.8 million ] in cash, cash equivalents and marketable securities. During the quarter, we implemented company-wide cash preservation measures intended to enhance our operational efficiency, extend our runway and maintain strategic flexibility across our Pherin pipeline. We believe we are well positioned to complete PALISADE-4 and to advance preparations and planning for our Pherin pipeline. In closing, our mission remains unchanged, to deliver transformative treatments and improved lives. The path forward requires discipline, rigor and thoughtful analysis, and we believe the steps we have taken and are taking position Vistagen to make informed decisions and responsibly advance programs with the potential to deliver meaningful value to patients and to shareholders. So I want to thank you for your continued interest in the company and your support, and we look forward to updating you on our progress in the quarters ahead. Mark McPartland: Thank you, Shawn. Operator, we would now like to open up the call for questions from the sell-side analysts joining us today. Operator: [Operator Instructions] The first question today is coming from the line of Andrew Tsai of Jefferies. Lin Tsai: Thanks for the update. So maybe in the PALISADE-3 data, you had a chance to look at it maybe descriptively, how did the individual curves look at every interval out to 5 minutes? Was there a separation at all across any of those time points with fasedienol versus placebo? Shawn Singh: Thanks for the question, Andrew. Josh? Joshua Prince: Andrew, we -- at this point, what we've released publicly is the top line results. So we're still looking into a lot of that data. We haven't released the individual curves publicly. We do know that there's what really -- where we find information is looking into individual respondents and subgroups of respondents. And again, that analysis continues. So that's where we do see definite differences. Lin Tsai: Okay. And it sounds like you're looking at ways for PALISADE-4 to tweak around the SAP planning, let's just say you did, would you need to notify and then talk to the FDA to potentially get an official buy-in from them that the changes can be done? Is there a risk to modifying the SAP plan, basically? Joshua Prince: Yes, great question. Go ahead, Shawn. Shawn Singh: No, you can go ahead. That's fine. Joshua Prince: Great question. The SAP, just like with PALISADE-3, already been submitted and approved, no feedback from FDA. So that's set. So any future changes, to your point, would absolutely require a resubmission and alignment with the FDA before we locked the database and got the top line results. Lin Tsai: Understood. And then my last question is, should you modify the plan, would you need to backfill back to the original enrollment target of around 236 or 238? Or are there no changes to the enrollment? Joshua Prince: Yes. The change to the SAP would not change the enrollment or the planned enrollment for the study. The key there is that it's whatever that SAP in is, like I said, locked in before you get to database lock and then applied to the total population for the study. Operator: Next question is coming from the line of Emily Chudy of Stifel. Jo Yi Chudy: This is Emily on for Paul Matteis from Stifel. We just had a quick question. Maybe could you remind us where you guys are in terms of enrollment for PALISADE-4? And if you like plan on telling -- or plan on PR-ing once that has completed or like dosing has completed? And then also, could you maybe share on like what details you saw in PALISADE-3 that kind of led you to refine -- to the refinements that you outlined in the PR? Shawn Singh: Thanks, Emily. Appreciate the question. So it will be consistent with the pattern for PALISADE-3. Once we hit the last patient's last visit and then proceed towards top line. So that will be -- we're on track with guidance that we've previously given with respect to PALISADE-4 TOR, the randomized portion of PALISADE-4. Josh, you can address the second part. Joshua Prince: I'm sorry, I missed the second part. Can you rephrase that? Jo Yi Chudy: For -- you guys discussed like refinements, including like retraining of some sites. Could you maybe provide any color on what details you saw from PALISADE-3 that kind of led to that decision? Joshua Prince: Yes. I don't think -- we can't go into too much detail given PALISADE-4 is ongoing. But at a high level, one of the things that made PALISADE-3 different than PALISADE-2 was a higher placebo response. So as one example, making sure that our training is reinforced and up-to-date with sites in terms of potential ways to minimize that, in particular, kind of how the protocol is followed, the script is followed to the letter, making sure that there's no chatting with the subjects as they come in, anything that could potentially lend to a comfort for a subject that can drive a higher placebo effect. Those types of things that we're able to implement quickly based on what we see from PALISADE-3. And also because we're listening to what's happening at each site through the audio recordings that we've talked about previously, it gives us the opportunity, again, to be hyper-focused on feedback and any intervention where we see something deviating from the prescript that we've put in place. Shawn Singh: In addition to that, some -- a focus on centralized recruitment and making sure that gets and stays completely tight or rationalized. So the kinds of things that can impact in stream execution especially, as Josh noted, with high focus on placebo mitigation strategies and best practices across -- especially from really experienced sites. Operator: Our next question is coming from the line of Myles Minter of William Blair. John Boyle: This is John on for Myles. I was wondering if you could talk a little bit more through your regulatory path forward and your confidence in it in the event that PALISADE-4 hits and you have a 50% program success? And alternatively, if PALISADE-4 misses, do you see any regulatory path forward with PALISADE-2 alone? Shawn Singh: Thanks, John. Appreciate the question. So look, they -- fundamentally, we believe that the regulatory outcomes always depend not only on FDA regulations and guidance, but the totality of data, the weight of evidence, the risk benefit, the nature of the in-need population. So these kinds of assessments, this is what we align our regulatory strategies to accordingly. So we're not really in a position to speculate on any approval scenarios, but what we can tell you, of course, is we're very mindful not only of the evolving -- the way that AI is evolving within the agency and how that is emerging is part of and factoring into the regulatory decision-making be on top of that and very closely focused on that. But also just, again, the weight of evidence, once we see where we are with the randomized portion of PALISADE-4, we'll be able to look across the totality of the program. And the primary objective in the primary regulatory strategy remains, as we've said, which is complementing if PALISADE-4 is successful, complementing PALISADE-2 with a broader base of information from the totality of the program for the acute treatment of social anxiety disorder. If PALISADE-4 doesn't hit and separate from placebo, it's still the same. It's the totality of evidence focus. It's the weight of evidence focus across the program and what we see from all data, we can possibly see and analyze relating to the drug. John Boyle: Helpful. And a quick follow-up. Is there anything that you're seeing in the blinded data of PALISADE-4 that gives you a little bit more confidence in that study over PALISADE-3? Shawn Singh: No comment on the blinded data, John. Operator: [Operator Instructions] And the next question is coming from the line of Elemer Piros of Lucid. Elemer Piros: Shawn, have you noticed any impact on enrollment since the announcement on December 17? Enrollment patterns? Shawn Singh: Josh, you can address that. Joshua Prince: Sure. The quick answer is no, definitely have not. Enrollment has continued as planned and projected for PALISADE-4. Elemer Piros: Okay. And so what I'm trying to understand is how could the PALISADE-3 outcome, and potentially PALISADE-4, be different by amending the SAP? Would that mean that you would include some covariates that may influence the separation between the 2 arms? If you could just help me conceptually understand this a little bit better. Shawn Singh: Sure. I mean part of what we're doing with AI and the machine learning, it's potential, it's not -- certainly not guaranteed. And if they're -- what you're looking for are there any covariates that may have a potential fixed effect on the ANCOVA. And that's -- that may or may not evolve and emerge from the work that we're doing with our collaborators with their proprietary AI and ML. But it would be those kinds of things. Are there covariates that you notice when you look through the patient populations in each arm in prior studies in PALISADE-3, in particular, that may give you some sort of signal? So the answer is we don't know yet. And as noted earlier, if we do make a modification to the SAP that's already been signed off by the agency, then we'd have to go back to them and socialize it with them. So that's part of what we're trying to find out. If there isn't, then again, we've got operational efficiencies and observations based on what we've seen across the studies that are being implemented into the PAL-3 or PAL-4 execution. Josh, anything you want to add on that from the teams? Joshua Prince: No, I think that captures it. Elemer Piros: So just to summarize, you're looking at PALISADE-3 and maybe even PALISADE-2 for some covariates. If you find them, then you modify the SAP, take it to the FDA before you were to analyze PALISADE-4 hypothesizing that those same covariates will be applicable to PALISADE-4. Am I understanding it correctly? Shawn Singh: Yes. It has to be whether -- not only whether it's timely, obviously, got to be timely before you lock the database, but it's also got to be appropriate. And there may also be potential changes that wouldn't be FDA regulatory appropriate. So it's got to be something that could be impactful, at the same time something that is reasonable with rigor and review from the FDA. Joshua Prince: Shawn, I would just add that we're actually -- we're looking across all the PALISADE studies. So PALISADE-1, 2 and 3 to see what we can learn. We've built -- now that we've had a third study complete. We've built continued size of data to examine, which gives you more power when you're digging into different things. But you're 100% correct that it's essentially the covariates or the correction factors that you would apply in your statistical model. Elemer Piros: I understand. And just a silly housekeeping question, if you may -- if I may. At the end of December, you had 39.7 million shares outstanding but the weighted average for the quarter was 42 million. Can you help me to understand that? Shawn Singh: Nick, are you on? Nick Tressler: Yes, I am. Yes. So it's shares are outstanding at the end of the quarter. It's how we measure our earnings per share. Elemer Piros: Okay. So shares, I would say -- but there are higher number of shares outstanding because they have reduced 42 million? Shawn Singh: That includes the prefunded warrants, Elemer. Mark McPartland: Operator, I believe that's all the time we have for today. We can wrap up the call. So thank you, everyone, for joining today and for your continued interest and support in Vistagen. Again, with our diverse, innovative pipeline, we are encouraged about the future prospects of the company. If you have any additional questions, please don't hesitate to reach out to us at -- via e-mail, ir@vistagen.com, or through the Contact Us section of our website. We also encourage you to register for e-mail updates and stay informed about the latest news and developments from Vistagen via our regular updates. We appreciate your time, engagement and ongoing support, and we look forward to keeping you updated on our continued progress. This concludes our call today. Have a great day. Shawn Singh: Mark, one more thing, real quick. I just want to clarify. I think I misspoke. I think I said $61.2 million at the end of 12/31/25, it was $61.8 million as reflected in our Q. Mark McPartland: Thanks, Shawn. Operator: This concludes today's program. Thank you all for joining. You may now disconnect.
Operator: Good afternoon. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to Toast's Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's call will be 45 minutes. I'll now turn the call over to Michael Senno, Senior Vice President of Finance. You may begin your conference. Michael Senno: Thank you, operator. Welcome to Toast's Earnings Conference Call for the Fourth Quarter and Full Year ended December 31, 2025. On today's call are CEO, Aman Narang; and CFO, Elena Gomez, who will open with prepared remarks, which will be followed by our Q&A session. Before we start, I'd like to draw your attention to the safe harbor statement included in today's press release. During this call, we'll make statements related to our business that may be considered forward-looking within the meaning of the Securities Act and the Exchange Act. All statements other than statements of historical facts are forward-looking statements, including those regarding management's expectations of future financial and operational performance and operational expenditures, location growth, future profitability and margin outlook, business and investment strategy, expected growth and business outlook, including our financial guidance for the first quarter and full year 2026. Forward-looking statements reflect our views only as of today, and except as required by law, we undertake no obligation to update or revise these forward-looking statements. Please refer to the cautionary language in today's press release and our SEC filings for a discussion of the risks and uncertainties that could cause actual results to differ materially from our expectations. During this call, we will discuss certain non-GAAP financial measures, including, but not limited to, non-GAAP subscription services gross profit and non-GAAP Financial Technology Solutions gross profit which we refer to collectively as our recurring gross profit streams. These are the basis for our top line guidance. These non-GAAP measures are not intended to be a substitute for our GAAP results. Please refer to our earnings release and SEC filings for detailed reconciliations of these non-GAAP measures to the most comparable GAAP measures. Unless otherwise stated, all references on this call to cost of revenue, gross profit and gross margin, sales and marketing expense, research and development expense and general and administrative expense are on a non-GAAP basis. Finally, the press release can be found on the Investor Relations website at investors.toasttab.com. After the call, a replay will be available on our website. With that, let me turn the call over to Aman. Aman Narang: Thanks, Michael, and thank you, everybody, for joining us today. I'm really proud of the Toast team for what we accomplished in 2025. We grew recurring gross profits 33%, expanded adjusted EBITDA margins to 34% and added over 30,000 net locations on the platform. Our core continues to grow at a rapid pace, with strong incremental margins as we scale while our emerging TAMs across retail, international and enterprise doubled ARR in 2025. We welcomed some amazing brands to the Toast platform in Q4, including iconic independent restaurants, such as Carmine's, Chef Daniel Boulud's restaurants, multiple enterprise chains, including Papa Murphy's and noteworthy retailers, including Meadow Lane. Our product team released over 500 new features, including ToastIQ, our conversational AI assistant. Customer feedback and adoption has been tremendous. ToastIQ not only generates reports and insights about restaurant performance, it executes tasks directly in Toast ranging from menu management to inventory updates. For example, ToastIQ can analyze and update menus, tell an operator why the Thursday nights might be slow or why a certain daypart is successful and analyze results across locations. It can also quickly answer questions like what events and weather should I pay attention to this week or who's working on a Friday night. Now AI is also reshaping how we work internally, from how we provide customer support to how we build software and how we sell and market our products. This is making our teams more productive, which opens up capital to invest against our most important long-term priorities. We have strong momentum as we head into 2026, building on top of a strong Q4, we expect another year of record net location adds and consistent ARPU growth as we execute against the priorities we laid out last year. Number one, growing market share in our core; number two, demonstrating that new markets will be material growth drivers: number three, increasing customer adoption of our platform; and lastly, gradually expanding margins as we invest with discipline. Longer term, if you can do these well, we are positioned to drive durable growth from over $2 billion in the ARR today to $5 billion and $10 billion and beyond. Starting with our first priority, growing market share in our core U.S. SMB and mid-market restaurants. We continue to grow market share year after year and now power 20% of SMB and mid-market restaurants in the U.S. This has nearly doubled over the past 3 years. We have seen success across all market types, including urban, suburban and rural markets as well as ones that had high and lower density of Toast restaurants. In fact, our sales productivity in our top 10 geos continues to outperform our average, which shows that we have plenty of headroom to continue to gain share. Our vertical platform across software, hardware, fintech and networking is purpose-built for restaurants and continues to get better. Over the past year we launched over 500 platform enhancements including Toast Go 3, the latest evolution of our handheld device designed to help restaurants drive throughput while elevating the customer experience and improving tips for staff. Other new releases include ToastIQ and Toast Advertising that are helping customers drive efficiency and guest demand. And Toast support has been reimagined with AI with over half of our support interactions now starting digitally through an AI agent and 70% of those never getting to a human. Our relentless focus to improve our platform for restaurants has helped us improve win rates with new customers and build a durable referral engine where 2/3 of our demand is inbound and existing customers are the largest source of referrals. And it's why many of the busiest and highly successful operators continue to choose Toast. A great example is Alicart the group behind New York's legendary restaurants, including carmine and Virgil's Barbecue. Carmine is one of the busiest independent restaurants in the country with over $40 million in annual sales and up to 3,000 covers per day. After 25 years with an existing provider, they decided on Toast for the depth, speed and reliability necessary to support their scale. And their first few deployments have gone so well, they accelerated their Toast rollout across all locations to leverage the benefits our platform offers. We hear stories like this from successful operators all the time. And we're committed to building the best innovation engine to help restaurants of all types and sizes stay ahead during a time when the technology landscape is evolving rapidly. We have plenty of market share in front of us. and continue to invest to serve deeper parts of the TAM. For example, in 2026, we'll launch better support for non-native English speaking operators and features to support bars, pizzerias and membership clubs even better. These investments in our products and our best-in-class go-to-market engine supports our path to doubling market share in ARR over time. Our second priority is demonstrating that our new markets will be material growth drivers. 2025 was a great year for our new markets. We signed our 2 largest enterprise customers, Applebee's and Firehouse Subs and successfully launched Australia, our fourth international market. And for the first time, we scaled a dedicated go-to-market team outside restaurants and have seen great results in retail. A few years in, each of these new markets is growing faster than our core was at a similar time period. This growth, combined with the size of TAM in these new markets gives me confidence they can be material drivers of growth over the long term. We are seeing the success because we're building on top of a proven vertical playbook. The vertical depth across product, go-to-market and customer success drove our early success in U.S. SMB restaurants, and we're applying the same approach when we build for retail, enterprise and international markets. We are very comfortable leaning into the product and platform complexity necessary in these markets versus a horizontal one-size-fits-all approach. We're seeing customers switch from legacy on-prem solutions, similar to what we saw in restaurants 10 years ago. And as we continue to scale and our platform gets better, we're confident we will see even higher win rates, rep productivity and ARPUs over time. In enterprise, our pipeline and active rollouts have never been bigger. In Q4, we expanded our relationship with MTY Group and signed Papa Murphy's, a 1,000-plus unit pizza chain. They chose Toast because of our flexible platform across multiple service models, including QSR and casual dining as well as the feature depth necessary to support large pizza chains. In 2026, we will continue to invest in the platform to support the needs of our largest customers, including the launch of our drive-thru product, which is planned for later this year. We're confident enterprise is well positioned to continue to drive strong growth in 2026 and beyond. Internationally, we're seeing strong location growth, including great early signals from our launch in Australia last year. Customer feedback and pull has been strong, and we hear from successful restaurants across Canada, U.K. and Ireland that Toast is making their businesses better. As we continue to build up support for the full platform in these markets, including the launch of our Toast Go 3 handheld as well as inventory management, I'm confident we will drive even stronger win rates in ARPUs as we scale. Over the next few years, you should expect us to continue to scale in our current markets while opening up new countries thoughtfully where we have a right to compete and win. In retail, we built out our go-to-market team last year and have seen incredible results so far. Our product can already support convenience stores, grocery chain, bottle shops, butcher shops and more because our platform offers the feature set necessary to support businesses with high SKU counts and complex inventory in high throughput environments. Many of these customers are coming from legacy on-prem solutions and have never experienced a cloud-based solution with the platform capabilities Toast offers across point of sale, guest-facing products, employee management, payments, capital and inventory. Customers especially love when we can support many different concepts within a single back end across their locations, from restaurants and retail shops in a hotel, the grocery store that also has a cafe or a restaurant inside it. A great example is La Carniceria Meat Market, a 25-location butcher and grocer who replaced guesswork with data by deploying our platform, automating inventory and invoices and understanding their costs better. Automated SKU management cut down mineral work and the rollout was smooth, thanks to our Spanish-speaking sales and support. It's a clear example of how Toast helps operators run more efficient profitable businesses. As we look to 2026, we're continuing to deepen the retail platform with more tailored onboarding support and integrations, including a new partnership with Instacart that allows retailers to sync in-store inventory with Instacart's marketplace. Our success in food and beverage retail reinforces something we believed for a long time. Our platform works well beyond restaurants. We're layering in the vertical-specific capabilities to meet the needs of different customer types. And we're starting to see early success with retail customers outside of food and beverage retail as well. Just as restaurants with hybrid restaurant retail concept pull us into retail, we'll use the signal from our customers and our retail go-to-market team is testing the new verticals and be disciplined about where we expand. Now zooming out, our new growth markets have been incredibly successful so far, and will continue to drive outsized growth in 2026 and beyond. As we gain market share and invest in our platform, we expect these new TAMs to drive strong growth and profitability just as we have in our core. And over the long term, we will continue to invest to expand the opportunity from new verticals to new countries where we believe Toast has product market fit and can help these businesses run more successfully. Moving on. Our third priority is increasing customer adoption of our broad platform and driving differentiation through data and AI. For 13 years, we've been at the center of this shift in restaurant technology from on-premise to cloud. We spent that time listening to our customers and solving their toughest problems, which has allowed us to evolve from a point-of-sale solution into a comprehensive system of record to help them manage operations, employees, guests and suppliers. As we've delivered more value and build out the partner ecosystem, we've seen broader attach of our platform as well as high ARPUs. When talking to customers, what I consistently hear is while they love the Toast platform, they don't have enough time in their week to leverage everything we have to offer. Many of them are small business owners that are stretched thin to deliver great customer experience, while managing their staff and their suppliers. They don't have enough actionable alerts and insights to make good decisions about their business in real time and they outsource a lot of the work, work for marketing, demand generation, bookkeeping or accounting, all the work that is critical to ensuring they have a profitable business. We believe our AI roadmap built on years of data insights can help our customers get more from the Toast platform. ToastIQ is the foundation of the strategy. Less than 4 months post launch, over half of all Toast locations have used ToastIQ, collectively sending over 8 million queries and tens and thousands of locations are already using it each week. We believe this early success comes out of 3 things: ToastIQ is built on more than a decade of deep restaurant expertise. It's tightly integrated into the core Toast experience customers already rely on and is designed to take action, not just surface insights that can help operators run key workflows faster and get more done. We're seeing this impact firsthand with customers like Alicart, an early ToastIQ adapter that now uses it daily. ToastIQ help our teams quickly make decisions and turn hours of menu analysis into clear, actionable insights in just minutes. Recently, the team used ToastIQ to identify many combinations to boost check sizes, helping them spot opportunities to improve service and drive sales at some of the busiest restaurants in the country. We're still in the early stages of what AI will enable. Today, customers are using it to get support, analyze data and make back-end configuration changes such as updating menus or generating content to build an e-mail campaign. We're investing for ToastIQ to evolve from an assistant to automating workflows and eventually to running a team of agents that will handle more of the work, restaurants have to do manually today. For example, we expect ToastIQ workflows like operating within a budget, to optimize marketing spend or to understand inventory levels and get ahead of an out-of-stock scenario and then place an order from approved vendors. And over the long term, we expect these AI agents to start to own whole functions from marketing to managing payroll and tax or accounting and bookkeeping. We believe because our data powers much of this work, we are uniquely positioned to both do it better and cheaper. Switching gears, our fourth priority is continuing to invest with discipline in our most important priorities while expanding margins over time. We're operating from a position of strength. We've achieved our medium-term margin targets, including 40% margins in our core ahead of schedule and have confidence we can both innovate and grow while working towards our long-term margins of 40% plus by holding a high bar on our execution and our capital allocation. I think we have an opportunity to build a much more material business over the next decade. That can both have a much bigger impact for our existing customers and expand the opportunity across new markets where we're seeing great early success. I'm committed that we will be disciplined in how we invest and only lean into our biggest and highest conviction opportunities where we can build differentiated and highly profitable businesses that deliver significant shareholder value. My conviction ultimately comes from our incredible team of Toasters who care deeply about innovating on behalf of our customers. I want to thank each of them for their dedication and commitment to Toast. I also want to thank our customers and investors for their continued support. We had a great 2025, and we're confident in our momentum and our plans heading into 2026. Thank you. And with that, I'll turn the call over to Elena. Elena Gomez: Thank you, Aman, and to everyone for joining us today. I also want to thank our team for another successful quarter and for the continued execution that led to our record performance throughout 2025. Our results showcased the strength of our business model in what was another outstanding year for Toast. Net adds increased every quarter versus a year ago, and we added a record 30,000 net locations in 2025, ending the year with 164,000 locations. ARR grew 26% and our recurring gross profit stream increased 33% for the year, an incredible accomplishment at our scale with over $2 billion in ARR and $195 billion in payment volume in 2025. On top of strong top line momentum, we are efficiently scaling the business through disciplined capital allocation and ongoing cost management. In 2025, we delivered adjusted EBITDA of $633 million and free cash flow of $608 million. GAAP operating income was $292 million, up from just $16 million a year ago, driven by our strong adjusted EBITDA and tight management of stock-based compensation. We entered 2026 in a strong financial position, enabling us to ostensibly lean into our key growth initiatives with a path to double market share in our core and accelerated expansion in our new TAMs. We are confident that continuing to invest behind these opportunities will lead to sustained top-tier growth for several years and create significant shareholder value. Turning to our fourth quarter results. Our recurring gross profit streams increased 28%. Total monetization measured by our recurring gross profit as a percentage of GPV hit 98 basis points. That's a 5 basis point increase from a year ago, reflecting our growing share of wallet and increasing value we provide to our customers. We added approximately 8,000 net locations in the quarter. We are consistently gaining market share in our core with increasing contributions across our new TAMs as they scale. Underpinning the location momentum across the business is our best-in-class vertical SaaS platform and local go-to-market execution. SaaS ARR and subscription revenue each grew 28% year-over-year. We are complementing our strong location growth with consistent mid-single-digit increases in SaaS ARPU on an ARR basis. SaaS ARPU in our core is growing even faster than total SaaS ARPU, driven by customers continuing to adopt more products across the platform. Subscription gross profit increased faster than top line at 33%, with SaaS gross margins expanding 300 basis points year-over-year to 80% in Q4. In addition to ongoing efficiency efforts across the business, the early benefits from leveraging AI to transform our customer support experience is contributing to margin expansion. Our SaaS net retention rate remained in a healthy range at 109% in 2025, led by solid contributions from upsell and location expansion from existing customers. Payments ARR grew 24% and fintech gross profit grew 25% in Q4. GPV was $51 billion, up 22% year-over-year with Q4 GPV per location down 1% versus last year. Fintech net take rate was 58 basis points. Payments take rate increased 2 basis points from a year ago to 48 basis points. We continue to drive year-over-year take rate expansion from cost optimization efforts, new products and ongoing price optimization even after lapping the benefit from the September 2024 pricing adjustments. Nonpayment Fintech solutions, led by Toast Capital, contributed $51 million in gross profit and 10 basis points in take rates. Overall, the program continues to grow at a steady clip, and defaults remain consistent and well within our risk guardrails. Hardware and professional services gross profit was negative 12% of our recurring gross profit streams. In addition to capitalizing on our customer acquisition momentum, we are absorbing higher tariff costs, our strong overall unit economics and scale enable us to do this while maintaining healthy payback period. Moving to expenses. We continue to balance investing in our highest priority initiatives across go-to-market and product while driving efficiencies across the business. Total full year OpEx, excluding bad debt and credit-related expenses grew 15%, providing 8 percentage points of operating leverage. In Q4, sales and marketing expenses increased 21%, we're investing to support our market share gains in the core, expanding our account management team and scaling the international and retail go-to-market teams to accelerate our progress. R&D increased 7% as we invest in product differentiation and add capabilities to expand our product market fit across our new growth markets. Adjusted EBITDA grew 47% to $163 million, a 32% margin. Stock-based compensation as a percentage of recurring gross profit was 12% down nearly 5 percentage points versus a year ago. That contributed to GAAP operating income more than doubling to $85 million. We've dramatically expanded adjusted EBITDA over the last few years, reflecting the strong unit economics of our business and focused capital allocation. Dollar-based payback period for our portfolio remained in the mid-teen months in 2025, consistent with the last few years. Our new TAMs represent significant ARR opportunities and our early success and strong customer signal give us confidence in our right to win. Payback periods across our new TAMs are above the core today, given we are earlier in building our go-to-market and product offering. As we scale and mature in these areas, we are confident each one is on a path to under 20 months. We have a proven track record and clear road map to improve payback periods. In the core, payback dropped from 22 months in 2019 to 14 months in 2023. During that time, we expanded our product offering to increase ARPU and built the flywheel effect, growing referrals and scaling the go-to-market motion to increase rep productivity. We also enabled our team with customer acquisition guardrails that balance efficiency and win rate. Since 2023, we've held core payback steady, and we believe operating in this range provides the right balance of growth and discipline and supports our long-term margin profile of over 40%. We are taking the same approach in our TAMs, expanding product capabilities to increase win rates and ARPU and scaling go-to-market to build the flywheel. Our near-term priority is investing to gain share. Over time, we have a clear path to optimize and drive efficiencies in the unit economics as we've done in the core. These new areas also leverage our core platform and centralized functions giving us confidence that at scale, these new TAMs will drive meaningful profitability. Moving to capital allocation. We've repurchased approximately 8 million shares for $235 million since the inception of our buyback authorization in 2024, including 3 million shares for $107 million in 2025. Returning capital to shareholders is an important part of our approach to driving long-term shareholder value, and the Board has approved a $500 million increase to our share repurchase authorization. We do not have a specific timetable to complete the authorization and we'll maintain the same approach to buybacks, opportunistically repurchasing shares based on market conditions to support long-term shareholder value. Turning to guidance and our outlook for the year ahead. Aman and I have highlighted our strong momentum across the board and our 2026 outlook builds on this trajectory. We remain well positioned to grow net location adds in 2026 compared to 2025 and sustain mid-single-digit SaaS ARPU growth on an ARR basis. For the full year, we expect 20% to 22% growth in our recurring gross profit streams and adjusted EBITDA of $775 million to $795 million, implying margins are slightly up year-over-year, consistent with the expectations we shared last quarter. In addition to the investments we're making in future growth and higher tariff costs, our guidance also includes approximately 150 basis points of negative impact from higher memory chip costs for our hardware. This headwind emerged since we shared our initial expectations last quarter with memory costs increasing from the surge in global demand for chips. We expect the cost pressure to be weighted towards the second half of the year as inventory with our higher cost parts roll out. We anticipate the market to stabilize over time. And while near-term hardware costs will be elevated, this does not structurally change our long-term financial profile. Over the past few years, we've demonstrated the power and leverage in our business model. Rapidly expanding margins to hit our medium-term targets faster than expected, while sustaining over 30% growth, investing in product innovation and building the next set of growth levers for the company. We are positioning cost to sustain high growth for the next 5 to 10 years and have high conviction and strong signal across our key growth opportunities. As we move through 2026, our bias is toward reinvesting potential top line upside to go even faster on our growth initiatives, including new TAMs, product and AI investments and seeding future growth bets. Our rigorous capital allocation approach is unchanged. We'll only invest where the customer signal and data weren't going faster. We are confident delivering durable compounding growth with the incredible leverage and cash flow generation in our business model will maximize long-term shareholder value. Turning to our first quarter guidance. We expect the same seasonal patterns in 2026 with Q1 being lighter quarters, both net adds and GPV compared to the rest of the year. That's reflected in our Q1 guidance for total fintech and subscription gross profit growth of 22% to 24% year-over-year and adjusted EBITDA of $160 million to $170 million. To wrap up, we are executing across the board, growing our core, expanding our TAM and maintaining healthy margins as we scale. Heading into 2026, we're laser-focused on sustaining our momentum and continuing to execute at a high level across the business. We're incredibly excited about what lies ahead for Toast and well positioned to capture the massive opportunity ahead. Now I will turn the call back over to the operator to begin Q&A. Operator: [Operator Instructions] Your first question comes from the line of Timothy Chiodo with UBS. Timothy Chiodo: I want to first start with SaaS ARR per location. So you mentioned for the full year of 2026 that you're confident and staying in that mid-single-digit range, which I think is great to hear. You mentioned that core and mid-market, so core SMB and mid-market are doing even better than that mid-single digit. There's a little bit of a drag on the front book from international food and beverage retail and enterprise. But I was hoping you could just break down a little bit of those components because international and food and beverage retail, yes, they're lower but there are good signs of them improving and getting closer and closer. Enterprise is sort of a different animal, right? Enterprise is sold differently. It's got a different LTV to CAC profile. It's very different. So really 2 questions related to this. One, if you could talk about the mid-single-digit SaaS ARR per location, maybe over the medium term. And then 2 is, if you could talk about if you've ever considered or would you consider just breaking out enterprise separately because some of these per location metrics would just look a little bit better if enterprise, again, sort of a different type of business was broken out separately. Elena Gomez: Timothy, thanks for the question. So lots of confidence actually in SaaS ARPU growth to remain in mid-single digits similar to what we saw in 2025. And to your point, core SaaS ARPU is actually growing faster than the total company based on exactly what you said, right? Some of these new TAMs today have lower SaaS ARPUs, but it's early, and we expect that as -- we expect them to grow as they scale. And just one thing that we've looked at in our data, when you look across all 3 of our business new TAMs, SaaS ARPU is ahead actually of where the core was at comparable times. So as we roll out more products, and we're planning on doing that across all of them, we will see ARPU grow over the long term. And in terms of enterprise, it's a really great point that it's a very different sales cycle. The way we look at it is different. We look at total ARR really when we look at enterprise. And we evaluate to be honest, deal by deal and the LTV to CAC per deal is really strong, right, there's higher ARRs, low CAC, low churn, all of these elements really contributing to strong unit economics. So really encouraged by what we've seen in international. And as we add more products like drive-thru, which we've talked about, it's only an opportunity to continue to grow. Operator: Your next question comes from the line of Will Nance with Goldman Sachs. William Nance: I wanted to ask on the net adds, really strong finish to close out the year in the fourth quarter and you're reiterating the expectation for net adds up this year. I think you mentioned in the prepared remarks that one of the goals this year is to prove out that the newer verticals can be a material driver of growth and you've kind of given us some data points on that along the way so far. Maybe you could just talk a little bit about the mix of core versus new verticals this year. What would be a good outcome? And what should we be looking to kind of gauge your success in those new parts of the business being a material contributor. Aman Narang: Yes. Will, so I think, first off, as you mentioned, we're really proud of our performance here in 2025. Every quarter in 2025, our net adds were up year-over-year. And in fact, in Q4 of 2025, the rate of growth accelerated to over a case. So I think that's really a testament of the team's performance. Now in terms of the composition, what we saw last year was the core was in the same range. And a lot of the incremental growth on net adds came from these new TAMs. Now if you think about the core locations, the market share has doubled over the past 3 years. And so when we look at this year now, what we expect is actually a very similar pattern to play out where the core should be in a similar range to 2025. And the new TAM should grow further, which is why we have a lot of confidence that net add growth in '26 should be even higher than '25. And some of that is, of course, we're investing in go-to-market capacity. We talked about that in retail. Some of it's the sales capacity, we have added ramping. And then we're also doing some early testing. We're learning beyond food and beverage retail. And as we expand the TAM further, that will give us some upside over the long term as well. William Nance: Great. I appreciate that. And then if I could squeeze in a follow-up. I was wondering if you could maybe just address kind of the elephant in the room around AI disruption in software. We used to talk about Toast trading like a software company, as being the bull case, but now that has gotten caught up in this AI narrative. I was hoping I could just give you the floor and you could talk about how you think about the moats around this business and why not new entrants leveraging new technology are or aren't a threat to the business? Aman Narang: Yes, sure, Will. Look, I think if you think about what Toast is, we're the most important piece of technology restauranteurs use around their business. Like where all the work gets done, if you think about like running the operations front of house, back of house, kitchen, all the reporting and analytics and data, the guest experience. Like a restaurant's website, online ordering, gift, loyalty, employee management, finance. And it's really broad. If you think -- we don't talk enough about how you think about everything Toast offers, it's software, it's also hardware. It's fintech, so things like lending and payments, payroll, with heavy regulatory and compliance needs. We power the network of these restaurants. And then we've got hundreds of partners that sit on top of Toast to extend what our platform offers. And if you talk to our customers, the other thing you'll hear is, in addition to all the technology that we power. They also look to us to leverage all the technology, almost like an outsourced CIO, like all of the sales and services team that enable our customers to leverage all of our technology. And so I think there's a lot to the Toast platform. I actually think AI is an opportunity for us to lean in even further. If you look on the customer side, and I talked a little bit about this in my prepared remarks, we are -- we started off early on by automating certain key workflows like generating an email campaign or maybe it's about getting inventory on the shelf faster. And now with ToastIQ, this copilot that actually can help restauranteurs leverage more of our platform, whether it's an analysis or data, automating certain workflows and making changes to the Toast back end. Voice, I think, is another opportunity. You think about walking up to a kiosk or a drive-thru, walking up to a terminal, voice to automate some of the work of placing an order. And then longer term, We are investing in a big way in ToastIQ, to do even more. So I talked about how restauranteurs spent a lot of -- they outsource work around generating demand with marketing or bookkeeping, payroll and tax. And we think there's an opportunity there because a lot of that is our data that's powering those experiences. There's an opportunity there to actually make some of those workflows more agentic than they have been in the past and to create -- to do them better and to do them cheaper. So I look at AI as an opportunity for Toast to lean in and drive innovation and impact for our customers and versus being a risk to the business. Operator: Your next question comes from the line of Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang: Nice results. Just to add on to your answer to Will's question there. Does your margin framework Aman, give you the leeway to lean harder into R&D to the extent that AI creates more opportunity, more tools, product services that you just talked about that customers demand. I'm just curious how you're balancing that, again, the leeway to lean in if you need to? Elena Gomez: Yes, I'll start, and Aman maybe you go ahead. But Tien-Tsin you're exactly right. Part of the reason, in fact, when you just think about our margin profile, we're not expanding margins faster because we're investing in R&D to really sustain this long-term growth that we've talked about innovating for our customers, solving problems for them. That said, our margin framework is to hit that head on remains unchanged, right? We're targeting 40% margins over the long term. And that pace, this is really important. The pace at which we drive that margin is in our control. And then a lot of things that Aman has said around AI investment, we view that as an incredible opportunity to accelerate and do more for our customers over time. Aman Narang: Yes. That's well said, Elena. I just want to reinforce one point. We are here to build a generational company over the next decade. It's the reason we're investing across the business, including in R&D in a big way because we think we can serve many multiples of the current TAM that we serve, and we can increase the impact through investments we're making across the platform. And so that's why we're investing in R&D. And if we wanted to focus on near shorter-term margin expansion, we absolutely could do that. It's really about investing for the long term. Operator: Your next question comes from the line of Matt Coad with Truist Securities. Matthew Coad: Aman really appreciate all the AI commentary so far. I just wanted to ask one more. Just curious with all of the broadening out of ToastIQ and everything it's doing for merchants, are you seeing ToastIQ kind of be a big reason why you're starting to win RFPs? And then, if so, what type of merchants find the most value in these tools? Aman Narang: Yes. Today, the focus, I think, is really in our SMB business. And we're certainly seeing our go-to-market team and our customers share of the data in terms of usage and adoption, play a big role in terms of why people are picking Toast. And I think what customers like about it, if you think about the average SMB restaurant owner. What they like about ToastIQ is that you've got this copilot that you can query. So whether it's simple things like asking questions to analyze data, it's much faster than finding the specific subreport that they need. You can generate custom views and data that maybe in the past you had to export to Excel and create a custom view on. You can make changes to the back end of the Toast, as I mentioned. So if you want 869 for example, or change which shows up online for online ordering. All these workflows that are so crucial, the ability to do faster has really been valuable to our customers. And we're certainly seeing that in our sales cycles. We're seeing our sales team is super excited about it and sees the impact it has because our tool is really purpose-built, right, for the restaurants, because a lot of the data and the use cases are focused on the workflows that our customers care about. So it's early -- and again, I'd say it's early, as I mentioned earlier, I think, over time, we think there's an opportunity to start to automate more complex workflows. So think about like -- imagine almost if I'm a restaurant, I want to think about demand when I'm slower, generating marketing spend through Toast Advertising to say, help me drive more demand in a budget, for example, and then over time, start to make more of the work more agentic. So again, good to see the early progress, and we're going to continue to invest to make it better based upon customer feedback. Operator: Your next question comes from the line of Josh Baer with Morgan Stanley. Josh Baer: Changing gears a little bit. Could you expand on the drive-thru product rollout? I think that you acquired a company called Delphi several years ago that had drive-thru tech, and I'm just wondering if that's a segment of the market that you have been addressing already? Or does this rollout open up that market? Aman Narang: Yes. So far, our focus upmarket in enterprise has been a non-drive-thru. If you look at all of our wins so far and the progress we've made, right? It's been in casual dining, it's been in sit-down. It's not been where drive-thru is the primary mode of their operations. And the investments we're making now, we're going to -- we're planning to launch our drive-thru product this year, which is going to open up that market in a much bigger way than has been available historically. It doesn't mean that some customers don't use that have got small drive-thru -- small amount of drive-thru as part of their business don't use Toast. But there's a lot to supporting multilane drive-thru and some of the complexity that exists there that we're launching this year. Josh Baer: Okay. That's really helpful. And along those lines, are there any other segments of the U.S. market that like you're not able to address today because of product, but maybe it's a potential on the product road map and opening that up down the road? Aman Narang: Yes. It's a good question. We're seeing across whether it's SMB or enterprise, there are parts of the TAM where we think we can create more value. And as I mentioned, like, for example, in SMB, for non-English-speaking operators, there's some work we've done and we are doing that I think will help. Even in parts of the tamer we're established, like bars or pizzerias or membership clubs, we're making some moves to a product that I think can drive further win rate. And then upmarket enterprise, there's opportunity in some segments of the market, like sports and entertainment as an example, where we've got some traction, but we think improving the product can open up that opportunity further and then even other sub-TAMs, you think about golf for example where we think we've got some adoption, but not at scale. And so the product team is always looking at like all of our data in a deaveraged way where they're looking at what are our win rates, what's our market share across all these sub-TAMs and then using the size of the opportunity to prioritize the road maps. Operator: Your next question comes from the line of Adam Frisch with Evercore ISI. Adam Frisch: Taking a step back to put '26 in perspective, you're still growing really well while investing heavily. Do you see it as a peak investment year at least as it relates to the current cycle? And then related to that your initial guide for RGP in '26 implies back half deceleration. Is there anything you'd like to call out there that's driving that initial guide or reasons it could prove conservative? Elena Gomez: Yes. So I'll take the last question first. Just in terms of how we guide, right, as we start the year, we take a pretty balanced view, as you know, looking at past years. And obviously, with GPV, we want to be balanced, but we always aim to do better. So just keep that in mind as we progress, we'll update you on that over time. And then in terms of your first question on peak investment year, as Aman said earlier, we're really thinking about this over the long term. We're trying to build a generational business, right, and have an ambition to find opportunities where we have the right to win, where the customer signal is really strong. And so 2026 reflects our conviction behind these new TAMs that we talked about. We haven't changed our long-term margin profile, as I talked about earlier. In fact, we have a lot of conviction and more conviction because of the TAMs and the fact that we have a path to sub 20 months. So zooming out, what you're seeing in 2026, you've got confidence that we've identified new TAMs that will drive durable growth over the very long term. And like I said earlier, driving margin and the timing of that is really in our control. Operator: Your next question comes from the line of Dominic Ball with Rothschild & Co. Dominic Ball: Thanks for the question. Another question on AI. It's very much dominating the debate with investors. The key concern, of course, is software becoming more commoditized. So Aman, can you speak a bit more about Toast potentially evolving beyond a software provider into more of a platform business, particularly through the strength of your ecosystem partnerships. Any more additional color on that and how that ecosystem kind of deepens your moat over time would be really helpful. Aman Narang: Yes. Sure, Dominic. I mean, if you look at Toast today, right, it is already, I'd say, more than right, a software provider for our customers. We've got -- and I think to your point about like how do you deepen the moat. It's continuing to invest to make the platform better and better to support the use cases that our customers want, including with AI. And so if you look at today, like the Toast platform, it's got software. It's got a broad software platform across powering operations, employees, guests, fintech, I think is less well known, we power the network in these restaurants as well. And then, as you mentioned, this large partner ecosystem that sits on top. And so part of the reason the average SMB restauranteur picks Toast is because we simplify all aspects, right, of the technology needs they have to help them run their business. Like they love the all-in-one nature of our platform. And so -- and I think the more we can continue to lean in to make our platform better and better. I mentioned some examples early on with ToastIQ, in voice AI. And then lastly, if you look at the average restauranteur, they are spending a lot on fractional work, that is actually not even full time hires that the restaurant has. A good example is to drive marketing and demand, you must have someone fractionally on the team or to manage your books or accounting and bookkeeping or to help you with payroll and tax. And those are the areas where the data, as I mentioned, comes from Toast. And so we think with ToastIQ, the vision is to start to support more and more complex workflows over time, which eventually, I think, could be actually doing some of the work. And so that's really the vision there in terms of where we're headed with AI and then I think in terms of your question on what Toast does as a software provider, I'd argue even already today, right, Toast is a lot more than just a software provider for our customers. Operator: We will now take our last question from the line of Dan Dolev with Mizuho. Dan Dolev: Last but not least, I guess, quick question and a follow-up. On the -- back to the AI environment, can you maybe talk about sort of the top 4 to 5 cross-sell modules and how much of the SaaS ARR they represent? And then I have a quick follow-up. Aman Narang: Dan, is the question specific to cross-sell modules tied to AI, or just to clarify the question. Dan Dolev: Yes. Just like given that there's so much focus on like AI and software like what are the most kind of important modules that you're selling in terms of like SaaS for example. Aman Narang: Yes. It's a good question. If you look at the history of like how our platform has evolved. So initially with AI, it was about automating some of the simpler work that a restauranteur had to do. So I'll give you a simple example. If I'm using our marketing module to drive demand. It's really valuable to be able to actually generate those e-mail campaigns with AI, because we've got lots of data and with generative AI you can generate campaigns much faster. Similarly if you want to bring inventory to your shelf or online on e-commerce, the ability to leverage our master catalog and generate images with AI, generate descriptions with AI, just makes that workflow faster. So that's really how we -- that's an example of how AI is actually embedded across our platform. And if you look at like features in guests or employee, for example, with scheduling, right, being able to forecast demand and be able to automate a schedule is an area that we're working on to automate the speed with which restauranteurs can drive an efficient labor schedule. So it's really across the board in the platform that we've asked our R&D teams to focus on ways to leverage AI to make the platform stronger and better. And specifically on your question on where are we driving across that, I'd say ToastIQ and the adoption of ToastIQ is really the foundation. We've seen really good adoption so far, as I mentioned, it's helping us drive win rates. And over time, within that ToastIQ framework, we will launch more, whether it's more complex work flows, agentic work flows, an example I think I shared with things like marketing and payroll, bookkeeping with really owning the whole function over time. And then, of course, with voice as well. So that's where we're headed. And so far -- and the focus really is right now is getting the ToastIQ platform to be adopted more widely. Dan Dolev: Great. And maybe just like a quick follow-up on the location metric has been obviously like front and center. Like as we move forward in the outer years, is this still sort of the main metric? Or is there something else you would like investors and analysts to be focused on? Aman Narang: Yes. Thanks, Dan. I can start. I think, look, at the end of the day, it's about driving durable growth. It's about driving ARR, recurring gross profit. We guide on recurring gross profit and balancing that with healthy margins as we continue to scale. The location growth, as I mentioned earlier, like I think the thing that gives me a lot of confidence there is it shows that what we did in SMB restaurants over the past 10 years, is applying beyond SMB restaurants as well. And that's really the crux of why we think there is an opportunity to continue to drive durable net adds over the long term. Operator: This concludes today's conference call. Thank you all for joining.
Operator: Good afternoon, and thank you for joining us today for Ryan Specialty Holdings Fourth Quarter 2025 Earnings Conference Call. In addition to this call, the company filed a press release with the SEC earlier this afternoon, which has also been posted to its website at ryanspecialty.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements. Investors should not place undue reliance on any forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially from those discussed today. Listeners are encouraged to review the more detailed discussion of these risk factors contained in the company's filings with the SEC. The company assumes no duty to update such forward-looking statements in the future, except as required by law. Additionally, certain non-GAAP financial measures will be discussed on this call and should not be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most closely comparable measures prepared in accordance with GAAP are included in the earnings release, which is filed with the SEC and available on the company's website. With that, I'd like to turn the call over to the Founder and Executive Chairman of Ryan Specialty, Pat Ryan. Patrick Ryan: Good afternoon, and thank you for joining us to discuss our fourth quarter results. With me on today's call is our CEO, Tim Turner; our CFO, Janice Hamilton; our CEO of Underwriting Managers, Miles Wuller; and our Head of Investor Relations, Nick Mezick. In many ways, 2025 was a strong year for Ryan Specialty, particularly considering the significant headwinds the industry faced. Our results are a testament to our team's ability to outperform in a challenging environment. Our conviction in putting our clients first, our unwavering focus on specialized expertise, commitment to attracting and retaining top talent, and dedication and excellence in everything we do. For the quarter, we delivered organic growth of 6.6%. I'm pleased with our performance especially taking into account the volatile property market conditions, increased competition and select casualty lines and continued delays in certain project-based business, all of which Tim will provide more color on shortly. For the full year, we surpassed revenues of $3 billion, up 21% year-over-year, driven by organic growth of 10.1%, on top of 12.8% in 2024, and significant contributions from our M&A strategy. We marked the seventh consecutive year of growing the top line by 20% or more and our 15th consecutive year of double-digit organic revenue growth. Adjusted EBITDAC grew 19.2% to $967 million. Adjusted EBITDAC margin was 31.7% compared to 32.2% in the prior year. Adjusted earnings per share grew 9.5% to $1.96. We completed 5 acquisitions with trailing revenue of over $125 million. I'd like to make a few comments on the overall market. Having lived through multiple of insurance pricing cycles, I've seen hard markets come and go. What distinguishes this cycle is simple. It was harder for longer on the way up and much faster on the way down, particularly as it relates to the property. Throughout my career, I've never witnessed market sentiment shifted this rapidly. We are currently operating one of the most volatile and reactive insurance markets, I've seen across my more than 60 years in the industry. Throughout this time, I've learned that volatility and market cycles is inevitable. And what sets us apart that's rooted in the very vision this company was founded on, brick by brick. We carefully constructed an intentionally diversified platform to deliver innovative solutions to brokers, agents and insurance carriers. To deliver for our clients and shareholders, when the times get tough, regardless of the market cycle. We didn't build Ryan Specialty for the easy years. People do for years like this, the power through transitioning markets. Diversified specialties, diversified products and diversified earnings, all backed by world-class talent, all by design. That's what makes us different. While we could not predict the precise timing or magnitude of this turn in the pricing cycle, we have long understood that the pricing cycle would eventually move from a tailwind to a headwind. From the very beginning, we made a deliberate decision to build more than a wholesale broker. We invested heavily in delegated authority, including both binding authority, and underwriting management. The benefits of this strategy are clear, deepened specialty presence and enhance the ability to bring products to market quickly, improve geographic balance through our international expansion and a significantly expanded total addressable market. Importantly, these strategies have underscored by alignment with our carrier trading partners and enhance the strength of our relationships with the capital providers who support us. Our delegated authority business generates meaningful revenue through contingent commissions, which are directly tied to the underwriting performance we deliver on our carriers' behalf. In softer markets, these contingent commissions act as a natural hedge, thus providing further diversification and balance to our total company earnings. Our numbers tell the story. Over the last 2 years, we've doubled our delegated authority revenue to $1.4 billion, now reflecting 47% of our total. A remarkable rise from $700 million and 35% of our total just 2 years ago. We've invested nearly $2.7 billion towards 12 acquisitions. We have grown a number of products on our platform by 50% to over 300. We've expanded our international presence now with 24 offices, up from just 6 in 2023. And still believe we're in the early innings. We've increased the size and capabilities of our central underwriting team to help support our efforts to deliver underwriting profits, growth and scale. We have dramatically increased the breadth and depth of Ryan Re, our reinsurance MGU. We have established in-house alternative for capital management solutions. We built a benefits division with distinguished capabilities and products, which are largely uncorrelated to the P&C cycle. And we've invested significant resources into all aspects of alternative risk including captive management and structured solutions. The diversification that we've achieved is significant, born out of the needs of the thousands of retail brokers with whom we trade, our enhanced offering has opened the door to additional opportunities across all our specialties and positions us well for a wide range of market outcomes. This evolution is exciting but it also introduces greater complexity to our business. As a result, we are launching Empower, a 3-year restructuring program designed to improve efficiency across the firm, particularly within delegated authority and create headroom for additional investment, despite the success we've achieved in many ways because of it, we are not yet as efficient as we need to be. And Empower is about more than just efficiency. It's about enabling our people to do what they do best, more tools, faster innovation and an even greater ability to deliver for our clients. AI will be a key enabler, allowing all our people to focus less on process and more on deepening client relationships. We're confident that Empower will deliver meaningful benefits for our colleagues, trading partners and shareholders. Tim and Janice will provide more details in their remarks, but we anticipate a cumulative special charge of approximately $160 million through 2028. We expect the program will deliver approximately $80 million of annual savings in 2029. The efficiencies we gained through Empower will enable us to continue making strategic investments in growth, top-tier talent, the novel formations and address the rapidly evolving needs of our clients, allowing us to maintain industry-leading growth in the years to come. We expect these savings will help contribute to our goal of modest margin expansion in most years, while maintaining the flexibility to continue investing in our business. As a result, we believe our industry-leading organic growth and accelerated efficiencies across all of our specialties will lead to enhanced earnings growth. I also want to provide an update on capital allocation. We are pleased to announce that our Board of Directors has authorized a $300 million share repurchase program. The scale of our platform, combined with our robust free cash flow generation gives us increased flexibility to expand how we deploy capital. This decision reflects our view that there's a meaningful dislocation between our current valuation and our confidence in the near and long-term outlook of our business. We remain committed to strategically investing for the long term, organically and inorganically while also opportunistically purchasing our shares when we believe it to be the best use of our capital. The added option of share repurchases is aligned with our goal of enhanced shareholder returns over the near and long term. As a coach of this terrific team, I'm incredibly proud of our ability to deliver exceptional results in a challenging environment. Our performance is a testament to the depth, expertise and determination of our people to provide value for our broker, agent and insurance carrier partners in the face of numerous challenges. All of these efforts will drive significant additional value for our shareholders and ensure we remain the leading specialty insurance services firm in our industry. I'm pleased to turn the call over to our Chief Executive Officer, Tim Turner. Tim? Timothy Turner: Thank you very much, Pat. Ryan Specialty delivered our 15th consecutive year of double-digit organic growth, once again, setting the standard for the specialty insurance industry. In a year where there have been significant pressures across the insurance broker landscape, our performance speaks to the resilience and differentiation of our platform. I am incredibly proud of how our team navigated what was, without question, the most challenging property environment, the insurance industry has faced in decades. We capitalized on specific areas of accelerated growth as evidenced across many products and lines of business, most notably in high-hazard casualty and transportation. We launched innovative solutions like Ryan Re's expanded relationship with Nationwide. RAP Re, our first-of-its-kind collateralized sidecar and numerous real-time de novo formations to meet the emerging needs of the market. As you've seen us do repeatedly, when we see an opportunity, we organize and we move at the speed in which our clients and trading partners demand. Turning to our results by specialty. Our wholesale brokerage specialty demonstrated remarkable resilience in 2025, led by our exceptional talent and the continuation of secular trends like panel consolidation. In property, our team executed on behalf of our clients in the face of an exceptionally difficult pricing environment. For the full year, our Property business declined only modestly. The fourth quarter was particularly challenging. We saw a further decline in property pricing as the quarter progressed. It was most notable in the month of December, particularly on certain large accounts where pricing was down 25% to 35%. Additionally, an albeit in pockets, we saw instances of admitted carriers stepping back into certain segments particularly on smaller accounts. Based on this continued softening in pricing, combined with January 1 reinsurance renewals and the widely held view of rate adequacy and property, we expect there could be similar pricing declines in 2026. We are not standing still. Our team of experts are focused on delivering the best solutions to our clients, winning head-to-head against our wholesale broker competitors. And our goal remains clear: return to growth in property as soon as the market allows. That said, we remain optimistic about property beyond the near term. The frequency and severity of cat events, increasing populations in cat-affected areas and continued demand for E&S solutions all support our belief that property will remain an important contributor to our growth over the long term. Meanwhile, our casualty practice had a very strong year. Underlying trends are moving in different directions across lines, but the net result remains favorable for Ryan Specialty. In high hazard lines like transportation, health care, social and human services and habitational, we continue to see significant price increases in many cases, exceeding 10%. Across these difficult lines, we are seeing carriers tightened distribution re-underwrite, change appetites, raise prices and focus on limit management, our professional lines team significantly outperformed the market despite continued pricing pressure aiding our growth for the year as well as social inflation and litigation trends, which continue to support the need for adequate pricing. At the same time, we are seeing a more constructive tone from carriers looking to grow in Casualty, which introduces additional competition beyond what we've been seeing in small commercial and middle market. This is leading to a slight moderation of pricing in certain pockets. Lastly, parts of the large construction industry remain a headwind as project-based business faces continued delays. But we're seeing early signs that activity may pick back up. And given recent interest rate cuts, we're optimistic heading into 2026. Taking these trends together, we're anticipating strong yet moderating casualty growth in 2026. On data centers, we're growing increasingly optimistic as the leading wholesale broker in construction, we are in a great position to assist our clients as they navigate this rapidly evolving risk landscape. But it's not just construction as we bring deep expertise across builders risk, environmental, architect and engineers, and other complementary lines as well as within the energy field, making us a natural partner for these complex placements. With many projects in the planning phases, and demand for insurance capacity only building, we believe we are well positioned to assist our retail broker clients. While these projects can be lumpy, our enthusiasm as well as our pipeline continue to grow. As we've said repeatedly, retail brokers use us when they need us. And here, we're honored to play an important role. Zooming out on wholesale brokerage, we believe the secular trends that have fueled our growth over the years remain intact. One worth highlighting is panel consolidation. The largest retail brokers continue to narrow the number of wholesale broker intermediaries they work with. We see this playing out in real time in 2026 and 2027 and for years to come. Our scale, track record and relationships with the top 100 retail brokers positions us well as this trend continues. Now turning to our delegated authority specialties, which include both binding authority and underwriting management. Our binding authority specialty continues to perform well, driven by our top-tier talent and expanding product set for small, tough to place commercial P&C risks. We continue to believe panel consolidation and binding authority remains a long-term growth opportunity, and we are well positioned to capitalize. Our underwriting management specialty, Ryan Specialty Underwriting Managers, delivered excellent results for the year, with strong performance across transactional liability, casualty and transportation. Our transactional liability practice performed exceptionally well, supported by the investments we've made over the past few years and the more constructive global M&A outlook. Velocity, our Tier 1 property cat MGU continued to expand its distribution through RT and ended the year with impressive year-over-year growth numbers. Conversely, while our builders risk MGU, U.S. Assure faces near-term pressure from project delays due to the heightened interest rate environment. We remain confident in the long-term opportunity as the housing market normalizes and construction activity picks up. Let me spend a moment on Ryan Re. Over the last 6 years, we've created a remarkable business strategically positioning us to capitalize on an expanded opportunity set. We are very proud of our ability to execute on our strategic partnership with Nationwide on the Markel Reinsurance book. We are driving increased brand awareness, deeper relationships with clients and diversification into niche specialty markets, enabling us to deliver on a very strong January 1 renewal season. Stepping back, our delegated authority strategy is a key differentiator for us. Our exceptional M&A activity over the last 2-plus years, cements Ryan Specialty underwriting managers as the preeminent delegated underwriting authority platform in the industry. As we've demonstrated, each of these acquisitions support our strategic vision of aligning specialized underwriting products with our distribution expertise across industries, expanding our capabilities, and offering clients diverse innovative solutions. Today, our delegated authority business manages north of $10 billion in premium across more than 300 products and has been recognized by business insurance as the largest delegated authority platform. What sets us apart is our consultative approach. We create bespoke solutions because our broker, agent and insurance carrier clients and trust us to solve problems alongside them. Our scale allows us to build markets and launch de novo programs with speed and efficiency in response to our clients' individual needs. We are here to add value and complement our trading partners, filling niches where needed and strengthening their distribution model, not to compete with them. Our skill and discipline to manage these businesses through the insurance cycle bolsters our ability to deliver consistently profitable underwriting results, growth and scale over the long term. Now turning to price and flow. We have repeatedly noted that in any cycle, as certain lines are perceived to reach pricing, adequacy, admitted markets historically reenter select placements. While we saw small pockets of this dynamic playing out in property during the fourth quarter, particularly on smaller accounts, the standard market has not meaningfully impacted rate or flow in the aggregate across our portfolio. As we've consistently said, we continue to expect the flow of business into the specialty and E&S market more so than rate to be a significant driver of Ryan Specialty's growth over the long term. Turning to M&A and capital allocation. We completed another exceptional year of acquisitions, closing 5 transactions with trailing revenue of over $125 million, including Velocity, USQ, 360 Underwriting, J.M. Wilson and SSRU to name a few. M&A has been and continues to be a top capital allocation priority for us. We remain disciplined in our approach to M&A, only moving forward when all of our criteria are met, a strong cultural fit, strategic and accretive. More broadly on capital allocation, we are excited to announce our first share repurchase program, adding another tool to our tool belt. Given the current dislocation that Pat mentioned, combined with our confidence in our near and long-term outlook, we believe now is the right time to act. The addition of this lever gives us more flexibility in how we return value to our shareholders. To sum up 2025, our colleagues performed exceptionally well, particularly in the face of a complex and rapidly evolving insurance and macro environment, which is a testament to the resilience and durability of our people and this platform. With that being said, we have built an intentionally diversified platform at Ryan Specialty, one that is able to not only withstand the ever-changing landscape but power through it, A platform that provides us with many avenues for expansion, designed to deliver industry-leading organic growth. As Pat mentioned, over the last 2 years, we've invested nearly $2.7 billion towards 12 acquisitions, significantly diversifying our platform with new products, geographies, capabilities and businesses. This transformation has been exciting, but with scale comes complexity. As a result, we are focused on further positioning the business to adapt and are excited to discuss Project Empower, our 3-year restructuring program. Empower is designed to streamline our broking and underwriting operations, optimize our scale, accelerate our data and technology strategies, and enhance efficiencies across all our specialties. Empower isn't just about efficiency. It's about enabling our people to do what they do best, more tools, faster innovation and an even greater ability to deliver for our broker, agent and insurance carrier partners. The efficiencies we gain through the Empower Program will enable us to continue making strategic investments in growth, top-tier talent, de novo formations, and address the rapidly evolving needs of our clients, allowing us to maintain industry-leading growth in the years to come. We will continue to invest in our business, in talent, innovation, technology and AI, investments that will lead to margin expansion over time, while maintaining flexibility to capitalize on strategic opportunities like our talent initiative late last year. Our scale, scope and intellectual capital thoughtfully crafted over our 15-year history is unmatched. It is the foundation of our ability to continue winning and expanding our market share over time. This platform is exceedingly difficult to replicate and the diversification we've achieved is significant. We continue to improve upon our competitive moat and we will continue investing to widen the gap between Ryan Specialty and the rest of the specialty industry. With that, I will now turn the call over to our CFO, Janice. Thank you. Janice Hamilton: Thanks, Tim. In Q4, total revenue grew 13% period-over-period to $751 million. Growth was comprised of organic revenue growth of 6.6%, contributions from M&A, which added over 5 percentage points to our top line and contingent commissions as we continue to deliver strong underwriting profits for our carrier trading partners. As Tim discussed, the fourth quarter reflected an intensification of the trends we've been navigating throughout the year. Adjusted EBITDAC grew 2.9% to $222 million. Adjusted EBITDAC margin was 29.6% compared to 32.6% in the prior year period. Adjusted diluted earnings per share of $0.45 was comparable period-over-period. Our full year 2025 results reflect the resilience and diversification of our platform. Total revenue grew 21% to over $3 billion, driven by organic revenue growth of 10.1% and strong contributions from M&A, which added 10 percentage points to our top line. Adjusted EBITDAC grew 19.2% to $967 million. Adjusted EBITDAC margin was 31.7% compared to 32.2% in the prior year. As we've discussed throughout the year, our margin was impacted by significant investments, principally in talent, operations and technology. Our talent investment was broad-based. We added key data and AI-focused resources within our central underwriting teams to support our expanded underwriting businesses, integrated strong talent to support Ryan Re and hired top-tier talent within alternative risk. We recruited at scale in wholesale brokerage, which heavily impacted our fourth quarter results. Adjusted EPS grew 9.5% to $1.96 per share. Our adjusted effective tax rate was 26% for both the quarter and the full year. We expect a similar tax rate in 2026. Based on the current interest rate environment and at current debt levels, we expect to record GAAP interest expense net of interest income on our operating funds of approximately $210 million in 2026 with $55 million in the first quarter. We ended the quarter at 3.2x total net leverage on a credit basis. We remain well positioned within our strategic framework and willing to temporarily go above our comfort corridor of 3x to 4x for compelling M&A opportunities that meet our criteria. More broadly on capital allocation, the Board of Directors approved an 8% increase to our regular quarterly dividend for our Class A stockholders now at $0.13 per share. We are pleased to grow our dividend at a modest and sustainable level. Additionally, our Board has authorized Ryan Specialty's first share repurchase program of $300 million. We have consistently demonstrated our ability to manage this business with an unwavering focus on strong free cash flow generation. It's 1 of the many great attributes of our firm and the broader insurance brokerage sector as a whole. Our free cash flow affords us the ability to deploy capital strategically, whether in organic investments, acquisitions, dividends and now opportunistic share repurchases. This repurchase program is a reflection of our confidence in our near- and long-term outlook and an opportunity to create additional value for shareholders. Turning to Project Empower. As Pat and Tim both mentioned, over the last 2 years we've invested nearly $2.7 billion towards 12 acquisitions, significantly diversifying our platform. As you would expect, an expansion of this magnitude has increased the complexity of our business. As a result, we are launching the Empower program, designed to: number one, streamline our broking and underwriting operations by standardizing processes, integrating operating platforms, increasing automation and driving efficiency and product innovation. Two, optimize our scale by eliminating redundancies to fully leverage and further monetize the investments we've made over the last several years. Three, accelerate our data and technology strategies by building a single unified ecosystem that harnesses advanced analytics and AI to improve client outcomes and drive operational excellence. Four, enhance efficiencies across all our specialties, leading to more consistent interactions across our 30,000-plus retail and wholesale broker relationships and deepen interactions with our 180-plus delegated authority carrier relationships. And finally, create headroom for additional investment. We anticipate a cumulative special charge of approximately $160 million through 2028. We expect the program will deliver approximately $80 million of annual savings in 2029. We expect the savings to ramp up over time. We expect these savings will help contribute to our goal of modest margin expansion in most years while maintaining the flexibility to continue investing in our business. Looking forward, we believe our industry-leading organic growth and accelerated efficiencies across all of our specialties will lead to enhanced earnings growth. Turning to guidance. We are guiding to organic revenue growth in the high single digits for 2026. This reflects our current view of market conditions, including continued property pricing pressures, a more moderate pace of casualty growth and broader macroeconomic uncertainty. From a seasonality perspective, we expect Q1 to be our strongest quarter for organic growth, aided by Ryan Re, as Tim mentioned. As a result of business mix changes and external trends, we expect organic growth to fluctuate quarter-to-quarter, but we remain confident in our full year outlook. We believe we will consistently deliver industry-leading organic growth on an annual basis moving forward. For the full year 2026, we are guiding to an adjusted EBITDAC margin of flat to moderately down as compared to the prior year. Embedded in this guide are a few headwinds. Notably, the impact of lower interest rates on fiduciary investment income, stable contingent commissions following an exceptional 2025, and higher health care and benefit costs. More importantly, we are continuing to absorb the significant talent and technology investments we made in the fourth quarter. As we close out 2025, I'm incredibly proud of the results we've delivered, another year of industry-leading growth particularly in the face of a very challenging environment is a testament to the depth, breadth, expertise and determination of our team. Looking ahead to 2026, we are well positioned to further differentiate Ryan Specialty as the destination of choice for the industry's top talent, powered by our commitment to innovation, our empowering culture, and the scale and scope we've built over the last 15 years. With that, we thank you for your time and would like to open up the call for Q&A. Operator? Operator: [Operator Instructions] Our first question will come from Elyse Greenspan with Wells Fargo. Elyse Greenspan: I guess my first question, I just want to spend more time on the organic guide, right? So it sounds like for '26, you guys are expecting that the property price declines will be at the same level as in '25, yet the organic guidance is now high single digits versus right this year where the guide or -- sorry, in '25 where the guide had been double digits. So what's the driver of that just in relation to property as well as just the overall change in the guide for 2026? Janice Hamilton: Elyse, I'll start this, and then Tim might want to add a little bit more on the property color. As you probably picked up on from our remarks, the fourth quarter really marked an intensification of some of these property pricing trends. We saw particularly in the large accounts, rate decreases to 25% to 35%, which was higher than what we were seeing earlier in the year. We're currently expecting that to continue. We did see some small -- smaller commercial business starting to head back towards the admitted market, but not necessarily in a meaningful way. So I wouldn't necessarily call that out as a significant headwind in any way for 2026, but it's really the continuation of the property pricing declines that we saw intensify within the fourth quarter. On top of that, Tim mentioned the fact that in casualty, there are a number of different pricing conditions that are going in a lot of different directions. All of that, we expect to be favorable to us. But that strong growth that we experienced in 2025, we expect to moderate within 2026. So those are the 2 things that I would call out. We had -- for the fourth quarter of 2025, we also had timing related to some of the construction business. That for us was stronger within the third quarter. We also had a stronger third quarter as it related to transactional liability, all headwinds or potential headwinds that we had called out in the third quarter as we headed into the fourth. But really, the 2 trends that we're looking at for '26 that are continuing is around property and moderating casualty growth. Tim, anything you'd want to add on either of those? Timothy Turner: Sure. Elyse. I would just add that, obviously, property is the big headwind here, but we have several niche firming phenomenons going on in casualty and professional liability. So the flow itself up 8% in the stamping offices remains very opportunistic for us. We're capturing a significant amount of new business coming into the channel, and we're winning in head-to-head competition with other wholesale brokers. So we believe there's plenty of new business for us to capture this year, and we continue to look for new innovative ways to broker that business and underwrite it. We can name a few niche firming phenomenon as you can take with you, but sports and entertainment would clearly be one of them, lots of consumer product liability, loss leaders in the reinsurance world, tough casualty risk with latency issues, public entity and municipality business really firming up for us, and social and human services and transportation. So lots of opportunities with increased flow and demand for our services, and we feel really good about '26. Elyse Greenspan: And then my follow-up question. We've seen the broker sector really underperformed this week just on some overall concerns about AI really hitting the group. I would just love to get your views just relative to AI impacts on Ryan and just the brokerage sector at large. Patrick Ryan: This is Pat. We look at AI as an ally, not as an adversary. Lots of opportunities for us to embrace AI and improve as we mentioned, the tools for our people to serve our clients even more effectively. We also believe that there's going to be some significant efficiencies through AI. We can't quantify them at this time. We're very excited about them. I've had experience over the years or people have always said brokers are going to be disintermediated. What I want to emphasize is that the brokers and we are leading this in the organic growth phenomenon that we have, a timeless value of advice and advocacy, and we're going to get efficiencies but specialty skills that our underwriters and our brokers have in these practice group verticals. They have the trust and relationship with the markets and with the clients in terms of the dynamic changes that are occurring, both in carrier appetite and frankly, in new risks and new ways to design, but also a clear understanding of which are the markets to take those 2. And that appetite changes fairly quickly. So we've got tremendous tailwinds in improving our productivity, improving our speed to market. Speed to market in our space is critical. And we know that when we get a great design product with competitive rates and terms and conditions. And we do that promptly. That accelerates our growth because the brokers are smart, they see the opportunity and they want to serve their clients. So we advocate every day, all day long on behalf of our clients. And so AI is going to help us serve our clients more effectively and faster. So that's how we feel about disintermediation. I've been resisting that term for over 30 years. Operator: Our next question will come from Alex Scott with Barclays. Taylor Scott: I had for you is on the app for construction. I know you mentioned there's still a lot of projects that haven't started up yet. But can we think about some of the comparisons when we consider the '25, I think, already began to have maybe a little softness in the growth in construction. As you lap some of that, does it become a little bit easier and less drag as we get into '26? I'm just trying to understand that part of your business and also just thinking through the acquisition you did. Timothy Turner: Yes. The construction segment and practice group for us remains very, very strong. Keep in mind that a large percentage of our construction business is renewable. So we write artisan subs, GCs, all the New York construction lines, they're renewable. What you see and what the headwind is all about are these large infrastructure projects, including residential construction projects, there's been a slowdown, not in flow. Our flow is very strong. We believe we're industry-leading. And we're getting them quoted, we're getting them teed up. But the macroeconomic pressure and the interest rates have slowed down the timeline between submit to quote to bind. So these projects are quoted, they're teed up, and the financing is just taking a little bit longer. So you saw a lumpy '25 as a result. We had some unbelievable victories in large construction projects, data centers. And then there was a slowdown. So we're still very bullish on it. We believe it will grow exponentially, and we believe we're the leading intermediary and underwriter in the construction industry in the U.S. Janice Hamilton: I would just add from an outlook perspective for 2026, just given the continued uncertainty from a macroeconomic perspective, it is still early -- too early to tell effectively how that will play out in '26. So we have a very strong pipeline, but those macroeconomic headwinds and visibility there do give us pause in terms of the timing of when some of these might hit. Timothy Turner: Absolutely. Taylor Scott: That's helpful. And the share repurchase authorization, can you talk a bit about that and just how you're viewing the M&A environment currently, particularly in light of, I guess, sort of the currency and your own stock valuation and what you're seeing for private equity valuations and how that all plays into capital management. Patrick Ryan: Well, I want to start off by saying the share repurchase is not in any sense diminish our commitment and enthusiasm for M&A. We're committed to -- that's the #1 priority for our capital allocation. But quite frankly, with the compression of our stock, and we look at the true value as we look at what we're going to -- how we're going to grow in the near term and the long term -- intermediate term and long term, we consider it to be a great investment for our shareholders and that improve shareholder returns. And so we're easing the opportunity, simple as that. Janice Hamilton: And then from an M&A perspective as well, you mentioned that it is our top capital allocation priority. Right now with the transitioning market that we face, we need to continue to be very disciplined in evaluating potential M&A criteria, all of our criteria to ensure those are met before we move forward with any acquisitions. So it's really about ensuring that we balance and utilize this program opportunistically because we do believe, as Pat said, given the dislocation in our valuation compared to our confidence in our outlook that this is the best use of our capital at this time. Operator: Your next question will come from Brian Meredith with UBS. Brian Meredith: Two questions here. The first one, more short term. The second 1 is more longer term. In the underlying growth guidance, I'm just curious if you can kind of give us a little sense of what client demand you're expecting? I mean are you seeing clients buying additional coverage with some of these price decreases? Or is the fact that you're seeing some economics uncertainty, you're not quite sure that's going to happen. I thought that would have been a nice offset. Timothy Turner: Brian, I would say this, that most commercial buyers of property and casualty insurance are connected to lender agreements and loan covenants. And so those limit requirements are prequalified early on in our approach to marketing these accounts. So we don't really see a change so much in the limits that they're buying, but the structure demands are a little bit different. So higher retention levels in certain accounts, alternative risk, as Pat mentioned many times, comes into play on the most difficult risks in the United States. So having the ability to be flexible for us to be able to structure these accounts in such a way that meets the unique needs of these buyers is important. And so we feel very confident that we can answer the bell on even the most difficult risks that we see in America. So I would say this that we don't see any measurable trends of buying less. It happens, but there's not really a trend that we can put our finger on. Brian Meredith: That's helpful. And then from a longer-term perspective, is the, call it, high single-digit organic growth that you're looking for in 2026, call it maybe a more normalized environment. And how are you thinking about these talent investments that you talked about last quarter factoring into organic growth, obviously look into the latter part of this year and into 2027? Janice Hamilton: Brian, I thank you for the question because I should have highlighted. From our perspective, high single digits. We are pleased with that expectation for '26. We believe that, that will be industry-leading growth. And our expectation, as we outlined last quarter, is the continuation of producing industry-leading growth going forward. When we think about talent, I commented last time that we expect that these will -- these new talent hires will contribute to margin pressures in the short and medium term. 2026 will represent effectively the first full year of that investment. We anticipate that they will begin to contribute to our organic growth from effectively day 1. But obviously, we need them to continue to abide by the restrictive covenants. So we anticipate that our ability to see the accretion from these investments that we've historically seen that are the most accretive investments we can make do take from 2 to 3 years. Tim, anything you'd want to add? Patrick Ryan: I'd like to add that we are guiding for 1 year forward. And we want to make sure that we're clear that this diversification of our offering to our clients has improved our ability to serve our clients greatly. But it's also -- is adding a lot of balance to our portfolio. So for example, we are strongly committed, and we're growing quickly as you're aware, in reinsurance, reinsurance underwriting. And that's a de novo. That's all just huge capital returns on capital, I should say. And more and more of our business is involving reinsurance, underwriting, managing underwriting. We're not a broker on that, managing underwriting. But alternative risk is something that we've been talking about. Those projects got pushed forward and not enacted as anticipated in Q4. But we're positive that there's going to be good growth on alternative risk. And those are reinsurance relationships. Additionally, our benefits start-up has gotten really good leverage. So as we go into '26 and on through '26, the diversification beyond and to help balance the E&S volatility, we're very excited about that. And so we're guiding high single digit because all brokers are under pressure right now. But as I said, that's for 1 year. We're not giving up. We're built for double digit. And that diversification is going to be a factor and down the road and getting to that, back to that. Operator: Your next question will come from Meyer Shields with KBW. Meyer Shields: So up until recently, I guess, there's a 35% margin guide for 2027, and you've been very clear about what's postponing that. But I'm wondering how we should think about the longer-term potential as good as the $80 million of savings is by 2027, that's probably, I don't know, less than 200 basis points of margin expansion. I was hoping you could just tie those ideas together? Janice Hamilton: Meyer, thank you for the question. This is Janice. So you're absolutely right. Last quarter, we deferred the goal of the 35% margin target beyond 2027. What we've talked about before is the expectation of modest margin expansion in future years -- in most years, right, allowing us to continue to invest in the growth of the business. Project Empower is intended to support the efficiencies that we've talked about to contribute to that modest margin expansion in most years. But at this point, we're not putting a time line around it. We continue to focus on ensuring that we're investing in talent, de novo formations, new product opportunities, and ensuring that we're delivering the right solutions to our clients. So we believe that 35% is still a realistic target for us, but we're not putting a date around when that may come to fruition. Meyer Shields: Okay. That's fair. I understand that. And I guess the question for Tim, I'm not sure how to answer this. But we've obviously heard a lot about significant rate decreases in -- during 1/1. And I'm wondering whether the perception of margins that will exist in primary property taking into account cheaper reinsurance, do they really support another full year of 25% to 35% rate decreases, especially in the back half of the year? Timothy Turner: Meyer, I would say this that it's hard to even conceive that the market could continue to cut rate at that level. But we're forecasting that. We're looking at it conservatively. There seems to be no let up. It's been a weak storm season, 2 years in a row, and we're not counting at it. But what we are counting on is fighting head-to-head to win new business and capture any new business that comes into the property channel. As you know, we've made some key acquisitions like Velocity. It strengthened our practice group vertical. So whatever is available, whatever we can capture in property, we'll do that. But like professional, you witnessed it a couple of years ago when cyber and public D&O took a dive our professional liability brokers were resilient, and they found other business, health care business, social and human service business, and now they're in a great double-digit growth trajectory. So we expect that from our property brokers. We expect them to find convective storm, sensitive business and flood sensitive business and to scrap and claw and find a way to grow. So we're very, very proud of the performance in the space of the headwind that they had, and we expect a similar performance in '26. Operator: Your next question will come from Andrew Kligerman with TD Cowen. Andrew Kligerman: I'd like to follow up a little more on the AI question. I've gotten quite a number of investors asking me, why wouldn't it be easy for a smaller wholesaler to create an app with AI, that's very speedy, and it would enable that smaller broker much smaller than Ryan to reach out to multiple specialty carriers as many as Ryan and they could go toe to toe. And I have my own thoughts on it, but I'd love to hear why and how there would be barriers that would keep Ryan front and center versus the startups and the smaller players that now have these AI apps to help them along? Patrick Ryan: Well, the AI app is one thing. It's the intellectual capital and it's the relationship with the market and the broker, the trust of that relationship, you can't just walk in and say, "Hi, I've got an AI app and I can now compete with the big guys. The AI app is an enabler. It's not anything more of an enabler. Can replace the trust, the adaptability, the flexibility, the understanding of what is the best market to place that risk in. We're not worried about the smaller guys coming in and leveling the playing field. It's all about our delivery, our delivering with our AI, and we're confident that we're going to be very effective with it. Andrew Kligerman: My follow-up is around the contingent and supplemental commissions. They were up quite materially year-over-year. They represent about 6% of revenue. How do you -- how are you thinking about -- in this pricing environment, contingent and supplemental commissions. Is it likely to be a headwind as you head into '26? I thought I heard Janice say it was actually a natural hedge in softer markets. But what are your thoughts there? Patrick Ryan: Yes. I'll let Janice add to this. But I think broadly speaking, these PCs represent years of measurement of profitable underwriting. And you're certainly seeing it emerge in the publicly reported carriers. We feel we're driving those great results for our partners. You've seen them profit commissions grow steadily with us. I believe our entire public life cycle. And based on our underwriting performance of the last several years, we do expect continued strong results. Janice Hamilton: And I think I also noted in my remarks -- sorry. Happy to just fill this one out, a touch more. So for 2026, we're expecting profit commissions and supplemental effectively to be relatively stable. The benign storm season that we saw within 2025, obviously produced some opportunities for additional profit commissions. As Miles said, these span a number of different years. So it is a number of playing at different times. But we're obviously going to start the year with an expectation that we would have a normal cat season effectively and there would be some anticipation of not having that same level of exceptional profit commissioning from '26. So the difference between being a natural hedge and what we're expecting for '26, I think that they will align over time. Operator: Our next question will come from Rob Cox with Goldman Sachs. Robert Cox: I just wanted to follow up on the organic growth guidance, high single digits for 2026. I'm curious what you think the E&S market as a whole will grow embedded in that organic guidance? And if you expect as we -- if we get into the outer years, would Ryan Specialty still be growing in excess of the E&S market as you look to deliver on the industry-leading organic growth? Timothy Turner: Well, we just received the stamping results and they're 8%. And so we try to outpace the growth and the flow of that business, the new business coming in, by capturing existing E&S business. So it's always a combination of that. And -- but we don't see the flow of E&S business subsiding much more. We believe there will always be loss leaders in the reinsurance world and dumping and shutting in these high-hazard specialty areas and property and casualty, Rob. So a big advantage we have is this lens and this optic that we have. When something creates problems for the standard markets, we see it very quickly, early on, and we can formulate these underwriting solutions, and broking expertise is very quickly in the verticals and capture the businesses that's being dumped. So we're certain that '26, '27 will bring more of those kind of incidents in situations where there's more dumping and shedding. We see it right now in public entity and municipalities, higher education, just tremendous losses in the reinsurance world that cause the dumping and the shedding. So we're counting on that. It's never let us down and we're faster, nimbler and quicker to create these solutions than we've ever been. So we welcome it. Janice Hamilton: And Tim, I might just add. The E&S market may not grow in the teens or 20s every year, but we believe it will continue to outpace the growth of the admitted market over the long term. And [ again we cannot count on our ] ability to take market share from our wholesale competitors. Robert Cox: Yes, indeed. That's helpful. And I just wanted to follow up on some of the casualty business. It seems like in spots is getting incrementally a bit more competitive. I was just curious on what you would chalk that up to? Is it just carriers incrementally less optimistic on property giving rate decreases? Is it trend has been behaving better in recent years. Just curious your thoughts. Timothy Turner: Well, Rob, I would kind of carve it up like this. You've got low to medium hazard casualty business and then medium to high casualty business. The softer part of the casualty market is medium hazard. So some of that is getting rate cuts, some of that's going back into the admitted market. Not a lot, not hardly measurable, much more in small commercial. We're seeing some movement there. But the main practice group verticals that we're known for and where we're needed the most, that would be construction, that would be transportation, sports and entertainment. I've mentioned a number of them. Those high-hazard niches that, again, are loss leaders in the reinsurance world and have a latency to the IBNR part of the risk. They're continuing to stay solidly placed in the E&S market. And so we're very bullish that we'll capture more and more of that business in '26. Patrick Ryan: I would add one other point. The profitability that carriers have realized in property because of the benign storm seasons have driven them to get more competitive on casualty risk. So some of that capital is being shifted in the casualty market and making that more competitive. But we have time for one more question. We've gone over a little bit. Operator: Your final question will come from Matthew Heimermann with Citi. Matthew Heimermann: A couple of questions. One was, it was noticeable to me that the wholesale growth you accelerated a lot. And I think accelerated more than some of the aggregate statistics would suggest for what's happening in the E&S market. So I wasn't sure if that was disproportionately the property we're talking about or flow or just unexpected volatility within just how the number is sorted out. Timothy Turner: I would attribute most of that Matthew to the property market, that's really slowed those numbers down. But again, we believe there's professional liability. There's a casualty business that I've mentioned that continues to firm and hence the 8% increase in stamping fees in the fourth quarter. So we're watching those niches carefully. And we -- as we said, we can move faster than our competitors to capture that business when these situations occur. Matthew Heimermann: I was curious with respect to the change in the outlook and the uncertainty and given that it looked like it was traditional wholesale brokers that was kind of a softer piece of the quarter and I think the focal point of most of your discussion on the call, is there any change to how you're thinking about the delegated underwriting side of the house or the binding authority side of the house? Or is it disproportionately the wholesale brokerage business and where that macro uncertainty piece and the property is not vested. Miles Wuller: Matt, it's Miles. Thank you for the question. I'll open the response. So we were proud of the results of the quarter and the year. I think Pat and Tim and Janice have been clear that over the last 18 months, we see an ongoing opportunity set and delegated both in utilization, but also a bit of a penetration into balance sheets that have not previously delegated. And I want to emphasize some comments Pat made earlier about the diversity of our underwriting portfolio. So when you see that specialty in our financials, that really represents 2,000 colleagues dedicated to P&C insurance, treaty and facultative reinsurance, health and benefits, alternative risk and alternative capital. And we have been recognized by the industry press as one of the largest -- or the largest provider, and we think the feedback is sustained from our partners that we are a leader in capability and sophistication and results. And the reality is we have really parlayed those advantages, the investment in the platform and the results to continue to develop new products, meet the needs of the wholesale community wherever possible, and manage incremental carrier capital. So we continue to have an exciting outlook for our delegated practice. Patrick Ryan: Okay. Well, thank you for excellent questions. Your support. Apologies for going over time, but there were a lot of great questions. We look forward to talking to you again in the near future. Thank you.
Operator: Welcome to BioGaia Q3 Report for 2025. [Operator Instructions] Now I will hand the conference over to CEO, Theresa Agnew; and CFO, Alexander Kotsinas. Please go ahead. Theresa Agnew: Hi. This is Theresa Agnew, CEO of BioGaia. We are here to present our Q4 results. So first off, our financial highlights. We had strong organic growth for the quarter of 32%. We had an EBIT margin of 27% and overall free cash flow at SEK 77 million. In terms of an overall summary, for the year, we hit SEK 1.5 billion, an increase of 14% in organic growth compared to last year and overall 8% growth adjusted for currency effects. In the fourth quarter, as I said, we had 32% organic growth and 21% including currency effects. We did experience some order variability in the fourth quarter as is typical across some of our quarters, and that was approximately SEK 35 million. Our overall operating profit for the quarter was SEK 121 million, which is an increase of 17%. And our EBIT margin, as I said, was 27% for the quarter. In terms of our strategy, we have 3 strategic pillars. Our first is what we call grow the core, and these are our core health areas, of which gut health, colic is a part of that for infants, oral health and immune health are our 3 core health areas that we focus on through our marketing and commercial excellence. Our second strategic area is what we call expansion through direct markets. So I'll talk about this a little bit in terms of how we have been expanding our business through new direct markets in 2025. And then our third strategic pillar is what we call breakthrough innovation. So think about this as market creation opportunities for probiotics, where probiotics are not used regularly. And the foundations that underpin our strategy are, of course, our people and culture, investing for profitable growth, digital as an enabler of our business in terms of how we go to market with our omnichannel approach as well as digitizing our business internally for more productivity and efficiency. One of our foundations, which has been a foundation for many years is driven by science. It's a key differentiator of who we are as a brand and in our products. And then finally, sustainable solutions, where we're focused on sustainability in multiple areas, packaging, raw materials and so forth. How did we deliver on our strategy? So in terms of our first area, grow the core, we're driving growth, as you saw in both the Pediatric and Adult segments for the quarter as well as for the year. We're investing in marketing and selling activities to drive very strong growth in the direct markets. And we are growing ahead in our direct markets, so strong double-digit growth versus our partner markets. We continue to roll out new products. So we launched a product called Gastrus Pure Action In the fourth quarter of 2024. And so in 2025, we continue to roll that out across a number of countries. And I'm very happy to report that in Q4, this product really set a record. It is the third highest growth contributor in terms of SEK 1 million to our business. So it's doing extremely well in the markets where we've launched. And then finally, in Q3, we launched Prodentis Fresh Breath. We launched that in the U.S. market and have also been rolling that out in Q4 and we'll continue to do so in 2026. So these 2 product launches have been very beneficial for us in terms of driving our growth, and we'll continue to roll them out in more markets in 2026. In terms of our second strategic area, expansion through direct markets, our direct market sales now in Q4 represent 40% of our sales. And as I said, are growing ahead of our partner markets. So this has been a change over the last 2 years in terms of our sales used to be around 30%. Now it's 40% driven by our direct markets. We launched in France in 2025 and also the Netherlands. So those 2 markets are doing well. France had a strong Q4 sales with record sales. Australia, we had launched in 2024, and that market, in particular, is doing very well for us. Our Protectis drops are now #1 in the market in Australia, whereas they previously were not with our previous partner. And in 2025, we had record sales in our U.S. market, SEK 316 million, which this represents 30% organic growth. So very strong performance by our U.S. market as well as our Canadian market, also strong double-digit growth. In the terms of breakthrough innovation, in 2025, we established a new subsidiary called BioGaia New Sciences with a strong focus on skin health. We have our probiotic ointment that we had launched and now is rolling out to more markets in 2025 and is also doing well where we launched it. So this is our overall how we've delivered on our strategy in Q4 as well as in 2025. In terms of our product launches, as you can see, we had a lot of product launches in Q4. So this lists all the different countries where we have launched different products, whether it be Pharax drops, which is one of our immune health products, Prodentis Fresh Breath lozenges, as I mentioned, Gastrus products, Prodentis products, so various new launches across markets in Q4. And as you see here, we've highlighted the markets where we rolled out Gastrus Pure Action, which I mentioned in Q4. Some of the key events that we have talked about in the quarter. In October, we announced a study on a new patented strain, which is called BG-R46, and that was published in a journal called Beneficial Microbes. Also in October, we talked about a study on a new bacteria for us that actually produces serotonin. So this is a first for bacteria. So more to come on this. This is a preclinical discovery. So we'll be doing more work on this in the future. And as you know, serotonin dramatically affects the brain in terms of mood and overall well-being of mental health. And then just recently, in February, we announced that our fourth quarter results exceeded our market expectations. And the Board is proposing an ordinary dividend according to our policy and also an extra dividend for a total dividend of SEK 4 per share. And overall, when you look at the business for Q4, as I said, we had 32% overall organic growth in the quarter for Pediatrics, 34%, for Adult, 27%. So Pediatrics represents about 75% of our overall revenue. And in the quarter, we saw some significant increases for Protectis drops in China as well as France. And also in the quarter for Adults, we saw some significant increases in Gastrus as well as Prodentis, mainly in the U.S.A. And in the chart, you can see our quarterly variations over the last 2 years. So you can see the various fluctuations. Sometimes we'll have more orders from partners in one quarter, less orders from partners in another quarter. And in terms of our sales per segment, I mentioned Pediatric and Adult for the quarter. But overall for the year, we had organic growth in Pediatrics of 11% and 22% in Adult Health. So both of these areas growing very well overall for the quarter as well as for the year in 2025. In terms of our regions, for Europe, Middle East, Africa in the quarter, we grew 34% and this is organic growth. And in terms of the year, we grew 1% in Europe, Middle East, Africa. A couple of comments here. For the quarter, we saw some increases in sales in France and Eastern Europe as well as in Italy. But also overall for the year, we took our business direct starting in April. So in Q1, we did -- we had much lower orders from our partner and also we had a period of time where our partner sells through their inventory. So then it takes a while then for our sales in the direct market to build. So that's also what impacted the overall year for EMEA as well as Germany. So we're now taking Germany direct. We've now launched that in Q1, Germany and Austria. So same thing in 2025, we see our distributor partner have less orders, so we have less overall sales, and then we start to see that pick up. So we will see the continuing decline of those orders from our partner in the beginning part of this year, 2026, and then start to see the sales growth for Germany in the second half of 2026. So for Asia Pacific, for the quarter, organic growth of 46%. Overall for the year, 19% organic growth, very strong for the quarter in China and the Philippines. We also had some quarterly variations for China in terms of orders in the quarter for Q4. So overall, Asia Pac doing extremely well in terms of overall growth, strong performance, as I said, China, Philippines as well as Indonesia for the year. For the Americas, for the quarter, we saw 20% organic growth and overall for the year, 22% organic growth. So in the Americas, as I said, U.S. is a standout market for us in terms of growth. So 30% overall organic growth for the year. In addition, we saw strong growth in Guatemala as well. And as we've discussed previously, especially in the U.S., we had increased our marketing investments to drive our overall brand awareness and equity and expand our market share, and we successfully did that in 2025. So now I will turn it over to Alex to go through the financials in more detail. Alexander Kotsinas: Thank you, Theresa. So if we start to summarize, we had a sales growth, as we heard of 21% from SEK 365 million to SEK 441 million. And we had a growth in gross profit of 25% to a margin -- gross margin of 74% compared to 71% in the same quarter last year. Our EBIT increased with 17%, and the EBIT margin was 27% versus 28% in the same quarter last year. As we heard, we had a total sales growth of 21%. However, we had considerable negative currency effects of minus 11%, so that our organic growth was 32% in the quarter. In terms of gross margins, we had an overall gross margin of 74% in the quarter compared to 71% 1 year ago. If we look at the 2 segments, Pediatrics increased its margin from 72% last year to 76%. This is mainly due to mix effects, both geographic mix effects and some product effects and also that we have done some price increases continuously here. And if we look at the Adult, we saw a slightly lower margin of 64% in the quarter versus 67%. This is really only related to some variation in some larger order mix effect that we had in the quarter. And as you can see for year-to-date, our Adult Health margin was 66% higher than in the quarter and also substantially higher than compared to the full year last year. So for the full year, we had an increase of our gross margin to 73% versus 72% a year ago, driven both by increases in margin, both in Pediatrics and Adult Health. If we move on to the operating expenses. Our total expenses were SEK 203 million in the quarter versus SEK 155 million 1 year ago, which was an increase of 31%. We didn't really have any adjustments in the quarter. However, we had it for the full year. For the sales and marketing, our costs increased 21%, basically in line with the sales increase. R&D costs increased 9%, administration, 8%. And then we had negative currency effects of SEK 6 million in the quarter. If we look at the full year, we had a cost increase of 18%. However, there were some one-offs in the same last year -- in the previous year in 2024. We had a write-down of an impairment for the MetaboGen acquisition, which affected the R&D costs. So if you normalize for that, our OpEx increased with 29%. For the full year, the sales and marketing also increased in line with what it did in the quarter, 21% and our administration costs increased 14% and we had considerable negative currency effects of SEK 40 million for the full year last year, which obviously affected our margin negatively. And this is mainly an effect of the weakening dollar versus the Swedish crown (sic) [ krona ]. We move on to the next to summarize the profit and loss. We had a total sales of SEK 441 million, OpEx of SEK 203 million and an EBIT of SEK 121 million, which then was a margin of 27% versus 28% last year and an earnings per share of SEK 0.98 versus SEK 0.81. And as we heard Theresa mentioned, for the full year, total sales of SEK 1.54 billion, an increase of 8% and an EBIT that was slightly lower, 3% lower due to the higher operating expenses and an EPS for the full year of SEK 3.29 versus SEK 3.48 last -- in the previous year. In terms of our cash flow, we had a cash flow from operating activities before changes in working capital of SEK 109 million, an improvement of SEK 14 million. The changes in working capital were, however, in the quarter negative SEK 25 million compared to plus SEK 9 million in the same quarter last year. This is mainly due to an increased number of receivables because we had a lot of sales in the later part of the quarter. So this will normalize in the first quarter this year. There is no one-off special effects. It's more an effect of the fact that some of the sales came later in the quarter, for example, those orders that -- the one-off orders that we mentioned. Cash flow from operating activities then at SEK 84 million versus SEK 103 million in the same quarter last year. We had very, very low investment -- cash flow from investments in the quarter, basically 0. Some cash flow from financing activities, minus SEK 7 million and a total cash flow in the period of SEK 77 million and the cash at the end of the period of SEK 800 million. And for the full year, we had a cash flow from operating activities of SEK 307 million, and we had a cash flow for the period of minus SEK 407 million, mainly then due to the negative cash flow from financing of the dividends, which were approximately SEK 700 million that we paid out last year. So with that, I hand over to Theresa for some final remarks. Theresa Agnew: So overall, in summary, our organic sales for the fourth quarter grew 32%. As we said, we had some order variability as we often do in the fourth quarter, approximately SEK 35 million. Our Pediatric segment, very healthy growth of 34% in the quarter. And overall, as I said, Protectis drops increased across all of the regions and mainly in China and France saw some significant growth. And the Adult Health segment in the quarter grew a very healthy 27%. So strong growth of Gastrus as well as Prodentis in the United States. All regions for the quarter delivered double-digit growth. All direct markets also delivered strong growth, as I mentioned. We, in 2025 as well as in Q4, invested in marketing activities to drive growth across our direct markets, specifically the U.S. is an area that we had strong investments in 2025. We did see strong double-digit growth in the quarter as well as year-to-date in the U.S., driven by these investments in marketing activities. We also saw strong sales in Europe, Middle East, Africa for the quarter. And as I explained, weaker sales overall for the full year, and this is due to establishing our direct markets of France and Germany. And overall, for the operating margin, 27% versus 28% last year for the quarter. So for the full year, we saw organic growth of 14%, 8% adjusted for currency. As we discussed, we have successfully delivered on our strategy with growing our core business around oral health, gut health and immune health. We are expanding our direct markets, very successful in driving growth in those markets ahead of our partner markets. And we've been successful in launching and rolling out new products across our global markets. And as I said, we have some particular very successful new products such as Gastrus Pure Action as well as now Prodentis Fresh Breath that we will continue to roll out in more markets in 2026. And as we look towards 2026, we remain committed to our ambition of growing low double-digit growth in terms of our top line, and we have a long-term EBIT margin target of 34%. So based on revenue, controlling our costs, we will see margin expansion in 2026 that will guide us more toward not quite yet to that long-term goal for margin. And we are proposing a Capital Markets Day in 2026. We have an annual strategy review process that we will be doing with our Board as we typically do each year. And then we will be doing a Capital Markets Day with more information to come on that later this year. So we open it up now to questions. Operator: [Operator Instructions] The next question comes from Mattias Vadsten from SEB. Mattias Vadsten: Can you hear me? Theresa Agnew: Yes. Mattias Vadsten: I have a few. So first one, in terms of understanding the U.S. sales growth. So the 30% organic sales growth you had here in 2025, sort of what products are growing the most, would you say? And what sort of efforts from BioGaia has been central to achieve this impressive figure? That's the first question. Theresa Agnew: Yes. So in answer to that question, the products that are growing the most are Prodentis, so the adult oral health area. So Prodentis, we do a lot of activities with dentists and dental hygienists to build recommendations for our brand. And then we see that strong growth through online channels. as well as last year, we got distribution for Prodentis in CVS, which is the #1 pharmacy chain in the United States. Most of our growth, I would say, is coming from online sales for Prodentis. So Prodentis is one of the winners. Another one is Gastrus, our adult gut health area. So we've seen strong online sales for Gastrus as well as strong sales for our Protectis drops. And our Protectis drops, we have sales online on Amazon as well as other channels. But in addition, in 2025, we expanded distribution into Walmart. That's going extremely well. Walmart is very pleased with the growth and is now expanding our product into more stores in 2026. So those are the main products where we saw growth in the U.S. Mattias Vadsten: And then I think you mentioned what share of sales was direct markets in 2025. If you could just remind me of that figure, I didn't. Theresa Agnew: Yes. So it's around 40% is now direct market sales. Mattias Vadsten: In full year '25 or in Q4? Theresa Agnew: Both. Mattias Vadsten: Okay. And then you focus on immune health, gut health, oral health, of course. And sort of could you -- you grew 14% on a group level for 2025. Could you just say, are you sort of satisfied with all of those 3 areas? Or could you expect better momentum in any of them if you follow what I mean. Theresa Agnew: I mean I would say we are very satisfied with growth across all of our sectors and extremely pleased with the gut health and the oral health areas. Those are the areas that are disproportionately growing for us across the world and also in very specific markets as well, such as I was talking about the U.S. with oral health, but also Canada with oral health, I would say, is another market, Japan as well as some of the other Asian markets. Mattias Vadsten: Perfect. And then last one, if you see a more modest OpEx growth from Q1 onwards on a year-on-year basis, driven by... Theresa Agnew: So for 2026 -- I'm sorry, go ahead. Mattias Vadsten: No, if you see that coming through and if you're also sort of looking at more modest U.S. investments? Or how do you view that? That was my last question. Theresa Agnew: Yes. Yes. So we look at -- for 2026, we'll be looking at controlling overall costs and OpEx so that we can drive our margin expansion with also strong revenue growth. And in the U.S., we will be spending less than we were previously in terms of our marketing expenditure. We learn what channels have the highest ROI for us and then focus our marketing spend in those channels with those creative executions. So we will be continuing, of course, our always-on marketing spend in the U.S. and in other markets. And we just -- we have a lot of information now in terms of what drives the strongest ROI, and we'll continue focusing on those particular channels. Operator: The next question comes from Mattias Haggblom from Handelsbanken. Mattias Häggblom: So even if I adjust for the one-off order, organic growth was 22% in Q4 despite a very tough comparable last year. So help me understand what that suggests for the momentum in the business heading into 2026 because I guess the instinct is, of course, that we should think of this pull forward order as Q1 will then be weak as a consequence. But if I adjust for the order and you grow 22%, that tells me another story. So help me understand the dynamic of the 2. Theresa Agnew: Yes. So why we communicate some of the order variability is because we do see this sometimes in our quarters where some partners will order more in one quarter versus another. So we like to signal that. So especially when we've had a strong quarter like Q4, so we make sure that estimates as we look at future quarters are appropriate. So we will continue overall as we look at growth, but not at the levels of our Q4 because we've had some orders that move in from Q1. Hopefully, that makes sense. Mattias Häggblom: So maybe -- yes, sure. Absolutely. We welcome the disclosure. But I'm still trying to better then understand the 22% growth adjusting for the one-off order, which suggests that the business is having a very strong momentum. So maybe although with the risk of repeating ourselves, remind us, in particular, what drove that strong underlying growth even adjusting for the one-off order? Alexander Kotsinas: Yes, I can try to answer that. I mean, as you can see, we had exceptionally strong growth in mainly -- well, in APAC and in EMEA. And this is also those areas where we did have those exceptional orders, so to speak. So -- but you can probably guess that, I mean, we would have a very strong growth even excluding that effect in EMEA, which is driven then by what we mentioned, the strong development in France, for example, where we have a strong development there and also some other EMEA markets performing a lot better, so to speak, which we saw sequentially last year during the quarter. So actually, EMEA from being negative was less and less negative and then turned into growth now in the fourth quarter. So in EMEA, it's driven by an underlying improvement in several markets in EMEA. And then it was a continued very strong development in Asia Pacific, even excluding the Chinese variable variation in orders. Mattias Häggblom: That's helpful. And then perhaps the German transition. So is it possible to help us understand the magnitude of that transition? Is it as large or smaller than the French transition? Just to understand the dynamic when you move from the distributor to direct sales? Theresa Agnew: Yes. It's a little bit smaller than France because France is one of our largest European markets. So it is smaller, but there still is an effect because in Germany, we've had strong sales, not just for our Protectis drops, but also for Prodentis. So there's that transition across both of those key areas. Mattias Häggblom: That's helpful. And then in terms of capital allocation, I'm curious to understand, we get the extraordinary dividend, and we know the policy of 50% plus up to 100% extraordinary dividend. But we have a new chair, and we have a somewhat different shareholder cap table basically. So has the management team discussed alternative ways of distributing capital back to shareholders beyond the extraordinary dividend, including buybacks? Theresa Agnew: Yes. So we have the management team as well as the Board, we have discussed various ways to return value back to the shareholder, and we'll be having more discussions on this as we go through the year. Mattias Häggblom: That's perfect. And my final one then is you spoke about the lessons learned in terms of marketing spend and what channels had in particular, best ROI. To the extent you can, can you share more color on where things work and where they work less so? Theresa Agnew: Yes, I can. So where they work better is when we use platforms to drive to our main sales channels such as Amazon. So there are some very specific advertising channels that you can use to drive consumers to specific points to purchase. So that works really well. And so we tested a lot of different channels, but we've also tested different amounts of spend, different creative. Your creative is a big part of your ROI. So also, we look at things such as there's more branded created. There's more things such as what we call user-generated content. So videos and testimonials of consumers talking about our brands. So we do a nice mix between those in our markets. But specifically, those channels that are driving to where our product sells the most have been very successful for us. Operator: The next question comes from Kristofer Liljeberg from Carnegie. Kristofer Liljeberg-Svensson: Yes. Coming back to this, the phasing effects and volatility in orders. So if you look at full year 2025, would you say that the total effect has been neutral, positive or negative? Theresa Agnew: I mean, I'd say overall kind of neutral, I guess, when you look maybe a little bit more. But if you look past at our quarters, we have some order variability. You can see that in terms of our overall business as well as our Pediatric and Adult business. And if you look at the page earlier that we were sharing in the past quarters, sometimes our Pediatric business is a little bit different in terms of quarterly variations versus the Adult business. So overall, we will continue to see order variability because of our distribution network through our partners. As our direct market sales get to be a larger percentage, we'll see less of that order variability. Kristofer Liljeberg-Svensson: Okay. So even if you were growing 14% organically here for the full year, that shouldn't stop you from continue to grow double digits in 2026. And I'm thinking specifically here also as you will scale back a bit on U.S. marketing, which I think has boosted sales somewhat in 2025? Theresa Agnew: Yes. I mean our ambition is to continue to grow and to grow in the low double digits. Operator: The next question comes from Mattias Haggblom from Handelsbanken. Theresa Agnew: We can't hear you. Is there a question? Mattias Häggblom: Apologies for that. So a question on direct sales. You said it's up at 40%, growing faster than the rest of the group. Is it fair to assume that you anticipate direct sales to grow faster than the group also in 2026 based on what you know today? Theresa Agnew: Based on what we know today, yes. We anticipate that we will continue to see this, especially because we've just established our direct market in France, which is a large market for us in Europe as well as Australia is growing well, Canada, U.S., Finland. So a lot -- we have much higher growth in our direct markets, and we anticipate that to continue. Alexander Kotsinas: And the addition of Germany. Theresa Agnew: Yes. Mattias Häggblom: And a follow-up to that then as my final question. Is there any ceiling in the business model? Or how do you think about these 2 different sources of sales for the company over time as it continues to march north as its growth faster, so to say. Where do you think things shakes out over time? Theresa Agnew: Yes. I would say we anticipate the percentage of our sales from direct markets to accelerate and grow higher because we have a lot of our larger markets now as direct markets. So that is what we anticipate. So that 40% will get larger over the coming years. But our distributor partner model is a very important part of how we go to market. And we are in markets -- we're in over 100 markets globally. So we don't ever anticipate that we will take all of our markets direct. So there will be key strategic markets where we have our business as a subsidiary. And in those markets, as you know, that's where we drive the marketing, the selling activities, the new product launches, all those aspects. So it's a very different setup for us versus working with a pharmaceutical company as a distributor partner. But we do, in answer to your question, we anticipate that percentage will continue to grow over the coming years. Operator: The next question comes from Mattias Vadsten from SEB. Mattias Vadsten: Just 2 follow-up questions, if that's okay. First one, I remember in Q3, we talked about a slow Eastern Europe development, and it sounded like you had a big distributor there covering, I don't know, if I remember, 14 or 16 markets. So just what happened there? And if that has coming back as you expected and if it's sort of good momentum in that region? Theresa Agnew: Yes. So in terms of Eastern Europe, we had a very strong 2024 across those markets. And then in 2025, we saw a little more softness in certain markets. Poland, which is the largest of those markets. And as you said, it's about 16 markets across Central Eastern Europe. Poland is really coming back nicely. And our partner has invested more in terms of selling and marketing activities in that market. So we anticipate Poland, a really good growth market for us for the future and one of the top probiotics markets globally. Some of the other markets are much smaller in terms of size. And so -- but we anticipate solid growth in those areas. Mattias Vadsten: That's very clear. And then on the U.S., you say 30% growth for the full year. I don't remember -- last quarter, we talked about some 25% year-to-date. So if you're willing to give any color on how Q4 organic growth looked like in the U.S. That's my last question. Theresa Agnew: Yes. We haven't given information specifically on the quarter-by-quarter. So we will report the U.S. on an annual basis more. But we've had some really nice consistent growth in the U.S. in the strong double digits really throughout 2025. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Theresa Agnew: So this is Theresa. Thank you so much for your questions and for listening for our Q4 results, and we will then be presenting later this year on Q1. So thank you so much.
Operator: Thank you for standing by, and welcome to the Dutch Bros Inc. Fourth Quarter 2025 Earnings Conference Call and Webcast. This conference call and webcast is being recorded today, 02/12/2026 at 5:00 PM Eastern Time and will be available for replay shortly after it concludes. Following the company's presentation, we will open the lines for questions, and instructions to queue up will be provided at that time. I would now like to turn the call over to Neil Patel, Dutch Bros Inc. Senior Manager, Investor Relations. Please go ahead. Good afternoon, and welcome. Neil Patel: I am joined by Christine Barone, CEO and President, and Joshua Guenser, CFO. We issued our earnings press release for the quarter and year ended 12/31/2025 after the market closed today. The earnings press release, along with a supplemental information deck, have been posted to our investor relations website at investors.dutchbros.com. Please be aware that all statements in our prepared remarks and in response to your questions, other than those of historical fact, are forward-looking statements and are subject to risks, uncertainties, and assumptions that may cause actual results to differ materially. They are qualified by the cautionary statements in our earnings press release and the risk factors in our latest SEC filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q. We assume no obligation to update any forward-looking statements. We will also reference non-GAAP financial measures on today's call. As a reminder, non-GAAP measures are neither substitutes for nor superior to measures that are prepared under GAAP. Please review the reconciliation of non-GAAP measures to comparable GAAP results in our earnings press release. During the question and answer portion of today's call, please limit yourself to one question. With that, I would like to turn the call over to Christine. Christine Barone: Thank you, Neil, and good afternoon, everyone. Dutch Bros Inc. remains a powerful growth engine, and as we enter our fifth full year as a public company, our growth story is exceptional, both in terms of the results we are delivering and the expansive future potential that lies ahead. Our fourth quarter and full year 2025 results demonstrate the strong momentum we have in delivering our long-term strategy and were primarily driven by standout transactions growth of 5.4% in Q4. 2025 revenues grew an outstanding 28%, reaching $1,640,000,000, and have more than doubled since 2022. Our stellar 2025 performance was driven by 16% new shop growth from 154 new shop openings, along with system same shop sales growth of 5.6% for the year. 2025 new shop productivity remains elevated, as the refinements we undertook in our development process over the course of the past couple of years are clearly evident in our results. Throughout the year, new shop openings were consistently strong in both existing and in newer markets, showing our ability to successfully densify and become the routine while still fostering the brand love to welcome long lines of customers. 2025 adjusted EBITDA grew 31%, reaching $303,000,000 and outpaced revenue growth, fueled by exceptional transaction growth and new shop performance. Compelling four-wall economics with company-operated contribution margin at 28.9%, representing over 400 basis points of margin expansion since 2022. And over the same time period, adjusted EBITDA has grown more than threefold to over $300,000,000, marking a significant milestone over my three years at Dutch Bros Inc. This meaningful achievement underscores the strength of our durable model, reinforcing the confidence I have in the long-term opportunity ahead. Focusing on Q4, our results maintained the strength of the prior three quarters with broad-based outperformance across the business, across geographies, and across dayparts, with our brand continuing to resonate with customers. Q4 total revenues grew 29%, driven by healthy new shop performance, system same shop sales growth of 7.7%, and company-operated same shop sales growth of 9.7%, with both of these metrics led by strong transaction growth. System-wide AUVs reached a record $2,100,000, reflecting the strength of our people pipeline, the love for our brand, and the superior development execution engine we have refined and built over the past few years. Against this backdrop of impressive growth, we are transitioning smoothly into the next chapter of the brand's journey, with a clear rallying goal to reach 2,029 shops in 2029. The progress the team made throughout 2025, including the acceleration of our shop pipeline and investments in our capabilities, leaves me with tremendous confidence in this brand and this team's ability to drive share-taking growth for many years to come. As we leave a very successful 2025 behind, and enter 2026 at full speed, I want to recognize and sincerely thank our teams for making this past year a resounding success. Our people, the heart of our brand, remain the foundation of our differentiated shop experience. They have been our shining strength for more than thirty years, and our people will continue to drive us forward for years to come. Our Broistas’ ability to deliver a unique experience has been central to our growth and mission of being a fun-loving, mind-blowing company that makes a massive difference one cup at a time. That commitment continues to be a defining driver of our success. In 2025, we began the year with 400 regional operator candidates in our pipeline and ended with approximately 475, a figure that has nearly doubled since 2022. During that period, we have nearly doubled our system shop count and more than doubled our company-operated shop count, which now represents over 70% of our system shop base. We believe this pace of expansion and our goal of reaching 2,029 shops in 2029 is only possible with the depth and readiness of our people, who continue to scale our shop footprint with love, energy, and kindness. Turning to shop growth, 2025 was a landmark year, setting the foundation for what is ahead. We expanded into seven contiguous states, including our entry into North Carolina in Q4, bringing our system shop footprint to 25 states and 1,136 system-wide shops. In 2025, we accelerated the growth of our shop pipeline while significantly lowering our average CapEx per shop, providing improved visibility and confidence for shop openings in future years. During the year, the number of shops in our pipeline accelerated substantially, with shop approvals more than doubling versus 2024. Given this improved visibility, the road to 2,029 shops in 2029 remains very clear. In Q4, we opened a walk-up shop in Downtown Los Angeles. This shop provides a valuable platform for insights into urban-dense corridors where drive-thrus are harder to build. Since opening in late November, this non-drive-thru location has been our top-performing shop and has an order ahead mix at over three times the system average. While still early, these insights position us to be confident in the types of locations where we can be successful. Looking to 2026, momentum is expected to continue. We now expect to open at least 181 new system shops, which includes the recently completed acquisition of 20 Clutch Coffee Bar locations across North and South Carolina. This conversion opportunity accelerates our presence in the Carolinas and allows us to introduce Dutch love to these communities beginning later this year. Now let me share how we are strengthening competitive advantage through a focused set of foundational transaction-driving initiatives, along with our strategic growth drivers to broaden to a wider set of customers and occasions. In 2023, we made a deliberate shift to build a foundational top-of-the-funnel paid advertising engine. The results have been clear. Aided and unaided awareness have meaningfully expanded, while still leaving substantial headroom for growth. And now in its third year, our brand awareness strategy is being deliberately amplified through the rollout of the Dutch Bros CPG platform. Creamers, coffee pods, ground coffee, and ready-to-drink offerings are now available in many retail outlets. We were very pleased with the initial customer reception and see meaningful potential to continue building this over time. Paired together, paid media and CPG form a scalable high-ROI awareness engine, extending the brand beyond our shops, reinforcing daily relevance, while converting awareness into incremental shop visits. We continue to believe brand awareness remains a significant opportunity, making CPG one of our most efficient levers to continue driving durable long-term growth. Our innovations empower our Broistas, unlocking near-infinite beverage customizations and deepening the emotional connection we have with our customers. This innovation momentum clearly showed up in Q4, with a highly successful holiday LTO launch which demonstrated our ability to drive strong customer engagement in the quarter. In November and December, we reinforced our strategy of driving innovation beyond beverages through impactful merch drops, including the Passenger Princess car magnets and the Little Bros mini figurines, which cleared out within hours of launch. And alongside innovation, our loyalty program continues to scale. Dutch Rewards turns five years old this month, having just surpassed 15,000,000 members at the end of 2025. In 2025, approximately 72% of system transactions were attributed to Dutch Rewards, representing four points of improvement versus 2024. Looking ahead to 2026, we expect to continue expanding our customer targeting capabilities, reaching the right customer at the right moment, improving lifetime value, and driving high-ROI transaction growth. Together, these foundational initiatives form a long-term engine of innovation, personalization, and loyalty that expands our competitive moat. Beginning in late 2024 and into 2025, we built on our foundational drivers by layering in additional multiyear capabilities: order ahead, improvements in throughput, and our new food program. Together, these initiatives are designed to meaningfully reduce friction, unlock our shop capabilities, and expand our customer base and visit frequency over time. Our order ahead program has activated an underutilized channel and ended 2025 with approximately 14% mix in Q4. Order ahead has also proven to be a powerful catalyst for our loyalty program, driving Dutch Rewards penetration higher to 70% plus each full quarter since launch. Even with continued growth in Dutch Rewards membership, we continue to see registrations per shop and active users per shop trend higher, an indicator of sound shop loyalty and customer engagement. 2025 was also a pivotal year in establishing the foundation for sustainable throughput improvement. We implemented a new training model for our field teams and refined labor deployment by aligning labor to better match customer demand patterns. These efforts are delivering results, enabling us to support continued transaction growth while protecting the customer and Broista experience. To further build on our momentum, we welcomed Jen Summers as Chief Shop Officer last month. She brings deep experience in scaling high-growth restaurant brands while elevating operational excellence and customer experience. We are equally encouraged with the progress of our new food program, which continues to perform exceptionally well as we expand its rollout across the broader system. This represents another meaningful step toward lowering structural barriers to visiting Dutch Bros Inc. and expanding the set of beverage occasions. It is worth noting that one year ago, this program was limited to four shops in the greater Phoenix market, and by the end of 2025, we had thoughtfully expanded this program to over 300 shops across 11 states, with plans for the rollout to be complete by the end of 2026. Collectively, these initiatives strengthen our scalable shop operating system, one designed to increase speed, provide greater convenience, and drive share-taking growth. In closing, Dutch Bros Inc. remains exceptionally well positioned with a very clear strategy, strong fundamentals, and a long runway ahead. We are intentionally building this business with a long-term mindset, focused on growing through our people, and investing in our brand. We have the largest and most experienced pipeline of regional operators in our history, providing a clear line of sight to 2,029 shops in 2029. System-wide AUVs are at record levels, reinforcing strong shop-level economics and giving us confidence to pursue our long-term opportunity of 7,000 shops. New shop productivity continues to exceed historical levels, reflecting disciplined market planning, targeted strategic investments in our real estate capabilities, and increased paid marketing to build brand awareness. We continue to have top-tier growth. Over the last three years, we have more than doubled total revenues while also tripling adjusted EBITDA, demonstrating the strength and scalability of our model. We have ignited transaction growth in 2025, with a much larger comp base, delivering sequential year-over-year improvement in transaction growth, driven by impactful innovation, the expansion of Dutch Rewards, and continued adoption of order ahead. We have built a highly scalable and profitable model that quickly resonates with our customers and a value proposition that has been carefully unlocked over thirty years. And our fundamentals remain sound, as we have delivered nineteen consecutive years of positive same shop sales growth. Our approach is designed for winning in the long run, operating with discipline, focusing on long-term execution, and growing through our exceptional people. With that, I will pass it to Josh. Joshua Guenser: Thanks, Christine. I will provide a recap of our fourth quarter and full year 2025 results, along with an outlook for 2026. Our fourth quarter performance reinforced the confidence we have in our underlying transaction strength and our strong four-wall shop economics. For 2025, total revenues were $1,640,000,000, representing an impressive growth of 28%. System-wide AUVs reached a record $2,100,000. Adjusted EBITDA climbed to $303,000,000, outpacing total revenue growth with an exceptional increase of 31%. System same shop sales growth was 5.6%, with impressive transaction growth of 3.2%. And despite commodity cost headwinds, our 2025 company-operated contribution margin landed at approximately 29%, a testament to our persistence in balancing near-term pressures and strategic investments while continuing to build long-term customer value. Looking forward, as we expect coffee costs to normalize, we remain extremely confident in our ability to deliver our long-term contribution margin goal of approximately 30%. During the year, we opened 154 new shops, bringing our total system shop count to 1,136. For the fourth quarter, total revenues were $444,000,000, an increase of 29% or $101,000,000 over the fourth quarter of last year. System same shop sales growth was 7.7%, driven by standout transaction growth of 5.4%. In Q4, we saw broad-based strength throughout the quarter, with momentum driven from exciting innovation and Dutch Rewards. Additionally, we are beginning to see the impact of our new food program on comp, including both ticket and transaction lift, which is consistent with our prior commentary on the program. Looking ahead to 2026, we expect full year system same shop sales growth of approximately 3% to 5%, which assumes taking around a point of incremental price during 2026 as we continue to strengthen our relative value proposition, the impact of cycling strong transaction growth that strengthened over the course of 2025, the annual lap of order ahead, and continued excitement on the new food rollout, with early shop results suggesting an approximate 4% comp lift in shops that have the program. We rolled off a point of pricing in January and expect to roll off another point in early July. As a result, we expect the benefit of effective pricing to step down slightly in the back half of the year, while transaction growth comparisons begin to step up. We plan to continue to methodically roll out food across our shops throughout 2026, with the comp lift impact phased in throughout the year. As a reminder, we expect that nearly 300 legacy shops may not be able to accommodate the new food program. Our 2026 system same shop sales growth guidance contemplates approximately 4% to 6% in the first quarter, reflecting the strong results we saw in January, and less than a point of price taken at the start of the year, and a gradual step-up into the rest of the year. In the fourth quarter, we opened 55 new shops, with many opening later in the quarter and a few carrying over into 2026. Consistent with our prior commentary, these openings in 2026 represent incremental shops beyond our initial 2026 guidance, and all of them opened in January. As a result of these carryover openings, we now expect to open at least 181 system shops in 2026. Hyun Jin Cho: Representing 16% shop growth. This figure includes 20 Clutch Coffee Bar conversions, which were contemplated in our original shop guidance provided last quarter. This conversion opportunity allows us to deploy capital in a highly efficient way with a purchase price of approximately $20,000,000. For modeling purposes, we expect approximately 30 system shop openings in Q1. Switching to company-operated shop performance in Q4, revenue was $410,000,000, an increase of 30% or $95,000,000 over the fourth quarter of last year. Company-operated same shop sales growth was an incredible 9.7% and was primarily driven by 7.6% transaction growth. Company-operated shop contribution was $113,000,000, an increase of 24% or $22,000,000 year over year. Company-operated shop contribution margin was 27.6%. Beverage, food, and packaging costs were 27% of company-operated shop revenue, which is 160 basis points unfavorable year over year, primarily driven by higher coffee costs and costs associated with the continued rollout of our new food program. With coffee costs remaining elevated throughout 2025, the impact increased throughout the year and will have a continued impact into 2026. Given our inventory turns, any change in coffee prices, including the related P&L impact, typically lags by two to three quarters. The midpoint of our full year 2026 guidance contemplates approximately 80 basis points of total COGS pressure. Included in this is approximately 200 basis points of total COGS pressure in Q1 2026, with that pressure stepping down throughout the year. Labor costs were 26.2% of company-operated revenue, which is 90 basis points favorable year over year. Occupancy and other costs were 17.2% of company-operated shop revenue, which is 30 basis points favorable year over year. As a reminder, in 2026, we expect occupancy and other costs as a percentage of revenue to increase by shifting more of our lease arrangements to build-to-suit leases. In 2025, approximately 45% of our leases were build-to-suit leases, and we expect continued progress in 2026 towards our long-term goal. Preopening expenses were 2% of company-operated shop revenue, which is 90 basis points unfavorable year over year, driven by increased strategic investments related to training and jump-starting shop openings. Switching gears, Q4 adjusted SG&A was $65,000,000 or 14.7% of total revenue. While we continue to make investments in our infrastructure and our people in 2025, we were also able to drive 140 basis points of leverage in adjusted SG&A. Our 2026 guidance contemplates a continuation of this momentum, as we expect an additional 70 basis points of adjusted SG&A leverage. For modeling purposes, expect continued flattening of adjusted SG&A dollars throughout the year when compared to 2025. In the quarter, adjusted EBITDA was $73,000,000, an increase of 49% or $24,000,000 over the fourth quarter of last year. Lastly, we delivered $0.17 of adjusted EPS, up from $0.07 in Q4 of last year. Let me now provide an update on our liquidity and cash flow. As of December 31, we had approximately $705,000,000 in total liquidity. This includes $269,000,000 in cash and cash equivalents, and approximately $435,000,000 in our undrawn revolver. In Q4, our average CapEx per shop was $1,300,000 compared to $1,800,000 in 2024. During the quarter, our net cash position increased by approximately $3,000,000 from Q3, driven by strong cash flows from operations. We have now consistently added net cash to our balance sheet, and in 2025, did so ahead of schedule, a testament to the strength of our execution and the long-term staying power of our brand. This marks a clear step change in the momentum we have built by generating free cash flow for a second consecutive year and reinforces my confidence that we are on the right track to further strengthen the durability of our business. Now let me provide our 2026 guidance. Total revenues are projected to be between $2,000,000,000 and $2,030,000,000, representing 22% to 24% growth year over year. Total system shop openings are now estimated to be at least 181 shops. System same shop sales growth is estimated to be in the range of 3% to 5%. Adjusted EBITDA is estimated to be in the range of $355,000,000 to $365,000,000. At the midpoint of this range, we expect approximately 60 basis points of net adjusted EBITDA margin pressure, largely driven by elevated coffee costs and the continued impact on occupancy that I spoke to earlier, but partially offset by leverage on adjusted SG&A. Capital expenditures are estimated to be in the range of $270,000,000 to $290,000,000. We remain optimistic about the future, with a clear and compelling path forward. Our ability to innovate and execute has scaled AUVs to record highs across an even larger set of shops, supported by best-in-class four-wall shop economics. Our people are delivering an exceptional customer experience, reinforcing the compelling value proposition we offer. Thank you, everyone. We will now take your questions. Operator, please open the lines. Operator: Thank you. We will now be conducting a question and answer session. And, again, that is star one to ask a question. Hyun Jin Cho: And our Operator: first question comes from Andrew Michael Charles with TD Cowen. Andrew Michael Charles: Great. Christine, investors are focused on your same store sales resiliency this spring as larger limited service restaurants either launch energy and iced coffee beverages or revamped their platforms. And I am guessing you are not providing specifics, but can you talk about the levers at your disposal to protect traffic during this time? For instance, is there an opportunity to accelerate the food rollout before 2026, given the success you are seeing there? Do you expect to raise marketing spend in 2026 to promote more awareness of Dutch? Are you open-minded to increase points offers with Dutch Rewards members? Just some texture on how you are thinking about this and how you maintain your traffic strength. Christine Barone: Yeah. Thanks for the question, Andrew. Our business is performing incredibly well. Look at the 7.7% same shop sales in Q4. And this has been a competitive market since 1992. We have an incredible value proposition. I think the combination of our service, the quality of our beverages, everything that our Broistas provide. We are also right in the sweet spot of where the growth in this market is. It is about convenience. It is about energy. It is about iced innovation. And we have the best teams and service in this industry. We started the year strong this year, and we are incredibly confident with where the business stands. Our next question comes from Chris O'Cull with Stifel. Good afternoon, guys, and congrats on another great quarter. Andrew Michael Charles: Christine, AUVs have reached record levels, yet David E. Tarantino: you have also noted that the company is still in the basic blocking and tackling phase of labor deployment. I am just wondering as Jen takes over shop operations, what is her mandate? And how much additional transaction capacity is she looking maybe to unlock during peak periods? Christine Barone: Yeah. So, Jen is new on board. She just completed her shop training and is getting to know all of our teams. And as we look at her priorities, it is really about how do we serve our Broistas better. So how do we prioritize the initiatives that are coming out of our shops, and how do we support them to continue to roll out the food program, to continue to roll out mobile order, and have enhancements in that program. So she will be very focused on the same initiatives that we are focused on really across the system. And moving next to Andy Barish with Jefferies. Andrew Marc Barish: Hey. Good evening, guys. I think you kinda Gregory Ryan Francfort: tied a couple things together, that you may be doing a little bit differently on new store openings, you know, in addition to the Andrew Marc Barish: you know, kind of work that went on on the pipeline and things like that. Can you unwrap that a little bit more in terms of training and things like that? Christine Barone: Yeah. So as far as our new shop openings go, we continue to focus on making sure that the shop opens with the right teams, with the right support from our mob team, and that we are aware of where there are shops close by so we can train in those shops. So we are very thoughtful now that we have such a large network of shops and such a large network of baristas who can support the opening of these shops that we can really support them in the best way. I think the other example of that is as our real estate modeling has gotten tighter, we can really think through what those AUVs are going to be in those new markets. Is this a first-to-market shop? What will those AUVs look like so that we can really send that support to ensure that the shop really opens in the best way possible. And our next question comes from Hyun Jin Cho with Goldman Sachs. Yes. Thank you so much, and congrats on a great quarter. You mentioned the 4% comp lift in your food pilot stores with kind of roughly one-fourth coming from transactions previously. As you scale the food program, are there any kind of to help us track the progress, attach rate, or mix shift, daypart growth? And, additionally, while your hot food is positioned as a lever to drive incremental beverage occasions, how are you thinking about potentially broadening the offering to capture additional dayparts and occasions now that all the equipment is already in place? Thank you. Yeah. So if we look at the food program, we have not shared additional statistics, but within the company, we are tracking lots of different things. So we are tracking our satisfaction. We are looking at how the customers are loving the food platform. We are looking at how each successive rollout, the training is going. We are looking at operational metrics within the shop of what our deliveries look like, what our waste percentages look like. So all of those things are being tracked, and we are incredibly pleased with everything that we are seeing as we continue to roll out this program. And then as far as the long term, we really are building a, you know, a long-term food platform and capability here. And we will continue to look for opportunities where we could grow attach or grow new occasions at different parts of the day. Our next question comes from Dennis Geiger with UBS. Dennis Geiger: Great. Thanks, guys, and congrats on the results. Joshua Guenser: Just as it relates to 2026 guidance, wondering if I could ask a bit more on two parts of the guide, Josh. One, including the revenue guide, and if anything more that you could add on sort of what you are embedding from a new store productivity standpoint, at least directionally. It sounds like still elevated. Just wanted to get a sense. Is it, you know, similar to what you saw last year or anything different embedded there? And just on the EBITDA margin side of things, if anything else additional to unpack there, I know you gave the COGS piece. Could you break out the food menu launch impact specifically, if possible? Thank you very much. Hyun Jin Cho: Yeah. Thanks for the question. So as we think about the, I guess, overall shape of margin for the year, we are expecting continued coffee headwinds, as I mentioned in my prepared remarks, where coffee costs are really remaining elevated throughout 2025, mostly impacting then Q1 of 2026. So we are expecting about 200 basis points of margin headwind in Q1. That is primarily coffee but also is driven partially by the impact of the food rollout. We did also highlight that we would continue to expect elevated occupancy and other costs. I have not given the specifics on that, but you can imagine that that will remain elevated as we continue our shift to build-to-suit leases. Other important factors as you think about the year is that while we continue to drive leverage in adjusted SG&A, we are expecting a continued flattening of the SG&A dollars quarter by quarter, relative to prior quarters. So all in, we are expecting full year about 60 basis points of EBITDA margin pressure from all those various pieces. Then, sorry, back to the first part of your question on new shop productivity. Certainly, we did see very strong performance coming from new shops, really across the board, really exceeding our expectations throughout the year. We have, you know, a lot of that being the results of the market planning work and then certainly some geographic openings that just performed really strong. We are expecting that we will have great openings going into next year, but remain very confident with that $1,800,000 target that we are typically underwriting at and feel really good about returns we see at those levels. Christine Barone: And moving on to David E. Tarantino with Baird. David E. Tarantino: Hi. Brian Hugh Mullan: Good afternoon. Christine, I was wondering if maybe we could revisit the topic on competitive product launches, and I guess there are two parts to the question. Yeah. If you could maybe comment again on how your stores in Colorado performed when McDonald's was running their big energy drink test. That might be helpful. And then I guess, bigger picture, I mean, you have been around the category for a really long time. And I was just wondering if your thoughts on kinda what the broader push on advertising of the category might mean for the category growth and how Dutch Bros Inc. might be able to take advantage of that. Christine Barone: Yeah. So on the first question on the energy test, as we shared last quarter, we really did not see anything in our business. I think we are the category creator of customized energy, and I think anything that is being shared about the category that creates new customers and new customer interest, I would guess that we would likely benefit from that. And so we do feel really confident about what we are doing from an energy perspective. We have been in the energy business for a very long time and really know what customers want in this space. I think, you know, big picture on this broader push on advertising and things like that, you know, I think that this is a category that continues to grow. I think with our very strong growth rate, we are clearly taking share in the category. And I think that anything around the category maybe continues to benefit us. We are seeing incredibly strong results right now. We will go next to Sara Harkavy Senatore with Bank of America. Thank you. I have a question about the Clutch acquisition and then just maybe a clarification on Josh's comments on the food impact on margin. I mean, I will start with that because it is straightforward. Just want to clarify. So food addition should be accretive to shop margins even if they are dilutive to food margins. Is that the right way to think about it? And then the question about the acquisition is, as you think about growth, would you anticipate doing more of these type real estate-type acquisitions? Is the philosophy that, you know, being first mover really matters? Is it that, you know, the scale that you can achieve quickly is important? I am just thinking $20,000,000 to buy 20 shops seems roughly about what it would cost for you to build, I think, or a little bit maybe more on a build-to-suit basis. So I am trying to understand maybe the economics or what the impetus was as you think about doing these kinds of things going forward. Thank you. Hyun Jin Cho: Yeah. Sara, thanks for the question. So on the food question, we are expecting pressure on COGS and certainly expect it to be dollar accretive as we are adding overall occasions to the business, but would expect it to put a bit of pressure on margin overall. In terms of Clutch, you know, the way we are looking at this, we certainly, to your point on the economics of this, view this as a very productive way of using our capital, deploying capital in acquiring those sites and then converting them, being that they are existing coffee stands. Relatively, you know, lower investment to be able to convert these to Dutch Bros Inc. You know, as we have done and looked at our portfolio over time, we are always looking at either ground-up builds or conversion opportunities. Clutch provided us a great opportunity to grab a hold of 20 sites in the market that we were just moving into, be able to enter that market relatively rapidly in a very capital efficient way. So, you know, as we think forward, we will always be looking for conversion opportunities. Certainly, like I said, a coffee stand is quite easy to then convert to a Dutch Bros Inc., but we will look for conversion opportunities or those ground-up builds as we continue to expand. Christine Barone: And Brian James Harbour with Morgan Stanley has our next question. Brian James Harbour: Yeah. Thanks. Good afternoon, guys. With food, David E. Tarantino: you know, what have you seen? Does it open quite strong, perhaps Brian Hugh Mullan: settle out? Does it sort of build steadily? Do you find that some of the markets that have it in more shops have seen higher food mix as that happens? Then I guess, are you contemplating marketing this this year, or is it more of like a 2027 onward thing? Christine Barone: Yeah. So we continue to be very pleased with what we are seeing from the food rollout. And what we are seeing is very consistent with what we shared last quarter. I think we have gotten it to enough shops that we knew what we were going to see. And, you know, we do roll this out, and pretty quickly, our customers are finding it and ordering it and enjoying it. So we see that lift pretty quickly after rollout, which has given us that great confidence to continue rolling out this food program. We are seeing both a transaction and a ticket lift, so seeing attach. But we also believe that our existing customers are maybe coming in for that extra beverage occasion because we now have that great morning food for them. We also have great feedback from our Broistas. So all that we are seeing is very strong. Now I would say on the marketing question that we are still building our brand overall, and we will be a beverage-first brand. We will remain a beverage-first brand. So I would expect to just continue to see us focusing on beverage as we look at external marketing and that food is that attach when you come into the shop. And moving on to Jeffrey Daniel Farmer with Gordon Haskett. Jeffrey Daniel Farmer: Thanks. Just following up on Sara's question about Clutch. I am curious if you guys are, you alluded to it, but if you are actually sort of actively seeking opportunities like that, or just how you are generally viewing the pursuit of small-scale acquisition to potentially accelerate unit growth? Christine Barone: Yeah. This is something we have continued to do. So last year, a number of the shops we opened were conversions of other different types of concepts. So this is something that has been in our portfolio for a while, being able to take attractive real estate and turn it into a Dutch Bros Inc. So we will just continue to look for the best real estate opportunities. What I would say with something like a Clutch, we want it from a CapEx perspective to really fall in line with what we are doing and opening the rest of our shops. So that is something important as we do look for these opportunities, but we are certainly open to looking for more. We will go next to John William Ivankoe with Citi. Hyun Jin Cho: Great. Thanks for taking the question. Maybe on the development side, Brian Hugh Mullan: you know, a number of, or at least one large coffee player is thinking about moving more aggressively into your markets. And I know there are a number of smaller growing chains that have also been expanding across a lot of your markets. And I am just curious, you know, I know your model is shifting from ground up to build-to-suit or more of them. But are you seeing any pressures on-site availability in markets, or are you seeing any cost pressures starting to build with respect to competition coming in and perhaps driving up the cost of new locations? Christine Barone: No. That is not what we are seeing. We are really seeing great real estate availability. And I think as our brand continues to grow, we are just an incredibly attractive tenant for folks out there. So we are actually seeing lots of different opportunities. As far as build costs go, we are seeing a steadiness there. But with our shift to build-to-suit, we have been able to lower our CapEx from $1,800,000 in Q4 of 2024 to $1,300,000 in 2025. So our capital outlay per shop has really reduced over the last year. And Chris O'Cull with KeyBanc Capital Markets has our next question. Christopher Thomas O'Cull: Hi. Congrats on the really strong results, Brian Hugh Mullan: and thanks for the update on order ahead and walk-up mix. I was wondering if you could maybe expand a little bit more on these channels or order methods, perhaps the incrementality that you are seeing from these channels. Then how are you thinking about the pace of growth of these channels for this year? And how much upside you are seeing from them long term? Thanks. Christine Barone: Yeah. So on mobile order, it hit 14% of transactions in Q4, so we are very pleased with that level. Internally, we do not have something that we are telling the shops we need to get to a certain level because we are really driven by what does the customer want to do, and we want to have the channels that the customer wants to approach us with. And so I think that is the most important part. So we are very pleased. It is clearly something that is incredibly popular with our customers, and it is something that has allowed us to balance all of that demand across the shop. And so when we started with mobile order, the window, that is not the drive-thru window, the one on the other side, is actually right around 10%, and so that move up to 18% really allows us to balance that demand across the shop in a nicer way. We will go next to Jeffrey Andrew Bernstein with Barclays. Jeffrey Andrew Bernstein: Great. Thank you very much, Christine. I was hoping to get more color on the David E. Tarantino: walk-up store you mentioned that I think you opened in November in LA. Obviously, it is very early, but a new potential new channel. So I am wondering your learnings, like would it give you a potential for more urban expansion? Christopher Thomas O'Cull: So how do you think about next steps or, you know, what that does for the Neil Patel: TAM opportunity or what you need to do to change the box? Any kind of learnings or initial thoughts on how you could perhaps accelerate this opportunity? Thank you. Christine Barone: Thanks, Jeff. Yeah. We are really pleased by what we are seeing. Again, this is very early in looking at this type of model. But I do think the investments that we have made over time, so having that mobile order channel, has allowed us to open this up. So the way that we opened the shop is we still have a walk-up window, and then we have a mobile order window. And so we still have two windows even though it is a non-drive-thru shop. And we have a line buster outside taking your order when you come in and you are coming to that walk-up window. And so a lot of the things that work in our drive-thru shops are working really well in the shop in LA. As a reminder, our TAM of 7,000 includes drive-thru locations like the locations we have. We still very much believe in that 7,000-unit TAM, and this is a potential additional channel that we are very pleased has just kicked off in a really strong way. Next, we have Logan Paul Reich with RBC Capital Markets. Gregory Ryan Francfort: Hey. Good afternoon. Thanks for, most of mine got asked already, so I will ask a follow-up on the Clutch acquisition. Appreciate the clarity around the $20,000,000 purchase price, about a million dollars per location. I am just wondering if you can give any additional color on what the additional investment is required to transition those locations over to Dutch Bros Inc. and timeline for openings for those 20 stores. Thanks. Brian James Harbour: Yeah. Thanks for the question. So, you could just think about these as Hyun Jin Cho: as, you know, an all-in cost not too Christopher Thomas O'Cull: inconsistent from how we have been building costs overall. Our building shop Hyun Jin Cho: overall. So these are existing coffee stands. Actually, the founder of the company was a former Dutch employee, so look and feel a lot like a Dutch Bros Inc. as they are. Christopher Thomas O'Cull: So we have some equipment to do, obviously, signage and look and feel to make them look like a Dutch Bros Inc. Relatively light capital lift that would put this right in the range of our cost of building shops today. Gregory Ryan Francfort: In terms of timeline of opening, we are obviously working through the process Hyun Jin Cho: of converting them. Expect them to open during the year here in Q2 and Q3. Christine Barone: We will go next to Nick Setyan with Mizuho. Nick, are you on the line? Hyun Jin Cho: Hey. Great. Thanks for the question. Neil Patel: And congrats on a great quarter. Obviously, company-owned growth is by far the primary driver of fundamentals. So just so we can all kind of be on the same page, would it be possible to maybe Hyun Jin Cho: tell us what the 3% to 5% comp for the year and the 4% to 6% system comp for Q1, what Neil Patel: that bakes in for company-owned comp? Hyun Jin Cho: Yeah. Nick, thanks for the question. We are not providing the decomposition of that on an outlook basis. So, obviously, we feel very pleased with the performance we have seen out of both the company and the system during Q4. We feel like both will be contributing to our growth as we head into 2026, so both will be contributing to the Q1 guide we gave as well as the full year of the 3% to 5%. Christine Barone: We will take our next question from Gregory Francfort with Guggenheim Partners. Gregory Ryan Francfort: Hey, thanks. Just one clarification. David E. Tarantino: Is the $20,000,000 of Clutch acquisition, is that included in the CapEx guide? And then my question, I guess, is for Christine. This walk-up stores opportunity that you guys are unlocking right now, do you think this is going to be a meaningful part of development Gregory Ryan Francfort: in either 2026, I guess not 2026, but 2027 or 2028? Brian Hugh Mullan: I guess, do you think we could turn that on from a kind of growth channel perspective that quickly? Thanks. Hyun Jin Cho: Yeah, Greg. Thanks for the question. I will take the first one quickly here. That $20,000,000 is included in our guide. So that is a part of the full CapEx guide we provided. Christine Barone: Yeah. And then on the walk-up location, we will continue to learn. So very early days, and we will continue to learn before we understand what this opportunity might look like for us. Moving on to John William Ivankoe with JPMorgan. John William Ivankoe: Hi. Thank you. You know, so the question is really on competition. And I do think that you have addressed competition for real estate very well. You know, but I do want to ask and, you know, this is really a hyper local market question because certainly not in the consolidated results around competition that might be happening in very specific trade areas. We know where you have gone from you being in a market to maybe having two new entrants or three new entrants, you know, that have kinda come in around you both from a customer perspective and also an employee perspective. Just if there is anything, you know, because certainly, you know, we kind of hear, you know, not any actual, you know, damage or concern, but people are worried that competition could begin to affect you locally before we would see something nationally. So, you know, what I am really looking for in this call is if you have seen anything locally, you know, that has happened from competition, how deep that may have been, or even the duration of that time, if there has been any impact at all, you know, that you have noticed, you know, just looking on a more micro basis across your chain. Thank you so much. Christine Barone: Thanks for the question, John. Yeah. We are not really seeing anything on a local level. When we go into every market, there is lots of competition already. There are lots of local players. There are big national players. There are sometimes other, you know, growing, fast-growing chains. So we see all types in lots of different markets and feel incredibly great about our value proposition and feel very good about our ability to compete among many different circumstances. I think the strength of the brand, the strength of our people, just sets us up in an incredible way. Great performance in our new shops across geographies, across dayparts, the business is just in a really strong place. This now concludes our question and answer session. I would like to turn the floor back over to Christine Barone for closing comments. Thanks for your questions. 2025 was a monumental year that significantly built on the multiyear runway since our IPO. Since 1992, it has always been about our people, our culture, and investing back into the communities we serve. We continued to give back in 2025, supporting nearly 700 local organizations across the country and hosting more than 1,600 local givebacks. Thank you again to our teams for making 2025 a resounding success. I am grateful for the opportunity to lead this team and look forward to 2026 and beyond. And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.
Operator: Good day, and welcome to the Federal Realty Investment Trust Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jill Sawyer, Senior Vice President, Investor Relations. Please go ahead. Jill Sawyer: Thank you, [ Ayisha ] Good evening, everyone. Thank you for joining us today for Federal Realty's Fourth Quarter 2025 Earnings Conference Call. Joining me on the call are Don Wood, Federal's Chief Executive Officer; Dan Guglielmone, Chief Financial Officer; Wendy Seher, Eastern Region President and Chief Operating Officer; and Jan Sweetnam, Chief Investment Officer; as well as other members of our executive team are available to take your questions at the conclusion of our prepared remarks. A reminder that certain matters discussed on this call may be deemed to be forward-looking statements. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results, including guidance. Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements, and we can give no assurance that these expectations can be attained. The earnings release and supplemental reporting package that we issued tonight, our annual report filed on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and operational results. Given the number of participants on the call, we kindly ask you to limit to just one question during the Q&A portion. If you have additional questions, please requeue. With that I will turn the call over to Don Wood. Donald Wood: Thank you, Jill, and good afternoon, everybody. Strong quarter, strong year, strong 2026 guidance, 6.4% bottom line FFO growth in the quarter, 4.3% for the year and guidance close to 6% at the midpoint for 2026. All those numbers, of course, eliminate the impact of the onetime new market tax credit last year as reflected in our new Core FFO metric. More to come on that from [ Dan]. Business is good with strong demand for our assets in both our historical locations as well as the newer markets. We ended the year with the overall portfolio 96.1% (sic) [ 96.6% ] leased, 94.1% occupied (sic) [ 94.5%]. About 50 basis points higher than that, excluding newly acquired centers. No surprise that leasing drives these and future results. With 601,000 feet of comparable deals done in the quarter at 12% rollover and 2.3 million feet of comparable deals done for the year at 15% rollover, an incremental $11 million of new rent is under contract. Starting rent on the new 2025 leases was $37.98 compared with ending rent on those same spaces after years of contractual bumps, by the way, of $33.12. We also did 20 noncomparable deals in 2025 at an average rate of $48.18, resulting in an incremental $6.3 million of new rent under contract and the deal pipeline continues to look strong. Wendy will talk more about that in a little bit. Leases signed in the fourth quarter included weighted average contractual rent bumps of 2.6%. A strong as operations were, transaction activity was equally robust in the fourth quarter and thus far into 2026. We closed the Annapolis Town Center in Maryland and Village Pointe in Omaha, adding nearly 1 million square feet to the portfolio for $340 million at an initial cash-on-cash yield in the low 7% range. Remerchandising and rents commensurate with the strong sales of these locations are the focal points of these 2 A- quality assets over the next 5 years with targeted unlevered IRRs approaching 9%. Both have started out as we've underwritten. Acquisitions completed early in the year -- earlier in the year, including Del Monte Center and 2 Leawood, Kansas properties are looking like excellent additions, particularly in Leawood, where tenant demand and expected rents are exceeding our underwriting. On the disposition side, we closed on the sale of Bristol Plaza in Connecticut and Pallas, the peripheral residential building at Pike & Rose in the quarter for a combined sales price of $169 million. Just last week, we closed on Misora, the peripheral residential building at Santana Row for proceeds of nearly $150 million, along with another small asset sale for [ 10 ]. The overall combined cap rate of these dispositions was in the low 5s. As we've talked about over the last several quarters, we're also finding opportunities to intensify our properties with development, usually residential product that is complementary to our shopping centers with little to no incremental land cost, the math works in the right locations. If 2025 has taught us anything about value, it's that high-quality apartments adjacent to great shopping environments in strong suburban locations create a more desirable living environment. That translates into higher residential rents, stronger growth and ultimately lower cap rates on sale. The 2025 and 2026 sales of Levare and Misora at Santana Row and Pallas at Pike & Rose, unlocked an unmatched cost of capital for us to reinvest in material amounts at sub-5% overall. We've previously disclosed the allocation of a total of $280 million for new residential development of the Blayr at Bala Cynwyd, which is nearly complete and ready for lease-up beginning this quarter, 301 Washington Street, Hoboken and Lot 12 at Santana Row, which together will add more than 500 units to the portfolio. And just this quarter, we've added another residential project to our development schedule that you can see in the 8-K. Willow Grove Shopping Center in suburban Philadelphia will be completely redeveloped and include an additional 261 apartments to complement a modernized and remerchandised shopping center. Our experience with residential development at our retail-centric properties is a skill set developed over 25 years and is certainly a unique differentiator of our business plan. After enjoying the 6.5% to 7% or higher income contribution from each of these residential additions for a period of time, we have the optionality to take advantage of cap rates well inside those yields and reinvest them tax efficiently, just as we've done so effectively last year and this. 2025 is a very special year for the Trust, and 2026 and 2027 look to capitalize on that. First of all, core leasing was exceptionally strong and looks to remain that way in 2026. Our expanded geographical reach is proving particularly fruitful with strong retailer demand anxious to be part of our property improvement effort. Lastly, the COVID era office leasing effort has been largely completed with meaningful rent starting in '26 and '27. In fact, at the mixed-use properties, we should have 0 office product available for lease, and that means 100% leased within the next 30 to 45 days. Our asset recycling effort is validating the long-term value creation that our business plan has created. And all of this is wrapped in a relatively stable interest rate environment that could result in lower rates as the year progresses. We'll see. The refinancing of our 1.25% bonds, up 1.25% this month represents the last major component of our debt portfolio with such a large market rate adjustment likely. And even through that, we're guiding to near 6% growth. Later this spring, we'll showcase our plan through an Investor Day at Santana Row. Jill has the details, and I think to save the dates have been sent out. Really looking forward to seeing most of you there. Enhanced internal and external growth using all the tools at our disposal, the name of the game. Quarters like this fourth and in fact, all of 2025 increase my confidence of our ability to do so. Let me now turn it over to Wendy and then to Dan to provide additional color. Wendy? Wendy Seher: Thank you, Don. In 2025, our leasing platform achieved record-breaking volume, delivering the highest annual square footage leased in company history, alongside the strongest comparable rent spreads achieved in over a decade. As we head into 2026 with over lease -- with an overall lease rate of 96.1% (sic) [ 96.6% ] our strategic focus will continue to be all about driving rent growth, disciplined expense management and capitalizing on our quality real estate to provide continuous opportunities for multiple year growth. For the quarter, we signed 105 comparable deals achieving 12% rollover, 15 anchor leases and 90 small shop deals drove a 90 basis points increased in our total comparable lease rate sequentially. Looking ahead, the breadth and durability of demand across all categories remains strong, reinforcing my confidence in our outlook for the year ahead. Increased leased and occupied rates in Q4 drove our signed not occupied spread to 200 basis points, representing a contribution of an additional 27 million to our in-place portfolio. Robust anchor demand, particularly in California, is fueling momentum. While we anticipate seasonal occupancy shifts in the first half of 2026, while anchors transition, most of these deals are already executed at higher rents, positioning us for improved occupancy levels by the end of the year. Mall shops remain a highlight at 93.8% leased, up 50 basis points, providing mark-to-market opportunities to drive rent growth while continuing to Prune and Tweak a premium merchandising mix. Leasing production from our expanded acquisition initiatives over the last few years continues to exceed expectations. In 2025, we executed 49 deals nearly 200,000 square feet at 34% increase from prior rents. Over the next 24 months, we are targeting accretive capital allocations to better align these centers with our core operating standards and the high income profile of the respective submarkets. Top-tier addition to these centers since acquisitions includes names such as Solid Core, Alo, Design Within Reach, Lovesac, Free People Movement and State and Liberty. More to come in 2026. Turning to our suburban portfolio in the Greater Washington, D.C. area, we continue to see -- we are continuing to be encouraged by the resilience across our Maryland and Virginia assets. Foot traffic momentum remains strong with quarterly traffic increasing 3% and up overall for the year. Annual sales moved higher year-over-year, while the fourth quarter sales remained stable from a strong prior quarter comp. What is especially encouraging to me is the outperformance of the hard goods category. We saw robust demand in furniture and home furnishings from premium brands such as Serena & Lily, West Elm, Sur La Table. We view this as a strong indicator of the underlying health of our consumer base. Given that home furnishings are highly discretionary, our core customer in this regions -- in this region continues to invest in their home, signaling confidence in their personal financial position. Now let me turn it over to Dan to dive into the numbers. Daniel Guglielmone: Thank you, Wendy, and hello, everyone. Our FFO per share of $1.84 for the fourth quarter reflects 6.4% growth versus last year and highlights a really strong underlying quarter operationally. This result came in slightly below the midpoint of our guidance range, solely due to a noncash charge related to Saks filing for bankruptcy post year-end. Comparable POI growth, excluding prior period rent and term fees, averaged 3.8% for the year and 3.1% for the fourth quarter. On a cash basis, this metric was 3.6% and 4.3% for the full year and fourth quarter, respectively. Now let me move quickly to the balance sheet. Liquidity at year-end stood at $1.3 billion under our available bank facilities and cash on hand. During the fourth quarter, we closed on an additional $250 million delayed draw term loan, providing us with enhanced financial flexibility. The facility has a 5-year maturity into 2031 and an interest rate of SOFR plus 85 bps. With respect to our $400 million bond maturity next week, we will utilize this term loan and available capacity on our revolving credit facility to refinance it on a near-term basis. A possible unsecured note or convertible bond offering remained under consideration for later in 2026. As lease-up of the larger commercial components of our redevelopment pipeline nears completion with Huntington Shopping Center fully stabilized, 915 Meeting Street a 100% leased and One Santana 100% committed, our free cash flow after dividends and maintenance capital is expected to exceed $100 million in 2026 and head higher in '27 as we convert straight-line rent to cash paying rent. With these $600 million of projects behind us and essentially complete, our ongoing redevelopment pipeline moving forward stands at about $500 million. This pipeline includes 780 residential units, all at existing retail properties. During the fourth quarter, we closed our asset sales of $169 million and added another $159 million subsequent to year-end at a combined blended low 5% cap rate. We also have an additional $170 million of sales in process with expected closings in the first half of 2026 with cap rates targeted in the low 5% range. While we have been active over 2025 deploying capital externally through our disciplined asset recycling program, we continue to maintain strong leverage metrics. Fourth quarter annualized adjusted net debt to EBITDA stood at 5.7x at year-end but is now inside 5.6x pro forma for the most recent asset sales and should trend further to the low to mid-5x range over the course of the year. Fixed charge coverage now stands at 3.9x and should eclipse our target metric of 4x over the course of the year. Now on to a discussion of our new Core FFO metric and guidance. After much discussion with the analyst and investor community over the course of 2025 regarding recurring FFO and significant one-timers, on a go-forward basis, we will be reporting both Nareit FFO and Core FFO. Core FFO is defined in our 8-K financial supplement on Page 10. It is also outlined in the table on the fourth page of the press release. It will be GAAP-based and simply adjust our Nareit FFO for nonrecurring onetime items in order to provide an enhanced comparability across periods for Federal's underlying operating results. Such onetime items include new market tax credit transaction income, executive transition costs, collection of COVID era prior period deferred rent and other items such as gain or loss on early extinguishment of debt. As we look forward to 2026, our guidance for both Nareit and Core FFO is $7.42 to $7.52 per share with no onetime adjustments in the forecast. At the midpoint of $7.47 per share, this represents about 5.8% growth for Core when compared to 2025 and 3.5% for Nareit defined. 2025 Core FFO is $7.06 per share and Nareit FFO is $7.22 per share with the material difference being the $0.15 of new market tax credit income. Guidance drivers to 2026 include comparable POI growth forecasted at 3% to 3.5%. This assumes the trajectory of occupancy in the first half of 2026 moves into the mid-93% range before returning above the current 94% level and up into the mid and upper 94% range by year-end 2026. As a result, we are set up well for a strong 2027 on a comparable basis. Comparable lease rollovers are forecast in the low to mid-teens. Incremental POI contributions from our development and expansion pipeline is forecast in the $13 million to $15 million range. Please see some additional disclosure that we've added in our 8-K at the bottom of Page 29 with respect to the quarterly cadence of POI for 2026 from the development pipeline. And guidance reflects a full year's contribution from the $750 million of dominant high-quality assets acquired in 2025 at roughly a 7% blended cash cap rate and a 7.5% GAAP cap rate. We are assuming our 1.25% unsecured notes are refinanced at a 4.25% to 4.5% interest rate under our available bank facilities. Please note that this represents a 170 to 180 basis point financing headwind, without which our midpoint Core FFO for 2026 would be growing at roughly 7.5%. We've assumed a total credit reserve of roughly 60 to 85 basis points of rental income in 2026, given our limited exposure to credit issues and additional guidance assumptions that we usually talk about here are outlined for capitalized interest, redevelopment spend, G&A and term fees on Page 29 of our 8-K supplement. This guidance does not include any acquisitions in 2026. None are probable enough at the moment. With respect to asset sales, it assumes only the dispositions announced last week, Misora and Courthouse Center. For all other acquisitions and dispositions, we will adjust our guidance likely upwards as we go. With respect to quarterly cadence of FFO in 2026, the first quarter will start with a range of $1.80 to $1.83 with the normal 1Q seasonality and asset recycling activity impacting sequential cadence from 4Q. The second and third quarter will be in the mid-180s and the fourth quarter in the mid $1.90s per share. And with that, operator, please open the line for questions. Operator: [Operator Instructions] The first question comes from Michael Griffin with Evercore ISI. Michael Griffin: Maybe just turning to the investment pipeline. Don or maybe Jan, can you give us a sense of what deals in the hopper are looking like today? I realize you're not guiding to anything this year, but is this more of what we've seen at Town Center in Kansas City or at the Village Pointe in Omaha? Is it stuff in kind of your core coastal markets? What are you really targeting, I guess? And do you have a feeling that we could see some deals close at some point this year? Jan Sweetnam: Michael, you're well. Thanks for the question. Look, we're still targeting large dominant shopping centers. We're focused on new markets in the middle of the country. We're still also trying to acquire in the coast in our existing markets. So right now, there's a couple of acquisitions that we're working on. We expect to see a lot more opportunities coming in the next several months, larger transactions. So some real reason to be optimistic. It's a little too early to kind of forecast how much we'll be able to buy this year. But based on where we are today and similar to last year, I would expect that the bulk of our activity will occur in the second half of this year. So from my perspective, reasons to be optimistic. Operator: The next question comes from Cooper Clark with Wells Fargo. Cooper Clark: I wanted to talk about the multifamily development and also ongoing recycling plan. Curious how much more peripheral multifamily you could potentially market for sale this year if you're able to source attractive opportunities on the acquisition side and also where yields stand today on the entitled multifamily development pipeline? Donald Wood: Sure, Michael. Let me start on that -- or Cooper rather, sorry. Let me start on that. It's such a kind of unique thing that we have here by having that value in there. There is -- there are still opportunities for us to monetize some residential product. And I'm not going to go into the specific ones right now, but you could probably guess. Again, they are peripheral to our primary mixed-use assets and our shopping center assets. But that stuff is at 5% or lower in terms of those cap rates. And that's just -- it's just a real advantage. Now in total, there's probably another $400 million or $500 million to be able to do of that ilk. Not sure that we will do that. We don't have them in the marketplace yet. But I'm pushing hard, frankly, to start doing that come the second quarter or third quarter and fourth quarter of this year to the extent we find the assets that Jan was just talking about a minute ago. You have one other -- you had a follow-up -- you had a backup question, I don't remember what it was. Anyway? Wendy Seher: Yields on development pipeline. Donald Wood: What's that? Wendy Seher: Yields on residential development pipeline. Donald Wood: And on the -- basically, we're able to underwrite the new development pipeline is somewhere between 6.5% and 7% on most of them. The reality is those are low 5s cap rate assets today. If what happens as what I think will happen is while we enter into it 6.5% and 7%, you'll see strong growth in those assets. The one thing that is crystal clear is at fully amenitized shopping centers, those rents are higher. They tend to have more retention and they tend to grow faster. So I'm just really encouraged about this program, which I don't think anybody got the expertise than we do on the shopping center side to be able to do this kind of stuff. We've been doing it for a long time. I think you should look hard at that portfolio, and we'll be talking to you more about that in the quarters to come. Operator: The next question comes from Andrew Reale with Bank of America. Andrew Reale: Wendy, you highlighted that 2025 delivered the strongest rent spreads and I believe, over a decade. I'm just wondering, is that pricing power being driven by any specific property types or regions? Or is that really truly broad-based? And do you view these levels of pricing power across the portfolio as sustainable throughout 2026? Wendy Seher: Thank you for the question, Andrew. I do consider them broad-based. It's a good time to be in a COO position with this high demand that we're having across the board and limited supply and the kind of premier properties that we own. So it doesn't get me better than right now. I will say that what you're seeing on being able to drive rents, if you look at our last 3 years, we are consistently overall driving rents higher and higher percentage-wise every year for the last 3 years. So I'm really thrilled with that. And then when you look at the demand on the anchor side, you're going to see that our occupancy is going to be kind of driving up as we head into the latter part of the year. So yes, all metrics are good right now. And I do think -- although Dan is going to look at me, I do think given what I know of today and we look at our rollover for next year, we should be able to be equal to where we are today. Operator: The next question comes from Greg McGinniss with Scotiabank. Greg McGinniss: Dan, I was just hoping that you could kind of give us the breakdown on the same-store NOI growth and then the primary pieces that are kind of adding on top of that to get to the 6% growth, that would be appreciated. And if there's anything in the term fee, which is bigger this year than last year, that's like known and in particular, it'd be appreciated. Daniel Guglielmone: Yes. No, with regards to kind of getting to the 6% FFO growth, roughly, and I have been talking to folks, the 3% to 3.5% that I've been talking to folks about over the course of 2025, roughly about $0.30 of growth there represents probably a good -- more than half of the growth in FFO drivers there. And then with probably net from acquisitions and net from redevelopment, you've got about $0.12 each there. So very, very consistent with kind of the guidance we have been giving. The refi headwind is kind of roughly $0.12 in terms of refinancing the 1.25% bonds, the way we're planning them out, that gets you to kind of almost that 6% FFO drive. And our comparable growth is pretty broad-based. It's rent bumps. It is rollover, it is parking. It is across the spectrum of kind of what we create in terms of a comprehensive shopping center growth profile. Nothing stands out there. And with regards to term fees, it's slightly higher than last year. We're just under $6 million. We're guiding to $7 million to $8 million. And we kind of feel like there's some things that are identified. We'll see how that comes out. That's an estimate, and that's why we give a range. But kind of in line, our 20-year history is probably in and around $7 million or $8 million. The last 10 years, probably more in the $5 million to $6 million. So you are kind of right in line with historical levels on term fees. Operator: The next question comes from Craig Mailman with Citi. Craig Mailman: Just curious, Don, as you guys ramp up the sales here and acquisitions take a little bit longer or more back-end weighted in a given year. Just from a timing perspective, do you have enough cushion in the dividend to either 1031 at least from a timing perspective or absorb some of the gains? Or could there be a bit of a special potential here as we move on later through the year? Donald Wood: I think, Craig, that you can count on us managing tax efficiently through the dividend and sales of gains and 1031. All of those tools are available to us to manage our taxable income and our dividend in line with what we've been doing for a bunch of years. That's what you should expect, not a special dividend. Operator: Our next question comes from Alexander Goldfarb Piper Sandler. Alexander Goldfarb: Don, you were among the standouts sticking with the Nareit FFO not going to Core. Real estate has a lot of -- there's a lot of cost, there's a lot of benefits, right? Sometimes you win on revenue, sometimes there's added costs from various things. But as you run the company and look at your team, you don't judge them and say, "Oh, we'll take out these items, take out those items, I'll give you -- I'll let you hit your number." You judge your team based on how they perform. So when you switch to the Core, I get it that there's volatility, but at the same time, isn't the whole point to judge the company based on the results they deliver as sort of the ball lies, not where you'd like it to be? Donald Wood: Alex, the -- adding on a Core FFO metric is truly simply a tool that's aimed not having anything to do with this team at all, but everything to do with being able to better analyze the financial results of the company, making it easier for you to see kind of missing some of the step -- missteps that we've had with -- in the past with simply using Nareit FFO. And so that is completely what this is all about. What is important in our view is that this is not used as a nickel-and-diming, if you will, of the Nareit FFO result, but rather big items, consequential items that just plain old distort the operating results of the company. That's all that's about. This team is judged on their performance based on what they do day in and day out and changing to a Core FFO metric will have no impact on that whatsoever. Operator: The next question comes from Michael Goldsmith with UBS. Michael Goldsmith: Comparable POI growth in 2025 of 3.8% initial guidance for 2026 of 3% to 3.5%. So just a couple of questions on this. Can you bridge the gap from '25 to 2026? Any headwinds that would drive a deceleration? And then is that 3% to 3.5%, is that the right way to think about the steady-state run rate of the business? Or as you continue to reposition the portfolio to higher growth assets, can it accelerate from here? Donald Wood: Yes. The big driver in terms of the deceleration is just we will be turning over, as Wendy alluded to, in her comments, a significant amount of anchor space that's already leased at much higher rents, but there will be downtime as leases end and we position the spaces to give to the incoming tenants at higher rent. That's about a 75 basis point drag of comparable POI. So the 3% to 3.5% is [ Scott ] 75 basis points of drag from that temporary disruption in occupancy. And so we'll see a spike in SNO as a result over the course of the year. So we're at 200 basis points. It's been increasing as both metrics increase occupied and leased. So we expect that to balloon a bit in the middle of the year and then come back down by the end of the year as occupancy levels get up into the -- back up into the 94%, mid-94s, upper 94s from the 94% level today. That's probably the biggest driver. The second question? Steady state, yes, I would say, look, I think historically, when you look back, we're in the 3% to 4% range. I think with some of the acquisitions, $2 billion of acquisitions, and we're seeing that we're operating these assets, I think, better than we had expected and with growth rates that are higher than the kind of 3% to 4% that we've historically seen in our portfolio. I would hope that, that would move up into the upper end of kind of the 3% to 4% range. And I think next year, 2027, we're well positioned to kind of be in and around that 4% level from where we sit today. Operator: The next question comes from Ravi Vaidya with Mizuho. Ravi Vaidya: I wanted to ask about tenant credit. Seems like the reserves are a bit conservative. Can you provide a bit more color here? What was the amount realized in full year '25? And are there any tenants or categories on your watch list? Can you add color on the mark-to-market opportunity for some of the recent bankruptcies, Container Store. Donald Wood: There were too many questions in there. So let me just start here with regards to the tenant credit. 60 to 85 is lower than we were at the start of the year last year at 75 to 100. We were about 80-ish finishing up the year, kind of in that ballpark. It's not very a precise number. But yes, that's kind of where we end up kind of 80 to 85 in 2025. The 60 to 85 we don't have a lot of exposure to tenant credit issues. We just don't. We do have Saks, Saks has got 2 exceptionally strong locations. One, we're getting back or expect to get back or it's closed for going out of business sales, and fifth at Assembly Row, which is a great box facing the power center right on a corner. It's probably got a 100% roll-up in rent from its current rent to where market rent is. So it's a huge opportunity. And the other location is a Saks Fifth Avenue store, a flagship location on Greenwich Avenue, hugely productive in the over affluent submarket of Greenwich, Connecticut, arguably one of the best pieces of real estate in the portfolio. So we'll see how that all plays out, but really, really great real estate with respect to that. The other thing that we keep an eye on is -- and we've talked about it is Container Store, both -- all 5 locations paying rent. All 5 locations, we feel good about. I think that, that's kind of the color we can give there. We'll see how this all plays out. I think we're well covered in the 60 to 85 basis point range that we've given. Operator: The next question comes from Rich Hightower with Barclays. Richard Hightower: I want to go back to one of the comments Wendy made in the prepared commentary about California being especially robust, I guess, enough to make it into the comments. So just tell us what's going on there. I guess we're hearing that from other property types as well. So perhaps it's all sort of singing the same cord, but I'd like to hear what you guys are seeing. Donald Wood: Can we tee up Jeff Kreshek to answer that, Jeff, I'd love you -- Jeff runs our West Coast operations as our President. Jeff, I'd love you to talk about that. Jeff Kreshek: Yes, sure. Rich, thanks for the question. Simply put, California is going to be our largest source of growth for the next few years given the backlog of leasing and development activity and the strategic capital recycling we're seeing out of Santana Row and Grossmont. So California is going to be a big, big contributor going forward for a number of years. Operator: Next question comes from Linda Tsai with Jefferies. Linda Yu Tsai: Just a question on timing. In terms of the $13 million to $15 million for the development expansion pipeline, what's the timing of that? Donald Wood: Yes. We've given some additional disclosure that hopefully will make it easy for everybody to understand at the bottom of Page 29 in the -- our 8-K supplement at the bottom of the guidance page, there is sequential quarterly cadence of the increase over the course of the year. It will be pretty pro rata. It will be pretty close each quarter. And you'll see the ramp-up from the $17 million coming from the properties in the development pipeline up to roughly a midpoint range that gets you to kind of $30 million to $32 million or $31 million midpoint. And so that $14 million, the cadence is outlined there. Anybody have any questions with regards to this additional disclosure that I think would be welcomed by most of you. Feel free to give me a Jill a call. We'll walk you through it. Operator: The next question comes from Floris Van Dijkum with Ladenburg. Floris Gerbrand Van Dijkum: So it seems like some people, based on the questions you've had, the comp NOI growth perhaps is understating the true growth that you expect to get from this portfolio and from this portfolio in '26. maybe -- and I know that in the past, your comp NOI as a percentage of overall NOI was actually pretty robust and pretty high. What percentage of your NOI is being captured in your comp pool today? And how does that impact the SNO pipeline as well? Donald Wood: Yes. I would estimate that kind of what's in the comparable pool is probably 85%, 90%. We can kind of refine that, but that feels about right. With regards to SNO, yes, sorry. With regards to SNO, our SNO within the existing pipeline is growing and significantly growing with the commencement of the PwC lease and beginning to recognize that in the fourth quarter, what's coming from the development portfolio is not going to be as high as it was in the past year. So SNO is probably around $27 million in the existing portfolio and another $5 million or $6 million in the development portfolio. And so the cadence, about 75% of that will come on next year, so roughly, call it, about $25 million and roughly kind of $10 million to $11 million in the first half of the year and call it, $14 million to $15 million in the second half of the year and then the balance in '27. Operator: The next question comes from Juan Sanabria with BMO Capital Markets. Juan Sanabria: Just hoping you could talk a little bit about the anchor movement, kind of what's driving that? Is that proactive by you? Or is that something else that's going on? And then you kind of mentioned a onetime hit that otherwise you would have hit your expectations related to Saks. If you could just quantify that dollar amount, that would be helpful. Donald Wood: Yes. Juan, first of all, on the anchors, simply timing. The way the expirations were working, particularly on the West Coast assets, there was -- there were expirations that were coming due a lot of last year and in the first half of this year, et cetera. So we've been on top of that to try to make sure that we've got either new tenants coming in Grossmont is basically a redevelopment of the entire asset there that's happening. Best Buy at Santana Row, which you may remember going out after an extremely productive period of time for a new lifetime deal there. It's simply the timing that we've got all leased up, but there'll be a hit in the meantime, but we're plowing right through that, and it's still going to grow, hopefully at 6% next year. So that's what's going on with respect to the anchors, nothing more than timing. The tax charge was a noncash charge writing off straight-line rent at roughly around $0.03 a share. Operator: The next question comes from Paulina Rojas with Green Stat. Paulina Rojas Schmidt: My question is about acquisitions. So while acquisitions are shaped really by what comes to market, if you had full discretion, would you cap your exposure to new secondary or tertiary markets? Or are you truly taking a fully market-agnostic approach, assuming property quality meets your standards? Donald Wood: First of all, Paulina, I love that you started this off with. Of course, it depends on how much supply is available because that's a really important point. The acquisitions get lumpy. We are so completely committed to the plan that we talked about last year, which is a combination of the new markets that we talked about. And I think you've seen our buy box of what markets effectively apply to that. And it's 1 million people in a marketplace and very affluent, all of the stuff that we've talked about. But yes, I would be agnostic to whether we find those assets in those places or in our existing markets that we have because real estate is local, and it really comes down to the submarket. And so to the extent we find those opportunities in places that we know inside now, and we're looking at some right now, frankly, that are adjacent to our existing assets, love that kind of stuff. In addition to the new markets that fit the buy box, yes, we're agnostic as to which of those opportunities come to fruition. I hope that helps. Operator: [Operator Instructions] The next question comes from Mike Mueller with JPMorgan. Michael Mueller: I think you mentioned you had another $400 million to $500 million of non-peripheral residential left that you could sell to fund acquisitions. And it seems like the acquisition opportunity is greater than that. So what's next on the pecking order after those remaining resi assets? Donald Wood: No question. And it's not even next. It's in conjunction with, Michael. It would be those assets, retail assets where we've done all we can. And to the extent we've done all we can and we can get a strong price, for those retail assets. We'll use those to recycle into better growth opportunities. So having the opportunity to have both resi and strong assets, strong retail assets that have limited growth opportunities, all of those things are considered. So it's not which one is -- it's not using up the resi and then moving to those. It's a combination based on market conditions and what it is that we -- where we think we can effectively get paid best for. So you should see a combination of both as we move forward. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jill Sawyer for any closing remarks. Please go ahead. Jill Sawyer: Thanks for joining us today. We look forward to seeing many of you in Florida in a few weeks. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.