加载中...
共找到 17,417 条相关资讯
Operator: Welcome to the Quarter 3 Analyst Meet of Mahindra & Mahindra Limited. For the main presentation today, we have with us our Group CEO and MD, Dr. Anish Shah; ED and CEO of our Auto and Farm business, Mr. Rajesh Jejurikar; and our Group CFO, Mr. Amarjyoti Barua. Once the presentation concludes, we will begin with the Q&A session. For the purpose of completeness, I wish to read this out. Certain statements in this meeting with regard to our future growth projects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. With that, now I hand over to Dr. Shah for opening remarks. Anish Shah: Hi. Good afternoon. It's a pleasure being with you again, more so when our results are in very good shape. And let me start with talking about our key messages as we do every quarter. And what you see again is a continued strong performance across businesses, and you're seeing contribution from all our businesses to delivering very strong results. Operating PAT is up 66%. Reported PAT is up 47%. There are 2 factors that make the difference between these 2 numbers: One is labor code impact, which I'm sure you've seen across all companies; and second is a onetime around Mahindra Finance, where they had a reserve release last year in the same quarter, as we take that out, that increases the operating profit. Volume and margin growth, very strong for both Auto and Farm. Volume up 23% for both businesses. Margins up 90 basis points for Auto, 240 basis points for Farm. Farm did have some impairments internationally, and that dragged down the overall number, but domestic operating performance was up 64%. I want to highlight 3, what we call, breakthrough performances. And while you will see some numbers on this page and the next page, the breakthrough performances are not because of the numbers. Mahindra Finance is up 97% from an operating standpoint, down 9% from a reported standpoint. But beyond the numbers, there were 3 things that we were focused on for the past 3 years: asset quality, controls and technology, along with putting in place a very strong management team. And that today is in very, very good shape. And you've seen the results for that. As a result, Mahindra Finance has announced in its analyst call 2 weeks ago that it will now pivot to growth, and we will start seeing a much faster growth rate, more diversification and areas that we need to focus on now. For the last 3 years, we were not talking about growth and focusing on asset quality controls and technology. And that pivot is what creates a breakthrough for Mahindra Finance right now. Lifespaces, profits up 5x, but I will again caveat it by saying that in real estate, as you well know, you will continue to see ups and downs based on occupation certificates coming in because that's when you recognize the profit. But it's breakthrough not just for the profit number, it's breakthrough because we can now see projects complete with the profitability we had planned for at the start of the project. We now see a much greater level of urgency in the business. The land acquisition is going very strong. We've had an external investor, Mitsui Fudosan come in. That was announced a couple of days ago. And the business, both from an IC and a residential standpoint, continues to be on a very strong track, and you will continue to see that as we go forward. Logistics, first profitable quarter after 11 quarters. But again, more than the fact that it is the first profitable quarter is the execution that is being done is very strong with Hemant Sikka coming in and a few key leaders coming into the business as well. That's really driving logistics in a very, very different way. And it's a business we expect a lot more from. So this is a good stepping stone, but the breakthrough is really driven by execution that the business has shown now. We thought it will be useful to show where does that operating profit growth come from. And therefore, on the left-hand side, what you see is operating profit. But let me first start with the bottom of the page, which has 3 numbers, 66% operating profit growth, 54% without the Mahindra Finance onetime of reserve release last year and 47% after you take out the labor code impact as well. So those are the 3 numbers that we're looking at. And it doesn't matter which number you look at it, it just is a very strong performance overall across businesses. Lifespaces up 5x from an operating standpoint; Logistics up 2x; Mahindra Finance, 97%; Auto, 42%; Tech M, 35%; Farm, 7%, as I mentioned, driven more by the international impairments; and investments up significantly because we had a CIE sale, which is in the operating numbers, which we pointed out on the right-hand side here. So that's really a map of where all the businesses are. Yes, there are some other businesses that have done very well, but these were the main ones that were driving growth, and therefore, we put them on this page. Consolidated results, up 26% for revenue, up 54%. Excluding labor code, 47% reported. Drivers from an Auto standpoint, while Rajesh will cover this in more detail, the key headlines are SUV volume up 26%, continue to be #1 there. Margin up 90 basis points. New product launches, you've heard about, have done very well. Besides revenue market share for SUVs, our LCV share has gone up 10 basis points also at 51.9% now. Farm volume up from an export standpoint, 36%. Market share down slightly, but in January, we made that up for year-to-date as well. And Farm Machinery revenue is up 45%. So we're starting to see much faster growth from a Farm Machinery standpoint. Mahindra Finance, assets under management up 12% despite not focusing on growth a whole lot. GS3 continues to be below 4%. We continue to maintain 4.5% as the benchmark we've set. But for the last many quarters, we've been below 4%. And we've got a new ECL policy, which is more in line with industry, which will help the business as well. And technology and controls, you don't see on this page, but that's been a huge focus over the last 3 years, and we've completed projects or are close to completion of certain projects there, and that gives us a lot more comfort around the business overall. Tech Mahindra, on track with what it's outlined in terms of its path for F '27 and deal wins, margin expansion, all of that playing into that track that Tech Mahindra has outlined. Logistics, we spoke about. Only thing I'll add there is strong momentum in both auto and e-commerce for logistics. Hospitality has given up whatever it has earned in India with an FX exposure with its Finland business. And real estate is on a very strong path, which I mentioned. And this is a page that you've seen many, many times now. Consistent delivery. ROE is up 20.1%. But before any question comes, I will say what I always say, we are at 18%. It may be slightly higher, slightly lower in any given quarter. So the new bar is not 20%. We will continue with 18% plus/minus a little bit. And we'll continue to drive growth, and you see a very strong growth that's been driven in this quarter and year-to-date as well so far. We are at, I think, 38%, if I got the exact number year-to-date growth from a profit standpoint. So I can tell you that's higher than what we had expected at the start of the year as well. With that, let me invite Rajesh to take you through more details. Rajesh Kajuria: Hi, everyone. I'm going to run through this quickly. I'm sure you've seen a lot of these slides already. So I'll be quick and give more time for Q&A. The SUV volume was up 26%. We've got to average Q2 and Q3 because Q2 had a lower GST. So even if we average, it will be 17%, 18%. The very good news is seeing the revival of LCV segment, which we were all wondering why it's not coming into growth. It finally has. The GST has helped. The replacement cycle has kicked in, and we do see this sustaining for some period of time. You see this Q3 -- Q2, Q3, which I just said, I think the right way to do is to average it out. A lot of the -- some of the Q3 growth is the GST transition in Q2, which spilled over to Q3, but still we've seen very robust demand in Q3. We did get affected somewhat by the fact that we scaled down XUV700 in Q3 as we were preparing for 7XO. So that has had some effect on the mix and the revenue because literally 1 month, 1.5 months, we had stopped billing new 700s out in the last quarter. You see revenue market share at 24-odd percent. We think that's about the level we'll be at. There was abnormal peak in Q1 and Q2. These numbers now -- well, earlier also, they included the EV numbers. We're just calling that out separately so that we're not going to have a separate slide on EV. On the same slide, you'll see where we are doing -- how we're doing on market share in that quarter and YTD, which you see at the bottom. 7XO has got very good response, a very strong order pipeline. And as some of you did mention, customers, we are back into this waiting period thing, which is not always desirable, but kind of also a recognition of the fact that the product has got accepted very well. Big skew again to the top end in spite of very attractive lower-end versions, almost 70% plus is the top 2 versions, which is in a way higher than what we thought, which is also good news, but that's what is adding to the complexity on waiting period, given that the skew is higher than what we expected to the -- especially AX7L version. 41,000-plus eSUVs sold, which is really about 4,000 a month as an average. The interesting thing is the 32.5 crore kilometers that the vehicle has run, which really implies 8,000 labs around the earth equivalent, goes to show that the vehicles are not just nice parking products in the garages, but are being used a lot and are very mainstream in the way that customers have adopted usage of this, which is building that positive word of mouth and confidence. We are seeing that translating into 9S, which I'll come to in a minute. A lot of awards. We believe the most prestigious out of these is the EV, the Green Car of the Year at the ICOTY, which is a very, very robust jury of multiple auto handles coming together, and they have only 3 awards, one of which is the EV Green Car of the Year, which 9e got. The 9S has got very good feedback as well and response. We had mentioned in one of the earlier quarters that we expected North to do better with the EV portfolio. With the 9S that's happening, that segment was looking for a more conventional shaped SUV, which the 9S is balancing well. So it's bringing all the goodness and tech associations of the earlier 2 products, but in a more conservative or conventional format and in 7-seater. So we are seeing, of course, good response everywhere, but North is adding a new set of customers into the 9S kitty. We had put out what products will come in the calendar, and there have been questions around how much have we already launched and what is not. So we just put this slide to clarify that. We had said 3 new ICE -- 3 ICE SUVs in this year. The new nameplate out of that was 7XO. Two more refreshes will come over and above the Bolero and Bolero Neo. When we had said 3, we had not counted Bolero and Bolero Neo in the 3. So we've done 7XO now, Bolero, Bolero Neo and there will be 2 more refreshes in this calendar year. On EVs, both what we had spoken about are done for this calendar year. So there's no new EV launch happening in this calendar year. LCVs, we had said 2. We've just done Bolero Camper and Bolero PikUp and 2 more will happen in this calendar year. A quick slide on capacity. So we're breaking this up into 3 phases, so to say. In the calendar 2026, we will work around debottlenecking some of the current capacity products where product capacity is running out, more specifically 3XO and Bolero in Nashik plant, some of Scorpio-N in Chakan plant. So all of these in Thar a little bit. So all of these are kind of out of capacity. We'll aim by July, August to add about 3,000 to 5,000 between these products per month. Over and above that 3,000 of EVs gets added with the 9S launch. So in a way, 6,000 to 7,000 additional capacities on these products get added in F '27 on top of what we have in F '26. Calendar year 2027 will see the addition of new capacity in Chakan for the new IQ platform. So one of the Vision S or Vision T, which we will launch in 2027 will kick in. The Nagpur facility, which will come up by -- in calendar 2028, will have primarily the new IQ platform on the SUV side, definitely Vision X, which is not going to come in Chakan. We will probably need more capacity than we are planning in Chakan for Vision S, Vision T. So we'll provide for that too and any other new products. We will also figure out which of the existing products need more capacity. We will have to work the cannibalization equation of new products over current products. We may add something at the Igatpuri new land that we are taking or we may add it in Nagpur. So that's something that we will work out by way of how to split and prepare for additional capacities on existing products. So Nagpur greenfield and if there are more questions, we can talk a little bit more about what will happen in Nagpur greenfield. LCVs, I'm not repeating, I've already spoken. Auto margins have been very robust, and you see the 10.4% here without contract manufacturing, but this chart gives you a better feel of the same thing, which is the auto stand-alone without contract manufacturing is 10.4%, which is what you saw on the previous slide. INR 10 crores is what we made on the contract manufacturing in M&M. And the stand-alone as reported is INR 9.5%, which, of course, comes down because there's a big element of contract manufacturing. On the EVs, as we've started doing, we made INR 175 crores end-to-end. In MEAL, as a company, the EBITDA was INR 149 crores, INR 27 crores of that was in M&M. And the total, as you see on this chart, is INR 175 crores. The PLI status is up here. So 9e, we have all variants approved. 9S, the top 2 packs are approved already. The balance are under approval and should come in by quarter 1. And BE 6 should come in by quarter 1 again, all variants. So basically, by quarter 1, we should have all variants, all products with PLI approval. Trucks and buses, a quick look. We had a strong growth. We also look at the YTD market share, we increased somewhat and we are both together at 6%. Last mile mobility, we continue our leadership, an exciting new launch happening tomorrow in Hyderabad. And do watch for that. We believe it will be a game changer. Some really very exciting breakthrough new design, and I think it will transform the penetration even more. We already are at 30% penetration. So just a quick look at the auto consolidated numbers. You've already seen that, so I'm skipping this. Farm, the volumes grew 23% in the quarter. We lost some market share. A lot of it was due to Swaraj Tractors completely running out of stock, and that's got recovered in January as well. So we are now at 44.1%. So that's what you see here. The farm machinery, Anish spoke about, we're seeing very good turnaround. Last few months, we've crossed INR 100 crores literally every month as an average. So it is a very strong momentum now that we are beginning to see. The core tractor margin here, which is really the important parameter, is at 21.2%, very good improvement over the like-to-like quarter, but also very close to our best performance. This gives you the volatility of industry growth versus how the margins move in a band, depending on the operating leverage. Anish has covered this. So again, very strong stand-alone performance. We had to take impairments on a couple of subsidiaries, which we can talk about, which is what is showing a PBIT negative 7% and a PAT plus 7%. With that, I'll hand over to Amar. Thank you. Amarjyoti Barua: Thank you, Rajesh. Just a recap of everything you heard. I won't repeat what has already been said, but I do want to take a second to highlight that this is the first time the group has crossed INR 50,000 crores in top line, and that's a big milestone for us as a group. What I just wanted to point out within the consolidated result, there is a INR 220 crore impact of labor code. This is our share. The gross amount across group companies was INR 565 crores, okay? This is the waterfall that I usually show to show the contribution of each of the pieces. You can see here the impairments were exactly offset or very close to being offset by the CIE gain. So just calling that out very clearly so that you can see that the operating performance was not helped necessarily by the CIE gain. It was offset by the onetime impairments we take -- we took. We took impairments in 2 entities. One is our Japan entity, and we took also an impairment in our Turkey foundry business, both of which the MAM Japan one we have talked about in the past. This is just continuing the restructuring in that business. Foundry is new and was impacted by the hyperinflation in Turkey. I do want to highlight growth gems grew 3x year-over-year, okay? And that's a very big deal for us. And then from the stand-alone side, the impact you all follow this, the impact of labor code is around INR 73 crores in that -- in the INR 3,931 crores that you see. And then we've talked about the revenue growth. Outside of this, the only thing I'd like to highlight, we don't show the page, but I do want to highlight the cash performance has been, again, very strong across the group. So we continue to keep growing our cash, which will be deployed towards future growth as we find new avenues. And from an outlook standpoint, I mean, we continue to see the strength in the portfolio, so hopefully should allow us to close the year very strong. Okay. With that, we can transition to questions. Operator: We'll just wait for the setup to complete, we'll start then. Yes, Kapil, please start. Kapil Singh: First of all, sir, I would like to congratulate you because this was a fairly strong all-round performance across the group companies. So really heartening to see that, that even the group companies are now contributing solidly. I'll start off with the auto sector, just Rajesh sir, your outlook for next year for each of the segments, LCVs, tractors and autos. And one of the concerns in mind is that because just GST cut has just happened. So is there an element of pent-up that you are sensing here and how to think about next year's growth for each of these segments? And within autos, various subsegments, including EVs and compact SUVs, how are you seeing the demand momentum over there? And also, if you can give some clarity on the capacity for FY '27 and FY '28 in terms of numbers, is it possible to share what will be the available capacity? So yes, that's the first question. Rajesh Kajuria: Yes. So Kapil, outlook, we'll share like we normally do in May, and we'll not give a specific number on outlook, but we'll try and maybe answer your question 2 and question 3 together, which is the impact of GST overall, how we are seeing, in which segments has it really made a difference and that, I think, connects with your question on the demand outlook at a qualitative level on EVs and subcompacts and LCVs and so on. So firstly, the biggest impact of GST will always be in commercial segments because it fundamentally -- or a price reduction because it fundamentally improves cost of ownership and improves viability. Also, the GST cut will drive GDP growth, we believe, to be much higher and the economic prosperity of the country will go up, which also helps commercial applications and commercial usages both. So it's 2 factors kicking in when we look at commercial segments. When I'm saying commercial, I'm counting LCV, bigger CVs and tractors. They all are following a similar paradigm, which is significantly better viability for the user out of a lower -- a significantly lower price. I mean, 10% is a big change in price for that segment. In LCVs, roughly, it leads to a 4% to 5% higher profit improvement for an operator. So it's not insignificant at all. So we believe this is a fundamental shift, and this will lead to a cycle of increased demand, and it's not a 1- or 2-month thing, which is just a pent-up because there was no -- it's not a pent-up. It was pent-up in LCVs to the extent that the replacement cycle had not kicked in, and we believe that was because of COVID, where usage had got delayed or reduced over a 1- or 2-year period. And as soon as -- so there was a replacement cycle delay of a year or 2 and GST, I think, provided that impetus and we saw growth kicking in together. So I think the commercial segments will gain the most. What's happening in the other segments in which we play is actually, we think, enabling higher version variant usage. We don't think fundamentally demand for an XUV 7XO or Scorpio-N is going up because of GST drop. And that may have been momentary if it did in the festival period at all. But the demand momentum continues even as we got into December and January. So it wasn't just festive and it wasn't just 1 month. There, what we are seeing is a much better move up the ladder because customers have a price point on which they're operating and then suddenly, they can get more in that price point. So it can either lead to a lower-model customer moving up to a higher model or a lower-variant customer moving up to a higher variant. So both of these will play out. I'm not sure it will increase the total size of the industry, but it will probably change the nature of the mix for an individual player or certain models, which fall in the consideration set, right? So with the 7XO of pricing that we have where we are operating, have reasonably good options between 13.5 and 15.5 or 16. 4.6 meter product actually competes like-to-like with the 4.2, 4.3 meter product, which was not the case earlier, right? So there would be 4.3 meter customers who may look for a 4.6, 4.7 product. So I think some of that will be helped by GST. The entry car has, of course, picked up with GST in a very significant way, which I'm sure is a function of the fact that that's become more affordable and hence, more accessible to many people. Whether that is pent-up or that is going to sustain, I don't have a point of view on right now. And hence, what we would have to watch out for as we get into F '27 is what will be the mix of small car to big cars and how will each subsegment grow? I think it's a little premature to reach a conclusion on how this mix will play out. I think each segment will grow by itself, but which will grow faster and which will grow a little slower and hence, the mix and the relative impact of that on market share is something that we'll have to watch for. We've seen very robust growth in all our sub INR 10 lakh product. So Bolero, Bolero Neo, everything is below INR 10 lakhs now on showroom. The GST cut helped that. So 3XO, Bolero, Bolero Neo all have got very, very strong demand. Capacity for '20... Kapil Singh: Sir, EVs as well. Rajesh Kajuria: EV, I spoke about in a fair amount of this thing. So the price point at which -- the price point/the fact that we are more than 4 meters, which means the gap between 5% GST and 40% GST is still quite significant and which is why we are able to price 9S almost like-to-like on road as a 7XO. So a customer actually can choose without worrying about price between whether they want a 7XO ICE or a 9S EV. So in the segments in which we play, I don't think the GST arbitrage change is making any difference. But in less than 4 meter, it would because there it was 28 to 5 versus 18 to 5. So it's a much, much closer comparison now. So the price advantage relatively in less than 4 meter kind of goes away. It's still quite significant in the segments in which we play. Capacity, just to again clarify what I had on the slide, we'll probably add this year, 5,000 to 6,000 by July, August in ICE over what we have right now, another 3-odd in EVs, so 7,000 to 8,000. F '27, we would add in ICE another 7,000 to 8,000 at least, that will come from Chakan in calendar 2027. That's for the new IQ platform. And then in 2028, depending on how quickly we are able to get actual possession of the land and productionize it, we would probably add in year 1, at least 8,000, 10,000 more. It will ramp up to 500,000 over a period of time. But in year 1, it will probably be 10,000, 12,000 a year. Sorry, Long answer, sorry. Kapil Singh: No, thanks. I think it's really helpful. Amar, just one to you. We are seeing a pretty steep commodity inflation, particularly precious metals. How do you see the impact of that as we look into next year? Do we have pricing power and hedging on the commodity side? And what was the impact in 3Q as well? Amarjyoti Barua: Sure. So let me address what is happening first and because it's difficult to predict what it will be. Today, what we are seeing is across almost every commodity, there is inflation. Precious metals lead the pack. Part of it is the same dynamics that is driving gold and silver. And part of it is supply issues, especially anything dependent on iron. So copper, aluminum, et cetera, you're seeing. The iron-related products are likely to not see sustained increase because these seem to be more supply-related issues, which will get solved. It's very difficult to say that for precious metals because there seems to be something more deep that is driving that, right? So we'll see how it all plays out through next year. Right now, we did see the inflation in our numbers. The hedges have worked, but I want to emphasize that the hedges can only cover a certain portion because there isn't necessarily a market for steel, for example, for hedging, right? So we do get exposed to anything that might be happening there. The other thing also is our hedges take care of purchases beyond current quarter. So some of the gains we get when we get mark-to-market is covering for purchases in the future. So you will see some volatility in commodity costs in the future and not a hedge offset. So I think so far, very benign because we are getting the advantage of having a very robust hedging program. But in the future, we'll have to see how it all plays out. Overall, I think Rajesh has already mentioned there was -- there is a 1% price increase to take care of what is going to be the future impact of some of this commodity inflation. And then we'll see how it goes. Kapil Singh: Sure. On the EVs, are you seeing more cost inflation? Anish Shah: Just to answer your question on pricing power. Do you want to cover that? Rajesh Kajuria: Yes, I think there's headroom on price. It's just that we don't want to -- we wouldn't want to push it unless we feel it's necessary. That's been our philosophy always to make sure we don't lose a sweet spot on the pricing. So we have taken 1%, as Amar just said in January. And we'll watch closely and see how the commodity is going. There's ability to take -- the key thing is anticipating whether you need it based on a stable view on what will happen to commodity. We don't want to be knee-jerk. So sometimes you kind of say, okay, this is a short-term thing. Let's not push price up for something which is going to go up today and come down tomorrow. So then you're not reacting and that has sometimes a short-term effect. But fundamentally, if you know that the commodity trend is upward, then we will take prices to correct for that. It's the judgment of whether it is just a short-term spike, which should be ignored or is it something that we fundamentally need to take a price to cover for. That's the -- it's that judgment which sometimes affects timing of a pricing decision. Anish Shah: Yes. So we have the pricing power, whether we use it or not is... Rajesh Kajuria: We don't want to -- I mean, the simplest thing is to say, okay, let's keep taking, which is something we want to avoid. Kapil Singh: Just wanted to hear your comments on EVs also in terms of cost pressures, is it more over there? Or should we expect that EV costs will still keep coming down? Amarjyoti Barua: Imports are going to be impacted because of the rupee, right? But I think there was an overhang on the rupee as well, which hopefully, with the announcement around the U.S. FTA should -- so our now view on the rupee is don't see a significant slide beyond where it is right now. Let's see how it all progresses. And that should help us ease some of the import pressure. But we mentioned this before, Kapil, there's an aggressive localization program that the team is running, right? So that will eventually offset this pressure point. Operator: Chandu, please go ahead. Unknown Analyst: First one is on CAFE. So there's now an expectation that after the industry has represented back to the government, the 113 grams coming down to 91 might potentially be 113 grams coming down to close to 100 grams in April 2027. So just wanted to understand your thoughts around that. And if that's the case, our 25% sort of EV mix target for F '28, how much could that potentially come down by? Second question is just around the tractor business. There is some expectation that over the next 12 to 18 months, there could be a recurrence of an El Nino scenario. So what your early thoughts are around that? Any offsets we have to potentially manage around that situation? And the last question is just around sort of capital allocation growth gems. Growth gems, I think we've put a lot of effort into those businesses over the last 4 to 5 years. Maybe the market at this stage doesn't fully appreciate the value in those businesses. But just related to that, we do have a couple of entities, Pininfarina and Erkunt, which might be rags on profitability of the overall group. So just your thoughts on, is there any potential restructuring possible in those entities? Rajesh Kajuria: You want to take that first? Anish Shah: Yes. So you're absolutely right, the growth gems are still underappreciated, but that's fine. We continue to have them deliver more and more. And as we shared at the Investor Day, the valuation of our growth gems as of 3 months ago was INR 56,000 crores. You're starting to see some of that in the numbers as well because they're starting to deliver more profits. Yes, there are a few businesses more so outside our growth gems, but some of the smaller businesses that haven't fully delivered to the potential. And we continue looking at that on a regular basis and culling them out as we need to. You saw that with Sampo a few quarters ago, where we exited Sampo. And we do have all our businesses in that watch in terms of what we need to do with them. We also announced Automobili Pininfarina that we were not continuing that forward. We merged that with Pininfarina. So that was, in a sense, another exit that we took. And Erkunt foundry is not strategic for us and which is where we've taken an impairment this quarter as well. So we continue to look for what are the strategic options for us in that business. So that's one discipline that will continue, and we will cull things out. But keeping that -- I look at that as a separate question from the growth gems itself. The growth gems continue to deliver value. And the way we think about it is there are a set of businesses that have scale and have a right to win. So you've got that in SUVs, in LCVs, in tractors, in farm machinery, there are a number of businesses that -- actually farm machinery doesn't have scale as yet. It will get to scale. But you've got a few businesses with that scale and a right to win. Then there are a number of businesses that have a very strong right to win, but don't have scale. And our focus is how do you start driving scale in those businesses. And many of them are growth gems. And then we have some businesses where we feel we should have the right to win, but we don't have a right to win as yet. And there, we're looking at can we develop that right to win. If we can, we will scale it. If we cannot, we will exit it. Rajesh Kajuria: Okay. Let me take the question on which there's no answer, which is CAFE. Yes, Chandu, of course, we are all as an industry body working regularly with the government on what we think should be the right and fair way to construct a policy around emission norms. So there is a fair amount of industry engagement with the government on this, and the government is not rushing into announcing something and are capturing all the views. The overall view of SIAM is to stay with the recommendation, which was made in, I think, December 2024. There's discussion around that. So you gave a number of 25%. I don't know that 25% that we had put out as our -- was our own target was not linked to what is needed by CAFE norm. We believe that most likely what will be needed by CAFE norm will be much lower than our own internal target. The difficult thing, of course, is if ICE continues to grow at a very robust pace, then what will be the ratios between ICE and EV. And that's really what part of the discussion is that you don't want to really stop growth of the economy or of the ICE portfolio and the government needs to construct it in a way which is reasonable for both industry and climate. And I think there's good listening around that. So let's wait. I think it's -- we're not too far away from getting a very clear view on what they will do, but it's maybe like -- I think we should have something out in a couple of months. So there's a lot of industry engagement with multiple government stakeholders. On the tractor industry, often you'll ask about projections. And often, I have said we have no ability to project it. As recently as 2 months back, we said it will be low double digits, and this year is going to end at twice that literally. So low double digits, if you say is 11% or 12%, we are going to end this year at 24%. So really, even the ability to forecast next 3 months is not there. I wouldn't worry about what's going to happen in October or November. It's too early to worry about that. We will go into next year feeling optimistic and positive. But keeping in mind that we are on a very high base because this year is going to end at 24% growth, which no one expected, right? So if we say example, next year is X percent growth. Earlier, we were saying it is X percent growth for F '27 on a 10% or 11% growth this year, which itself we thought is good. Now the point is if this year is not 10% or 11%, but it's 24%, which is what it's likely to be, then we have to have a reasonable assumption of on that base, what kind of growth is going to kick in next year. Multiple things in the country, we believe, are very enabling and reservoir levels is one key enabler even if when monsoons are not good. So whatever we read about El Nino effect is likely to happen after the first round of rains. So most people say that, that effect may kick in, in August or September. So if you had a good flush of rains, then your first round of kharif sowing has happened. Reservoir levels are good, which anyway, we are going to open F '27 with good reservoir levels. Government spending in rural and agricultural sectors, both has been robust, which is also a key driver of tractor growth, so -- and favorable terms of farmer trade. So there are multiple enabling factors. So let's wait and watch. I know many of you are picking up signals that tractor demand may be under stress. I think we have to see that relative to the fact that this year will be a 24% industry growth. And overall, we think right now, there are -- the enablers are much more than the dis-enablers. At least that's the way we are going in and which is why we are triggering capacity expansion and all of that for tractor, Mahindra tractors in Nagpur, which is where we already have a base on the greenfield, plus we'll also look at something more on Swaraj. So we are preparing for the longer-term growth trend, which we spoke about on the Investor Day of about 9% CAGR. Anish Shah: The economy is accelerating. And it's driven by some of the actions taken last year, but even more so from the foundation elements that have been laid. And we continue to believe that the industry will accelerate. I've gone on record saying we would look at an 8% to 10% growth over the next 20 years, just given all the key factors that drive the economy, demographics, the infrastructure that's being built, the government reforms, and then you see last year's actions around tax, around GST, around the rate cut. So you see various different actions that have come in. So we feel that there's a very strong tailwind that will position India very well, and that will benefit multiple industries in India. Unknown Analyst: Anish, the 8% to 10%, you're talking more real growth or nominal growth? Anish Shah: Real growth. Amarjyoti Barua: Can I just add one perspective because this is why we always encourage all of you to look at consolidated. All of these impairments are not just accounting, right? There are some tough decisions that have been taken by the Farm leadership. And so we do foresee international not to be such a big drag next year, right? And I think that is something -- when you think about Farm at a consolidated level, there is also that constructive view that you should take because there is some really tough decisions that the team has taken. Anish Shah: Yes. And I'll emphasize 2 points. One on what Amar said and coming back to your question around the growth numbers. There was a point in time which you've seen we would put impairments as onetime items. You saw from the pages today, impairment was not a onetime item. It is operating profit, right? Or it brings the operating profit down. And that's a mindset we are using right now to say that wherever we invest, we need to get the results from there. And as a management team, we take accountability for that to say that is the result we will drive. And therefore, it is in our operating profit number, not as a onetime item that look at as an impairment. But to Amar's point, that improves performance going forward. And yes, there are some actions that will not work. That will always happen. But we find ways to offset that. But as we've done this, it improves performance going forward. Second, I'll come back to the growth point and expand a little on what I said. India has grown 6.5% a year in real terms for the last 30 years. And with what we see today, with the kind of infrastructure that's put in both physical and digital, the kind of government spending on CapEx, the reforms that have been put in place and more that are coming, the focus of the government on making it easier to do business, we're not completely there as yet, but there's a lot of conversation that takes place. Often, we are part of those conversations to say, here's what needs to be done. And there's a lot of room for the government to listen to it and start taking action for it. The demographic factor that we have, we are at 28.8 years median age. The China and the U.S. are at 38, Japan is at 48. So we have a lot of these benefits, and we are starting to see that come together as one to start the economy growing faster, so which is where we say that it should be 8% to 10% from a real basis. With all these actions that have been taken, this is not a -- we hope for actions in future and it will happen. This is the result of actions that have been taken already. Operator: We'll go with Raghu, then Gunjan will come to you and Rakesh. Unknown Analyst: Congratulations on strong numbers. Firstly, to Anish sir. Sir, in your Davos interview, you had talked about last mile mobility listing. If you can talk about the time line and strategy, that would be helpful. Also, if you can share your thoughts on the benefits for Mahindra Group from the recent trade deals with Europe and U.S. And also like last 2 years were remarkable for Tech Mahindra in terms of deal wins and margin expansion. How do you see the medium-term outlook? And finally, on Mahindra Finance, now that the asset quality is better, how do you see the growth ahead? Anish Shah: All right. That's a great set of questions overall. So let me start with the last 2 and Mahindra Finance, in particular, and Tech M and then I'll go to the EU FTA and continue on the first question. So Mahindra Finance, for the last 3 years, we specifically had a view that the business has to get to a much stronger and consistent asset quality. If you look back over time and you look back even what I've said on Mahindra Finance in the past, we would go to 16.5% or 16% GNPAs in every crisis, stay at 8% in normal terms. We would always say that we will get all of this back and we did. So it was always profitable, but it was highly volatile. And that is something that we had to change because we didn't like the volatility. It caused a lot of questions. You didn't like the volatility either. And therefore, we said that we have to bring it down to less than 4.5%. What that also does is it brings ROA down because higher risk, higher return. But the ROA hasn't come down as much as we had expected it to come down. So it's come down to 1.9% or so right now. The last few quarters have been less than 4% from a GNPA standpoint. And we've cut out a number of customers that caused earn and pay. And if you go back to even many years, every time during a crisis, our CEO at that time, Ramesh Iyer would talk about the earn and pay segment. And so the earn and pay segment has been impacted, and they will come back and pay later because they're not earning right now, they're not paying. But that segment, we're not lending to anymore. And therefore, you've got that coming down. ROA at 1.9% doesn't worry us as much because our cross-sell ratio is the worse in industry, which I look as an opportunity. So as we cross-sell more, as we sell more insurance and other fee-based products, that is starting to come up, and we'll get that back to 2.2% to 2.5% after that as well, but have a very strong, stable business. The other aspect we needed in that stability was controls because we did at times go 2 steps forward and come 1 step back, right? That something happens in ice ball, something happens somewhere else. It's out of our control. But can we have a business with very strong controls where we can start picking this up and centralize a lot of the processing, put in a lot of technology that's good for customers as well. In some cases, our customers have to sign 76 times to get a loan. I'm not exaggerating on this one. And with technology now that has been put in Project Udaan that got put in, it's one digital signature, and that's it. So it's taken away a lot of the processing away from it, which then improves cost. So OpEx ratios, we haven't talked about a whole lot as yet, but a lot of cost will come out of the system as technology has been put in. So as we look at our OpEx ratio, as we look at our loss ratios coming down, our credit losses have always been stable. Our GS3 will be even better. The business is on a very strong track. And now we have pivoted to growth. We will grow responsibly. We're not going to grow even at the levels we could right now because we're going to continue to maintain this discipline that we have. So therefore, we see Mahindra Finance on a very strong track at this point in time. Tech M hasn't finished its first phase as yet. Mahindra Finance has finished its first phase. The other aspect in Mahindra Finance is a very strong management team. And you can see that in terms of what we've announced. We've got some really good leaders from top banks and in a couple of cases, top NBFCs as well. So that gives us a lot of comfort. Tech M, we've got a very strong team. We've made the internal transition of the delivery organization, centralized it, and that's working very well right now. It's on track to deliver what it has to in its first phase, which ends by F '27, and it has to get to a 15% EBIT margin. As it does that, then we will look at pivot to growth from that standpoint as well. So that's on the Tech M story. On FTA, I like the way you phrased your question, which is what are the benefits from the FTA. And actually, we see that as benefits because I will give a lot of credit to the government on this. They had a very, very fine balancing act because this was a big ask from the EU because of the unused capacity that they have. And the government had the balancing act not to protect us in any form because I'll come back to that protection part, but to ensure that manufacturing in India did not get a hit, that OEMs outside India continue to invest in India and continue to manufacture in India. And that's what we told them. That's what we want. We want more carmakers to come here. We want more competition. We want a bigger market here because the more scale that we have to manufacture in India, the better it is for us. We will get a better ecosystem. We'll be more competitive and we can Make in India for the world in a much better way. That's why China is very competitive. China capacity today is 50 million units a year. Roughly half is unused. India capacity is 5 million units a year. That's where China was 20 years ago. Europe is at 23 million units a year. But Europe also has 10 million, 11 million unused capacity. Volkswagen alone has unused capacity that's half of the India market. 2.2 million is Volkswagen's unused capacity. So as you look at all of these things, the fine balancing act was to make sure that we open up the industry, we'll reduce tariffs. At the same time, we encourage all of the European makers to continue making in India. And I think they've done that really well. We can go through some of the details. You've seen most of it already. Coming to the part around protection and competition for us, take any of the European models, right? Any model that's going to be successful in India is in India. Now if you look at the math behind it, whether it's a Renault Duster or whether it's a Stellantis Jeep or whether it's any other vehicle, can they make it in EU, ship it, take the cost for shipping, take the cost of inventory for 4 months and do it cheaper than they can manufacture in India? Unlikely. If that is the case, then how does it change competition for us? They will make as many cars as they can make for India, that's what the price will be. What they would have done if the outcome had been different is if they were allowed to send everything from Europe, they could have said, "I'll shut down my India plant, and I will manufacture in Europe and send it here because I don't have to shut down my European plant in that case," right? Some have announced shutdowns of European plants as well, which they have not been able to do right now. But that's where the FTA has been done very well, which will not allow them to do that because they will need a presence in India to be able to succeed here. So that is our view on why the FTA has been done very well. The benefits or opportunities come from the fact that we can send our cars to Europe at 2.5x the quota that they have there, which is a great quota from our standpoint at 0% tax, right? Yes, their reduction was lower. Their starting point was lower and which is why it goes down to 0%. But that opens up a significant opportunity for us. And we can test the European market by manufacturing in India well and sending it there. We will also get a lower price for some of our components coming in because this FTA also allows for that. So today, we pay 16.5% for electronic screens. We have a few other imports that we have that we have a higher price. That comes down as well. So we see a lot of benefits from the EU FTA in particular. The U.S. FTA actually was a surprise in many ways. It doesn't really give much to the U.S. from an auto standpoint, the way it's drafted right now, at least what we've seen. We'll wait for the details to come in, but we don't expect any -- we never expected any challenge from the U.S. in any case. Europe was a bigger one in that sense. Unknown Analyst: Last mile, sir? Anish Shah: Yes. On last mile, we did talk in towers that we'd look at an IPO next year. And that's more around where the business is, where its trajectory is. It is competing fiercely in the market and doing very well. And we just feel that an IPO will just help unlock that value for that business. It's the right time for it, and that's what we'll do. It's not for monetization in any form because we're not worried about the cash aspect of it, but it's just something that helps proclaim victory in that space, which is why we do it. So that's -- it really shouldn't change anything from the economic view of the group. Unknown Analyst: To Rajesh sir and also to Veejay sir, on the tractor side, how do you see the contribution of the subsidy-led sales in the current year? And how do you see that subsidy-led momentum continuing for next year? Rajesh Kajuria: Yes. I'll take that, Raghu. And of course, Divya had prepared us for this question coming from many of you. So mainly the subsidy was Maharashtra and Maharashtra saw a huge growth in industry, thanks to the subsidy. Roughly 35,000 extra numbers of tractors have got sold on account of the one subsidy, which was very successful. There were 3 subsidy schemes in Maharashtra. So without getting into the granular details of each subsidy scheme. So roughly 35,000 extra tractors in F '26 over F '25 on account of the one major thing, which we don't expect will continue. But then that's the number in perspective. From looking at just that state of Maharashtra, obviously, the state will not get growth. But normally, some other state will do something or there will be key drivers. If you see the previous year, Chhattisgarh had a huge growth just like Maharashtra is having this year. So there will always be 1 or 2 other states which compensate for something else. So we live in that hope. And certainly, Maharashtra will be flattish after such a heavy growth. I think it was 90% growth or something in Maharashtra, 68%, whatever. Unknown Executive: Two years of already a pretty strong... Rajesh Kajuria: Yes, yes. So that is what it is. So that's the 35,000 is the extra absolute number in an industry of 10,000 numbers or 10 lakh numbers, all India industrial... Anish Shah: I'll just add to that and also what Kapil asked earlier, we generally like steady growth numbers year-over-year because we look at outperforming in the market. And even the auto industry, if you look back over the last few years, hasn't really grown at rapid pace, and we've done very well in an industry that hasn't grown at a very rapid pace. So for us, the huge fluctuation where growth goes up so much and then in Maharashtra it will come down again is not ideal. Yes, we will like some short-term numbers that come from it. But our general preference is slow, steady growth that comes in, and we'll overperform on that basis. Unknown Analyst: Just a last question... Operator: I'll come back to you. We'll go with Gunjan. Gunjan Prithyani: Okay. I'm going to keep it at 2. So Rajesh, with you. I think I just want to hear your thoughts on the EV business scale up now that it's been a year, we've had the portfolio in place and the fact that we have these 3 models, which will be there for the -- in CY '26, there's nothing incrementally new coming, right? So a couple of things that I'm trying to get your thoughts on. One, how do we think about the ramp-up of the volumes with these 3 models? And are these 3 models enough in context of the CAFE emission norms if they were to kick in from April '27 onwards? And just going back to the supply chain bit that this is a lot different from the ICE supply chain. Having sort of produce these models for almost a year, what are the challenges that we are -- and we see, particularly memory chips is something that I keep hearing from my colleagues is a big issue. So some thoughts on the supply chain, how sorted are we now for the next stage of ramp-up on this business? Rajesh Kajuria: Okay. Let's just get the memory chip thing out of the way. It's not an EV thing, the memory chip, right? It's going into everything. It's in infotainment systems and multiple other parts of every ICE and EV car. So a memory chip shortage has no isolated effect on EV. It has an effect on the whole portfolio because literally every part of our -- every product or variant of ours has something like an infotainment system, which needs a memory chip. So memory chip is something that is a supply chain risk/price-sensitive thing because shortage obviously is driving premiums in memory chips. So memory chip is something which is a watch out across the portfolio right now. That's the new rare earth, let's call it that, right? So every quarter, we have one such thing which will take disproportionate energy at the moment, that is memory chips. So that's not an EV thing. I'm just wanting to get that out of the way because, yes, it's a watch out and it's something that we are taking all the mitigating actions to build inventory, so on and so forth, which we have done in all other previous such kind of at risk to supply parts and memory chip is certainly one. But I just want to call out that, that is -- I'm isolating that from EV that is -- a memory chip shortage will affect the whole portfolio significantly. Gunjan Prithyani: Are you covered for it in the... Rajesh Kajuria: We are covered for it in the short run. We are buying in market. We are paying premium, and we have a set of mitigating actions. We are covered in the short run. But it's almost like going back to semiconductors of COVID. I mean that's -- the risk could be quite severe. We have the learnings now out of having handled some of those discontinuities or disruptions. So we are probably better equipped to deal with it, and that's what we are doing proactively. So memory chip is one. We are covered for now. The EV business scale up for the year F '27 is based on the 3 models, which we said. The model some of you got to see we had kind of put visuals of that out in the Banbury 2022 event is what we had code named BO7. It probably won't be launched with that name, will come in, in some part of calendar 2027. That we believe will be a very big volume driver on top of what we are doing with our current 3 products. So that is we are expecting as a 2027 launch. The 3 products we are expecting will be in the volume range right now in this calendar year between 7,000 to 8,000 a month, which is the kind of number that we have put out when we launched the 9S. So I'm just reinforcing the number that we put out as our projection for 2027, roughly [ 80-plus thousand ] a year. We feel comfortable based on the response that we've got to 9s. That's a number which is achievable. The CAFE question I've already answered, Raghu, by way of saying that there's no real answer. So I just stay with that same position. I think right now, all we can do is try to do the best in each segment without worrying about ratios. That to us is the best approach. While we, as an industry, are in touch with government, we've got to see how we grow the business and each subsegment individually, which is ICE to not curtail growth of ICE worrying about ratio and EV to maximize it to leverage the opportunity that there is. So that's really the way we are thinking about it. There's no separate supply chain-related disruption that we are seeing on EVs compared to ICE. So I just want to clarify that actually the rest of the supply chain sales and all of that on EV has actually been very seamless. So we actually don't have EV-specific supply chain disruption at all. Any supply chain disruption that is happening is based -- is actually impacting ICE and EV both because we do now have very good and high technology even in the ICE. So if there's anything happening there, it's happening here as well. Gunjan Prithyani: And just to get the regulation out, is BS VII something that is from a cost implication perspective, going to be meaningful, particularly on the diesel heavy portfolio, if you can share your thoughts. Rajesh Kajuria: Yes. No, I don't think it was -- I don't think Velu is here to help me with this, but it's not going to be -- I don't think we're going to have a penalty on diesel compared to gasoline on BS VII. A lot of work has already been done on BS VI.2. So the incremental cost of doing diesel or gasoline may not be disproportionately high. We are right now working on being ready with BS VII. We're not sure of the timing, but we are ready -- we will be ready with BS VII and... Gunjan Prithyani: The cost... Rajesh Kajuria: The cost is something we'll have to see. I mean we -- the whole industry did take BS VI. Unknown Executive: [indiscernible]. Rajesh Kajuria: Yes. Gunjan Prithyani: Okay. Got it. Just last question, Amar, to you. I think on the MEAL, if you can share what was the PLI that was as a percentage that we are accruing on the subsidiary? And with the all capacity that we've announced, is there any change to the CapEx outlook versus what we had shared earlier or anything that we should think through? Amarjyoti Barua: CapEx, we'll talk about in May because then we'll give you -- I mean there is -- it's all within what we had communicated earlier. We had always anticipated there will be greenfield and all of that is in there, but we'll give you more. On PLI, we've been accruing 13% on wherever there is approval. And as each of -- as Rajesh clearly laid out, I think this quarter, there will be -- to the extent there is 9S, we will have similar and then next quarter with the BE 6. Rajesh Kajuria: We may not accrue or assume to accrue 13 as we go into Q1. Basically, the way this works, Gunjan, is it depends on which suppliers in the value chain also qualify for PLI. So basically, if nobody qualifies in that period, then you can accrue the whole spread of 13. But if someone else, then there's a sharing. So it could range anywhere between 8 and 13 depending on which suppliers also qualify for PLI in your value chain. So we've been accruing 13 because nobody else has qualified. Amarjyoti Barua: For 9, there was nobody else. Rajesh Kajuria: Nobody else. So we have accrued the full 13. But as we get into Q1, we'll have to see whether it's 8 or 13 or whatever is the number. Amarjyoti Barua: For example, LMM to Rajesh's point is at a lower level because there are suppliers who qualify. Operator: Rakesh, you want to go? Unknown Analyst: Rajesh, my question was on 7XO. So pretty solid initial demand in terms of booking. And for the top 2 variants, specifically, you called out 70% of the demand is for that. If we go back 4, 5 years when 700 was launched, we had a similar situation, pretty solid demand, more skewed towards higher variant, maybe less than what we are seeing with 7XO. And then as the demand stabilizes, we start seeing that the product started being seen as a premium product priced above INR 20 lakh, INR 25 lakh, and that makes it difficult to sustain strong volume and you had to take price action at that time as well. How are you going to mitigate a similar repeat of a risk that once the demand stabilizes for the premium product, it doesn't get restricted to a smaller price point, but the entire price from INR 13 lakh to INR 25 lakh is addressed. Rajesh Kajuria: Okay. Rakesh, great question. So learning out of that, what we've done in 7XO, we've actually discontinued what we were calling the MX series. So just to go back to the 700, we used to have the MX series and the AX Series. AX was AdrenoX-based, which was a connected car. And MX did not have the connectivity and the AdrenoX interfaces, which were well priced. But for a customer who was coming into 700 kind of tech mindset, didn't want to look at MX as an option at all, while that was well priced. So the few corrections we made in the way we've constructed the variant lineup on 7XO is completely discontinued MX. So we now start with AX. So the lowest entry version of 7XO comes with AdrenoX and is a connected car. We have 3 screens right from AX. So the entry variant has 3 screens. So there are some of these things which were very key part of the value proposition of the product, we didn't have in 700 and the lower versions. And which is why when later on, as demand for the higher end started going down, customers are not willing to -- they didn't find the lower-end versions attractive enough because the brand stood for a certain tech value proposition and the lower end were not offering that. This we have taken care of this time. So we -- basically the key part, so DAVINCI suspension or the AdrenoX connectivity or the 3 screens are there right from the entry variant of AX. So it will be far easier for us to leverage AX, AX3 to drive volumes than what we were able to do with 700, where basically MX was not getting any traction at all. Unknown Analyst: So this initial skew of demand towards higher variant, you don't see that as a risk that in the mind of customers, it's fixed that 7XO probably is a premium car. Eventually, you would start seeing a more diversified demand across portfolio. Rajesh Kajuria: Yes. Unknown Analyst: The question I'm trying to come to essentially is that... Rajesh Kajuria: Will we have to drop price again? Unknown Analyst: Or maybe introduce some other brand at a lower price? Rajesh Kajuria: Yes. This risk is there because if you keep selling the top-end version only then the brand starts getting associated at, whatever, INR 20 lakh, INR 22 lakh price point. We've just introduced the Roxx, a special version on Roxx, called Roxx Star, Star Edition, which is actually the X7, which is at, I think, INR 16.5 lakhs or INR 16.9 lakhs or INR 16.8 lakhs or some 16.8 lakhs, which actually achieves this objective. So we had kept that option open in the -- when we launched Roxx that there is a slot in between, which was the AX7 equivalent slot, which we didn't use. And we have the ability to bring that in at a time when then that allows -- when needed to pick up volume at a price point of INR 17-odd lakhs. So there are things like that we could do with 7XO as well. To your point on should we have another product, that is something that we -- I'm sure we'll talk about as we talk about our product portfolio and share more with you as we go along. Unknown Analyst: Great. Just one clarification on your tractor capacity. How is it positioned and for the next year... Rajesh Kajuria: Yes, it's tight, honestly, because we are not -- we were not prepared for 25% growth this year. So we are scrambling to put capacity in more by way of Swaraj than Farm division. Swaraj, we have a plant 3 and that we are ramping up. We had some capacity constraints at our engine facility, which is Swaraj Engines. That capacity expansion was already approved. And that, I think, comes on way now between March and June. So it was basically June, which we are trying to prepone and get done by March. So because there was a little bit of a timing gap in that capacity coming in place, so Swaraj was constrained by engine availability from Swaraj Engines, which is the primary or the only supplier to Swaraj tractors. But that, I think we'll overcome. But like I said, we are adding 100,000 in Nagpur greenfield for Mahindra branded tractors plus looking at what we need to do for Swaraj, which should cover us for F '27. Operator: Raghu, your last question? Unknown Analyst: To Amar sir, if you can talk about the Farm subsidiaries, there was this noncash write-offs this quarter. So next quarter onwards, we should expect a normalized performance? Amarjyoti Barua: So for some of the subsidiaries where we have decided to restructure, there are rules around what you can recognize and can't recognize. So we have done whatever is the maximum possible under the rules, and there will be some trailing costs after, right? So there will be costs, but not of the magnitude that you saw today. So there will be trailing costs, and then there will be losses till the time the complete restructuring has been completed. So you will -- at least for this year, don't expect any dramatic changes. Next year, towards the second half, you should see the change in trajectory. Operator: Great. We are running a bit over time, so we'll just close this -- you have a question, okay, please proceed. Unknown Analyst: I had a question. What is your global ambition in EVs? And second is, what is the key to increasing margins in the automotive business because your scale is going up, your volumes, your market share, your acceptance is very strong. And how do you increase the margins there? Rajesh Kajuria: Yes. On the EV global, we had already spoken about the way we are approaching this. So we will look at, like we had said, for the EVs, the right-hand drive markets first, so which is Australia, New Zealand and maybe potentially U.K. Anish just spoke about the EU opportunity. So at an appropriate time, we'll go into left-hand drive markets in Europe potentially, but only after testing and being confident that it's an acceptable and a successful value proposition in the right-hand drive market. So we don't want to globalize recklessly. We have said that we will do it in a very calibrated way, see the response that we get in right-hand drive markets, maybe Australia, New Zealand first and then U.K. So that's where we are on EV. It will be very watchful and calibrated. On margins on auto, our approach has always been -- and we just had some questions around how we are pricing and so on, but is to make sure that we drive margin improvement not because the customer is willing to pay for more, so we should just keep increasing prices. It should come out of staying focused on volume, ensuring the brands continue to have a strong value proposition while working on our cost structure. So we are very, very careful and calibrated in price increases that we take. We want to keep the positioning visa customers -- price positioning vis-a-vis customers intact, so the brands continue to have momentum and then work on costs. And that, as you've seen with time, we have the best in industry peer margins right now. That comes out of -- or in spite, if I may use that word, of being very competitively priced with every launch that we do and even with our existing products. So it's really the balancing between how to get margins by being very well priced and managing costs well. Unknown Analyst: And sir, out of, let's say, 50-odd thousand SUVs, which you sell every month, how many of the customers are coming who are Mahindra customers in some way? And how many are coming from other brands, if you can help us? Rajesh Kajuria: Yes. So we've shared this earlier for EVs where 80% of the customers that we got in last year were actually non-Mahindra customers. In the rest of the portfolio, it depends based on products. So for example, 3XO, which we do almost 9,000, 10,000 a month, is not -- are all new or first-time buyers. They're not really Mahindra customers. Bolero, Bolero Neo will get a lot of Mahindra customers. XUV 7XO is getting a lot of customers which are non-Mahindra. So it really varies across product portfolio. I don't want to give you a very broad one number because that would be not the right way to interpret it. Operator: Great. With that, we'll close this meeting. Thank you so much, everyone, for joining us. Please join us for refreshments. Thank you.
Operator: Good day, and thank you for standing by. Welcome to the Tower Semiconductor Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your first speaker Noit Levy, Investor Relations and Corporate Communications. Please go ahead. Noit Levi-Karoubi: Thank you. Good day, and thank you, everyone, for joining us today. Welcome to Tower Semiconductor's Fourth Quarter and Full Year 2025 Financial Results Conference Call. With us today are Mr. Russell Ellwanger, our Chief Executive Officer; and Mr. Oren Shirazi, our Chief Financial Officer. Before we begin, please note that certain statements made during today's call may be forward-looking and subject to risks and uncertainties that could cause actual results to differ materially. These risks are detailed in our SEC filings, Form 20-F and 6-K as well as filings with the Israeli Securities Authority, all available on our website. Tower assumes no obligation to update any such forward-looking statements. Our fourth quarter and full year 2025 results are prepared in accordance with U.S. GAAP. Some that are presented may include non-GAAP financial measures as defined under SEC Regulation G. Reconciliations to GAAP figures and full explanations are provided in today's press release and financial tables. For your reference, a supporting slide deck is available on our website and integrated into this webcast. With that, I'd like to turn the call over to our CEO, Mr. Russell Ellwanger. Russell? Russell Ellwanger: Thank you, Noit. Hello, everybody. Thank you for joining our call today. Very pleased to share our results for the fourth quarter and full year of 2025. Additionally, we are extremely excited to present how these results have redefined our financial milestones and accelerated the time line for achievement of the same. The updated financial model, which we will present is the result of already strong partnerships with our lead customers having grown into deeply trust-rooted supplier customer partnership technical alliances. We ended our fourth quarter of 2025 with a company revenue of $440 million, an 11% quarter-over-quarter growth, 14% year-over-year growth, fulfilling our beginning of the year target of quarterly sequential growth. In addition to the top line, we achieved bottom line growth throughout the year. Fourth quarter net profit was $80 million or 18% net margin, up from 11% in Q1 '25, 13% in Q2 '25, 14% in Q3, indicative of a value-based growth being driven by technology mix enrichment. The revenue growth from Q1 to Q4 of 2025 was $82 million, of which there was a $40 million net profit drop down and almost 50%, to be exact 48.78% and this due to the high value of the incremental Photonics revenue. Revenue for the full year was $1.566 billion, $130 million or 9% increase as compared to 2024 revenue. Now to review our 2025 revenue breakdown and discuss the key trends, please see Slides 5 and 6 as referenced. We achieved year-over-year growth across our key technology platforms, namely power management, image sensors and 300mm RFSOI on top of which record achievements and unprecedented growth of our market-leading optical transceiver offerings, silicon germanium and SiPho advanced platforms has propelled us into a favored and unique position, both driving our growth for 2026 and additionally, giving us the ability to redefine our financial model, which I will present at the end of my comments. RF infrastructure showed a 75% revenue increase, 2025 over 2024 being our fastest-growing application in '25 driven by hyperscaler rapid adoption of silicon photonics in 800G and 1.6T pluggable transceivers. Silicon germanium and silicon photonics revenues represented 27% of our corporate revenues were $421 million, up from $241 million or 17% in 2024. SiPho revenues alone were $228 million in 2025, up from $106 million in 2024. Specific to the fourth quarter, RF infrastructure revenues were 32% of corporate revenue, with SiPho having achieved $95 million or a $380 million annual run rate. Included in this number is some non-wafer NRE to enhance future developments for Gen+1 and Gen+2. As highlighted in our recent announcement with NVIDIA, the insatiable demand for compute bandwidth in both scale-up and scale-out architectures and Tower's exceptional ability to scale the capacity flawlessly in partnership with our customer has made 1.6 terabyte per second, the fastest-growing silicon photonics node in the industry to date, with Tower being by far the majority supplier of 1.6T silicon PICs. The partnership announced with NVIDIA as with all our direct module customers, underscores our commitment to deliver best-in-class technology and the manufacturing agility required to meet such an exceptional demand trajectory. In addition to Fab 3 Newport Beach, this past year, we successfully ramped silicon photonics production in Fab 9 San Antonio, Fab 7, Uozu, Japan, and are on track to ship the first production, a very large SiPho ramp in 2026 and from Fab 2 Migdal Haemek. Given an even stronger customer demand than was known at our last quarterly release, we have increased our CapEx plan for 2026 and with multiple customer requests to enter into capacity reservation agreements through 2028, enabling our customers to, in turn, give firm commitments to their customers having ensured their supply. For next-generation 400-gigabit per lane, we continue to make strong progress with heterogeneously integrated indium phosphide on silicon and other material systems. We are playing a key role, partnering with our lead customers to define the material systems that will be chosen, refining the flow and hence ensuring manufacturability readiness and immediate ramp capability upon 3.2T market introduction. We also see co-packaged optics as a substantially incremental opportunity for us in the coming years, as optics gets adopted and scale-up interconnects as well as XPU to high-bandwidth memory interconnects that are today largely copper. In Q4 '25, we announced the expansion of our mature 300 millimeter wafer bonding technology to enable wafer to wafer integration of silicon photonics ICs and silicon germanium electrical ICs. In addition, we continue to work with several customers on dense wavelength division multiplexing laser sources, which are a critical component of many CPO implementations and can significantly expand our served optical market by now including the laser source. Beyond optical transceivers, our silicon photonics platform continues to be the technology of choice for physical AI applications, particularly frequency modulated continuous wave LIDAR. Ahead of CES, 2 of our FMCW LIDAR partners, AVA and LightIC publicly announced their collaboration with us in bringing to market disruptive products. The proven robustness of our silicon photonics platform supported by many tens of thousands of high-yielding, high-quality wafers ship to date is enabling silicon photonics to capture growing share in the LIDAR market, unlocking new automotive and robotics opportunities. Our silicon germanium platform delivered strong growth year-over-year in 2025 of 43%, remaining the optimal platform solution for low-power, low-latency, high-performance components such as drivers, trans-impedance amplifiers for pluggables, LPOs and active copper and active optical cables. Alongside our silicon photonics production, our silicon germanium platform is now running in high volumes across Fab 3 Newport Beach, Fab 9 San Antonio, Fab 2 Migdal Haemek, and we have shipped 300 millimeter prototypes from Fab 7 in Uozu. RF mobile represented 23% of our 2025 corporate revenue and 24% of our Q4 25 revenues. 300mm RFSOI was up 5.5%, while the RF mobile as a whole was down 15% year-over-year. Those are primarily due to our proactively working with our customer partners to responsibly reduce exposure to lower margin controller offerings in favor of higher-value optical and RF mix in the fabs and also influenced with the front-end module market shift from 200 millimeter to the higher digital content better served with more advanced nodes in 300 millimeter. Our latest technology, which we presented last quarter, with substantial improvement of our [indiscernible] relative to the competition and reduced layer count, therefore, higher overall value per customer dollar continues to see robust customer adoption. Lead customers have recognized it as best-in-class and are preparing to ramp to high volumes. Across the board, we continue to see strong design win momentum that positions our 300mm RFSOI platform for sustained secular growth. In 2025, we achieved major wins, namely 3 of the top 4 Tier 1 RF front-end module providers. One has begun production with all planning for strong ramp in 2027 towards achieving appreciable revenue volumes in 2028. Power Management grew 20% year-over-year, demonstrating strong year-over-year revenue growth in both 200 millimeter and 300 millimeter offering, representing 16% of our 2025 corporate revenues and 15% of our Q4 '25 revenues. In 300 millimeter, this includes the ramp of the Tier 1 handset envelope tracker previously announced, which is expected to continue to gain share in the years to come. Overall, our revenue growth in 300 millimeter power has significantly outpaced the rate of growth for both the power market as well as the mobile handset market, demonstrating the strength of our offering and share gains in this significant space. Sensors and Displays grew 10% year-over-year, representing 16% of our 2025 corporate revenue, 15% of the fourth quarter revenue. We have seen strength and continue to see strength in the machine vision market with new advanced products ramping to production alongside existing products that continue to gain share. We also expect our first ramp in the AI -- I'm sorry, in the AR display segment with our silicon back plane for OLED on silicon, which has started production this past quarter. We are tracking this first adoption and its overall market carefully and with optimism as it may have significant value for Tower in the following years. Mixed signal CMOS represented 7% and Discrete represented 11% of our 2025 corporate revenues. Year-on-year, we've seen decreases of 18% and 14%, respectively, supporting our value-driven growth strategy, allowing additional capacity for the higher margin and the highest margin platform to replace these 2 application sets. Regarding capacity expansion. During our previous earnings release in November '25, we announced an increase of investment for silicon photonics and silicon germanium growth targeting a tripling of SiPho capacity against our targeted Q4 '25 silicon photonics actual shipments having stated a target that this would be online to begin silicon starts in the second half of 2026. Due to continued growth in demand, we are announcing today additional CapEx investment of $270 million on top of the previously announced $650 million capacity expansion plan. This total capacity is targeted to yield capacity growth greater than 5x of the actual fourth quarter monthly wafer shipments -- silicon photonics wafer shipments to be compared to the 3x target that we gave during the Q3 public release. And over 70% of the total SiPho capacity is either presently reserved or in the process of being reserved through 2028, firmly backed with customer prepayment. For the fourth quarter, utilization rates were Fab 2 operated at about 60% utilization as we are now in the final stages of silicon germanium and silicon photonics capacity qualification for a variety of flows. Fab 3 maintained our model full utilization of 85% and still adding capacity for increasing silicon photonics capability. Fab 5 was a 75% utilization. Fab 7 was fully utilized, well above our 85% utilization model. Fab 9 was at 65% utilization, presently in the silicon photonics and silicon germanium ramp. As stated in our press release, Intel has expressed its intention not to perform under the September '23 Fab 11X agreement. We are presently in a mediation process. All flows, which have been transferred or are in the process of being transferred to Fab 11X were originally qualified in our Japanese 300 millimeter factory Fab 7. Customers are being redirected to be supported by this fab in Japan. For guidance, we guide our first quarter of 2026 midrange revenue to be $412 million plus/minus 5%, representing a 15% increase as compared to the start of 2025. We target quarter-over-quarter revenue and profitability growth throughout 2026. Based upon the thriving corporate ecosystem we've developed intertwined with deeply trusted customer partner alliances, we are pleased to provide a revised financial model. This new model demonstrates our value-driven growth strategy. Please refer to Slide 7. First, the assumptions. Beyond the $920 million CapEx plans that have been released, no additional CapEx, clean room space or otherwise additional monies are required to achieve this model. This model is based on utilizing Tower-owned capacity at an 85% utilization level. Intel Fab 11X is not included in this model. Revenue, $2.84 billion, which will create 39.4% gross margin, 31.7% operating margin, a 7.7 point drop from gross to operating margin, demonstrating a highly efficient business and if not the very best, certainly among the best in our industry. Such efficiency is seen in more than just margin dollars. It is reflective to the speed of decision-making and execution. Speed is a sustainable differentiator. Net profit is $750 million or 26.4% net profit margins. All tools and customer qualifications are planned to be fully completed within 2026. Hence, and most importantly, we target to achieve this model in the calendar year 2028. Now I'd like to turn the call to our CFO, Oren Shirazi. Oren, please. Oren Shirazi: Hello, everyone. Earlier today, we released our financial results for the fourth quarter of 2025 and for the full year and also released our balance sheet and cash flow reports. Now I will review the results highlights as well as the highlights of our CapEx investment and afterwards, I will present our updated target financial model, resulting in higher revenue and profit margins than the prior model. Let's first look into the P&L. In 2025, we achieved quarter-over-quarter revenue increase during the year, which has accelerated in the second half of 2025, resulting in record revenue of $440 million in the fourth quarter of 2025, reflecting a year-over-year revenue increase of 14% and a quarter-over-quarter revenue increase of 11%. Gross profit for the fourth quarter of 2025 was $118 million, an increase of $25 million or 26% compared to the prior quarter. And operating profit was $71 million, 40% higher as compared to the prior quarter. Net profit the fourth quarter of 2025 was $80 million, an increase of $26 million or 49% compared to net profit of $54 million in the prior quarter. And earnings per share were $0.71 basic and $0.70 diluted per share compared to $0.48 basic and $0.47 diluted earnings per share reported for the prior quarter. Please note that income tax expenses line in the P&L includes a nonrecurring tax benefit recorded in the fourth quarter of 2025, resulting in an all-in 2% effective tax rate. For 2026 and beyond, as required by Pillar 2 regulation, we estimate all-in tax effective rate to be at least 15% in all our manufacturing sites. For the full year 2025, we reported revenue of $1.57 billion, 9% higher as compared to $144 billion in 2024. Gross profit and operating profit for '25 were $364 million and $194 million, respectively, compared to $339 million and $191 million in 2024 respectively. Net profit for 2025 was $220 million or $1.97 basic and $1.94 diluted earnings per share, compared to $208 million net profit in 2024. Moving to our balance sheet. Our balance sheet is very strong, evidenced by the following indicators and financial ratios. As of end of December 2025, our assets totaled over $3 billion, primarily comprised of $1.5 billion in fixed assets, predominantly comprised of fab machinery and $1.7 billion of current assets. The recent increase in other long-term assets as compared to past periods is mostly attributed to the Newport Beach Fab lease extension prepayment as was announced in November 2025 and paid, which is presented as an asset as required by GAAP. Current assets ratio is very strong at about 6.5x, while shareholders' equity reached a record number of $2.9 billion at the end of December 2025. Hedging, I would like now to describe our currency hedging activities. In relation to the Japanese yen, since the majority of TPSCo's revenue is denominated in yen and the vast majority of TPSCo's costs are in yen, we have a natural hedge over most of our Japanese business and operations. To mitigate part of the remaining yen exposure, we are executing 0 cost cylinder transactions to hedge currency fluctuations. Hence, while the yen rate against the dollar may fluctuate, there is limited impact on our margin. Similar concept goes to the Israeli shekel. In relation to the Israeli shekel currency, while we have no revenue in this currency since a portion of our cost in Israel is denominated in shekel, we also hedge a large portion of such currency risk by engaging zero-cost cylinder transaction to mitigate this exposure. Hence, while the shekel rate against the dollar may fluctuate, the impact on our margins is limited. Now moving into our CapEx investment plan and its impact on our financial model. As we announced today, in order to support the increasing SiPho and SiGe demand, we are allocating an additional $270 million of cash to invest in capacity and capability side for equipment, which would result in a total of $920 million cash investments in CapEx, including the $650 million we already announced during 2025. These $920 million CapEx investment will expand our Fab's capacity in our 8-inch fabs in Israel, Newport Beach, Texas and also in our 12-inch Uozu Fab in Japan. This CapEx plan includes a large portion of capability CapEx for advanced development and high-end RF technology-related projects. Approximately 28% of the above-stated $920 million CapEx investments were already paid to date while the remaining 72% of the $920 million are expected to be paid in 2026 and 2027. Moving to the financial model. Following these investments, which are expected to drive greater revenue and incremental margins as compared to our prior model, which we released more than 2 years ago, we are providing an updated target financial model resulting in significantly higher revenue, profitability and margin targets. Please note, the model is based on many forward-looking operational business and financial assumptions including the assumption that all our fabs will operate at 85% utilization post installation and qualification of the $920 million equipment tools we are investing in. Assumptions considering a modest average wafer selling price reduction of existing products and/or flows that we target will be offset by new products and/or flows introductions. Assumptions that our cost estimates will not differ significantly from our current assumptions. And lastly, please note that the model does not include Fab 11X capacity, revenue and margin. Now any possible additional fabs and/or new capacity that has not yet been obtained, established or announced to date. Under this model, which you may see in the slide for your reference, we are targeting $2.84 billion in annual revenue, which is $1.27 billion higher or 81% higher in revenue than our actual full year 2025 revenue. $1.12 billion in gross profit, which is more than tripling our 2025 gross profit. This level of gross profit reflects approximately 40% gross margin, which reflects a 59% incremental gross profit that are derived from the incremental revenue when comparing the model to FY 2025 actual results. It also states $900 million in annual operating profit, which is 4.6x our actual FY '25 operating profit, reflecting 32% operating margin. This reflects 55% incremental operating profit margins that are derived from the incremental revenue when comparing the model to FY 2025 actual results. And lastly, on net profit, $750 million, more than tripling the full year 2025 net profit, reflecting 26% net margin, like Russell stated, which reflects 42% incremental net profit margins that are derived from the incremental revenue when comparing the model to FY 2025 actual results. To summarize, comparing this updated financial model to the prior financial model that we presented more than 2 years ago, gross profit, operating profit and net profit are much higher, 50%, 60% each higher as compared to the prior model, mostly driven by the higher SiPho and SiGe mix and the additional value we bring to our customers. That concludes my prepared remarks. Now I'd like to turn the call back to the operator so we can take your questions. Operator: [Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Mehdi Hosseini from Susquehanna Financial Group. Mehdi Hosseini: A couple of questions from me. Russell, I want to dive into the announcement that you had last Thursday, increased collaboration with NVIDIA. The press release was making a reference to module. And I want to better understand what that implies. Does this mean that you will be manufacturing a transceiver for NVIDIA or the module is more of a broader -- a reflection of a broader services that you would provide for this customer? And I have a follow-up. Russell Ellwanger: No, the part of our role in the module is the output parameters of our photonics or of the TIA or of the drivers or of the -- for the pluggable or as well for the copper or optical cable. But the partnership is referring to the fact of alignments and needs directly and through our module customers and understandings of supply needs and commitments on supply shipments. Mehdi Hosseini: Okay. And your 5x capacity increase for silicon photonics, silicon germanium, is that -- does that include incremental demand from NVIDIA and partners? Russell Ellwanger: Yes, that's referring to total demand. Well, I wouldn't say it's necessarily referring to total demand. It's an answer to demand, but it's the actual capacity that we're building. So if you look at what we had referred to as the $380 million run rate that we had in Q4, take off of that some small amount of NRE, which we don't specify, the silicon wafers that we shipped for the fourth quarter, that exact amount of silicon wafers by capacity, we plan to have 5x more of that in the fourth quarter of 2026. Mehdi Hosseini: Got it. Okay. And then on your power business line, does -- would you be able to also help prospective customers on the high voltage, especially as the next generation of AI server rack will require 800-volt DC? Russell Ellwanger: We have a variety of road map activities. We don't, at this moment, have an 800-volt platform on an IC. We do have 800-volt capabilities in Fabs, but not in an IC. But we do have higher voltage IC capabilities with and without SOI. Operator: We are now going to take our next question. And the next questions come from Tavy Rosner from Barclays. Tavy Rosner: Just following up on the NVIDIA question. So just to clarify, you're not actually shipping directly to NVIDIA, you're shipping through resellers that will just send your technology on to them. Russell Ellwanger: That is correct. We -- as far as the photonics itself, we do not ship that directly to NVIDIA. And as far as specifics of projects or activities that we're doing with NVIDIA, that anything that was not specifically stated in the PR, I would not be at liberty to talk about. But as far as the present photonics -- silicon-based photonics ICs, they are all being designed by and shipped through other module makers or integrators. Tavy Rosner: Okay. Understood. And then around CPU, I mean, you spoke about the opportunity. I think I recall last quarter, maybe it was a different conversation. You guys spoke about the ability to add value to the ecosystem through lasers, power connectors and you guys also doing any R&D on the actual CPU as well, maybe through like third-party packaging in order to have your kind of own end-to-end offering at some point? Russell Ellwanger: Direct packaging of the CPU, no, we're certainly working on multiple architectures of CPO and certainly, the XPU would be or could be incorporated into the CPO. But the specific activity right now of our engagement, well, that's not even 100% true. Yes. I mean we're certainly working with XPU makers on CPO strategies. Tavy Rosner: Okay. Understood. And then very last one for me. The rollout of additional CapEx, I think I recall you saying it's going to be all live by end of 2026. Is there any chance that it can come in sooner depending on several factors, maybe some of them beyond your control, but like is there any chance or you have the certainty that that's not going to be online before the end of the year? Russell Ellwanger: The capacity qualification ramp will be happening throughout the year. So it will -- the biggest portion of this $920 million should easily be online, I mean, fully qualified within the third quarter -- on or before the third quarter with growth happening in the first and the second quarter as well. The most recent orders that we've done also have tools that are coming in, in the second quarter. So -- but what we've stated is that what I just stated is that expect and target that by December, everything will be fully qualified in order to be able to do customer starts. In order to have everything fully qualified by December, the tools really have to arrive before the end of the third quarter and nominally by mid-third quarter. So that's where you could be thinking of is that linear or not, there will be a distribution of tools. Some have already arrived and the bulk of this $920 million will be arriving between now and mid-third quarter. Operator: We are now going to proceed with our next question. And the question comes from the line of Cody Acree from Benchmark StoneX. Cody Grant Acree: Congrats on the steady and impressive progress. Russell, maybe could you just give us a little more color on your expectations for your silicon photonics contribution in '26 and '27, specifically with the 70% commitment already talking about prepaid. It looks like your visibility should be pretty solid for the next couple of years. Russell Ellwanger: Yes, definitely. The demand is there. Certainly, we're very aware of the demand. Right now -- if your question is really on the ramp profile, the ramp profile is pure operational execution at this moment. I mean there's some technical execution still. There's some flows that still would need to be qualified, be it San Antonio or be it Migdal Haemek that are not yet qualified that are in the first order -- not the first order, but solely qualified in Newport Beach as that was the fab that most all of this development was done at. So you have some more technical work has to be done, but that's, for the most part, behind us on the technical work. From the time that everything is ready to be qualified, you still have several months for live testing in order to have customers qualify the flow themselves, if you know what I mean. So in some cases, it goes through HTOL and whatever other live tests the customer requires in its own commitments to their end customers, but the bulk of this is just operational execution. I think that's one reason that we're so bullish and confident on where we're at and where we're going on this model that we just gave of the [ 2.8 ] -- what was it [ 2.84 ] and the $750 million net profit. When your target and your plans are to have everything online, for wafer starts in December. Okay, let's say, worst case, you miss it by 1 month, 2 months, 3 months, okay, maybe, but it's there. So if it's -- will you have the full start capability in December, we target to have that, and I believe that we will. Can it push out that 1 or 2 tools isn't fully qualified for whatever reason. Obviously, this is a lot of equipment coming from suppliers. And although we're very good and the suppliers are very good at doing a final test at the supplier site, the tools are all disassembled and shipped. During the disassembly and shipment, there can be something that's broken or goes wrong, that isn't identified immediately during the, what's called Tier 1, Tier 2 start-up at our site. So it's possible that, that could take a little bit longer and 1 or 2, 3 tools can be delayed beyond the plan. It's also possible that for whatever reason, the supplier themselves misses their initial target, and that can happen. The same as not that tower would ever do it, but sometimes wafer manufacturers miss their commitments -- to just a joke there. But the point being, whether it's December or January, maybe February, I don't know. It could also be -- I mean we've released that we tend to have everything up and running in December. People that want to make sure that future commitments will always give targets where they believe they have some leeway. So the internal target should probably be more aggressive than the express target to the street, right? But the big point I'm trying to make in maybe too many words is that whether we hit the full qualification of start capability in December or whether it's November or whether it's January or February, it will be hit. And the demand is there, it's committed, and it will be used. So the model will be hit. Now from the time that you start all the starts, it's some period of time to get everything ramped and qualified. And then it's some amount of months before you can ship and get the revenue. So we feel very comfortable in talking about the 2028 to hit our model because the demand is there. Customers have committed to that demand to the extent we did not ask customers for reservation fees, they wanted it. They know how precious, especially from tower, SiPho demand is as we are truly by far, the leader in silicon PICs. So they want the wafers and it's just really in our hands as far as operational execution. Now I'd like to say it's 100% in our hands. It also is in the hands of our suppliers. But they're good suppliers. And we have a good relationship with our suppliers. We really focus on having strong relationships with our customers. To have a good relationship with the customer, you must also have that same model with your suppliers, right? I mean what goes around comes around. So you can't easily be someone that has a mentality to not treat a supplier well and expect a customer to treat you well and vice versa. So I think, Cody, maybe any -- too many words. But our plans are very firm, very strong. Can something be impacted by a month or two, one way or the other, of course. But the plans are there. And if it is impacted by a month or two, it's not impacted by the bulk of the capacity growth there will be 1 or 2 tools or I don't know, a handful of tools that sometimes are called a lemon tool. It's not necessarily a lemon tool. It means that there's a problem that wasn't found immediately. That can delay something. But there will always throughout this year, we will definitely have incremental capacity growth. Cody Grant Acree: Maybe can I just continue on with your mobile business. Any concerns about the ongoing memory shortages or the increased prices that have been called out by some of your peers in the industry and the impact to potential unit volumes in the handset market? Russell Ellwanger: Cody, I mean there's always a concern when you have something in the market that you yourself have no say in or control of. So yes, there's definitely a concern there. We work with our customers closely to understand what their inventory levels are. They try to understand what their customer inventory levels are. And to be as convinced as possible that the plan that we have for -- our start plan for the year can be hit. But are we -- I'd love to be able to say that there's no concern we're impervious to it. We're not -- there's -- there are factors in the market that always play that you never want to be a victim, so you try to do as good a planning as you can. And in the best case to have alternatives should a certain capacity not be used in the fab that it can be replaced with something else where we talked about the fact of intentionally working out some lower-margin products to allow room for higher-margin products. The lower-margin products are still in demand and there's always the possibility if there is a gap in the fab because a demand of what you thought would be there is not there, we have the opportunity to backfill it with something else. And that something else is maybe not preferred because it's not the same margin profile, but it can be done. So at least you're absorbing your fixed cost. Operator: We are now going to proceed with our next question. the questions come from the line of Richard Shannon from Craig-Hallum Capital Group. Unknown Analyst: This is Tyler on for Richard. Sorry to disappoint. I have a question. I had a question on this model that you gave and the 2028 time line. Is this a run rate in 2028? Or is this the full year? Russell Ellwanger: Yes. No, certainly, we will achieve it by run rate and we target to get a full year. But what we stated is that it would be achieved within the year. So we're -- our target and what I've stated is that is our target. One could definitely believe that we will hit it by run rate. And nominally, we'd love to hit it for full year. And it's possible. Unknown Analyst: Okay. Great. And then the silicon photonics, I know you just mentioned you could backfill other things. But at this point, with all of the CapEx investments that you make is this going to put the fabs at fully utilization for that model? Russell Ellwanger: No. Silicon photonics would not bring any of the factories to the full photo utilization. But it's not the silicon photonics that I was talking about as far as backfilling. That question was the specific question with regard to the RF mobile because of fear of the high-bandwidth memory manufacturers focusing on that for data center rather than supplying it elsewhere. And without the memory that it might not that there could be a decline in the overall mobile integrator by not having the memory they need for their phones. That was what the question was. So I was saying if that was the case, that capacity is fungible. Unknown Analyst: Got it. But with this, I think what I'm really getting at is with this CapEx spend that you're adding today does that bring us to the 85% utilization? Russell Ellwanger: It does providing that the other flows are used to the prescribed capacity that we allotted to them. So no, it's not -- if it was only silicon photonics, it would not be 85% utilization. But must understand as well, and this is an important point. We're focusing on the silicon photonics, our commitments around the silicon photonics where I say that the RFSOI, if you will, for the most part, that's pretty fungible to power. I mean there are some layers that are different, but relatively fungible for power, relatively fungible for imaging. The silicon photonics is under different ratios, but it's very fungible to silicon germanium. Operator: We are now going to proceed with our next question the questions come from Lisa Thomson from Zacks Investment Research. Lisa Thompson: I have a few accounting questions for Oren. First off, could you tell us exactly what the dollar amount was for the onetime tax benefit in Q4? Oren Shirazi: It's approximately the difference between if we had 15% tax or 16% or 17% by the model, which is about from the $81 million pretax income we should have like have a tax expense of about 15% to 17% of that. So about like $12 million, $13 million. Instead of that, we have $1.5 million. So the gap is about $10 million. Lisa Thompson: Okay. And can you explain exactly what did you get for the $105 million for the lease extension? Oren Shirazi: We got additional 3.5 years of lease of Newport Beach facility. We announced on 13 November 2025 press release. Instead of that it was supposed to be ending in the beginning of '27, it is now until the end of 2030. Lisa Thompson: Okay. And you paid the $105 million upfront cash? Oren Shirazi: Yes, yes. Yes. And it's included in the cash flow operations of Q4, which is the reason why it is a onetime lower by $105 million than any model. But we announced it in November. So it's not new, no. Lisa Thompson: Right, right, right. And then I'm just curious as the change in the U.S. depreciation rules of what you can write off -- has that changed your model at all or changed your depreciation expectations going forward? Oren Shirazi: No. No impact on us. Lisa Thompson: No, not at all. Okay. Great. Operator: This concludes the question-and-answer session. So I will now turn back to Russell for closing remarks. Thank you. Russell Ellwanger: Thank you very much. 2025 marked the completion of my 20th year at Tower. So I thought I would give a little bigger picture view of what Tower is about where we're going, what we're doing. For the year 2025, we had a corporate theme and the theme was bold growth, limitless impact, infinite reach. I love that theme and put a lot of thought into it and truly would be my great honor if my life's journey would be worthy to have those words in my epitaph included, obviously, to loving, honorable, loyal, husband, father, grandfather and friend. But if that was written on my epitaph, wow, what a value-add life I would have led. If you look at bold growth, at least to me, it means being undaunted and creating a legacy much accretive to one's birth situation. In the case directly of corporate leadership, it would mean expanding the enterprise much, much beyond the situation from when one arrived. If you talk about limitless impact, that would mean that the individual or the corporate leader has been successful in importing knowledge and creating opportunities for employees, colleagues, community for one family to have an advancing growth trajectory much beyond what they otherwise would have had, what otherwise would have been. Infinite Reach is a very interesting concept. I first encountered the term in David Deutsche's book, the beginning of infinity and the meeting that he put it forward meant that truth discovered in any severe if indeed a truth holds in all spheres. And it is very interesting. If you look at learning, there are many things which truly cannot be taught, but rather must be learned and where the learning comes only through doing. And I thought about that quite a bit. It really -- many, many things can be taught, but those things that can be told are tools. Things that can be learned are principles and values and it really only is learned through the doing. I have a very, very fervent belief that work is the laboratory where one can and should learn and develop themselves in all capabilities, principles and values needed to become the person that they aspire to be. Anybody worth their salt spends the bulk of their wakened dollars at work. What a meaningless activity if that isn't the place where one develops as a person. And I thought very much that a good company must allow for financial and professional growth, but a great company allows for the same with the addition of personal growth. Years back, earlier in my career, I had the great pleasure to reflect and thank Dr. Dan Medan at the time the President of Applied Materials, and this is directly what I wrote in. When I came to Applied I believe I was a good person. Thank you for creating an environment that has allowed me to become a better person. Tower aspires to be such a high -- such a company. We focus on hiring most capable and passionate people and of equal importance to develop and nurture an environment where passionate and capable people can further grow in capability, in passion and as well in virtue. We acknowledge and drive an understanding that the strongest catalyst for increased capability and enhanced passion or close collaborations with our customers and the excitement enjoy that is earned and truly earned from sharing in each other's successes. There's a quote of uncertain origin. If 2 people agree on everything, one of them is unnecessary. We treasure diversity. We treasure diversity of opinions, but only if it's directed to single miss and purpose and actions. Organizational anarchists do not do very well at Tower. But no matter what and how diverse the opinion is, if it's directed towards making things better, it's highly appreciated. I don't think a much different than anyone else. I don't like it when people disagree with me but I truly value it. And it's a very strong thing, and that's the culture that we have. So we have worked hard to be a company that really does allow people to grow. And if you allow people to grow, you have an environment and a spirit in the company where the company has become truly a masterpiece. Now I don't know the attraction of any single piece of art or music to those on the call, but I can say that I cannot walk by a da Vinci without being drawn to it. That's the impact of a masterpiece. It's the same thing with the company. If a company has extremely passionate people and they're of the highest character and they are capable, knowledgeable people, they are a magnet for the customer and the customer wants to be with them. And that's what allows for corporate growth. That is one of the things that allows for bold growth that allows a company to have limitless impact, and it's based on the infinite reach of people as soon as you take on big responsibilities, and you take full ownership on those responsibilities you learn so many truths. And what is true in one sphere is true in everything. The principles that allow you to be a successful business leader, allows you to be a successful father, a successful husband, a successful mother, successful wife, successful daughter, successful and value-added friend. So those are the things that Tower has truly worked on that we continue to work on. Ex U.S. President, Bill Clinton, had a quote that on first hearing sounds very nice, and it says old age is when your memories outweigh your dreams. I'm not a spring chicken, so those are the type of things that I think about. And at first, again, it sounds very good, but certainly, having dreams in no way define vibrant youth. So the statement maybe is correct as far as if your memories outweigh your dreams, it shows that you're old. But having dreams does not show that you're youthful. Many, many people, even at a young age, only have dreams, they do nothing to try to make the dreams real. So I added to this quote and took the liberty. Old age is when your memories outweigh your dreams and consequent actions to achieve them. Tower is in no way an aged company. We work off of the experience and knowledge that comes only through age, but with the full vibrance and excitement of use, and that's a combination that's unbeatable and is truly a catalyst for customers to want to engage with your company. We showed this new financial model, which as having stated multiple times and being questioned about as well, it's our target to achieve it, be it by run rate or be it in the full year, but to achieve this model in 2028, relatively short term. The model or went through all of the incremental margins, but what it is, it's a revenue CAGR of 22%. It's a very nice CAGR in our industry, a very nice foundry CAGR. So a 3-year CAGR of 22%. But it's a net profit CAGR of 50.5%, and that's really incredible to have a 2.5% off of the 22% CAGR -- to have a 2.5% increase on the CAGR of the net profit, which isn't something that's talked about often because most people don't have CAGRs on net profit. But from the present state to achieving this model, it's 50.5%. That is not an aged company. That is a company that is full, full of youthful exuberance based upon the capability of age, based upon experience, based upon having developed multiple years of strong, extremely strong relationships with customers. So to close, we entered 2026 with very strong momentum towards bold growth, limitless impact and infinite reach. Thank you for being with us. Thank you for continuing to be with us as we track towards the achievement of the $750 million net profit model. Thank you very much. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.
Operator: Good day, and thank you for standing by. Welcome to the DPM Metals Fourth Quarter and Full Year 2025 Earnings 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, Jennifer Cameron. Please go ahead, ma'am. Jennifer Cameron: Thank you, and good morning. I'm Jennifer Cameron, Director of Investor Relations, and I'd like to welcome you to the DPM Metals Fourth Quarter and Year-end Conference Call. Joining us today are members of our senior management team, including David Rae, President and CEO; and Navindra Dyal, Chief Financial Officer. Before we begin, I'd like to remind you that all forward-looking information provided during this call is subject to the forward-looking qualification, which is detailed in our news release and incorporated in full for the purposes of today's call. Certain financial measures referred to during this call are not measures recognized under IFRS and are referred to as non-GAAP measures or ratios. These measures have no standardized meanings under IFRS and may not be comparable to similar measures presented by other companies. The definitions established and calculations performed by DPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Please refer to the non-GAAP financial measures section of our most recent MD&A for reconciliations of these non-GAAP measures. Please note that unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have generally been rounded. References to 2024 pertain to the comparable periods in 2024 and references to averages are based on midpoints of our outlook or guidance. I'll now turn the call over to David Rae. David Rae: Good morning, and thank you all for joining us. 2025 was an excellent year for DPM and demonstrates DPM's strength of disciplined capital allocation and operational excellence that underpin our strategy to be a premier mining business. First, we are a sustainable, responsible and efficient operator. In 2025, we achieved our gold production guidance, extending our operational track record to an exceptional 11 years. At the same time, we continue to deliver strong margins with an all-in sustaining cost of $1,082 per ounce of gold sold compared to an average realized gold price of $4,323 per ounce. Most importantly, we've accomplished all of this while maintaining a high standard for responsible mining with a strong safety and environmental track record that has ranked us at the top of our industry for the past 5 years in the S&P Global Corporate Sustainability Assessment. Second, we're focused on developing quality assets. In 2025, we transformed our growth profile by acquiring the high-margin Vares operation, advancing Coka Rakita to feasibility while defining Dumitru Potok and outlining a 10-year mine life with potential to extend at our flagship mine, Chelopech. We completed an initial mineral resource for the Rakita camp, which together with the results for Coka Rakita, confirms the Rakita camp is a Tier 1 gold asset for DPM, offering a rare combination of scale, grade and longevity. Third, we maintain a strong financial position to support our growth. We've consistently delivered free cash flow generation, including a record $505 million in 2025, and we returned over $145 million to shareholders through dividends and share repurchases. And we currently have $1 billion of immediate liquidity to deliver high-return growth. Overall, we were pleased to see our accomplishments in 2025 result in DPM being one of the top performing stocks of mid-cap precious metals producers. As we enter 2026, we are focused on execution and growth, delivering an average of approximately 350,000 ounces of gold equivalents annually over the next 3 years and continuing to maintain our competitive cost position. Turning to Vares, the new addition to our portfolio and a key driver of our near-term growth, integration and ramp-up activities are continuing to advance very well. From day 1, we focused on embedding DPM's health and safety practices at Vares, ensuring the well-being of our people remains our top priority. Development rates have continued to progress in line with plan and mine production recommenced in January. This progress is the result of our efforts to transform training programs for local employees and engaging with stakeholders, both important steps as we build a strong foundation for long-term success. Our 2026 guidance for Vares reflects this fact, and this is a transitional year for the operation. Production is expected to increase quarterly as we progress the ramp-up to 850,000 tonnes per year as a rate we expect to achieve in Q4 and then continuing in future years, with the second half of this year represents approximately 2/3 of our 2026 production. This year, we're accelerating precious metals production with gold and silver production higher than previously communicated in the PFS for gold equivalent production of over 100,000 ounces. Cash flow and margins are expected to be higher than the PFS as a result of the increased precious metals production and higher prices, more than offsetting higher operating costs that we anticipate this year. Consistent with our approach across all of our operations, we will continue to evaluate opportunities to optimize the cost structure for 2027 and beyond, targeting the cash cost per tonne metrics outlined in the technical report. Our track record of optimizing assets and driving efficiencies gives us the confidence that we can unlock additional value at Vares just as we've done at Chelopech. In short, Vares is off to a strong start, and we're excited about its contribution to our growth in the years ahead. Turning now to Chelopech, our flagship asset that continues to underpin our success. We're expecting consistent high-margin production in line with the updated life of mine plan we published last week. We're pleased to achieve our target of increasing Chelopech's mine life to 10 years. However, it is important to note this does not incorporate the potential of the new Wedge Zone Deep discovery and the prospectivity of Chelopech North and the Brevene exploration licenses. With results from drilling to date demonstrating grades higher than reserve grade, the Wedge target represents an opportunity to enhance mill feed grades and gold production potentially from 2029. Initial drilling results from this discovery made in a relatively underexplored area of the mine concession demonstrate this is an area of high -- that is highly prospective for additional discoveries. We are currently completing a 10,000-meter drilling program in the first quarter and expect to provide an update in the second quarter. Additionally, we expect the Chelopech North concession to be granted this year and concurrently, the Brevene exploration license is progressing through a well-defined permitting regime. Our growth priority in 2026 is advancing Coka Rakita permitting to support a construction decision. Late last year, we completed the feasibility study for Coka Rakita as planned, confirming robust economics for a high-margin underground gold mining operation, contributing almost 190,000 gold ounces annually for the first 5 years at first quartile life of mine all-in sustaining cost of $644 per ounce of gold sold. Based on the positive results, we're proceeding to execution readiness and construction permitting with first concentrate production anticipated in the first half of 2029. In November, we achieved a key permitting milestone with the approval to initiate the Special Purpose Planning process. Permitting activities continue with a detailed permitting time line focused on supporting start-up of construction in early 2027. Most baseline studies required for the environmental and social impact assessment have been completed and the approval and adoption of the Special Purpose Spatial Plan is expected in the second half of 2026, following which DPM anticipates submitting the exploitation field application in accordance with the Serbian permitting process. We are maintaining close and proactive engagement with the relevant authorities to support this permitting process, and we remain confident in the overall progress at Coka Rakita. In terms of our exploration activities at the Rakita camp, in early December, we announced initial Mineral Inferred (sic) [ Inferred Mineral ] Resource Estimates for Dumitru Potok, Frasen and Rakita North of 2.6 million ounces of gold and 1.9 billion pounds of copper. The mineral resource estimates demonstrate the Rakita camp's potential of the district-scale gold-copper system with all 3 prospects remaining open in multiple directions and sitting alongside several other high potential targets along a 6-kilometer trend. Within 14 months of announcing these initial discoveries, they've rapidly grown into a significant gold-copper inferred mineral resource, a remarkable achievement over a short period of time, underscoring the significant potential of the Rakita camp. Drilling is currently paused on the Rakita license, the Coka Rakita license pending the normal course renewal of permits and is anticipated to recommence in the second quarter of 2026. Upon renewal of the permit, we're planning 20,000 meters of drilling, of which a significant portion will be allocated to infilling and extending mineralization at Dumitru Potok and increasing drill density prior to initiating any PAA -- PEA or other economic study Meanwhile, active drill testing is ongoing on the neighboring Potaj Cuka license to the north of the Rakita license. Before handing the call over to Navin, I'll summarize our 2026 priorities. We intend to deliver on the ramp-up at Vares. We're going to be advancing Coka Rakita to a construction decision, and we're going to be following up on the significant exploration potential within our existing portfolio, both in Serbia and in Bulgaria, each with the potential to drive meaningful value for our shareholders. We will continue to execute on these priorities with the same commitment to responsible, efficient mining, financial discipline and value creation. I'll now turn the call over to Navin for a review of our financial results and a detailed look at our guidance. Navindra Dyal: Thanks, Dave. I'll be touching on the financial highlights for the year, provide an overview of our 2026 guidance and updated 3-year outlook and conclude with some commentary on our balance sheet and return of capital program. All of my remarks will focus on results from continuing operations unless otherwise noted. Looking at our financial highlights for the year, we achieved consolidated production and costs in line with our guidance and delivered record financial results, including revenue of $950 million, adjusted net earnings of $443 million or $2.39 per share. Cash flow provided from operating activities of $492 million and free cash flow of $505 million. Our record financial results reflect our strong operating performance, the low-cost nature of our operations, a favorable commodity price environment and the initial contribution from Vares following the closing of the acquisition of Adriatic last September. Looking at our earnings and cash flow in more detail. Revenue was higher than the prior year due primarily to higher realized metal prices and post-acquisition revenue from Vares, partially offset by lower volumes of gold sold at Ada Tepe. Adjusted net earnings increased compared to the prior year due primarily to higher revenue, partially offset by higher cost of sales and higher mark-to-market adjustments to share-based compensation expenses. Adjusting items, net of taxes, not reflective of the underlying operations of the company include a $27 million noncash fair value adjustment on inventories at Vares recognized in cost of sales. The 2025 Bulgarian levy of $22 million, acquisition-related costs for Adriatic incurred by DPM of $15 million. The fair value -- and the fair value adjustment on Vares copper stream liability of $9 million. Cash flow provided from operating activities was higher than the prior year due primarily to higher earnings generated in the period, partially offset by the timing of collections from sales and payments to suppliers, the payment of the 2025 Bulgarian levy and higher income taxes paid. Free cash flow, which is calculated before changes in working capital, was higher than the prior year due primarily to the higher earnings generated in the year. Taking a look at our cost metrics. All-in sustaining costs of $1,121 per ounce of gold sold for the year were 29% higher than the prior year due primarily to higher mark-to-market adjustments to share-based compensation expenses, lower volumes of gold sold and a stronger euro relative to the U.S. dollar, partially offset by higher by-product credits reflecting higher realized prices for copper and silver sold. Mark-to-market adjustments for share-based compensation expenses resulted in an increase of $242 per ounce of gold sold in 2025 compared to only $28 per ounce of gold sold in 2024. In terms of our capital spending, sustaining capital expenditures of $33 million for the year were lower compared to 2024 due primarily to changes in deferred stripping costs at Ada Tepe as a result of the changes to the stripping ratios compared to 2024, and it was in line with the mine plan. Growth capital expenditures of $56 million for the year were higher than the prior year as a result of costs related to the Coka Rakita project being capitalized from the beginning of 2025. Last night, we provided an updated 3-year outlook for production and all-in sustaining costs. Following the addition of the silver and polymetallic Vares mine, we are transitioning to gold equivalent ounces reporting for production and all-in sustaining costs. We will no longer be reporting all-in sustaining costs on a byproduct basis. Over the next 3 years, metal production is expected to average approximately 350,000 ounces of gold equivalent ounces per year. The growth in production is driven primarily by the contribution from Vares and stable production at Chelopech, partially offset by lower production at Ada Tepe as it reaches the end of its mine life by mid-2026. All-in sustaining costs over the next 3 years is expected to average approximately $1,450 per gold equivalent ounce sold. This outlook incorporates variations in metal production and sales year-over-year as well as the impact of higher local currency operating costs, combined with a stronger euro relative to the U.S. dollar assumption in 2026 as compared to 2025. At Vares, as the mine achieved commercial production, we will be evaluating opportunities to optimize the cost structure in 2027 and beyond, targeting the cash cost per tonne metric outlined in the Vares technical report. We are forecasting higher investment in exploration over the next 3 years, reflecting our success in generating value through exploration, especially in 2026 with potential to increase in future years dependent on the success of the company's exploration prospect. Sustaining capital expenditures over the next 3 years show stable spending at Chelopech and primarily underground capital development at Vares. Our 3-year outlook for growth capital primarily relates to the Coka Rakita project, which is expected to commence construction in early 2027 and achieve first production concentrate in the first half of 2029. In 2026, growth capital expenditures also include expenditures related to Vares to support the development and ramp-up to commercial production as well as limited expenditures related to the Loma Larga project, pending resolution of the revocation of the environmental license. We continue to maintain a strong balance sheet with a consolidated cash balance of $498 million, no debt and a new undrawn credit facility. The new credit facility has capacity of $400 million and an accordion feature that takes capacity up to $550 million with more favorable terms, added flexibility and lower pricing. The strength of our balance sheet is a testament to our focus on disciplined financial management, providing us with the flexibility to fully fund growth and our exploration process. We've consistently demonstrated our disciplined approach to capital allocation, which is based on 3 fundamental considerations: maintaining a strategic cash position to fund organic growth and pursue strategic transactions, reinvestment in the business to grow value and the long-term sustainability of the business and returning excess capital to shareholders through a mix of dividends and share repurchases with a view to maximizing total shareholder returns over the long term. We remain focused on returning capital to investors through dividends and share repurchases, reflecting confidence in DPM's future and our commitment to generating shareholder value. During 2025, we returned a total of $145.5 million to shareholders through the repurchase of approximately 10 million shares for a total cash payment of $116.1 million and $29.4 million of dividends paid. Our current NCIB expires in March. Board of Directors has approved the renewal of the NCIB subject to approval by the TSX. Reflecting our confidence in DPM's future and commitment to shareholder value for the calendar year 2026, the Board of Directors has authorized the repurchase of up to $200 million of the company's shares -- $200 million worth of the company's shares. In closing, we continue to deliver strong performance from our mining operations, and we are in a strong cash position to achieve our guidance and continue our track record of generating significant free cash flow. I will now turn the call back to Dave for concluding remarks. David Rae: Thanks Navin. This is an exciting time for DPM and our shareholders who were rewarded in 2025 with top quartile share price performance. Our future as a growing precious metals producer offering a peer-leading development pipeline, a proven approach to capital allocation, underpinned by an exceptional operational track record for continued share price appreciation. We remain focused on executing our strategy to deliver above-average returns for our shareholders as a mid-tier precious metals company with a clear path forward to drive value. I'd now like to open the call for any questions. Operator: [Operator Instructions] Our first question will come from the line of Fahad Tariq with Jefferies. Fahad Tariq: On Coka Rakita, the permitting, can you maybe just talk through the specific remaining permits? Is it just a special purpose spatial plan? Or is there something else? And have there been any surprises so far as you've gone through the permitting process? David Rae: Yes. Thanks for the question. So there are a couple of different things that comprise the work that's required to be completed to get the EIA and the permitting for construction. So at the moment, we have a number of things happening at the same time. The one is this Special Purpose Planning process, which effectively is like a land use permit, where what we do is we give information on what it is that we plan to do. So this will be road access, land conversion, use of things like power, water, tailings, rehabilitation, all of these things. And the way that works is that the government requests input on a standard process looking for what are the other things that people might want to see in the work that we submit such that we can provide confidence and clarity in terms of what it is that we need to do. That process of those questions has been completed, and there is a group together, which is now progressing this work that will be required for us to answer the SPSP process as we call it. So we anticipate that over the next couple of months, we're going to respond to those questions, recognizing the bulk of that work is already done as part of our engineering process and really just looking at any remaining questions that there may be that we provide input into. So we anticipate that being done early in the second half of the year. In addition to that, we're also going to be completing a Serbian feasibility study, recognizing, again, a lot of that work has already been done, but you need to do that with local companies and local engineering people, part of them are actually already within our project team. So we'll be completing that at the same time and anticipate that being ready in Q -- let's say, Q4, early Q4 of this year. On top of that, we'll be looking to complete an EIA and looking for approval of that late this year, early next year, let's say, January. And then with all of that, we anticipate we'll be in a position to have a construction permit. So again, early in the first quarter next year. Hopefully, that helps. Fahad Tariq: That's very clear. And then on the Rakita camp, I guess, a drilling permit, is that just a normal course? Is there anything different there? David Rae: Yes, it's normal course. So we get an 8-year exploration license, which runs in 3 plus 3 plus 2. We've completed the first 3 years of activity. We then provide a report saying this is what we did relative to what we said we were going to do. Here's what we plan to do in the next phase. All of that has been done, and we're just waiting now for the response from the ministry. So it is normal course. Fahad Tariq: Okay. And then finally, just switching gears to just more strategically on M&A. I noticed the upsize to revolving credit facility. Loma Larga, sounds like the environmental permit still needs to be resolved there and spending has been minimized. I don't know, just piecing it all together, is there something to read through in terms of potential M&A and potential acquisitions to replace Loma Larga with something else? Navindra Dyal: Yes. Maybe I'll just start with the revolver here. So, yes, the revolver is essentially a working capital facility for us. So it's not meant to be for any given particular purpose around M&A transactions. It's really just for us to have that available liquidity. So maybe I'll turn it back to Dave to maybe respond to that. David Rae: Yes, don't need anything into that in terms of the project activity that we have gone forward or the potential status or intent in terms of Loma Larga. With Loma Larga, we're intent on preserving value. And to that end, we said initially that we would let things flatten down. And then there's going to be a necessity of a few different activities, but part of which includes engagement. So -- we'll talk more about Loma Larga as we progress through this year. I think there's been a couple of thoughts along the lines of where is our primary focus as an organization. And pretty clearly, that's within the Balkans at the moment, where we have both Chelopech with an extended mine life. We've got some -- a lot of excitement around Vares and our ability to make things happen there plus tremendous success of our exploration team in Serbia and also Chelopech. Operator: [Operator Instructions] Our next question will come from the line of Eric Winmill with Scotiabank. Eric Winmill: David and team, congratulations on the strong quarter here. Just a quick question on my side, if you don't mind, on Bulgaria. Any additional updates there in terms of what you're seeing on the ground? It sounds like we're having election possibly later this year. I know they took on the euro earlier as well. Also maybe some changes to the royalties here, but it looks like Chelopech is mostly grandfathered. Wondering if that's the same for the new concessions as well or some of the outlying areas. I appreciate it. David Rae: Okay. So the euro is a seamless transition. That, of course, we've been fixed in terms of the Bulgarian led to the euro. for many, many years now. And that now recently has translated into a full adoption within not just the Euro zone and membership from the EEA to the EU, but also with the acceptance adoption of the euro from the 1st of January. So all of that's gone well. In terms of the election process, you're correct. There is actually an election that's anticipated that's going to be at some point in April. This is not unusual, and we've had quite a few changes in government over the last number of years. There's a well-understood set of processes around working with the authorities on mining, and we've not seen any changes in that with changes in government. So happy to say that it's sort of operations normal in terms of what we're doing. And yes, we do anticipate that there's going to be some elections coming up in April. The last question that you asked was about the royalty. There was a royalty for those mines whereby there was a clause -- sorry, Navin, did you want to... Navindra Dyal: Yes, I could just jump in here. Yes. So Eric, on January 30, the Bulgarian government adopted new royalty rates for mining concessions, increased the royalty rates for gold from 2% to 6% and for copper from 2% to 5%. Now you're right as well, these new rates do not apply to the existing Chelopech concession, which has fixed royalty terms. They do apply minimally to Ada Tepe, but given that Ada Tepe is reaching the end of its mine life, we've already included that in our outlook for next year -- or for this year. Now the Chelopech concession does expire in 2029, and we do expect that the new rates to apply upon the renewal. And as well as to your question around whether applies to the concessions? It would apply to any new concessions we have such as Chelopech North or Brevene concessions once those concessions been granted. David Rae: Yes. So the difference between the timing of the 2 different permits, the concessions between Ada Tepe and Chelopech. Chelopech was already in place and has no clause or increases, which can be brought in. That's why we're confident that stays until we renew the concession, whereas Ada Tepe was something new that was brought in and say, 2016, 2017 and in that, if there were any changes then they would apply. So that's why the difference between the two. Eric Winmill: Okay. Fantastic. Really appreciate the extra clarity. Maybe just one more from my side, if you don't mind in terms of M&A. How important do you see M&A as part of your strategy here going forward? David Rae: So we're obviously very opportunistic in terms of if we identify something that makes sense as an organization, that we'll act on it. But I think you can also see, Eric, that we've had a great deal of success in terms of developing our organic growth portfolio. And happy to say that from where we were 5 to 6 years ago to where we are now, we're in a very different position. So we continue to watch for M&A actively, but we need something that would make a difference and that we're not chasing on value in order to pick something up. So no necessity to have something. But if we find something of interest, we'll certainly engage. So at this point, though, regardless, if you look at adding 4 million gold equivalent ounces last year, that certainly sends a message in terms of what we can do with our existing portfolio. So we look but no need to engage unless we see something particularly interesting that's going to really help create something accretive to the organization going forward. Operator: I would now like to hand the conference back over to Jennifer Cameron for closing remarks. Jennifer Cameron: Great. Thanks, everyone, for joining us today. If there's any further questions, please feel free to reach out, and we look forward to talking to you guys over the coming weeks. Thanks, and take care. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Bodil Torp: Good morning, and welcome, everyone. I'm Bodil Eriksson Torp, the CEO of Storytel Group. And together with me here today is, of course, our Group CFO, Stefan Ward. We are happy to deliver record strong Q4 and full year for Storytel with good financial and operational performances across both our streaming and publishing segments. We conclude 2025 with record high profitability and a strong cash flow generation. And we can say that we are in a good shape to continue our progress in 2026. So here comes some of our strong highlights for 2025 and Q4. Our Q4 highlights includes continued strong top line growth with improved profitability and a strong cash flow generation. Our streaming business delivered subscriber growth of 9%, reaching 2.7 million paying subscribers at the end of 2025. Our subscriber growth was strong across all our core markets in Q4 and also for the full year 2025. And the churn continued lower throughout the whole year, while ARPU levels in local markets remained stable. And this is, of course, a good indicator of the value that we bring to our book lovers. Our publishing business continued to deliver very good performance as well with external revenue growth of 18% in constant currency, also with high expanding profitability. In Publishing, we had a strong list of new releases also in Q4, such as, for example, the August price winner and the best-selling title Viton with Bea Uusma. And we have also today announced that we, during Q4, started the process to transfer our listing to NASDAQ Stockholm market -- main market, and it's expected to be complete in 2026. So now over to our financial performance in the quarter. We delivered sales growth of 12% in constant currencies and EBITDA growth of 15% in the quarter. Our gross margin was at a new all-time high level, while our EBITDA margin was at the 20% level for a second quarter in a row. So our net profit of SEK 300 million was boosted also by a one-off positive tax impact of SEK 195 million, and Stefan will come back and talk a little bit more about that as well. Cash flow was solid, and we ended the year with a net cash position. So we are very satisfied with the performance in Q4. We continue to see improved internal efficiencies while at the same time, our product development has been intensified during the year. So this is also more that will come, I would say. We crossed SEK 4 billion in sales for the full year 2025. Our full year EBITDA grew by an impressive 26% in 2025 over 2024. Our EBITDA margin for the year reached 18.8% -- this is keeping us well on track to meet our midterm 2028 targets as we announced last year at CMB in May. So over to you, Stefan, and the numbers of our 2 business segments. Stefan Wård: Thank you, Bodil. We had another solid quarter in our streaming business, adding close to 50,000 new paying subscribers during the quarter and over -- well over 200,000 for the full year. In the Nordics, we added 16,000 in Q4 and 57,000 in 2025. So a relatively strong intake in the Nordics where we have a good or high market share position. In Sweden, we had positive intake both in Q4 and for the full year. Outside the Nordics, we added 32,000 subs during the quarter and 152,000 during 2025. Our strongest market in terms of net intake was Poland with a total increase of over 50,000 for the full year. Other markets with strong subscriber growth included Bulgaria, the Netherlands, Turkey and Germany. At the end of Q4, our Nordic and non-Nordic subscriber bases were roughly evenly split at 1.34 million each. As a consequence, we continue to see a decline in the average ARPU as our Nordic ARPU is typically higher than ARPU levels outside the Nordics. This trend will continue. However, it is important to note that the ARPU levels in local markets remain stable to positive in constant currencies. Over the past few years, we have seen a significant decrease in churn levels and churn continues to move lower also in 2025, ending the year at a new all-time low level. Looking at streaming financial, we delivered sales growth of 10% in constant currencies and 5% in reported. Streaming gross margin was 43.6%, while the EBITDA margin was 15.3% for a total EBITDA growth of 8% year-on-year. Our EBIT in streaming improved by 21%. We're on track to cross SEK 1 billion in quarterly revenues from streaming during the second half of 2026. In our Publishing segment, we delivered another strong quarter with 11% year-on-year revenue growth and external publishing revenue growth of 21%. Publishing EBITDA margin expanded to 32.2%, enabling EBITDA growth of 19% year-on-year, while our EBIT grew by 20%. Storyside is our in-house publisher that has been fundamental for us to build and develop the audiobook market, both in the Nordics and throughout most of our non-Nordic footprint. It remains the biggest profit engine of our publishers and had a very good year. Other publishers that delivered strong results during the year are Lind & Co, Norstedts and Bokfabriken. Bokfabriken was acquired early in 2025, and has rapidly improved to become one of the key profit contributors in our publishing business. It has exceeded our expectations for 2025 and prospects are promising also for next year. In terms of cash flow, it remained strong, both in Q4 and for the full year. Cash flow from operations before changes in working capital was -- in Q4 was SEK 217 million, up 10% on a comparable basis. That means adjusting for the Copyswede amount of SEK 34 million that was included in Q4 last year. Cash flow from operations for the full year amounted to SEK 647 million, up 26% year-on-year. We had some tailwind from working capital in the quarter, but it was less than anticipated. The reason for this is that we have tied up a little bit of unnecessary working capital during the year and had a negative impact from working capital of SEK 75 million. These are due to some unfortunate internal issues that has been resolved. So our best estimate for working capital development in 2026 is to have a neutral impact for the full year. Cash flow from investing activities was SEK 55 million in the quarter and SEK 252 million for the full year, of which SEK 160 million relates to CapEx. Cash flow from financing was minus SEK 12 million in the quarter and minus SEK 235 million for the full year, including debt repayments of SEK 100 million and last year's dividend of SEK 1 per share of close to SEK 100 million. On the next slide, we can see the balance sheet. And in here, you can have a look -- both have a look at the cash and equivalents position of SEK 686 million that we had at the end of the year. You can also see that we have recognized a deferred tax asset of SEK 195 million relating to previously unrecognized tax losses carried forward. This is now deemed as highly probable to be able to utilize and therefore, moved on the balance sheet included in the noncurrent financial assets. We concluded our refinance agreement in January, where for our interest-bearing debt of SEK 550 million was -- by year-end, it was moved from noncurrent liabilities to current. But as we have concluded the refinancing early this year, it will be moved back to noncurrent in the Q1 results. Our equity to assets ratio continues to improve and is currently at 53%. On the next slide, we can see our net debt position was SEK 136 million at the end of the year. The strengthening of our balance sheet reflected the new terms of our financing -- it provides us with plenty of flexibility to pursue both organic and M&A growth strategies going forward. In addition to strong operating profitability, we also expect to see lower cost of financing and for the tax rate to remain low for the next several years. With that, I hand back to Bodil. Bodil Torp: Thank you, Stefan. And to deliver strong financial performance, we need to also deliver strong customer value. And I just would like to take some minutes to highlight what's going on during 2025, where we have increased our efforts for increased customer experience. We have a market-leading position across most of the markets in our footprint, and we are proud of that. And our strategy to defend that is the position that we have built for our 2 pillars, a world-class user experience and the strongest content catalog. We cater our book level segment where reading books is a natural part of daily lives. So since I joined in October 2024, reigniting our industry-leading product expertise has been moved up to the top of our strategic agenda during last year, and it will stay there. We will be in the front of the evolution of book consumption across all formats. And over the past year -- last year, we launched several strong new features, and I will also highlight that there is more to come here. We will continue to intensify our investments in the local relevant content, but also, of course, in the user experience that is extremely important for us. So that will continue to improve both engagement and satisfaction for our book lovers of today and tomorrow that is building our resilience. So one of the most common specific feature that has been requested from our customer is actually listening and reading. This is enabling our users to read along as they are listening or just jump between read and listening. And that's a fantastic feature that many of our customer loves. Sync listening is currently enabled on almost 50,000 books in our catalog, and this is expanding as we speak. Another feature is Story Art recently launched that shows art features connected to a specific time line in the book. Story Art with all the visuals now becomes a natural part of the listening experience optimized in the player. This adds a new immersive layer to the story, driving engagement again and connection with the story. So pilots are launched with Pottermore, Harry Potter in Netherlands, and we have also launched it together with the Bea Uusma's title Viton that also was the Swedish August prize winner last year. So this is very exciting. And here, we will soon see many more titles coming up also in the children's segment, I would say, where we see -- where we have some demand. The Sleep Timer is also very -- yes, it's a function that really many of our users use every night. It's used by 300,000 users every night. And we recently launched Sleep Timer recaps where we use generative AI to enrich the rewind options and to enable a better recap and understanding of the story. Also when you fell asleep -- fall asleep and you don't really know where did you lost the story. So it's easier for you to actually find where you were sleeping in the story. So it's easier to recap and follow up where you start to listen again. This is some of our new features. And with this, I would -- it's important for us to highlight that we have more exciting features to come in pipeline, and this is a strategic important objective for us to increase our customer experience in the payer. And over to the last slide here to recap our messages for Q4. We have delivered on our 2025 targets with record profitability and strong cash flow generation, making this a successful year. Our streaming subscribers hit 2.67 million with churn rates consistently moving lower, while ARPU levels remain stable in local currencies. Our Publishing segment delivered record external revenue growth. Cash flow generation continues to increase, and we closed the year with a net cash position. We remain on track to reach our 2028 midterm targets. Our firm targets for this year, 2026 is to deliver at least SEK 870 million in EBITDA. We also proposed a dividend of SEK 1.50, up from SEK 1 last year. We see room for -- we see room to increase our dividend by a similar amount also in 2027 and 2028. We are ready to take our business to the next level and one step is also to change listening to the main market in 2026. So with this, I would say stay tuned. And now we are ready to take your answers -- no to take your questions, so we can answer your questions. So please go ahead. Operator: [Operator Instructions] The next question comes from Joachim Gunell from DNB Carnegie. Joachim Gunell: So the new market listing here should provide some more capital allocation flexibility. And I noted here that you already had some one-off charges related to this list change in Q4. So can you comment a bit on when you expect this to be completed? And if you think that buybacks is one tool for shareholder remuneration already in 2026? Stefan Wård: Well, we aim to move the -- or what we have communicated is that it will take place during 2026. We will try to keep it a speedy process. And hopefully, we will be done by mid-2026, but that is not a firm promise at this stage. It allows us to have a broader set of tools for shareholder strategies, absolutely, but I can't comment any further than that. Joachim Gunell: Great. And in light of yet again strong cash flows and the strong balance sheet that you now have, can you provide just some reflections on your appetite for non-Nordic content acquisitions for 2026 and the pipeline you envision there? Bodil Torp: Yes, we have communicated that before that we have an active M&A agenda and the appetite is high, I would say, and we have a high activity ongoing on different markets. So that is what we can say for the moment. And we have also communicated that we are into both streaming and publishing, preferably publishing to roll out our model -- business model that has been proven in the Nordics to more markets. So we are on track on having a lot of meetings for the moment. That's what we can say. Stefan Wård: High activity on the M&A agenda, and we look to broaden our publishing base in our core markets outside the Nordics. Joachim Gunell: That sounds encouraging. And you comment here with regards to -- we see strong ARPU development on an organic basis. Gross margin is strong here and the churn trends continue to be supportive, I think, contrary to some competitive woes out in the market. So can you comment just a bit on whether you've seen any sort of impact from heightened competitive activity in Sweden? Stefan Wård: Well, in Sweden, we added -- we grew our subscriber base in Q4, and we grew it for the full year. So we have net additions in 2025 and the competitive environment is challenging, but it's not more challenging in Q4 than it was in Q3 really. So -- but there's a new entrant. And I mean, it's some uncertainty on what to expect going forward. But so far, it has been business as usual from our side. Joachim Gunell: Perfect. Maybe just squeeze in one question -- perfect, just one question since Bodil, you commented a bit about the user experience enhancements that we have seen in this year, but also that you now provide some a la carte titles in English through the Penguin Random House partnership here. So just help us here since strong local content slate is a key competitive advantage, whereas -- I mean, should we interpret this partnership with Penguin Random House -- you're seeing some shift in how your customers consume content? I mean, is the younger consumer cohorts increasingly preferring English language titles? And is this some sort of trend that you see? Bodil Torp: No, I wouldn't say that we change the focus. I mean the local knowledge and the local content is still extremely important for us. We know that over 85% of the consumption in the audio books and e-books are in local language. So that is -- we won't leave that focus. That is super important. But I mean, paper book and also the English catalog, it's, of course, one way of adding value to our customers that also want to have those titles and also the English content. So it's more like expanding our value to the customer. It's not about changing focus. The local perspective is super important still. And regarding the features and then customer experience in the app, it's also a high priority for us now to actually increase the customer experience and the customer value to actually also be the front runner when it comes to listening and reading books regardless format, I would say. But it's -- I think the company has been in a very intense years for a turnaround, and we didn't see that many feature launched a couple or 3 years ago. So I think this is super important to build our resilience to increase the engagement and loyalty as it comes to our customers. So we need to be the best payer when it comes to audiobooks and e-books. So this is -- I'm really proud of our product and tech team that also launched. We had like 7 features during end autumn last year, and we are on a good pace now. So you will see more to come when it comes to that. That's also important for the resilience and to be the front runner, so to say. Operator: The next question comes from Georg Attling from Pareto Securities. Georg Attling: I have a couple of questions, starting with the impact from Spotify. So I mean, it's quite clear in your Nordic numbers here in Q4 that they aren't much affected. But I saw comments from your competitor, BookBeat, who said that the churn to Spotify has eased in early 2026. So I'm just wondering if that's something you see as well that the churn to Spotify is easing off a bit here in early '26. Stefan Wård: Yes. We haven't seen any increase in our churn in neither of the markets where Spotify has launched in the Nordics. We assume that consumption is growing for them, but it looks to be rather from new sort of nonexisting audiobook consumers. So new people in the market would be our best guess. Georg Attling: Yes. That's clear. Then second question on the guidance here for '26. So I'm just wondering, one, how much margin expansion you baked into this? And second, how much of that SEK 870 million that is licensing revenue from Spotify? Stefan Wård: We can definitely not comment on what is licensing revenue from Spotify in that guidance. But the guidance is based on our existing model. It's pure organic. It's based on our subscriber growth estimates and our best view of what we can get from the publishing business. Yes. Georg Attling: Yes. But it sounds like if you're going to reach SEK 1 billion in quarterly streaming sales in second half of '26, it's quite a lot of growth in that top line as well. It's not solely margin expansion, so to say. Stefan Wård: No, certainly not. The guidance gives us a firm commitment for you, the external viewers of the company, a firm commitment to what to expect from us. But it also leaves us some flexibility to prioritize if we see that we can drive growth, then we can do that without being limited by a margin range, so to speak, and vice versa. If we don't see those opportunities or get good returns on our marketing spend, then we will reach that number through other strategies. But I would say that expect us to try to grow top line as much as possible while protecting our satisfactory profitability at current level, but we're not seeking sort of to maximize the margins in 2026. It's a combination. Georg Attling: Yes. Just a final question here on the ARPU in non-Nordic core, quite strong here in Q4 if you compare it to quarters -- 5 quarters in the year. So I'm just wondering what's driving this? Is it a mix shift in countries? Or is it any price changes in those markets? Stefan Wård: Well, it's a little bit of both, but we're growing in markets where we have relatively good ARPU levels, and we try to increase prices where we feel that, that is motivated. Operator: The next question comes from Martin Wahlstrom from SB1 Markets. Martin Wahlstrom: Starting off, I noted a while back that Spotify introduced a new feature where you could kind of shift between physical and e-books, the Page Match feature and also that they introduced kind of reselling of physical books on their page. Kind of are you surprised by their ambition in this space and kind of the turn that they are going into? Bodil Torp: Yes. I would say we have high ambitions regarding not only what Spotify is doing, but it's more about our own agenda to actually increase and enhance the value to the customer. And I think we have delivered on that in a good way during the 6 months when it comes to the features. So we are on a really good track here, and there will be more to come. That is what I can say for the moment. But it's on a high -- it's on the top of our strategic agenda, of course. Martin Wahlstrom: Sorry, my question might have been a bit vague, but I'm looking for -- looking at Spotify's ambition, kind of the features they seem to be introducing and rolling out and evolving their offering, kind of -- is this level of ambition in line with what you could expect from them? Or are you surprised in any way? Bodil Torp: I think, I mean, they are good and we know that they are good in driving innovation and features when it comes to the music industry. So that's maybe... Stefan Wård: We're not really surprised. I mean it was fairly anticipated that they were entering the market and that they will have a competitive offering is also expected. So I wouldn't say that we're surprised by any of the features that they've launched or any parts of their offering really. When it comes to physical book sales, it's in market that are not outside of the Nordics and for English-speaking titles. So that is not hugely important for us at this stage when it relates to physical book sales. Martin Wahlstrom: Okay. Great. And then I was just wondering if we could get any comments on the impact from the Klarna partnership that was announced during the fall. Bodil Torp: Yes, we are -- I mean, it's a big partnership and still a bit early to comment on that. We are in collaboration in 14 markets with Klarna and increasing also our efforts in that partnership. So I have nothing really now to comment on that partnership. It's in line with our expectations for the moment. Martin Wahlstrom: Yes. Great. And then kind of looking at your churn trends, they're, of course, very encouraging as they're trending lower. But kind of how do you balance with kind of new customer intake and driving down churn? I mean, are you a bit too cautious on new customer intake? Or kind of how should we view that? Stefan Wård: I wouldn't say that we are too cautious, but we're mindful of getting good returns on our marketing investments. Churn trends is more explained by that we -- our subscriber base as it grows, it also becomes -- a larger part of our base has been customers for a very long time, and they basically don't churn, and that helps us move the churn trend lower. Then when we go into new markets, we still have high churn rates in the beginning and a lot of churn for new customers in the early months, that is nothing that has changed. But the portion of loyal long-time customers is steadily increasing in the base, and that helps bringing churn down over time. Martin Wahlstrom: Great. And then just one final question here on the gross margin, which was up now again year-over-year. Kind of how should we view this going forward? Should flatten out here? Or it seems it's continuously drifting a bit upwards? Stefan Wård: Yes. In the streaming, we are growing our business outside -- we're growing in the core markets outside the Nordics. And in those markets, we typically have a higher gross margin than streaming in general, especially compared with the Nordics. And that trend is expected to continue. So we will have some support for improving gross margins in the streaming mix. On Publishing, it's more an effect -- we had a very strong year in Publishing 2025 and especially a very strong finish also with the Nobel Prize winner and this August Prize winning titles, and that helps to boost the gross margins in Publishing. That is a little bit less certain how gross margin in Publishing will evolve going forward. But I think what you should expect from us is to have a gross margin above 45%. I don't think it's reasonable to expect it to expand from 47%. That is a range, 45% to 47% is -- it's a range where we are quite satisfied. I understand that there's some surprises between quarters, but it's the nature of our business, especially when looking at the publishing side of it. Operator: [Operator Instructions] The next question comes from Derek Laliberte from ABG Sundal Collier. Derek Laliberte: I wanted to ask about -- and apologies if this has been covered somewhere, but I just noted that operating expenses were up by quite a bit in Q4, both sequentially and year-on-year. And you mentioned the marketing spend here to drive growth. But what else is it that sort of results in the higher OpEx? Stefan Wård: No, it's mainly an increase in marketing, and we also flagged that in the Q3 call that we -- in Q3, it was a little bit too low. So we saw that increase in Q4. Other than that, there's no real significant explanations. It's relating to us growing top line basically. So I don't have any better answer than that Derek. Derek Laliberte: I'm happy with that. And on the marketing spend there, I mean, can you give any comment about where you've increased spend the most and also when you expect to see sort of an effect on the subscriber base from that? Stefan Wård: Well, the biggest part of our marketing budget is still the Nordics, but we don't increase that. The increase in marketing spend is more related to growth outside the Nordics, which is also visible in how the subscriber intake is divided. That's the best answer I can give you. Derek Laliberte: Perfect. That's great. And then -- sorry if you covered this as well. But you talked -- you got a question there about the ARPU in the non-Nordic segment, which looks really good there up sequentially. Did you say where have you made price adjustments, if any? Stefan Wård: We don't comment on the local markets. You can look at the different websites for granularity, but we are trying to work with price where we find it motivated. And then we're growing more in markets where we have a good or higher ARPU levels that helps also. So it's both a mix change and a price effect. Operator: There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Stefan Wård: Okay. So we have a few written questions. First one is churn level in the non-Nordics core is not as good as the other markets. What is the reason for that divergence? So churn in non-Nordics core is lower than in the Nordics, and that has to do with a little bit of a maturity profile that will drive a stronger subscriber intake in these non-Nordic core markets. And that is also -- when we grow fast, that also increases the churn somewhat. So it was the same when we were more aggressive in the Nordics back in the days when we sort of built the Nordic market. We had a strong subscriber intake and the churn levels were at a higher level. So that's the most or the best answer I can give to that question. Then Bodil, we have a question about the Storytel Reader. Any news about Reader? Bodil Torp: Yes. Any news about that? Yes. I know that I have said that we are into also relaunch the Reader, and there's a lot of customers waiting for that. So I will say that we are quite nearby to launching and test it in some of the markets, not all of the markets, but some markets that we think that we have the most -- the best fit into where we see the demand from the customers. So I will come back to that quite soon again. We will also do it in a cost-efficient way. That's super important. That's why it takes some time. Stefan Wård: Yes. Then we have a question relating to any thoughts on the impact for Storytel on Spotify entering the Nordic markets. And what we have said there is that so far, we are satisfied with the churn rates in those markets where Spotify has launched. So in this very short period where they have been in the market, we haven't really seen any negative impact on our side. We don't expect that to be forever. I mean we view them as a serious competitor, but we hope that they help develop the markets in those markets where we coexist and that they will -- yes, they will help us build the audiobook market, and that could be something that both consumers and providers benefit from. Then I have a question regarding the unfortunate internal working capital impacts referred to in Q4. Please expand what these were and what should normal working capital performance looks like? Okay. So the headwind or the unfortunate impact of working capital relates to the full year. We actually had a tailwind of SEK 14 million from working capital in Q4. What we can say there is that we have shortened the period, the number of days that we pay our payables a little bit too much, unnecessary too much, and we have altered that back. So that should reverse. I would estimate that impact to be around SEK 35 million. And then normal working capital is the guidance that we mentioned earlier in the call that we expect a neutral impact on working capital for 2026. And then we have a final question relating to our dividend policy for the upcoming years. And what we have communicated there is that we increased the dividend this year. I know that it wasn't formulated as an ordinary dividend last year. But from -- going forward, it should be viewed as we started with SEK 1. We raised it to SEK 1.50. What we have said is that we expect to be able to increase it by a similar amount also for '27 and '28. And that fits into our midterm targets and provide some visibility on what to expect. So far, we see that we generate so much cash flow that we are able to pursue our growth strategies while also rewarding shareholders through other strategies. and we expect this to continue over the midterm. If there will be any changes to that, it should be in our sort of when we update the midterm targets. But it looks promising. So hopefully, that clears the picture. Okay. Do we have any final questions? Nothing more. Okay. Then we conclude the call, and thank you for your interest in our company. Looking forward to see you at our next quarterly update. Bodil Torp: Thank you very much for all the good questions and participation today, and we are really looking forward to next quarter. Thank you.
Operator: Welcome to the Quarter 3 Analyst Meet of Mahindra & Mahindra Limited. For the main presentation today, we have with us our Group CEO and MD, Dr. Anish Shah; ED and CEO of our Auto and Farm business, Mr. Rajesh Jejurikar; and our Group CFO, Mr. Amarjyoti Barua. Once the presentation concludes, we will begin with the Q&A session. For the purpose of completeness, I wish to read this out. Certain statements in this meeting with regard to our future growth projects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. With that, now I hand over to Dr. Shah for opening remarks. Anish Shah: Hi. Good afternoon. It's a pleasure being with you again, more so when our results are in very good shape. And let me start with talking about our key messages as we do every quarter. And what you see again is a continued strong performance across businesses, and you're seeing contribution from all our businesses to delivering very strong results. Operating PAT is up 66%. Reported PAT is up 47%. There are 2 factors that make the difference between these 2 numbers: One is labor code impact, which I'm sure you've seen across all companies; and second is a onetime around Mahindra Finance, where they had a reserve release last year in the same quarter, as we take that out, that increases the operating profit. Volume and margin growth, very strong for both Auto and Farm. Volume up 23% for both businesses. Margins up 90 basis points for Auto, 240 basis points for Farm. Farm did have some impairments internationally, and that dragged down the overall number, but domestic operating performance was up 64%. I want to highlight 3, what we call, breakthrough performances. And while you will see some numbers on this page and the next page, the breakthrough performances are not because of the numbers. Mahindra Finance is up 97% from an operating standpoint, down 9% from a reported standpoint. But beyond the numbers, there were 3 things that we were focused on for the past 3 years: asset quality, controls and technology, along with putting in place a very strong management team. And that today is in very, very good shape. And you've seen the results for that. As a result, Mahindra Finance has announced in its analyst call 2 weeks ago that it will now pivot to growth, and we will start seeing a much faster growth rate, more diversification and areas that we need to focus on now. For the last 3 years, we were not talking about growth and focusing on asset quality controls and technology. And that pivot is what creates a breakthrough for Mahindra Finance right now. Lifespaces, profits up 5x, but I will again caveat it by saying that in real estate, as you well know, you will continue to see ups and downs based on occupation certificates coming in because that's when you recognize the profit. But it's breakthrough not just for the profit number, it's breakthrough because we can now see projects complete with the profitability we had planned for at the start of the project. We now see a much greater level of urgency in the business. The land acquisition is going very strong. We've had an external investor, Mitsui Fudosan come in. That was announced a couple of days ago. And the business, both from an IC and a residential standpoint, continues to be on a very strong track, and you will continue to see that as we go forward. Logistics, first profitable quarter after 11 quarters. But again, more than the fact that it is the first profitable quarter is the execution that is being done is very strong with Hemant Sikka coming in and a few key leaders coming into the business as well. That's really driving logistics in a very, very different way. And it's a business we expect a lot more from. So this is a good stepping stone, but the breakthrough is really driven by execution that the business has shown now. We thought it will be useful to show where does that operating profit growth come from. And therefore, on the left-hand side, what you see is operating profit. But let me first start with the bottom of the page, which has 3 numbers, 66% operating profit growth, 54% without the Mahindra Finance onetime of reserve release last year and 47% after you take out the labor code impact as well. So those are the 3 numbers that we're looking at. And it doesn't matter which number you look at it, it just is a very strong performance overall across businesses. Lifespaces up 5x from an operating standpoint; Logistics up 2x; Mahindra Finance, 97%; Auto, 42%; Tech M, 35%; Farm, 7%, as I mentioned, driven more by the international impairments; and investments up significantly because we had a CIE sale, which is in the operating numbers, which we pointed out on the right-hand side here. So that's really a map of where all the businesses are. Yes, there are some other businesses that have done very well, but these were the main ones that were driving growth, and therefore, we put them on this page. Consolidated results, up 26% for revenue, up 54%. Excluding labor code, 47% reported. Drivers from an Auto standpoint, while Rajesh will cover this in more detail, the key headlines are SUV volume up 26%, continue to be #1 there. Margin up 90 basis points. New product launches, you've heard about, have done very well. Besides revenue market share for SUVs, our LCV share has gone up 10 basis points also at 51.9% now. Farm volume up from an export standpoint, 36%. Market share down slightly, but in January, we made that up for year-to-date as well. And Farm Machinery revenue is up 45%. So we're starting to see much faster growth from a Farm Machinery standpoint. Mahindra Finance, assets under management up 12% despite not focusing on growth a whole lot. GS3 continues to be below 4%. We continue to maintain 4.5% as the benchmark we've set. But for the last many quarters, we've been below 4%. And we've got a new ECL policy, which is more in line with industry, which will help the business as well. And technology and controls, you don't see on this page, but that's been a huge focus over the last 3 years, and we've completed projects or are close to completion of certain projects there, and that gives us a lot more comfort around the business overall. Tech Mahindra, on track with what it's outlined in terms of its path for F '27 and deal wins, margin expansion, all of that playing into that track that Tech Mahindra has outlined. Logistics, we spoke about. Only thing I'll add there is strong momentum in both auto and e-commerce for logistics. Hospitality has given up whatever it has earned in India with an FX exposure with its Finland business. And real estate is on a very strong path, which I mentioned. And this is a page that you've seen many, many times now. Consistent delivery. ROE is up 20.1%. But before any question comes, I will say what I always say, we are at 18%. It may be slightly higher, slightly lower in any given quarter. So the new bar is not 20%. We will continue with 18% plus/minus a little bit. And we'll continue to drive growth, and you see a very strong growth that's been driven in this quarter and year-to-date as well so far. We are at, I think, 38%, if I got the exact number year-to-date growth from a profit standpoint. So I can tell you that's higher than what we had expected at the start of the year as well. With that, let me invite Rajesh to take you through more details. Rajesh Kajuria: Hi, everyone. I'm going to run through this quickly. I'm sure you've seen a lot of these slides already. So I'll be quick and give more time for Q&A. The SUV volume was up 26%. We've got to average Q2 and Q3 because Q2 had a lower GST. So even if we average, it will be 17%, 18%. The very good news is seeing the revival of LCV segment, which we were all wondering why it's not coming into growth. It finally has. The GST has helped. The replacement cycle has kicked in, and we do see this sustaining for some period of time. You see this Q3 -- Q2, Q3, which I just said, I think the right way to do is to average it out. A lot of the -- some of the Q3 growth is the GST transition in Q2, which spilled over to Q3, but still we've seen very robust demand in Q3. We did get affected somewhat by the fact that we scaled down XUV700 in Q3 as we were preparing for 7XO. So that has had some effect on the mix and the revenue because literally 1 month, 1.5 months, we had stopped billing new 700s out in the last quarter. You see revenue market share at 24-odd percent. We think that's about the level we'll be at. There was abnormal peak in Q1 and Q2. These numbers now -- well, earlier also, they included the EV numbers. We're just calling that out separately so that we're not going to have a separate slide on EV. On the same slide, you'll see where we are doing -- how we're doing on market share in that quarter and YTD, which you see at the bottom. 7XO has got very good response, a very strong order pipeline. And as some of you did mention, customers, we are back into this waiting period thing, which is not always desirable, but kind of also a recognition of the fact that the product has got accepted very well. Big skew again to the top end in spite of very attractive lower-end versions, almost 70% plus is the top 2 versions, which is in a way higher than what we thought, which is also good news, but that's what is adding to the complexity on waiting period, given that the skew is higher than what we expected to the -- especially AX7L version. 41,000-plus eSUVs sold, which is really about 4,000 a month as an average. The interesting thing is the 32.5 crore kilometers that the vehicle has run, which really implies 8,000 labs around the earth equivalent, goes to show that the vehicles are not just nice parking products in the garages, but are being used a lot and are very mainstream in the way that customers have adopted usage of this, which is building that positive word of mouth and confidence. We are seeing that translating into 9S, which I'll come to in a minute. A lot of awards. We believe the most prestigious out of these is the EV, the Green Car of the Year at the ICOTY, which is a very, very robust jury of multiple auto handles coming together, and they have only 3 awards, one of which is the EV Green Car of the Year, which 9e got. The 9S has got very good feedback as well and response. We had mentioned in one of the earlier quarters that we expected North to do better with the EV portfolio. With the 9S that's happening, that segment was looking for a more conventional shaped SUV, which the 9S is balancing well. So it's bringing all the goodness and tech associations of the earlier 2 products, but in a more conservative or conventional format and in 7-seater. So we are seeing, of course, good response everywhere, but North is adding a new set of customers into the 9S kitty. We had put out what products will come in the calendar, and there have been questions around how much have we already launched and what is not. So we just put this slide to clarify that. We had said 3 new ICE -- 3 ICE SUVs in this year. The new nameplate out of that was 7XO. Two more refreshes will come over and above the Bolero and Bolero Neo. When we had said 3, we had not counted Bolero and Bolero Neo in the 3. So we've done 7XO now, Bolero, Bolero Neo and there will be 2 more refreshes in this calendar year. On EVs, both what we had spoken about are done for this calendar year. So there's no new EV launch happening in this calendar year. LCVs, we had said 2. We've just done Bolero Camper and Bolero PikUp and 2 more will happen in this calendar year. A quick slide on capacity. So we're breaking this up into 3 phases, so to say. In the calendar 2026, we will work around debottlenecking some of the current capacity products where product capacity is running out, more specifically 3XO and Bolero in Nashik plant, some of Scorpio-N in Chakan plant. So all of these in Thar a little bit. So all of these are kind of out of capacity. We'll aim by July, August to add about 3,000 to 5,000 between these products per month. Over and above that 3,000 of EVs gets added with the 9S launch. So in a way, 6,000 to 7,000 additional capacities on these products get added in F '27 on top of what we have in F '26. Calendar year 2027 will see the addition of new capacity in Chakan for the new IQ platform. So one of the Vision S or Vision T, which we will launch in 2027 will kick in. The Nagpur facility, which will come up by -- in calendar 2028, will have primarily the new IQ platform on the SUV side, definitely Vision X, which is not going to come in Chakan. We will probably need more capacity than we are planning in Chakan for Vision S, Vision T. So we'll provide for that too and any other new products. We will also figure out which of the existing products need more capacity. We will have to work the cannibalization equation of new products over current products. We may add something at the Igatpuri new land that we are taking or we may add it in Nagpur. So that's something that we will work out by way of how to split and prepare for additional capacities on existing products. So Nagpur greenfield and if there are more questions, we can talk a little bit more about what will happen in Nagpur greenfield. LCVs, I'm not repeating, I've already spoken. Auto margins have been very robust, and you see the 10.4% here without contract manufacturing, but this chart gives you a better feel of the same thing, which is the auto stand-alone without contract manufacturing is 10.4%, which is what you saw on the previous slide. INR 10 crores is what we made on the contract manufacturing in M&M. And the stand-alone as reported is INR 9.5%, which, of course, comes down because there's a big element of contract manufacturing. On the EVs, as we've started doing, we made INR 175 crores end-to-end. In MEAL, as a company, the EBITDA was INR 149 crores, INR 27 crores of that was in M&M. And the total, as you see on this chart, is INR 175 crores. The PLI status is up here. So 9e, we have all variants approved. 9S, the top 2 packs are approved already. The balance are under approval and should come in by quarter 1. And BE 6 should come in by quarter 1 again, all variants. So basically, by quarter 1, we should have all variants, all products with PLI approval. Trucks and buses, a quick look. We had a strong growth. We also look at the YTD market share, we increased somewhat and we are both together at 6%. Last mile mobility, we continue our leadership, an exciting new launch happening tomorrow in Hyderabad. And do watch for that. We believe it will be a game changer. Some really very exciting breakthrough new design, and I think it will transform the penetration even more. We already are at 30% penetration. So just a quick look at the auto consolidated numbers. You've already seen that, so I'm skipping this. Farm, the volumes grew 23% in the quarter. We lost some market share. A lot of it was due to Swaraj Tractors completely running out of stock, and that's got recovered in January as well. So we are now at 44.1%. So that's what you see here. The farm machinery, Anish spoke about, we're seeing very good turnaround. Last few months, we've crossed INR 100 crores literally every month as an average. So it is a very strong momentum now that we are beginning to see. The core tractor margin here, which is really the important parameter, is at 21.2%, very good improvement over the like-to-like quarter, but also very close to our best performance. This gives you the volatility of industry growth versus how the margins move in a band, depending on the operating leverage. Anish has covered this. So again, very strong stand-alone performance. We had to take impairments on a couple of subsidiaries, which we can talk about, which is what is showing a PBIT negative 7% and a PAT plus 7%. With that, I'll hand over to Amar. Thank you. Amarjyoti Barua: Thank you, Rajesh. Just a recap of everything you heard. I won't repeat what has already been said, but I do want to take a second to highlight that this is the first time the group has crossed INR 50,000 crores in top line, and that's a big milestone for us as a group. What I just wanted to point out within the consolidated result, there is a INR 220 crore impact of labor code. This is our share. The gross amount across group companies was INR 565 crores, okay? This is the waterfall that I usually show to show the contribution of each of the pieces. You can see here the impairments were exactly offset or very close to being offset by the CIE gain. So just calling that out very clearly so that you can see that the operating performance was not helped necessarily by the CIE gain. It was offset by the onetime impairments we take -- we took. We took impairments in 2 entities. One is our Japan entity, and we took also an impairment in our Turkey foundry business, both of which the MAM Japan one we have talked about in the past. This is just continuing the restructuring in that business. Foundry is new and was impacted by the hyperinflation in Turkey. I do want to highlight growth gems grew 3x year-over-year, okay? And that's a very big deal for us. And then from the stand-alone side, the impact you all follow this, the impact of labor code is around INR 73 crores in that -- in the INR 3,931 crores that you see. And then we've talked about the revenue growth. Outside of this, the only thing I'd like to highlight, we don't show the page, but I do want to highlight the cash performance has been, again, very strong across the group. So we continue to keep growing our cash, which will be deployed towards future growth as we find new avenues. And from an outlook standpoint, I mean, we continue to see the strength in the portfolio, so hopefully should allow us to close the year very strong. Okay. With that, we can transition to questions. Operator: We'll just wait for the setup to complete, we'll start then. Yes, Kapil, please start. Kapil Singh: First of all, sir, I would like to congratulate you because this was a fairly strong all-round performance across the group companies. So really heartening to see that, that even the group companies are now contributing solidly. I'll start off with the auto sector, just Rajesh sir, your outlook for next year for each of the segments, LCVs, tractors and autos. And one of the concerns in mind is that because just GST cut has just happened. So is there an element of pent-up that you are sensing here and how to think about next year's growth for each of these segments? And within autos, various subsegments, including EVs and compact SUVs, how are you seeing the demand momentum over there? And also, if you can give some clarity on the capacity for FY '27 and FY '28 in terms of numbers, is it possible to share what will be the available capacity? So yes, that's the first question. Rajesh Kajuria: Yes. So Kapil, outlook, we'll share like we normally do in May, and we'll not give a specific number on outlook, but we'll try and maybe answer your question 2 and question 3 together, which is the impact of GST overall, how we are seeing, in which segments has it really made a difference and that, I think, connects with your question on the demand outlook at a qualitative level on EVs and subcompacts and LCVs and so on. So firstly, the biggest impact of GST will always be in commercial segments because it fundamentally -- or a price reduction because it fundamentally improves cost of ownership and improves viability. Also, the GST cut will drive GDP growth, we believe, to be much higher and the economic prosperity of the country will go up, which also helps commercial applications and commercial usages both. So it's 2 factors kicking in when we look at commercial segments. When I'm saying commercial, I'm counting LCV, bigger CVs and tractors. They all are following a similar paradigm, which is significantly better viability for the user out of a lower -- a significantly lower price. I mean, 10% is a big change in price for that segment. In LCVs, roughly, it leads to a 4% to 5% higher profit improvement for an operator. So it's not insignificant at all. So we believe this is a fundamental shift, and this will lead to a cycle of increased demand, and it's not a 1- or 2-month thing, which is just a pent-up because there was no -- it's not a pent-up. It was pent-up in LCVs to the extent that the replacement cycle had not kicked in, and we believe that was because of COVID, where usage had got delayed or reduced over a 1- or 2-year period. And as soon as -- so there was a replacement cycle delay of a year or 2 and GST, I think, provided that impetus and we saw growth kicking in together. So I think the commercial segments will gain the most. What's happening in the other segments in which we play is actually, we think, enabling higher version variant usage. We don't think fundamentally demand for an XUV 7XO or Scorpio-N is going up because of GST drop. And that may have been momentary if it did in the festival period at all. But the demand momentum continues even as we got into December and January. So it wasn't just festive and it wasn't just 1 month. There, what we are seeing is a much better move up the ladder because customers have a price point on which they're operating and then suddenly, they can get more in that price point. So it can either lead to a lower-model customer moving up to a higher model or a lower-variant customer moving up to a higher variant. So both of these will play out. I'm not sure it will increase the total size of the industry, but it will probably change the nature of the mix for an individual player or certain models, which fall in the consideration set, right? So with the 7XO of pricing that we have where we are operating, have reasonably good options between 13.5 and 15.5 or 16. 4.6 meter product actually competes like-to-like with the 4.2, 4.3 meter product, which was not the case earlier, right? So there would be 4.3 meter customers who may look for a 4.6, 4.7 product. So I think some of that will be helped by GST. The entry car has, of course, picked up with GST in a very significant way, which I'm sure is a function of the fact that that's become more affordable and hence, more accessible to many people. Whether that is pent-up or that is going to sustain, I don't have a point of view on right now. And hence, what we would have to watch out for as we get into F '27 is what will be the mix of small car to big cars and how will each subsegment grow? I think it's a little premature to reach a conclusion on how this mix will play out. I think each segment will grow by itself, but which will grow faster and which will grow a little slower and hence, the mix and the relative impact of that on market share is something that we'll have to watch for. We've seen very robust growth in all our sub INR 10 lakh product. So Bolero, Bolero Neo, everything is below INR 10 lakhs now on showroom. The GST cut helped that. So 3XO, Bolero, Bolero Neo all have got very, very strong demand. Capacity for '20... Kapil Singh: Sir, EVs as well. Rajesh Kajuria: EV, I spoke about in a fair amount of this thing. So the price point at which -- the price point/the fact that we are more than 4 meters, which means the gap between 5% GST and 40% GST is still quite significant and which is why we are able to price 9S almost like-to-like on road as a 7XO. So a customer actually can choose without worrying about price between whether they want a 7XO ICE or a 9S EV. So in the segments in which we play, I don't think the GST arbitrage change is making any difference. But in less than 4 meter, it would because there it was 28 to 5 versus 18 to 5. So it's a much, much closer comparison now. So the price advantage relatively in less than 4 meter kind of goes away. It's still quite significant in the segments in which we play. Capacity, just to again clarify what I had on the slide, we'll probably add this year, 5,000 to 6,000 by July, August in ICE over what we have right now, another 3-odd in EVs, so 7,000 to 8,000. F '27, we would add in ICE another 7,000 to 8,000 at least, that will come from Chakan in calendar 2027. That's for the new IQ platform. And then in 2028, depending on how quickly we are able to get actual possession of the land and productionize it, we would probably add in year 1, at least 8,000, 10,000 more. It will ramp up to 500,000 over a period of time. But in year 1, it will probably be 10,000, 12,000 a year. Sorry, Long answer, sorry. Kapil Singh: No, thanks. I think it's really helpful. Amar, just one to you. We are seeing a pretty steep commodity inflation, particularly precious metals. How do you see the impact of that as we look into next year? Do we have pricing power and hedging on the commodity side? And what was the impact in 3Q as well? Amarjyoti Barua: Sure. So let me address what is happening first and because it's difficult to predict what it will be. Today, what we are seeing is across almost every commodity, there is inflation. Precious metals lead the pack. Part of it is the same dynamics that is driving gold and silver. And part of it is supply issues, especially anything dependent on iron. So copper, aluminum, et cetera, you're seeing. The iron-related products are likely to not see sustained increase because these seem to be more supply-related issues, which will get solved. It's very difficult to say that for precious metals because there seems to be something more deep that is driving that, right? So we'll see how it all plays out through next year. Right now, we did see the inflation in our numbers. The hedges have worked, but I want to emphasize that the hedges can only cover a certain portion because there isn't necessarily a market for steel, for example, for hedging, right? So we do get exposed to anything that might be happening there. The other thing also is our hedges take care of purchases beyond current quarter. So some of the gains we get when we get mark-to-market is covering for purchases in the future. So you will see some volatility in commodity costs in the future and not a hedge offset. So I think so far, very benign because we are getting the advantage of having a very robust hedging program. But in the future, we'll have to see how it all plays out. Overall, I think Rajesh has already mentioned there was -- there is a 1% price increase to take care of what is going to be the future impact of some of this commodity inflation. And then we'll see how it goes. Kapil Singh: Sure. On the EVs, are you seeing more cost inflation? Anish Shah: Just to answer your question on pricing power. Do you want to cover that? Rajesh Kajuria: Yes, I think there's headroom on price. It's just that we don't want to -- we wouldn't want to push it unless we feel it's necessary. That's been our philosophy always to make sure we don't lose a sweet spot on the pricing. So we have taken 1%, as Amar just said in January. And we'll watch closely and see how the commodity is going. There's ability to take -- the key thing is anticipating whether you need it based on a stable view on what will happen to commodity. We don't want to be knee-jerk. So sometimes you kind of say, okay, this is a short-term thing. Let's not push price up for something which is going to go up today and come down tomorrow. So then you're not reacting and that has sometimes a short-term effect. But fundamentally, if you know that the commodity trend is upward, then we will take prices to correct for that. It's the judgment of whether it is just a short-term spike, which should be ignored or is it something that we fundamentally need to take a price to cover for. That's the -- it's that judgment which sometimes affects timing of a pricing decision. Anish Shah: Yes. So we have the pricing power, whether we use it or not is... Rajesh Kajuria: We don't want to -- I mean, the simplest thing is to say, okay, let's keep taking, which is something we want to avoid. Kapil Singh: Just wanted to hear your comments on EVs also in terms of cost pressures, is it more over there? Or should we expect that EV costs will still keep coming down? Amarjyoti Barua: Imports are going to be impacted because of the rupee, right? But I think there was an overhang on the rupee as well, which hopefully, with the announcement around the U.S. FTA should -- so our now view on the rupee is don't see a significant slide beyond where it is right now. Let's see how it all progresses. And that should help us ease some of the import pressure. But we mentioned this before, Kapil, there's an aggressive localization program that the team is running, right? So that will eventually offset this pressure point. Operator: Chandu, please go ahead. Unknown Analyst: First one is on CAFE. So there's now an expectation that after the industry has represented back to the government, the 113 grams coming down to 91 might potentially be 113 grams coming down to close to 100 grams in April 2027. So just wanted to understand your thoughts around that. And if that's the case, our 25% sort of EV mix target for F '28, how much could that potentially come down by? Second question is just around the tractor business. There is some expectation that over the next 12 to 18 months, there could be a recurrence of an El Nino scenario. So what your early thoughts are around that? Any offsets we have to potentially manage around that situation? And the last question is just around sort of capital allocation growth gems. Growth gems, I think we've put a lot of effort into those businesses over the last 4 to 5 years. Maybe the market at this stage doesn't fully appreciate the value in those businesses. But just related to that, we do have a couple of entities, Pininfarina and Erkunt, which might be rags on profitability of the overall group. So just your thoughts on, is there any potential restructuring possible in those entities? Rajesh Kajuria: You want to take that first? Anish Shah: Yes. So you're absolutely right, the growth gems are still underappreciated, but that's fine. We continue to have them deliver more and more. And as we shared at the Investor Day, the valuation of our growth gems as of 3 months ago was INR 56,000 crores. You're starting to see some of that in the numbers as well because they're starting to deliver more profits. Yes, there are a few businesses more so outside our growth gems, but some of the smaller businesses that haven't fully delivered to the potential. And we continue looking at that on a regular basis and culling them out as we need to. You saw that with Sampo a few quarters ago, where we exited Sampo. And we do have all our businesses in that watch in terms of what we need to do with them. We also announced Automobili Pininfarina that we were not continuing that forward. We merged that with Pininfarina. So that was, in a sense, another exit that we took. And Erkunt foundry is not strategic for us and which is where we've taken an impairment this quarter as well. So we continue to look for what are the strategic options for us in that business. So that's one discipline that will continue, and we will cull things out. But keeping that -- I look at that as a separate question from the growth gems itself. The growth gems continue to deliver value. And the way we think about it is there are a set of businesses that have scale and have a right to win. So you've got that in SUVs, in LCVs, in tractors, in farm machinery, there are a number of businesses that -- actually farm machinery doesn't have scale as yet. It will get to scale. But you've got a few businesses with that scale and a right to win. Then there are a number of businesses that have a very strong right to win, but don't have scale. And our focus is how do you start driving scale in those businesses. And many of them are growth gems. And then we have some businesses where we feel we should have the right to win, but we don't have a right to win as yet. And there, we're looking at can we develop that right to win. If we can, we will scale it. If we cannot, we will exit it. Rajesh Kajuria: Okay. Let me take the question on which there's no answer, which is CAFE. Yes, Chandu, of course, we are all as an industry body working regularly with the government on what we think should be the right and fair way to construct a policy around emission norms. So there is a fair amount of industry engagement with the government on this, and the government is not rushing into announcing something and are capturing all the views. The overall view of SIAM is to stay with the recommendation, which was made in, I think, December 2024. There's discussion around that. So you gave a number of 25%. I don't know that 25% that we had put out as our -- was our own target was not linked to what is needed by CAFE norm. We believe that most likely what will be needed by CAFE norm will be much lower than our own internal target. The difficult thing, of course, is if ICE continues to grow at a very robust pace, then what will be the ratios between ICE and EV. And that's really what part of the discussion is that you don't want to really stop growth of the economy or of the ICE portfolio and the government needs to construct it in a way which is reasonable for both industry and climate. And I think there's good listening around that. So let's wait. I think it's -- we're not too far away from getting a very clear view on what they will do, but it's maybe like -- I think we should have something out in a couple of months. So there's a lot of industry engagement with multiple government stakeholders. On the tractor industry, often you'll ask about projections. And often, I have said we have no ability to project it. As recently as 2 months back, we said it will be low double digits, and this year is going to end at twice that literally. So low double digits, if you say is 11% or 12%, we are going to end this year at 24%. So really, even the ability to forecast next 3 months is not there. I wouldn't worry about what's going to happen in October or November. It's too early to worry about that. We will go into next year feeling optimistic and positive. But keeping in mind that we are on a very high base because this year is going to end at 24% growth, which no one expected, right? So if we say example, next year is X percent growth. Earlier, we were saying it is X percent growth for F '27 on a 10% or 11% growth this year, which itself we thought is good. Now the point is if this year is not 10% or 11%, but it's 24%, which is what it's likely to be, then we have to have a reasonable assumption of on that base, what kind of growth is going to kick in next year. Multiple things in the country, we believe, are very enabling and reservoir levels is one key enabler even if when monsoons are not good. So whatever we read about El Nino effect is likely to happen after the first round of rains. So most people say that, that effect may kick in, in August or September. So if you had a good flush of rains, then your first round of kharif sowing has happened. Reservoir levels are good, which anyway, we are going to open F '27 with good reservoir levels. Government spending in rural and agricultural sectors, both has been robust, which is also a key driver of tractor growth, so -- and favorable terms of farmer trade. So there are multiple enabling factors. So let's wait and watch. I know many of you are picking up signals that tractor demand may be under stress. I think we have to see that relative to the fact that this year will be a 24% industry growth. And overall, we think right now, there are -- the enablers are much more than the dis-enablers. At least that's the way we are going in and which is why we are triggering capacity expansion and all of that for tractor, Mahindra tractors in Nagpur, which is where we already have a base on the greenfield, plus we'll also look at something more on Swaraj. So we are preparing for the longer-term growth trend, which we spoke about on the Investor Day of about 9% CAGR. Anish Shah: The economy is accelerating. And it's driven by some of the actions taken last year, but even more so from the foundation elements that have been laid. And we continue to believe that the industry will accelerate. I've gone on record saying we would look at an 8% to 10% growth over the next 20 years, just given all the key factors that drive the economy, demographics, the infrastructure that's being built, the government reforms, and then you see last year's actions around tax, around GST, around the rate cut. So you see various different actions that have come in. So we feel that there's a very strong tailwind that will position India very well, and that will benefit multiple industries in India. Unknown Analyst: Anish, the 8% to 10%, you're talking more real growth or nominal growth? Anish Shah: Real growth. Amarjyoti Barua: Can I just add one perspective because this is why we always encourage all of you to look at consolidated. All of these impairments are not just accounting, right? There are some tough decisions that have been taken by the Farm leadership. And so we do foresee international not to be such a big drag next year, right? And I think that is something -- when you think about Farm at a consolidated level, there is also that constructive view that you should take because there is some really tough decisions that the team has taken. Anish Shah: Yes. And I'll emphasize 2 points. One on what Amar said and coming back to your question around the growth numbers. There was a point in time which you've seen we would put impairments as onetime items. You saw from the pages today, impairment was not a onetime item. It is operating profit, right? Or it brings the operating profit down. And that's a mindset we are using right now to say that wherever we invest, we need to get the results from there. And as a management team, we take accountability for that to say that is the result we will drive. And therefore, it is in our operating profit number, not as a onetime item that look at as an impairment. But to Amar's point, that improves performance going forward. And yes, there are some actions that will not work. That will always happen. But we find ways to offset that. But as we've done this, it improves performance going forward. Second, I'll come back to the growth point and expand a little on what I said. India has grown 6.5% a year in real terms for the last 30 years. And with what we see today, with the kind of infrastructure that's put in both physical and digital, the kind of government spending on CapEx, the reforms that have been put in place and more that are coming, the focus of the government on making it easier to do business, we're not completely there as yet, but there's a lot of conversation that takes place. Often, we are part of those conversations to say, here's what needs to be done. And there's a lot of room for the government to listen to it and start taking action for it. The demographic factor that we have, we are at 28.8 years median age. The China and the U.S. are at 38, Japan is at 48. So we have a lot of these benefits, and we are starting to see that come together as one to start the economy growing faster, so which is where we say that it should be 8% to 10% from a real basis. With all these actions that have been taken, this is not a -- we hope for actions in future and it will happen. This is the result of actions that have been taken already. Operator: We'll go with Raghu, then Gunjan will come to you and Rakesh. Unknown Analyst: Congratulations on strong numbers. Firstly, to Anish sir. Sir, in your Davos interview, you had talked about last mile mobility listing. If you can talk about the time line and strategy, that would be helpful. Also, if you can share your thoughts on the benefits for Mahindra Group from the recent trade deals with Europe and U.S. And also like last 2 years were remarkable for Tech Mahindra in terms of deal wins and margin expansion. How do you see the medium-term outlook? And finally, on Mahindra Finance, now that the asset quality is better, how do you see the growth ahead? Anish Shah: All right. That's a great set of questions overall. So let me start with the last 2 and Mahindra Finance, in particular, and Tech M and then I'll go to the EU FTA and continue on the first question. So Mahindra Finance, for the last 3 years, we specifically had a view that the business has to get to a much stronger and consistent asset quality. If you look back over time and you look back even what I've said on Mahindra Finance in the past, we would go to 16.5% or 16% GNPAs in every crisis, stay at 8% in normal terms. We would always say that we will get all of this back and we did. So it was always profitable, but it was highly volatile. And that is something that we had to change because we didn't like the volatility. It caused a lot of questions. You didn't like the volatility either. And therefore, we said that we have to bring it down to less than 4.5%. What that also does is it brings ROA down because higher risk, higher return. But the ROA hasn't come down as much as we had expected it to come down. So it's come down to 1.9% or so right now. The last few quarters have been less than 4% from a GNPA standpoint. And we've cut out a number of customers that caused earn and pay. And if you go back to even many years, every time during a crisis, our CEO at that time, Ramesh Iyer would talk about the earn and pay segment. And so the earn and pay segment has been impacted, and they will come back and pay later because they're not earning right now, they're not paying. But that segment, we're not lending to anymore. And therefore, you've got that coming down. ROA at 1.9% doesn't worry us as much because our cross-sell ratio is the worse in industry, which I look as an opportunity. So as we cross-sell more, as we sell more insurance and other fee-based products, that is starting to come up, and we'll get that back to 2.2% to 2.5% after that as well, but have a very strong, stable business. The other aspect we needed in that stability was controls because we did at times go 2 steps forward and come 1 step back, right? That something happens in ice ball, something happens somewhere else. It's out of our control. But can we have a business with very strong controls where we can start picking this up and centralize a lot of the processing, put in a lot of technology that's good for customers as well. In some cases, our customers have to sign 76 times to get a loan. I'm not exaggerating on this one. And with technology now that has been put in Project Udaan that got put in, it's one digital signature, and that's it. So it's taken away a lot of the processing away from it, which then improves cost. So OpEx ratios, we haven't talked about a whole lot as yet, but a lot of cost will come out of the system as technology has been put in. So as we look at our OpEx ratio, as we look at our loss ratios coming down, our credit losses have always been stable. Our GS3 will be even better. The business is on a very strong track. And now we have pivoted to growth. We will grow responsibly. We're not going to grow even at the levels we could right now because we're going to continue to maintain this discipline that we have. So therefore, we see Mahindra Finance on a very strong track at this point in time. Tech M hasn't finished its first phase as yet. Mahindra Finance has finished its first phase. The other aspect in Mahindra Finance is a very strong management team. And you can see that in terms of what we've announced. We've got some really good leaders from top banks and in a couple of cases, top NBFCs as well. So that gives us a lot of comfort. Tech M, we've got a very strong team. We've made the internal transition of the delivery organization, centralized it, and that's working very well right now. It's on track to deliver what it has to in its first phase, which ends by F '27, and it has to get to a 15% EBIT margin. As it does that, then we will look at pivot to growth from that standpoint as well. So that's on the Tech M story. On FTA, I like the way you phrased your question, which is what are the benefits from the FTA. And actually, we see that as benefits because I will give a lot of credit to the government on this. They had a very, very fine balancing act because this was a big ask from the EU because of the unused capacity that they have. And the government had the balancing act not to protect us in any form because I'll come back to that protection part, but to ensure that manufacturing in India did not get a hit, that OEMs outside India continue to invest in India and continue to manufacture in India. And that's what we told them. That's what we want. We want more carmakers to come here. We want more competition. We want a bigger market here because the more scale that we have to manufacture in India, the better it is for us. We will get a better ecosystem. We'll be more competitive and we can Make in India for the world in a much better way. That's why China is very competitive. China capacity today is 50 million units a year. Roughly half is unused. India capacity is 5 million units a year. That's where China was 20 years ago. Europe is at 23 million units a year. But Europe also has 10 million, 11 million unused capacity. Volkswagen alone has unused capacity that's half of the India market. 2.2 million is Volkswagen's unused capacity. So as you look at all of these things, the fine balancing act was to make sure that we open up the industry, we'll reduce tariffs. At the same time, we encourage all of the European makers to continue making in India. And I think they've done that really well. We can go through some of the details. You've seen most of it already. Coming to the part around protection and competition for us, take any of the European models, right? Any model that's going to be successful in India is in India. Now if you look at the math behind it, whether it's a Renault Duster or whether it's a Stellantis Jeep or whether it's any other vehicle, can they make it in EU, ship it, take the cost for shipping, take the cost of inventory for 4 months and do it cheaper than they can manufacture in India? Unlikely. If that is the case, then how does it change competition for us? They will make as many cars as they can make for India, that's what the price will be. What they would have done if the outcome had been different is if they were allowed to send everything from Europe, they could have said, "I'll shut down my India plant, and I will manufacture in Europe and send it here because I don't have to shut down my European plant in that case," right? Some have announced shutdowns of European plants as well, which they have not been able to do right now. But that's where the FTA has been done very well, which will not allow them to do that because they will need a presence in India to be able to succeed here. So that is our view on why the FTA has been done very well. The benefits or opportunities come from the fact that we can send our cars to Europe at 2.5x the quota that they have there, which is a great quota from our standpoint at 0% tax, right? Yes, their reduction was lower. Their starting point was lower and which is why it goes down to 0%. But that opens up a significant opportunity for us. And we can test the European market by manufacturing in India well and sending it there. We will also get a lower price for some of our components coming in because this FTA also allows for that. So today, we pay 16.5% for electronic screens. We have a few other imports that we have that we have a higher price. That comes down as well. So we see a lot of benefits from the EU FTA in particular. The U.S. FTA actually was a surprise in many ways. It doesn't really give much to the U.S. from an auto standpoint, the way it's drafted right now, at least what we've seen. We'll wait for the details to come in, but we don't expect any -- we never expected any challenge from the U.S. in any case. Europe was a bigger one in that sense. Unknown Analyst: Last mile, sir? Anish Shah: Yes. On last mile, we did talk in towers that we'd look at an IPO next year. And that's more around where the business is, where its trajectory is. It is competing fiercely in the market and doing very well. And we just feel that an IPO will just help unlock that value for that business. It's the right time for it, and that's what we'll do. It's not for monetization in any form because we're not worried about the cash aspect of it, but it's just something that helps proclaim victory in that space, which is why we do it. So that's -- it really shouldn't change anything from the economic view of the group. Unknown Analyst: To Rajesh sir and also to Veejay sir, on the tractor side, how do you see the contribution of the subsidy-led sales in the current year? And how do you see that subsidy-led momentum continuing for next year? Rajesh Kajuria: Yes. I'll take that, Raghu. And of course, Divya had prepared us for this question coming from many of you. So mainly the subsidy was Maharashtra and Maharashtra saw a huge growth in industry, thanks to the subsidy. Roughly 35,000 extra numbers of tractors have got sold on account of the one subsidy, which was very successful. There were 3 subsidy schemes in Maharashtra. So without getting into the granular details of each subsidy scheme. So roughly 35,000 extra tractors in F '26 over F '25 on account of the one major thing, which we don't expect will continue. But then that's the number in perspective. From looking at just that state of Maharashtra, obviously, the state will not get growth. But normally, some other state will do something or there will be key drivers. If you see the previous year, Chhattisgarh had a huge growth just like Maharashtra is having this year. So there will always be 1 or 2 other states which compensate for something else. So we live in that hope. And certainly, Maharashtra will be flattish after such a heavy growth. I think it was 90% growth or something in Maharashtra, 68%, whatever. Unknown Executive: Two years of already a pretty strong... Rajesh Kajuria: Yes, yes. So that is what it is. So that's the 35,000 is the extra absolute number in an industry of 10,000 numbers or 10 lakh numbers, all India industrial... Anish Shah: I'll just add to that and also what Kapil asked earlier, we generally like steady growth numbers year-over-year because we look at outperforming in the market. And even the auto industry, if you look back over the last few years, hasn't really grown at rapid pace, and we've done very well in an industry that hasn't grown at a very rapid pace. So for us, the huge fluctuation where growth goes up so much and then in Maharashtra it will come down again is not ideal. Yes, we will like some short-term numbers that come from it. But our general preference is slow, steady growth that comes in, and we'll overperform on that basis. Unknown Analyst: Just a last question... Operator: I'll come back to you. We'll go with Gunjan. Gunjan Prithyani: Okay. I'm going to keep it at 2. So Rajesh, with you. I think I just want to hear your thoughts on the EV business scale up now that it's been a year, we've had the portfolio in place and the fact that we have these 3 models, which will be there for the -- in CY '26, there's nothing incrementally new coming, right? So a couple of things that I'm trying to get your thoughts on. One, how do we think about the ramp-up of the volumes with these 3 models? And are these 3 models enough in context of the CAFE emission norms if they were to kick in from April '27 onwards? And just going back to the supply chain bit that this is a lot different from the ICE supply chain. Having sort of produce these models for almost a year, what are the challenges that we are -- and we see, particularly memory chips is something that I keep hearing from my colleagues is a big issue. So some thoughts on the supply chain, how sorted are we now for the next stage of ramp-up on this business? Rajesh Kajuria: Okay. Let's just get the memory chip thing out of the way. It's not an EV thing, the memory chip, right? It's going into everything. It's in infotainment systems and multiple other parts of every ICE and EV car. So a memory chip shortage has no isolated effect on EV. It has an effect on the whole portfolio because literally every part of our -- every product or variant of ours has something like an infotainment system, which needs a memory chip. So memory chip is something that is a supply chain risk/price-sensitive thing because shortage obviously is driving premiums in memory chips. So memory chip is something which is a watch out across the portfolio right now. That's the new rare earth, let's call it that, right? So every quarter, we have one such thing which will take disproportionate energy at the moment, that is memory chips. So that's not an EV thing. I'm just wanting to get that out of the way because, yes, it's a watch out and it's something that we are taking all the mitigating actions to build inventory, so on and so forth, which we have done in all other previous such kind of at risk to supply parts and memory chip is certainly one. But I just want to call out that, that is -- I'm isolating that from EV that is -- a memory chip shortage will affect the whole portfolio significantly. Gunjan Prithyani: Are you covered for it in the... Rajesh Kajuria: We are covered for it in the short run. We are buying in market. We are paying premium, and we have a set of mitigating actions. We are covered in the short run. But it's almost like going back to semiconductors of COVID. I mean that's -- the risk could be quite severe. We have the learnings now out of having handled some of those discontinuities or disruptions. So we are probably better equipped to deal with it, and that's what we are doing proactively. So memory chip is one. We are covered for now. The EV business scale up for the year F '27 is based on the 3 models, which we said. The model some of you got to see we had kind of put visuals of that out in the Banbury 2022 event is what we had code named BO7. It probably won't be launched with that name, will come in, in some part of calendar 2027. That we believe will be a very big volume driver on top of what we are doing with our current 3 products. So that is we are expecting as a 2027 launch. The 3 products we are expecting will be in the volume range right now in this calendar year between 7,000 to 8,000 a month, which is the kind of number that we have put out when we launched the 9S. So I'm just reinforcing the number that we put out as our projection for 2027, roughly [ 80-plus thousand ] a year. We feel comfortable based on the response that we've got to 9s. That's a number which is achievable. The CAFE question I've already answered, Raghu, by way of saying that there's no real answer. So I just stay with that same position. I think right now, all we can do is try to do the best in each segment without worrying about ratios. That to us is the best approach. While we, as an industry, are in touch with government, we've got to see how we grow the business and each subsegment individually, which is ICE to not curtail growth of ICE worrying about ratio and EV to maximize it to leverage the opportunity that there is. So that's really the way we are thinking about it. There's no separate supply chain-related disruption that we are seeing on EVs compared to ICE. So I just want to clarify that actually the rest of the supply chain sales and all of that on EV has actually been very seamless. So we actually don't have EV-specific supply chain disruption at all. Any supply chain disruption that is happening is based -- is actually impacting ICE and EV both because we do now have very good and high technology even in the ICE. So if there's anything happening there, it's happening here as well. Gunjan Prithyani: And just to get the regulation out, is BS VII something that is from a cost implication perspective, going to be meaningful, particularly on the diesel heavy portfolio, if you can share your thoughts. Rajesh Kajuria: Yes. No, I don't think it was -- I don't think Velu is here to help me with this, but it's not going to be -- I don't think we're going to have a penalty on diesel compared to gasoline on BS VII. A lot of work has already been done on BS VI.2. So the incremental cost of doing diesel or gasoline may not be disproportionately high. We are right now working on being ready with BS VII. We're not sure of the timing, but we are ready -- we will be ready with BS VII and... Gunjan Prithyani: The cost... Rajesh Kajuria: The cost is something we'll have to see. I mean we -- the whole industry did take BS VI. Unknown Executive: [indiscernible]. Rajesh Kajuria: Yes. Gunjan Prithyani: Okay. Got it. Just last question, Amar, to you. I think on the MEAL, if you can share what was the PLI that was as a percentage that we are accruing on the subsidiary? And with the all capacity that we've announced, is there any change to the CapEx outlook versus what we had shared earlier or anything that we should think through? Amarjyoti Barua: CapEx, we'll talk about in May because then we'll give you -- I mean there is -- it's all within what we had communicated earlier. We had always anticipated there will be greenfield and all of that is in there, but we'll give you more. On PLI, we've been accruing 13% on wherever there is approval. And as each of -- as Rajesh clearly laid out, I think this quarter, there will be -- to the extent there is 9S, we will have similar and then next quarter with the BE 6. Rajesh Kajuria: We may not accrue or assume to accrue 13 as we go into Q1. Basically, the way this works, Gunjan, is it depends on which suppliers in the value chain also qualify for PLI. So basically, if nobody qualifies in that period, then you can accrue the whole spread of 13. But if someone else, then there's a sharing. So it could range anywhere between 8 and 13 depending on which suppliers also qualify for PLI in your value chain. So we've been accruing 13 because nobody else has qualified. Amarjyoti Barua: For 9, there was nobody else. Rajesh Kajuria: Nobody else. So we have accrued the full 13. But as we get into Q1, we'll have to see whether it's 8 or 13 or whatever is the number. Amarjyoti Barua: For example, LMM to Rajesh's point is at a lower level because there are suppliers who qualify. Operator: Rakesh, you want to go? Unknown Analyst: Rajesh, my question was on 7XO. So pretty solid initial demand in terms of booking. And for the top 2 variants, specifically, you called out 70% of the demand is for that. If we go back 4, 5 years when 700 was launched, we had a similar situation, pretty solid demand, more skewed towards higher variant, maybe less than what we are seeing with 7XO. And then as the demand stabilizes, we start seeing that the product started being seen as a premium product priced above INR 20 lakh, INR 25 lakh, and that makes it difficult to sustain strong volume and you had to take price action at that time as well. How are you going to mitigate a similar repeat of a risk that once the demand stabilizes for the premium product, it doesn't get restricted to a smaller price point, but the entire price from INR 13 lakh to INR 25 lakh is addressed. Rajesh Kajuria: Okay. Rakesh, great question. So learning out of that, what we've done in 7XO, we've actually discontinued what we were calling the MX series. So just to go back to the 700, we used to have the MX series and the AX Series. AX was AdrenoX-based, which was a connected car. And MX did not have the connectivity and the AdrenoX interfaces, which were well priced. But for a customer who was coming into 700 kind of tech mindset, didn't want to look at MX as an option at all, while that was well priced. So the few corrections we made in the way we've constructed the variant lineup on 7XO is completely discontinued MX. So we now start with AX. So the lowest entry version of 7XO comes with AdrenoX and is a connected car. We have 3 screens right from AX. So the entry variant has 3 screens. So there are some of these things which were very key part of the value proposition of the product, we didn't have in 700 and the lower versions. And which is why when later on, as demand for the higher end started going down, customers are not willing to -- they didn't find the lower-end versions attractive enough because the brand stood for a certain tech value proposition and the lower end were not offering that. This we have taken care of this time. So we -- basically the key part, so DAVINCI suspension or the AdrenoX connectivity or the 3 screens are there right from the entry variant of AX. So it will be far easier for us to leverage AX, AX3 to drive volumes than what we were able to do with 700, where basically MX was not getting any traction at all. Unknown Analyst: So this initial skew of demand towards higher variant, you don't see that as a risk that in the mind of customers, it's fixed that 7XO probably is a premium car. Eventually, you would start seeing a more diversified demand across portfolio. Rajesh Kajuria: Yes. Unknown Analyst: The question I'm trying to come to essentially is that... Rajesh Kajuria: Will we have to drop price again? Unknown Analyst: Or maybe introduce some other brand at a lower price? Rajesh Kajuria: Yes. This risk is there because if you keep selling the top-end version only then the brand starts getting associated at, whatever, INR 20 lakh, INR 22 lakh price point. We've just introduced the Roxx, a special version on Roxx, called Roxx Star, Star Edition, which is actually the X7, which is at, I think, INR 16.5 lakhs or INR 16.9 lakhs or INR 16.8 lakhs or some 16.8 lakhs, which actually achieves this objective. So we had kept that option open in the -- when we launched Roxx that there is a slot in between, which was the AX7 equivalent slot, which we didn't use. And we have the ability to bring that in at a time when then that allows -- when needed to pick up volume at a price point of INR 17-odd lakhs. So there are things like that we could do with 7XO as well. To your point on should we have another product, that is something that we -- I'm sure we'll talk about as we talk about our product portfolio and share more with you as we go along. Unknown Analyst: Great. Just one clarification on your tractor capacity. How is it positioned and for the next year... Rajesh Kajuria: Yes, it's tight, honestly, because we are not -- we were not prepared for 25% growth this year. So we are scrambling to put capacity in more by way of Swaraj than Farm division. Swaraj, we have a plant 3 and that we are ramping up. We had some capacity constraints at our engine facility, which is Swaraj Engines. That capacity expansion was already approved. And that, I think, comes on way now between March and June. So it was basically June, which we are trying to prepone and get done by March. So because there was a little bit of a timing gap in that capacity coming in place, so Swaraj was constrained by engine availability from Swaraj Engines, which is the primary or the only supplier to Swaraj tractors. But that, I think we'll overcome. But like I said, we are adding 100,000 in Nagpur greenfield for Mahindra branded tractors plus looking at what we need to do for Swaraj, which should cover us for F '27. Operator: Raghu, your last question? Unknown Analyst: To Amar sir, if you can talk about the Farm subsidiaries, there was this noncash write-offs this quarter. So next quarter onwards, we should expect a normalized performance? Amarjyoti Barua: So for some of the subsidiaries where we have decided to restructure, there are rules around what you can recognize and can't recognize. So we have done whatever is the maximum possible under the rules, and there will be some trailing costs after, right? So there will be costs, but not of the magnitude that you saw today. So there will be trailing costs, and then there will be losses till the time the complete restructuring has been completed. So you will -- at least for this year, don't expect any dramatic changes. Next year, towards the second half, you should see the change in trajectory. Operator: Great. We are running a bit over time, so we'll just close this -- you have a question, okay, please proceed. Unknown Analyst: I had a question. What is your global ambition in EVs? And second is, what is the key to increasing margins in the automotive business because your scale is going up, your volumes, your market share, your acceptance is very strong. And how do you increase the margins there? Rajesh Kajuria: Yes. On the EV global, we had already spoken about the way we are approaching this. So we will look at, like we had said, for the EVs, the right-hand drive markets first, so which is Australia, New Zealand and maybe potentially U.K. Anish just spoke about the EU opportunity. So at an appropriate time, we'll go into left-hand drive markets in Europe potentially, but only after testing and being confident that it's an acceptable and a successful value proposition in the right-hand drive market. So we don't want to globalize recklessly. We have said that we will do it in a very calibrated way, see the response that we get in right-hand drive markets, maybe Australia, New Zealand first and then U.K. So that's where we are on EV. It will be very watchful and calibrated. On margins on auto, our approach has always been -- and we just had some questions around how we are pricing and so on, but is to make sure that we drive margin improvement not because the customer is willing to pay for more, so we should just keep increasing prices. It should come out of staying focused on volume, ensuring the brands continue to have a strong value proposition while working on our cost structure. So we are very, very careful and calibrated in price increases that we take. We want to keep the positioning visa customers -- price positioning vis-a-vis customers intact, so the brands continue to have momentum and then work on costs. And that, as you've seen with time, we have the best in industry peer margins right now. That comes out of -- or in spite, if I may use that word, of being very competitively priced with every launch that we do and even with our existing products. So it's really the balancing between how to get margins by being very well priced and managing costs well. Unknown Analyst: And sir, out of, let's say, 50-odd thousand SUVs, which you sell every month, how many of the customers are coming who are Mahindra customers in some way? And how many are coming from other brands, if you can help us? Rajesh Kajuria: Yes. So we've shared this earlier for EVs where 80% of the customers that we got in last year were actually non-Mahindra customers. In the rest of the portfolio, it depends based on products. So for example, 3XO, which we do almost 9,000, 10,000 a month, is not -- are all new or first-time buyers. They're not really Mahindra customers. Bolero, Bolero Neo will get a lot of Mahindra customers. XUV 7XO is getting a lot of customers which are non-Mahindra. So it really varies across product portfolio. I don't want to give you a very broad one number because that would be not the right way to interpret it. Operator: Great. With that, we'll close this meeting. Thank you so much, everyone, for joining us. Please join us for refreshments. Thank you.
Operator: Ladies and gentlemen, good day, and welcome to Grasim Industries Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Panchmatia, Head, Investor Relations of Grasim Industries. Thank you, and over to you, Mr. Ankit. Ankit Panchmatia: Good morning, and thank you for joining Grasim's Third Quarter Financial Year 2026 Earnings Call. The financial statements, press release and presentation are already uploaded on the website of stock exchanges and our website for your reference. For safe harbor, kindly refer to cautionary statement highlighted in the last slide of our presentation. Our management team is present on this call to discuss our results and business performance. We have with us Mr. Himanshu Kapania, Managing Director, Grasim Industries and Business Head, Birla Opus Paints; Mr. Hemant Kadel, Chief Financial Officer of Grasim Industries. Also joining them, we have with us Mr. Jayant Dhobley, Business Heads of Chemicals, Cellulosic Fashion Yarn and Insulators; Mr. Vadiraj Kulkarni, Business Head of Cellulosic Fibers Business; and Mr. Sandeep Komaravelly, CEO, Birla Pivot, our B2B e-commerce business. Let me now hand over the call to Himanshu, sir, for his opening remarks. Over to you, sir. Himanshu Kapania: Good morning, and a very warm welcome to everyone joining us today. At the outset, we wish all of you a happy new year 2026. We hope that the year has begun on a positive note for you and your families, and it brings good health, continued progress and renewed optimism. As we step into 2026, we do so with a sense of confidence and purpose. While the global environment continues to evolve, the underlying strength of our markets, the resilience of demand and our disciplined execution gives us optimism about the road ahead. The new year represents not just a change in calendar, but an opportunity to build on momentum, sharpen our focus and deepen the value we create for our stakeholders. On that value creation, let me start sharing key updates on two of our latest growth engines. As announced earlier, our Paints business, Birla Opus CEO, Mr. Sachin Sahay, shall join us from 16th February 2026. Despite the absence of CEO, the existing Paints team delivered an extraordinary performance, reaffirming the company is being built on rock-solid foundation and has a long pipeline of leadership who can take on the baton when the need arises. During the quarter 3 of FY '26, Birla Opus, the third largest decorative paints player, expanded its revenue market share by more than 300 basis points year-on-year based on internal estimates and announced results of listed paint meters. On a quarter-on-quarter basis, Birla Opus accelerated its market share gains with revenue growth of nearly 3x the Indian decorative paint industry growth rate, inclusive of Birla Opus. Further, the combined revenue of Birla Opus and Birla White Putty business in quarter 3 FY '26, the revenue market share gap with existing #2 paint players is now reduced to around 300 basis points, based on the guided decorative segment revenues, which includes their putty business as well. In quarter 3 FY '26, Birla Opus sales volume has risen by 70% on year-on-year basis. Early this January, Birla Opus has crossed the milestone of 500 million liters of paint sales cumulatively. We believe that more than 6 million households are now experiencing superior quality of Birla Opus in a short period of 18 months. Birla Opus exponential growth is underpinned by rising brand acceptance, rapid expansion of distribution network, strong sales throughput from dealer counters to contractors and consumers, consistent differentiation through superior quality -- product quality and focused brand-building efforts. Let me give you final details of execution on the above. First, on brand reach. The presence of Birla Opus has crossed 10,400 towns across 35 states and union territories. We have covered all 50,000 population centers across India and more than 75% of the 10,000 to 50,000 population centers. The company will continue its expansion effort deeper into Bharat. The active quarterly billing dealers has grown in double digits, along with a single -- high single-digit growth per dealer revenue throughput on month-on month when compared with last year same quarter. Additionally, Birla Opus is transforming the paint consumer retail experience with company exclusive franchise outlets nearing 1,000 Birla Opus paint galleries. These galleries uplift consumer experience by selecting a paint brand, helping premiumization of the category. Institution sales continued to gain traction during the quarter, supported by increasing project wins and specification approvals among clients, including governments, builders, factories, hospitals and cooperative housing. The institution sales grew by 40% quarter-on-quarter. As institution orders have a long gestation period, happy to report more than 40,000 mid- and large-sized projects are in various stages of negotiation with nearly 25% build, thereby a strong project pipeline for future. Secondly, Birla Opus remains focused on driving secondary sales from dealer counters to contractors and consumers. The 10% free paint promotion continues on 10- and 20- data pack across all-emulsion top coats waterproofing range, however, excludes subeconomy and other categories. The company equally focused on building relationships with paint contractors, the key influencers. For them, Birla Opus has built an end-to-end first-of its kind digital platform to engage with contractors online on pan-India basis for product information, incentives and schemes, sharing consumer reach, offers assurance registration, complaint handling and much more. This platform is integrated with our unique track and trace system to monitor consumption by customers at pin code and dealer levels. We are also implementing AI-based projects to improve contractor connect and analytics. I'm happy to share that over 7.5 lakh contractors and painters have applied and experienced Birla Opus superior range of products on pan-India basis. This online platform allows us to remain always in touch digitally with the unorganized painter community and instantly transfer accrued benefits to their banks on a click of a button from their app anywhere, anytime and experience like UPI. Additionally, the centrally controlled tinting machine analytics shows strong color and consumption across geographies. With over 35,000 active tinting machines in operation during quarter 3, the tinting data shows interesting consumer insights. The top 2 [ Opus ] colors unifying the country include [ Fort Kochi ], a dark bluish gray color; and a [ Morning Birdsong ], a light, bluish gray shade, which are tinted by more than 30,000 dealers in the last 1 year. Thirdly, the foundation of our product strategy is built on R&D excellence with a portfolio designed for performance, durability and unmatched finish. Birla Opus has achieved what we believe is the fastest portfolio expansion by any brand in the industry. Today, Birla Opus proudly offers one of the widest product ranges of more than 216 products, 1,848 SKUs across emulsions, enamels, waterproofing, wood finish, wallpaper and others. This year itself, till now, we've introduced 40 new products, including the completion of retail waterproofing line, launch of painting tools and indigenously developed Italian few [ Alka ] range and many more. These innovations are not just additions, there are accelerators of growth, which is creating clear product differentiation, winning the trust of dealers and delighting consumers. The fourth powerful driver of Birla Opus is creating consumer pool by our sustained brand salience and differentiated marketing. According to Opus commission, Brand track study, the top-of-mind brand recall for bills has surged into double digits, positioning us as the second most recalled paints brand in urban markets. With over 6 million satisfied home users acquired in a very short period, Birla Opus brand acceptance will continue to accelerate, providing solid impetus to growth. From builders and government bodies to industry, total education institutions and MSMEs in the project segment to individual homeowners and housing cooperatives Birla Opus brand test is on the right. With a strong media presence in quarter 4 and high engagement campaign, our brand salience is set to sort even higher. Watchout for our latest Opus by campaign Colours of Togetherness in the ongoing T20 World Cup and upcoming IPL 2026 and many other regional and national impact properties on television, digital and outdoor media. Our premiumization efforts continue with PaintCraft recently launched Birla Opus professional painting services, fully GST compliant, transparent pricing, attractive EMI options end-to-end platforms from lead management to quotation to monitoring of services and quality approval, managed jointly by central and field team. This service has expanded to over 5,000 pin codes, and we tapped to open PaintCraft on pan-India basis through the 1,000 Paint [ gates ] at the earliest. Separately, on OPUS Assurance Services, where the company has given additional guarantee besides the standard warranty clause to redo the painting, including labor, if need arise; more than 60,000 consumers sites have been registered through nearly 30,000 contractors under this first of its kind program. The combination of PaintCraft and Opus Assurance will improve consumer experience, allowing us to sell higher-end products and premium services. The fifth powerhouse behind Birla Opus momentum is the second largest manufacturing capacity holder in the industry, a formidable 24% capacity share. With the launch of Kharagpur and a steady ramp-up of capacity utilization across each of our 6 plants, the company has executed their natural production strategy by producing fast-moving category products closer to their market, cutting down the drag of logistics cost and inventory and sharpening its service edge. With the completion of projects on time and within budgeted CapEx, the focus of the company now has shifted to improve productivity, efficiency operations and bring down significant variable costs through optimization. At the heart of our manufacturing journey lies a bold embrace of Industry 4.0 with IoT-driven automation helping standardization and consistency of quality. This excellence is now obviously validated. We are proud and excited to share that Birla Opus has received Integrated Management System certificate and compressing ISO 9001, 14001 and 45001 for all the 6 plants in one go. Achieving these certifications strengthens our organization framework and reinforces confidence of our customers, partners, stakeholders in our capabilities. Securing certification in less than 18 months of full-scale operation is an unprecedented milestone. It underscores our deep commitment to the highest standards of quality, safety environmental stewardship, compliance and operational excellence and marks a powerful step forward in our ongoing sustainability evolution. Before I move on to the next business, I wish to address the narrative about sluggish industry growth. Based on announced results of 4 listed paint [ measures ] and guidance on their decorative business. It appears the decorative paints, excluding Birla Opus, has grown by 1% to 2% by revenue but 7% to 8% by volume in quarter 3 FY '26 versus quarter 3 FY '25. Now when we add Birla Opus quarter 3 performance to these 4 players decorative paints business, industry revenue growth, including Opus, rises to 5% to 6% and volume growth jumps to 11% to 12%. In my economic understanding, a double-digit volume growth reflects a good to strong consumer demand. However, the pain of the industry is rate realization, which we believe is lower due to a combination of higher discounting and [ income ] players tendency to focus on low-value economy, subeconomy category and deep discounted [Putty] business. Birla Opus offers revenue is without [ Putty ], and our growth remains balanced across all categories of paints with premium and luxury segment continues to contribute steady 65% in our overall revenue. We have taken 2% to 6% price rise in January and February against standard dealer price list across the range of products to test the channel and consumer reaction. Coming to Birla Pivot, the B2B e-commerce business crossed the INR 8,500 crores annualized revenue run rate, ARR mark and remains on track to surpass the annual revenue of INR 8,500 crores, way ahead of FY '27 guidance. In a country as dynamic and fast growing as India, the next great feet in e-commerce would come from building another marketplace, it will come from digitizing and organizing B2B procurement at a scale and complexity few have ever dared to tackle. That is exactly what Birla Pivot is doing, and we are taking one of the largest, most fragmented operationally intense spaces in the economy and turning it into a trusted tech-enabled, outcome-driven platforms. Our vision is bold and unambiguous to become the most trusted B2B e-commerce platform in India. And we're building it the right way by scaling a powerful buyer-seller network and compounding our advantage across the three pillars that truly matter in e-commerce: Price, assortment and experience. Let's start with price, because in B2B, pricing is only about competitive parity, it's about removing friction from the system. India's raw material ecosystem is full of inefficiencies discovery gaps, opaque comparisons, fragmented sourcing and complex multi-vendor procurement. Birla Pivot doesn't mainly negotiate price, we reengineer the economics of procurement, we align suppliers' inefficiencies with buyers' needs, enabling transparent discovery and comparisons, helping suppliers reach demand more efficiently and absorbing the operational complexity of procurement at scale. In other words, we convert fragmentation into efficiency and we pass that value back to consumers. On assortment, this is where Birla Pivot is fundamentally changing how business and individuals buy project materials. We are building a true one-stop procurement engine, 35-plus categories, 40,000-plus SKUs and solution aggregated from 300-plus top brands. The product category is covering everything from steel to tiles, cement to chemicals. This breadth isn't just impressive, it's transformational. It consolidates vendors, compresses procurement cycles, standardize buying decisions and [ stabilizes ] approvals and purchase planning. We are going to step further because in B2B, the ability to buy is often tied to working capital. And that's why Birla Pivot is enabling fast, easy, customized financing designed around real procurement needs so businesses can purchase with confidence, flexibility and speed. And then comes our biggest differentiator, experience because B2B is not just digital, it's physical, operational and relentlessly service-driven. Birla Pivot delivers B2C-like simplicity in a B2B world, powered by digital tools for order enablement and fulfillment, nationwide support backbone and consistent trusted buyer experience. We are not simply building a website, we are building a reliability at scale. We are making complex procurement feel effortless, dependable and repeatable. That's the moment when a platform stops being a channel and becomes a habit. This momentum is not episodal, it's network-led, value-led and scalable. As categories expand, network effects deepen and digital adoption accelerate, Birla Pivot is uniquely positioned to play a defining role in shaping and leading India's B2B procurement digitization growth story. This isn't just about growth, it's creation of a new infrastructure layer for Indian commerce. Moving on from new businesses and focusing on macros, India continues to stand out on a global growth map. India's domestic demand is resilient, investment cycle strength and policy support have kept growth momentum intact. The most recent Union Budget reinforced this momentum with several strategic themes. First theme is government's continued focus on infrastructure, housing and urban development would drive growth for Grasim's Cement business. India's push towards self-reliance, manufacturing scale and supply chain integration would drive growth for our chemicals business. The recent GST rationalization focus on improving India's per capita driven by higher disposable incomes, better quality housing and aspirational consumption would drive growth for decorative paints and premium textiles. Support for MSMEs by increasing finance democratization and integrating into organized supply chain would drive growth for Birla -- Aditya Birla Capital and Birla Pivot. Lastly, a balanced focus on renewable energy and energy security will drive growth for our Renewable and Insulator business. For investors seeking a single scalable entry into India's structural growth, Grasim represents a credible and well-diversified proxy. As India's growth story unfolds through these diverse themes, Grasim businesses remain deeply intervened with each of these structural pillars, presenting long runway of growth and value creation. Reflecting on this growth, I'm happy to share that Grasim consolidated revenue for the current quarter stood highest at INR 44,312 crores, an impressive improvement by 25% year-on-year with building materials, Financial Services, cellulose fibers, Chemicals and even premium textiles and Insulators firing on all cylinders. The 9-month revenue stood at INR 124,330; crores, up 19% year-on-year, demonstrating consistency of performance. Stand-alone revenue grew at even faster rate, reaching highest ever at INR 10,432 crores, up by 28% year-on-year, with strong contribution from both core and new businesses. I would now like to hand over the call to Hemant, CFO, to further discuss financials and key business highlights of other businesses. Hemant Kadel: Thank you, sir. Good morning, everyone. It's my pleasure to interact with you all again. Happy 2026 to all present on this call. I am very proud to say that we have closed the calendar year 2025 on a high note with two of our new businesses on track to achieve their stated goals. As on 31st December 2025, the TTM consolidated revenue is nearly INR 170,000 crores, growth of 14% compared to FY '25 revenue. Currently, stand-alone revenue on TTM basis stands at INR 38,191 crores, up 21% compared to FY '25. Based on the current quarter revenue, stand-alone businesses are now at annualized revenue run rate of higher than INR 40,000 crores. There has been a strong underlying growth across all the businesses. Consolidated EBITDA grew by 33% year-on-year to INR 6,215 crores. Stand-alone EBITDA grew at a faster pace with growth of 57% year-on-year to INR 585 crores. Starting with key business, Building Materials, revenue for the segment grew by 30% year-on-year, driven by all-round performance across Cement, Paints and B2B. Led by the sector's strong outlook, UltraTech is steadily expanding both size and scale. UltraTech's clear vision and disciplined execution have led current capacity to reach 194.06 million metric tons with clear sight of reaching a capacity of 240.8 million metric tons by March 2028, which is a CAGR of more than 10%. The capacity expansion is clear from -- critical from three or four perspectives. Firstly, it reinforces our role as a key enabler of India's infrastructure and development journey. Secondly, it enables us to grow ahead of industry curve. Third, it narrows demand and supply gap across critical markets nationwide. And lastly, it further strengthens UltraTech's leadership position. While capacity expansion remains core to our growth, we have embedded a culture of efficiency to ensure that our growth is resilient, sustainable and cost effective. Underpinning this strength is our EBITDA growth, which grew by 29% year-on-year with an EBITDA per tonne of INR 1,051. Our MD has already covered Paints and B2B e-commerce business. Hence, let me now directly come to our core businesses of Cellulose Fibers and Chemicals. Highlight for these core businesses is that while we can keep on discussing them individually, irrespective of commodity cycles, both the businesses combined have delivered consistent EBITDA. Leadership, innovation, sustainability, capital allocation and cost effectiveness are key tenet to such consistency, which are an integral part of Grasim's growth strategy. Starting with Cellulose Fiber, the business has delivered EBITDA of INR 491 crores, growth of 48% year-on-year. This is driven by three factors: first, improved realization due to favorable product mix led by exports; second, operational efficiency due to volume growth; third, declining input prices, mainly pulp and caustic. The demand for cellulose fiber in China continues to exhibit stability due to global tightness in supply. In India, we have seen similar strength despite removal of Quality Control Order. Due to this inherent strength, we have seen prices for cellulose fiber decoupling with other competing fibers, which are on a declining trend over the past few quarters. Unlike cellulosic fiber, which are largely stable, have started to recover. Cellulosic Fiber segment also includes cellulosic fashion yarn business. The business performance for the quarter was subdued due to cheaper imports from China, which has created oversupply and lower downstream demand. Secondly, Chemical business, the revenue growth of 5% year-on-year was largely driven by volume. Caustic soda sales volume for the quarter 3 FY '26 stood at highest ever 313,000 tonnes, up by 4% year-on-year. While CFR SEA prices are down on Y-o-Y basis, domestic caustic prices are showing some resilience led by stable demand and rupee [ depreciation ]. EBITDA in Chemical business was lower by 4% year-on-year due to higher equity realization and lower profitability in Specialty Chemical business. Higher ECH price resulted in lower profitability in Specialty Chemical business, which was partially offset by lower BPA prices. Coming back to the consolidated business, in the Financial Services, it is one of the fastest-growing businesses in our portfolio. This is driven by their multichannel approach aimed at providing customers with seamless experience across channels of interaction. The revenue was up by 29% year-on-year, led by all-round performance across lending, asset management, insurance and advisory services business. Total lending portfolio, which includes NBFC and Housing Finance, grew by 30% year-on-year to over INR 190,000 crores. On a strategic front, we would like to highlight the recent announced partnership with Advent International, which also marks an important milestone for Aditya Birla Capital. During the quarter, Aditya Birla Capital Board approved a primary capital infusion of INR 2,750 crores into Aditya Birla Housing, valuing the business at approximately INR 19,250 crores on a post-money basis. Advent will hold roughly 14.3% of Housing Finance, with Aditya Birla Capital retaining about 85.7%, subject to customary shareholder and regulatory approvals. In other businesses, starting with Renewable business, Aditya Birla Renewable grew by 82% year-on-year, largely led by higher capacities, which now stands at nearly 2% peak capacity compared to 1.2 gigawatt quarter 3 FY '25. Aditya Birla Renewables has announced a strategic investment by Global Infrastructure Partners, which is a part of BlackRock. This deal marks one of the largest primary private equity commitment into an Indian renewable company. GIP will invest up to INR 3,000 crores, comprising of an initial INR 2,000 crore commitment with a green [ shoot ] option of INR 1,000 crores, subject to customary regulatory and closing conditions. Post this deal, the renewable business is valued at an [ EV ] of INR 14,600 crores. I'm happy to say that this partnership is expected to accelerate Aditya Birla Renewables growth trajectory as it builds on its operational and contracted capacity of nearly 4.3 gigawatt of peak capacity portfolio across solar, hybrid, floating solar and RTC assets and targeting scaling capacity beyond 10 gigawatt of peak capacity in coming years. This transaction brings not only capital, but also the GIP's global infrastructure operating experience to support disciplined expansion and contribute meaningfully to India's energy transition goal. As regards CapEx, post commissioning of Kharagpur plant, we have completed majority of the planned capital expenditure in decorative paint business. The capital expenditure spent on YTD basis is INR 1,310 crores. Focus now remains on Phase 1 of Harihar Lyocell project for additional 55,000 metric tons per annum capacity of specialty fibers. As on 31st December 2025, net debt of the company stood lower at INR 6,882 crores compared to INR [ 8,277 ] crores in the same period last year, with net debt to TTM EBITDA healthy at 2.1 level. Let me now open the floor for Q&A. Operator: [Operator Instructions] The first question comes from the line of Navin Sahadeo with ICICI Securities. Navin Sahadeo: Yes. I hope I'm audible. Himanshu Kapania: Yes. Navin Sahadeo: Yes. And also thank you for the detailed initial comments. Two questions. First, of course, on the paints business. So needless to say, the company has done a commendable job. I believe for the quarter, the revenues given like INR 8,500 crore run rate for the Birla Pivot and numbers that are published for UltraTech. Our sense is paints would have done roughly INR 1,200 crores kind of revenue in this particular quarter, which, of course, is great from the start that we have had. My question is the growth is seen maturing. In the sense, in Q1, a similar sort of a very rough cut working suggested INR 1,100 crores kind of a growth in the June quarter, similar flattish in September, and now we are at INR 1,200 crores give or take some margins there. I mean, some buffer there. Now to reach the scale of INR 10,000 crores exit by Q4 '28, which is a run rate -- I mean, which is around INR 2,500 crores revenue over the next 9 quarters, we need to grow at 40% CAGR year-on-year for us. So I'm just trying to understand, first of all, what different than now the company will do or what convinces us now given that the growth is maturing in the last 1, 2 quarters, how should one look at this target realistically being achieved and in that what is also the industry value growth into consideration? That's my first question. Himanshu Kapania: Thank you, Navin. So while you have done your internal calculations, I'm not going to either accept or deny it. But all I can say, both on quarter-on-quarter basis, we had a robust more than double-digit levels of growth. It's closer to between 18% to 20% on a quarter-on-quarter basis. On an annualized basis, these numbers are tending towards the 3-digit growth. So I don't know what numbers you have in your calculations and using words called mature, when we have grown on a year-on-year basis by 300 basis points in the paint industry and we see a similar kind of consumer uptake in the current quarter. On an overall basis, we are seeing across geographies, very strong demand for Birla Opus paints and a large number of existing dealers who have joined us have increased their throughout and they continue to grow at levels of strong single-digit on a quarter-on-quarter basis. And we continue to add new dealers at a double-digit level on a quarter-on-quarter basis and on H1 and H1 -- half year -- on half yearly basis. So that is the part one. Second part, which is besides consumer and dealers, we're also getting very good attraction from the contractors and as I mentioned in my opening speech, more than 7.5 lakh contractors have joined hands. And these volume -- these number of contractors give us confidence that the growth will continue. We are still a single-digit market share player. We have a large capacity. Our presence is now on a pan-India basis. We've reached every 50,000 population town. We have reached more than 75% of 10,000 to 50,000 population town. So the growth are happening. We have a large portfolio of businesses. Consumer demand is building up, and we remain confident and remain -- we continue to guide that we will deliver the INR 10,000 crores in the third year -- in third full year of operation. Navin Sahadeo: Understood. So despite the price increase that we have taken, as you said, across 2% to 6%. Despite that, you are saying we are confident to achieve the revenue target. Himanshu Kapania: So there's a price -- so you understand the philosophy of price increase. We always want to maintain a particular distance from the market leader. And we felt this distance was slightly more than that was necessary, and we're bridging that gap. That is the objective of price increase, and there is no other objective. And if you also want to test at what is the -- what demand of consumer contractor remains at the revised price. This is our first... Navin Sahadeo: Yes, go ahead, please. Himanshu Kapania: No, that's fine. Navin Sahadeo: Okay. My second question then was on your Birla Pivot business. And of course, extremely fast execution, much, much ahead of expectation. But we had also, I think, hinted, the first time we gave this target the road to profitability or breakeven for this business was also like a $1 billion kind of revenue run rate. So is it now fair that since we have achieved almost we are there, this business is breaking even or will start making positive contribution? How should one look at profitability for Birla Pivot from now going ahead? Sandeep Komaravelly: Thanks, Navin. This is Sandeep here. On the profitability front, we are making progress similar to how we have done -- how we have executed on the revenue side and the growth has been excellent over the last few quarters. We've been making good progress on bridging the gap so that we can get to breakeven as well. I think from our current estimates, we will exit FY '27 at a breakeven level, that is our current estimate. Operator: Next question comes from the line of Rahul Gupta with Morgan Stanley. Rahul Gupta: Two questions. One, continuing on the Pivot point. I remember earlier you had made a point to -- earlier you had guided to break -- cash breakeven by 2030. So you are now front loading it, accelerating it to fiscal '27 end, right? Sandeep Komaravelly: Rahul, I don't think we give the guidance of 2030 earlier, but as I mentioned, in response to the earlier question, FY '27 exit, we should be exiting the year at breakeven, yes. Rahul Gupta: Okay. That's great. And my second question is on the continuation of the points you -- point you made on the paint. You are testing waters with 2% to 6% hikes in January. Now it's early days. Can you please help us understand how the acceptance has been? And if we look at the industry which has been struggling with the discounting, how should we look at the overall industry from here on? Or let me put it this way, how volume versus value gap should move over the next year for industry and you? Himanshu Kapania: So first and foremost, as I mentioned in the previous answer, there was -- the gap between the leader and us was high, and we've used this price increase primarily to be able to bridge the gap. We obviously still are a single-digit player. And our aim is to bridge the gap between our capacity, which is at 24% to our current revenue market share. So that is part one. It's early time to be able to say what is the response to the price increase because we've had certain of a range of products where we took price increased on 28th of January and the remaining range of products is happening on 25th of February. So it will be better I respond to the consumer and contractor response after the quarter 4 results are there, because we are still in the process of executing the price increase. But on a mid- to long-term basis, what is our view about the industry. We remain very bullish if there has been -- as I mentioned in my opening speech, the industry in quarter 3 has grown by 10% to 11% or probably even 12% by volume. The challenges have been over focused on economy, subeconomy and putty-based business. So if we stop the down trading and if you notice, Birla Opus wants to operate a bit more balanced approach, it is making every effort to premiumize the service with the launch of its paint galleries and where, obviously, the ratio of premium and luxury is significantly higher. And the same is true for our painting services. We've been making every effort to premiumize and ensure that in the mix our rate realization remains at similar levels to the volume. And our attempt is volume and value to both move in tandem. As far as the industry is concerned, we believe that this year, the industry may -- including Birla Opus, may grow by 5% to 6%. FY '25, it has grown by -- almost it was nil. And FY '27, we are hopeful that it will come back to an 8% to 10% growth levels. Operator: Next question comes from the line of Nirav Jimudia with Anvil Wealth. Nirav Jimudia: Sir, just one question on the chemical side. For the Epoxy business. I just wanted to have your thoughts, a, with the trade deal donw then with the U.S.A. now and Chinese currency also appreciating by close to around 8% to 9%, how do we see our exports to the U.S.A. market in the medium term? And on a longer-term basis, with now EU FTA also in place, how do we see our volumes in terms of exports to that region as well? Himanshu Kapania: Thanks, Nirav. Thanks for your question. Can you hear me? Nirav Jimudia: Yes, loud and clear. Himanshu Kapania: Both are positive for us in a way. So as you know that in epoxy, particularly in liquid epoxy resins, the Koreans have been available in India due to their FTA, they get a certain advantage where they can bring in product without the duty. And also, they had preferential access to U.S. as well as Europe. Now clearly, that advantage is going to go away. If you look in terms of timing, then the U.S. deal probably will get actioned before the American deal. So I am seeing a positive upside on export of epoxy from India to the U.S. Now how much quantity that will be, how that will ramp up, et cetera, is a matter of individual customer qualifications and those kind of things. That's a little bit too much detail to get into right now, but we do see a positive impact on that side. Similarly, if you look at Europe, as you know very well, Nirav, the European chemical industry is struggling with high costs, both from a perspective of energy, but also from a perspective of extremely high labor costs. As you know, a lot of restructuring has been announced in Europe, you know equally that Westlake has stock operations on their Rotterdam site. I think the India-Europe FTA, in the longer term will have a much more significant impact on the Indian chemical industry, probably in my personal opinion, more than the U.S. Of course, the speed at which Europe will ratify, all this will get down into law, et cetera, will be a little bit slower, but I believe that will be more sticky. So both these agreements, Nirav, are, I think, positive for the industry. Nirav Jimudia: Got it. Yes. Sir, just 2 clarifications here. Sir, a, do we import any raw material from EU, which were earlier subject to taxes and now with this deal, could help us from the chemical business point of view also and from an overall business point of view also? And b, any volume guidance which you would like to share from the epoxy business point of view for FY '27? Himanshu Kapania: Yes. So if I look at imports from Europe, yes, we have. I would not like to get into the details of what that is, but those are like -- they're not a large part of our basket. So I don't see really a large benefit from that. What I may think of is if glycerine prices continue to remain high, then the propylene route to ECH has its own competitive advantage, right? And several of the propylene-based producers are Western based. But there is a logistic cost hurdle. So let's see how this plays out in the long term. If you look at volume growth, then if I look year-on-year, our overall epoxy business, liquid proxy plus formulations this year has grown or at least for the year-over-year, we have grown by about 6%. I expect this rate to ramp up next year. Now how much it will ramp up by as a matter of speculation, but I expect that rate to ramp up further. Nirav Jimudia: Got it. Safe to... Himanshu Kapania: None of the fundamentals changed. Nirav Jimudia: And safe to assume that this ECH price corrections, which have happened on the upside would translate into a similar increase in the prices of epoxy, which generally gets passed on a lag basis? Himanshu Kapania: Yes, there is usually a time lag associated with that. As I mentioned, in the epoxy value chain, there are competing routes, right, glycerin-based ECH and propylene-based ECH. So what may be a pass-through for me may not necessarily be a pass-through for somebody else, maybe globally who may be propylene integrated. So depending on where crude prices, propylene prices, glycerin prices, the pass-through mechanism has a different cyclicality. But in the longer term, it all always passes on, right? It's always a matter of time. But the exact speed by which it passes on depends upon these 3, 4 factors. Nirav Jimudia: Sir, last clarification, if you allow. This quarter, we have seen a dip in our epoxy revenues. So was it more because of the volumes were lesser this quarter and that should start correcting next quarter onwards? Is this the right assumption to make? Himanshu Kapania: Just let me quickly check the data. Yes. So volumes were slightly under pressure on the liquid epoxy resin side. Actually, maybe the better way to see it is we decided not to take certain volumes where we thought the margin was getting too squeezed. That's probably the better way to see it. If I look at the non-LER business, all the formulation specialties, so the specialties within the specialties, there actually, we have not had any volume issue. It's on the margin where perhaps the lowest profitable part of our LER business, we have been a little bit unwilling to allow our margins to get compressed too much. Operator: Next question comes from the line of Amit Purohit with Elara. Amit Purohit: Thanks for the detailed data points on the paint. Just to recheck, sir, on the overall sales that we sold, you talked about 500 million kiloliters. That was since the time we have been into the market, right? Is it kiloliters or did I hear it correctly? Himanshu Kapania: 500 million liters, not 500 million kiloliters. Amit Purohit: Okay. That is -- since the time we have started operations. Yes. Okay. And secondly, sir, I also wanted to understand when you talked about 300 bps lower than the second player, that includes putty and everything, right, at this point of time? Market share -- exit market share you were talking about or... Himanshu Kapania: I am saying what we said in the statement, opening remark, Birla White, the Birla Opus revenue for quarter 3 and guidance given by #2 players. In our assessment, internal estimates, now the gap is 300 basis points. I hope it's clear. And it is only Birla White's putty business. It does not include any other business. Amit Purohit: Sure. And sir, we've talked about increase in new dealer addition. I just wanted to understand the typical profile of these dealers. If you could just qualitatively highlight these are large dealers or these are dealers largely from the market leaders? Or if you could just throw some highlight because typically, I mean, there is different types of dealers. And initially, when we started off, obviously, there were challenges to reach out to the very, very large dealers. What is the state now, I mean, in terms of acceptance? Himanshu Kapania: We are getting blend from all category of dealers. In our internal assessment, we've broken the dealers into A category, which are more than INR 3 crores; B category, which is INR 1 crores to INR 3 crores; C category, which is INR 30 lakhs to INR 1 crores and D category into less than INR 30 lakhs. Most of the dealers are coming in, in the A, B, C. The small numbers will also come in the B category, but our focus in the A, B, C category. Amit Purohit: And lastly, the price increase that we highlighted, that is more from a testing perspective? Or is there any raw material pressure, which kind of -- or do you think that from now on, the brand is strong enough to kind of take pricing and still it adds value to the entire channel as well. Just wanted to know your outlook as you highlighted that next year FY '27, the growth in the industry could be closer to about 8%. So the pricing volume graph should it reduce in the FY '27? That's the last question. Himanshu Kapania: First and foremost, there are no current raw material pressures. Second, we've been consistently maintaining that we are at a lower price than the market leader and we felt the gap was higher, and we reduced the gap. That has been the strategy around there. It is not a price increase strategy per se as you're reading it. Please read it that we would like to maintain a certain gap with market leaders, and that's -- and we want to test at that gap, what is the consumer response. There was an X gap that existed and we reduced that gap. Operator: Next question comes from the line of Pathanjali Srinivasan with Sundaram Mutual Fund. Pathanjali Srinivasan: A couple of questions. So firstly, could you explain a bit on our share of retail business and institutional business because I believe we've grown pretty fast in our institutional business, but I was just trying to figure out if the base there is lower? Or are we created more towards institutional business? Himanshu Kapania: So to our understanding, the industry, retail and institutional business mix is 85-15. We are not yet there on that mix. We are still single digit on the institutional business. Retail is much faster to take off and institutional has a much longer gestation period. The message that I was communicating is that we have a strong pipeline. And over -- hopefully by FY '27, we should be able to come closer to the industry average between 12% to 15% on overall contribution from institutional business. Pathanjali Srinivasan: So could you give me some numbers for where we are in terms of range here? Himanshu Kapania: As I explained, we were a single-digit number, and we have a strong pipeline of institution, but retail continues to be the stronger forte for us at this point of time. But institutional is growing faster... Pathanjali Srinivasan: Sure. And just one more question around. So this number of saying 18% we've grown last quarter and all of that. There's just one part though where I've not been able to figure out. Like I met a couple of dealers from the time we started and more recently. And I have seen some of them saying that they've either stopped doing business or they're finding it difficult or something like that, while my sample size is very small. I want to know like what is an acceptable level of pushback or a reduction in dealers when we expand dealership and what are our targets here and where are we... Himanshu Kapania: So the -- it's a large dealer universe. They are overall 100,000 dealers. On an average in a quarter, about 50% to 60% of the dealers are active. We are also experiencing a similar levels. In fact, our sense is about 70% to 75% in the quarter are active around that. And we are satisfied with the number of people who onboarded with us with the number of people who are active in a given quarter. So from that perspective, we are very satisfied both in the expansion of -- expansion pace of dealers, both in the existing towns and new terms as well as the throughput pace of improvement of dealers. We are -- most of the leaders who have joined us and have been consistently -- have continued to stay with us. There's obviously -- we are very focused on our collection and there are dealers who are pay masters are the ones probably you may be referring to. Pathanjali Srinivasan: Got it, sir. Just to continue on that. I just wanted to know what is our policy with printing machines that we've given to dealers and where dealers have not been doing as much business as we like to them? How are we dealing with them? And are we -- have we started collecting money for tinting issues that we've given to dealers? Himanshu Kapania: No, we don't collect money for -- as we already explained, we give the dealers free-of-charge printing machines, and that remains a consistent policy even in FY '26 and going forward. Only if a dealer does default on his payment for a long period of time, are there any actions that are necessary, but it's a few and far and are probably not relevant for this national platform. Operator: Next question comes from the line of Prateek Kumar with Jefferies. Prateek Kumar: My first question is on paints. Can you just confirm again the -- while you talked about your revenue expectation maintaining for FY '28, what do you think on profitability? Other related question, you have like seen some increase in interest expense during the quarter sequentially and depreciation. Is this completely related to capitalization of 6 plants? Or also, is there any working capital changes which you expect because you're also increasing mix in your business? Himanshu Kapania: I just want to be clear, what your question is? You are referring to overall Grasim results, and you're saying that the interest and depreciation component gone up. Is that what you're referring to? Prateek Kumar: Yes, that is right. Unknown Executive: Yes. So in Grasim, if you are referring with the last year, the borrowing for the purpose... Prateek Kumar: Q-on-Q, I mentioned. Unknown Executive: Setting up the new plant was being capitalized. On the 15th of October, we have commissioned our last sixth plant. And now from quarter -- next quarter onwards, there will be no capitalization and all the interest costs will be coming to P&L account. Did this answer your query? Prateek Kumar: Yes, sure. So there's no material working capital changes because we're shifting business -- paint segment business to more institution. That doesn't have... Operator: Sorry for interrupting. Mr. Kumar, your voice is breaking. Can we just come a little closer to the mic and speak? Unknown Executive: In paints business, we have capitalized over all the 6 plants and no major CapEx is spending at all. Himanshu Kapania: If your question is on data, we are well in control as our debtors and working capital is not a challenge. We repeat again that the interest component in the past, a portion of that was getting capitalized. And now it will not -- the portion has significantly fallen because from 6 plants now down to around 15th October, it's only 1 plant. And that also, a part of it was no more capitalized. And the same applies to depreciation. As now all the 6 plants are fully commissioned, the full depreciation is reflecting in the books. Prateek Kumar: And the other question was on Paint segment profitability, which you're expecting for Fy '28. You maintain it as like turning positive by FY '28. Himanshu Kapania: Yes. We maintain our guidance. I'll repeat within 3 years of full-scale operation, we will -- we are targeting to be able to reach a profitable #2 position. Operator: Next question comes from the line of Shreya Banthia with Oakland Capital Management. Shreya Banthia: Am I audible? Operator: Yes, you are. Shreya Banthia: So my question is regarding the Chemical segment. So if you could share what is the current share of renewable energy in the Chemical segment? Himanshu Kapania: Just second. It is around -- exit rate is around 20%, 23%, right? And we expect -- we actually are targeting to reach an exit rate of over 40% by end of FY '27, if you want to make a projection. Operator: Next question comes from the line of [ Vipulkumar Anopchand Shah with Sumangal Investments ]. Vipulkumar Anopchand Shah: So when we will start sharing the revenue and EBITDA numbers of our paint business? Himanshu Kapania: Shortly. Vipulkumar Anopchand Shah: Shortly means, sir? Himanshu Kapania: Yes. We are -- even today because that's why the -- there is a portion of the material that has been produced and was not sold, and they are still reflecting revenues which they're getting capitalized. We're expecting to complete that, and we will move on to -- we will share with you the exact dates when we do that. But there is still -- so that's why this gap between capitalization, that's why the numbers, what market calculates is there is a gap, and we want to finish all the materials that we have produced before commissioning and consume it, which remains in the capitalization. Vipulkumar Anopchand Shah: So should we assume that from next financial year, you will start sharing those numbers? Himanshu Kapania: We'll definitely come back. Operator: Ladies and gentlemen, due to time constraint, that was the last question for today. We have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments. Himanshu Kapania: Thank you so much for participating on the Grasim call. We're now going to close the call. Unknown Executive: Thank you. Operator: On behalf of Grasim Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the NanoXplore Second Quarter 2026 Earnings 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, Pierre Terrisse, Vice President of Corporate Development. Please go ahead. Pierre-Yves Terrisse: [Foreign Language] Good morning, everyone, and thank you for joining this discussion of NanoXplore financial and operating results for the second quarter of fiscal 2026. The press release reporting these results was published yesterday after market close and can also be found on our website along with our financial statements and MD&A. These documents are also available on SEDAR+. Before we begin, I'd like to remind you that today's remarks, including management outlook and answer to questions, contain forward-looking statements. These forward-looking statements represent our expectation as of today, February 11, 2026, and accordingly are subject to change. Such statements are based on assumptions that may not materialize and are subject to risks and uncertainties. Actual results may differ materially, and listeners are cautioned not to place undue reliance on these forward-looking statements. A description of the risk factors that may affect future results is contained in NanoXplore annual information form available on our corporate website and in our filings with the Canadian Securities Administrator on SEDAR+. On the call with me this morning, we have Rocco Marinaccio, our CEO; and Pedro Azevedo, our CFO. After remarks from Rocco and Pedro, we'll open the call to questions from financial analysts. Let me now turn the call over to Rocco. Rocco Marinaccio: [Foreign Language] Thank you for joining us today to discuss NanoXplore's Fiscal Second Quarter 2026 results. As we build on the momentum established in Q1, I'm pleased to report a rebound in our operating performance this quarter. We delivered sequential improvements in revenue, gross margin and adjusted EBITDA. While we remain focused on execution and continued margin expansion, these results reflect improving fundamentals across the business. Since assuming the CEO role, our priorities have been clear, disciplined execution, diversification of revenue streams and maximizing the value of our differentiated graphene manufacturing platform. Our commercial pipeline remains robust, our technology leadership is intact, and our teams are executing with focus as we scale operations and drive long-term shareholder value. Today, I will cover 3 key areas: our final decision regarding the coated spherical purified graphite, or CSPG project, an update on the implementation of our dry process graphene platform, and progress across our Tribograf and graphene solutions business. Starting with CSPG after extensive analysis we have made the decision not to proceed with the previously contemplated $100 million investment. This reflects disciplined capital allocation and a clear focus on risk-adjusted returns. The decision was driven by 3 factors: ongoing geopolitical uncertainty that can materially impact pricing and market access, prolonged qualification and testing time lines from potential offtakers and a highly unstable business environment including an instance where a CSPG manufacturer had a binding agreement subsequently nullified. We are confident this was the right decision for the company and our shareholders and allows us to focus our capital toward higher return, lower-risk growth opportunities. Turning to our dry process graphene initiative. I'm pleased to confirm that installation is on schedule with our first fully commercial module expected to be operational by early April. This represents a critical milestone for NanoXplore. Dry process graphene is significantly less costly for us to produce compared to our wet process graphene and opens new end markets that are not accessible to us today. The new mill will add incremental capacity between 500 to 1,000 tons annually. This is not simply incremental capacity. It is a transformative step that strengthens our cost leadership and significantly expands our addressable market. Moving to our graphene solutions business. We are encouraged by improving market conditions following the softness experienced over the past 3 quarters, particularly from our 2 largest customers. Demand has stabilized and OEM forecasts continue to point to a recovery in the second half of the calendar year. While timing and magnitude remain difficult to predict, we expect a gradual volume improvement beginning mid- to late this year. A major highlight this quarter was the successful launch of our program with Club Car. The launch was executed flawlessly with on-time delivery and seamless integration into their manufacturing operations. As we enter the peak recreational season, shipments are accelerating and tracking as expected. This partnership is a strong validation of our ability to scale advanced materials solutions within global OEM platforms and position us well for future expansion across Club Car's broader product portfolio. In addition, we are pleased to report a new takeover contract award from Volvo Trucks expected to begin in summer 2027 with annual revenue contributions of approximately CAD 9 million to CAD 10 million. This award adds to the $40 million of contracted business we previously reported within our graphene solutions business and further strengthens our long-term revenue visibility. Turning to drilling fluids. Our strategic collaboration with Chevron Phillips Chemical continues to advance. As a reminder, the contract became effective on October 1, 2025, with the commercial launch announced by CPChem in mid-November, just ahead of a seasonally slower drilling period. During fiscal Q2, we shipped Tribograf to CPChem's early adopters. More importantly, CPChem is actively field testing NanoSlide with 2 major Asian oil and gas producers, shipped product to one of the world's leading oilfield service companies and initiated additional testing programs in Latin America. This is a new product launch and a new commercial relationship, which makes near-term revenue visibility inherently difficult to quantify. However, the pace of customer engagement and the expanding pipeline are in line with our expectations and underscore the strategic value of this partnership. This high-margin application not only diversifies our revenue base but also aligns well with industry demand for performance-driven cost-efficient solutions. In summary, Q2 represents an important inflection point for NanoXplore. Sequential operating improvements, disciplined capital allocation, successful contract launches and the upcoming commercialization of breakthrough technology position us well for a stronger second half. With that, I'll turn the call over to Pedro to walk you through our financial results. Pedro Azevedo: Good morning, everyone. Today, I will begin with a review of our Q2 financial results, followed by an update on financial aspects of our 5-year plan and conclude with some commentary on near-term CapEx spending and revenue guidance for fiscal year 2026. Total revenues in Q2 were 17% lower than Q2 last year at $27.6 million. This decrease was mainly due to a reduction in volume demand from our 2 largest customers as well as lower tooling revenue, which was higher than usual last year. This was partially offset by new revenues with the start of the Club Car program and higher powdered sales resulting from the CPChem contract. Despite the lower volumes from our 2 largest customers in Q2, their volumes have stabilized during the quarter and forecast continued to show progressive volume increases during calendar 2026. Adjusted gross margins, which exclude depreciation as a percentage of sales was 21.5%, a slight increase versus 21.3% last year despite $5.6 million less revenues. Our ability to achieve this level of gross margin results mainly from the higher margin contributions of powder sales and the addition of the Club Car program, partly leveraging existing overheads. Adjusted EBITDA was $224,000, a decrease of $880,000 versus last year and was comprised of $181,000 in the Advanced Materials, Plastics and Composites Products segment, a decrease of $1.1 million versus last year and $43,000 in the Battery Cells and Materials segment, an improvement of $260,000 versus last year. Regarding our balance sheet and cash flows, we ended the quarter with $30.1 million in cash and cash equivalents and $14.6 million in short-term and long-term debt. Our cash, along with the unused space in our revolving credit lines, resulted in a total liquidity of $40.1 million at December 31. Operating cash flows were negative $6.4 million, mainly resulting from an increase in working capital, largely due to higher sales, payments to suppliers on tooling projects and income tax payments. Cash flows from financing activities were positive $30.1 million, resulting from the equity financing in October 2025 and equipment financing offset by debt and lease repayments. Finally, cash flows from investing activities were negative $3.6 million, mainly due to capital expenditure payments. At the end of December, the company had used a cumulative cash amount of $4 million on capital expenditures for projects in progress that will be financed during Q3 with the RBC credit facility. Moving now to an update on financial aspects of our 5-year plan. As explained by Rocco, the decision not to proceed with the CSPG production initiative of the 5-year plan is one that removes the need for over $100 million in required investment. However, the dry process graphene element of this initiative will remain a central part of our growth plan and will be undertaken in a modular way as demand for this new grade of graphene increases. Each module is expected to cost between $1.5 million and $2 million, reducing the need for large upfront investments. Regarding the graphene-enhanced SMC initiative, we completed the U.S. part of this initiative during Q1 and expect to complete the Canadian part of this initiative during Q4. While the generation of new revenues have already started in the U.S., we expect new revenues on the Canadian part to begin during fiscal year 2027. Turning now to our near-term CapEx spending and fiscal year 2026 guidance. CapEx spending during the quarter was $3.6 million and in line with expectations. We expect to spend another $4 million to $5 million during Q3 to complete the graphene-enhanced SMC initiative as well as the first module of the dry process graphene line. Once these 2 projects are completed, we expect CapEx to greatly reduce and represent less than $1 million per quarter, excluding any new initiatives. Regarding our fiscal year 2026 guidance, the economic environment remains volatile, but forecast accuracy seems to be improving. As mentioned during our Q1 earnings call, Q1 revenues were at the trough of the fiscal year with sequential quarterly revenue growth thereafter. Q2 has demonstrated this. And with the visibility we have for Q3 and Q4, it remains the case. As such, we believe revenues for the full year to be between $115 million and $120 million. Rocco Marinaccio: Thank you, Pedro. Operator, we can now open the line for questions. Operator: And our first question comes from Baltej Sidhu of National Bank of Canada. Baltej Sidhu: So a few questions from me. So margin improvement was much better than we had anticipated, and you had highlighted the drive for this was better product mix, improved productivity and cost control. So given that volume was still relatively low on this quarter, can you provide a targeted gross margin you'd expect with more run rate volumes with a similar product mix? And with that being said, and I think this has been alluded to in the prior comments, it's fair to assume that the continued quarter-on-quarter margin expansion should hold throughout the year. Pedro Azevedo: Yes. So that's correct, Baltej. We will continue sequentially quarter-to-quarter to increase the margins as sales kind of recover. The addition of the powder sales for Tribograf as they grow, and this is part of what Rocco was saying is that it's hard to tell how fast it will grow, but that inclusion of Tribograf sales will contribute to the margins that the company produces overall in a very direct way because a lot of the structural costs are already built in. So every sale of Tribograf is actually producing very strong flow-throughs to the bottom line. So in terms of specific numbers, I don't want to commit too much to numbers, but the 21.5%, we do see it growing maybe to 22%, 23% and so on over the course of the next few quarters, sequential quarters. And it really is going to be an element of how much Club Car volumes will be in the next few quarters, how much Tribograf will be sold and how much of the recovery in Club Car and Volvo volumes that are going to contribute to already existing structural costs. So all of these things should ramp up the gross margins over the coming quarters just gradually, but you should see that continuation for several quarters. Baltej Sidhu: Fantastic. That's great color. And just another one for me with the first commercial dry process mill expected to be installed shortly. Could you just walk us through the sequence from commissioning to commercial revenue? And specifically, what milestones are you looking for or that need to occur before we continue to see meaningful revenue contribution? Rocco Marinaccio: Yes, so the mill is on track in terms of being installed by April. We've -- in the past year, we've been able to produce very small lab-scale quantities to validate performance, okay? And we're in different markets. We've identified markets that are not addressable to us today are now addressable to us. So as we ramp up the mill in April this coming year, we'll be able to produce larger volumes. There's different customers in different markets in different stages of testing. Some require much more volume than we could produce to advance their testing. So again, this is difficult to predict exactly. But I will tell you, the early results that we've seen up that led us to this point, are extremely promising. And like I said, there's customers in different stages of testing. Some are towards the advanced staging, some are initial with promising results across the board. Baltej Sidhu: Perfect. And just a quick one here just on CPC Chem, exceeding expectations just with the testing that we have and in different basins and geographies. Are you comfortable with the capacity that you have there for them? Rocco Marinaccio: We're comfortable now. It is difficult. So I guess the biggest change this quarter from last quarter, we just -- we launched when we had the discussion and CPChem was trialing in one specific area. That's where all the testing was done initially, and that was validation of the product because it was one of the most stringent areas in the world. It was in the U.S. What they've started to do now is additional testing in other parts of the world to validate product, and that's where they are now. So in terms of capacity, we're fine now, and we're fine for the foreseeable future. Time will tell when we install additional capacity on the website. Operator: And our next question comes from Amr Ezzat of Ventum Financial. Amr Ezzat: Just to continue on CPChem. I believe in your prepared remarks, you noted, and I'm not sure if I'm quoting you right, a large services player is now trialing the product. I just want to confirm, is that a new potential clients beyond the first sort of batch that CPChem had? And if so, when you guys say a large services player, how should we think about the potential scale of that customer relative to the original set of customers CPChem had? Rocco Marinaccio: So yes -- so the initial customer that trialed and converted, I mentioned they're early adopters in this process. That's how I referred to them. They were the first customer that have multiple sites across the U.S., and they have converted not 100% of their volume to NanoSlide, a portion of it and they're in process of converting over time. What we referred to in the remarks were all additional customers that have been trialing or started trialing within the quarter. And that large service provider, I mean, there's 2 or 3 main ones. They're 1 of the 3 main ones, the biggest players in the world, all based in the Southern Texas, right? They're 1 of the 3. And it's not uncommon in this industry for a customer to private label a product of a competitor that is adding value and they label it as their own call white labeling. And in this case, this is what would happen once adopted. Amr Ezzat: Fantastic. It does seem that, that one player would -- is much larger, I guess, than all the other clients CPChem has. Can you help us understand where are they in the testing process? Is it still like early days? Or have they already tested the product? Rocco Marinaccio: Yes. So they've done a lab test. So everyone is going to take the CPChem data and they're going to go validate in the lab, right? That's step number one. They've done that. They're moving on to field testing. So they've ordered NanoSlide for field testing. Amr Ezzat: Understood. Okay. That's very helpful. Congrats on that. It's hard for me to ask you like at what point, what process capacity becomes a constraint. But can you maybe help us understand how quickly could you guys add incremental capacity if and when needed? Rocco Marinaccio: Sure. We believe 9 to 12 months for additional capacity, whether it's wet or dry, the answer is going to be the same. We feel 12 months would be, I would say, conservative on both sides. The difference between wet and dry, wet, we need a much larger footprint, obviously, we can't go smaller. We don't want to go smaller than what we have. So we would need additional square footage. On the dry side, we have ample square footage to expand into in our current facility. Amr Ezzat: Yes. Fantastic. Congrats on the Volvo contract. Will that be fulfilled out of North Carolina? And did I understand correctly that this is additive to the $40 million composites target that you guys have? Rocco Marinaccio: Correct. So the launch of Statesville, which is where we do the Cliff Card business, that facility is basically set up for all future SMC growth. It's an SMC contract win, where graphene enhanced SMC. And yes, it is incremental to the $40 million previously announced. Amr Ezzat: Okay. And it's not just a transfer from your existing Volvo business. This is like incrementally new? Rocco Marinaccio: It's a takeover from a competitor, if you will. So it's not internally... Amr Ezzat: No, that's helpful. Then maybe one last one on the dry process. Like you guys have highlighted some very positive sort of customer testing feedback and so on. I just wonder like what are the gating factors between installation and meaningful revenue in fiscal '27. Do we expect like a long sort of qualification cycle? Or is it really about customer integration time lines? Rocco Marinaccio: Yes. Different customers in different markets have different time lines, if you will. we're in advanced testing with certain markets and initial to mid-level testing with others. And the data has all proven to add tremendous value in each of these markets where there's final testing, I mean, plant trials that have to occur, some buyouts that have to be done. Pricing usually gets discussed pretty early on to make sure we don't go down the road that we can't supply or we can't satisfy. So again, very difficult to say the mill is going to be sold out in 3 months or 6 months or 9 months. Obviously, our goal is to fill up the capacity ASAP and order incremental mills. Operator: And our next question comes from James McGarragle of RBC Capital Markets. James McGarragle: I just had a question on the decision to forgo the CPG -- CSPG investment. I know a lot has changed since you provided those 5-year targets. I think it was in 2022. But at the time, there was $100 million of top line associated with that investment. And then maybe this isn't the time for you to address this, maybe that this is for an Investor Day. But when I look at consensus revenue, it has top line doubling by fiscal '28 versus fiscal '26. So can you just kind of provide some color on how should we be thinking about the growth rate without the decision to invest in that? I know you mentioned the CPChem opportunity is kind of hard to define in the near term. But just any color on how we should be thinking about top line growth into fiscal 2027 and fiscal 2028 would be helpful. Rocco Marinaccio: Yes. Thanks for the question, James. So go back to CSPG. So the top line growth you referenced was a combination between CSPG and dry process, okay? And just to clarify, dry process is still a goal and still a main pillar of our company going forward. So the CSPG aspect, although a number was provided, again, we strongly feel the decision at the time was the right one for the company. But as we peel back that onion further and geopolitical conditions have changed, that decision became much more inherently risky for us as a company, I mean, for North America as a whole, if you will. So the top line revenue for CSPBG, like I said, even if we had a customer in an agreement, the risk factor would always be there in terms of any margin associated could eventually go negative, right? And that was one of the main risks. On the dry process side, the answer is going to be the same, right? So as we ramp up customers, the differences between dry and wet is we don't have to add 4,000 ton capacity. We can add mills as needed depending on the grade the customer requires in incremental capacities, right? In each mill, if you use the same selling price, just to give you a thumb, I mean, each mill has between 500 to 1,000 tons of capacity. James McGarragle: I appreciate the color there. That makes a lot of sense. And then you noted volumes from your 2 largest customers started to stabilize during the quarter and that you're kind of expecting some gradual improvement as we move through the year. Can you just give us a quick update on what your customers are saying about the health of the transportation market? And any visibility you have into that ramping in Q3 and into Q4? Rocco Marinaccio: Absolutely. Yes. So the last 3 quarters have been tough for the whole industry, not just our customers specifically. The whole industry, I mean, as a whole has taken a major hit. You can point to many different factors, right? I'll tell you, for our customers specifically, where we were supplying, tariffs were an impact and the customer had to take the last few quarters to localize production where it made sense for them. We're very well positioned. We can supply out of our current facility where we supply of Quebec, we can supply to Statesville. So for us, it's very, very good that we're well positioned to support our customer growth. So what we see in the industry as a whole is that a gradual ramp-up starting, I would say, early next quarter going into the end of the year to get back to very close to, I would say, capacity, not 100% volumes to where we were 12 months ago, 12 to 15 months ago, but very close. James McGarragle: And then I was just going to squeeze one last quick housekeeping one in. I just want to confirm the commentary on the CapEx. So it was stated $4 million to $5 million in Q3. That's going to go to $1 million per quarter into Q4. And is that a reasonable run rate, the $1 million to put into our models for 2027? Yes, that's right. Operator: And our next question comes from Fred Gatali of Raymond James. Fred Gatali: Just want to go back to the CPChem, specifically on the marketing of the product. It's now been a few months that the deliveries have started. What are you seeing in terms of success and incremental demand that has come from the marketing of this product? Rocco Marinaccio: Yes, good question. So contract was official October 1, 2025. CPChem started marketing mid-November, okay? And there was a 6-week gap there really because they didn't want to market without having product blended and ready for customer trials, okay? They didn't want customers sitting there waiting. So there was a big gap in terms of when they started their marketing. And then in the industry -- and when I talk about seasonality and slowdown, I'm more talking about geographical locations where weather plays a factor. So obviously, in Middle East, where weather is not a factor, those comments don't apply. But where the initial trials were done in the U.S., weather plays a factor in December or January is a seasonality is slow period, very difficult to drill if the ground is frozen, right? So the customers that have begun trialing in the quarter or previously, results have all validated what the product has said it was going to do. And there has been no negative technical feedback, at least to our knowledge. Fred Gatali: Okay. And on the details on this Volvo award, you just parse through maybe this a multiyear contract, sort of the implications on the North Carolina facility capacity with this in place and then whether this is in line with current margins? Rocco Marinaccio: Can you -- you cut out a bit. Can you just repeat the question, please? Fred Gatali: On this Volvo award, SMC award, could you just maybe go into further details on sort of the length of this contract, perhaps then go through sort of the margin implications as well? Rocco Marinaccio: Sure. So length of contract, this is a takeover business, right? So I want to say there's at least 4 to 5 years left on this program. The good thing about this component is a lot of times when we have one business in the transportation sector, it has been for a specific program. So whether it's a hood or it doesn't matter what the component is, if you're tied into a specific program, your volume is dictated by how well that one program sells. In the case of this business, this is an oil pen, which is a common component that goes across the whole trucking platform in North America. So the volume is much higher for us. And the margin question, it's in line with our expectations on the graphene enhanced solutions business. Operator: And our next question comes from MacMurray Whale of ATB CCM. MacMurray Whale: Can you discuss what sort of efforts you might need to make on material sourcing now that you're not doing the CSPG initiative? Is there much of a disruption there? Rocco Marinaccio: Good question. No. So our process is one that's set up where it's very flexible for any type of raw material coming in. So whether it's -- we use local supply today, whether we go to Brazil, South Africa, I mean, wherever we source raw materials from, our process is very flexible to adapt. And we have agreements with more than one -- multiple sources. MacMurray Whale: Okay. I guess on the other side, you mentioned is one of the risks is the geopolitical uncertainty. What specifically are you referring to? Is it more related to, say, government support around energy transition? Or are you just really speaking about trade issues between clients that might be now outside our sort of favored nation? Is that the kind of issue? Rocco Marinaccio: Yes. I mean, trade and tariff. I mean, even with tariffs on foreign materials coming in to get to a price point, even if you include the tariff, it's not very easy to get to those numbers. And who knows what the future holds. If that tariff ever went back to where it was, we don't feel we could compete. So there's been instances where binding agreements have been nullified for the same thing. So on a binding agreement, we said we would move forward. I mean if we did move forward and it got canceled, we'd be left holding a big bag right now. MacMurray Whale: Okay. And then when you're looking -- you talked about how the rest of the year should be -- we should be seeing these improvements as you've established now in Q2. Do you find -- do you expect an acceleration of the improvements? I mean, is it more of a linear? Or is it more -- can you kind of see bigger and bigger steps in the improvement as you ramp up? Pedro Azevedo: I think the steps will be a little bit bigger as PACCAR and Volvo volumes start coming back. The Club Car business is already a bit established. So the step-up that we had from Club Car and from CPChem will continue to step up quarter-over-quarter. So you should expect a step that's a little bit better each quarter from sequential quarter-to-quarter. Operator: I'm showing no further questions at this time. I'd like to turn it back to Pierre Terrisse for closing remarks. Pierre-Yves Terrisse: Well, thank you, everyone, for participating in the call this morning, and have a great day. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Tower Semiconductor Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your first speaker Noit Levy, Investor Relations and Corporate Communications. Please go ahead. Noit Levi-Karoubi: Thank you. Good day, and thank you, everyone, for joining us today. Welcome to Tower Semiconductor's Fourth Quarter and Full Year 2025 Financial Results Conference Call. With us today are Mr. Russell Ellwanger, our Chief Executive Officer; and Mr. Oren Shirazi, our Chief Financial Officer. Before we begin, please note that certain statements made during today's call may be forward-looking and subject to risks and uncertainties that could cause actual results to differ materially. These risks are detailed in our SEC filings, Form 20-F and 6-K as well as filings with the Israeli Securities Authority, all available on our website. Tower assumes no obligation to update any such forward-looking statements. Our fourth quarter and full year 2025 results are prepared in accordance with U.S. GAAP. Some that are presented may include non-GAAP financial measures as defined under SEC Regulation G. Reconciliations to GAAP figures and full explanations are provided in today's press release and financial tables. For your reference, a supporting slide deck is available on our website and integrated into this webcast. With that, I'd like to turn the call over to our CEO, Mr. Russell Ellwanger. Russell? Russell Ellwanger: Thank you, Noit. Hello, everybody. Thank you for joining our call today. Very pleased to share our results for the fourth quarter and full year of 2025. Additionally, we are extremely excited to present how these results have redefined our financial milestones and accelerated the time line for achievement of the same. The updated financial model, which we will present is the result of already strong partnerships with our lead customers having grown into deeply trust-rooted supplier customer partnership technical alliances. We ended our fourth quarter of 2025 with a company revenue of $440 million, an 11% quarter-over-quarter growth, 14% year-over-year growth, fulfilling our beginning of the year target of quarterly sequential growth. In addition to the top line, we achieved bottom line growth throughout the year. Fourth quarter net profit was $80 million or 18% net margin, up from 11% in Q1 '25, 13% in Q2 '25, 14% in Q3, indicative of a value-based growth being driven by technology mix enrichment. The revenue growth from Q1 to Q4 of 2025 was $82 million, of which there was a $40 million net profit drop down and almost 50%, to be exact 48.78% and this due to the high value of the incremental Photonics revenue. Revenue for the full year was $1.566 billion, $130 million or 9% increase as compared to 2024 revenue. Now to review our 2025 revenue breakdown and discuss the key trends, please see Slides 5 and 6 as referenced. We achieved year-over-year growth across our key technology platforms, namely power management, image sensors and 300mm RFSOI on top of which record achievements and unprecedented growth of our market-leading optical transceiver offerings, silicon germanium and SiPho advanced platforms has propelled us into a favored and unique position, both driving our growth for 2026 and additionally, giving us the ability to redefine our financial model, which I will present at the end of my comments. RF infrastructure showed a 75% revenue increase, 2025 over 2024 being our fastest-growing application in '25 driven by hyperscaler rapid adoption of silicon photonics in 800G and 1.6T pluggable transceivers. Silicon germanium and silicon photonics revenues represented 27% of our corporate revenues were $421 million, up from $241 million or 17% in 2024. SiPho revenues alone were $228 million in 2025, up from $106 million in 2024. Specific to the fourth quarter, RF infrastructure revenues were 32% of corporate revenue, with SiPho having achieved $95 million or a $380 million annual run rate. Included in this number is some non-wafer NRE to enhance future developments for Gen+1 and Gen+2. As highlighted in our recent announcement with NVIDIA, the insatiable demand for compute bandwidth in both scale-up and scale-out architectures and Tower's exceptional ability to scale the capacity flawlessly in partnership with our customer has made 1.6 terabyte per second, the fastest-growing silicon photonics node in the industry to date, with Tower being by far the majority supplier of 1.6T silicon PICs. The partnership announced with NVIDIA as with all our direct module customers, underscores our commitment to deliver best-in-class technology and the manufacturing agility required to meet such an exceptional demand trajectory. In addition to Fab 3 Newport Beach, this past year, we successfully ramped silicon photonics production in Fab 9 San Antonio, Fab 7, Uozu, Japan, and are on track to ship the first production, a very large SiPho ramp in 2026 and from Fab 2 Migdal Haemek. Given an even stronger customer demand than was known at our last quarterly release, we have increased our CapEx plan for 2026 and with multiple customer requests to enter into capacity reservation agreements through 2028, enabling our customers to, in turn, give firm commitments to their customers having ensured their supply. For next-generation 400-gigabit per lane, we continue to make strong progress with heterogeneously integrated indium phosphide on silicon and other material systems. We are playing a key role, partnering with our lead customers to define the material systems that will be chosen, refining the flow and hence ensuring manufacturability readiness and immediate ramp capability upon 3.2T market introduction. We also see co-packaged optics as a substantially incremental opportunity for us in the coming years, as optics gets adopted and scale-up interconnects as well as XPU to high-bandwidth memory interconnects that are today largely copper. In Q4 '25, we announced the expansion of our mature 300 millimeter wafer bonding technology to enable wafer to wafer integration of silicon photonics ICs and silicon germanium electrical ICs. In addition, we continue to work with several customers on dense wavelength division multiplexing laser sources, which are a critical component of many CPO implementations and can significantly expand our served optical market by now including the laser source. Beyond optical transceivers, our silicon photonics platform continues to be the technology of choice for physical AI applications, particularly frequency modulated continuous wave LIDAR. Ahead of CES, 2 of our FMCW LIDAR partners, AVA and LightIC publicly announced their collaboration with us in bringing to market disruptive products. The proven robustness of our silicon photonics platform supported by many tens of thousands of high-yielding, high-quality wafers ship to date is enabling silicon photonics to capture growing share in the LIDAR market, unlocking new automotive and robotics opportunities. Our silicon germanium platform delivered strong growth year-over-year in 2025 of 43%, remaining the optimal platform solution for low-power, low-latency, high-performance components such as drivers, trans-impedance amplifiers for pluggables, LPOs and active copper and active optical cables. Alongside our silicon photonics production, our silicon germanium platform is now running in high volumes across Fab 3 Newport Beach, Fab 9 San Antonio, Fab 2 Migdal Haemek, and we have shipped 300 millimeter prototypes from Fab 7 in Uozu. RF mobile represented 23% of our 2025 corporate revenue and 24% of our Q4 25 revenues. 300mm RFSOI was up 5.5%, while the RF mobile as a whole was down 15% year-over-year. Those are primarily due to our proactively working with our customer partners to responsibly reduce exposure to lower margin controller offerings in favor of higher-value optical and RF mix in the fabs and also influenced with the front-end module market shift from 200 millimeter to the higher digital content better served with more advanced nodes in 300 millimeter. Our latest technology, which we presented last quarter, with substantial improvement of our [indiscernible] relative to the competition and reduced layer count, therefore, higher overall value per customer dollar continues to see robust customer adoption. Lead customers have recognized it as best-in-class and are preparing to ramp to high volumes. Across the board, we continue to see strong design win momentum that positions our 300mm RFSOI platform for sustained secular growth. In 2025, we achieved major wins, namely 3 of the top 4 Tier 1 RF front-end module providers. One has begun production with all planning for strong ramp in 2027 towards achieving appreciable revenue volumes in 2028. Power Management grew 20% year-over-year, demonstrating strong year-over-year revenue growth in both 200 millimeter and 300 millimeter offering, representing 16% of our 2025 corporate revenues and 15% of our Q4 '25 revenues. In 300 millimeter, this includes the ramp of the Tier 1 handset envelope tracker previously announced, which is expected to continue to gain share in the years to come. Overall, our revenue growth in 300 millimeter power has significantly outpaced the rate of growth for both the power market as well as the mobile handset market, demonstrating the strength of our offering and share gains in this significant space. Sensors and Displays grew 10% year-over-year, representing 16% of our 2025 corporate revenue, 15% of the fourth quarter revenue. We have seen strength and continue to see strength in the machine vision market with new advanced products ramping to production alongside existing products that continue to gain share. We also expect our first ramp in the AI -- I'm sorry, in the AR display segment with our silicon back plane for OLED on silicon, which has started production this past quarter. We are tracking this first adoption and its overall market carefully and with optimism as it may have significant value for Tower in the following years. Mixed signal CMOS represented 7% and Discrete represented 11% of our 2025 corporate revenues. Year-on-year, we've seen decreases of 18% and 14%, respectively, supporting our value-driven growth strategy, allowing additional capacity for the higher margin and the highest margin platform to replace these 2 application sets. Regarding capacity expansion. During our previous earnings release in November '25, we announced an increase of investment for silicon photonics and silicon germanium growth targeting a tripling of SiPho capacity against our targeted Q4 '25 silicon photonics actual shipments having stated a target that this would be online to begin silicon starts in the second half of 2026. Due to continued growth in demand, we are announcing today additional CapEx investment of $270 million on top of the previously announced $650 million capacity expansion plan. This total capacity is targeted to yield capacity growth greater than 5x of the actual fourth quarter monthly wafer shipments -- silicon photonics wafer shipments to be compared to the 3x target that we gave during the Q3 public release. And over 70% of the total SiPho capacity is either presently reserved or in the process of being reserved through 2028, firmly backed with customer prepayment. For the fourth quarter, utilization rates were Fab 2 operated at about 60% utilization as we are now in the final stages of silicon germanium and silicon photonics capacity qualification for a variety of flows. Fab 3 maintained our model full utilization of 85% and still adding capacity for increasing silicon photonics capability. Fab 5 was a 75% utilization. Fab 7 was fully utilized, well above our 85% utilization model. Fab 9 was at 65% utilization, presently in the silicon photonics and silicon germanium ramp. As stated in our press release, Intel has expressed its intention not to perform under the September '23 Fab 11X agreement. We are presently in a mediation process. All flows, which have been transferred or are in the process of being transferred to Fab 11X were originally qualified in our Japanese 300 millimeter factory Fab 7. Customers are being redirected to be supported by this fab in Japan. For guidance, we guide our first quarter of 2026 midrange revenue to be $412 million plus/minus 5%, representing a 15% increase as compared to the start of 2025. We target quarter-over-quarter revenue and profitability growth throughout 2026. Based upon the thriving corporate ecosystem we've developed intertwined with deeply trusted customer partner alliances, we are pleased to provide a revised financial model. This new model demonstrates our value-driven growth strategy. Please refer to Slide 7. First, the assumptions. Beyond the $920 million CapEx plans that have been released, no additional CapEx, clean room space or otherwise additional monies are required to achieve this model. This model is based on utilizing Tower-owned capacity at an 85% utilization level. Intel Fab 11X is not included in this model. Revenue, $2.84 billion, which will create 39.4% gross margin, 31.7% operating margin, a 7.7 point drop from gross to operating margin, demonstrating a highly efficient business and if not the very best, certainly among the best in our industry. Such efficiency is seen in more than just margin dollars. It is reflective to the speed of decision-making and execution. Speed is a sustainable differentiator. Net profit is $750 million or 26.4% net profit margins. All tools and customer qualifications are planned to be fully completed within 2026. Hence, and most importantly, we target to achieve this model in the calendar year 2028. Now I'd like to turn the call to our CFO, Oren Shirazi. Oren, please. Oren Shirazi: Hello, everyone. Earlier today, we released our financial results for the fourth quarter of 2025 and for the full year and also released our balance sheet and cash flow reports. Now I will review the results highlights as well as the highlights of our CapEx investment and afterwards, I will present our updated target financial model, resulting in higher revenue and profit margins than the prior model. Let's first look into the P&L. In 2025, we achieved quarter-over-quarter revenue increase during the year, which has accelerated in the second half of 2025, resulting in record revenue of $440 million in the fourth quarter of 2025, reflecting a year-over-year revenue increase of 14% and a quarter-over-quarter revenue increase of 11%. Gross profit for the fourth quarter of 2025 was $118 million, an increase of $25 million or 26% compared to the prior quarter. And operating profit was $71 million, 40% higher as compared to the prior quarter. Net profit the fourth quarter of 2025 was $80 million, an increase of $26 million or 49% compared to net profit of $54 million in the prior quarter. And earnings per share were $0.71 basic and $0.70 diluted per share compared to $0.48 basic and $0.47 diluted earnings per share reported for the prior quarter. Please note that income tax expenses line in the P&L includes a nonrecurring tax benefit recorded in the fourth quarter of 2025, resulting in an all-in 2% effective tax rate. For 2026 and beyond, as required by Pillar 2 regulation, we estimate all-in tax effective rate to be at least 15% in all our manufacturing sites. For the full year 2025, we reported revenue of $1.57 billion, 9% higher as compared to $144 billion in 2024. Gross profit and operating profit for '25 were $364 million and $194 million, respectively, compared to $339 million and $191 million in 2024 respectively. Net profit for 2025 was $220 million or $1.97 basic and $1.94 diluted earnings per share, compared to $208 million net profit in 2024. Moving to our balance sheet. Our balance sheet is very strong, evidenced by the following indicators and financial ratios. As of end of December 2025, our assets totaled over $3 billion, primarily comprised of $1.5 billion in fixed assets, predominantly comprised of fab machinery and $1.7 billion of current assets. The recent increase in other long-term assets as compared to past periods is mostly attributed to the Newport Beach Fab lease extension prepayment as was announced in November 2025 and paid, which is presented as an asset as required by GAAP. Current assets ratio is very strong at about 6.5x, while shareholders' equity reached a record number of $2.9 billion at the end of December 2025. Hedging, I would like now to describe our currency hedging activities. In relation to the Japanese yen, since the majority of TPSCo's revenue is denominated in yen and the vast majority of TPSCo's costs are in yen, we have a natural hedge over most of our Japanese business and operations. To mitigate part of the remaining yen exposure, we are executing 0 cost cylinder transactions to hedge currency fluctuations. Hence, while the yen rate against the dollar may fluctuate, there is limited impact on our margin. Similar concept goes to the Israeli shekel. In relation to the Israeli shekel currency, while we have no revenue in this currency since a portion of our cost in Israel is denominated in shekel, we also hedge a large portion of such currency risk by engaging zero-cost cylinder transaction to mitigate this exposure. Hence, while the shekel rate against the dollar may fluctuate, the impact on our margins is limited. Now moving into our CapEx investment plan and its impact on our financial model. As we announced today, in order to support the increasing SiPho and SiGe demand, we are allocating an additional $270 million of cash to invest in capacity and capability side for equipment, which would result in a total of $920 million cash investments in CapEx, including the $650 million we already announced during 2025. These $920 million CapEx investment will expand our Fab's capacity in our 8-inch fabs in Israel, Newport Beach, Texas and also in our 12-inch Uozu Fab in Japan. This CapEx plan includes a large portion of capability CapEx for advanced development and high-end RF technology-related projects. Approximately 28% of the above-stated $920 million CapEx investments were already paid to date while the remaining 72% of the $920 million are expected to be paid in 2026 and 2027. Moving to the financial model. Following these investments, which are expected to drive greater revenue and incremental margins as compared to our prior model, which we released more than 2 years ago, we are providing an updated target financial model resulting in significantly higher revenue, profitability and margin targets. Please note, the model is based on many forward-looking operational business and financial assumptions including the assumption that all our fabs will operate at 85% utilization post installation and qualification of the $920 million equipment tools we are investing in. Assumptions considering a modest average wafer selling price reduction of existing products and/or flows that we target will be offset by new products and/or flows introductions. Assumptions that our cost estimates will not differ significantly from our current assumptions. And lastly, please note that the model does not include Fab 11X capacity, revenue and margin. Now any possible additional fabs and/or new capacity that has not yet been obtained, established or announced to date. Under this model, which you may see in the slide for your reference, we are targeting $2.84 billion in annual revenue, which is $1.27 billion higher or 81% higher in revenue than our actual full year 2025 revenue. $1.12 billion in gross profit, which is more than tripling our 2025 gross profit. This level of gross profit reflects approximately 40% gross margin, which reflects a 59% incremental gross profit that are derived from the incremental revenue when comparing the model to FY 2025 actual results. It also states $900 million in annual operating profit, which is 4.6x our actual FY '25 operating profit, reflecting 32% operating margin. This reflects 55% incremental operating profit margins that are derived from the incremental revenue when comparing the model to FY 2025 actual results. And lastly, on net profit, $750 million, more than tripling the full year 2025 net profit, reflecting 26% net margin, like Russell stated, which reflects 42% incremental net profit margins that are derived from the incremental revenue when comparing the model to FY 2025 actual results. To summarize, comparing this updated financial model to the prior financial model that we presented more than 2 years ago, gross profit, operating profit and net profit are much higher, 50%, 60% each higher as compared to the prior model, mostly driven by the higher SiPho and SiGe mix and the additional value we bring to our customers. That concludes my prepared remarks. Now I'd like to turn the call back to the operator so we can take your questions. Operator: [Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Mehdi Hosseini from Susquehanna Financial Group. Mehdi Hosseini: A couple of questions from me. Russell, I want to dive into the announcement that you had last Thursday, increased collaboration with NVIDIA. The press release was making a reference to module. And I want to better understand what that implies. Does this mean that you will be manufacturing a transceiver for NVIDIA or the module is more of a broader -- a reflection of a broader services that you would provide for this customer? And I have a follow-up. Russell Ellwanger: No, the part of our role in the module is the output parameters of our photonics or of the TIA or of the drivers or of the -- for the pluggable or as well for the copper or optical cable. But the partnership is referring to the fact of alignments and needs directly and through our module customers and understandings of supply needs and commitments on supply shipments. Mehdi Hosseini: Okay. And your 5x capacity increase for silicon photonics, silicon germanium, is that -- does that include incremental demand from NVIDIA and partners? Russell Ellwanger: Yes, that's referring to total demand. Well, I wouldn't say it's necessarily referring to total demand. It's an answer to demand, but it's the actual capacity that we're building. So if you look at what we had referred to as the $380 million run rate that we had in Q4, take off of that some small amount of NRE, which we don't specify, the silicon wafers that we shipped for the fourth quarter, that exact amount of silicon wafers by capacity, we plan to have 5x more of that in the fourth quarter of 2026. Mehdi Hosseini: Got it. Okay. And then on your power business line, does -- would you be able to also help prospective customers on the high voltage, especially as the next generation of AI server rack will require 800-volt DC? Russell Ellwanger: We have a variety of road map activities. We don't, at this moment, have an 800-volt platform on an IC. We do have 800-volt capabilities in Fabs, but not in an IC. But we do have higher voltage IC capabilities with and without SOI. Operator: We are now going to take our next question. And the next questions come from Tavy Rosner from Barclays. Tavy Rosner: Just following up on the NVIDIA question. So just to clarify, you're not actually shipping directly to NVIDIA, you're shipping through resellers that will just send your technology on to them. Russell Ellwanger: That is correct. We -- as far as the photonics itself, we do not ship that directly to NVIDIA. And as far as specifics of projects or activities that we're doing with NVIDIA, that anything that was not specifically stated in the PR, I would not be at liberty to talk about. But as far as the present photonics -- silicon-based photonics ICs, they are all being designed by and shipped through other module makers or integrators. Tavy Rosner: Okay. Understood. And then around CPU, I mean, you spoke about the opportunity. I think I recall last quarter, maybe it was a different conversation. You guys spoke about the ability to add value to the ecosystem through lasers, power connectors and you guys also doing any R&D on the actual CPU as well, maybe through like third-party packaging in order to have your kind of own end-to-end offering at some point? Russell Ellwanger: Direct packaging of the CPU, no, we're certainly working on multiple architectures of CPO and certainly, the XPU would be or could be incorporated into the CPO. But the specific activity right now of our engagement, well, that's not even 100% true. Yes. I mean we're certainly working with XPU makers on CPO strategies. Tavy Rosner: Okay. Understood. And then very last one for me. The rollout of additional CapEx, I think I recall you saying it's going to be all live by end of 2026. Is there any chance that it can come in sooner depending on several factors, maybe some of them beyond your control, but like is there any chance or you have the certainty that that's not going to be online before the end of the year? Russell Ellwanger: The capacity qualification ramp will be happening throughout the year. So it will -- the biggest portion of this $920 million should easily be online, I mean, fully qualified within the third quarter -- on or before the third quarter with growth happening in the first and the second quarter as well. The most recent orders that we've done also have tools that are coming in, in the second quarter. So -- but what we've stated is that what I just stated is that expect and target that by December, everything will be fully qualified in order to be able to do customer starts. In order to have everything fully qualified by December, the tools really have to arrive before the end of the third quarter and nominally by mid-third quarter. So that's where you could be thinking of is that linear or not, there will be a distribution of tools. Some have already arrived and the bulk of this $920 million will be arriving between now and mid-third quarter. Operator: We are now going to proceed with our next question. And the question comes from the line of Cody Acree from Benchmark StoneX. Cody Grant Acree: Congrats on the steady and impressive progress. Russell, maybe could you just give us a little more color on your expectations for your silicon photonics contribution in '26 and '27, specifically with the 70% commitment already talking about prepaid. It looks like your visibility should be pretty solid for the next couple of years. Russell Ellwanger: Yes, definitely. The demand is there. Certainly, we're very aware of the demand. Right now -- if your question is really on the ramp profile, the ramp profile is pure operational execution at this moment. I mean there's some technical execution still. There's some flows that still would need to be qualified, be it San Antonio or be it Migdal Haemek that are not yet qualified that are in the first order -- not the first order, but solely qualified in Newport Beach as that was the fab that most all of this development was done at. So you have some more technical work has to be done, but that's, for the most part, behind us on the technical work. From the time that everything is ready to be qualified, you still have several months for live testing in order to have customers qualify the flow themselves, if you know what I mean. So in some cases, it goes through HTOL and whatever other live tests the customer requires in its own commitments to their end customers, but the bulk of this is just operational execution. I think that's one reason that we're so bullish and confident on where we're at and where we're going on this model that we just gave of the [ 2.8 ] -- what was it [ 2.84 ] and the $750 million net profit. When your target and your plans are to have everything online, for wafer starts in December. Okay, let's say, worst case, you miss it by 1 month, 2 months, 3 months, okay, maybe, but it's there. So if it's -- will you have the full start capability in December, we target to have that, and I believe that we will. Can it push out that 1 or 2 tools isn't fully qualified for whatever reason. Obviously, this is a lot of equipment coming from suppliers. And although we're very good and the suppliers are very good at doing a final test at the supplier site, the tools are all disassembled and shipped. During the disassembly and shipment, there can be something that's broken or goes wrong, that isn't identified immediately during the, what's called Tier 1, Tier 2 start-up at our site. So it's possible that, that could take a little bit longer and 1 or 2, 3 tools can be delayed beyond the plan. It's also possible that for whatever reason, the supplier themselves misses their initial target, and that can happen. The same as not that tower would ever do it, but sometimes wafer manufacturers miss their commitments -- to just a joke there. But the point being, whether it's December or January, maybe February, I don't know. It could also be -- I mean we've released that we tend to have everything up and running in December. People that want to make sure that future commitments will always give targets where they believe they have some leeway. So the internal target should probably be more aggressive than the express target to the street, right? But the big point I'm trying to make in maybe too many words is that whether we hit the full qualification of start capability in December or whether it's November or whether it's January or February, it will be hit. And the demand is there, it's committed, and it will be used. So the model will be hit. Now from the time that you start all the starts, it's some period of time to get everything ramped and qualified. And then it's some amount of months before you can ship and get the revenue. So we feel very comfortable in talking about the 2028 to hit our model because the demand is there. Customers have committed to that demand to the extent we did not ask customers for reservation fees, they wanted it. They know how precious, especially from tower, SiPho demand is as we are truly by far, the leader in silicon PICs. So they want the wafers and it's just really in our hands as far as operational execution. Now I'd like to say it's 100% in our hands. It also is in the hands of our suppliers. But they're good suppliers. And we have a good relationship with our suppliers. We really focus on having strong relationships with our customers. To have a good relationship with the customer, you must also have that same model with your suppliers, right? I mean what goes around comes around. So you can't easily be someone that has a mentality to not treat a supplier well and expect a customer to treat you well and vice versa. So I think, Cody, maybe any -- too many words. But our plans are very firm, very strong. Can something be impacted by a month or two, one way or the other, of course. But the plans are there. And if it is impacted by a month or two, it's not impacted by the bulk of the capacity growth there will be 1 or 2 tools or I don't know, a handful of tools that sometimes are called a lemon tool. It's not necessarily a lemon tool. It means that there's a problem that wasn't found immediately. That can delay something. But there will always throughout this year, we will definitely have incremental capacity growth. Cody Grant Acree: Maybe can I just continue on with your mobile business. Any concerns about the ongoing memory shortages or the increased prices that have been called out by some of your peers in the industry and the impact to potential unit volumes in the handset market? Russell Ellwanger: Cody, I mean there's always a concern when you have something in the market that you yourself have no say in or control of. So yes, there's definitely a concern there. We work with our customers closely to understand what their inventory levels are. They try to understand what their customer inventory levels are. And to be as convinced as possible that the plan that we have for -- our start plan for the year can be hit. But are we -- I'd love to be able to say that there's no concern we're impervious to it. We're not -- there's -- there are factors in the market that always play that you never want to be a victim, so you try to do as good a planning as you can. And in the best case to have alternatives should a certain capacity not be used in the fab that it can be replaced with something else where we talked about the fact of intentionally working out some lower-margin products to allow room for higher-margin products. The lower-margin products are still in demand and there's always the possibility if there is a gap in the fab because a demand of what you thought would be there is not there, we have the opportunity to backfill it with something else. And that something else is maybe not preferred because it's not the same margin profile, but it can be done. So at least you're absorbing your fixed cost. Operator: We are now going to proceed with our next question. the questions come from the line of Richard Shannon from Craig-Hallum Capital Group. Unknown Analyst: This is Tyler on for Richard. Sorry to disappoint. I have a question. I had a question on this model that you gave and the 2028 time line. Is this a run rate in 2028? Or is this the full year? Russell Ellwanger: Yes. No, certainly, we will achieve it by run rate and we target to get a full year. But what we stated is that it would be achieved within the year. So we're -- our target and what I've stated is that is our target. One could definitely believe that we will hit it by run rate. And nominally, we'd love to hit it for full year. And it's possible. Unknown Analyst: Okay. Great. And then the silicon photonics, I know you just mentioned you could backfill other things. But at this point, with all of the CapEx investments that you make is this going to put the fabs at fully utilization for that model? Russell Ellwanger: No. Silicon photonics would not bring any of the factories to the full photo utilization. But it's not the silicon photonics that I was talking about as far as backfilling. That question was the specific question with regard to the RF mobile because of fear of the high-bandwidth memory manufacturers focusing on that for data center rather than supplying it elsewhere. And without the memory that it might not that there could be a decline in the overall mobile integrator by not having the memory they need for their phones. That was what the question was. So I was saying if that was the case, that capacity is fungible. Unknown Analyst: Got it. But with this, I think what I'm really getting at is with this CapEx spend that you're adding today does that bring us to the 85% utilization? Russell Ellwanger: It does providing that the other flows are used to the prescribed capacity that we allotted to them. So no, it's not -- if it was only silicon photonics, it would not be 85% utilization. But must understand as well, and this is an important point. We're focusing on the silicon photonics, our commitments around the silicon photonics where I say that the RFSOI, if you will, for the most part, that's pretty fungible to power. I mean there are some layers that are different, but relatively fungible for power, relatively fungible for imaging. The silicon photonics is under different ratios, but it's very fungible to silicon germanium. Operator: We are now going to proceed with our next question the questions come from Lisa Thomson from Zacks Investment Research. Lisa Thompson: I have a few accounting questions for Oren. First off, could you tell us exactly what the dollar amount was for the onetime tax benefit in Q4? Oren Shirazi: It's approximately the difference between if we had 15% tax or 16% or 17% by the model, which is about from the $81 million pretax income we should have like have a tax expense of about 15% to 17% of that. So about like $12 million, $13 million. Instead of that, we have $1.5 million. So the gap is about $10 million. Lisa Thompson: Okay. And can you explain exactly what did you get for the $105 million for the lease extension? Oren Shirazi: We got additional 3.5 years of lease of Newport Beach facility. We announced on 13 November 2025 press release. Instead of that it was supposed to be ending in the beginning of '27, it is now until the end of 2030. Lisa Thompson: Okay. And you paid the $105 million upfront cash? Oren Shirazi: Yes, yes. Yes. And it's included in the cash flow operations of Q4, which is the reason why it is a onetime lower by $105 million than any model. But we announced it in November. So it's not new, no. Lisa Thompson: Right, right, right. And then I'm just curious as the change in the U.S. depreciation rules of what you can write off -- has that changed your model at all or changed your depreciation expectations going forward? Oren Shirazi: No. No impact on us. Lisa Thompson: No, not at all. Okay. Great. Operator: This concludes the question-and-answer session. So I will now turn back to Russell for closing remarks. Thank you. Russell Ellwanger: Thank you very much. 2025 marked the completion of my 20th year at Tower. So I thought I would give a little bigger picture view of what Tower is about where we're going, what we're doing. For the year 2025, we had a corporate theme and the theme was bold growth, limitless impact, infinite reach. I love that theme and put a lot of thought into it and truly would be my great honor if my life's journey would be worthy to have those words in my epitaph included, obviously, to loving, honorable, loyal, husband, father, grandfather and friend. But if that was written on my epitaph, wow, what a value-add life I would have led. If you look at bold growth, at least to me, it means being undaunted and creating a legacy much accretive to one's birth situation. In the case directly of corporate leadership, it would mean expanding the enterprise much, much beyond the situation from when one arrived. If you talk about limitless impact, that would mean that the individual or the corporate leader has been successful in importing knowledge and creating opportunities for employees, colleagues, community for one family to have an advancing growth trajectory much beyond what they otherwise would have had, what otherwise would have been. Infinite Reach is a very interesting concept. I first encountered the term in David Deutsche's book, the beginning of infinity and the meeting that he put it forward meant that truth discovered in any severe if indeed a truth holds in all spheres. And it is very interesting. If you look at learning, there are many things which truly cannot be taught, but rather must be learned and where the learning comes only through doing. And I thought about that quite a bit. It really -- many, many things can be taught, but those things that can be told are tools. Things that can be learned are principles and values and it really only is learned through the doing. I have a very, very fervent belief that work is the laboratory where one can and should learn and develop themselves in all capabilities, principles and values needed to become the person that they aspire to be. Anybody worth their salt spends the bulk of their wakened dollars at work. What a meaningless activity if that isn't the place where one develops as a person. And I thought very much that a good company must allow for financial and professional growth, but a great company allows for the same with the addition of personal growth. Years back, earlier in my career, I had the great pleasure to reflect and thank Dr. Dan Medan at the time the President of Applied Materials, and this is directly what I wrote in. When I came to Applied I believe I was a good person. Thank you for creating an environment that has allowed me to become a better person. Tower aspires to be such a high -- such a company. We focus on hiring most capable and passionate people and of equal importance to develop and nurture an environment where passionate and capable people can further grow in capability, in passion and as well in virtue. We acknowledge and drive an understanding that the strongest catalyst for increased capability and enhanced passion or close collaborations with our customers and the excitement enjoy that is earned and truly earned from sharing in each other's successes. There's a quote of uncertain origin. If 2 people agree on everything, one of them is unnecessary. We treasure diversity. We treasure diversity of opinions, but only if it's directed to single miss and purpose and actions. Organizational anarchists do not do very well at Tower. But no matter what and how diverse the opinion is, if it's directed towards making things better, it's highly appreciated. I don't think a much different than anyone else. I don't like it when people disagree with me but I truly value it. And it's a very strong thing, and that's the culture that we have. So we have worked hard to be a company that really does allow people to grow. And if you allow people to grow, you have an environment and a spirit in the company where the company has become truly a masterpiece. Now I don't know the attraction of any single piece of art or music to those on the call, but I can say that I cannot walk by a da Vinci without being drawn to it. That's the impact of a masterpiece. It's the same thing with the company. If a company has extremely passionate people and they're of the highest character and they are capable, knowledgeable people, they are a magnet for the customer and the customer wants to be with them. And that's what allows for corporate growth. That is one of the things that allows for bold growth that allows a company to have limitless impact, and it's based on the infinite reach of people as soon as you take on big responsibilities, and you take full ownership on those responsibilities you learn so many truths. And what is true in one sphere is true in everything. The principles that allow you to be a successful business leader, allows you to be a successful father, a successful husband, a successful mother, successful wife, successful daughter, successful and value-added friend. So those are the things that Tower has truly worked on that we continue to work on. Ex U.S. President, Bill Clinton, had a quote that on first hearing sounds very nice, and it says old age is when your memories outweigh your dreams. I'm not a spring chicken, so those are the type of things that I think about. And at first, again, it sounds very good, but certainly, having dreams in no way define vibrant youth. So the statement maybe is correct as far as if your memories outweigh your dreams, it shows that you're old. But having dreams does not show that you're youthful. Many, many people, even at a young age, only have dreams, they do nothing to try to make the dreams real. So I added to this quote and took the liberty. Old age is when your memories outweigh your dreams and consequent actions to achieve them. Tower is in no way an aged company. We work off of the experience and knowledge that comes only through age, but with the full vibrance and excitement of use, and that's a combination that's unbeatable and is truly a catalyst for customers to want to engage with your company. We showed this new financial model, which as having stated multiple times and being questioned about as well, it's our target to achieve it, be it by run rate or be it in the full year, but to achieve this model in 2028, relatively short term. The model or went through all of the incremental margins, but what it is, it's a revenue CAGR of 22%. It's a very nice CAGR in our industry, a very nice foundry CAGR. So a 3-year CAGR of 22%. But it's a net profit CAGR of 50.5%, and that's really incredible to have a 2.5% off of the 22% CAGR -- to have a 2.5% increase on the CAGR of the net profit, which isn't something that's talked about often because most people don't have CAGRs on net profit. But from the present state to achieving this model, it's 50.5%. That is not an aged company. That is a company that is full, full of youthful exuberance based upon the capability of age, based upon experience, based upon having developed multiple years of strong, extremely strong relationships with customers. So to close, we entered 2026 with very strong momentum towards bold growth, limitless impact and infinite reach. Thank you for being with us. Thank you for continuing to be with us as we track towards the achievement of the $750 million net profit model. Thank you very much. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.
Operator: Welcome to the Liberty Broadband Corporation's 2025 Year End Earnings Call. During the presentation, all participants will be in listen-only mode. Afterwards, we will conduct a question and answer session. As a reminder, this conference will be recorded February 11. I would now like to turn the call over to Hooper Stevens, Senior Vice President of Investor Relations. Please go ahead. Hooper Stevens: Good morning. Thank you for joining us. This call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Forms 10-Ks filed by Liberty Broadband Corporation with the SEC. These forward-looking statements speak only as of the date of this call, and Liberty Broadband Corporation expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Broadband Corporation's expectations with regard thereto or any change in events, conditions, or circumstances on which such statements are based. On today's call, we will discuss certain non-GAAP financial measures for Liberty Broadband Corporation, including adjusted OIBDA, adjusted OIBDA margin, and free cash flow. Information regarding the required definitions along with the comparable GAAP metrics and reconciliations, including Schedule 1 and Schedule 2 for Liberty Broadband Corporation, can be found in the earnings press release issued today, which is available on Liberty Broadband Corporation's IR website. Speaking on today's call will be Ron Duncan, the CEO of Liberty Broadband Corporation, and Brian Wendling, Liberty Broadband Corporation's Chief Accounting and Principal Financial Officer. Also during the Q&A, we will take questions related to Liberty Broadband Corporation should they arise. Additional members of Liberty Broadband Corporation management will be available to assist Ron and Brian with questions. With that, I'll hand the call over to Ron Duncan. Ron Duncan: Thank you, Hooper, and good morning. Liberty Broadband Corporation had an exceptional year. We reported solid fourth-quarter results with achieved record revenue of over $1 billion and record adjusted EBITDA of more than $400 million, a significant milestone for the company. We continue to execute on our mission to deliver best-in-class connectivity across Alaska. Our consumer wireless base is expanding. We are realizing the benefits of last year's strong sales cycle in our business segment. We continue to sharpen our strategic focus as Alaska's only converged broadband and wireless provider following the exit of our video business last year. During the fourth quarter, we announced, executed, and completed our rights offering. The rights offering was fully subscribed, resulting in approximately $300 million in net proceeds. We are pleased with the outcome, which allows us ample flexibility to continuously canvas the market and fine-tune our strategy at the parent company level. We plan to use the proceeds for general corporate purposes as well as for potential strategic acquisitions, investments, or partnerships. Turning to the business, I'm proud of how nimble and effective our Liberty Broadband Corporation team is in ensuring the continuity of our network. First, in December, we experienced two fiber breaks, one in Dutch Harbor, which was repaired in early January in under two weeks, and the other in Dearing. We expect to incur repair costs this year in the low single-digit million range, with service expected to be restored at Dearing in the summer months after the ice goes out. Second, as we mentioned last quarter, Typhoon Helong hit Southwest Alaska in early October of last year. We fully restored service to the two villages that were hit in under four months. Beyond the small revenue overhang in January, we do not expect any ongoing impact on our business. We commend the entire Liberty Broadband Corporation team for their outstanding service to the communities that we serve. Turning now to our operating highlights. We grew consumer wireless subscribers 2% year over year and ended the year with 199,000 consumer wireless lines. We had a total of 207,500 wireless lines at year-end, including 8,500 business lines. We added 3,500 consumer wireless lines during the year, including 6,700 postpaid lines, largely as a result of our unlimited test drive promotion. We continue to see slow erosion in our prepaid and government-subsidized lifeline segments, partially offsetting the growth in our postpaid lines. On the data side, we saw a 3% decline year over year, exiting the year with 151,200 data subscribers. We lost 4,500 data subscribers during the year and 1,200 data subscribers during the fourth quarter. The decline of data subscribers over the past year is due to wireless substitution and limited competition from Starlink and others, exacerbated by a fiber break on a third-party network in which Liberty Broadband Corporation uses capacity. As of the third quarter, service has been restored, although we note that winning back customers in the service-impacted areas has been slow. We are proud of the operational and financial progress we made in 2025. We reported over $400 million of adjusted OIBDA, an exceptional milestone for Liberty Broadband Corporation. But looking ahead to this year, we expect the business to be stable. As we look forward to 2026, our operating priorities are first, to invest in our network infrastructure, deliver high-quality service to our customers. Second, to complete our build-out commitments under the Alaska plan. Third, to drive value and the benefits of convergence for our customers, and fourth, to continue bridging the digital divide through our rural expansion. Starting with our network infrastructure. We're offering 2.5 gigabit broadband connectivity everywhere that has fiber middle mile, which means we can offer it to an overwhelming majority of our customers. We're making progress improving the broadband network in Anchorage. We're in the process of upgrading the core, reducing node sizes, and upgrading to a 1.8 gigahertz plant. Our initial deployment is yielding positive results. We plan to significantly scale deployment of our HFC network this year. All the work that we are doing is DOCSIS 4.0 or 4.0 capable, enabling speeds that are multiple times what we have today. We will be rolling this out to markets outside of Anchorage this year, allowing us to get to five gigabits and ultimately beyond. We believe these changes will not only lead to higher speeds but also a network with better reliability and fewer maintenance requirements. The strength of this offering positions us well against competitors today and into the future. Next, on driving convergence and maximizing value and quality for our customers. We concluded our unlimited test drive promotion at year-end, which drove meaningful postpaid consumer wireless growth in 2025 to a peak of 165,400 lines. The first cohorts of our promotional subscribers are now rolling off, and while it's still early, we are seeing exceptionally strong retention rates. In January, we launched a twelve-month free promotion that we expect will further support postpaid wireless growth this year. As of year-end, approximately 40% of our broadband customers have one or more wireless lines, and approximately 62% of our postpaid wireless lines are sold as part of a bundle, up from 57% at the end of 2024. Our focus remains on delivering quality and value for all of our customers. Lastly, on bridging the digital divide in Alaska, through expansion and completing our build commitments on the Alaska plan. Just a few weeks ago, we announced that we had completed the build-out of the iHUC one net network, which brings fiber infrastructure to the Yukon Quest equipped Delta, ensuring residents there enjoy 2.5 gigabit service. We also remain on track to complete our build-out requirements for the Alaska plan this year and increase wireless speeds in the communities we serve. The new Alaska Connect fund will extend the Alaska plan to 2034. Our focus remains on providing 5G wireless service to all covered Alaskans over the coming years. Turning briefly to Bead, the State of Alaska has announced that Liberty Broadband Corporation has been provisionally awarded approximately $120 million in Bead fund. The award remains subject to approval by the NTIA. There remains substantial uncertainty about the timing of the final awards as the state is still in active negotiations with the NTIA regarding the ultimate distribution of Alaska to be funded. Any funding that Liberty Broadband Corporation ultimately receives will offset our capital costs as we expand in unserved locations. Regulatory and macro environment. From a macro perspective, Alaska's economy could be poised for some long-overdue economic growth. In mid-October, the Trump administration announced plans to open the Arctic National Wildlife Range to drilling, a development that could accelerate oil and gas activity across the state. Combined with the potential development of the gas line, these initiatives could drive substantial economic expansion in Alaska, lifting the Alaska economy and creating new opportunities with the potential of increased demand for our services. In summary, we are encouraged by an exceptional year of financial and operational performance. The peak of CapEx in 2026 and projected step down over the coming years back to our historical range of 15% to 20% of revenue should be highly supportive of substantial cash generation as we look ahead. We believe the strength of our network and our robust operating results will continue to create value for our customers, partners, and shareholders. With that, I'll turn it to Brian to discuss the financials in more detail. Brian Wendling: Thank you, Ron, and good morning, everyone. At year-end, Liberty Broadband Corporation had consolidated cash, cash equivalents, and restricted cash of $429 million, which is inclusive of our approximately $300 million offering, which was completed at the end of 2025. And we had a total principal amount of debt of approximately $1 billion. At year-end, Liberty Broadband Corporation's net leverage, as defined in its credit agreement, was 2.3 times, and Liberty Broadband Corporation's consolidated net leverage was 1.6 times, which incorporates cash at the parent level, including the proceeds from the rights offering, as well as Liberty Broadband Corporation's non-voting preferred stock. Additionally, Liberty Broadband Corporation's credit facility has $377 million of undrawn capacity net of letters of credit. Just an admin matter during the fourth quarter, we refined the definition of our subscriber metrics. The definitions of consumer cable and wireless subscribers now exclude prepaid customers who are no longer paying for the service and postpaid and cable modem customers who have been inactive for over sixty days. All prior periods have been reflected for this refined definition, and this aligns with how Liberty Broadband Corporation manages and evaluates the business. Turning to Liberty Broadband Corporation's operating results for the full year and the fourth quarter. For the year, Liberty Broadband Corporation generated total revenue of $1 billion, representing a 3% increase for the full year. Revenue increased primarily due to growth at Liberty Broadband Corporation business. Adjusted OIBDA of $403 million was a record high and increased 12% for the full year. The increase was driven by both higher revenue and lower operating expenses, which includes lower programming video programming expenses, and reduced distribution costs related to temporary cost savings from a fiber break on a third-party network. The fiber break was fully restored during 2025. In the fourth quarter, Liberty Broadband Corporation generated total revenue of $262 million. This is flat with the prior year quarter. And adjusted OIBDA increased 7% to $90 million, primarily due to lower selling, general, and administrative expenses related to personnel and compensation expenses. Consumer revenue declined 2% for the full year in the fourth quarter, with the majority of the decline driven by the shutdown of the video business as well as data subscriber losses slightly offset by growth in wireless. As a reminder, Liberty Broadband Corporation exited the video business during the third quarter of the year. Consumer wireless revenue increased both for the full year and the fourth quarter, driven by an increase in federal wireless subsidies. Consumer gross margin increased to 70.7% for the full year and increased to 69.7% for the fourth quarter, driven by a decline in consumer direct costs resulting from decreases in video programming costs. For the year, direct costs also benefited from temporary cost savings from the fiber break on the third-party network that was previously discussed. Business revenue grew 7% for the year and 1% during the fourth quarter. For the year, the increase was driven by the strong upgrade cycle, which started in 2024. For both the full year and fourth quarter, revenue growth was partially offset by lower wireless roaming revenue. Business gross margin increased to 80.1% for the year and increased to 78.3% for the fourth quarter, primarily driven by revenue growth. For the year, business gross margin benefited from lower direct costs due to temporary cost savings from the aforementioned third-party fiber break. Capital expenditures net of grant proceeds totaled $224 million for the year. As Ron said, we expect 2026 CapEx of approximately $290 million, which includes $20 million carried over from 2025 due to normal course timing shifts. As was mentioned, we expect '26 to represent our peak year of CapEx spend, driven by completing the build-out requirements of the Alaska plan, and the timing shifts for 2025. Our historical CapEx has been 15% to 20% of revenue, and we expect our long-term CapEx following the completion of the Alaska plan build-out to trend back to these levels. Liberty Broadband Corporation generated $146 million in free cash flow for the full year, up over 70% from 2024, driven by our record financial growth. And 2025 free cash flow also benefited from positive working capital swings. The CapEx increase in 2026, when coupled with ordinary course working capital swings, will drive proportionately lower free cash flow on a year-over-year basis. And with that, I'll turn the call back over to Ron. Ron Duncan: Thank you, Brian. We appreciate everyone's interest in Liberty Broadband Corporation, and we look forward to continuing to update you on our progress. With that, we'll open the call up for Q&A. Operator: Thank you. We'll now be conducting a question and answer session. Thank you. And the first question comes from the line of David Joyce with Seaport Research. Please proceed with your questions. David Joyce: Thank you. A couple of questions, please. First, I was wondering how we should think about margins this year since you'll be comping against the operational savings while the undersea fiber was offline in the first part of last year and then you don't have the TV programming expenses? And then secondly, what sort of cadence of CapEx spending should we expect this year? And if you could kind of drill down on where, you know, where you would be spending which products? Thanks. Ron Duncan: Okay. Pete, do you want to tackle the margin question? Pete, you're out there? No, Pete. Okay. Well, I will do my best on the margins. The margins should be was Pete there? Pete just joined. No, Tyler. Go ahead. I'm happy to take the margin question, and you can add some color if you want. I think on the margin, we obviously can't guide, David. On where we think we'll ultimately end up for 2026. Jake, as you heard Ron say in his remarks, we expect a stable year for 2026. There are certainly some things on the cost side that are benefits, meaning no video expense at all during 2026. We also had revenue that was offsetting that in the early part of the year. And then there was the benefit from the fiber break. But overall, we expect a pretty stable year for next year. And I have Ron's comment yes, I'll take the CapEx. I would just comment on margins as well that the video business was kind of a net zero for us anyway by the time we got out. They were substantial revenues, but also very substantial programming costs. The reasons we exited was we could see ourselves heading into a negative free cash flow situation to stay in the video business. So it was a net positive going forward and probably not tremendous change in the base of the business as you look at it. On the CapEx cadence, typically, we peak in the second and third quarters. When the construction season is in full swing up here, and I expect that pattern to continue this year. The largest single element of this year's CapEx is in wireless, particularly rural wireless, as we sprint to the finish of our first phase commitments under the Alaska plan. We'll also be expanding substantial CapEx to expand the urban wired network as we move to our 5G and full DOCSIS 4.0 implementation. David Joyce: Great. Thank you. Thank you. Brian Wendling: David, if you don't have any other questions, that will conclude today's call. Appreciate everybody's participation. And we look forward to speaking to you offline in next quarter as well. Thank you. Ron Duncan: Thank you all very much. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation. Have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the Frontier Group Holdings Q4 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, David Erdman, Senior Director, Investor Relations. Please go ahead. David Erdman: Thank you, and good morning, everyone. Welcome to our Fourth Quarter and Year-End 2025 Earnings Call. With me this morning are Jimmy Dempsey, President and Chief Executive Officer; Bobby Schroeter, Chief Commercial Officer; and Mark Mitchell, Chief Financial Officer. On today's call, Jimmy will be providing commentary on his strategic priorities, and then we're going to jump directly to the Q&A. However, a transcript of the prepared remarks, which would otherwise have been delivered by Bobby and Mark is available for download on our Investor Relations website. Before yielding, let me recite the customary safe harbor provisions. We will be making forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially from those predicted in these forward-looking statements. Additional information concerning risk factors which could cause such differences are outlined in the announcement we released earlier, along with reports we filed with the Securities and Exchange Commission. Moreover, we will also be discussing non-GAAP financial measures, actual results of which are reconciled to the nearest comparable GAAP measure in the appendix of the earnings announcement. And then we'll also be referencing state-adjusted unit metrics, which are based on 1,000 miles. So I'm going to give the floor to Jimmy to begin his prepared remarks. Jimmy? James Dempsey: I'd like to start by emphasizing how honored I am to be taking on the role of CEO, particularly at such a pivotal moment for Frontier. When I accepted this role, the Board gave me a clear mandate to enact change at our company. We know that we need to do better across the business and deliver increased value for all our stakeholders, employees, customers and our investors. With this in mind, I have spent the past 2 months rolling up my sleeves to build a clear strategic path designed to return Frontier to sustain profitability as the low-cost, high-value airline of choice. This plan comprises 4 strategic priorities: rightsizing the fleet, strengthening our cost discipline, reducing cancellations and improving on-time performance and driving customer loyalty. Today, I will walk you through the actions we are taking on these priorities that I expect will drive meaningful changes and improvement across our organization. First and foremost, I am focused on resetting and stabilizing the business through a comprehensive rightsizing of our fleet. Returning Frontier to profitability is about going back to our roots as an organization. This means taking action to increase fleet productivity and efficiency. Just recently, we entered into a nonbinding agreement with AerCap, which will enable us to benefit from the early termination of 24 aircraft leases in the second quarter. We plan to take advantage of this by increasing utilization across our remaining fleet to support our planned growth and drive efficiency. AerCap will remain one of our largest lessors, and we look forward to expanding our partnership with an additional 10 sale-leasebacks in the future as part of this agreement. Separately, we reached a nonbinding framework agreement with Airbus, which revises the delivery profile of our order book. It supports a more measured and sustainable long-term growth rate of approximately 10%, representing a meaningful moderation versus our prior growth trajectory. The update to our delivery profile and underlying growth rate helps to minimize the proportion of new market activity while supporting ongoing productivity and operational reliability. Our plan to rightsize the fleet directly contributes to my next strategic priority, strengthening our cost discipline. Cost discipline has always been a cornerstone of our business model. We are targeting $200 million of annual run rate cost savings by 2027, largely from network optimization, productivity enhancements and other efficiencies across the business, which includes approximately $90 million of expected annual rent savings from the early termination of the 24 aircraft leases. The next strategic priority throughout 2026 is centered around improving our operational reliability by reducing cancellations and improving our on-time performance. We're simply not satisfied with our past record in these areas. The status quo is not acceptable and every available option is on the table to improve our performance. I will give you some examples in a long list of initiatives we are working on across the business. Turn times, we are working on improvements to optimize our airport operation workflows, strengthening our head start performance and improving day of travel communications with our customers. Over 85% of our customers use our recently updated mobile app. By leveraging digital channels, we can push timely alerts of our clear next steps during delays and ensure customers feel supported and informed throughout their journey. We are also working on improved operational planning that better integrates scheduled maintenance into the early stage of our network design process to take advantage of our enhanced maintenance footprint. While we remain firmly committed to cost discipline and operational excellence, our final strategic priority is pairing that discipline with smart high-return upgrades that will accelerate the maturity of our customer loyalty program. Last year, we launched a series of enhancements to our loyalty ecosystem, including changes that simplify elite benefits, enhanced redemption opportunities and create broader customer engagement. Our simplified reward structure and easier elite status benchmarks have already begun to resonate with customers, and we are expanding on these efforts in 2026. Furthermore, we'll be modernizing every part of our commercial offering this year and into 2027 from digital tools and distribution to loyalty and onboard experience. These initiatives include the fleet-wide rollout of first-class seating, onboard WiFi, and upgraded website and mobile app and enhanced digital products and communications. These enhancements will broaden our appeal and effectively address friction points that have historically limited conversion and loyalty. We're building a product that remains incredibly affordable while delivering more value than ever before. Our loyalty assets represent one of our strongest long-term levers for value creation in the business. We're confident our recent and planned investments in our loyalty program and product offerings will be a significant part of our revenue growth. Overall, we're pairing our unique ability to provide low fares with an increasingly elevated product and customer experience to deliver unmatched value in air travel. The path ahead requires meaningful change and we are embracing that reality with clarity and conviction in order to capitalize on the substantial opportunity we see in front of us. We've adopted a disciplined actionable set of strategic priorities to transform our company and put Frontier on a path towards sustained profitability. Above all, we are deeply committed to creating long-term value for our shareholders, employees and customers. Thank you for your continued support. As David noted, we'll preempt commentary from Bobby and Mark to allow sufficient time for analyst questions. With that, operator, we're ready to begin the Q&A segment. Operator: [Operator Instructions] The first question we have today is coming from Atul Maheswari of UBS. Atul Maheswari: I had a question on your long-term growth plan of 10%. So where is this growth going to be concentrated? Is it simply going to be backfilling the space vacated by Spirit? Or are there other geographies where you see an opportunity? And then related to this topic, why is 10% the right growth target for this year and for the long term? Why is it not a smaller number than that, as that would in theory, accelerate your ROIC improvement. So any thoughts there would be helpful. James Dempsey: Yes, sure. Thanks, Atul. Look, we'll obviously be disciplined in deploying our capacity across over a multiyear basis across the system. And what you're seeing this year is effectively infilling our network from a growth perspective. So we anticipate growth will be approximately 10%. I mean there's a long way to go from now to the end of the year to determine exactly what that rate will perfectly be. We anticipate about half of that is filling out the existing network. And so moving capacity that was taken down on Tuesday and Wednesdays, and Saturdays and moving back into bringing capacity back into those days. And then about half is new markets. And new markets are driven by items that didn't work last year or opportunities that are presenting themselves with changes in capacity across the environment. So you're seeing us take advantage of that in parts of the U.S. And you've seen us do that in a lot of airports around the states like Atlanta, Las Vegas and other places. In terms of the 10% growth rate and why that makes sense for us. Look, historically, we've grown the airline by mid- to high single-digit teens, and in some cases, well over 20%. We think that about -- when you grow by about 5% to 7%, you don't necessarily take a significant RASM penalty to that growth. And we like the growth profile of around 10%. This drives a lot of utilization flexibility in the organization where you can manage your utilization and manage growth rates either below or above at 10% depending on market opportunities. What we see at the moment because we're infilling a lot of productivity into the airline, we think that, that would provide real stability in the revenue performance across this year and sort of piggybacks on the benefits that we're seeing from a revenue perspective across the back end of the fourth quarter and certainly, the run rate that we're seeing right now in terms of RASM going through this quarter and into the second quarter. Atul Maheswari: Got it. That's helpful. And then as my follow-up, I had a question on the guidance that was issued for this year. So based on my math, it appears you will need high-single digit to maybe double-digit RASM growth over the second to the fourth quarter to achieve the midpoint of the guidance. So a, can you confirm if that math is correct? And then b, if it is, what's giving you the confidence that you can drive this level of RASM increase beginning in the second quarter of this year because that's the time when your capacity growth will also accelerate to double-digit levels. James Dempsey: Look, a couple of things are happening, right? This is a major transition year for the airline. We will change the utilization profile of the business as you progress through into the second half of the year. And what we're seeing right now in terms of the RASM performance is meaningfully improved year-over-year. We're seeing a trend above 10% in terms of RASM improvement. We're seeing that in the early booking process through March and particularly April and May. And so we're actually quite encouraged by what we see in terms of RASM trends going across the year. In terms of the long term, post adjusting our costs, like one of the focuses in the business is getting a significant saving in unit costs across this year, but largely moving into 2027. And so you effectively have a reset year in terms of the business and its productivity, and that's where our focus lies at the moment. We're certainly seeing that stability in revenue and improvement in revenue carry forward, which gives us confidence that, that performance happens for the rest of the year. Robert "Bobby" Schroeter: Yes. And this is Bobby. So some of the things that we're seeing, of course, there's a good supply/demand backdrop that exists, capacity has been moderated a bit. But some of the things we've done that we're seeing unique benefits to as well. Last quarter, we moved back to a basic first product architecture that has the 3 clearly defined bundles that we have within there, so economy and premium and business. And then we reinforced revenue management discipline around that structure. So that allowed us to yield up more effectively across the fare ladder. And then in addition to that, which has enhanced this, we've seen significant in the past quarter, significant NDC distribution enhancement. So that's helping to improve the conversion across third-party channels. It's allowing us to merchandise those bundles more effectively on the OTAs and aggregators. And they're effectively, if you think about it now, they're on the shelf that they weren't before. So that's driving purchases early in the curve, allowing for improved attachment rates and better yield opportunities. And those are things that are going to continue in the future. So as Jimmy said, we're seeing that in the first quarter, and those are on continued benefits that we'll see throughout the year, we believe. Operator: And our next question is coming from the line of Savi Syth of Raymond James. Savanthi Syth: I wonder if you could remind us what the delivery cadence is for 2026. And then as you look to '27 and '28, just generally how many aircraft are you kind of anticipating with this revised orders? Mark Mitchell: Yes. So the delivery cadence for this year. So we have 24 aircraft scheduled, 6 in the first quarter, 8 in the second quarter and then 5 in both the third and fourth quarter. And with the fleet plan that we announced, when you look at those 24 inductions, 24 early terminations, we expect to end the year with the same number of aircraft we began the year with, so 176. And then as you look across '27, we expect to be roughly by the end of '27 at a similar level to where we ended '25 and expect to end '26. James Dempsey: Yes. And Savi, I mean that's an important point, right? We're going to start and end the year at the same number of aircraft and actually start and end 2027 with the same number of aircraft that we started 2026 with. And so really, the growth that you're seeing in the business is bringing back that productivity in the airline that's been missing for the last couple of years. And so that puts us on a better trajectory in terms of core operating unit costs in the business. So that gives us real confidence that this plan that we're putting in place today is very manageable across the airline. You're effectively infilling utilization into a largely already existing network. So that's where our confidence is coming from this plan from a stability of revenue perspective, but also from an ability to operate the airline at a higher utilization clip. Savanthi Syth: That makes sense. I mean I wonder like what do you think you can get to in terms of utilization as you exit this year? And what's the dispute order, like what's the new normal in utilization? And when can we get there? James Dempsey: We've targeted about 11.5 hours across the entire fleet. And the fleet is more complicated than it was prior to COVID, where you got closer to 12 hours because of some of the engine noise with the new engine technology that exists across the fleet. So you do have aircraft that are less productive because of that. And so we've picked 11.5 hours. It gives us flexibility to add time to it, if we see it in certain periods and take time away from a seasonal perspective or other periods. So we think about 11.5 hours. That's our initial target to reset the business and do that between now and probably running into the summer of 2027. You get a big boost from a utilization rate of like averaging about 9 hours last year when you remove the 24 aircraft and rightsize the fleet. I mean that's a very, very important change that will happen quite abruptly midway through the second quarter. So that's a really good step change as you progress into the second half of this year. And then you've got to grow into the remainder of the fleet from a pilot flight attendants perspective to operate at close to 11.5 hours probably by summer 2027. Operator: And the next question will be coming from the line of Jamie Baker of JPMorgan Securities. Jamie Baker: So the $200 million of run rate cost savings, I'm curious what labor assumptions underpin that. I believe at one time, Barry had at least sort of implied that revised economics were part of a longer-term plan that you would articulated. I know that there was never an official 2026 guide today. But yes, straightforward question. Is there a pilot deal in your full year guide? James Dempsey: There is not a pilot deal in our full year guide. We continue, Jamie, in negotiations with the pilots through the mediation process. And so look, we'll update on that if we have something to talk to you about. The $200 million of cost savings, about half of it is rent, right, which comes from the deal we've done today. About another 1/3 of it is really network shape, driving unit cost savings into the business from where we fly basically. And then you've got efficiencies that come on the back of having a business that was fragmented as the week progressed. So Tuesdays and Wednesdays had lower flying. Saturday had slightly lower flying than the other 4 days of the week. And so you get efficiencies from that. But back to your primary question, no, we haven't baked in the cost savings, any changes to crew other than efficiency that comes naturally across the week from flying a more stable schedule. Jamie Baker: Well, that's a good segue into my second question. And I guess this kind of builds on what Savi was asking about. But clearly, there are 2 iterations of low-cost flying in the U.S., the high daily utilization model and the other being more of the kind of Allegiant Sun country, only fly when you can make money, low utilization model, whatever you want to call that. So it's clear you're leaning back into the high utilization model. What is it about Frontier's structure or network that assures us that, that is the better of the 2 low-cost iteration operating models in the U.S.? James Dempsey: Well, fundamentally, the efficiency that comes to the airline from flying a more regular schedule throughout the week is a meaningful cost saving in the business. And so this business model, the focus is always on strengthening your cost discipline across the business. And that's the appetite to do it. What we've seen in our business over the past number of months as we invest in loyalty, invest in the network and adapt the network to today's environment and the playing field that we're in today, we've seen real performance improvement across the week, including some of the off-peak days that you have, albeit with lower capacity deployed in those days. So we're pretty confident that the run rate RASM that we're seeing at the moment, given the structural change that's happening in the -- that has been happening in the industry, and the capacity discipline that is in a number of carriers across the industry puts us in a really good place to take advantage of that and bring the airline back to that cost discipline place than it was prior to COVID. Operator: One moment for the next question. And the next question will come from the line of Ravi Shanker of Morgan Stanley. Katherine Kallergis: This is Katherine on for Ravi. I guess just a question on the guidance range. Obviously, there's a bit of a wide range here. So can you just maybe talk us through what would push you maybe to the low end of the guidance versus the high end and what you're assuming there for the full year? Mark Mitchell: Yes. So as you look at the full year, right? I mean, as Jimmy highlighted, this is a transition year. So as we go through this year, working to reset the productivity and the efficiency of the airline. We've got cost savings that we've got line of sight to that we're targeting. And so as you look at that guidance range, it takes into account the fact that there is a transition, there's a timing element to that needs to be worked through. And as you look at the other side of the range, we are seeing a more constructive supply-demand environment, and we do expect as we go through the year, benefits on it from a productivity standpoint and a cost savings standpoint and also further traction on the revenue initiatives that were highlighted earlier. Katherine Kallergis: Got it. That's very helpful. And just as a quick follow-up. What was the catalyst for deferring some of these planes? I know you talked about how 10% is going to be the right growth for you. So is it more so figuring out what the growth rate long term would work for you guys? Or kind of what kind of kicked this off? Robert "Bobby" Schroeter: Yes. I mean we've been -- look, we're obviously managing over the last 2 months, 2 deals that we've been doing to rightsize the fleet. The reason we picked 10% is we think it provides more stability from a revenue perspective than the airline has had historically where it's had a growth rate of 20% plus in certain years, but certainly high teens growth rate. And so we think 10% is a good number for the business to grow at. It provides an opportunity for us to drive growth into new markets where we're offering value that is clearly a differentiator with the rest of the industry, given our low cost base. And so we think about 10% makes sense. Obviously, you can accelerate that if you choose to or decelerate it depending on how you utilize the airline. But we think around 8%, 9%, 10% is a good number for the airline to be at over the kind of long term. We expect as the airline grows beyond 2030 and beyond, that may come down a little bit because the airline is much bigger. And so the level of growth is not necessarily as high from a percentage term basis, but may well be consistent with the ASM production that you produce each year from a growth perspective. Operator: And the next question will come from the line of Duane Pfennigwerth of Evercore. Duane Pfennigwerth: Thank you. Jimmy, I wonder if you could speak to return conditions generally on your engines. How much is an engine rebuild costing you in the current backdrop versus maybe what was contemplated in these leases 12 years ago? And if you're willing to speak to it, just remind us what your agreements sort of require at the back end? Is there a true-up mechanism in your return conditions? James Dempsey: Yes. I'm not going to get into the complexity of the deal that we've done in great detail. These are not 12-year-old aircraft. These are midway through their lease life. And so the opportunity that came is related to a need for more engines in the CFM engine pool. And so we have been in dialogue with multiple parties around this for the last month or so to try and put a structure in place that work for both us and them. And so we've got to a very creative place. There is no liquidity penalty on Frontier in 2026 in relation to this deal. We have to work through the redelivery conditions of the engines over the coming months. But we think that the cost of this is relatively minor in the context of our fleet. And actually, what it does, Duane, is it gives you a meaningful improvement in expected maintenance costs in the next 3 to 5 years from removing these aircraft from the fleet. So this is a very positive deal both in the short term and to reset the productivity of the airline, but over the medium term in terms of the maintenance profile of the business in the next 3 to 5 years. And so we're really happy with the deal that's been struck. Duane Pfennigwerth: Okay. How will you measure -- should we view this as this is a one and done or this is one of perhaps several of these? How will you measure if 24 aircraft is sufficient to get you back to where you need to be? James Dempsey: I mean, look, they're -- I don't know that there's another opportunity that is -- that can mirror this opportunity that we put in place to remove 24 aircraft. There may well be an opportunity. It would just accelerate the productivity of the airline. You would just move back to an 11.5 hour utilization rate at a faster pace. We've been very focused on this deal and separately fixing the medium- to long-term growth rate of the airline, so that we could have a measured growth profile of the airline. If another deal comes along, we'll certainly look at it, but we'll be disciplined in terms of how we assess whether it's the right thing to do for the airline or not. Operator: And the next question will come from the line of Michael Linenberg of Deutsche Bank. Michael Linenberg: Yes. Just maybe touching back on Duane's question, Jimmy. Obviously, the return of 24 airplanes, normally, there's a sizable upfront cash component tied to redelivery costs. I think you said that there was no liquidity penalty. So presumably, no cash goes out the door when they return. And I think you mentioned also that the P&L impact, it seemed like it would be modest. Is that reflected like when I look at the range for the year, the loss of $0.40 for the profit of $0.50, does that include any sort of P&L impact that would be associated with any sort of redelivery costs on the airplane? James Dempsey: Yes. So there will be a onetime expense for noncash onetime expense that occurs when we execute the final agreements. But there -- and look, that onetime expense is likely to be non-GAAPed out. The guidance range puts -- takes into account any real costs linked to this deal that we have from a return condition perspective. Mark Mitchell: So those onetime costs that we expect to be non-GAAPed out would not be part of that range. Michael Linenberg: Yes. Okay. Great. And then just on my second question, I saw that you did increase the size of the revolver and as I recall, I believe you had collateral pledged against that revolver, you could correct me if I'm wrong. But if you could just give us a sense where does your sort of unencumbered collateral position stand? Mark Mitchell: Yes. So the revolver is backed by our loyalty assets. And so as we have in the script and as we've talked about before, those cash flows continue to perform well. We just had in Q4, our third consecutive quarter of double-digit growth. Q4 was up over 30%. So those are the assets that back the revolver. And yes, you're right. In December, one of the banks that supports the facility, increase their position, providing a vote of confidence for the revolver. James Dempsey: Yes. And just to add to what Mark has said, like one of the byproducts of deferring aircraft with Airbus is that you have less PDP payments that are required in the near term because you're effectively taking a pause on deliveries during 2027. And so you end up actually with less because we finance some of our PDP, you end up with less drawn debt in our PDP structure. So you actually end up in a lower net debt position. Mark Mitchell: Yes. And to Jimmy's point, so you'll see in the guidance that we put forward an expectation of net PDP deposit returns. So lower PDP balance at the end of the year of $170 million to $210 million. And with that deposit level going down, the corresponding debt levels would go down as well, so helping the leverage ratios. Operator: Our next question is coming from the line of Scott Group of Wolfe Research. Ryan Capozzi: This is Ryan Capozzi on for Scott. Maybe first, so we saw a pretty big divergence in fare revenue versus ancillary revenue trends this quarter. What were some of the drivers here? And how should we think about the growth of both segments going forward? Robert "Bobby" Schroeter: Yes. So I kind of talked about this a little bit earlier. One of the things that we've done in the past quarter was migrate back to a basic first product. And what that means is people go in, they're deciding whether they want to take the basic product and purchase ancillary -- purchase whatever ancillary products they want from that or they can choose a bundle of which we have 3 bundles there and can choose that. So that has had good upward movement around ancillary itself in addition to NDC, the new distribution capability, which is you have -- it's effectively a direct connect. We've been scaling that up more broadly in the past quarter. And not only does that help conversion overall but the products, the bundled products are actually on the shelf, which they hadn't been previously. So that again helps move things back in the curve, helps you yield up and helps bundle attachment as well. So there's a variety of things that are unique to us again that have helped from that perspective. On the fare side, additionally, as we move back to basic first, a lot of that -- we're disciplined in how we handle that from a revenue management perspective. And that has helped, along with, of course, the environment, the macro environment has helped solidify an outsized benefit on that side as well. So you're seeing fare improvements, you're seeing ancillary improvements. And again, we anticipate based on some of those things being very structural to see that benefit move forward as well. James Dempsey: And Ryan, just to add to what Bobby you said, like, one of the benefits we're getting from having -- we went through this about 2 years ago with the new Frontier in our website, and we played around with different structures during last year. We got to a much more disciplined place from October on in terms of the way we price as he mentioned. But don't underestimate the impact that moving to NDC and giving clarity to someone who's booking through an online travel agent, exactly the total cost of their trip with Frontier. And so what you're seeing today is an ability for a customer to look at the value that they can get from Frontier by adding a bundle, economy bundle or other bundles to their booking. And so they know the all-in price. Historically, a customer would book through a GDS or through an OTA linked to GDS, and they wouldn't have that clarity. They just see the fare and then they typically come to our site at management booking or at check-in and add either on an a la carte basis or through a bundle, the incremental products that they want to buy. And so what we're seeing is an earlier conversion of bundles in the booking curve at the point of booking of the customer, but also clarity for the customer where they actually see the real value that's created by booking with us in comparison to the competition. And so that is having a unique benefit into Frontier. And other airlines have obviously had NDC for quite some time. We were late to the game. But since we launched it, we've seen a really good attachment rate and conversion rate across that distribution channel, where it's adding to the improvement in unit revenues that we're seeing in the business. Ryan Capozzi: Got it. That's helpful there. And then could you maybe just talk specifically about your strategy in Atlanta this year and maybe why you're growing so aggressively there this year? James Dempsey: Yes. I mean you've seen Southwest and Spirit reduced capacity in Atlanta. And we have, for a long time, had an operation in Atlanta, and we've seen an opportunity to enhance that in terms of the volume of traffic flows that we are flying from Atlanta. And we're really happy with the performance of the base. We had about 60 daily departures in Atlanta through the peak last summer. And obviously, we're encouraged by the commercial performance that we're adding more departures this year to Atlanta. So we're very happy with the performance. Operator: Our next question is coming from the line of Andrew Didora of Bank of America. Andrew Didora: Actually, just another question on your growth this year. So you talked about 50-50, kind of 50% new markets. You just touched on Atlanta. I guess in the 50% that you kind of dub the infilling, adding in Tuesday, Wednesday, Saturday flying. But RASM is improving now, I know these off-peak days have been highlighted as sort of the weakest RASM days. So why are you adding these back? James Dempsey: Largely because, Andrew, we see a real improvement in the revenue environment from more disciplined capacity deployment across the industry. You've seen significant reduction in capacity that's come from Spirit Airlines, particularly in the West of the United States. And so if you look historically, like 2 years ago, the overlap between Frontier and Spirit was close to 50%. It's now meaningfully lower than that and meaningfully lower than that in the West of the United States. And so we see opportunities that are coming on the back of their changes in capacity that we think allows us to move more flights to off-peak days of the week and do it successfully and contribute to the overall airline. And so that's really one of the reasons behind us. We're also seeing some discipline across other airlines in terms of their capacity deployment. And then we're really encouraged by the performance in terms of our revenue generation with the changes that we made that we discussed earlier around the disciplined pricing strategy together with actually the new distribution capability that we have across all our OTAs now. So we feel pretty confident that the revenue environment is moving in a very, very good place. And I mean, fundamentally, this business model is built on higher utilization and really strong cost discipline and that higher utilization gets you to a really good unit cost place that we think gets the airline back to -- on a path to sustain profitability. Andrew Didora: Got it. Understood. And then I guess I'll ask the question. Given you're backfilling a lot of Spirits markets, does that mean you're no longer would have interest kind of going forward in terms of combining with Spirit in the future? James Dempsey: Sure. Look, I'm not going to speculate on what happens next with Spirit. Look, both the Board and I are solely focused on putting Frontier on a path back to sustainable profitability. And that's really been the focus and high attention for the last 2 months. Operator: Our next question will come from the line of Daniel McKenzie of Seaport Global. Daniel McKenzie: Jimmy, I guess, first, congrats on your new role. And I guess my first question really is just putting on the hat of a longer-term investor, getting that capital into your stock. Is the Board holding you to any specific profit metrics, so either return on invested capital, operating margin or however, I guess you're measuring the success of the business. James Dempsey: Look, for the last 2 months, Dan, as you can see from what we've announced today, we are very focused on bringing the airline back to sustained profitability. I've been given a clear mandate to change the business and bring that back. And like I've been very focused on rightsizing -- initially rightsizing the fleet and getting a cost plan that makes sense for the airline over the medium term. Our job now is really to fix some of the other things in the business, such as like reducing cancellations and improving our on-time performance, that is the considerable effort that we have. A series of projects around to build customer loyalty into the business and a good customer experience that drives repeat traffic flows. And really, the outcome of that will be determined by how we perform on loyalty, right, and also the metrics that we have every day in terms of our operational performance. That's where the focus of the business is at the moment. Clearly from a long-term incentive perspective, there are multiple different metrics that exist in all of our teams in long-term incentives around shareholder performance and then the performance of Frontier within that world. And so we are very aligned with our shareholders with a real focus on returning the airline to sustain profitability. Daniel McKenzie: Yes, very good. My next question really is, I guess, for Bobby. A couple of points here. Just going back to that point of loyalty. What was the redeemed revenue per passenger in 2025? And how would you see Frontier exiting 2026 on that metric? And then just related to this is sort of the K-shaped economic recovery that we have seen here. I'm just curious, what percent of your passengers and/or revenue has been permanently lost from this uneven economic recovery, sort of among the low to middle income workers? And is that part of the missing revenue story today that potentially could come back at some point? Or how are you thinking about that? Robert "Bobby" Schroeter: Yes. I mean rather than talk about sort of the specific revenue around loyalty. I'll just talk about it in components of what we drive through revenue or through loyalty. So we have the co-brand card. Of course, that is a cornerstone of the loyalty program in terms of how we profit from that, but also provide value to our customers overall. That has seen tremendous amount of engagement. The overall loyalty revenue is up over 30% as we stated. And a lot of that -- a large part of that is the co-brand card set up. And again, that's because of the changes that we've made throughout the organization, not just in terms of what we provide from a product perspective, but also what we're providing in the loyalty program itself. And so you've seen engagement, not just in terms of new customers and acquisitions within that, but the spend has gone up tremendously as well within that, showcasing that people want to engage with us as an airline more than they had in the past. We also have 2 other subscription programs, of course, Discount Den and Go Wild, which have been very beneficial to us. Go Wild has seen a tremendous amount of upside in the revenue year-over-year as well. In large part because of the product that we provide, it's -- you're able to fly for free for a year and in some cases, more than a year based on when we rolled this out. And people have been seeing that value and transacting and we've been acquiring more Go Wild customers than we had historically within that. On the K-shape scenario, the way I'd say that is, look, we have a cost structure that provides opportunity for really multiple segments and create flexibility within that. We have people who want to have the lowest price possible. We have that. We also have been putting in a variety of options and premium products that people can engage with. UpFront Plus is one of those. Historically, we talked about the paid load factor there. That's up over 80% now. So -- and we have first class coming in a variety of other things. So we actually have the ability to profit in a wide range of setups and how people want to engage that other airlines don't have the ability to do as much. So we're focused on making sure that we have the cost structure set where we can continue to engage on that and provide the lowest fare but also providing premium products that people can engage with and if they so choose, be able to do that as well. So we have that spectrum. And so we haven't seen that. In fact, we've actually seen people engaging at a higher rate with us as we talked about some of the unique things that we have going for us, those actually will help in the future as well. James Dempsey: In terms of -- just to complete the K-shaped economy comment, like we are seeing an improvement -- a meaningful improvement in unit revenues. Like our unit revenues are going to be 10% plus up in the quarter. We'll see how March finally books in the coming weeks, but the trends are very, very favorable to the business. Bobby mentioned that we've obviously added some premium products into the business. But one of the benefits that we're getting is people booking earlier with clarity and booking their non-ticket items earlier in the process. And so our booking curve is actually extending out further than it previously was, which is a really good sign for our business and the product that we're selling and merchandising to our customers. Operator: Our next question will be coming from the line of Chris Stathoulopoulos of Susquehanna International Group. Christopher Stathoulopoulos: So I want to go back to -- and apologies upfront for another capacity question here, but I'm trying to reconcile, so the sustained profitability as part of your 4, I guess, 4-pronged plan here, 8% to 9% to 10% you said longer term here. Maybe if you could help understand -- and part of that, I heard in so far as the market, 50% in new markets. In the past, it's been about competing in some of these larger markets which are also typically more expensive to compete in and not sure how that also squares with the sustained profitability. But I guess maybe a more granular approach to how you're thinking about holistically whether it's the 10%, the 8% or 9% to 10%, you can frame that departure stage, engage, those tend to obviously have different margin profiles. How you're thinking about macro scenarios under that and also all the things that we're seeing from competitors here with their rebanking and connectivity efforts? It's just not entirely clear how that level of growth at this point is sort of, I guess, really squares with the plan that you've outlined and perhaps the best path forward, if you will, into this transition year into longer term? James Dempsey: Yes. I mean, most of the growth that's coming, I mentioned this earlier in the call, is coming from infilling the network that already exists, right? And so it's not a charge for 10% growth over the next 2 years where you're adding substantially new markets into the airline. So you already have clearly with a 10% improvement in RASM in this quarter, revenue stability in that network. And so we're really encouraged by the performance that we're seeing in the business in that network. We're obviously then looking at the opportunities that exist across the entire U.S. where capacity is changing across airports. And so we'll take advantage of capacity opportunities that exist at our cost base. And so our cost base is very, very important to how we deploy assets and how we move the airline back to a path to profitability. And getting more productivity and efficiency into the airline is foundational to that cost base and giving us the ability to offer real value to customers and that they now see it very clearly that real value, and they're able to attach to it and convert. And so that's where our business is. That's why we have confidence in growing the airline by 10% a year. We think it's very, very good for the unit cost in the business. And look, we have a value proposition to the customer that really is unmatched across the United States in a lot of the major markets that exist out there. And so we consistently provide the lowest fares and the lowest all-in pricing for customers. And we should be very proud of that as an airline. And why wouldn't we grow? Christopher Stathoulopoulos: Okay. My second question, I just want to follow up on the point Jamie made earlier. So it sounds like you're betting on or you're anchoring to this high utilization model, if you will. And I know you described this as a transition year. But as we think about Frontier exiting this year or end of decade, and you're able to achieve these initiatives here. In this environment, brand loyal, premium tech focused, however you want to describe it, could you help frame and I'm not asking for guidance here, but a high level assuming this all plays out and this environment is the new norm, if you will, how we should think about margins, free cash flow, return on -- anything at a high level that we should think about, assuming this all falls in place here and this high utilization model, as you said, you're anchoring yourself to is successful. James Dempsey: Sure. Look, we're very focused on moving the airline back to free cash flow generation business model. That is a core tenet of the modeling that's been put in place and the drive to rightsize the fleet this year. We use this year as a transition. I'm not going to start guiding 3, 4 years out but our expectation is that the airline gets back to sustained profitability and free cash flow generation over the next number of years, which puts the airline in a very, very strong position. Operator: We next have a follow-up from the line of Savi Syth of Raymond James. Savanthi Syth: I just was curious as you kind of go through these changes and some of your kind of sister organizations have kind of thought about financing aircraft recently. And curious what your views are on kind of continuing to use sale-leaseback versus some other avenues for financing? James Dempsey: Yes. I mean we're largely financed Savi this year through sale and leasebacks. I mean over the medium term, I think the airline will probably diversify somewhat from sale and leaseback financing. But I mean in the immediate near term, we've largely financed most of the fleet that's coming this year. And so I don't see any near-term change. But I can obviously over time, see navigating to kind of a more balanced financing structures across the airline where you continue to have a high proportion of your fleet financed with sale and leasebacks or financing, but you bring some other forms of financing into the business. That makes sense. If it commercially makes sense, we should do it. Operator: We will now turn the call back to Jimmy Dempsey for brief remarks. Please go ahead. James Dempsey: Thank you. I just wanted to quickly say thank you to all the analysts that are on the call. We're happy to take follow-up calls if you have any further questions today or in the coming days. And look, we look forward to seeing you in person over the next couple of months. Appreciate your time, and thank you very much. We have a lot of work to do here. We're going to roll up our sleeves now and move the airline back to a sustainable profitability path. I think that's fundamentally important for the airline. And I think today's plan that we've laid out to you puts us in a really good place and path to bring the airline back to that location. So thanks very much, and enjoy your day. Operator: This concludes today's conference call. Thank you so much for joining. You may now disconnect.
Bodil Torp: Good morning, and welcome, everyone. I'm Bodil Eriksson Torp, the CEO of Storytel Group. And together with me here today is, of course, our Group CFO, Stefan Ward. We are happy to deliver record strong Q4 and full year for Storytel with good financial and operational performances across both our streaming and publishing segments. We conclude 2025 with record high profitability and a strong cash flow generation. And we can say that we are in a good shape to continue our progress in 2026. So here comes some of our strong highlights for 2025 and Q4. Our Q4 highlights includes continued strong top line growth with improved profitability and a strong cash flow generation. Our streaming business delivered subscriber growth of 9%, reaching 2.7 million paying subscribers at the end of 2025. Our subscriber growth was strong across all our core markets in Q4 and also for the full year 2025. And the churn continued lower throughout the whole year, while ARPU levels in local markets remained stable. And this is, of course, a good indicator of the value that we bring to our book lovers. Our publishing business continued to deliver very good performance as well with external revenue growth of 18% in constant currency, also with high expanding profitability. In Publishing, we had a strong list of new releases also in Q4, such as, for example, the August price winner and the best-selling title Viton with Bea Uusma. And we have also today announced that we, during Q4, started the process to transfer our listing to NASDAQ Stockholm market -- main market, and it's expected to be complete in 2026. So now over to our financial performance in the quarter. We delivered sales growth of 12% in constant currencies and EBITDA growth of 15% in the quarter. Our gross margin was at a new all-time high level, while our EBITDA margin was at the 20% level for a second quarter in a row. So our net profit of SEK 300 million was boosted also by a one-off positive tax impact of SEK 195 million, and Stefan will come back and talk a little bit more about that as well. Cash flow was solid, and we ended the year with a net cash position. So we are very satisfied with the performance in Q4. We continue to see improved internal efficiencies while at the same time, our product development has been intensified during the year. So this is also more that will come, I would say. We crossed SEK 4 billion in sales for the full year 2025. Our full year EBITDA grew by an impressive 26% in 2025 over 2024. Our EBITDA margin for the year reached 18.8% -- this is keeping us well on track to meet our midterm 2028 targets as we announced last year at CMB in May. So over to you, Stefan, and the numbers of our 2 business segments. Stefan Wård: Thank you, Bodil. We had another solid quarter in our streaming business, adding close to 50,000 new paying subscribers during the quarter and over -- well over 200,000 for the full year. In the Nordics, we added 16,000 in Q4 and 57,000 in 2025. So a relatively strong intake in the Nordics where we have a good or high market share position. In Sweden, we had positive intake both in Q4 and for the full year. Outside the Nordics, we added 32,000 subs during the quarter and 152,000 during 2025. Our strongest market in terms of net intake was Poland with a total increase of over 50,000 for the full year. Other markets with strong subscriber growth included Bulgaria, the Netherlands, Turkey and Germany. At the end of Q4, our Nordic and non-Nordic subscriber bases were roughly evenly split at 1.34 million each. As a consequence, we continue to see a decline in the average ARPU as our Nordic ARPU is typically higher than ARPU levels outside the Nordics. This trend will continue. However, it is important to note that the ARPU levels in local markets remain stable to positive in constant currencies. Over the past few years, we have seen a significant decrease in churn levels and churn continues to move lower also in 2025, ending the year at a new all-time low level. Looking at streaming financial, we delivered sales growth of 10% in constant currencies and 5% in reported. Streaming gross margin was 43.6%, while the EBITDA margin was 15.3% for a total EBITDA growth of 8% year-on-year. Our EBIT in streaming improved by 21%. We're on track to cross SEK 1 billion in quarterly revenues from streaming during the second half of 2026. In our Publishing segment, we delivered another strong quarter with 11% year-on-year revenue growth and external publishing revenue growth of 21%. Publishing EBITDA margin expanded to 32.2%, enabling EBITDA growth of 19% year-on-year, while our EBIT grew by 20%. Storyside is our in-house publisher that has been fundamental for us to build and develop the audiobook market, both in the Nordics and throughout most of our non-Nordic footprint. It remains the biggest profit engine of our publishers and had a very good year. Other publishers that delivered strong results during the year are Lind & Co, Norstedts and Bokfabriken. Bokfabriken was acquired early in 2025, and has rapidly improved to become one of the key profit contributors in our publishing business. It has exceeded our expectations for 2025 and prospects are promising also for next year. In terms of cash flow, it remained strong, both in Q4 and for the full year. Cash flow from operations before changes in working capital was -- in Q4 was SEK 217 million, up 10% on a comparable basis. That means adjusting for the Copyswede amount of SEK 34 million that was included in Q4 last year. Cash flow from operations for the full year amounted to SEK 647 million, up 26% year-on-year. We had some tailwind from working capital in the quarter, but it was less than anticipated. The reason for this is that we have tied up a little bit of unnecessary working capital during the year and had a negative impact from working capital of SEK 75 million. These are due to some unfortunate internal issues that has been resolved. So our best estimate for working capital development in 2026 is to have a neutral impact for the full year. Cash flow from investing activities was SEK 55 million in the quarter and SEK 252 million for the full year, of which SEK 160 million relates to CapEx. Cash flow from financing was minus SEK 12 million in the quarter and minus SEK 235 million for the full year, including debt repayments of SEK 100 million and last year's dividend of SEK 1 per share of close to SEK 100 million. On the next slide, we can see the balance sheet. And in here, you can have a look -- both have a look at the cash and equivalents position of SEK 686 million that we had at the end of the year. You can also see that we have recognized a deferred tax asset of SEK 195 million relating to previously unrecognized tax losses carried forward. This is now deemed as highly probable to be able to utilize and therefore, moved on the balance sheet included in the noncurrent financial assets. We concluded our refinance agreement in January, where for our interest-bearing debt of SEK 550 million was -- by year-end, it was moved from noncurrent liabilities to current. But as we have concluded the refinancing early this year, it will be moved back to noncurrent in the Q1 results. Our equity to assets ratio continues to improve and is currently at 53%. On the next slide, we can see our net debt position was SEK 136 million at the end of the year. The strengthening of our balance sheet reflected the new terms of our financing -- it provides us with plenty of flexibility to pursue both organic and M&A growth strategies going forward. In addition to strong operating profitability, we also expect to see lower cost of financing and for the tax rate to remain low for the next several years. With that, I hand back to Bodil. Bodil Torp: Thank you, Stefan. And to deliver strong financial performance, we need to also deliver strong customer value. And I just would like to take some minutes to highlight what's going on during 2025, where we have increased our efforts for increased customer experience. We have a market-leading position across most of the markets in our footprint, and we are proud of that. And our strategy to defend that is the position that we have built for our 2 pillars, a world-class user experience and the strongest content catalog. We cater our book level segment where reading books is a natural part of daily lives. So since I joined in October 2024, reigniting our industry-leading product expertise has been moved up to the top of our strategic agenda during last year, and it will stay there. We will be in the front of the evolution of book consumption across all formats. And over the past year -- last year, we launched several strong new features, and I will also highlight that there is more to come here. We will continue to intensify our investments in the local relevant content, but also, of course, in the user experience that is extremely important for us. So that will continue to improve both engagement and satisfaction for our book lovers of today and tomorrow that is building our resilience. So one of the most common specific feature that has been requested from our customer is actually listening and reading. This is enabling our users to read along as they are listening or just jump between read and listening. And that's a fantastic feature that many of our customer loves. Sync listening is currently enabled on almost 50,000 books in our catalog, and this is expanding as we speak. Another feature is Story Art recently launched that shows art features connected to a specific time line in the book. Story Art with all the visuals now becomes a natural part of the listening experience optimized in the player. This adds a new immersive layer to the story, driving engagement again and connection with the story. So pilots are launched with Pottermore, Harry Potter in Netherlands, and we have also launched it together with the Bea Uusma's title Viton that also was the Swedish August prize winner last year. So this is very exciting. And here, we will soon see many more titles coming up also in the children's segment, I would say, where we see -- where we have some demand. The Sleep Timer is also very -- yes, it's a function that really many of our users use every night. It's used by 300,000 users every night. And we recently launched Sleep Timer recaps where we use generative AI to enrich the rewind options and to enable a better recap and understanding of the story. Also when you fell asleep -- fall asleep and you don't really know where did you lost the story. So it's easier for you to actually find where you were sleeping in the story. So it's easier to recap and follow up where you start to listen again. This is some of our new features. And with this, I would -- it's important for us to highlight that we have more exciting features to come in pipeline, and this is a strategic important objective for us to increase our customer experience in the payer. And over to the last slide here to recap our messages for Q4. We have delivered on our 2025 targets with record profitability and strong cash flow generation, making this a successful year. Our streaming subscribers hit 2.67 million with churn rates consistently moving lower, while ARPU levels remain stable in local currencies. Our Publishing segment delivered record external revenue growth. Cash flow generation continues to increase, and we closed the year with a net cash position. We remain on track to reach our 2028 midterm targets. Our firm targets for this year, 2026 is to deliver at least SEK 870 million in EBITDA. We also proposed a dividend of SEK 1.50, up from SEK 1 last year. We see room for -- we see room to increase our dividend by a similar amount also in 2027 and 2028. We are ready to take our business to the next level and one step is also to change listening to the main market in 2026. So with this, I would say stay tuned. And now we are ready to take your answers -- no to take your questions, so we can answer your questions. So please go ahead. Operator: [Operator Instructions] The next question comes from Joachim Gunell from DNB Carnegie. Joachim Gunell: So the new market listing here should provide some more capital allocation flexibility. And I noted here that you already had some one-off charges related to this list change in Q4. So can you comment a bit on when you expect this to be completed? And if you think that buybacks is one tool for shareholder remuneration already in 2026? Stefan Wård: Well, we aim to move the -- or what we have communicated is that it will take place during 2026. We will try to keep it a speedy process. And hopefully, we will be done by mid-2026, but that is not a firm promise at this stage. It allows us to have a broader set of tools for shareholder strategies, absolutely, but I can't comment any further than that. Joachim Gunell: Great. And in light of yet again strong cash flows and the strong balance sheet that you now have, can you provide just some reflections on your appetite for non-Nordic content acquisitions for 2026 and the pipeline you envision there? Bodil Torp: Yes, we have communicated that before that we have an active M&A agenda and the appetite is high, I would say, and we have a high activity ongoing on different markets. So that is what we can say for the moment. And we have also communicated that we are into both streaming and publishing, preferably publishing to roll out our model -- business model that has been proven in the Nordics to more markets. So we are on track on having a lot of meetings for the moment. That's what we can say. Stefan Wård: High activity on the M&A agenda, and we look to broaden our publishing base in our core markets outside the Nordics. Joachim Gunell: That sounds encouraging. And you comment here with regards to -- we see strong ARPU development on an organic basis. Gross margin is strong here and the churn trends continue to be supportive, I think, contrary to some competitive woes out in the market. So can you comment just a bit on whether you've seen any sort of impact from heightened competitive activity in Sweden? Stefan Wård: Well, in Sweden, we added -- we grew our subscriber base in Q4, and we grew it for the full year. So we have net additions in 2025 and the competitive environment is challenging, but it's not more challenging in Q4 than it was in Q3 really. So -- but there's a new entrant. And I mean, it's some uncertainty on what to expect going forward. But so far, it has been business as usual from our side. Joachim Gunell: Perfect. Maybe just squeeze in one question -- perfect, just one question since Bodil, you commented a bit about the user experience enhancements that we have seen in this year, but also that you now provide some a la carte titles in English through the Penguin Random House partnership here. So just help us here since strong local content slate is a key competitive advantage, whereas -- I mean, should we interpret this partnership with Penguin Random House -- you're seeing some shift in how your customers consume content? I mean, is the younger consumer cohorts increasingly preferring English language titles? And is this some sort of trend that you see? Bodil Torp: No, I wouldn't say that we change the focus. I mean the local knowledge and the local content is still extremely important for us. We know that over 85% of the consumption in the audio books and e-books are in local language. So that is -- we won't leave that focus. That is super important. But I mean, paper book and also the English catalog, it's, of course, one way of adding value to our customers that also want to have those titles and also the English content. So it's more like expanding our value to the customer. It's not about changing focus. The local perspective is super important still. And regarding the features and then customer experience in the app, it's also a high priority for us now to actually increase the customer experience and the customer value to actually also be the front runner when it comes to listening and reading books regardless format, I would say. But it's -- I think the company has been in a very intense years for a turnaround, and we didn't see that many feature launched a couple or 3 years ago. So I think this is super important to build our resilience to increase the engagement and loyalty as it comes to our customers. So we need to be the best payer when it comes to audiobooks and e-books. So this is -- I'm really proud of our product and tech team that also launched. We had like 7 features during end autumn last year, and we are on a good pace now. So you will see more to come when it comes to that. That's also important for the resilience and to be the front runner, so to say. Operator: The next question comes from Georg Attling from Pareto Securities. Georg Attling: I have a couple of questions, starting with the impact from Spotify. So I mean, it's quite clear in your Nordic numbers here in Q4 that they aren't much affected. But I saw comments from your competitor, BookBeat, who said that the churn to Spotify has eased in early 2026. So I'm just wondering if that's something you see as well that the churn to Spotify is easing off a bit here in early '26. Stefan Wård: Yes. We haven't seen any increase in our churn in neither of the markets where Spotify has launched in the Nordics. We assume that consumption is growing for them, but it looks to be rather from new sort of nonexisting audiobook consumers. So new people in the market would be our best guess. Georg Attling: Yes. That's clear. Then second question on the guidance here for '26. So I'm just wondering, one, how much margin expansion you baked into this? And second, how much of that SEK 870 million that is licensing revenue from Spotify? Stefan Wård: We can definitely not comment on what is licensing revenue from Spotify in that guidance. But the guidance is based on our existing model. It's pure organic. It's based on our subscriber growth estimates and our best view of what we can get from the publishing business. Yes. Georg Attling: Yes. But it sounds like if you're going to reach SEK 1 billion in quarterly streaming sales in second half of '26, it's quite a lot of growth in that top line as well. It's not solely margin expansion, so to say. Stefan Wård: No, certainly not. The guidance gives us a firm commitment for you, the external viewers of the company, a firm commitment to what to expect from us. But it also leaves us some flexibility to prioritize if we see that we can drive growth, then we can do that without being limited by a margin range, so to speak, and vice versa. If we don't see those opportunities or get good returns on our marketing spend, then we will reach that number through other strategies. But I would say that expect us to try to grow top line as much as possible while protecting our satisfactory profitability at current level, but we're not seeking sort of to maximize the margins in 2026. It's a combination. Georg Attling: Yes. Just a final question here on the ARPU in non-Nordic core, quite strong here in Q4 if you compare it to quarters -- 5 quarters in the year. So I'm just wondering what's driving this? Is it a mix shift in countries? Or is it any price changes in those markets? Stefan Wård: Well, it's a little bit of both, but we're growing in markets where we have relatively good ARPU levels, and we try to increase prices where we feel that, that is motivated. Operator: The next question comes from Martin Wahlstrom from SB1 Markets. Martin Wahlstrom: Starting off, I noted a while back that Spotify introduced a new feature where you could kind of shift between physical and e-books, the Page Match feature and also that they introduced kind of reselling of physical books on their page. Kind of are you surprised by their ambition in this space and kind of the turn that they are going into? Bodil Torp: Yes. I would say we have high ambitions regarding not only what Spotify is doing, but it's more about our own agenda to actually increase and enhance the value to the customer. And I think we have delivered on that in a good way during the 6 months when it comes to the features. So we are on a really good track here, and there will be more to come. That is what I can say for the moment. But it's on a high -- it's on the top of our strategic agenda, of course. Martin Wahlstrom: Sorry, my question might have been a bit vague, but I'm looking for -- looking at Spotify's ambition, kind of the features they seem to be introducing and rolling out and evolving their offering, kind of -- is this level of ambition in line with what you could expect from them? Or are you surprised in any way? Bodil Torp: I think, I mean, they are good and we know that they are good in driving innovation and features when it comes to the music industry. So that's maybe... Stefan Wård: We're not really surprised. I mean it was fairly anticipated that they were entering the market and that they will have a competitive offering is also expected. So I wouldn't say that we're surprised by any of the features that they've launched or any parts of their offering really. When it comes to physical book sales, it's in market that are not outside of the Nordics and for English-speaking titles. So that is not hugely important for us at this stage when it relates to physical book sales. Martin Wahlstrom: Okay. Great. And then I was just wondering if we could get any comments on the impact from the Klarna partnership that was announced during the fall. Bodil Torp: Yes, we are -- I mean, it's a big partnership and still a bit early to comment on that. We are in collaboration in 14 markets with Klarna and increasing also our efforts in that partnership. So I have nothing really now to comment on that partnership. It's in line with our expectations for the moment. Martin Wahlstrom: Yes. Great. And then kind of looking at your churn trends, they're, of course, very encouraging as they're trending lower. But kind of how do you balance with kind of new customer intake and driving down churn? I mean, are you a bit too cautious on new customer intake? Or kind of how should we view that? Stefan Wård: I wouldn't say that we are too cautious, but we're mindful of getting good returns on our marketing investments. Churn trends is more explained by that we -- our subscriber base as it grows, it also becomes -- a larger part of our base has been customers for a very long time, and they basically don't churn, and that helps us move the churn trend lower. Then when we go into new markets, we still have high churn rates in the beginning and a lot of churn for new customers in the early months, that is nothing that has changed. But the portion of loyal long-time customers is steadily increasing in the base, and that helps bringing churn down over time. Martin Wahlstrom: Great. And then just one final question here on the gross margin, which was up now again year-over-year. Kind of how should we view this going forward? Should flatten out here? Or it seems it's continuously drifting a bit upwards? Stefan Wård: Yes. In the streaming, we are growing our business outside -- we're growing in the core markets outside the Nordics. And in those markets, we typically have a higher gross margin than streaming in general, especially compared with the Nordics. And that trend is expected to continue. So we will have some support for improving gross margins in the streaming mix. On Publishing, it's more an effect -- we had a very strong year in Publishing 2025 and especially a very strong finish also with the Nobel Prize winner and this August Prize winning titles, and that helps to boost the gross margins in Publishing. That is a little bit less certain how gross margin in Publishing will evolve going forward. But I think what you should expect from us is to have a gross margin above 45%. I don't think it's reasonable to expect it to expand from 47%. That is a range, 45% to 47% is -- it's a range where we are quite satisfied. I understand that there's some surprises between quarters, but it's the nature of our business, especially when looking at the publishing side of it. Operator: [Operator Instructions] The next question comes from Derek Laliberte from ABG Sundal Collier. Derek Laliberte: I wanted to ask about -- and apologies if this has been covered somewhere, but I just noted that operating expenses were up by quite a bit in Q4, both sequentially and year-on-year. And you mentioned the marketing spend here to drive growth. But what else is it that sort of results in the higher OpEx? Stefan Wård: No, it's mainly an increase in marketing, and we also flagged that in the Q3 call that we -- in Q3, it was a little bit too low. So we saw that increase in Q4. Other than that, there's no real significant explanations. It's relating to us growing top line basically. So I don't have any better answer than that Derek. Derek Laliberte: I'm happy with that. And on the marketing spend there, I mean, can you give any comment about where you've increased spend the most and also when you expect to see sort of an effect on the subscriber base from that? Stefan Wård: Well, the biggest part of our marketing budget is still the Nordics, but we don't increase that. The increase in marketing spend is more related to growth outside the Nordics, which is also visible in how the subscriber intake is divided. That's the best answer I can give you. Derek Laliberte: Perfect. That's great. And then -- sorry if you covered this as well. But you talked -- you got a question there about the ARPU in the non-Nordic segment, which looks really good there up sequentially. Did you say where have you made price adjustments, if any? Stefan Wård: We don't comment on the local markets. You can look at the different websites for granularity, but we are trying to work with price where we find it motivated. And then we're growing more in markets where we have a good or higher ARPU levels that helps also. So it's both a mix change and a price effect. Operator: There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Stefan Wård: Okay. So we have a few written questions. First one is churn level in the non-Nordics core is not as good as the other markets. What is the reason for that divergence? So churn in non-Nordics core is lower than in the Nordics, and that has to do with a little bit of a maturity profile that will drive a stronger subscriber intake in these non-Nordic core markets. And that is also -- when we grow fast, that also increases the churn somewhat. So it was the same when we were more aggressive in the Nordics back in the days when we sort of built the Nordic market. We had a strong subscriber intake and the churn levels were at a higher level. So that's the most or the best answer I can give to that question. Then Bodil, we have a question about the Storytel Reader. Any news about Reader? Bodil Torp: Yes. Any news about that? Yes. I know that I have said that we are into also relaunch the Reader, and there's a lot of customers waiting for that. So I will say that we are quite nearby to launching and test it in some of the markets, not all of the markets, but some markets that we think that we have the most -- the best fit into where we see the demand from the customers. So I will come back to that quite soon again. We will also do it in a cost-efficient way. That's super important. That's why it takes some time. Stefan Wård: Yes. Then we have a question relating to any thoughts on the impact for Storytel on Spotify entering the Nordic markets. And what we have said there is that so far, we are satisfied with the churn rates in those markets where Spotify has launched. So in this very short period where they have been in the market, we haven't really seen any negative impact on our side. We don't expect that to be forever. I mean we view them as a serious competitor, but we hope that they help develop the markets in those markets where we coexist and that they will -- yes, they will help us build the audiobook market, and that could be something that both consumers and providers benefit from. Then I have a question regarding the unfortunate internal working capital impacts referred to in Q4. Please expand what these were and what should normal working capital performance looks like? Okay. So the headwind or the unfortunate impact of working capital relates to the full year. We actually had a tailwind of SEK 14 million from working capital in Q4. What we can say there is that we have shortened the period, the number of days that we pay our payables a little bit too much, unnecessary too much, and we have altered that back. So that should reverse. I would estimate that impact to be around SEK 35 million. And then normal working capital is the guidance that we mentioned earlier in the call that we expect a neutral impact on working capital for 2026. And then we have a final question relating to our dividend policy for the upcoming years. And what we have communicated there is that we increased the dividend this year. I know that it wasn't formulated as an ordinary dividend last year. But from -- going forward, it should be viewed as we started with SEK 1. We raised it to SEK 1.50. What we have said is that we expect to be able to increase it by a similar amount also for '27 and '28. And that fits into our midterm targets and provide some visibility on what to expect. So far, we see that we generate so much cash flow that we are able to pursue our growth strategies while also rewarding shareholders through other strategies. and we expect this to continue over the midterm. If there will be any changes to that, it should be in our sort of when we update the midterm targets. But it looks promising. So hopefully, that clears the picture. Okay. Do we have any final questions? Nothing more. Okay. Then we conclude the call, and thank you for your interest in our company. Looking forward to see you at our next quarterly update. Bodil Torp: Thank you very much for all the good questions and participation today, and we are really looking forward to next quarter. Thank you.
Operator: Good morning, everyone, and welcome to Crombie REIT's Fourth Quarter Conference Call. [Operator Instructions] This call is being recorded on February 11, 2026. I would now like to turn the conference over to Meghna Nair, Manager of Investor Relations at Crombie. Please go ahead. Meghna Nair: Good day, everyone, and welcome to Crombie REIT's Fourth Quarter and Year-end 2025 Conference Call and Webcast. Thank you for joining us. This call is being recorded in live audio and is available on our website at www.crombie.ca. Slides to accompany today's call are available on the Investors section of our website under Presentations & Events. Joining me on the call today are Mark Holly, President and Chief Executive Officer; Kara Cameron, Chief Financial Officer; and Arie Bitton, Executive Vice President, Leasing and Operations. Today's discussion includes forward-looking statements. As always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings, including our management's discussion and analysis and annual information form for a discussion of these factors. Our discussion will also include expected yield on cost for capital expenditures. Please refer to the Development section of our management's discussion and analysis for additional information on assumptions and risks. I will now turn the call over to Mark, who will begin the discussion with comments on Crombie's strategy and outlook. Kara will review Crombie's operating and financial results, and Mark will conclude with a few final remarks. Over to you, Mark. Mark Holly: Thank you, Meghna, and good morning, everyone. 2025 was a standout year for Crombie for disciplined execution across the 2 pillars of our Building Together strategy combined to deliver solid results. These pillars, value creation and solid foundation, guide our day-to-day execution and have been designed for resiliency, stability and long-term unitholder growth. 2025 was a year that highlighted the power of this strategy and the operational excellence of the team. A few metrics worth highlighting. Four consecutive quarters of record committee occupancy, ending the year at 97.7%; average annual minimum rent growth of 4.8%; commercial same-asset property cash NOI growth of 3.7%, above our long-term target of 2% to 3%; 6.5% growth in AFFO per unit; a distribution increase; and finally, a credit rating upgrade from Morningstar DBRS, an impressive year. Today, I will focus my comments on 3 drivers within value creation, own and operate, optimize and partner. Let me start with own and operate, the foundation of value creation and the core of our business. Our coast-to-coast grocery-anchored centers sits at the heart of vibrant growing communities, generating consistent traffic and strong tenant demand. Through disciplined portfolio management and deliberate curation of our tenant merchandise mix, we continue to position Crombie as an attractive partner for retailers seeking access to multiple markets on a coast-to-coast basis. In 2025, demand for our space was very strong. Established national retailers and emerging concepts, both sought space across our portfolio, and that demand combined with proactive leasing management drove solid results. Year 1 renewal spreads averaged 10.4% and our weighted average lease term remained healthy at 7.9 years, reflecting the stability of our tenant relationships and the steady growth embedded in the portfolio. Portfolio management is central to our own and operate driver as we always look to high-grade our portfolio of assets. On the acquisition front, we continue to lean into grocery-anchored retail opportunities. In 2025, we added 5 Empire-bannered grocery properties totaling 197,000 square feet for $49.7 million. The acquisition of the Queensway property in Q4 was the fifth. The Queensway property is a 3.6 acre newly constructed 51,000 square foot Longo's anchored site with 2 freestanding bank pads. It was built by Crombie as development manager on behalf of Empire and subsequently acquired for $28.5 million, excluding closing and transaction costs. The property is 100% leased with all tenants now operating. It is exactly the type of necessity-based high-quality asset that strengthens our portfolio and reflects the value of our strategic partnership with Empire. We were equally disciplined on the disposition side in 2025, where we sold 2 noncore properties in New Brunswick, the 140,000 square foot Main Street office in Moncton, which had persistent vacancy, and Loch Lomond Place, a non-grocery retail property in St. John. These acquisitions reduced exposure to lower growth assets and freed up capital to be redeployed towards higher-quality properties that will provide stronger long-term FFO growth. We also completed a strategic land swap at Barrington Street in Halifax that strengthened our position on a key urban site and enhanced its long-term development potential. Ongoing portfolio review and thoughtful capital recycling remains an important driver to how we provide long-term returns for our unitholders. As part of our financial results press release last night, we highlighted that we have entered into a binding agreement to acquire a grocery-related industrial asset in Whitby, Ontario for approximately $115 million. The asset is a 42-acre property with 484,000 square foot high bay industrial distribution facility, fully leased to Sobeys under a long-term lease agreement. The facility features 37-foot clear heights with approximately 90 loading dock doors and roughly 240,000 square feet of temperature-controlled cooler space. Located directly off Highway 401 and within a 5-minute walk to the Whitby GO station, the property offers exceptional connectivity and operationally supports Sobey's distribution to its Ontario grocery stores. This acquisition brings long-duration income, serves as a central logistics infrastructure and sits in a tightly supplied transit-connected industrial corridor. It strengthens the defensive profile of our property and portfolio and expands our presence in grocery-linked industrial real estate. The acquisition enhances our long-term cash flow growth and is accretive from day 1. Turning briefly to our Calgary customer fulfillment center industrial asset. In late January, Empire announced changes to its e-commerce operations in Alberta, which included our 100% Crombie-owned industrial warehouse. The long-term lease remains in place. The asset represents approximately 300,000 square feet within our fully occupied retail-related industrial portfolio, and we expect no material financial impact from the announcement. Our second pillar, optimize, is about unlocking embedded value in the existing portfolio through targeted investments and development. In 2025, we continue to advance nonmajor development program. These are shorter duration projects, modernization, intensifications, small-scale redevelopments and greenfield projects. They're typically $50 million or less and often completed within 12 months. We expect targeted yield on cost in the range of 6% to 8%. One of our nonmajor investments is our modernization program with Empire, where we completed more than 60 projects with them in 2025. These projects upgrade the look, feel and functionality of the grocery stores and create a halo effect that benefits other tenants on the site. It also supports our leasing performance across both renewals and new deals. Our nonmajor program is a repeatable lever that enhances asset quality and drive steady growth. Within our major development pipeline, entitlements remain the strategic focus. By securing zoning and planning approvals ahead of major capital commitments, we preserve flexibility on timing and phasing, ensuring we can adapt to an evolving market conditions and build a pipeline of fully entitled properties that can support our long-term value creation. We continue to advance key sites in a deliberate manner during 2025. Of the 26 identified sites in our major development category, 6 are now zoned and 3 have applications in process. The Marlstone in Halifax is our only major project currently under construction. Pre-leasing is underway and the early response has been positive. Our last driver within value creation pillar is partner. As I noted, our strategic partnership with Empire continues to be an important competitive advantage. Our real estate priorities are closely aligned with their operational needs, and that alignment shows up across acquisitions, modernization and new store opportunities. the Queensway and our modernization program are great examples of our partnership in action. Beyond Empire, we stood up 2 new programmatic partnerships in Halifax in Vancouver this year. These programmatic partnerships serve 3 important purposes for Crombie. First, they enable us to share capital and risk on larger, longer duration opportunities, while preserving balance sheet capacity for our core grocery-anchored platform. Second, they provide a stream of management and development fees as we progress entitlements and planning work. And third, they unlock embedded NAV through highest and best use zoning and gives us flexibility on when and how we bring these high potential sites forward for redevelopment. Across the 3 value creation drivers, own and operate, optimize and partner, our capital allocation decisions are guided by our strategy of delivering resiliency, stability and growth. With that, I'll turn the call over to Kara to walk us through our financial results and the strength of our balance sheet. Kara Cameron: Thank you, Mark, and good morning, everyone. Our 2025 results reinforce the strength of our platform, the consistency of our execution and the discipline of our approach to capital allocation. And as Mark said, our focus on unitholder return. That strength translated directly to our bottom line with FFO per unit growing 4.8% and AFFO per unit growing 6.5% year-over-year. The numbers continue to tell a clear story, our strategy is working. In the fourth quarter, we completed 239,000 square feet of renewals at a year 1 increase of 10% over expiring rental rates. As we've emphasized consistently, we focus on achieving growth over the full duration of the lease. And for the quarter, we secured a 12.1% increase when comparing expiring rates to the weighted average rental rate over the renewal term. This leasing activity, combined with contractual rent step-ups and contributions from our modernization investments drove commercial same-asset property cash NOI growth of 4.1% in the fourth quarter, above the upper end of our 2% to 3% long-term target range. For the full year, we renewed 768,000 square feet of space at an average increase of 10.4% over expiring rents. This strength was broad-based with spreads of 11% in VECTOM, 14.5% in major markets and 7.9% across regional markets with a 12.2% increase in weighted average rental rate for the renewal term. We also have added 259,000 square feet of new leases during the year at an average first year rate of $16.67 per square foot. Average annual minimum rent per square foot grew 4.8% year-over-year. The same fundamental drivers of Q4 performance carried through the year, contributing to commercial same-asset property cash NOI growth of 3.7%, again, above the upper end of our 2% to 3% long-term target range. Property revenue in the fourth quarter was $122.1 million, up 0.4% from the prior year. This increase was driven by several key factors. Same asset NOI growth from renewals and new leasing, contractual rent step-ups, contributions from nonmajor development projects completed over the past 12 to 18 months, and a full quarter of income from properties acquired earlier in the year. These factors were partially offset by dispositions completed in late 2024 and 2025. For the full year, property revenue grew 3.8% to $488.7 million, reflecting higher base rents and recoveries from record occupancy, incremental contributions from nonmajor development completions and modernization investments, and revenue from assets acquired through the year, partially offset by dispositions and higher tenant incentive amortization. Management and development fee revenue in the quarter was $2.5 million, up from $1.4 million in quarter 4 of 2024. For the full year, fee revenue was $11.4 million, up 113% from $5.3 million in 2024. This growth reflects contributions from our programmatic partnerships in Halifax and Vancouver as well as fees from various Empire projects. These contributions have become a stable recurring component of our cash flow profile. For the full year, general and administrative expenses, excluding unit-based compensation, represented 4.1% of total revenue, including revenue from management and development services, consistent with where we've been tracking throughout the year. Finance costs were $97.4 million in 2025, up $4.9 million year-over-year, primarily reflecting higher interest expense related to the 2024 net issuance of senior unsecured notes. Turning to earnings. FFO for the fourth quarter totaled $0.33 per unit, up 3.1% year-over-year. FFO was $0.29 per unit, up 3.6%. For the full year, FFO per unit was $1.30, an increase of 4.8% from 2024, and AFFO per unit was $1.15, up 6.5%. This growth was driven by higher net property income, a more than doubling of management and development fees, and contributions from acquisitions and nonmajor investment activity, partially offset by higher interest expense. We ended the quarter with FFO and AFFO payout ratios of 69.2% and 78.2%, respectively. For the full year, payout ratios were 69.1% for FFO and 78.1% for AFFO, comfortably within our targeted ranges even after the distribution increase implemented in 2025. The Marlstone project continues to progress on time and on budget. At year-end, estimated cost to complete was approximately $22 million at Crombie share with expected yields on cost in the 4.5% to 5.5% range. Upon completion, construction financing will convert to CMHC mortgage financing with anticipated financing rates lower than conventional mortgages. Now turning to our balance sheet. Our balance sheet remains a core strategic asset and the source of resiliency, especially in a more volatile capital markets environment. We continue to prioritize liquidity, ending the year with $669.2 million in available liquidity between undrawn credit facilities and cash with an unencumbered asset pool exceeding $3.9 billion in fair value, earning us with ample liquidity and multiple funding levers to address our 2026 and 2027 maturities. We continue to maintain a disciplined leverage profile with a focus on preserving financial flexibility while protecting our long-term unitholder value. Debt to gross fair value was 42.1% at year-end and debt to trailing 12-month adjusted EBITDA was 7.69x. Interest coverage ratio improved to 3.39x, reflecting higher adjusted EBITDA. We actively manage interest rate exposure through a balanced mix of fixed and floating rate debt, while maintaining meaningful undrawn credit capacity to fund near-term commitments. Unsecured debt represents about 61% of our total debt and approximately 97% of our debt is fixed rate with a weighted average term to maturity of roughly 4 years. This approach enables us to absorb market variability, support development and leasing initiatives and remain positioned to act opportunistically without compromising credit quality. Over the past 2 years, we have taken deliberate steps to strengthen our debt structure, refinancing ahead of maturities, extending duration, increasing the proportion of fixed rate and unsecured debt and diversifying our funding sources. The credit rating upgrade we received earlier this year is a direct result of that work. This was a strategic objective we set for ourselves, and I'm very pleased that the team's focused execution delivered it. The upgrade has enhanced our long-term funding flexibility and supports our ability to access capital at attractive rates. Turning to capital allocation. Our capital allocation framework remains anchored in driving sustainable per unit growth, while strengthening the balance sheet. Free cash flow and disposition proceeds are directed first towards funding high-return investments, which during the year included redevelopment, intensification and leasing capital that enhanced asset quality and income durability. We continue to recycle capital out of lower growth and noncore assets such as Loch Lomond and Main Street, as Mark mentioned, into properties and projects with stronger long-term fundamentals, while also allocating capital to debt reduction where it improves leverage metrics and interest coverage. As mentioned, subsequent to the quarter end, we entered into a bonding agreement to acquire the Whitby RFC for $115.4 million. The asset is secured by a long-term triple net lease to Sobeys with contractual annual escalations, providing a high-quality, stable income stream. The acquisition is immediately accretive to both FFO and AFFO. We expect to initially fund the transaction through our unsecured revolving credit facility. Overall, 2025 was a strong year. We're hitting our strategic targets, producing consistently solid financial results and managing our balance sheet to support both stability and measured growth. We enter 2026 well positioned to continue generating dependable growth for our unitholders. And with that, I'll turn it back to Mark for some closing remarks. Mark Holly: Thank you, Kara. To wrap up, 2025 was a year defined by consistent execution and strong performance across our business. Our Building Together strategy is working, and the results this year make that clear. Underpinning our performance is the strength of our people. The people pillar of our strategy is core to our success. And as we look ahead, our focus remains the same, owning and operating essential real estate at the heart of Canadian communities, deploying capital thoughtfully and growing cash flow growth, while compounding long-term value for our unitholders. We have a proven strategy, a resilient and high-quality portfolio, and the team is committed to disciplined execution. This March will mark 20 years as a publicly listed company. And over that time, we have built a portfolio, a balance sheet and a team that is focused on stability and growth. And entering 2026, we are well positioned to continue delivering, creating long-term value that our unitholders expect from Crombie. With that, we'll open the call for questions. Operator: [Operator Instructions] The first question comes from Mike Markidis with BMO. Michael Markidis: Good morning, Crombie, and congrats on a strong finish to 2025. I was wondering up on the milestone. I know pre-leasing is progressing. If you could give us a little bit more color on how that looks as a percentage of the total units. Arie Bitton: Sure, Mike. It's Arie. What I'd tell you is that pre-leasing has been since end of last year. We have been getting a lot of activity on site. The -- I would say, marketing awareness of the property is high in the market. We are getting a lot of inbound. We're conducting touring right now still predominantly within the model suite at Scotia Square. And we're going to actively ramp that up as the building nears completion towards the end of March and take prospects through the building, it's amenities and we'll be able to then start converting applications on site with the leasing office on the premises. So I would say to date, we're pleased with the response we're seeing on the model suite. But we're going to turn that once the building gets turned over to the leasing team towards the end of March. Michael Markidis: Okay. Sounds encouraging. Just on the Calgary CFC, I know, Mark, you had a press release and you gave some color there about no material impact. I was just wondering if you could remind us what Crombie's basis or total investment is on that property and give us a little bit more, I guess, a better lens into what the remaining term on the leases. Mark Holly: Sure. Total investment is and around $100 million. It is a 300,000 square foot warehouse in Rocky View, which is in an industrial park. And it has got 36-foot clear ceiling height. It's got 90 dock -- sorry, 40 dock doors and was built purposely for Empire for its Voila platform. It's under a very long-term lease, longer than what would be a commercial standard, but all other terms and conditions within that lease are commercial. And in terms of their path forward, we started dialoguing with them about what would that look like on a go-forward basis between subletting or signing, and they do have those rights, but those rights are subject to landlords approval. So we started dialoguing with them. More to come on sort of how we're going to proceed with the asset, but we're under a long-term lease, no material impact to financials at this point, and we'll just continue to work with them as they look for subtenants. Michael Markidis: Okay. And then just on the subsequent acquisition of the industrial asset at Whitby. Congrats on that. Kara, I know you said that you initially will finance that through your facility. And I know you got tons of capacity from a balance sheet perspective. But it's a pretty significant sizable transaction. Should we be thinking about an increase in disposition volume this year in terms of total gross proceeds? Just wondering how you guys are thinking about that as we move through '26. Kara Cameron: Thanks for the question. Like you said, we've got a lot of liquidity. We've got nothing drawn on the revolver at year-end. So nothing that we need to dispose of at this point in order to fund that purchase. So I wouldn't link those two. Operator: The next question comes from Lorne Kalmar with Desjardin. Lorne Kalmar: Maybe just going back to the milestone because I feel like it was a little bit vague in terms of the lease-up color. To be clear, has leasing actually progressed or has it started yet? Or it's just really still preliminary at this point? Arie Bitton: Leasing has started. We have signed applications. We have tenants moving in as of May 1. And we have a fully functioning website where tenants are self-starting applications as we speak on that website and coming in to do touring, again, in the model suite. But we have leases in place with occupancy starting in Q2. Lorne Kalmar: Okay. And then I guess, are there any like direct competitors in that node to the type of product that you have at the Marlstone? Or are you guys kind of on your own with that? Just wondering about increased competition in the face of increased supply in the Halifax market. Arie Bitton: There is a number of buildings being constructed right now in Darkmouth. I would say that on the Peninsula, there's nothing that matches the quality of what we're building. There's nothing that matches the connectivity with Scotia Square, the parking and all the other features, including the amenities that this building has at this point. So I would say that from a downtown perspective, we're feeling pretty good about the positioning of the Marlstone. Lorne Kalmar: Okay. So no real concerns in terms of the timing of the lease-up versus what you guys have initially pro forma? Arie Bitton: That's right. Lorne Kalmar: Okay. Fair enough. And then just on the acquisition side, you guys are obviously pretty active now when you lump in the distribution center. What does the rest of 2026 look like for the team? Mark Holly: The acquisition of Whitby is $115 million. And if you kind of step back and look at how much do we allocate in capital on an annual basis, we talk about it upwards of $250 million. So this was a meaningful acquisition. We are still underwriting opportunities. We still want to grow in the core. We want to be a necessity-based, and we consider the industrial portfolio to be necessity-based as it is distributing food to stores. So we're active on it. We're doing a bunch of underwriting. The market is very hot for grocery-anchored, as you probably know. And so we're being very strategic and selective on which ones we're able to buy. We were very fortunate to be able to bring in 5 into 2025, and we're looking to do more in '26. Lorne Kalmar: Is there a preference in terms of grocery-anchored versus retail-related industrial? Or is it more opportunistic? Mark Holly: Opportunistic. We're looking at both. Operator: The next question comes from Golden Nguyen-Halfyard with TD Securities. Golden Nguyen-Halfyard: Just going back to the Whitby distribution center acquisition, would you be able to provide a cap rate on the deal as well as lease terms? Mark Holly: On cap rate, no. We don't give individual cap rates. But if you look at our portfolio weighted average, we're in and around that range. In terms of the lease, it's a long-term lease with renewals, and it is a commercially standard lease that you would find at any industrial facility. Golden Nguyen-Halfyard: Okay. And turning to the residential portfolio. Any plans to sell down a 50% interest in Zephyr? Mark Holly: Not at this point in time. Golden Nguyen-Halfyard: All right. And then maybe just one last question for me. If you had to say one area or category of leasing that will be different in 2026 versus 2025, what would it be? Mark Holly: Could you repeat the question? What category would be... Golden Nguyen-Halfyard: Yes. If you had to say one area or category of leasing that will be different in '26 versus '25, what would it be? Mark Holly: Different? Okay. Arie Bitton: I would say that right now, where we're targeting is additional uses for our retail portfolio that are maybe, what you would call, nontraditional, so additional services, additional medical to our shopping centers that really complement the grocery and traditional convenience offering. That is an area that we're focusing in on, and there's a lot of inbound demand. We demonstrated that last year with the opening of a first-class medical facility in Nova Scotia, and we're continuing to execute on deals like that. It's what tenants are asking for. It's what customers are asking for. And it really ties in nicely. And we're talking about those types of uses, medical, library uses, and more of those sort that are really adding to the complexion of our portfolio. Operator: Our next question comes from Brad Sturges with Raymond James. Bradley Sturges: Mark, you've always talked about the kind of the long-term target for NOI growth of kind of 2% to 3%. Last year was better than that. Do you see 2026 kind of being above that long-term target, kind of in that 3% to 4% range again this year? Mark Holly: Yes, 2025 was a really strong year. And as Kara called out on her prepared remarks, renewals, contractual rent step-ups, modernization program that we have with Empire, intensifications that we have been doing on sites over the last couple of years have all been contributing to that in the retail side. We continue to push on all of those drivers of same-asset NOI. We are still holding though to our long-term target ranges of the 2% to 3%. But what we do indicate is that we'll likely be on the higher end of that 2% to 3% range as we look into 2026. Bradley Sturges: Okay. My other question would just be on property -- the fee income stream. Obviously, you had an acceleration last year and there might have been a little bit of catch-up on deferred fees. Just how should we think about that line item for 2026? Mark Holly: In terms of the 2 programmatic partnerships that we have, we talked about that stability around $2.4 million on a quarterly basis and then the flow upwards as we do one-off opportunities with Empire and some of our other partners. So as you're thinking about modeling, definitely the $2.4 billion is consistent, and then there'll be opportunities to grow off of that as we do more work with our partner at Empire or some of our JOs that we have in the portfolio. Operator: The next question comes from Mario Saric with Scotiabank. Mario Saric: Just coming back to the Whitby acquisition. In terms of the annual contractual escalators, is it fair to say that, that figure is fairly consistent with the portfolio average? Or is there a nuance involved? Mark Holly: It's fairly consistent. I would say it's a little bit better, slightly better than our portfolio average, Mario, but it's not material. Mario Saric: Got it. And then coming back to the funding, I know dispositions have been opportunistic, but you're consistently kind of reviewing the portfolio for opportunities. Like in an ideal world, if things play out the way you'd like them to play out, is there a quantum of dispositions that you're thinking about in '26? Or are you conversely okay with the existing portfolio and okay with inching up leverage on a more structural basis on the back of this acquisition? Mark Holly: That's a good question. Definitely, always looking at the portfolio, always looking to high-grade it. We've been very active in that since 2023, pruning the ones that have low growth or have structural vacancies or have a declining NOI perspective as we look into the future. We are looking to continue to always high-grade. So actioning against some in 2026 is going to be our path and our plan. And in terms of using it as a mechanism to ensure we free up cash flow to high-grade the portfolio, some of it, yes, but we're comfortable with our debt metrics running at 7, 6, 9x ample room in there. We have, as Kara called out, we have no material leverage issues to address. So we're on our front foot, Mario. So we are looking at high-grading the portfolio through dispositions and acquisitions and not using it to shore up the balance sheet. Mario Saric: Got it. And what -- turning to Broadview -- Broadway & Commercial, what are the odds of some kind of resolution at that site in 2026? Mark Holly: All of '26. If you had asked Q1, I would have said extremely low. First half, probably slightly better, but still low. The development team is working with municipality and there's a number of contracts that we have to work through, and that's just going to take some time. So I can't give you is it going to happen in '26, but the team is working through it. Mario Saric: Okay. And then just maybe last question on fundamentals. You're continually hitting record high occupancy levels at some point. Presumably occupancy can't go any higher. But relative to the Q3 call, given that we're kind of 1.5 months into what could be characterized as maybe a seasonally slower retail leasing period relative to Q3, what's your level of confidence with respect to achieving continued double-digit blended lease rents in '26? And has anything changed in terms of watch lists and so on as we're heading into the spring? Arie Bitton: Mario, the outlook is still similar to what it was as we closed out 2025. So tenant demand remains high and supply remains constrained. The -- some of the, I'd call it, anomalies, Q4, we historically have some strong temporary leasing in some of our malls. So we typically see that fall off a little bit in Q1. And we also had Toys "R" Us announced the CCAA proceeding. But what we've done with that one is we terminated Toys "R" Us in January, and we are now working with a receiver to get them reopened with the receiver on a temporary basis. as of tomorrow potentially. So our watch list, really, that was probably the biggest occupier space that we were keeping an eye on. And I would say that we've mitigated that in the short term, but we've been working on backfill options throughout. And I'd say that from an additional tenant perspective, we don't have any Eddie Bauer or any of the other potential tenants that of concern right now. So I would say that our occupancy is going to remain roughly where it is. It might go a little bit up, a little bit down, but we're talking a few basis points here and there. Operator: The next question comes from Giuliano Thornhill with National Bank. Giuliano Thornhill: Just turning -- or sticking with the occupancy kind of question. I'm just wondering on your regional markets, what is the remainder kind of occupancy uptick left in your portfolio? Is it market specific or just kind of broadly and really like your ability to get to the higher levels is kind of what I'm asking? Arie Bitton: We have a number of properties that are older and closed assets that still have some remnants of vacancy. We're working our way through those. In the quarter, we leased up, as an example, 19,000 square feet in Newfoundland that was historically vacant. So I would say that those are the properties that are most affected. Again, the demand is there and there's not supply. So we are having tenants come in now that we haven't seen previously. But I would say, they're not in our grocery-anchored portfolio. They're more so in the former enclosed properties. Mark Holly: One item that I would add on that is just when you look at the 3 market classes, regional markets versus our total of 97.7%, regional markets are running at 97.1%. And if you kind of go back 36 months, that was probably 5 percentage points lower. So Arie and the team have done just an exceptional job of catching the wind that is in retail demand and doing the things that he talked about of the medical uses and some of the local government opportunities to kind of create that hub around that grocery anchored to inflate it even more. So there is still a little bit of opportunity in it, but I'd say we've moved that needle significantly over the last couple of years. Giuliano Thornhill: And the renewal -- the leasing renewal maturity for next year, would you see that broadly consistent with what you saw in 2025 in terms of location and tenant type? Arie Bitton: It is. Giuliano Thornhill: And then just lastly, on the Toys "R" Us, how large was the exposure there? Arie Bitton: About 35,000 square feet. Giuliano Thornhill: Okay. So pretty small. Operator: The next question comes from Tal Woolley with CIBC. Tal Woolley: Good morning, everybody. Just with the Empire restructuring of Voila in Western Canada, does that you think portend anything in terms of changes, modifications that Empire wants to make to its retail footprint in Western Canada? Like should we expect maybe more banner conversions, more interest in modest redevelopments? Or is there a desire on Empire's part to sort of -- I think when they acquired Safeway, they really started to get moving on remodeling a lot of the older stores in the urban markets too as well. I'm just wondering if you can sort of talk a little bit about how all this maybe changes the approach. Mark Holly: I can't comment on Empire's business or their strategy or the things that they're looking to execute against, Tal. But as a very long-term strategic partner of theirs, we intersect with them on modernizations and land use intensifications. We're buying the Whitby warehouse from them. And so we're going to -- that is our strategic competitive advantage, and we're going to lean into it. But I can't speak to sort of their strategic intent as you're asking about their wind down of Voila and does that change any of their dynamics around store deals or units. They have talked about growing more stores. That's not new. And we're actively working with them to build more stores. We did the Queensway last quarter. We have a few others that we're working on with them. So -- but I can't comment on their operating business. Operator: We have a follow-up question from Mario Saric with Scotiabank. Mario Saric: Just one more for me, maybe for Arie. The lack of new supplies, as you referenced it a couple of times in the call, it comes up consistently in the industry in terms of what's driving kind of the strong rent growth. Like if you were to add a small pad on good quality site, like what would you guess or what would you estimate is the gap between kind of market rent today and then like the rent required to achieve a good development yield on that pad? Arie Bitton: So yes, I think on that point, Mario, the new pad opportunities, the reason a lot of them aren't getting built is not because of the lack of demand, it's because of the construction cost. So where we've been able to get around that is by working on some land leases or prep pads to overcome some of those. I would say it's hard to pin down an exact number on what that delta is on a traditional basis, just given many of these, we're not building on spec, we're building for specific uses. But these days, you're probably looking at $50 to $60 or more to construct a pad. So that gives you a rough idea of where that would place us versus our in-place $19 portfolio rent. I think that's guidepost for you. Operator: We have a follow-up question from Mike Markidis with BMO. Michael Markidis: Just following up on Mario's question there. Arie, the $50 to $60 a foot for a pad, is that a net or a gross figure? Arie Bitton: Those are net rents. Michael Markidis: Okay. And then I think last quarter, you guys talked about 2 dozen properties where you actually had expansion capabilities. So I'm just wondering and trying to reconcile that comment with the comment on rents don't work. Arie Bitton: So I think you can see in our disclosure, we opened up a number of pad opportunities over the years. So again, the QSRs that are looking to grow are willing to pay the rents necessary in order to support their growth. So we saw that in our -- in both Nova Scotia as well as BC. So I would say that the demand is there. We're working our way through them. And those 2 dozen aren't just solely rents. There's entitlement, there's some zoning, but we're working our way through all those 2 dozen opportunities as we speak. Michael Markidis: Okay. And then if the construction costs don't work, can you -- I mean this might be a rudimentary question, I'm missing something, but how does the land lease work? I mean, I get how land lease works for you, but how does the land lease make it more amenable for the person paying the rent? Mark Holly: Michael, so in a land lease scenario, they're taking on the risk of the capital deployment and they're not getting a rental structure increase over it. So from their lens, in some cases, they like to take on that and not have to pay the longer-term rent obligations. We're doing it in some cases and not all cases. We did the 2 bank deals at the Longo's plaza that we just acquired. We're slightly structured differently. We've done QSRs, McDonald's and Wendy's and Dairy Queen's that are slightly different. So where Arie is getting to is it's not one-size-fits-all. So when we look at our entire portfolio of 308 properties, we're always looking at what the optimization of those properties are through intensification or modernization. On intensification, where we can pump out on the existing CRU, that's 3 walls. So that works a little bit better. And if we're doing pads, there are usually 5,000 square foot buildings, some have drive-through, some don't. So the costs there do creep up. I would say what we are seeing in construction cost, though, is stabilization. We're seeing lower cost on the front-end divisions, which is the underground and earthworks. And what we haven't seen is some of the finishes. We've seen them stabilize. We haven't seen the finishes come off. But that said, it's not escalating the way it was. So there's more certainty around what the going-in costs are going to be, which is giving the retailers less of a pause to greenlight projects. So those 2 dozen that we've talked about are the ones that we see potential near-term opportunities to build out, and that's where you're going to start to see them show up over the next number of years in that nonmajor category. So $50 or $60 square foot rent is depending on what you're going-in costs were for land, how much underground earthworks you're doing, how much you're prepping the pad versus building the asset, shelling it. So it's really difficult just to give you a blanket number of $50 because every deal is unique. But the opportunities are real. The retailers are looking to drive more incremental units, and they're finding stability and cost and ability to run a pro forma that meets their P&L. Operator: There are no further questions. This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Ladies and gentlemen, good day, and welcome to Grasim Industries Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Panchmatia, Head, Investor Relations of Grasim Industries. Thank you, and over to you, Mr. Ankit. Ankit Panchmatia: Good morning, and thank you for joining Grasim's Third Quarter Financial Year 2026 Earnings Call. The financial statements, press release and presentation are already uploaded on the website of stock exchanges and our website for your reference. For safe harbor, kindly refer to cautionary statement highlighted in the last slide of our presentation. Our management team is present on this call to discuss our results and business performance. We have with us Mr. Himanshu Kapania, Managing Director, Grasim Industries and Business Head, Birla Opus Paints; Mr. Hemant Kadel, Chief Financial Officer of Grasim Industries. Also joining them, we have with us Mr. Jayant Dhobley, Business Heads of Chemicals, Cellulosic Fashion Yarn and Insulators; Mr. Vadiraj Kulkarni, Business Head of Cellulosic Fibers Business; and Mr. Sandeep Komaravelly, CEO, Birla Pivot, our B2B e-commerce business. Let me now hand over the call to Himanshu, sir, for his opening remarks. Over to you, sir. Himanshu Kapania: Good morning, and a very warm welcome to everyone joining us today. At the outset, we wish all of you a happy new year 2026. We hope that the year has begun on a positive note for you and your families, and it brings good health, continued progress and renewed optimism. As we step into 2026, we do so with a sense of confidence and purpose. While the global environment continues to evolve, the underlying strength of our markets, the resilience of demand and our disciplined execution gives us optimism about the road ahead. The new year represents not just a change in calendar, but an opportunity to build on momentum, sharpen our focus and deepen the value we create for our stakeholders. On that value creation, let me start sharing key updates on two of our latest growth engines. As announced earlier, our Paints business, Birla Opus CEO, Mr. Sachin Sahay, shall join us from 16th February 2026. Despite the absence of CEO, the existing Paints team delivered an extraordinary performance, reaffirming the company is being built on rock-solid foundation and has a long pipeline of leadership who can take on the baton when the need arises. During the quarter 3 of FY '26, Birla Opus, the third largest decorative paints player, expanded its revenue market share by more than 300 basis points year-on-year based on internal estimates and announced results of listed paint meters. On a quarter-on-quarter basis, Birla Opus accelerated its market share gains with revenue growth of nearly 3x the Indian decorative paint industry growth rate, inclusive of Birla Opus. Further, the combined revenue of Birla Opus and Birla White Putty business in quarter 3 FY '26, the revenue market share gap with existing #2 paint players is now reduced to around 300 basis points, based on the guided decorative segment revenues, which includes their putty business as well. In quarter 3 FY '26, Birla Opus sales volume has risen by 70% on year-on-year basis. Early this January, Birla Opus has crossed the milestone of 500 million liters of paint sales cumulatively. We believe that more than 6 million households are now experiencing superior quality of Birla Opus in a short period of 18 months. Birla Opus exponential growth is underpinned by rising brand acceptance, rapid expansion of distribution network, strong sales throughput from dealer counters to contractors and consumers, consistent differentiation through superior quality -- product quality and focused brand-building efforts. Let me give you final details of execution on the above. First, on brand reach. The presence of Birla Opus has crossed 10,400 towns across 35 states and union territories. We have covered all 50,000 population centers across India and more than 75% of the 10,000 to 50,000 population centers. The company will continue its expansion effort deeper into Bharat. The active quarterly billing dealers has grown in double digits, along with a single -- high single-digit growth per dealer revenue throughput on month-on month when compared with last year same quarter. Additionally, Birla Opus is transforming the paint consumer retail experience with company exclusive franchise outlets nearing 1,000 Birla Opus paint galleries. These galleries uplift consumer experience by selecting a paint brand, helping premiumization of the category. Institution sales continued to gain traction during the quarter, supported by increasing project wins and specification approvals among clients, including governments, builders, factories, hospitals and cooperative housing. The institution sales grew by 40% quarter-on-quarter. As institution orders have a long gestation period, happy to report more than 40,000 mid- and large-sized projects are in various stages of negotiation with nearly 25% build, thereby a strong project pipeline for future. Secondly, Birla Opus remains focused on driving secondary sales from dealer counters to contractors and consumers. The 10% free paint promotion continues on 10- and 20- data pack across all-emulsion top coats waterproofing range, however, excludes subeconomy and other categories. The company equally focused on building relationships with paint contractors, the key influencers. For them, Birla Opus has built an end-to-end first-of its kind digital platform to engage with contractors online on pan-India basis for product information, incentives and schemes, sharing consumer reach, offers assurance registration, complaint handling and much more. This platform is integrated with our unique track and trace system to monitor consumption by customers at pin code and dealer levels. We are also implementing AI-based projects to improve contractor connect and analytics. I'm happy to share that over 7.5 lakh contractors and painters have applied and experienced Birla Opus superior range of products on pan-India basis. This online platform allows us to remain always in touch digitally with the unorganized painter community and instantly transfer accrued benefits to their banks on a click of a button from their app anywhere, anytime and experience like UPI. Additionally, the centrally controlled tinting machine analytics shows strong color and consumption across geographies. With over 35,000 active tinting machines in operation during quarter 3, the tinting data shows interesting consumer insights. The top 2 [ Opus ] colors unifying the country include [ Fort Kochi ], a dark bluish gray color; and a [ Morning Birdsong ], a light, bluish gray shade, which are tinted by more than 30,000 dealers in the last 1 year. Thirdly, the foundation of our product strategy is built on R&D excellence with a portfolio designed for performance, durability and unmatched finish. Birla Opus has achieved what we believe is the fastest portfolio expansion by any brand in the industry. Today, Birla Opus proudly offers one of the widest product ranges of more than 216 products, 1,848 SKUs across emulsions, enamels, waterproofing, wood finish, wallpaper and others. This year itself, till now, we've introduced 40 new products, including the completion of retail waterproofing line, launch of painting tools and indigenously developed Italian few [ Alka ] range and many more. These innovations are not just additions, there are accelerators of growth, which is creating clear product differentiation, winning the trust of dealers and delighting consumers. The fourth powerful driver of Birla Opus is creating consumer pool by our sustained brand salience and differentiated marketing. According to Opus commission, Brand track study, the top-of-mind brand recall for bills has surged into double digits, positioning us as the second most recalled paints brand in urban markets. With over 6 million satisfied home users acquired in a very short period, Birla Opus brand acceptance will continue to accelerate, providing solid impetus to growth. From builders and government bodies to industry, total education institutions and MSMEs in the project segment to individual homeowners and housing cooperatives Birla Opus brand test is on the right. With a strong media presence in quarter 4 and high engagement campaign, our brand salience is set to sort even higher. Watchout for our latest Opus by campaign Colours of Togetherness in the ongoing T20 World Cup and upcoming IPL 2026 and many other regional and national impact properties on television, digital and outdoor media. Our premiumization efforts continue with PaintCraft recently launched Birla Opus professional painting services, fully GST compliant, transparent pricing, attractive EMI options end-to-end platforms from lead management to quotation to monitoring of services and quality approval, managed jointly by central and field team. This service has expanded to over 5,000 pin codes, and we tapped to open PaintCraft on pan-India basis through the 1,000 Paint [ gates ] at the earliest. Separately, on OPUS Assurance Services, where the company has given additional guarantee besides the standard warranty clause to redo the painting, including labor, if need arise; more than 60,000 consumers sites have been registered through nearly 30,000 contractors under this first of its kind program. The combination of PaintCraft and Opus Assurance will improve consumer experience, allowing us to sell higher-end products and premium services. The fifth powerhouse behind Birla Opus momentum is the second largest manufacturing capacity holder in the industry, a formidable 24% capacity share. With the launch of Kharagpur and a steady ramp-up of capacity utilization across each of our 6 plants, the company has executed their natural production strategy by producing fast-moving category products closer to their market, cutting down the drag of logistics cost and inventory and sharpening its service edge. With the completion of projects on time and within budgeted CapEx, the focus of the company now has shifted to improve productivity, efficiency operations and bring down significant variable costs through optimization. At the heart of our manufacturing journey lies a bold embrace of Industry 4.0 with IoT-driven automation helping standardization and consistency of quality. This excellence is now obviously validated. We are proud and excited to share that Birla Opus has received Integrated Management System certificate and compressing ISO 9001, 14001 and 45001 for all the 6 plants in one go. Achieving these certifications strengthens our organization framework and reinforces confidence of our customers, partners, stakeholders in our capabilities. Securing certification in less than 18 months of full-scale operation is an unprecedented milestone. It underscores our deep commitment to the highest standards of quality, safety environmental stewardship, compliance and operational excellence and marks a powerful step forward in our ongoing sustainability evolution. Before I move on to the next business, I wish to address the narrative about sluggish industry growth. Based on announced results of 4 listed paint [ measures ] and guidance on their decorative business. It appears the decorative paints, excluding Birla Opus, has grown by 1% to 2% by revenue but 7% to 8% by volume in quarter 3 FY '26 versus quarter 3 FY '25. Now when we add Birla Opus quarter 3 performance to these 4 players decorative paints business, industry revenue growth, including Opus, rises to 5% to 6% and volume growth jumps to 11% to 12%. In my economic understanding, a double-digit volume growth reflects a good to strong consumer demand. However, the pain of the industry is rate realization, which we believe is lower due to a combination of higher discounting and [ income ] players tendency to focus on low-value economy, subeconomy category and deep discounted [Putty] business. Birla Opus offers revenue is without [ Putty ], and our growth remains balanced across all categories of paints with premium and luxury segment continues to contribute steady 65% in our overall revenue. We have taken 2% to 6% price rise in January and February against standard dealer price list across the range of products to test the channel and consumer reaction. Coming to Birla Pivot, the B2B e-commerce business crossed the INR 8,500 crores annualized revenue run rate, ARR mark and remains on track to surpass the annual revenue of INR 8,500 crores, way ahead of FY '27 guidance. In a country as dynamic and fast growing as India, the next great feet in e-commerce would come from building another marketplace, it will come from digitizing and organizing B2B procurement at a scale and complexity few have ever dared to tackle. That is exactly what Birla Pivot is doing, and we are taking one of the largest, most fragmented operationally intense spaces in the economy and turning it into a trusted tech-enabled, outcome-driven platforms. Our vision is bold and unambiguous to become the most trusted B2B e-commerce platform in India. And we're building it the right way by scaling a powerful buyer-seller network and compounding our advantage across the three pillars that truly matter in e-commerce: Price, assortment and experience. Let's start with price, because in B2B, pricing is only about competitive parity, it's about removing friction from the system. India's raw material ecosystem is full of inefficiencies discovery gaps, opaque comparisons, fragmented sourcing and complex multi-vendor procurement. Birla Pivot doesn't mainly negotiate price, we reengineer the economics of procurement, we align suppliers' inefficiencies with buyers' needs, enabling transparent discovery and comparisons, helping suppliers reach demand more efficiently and absorbing the operational complexity of procurement at scale. In other words, we convert fragmentation into efficiency and we pass that value back to consumers. On assortment, this is where Birla Pivot is fundamentally changing how business and individuals buy project materials. We are building a true one-stop procurement engine, 35-plus categories, 40,000-plus SKUs and solution aggregated from 300-plus top brands. The product category is covering everything from steel to tiles, cement to chemicals. This breadth isn't just impressive, it's transformational. It consolidates vendors, compresses procurement cycles, standardize buying decisions and [ stabilizes ] approvals and purchase planning. We are going to step further because in B2B, the ability to buy is often tied to working capital. And that's why Birla Pivot is enabling fast, easy, customized financing designed around real procurement needs so businesses can purchase with confidence, flexibility and speed. And then comes our biggest differentiator, experience because B2B is not just digital, it's physical, operational and relentlessly service-driven. Birla Pivot delivers B2C-like simplicity in a B2B world, powered by digital tools for order enablement and fulfillment, nationwide support backbone and consistent trusted buyer experience. We are not simply building a website, we are building a reliability at scale. We are making complex procurement feel effortless, dependable and repeatable. That's the moment when a platform stops being a channel and becomes a habit. This momentum is not episodal, it's network-led, value-led and scalable. As categories expand, network effects deepen and digital adoption accelerate, Birla Pivot is uniquely positioned to play a defining role in shaping and leading India's B2B procurement digitization growth story. This isn't just about growth, it's creation of a new infrastructure layer for Indian commerce. Moving on from new businesses and focusing on macros, India continues to stand out on a global growth map. India's domestic demand is resilient, investment cycle strength and policy support have kept growth momentum intact. The most recent Union Budget reinforced this momentum with several strategic themes. First theme is government's continued focus on infrastructure, housing and urban development would drive growth for Grasim's Cement business. India's push towards self-reliance, manufacturing scale and supply chain integration would drive growth for our chemicals business. The recent GST rationalization focus on improving India's per capita driven by higher disposable incomes, better quality housing and aspirational consumption would drive growth for decorative paints and premium textiles. Support for MSMEs by increasing finance democratization and integrating into organized supply chain would drive growth for Birla -- Aditya Birla Capital and Birla Pivot. Lastly, a balanced focus on renewable energy and energy security will drive growth for our Renewable and Insulator business. For investors seeking a single scalable entry into India's structural growth, Grasim represents a credible and well-diversified proxy. As India's growth story unfolds through these diverse themes, Grasim businesses remain deeply intervened with each of these structural pillars, presenting long runway of growth and value creation. Reflecting on this growth, I'm happy to share that Grasim consolidated revenue for the current quarter stood highest at INR 44,312 crores, an impressive improvement by 25% year-on-year with building materials, Financial Services, cellulose fibers, Chemicals and even premium textiles and Insulators firing on all cylinders. The 9-month revenue stood at INR 124,330; crores, up 19% year-on-year, demonstrating consistency of performance. Stand-alone revenue grew at even faster rate, reaching highest ever at INR 10,432 crores, up by 28% year-on-year, with strong contribution from both core and new businesses. I would now like to hand over the call to Hemant, CFO, to further discuss financials and key business highlights of other businesses. Hemant Kadel: Thank you, sir. Good morning, everyone. It's my pleasure to interact with you all again. Happy 2026 to all present on this call. I am very proud to say that we have closed the calendar year 2025 on a high note with two of our new businesses on track to achieve their stated goals. As on 31st December 2025, the TTM consolidated revenue is nearly INR 170,000 crores, growth of 14% compared to FY '25 revenue. Currently, stand-alone revenue on TTM basis stands at INR 38,191 crores, up 21% compared to FY '25. Based on the current quarter revenue, stand-alone businesses are now at annualized revenue run rate of higher than INR 40,000 crores. There has been a strong underlying growth across all the businesses. Consolidated EBITDA grew by 33% year-on-year to INR 6,215 crores. Stand-alone EBITDA grew at a faster pace with growth of 57% year-on-year to INR 585 crores. Starting with key business, Building Materials, revenue for the segment grew by 30% year-on-year, driven by all-round performance across Cement, Paints and B2B. Led by the sector's strong outlook, UltraTech is steadily expanding both size and scale. UltraTech's clear vision and disciplined execution have led current capacity to reach 194.06 million metric tons with clear sight of reaching a capacity of 240.8 million metric tons by March 2028, which is a CAGR of more than 10%. The capacity expansion is clear from -- critical from three or four perspectives. Firstly, it reinforces our role as a key enabler of India's infrastructure and development journey. Secondly, it enables us to grow ahead of industry curve. Third, it narrows demand and supply gap across critical markets nationwide. And lastly, it further strengthens UltraTech's leadership position. While capacity expansion remains core to our growth, we have embedded a culture of efficiency to ensure that our growth is resilient, sustainable and cost effective. Underpinning this strength is our EBITDA growth, which grew by 29% year-on-year with an EBITDA per tonne of INR 1,051. Our MD has already covered Paints and B2B e-commerce business. Hence, let me now directly come to our core businesses of Cellulose Fibers and Chemicals. Highlight for these core businesses is that while we can keep on discussing them individually, irrespective of commodity cycles, both the businesses combined have delivered consistent EBITDA. Leadership, innovation, sustainability, capital allocation and cost effectiveness are key tenet to such consistency, which are an integral part of Grasim's growth strategy. Starting with Cellulose Fiber, the business has delivered EBITDA of INR 491 crores, growth of 48% year-on-year. This is driven by three factors: first, improved realization due to favorable product mix led by exports; second, operational efficiency due to volume growth; third, declining input prices, mainly pulp and caustic. The demand for cellulose fiber in China continues to exhibit stability due to global tightness in supply. In India, we have seen similar strength despite removal of Quality Control Order. Due to this inherent strength, we have seen prices for cellulose fiber decoupling with other competing fibers, which are on a declining trend over the past few quarters. Unlike cellulosic fiber, which are largely stable, have started to recover. Cellulosic Fiber segment also includes cellulosic fashion yarn business. The business performance for the quarter was subdued due to cheaper imports from China, which has created oversupply and lower downstream demand. Secondly, Chemical business, the revenue growth of 5% year-on-year was largely driven by volume. Caustic soda sales volume for the quarter 3 FY '26 stood at highest ever 313,000 tonnes, up by 4% year-on-year. While CFR SEA prices are down on Y-o-Y basis, domestic caustic prices are showing some resilience led by stable demand and rupee [ depreciation ]. EBITDA in Chemical business was lower by 4% year-on-year due to higher equity realization and lower profitability in Specialty Chemical business. Higher ECH price resulted in lower profitability in Specialty Chemical business, which was partially offset by lower BPA prices. Coming back to the consolidated business, in the Financial Services, it is one of the fastest-growing businesses in our portfolio. This is driven by their multichannel approach aimed at providing customers with seamless experience across channels of interaction. The revenue was up by 29% year-on-year, led by all-round performance across lending, asset management, insurance and advisory services business. Total lending portfolio, which includes NBFC and Housing Finance, grew by 30% year-on-year to over INR 190,000 crores. On a strategic front, we would like to highlight the recent announced partnership with Advent International, which also marks an important milestone for Aditya Birla Capital. During the quarter, Aditya Birla Capital Board approved a primary capital infusion of INR 2,750 crores into Aditya Birla Housing, valuing the business at approximately INR 19,250 crores on a post-money basis. Advent will hold roughly 14.3% of Housing Finance, with Aditya Birla Capital retaining about 85.7%, subject to customary shareholder and regulatory approvals. In other businesses, starting with Renewable business, Aditya Birla Renewable grew by 82% year-on-year, largely led by higher capacities, which now stands at nearly 2% peak capacity compared to 1.2 gigawatt quarter 3 FY '25. Aditya Birla Renewables has announced a strategic investment by Global Infrastructure Partners, which is a part of BlackRock. This deal marks one of the largest primary private equity commitment into an Indian renewable company. GIP will invest up to INR 3,000 crores, comprising of an initial INR 2,000 crore commitment with a green [ shoot ] option of INR 1,000 crores, subject to customary regulatory and closing conditions. Post this deal, the renewable business is valued at an [ EV ] of INR 14,600 crores. I'm happy to say that this partnership is expected to accelerate Aditya Birla Renewables growth trajectory as it builds on its operational and contracted capacity of nearly 4.3 gigawatt of peak capacity portfolio across solar, hybrid, floating solar and RTC assets and targeting scaling capacity beyond 10 gigawatt of peak capacity in coming years. This transaction brings not only capital, but also the GIP's global infrastructure operating experience to support disciplined expansion and contribute meaningfully to India's energy transition goal. As regards CapEx, post commissioning of Kharagpur plant, we have completed majority of the planned capital expenditure in decorative paint business. The capital expenditure spent on YTD basis is INR 1,310 crores. Focus now remains on Phase 1 of Harihar Lyocell project for additional 55,000 metric tons per annum capacity of specialty fibers. As on 31st December 2025, net debt of the company stood lower at INR 6,882 crores compared to INR [ 8,277 ] crores in the same period last year, with net debt to TTM EBITDA healthy at 2.1 level. Let me now open the floor for Q&A. Operator: [Operator Instructions] The first question comes from the line of Navin Sahadeo with ICICI Securities. Navin Sahadeo: Yes. I hope I'm audible. Himanshu Kapania: Yes. Navin Sahadeo: Yes. And also thank you for the detailed initial comments. Two questions. First, of course, on the paints business. So needless to say, the company has done a commendable job. I believe for the quarter, the revenues given like INR 8,500 crore run rate for the Birla Pivot and numbers that are published for UltraTech. Our sense is paints would have done roughly INR 1,200 crores kind of revenue in this particular quarter, which, of course, is great from the start that we have had. My question is the growth is seen maturing. In the sense, in Q1, a similar sort of a very rough cut working suggested INR 1,100 crores kind of a growth in the June quarter, similar flattish in September, and now we are at INR 1,200 crores give or take some margins there. I mean, some buffer there. Now to reach the scale of INR 10,000 crores exit by Q4 '28, which is a run rate -- I mean, which is around INR 2,500 crores revenue over the next 9 quarters, we need to grow at 40% CAGR year-on-year for us. So I'm just trying to understand, first of all, what different than now the company will do or what convinces us now given that the growth is maturing in the last 1, 2 quarters, how should one look at this target realistically being achieved and in that what is also the industry value growth into consideration? That's my first question. Himanshu Kapania: Thank you, Navin. So while you have done your internal calculations, I'm not going to either accept or deny it. But all I can say, both on quarter-on-quarter basis, we had a robust more than double-digit levels of growth. It's closer to between 18% to 20% on a quarter-on-quarter basis. On an annualized basis, these numbers are tending towards the 3-digit growth. So I don't know what numbers you have in your calculations and using words called mature, when we have grown on a year-on-year basis by 300 basis points in the paint industry and we see a similar kind of consumer uptake in the current quarter. On an overall basis, we are seeing across geographies, very strong demand for Birla Opus paints and a large number of existing dealers who have joined us have increased their throughout and they continue to grow at levels of strong single-digit on a quarter-on-quarter basis. And we continue to add new dealers at a double-digit level on a quarter-on-quarter basis and on H1 and H1 -- half year -- on half yearly basis. So that is the part one. Second part, which is besides consumer and dealers, we're also getting very good attraction from the contractors and as I mentioned in my opening speech, more than 7.5 lakh contractors have joined hands. And these volume -- these number of contractors give us confidence that the growth will continue. We are still a single-digit market share player. We have a large capacity. Our presence is now on a pan-India basis. We've reached every 50,000 population town. We have reached more than 75% of 10,000 to 50,000 population town. So the growth are happening. We have a large portfolio of businesses. Consumer demand is building up, and we remain confident and remain -- we continue to guide that we will deliver the INR 10,000 crores in the third year -- in third full year of operation. Navin Sahadeo: Understood. So despite the price increase that we have taken, as you said, across 2% to 6%. Despite that, you are saying we are confident to achieve the revenue target. Himanshu Kapania: So there's a price -- so you understand the philosophy of price increase. We always want to maintain a particular distance from the market leader. And we felt this distance was slightly more than that was necessary, and we're bridging that gap. That is the objective of price increase, and there is no other objective. And if you also want to test at what is the -- what demand of consumer contractor remains at the revised price. This is our first... Navin Sahadeo: Yes, go ahead, please. Himanshu Kapania: No, that's fine. Navin Sahadeo: Okay. My second question then was on your Birla Pivot business. And of course, extremely fast execution, much, much ahead of expectation. But we had also, I think, hinted, the first time we gave this target the road to profitability or breakeven for this business was also like a $1 billion kind of revenue run rate. So is it now fair that since we have achieved almost we are there, this business is breaking even or will start making positive contribution? How should one look at profitability for Birla Pivot from now going ahead? Sandeep Komaravelly: Thanks, Navin. This is Sandeep here. On the profitability front, we are making progress similar to how we have done -- how we have executed on the revenue side and the growth has been excellent over the last few quarters. We've been making good progress on bridging the gap so that we can get to breakeven as well. I think from our current estimates, we will exit FY '27 at a breakeven level, that is our current estimate. Operator: Next question comes from the line of Rahul Gupta with Morgan Stanley. Rahul Gupta: Two questions. One, continuing on the Pivot point. I remember earlier you had made a point to -- earlier you had guided to break -- cash breakeven by 2030. So you are now front loading it, accelerating it to fiscal '27 end, right? Sandeep Komaravelly: Rahul, I don't think we give the guidance of 2030 earlier, but as I mentioned, in response to the earlier question, FY '27 exit, we should be exiting the year at breakeven, yes. Rahul Gupta: Okay. That's great. And my second question is on the continuation of the points you -- point you made on the paint. You are testing waters with 2% to 6% hikes in January. Now it's early days. Can you please help us understand how the acceptance has been? And if we look at the industry which has been struggling with the discounting, how should we look at the overall industry from here on? Or let me put it this way, how volume versus value gap should move over the next year for industry and you? Himanshu Kapania: So first and foremost, as I mentioned in the previous answer, there was -- the gap between the leader and us was high, and we've used this price increase primarily to be able to bridge the gap. We obviously still are a single-digit player. And our aim is to bridge the gap between our capacity, which is at 24% to our current revenue market share. So that is part one. It's early time to be able to say what is the response to the price increase because we've had certain of a range of products where we took price increased on 28th of January and the remaining range of products is happening on 25th of February. So it will be better I respond to the consumer and contractor response after the quarter 4 results are there, because we are still in the process of executing the price increase. But on a mid- to long-term basis, what is our view about the industry. We remain very bullish if there has been -- as I mentioned in my opening speech, the industry in quarter 3 has grown by 10% to 11% or probably even 12% by volume. The challenges have been over focused on economy, subeconomy and putty-based business. So if we stop the down trading and if you notice, Birla Opus wants to operate a bit more balanced approach, it is making every effort to premiumize the service with the launch of its paint galleries and where, obviously, the ratio of premium and luxury is significantly higher. And the same is true for our painting services. We've been making every effort to premiumize and ensure that in the mix our rate realization remains at similar levels to the volume. And our attempt is volume and value to both move in tandem. As far as the industry is concerned, we believe that this year, the industry may -- including Birla Opus, may grow by 5% to 6%. FY '25, it has grown by -- almost it was nil. And FY '27, we are hopeful that it will come back to an 8% to 10% growth levels. Operator: Next question comes from the line of Nirav Jimudia with Anvil Wealth. Nirav Jimudia: Sir, just one question on the chemical side. For the Epoxy business. I just wanted to have your thoughts, a, with the trade deal donw then with the U.S.A. now and Chinese currency also appreciating by close to around 8% to 9%, how do we see our exports to the U.S.A. market in the medium term? And on a longer-term basis, with now EU FTA also in place, how do we see our volumes in terms of exports to that region as well? Himanshu Kapania: Thanks, Nirav. Thanks for your question. Can you hear me? Nirav Jimudia: Yes, loud and clear. Himanshu Kapania: Both are positive for us in a way. So as you know that in epoxy, particularly in liquid epoxy resins, the Koreans have been available in India due to their FTA, they get a certain advantage where they can bring in product without the duty. And also, they had preferential access to U.S. as well as Europe. Now clearly, that advantage is going to go away. If you look in terms of timing, then the U.S. deal probably will get actioned before the American deal. So I am seeing a positive upside on export of epoxy from India to the U.S. Now how much quantity that will be, how that will ramp up, et cetera, is a matter of individual customer qualifications and those kind of things. That's a little bit too much detail to get into right now, but we do see a positive impact on that side. Similarly, if you look at Europe, as you know very well, Nirav, the European chemical industry is struggling with high costs, both from a perspective of energy, but also from a perspective of extremely high labor costs. As you know, a lot of restructuring has been announced in Europe, you know equally that Westlake has stock operations on their Rotterdam site. I think the India-Europe FTA, in the longer term will have a much more significant impact on the Indian chemical industry, probably in my personal opinion, more than the U.S. Of course, the speed at which Europe will ratify, all this will get down into law, et cetera, will be a little bit slower, but I believe that will be more sticky. So both these agreements, Nirav, are, I think, positive for the industry. Nirav Jimudia: Got it. Yes. Sir, just 2 clarifications here. Sir, a, do we import any raw material from EU, which were earlier subject to taxes and now with this deal, could help us from the chemical business point of view also and from an overall business point of view also? And b, any volume guidance which you would like to share from the epoxy business point of view for FY '27? Himanshu Kapania: Yes. So if I look at imports from Europe, yes, we have. I would not like to get into the details of what that is, but those are like -- they're not a large part of our basket. So I don't see really a large benefit from that. What I may think of is if glycerine prices continue to remain high, then the propylene route to ECH has its own competitive advantage, right? And several of the propylene-based producers are Western based. But there is a logistic cost hurdle. So let's see how this plays out in the long term. If you look at volume growth, then if I look year-on-year, our overall epoxy business, liquid proxy plus formulations this year has grown or at least for the year-over-year, we have grown by about 6%. I expect this rate to ramp up next year. Now how much it will ramp up by as a matter of speculation, but I expect that rate to ramp up further. Nirav Jimudia: Got it. Safe to... Himanshu Kapania: None of the fundamentals changed. Nirav Jimudia: And safe to assume that this ECH price corrections, which have happened on the upside would translate into a similar increase in the prices of epoxy, which generally gets passed on a lag basis? Himanshu Kapania: Yes, there is usually a time lag associated with that. As I mentioned, in the epoxy value chain, there are competing routes, right, glycerin-based ECH and propylene-based ECH. So what may be a pass-through for me may not necessarily be a pass-through for somebody else, maybe globally who may be propylene integrated. So depending on where crude prices, propylene prices, glycerin prices, the pass-through mechanism has a different cyclicality. But in the longer term, it all always passes on, right? It's always a matter of time. But the exact speed by which it passes on depends upon these 3, 4 factors. Nirav Jimudia: Sir, last clarification, if you allow. This quarter, we have seen a dip in our epoxy revenues. So was it more because of the volumes were lesser this quarter and that should start correcting next quarter onwards? Is this the right assumption to make? Himanshu Kapania: Just let me quickly check the data. Yes. So volumes were slightly under pressure on the liquid epoxy resin side. Actually, maybe the better way to see it is we decided not to take certain volumes where we thought the margin was getting too squeezed. That's probably the better way to see it. If I look at the non-LER business, all the formulation specialties, so the specialties within the specialties, there actually, we have not had any volume issue. It's on the margin where perhaps the lowest profitable part of our LER business, we have been a little bit unwilling to allow our margins to get compressed too much. Operator: Next question comes from the line of Amit Purohit with Elara. Amit Purohit: Thanks for the detailed data points on the paint. Just to recheck, sir, on the overall sales that we sold, you talked about 500 million kiloliters. That was since the time we have been into the market, right? Is it kiloliters or did I hear it correctly? Himanshu Kapania: 500 million liters, not 500 million kiloliters. Amit Purohit: Okay. That is -- since the time we have started operations. Yes. Okay. And secondly, sir, I also wanted to understand when you talked about 300 bps lower than the second player, that includes putty and everything, right, at this point of time? Market share -- exit market share you were talking about or... Himanshu Kapania: I am saying what we said in the statement, opening remark, Birla White, the Birla Opus revenue for quarter 3 and guidance given by #2 players. In our assessment, internal estimates, now the gap is 300 basis points. I hope it's clear. And it is only Birla White's putty business. It does not include any other business. Amit Purohit: Sure. And sir, we've talked about increase in new dealer addition. I just wanted to understand the typical profile of these dealers. If you could just qualitatively highlight these are large dealers or these are dealers largely from the market leaders? Or if you could just throw some highlight because typically, I mean, there is different types of dealers. And initially, when we started off, obviously, there were challenges to reach out to the very, very large dealers. What is the state now, I mean, in terms of acceptance? Himanshu Kapania: We are getting blend from all category of dealers. In our internal assessment, we've broken the dealers into A category, which are more than INR 3 crores; B category, which is INR 1 crores to INR 3 crores; C category, which is INR 30 lakhs to INR 1 crores and D category into less than INR 30 lakhs. Most of the dealers are coming in, in the A, B, C. The small numbers will also come in the B category, but our focus in the A, B, C category. Amit Purohit: And lastly, the price increase that we highlighted, that is more from a testing perspective? Or is there any raw material pressure, which kind of -- or do you think that from now on, the brand is strong enough to kind of take pricing and still it adds value to the entire channel as well. Just wanted to know your outlook as you highlighted that next year FY '27, the growth in the industry could be closer to about 8%. So the pricing volume graph should it reduce in the FY '27? That's the last question. Himanshu Kapania: First and foremost, there are no current raw material pressures. Second, we've been consistently maintaining that we are at a lower price than the market leader and we felt the gap was higher, and we reduced the gap. That has been the strategy around there. It is not a price increase strategy per se as you're reading it. Please read it that we would like to maintain a certain gap with market leaders, and that's -- and we want to test at that gap, what is the consumer response. There was an X gap that existed and we reduced that gap. Operator: Next question comes from the line of Pathanjali Srinivasan with Sundaram Mutual Fund. Pathanjali Srinivasan: A couple of questions. So firstly, could you explain a bit on our share of retail business and institutional business because I believe we've grown pretty fast in our institutional business, but I was just trying to figure out if the base there is lower? Or are we created more towards institutional business? Himanshu Kapania: So to our understanding, the industry, retail and institutional business mix is 85-15. We are not yet there on that mix. We are still single digit on the institutional business. Retail is much faster to take off and institutional has a much longer gestation period. The message that I was communicating is that we have a strong pipeline. And over -- hopefully by FY '27, we should be able to come closer to the industry average between 12% to 15% on overall contribution from institutional business. Pathanjali Srinivasan: So could you give me some numbers for where we are in terms of range here? Himanshu Kapania: As I explained, we were a single-digit number, and we have a strong pipeline of institution, but retail continues to be the stronger forte for us at this point of time. But institutional is growing faster... Pathanjali Srinivasan: Sure. And just one more question around. So this number of saying 18% we've grown last quarter and all of that. There's just one part though where I've not been able to figure out. Like I met a couple of dealers from the time we started and more recently. And I have seen some of them saying that they've either stopped doing business or they're finding it difficult or something like that, while my sample size is very small. I want to know like what is an acceptable level of pushback or a reduction in dealers when we expand dealership and what are our targets here and where are we... Himanshu Kapania: So the -- it's a large dealer universe. They are overall 100,000 dealers. On an average in a quarter, about 50% to 60% of the dealers are active. We are also experiencing a similar levels. In fact, our sense is about 70% to 75% in the quarter are active around that. And we are satisfied with the number of people who onboarded with us with the number of people who are active in a given quarter. So from that perspective, we are very satisfied both in the expansion of -- expansion pace of dealers, both in the existing towns and new terms as well as the throughput pace of improvement of dealers. We are -- most of the leaders who have joined us and have been consistently -- have continued to stay with us. There's obviously -- we are very focused on our collection and there are dealers who are pay masters are the ones probably you may be referring to. Pathanjali Srinivasan: Got it, sir. Just to continue on that. I just wanted to know what is our policy with printing machines that we've given to dealers and where dealers have not been doing as much business as we like to them? How are we dealing with them? And are we -- have we started collecting money for tinting issues that we've given to dealers? Himanshu Kapania: No, we don't collect money for -- as we already explained, we give the dealers free-of-charge printing machines, and that remains a consistent policy even in FY '26 and going forward. Only if a dealer does default on his payment for a long period of time, are there any actions that are necessary, but it's a few and far and are probably not relevant for this national platform. Operator: Next question comes from the line of Prateek Kumar with Jefferies. Prateek Kumar: My first question is on paints. Can you just confirm again the -- while you talked about your revenue expectation maintaining for FY '28, what do you think on profitability? Other related question, you have like seen some increase in interest expense during the quarter sequentially and depreciation. Is this completely related to capitalization of 6 plants? Or also, is there any working capital changes which you expect because you're also increasing mix in your business? Himanshu Kapania: I just want to be clear, what your question is? You are referring to overall Grasim results, and you're saying that the interest and depreciation component gone up. Is that what you're referring to? Prateek Kumar: Yes, that is right. Unknown Executive: Yes. So in Grasim, if you are referring with the last year, the borrowing for the purpose... Prateek Kumar: Q-on-Q, I mentioned. Unknown Executive: Setting up the new plant was being capitalized. On the 15th of October, we have commissioned our last sixth plant. And now from quarter -- next quarter onwards, there will be no capitalization and all the interest costs will be coming to P&L account. Did this answer your query? Prateek Kumar: Yes, sure. So there's no material working capital changes because we're shifting business -- paint segment business to more institution. That doesn't have... Operator: Sorry for interrupting. Mr. Kumar, your voice is breaking. Can we just come a little closer to the mic and speak? Unknown Executive: In paints business, we have capitalized over all the 6 plants and no major CapEx is spending at all. Himanshu Kapania: If your question is on data, we are well in control as our debtors and working capital is not a challenge. We repeat again that the interest component in the past, a portion of that was getting capitalized. And now it will not -- the portion has significantly fallen because from 6 plants now down to around 15th October, it's only 1 plant. And that also, a part of it was no more capitalized. And the same applies to depreciation. As now all the 6 plants are fully commissioned, the full depreciation is reflecting in the books. Prateek Kumar: And the other question was on Paint segment profitability, which you're expecting for Fy '28. You maintain it as like turning positive by FY '28. Himanshu Kapania: Yes. We maintain our guidance. I'll repeat within 3 years of full-scale operation, we will -- we are targeting to be able to reach a profitable #2 position. Operator: Next question comes from the line of Shreya Banthia with Oakland Capital Management. Shreya Banthia: Am I audible? Operator: Yes, you are. Shreya Banthia: So my question is regarding the Chemical segment. So if you could share what is the current share of renewable energy in the Chemical segment? Himanshu Kapania: Just second. It is around -- exit rate is around 20%, 23%, right? And we expect -- we actually are targeting to reach an exit rate of over 40% by end of FY '27, if you want to make a projection. Operator: Next question comes from the line of [ Vipulkumar Anopchand Shah with Sumangal Investments ]. Vipulkumar Anopchand Shah: So when we will start sharing the revenue and EBITDA numbers of our paint business? Himanshu Kapania: Shortly. Vipulkumar Anopchand Shah: Shortly means, sir? Himanshu Kapania: Yes. We are -- even today because that's why the -- there is a portion of the material that has been produced and was not sold, and they are still reflecting revenues which they're getting capitalized. We're expecting to complete that, and we will move on to -- we will share with you the exact dates when we do that. But there is still -- so that's why this gap between capitalization, that's why the numbers, what market calculates is there is a gap, and we want to finish all the materials that we have produced before commissioning and consume it, which remains in the capitalization. Vipulkumar Anopchand Shah: So should we assume that from next financial year, you will start sharing those numbers? Himanshu Kapania: We'll definitely come back. Operator: Ladies and gentlemen, due to time constraint, that was the last question for today. We have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments. Himanshu Kapania: Thank you so much for participating on the Grasim call. We're now going to close the call. Unknown Executive: Thank you. Operator: On behalf of Grasim Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Operator: Greetings and welcome to PolyPid's Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] As a reminder, this call is recorded. And I would now like to introduce your host for today's conference, Yehuda Leibler from ARX Investor Relations. Mr. Leibler, you may begin. Yehuda Leibler: Thank you, operator, and thank you all for joining PolyPid's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me on the call today will be Dikla Czaczkes Akselbrad, Chief Executive Officer of PolyPid; Jonny Missulawin, PolyPid's Chief Financial Officer; and Ori Warshavsky, Chief Operating Officer, U.S. of PolyPid. Earlier today, PolyPid released its financial results for the 3 and 12 months ending December 31, 2025. A copy of the press release is available in the Investors section on the company's website at www.polypid.com. I'd like to remind you that on this call, management will make forward-looking statements within the meaning of the federal securities laws. For example, management is making forward-looking statements when it discusses the company's regulatory strategy and the anticipated timing and structure of the planned new drug application or NDA submission for D-PLEX100, including the rolling submission, the potential regulatory and commercial pathways for D-PLEX100, the company's ongoing partnership discussions, commercialization readiness, transition from a primarily R&D and clinically focused organization into one that is preparing for commercialization, the potential for 2026 to be a transformative year for the company, benefits and advantages of D-PLEX100 that Kynatrix represents a broader long-term opportunity for PolyPid and the expectation that current cash resources will be sufficient to fund operations into the second half of 2026. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond the company's control, including the risks described from time to time in the company's SEC filings. The company's results may differ materially from those projections. These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these statements. I encourage you to review the company's filings with the SEC, including, without limitation, the company's annual report on Form 20-F filed on February 26, 2025, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. PolyPid disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today, February 11, 2026. With the completion of those prepared remarks, it is my pleasure to turn the call over to Dikla Czaczkes Akselbrad, the CEO of PolyPid. Dikla? Dikla Akselbrad: Thank you, Yehuda, and thank you all for joining us today. 2025 was a pivotal year for PolyPid. Over the course of the year, we successfully completed the SHIELD II Phase III trial and announced positive results with D-PLEX100 meeting its primary endpoint and all key secondary endpoints and demonstrating a meaningful reduction in surgical site infection. Building on that momentum, we advanced D-PLEX100 into the final stages of regulatory preparation, marking an important transition point for the company. In parallel, we continue to advance our broader platform efforts, including our long-acting GLP-1 Receptor Agonist program. As we continue executing against our strategy, our progress is focused on 2 priorities: advancing the regulatory pathway for D-PLEX100 and advancing our commercial U.S. partnership discussions. Starting with regulatory progress. We recently received positive written feedback from the FDA following the pre-NDA meeting communication. Importantly, the agency supported our plan to pursue a rolling NDA review for D-PLEX100. We expect to begin the rolling NDA submission by the end of the first quarter of 2026. The FDA also agreed that the company's existing clinical data package, including results from the Phase III SHIELD II trial appears adequate to support NDA submission and review. This feedback provides meaningful clarity on the structure and expectations for our submission and further validates the regulatory pathway we have been preparing for. In parallel with our regulatory efforts, we made significant progress on the commercial front. Following our positive Phase III results and the advancement of our regulatory strategy, we have moved into advanced stages of partnership discussions in the United States. These discussions reflect growing recognition of D-PLEX100's strong clinical profile, its differentiated value proposition and the significant unmet need it addresses. I'm glad to share that we are very pleased with the progress we made throughout the quarter in our U.S. partnership discussions. These conversations have continued to move forward to advanced stages, which Ori will expand on later in the call. During the quarter, we also participated in a virtual key opinion leader webinar featuring Dr. Steven D. Wexner, a globally recognized leader in colorectal surgery. The discussion focused on the real-life clinical and economic burden of surgical site infections and why prevention remains a major unmet need in abdominal colorectal procedures. Importantly, the conversation reinforced what we believe is the core opportunity of D-PLEX100, a differentiated, long-acting localized approach that can significantly reduce infection while fitting naturally into the surgical workflow. As Dr. Wexner noted, this is truly new. This is a paradigm shift for us. We view this type of external clinical engagement as an important part of building awareness and readiness as we prepare the market for approval and launch. A link to the recording of the webinar is on our website under the Investors section. I invite all of you to listen to Dr. Wexner insights. Looking ahead, we believe 2026 has the potential to be a transformative year for PolyPid. With the rolling NDA submission expected to begin by the end of this quarter, partnership discussions continue to advance and an organization increasingly oriented towards commercial execution, we are entering a new chapter for the company. I also want to highlight an important corporate update. In December 2025, we appointed Ms. Brooke Story as Chairman of our Board of Directors. Brooke brings extensive leadership experience in medical technology and surgical solutions, including senior executive role at Becton, Dickinson and Medtronic. As we transition toward commercialization and engage with large strategic partners, we believe her background and perspective will be highly valuable in helping guide PolyPid throughout this next chapter. We look forward to providing updates as these developments continue to unfold. With that, I will now turn the call over to Ori Warshavsky, our Chief Operating Officer, U.S., who will discuss how we are approaching commercialization readiness and partner engagement, our refreshed corporate brand and the introduction of our Kynatrix technology. Ori? Ori Warshavsky: Thank you, Dikla. As Dikla mentioned, we continue to advance discussions during the quarter with potential U.S. commercial partners that have demonstrated experience in hospital-based commercialization and a strong presence within the surgical ecosystem. As these discussions have progressed, they have become increasingly detailed and operational in nature, reflecting both the maturity of the opportunity following our Phase III results and the progress we have made on our regulatory front. Turning now to our refreshed corporate brand. As you might have noticed in this morning's press release, PolyPid has a new brand look, which aims to reflect that PolyPid as a company looks different today than it did even a year ago. The 3 brands come at a very intentional moment in the company's life cycle as we transition from a primarily R&D and clinically focused organization into one that is preparing for commercialization and engaging more broadly with external stakeholders. Our audience is expanding. In addition to clinician and investigators, we are increasingly engaging with surgeons, pharmacists, hospital administrators, value committee members and potential commercial partners. The refresh brand is designed to support the more external safety conversations and to clearly communicate who we are as a company at this stage. Importantly, the new visual language is meant to convey precision, intention, reliability and control, core attributes of how our technology is engineered to perform. It reflects a more confident, mature and credible organization as we move closer to potential commercialization. I encourage investors and partners to visit our new website and review our updated corporate material, which reflects this evolution and our long-term vision. Closely related to this evolution is an important update on our technology. Over the past several years, we have significantly expanded our technological capabilities beyond what the original PLEX platform was designed to do. As a result, we are formally introducing Kynatrix as the name of our next-generation technology. Kynatrix brings together the broader set of controlled release and delivery capabilities along with the growing intellectual property portfolio we have developed over time. While PLEX remains foundational, our technology is no longer limited to local to local delivery of small molecules such as antibiotics. One clear example of these expanded capabilities is our move into metabolic disease, starting with our ultra-long-acting GLP-1 Receptor Agonist program. This program serves as the first step case for extending our technology beyond localized delivery towards addressing systemic therapeutic needs, and we continue to evaluate additional modalities where these capabilities may be applied. While Kynatrix represents a broad long-term opportunity for PolyPid, it is important to emphasize that D-PLEX100 remains firmly at the center of our near-term execution and commercial focus. Taken together, our continued progress in partnership discussions, our brand evaluation, the formal introduction of the Kynatrix technology and growing engagement with clinical leaders all reflect the company that is actively preparing for its next phase of growth. With that, I'll now turn the call over to Jonny to review our financial performance for the quarter and the full year. Jonny? Jonny Missulawin: Thank you, Ori. I'll now walk through our financial results for the fourth quarter and full year ended December 31, 2025. Starting with the fourth quarter, research and development expenses were $6.2 million compared to $7 million in the same period last year. This decrease primarily reflects the completion of the SHIELD II Phase III trial and our transition towards regulatory submission and preparation activities. General and administrative expenses for the quarter were $1.8 million compared to $1 million in the fourth quarter of 2024. Marketing and business development expenses were $0.6 million for the quarter compared to $0.2 million in the prior year period. Net loss for the fourth quarter was $8.5 million or $0.41 per share compared to a net loss of $8.5 million or $1.13 per share in the fourth quarter of 2024. Turning to the full year results. Research and development expenses for 2025 totaled $23.8 million compared to $22.8 million in 2024. The increase was primarily driven by continued activities related to the completion of the SHIELD II Phase III trial as well as regulatory preparation efforts and advancement of our development programs. General and administrative expenses for the full year were $7.2 million compared to $4.3 million in 2024. This increase was primarily due to noncash expenses relating to the vesting of performance-based options following the successful completion of the SHIELD II Phase III trial. Marketing and business development expenses for the year were $2 million compared to $0.9 million in 2024, reflecting increased business development and commercial preparation efforts as we move closer to potential commercialization. Net loss for the full year ended December 31, 2025, was $34.2 million or $2.09 per share. compared to a net loss of $29 million or $4.91 per share in 2024. From a balance sheet perspective, as of December 31, 2025, PolyPid had $12.9 million in cash, cash equivalents and short-term deposits. Subsequent to the end of the quarter, several long-time shareholders exercised warrants ahead of their expiration at prices ranging between $3.61 and $4.5 per share, generating $3.7 million in additional gross proceeds, further strengthening our balance sheet. Based on our current plans and assumptions, we believe that our existing cash resources will be sufficient to fund operations into the second half of 2026 and through several significant upcoming milestones. With that, we will now open the call for questions. Operator? Operator: [Operator Instructions] We will take our first question -- and the question comes from the line of Chase Knickerbocker from Craig-Hallum. Chase Knickerbocker: Maybe just a couple around the pre-NDA minutes that you received in December. Depo, would you be willing to share kind of how those discussions around the scope of the label sort of progressed? And just kind of generally, what your current expectations are as you kind of look to your proposed label as far as what we're thinking around kind of colorectal kind of specific versus a broader kind of abdominal label? And then kind of the same question around what kind of investor expectation should be potentially for some sort of risk factor or size of incision that could be on a proposed label. Dikla Akselbrad: Thank you. With regards to label, based on our discussion with the FDA we are targeting an initial label for the prevention of surgical site infections in prevention in patients undergoing abdominal colorectal surgery. This indication is directly supported by the SHIELD II Phase III data and is also our breakthrough therapy designation. We also expect that there may be an opportunity to evaluate potential label expansion into broader abdominal surgical application as we pursue -- as we go through the review process in a parallel. And the main rationale around it is as colorectal is the worst SSI prevalence in abdominal surgery. And obviously, there are other, but that's just as a high level. So that's our baseline assumption. This is how we built all of our planning and models. We do not expect on that regard anything that will narrow this. We think that this is a very conservative assumption, and this is why this is our baseline assumption. And as you referred to, we also met the FDA towards the end of last year as part of an NDA process, actually had a pre-IND communication with the FDA, where the purpose of this communication was really to align the requirement around the NDA submission, both in terms of time lines as well as in terms of having the FDA agreed that the Phase III data is adequate for NDA submission, both in terms of efficacy and safety. Chase Knickerbocker: Got it. Maybe just along those lines, it may be somewhat dependent on kind of partnership discussions as well, but any kind of formal thoughts on kind of plans as far as what may be required for a broader label and/or kind of further expansion opportunities for D-PLEX100 specifically. Maybe a little bit too early for that question, but any additional thoughts? Dikla Akselbrad: Yes. Maybe I think what I can say is that we have as part of our planning time frame that we plan to meet with the FDA to discuss this. Chase Knickerbocker: Got it. And just maybe last one for me on kind of future applications for the platform. Can you kind of help shape our thinking a little bit for kind of where you may go next? Obviously, you've announced that metabolic program, but -- and how these kind of future formulations may differ from what we've seen you do thus far? Dikla Akselbrad: So first, as you rightly referred to, we have the opportunity to expand D-PLEX into other indications, and that's the first and probably the most advanced pipeline expansion that we look, which is specifically on D-PLEX. But with regards to other pipeline, so I'm saying that because it's important for investors to understand that our near-term focus remains firmly on execution, the regulatory and commercialization pathway of D-PLEX. So that is where the vast majority of our intention, our resources are directed. But as we move forward with the NDA submission and approval, we are expanding into specifically, as you all know, around the GLP-1 and metabolic health. I expect that we will see during this year, we'll get additional data. I would even say around midyear. This program is still at preclinical development but with the underlying technology platform that provides long-term opportunity -- sorry, long-term exposure of 60-plus or around 60 days and the ability to support it in a linear way, this is very lucrative in this area. Operator: The next question comes from Jason Butler at Citizens. Jason Butler: Congrats on the progress. Dikla, can you just talk about the work that you're doing or will be doing this year to get ready for a potential approval of D-PLEX100, both in terms of building awareness as well as getting ready with payers. Just the work that needs to be done before approval. Dikla Akselbrad: Sure, sure. So some of it, we've shared with -- in previous calls and some of it is also Ori referred to in our new branding and website. This is all part of getting ready for the commercial stage. Some of it is already out there like the website and the new branding. But also there is work that is done around packaging for D-PLEX, its commercial name that we will obviously expose later on once we are in the approval process. And in addition to that, we have been doing a lot of work, not just now, but in the last 2 years. And Ori, please feel free to add to that. whether it is in terms of market research of pricing, creating awareness, you'll start to see many more abstracts and article coming from our front during this year, building a KOL network. Just the beginning of it was with our KOL event with doctor -- or well, it was actually our KOL event, but the ROTH Group KOL event with Professor Steven D. Wexner. Ori, do you want to add anything to that? Ori Warshavsky: I would just add that the main work right now is really, like you said, Jason, kind of putting the data out there and making sure that people are aware of the data of the product. So conferences will be a big part of it. publication will be a big part of it. A lot of the health economics piece is something that is kicking off now because, as you said, for market access, this is a driver. But also some of the on the ground kind of boots on the ground market preparation will be dependent on the partner, and we are expecting that the partner will have sufficient time, and we are -- and that's why our conversations are with kind of experienced global partners that will kind of get running immediately after signing can go on and start doing all the prior approval meetings in the hospitals and really get the access piece going almost immediately. Jason Butler: Great. And then just one more for me. On the GLP-1 program, how do you think about strategically when and what data you can generate yourself versus when a partner might make sense to bring on board? And just longer term, how you think about positioning and differentiation in this market? Dikla Akselbrad: Sure, sure. So our GLP-1 program leverages our new Kynatrix technology for approximately 60 days of sustained release and we are targeting improved patient compliance. Our vision for this program is to partner at a relatively early stage. What we are building now is more robust preclinical efficacy and [ PK ] sets of data that support this attribute, this sustained release, no spike as you see the burst release that you see -- that is seen with current weekly delivered molecules. So we are targeting to have this more robust efficacy and PK studies. We are already along the development of this program, have been speaking with different groups, but we believe that once we have this set of data, this could be very interested for partner, especially since we have -- this is coming after a validated program. D-PLEX100 has validated our approach in a very robust way, both in terms of manufacturing, CMC as well as PK and our ability to deliver and develop our technology forward into drugs. Operator: We will take our next question -- your next question comes from the line of Boobalan Pachaiyappan from ROTH Capital Partners. Boobalan Pachaiyappan: So first, I wanted to talk about the progress you highlighted in the press release about the potential U.S. partnership. So without getting into the confidential information, is it reasonable to assume the potential partner should also have a presence in ex-U.S. regions? And also assuming the significant interest post-NDA filing, what factors could play a pivotal role in closing in the partnership? And I have some follow-ups. Dikla Akselbrad: Great. thank you for that. So I'll start with the first portion. In terms of other geographies. So we are very focused now on U.S. We think that's our highest priority. That said, there might be interest to other geographies as well as part of those discussions and other discussions that we have. But our first priority is U.S. Also, since in terms of the time line, when you look at our NDA submission that is expected by the end of this quarter and European submission is expected later on about a quarter -- around the quarter after we finalize the FDA submission. So it makes more sense. And your second portion was? Boobalan Pachaiyappan: So I was asking about what factors might play a role in identifying the final partner. Dikla Akselbrad: So Ori, feel free to add to that. But we have been saying for quite some time that the ideal partner and also the partner that we are discussing with are with broad hospital-based capabilities and present in the surgical suite, in the hospital. And this is what's really needed to market a product like D-PLEX100. So I don't see the -- what could go wrong in that respect because I think that the interest and there is an alignment between the interest and the need. Ori, do you want to add to that? Ori Warshavsky: I would just add that we are -- we keep saying we're advancing, but we are advancing from a high-level discussion. The due diligence is going on and becomes more and more in the details. And I think that's a sign that we're heading in the right direction here. Boobalan Pachaiyappan: All right. That's helpful. And then you mentioned about the KOL call. Obviously, during my call with Dr. Wexner, she mentioned that the Phase III study was well designed, adequately controlled with balanced characteristics and the patients, they reflect the real-world scenario. So I was wondering if you could comment on whether the FDA took a similar view based on your pre-NDA meeting communications. Dikla Akselbrad: I think the fact that the positive -- the feedback was positive and there is an alignment on that and the FDA confirm both the NDA pathway as well as indicated that the existing clinical data package is sufficient to support an NDA submission. I think that's -- it says it all.. Boobalan Pachaiyappan: All right. Maybe one final question from us. So we have done some research. It looks like there's approximately 900 integrated delivery networks in the U.S., and they manage roughly 6,000 to 7,000 hospitals. So I was wondering, assuming this is indeed the case, what percentage of potential target IDNs would reasonably likely to include D-PLEX on formulary within the first 12 months after approval? Dikla Akselbrad: Ori, do you want to take this. Ori Warshavsky: Yes, I can take this. I think the process -- first, I would say that, of course, this would be a mission for the U.S. commercial partner. And this is the reason why we are discussing the commercialization activities with partners that understand the ins and outs of the IDNs that have relationship from the surgeon to the pharmacist to the IDN level to the GPOs to really ensure kind of uptake as fast as we can. Specifically about 1 month, I think it really -- it depends -- it's a hospital-by-hospital or network-by-network decision. There are a number of steps, and I think we discussed this in the past, there are a number of steps to get the product used in the hospital starts with finding the right champions, which this is a process that will be done even before launch to start educating from a medical perspective, educating the surgeons on the need. Then the product needs to come to a P&T review. And in this P&T review, there will be discussions both on the clinical benefit, the end economic benefits. All of that are topics that we have strong information on and the partners will have all the tools they will need to make the case. And then likely, the hospital or the IDN will ask for some sort of maybe a small pilot study, a handful of patients just really to see how this product works in the operating room and then an update to the electronic systems within the hospital. So all to say a little bit of a long answer to say that it's -- the uptake will take a little while. It's not a day 1 peak of sales, probably a few months before we'll start seeing a meaningful uptake. But I think the flip side of that is once there is -- once the product is on a formulary and there is usage, it's a relatively sticky process, meaning the products are rarely getting taken off formulary, assuming the product works and there are no issues. So we can see once the product is on formulary, volume growing steadily and usage growing steadily month after month. Operator: We will take our next question -- and the question comes from the line of Brandon Folkes from H.C. Wainwright. Brandon Folkes: Congrats on all the progress. Maybe just 2 from me. Maybe firstly, any color on when you expect to complete the rolling submission? And then maybe secondly, can you just elaborate on the differences between the Kynatrix platform and D-PLEX technology platform? And just how much early-stage work do you need to do on the Kynatrix platform? Or how much can you leverage from your experience with D-PLEX?'m just thinking about sort of how we should think about timing of moving products forward on the new platform? Dikla Akselbrad: Thank you. Thank you, Brandon. So with regards to the time line, as we said, we expect to submit the NDA by the end of the first quarter. We will first submit the CMC and nonclinical module followed by the clinical module. And the gap between those 2 submission is not more than a couple of months. It is very close to one another. From that point, since we have a Fast Track and breakthrough therapy designation that support the use of a rolling submission priority review, we expect that the NDA review will be shortened to 6 months from the regular 10 months. Ori, do you want to give a bit of difference? Ori Warshavsky: Yes, I can take that question. So Brandon, first, I think it's important to understand that it's not that one day we were on PLEX and the next day, it was Kynatrix. Kynatrix really is collecting under one umbrella, a lot of the work that has been done over the past several years that is not -- that was not under PLEX and under the PLEX IP umbrella, meaning to say there's no gap here. The work has been going on for -- as a continuous work. What you see under Kynatrix is now a way for us to collect some of the IP on peptide release on intratumoral injection on the STING agonist partnership that we had. All these activities coming under this umbrella and helping us build new IP and in a way, allowing us to discuss this more freely without the limitations of PLEX. So it's a new name, but the work in the R&D team and the development has been going on continuously forever. Does that make sense, Brandon? Brandon Folkes: Yes. Very helpful, I appreciate it and congrats again. Operator: This concludes today's question-and-answer session. I'll now hand the call back for closing remarks. Dikla Akselbrad: Thank you all for joining us today. 2025 marked an important turning point for PolyPid, and we enter 2026 with momentum across regulatory, commercial and organizational fronts. With the rolling NDA review expected to begin shortly, continued progress in partnership discussion and a clear strategic vision for the company's future, we believe PolyPid is well positioned for the next phase of growth. We appreciate the continued support of our shareholders, partners and employees, and we look forward to providing further updates as the year progresses. Thank you. And operator, you may now close the call. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Greetings, and welcome to the NETSTREIT Corp. Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. It is now my pleasure to introduce your host, Matt Miller, Head of Capital Markets and Investor Relations. Thank you. You may begin. Matt Miller: Good morning, and thank you for joining us for NETSTREIT Corp. Fourth Quarter 2025 Earnings Conference Call. On today's call, management's remarks and responses to your questions may contain statements considered forward-looking under federal securities law. These statements address matters subject to risks and uncertainties that may cause actual results to differ from those discussed today. For more information on these factors, we encourage you to review our Form 10-Ks for the year ended 12/31/2025, and other SEC filings. All forward-looking statements are made as of today, 02/11/2025, and NETSTREIT assumes no obligation to update them in the future. In addition, certain financial information presented on this call includes non-GAAP financial measures. Please refer to our earnings release and supplemental package for definitions, reconciliations to the most comparable GAAP measures, and explanation of their usefulness, which can be found in the investor relations section of the company's website at netstreit.com. Today's call is hosted by NETSTREIT's CEO, Mark Manheimer, and CFO, Daniel Donlan. They will make some prepared remarks followed by a Q&A session. With that, I'll turn the call over to Mark. Mark Manheimer: Thank you, Matt, and thank you all for joining us this morning on our fourth quarter 2025 earnings call. I first want to congratulate the team on an outstanding 2025. We are efficiently running on all cylinders as we have the right people in place in each role across the entire organization to expand upon our success. We are well equipped from a balance sheet and cultural perspective at NETSTREIT to source the best opportunities, thoroughly underwrite them, and close them efficiently while also maintaining rigorous monitoring and asset management to get ahead of future risks. We had a strong quarter of accelerated transaction activity as we completed $245.4 million of gross investments, our highest quarter on record, at a blended cash yield of 7.5% with fifteen years of weighted average lease term. For the full year, we completed a record $657.1 million of gross investments at a 7.5% blended cash yield with thirteen point nine years of weighted average lease term. When considering how modest our investment goals were to start the year, this record level investment activity is even more impressive as it demonstrates our team's ability to rapidly adapt to fluctuations in both our cost of capital and the overall net lease marketplace. In addition, we accomplished this record activity while maintaining focus on diversification as evidenced by our record level of dispositions, which were completed 60 basis points inside our blended cash yield on investments. Additionally, our diversification efforts led to 15 new tenants joining our roster in the fourth quarter alone, and with 31 new tenants being added for the full year. From an earnings perspective, our attractive investment activity helped us reach the high end of our upwardly revised AFFO per share guidance range. And looking ahead to this year, the team continues to find well-priced high-quality investment opportunities with heightened levels of activity within the grocery, fitness, convenience store, and quick service restaurant industries. As previously announced, we achieved an investment-grade rating of BBB- from Fitch Ratings, which has greatly improved our access to debt and allows for tighter spreads. Coupled with our growing pipeline of opportunities, improving cost of capital, and our low dividend payout ratio, all of which have accelerated our growth prospects, we are increasing our quarterly dividend by 2.3% to $0.22 per share. Our balance sheet remains in excellent condition with pro forma leverage of 3.8 times, $100 million of undrawn term loan capital as of today, $373.1 million of unsettled forward equity at year-end, and no major debt maturities until 2028. Turning to the portfolio, we ended the quarter with investments in 758 properties that were leased to 129 tenants operating in 28 industries across 45 states. From a credit perspective, 58.3% of our total ABR is leased to investment-grade or investment-grade profile tenants. Our weighted average lease term remaining for the portfolio was ten point one years, with just 2.4% of ABR expiring through 2027. The portfolio weighted average unit level coverage is a very healthy 3.8 times. Moving on to dispositions, we sold 76 properties in 2025, totaling $178.6 million at a 6.9% cash yield, which allowed us to accomplish all of our diversification goals for the year, including bringing all tenants below 5% of ABR. With our diversification efforts now met, we do anticipate selling fewer assets in 2026, with our focus turning more towards opportunistic sales and risk mitigation in order to get ahead of potential risks well before they can impact our AFFO per share. That said, we do expect to improve portfolio diversity through the year with Walgreens representing less than 2% of ABR by 2026 year-end. We are confident in the strength of the portfolio we have constructed and the durability of our place rent stream. More specifically, when analyzing the ABR that expires over the next four years, we continue to see a high probability of renewal given the cohort blended rent coverage ratio of 5.1 times and our ongoing dialogue with these tenants. Coupled with our high corporate credit portfolio, properties with in-place rents near market with strong real estate fundamentals, and an active asset management process, we remain confident that our portfolio can continue to produce consistent cash flow generation in the net lease space. In summary, 2025 was a year of record achievements for NETSTREIT driven by our focus on high-quality, necessity-based retail properties and commitment to a well-capitalized balance sheet. We are excited about the momentum we have established in 2026 and our ability to deliver value to shareholders as one of the fastest AFFO per share growers in the space. With that, I'll hand the call to Dan to go over fourth quarter financials and then open up the call for your questions. Daniel Donlan: Thank you, Mark. Looking at our fourth quarter earnings, we reported net income of $1.3 million or $0.02 per diluted share. Core FFO for the quarter was $26.6 million or $0.31 per diluted share, and AFFO was $28.2 million or $0.33 per diluted share, a 3.1% increase over last year. For the full year 2025, we reported net income of $0.08 per diluted share, core FFO of $1.23 per diluted share, and AFFO of $1.31 per diluted share, which represented 4% growth over 2024. Turning to the expense front, with the company making seven net new hires during the year, our total recurring G&A represented 11% of total revenues in 2025, which was unchanged versus 2024. Looking ahead to 2026, we expect this metric to average below 10% as our G&A continues to rationalize relative to our revenue base. Turning to capital markets activity, we sold 5.8 million shares for $104 million of net proceeds in the quarter via our ATM program. Subsequent to quarter-end, we sold an additional 2.6 million shares for $46 million of net proceeds. Looking at the balance sheet, our adjusted net debt, which includes the impact of all forward equity, was $720 million. Our weighted average debt maturity was three point nine years, and our weighted average interest rate was 4.24%. Including extension options, which can be exercised at our discretion, we have no material debt maturing until February 2028. In addition, our total liquidity of $1 billion at year-end consisted of $14 million of cash on hand, $500 million available on our revolving credit facility, $373 million of unsettled forward equity, and $150 million of undrawn term loan capacity. From a leverage perspective, our adjusted net debt to annualized adjusted EBITDAre was four times at quarter-end, which remains comfortably below our target leverage range of four and a half to five and a half times. Including ATM, raise subsequent to quarter-end adjusted net debt to annualized adjusted EBITDAre was 3.8 times. Moving on to guidance, we are reaffirming our 2026 AFFO per share guidance range of $1.35 to $1.39, which assumes year-over-year growth of 5% at the midpoint. Additionally, we continue to expect our net investment activity to range between $350 million to $450 million and our cash G&A to range between $16 million to $17 million. In addition, the company's AFFO per share guidance range includes $0.015 to $0.03 per share of estimated dilution due to the impact of the company's outstanding forward equity calculated in accordance with the treasury stock method. Lastly, on February 5, the Board declared a quarterly cash dividend of $0.22 per share, which represented a 2.3% increase from the prior quarter dividend of $0.215 per share. The dividend will be payable on March 31 to shareholders of record on March 16. With that, operator, we will now open the line for questions. Operator: Thank you. We will now be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue. The first question is from Haendel St. Juste from Mizuho Securities. Please go ahead. Ravi Vaidya: Hi there. Good morning. This is Ravi Vaidya on the line for Haendel. Hope you guys are doing well. I wanted to ask how are you thinking about balancing tenant credit and yield as part of your capital deployment? Saw that Seven Eleven and Festival are no longer on your top tenant list. But Academy, a lower corporate credit, has entered the list. Is there more of a focus on four-wall coverage or lease term as you move forward with your capital deployment? Thanks. Mark Manheimer: Ravi, good to hear from you. So, yeah, I mean, I guess specifically as it relates to Academy, I mean, double B plus, so that's one notch away from being investment grade. And I think if you just look at their current ratios, I mean, very low debt levels, you know, 3.3 times fixed charge coverage ratio, more than a $6 billion revenue company. I think if you just took the name off of it, you might think that they'd be investment grade. I think the fact that they went public on a five-plus years ago after being a private equity-backed company, you know, they've really kind of returned to their roots as being, you know, what they were as a kind of a family-run business. When most people really thought of them as an investment-grade company. So I do think that they are a high-quality retailer, we have been very selective in terms of the assets that we've acquired. You know, got a very good relationship directly with the folks down in Katy, Texas. And so, you know, we make sure that we're buying locations that generate very strong cash flows. But I do think that is a potential upgrade at some point in time. So that could, you know, at some point in time, move up into the investment-grade bucket. And then just more broadly, you know, as it relates to investment-grade investment-grade profile, versus kind of the sub-investment grade. You know, overall, I'd say we are seeing probably the better risk-adjusted returns in the non-rated bucket where we're doing our own underwriting of the corporate credit. Many of whom don't have any debt, so there's no reason for them to have a rating. And I think could be really safer than some of the investment-grade names out there. And then we're getting, you know, stronger leases where we're getting, you know, master leases. We're getting better rent escalations and pure absolute triple net leases. So, you know, we feel like the risk-adjusted returns are a little bit stronger there. But as you note in the past, you know, we've gone a little bit heavier on the investment-grade side where the pricing was condensed. There wasn't much of a difference. And so I think it shows the strength of the acquisitions team and the underwriting team to be able to go out and source a lot of different types of opportunities and really sort through where we're getting the best risk-adjusted returns. Ravi Vaidya: Got it. That's really helpful color. And maybe you could just talk about the guide. What is your level of confidence towards reaching the upper end of the acquisition rate and the upper end of the AFFO guide? And maybe some thoughts on how 1Q has progressed so far from a capital deployment standpoint? Thanks. Mark Manheimer: Yes, I'll just jump in on the acquisition side. Yes, I mean, I think you saw the number of acquisitions that we did last year. Certainly feel very comfortable that we can hit the high end of the acquisitions guide. Especially in light of the fact that we're gonna be selling significantly fewer properties this year. Daniel Donlan: Yeah. You know, Ravi, anytime we put together guidance, you know, I think we obviously have a bias towards the upper end of the range. You know, as you think about it, there's really four drivers. It's not investment activity in the timing thereof. It's cash G&A. It's dilution from, you know, treasury stock method and as well as potential loss rent from credit events. I would say it's not linear. So, you know, if we come in at the low end of some of those ranges, it doesn't mean we can't be at the high end. It's kind of a mixed bag, in terms of where we can end up, but we certainly confident as we did last year, you know, that we can reach the upper end of our range. Ravi Vaidya: Thanks so much, guys. Appreciate the color. Operator: The next question is from Greg McGinniss from Scotiabank. Please go ahead. Greg McGinniss: Hey, good morning. Mark, with these non-IG investments, you mentioned master leases and stronger rent escalation. Are you also getting property-level P&Ls to compensate for the lower lack of credit? Mark Manheimer: Yeah. I mean, I think, you know, in most cases, we are. Each transaction is a little bit different. And again, just because, you know, S&P or Moody's or Fitch doesn't say that somebody's investment grade. They can still have an investment-grade balance sheet and strong operations generating a lot of cash flow. But, yeah, I mean, I think in general, you have a little bit more leverage. A lot of these are sale-leasebacks where we're dealing directly with a tenant, not buying the assets from other landlords. So it makes it a lot easier to have that negotiation. It is very important for us to, you know, to really understand not just so much at the corporate level, but also at the unit level, that we're getting, you know, productive stores that, you know, the tenant's committed to long term. Greg McGinniss: Mhmm. Okay. Thanks. And, Dan, on the guidance, are you able to give us some maybe some guidelines or your thoughts around the equity issuance that you're kind of building in there and on the treasury solution as well? Daniel Donlan: Yeah. You know, look, I think where we sit today at three pro forma leverage and you think about we have $100 million of undrawn term loan capital today. We have over $400 million of unsettled forward equity that we can draw upon, you know, over $40 million of free cash flow. You know, we certainly don't need to raise any equity at the moment. We can afford to be patient. I think what I'd tell you is we sort of have a de minimis amount of equity baked into the model at this point in time. So, you know, nothing that we can't handle as we sit here today. Greg McGinniss: So could we assume that with a, you know, slightly higher or I don't know how much higher you guys feel it needs to be stock price, then you kinda open up a lot of opportunity on the acquisition side. And growth. Daniel Donlan: Yeah. I think what I would say is just from a leverage perspective, our targeted range is four and a half to five and a half times. I think we can easily operate within that range, raise no additional equity. I think our preference is to obviously be over-equitized. And to the degree that our stock price stays where it is or moves higher, I think we're comfortable raising equity as we sit here today. Our spreads are 160 to 170 basis points over. You know, I think that's certainly above the, you know, industry average over the last twenty years. But at the same time, you know, it's early in the year, and, you know, we're not necessarily in we can be patient. And, so, I think to the degree that the pipeline continues to increase, and we feel good about cost of equity, we could certainly raise it, but it's still early on in the year. Greg McGinniss: Great. Thank you. Operator: The next question is from John Kilichowski from Wells Fargo. Please go ahead. John Kilichowski: Hi, good morning team. First one, just kind of going back to that last question. I'm curious if there's no real extra need for equity here. I guess as far as the acquisition guide is concerned, how much of that is dictated by capital needs versus just what the opportunity set is out there on the market? Because it's good to hear there's nothing that you need, but I'm curious like, you know, how far above and beyond you can go given where leverage is and given the equity capacity you've built up. Mark Manheimer: Yeah. And I think with the guide, I mean, we've, you know, we want some optionality in there. I think the team is able to source significantly more than what we've done in the past. And so, yeah, I mean, I think it's really, you know, capital cost of capital constraints. You know, if our cost of capital gets meaningfully more attractive, we can certainly, you know, ramp up acquisitions, you know, quite a bit. John Kilichowski: Mhmm. And then maybe just one for me on the IG side. You've seen a little bit of drift downwards in that IG profile exposure over the past couple of quarters. Is there anything to note there strategically? I understand there's just better risk-adjusted returns in that space that you're seeing right now, but I'm curious what's the net move. Are you just is there a target subsectors that sit outside of that box that you like more? You like the unit level coverage? Just curious what's making that move. Mark Manheimer: Yeah. I mean, it's really just the pricing of the opportunities. You know, we're seeing a lot of great opportunities really on both sides. It's just, you know, we feel like the pricing has been more attractive and really kind of our efficient frontier of, you know, what our portfolio allocation looks like right now. It's kind of really more it's not really it's a byproduct of what we're doing, which is, you know, to 40% investment grade investment grade profile. Tenants you know, right now, but that can certainly change if we see the market dynamics change. And then, you know, I think things that don't jump off the page are really, you know, the quality of the leases. You know, we don't really want to go out and buy what are shopping center leases where you have, you know, co-tenancy, use restrictions, you know, and a lot of things, you know, landlord responsibilities that we don't really want to be taking on and taking on the cost of. And so, you know, we're not as dogmatic about whether something is just investment grade or not investment grade. We're really just kind of focused on the right risk-adjusted returns. John Kilichowski: Thank you. Operator: The next question is from Michael Goldsmith from UBS. Please go ahead. Michael Goldsmith: Good morning. Thanks a lot for taking my questions. As portfolio diversification is presumably more complete, how would you characterize the shift in strategy from here? I think you talked a little bit about being more opportunistic. Is there a way to think about, like, shifting from defense to offense? Just trying to get a sense of how your actions this year and in the future may change from kind of what you what kind of transpired in the last year or so? Mark Manheimer: Yeah. Sure. I mean, I think, you know, coming out of the gates back in 2020, you know, with a smaller portfolio, any that we saw a really great opportunity that had some size to it, it really kind of moved the concentrations around, you know, quite a bit, you know, with a smaller portfolio. And so, really, just with the market reaction of, you know, some of the tenants even though we felt like were good assets and, you know, continue to think that they were good assets, they're gonna continue to pay rent and continue to renew their leases. You know, it had an impact on our multiple. So we became a little bit more aggressive on addressing some of the concentrations to bring them down, which was kind of a longer-term plan, but we, you know, that into a shorter or medium-term plan. I think, you know, as we look forward today, I would just expect us to not have to, you know, down as much. It would take a lot more for us to buy really start to run into any type of concentration concerns. On a go-forward basis, I think under 5% is, where all tenants are today. I'd be surprised to see anybody move up above that threshold in I think you're gonna see the diversity of the portfolio just continue to improve over time. Michael Goldsmith: Thanks for that. And as a follow-up, the sub-one-time coverage tranche, it picked up sequentially by 50 basis points. So what's driving that? Is that something that you're monitoring? Just trying to get a little more color there. Mark Manheimer: Yeah. Yeah. Sure. So I mean, it is something that we monitor. I mean, we're monitoring everything on that histogram. I think that's gonna move around a little bit. Quarter to quarter, so, we try not to overreact to any moves there. But that relates to some assets that, you know, we feel like are fine, you know, that are, you know, the rent per square foot is below market for each of those assets. And we've got some lease terms. So we'll continue to monitor that if we don't see improvement over the next, you know, several quarters, then we may look to monetize the assets or do something there. But, you know, it's certainly nothing of concern here in the short or medium term. Michael Goldsmith: Thank you very much. Good luck in 2026. Daniel Donlan: Thanks, Michael. Operator: The next question is from Smedes Rose from Citi. Please go ahead. Joseph: Thanks. It's Joseph here with Smedes. Maybe just following up on that last I think in the opening remarks, you talked about opportunistic sales. And really just risk mitigation. As you look at the portfolio today, is that a comment more on industries? Or is that, you know, tenant or property specific? Mark Manheimer: Yeah. No. I think, you know, last year, we sold a lot of properties. And so that was really addressing some of the concentrations, trying to bring those down. I think we're more or less done with what needs to get accomplished there. We hit the goal that we set out at the beginning of the year. And so when we think about dispositions now, you we've got some relationships where people will come to us with, you know, very aggressive cap rates, on some assets that we own, and we feel like, okay. They're valuing those assets more than we are, and so we can take that capital and redeploy it accretively. Improve the quality of the portfolio. So anytime we can do that, we're gonna we'll take advantage of those situations. And then it's just general risk mitigation. I think you can kind of look at, you know, the histogram to get some idea of, you know, the things that we're thinking about. And, you know, if we start to see degradation of performance either at the corporate or unit level, those will likely be more likely to be disposed of in the future. But it's when you think about the quantum of what we'll be selling, it'll be significantly less than what we did last year. Joseph: Thanks. And then, no, there's not a high percentage of rent expiring this year, but what are the expectations for kind of the new rent versus the expiring rent? Mark Manheimer: Yeah. I mean, I think in most cases, they're just gonna renew the lease. And then I think there's one property where rent's about $160,000 where we do not expect the lease to get renewed, but we're in conversations with a convenience store operator that would be interested in taking that over as a ground lease either to ground lease it or to just sell it. We're gonna kind of figure out where we're getting the better outcome. Joseph: Thanks. Operator: The next question is from Jay Kornreich from Cantor Fitzgerald. Please go ahead. Jay Kornreich: Hey, good morning guys. Following up on the deal spreads you outlined currently 160 to 170 basis points. Can you maybe just describe the competitive landscape for net lease assets currently? I mean, it looks like cap rates hold up at 7.5% in 4Q. Just curious if you anticipate elevated competition to compress rates in 2026. Or perhaps that's why you like these nonrated tenant investments that they face less competition and have better yields just curious of your thoughts on that as the year goes on. Mark Manheimer: Yeah. And, you know, we've certainly, you know, read a lot about competition coming into the space and you know, are aware of some groups, you know, stepping in and buying some larger portfolios. But you know, they're really not chasing the smaller opportunities. You know, we're averaging, you know, 3 and a $4 million per property. It's a little bit too cumbersome for a lot of those larger shops with smaller teams to go out and compete there. So just haven't really seen them very much. You know? And so the competition has not changed at all. We're typically competing with the seller's expectations in most cases and occasionally a 1031 buyer. But for the most part, you know, the competition has not had an impact on pricing at all. We've seen a very tight band of where the ten year is trading. I think it was, you know, a little less than 4.2%, before we got on the call. So, it's really kind of bounced around four, low fours, and maybe a little bit under four here and there. But that tight band has really allowed prices to get very sticky. And so we expect at least through, you know, first quarter and even some of what we've acquired, or looking to acquire in the second quarter that's in our pipeline. To see very similar cap rates what we saw, throughout 2025. Jay Kornreich: Okay. Appreciate that. And then just one follow-up. You received your first rating as investment grade from Fitch in December. So can you just outline what the cost of capital improvements are you expect from that and any update to timing or impact from further ratings from Moody's or S&P? Daniel Donlan: Sure. Look, as you can see in the disclosure, you know, most of our term loans priced down 25 to 20 basis points. So it kind of resulted in basically $2 million of annual interest rate savings. You know, we feel good about the rating that we received. To the degree that we got an upgrade in that rating, it'd be another probably 10 basis points of upside across the term loan stack. As we sit here today, you know, we don't really have a need to go out and raise long-term debt until probably mid-2027. So we're not necessarily in a rush to get another rating, but you know, certainly, we'll be talking and speaking with the agencies, you know, throughout this year and into next year just to maintain dialogue. Jay Kornreich: Okay. Thanks very much. Operator: The next question is from Wesley Golladay from Baird. Please go ahead. Wesley Golladay: Hey, guys. I believe you mentioned you added 31 tenants in 2025. I guess when you look at the deal volume in 2026, do you expect to add a lot more relationships like you did last year? You just kind of work more with the existing relationships. Mark Manheimer: Yeah. I mean, it will certainly be a combination. You know, we expect to add new tenants, you know, to be totally frank, those 31 tenants, most of those are, you know, one or two properties, you know, a couple portfolios in there. Sale leaseback, but, you know, a lot of those are just kind of, you know, very small investments that kind of, you know, make that number seem maybe a little bit bigger. But I would expect us to be adding, you know, five, six, new tenants per quarter would be a good assumption. Wesley Golladay: Okay. And what about categories? Do you expect to add a lot this year or lean into some a lot more? Mark Manheimer: I think we'll be shopping in the same food groups as we've been, you know, more recently. So, you know, we're seeing really good opportunities. And, yeah, convenience stores continue to be, you know, a big one. Grocery even some fitness selectively and quick service restaurants have been really, really good for us as well. Wesley Golladay: Okay. That's all for me. Thank you. Mark Manheimer: Thanks, Wes. Operator: The next question is from Michael Gorman from BTIG. Please go ahead. Michael Gorman: Yes, thanks. Just one quick one for me, Dan. Going back to your mentioning not needing to raise long-term debt until kind of mid-2027, can you just remind us of the road map? Would that be an unsecured would you be looking at the unsecured listed market then? Or just kind of what the road map is to get to the unsecured listed market there? Thanks. Daniel Donlan: Yes. So yeah. So you actually don't even need an investment-grade credit rating or to access the private placement market. That certainly is preferred. So as we sit here today, if we wanted to go out and access the private placement market, efficiently, I think we could. As we think about 2027, it's a year and a half away. I think it could take the it could be a private placement. It could be unsecured bonds. The degree that we got a second or third rating from one of the rating agencies. I think it just kind of depends on kind of the growth of the company and, you know, where we see, you know, the lowest cost of capital from the debt side. So, you know, it just kind of remains to be seen, Michael. Michael Gorman: Great. Thanks, Dan. Operator: The next question is from Upal Rana from KeyBanc Capital Markets. Upal Rana: Great. Thank you. I want to get your thoughts on the broader retail space and what you're seeing in terms of any kind of troubled tenants or troubled categories. You've had your fair share of headline risks in '24, but was able to sidestep that last year. So just curious on your thoughts heading to '26 and how maybe bankruptcies or store closings might impact how you invest or divest this year? Mark Manheimer: Yeah. Sure. I mean, there's really not anything in our portfolio, that, you know, any themes there. I think just more broadly, as you think about the consumer, you know, not new news to anybody, but, you know, the k-shaped economy is real, and the, you know, lower-income consumers, you know, felt a lot more pressure, and that's leaked into, you know, some middle-income consumers. So I think you have to be very careful about, you know, understanding who the consumers are of each business, and, you know, whether these are necessity products or, you know, how discretionary they are. And so that cross-section of the lower-income consumer and more discretionary spend is likely to have a little bit more pressure. We've seen, you know, a handful of casual diners, you know, come under some pressure. Whether it be Bahama Breeze, I think, you know, completely shutting their doors one of the Darden concepts. And, you know, we've seen a couple of those types of things, but I think that's gonna be the theme is it's gonna be the, lower-income consumer, you know, at a cross-section of more discretionary spend. Upal Rana: Okay. Great. That was helpful. And then, you know, I'm just doing fewer dispositions this year. Just curious, are you still planning to reduce store account exposure? Some of your troubled tenants, or are you comfortable with what you currently own? And maybe you could talk about the appetite for those types of tenants in the transaction market today. Mark Manheimer: Yeah, sure. I mean, I'm not sure if we have troubled tenants. I think we had a couple of tenants that maybe the news flow wasn't quite as positive. But that being said, we're unlikely to be adding to the tenants that we were decreasing exposure to. I think they're likely to continue to decrease a little bit on the margin. But the portfolio as it sits today and even with those tenants, we've got really strong performing assets. You know, our relationship with the tenants is really very helpful in making sure that we understand, you know, what that risk looks like, and making sure that we've got locations that generate, you know, very strong cash flow, and we're very confident in the portfolio. Upal Rana: Okay. Great. Thank you. Operator: The next question is from Jana Galan from Bank of America. Please go ahead. Jana Galan: Hi, thank you for taking the question. Following up on the rent recapture conversation, Mark, I thought your comments on rent coverage of 5.1 times for the near to medium-term lease expirations were very interesting. Most of these tenants still have renewal options available, or can lease recapture in the future be higher than the historical level? Mark Manheimer: I wish we had a lot of, you know, leases with no options, but I, you know, very rarely do we have any, you know, lease that doesn't have options left. Our expectation is that, you know, almost all of those locations or at least the lion's share of those locations the tenant's just gonna hit the option. Because they're generating so much cash flow. Jana Galan: Thank you. And maybe for Dan on the balance sheet. Some of your peers in net lease have implemented commercial paper programs. Is that something you would look to in the future? Daniel Donlan: Yeah. It's not something I've looked into in the near term. I think you have to be, you know, much more sizable than we are today to access that program. So it's something we would look forward to doing. But I think at our size today, I don't think that, as well as our credit ratings, I don't think that market is available to us at the moment. Jana Galan: Thank you. Operator: The next question is from Daniel Guglielmo from Capital One Securities. Please go ahead. Daniel Guglielmo: Hi, everyone. Thank you for taking my questions. On the net investment guidance, do you think of kind of the higher end of the range as a limit or would you be willing to push through that if the conditions are right? Mark Manheimer: Yeah. I mean, it certainly, you know, I have very few concerns about us being able to source attractive opportunities. So that's not really a limit, you know, at all. In fact, I think we could do significantly more than the high end of the band there. It's really gonna come down to, you know, how accretive would it be for us to go down that path if we've got a really strong cost of capital and our stock price is doing really well. I would expect us to increase that. Daniel Guglielmo: Okay. I appreciate that. Thank you. And then on the 3Q call, you all had said there was about $100 million of acquisitions the last two days of the quarter. There similar kind of investment volumes the last few days of 4Q? Or was it more evenly spread? Daniel Donlan: No. It wasn't as bad as the third quarter. Just because, you know, we really started to accelerate our growth when we got to follow on in mid-July. I think our average closing date was, you know, kind of middle December, and we did close about $77 million of transactions in the last three days of the quarter. So it was more back-end weighted, similar to the third quarter. Mark Manheimer: And then just to piggyback on that, I would not expect that in the first quarter where we were able to close more earlier in the quarter. Daniel Guglielmo: Great. Thanks. Appreciate that color. Operator: There are no further questions at this time. I would like to turn the floor back over to Mark Manheimer for closing comments. Mark Manheimer: Well, thanks, everybody, for joining today. We appreciate your interest in the company and look forward to seeing many of you at the upcoming conference season. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings, and welcome to the Lithia Motors, Inc. 2025 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jardon Jaramillo, Senior Director of Finance. Thank you. You may begin. Jardon Jaramillo: Good morning. Thank you for joining us for our fourth quarter earnings call. With me today are Bryan B. DeBoer, President and CEO, Tina H. Miller, Senior Vice President and CFO, and Chuck Lietz, Senior Vice President of Driveway Finance. Today’s discussion may include statements about future events, financial projections, and expectations about the company’s products, markets, and growth. Such statements are forward-looking and subject to risks and uncertainties that could cause actual results to materially differ from the statements made. We disclose those risks and uncertainties we deem to be material in our filings with the Securities and Exchange Commission. We urge you to carefully consider these disclosures and not to place undue reliance on forward-looking statements. We undertake no duty to update any forward-looking statements that are made as of the date of this release. Our results discussed today include references to non-GAAP financial measures. Please refer to the text of today’s press release for a reconciliation to comparable GAAP measures. We have also posted an updated investor presentation on our website investors.lithiadriveway.com, highlighting our fourth quarter results. With that, I would like to turn the call over to Bryan B. DeBoer, President and CEO. Bryan B. DeBoer: Thank you, Jardon. Good morning, and welcome to our fourth quarter earnings call. In the fourth quarter, we achieved record revenues driven by impressive used vehicle sales that greatly outpaced the market. Quarterly revenue was $9,200,000,000 setting a new record for full-year revenue of $37,600,000,000, up 4% from 2024. Adjusted diluted EPS was $6.74 for the quarter, with full-year adjusted EPS of $33.46, up 16% from 2024. Our operational leaders leaned into growing our top line and flexing their muscles across all aspects of our ecosystem including DFC, which saw a $19,000,000 year-over-year increase in pretax income and delivered a 16.7% penetration rate in December, exemplifying auto done easy. I would like to commend our ops leaders for leaning into used cars, especially value autos, focusing on the customer experience, and earning considerably more share in positioning us again at the top of our peer group. Together, we are challenging our store and sales department leaders to reinvent their profit equation through more dynamic pricing and reducing SG&A while outperforming in volume. Growing our market share and increasing volume is a turbo boost to our ecosystem’s future profitability as we increase DFC penetration, aftersales retention, and benefit from the waterfall of used vehicle trade-ins. During the quarter, our same-store revenues were essentially flat, and gross profit was down 1.2%, reflecting strong execution relative to the market. Total vehicle GPU was $3,946, down $258 year over year, in line with industry-wide compression in both new and used vehicle margins. Despite these headwinds, our diversified earnings mix and focus on market share delivered double-digit growth in aftersales and stable F&I performance to help offset front-end pressures. Note that all vehicle operation results will be on a same-store basis from this point forward. New vehicle revenue declined 6.6% on an 8.3% unit decline as industry demand softened and supply normalized. New vehicle GPU was $2,760, down $300 over last year. Performance varied by brand with luxury brand revenue down 12.7% year over year, partially due to the difficult prior-year comp. Domestic and import brands were also soft, particularly late in the quarter when sales promotions did not materialize. Our used retail performance has returned to our historical industry-leading mid-single-digit growth levels, with used revenue up 6.1% driven by 4.7% unit growth. Our value auto platform continued its strong momentum with 10.9% unit growth, demonstrating our growth at the most affordable price points. Used GPU was $1,575, down $151 year over year as we increased market share considerably, while now turning to the opportunity to improve unit profitability as well. Our focus on this high ROI area provides a stable anchor to new vehicle cycles and allows us to increase the number of customers in our ecosystem while growing our F&I and aftersales profitability. F&I per unit was $1,874, up $10, demonstrating the resilience of this high-margin business. This steady growth came despite a record DFC penetration, where we intentionally shift finance gross profit from F&I to our captive finance platform. Adjusting for these mix shifts, underlying F&I product attachments and pricing was healthy, reflecting strong execution across our network. Inventory levels remain consistent with new vehicle day supply at 54 days, essentially flat from 52 days last quarter. Flat inventory plus lower interest costs drove $6,500,000 in year-over-year floor plan interest. And used inventory at 40 days compared to 46 days in Q3. Aftersales was also up nicely with 10.9% growth in revenue and 9.8% growth in gross profit, delivering 57.3% gross margin. We saw consistent growth across all categories, with customer pay gross profit up 10.9% and warranty gross profit up 10.1%. This stable broad-based growth demonstrates the underlying strength of our aftersales business model and its power to create customer loyalty. Our sales departments have been challenged and are responding to improved SG&A leverage and ensuring more of our gross profit is realized on the bottom line. This quarter, GPU compression outpaced our cost reduction efforts Tina will talk to in just a moment. As we look ahead into 2026, we have flattened the organization, continue to focus on efficient customer experiences, and are making technology investments that will drive efficiency. In the UK, our teams delivered a 10% increase in same-store gross profit while navigating challenging market conditions as well as regulatory labor cost increases. We are capturing market share in our high-margin aftersales business across the UK network while focusing on sales throughput, particularly in used vehicles. Adjusted pretax income for the UK increased 53% for the full year compared to 2024, and we see continued opportunities to strengthen our results in 2026. Well done, Neil, and well done, UK team. Our digital platforms continue increasing our reach and enhancing the customer experiences to make shopping, financing, and servicing simpler and faster. Our partnership with Pinewood AI has delivered exceptional returns, and we are excited to pilot the Pinewood dealer management system in our first North American store soon, creating a single modern platform and reducing complexity, accelerating workflows, and placing our team members in the same systems as our customers to deliver faster, more seamless customer experiences. Together, these technology investments deepen customer retention, support operational efficiency, and reinforce the power of our integrated ecosystem. Driveway Finance Corporation continues to scale profitably with record income, healthy net interest margins, and disciplined credit quality. Our expanding market share creates a larger origination funnel and a path to our long-term 20% penetration target that will convert more sales into reoccurring countercyclical income. As DFC continues to scale, this platform will differentiate our customer offerings while driving higher-quality, more diversified earnings streams. Now on to capital allocation where we remain focused on maximizing shareholder return through disciplined deployment. With our shares trading at a deeply discounted valuation, we accelerated repurchases this year, retiring 3.8% of our shares in the quarter and 11.4% of our shares in 2025 at prices that we should drive meaningful accretion with. We also strengthened our balance sheet through opportunistic refinancing while preserving capacity for our growth investments. Going forward, we will maintain this balanced capital strategy between buybacks, selective M&A, organic investments, and balance sheet strength. Our integrated ecosystem continues to strengthen. Growing aftersales profitability, accelerating used vehicle growth, expanding DFC penetration, and ongoing operational improvements in our sales departments will create a stronger earnings base. With improving operational efficiency, robust free cash flow generation, and disciplined capital deployment, we are well positioned to deliver compounding earnings growth in 2026 as industry conditions normalize by doing what we do best: growing through the power of our people. Strategic acquisitions remain a core pillar and key differentiator, and in the past six years, more than tripled our revenue while pairing scale with consistent EPS growth. This growth was accomplished while also building a more diversified and profitable business model. Today, our cash engine and unique ecosystem give us the flexibility to both accelerate buybacks and continue to grow through high-return acquisitions. We remain disciplined and strategically focused on prioritizing stores that strengthen our network density and elevate our brand mix in high opportunity markets. In the fourth quarter, we added iconic luxury stores, improved our import mix, and expanded a little bit with our Canadian footprint. For the full year, we acquired $2,400,000,000 in expected annualized revenues, diversifying our portfolio and expanding our reach. Our results over the past decade have yielded high rates of return. We achieved nearly double our 15% after-tax hurdle rate through consistent and disciplined acquisitions, targeting purchase prices of 15% to 30% of revenue, or three to six times normalized EBITDA. Looking ahead in 2026 and over the long term, we continue to target $2,000,000,000 to $4,000,000,000 of acquired revenue annually, balancing our share valuation and acquisition prices to strategically accelerate shareholder return. With a half a decade of tremendous results behind us, we are looking ahead to 2026. Our strategic design is showing durable results as the industry normalizes. The elements that support our long-term $2 of EPS per $1,000,000,000 of revenue targets continue to build momentum as we lift store-level productivity and throughput, expand our footprint and digital reach to grow US and global share, increase DFC penetration, reduce costs through scale efficiencies, optimize our capital structure, and finally, capture rising contributions from omnichannel adjacencies. The continued development of these levers will convert momentum into durable EPS and cash flow growth. Our network and digital platform create engagement across the entire ownership life cycle, while strengthening used vehicle, aftersales, and DFC businesses deepen customer relationships throughout economic cycles. Leaders across our organization are unlocking store potential, integrating adjacencies, and enhancing customer experiences. These capabilities demonstrate resilience, operational flexibility, and the compounding momentum that will drive sustained shareholder value creation. With that, I will turn the call over to Tina. Tina H. Miller: Thank you, Bryan. Our fourth quarter results reflect the more challenging environment with year-over-year earnings pressure driven by margin compression and SG&A deleverage. At the same time, our results in financing operations continue to demonstrate the strength of our diversified model, and our solid free cash flow generation supported meaningful share repurchases while maintaining balance sheet discipline. Our leverage remained comfortably below target levels with ample liquidity to opportunistically fund acquisitions and return capital to shareholders. It is important to note that prior-quarter results included the benefit of a large insurance recovery related to the CDK outage. Adjusting for the $0.53 prior-year impact provides better year-over-year comparison. Our year-over-year results reflect class-leading top line and gross profit trends, and as we have historically seen, responding to quickly declining vehicle margins occurs on a lag as our sales departments work to rebalance their cost structures. The benefit of the design of our business and disciplined approach is the optionality provided by our resilient cash engine and the long-run operational efficiency generated by our size and scale that will compound value over time. Adjusted SG&A as a percentage of gross profit was 71.4% versus 66.3% a year ago, with top quartile SG&A performance of 67.9% in North America. These increases reflect the pressure of normalizing GPUs on our sales departments. Our teams continue to focus on managing costs through growing market share and gross profit. More specifically, our sales departments are navigating volume, gross profit pressures, and productivity to meet market conditions and manage efficiency while effectively serving our customers. Beyond near-term cost management, we are executing structural improvements across our network that will compound over time: raising productivity through performance management and technology solutions, including early investments in AI-powered chatbots and customer service automation; simplifying the tech stack and retiring redundant systems; renegotiating vendor contracts at scale; and automating back-office workflows. These efforts are building momentum quarter by quarter with benefits from our Pinewood AI investments expected to materialize over time as we scale deployment and realize efficiency gains. As Bryan mentioned, the most effective strategy to improve future SG&A leverage is to improve market share and volume. Combined with our unique ecosystem, we accelerate profitability as we build customer loyalty and increase the value of our adjacencies. Driveway Finance Corporation delivered strong profitable growth in Q4 with financing operations income of $23,000,000, bringing full-year 2025 income to $75,000,000, an increase of $67,000,000 from the prior year. Our managed receivables portfolio grew to $4,800,000,000, up 23% year over year, while net interest margin expanded to 4.8%, up 55 basis points. North American penetration reached 15% for the quarter, up 650 basis points. Credit performance remains exceptionally strong with an annualized provision rate of 3%, supported by an average origination FICO score of 751 and 95% LTV in the fourth quarter. Our ability to originate loans at the top of the demand funnel creates a fundamental advantage in credit selection and keeps capital requirements efficient. With a steadily growing portfolio approaching $5,000,000,000, increasingly efficient securitizations, steadily improving margins, and clear runway for penetration growth, DFC is delivering on a significant promise as we scale toward our long-term profitability targets. Now moving on to cash flow and balance sheet health. We reported adjusted EBITDA of $364,100,000 in the fourth quarter, an 8.9% decrease year over year, primarily driven by lower net income. We generated $97,000,000 of free cash flow during the quarter, and our strong balance sheet allows us the ability to repurchase shares and acquire stores in strategic markets while diversifying our brand mix. We are committed to maintaining investment-grade discipline with our leverage ratio targeted to remain below three times. Our regenerative cash engine positions us to continue deployment of capital to maximize shareholder returns. This quarter, we continued our commitment to focus on share buybacks while balancing accretive acquisitions. Our shares continue to trade significantly below intrinsic value, and we allocated approximately 40% of capital deployed to share repurchases, buying back 3.8% of outstanding shares at an average price of $314. In 2025, we repurchased 11.4% of our float at an average price of $314. We remain committed to allocating capital to opportunistic share repurchases as our shares trade at a discount to intrinsic value. Approximately 40% of capital was deployed to high-quality acquisitions and the remainder to store capital expenditures, customer experience, and efficiency initiatives. As we look ahead to 2026, our capital allocation philosophy will remain disciplined and opportunistic. With leverage below our three times target, regenerative cash flows, and ample liquidity available, we will maintain our balanced approach, allocating free cash flows to repurchases when relative valuations are attractive and investing in accretive acquisitions at the right price. This balanced deployment allows us to compound returns for shareholders through buybacks while simultaneously expanding our footprint through strategic acquisitions that strengthen our competitive position and diversify our brand portfolio. Our resilient model generates differentiated earnings and cash flows from an omnichannel platform that serves the full ownership life cycle. With talented teams, class-leading digital and financing capabilities, and a strong balance sheet, we are executing with the same discipline that powered the growth of our business over the last ten years. Our diversified model responds with agility as macroeconomic conditions evolve while preserving capital flexibility to deploy where returns are highest. As we move into 2026, we will continue focusing on increasing profitability, scaling high-margin adjacencies like DFC, and translating share gains into cash flows and compounding value per share. This concludes our prepared remarks. With that, I will turn the call over to the operator 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 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Michael Patrick Ward with Citi. Please proceed with your question. Michael Patrick Ward: Thanks. Good morning, everyone. On Page 19 of your slide deck, you have an interesting chart that shows the retention levels on the aftersales business. And it seems like you have had some pretty big increases, particularly with some of the older vehicles. That is just from last year. How much of that growth is tied into the extended service contracts that you are dealing with F&I? I do not know if you can share with us any details on what the take rate is for the extended service contracts. Bryan B. DeBoer: Hi, Mike. This is Bryan. Thanks for joining us today. When we think about retention, we are up slightly as a percentage relative to a state average over last year, where you sit typically around eight or nine better than average, and it is up slightly year over year. When we think about the take rates and how much of our business is driven off of aftersales and customer pay, it is less than 25% of our business in customer pay. Now when people buy cars from us, I think we were sitting at 37% penetration on service contracts. Tina H. Miller: And then somewhere just under 20% penetration in lifetime oil, and that obviously still includes, you know, the denominator of that still includes full electrified vehicles that we do not sell lifetime oil on. So Michael Patrick Ward: Okay. The second thing, it looks like with the shifting priorities, you are really generating a lot of cash and returning it to shareholders. Any reason that is going to shift in any direction over the next couple of years? Bryan B. DeBoer: There is one big reason. If our stock price increased in value relative to acquisitions, then it may make sense. But we really believe that at these prices, it is quite a value. And Tina, myself, and the rest of our capital allocations team are quite focused on it. And imagine we will continue to back up the truck and buy shares because that is an easy return to each of you, as well as ourselves. So Michael Patrick Ward: And there is less cash needed to grow Driveway Finance, and so that is freeing up more capital to do this. Bryan B. DeBoer: Great point. I mean, we hit max cash outlay a couple of quarters ago, which was just under $1,000,000,000, around $900,000,000. And because our overcollateralizations are now so efficient, we are only at overcollateralizing, you know, mid-single digits typically. When we started, we were overcollateralizing upwards of 25%. That obviously is where the capital comes back in. And as those loans begin to age, the 25% turns into 3% or 4%, and we get 22% back. So we really believe that the $15,000,000,000 to $17,000,000,000 mature portfolio at a 20% penetration rate really takes about 3% to 5% to be able to manage that, which means we could probably continue to grow and still recapture a couple hundred million dollars over the next four, five years. Michael Patrick Ward: That is great news. Thank you, Bryan. Thank you, everyone. Bryan B. DeBoer: Thank you, Mike. Operator: Our next question comes from the line of John Murphy with Evercore ISI. Proceed with your question. John Murphy: Hey, guys. Thanks for taking my call. In Q4, SG&A as a percentage of GP came in a bit higher than we were expecting. So I wonder if there is anything specific that drove that number during the quarter, and maybe could you explain how much of Q4 SG&A dilution from the M&A activity? Bryan B. DeBoer: Sure, John. This is Bryan. Maybe I will take a shot at the first part of the question. I will let Tina deal with the dilution. We would classify the quarter as such: it continually weakened. Typically, in the fourth quarter, you get a good close at the November, at the December. And we saw a mediocre close at the November, but we did not see sales materialize like we typically do in the last ten days of December. And we were pushing marketing budgets and so on to be able to drive volume. And when those materialize or GPUs do not materialize, the two combined created a bit of an uptick in SG&A. The neat part is our stores are trying to find that nice balance between volume and net because what we do know is that volume is what drives the future of our entire ecosystem, specifically referring to that waterfall effect of used car trade-in. Big part of that. That drives the reconditioning of service and parts. And all of those drive sales, which generates aftersales business and DFC business. So we believe it is the right model to go after volume. I think we just got, I think the market was a little softer than our teams expected. Tina H. Miller: Yeah. This is Tina. When we look at the same-store SG&A as a percentage of gross profit, it is relatively similar to our total company at 71.2%. You know, the big differentiator really is the UK versus North America. And as talked about in the prepared remarks, you know, our North America SG&A as a percentage of gross profit continues to be in the top-performing quartile when you look at us versus our peers. So good strength there. As Bryan mentioned, a lot of that driven by that top line movement that we are seeing. John Murphy: Okay. Thanks. And then taking a broader view, but staying focused on that SG&A as percent of GP. You ended up the year at 68.8%, up, I think, 130 bps versus 2024. Would you be willing to stake a claim for where SG&A can get to in 2026 en route to your longer-term targets of 60% to 65% overall? Bryan B. DeBoer: John, we can take that question offline, too. But I think most importantly, SG&A is primarily a function of what your GPUs look like and what your volume looks like, and then the response that you take off that. So it is difficult, especially when we are starting to feel some pressures in terms of volumes, and I think you saw that across the entire sector. We were very fortunate that we looked top of the heap in terms of revenue growth. Obviously, looked real good in used car growth and aftersales growth. But generally speaking, everyone is softening on new cars, and that has major implications of SG&A. But one thing I know is that our team has the ability to adjust their cost structures, and we are out there challenging them. And I know my operational presidents and vice presidents are actively working on that to be able to do the best that we possibly can. John Murphy: Okay. Thanks, guys. Bryan B. DeBoer: Thanks, John. Operator: Our next question comes from the line of Ryan Ronald Sigdahl with Craig-Hallum. Please proceed with your question. Ryan Ronald Sigdahl: Hey, good morning, Bryan, Tina. I want to stay a little bit on those topics, but you mentioned kind of weakening sequential trends in Q4, a little bit of a lagged marketing strategy change, I guess, to align. But Q1, thus far, any demand trends that you are willing to call out? And then we have heard of some weather impact in January. March has an impossibly high comp. But I guess, have those trends continued into Q1 is ultimately my question? And then what are you doing from a spend standpoint to align to that? Bryan B. DeBoer: Sure, Ryan. And you are correct. I mean, we do have some Northeast business that is affected a little bit by weather. But, overall, the trends are very similar to what we saw in the latter two months of Q4. We are hoping that once the thaw happens that March sales return. And I think when you think about Lithia and Driveway, we do look at Q4 as our softest quarter, and a lot of that is because the United Kingdom does not have that big month like a September and March in it. So the variation now between Q4 and Q1 can be quite large, which is a nice wind at our tail. And as we mentioned, I mean, the UK was up 50-some percent year over year in net profit, so that is a nice number. So we have got that advantage coming in the month of March, and they had a decent January. So we always have that little benefit now where Q1 and Q4 used to be relatively both our softest quarter. So nice little boost there, hopefully. Ryan Ronald Sigdahl: Yeah. Nice to see the UK turning to a nice tailwind, given the challenges in the market. DFC for my second question, if I look at Slide 12, $62,000,000, nice 2025 finish for the year. Medium term, $150,000,000 to $200,000,000, given you are getting closer to that 16% penetration, kind of all the assumptions and everything is normalizing. I guess, is that medium term kind of within the next couple years or any time frame to get there? And then any commentary to kind of bridge 2026 into that medium term? Chuck Lietz: Yes. Great. Ryan, this is Chuck. Thanks for your question. In terms of kind of last year, we were pretty pleased that we were sort of guiding that, you know, kind of $50,000,000 to $60,000,000 for our total financing income and delivering $75,000,000, which is a great result for last year. But kind of looking forward, we would certainly expect that to be consistent and repeatable in terms of our growth. And so we see kind of a 20% plus kind of growth rate of our financing income operation, and that kind of does align pretty well with your within a year or two, or a couple years, I should say, of hitting sort of that midterm kind of growth targets that we are showing there. Bryan B. DeBoer: Chuck, do not be shy. Talk to him about our penetration rate in January. Chuck Lietz: Great. Thanks, Bryan. You know, January penetration rates were record for DFC at about 17.5%. And we really see clear line of sight to getting to that 20% pen rate a little faster. Now that is going to put pressure on financing income projections as we continue to accelerate the growth due to the CECL reserves. But we think that is the right strategy to continue to make those investments in DFC and continue to partner with our stores and deliver better outcomes for our investors. Ryan Ronald Sigdahl: Thanks, Chuck. If I may, just a quick follow-up there. You mentioned kind of the 20% plus CAGR on the financing income, but also higher penetration kind of as a near-term negative. So I guess, is that 20% a longer term, or can we assume that for 2026 when things kind of normalize from a penetration standpoint throughout the year? Chuck Lietz: Just a slight correction. I said 20% plus CAGR. So 25% is obviously the goal, but I think to your point of the question, yes, you know, as we continue to accelerate growth, that could be a headwind. But we think 20% would be on the low side of that range. And if for some reason our growth rates were to slide, that would obviously put pressure on the top end of that range, which is why it is at 20% plus. But we are still very confident that, you know, we can hit long term that $500,000,000 of pretax income for our financing operations within, you know, a very achievable time frame. Bryan B. DeBoer: Ryan. Operator: Our next question comes from the line of Rajat Gupta with JPMorgan. Please proceed with your question. Rajat Gupta: Great. Thanks for taking the question. I had a quick question on the used GPUs. It has been under pressure for quite a few quarters now. I mean, obviously, nice performance on the unit side. I am curious, like, are we at a new run rate on used car GPUs? Anything you would call out that is causing some pressure there would be helpful, and I have a follow-up. Bryan B. DeBoer: Sure, Rajat. This is Bryan. This is the fun part of the business for me. And I think there is a stage and an evolution that occurs in selling used cars that I think we have got the right formula now that our stores are keeping the older cars. What we are also starting to realize is two of my operations vice presidents have been doing some heavy lifting on what do our pricing models look like. And they did uncover some pretty healthy pricing gains primarily in two areas, and we basically do these studies that is price to market of what we believe cars sell for and then what we sell those cars for. And the biggest single delta was in our value auto cars, which is over nine-year-old cars, that we had a 12% to 13% delta between what the marketplace was selling the cars for. So even though I am motivated by the fact that we are up low double digits in value auto, we are still having tendencies to give them away or think that there is a more sensitive pricing on those scarce older cars, and there is not. So what we are trying to do is reeducate store leaders to inflate the pricing on those cars and understand that it is not necessary that the velocity of that car turns within four days. It is okay if it turns in 24 days, because that scarce car will bring in additional traffic. And then, ultimately, if our average value auto car is around $16,170, an extra 12% is an extra $2,000 a deal. So that is a big number. The other soft spot that we have in pricing is what we would call scarcer late-model used cars, which is basically lower mileage cars than what their model year is, meaning they are driving 4,000 or 5,000 miles a year instead of 10,000 to 12,000 miles a year. We are underpricing those cars by almost 8%. And those cars are a $30,000 average. So, again, it is a pretty darn big number that we have just got to get better at pricing. And this is where some of our data is starting to be used, but it is finally getting disseminated into the field. So we hope in 2026 that we see some of the lift on pricing. And that is what I would say is most of the GPU dilemma is that sacrifice of volume and then not understanding what the pricing is because a lot of those stores, they are still afraid and thinking that an old car they do not have customers for they should not maybe be selling quite yet because we have never done it in the past, and then they cheap sell it. And that is something that will help guide them, and they will mature as they do it more often. Rajat Gupta: Got it. That sounds helpful color. And just follow-up on aftersales parts and service. Pretty remarkable growth there in the fourth quarter. I know it looks like some of the initiatives are coming through, but would you be able to double click on maybe one or two areas that are driving that kind of growth, and what is a good ballpark assumption that we should bake in, you know, for 2026 in that segment? Thanks. Bryan B. DeBoer: Sure, Rajat. I think when we think about what drives same-store sales growth in our aftersales department, it is all about relationships with customers. And I think many of our stores now are understanding that the relationship is built by doing things their way other than our way. And I think that has been a lot of our opportunity is coming from we have processes. We want customers to fall within those processes. But the My Driveway portal of what we do today allows customers to schedule their own appointments, which makes it easier and makes it more collaborative. Then when they come in, we know who they are a little bit better, and hopefully we can focus our attentions on opening our ears and having our heads up rather than texting or thinking about our processes and really delighting and creating memorable experiences. So I would say that if we look forward at aftersales growth, I believe that a mid-single-digit number is a realistic number for the near term. We do have some harder comps coming up because of some big recalls. But those, as we all know, do not just end. They kind of have tails to them, and there are always laggards of people that have not done those recalls that you will get. And then the next recall comes in, and in fact, I was mentioning to Tina and Jardon that I have three cars in service right now that all have recalls, and it is like, oh, my God. One of them had three. So anyway, lots of opportunities in aftersales, but I think for our team, it is about focusing on the individual needs of each and every customer. Operator: Our next question comes from the line of Jeff Licht with Stephens. Please proceed with your question. Jeff Licht: Good morning. Thanks for taking my question. Bryan, you know, you have normally had some pretty in-depth points of view on, you know, the path travel with new GPUs. You finished at $2,781. No, $2,958 for the year, which was at the high end of your guys’ kind of guidance of $2,800 to $3,000. Just curious as we go into next year, I mean, you know, some of your peers have said, hey, look, it feels like things are bottoming. Maybe a couple others have thought, hey, you know, there is maybe some giveback with some of the brands that have not given back such as Toyota. Just curious your thoughts on where you see GPUs going in 2026? Bryan B. DeBoer: Yeah. Sure, Jeff. I think the neat part is I think our manufacturer partners have figured out how to throttle up and down inventory a little more effectively than they have done in the past, whether it is true production capacity issues or whether it is just, hey, we are going to control our inventory so both our gross profit and our dealers’ gross profits are stabilized. And we are quite proud of our Toyota partners and our other for trying to control inventory, because it does matter. It does feel, and I would probably agree with the rest of our peers, that it feels like it is bottoming out, which is nice. We are still seeing some weakness when it comes to BEVs. But, again, I think that is just the backlash of the incentives being gone and us needing to continue to push volume for the lessened CAFE standards and those types of things. But all in all, we, things look pretty good. And I think most importantly, our focus is a lot on used cars and hopefully getting the GPUs out of that in the event that the GPUs on new that are kind of dictated by the marketplace and supply, that maybe we are not able to control those quite as much as we can on used. We will just make sure that we figure out how to balance that. Jeff Licht: And then just a quick follow-up on, you know, just doubling back on the SG&A. And I was wondering, like, back in the day, one of the big talking points for the dealers was always, you know, a very variable cost expense structure. Just curious just more on an in-the-weeds level. When volume does not pan out, I get advertising is what it is. So if you advertise thinking, hey, we are going to do 100 units per month at a store and end up doing 80 and advertising is what it is. What are some of the other expenses that you get caught with when volume drops? Bryan B. DeBoer: The biggest typically is personnel costs. And you would think that they would be volume-based. But unfortunately, there are still guarantees, and there are other factors at play. We are being pretty diligent on modifying compensation plans with what is something that we call XY pay plans. It is basically a grid type of pay plan that is really trying to motivate both volume and ecosystem effectiveness, we call it, as well as net profit. And some of our leaders have really asked for those type of pay plans to drive their performance. And Jeff, I would say this. We as an industry do spend a lot of money on personnel and marketing to drive things that we probably would be able to sell without a lot of that marketing or personnel. So I think as we think about our future, we think about leveraging our best people to be able to do more with less. And as we think about the future and we think about Pinewood AI and the ideas of placing our customers and our team members into the same IT ecosystem, there are massive amounts of savings that should be able to be realized over time, and we are really in the infancy of putting our numbers on that, and the UK’s teams are a little bit further ahead than us. But we still see a nice pathway to that mid to high 50% range, despite being a little higher this quarter in our weakest typical quarter of the year. So nice improvements, but we have got our pulse on this and know that that is where the money can be made in the industry. And ultimately, that is where the relationships with the customers can be leveraged to create more wallet share, you know, more of us getting their wallet shares out. Alright, Jeff. Thanks. Jeff Licht: Just last real quick. Can you define what you meant by medium term in the SG&A slide? In terms of time? Bryan B. DeBoer: That is typically three to four years. Jeff Licht: Awesome. Thank you very much. Bryan B. DeBoer: Thanks, Jeff. Operator: Our next question comes from the line of John Babcock with Barclays. Please proceed with your question. John Babcock: Just firstly, I think you mentioned earlier, and obviously, correct me if I am wrong, but I think you were saying that you were seeing trends similar to the last two months. So currently, it is similar to the last two months of the fourth quarter. Out of curiosity, does that apply to the used market? And also just broadly, it does seem like the used vehicle market is at least showing some decently positive indicators. I mean, it seemed like pricing was up pretty decently in January and, you know, everything we are hearing on the wholesale side sounds like that is pretty strong. So I guess just overall, if you could talk about the used market and what you are seeing there, that would be helpful. Bryan B. DeBoer: That is accurate. The trends that I mentioned are similar in used, new, and aftersales. So we are real pleased with that. We do have two less days in aftersales in January, so it is a little bit hard to extrapolate, which implies that there is 8% less days to be able to turn wrenches. But that usually will get made up in February and March. In any given quarter, it usually does not have that big a difference. When we think about the used car market, this is the typical time that it does begin to strengthen. We are a little surprised that it showed the strength that it did, and to be fair, that is not really how we think about our used car business. I mean, we typically look at our inventories and then look at our turn rates and see which segments are moving quickly, and then go target our buying habits on those areas and elaborate and buy in the areas that things are turning quickly. And I mentioned that idea of how do we make sure our used cars are turning, how do we capture all parts of the marketplace. That is how we think about the used car business. It is about affordability. As long as I have a broad range of one- to ten-year-old cars, whatever happens with pricing, we clear it out in less than two months anyway. So it does not affect us as retailers as much, other than we do think about affordability and making sure that we touch every possible affordability level in used cars. John Babcock: Okay. Thanks for that. And then just my last question. On the affordability point, there was some discussion at NADA about offering Chinese brands in the US. I am just kind of curious. I mean, have you been approached by Chinese brands to offer their products? And then also, what is your interest level in doing that? Bryan B. DeBoer: Sure. Good question, John. I think let me start with we have growing relationships with three Chinese manufacturers in the United Kingdom. We now have a double-digit store count, and they are taking some market share there. I think it is important to remember that with our Chinese partners, the market share gains that they are making in Western Europe is not coming from electrification. Their initial flurries into the Western European markets came on the back of electrified vehicles. It did not go very well. There was not very much traction. And it was not until they brought in ICE engines until they basically 10x’ed their sales. So we are quite excited that we have got that in the United Kingdom, but there is a big fundamental difference. In the United Kingdom, we are allowed to do what is called dueling of franchises, meaning that if I have a certain brand and that brand is not performing as well as another brand, meaning that if the Chinese brand, let us use Chery, for example, is conquesting market share from Stellantis, it is typical that Stellantis will allow us to put Chery brand right next to them in the same showroom with somewhere less than $100,000 in capital expenditure to do it. Why is that important? Because it gives us additional new cars and maybe used car sales. Here is the problem. There are no units in operation when you are opening these Chinese brands. So I think we would probably not be early adopters when it comes to the United States or possibly even Canada, primarily because we are usually not in a dual franchise situation, meaning that I can have my Stellantis brand that has this great units-in-operation even though their new car volumes are dropping. That offsets the fact that the Chinese brands are now selling cars, new cars, maybe a few used cars. Are you following me? And no service and parts business. So it is a balancing act. And I think when we extrapolate that over the North American footprint, I think it would have to be a broader relationship than a dealer, where we would have more influence over the aftersales and the life cycle experiences that you would have with that, possibly even more control over pricing, which would mean we would need, you know, market control to some extent to be able to make it make sense that you are going to be opening points without a service and parts base to start. And remember, we do get 50% to 60% of our profits from service and parts. So it is quite a difficult venture, but we will approach that. We do have building relationships with a number of different Chinese brands and have a pretty good Chinese contingency operationally with Brian Lam, who has done some work with that. And we will keep our minds open and look at what the opportunities that present us in the future. Hopefully, that answered your question, John. John Babcock: Yeah. That is perfect. Thanks for all the detail. Bryan B. DeBoer: You bet, John. Operator: Our next question comes from the line of Bret Jordan with Jefferies. Please proceed with your question. Bret Jordan: Hey, guys. Could you give us a little more color on luxury? I guess, you mentioned that there was some timing issue as, but I think on the third quarter call, you talked about seeing some softening amongst that high-end consumer. How much is product versus pull-forward versus, you know, more of a macro consumer sentiment issue? Bryan B. DeBoer: It is a little of both, Bret. Our luxury was down somewhere in the 11% range. But what we are feeling is that we are fortunate that their service and parts business is still fairly strong, which helps balance some of those things out. I do have some specific numbers. It looks like BMW and Porsche were probably the hardest hit, you know, but they are all within four or five percentage points of each other in terms of same-store sales. And when you start to get down into net profit, there are some more punitive numbers if you get into some of the lesser German brands. So, you know, but we are working on that, and we still got, we announced, what, last week we had our LPG, our Lithia and Driveway Partners Group announcements. Our number one store in the company, and this will tell you the power of people. Our number one store that won our Founders’ Cup is an Infiniti store. So if you get, if that is about as hard a brand as you could have last year, and somehow that person managed to turn lemons into lemonade. And we are quite proud of the accomplishment of all our LPG winners, including some of those sales departments and service departments that really found ways to buck the trends with certain manufacturers. So Bret Jordan: Okay. And then one follow-up question on used. Obviously, the margin rate on used is well below where it was sort of pre-pandemic. And when you think about that, you know, between mix of value versus core and all, but where do you see the margin rate coming back to? Are we structurally less because you have got better internet price transparency? Or is it a supply issue? And if off-lease cars come back, you can see real margin recovery in that category. Bryan B. DeBoer: Bret, I want to believe this is just a maturity thing. We have added two-thirds of our business that have not really ever got into these businesses. So I think that we will get that knowledge into those stores and they will start to understand and be more dynamic in their pricing. That if they do have scarce cars, they have got to price those differently than less scarce cars. And, you know, we have got certain tools that the stores use at times that are there for reference rather than as a bible. And they have tendencies to look at it all as a bible, and those tools do not always delineate between a low-mileage car and an average-mile car, and they do not delineate between a nine-year-old car versus a nine-month-old car. And there are massive differences. And that is where we are relying on our general managers, our general sales managers, and used car managers to watch what is happening on their lots and be sensitive to that and establish pricing that is appropriate for the marketplace and not give the cars away because they happen to be able to steal a trade-in. And that is really the underpinnings of this, is they are able to negotiate trade-ins at a one-to-one negotiation that are less than market conditions, and we still are able to buy our cars, you know, 5% to 7% below what our competitors typically do that are not new car dealers. Why? Because of that one-to-one negotiation. And then, sadly, we pass it along to the next customer rather than sit and wait for the right customer and spread the visibility of that car through driveway.com or GreenCars where you get enough eyes on it that you finally find a customer that will pay you the true market value of that car. So I believe, Bret, that this is all about maturity, and you are starting to see the, I mean, I think last year this time, we were minus 6% or 7% used car same-store sales, and we are the exact inverse of that this year. So that is the sign we want to see first. Now we are going to start constructively working on pricing and maturity and finding these cars and being able to turn them. Bret Jordan: Great. Thank you. Bryan B. DeBoer: You bet, Bret. Operator: Our next question comes from the line of Daniela Marina Haigian with Morgan Stanley. Please proceed with your question. Daniela Marina Haigian: Thanks. Just switching gears a little bit to a more strategic question. We are seeing this big inflection point this year and next few years in autonomous driving. And as legacy OEMs are also emphasizing their push into these passenger vehicles, L2 and L3 ADAS, they are embedding more advanced sensor suites, radars, LIDARs. Essentially, what I want to understand is what is Lithia Motors, Inc.’s capabilities in servicing these advanced sensor suites and EVs with sensor telemetry for autonomy. Bryan B. DeBoer: So this is great, Daniela. Nice to hear from you. It is pretty cool to be able to see these cars have these types of skills, but with that comes massive amounts of technology and massive cost to that technology. I think average aftermarket LIDAR is around $45,000 and has so many different parts. And I imagine as our cars become more so that way, what you find is that proprietary technology that we need to fix those things brings customers back into our dealerships, which is beneficial. So we are down to ultimately all of this. So whatever our manufacturers decide to upfit the cars with and whatever consumers are really demanding, we get the benefits of it. So this technology creates a lot higher breakage rates. And I think that is why it is fairly easy to contend that mid-single-digit same-store sales growth rate for the next five to ten years is probably a pretty nice number. In terms of what can Lithia do differently, I think the single biggest thing that we can do is create optionality and go into people’s homes to make a difference. Make it convenient. Make it simple. Make it transparent. And that is how we try to differentiate ourselves alongside the brand names that are on our buildings. Daniela Marina Haigian: Thank you. And then shifting to auto credit, we have gotten a lot of questions. We have seen rising delinquencies in both prime and subprime in January. Obviously, DFC is skewed much higher on the credit quality curve. But any color you can share on how you have adjusted underwriting standards, if at all, to address the risk there? Have you seen any change in consumer behavior starting in 2026? Chuck Lietz: Yeah. Daniela, this is Chuck. You know, first, I would just like to say that every year for the last four years at DFC, we have improved our credit quality in our three key metrics. Our average FICO has increased, our payment-to-income percentage has declined, and our front-end LTV percentage has declined. That speaks to the consistency of our underwriting standards. And while we tightened up, you know, kind of our credit standards in that 2021 kind of time period where we could see a lot of choppiness in the market, we have been incredibly disciplined, incredibly focused on maintaining our credit discipline, and that really is bearing fruit today. And when we look at our year-over-year delinquency trends, we are down 36 basis points in the 31-plus bucket. That is bucking the trends of the market right now, and that again really just proves out the overall DFC hypothesis of being top of funnel. That really gives us a leg up in terms of our credit quality, and we see those trends continuing as we go forward. Bryan B. DeBoer: Thanks for your questions, Daniela. Daniela Marina Haigian: Great. Thank you both. Operator: Our next question comes from the line of Mark David Jordan with Goldman Sachs. Please proceed with your question. Mark David Jordan: Just one quick one for me on M&A. It picked up here in 4Q, and I understand the capital allocation going forward will be more opportunistic with respect to share repurchases. But, you know, can we expect this year to be kind of a normal year in the $2,000,000,000 to $4,000,000,000 of acquired revenue? Bryan B. DeBoer: Mark, this is Bryan. That is definitely what we are seeing today. And obviously, we are starting to drop off some pretty good profitability years, which helps pricing on M&A. But right now, the market is kind of static. I mean, we are definitely finding some deals. We announced those nice deals in Beverly Hills. We found a small little deal up in Canada, a few others under contract. So I think that that is a pretty good pace for us, and again, depending on what our stock price is versus what those acquisitions are out there for helps dictate how much we will end up doing. Mark David Jordan: Perfect. Thank you very much. Bryan B. DeBoer: Thanks, Mark. Operator: We have reached the end of the question and answer session. Bryan B. DeBoer, I would like to turn the floor back over to you for closing comments. Bryan B. DeBoer: Thank you, Christine, and thank you, everyone, for joining us today. We look forward to talking to everyone again on our call in April. All the best. Operator: Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Nadia: Good morning. My name is Nadia, and I will be your conference operator today. At this time, I would like to welcome everyone to Vertiv Holdings Co's Fourth Quarter and Full Year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Please note that this call is being recorded. I would now like to turn the program over to your host for today's call, Lynne M. Maxeiner, Vice President of Investor Relations. Lynne M. Maxeiner: Great. Thank you, Nadia. Good morning, and welcome to Vertiv Holdings Co's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today are Vertiv's Executive Chairman, David M. Cote, Chief Executive Officer, Giordano Albertazzi, and Chief Financial Officer, Craig Chamberlain. We have one hour for the call today. During the Q&A portion of the call, please be mindful of others in the queue and limit yourself to one question. If you have a follow-up question, please rejoin the queue. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of Vertiv Holdings Co. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. I refer you to the cautionary language included in today's earnings release, and you can learn more about these risks in our annual and quarterly reports and other filings made with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will also present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release and in the investor slide deck found on our website at investors.vertiv.com. With that, I will turn the call over to Executive Chairman, David M. Cote. David M. Cote: Well, I am extremely pleased with how we executed in the fourth quarter and for the full year of 2025. We delivered strong results across key metrics, and we have tremendous momentum heading into 2026 and beyond. What you are seeing is the payoff from years of strategic investments and disciplined execution. Our focus on engineering innovation, capacity expansion, and deep customer partnerships is translating directly into results. Giordano and his team are doing an outstanding job executing our strategy, and I am impressed with how they are navigating both opportunities and challenges. AI-driven infrastructure build-out is accelerating, and data centers are at the center of it all. We are still in the early innings of this secular growth trend. Vertiv Holdings Co's position in this market keeps getting stronger. Our technology leadership and global scale, along with our service and operational capabilities, are not easily replicated. And we keep widening that gap. We have established a strong record. We commit to ambitious goals, and we deliver. Now, here is what excites me the most. Vertiv Holdings Co is not choosing between today and tomorrow. We are winning now and winning later, positioning us to create value both now and well into the future. Said more simply, we are not done yet. With that, I will turn it over to Giordano Albertazzi, our leader and architect of this most excellent day. Giordano Albertazzi: Well, thank you. Thank you very much, David. And welcome, everyone. We go to slide three. And certainly quite pleased with how we closed 2025. Another very strong quarter and a very strong year. Organically, fourth quarter orders were up 152% year over year and up 117% sequentially. Very strong, all regions, all markets. Trailing twelve-month organic orders growth was 81% and would be even higher if we included our recent acquisitions. Our book-to-bill ratio was 2.9 times. Our backlog stands at $15 billion, more than double last year's. Q4 organic net sales were up 19%, primarily driven by remarkable strength in The Americas, which grew 46% organically. APAC was down 9% and EMEA down 14%. Q4 adjusted operating margin was 23.2%, up 170 basis points from Q4 2024. Adjusted operating profit was $668 million and was up 33% from the prior year. Our fourth quarter adjusted diluted EPS was $1.36, up 37% from Q4 2024. Adjusted free cash flow for the full year was circa $1.9 billion, with an adjusted free cash flow conversion of 115%. For 2026, we are projecting adjusted diluted EPS of $6.02 on organic sales growth of 28% with an adjusted operating margin of 22.5%. But let me give you some color on what we see regionally, and for that, we go to slide four. Let's start with The Americas. The Americas continues to be the primary engine of our growth. Sales in 2025 were strong and broad-based, across products and customer segments. The market is accelerating. Even after the large Q4 order intake, our pipeline continues to grow. Our guidance assumes a sales growth in the high thirties. The Americas led acceleration, and that momentum continues. If we go to EMEA, well, we can say that the coiled spring is uncoiling. The market sentiment has significantly improved. Pipeline growth has accelerated. We saw strong orders in Q4, and we expect that to continue in 2026. We expect to return to sales growth in the second half of the year. When it comes to APAC, well, that is accelerating. Despite China remaining muted, we saw strong Q4 order growth, and we expect China's soft growth rate to persist in 2026, but India and the rest of Asia are robustly accelerating. And we are well-positioned to capture that growth. Now let's go to slide five. Where I want to start with customer demand on the left of the slide and just say, Vertiv Holdings Co's momentum is quite remarkable. Trailing twelve-month organic orders grew 81%, fourth quarter orders were up more than 250%. Book-to-bill almost three times a strong performance, and we did see some large orders coming in during the quarter. These large orders reflect our customers' increasing trust in Vertiv Holdings Co's ability to deliver at scale and their confidence in their market. Our $15 billion backlog is more than double last year's and up 57% sequentially. Strong. Worth noting, the shape of our backlog is not very different from what we saw a year ago, yet it is more elongated into the twelve to eighteen-month window. This is very consistent with a very strong Q4 order intake. We are seeing robust pipeline growth across all regions and all product technologies. This is a testament to the health of demand and of our visibility of the market. We have confidence in capturing a significant portion of this pipeline. Orders are getting bigger. Over time, we have been vocal about the lumpy nature of orders. This lumpiness can generate unnecessary volatility. The dynamics of the market also make orders very difficult to predict. Consistent with what we said during 2025, we have been reflecting on our orders of disclosure. We believe that currently, the best approach is to no longer report actual orders, orders forecast, or backlog with quarterly earnings. It just seems to lead to excessive volatility that is not representative of the sustained performance of the company and is not beneficial to our investors. We will continue to provide our full-year historical disclosure regarding sales and backlog in our form 10-K. We will provide a view of the market in our quarterly earnings call. We feel very good about the strength of our pipelines, our ability to win, and our prospects for growth and to lead the industry. We had an extremely strong year in orders, and we do believe we will grow further in 2026. Pricing continues to be favorable. 2025 pricing exceeded inflation, and we expect the same in 2026. The right side of the slide now to talk about how we are managing the current environment and positioning for growth. We are mitigating material inflation pressure through our pricing mechanism and focus cooperation with our suppliers. On capital, we are stepping up to 3-4% of sales in 2026, from our historical 2-3%. We continue to adopt a very disciplined and forward-looking approach enabling our growth trajectory. Our suppliers are extensions of our operations, and we are working hand in hand to ensure they are scaling with us. This combination positions us very well to capture the growth ahead. While protecting our margins, which you see embedded in our guidance. And let's now go to slide six. You know how passionate we are about driving rapid evolution. This is where Vertiv Holdings Co's strengths really come into play. Our traditional expertise in gray space is seamlessly being augmented by and interwoven with white space infrastructure expertise. With hundreds of kilowatts per rack, mechanical, the electrical infrastructure, and the IT stack are so intimately connected that they need to be thought of as one system. Here are two of our converged prefabricated solutions that perfectly align to this vision. Let's start with OneCore, an end-to-end full data center solution that dramatically simplifies and accelerates the customer journey, significantly reducing time to token. Vertiv OneCore can scale to gigawatts in 12.5 megawatts building blocks. OneCore is a complete converged entire data center infrastructure. It's engineered and scaled to deliver for the industry with speed, simplicity, and repeatability. It's engineered and scaled by an industry leader with a complete portfolio. Our collaboration with Hut 8 demonstrates this path. Let's now continue with the Vertiv SmartRun. A converged and prefabricated white space infrastructure solution that massively accelerates data whole fit out and readiness. Also here, it delivers simplicity and time to token for our customers. SmartRun is flexible and scalable across multiple generations of silicon. It is being deployed across several large customers at scale, and now work with Compass data centers perfectly shows those capabilities. Vertiv SmartRun can be standalone or part of OneCore. We continue to actively define the market with solutions like OneCore and SmartRun. Let's go now to slide seven. Our service portfolio is a critical competitive advantage and a robust source of recurring revenue. Our life cycle services orders growth was north of 25% year on year. I am very pleased to see that. I am not satisfied as you may imagine. The increasing complexity and technical challenges that characterize the market are an opportunity to demonstrate our unique service capabilities and to deepen our customer relationships. Our service business is designed to deliver customer value across every phase of the infrastructure journey. The PerchRight acquisition fits exactly within Vertiv Holdings Co's service paradigm. It significantly strengthens our fluid management capabilities end to end both the primary and the secondary fluid networks. These are very critical systems in chilled water and liquid-cooled AI data centers. Fluid management is one of the most technically demanding and financially consequential aspects of running a modern data center and AI factory. With PerchRight, Vertiv Holdings Co now offers one of the most comprehensive fluid management capabilities in the industry. From initial design to commissioning and then throughout decades of operational life. Of the data center. We optimize flow at stop top and maintain balance, ultra cleanliness, fluid performance, across the life cycle of the site. Every rack gets exactly the cooling it needs, with the highest levels of reliability and resilience as the environment evolves. For customers, this means fewer thermal throttles, higher compute throughput, efficiency improvement, and a dramatically reduced downtime risk on hardware worth millions of dollars per rack. We expect PerchRight's specialized expertise to scale globally through our existing services network. Creating the differentiated capability that addresses a growing critical customer need. With that, over to you, Craig. But first, I am very glad to introduce our new CFO, Craig Chamberlain, to the earnings audience. Craig, calling you new sounds quite strange, actually. And I am extremely pleased with the speed at which you are getting a strong handle on the business. We work really well together. And it feels like we have been working together way more than hardly three months or so. I am very thrilled. So now truly over to you. Craig Chamberlain: Thanks, Giordano. And just to start, I would like to say I am very excited to be here as Vertiv Holdings Co's new CFO. In my two-plus decades in the industrial industry, I worked with many great companies. However, what is happening here at Vertiv Holdings Co really stands out to me. The strength of our market position, the quality of our technology, and the caliber of this team makes me very excited about where we are headed. What Vertiv Holdings Co has built, the competitive advantage, customer relationships, and operational capabilities is a result of disciplined execution and strategic vision. I am honored to join at this inflection point. And I look forward to working with all of you as we continue to drive shareholder value. Now let's walk through our financial results. Turning to slide eight. We can walk through our strong first-quarter performance. Starting with adjusted diluted EPS of $1.36, up 37% year over year, $0.10 above our prior guidance. The primary driver is strong operational performance, particularly in The Americas where we saw exceptional volume growth. Organic net sales were up 19% with strong momentum continuing in The Americas, up 46%, offset by APAC down 9% and EMEA down 14%. Our adjusted operating profit of $668 million was up 33% versus the prior quarter and $29 million higher than prior guidance. Adjusted operating margin of 23.2% grew by 170 basis points versus last year. This margin expansion was driven by strong operational leverage on higher volumes, productivity gains, and favorable price-cost execution. As well, we saw our incremental margins year over year continue on a positive trend, as they came in at 31% for the quarter. To wrap up the fourth quarter discussion, let's hit on cash. We delivered $910 million of adjusted free cash flow, up 151% from the prior year fourth quarter driven by higher operating profit and working capital efficiency. Which was partially offset by an increase in higher cash tax. The larger orders in the quarter came with corresponding larger advance payments which benefited our Q4 cash flow. We exited the quarter with net leverage of 0.5 times, giving us significant strategic flexibility. Moving on to slide nine. Let's take a look at segment performance, which further highlights some of the dynamics Giordano mentioned earlier in the pitch. In The Americas, the team delivered another strong performance. Sales were up 50% with 46% organic growth. This growth was driven by broad-based strength across products and customer segments, strong end-market demand combined with our ability to deliver. Adjusted operating profit was $568 million, up 77%, and margin rate expanded by 450 basis points. The results were the outcome of strong operational leverage, positive price-cost, and continued productivity. Moving to the right, APAC sales were down 10%, 9% organically, primarily due to macroeconomic conditions in China. However, the rest of Asia remains strong. Adjusted operating profit of $49 million resulted in an adjusted operating margin of 9.9%. Which was down 270 basis points versus the prior year. Pressured primarily by volume deleverage. In EMEA, sales were down 8%, 14% organically due to continued softness in the market. However, as Giordano highlighted, we are seeing signs of recovery from strong fourth-quarter orders performance. We continue to expect EMEA to return to sales growth in 2026. Fourth-quarter adjusted operating profit of $111 million with an adjusted operating margin of 22.1%. This is a decline from the prior year's 26.6% which was expected given the 14% organic sales decline. The margin pressure reflects lower operating leverage, and we expect this margin trend to continue into 1Q. Flipping to slide 10. Here, we are highlighting our full-year 2025 results in which the team delivered another outstanding performance. We saw improvements across all key financial metrics. Adjusted diluted EPS of $4.20 was up 47% and exceeded guidance by $0.10. Net sales of $10.2 billion delivered 26% organic growth and exceeded guidance by $30 million. We saw strong growth in The Americas, up 41% and APAC, up 18%. With the partial offset of EMEA being down 2%. Adjusted operating profit of $2.1 billion was up 35%, and $30 million above guidance. Operating margin expanded 100 basis points to 20.4%. The full-year margin expansion was driven primarily by productivity and positive price-cost. To close out the margin discussion, I would like to highlight that we are delivering margin expansion while investing in growth and managing inflationary headwinds. Adjusted free cash flow was another strong performance. We generated approximately $1.9 billion in adjusted free cash flow, up 66% mainly driven by higher operating profit and positive working capital. Including increased advanced payments from the significant order delivery in the quarter. Our cash performance gives us flexibility to invest in growth, pursue strategic M&A, and return capital to shareholders. These results demonstrate both our excellent execution and industry leadership. Now let's turn to page 11 and go through our full-year 2026 guidance. We believe this outlook underscores our confidence in the market growth, and our ability to continue to drive excellent performance. We are projecting adjusted diluted EPS of $6.20 representing 43% growth at the midpoint. This improvement continues to show strong profit growth from the prior year. As we move to net sales guidance, we are projecting $13.5 billion at the midpoint which represents 28% organic growth with projected sales growth to be driven by continued strength in The Americas, at high 30% growth. With APAC at mid 20% growth and EMEA flat to down mid-single digits. On EMEA, as we mentioned earlier in the presentation, we expect a reacceleration in the market in 2026. Moving on, we expect adjusted operating profit of $3.04 billion and a 22.5% margin at the midpoint. Which translates to 210 basis points of expansion. This margin expansion is expected to be largely driven by continued operating leverage and positive price-cost, while we also expect to continue to invest in capacity and technology advancement. Finally, for the year, adjusted free cash flow is expected to be $2.2 billion representing 17% growth reflecting anticipated strong profit growth and working capital improvements offset by higher tax, and increased CapEx to support growth. As you can see from the metrics on the page, we are confident in our ability to deliver another strong year in 2026. Flipping to slide 12, we can round out with a look at 1Q 2026. For 1Q 2026, we are projecting adjusted diluted EPS of $0.98 which represents 53% growth at the midpoint. For net sales, we expect to deliver $2.6 billion or 22% organic growth at the midpoint. This guide anticipates growth in The Americas of high 30s percent and growth in APAC of low 20% with anticipated offset of EMEA being down in the mid-20% range. We expected adjusted operating profit of $495 million up 47% at the midpoint, and margin rate of 19% translates to 250 basis points of expansion at the midpoint. Just as a note on tariffs, we expect on an exit rate basis to have materially offset unfavorable margin impact from tariffs as of the first quarter of this year. As you can see from the metrics, we are expecting to deliver a strong start in 2026. With that, I will send it back to you, Giordano. Giordano Albertazzi: Well, thanks, Craig, and let's wrap up. And for then, we go to slide 13. Again, Q4 and full-year 2025 exceeded guidance across all metrics. Orders backlog, very robust, evidenced by impressive book-to-bill circa three times. The momentum is certainly very strong. We continue to strengthen our position as an industry thought leader and this is highlighted by our product technology offering full system approach, and our services strength. At this and all this is strengthened by our acquisitions, of which PerchRight is a great example. Our 2026 guidance shows a step up in all key metrics. I have never been more excited about Vertiv Holdings Co's future. We are leading the industry in orders. We are scaling. We are very well positioned to expand our market leadership and drive the industry forward. Very much looking forward to seeing as many of you as possible at our investor conference in May. And with that, back to you, Nadia, and let's start the Q&A. Nadia: Thank you. We will now begin the question and answer session. And if you have a follow-up question, please rejoin the queue. We will pause just a moment to compile the Q&A. The first question goes to Charles Stephen Tusa of JPMorgan. Please go ahead. Charles Stephen Tusa: Morning, Steve. Morning. Your ERP must have been busy this quarter. Probably requires a few more data centers just to handle that. So just on the dollar value of the orders, is there, you know, you guys have talked about the $3 to $3.5 per megawatt. There is obviously a lot of, like, megawatts coming on and being ordered. But is there any, you know, creep in that content to the upside that's bolstering these orders, or should we still think about that as the right framework for the dollar per megawatt TAM? Giordano Albertazzi: I would say that, currently, you can just use that as a framework. Clearly, we have been vocal on other occasions, certainly, as all the more recent true as the technology evolves that the complexity of the technology and the technology trajectory if anything, is good from a TAM per megawatt standpoint. So it would be a little premature at this stage. We like what we see. I think the best is, you know, three months from now, we will be together, and, certainly, this will be an important theme. Charles Stephen Tusa: And then just quickly following up on the CapEx number. How should we think about for every like $100 million of incremental CapEx, you know, from what we have seen, whether it is, you know, Eaton or some of your other peers, it is a pretty high multiple of sales growth on, you know, on that CapEx. Like, what a $100 million can what the output of that could mean? Is there some sort of multiple, like, I do not know, 15, 20 times on that extra $100 million that we can think about as being able to support a, you know, a revenue run rate for the future? Was trying to understand how you can deliver on this, you know, and what it will take to execute on this backlog. Giordano Albertazzi: I will give it a go and Craig if you want to chip in. But I would say that think the best way of looking at it is to look at 2-3% CapEx percent of sales moving to 3-4, call it 3.5. That is you can certainly correlate that to our growth and our trajectory. And, yeah, going back to how we make it happen, as I mentioned a few minutes ago, it is about being gradual. It is about being ahead. But, again, CapEx expansion, capacity expansion does not happen in big steps, at least not the way we do it. We like many steps that are meaningful but, again, I think the correlation between growth and our percent CapEx is an interesting and important element. Yeah. Excellent. Thanks, guys. Nadia: Thanks. The next question goes to Scott Reed Davis of Melius Research. Scott, please go ahead. Scott Reed Davis: Hey. Good morning, guys. And Good morning, Scott. Orlando and welcome, Craig. Congrats on an unbelievable year. Guys, I am just kind of curious as back you know, the I am just trying to picture these orders coming in April or just massive, and I know that was the crux of Steve's question as well. But is there any you know, you talked about lumpiness, were there any particularly large projects or anything unusual in the quarter? Was there any is there any incentive perhaps for folks to make an order before the end of the year in 2025 or price or otherwise or getting ahead in the queue I am just trying to get my arms around these. These numbers are just absolutely massive. Giordano Albertazzi: Well, the answer in terms of something that is unusual, let's say, from the normal course of business in terms of, price and whatever else, the answer is no. Very, very, very simply. I would say that certainly is a reflection of the demand that we see in the market. Certainly, as I said, it is a reflection of the belief and demonstrated ability to scale combined with our awesome technology. Yeah. But the fact is yes, there were quite a few large orders. But again, quite a few. The big should not look at this as something dramatically strange. This is something that has been happening in the market, all are becoming larger and larger and larger. So this is really orders with customers know that they need our kit, our systems, our solutions, and they know where and when. So it is not kind of a no big anomalies here. But orders can be lumpy. And sometimes they happen all in one quarter. More in one quarter and the other, etcetera. So the sequencing is something that is you know, lumpy, and that is what we have been saying for quite some time, and that is why, you know, the decisions that we have made on, on orders, guidance, and actuals But, no. Nothing unnatural. Craig Chamberlain: And I would think it continues to underscore what we Scott Reed Davis: sorry. Go ahead, Craig. Craig Chamberlain: No. So it continues to underscore what we have talked about before, which is the system level thinking. And I think the system level thinking is starting to play out on a larger scale. Scott, which is making these orders bigger than what they have been in the past. Giordano Albertazzi: Fair enough. Scott Reed Davis: Best of luck, guys. I appreciate the color. Thank you. Craig Chamberlain: Pass it on. Thanks, Scott. Nadia: The next question goes to Amit Jawaharlal Daryanani of Evercore. Amit, please go ahead. Amit Jawaharlal Daryanani: Thanks a lot and congrats on my side as well from some very impressive orders over here. You know, if I look at the order and the back number that you folks have, you clearly set up for some very strong performance I imagine not just in 2026, but even in 2027 and beyond. So I am wondering, Giordano, if you can just kind of walk through know, what are the key operational steps, the key bottlenecks you think you have to solve for to convert this backlog into, you know, revenues and EPS over time You know, just maybe help us understand, like, what are you focused on? What needs to go right convert these orders into sales and EPS in 2026 and 2027? Thank you. Giordano Albertazzi: Yeah. We are well, thank you. Thank you, Amit. We are really working, and we have been working. So it is not like something new. We have been working, and we continue to work. We are accelerating our capacity expansion. Capacity expansion always happens in two ways. One is, CapEx, so call it footprint. Generally speaking, not only. There is also an increase of productivity, but the other is really obtaining more output from the existing footprint. So the two-pronged approach that we talked about several times is what continues to happen. But as we speak, you know, we are factories being expanded. We have a couple of new locations coming live. And, you know, we are working very, very actively with our supply chain. So, it is really diligently and, in a very focused manner, execute on, on this, on this backlog. Think we are in a good shape. We have been diligent about making capacity available, gradually but rapidly. For, for the last couple of years, and, you know, we are accelerating. As our numbers are saying, both on CapEx and the top line. Craig Chamberlain: And Amit, I think you could look at just the fourth quarter, the acceleration in CapEx is in the financial numbers, and you will also see that in the guide that the acceleration in CapEx is there as well, which underscores what we are doing. Most of that is in flight. Meaning that we are already doing the build-outs, and we understand what we need to go do to deliver the capacity for the guide that we put out there for sales. Amit Jawaharlal Daryanani: Got it. Thank you. Nadia: The next question goes to Jeffrey Todd Sprague of Vertical Research. Jeff, please go ahead. Jeffrey Todd Sprague: Hey, thank you. Good morning. Congrats on the shock and awe numbers here. Maybe we could just sit on Europe and Asia briefly from my standpoint. First on Europe, you know, have things really changed on the ground in terms of the permitting bottlenecks and the like? Obviously, you said the orders are a bit better, but it is close to 30 to the year. And I am also just curious on China specifically, if you could address that. Clearly, you know, weak economically and industrially, but I would not think China would want to fall behind in the AI race. I just wonder if the weakness there is maybe some indication that Western players are not being invited to play to the same degree as they were historically. It is just a competitive state of things on the ground in China. I will leave it there. Thanks. Giordano Albertazzi: Yep. Well, thanks, Jeff. But it sounds with EMEA. Let's start with EMEA in general. Think it is certainly a combination of an acceleration of investment, basically. So it is not that somebody will do magic wand and everything kind of a permit wise became easy. In EMEA. That would be too simplistic. But I think the focus and the realization that a lot more infrastructure is needed is now palpable. And, pipelines that have been there for quite a while, you remember I have been vocal about that, have been and are expanding and the sales cycle of the various elements in the pipelines are accelerating. And then we have areas that are specifically moving well. So you take the Nordics as an example, not solely, but that is an example where that is happening. You have heard me probably talk about a couple of times about the fact that with all that is happening in North America, some of the decision-makers were still concentrated in North America while still are concentrated in North America. Now I think the realization that things need to happen beyond North America is and that is I think, or at least what we see happening as a matter of fact. So, quite, quite optimistic there. So you are kind of a ferbacement in the market that I have not seen for quite some time. When it comes to Asia, I would not attribute that to kind of a Western players type of dynamics. The market demand is not very strong. In, in this, in this moment. So, clearly, there is, you know, it is an important AI market with, with its own characteristics. But, again, what we see is more attributable to a general market situation than, at a particular kind of a player. I mean, we are a Chinese player in China. We are silicon agnostic. So yeah, again, very happy. With everything outside of China, but also very, very proud of what we are doing in China as a team. Jeffrey Todd Sprague: Great. Thank you. Nadia: The next question goes to Christopher M. Snyder of Morgan Stanley. Chris, please go ahead. Christopher M. Snyder: Thank you. Giordano, you talked about the company's deep relationship with the data center industry leaders. So I guess, you know, my question is how much visibility do these relationships afford Vertiv Holdings Co into the future workflow or architecture of these data centers? Because, you know, I have to imagine that you guys need to have the solutions developed, you know, before the customers are ready for it. So also interested in, you know, how far in advance does the company start the R&D or engineering process to be, to bring some of these future solutions to market? Thank you. Giordano Albertazzi: Sure. Well, thank you, Chris. I think a couple of dimensions to that. We have been always vocal about the strength of our relationship with customers, but also the other players in the ecosystem. Ecosystem. Super important. Super important because exactly as you were saying, our technology needs to land ahead of well ahead of, of the most advanced, silicon. But to that to be the case, of course, with the with the NVIDIA or other silicon let's say, technology providers, then it is about looking out two, three years sometimes in terms of or beyond. At a higher level of, let let's say, more R&D. But being two, three years out, in the way we work together. So our roadmaps certainly extend, but the role that an aspect that I am very proud of, and it is very important for, for our and especially for our customer success. So from for the our end of customers success is the work that we do with many of them really kind of a technology partnership, looking out, one, two, sometimes three years and say, hey. With all that is happening from a technology standpoint, given your business model, customer, what is really the technology the best suits your strategy. And you know, it is not it is not being told. But it is architecting together and giving them an understanding of the possibilities that they have from a technology standpoint. I think we have a uniquely stronger role in the industry. In this respect. So it is working out quite well. Christopher M. Snyder: It seems like it. Thank you. Giordano Albertazzi: Thank you. Nadia: The next question goes to Nigel Edward Coe of Wolfe Research. Nigel, please go ahead. Nigel Edward Coe: Thanks. Good morning, everyone. I guess we are not seeing too much impact yet from, Disney space. So that is good news. So want to go back to the backlog. And Okay. You know, Oh, got it. Sorry. I could not hear you. There was a little bit of a blip. In the line. Nigel Edward Coe: Okay. Go ahead, Nigel. Yeah. Sorry. Let me go let let yeah. Can you can you can you hear me now? Giordano Albertazzi: Yep. Nigel Edward Coe: Yep. Great. So I want to go back to the backlog. And I think, Craig, you mentioned more system level orders. So obviously, you have highlighting the SmartRun product. Maybe just talk about where you are seeing that success and the sort of the word share you are gaining with the data centers. And maybe, Giordano, could you just maybe touch on the backlog agent? It seems to the guidance implies roughly fifteen months of conversion to backlog. Typically, you do nine months. So maybe just talk about, are we seeing longer duration orders in that backlog? Thanks. Giordano Albertazzi: Well, so let's start with the agent so that we can address that. We are we have been already vocal quite a lot already that our customers requested lead time pretty much ranges from twelve to eighteen months, especially when we talk about, the bigger orders. It is never an exact science. It always ranges but I would say that twelve to eighteen is a good, is a good approximation of where the large orders demand the deliveries to be in. Typically, not even just one bulk if it is really a large order. But having said that, if you think about the structure of our order, you take this year, sorry, last year, 2025, with a very, very strong, second half, relative anyway to a very strong year altogether, but particularly strong in the second half and particularly, particularly strong that in the last, in the last, quarter, then they see that the twelve to eighteen months, there is a push of things, into 2027 while we have we are very happy with, how 2026 is covered. So, again, as I said in the as I said in my, comments earlier, the shape of the backlog is not something different. It is just a consequence of the phasing of the orders when we when we receive that. So no big differences in the way the market asks and demands or expects our deliveries. When it comes to the system question, we clearly see an acceleration. When we talk about OneCore or we talk about SmartRun, you know, we talk about systems and solutions that start to be quite, broadly adopted. And, certainly, that helps, the dynamic of our order intake of and our backlog. But when we talk system, we do not just talk about integration. System for us is having the entire powertrain, the entire thermal chain, certainly when we deliver a prefabricated solution, or a converged solution, considering all the pieces that really designed to work to work together. But, again, if we go back to the previous question, my answer was, it is about sitting together with a customer and having the entire portfolio and having a good and just a very profound understanding of, a system level and all data center level, technology and being able to talk systems our customers. Nigel Edward Coe: Okay. Thank you, Giordano. Thank you. The next question goes to Andrew Burris Obin of Bank of America. Andrew Burris Obin: Yes, good morning. Morning. Good morning. Giordano, Craig, Lynne. Thank you. So the question I have is on services. You know, it seems that the feedback we are getting is that the big differentiator for Vertiv Holdings Co is your ability not only to deliver the product, but to actually service it in the field and wrap all the sort of additional value-added stuff around that. Last quarter, you shared with us, you know, the increase in service headcount. Would you update us on what the headcount looks like as you increase in backlog? Rapidly and maybe preview where the service organization is going I am sure you are going to talk about your analyst day, but just give us a preview of what is happening there. Thank you. Giordano Albertazzi: Well, thank you, Andrew. One of my favorite subjects. So, and, I have many, but this is certainly one of my favorite subjects. So, and I agree. It is a big differentiation. And as you see, a big differentiator that we continue to fuel. So absolutely not static in our view. Well, we talked about, headcount. I think we are approaching it very, very rapidly, the 5,000, field people right now and really think in terms of our field capacity following very similar to, the delivery capacity. Now of course, is a function of the install base, but the installed base is growing. Our services are growing. Certainly, the commissioning, the start-up are very important events in the life cycle of a data center, and we will make sure we are there with the capacity locally to serve our customers. Also evolving our technology, not only in the of PerchRight, to me, a great example of also the all the digitization that we are injecting into our services. Business. Craig Chamberlain: I mean, I would add on that I am just as excited as Giordano is on our services portfolio coming from, you know, heavy industrial companies that lived and died on services. I think this is a superpower that we are going to continue to build out, and especially when we are when you are starting to look at what we can do with the installed bases out there. Andrew Burris Obin: Thank you very much. Giordano Albertazzi: Thank you. Nadia: The next question goes to Nicole Sheree DeBlase of Deutsche Bank. Nicole, please go ahead. Nicole Sheree DeBlase: Yes, thanks for the question. Good morning, everyone, and congrats on a great quarter. To start with the backlog, I guess, obviously, a really nice step up in backlog sequentially and year on year in the fourth quarter. Giordano, when you kind of look out over the next twelve months and with what you see in the pipeline, do you expect that we will see another year on year increase in backlog in 2026? And then just a small follow-up on CapEx. Are we going to kind of be in this 3% to 4% CapEx to sales zone for the foreseeable future given how fast the industry is growing? Thank you. Giordano Albertazzi: Well, you know, I would not go all the way to guiding orders, which I would do if I were to answer in with many details. But, obviously, if you go back we if we go back to what we shared already, if you think about our directional indication that, we believe our orders will be will be up. You probably have done the math, but our orders in 2025 right now, we have sales. So probably the answer is straightforward. We believe we will continue to build a backlog directionally. So that is, that is certainly the case. Craig Chamberlain: And I think on your question, Nicole, on the CapEx, I think, again, we always want to look at a normalization around the 2-3% as we add as you had mentioned before, prudently. So we think this year might be a little bit higher than normal, but we would always want to continue to be right around that 2-3% on a normalized basis. So I think that would be our answer right now. We would not really put a number out there for 2027 yet until we see what the market is going to look like from an orders perspective. But the guide this year is to continue to look at that as we go forward. Giordano Albertazzi: And, again, we really hope to see you at our Investor Day, and, certainly, that will be an opportunity to further elaborate on that. And the long-term trajectory of the business. Nicole Sheree DeBlase: I would not miss it. Thanks, guys. Pass it on. Giordano Albertazzi: Thank you. Nadia: The next question goes to Julian Mitchell of Barclays. Julian, please go ahead. Julian Mitchell: Hi, good morning. I just wanted to look at the orders and the sort of composition of the backlog maybe from the standpoint of cash. Because I suppose it was interesting that you had a large working capital cash inflow in 2025, whereas I think we have heard from some other companies that the high growth is one reason for bad cash flow conversion, but for you, it is the opposite. A lot of that is because of your deferred revenue inflows in the fourth quarter. So related to that, I wanted to understand is it the type of orders you got in Q4 that generated some disproportionate amount of deferred revenue inflow? And also, when we look at Slide 11, you are guiding for working capital and other to be a small use of cash. In 2026. But if orders are growing and all the rest of it, is it not more like we would see another deferred revenue inflow helping working capital be a source of cash in 2026? Craig Chamberlain: And yes, Julian, let me clarify the slide first off, and then we will get into a little bit more. But the slide says $80 million down year over year. And I believe it is down year over year, still be a working capital. It should be a working capital outcome that will be positive. So it would be just less positive than it would be year over year. Julian Mitchell: Got it. Thank you. And is that and these deferred revenue balances, are they swelling because of specific very large orders? Or we should think about them being proportionate to just the aggregate kind of volume of orders that you are getting? Just trying to understand it because traditionally in low and medium voltage electrical equipment, you do not have these large prepayments. Craig Chamberlain: Yeah. And I would say it depends on the type of order and the mix of order. Again, I think that we do always try to push to get some down payments and progress payments in there. But the mix would impact that a little bit, and it could be an influence in what drove up fourth quarter third quarter. I would not say it is marginally different than what we have seen historically. Julian Mitchell: Great. Thank you. David M. Cote: Thank you. Nadia: The next question goes to Mark Trevor Delaney of Goldman Sachs. Mark, please go ahead. Mark Trevor Delaney: Yes, good morning. Thank you very much for taking my question. Congratulations on the strong results and strong orders. I was hoping to get Vertiv Holdings Co's view on how its cooling product mix and business opportunity may evolve. And I ask because post-CES, there was some discussion that Reuben raised racks may not need chillers and conversely, post-supercompute last fall, there was a proposal from a competitor about stainless steel chillers maybe displacing CDUs. So some moving parts there, and we would love to get your opinion on how Vertiv Holdings Co sees its business opportunity evolving and what this might all mean for your content per megawatt and market share. Thanks. Giordano Albertazzi: Let's start from the thank you, Mark. Let's start from the bottom. So I go back to what we are saying. We believe the technology evolution is certainly central to that statement, is, is, favorable. From a content standpoint. It is no exception. So clearly, there is an opportunity to run some GPUs at a higher temperature than historically done. But this is pretty much what has been true for many of the more recent chips of NVIDIA. Advantages, helpful. Let's all remember that that does not rule out heat rejection. Heat rejection will continue to exist. Continue to be there. Let's not forget that there are loads that can be cooled at higher temperatures. There are loads with the same data centers that require lower temperatures. So if anything, whereas the overall efficiency of the system indeed improves, we are thinking more and more about a hybrid, cooling and thermal chain infrastructure. Now, clearly, the ability to reduce the number of chillers, but not the number net number of, heat rejection technologies, depends on the climate-specific climate situation, depends on the type of loads. Depends on the resiliency to various types of, non-GPU or different GPU loads that the data center is designed for. You know, when we look at this space, we are very, very encouraged by what we see in terms of a product that is now cataloged, and that is very, very important for us. That what we call trim cooler. So a chiller that is really optimized to operate at high temperatures, but also with the flexibility for lower temperatures that, again, coexist in systems. It is a solution that maximizes free cooling, and it is certainly very, very central to the future of the industry. So, all in all, we see that design continues to be mixed. If anything, this complicates the thermal chain and this complexity is something that we like. As someone who has got the entire portfolio, we certainly are perfectly positioned to support our customers. And, again, going back to what we are saying, enable the right choice for our customers. Cooling, chips directly in other ways than through a CDU in this moment is not something that we see, simply because you know, it would in most of the cases, it will be niche applications probably, but in most of the cases, that would be too dangerous. Blast radius is, a little bit too big at. So we are pretty sure that CDUs in various shapes and forms are a long-term element of the thermal chain. Mark Trevor Delaney: Thanks, Giordano. Appreciate it. Giordano Albertazzi: Sure. Nadia: The next question goes to Andrew Alec Kaplowitz of Citigroup. Andy, please go ahead. Andrew Alec Kaplowitz: Morning. Good morning. Giordano, Craig, good morning. If I look at core incrementals that you are I think you have got pretty close to 30% dialed in. It is kind of the low end of your long-term range for Q1 and 2026, but I would guess the scale of some of these contracts could be your friend because they should maximize the ability to leverage your sales. So is it possible to generate higher incrementals given potential operating leverage? Or do we need to be a bit more conservative regarding supply chain? And or do you just need a higher level of growth investment to fund all of your revenue growth? Craig Chamberlain: Andy, I will start off by saying you are exactly right there. There is a higher level of investment. We are still guiding at that lower end of the 30% to 35% that we have said in the past. I think as we get through the year and the investment that we are putting into place, we can continue to see those go up in our longer-term guidance and we will reiterate that in the Investor Day of what we see as that goes forward. But I think you are exactly spot on. Some of the investments that we are doing and the, I would say, the ramp-up of those has a little bit of pressure on us as we drive those incremental margins. Giordano Albertazzi: Yeah. I would say that, like, the long-term trajectory is absolutely unchanged. Yep. So I feel good about it. Andrew Alec Kaplowitz: Alright. Thanks, guys. Giordano Albertazzi: Thank you. Nadia: The next question goes to Michael Elias of TD Cowen. Michael, please go ahead. Michael Elias: Great. Thanks for squeezing me in here, and congrats on the order quarter. Great to see you guys capturing the, the market share out there. You know, Giordano, question for you. I am sure you came out of PTC with a similar sense that demand is rocking and rolling. You know, as we think about going forward, yeah, could you just give us an update on the utilization of your existing production capacity? And maybe as part of that, the evolution that you are seeing on the product lead time front for things like switchgear and how they may have evolved over the last three months given the demand strength? Giordano Albertazzi: Eric, thanks. Yeah. Certainly. Certainly, demand is there and, in, in very rude health. As one would say, and we are very happy, we capture that. Again, utilization of capacity clearly, we are pretty satisfied. In general, I always talked about having a wiggle room in the way we load our capacity in our factories. This is still true. So we are using this wiggle room to if needed sometimes to accelerate growth. But again, we like to continue to design our capacity with that wiggle room that is 20-25%. So the same way of looking at the long-term capacity. Applies, here. And that is how we decide on capacity increments. As reflected in our CapEx numbers. When it comes to lead times, yes, there has been some expansion a little bit in some product lines. But, again, pretty much, on customer and market, end market lead time in general across the majority of products. So again, quite happy quite happy with our evolution in this respect. We like the growth. We like the capacity utilization. Michael Elias: Great. Thanks. I am looking forward to seeing what is to come. Giordano Albertazzi: Alright. I think we have time for one more. Nadia: The last question goes to Amit Singh Mehrotra of UBS. Amit, please go ahead. Amit Singh Mehrotra: Thanks. Maybe just batting cleanup here a little bit. So wanted to ask about the pipeline because, obviously, pipeline leads orders. Would imagine if you are more than doubling your orders sequentially from 3Q to 4Q, pipeline is depleted. It does not seem that is the case based on how you talk about the pipeline. So just talk about that. And then the last, just a clarification. Just remind us what has to happen, what hurdles you have to pass, for an order to make it into your backlog? From a deposits or delivery certainty visibility perspective? If you can just remind us on that, that would be great. Giordano Albertazzi: Okay. So the pipeline the pipeline has not depleted. If anything, you know, despite certainly the very strong order intake in the last quarter, we are seeing the pipeline to grow quarter to quarter. So again, very satisfied about that. It is not just the market. It is the visibility of the market. So just want to reiterate it. It has not depleted. When it comes to what makes an opportunity backlog, it is a binding purchase order. Everything backlog at is a binding purchase order. Majority of but very often, with advanced payment, but, it is the nature of the PO. Binding legally binding. Purchase order. Amit Singh Mehrotra: Got it. Okay. Thank you. Appreciate it. Giordano Albertazzi: Thank you. Nadia: Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Giordano Albertazzi for any closing remarks. Giordano Albertazzi: Well, thank you very much. Thank you all for the questions, and thank you for your time today. Of course, I am very pleased with what we delivered in 2025. And very pleased with how we positioned entering 2026. Certainly very proud of our job that the entire Vertiv Holdings Co team has done and I am super grateful for the collaboration with our customers and partners. We are pleased with our progress, you know me by now. We are certainly never satisfied. I am certainly never satisfied. We continue and we will continue to invest ahead of the curve, maintain our technology leadership, execute with speed and precision. I am more confident today than I absolutely ever been about Vertiv Holdings Co's trajectory. Very encouraged. And, I want to thank you all and wish you all a great rest of your day. Nadia: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the BAWAG Group Full Year 2025 Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. There will also be a transcript on the company's website. I would now like to hand the conference over to your speaker today, Anas Abuzaakouk, CEO of the company. Please go ahead. Anas Abuzaakouk: Thank you, operator. Good morning, everyone. I hope everyone is keeping well. I'm joined this morning by Enver, our CFO. So we have a lot to cover. Let's jump right into it with a summary of full year 2025 results on Slide 3. For the full year 2025, we delivered a record net profit of EUR 860 million earnings per share of EUR 10.87 and a return on tangible common equity of 27%. The underlying operating performance of our business was very strong with pre-provision profits of EUR 1.42 billion, up 31% versus prior year and a cost-to-income ratio of 36%. Total risk costs were EUR 228 million with an NPL ratio of 80 basis points. The fourth quarter was particularly strong with a net profit of EUR 230 million, a return on tangible common equity of 28% and a strong springboard as we entered 2026. We exceeded all of our 2025 targets and distributed EUR 607 million to shareholders, EUR 432 million in dividends, which was equal to EUR 5.50 per share and EUR 175 million share buyback, translating into a cancellation of 1.6 million shares or 2% of shares outstanding. Since our IPO in October 2017, we have reduced shares outstanding by 23% with 77 million shares outstanding as of year-end 2025. We closed the year with a pro forma CET1 ratio of 14.6% after setting aside EUR 481 million for dividends, equal to EUR 6.25 per share, which we will propose at our Annual Shareholder Meeting in April as well as deducting the EUR 75 million share buyback that we completed earlier this year. The recent buyback was used to fund employee stock and remuneration programs as we are keen to avoid diluting our shareholders. Our liquidity position is robust with cash of EUR 14 billion, equal to 19% of our balance sheet. Organic customer loan growth was strong, up 3% year-over-year when excluding the Barclays acquisition, including the Barclays Consumer Bank Europe acquisition, customer loans were up 12%. Net interest margin for the business was 329 basis points, up 22 basis points from prior year and reflecting the positive impact from the German credit cards and strong growth in consumer and SME. Despite our record performance in 2025 and an EPS CAGR of 14% over the last 3 years, our best years lie ahead. Our strategy has been consistent since 2012, one focused on being patient, disciplined, cutting through the noise and embracing a continuous improvement mindset. Our resilience is proven by our ability to consistently deliver results and improve each year. On the back of strong customer loan growth in 2025 and the integrations delivering ahead of plan, we are updating our targets and introducing a new 3-year rolling outlook. We are now targeting net profit of over EUR 960 million in 2026, over EUR 1.1 billion in 2027 and over EUR 1.2 billion in 2028, excluding any potential acquisitions. This translates into a net profit CAGR of 12% over the next 3 years from 2025 through 2028. We also continue to build up excess capital with over EUR 1.1 billion projected from 2026 through 2028, leaving us with over EUR 1.5 billion of excess capital, which includes our pro forma excess capital of EUR 468 million to earmark towards M&A, capital distributions or potential new growth opportunities above our stated plans. It's important to note this excess capital is incremental to the capital underpinning our updated 3-year targets and post our 55% dividend payout ratio. Through the cycle, we are targeting an ROTCE over 20% and cost-income ratio under 33% as the franchise continues to reap the benefits of long-term investments and scale as we build out a pan-European and U.S. banking group. When we refer to through the cycle, there will be years we deliver higher returns given the current rate environment and benign credit cycle with our targets representing a more conservative floor. However, our goal is to consistently deliver results and be prudent in how we run the bank, accounting for the cyclical nature of markets and lending. Our CET1 target remains at 12.5%, 227 basis points above our minimum regulatory capital requirements. Going forward, we plan to provide a rolling 3-year outlook with full year earnings allowing for a more dynamic outlook that captures internal as well as external developments more real time. Moving to Slide 4, our capital development. At year-end 2025, our reported CET1 ratio landed at 14.2%. We generated 417 basis points of gross capital from earnings. Closed on the Barclays Consumer Bank Europe acquisition using 180 basis points when compared against year-end RWAs and made or earmarked capital distributions equal to 350 basis points which comprised of earmarked dividends of EUR 481 million as well as EUR 250 million of share buybacks completed across 2 tranches. We also completed 3 SRT transactions, which funded the underlying business growth and provided a net capital relief of approximately 60 basis points. On a pro forma basis, our CET1 ratio was 14.6% equal to EUR 468 million of excess capital above our CET1 target of 12.5%. This factors in the sale of a minority investment that signed in the fourth quarter of 2025 and is expected to close in the first half of this year. This excess capital starting point provides us with a significant amount of dry powder to capitalize on unique organic and inorganic opportunities should they arise. It is important to note that both the Knab and Barclays Consumer Bank Europe acquisitions were fully self-funded. As our owner operators, we strive to be good stewards of capital, prudent and disciplined in how we allocate capital with a strong aversion to diluting shareholders. However, this is only made possible because of a very strong earnings and capital generation as we are positioned to deliver a through-the-cycle return on tangible common equity of over 20%. Slide 5. Positioning our balance sheet for growth while staying conservative. A key pillar to our strategy is maintaining a conservative balance sheet that is positioned for growth, ensuring we have excess capital and liquidity and always focusing on risk-adjusted returns taking a proactive approach to risk management. As we look ahead to 2026 and beyond, we have positioned our balance sheet in a few ways. We have purposely kept an excess cash position providing us with dry powder from a liquidity standpoint. We have EUR 14 billion of cash equal to 19% of our balance sheet, and our securities portfolio remains underinvested at EUR 3 billion, equal to 5% of our balance sheet, while we target more of a long-term range of 15% to 20% in a more attractive spread environment. We continue to be patient and disciplined and we'll be ready to deploy into customer lending as well as adding to our securities portfolio when the right opportunities present themselves that meet our risk-adjusted returns. As far as customer loans, we are focused on secured and public sector lending with an inherently low risk profile as well as providing us with a source of long-term funding. Over 80% of our customer book is secured or public sector lending that is conservatively underwritten and well collateralized. Housing loans account for over 50% of our customer loans with an average LTV of 55% on the nonguaranteed mortgages. In total, 60% of the mortgage portfolio has NHG government guarantees, insurance or risk transfers. Additionally, we have EUR 13 billion of covered bond funding relative to approximately EUR 40 billion of mortgages, commercial real estate and public sector assets with significant potential for further long-term covered bond funding. Over the years, we have deployed various risk management tools to proactively mitigate credit risk and free up capital to fund growth using CDS direct insurance and significant risk transfers or SRTs, in the form of cash and/or guarantees. We use SRT specifically to free up capital to fund growth and as a loss mitigation tool with an emphasis on unsecured lending. Today, SRTs have become quite prevalent, but our focus over the years was risk mitigation accounting for through-the-cycle losses and ensuring we stay competitive from a risk-adjusted return standpoint. This has become more pronounced across mortgage lending as we transition to the standardized approach in 2024. Today, SRTs cover EUR 9 billion of assets on the balance sheet, of which EUR 6 billion or 2/3 are tied to mortgages on the standardized approach. SRTs on mortgages improve capital efficiency on a low-risk asset class, allowing us to fund growth and better compete with IRB banks and nonbank lenders. SRTs on unsecured and specialty finance assets, which account for EUR 3 billion, primarily consumer loans, credit cards and corporate loans, mitigate risk of unexpected losses and work more as an insurance policy, specifically against volatility of macro sensitive assets. In terms of lending activity, 2025 was another year defined by being patient and disciplined. Although we saw a pickup in lending activity across consumer and SME, the pricing environment is still challenging across mortgages and corporate lending. We have strategically avoided chasing growth as credit markets remain frothy given the number of players driving down margins and foregoing loan protections. We believe credit risk in general is mispriced given geopolitical risks, the fiscal situation of many sovereigns and a flawed short-term focus on aggressively pushing lending volume given the perpetual need to deploy capital as incentives have decoupled from performance. On the flip side, our commercial real estate business continues to perform well, and we are finding pockets of opportunity. This is a result of our conservative underwriting over the years and underlying exposure to residential, industrial and logistics assets. which make up approximately 80% of the portfolio. The U.S. office sector overall remains distressed. However, we are now seeing pockets of opportunity in select idiosyncratic transactions across the capital structure. Moving to Slide 6. Building a pan-European and U.S. banking group. Our success over the years is a result of embracing a continuous improvement mindset, one that allows the company to constantly adapt. This past year was no different. Even though our company is in great shape, we must adapt from a position of strength and not fall victim to complacency. The recent acquisitions have been a catalyst for building the operating framework for a pan-European and U.S. banking group. As we look to the future, we must challenge the status quo we reimagined the company. In the face of shifting demographics, changing customer behavior and transformative technologies, we need to ensure that we stay competitive and relevant for the long term. Over the years, we have transformed from a branch-heavy business with limited digital capabilities to a digital-first bank complemented by a high-quality advisory branch network. We self-funded 14 acquisitions, expanded into 6 new countries and built a strong leadership team with a deep bench in an owner-operator mindset. Today, our business is 90% retail and SME, 90% digital originations and 90% tied to the euro countries of Austria, Germany, the Netherlands and Ireland. With the integrations of our 2 recent acquisitions largely complete, we are positioning ourselves for future growth, both organic and inorganic. We have redesigned the company to reflect both the broader footprint as well as capture new opportunities. We are starting to see the benefits of greater scale and efficiencies, greater digital engagement, a wider geographic footprint and more opportunities to pursue. Most importantly, our transformation over the years has been anchored to our culture. We foster an owner-operator mindset, encourage entrepreneurial thinking and continuously challenging the status quo. Our senior leadership team embodies stability and dedication with the Management Board and senior leaders collectively owning approximately 5% of the company. This reflects our owner-operator culture and commitment to long-term success of the franchise. This group has an average tenure of 12 years. 25% of our current leadership team joined through prior acquisitions, and we continue to build a deep bench of leaders cultivated through internal development programs, mentoring, strategic recruitment and acquisitions. This is vital as we expand into a pan-European and U.S. banking group, ensuring we have the proper bandwidth and skill set to grow the business and address the many challenges and opportunities ahead. Our future success depends on preserving this truly unique and dynamic culture as our company continues to grow and evolve. Moving to Slide 7. Technology underpinning our transformation, AI is the next leg. Despite our achievements over the years, we recognize that ongoing technological disruption, specifically the rapid advance of artificial intelligence, demands that we proactively redesign our company. This era of innovation and disruption will fundamentally reshape how we serve our customers, structure our organization and define the very nature of work. As a result, some technologies and processes will quickly become obsolete, requiring us to rethink traditional roles and create entirely new ones. The economic landscape is evolving in ways that are hard to understand or predict. Our goal is to proactively navigate these changes and ensure the long-term success of our franchise. We plan to incorporate AI into our operating framework. We will significantly enhance customer service making this a true competitive advantage as we reduce friction in our processes, enable immediate and effective first touch resolution. While we have already made significant strides in driving operational efficiency, we must remain focused on continuing to eliminate unnecessary bureaucracy, freeing up our people to engage in more impactful and rewarding work that requires more creativity, problem-solving and critical thinking. Our goal is to free up advisers to spend more quality time with customers, enable our operations and call center teams to focus on more complex cases and portfolio management and streamline central functions to play a more strategic role across the group. Central to our AI strategy is building the right technical infrastructure and fostering institutional expertise to remove friction for both customer journeys and internal operations. Our TechOps investments over the years have enabled us to fully migrate to the public cloud, enhance our data architecture and adopt standardized workflow and reporting tools. This technical foundation will be the foundation for building an AI operating framework, one that seamlessly integrates technology, supports robust governance and drives impactful use cases. To support this, we have set up a dedicated team of business process engineers within our TechOps Group combining process know-how with technical skills to lead AI initiatives in close partnership with functional experts. However, we believe that before AI can be properly implemented, there needs to be NI or natural intelligence around the process. This means team members with deep process and institutional knowledge working closely with business process engineers to redesign processes through simplification measures, basic workflow automation and ultimately, AI. We believe AI will ultimately enhance our operational excellence and best-in-class efficiency in the coming years, a true differentiator for BAWAG and our competitive advantage. With that, I'll hand over to Enver. Enver Sirucic: Thank you, Anas. I will continue on Slide 9. In terms of our balance sheet and capital, customer loans were up 2% and customer deposits were up 4% quarter-over-quarter. Organic customer loan growth was 3% year-over-year when excluding the Barclays acquisition, including the Barclays acquisition, customer loans were up 12%. Tangible common equity is up 9% year-over-year after setting aside a EUR 6.25 dividend per share or EUR 481 million in absolute terms, which we will propose at our Annual Shareholder Meeting in April. We maintained a fortress balance sheet with EUR 14.1 billion in cash equal to 19% of our balance sheet and LCR of 204% and overall strong asset quality with a loan NPL ratio of 80 basis points. Moving to Slide 10, a strong last quarter with net profit of EUR 230 million and a return on tangible common equity of 28%. Core revenues were up 3% versus prior quarter with net interest income up 3% and net commission income up 4%. Operating expenses were down 3% in the quarter and cost income ratio stood below 34%. Risk costs were EUR 64 million or 45 basis points in the quarter, including provisions for a single name default. On Slide 11, our core revenues. Strong performance, net interest income was up 3% in the quarter, driven by robust customer loan growth of 2%, with strong momentum in real estate and public sector, solid consumer business and stable mortgage lending. Net interest margin at 332 basis points improved on back of better asset mix, while deposit beta improved by 1 percentage point to 37% in Q4. Net commission income was up 4% with continued strong momentum across business lines, particularly in credit cards and payments. For 2026, we anticipate a continued positive trend with net interest income and core revenues expected to grow by 6%. On Page 12, operating expenses at EUR 194 million, a 3% decrease for the quarter with the cost income ratio at 33.8%, similar to levels before both acquisitions. To date, more than 80% of the acquisitions have been successfully integrated as planned and cost synergies have increased particularly after the branchification of Knab last November. We continue to drive operational initiatives designed to streamline processes and enhance long-term productivity across our business lines. Combined with the completion of integration efforts, these measures are expected to improve our operational efficiency. We expect a reduction in operational expenses by more than 5% in 2026. Regulatory charges are projected to increase by EUR 9 million to EUR 48 million in 2026 due to increased size of our balance sheet. Moving to Page 13. Risk costs were EUR 64 million in the quarter, driven by a provision for a single name default and higher share of retail consumer lending. Asset quality remains solid with an NPL ratio of 80 basis points. We expect continued strong asset quality in 2026 with a risk cost ratio of around 45 basis points mainly reflecting a higher share of consumer lending and otherwise strong credit quality. Slide 14. Our retail SME business delivered a quarterly net profit of EUR 210 million, a very strong return on tangible common equity of 39% and a cost income ratio of 31%. Pre-provision profits were EUR 343 million, up 10% compared to prior quarter with core revenues 4% stronger versus prior quarter, while operating expenses were down 8% in the quarter. The retail risk costs were EUR 58 million, with a risk cost ratio of 60 basis points. We continue to see solid credit performance across the business with a low NPL ratio of 1.2%. Average customer loans and deposits grew by 1% in the quarter, and we expect continued growth across the retail SME franchise in 2026 driven by solid growth in consumer and SME with mortgage originations slowly starting to pick up. On Slide 15, our corporate real estate and public sector business delivered fourth quarter net profit of EUR 37 million and generating a strong return on tangible common equity of 29% and a cost income ratio of 23%. Pre-provision profits were EUR 58 million, while risk costs were at EUR 6.5 million, mainly tied to provisions for a single name default. Average assets were up 4% in the quarter, with strong momentum in real estate and public sector while corporate lending remained muted. We'll continue with our current approach in 2026 and stay patient, focus on disciplined underwriting, risk-adjusted returns and not blindly chase volume growth. Slide 16, our updated targets. Following strong customer loan growth in 2025 and progress on integrations being ahead of plan, we are revising our targets and the 3-year outlook. We are targeting net profit exceeding EUR 960 million in 2026 over EUR 1.1 billion in 2027 and over EUR 1.2 billion in 2028 with a 12% CAGR from 2025 to 2028, excluding any acquisitions. Our strategy focuses on improving operating leverage by increasing core revenues and consistently reducing expenses. Top line growth will come from 3% to 4% annual loan growth a higher asset margin due to an improved asset mix and positive effects from deposit hedge roll off. Following integrations, we aim for annual net cost reductions through 2028. These efforts will drive ongoing improvement as we continue investing in advisory, tech infrastructure and data assets. Looking ahead, with continued mix shifts and effective underwriting, we expect risk costs to remain at 45 basis points for the next few years. In addition to our profit targets, we plan to generate over EUR 1.1 billion in incremental excess capital by 2028, following a dividend payout of 55%. The resulting excess capital of more than EUR 1.5 billion by 2028 may be allocated towards organic growth initiatives, further M&A or capital distributions. Our through-the-cycle targets remain unchanged with a return on tangible common equity of above 20%, cost income ratio of below 33% and a CET1 ratio target at 12.5%. And with that, operator, let's open up the call for Q&A. Thank you. Operator: [Operator Instructions] The question comes from the line of Gabe Kemeny from Autonomous Research. Gabor Kemeny: My first question is on the 2027 guidance that you upgraded by around EUR 100 million. I understand this is primarily NII driven. And can you confirm it's mostly the asset mix as you are shifting more towards consumer to remember about the hedges, how the hedge positions have become more -- or expected to become more profitable? And specifically, on consumer, you pointed out that it's growing nicely. Can you speak a bit about the drivers and the growth outlook in this segment? My other question will be on capital. I mean you ended the year at EUR 0.5 billion of excess capital, but not doing a share buyback for now. Yes, I understand you are working on -- you are looking at various capital deployment options. But when do you think you will be able to decide on whether you do a share buyback this year or not? And my final question is a broader one. I understand you can't comment on transactions. But can you share your views on the Irish banking market and the performance of your local business there? Anas Abuzaakouk: Okay. Gabor, let's -- I'll start with the capital allocation question 2 and 3, Ireland and then Enver will take the 2027 guidance, some of the specifics. So all good questions, Gabor. Thanks for submitting. As far as capital allocation, we always say as part of our capital allocation framework, we will assess at year-end given our excess capital position. This is really no different this year. The only difference is we're assessing a number of market opportunities, and we'll be in a better position to communicate what we're going to do with our excess capital and overall capital allocation, hopefully, by the first quarter results. I think we're going to be in a good position. As to your general question of Ireland, we entered Ireland 2 years ago through MoCo and that was on the back of having studied the market and having went into Ireland for a number of years. We bought DEPO, which was a wind-down platform. We think Ireland is one of the most robust banking markets across the European Union. But that's not a development today. That's been our belief over the past few years. So we think it's structurally a really good retail banking market. But that's one of our core 7 markets that we've defined in 1 of the 4 core European markets. So I will pass it over to Enver on the '27 guidance. Enver Sirucic: So Gabor, on your question, I think, related to the NII development. Yes, there are 3 factors that we laid out. The first one is we assume loan growth of 3% to 4%. And if you look back, this is consistent with the performance that we have seen, especially over the last 12 months. The second one is better asset mix. The overall balance sheet structure will not change significantly. When we say we have 80-20, like 80% secured public sector lending, then 20% unsecured, that's going to be the same mix in the future. The only difference, if you look at the front book NIM, the asset mix is healthier in terms of NIM improvement, mainly driven by consumer lending and the credit card business that we acquired, obviously, last year. And the third element is the deposit hedge roll, which is more a technical effect given the duration of our structural hedge that is on the long tail 10 years rolling or 5 years effective. And that effect is coming through now in '26, '27 and '28. I hope that helps. Operator: Your next question comes from the line of Hugo Cruz from KBW. Hugo Moniz Marques Da Cruz: So yes, could you give a little bit more detail on those NII dynamics? So where do you expect loan growth to -- I mean, you said it was a bit in line with the current trends. But if you could kind of give us a bit more granular expectations of loan growth by country or by key products? And also, can you quantify the benefit from the deposit hedging in each year, so like kind of where is the kind of the front book yields and size of the portfolio, so we can try to model it, please? And final question on M&A, can you remind us like what is your ROI and EPS accretion thresholds for any deals that you might announce? Anas Abuzaakouk: Okay. Thanks, Hugo. All good questions as well. Let me start with the easy one, the last one. When we do M&A, consistent with the 14 acquisitions that we've done over the past decade, we have the defined return threshold requirement. That for us is kind of our franchise through the cycle return on tangible common equity of over 20%. And I think if you look at prior deals, we've obviously had, I think, really strong performance and outperformed a particular threshold. But you should think of that as kind of the floor. And then when we look at just M&A and just inorganic opportunities more generally, we measure that against potential share buyback. And I think if you look at not that we focus on the share price or valuations that we don't make strategic decisions based off of that. But if you look at where the business is trading on a price to earnings basis, and take a 2-year 4 PE multiple, I think share buybacks are still very attractive. It's a good return for our investors given that we, I think, trade at or slightly below the European bank index in terms of PE multiples. Okay. So that was M&A return thresholds. What was the... Enver Sirucic: Loan trends. Anas Abuzaakouk: So loan trends. More broadly, Hugo, I tried to give some color during the presentation and Enver can add more specifics. But if you look at the different asset classes, so within consumer and SME, the credit card business actually has performed better than we had underwritten after making the acquisition. And that I think that trend will continue in the years to come. That's specific to Germany, but also potentially Austria and adjacent countries, but that's really not in the numbers. Specialty finance which is leasing, in particular, both auto and equipment leasing, I think that's been a positive development as well as our factoring business, and that's a mix of NII and NCI. The mortgages, I'd say, has been from a consumer standpoint or retail and SME standpoint has been probably the one challenged area, not so much because the volume is there, but I made a comment around just overall margins. And when you look at kind of risk-adjusted returns, I think there's certain levels that for us, we think, have become irrational as far as pricing. So we're pretty conservative on that front. I think when you think about overall mortgages. Now that obviously varies between different countries. I think it's more challenged in Austria and Germany. We see good opportunities in the Netherlands and Ireland from a mortgage standpoint. Just to answer your question about specific geographies. And then when you look at the nonretail and SME business, I would say don't have much expectations for us, at least in our planning for corporate lending. Obviously, there's pockets of opportunities but the general comment about credit risk being mispriced really is focused on corporate lending and corporate credit risk. And it just feels like there's an irrational exuberance and a real strong focus on volumes because a lot of capital has been -- what's the right way of saying this? There's been a lot of capital that has been raised across different platforms, public and private. And when you raise that much capital, you're incentivized, I think, to deploy that capital and to grow AUM and that was my comment about decoupling of performance in a lending environment. So that's one where I think we'll just continue to be conservative. Public sector, we see good opportunities. More broadly, not just in Austria but across kind of the core markets that we're in. And then commercial real estate, which is really residential in one form or another. Industrial logistics also to a certain extent, but it's been really focused on residential. That has been robust and we see a good pipeline on the back of a strong fourth quarter. So when you put all of that together, Hugo, that I think, gives you a good perspective and why the team, we feel pretty confident. We usually don't give loan volume targets but this is 1 to 2 points above kind of blended GDP growth in the markets that we're in, which translates to about 3% to 4% loan growth. And hopefully, we'll be able to execute and hopefully even over-deliver. Enver Sirucic: I think there was a question on the contribution of the deposit hedge to the overall NOI and the trends. We try to provide the details on that target page, but probably I would phrase it is -- if you think about 2026, we are saying the NII will grow by more than 6%. And if you want to break it down by asset or loan growth on the one side and the liability side on the other side, I would probably say 2/3 is coming from loan growth and asset margin improvement and 1/3 is coming from the deposit side. So if you like, 2 points around about deposits and 4 points plus is on the asset side. And I would assume a very similar trend for the other years. Obviously, there's always some nuance to that. But directionally, this is the formula for the NII growth in '26 and the other years. Operator: The question comes from the line of Jeremy Sigee from BNP Paribas. Jeremy Sigee: You've got about EUR 0.5 billion surplus capital as of now with the pro forma numbers. Just continuing the discussion about capital deployment and investment opportunities, could you talk about your attitude to -- so I mean, you could already afford to do another Knab or Barclays Germany. But could you talk about your attitude to potentially larger transactions if something came up in the EUR 1 billion, EUR 2 billion range. Would that be manageable? How would you see the risk reward? And what would be your attitude to potential share issuance or other financing options for that? Anas Abuzaakouk: Thanks, Jeremy. Good question. I would say, look, if you look at our history of deals that we've done, 14 acquisitions, right, and that's some portfolios as well. It's ranged from as small as EUR 0.5 billion to as large as almost EUR 20 billion we do not discriminate in terms of size. I would say the one thing that we're probably more sensitive to now given just the position of the franchise is a small deal takes as much time as a large deal. So we have no aversion towards going after larger deals, and that varies in size. I think you mentioned EUR 1 billion to EUR 2 billion in terms of acquisition price. I wouldn't even look at it through that lens. I think from our standpoint, when you look at it through [indiscernible] can we actually create value when we think about what makes BAWAG unique in terms of our culture, our focus on operational excellence, managing the balance sheet, focusing on conservative markets. I think 50% of our balance sheet today is in -- our customer loans is in mortgages. We have a -- how much can you lose as opposed to how much can you make the type mindset when we think about risk management. And all of that kind of factors into our overall decision. And I would say an important intangible element is do we have the bandwidth and I kind of alluded to it during the presentation, which was I think we have a deep bench of senior leaders. We'vd worked together for over a decade. And I think we have the bandwidth to be able to take on larger acquisitions. And given that the 2 acquisitions are largely complete, Knab and Barclays Consumer Bank Europe, I think we have the bandwidth to be able to address larger acquisitions going forward. Was there another question we were seeing? I think that was in the M&A. Jeremy Sigee: Just about also financing. We just have financing as well. I mean, that would imply if it was bigger than the surplus capital so you had to issue some shares as part of the transaction, what would be your attitude to that? Anas Abuzaakouk: Jeremy, we're not averse to issuing shares. But if you look again at the 14 deals that we've done, you saw the 2 deals that we did concurrently the more recent ones, we've self-funded everything. We generate over 400 basis points of gross capital through earnings. As you rightly stated, we have about EUR 0.5 billion. We're talking about making almost EUR 1 billion this year. I mean if you kind of put all this stuff together, I think we're in a really fortunate position where we generate a significant amount of capital that to the extent that we can avoid ever diluting shareholders, that's our default position. Yes, we're not [indiscernible] Operator: The next question comes from the line of Borja Ramirez from Citi. Borja Ramirez Segura: A couple of questions on the NII, please. So the NII guidance includes 6% annual growth includes 4% from the asset side and on the deposit side, if I understood. From the asset side, are you assuming any redeployment of your excess cash into bonds in your target? And then on the deposit side, are you assuming deposit beta remains stable? And also, could you please remind me the notional and the yield of the hedge and the duration, please? Enver Sirucic: So Borja, I think it's easy to answer. Yes, the split is plus 4% and plus 2%, as I mentioned previously. We do not assume any redeployment of the excess cash into bond investments. So that's not in our numbers. We'd like to do, yes, we have a lot of excess cash to deploy. But if you look at the current market trends, we do not expect any widening of the credit spreads at the current stage. I think the other question was around the structure of the deposit hedge, I guess. So 40% of our nonmaturity deposits, so which oscillates between EUR 35 billion and EUR 40 billion. So 40% of that directionally, we put on a structured hedge, which is 10 years rolling monthly. So on average duration, you have 5 years on that part. And that's the main driver then for the NII uptick in the outer years. Operator: Your next question comes from the line of Amit Ranjan. Amit Ranjan: The first one is on the slide on AI, Slide 7. How should we think about the investments versus the savings? Are these gross cost savings initiatives, which are then invested in the business? And at one point, midterm, we should think about some net cost savings from this? Anas Abuzaakouk: Amit, good question. The way you should think about the AI is, look, AI is built into kind of our technological transformation. It's just one component of many components. If you're asking specifically around where is the cost out, it's -- everything is within kind of the mixture of under 33%. And I'd mentioned also like the -- through-the-cycle targets, those are more floors and obviously, hopefully, we look to overdeliver. But for us, AI in terms of like reinvestments, we've continuously made technology investments over the years. It's not a one thing comes out and one thing goes up. We look at it at a macro level in terms of are we making the right technology investments? Are we building up our tech ops capabilities? And I think that's more was my comment around we will always be best-in-class when it comes to operational excellence as well as efficiency, and that's a true competitive advantage. So we don't go into this kind of change the bank, run the bank. These are like the monikers that we just don't look at it that way, so. Amit Ranjan: And just one clarification on the NII, are you using the forward curve for '26 and beyond? Enver Sirucic: Sorry, could you say that again? Anas Abuzaakouk: Are using the forward curve? Enver Sirucic: Yes, we always update the numbers based on the most recent forward curve. Operator: There are no further questions in the queue. I will now hand back to Anas Abuzaakouk for closing remarks. Anas Abuzaakouk: Thank you, operator. Thanks, everyone, for joining this morning. Sorry for the slight delay to get started, but we look forward to catching up with you during first quarter results. Take care, everybody. Have a nice day. Operator: This concludes today's conference. Thank you for participating. You may now disconnect.
Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Acadia Realty Trust Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host for today, Will Delts. Please go ahead. Will Delts: Good afternoon. Thank you for joining us for the fourth quarter 2025 Acadia Realty Trust earnings conference call. My name is Will Delts, and I'm an analyst in our asset management. Before we begin, please be aware that statements made during the call are not historical and may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934. Actual results may differ materially from those indicated by such forward-looking statements due to a variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-Ks and other periodic filings with the SEC. Forward-looking statements speak only as of the date of this call, February 11, 2026. The company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia's earnings press release posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. Once the call becomes open for questions, we ask that you limit your first round to two questions per caller and give everyone the opportunity to participate. You may ask further questions by reinserting yourself into the queue. We'll answer as time permits. Now it's my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks. Ken Bernstein: Thank you, Will. Great job. Welcome, everyone. Our strong fourth quarter results added to an overall strong year with both solid internal and external growth. And this momentum is continuing as we head into 2026. AJ, Reggie, and John will discuss our performance last quarter and our outlook going forward. But before diving into the details, I'd like to take a step back and discuss the key initiatives we put in place over the past few years, and how they have positioned us for not only strong current performance but also for strong long-term growth. A few years ago, after the very painful multiyear headwinds, first from the retail Armageddon, then from COVID and related issues, it became clear that the strong rebound in our portfolio performance was likely more than just a COVID rebound and was setting up for a longer-term positive fundamental shift for retail real estate. As we've discussed on prior calls, these tailwinds benefited most open-air retail, but they have been especially beneficial for the street retail component of our portfolio. And for several reasons. First, the lack of new development of retail real estate for almost a decade has caused the rebalancing of supply and demand and has been a powerful tailwind for all open-air retail. But more importantly, the additional shift by retailers away from a heavy reliance on selling through wholesale and department stores and their recognizing the need for their own physical stores has been an additional important driver of demand. And this increased demand has applied much more to discretionary retail, especially in key must-have corridors. Then second, while the consumer has generally been more resilient than anticipated, the so-called K-shaped economy has meant that tenant demand and tenant performance by discretionary retailers who serve the upper segment of the economy has continued unabated. Thus, the general bias in the equity markets last year to pivot to necessity-based retail following liberation day appears overdone as the street retail portion of our portfolio continued to outperform our other segments. Then third, the structure of street retail leases enables us to capture higher rental growth sooner than in our suburban assets. While increasing market rents are good for all real estate, it is most beneficial that those properties like street retail, that have a combination of stronger contractual growth, fair market value rent resets, and lighter relative CapEx on retenanting. Sooner or later, all retail real estate will benefit from increases in market rents. We just prefer sooner. So as we saw these trends unfolding, we positioned ourselves to capture this growth. As we stated, our goal has been to deliver multiyear NOI growth of 5% and for this growth to hit the bottom line, both in terms of earnings growth and net asset value growth. Consistent with this goal, we have now delivered four consecutive years of same property NOI in excess of 5%. And we want to make sure that we are not only producing strong current results but are positioned to do so for the foreseeable future. We are delivering on this growth goal through several different initiatives or levers. First and foremost, is leasing up a vacancy. Over the past four years, we have increased our economic shop occupancy from approximately 81% at the end of 2021 to over 90% today. And at 90%, still have room to run. Then beyond this lease-up, a second lever is our ability to capture rental growth on our streets from both our pry loose strategy and our fair market value resets. And AJ Levine will discuss the opportunities we're seeing here. Then a third lever will come from the meaningful growth coming out of our redevelopment pipeline, most immediately from our two assets in San Francisco as well as our development on Henderson Avenue in Dallas. John and AJ will also give further color on these needle movers as well. And then finally, to supplement this internal growth and to better ensure that we can continue to deliver our long-term growth goals has been our external growth initiatives. For our on-balance sheet REIT acquisitions, our focus here has been primarily on street retail investments where we can benefit from building operating scale on must-have streets. While we have found the benefits of scale on the suburban side of our business to be somewhat elusive, we are seeing the benefits more clearly through owning multiple stores on given key streets where we are able to better both curate a street and then drive incremental growth. We saw this playing out on several of our existing corridors such as Armitage Avenue in Chicago and M Street in Georgetown. And this gave us the conviction to focus our future street retail investments on those corridors where we can own enough concentration to create benefits of scale. So we doubled our ownership stake in Georgetown and DC, and now control nearly 50% of the street retail in this key corridor. And last year, delivered in excess of 10% NOI growth. We also doubled down in Williamsburg, Brooklyn investing approximately $160 million by adding 10 storefronts on North 6th Street. We also doubled down on Green Street and Soho investing over $80 million. And we more than doubled down on Henderson Avenue in Dallas, where we will be increasing our investment there by almost $200 million by adding additional assets and commencing our 170,000 square foot development there. We also expanded into new corridors such as Bleecker Street in the West Village, and just this quarter, Upper Madison Avenue in New York City. All told, over the past twenty-four months between our street acquisitions and planned investments into Henderson Avenue, we have invested about $700 million. And all of these investments are with a view towards further recognizing the benefits of scale and extending our long-term growth goals well into the future. And while the benefits of scale are important on a corridor-by-corridor basis, they also benefit our overall as we are well on our way to being the premier owner-operator of street retail in the United States. Then complementing the street retail side of our business is our investment management platform. For as long as Acadia has been in business, we have leveraged our institutional capital relationships to pursue alternative and complementary investment opportunities. More recently, our investment management model has shifted from running single traditional closed-end funds into multiple JV channels, and as Reggie Livingston will walk through, including our most recent activity, we have successfully executed over $800 million in JV acquisitions over the past twenty-four months. Big picture, we have been deploying our capital using a barbell approach. On one side, our on-balance sheet activity has been focused on high-growth street retail, well-suited to long-term ownership. And then for our investment management platform, we are focusing for this buy, fix, sell side of our business on opportunistic and higher-yielding investments. So to conclude, the internal and external opportunities we see provide a clear line of sight into providing multi-year top-line growth of 5% and having that growth drop to the bottom line. Then with ample balance sheet capacity, we're in a position to capitalize on the exciting opportunities that we have in front of us. With that, I'd like to thank the team for their hard work last quarter and last year, and I'll hand the call over to AJ Levine. AJ Levine: Great. Thanks, Ken. Good morning, everyone. Before I dive into the quarter, I'd like to take a minute to highlight another record year of leasing for us in 2025. Driven largely by the trends that Ken mentioned, most notably retailers' increased focus on DTC and the remarkable strength of the high-end consumer, our tenants invested in both new and existing stores with confidence and at an accelerated pace. That momentum remained consistent throughout the year and shows no signs of slowing as we look ahead to the balance of 2026 and beyond. Over the course of 2025, with a focus on Pralose opportunities and thoughtful curation, we leaned into our growing scale to add several new and exciting brands while also expanding relationships with some of our most dynamic highest-performing tenants. Notable additions would include TNT Grocery and LA Fitness Club Studio in San Francisco, Google and Swarovski on M Street in DC, Richemont's Watchfinder and Veronica Beard in Soho, Rag and Bone on Henderson Avenue in Dallas, UGG on North 6th Street in Williamsburg, and most recently, an expansion and extension of The Row on Melrose Place in Los Angeles. In addition to curation, 2025 was also a year of unlocking the outsized rent growth we've seen across our streets over the last several years. Through a combination of lease-up, Pralose, and fair market resets, the team consistently delivered spreads in excess of 50% on our streets. 2025 is also a banner year for tenant performance and sales growth across our dance contemporary, aspirational, and specialty street tenants. Year-over-year sales on our streets ranged from 10% to as high as 30% to 40% in some markets. As we've said, tenant performance remains the most important indicator of future rent growth. And where sales go, rents inevitably follow. And we expect that the last several years of outsized sales growth on our streets will continue to translate through to outsized mark-to-markets in the coming years. But given where occupancy cost ratios are on our streets today, even if that growth were to moderate, our tenants and our markets would remain healthy. Now turning to the quarter. In Q4, we signed another $3.5 million of ABR with nearly 75% coming from high-growth markets, including Melrose Place, Williamsburg, Newberry Street, and Henderson Avenue in Dallas. Highlights included the addition of UGG and one of our more recent acquisitions on North 6th Street in Williamsburg, replacing Lululemon, which we successfully relocated and expanded elsewhere on the street. Because of our scale on North 6th, we were able to add UGG at an unreported 72% spread, while also retaining an important tenant in Lululemon. While that spread was not included in our release, it's another strong data point indicative of what we're seeing across the Street portfolio. Similarly, during the quarter, we signed a new lease on Newbury Street at a 58% spread and on Melrose Place at a 60% spread. And as is typical for street leases, all of these deals included the added benefits of 3% annual contractual growth and fair market resets. Beyond signing new leases, we continue to create value through our PryLoose and mark-to-market strategy. As a byproduct of the sales growth we've highlighted, tenants are increasingly reinvesting in existing stores, especially in must-have markets like Soho, Gold Coast Chicago, and Melrose Place. In many cases, tenants are approaching us several years ahead of lease expiration for additional term, which allows us to secure these tenants long-term and recast those leases to market. For example, in January, a tenant of ours in Soho was planning a substantial reinvestment in their store but had just two years of term remaining. In exchange for extending the lease today, we were able to immediately reset the rent to market, effectively pulling forward mark-to-market by two years and achieving a 51% spread. This transaction alone contributed close to half a penny of FFO. But the PryLoose and Blend and Extend strategy is not just about accelerating mark-to-market. It is also a critical component of portfolio maintenance and risk management. In many cases, it allows us to upgrade credit merchandising. While in other cases, including this one in SoHo, it allows us to lock in credit long-term, helping mitigate any potential short-term market volatility. In that sense, the strategy is both proactive and defensive. Looking ahead, we've identified additional Pralus and early extension opportunities across Soho, M Street, Armitage Avenue, Henderson Avenue, Bleecker Street, and Williamsburg. While we still have a healthy amount of lease-up ahead of us on our streets, we also expect to continue mining the portfolio and capturing outsized rent growth while setting the portfolio up for long-term success. Now looking ahead to 2026 and beyond, tenant demand appears to be accelerating. And our pipeline of leases in advanced negotiation currently exceeds $9 million, up roughly $1 million from last quarter, with the majority of that future growth coming from our streets. And finally, in terms of markets in the earlier stages of recovery, we continue to be encouraged by the interest and the activity we're seeing in San Francisco. John will walk through the economic impact of our progress in the city, but over the past year, we've signed 90,000 square feet of leases at 555 9th Street and City Center that currently sit in our S and O pipeline. At both assets, we saw the elimination of formula retail restrictions, which will help these retailers and future tenants get open faster and with fewer obstacles. So with the wind in our backs picking up, and a pro-business administration in office, we expect continued progress in San Francisco, and we are in active negotiations on several more high-impact deals that we look forward to discussing in the coming months. So overall, we remain very encouraged by the trends and the performance we've seen over the past year. And as we look forward, we see clear indications that this momentum will continue. I want to thank the entire team for their hard work and focus throughout the year. And with that, turn things over to Reggie. Reggie Livingston: Thanks, AJ. Good morning, everyone. As noted in our earnings release, our Q4 and to-date acquisition volumes stand at nearly $500 million. And to give our recent growth further context, over the last twenty-four months, we've closed in excess of $1.3 billion of acquisitions, including over $500 million in street retail for our REIT portfolio, and over $800 million in value-add deals for our investment management platform. That volume is certainly a needle mover for a company of our size, but it isn't volume for volume's sake. As Ken mentioned, in our street retail acquisitions, we doubled down in dynamic growth markets and expanded into new markets with those same growth characteristics. And for our investment management platform, we did more volume than any comparable period during our commingle fund business. As we continue to find great assets with strong upside and capitalize them with top-tier institutional partners. By design, our dual platform approach has continued to find ways to profitably grow as our REIT portfolio and our IMP deliver the accretion consistent with our goals of a penny per $200 million. We're excited by how much we've grown, and we see nothing on the horizon that should slow us down. Now diving into specifics of our most recent activity and some 2026 visibility. Last month, we purchased five retail storefronts at 1045 and 1165 Madison Avenue in Manhattan, with tenants such as La Lavo and Todd Snyder. These assets sit within the Upper Madison retail district, which is attracting a new generation of contemporary brands. This influx is driving a rent growth surge, that places the current rents in these assets below market. And further, if we can find accretive opportunities, we plan to add more assets in this corridor to generate the benefits of scale that we've enjoyed in other submarkets. Looking ahead in our street retail business, we continue to see prime opportunities and currently have north of $150 million of deals under agreement that could close in Q1. This pipeline is being driven by sellers who continue to come off the sidelines and our priority position as the first call for many of those sellers. Our reputation as a group that knows how to underwrite and close these transactions is well known throughout our target markets and continues to serve as a competitive advantage. And while that positive reputation has underpinned our street retail growth, it also contributes to us executing the other side of our barbell investment approach. That is finding value-add and opportunistic deals for our IMP. In that platform, alongside our partners at TPG Real Estate, we closed on shops at Skyview, approximately $425 million. The asset is a 550,000 square foot center in Queens, New York with national tenants including Marshalls, Burlington, Uniqlo, and BJ's among others. The investment delivers similar yields to other recent IMP deals, but the population density and trade area spending power is substantially higher here. The asset attracts nearly 12 million annual visitors, which is only poised to increase with the recently improved Hard Rock Hotel and Casino. An $8 billion mixed-use development located a short walk from the asset. Our business plan will continue to drive value through accretive remerchandising and harvesting mark-to-market rents. We're also in advanced stages of recapitalizing Pinewood Square and Avenue at West Cobb with first-class institutional investors. Again, demonstrating another arrow in our quiver. Using our balance sheet to close quickly on IMP assets, while being thoughtful about matching the investment with the right partner. These transactions, along with others we have currently teed up, should make for an active Q1 for the investment management side, so stay tuned. Looking ahead, we anticipate this side of our business will continue to find attractive value-add deals this year, even as the surge of investment interest in retail has made finding such deals frankly harder. But in those competitive environments, our platform has a history of being able to profitably source, analyze, and harvest outsized returns. So in summary, we closed nearly $1 billion of 2025 and to-date acquisitions. That amount includes nearly $400 million in REIT portfolio transactions that resulted in an attractive gap yield in the mid-sixties and five-year CAGR in excess of 5%. And most importantly, these deals across platforms delivered accretion in excess of our 1p per 200 target. And further, we're excited about our 2026 pipeline. While my goal isn't in John's numbers, I'm confident we should be able to deliver volume consistent with our run rate the past two years. And it will deliver the earnings and NAV accretion consistent with our mandate not to mention strong CAGR to complement our internal growth. I want to thank the team for their hard work this quarter. And with that, turn it over to John. John Gottfried: Thanks, Reggie, and good morning. My remarks today will focus on our quarterly results, our 2026 outlook, and then closing with an update on our balance sheet. Our message is clear. We are continuing to see strength across our dual platforms. And with multiple avenues of growth, our team is laser-focused on driving earnings and NAV growth. Starting with our fourth quarter results. We reported same property NOI growth of 6.3% for the quarter and 5.7% for the year. Coming in at the upper end of our guidance, with our street and urban portfolio once again driving our growth. And this top-line growth is hitting our bottom-line earnings. We reported $0.34 a share for the fourth quarter, which included $0.03 of gains from our final sale of Albertsons shares. Just to lay out a clean run rate, once we back out the 3¢ of Albertsons gains and the one-time penny of net real estate tax savings highlighted in our release, we're at 30¢ for the quarter, which is sequentially up an incremental penny from the 29¢ also net of the gains and promotes that we reported in Q3. Additionally, and in line with our goals, we increased the REIT's economic occupancy another 30 basis points to 93.9%. It's also worth highlighting that our street and urban economic occupancies sequentially increased an additional 80 basis points during the fourth quarter and 370 basis points over the course of 2025. But as we've said before, not all occupancy is created equal. With street and urban occupancy at approximately 90%, versus prior peak levels that were in excess of 95%, we continue to see meaningful embedded NOI and earnings growth. I'd now like to highlight a few items from our signed, not open pipeline. First, our pipeline of $8.9 million at December 31 remains elevated with ABR at our share of approximately 4% of in-place rents. And with the incremental leasing opportunities that AJ discussed, we should be able to maintain an opportunity to exceed our current pipeline setting us up for continued growth heading into 2027 and beyond. Substantially, of our $8.9 million pipeline is expected to commence in 2026 with roughly 25% commencing in each of Q1 and Q2. And the remaining portion commencing in the second half of the year heavily weighted towards the fourth quarter. And based on this timing, we expect approximately $4 million of ABR to be reflected in NOI in 2026, with the incremental $4.9 million in 2027. Secondly, in terms of the portion of our pipeline related to our same store pool, we executed $1.5 million of new same store leases fully replacing the $1.5 million of leases that commenced during the quarter. Meaning our ongoing same property growth trajectory remains intact. Third, and as a reminder, our pipeline reflects only incremental ABR, and excludes leases on occupied space. And we have over $1 million of executed leases on spaces currently occupied, which is incremental to the $8.9 million in our pipeline. Now moving on to our guidance. As a reminder and outlined in our release, we have simplified our reporting beginning with our 2026 guidance. And we want to thank both the buy side and sell side for their input and their strong support in making this important change. Our new metric, FFO as adjusted, excludes gains from our investment management business along with any material, noncomparable items that we believe are not reflective of our core operating results. As outlined in our release, we are anticipating 2026 FFO as adjusted between $1.21 and $1.25 and projecting same property NOI growth of 5% to 9%, excluding redevelopments. With our Street anticipated to deliver about 400 basis points of outperformance as compared to our suburban portfolio. I want to start with a few thoughts on our guidance ranges and what factors will determine where we ultimately land. Keeping in mind that $1.4 million currently represents about a penny of FFO, and a 100 basis points of annual safe property NOI growth. And three key factors will determine where we land within these ranges. First, our assumptions regarding rent commencement dates on executed leases. With 4% of our ABR anticipated to commence in 2026, each month of an acceleration or delay as compared to our initial projection equates to approximately $750,000. Second is credit loss. At the midpoint of our guidance, we've assumed approximately 115 basis points against minimum rents, which is in addition to known or specific reserves we have factored in for known tenant issues. And for context, 150 basis points feels fairly conservative relative to the roughly 50 basis points have averaged over the prior two years. And lastly and potentially most impactful, is the pride lose strategy that AJ discussed. While it's not factored into our base case, our active management and leasing teams are actively pruning our portfolio to accelerate these opportunities. And while greater success in these efforts may impact our short-term results, it accelerates our long-term growth and value creation. Also want to hit on a few other items as it relates to our 2026 assumptions. First, alongside our projected 5% to 9% same property NOI growth, we expect total pro rata NOI including redevelopments and investment management, to increase approximately 15% to roughly $230 million at the midpoint compared with the approximately $200 million that we reported in 2025. Secondly, and as outlined in our release, our earnings guidance, including the numbers I the NOI numbers I just mentioned, not factor in any acquisitions or dispositions other than those that we've reported in our release. And as you've heard from Ken and Reggie, we have consistently delivered in excess of $500 million of annual transaction volume we continue to target a penny of FFO accretion incremental gross asset value acquired. Whether it's for the REIT or our I'm business. And finally, I'll close with an update on our balance sheet. With our pro rata debt to EBITDA at about five times, meaningful liquidity on our credit facilities, along with anticipated capital coming back from our investment management and structured finance businesses not only have we fully funded our Henderson development project, our balance sheet has several $100 million of dry powder on call to play offense. Additionally, we do not have any material debt maturities in 2026, and are well hedged against interest rate volatility. And with our weighted average borrowing cost of 4.5%, and five-year unsecured funding, available to us today at similar pricing we do not expect any material interest expense pressure as our debt maturities roll. The course of 2026, we intend to continue working with our capital partners to strategically and accretively refinance and extend duration across our portfolio. As debt markets remain wide open to us, with both the availability of credit and spreads at record lows. So in summary, not only were you projecting strong earnings and NOI growth in 2026, our multiyear goal is to position our portfolio to deliver sustained, 5% growth. And as we look beyond 2026, we have multiple clearly identifiable drivers that position us to achieve just that. And as Ken laid out in his remarks, those drivers include street lease-up and mark-to-market opportunities. We have roughly 500 basis points of embedded street occupancy upside, along with meaningful mark-to-market on expiring leases. And when combined with a 3% contractual rent growth, in our existing street leases, this adds an opportunity for several 100 basis points of incremental growth. Second is our redevelopments. We already have $3.5 million of executed leases in our redevelopment pipeline that we anticipate will come online in late 2026. With the vast majority of it coming from our two redevelopment projects in San Francisco. And as AJ mentioned, leasing momentum in San Francisco continues to build as tenant demand returns. And upon stabilization, inclusive of our S and O pipeline, we estimate these two projects alone will contribute an additional $7 to $9 million of NOI beyond those amounts included in 2026. Translating to approximately 3 to 5¢ of incremental FFO net of the capitalized interest in and retenanting cost. Third is Henderson Avenue. We've discussed on past calls, Henderson is tracking to stabilize in 2027 and 2028, and we continue to anticipate a high single-digit yield on our cost. Which means that upon stabilization, the project is poised to deliver 3 to 5¢ of incremental FFO. And keep in mind, that's just phase one of the project. We already have and will continue to add sites on Henderson Avenue. Which we anticipate quickly become one of our top-performing street retail quarters. And lastly is external growth. With the balance sheet positioned for offense, several $100 million of available capacity, we will remain disciplined but anticipate being highly active on the investment. These are just a few of the key drivers that give us confidence of achieving sustained 5% growth. With opportunity for additional upside on items I haven't even touched on. Whether it's City Point in Brooklyn, lease-up of 840 North Michigan Avenue in Chicago, the pride lose opportunities on our street, or the numerous and accretive redevelopment opportunities embedded throughout our portfolio. At the sake of getting to your questions, I will stop here and turn the call over to the operator for questions. Operator: Thank you. Ladies and gentlemen, to ask to be announced. To withdraw your question, simply press 11 again. As a reminder, please limit yourself to two questions per person. If you have any additional questions, you may reenter the queue if time permits. Please stand by while we compile the candidate roster. Our first question coming from the line of Samir Khanal with Bank of America Securities. Your line is now open. Samir Khanal: Good afternoon, everybody. I guess, Ken or John, I mean, you gave a lot of good details on kind of the acquisition environment, you know, the advanced stages of negotiations you're in. Maybe expand a little bit on kind of the markets and kind of what you're seeing from a pricing perspective. Ken Bernstein: Sure. I'll start it off, and then, Reggie, perhaps you'll add some more color to it. In general, the markets that we are currently active in and that you've seen the acquisitions over the last couple of years, ranging from New York, SoHo, Williamsburg down to DC, continue to be very exciting for us. There are probably a half a dozen other markets that we either have been active in and will continue at and some new markets. In terms of pricing, it's very tricky to talk about going in cap rates because rents have moved. AJ mentioned the mark to market in SoHo of 50%. So if a cap rate would be substantially lower on a lease that you know you have near-term 50% increase than one that is at market. So I'm hesitant to give going in yields other than to say we are still shooting for our overall goal of acquiring assets, that through contractual growth, and periodic fair market value resets mark to market can throw off a 5% CAGR over the next five years. And we're seeing that in the markets we're currently active in. And our retailers are showing us other markets, that makes sense in that same profile as well. Reggie, I don't know if there's anything additional you wanna add. Reggie Livingston: Yeah. I would just say that, you know, we go through a rigorous process, Samir, of looking at potential new markets. Just making sure they have those same growth characteristics of our existing markets, the tight supply, the tenant performance, and work extensively with AJ and his team, as Ken said, to understand what do tenants wanna be? And how can we find the right entry point in those markets? And then is there an opportunity to scale in those markets as we've often talked about the benefits of that scale? So go through a rigorous process with that, and we think there are new markets on the horizon. Samir Khanal: Thank you for that. And then, John, on the assumption for same store NOI growth, I know that 5% to 9%, you talked about sort of the swing factors there. I just want to make sure, is rent commencement and sort of credit loss assumptions sort of the main factors to kind of get you the high end and the low end there, or are you kind of missing on something else? John Gottfried: Yeah. I mean, I think it's a combination of three, Samir, but I would say it's really the piece that I wanted to highlight that I think, you know, as we've been posting and talking about there's a lot of below-market leases on our portfolio. And to the extent we could get those leases out, that's gonna create short-term downtime. Which we haven't filled in, into that, but one, we are actively hoping to do it. So I'd say the other ones could move, you know, 100 basis points here or there. But I think if we do our job and we could accelerate mark-to-markets on this, short-term quarterly downtime that we could get from that, we're gonna take that to get the long-term growth. So I would say that's probably the most impactful of where we land within that range. And we'll update throughout the quarters as to our progress on that. Ken Bernstein: And then under any circumstance, we're still looking at a robust 5% to 9%. Barring significant credit loss or other things, which feels pretty darn good. Operator: Our next question's coming from the line of Craig Mailman with Citi. Your line is now open. Craig Mailman: Hey. Good morning, guys. You know, I don't wanna put words in your mouth, but John, maybe it feels like reading between the lines there's plenty of variables that could, you know, make guidance here a little bit conservative. I'm just trying to figure out, you know, some of the things that AJ talked about on the kind of blend and extends and the pry loose, like, how do you guys go about figuring out what to include in guidance versus what's lower probability? Or maybe another way of asking that is, like, how much of low probability kind of upside could there be that you didn't include in guidance, but maybe relative to the past couple of years, you guys have been able to capture above and beyond that initial projection. John Gottfried: Yeah. Craig, so I think, you know, I think if you've known the way that we put out our guidance, we tend to set realistic goals and we achieve those versus putting in super soft assumptions that we would miraculously be the next quarter. So I'll just start with that, that philosophy is unchanged. What I'll say has changed is the environment that we're in. So in terms of, you know, we are not going to, as much as I trust AJ, if he tells me he's gonna get a 50% spread and open that lease in two weeks, I am absolutely not going to put that in our guidance. So I think if there's things that are not within our control, we're not gonna layer that assumption in there. I do think our credit is conservative as I put in my remarks. It's double what we needed in the prior two years. And we've also pulled out known specific or so I think to the extent we had a tenant struggling, so think, you know, we have one a single container store. You should assume that is not included in our guidance. So think there is a bit of conservatism there. But I think where we, I will say we have a lot of conservatism is on the active on the investment side. Several $100 million of forward equity. Reggie talked about the pipeline. And we're gonna be busy there. So I think that's where the upside is. The other thing is can add a penny or 2 here or there. But I think it's really our upside is gonna be from the external growth in '26. Some of the drivers for '27 and beyond, there's a lot of upside in those, which I tried to articulate, you know, with that setup going beyond this the current year. Ken Bernstein: And that just to reinforce that, whether it's pry loose, fair market value resets, or other drivers, it will probably have less of a needle-moving impact this year in '26 and more set us up stronger '27 and '28, which is how we're really thinking about this. We like how our numbers are stacking up for the foreseeable future, we wanna make sure we're continuing to extend that. Craig Mailman: That makes sense. That's helpful. And I apologize. My line was breaking in and out. Reggie, did I hear you say $500 million of kind of a near-term deal pipeline and is that correct? Reggie Livingston: I'm saying that the $150 million under agreement. But we feel confident we can always do the run rate that we've done the past two years with half of it IMP and half of it street. Ken Bernstein: And that's where the 500? Would come in? Yep. Craig Mailman: So is it another I sorry to belabor. But you guys already did the $4.25 through Skyview. Like, do you view that as your 20% So the $1.50 that Reggie's referring to is on balance sheet, 100% owned street retail assets. Reggie Livingston: New and not discussed. Craig Mailman: Yes. Until right now. Ken Bernstein: Okay. And what do you think timing on that could be? Reggie Livingston: Q1. Let's stay tuned. Craig Mailman: Okay. Great. Thank you. Operator: Our next question coming from the line of Linda Tsai with Jefferies. Your line is now open. Linda Tsai: Hi. Good morning. Any thoughts on where the 90% street occupancy could end by year-end? John Gottfried: Yeah. So I think, Linda, again, what I would say is that I look more in terms of NOI than on occupancy. So, you know, we have a single location in Soho. That's gonna have a far greater impact than, you know, a location that we have elsewhere in our portfolio. So the percentage I will say, is less relevant. But, you know, what I would say, you know, our goal continues to be is that we wanna get to that 95%. Know, call that within eighteen months. Linda Tsai: Thanks. And just one question for Ken. Any high-level color on how tariffs might have shown up in retailer results in 2025? Either from a sales or margin perspective, and how this might change in '26? Ken Bernstein: So I've had a variety of those conversations with as many of the retailers that we have in our portfolio that we meet with regularly. And the first answer is it's somewhat varied retailer by retailer. The general takeaway would be most of our retailers believe that they have navigated through the toughest parts of that storm. Now, obviously, things seem to change every day. And we would all welcome more predictability. But it feels first and foremost that the most difficult parts of that are in the rearview mirror. Secondly, and probably the most important to us, on the street retail side, this is a little different on our mass merchant side, but for our street retailers, they've been able to adequately navigate around tariffs and hold on to margins defined from our perspective. Such that the traditional rent-to-sales ratios that we have always talked about, whether it's 8% for a restaurant or 12% for certain advanced contemporary and 18% for others. Those ratios are holding. And thus, and this is important, as sales increase, whether it's due to slightly stronger inflation or strong consumer, consistent consumer demand, as you see top-line sales grow, you should expect retailers' ability to pay that increased rent has remained very similar today to where it was five, ten years ago. There's not been that shift of margin pressure resulting in any kind of pushback in terms of our rent requests. Our retailers are opening these stores. They're profitable. And while they always want to pay less rent, they are not looking to or blaming the noise around tariffs as the gating issue. Operator: Thank you. Our next question coming from the line of Todd Thomas with KeyBanc Capital Markets. Your line is now open. Todd Thomas: Hi. Thanks. Good morning. I wanted to just go back to the acquisitions. And the pipeline, you know, the, I guess, really the $150 million that the company's been awarded and maybe perhaps a little bit more broadly, you think about investments during the year. You've been active in New York more recently. And Ken, you mentioned there could be some new markets. But is the opportunity set that you're seeing in New York on a risk-adjusted basis just most favorable today? How should we think about future investment activity in the markets that you're sort of focusing on or, you know, readying to deploy capital on more near term here? Ken Bernstein: Yeah. So let me start and Reg then chime in. New York is probably a more competitive market. So where we can find deals, often they are more often than not off-market and New York will continue to do those, but you should expect to see us go into other established markets, established meaning obvious that our retailers are there and want to be there as long as we can have a view that there can be follow-on deals such that we can build scale. And we have built a nice portfolio in New York, continue to plan on adding to it. But my expectation is other markets will kick in as well. Reg, anything you wanna add to that? Reggie Livingston: Yeah. I would just say with the competition you alluded to, there's certainly more competition. But I would say not too long ago, the issue was bringing sellers for street retail, bringing them off the sidelines to decide whether they wanted to sell or not. A lot of them, because of the retail fundamentals, they've decided to sell, and so now we're just in competition with others, and I'd like that back pattern for us because it usually goes to those who have the reputation, have the capitalization, have the experience. And we feel we do well in that environment. Todd Thomas: Okay. And then, you know, Ken, you didn't mention Chicago. When you were discussing markets that remain exciting. And you just listed a couple. But how are you thinking about Chicago today in terms of both capital deployment for newer deals and also as a potential opportunity to maybe recycle capital out of? Ken Bernstein: Yeah. So let's first start with fundamentals because I think Chicago has until recently been getting a bum rap. And if you look at our metrics, if you look at our rental growth, especially on our major markets, whether it's the Gold Coast or Armitage Avenue, one of our tenants is paying percentage rent on State Street. That's fantastic. And it puts that store in one of the top of their chain. So in general, the fundamentals have recovered pretty darn strong. And that's good and encouraging to us. That being said, we still have too much ownership in Chicago relative to the rest of our portfolio. And it would make sense over the next year or two as we lease up assets. If they are not part of our scale strategy on a given corridor, it would make sense for us to prune. A goal of ours, we'll see if we can get there, is over the next two to three years, to get Chicago to that right balance which would mean even though we do periodically see some good acquisition opportunities, and even though we have seen some really strong rental growth, we don't intend to add, and we probably will, subtract in Chicago in due course. But thank goodness we did not fire sales stuff because the rent spreads and new tenant demand, the deals we've done, whether it would be Mango or KIF, thank goodness we didn't exit before those. But we recognize the rebalancing. Operator: Thank you. Our next question coming from the line of Michael Mueller with JPMorgan. Your line is now open. Michael Mueller: Yeah. Hi. I guess, first of all, I think you made a comment you'd like to be at 95% street occupancy in the next eighteen months. Is a lease number or an occupied number? And how should we think about, you know, ballpark blended rent per square foot for that 500 basis points? At least a range. John Gottfried: Yeah. So, Mike, I would say that it would be when we say least, to give us some room. Upside to have it occupied and paying. Then in terms and Mike, you know, we've had this conversation a bunch of times. It's going to absolutely matter what within that 95% we get leased up. So, for example, we could look through our portfolio. We have a single location in Soho. That is going to be in the, you know, that's going to be a very large lease, which will have a big economic impact and a relatively small impact on the occupancy. So it's really, and I know it makes it challenging in your seat, but to put a blanket number on every 100 basis points equals x, it is really it really is case by case. But what I would say is that stepping back, is several 100 basis points of NOI growth. And several cents of bottom-line FFO growth. Michael Mueller: Got it. Okay. And then for the second question, I guess, just looking across the portfolio, and I was thinking about the Madison Avenue investments, but just generally speaking, is there, like, a cap to a level of single store investment that you would make? You know, like, is it $5 million, $50 million, $100 million? Like, what should we be thinking up there? What sort of guidelines for that? Ken Bernstein: Yeah. Generally, for the streets that we're active in or most active in, it's more how small an add-on deal are we willing to do. And you see periodically, we'll do some small bolt-ons on Armitage Avenue. On the too large, you're really talking about 5th Avenue boxes, and we have been hesitant to jump into that because the outcome or the volatility of a very large single tenant acquisition and we lived out on North Michigan Avenue, the volatility is at least for a company of our size at this time, something we've always been cautious about. Worry more about us doing too many small deals than us biting one big chunky single asset deal if you're talking about a single building. If you're talking about buying a corridor and putting several 100 millions of dollars to work quickly that we would do all day long. Operator: Thank you. Our next question coming from the line of Floris van Dijkum with Ladenburg Thalmann. Line is now open. Floris van Dijkum: Hey. Thanks, guys, for taking my question. Wanted to touch on the acquisition pipeline a little bit more. I think, Reggie, you indicated it was $150 million of transactions under agreement right now. Can you give us a percentage of what is New York versus other markets? Reggie Livingston: Well, without getting too far ahead, I would say that those are the other markets. That fall into the other markets category. Floris van Dijkum: Got it. Okay. So the $150 under agreement would typically be outside of New York then? Is that the right way to interpret that? Reggie Livingston: Correct. Floris van Dijkum: And then, you know, one of the other things that we've seen happen in SOHO in particular, I think with Ralph Lauren and with IKEA. Buying, you know, retailers buying their own store. Are you seeing competition for transactions from retailers themselves and or have retailers indicated, you know, a desire maybe to purchase a store from your portfolio? Ken Bernstein: Hold on. I'll take that one. So, so far, and, AJ, correct me if I'm wrong. It's very rare that retailers, well, one or two have come to us. But usually, if retailers as competition, they're fairly too very selective. We tend not to, when we're working on deals, have a retailer be our competition. But I think, again, it speaks to the commitment that retailers are willing to make to these corridors. And in general, I find it encouraging. That being said, if I find we're bidding against one and we lose, then I'll be pissed. So, stay tuned. Operator: Thank you. And I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Bernstein for any closing remarks. Ken Bernstein: Great. Well, thank you all for the time, and we look forward to speaking to you next quarter. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Good morning. My name is Hillary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Am�rica M�vil Fourth Quarter 2025 Conference Call. [Operator Instructions] Thank you. I will now turn the call over to Ms. Daniela Lecuona, Head of Investor Relations. Please go ahead. Daniela Lecuona: Thank you so much. Good morning, everyone. Thank you for joining us today to discuss our fourth quarter results. We have today on the line Mr. Daniel Hajj, CEO; Mr. Oscar Von Hauske, COO; and Mr. Carlos Garcia Moreno, CFO. Thank you for joining. Daniel Hajj Aboumrad: Thank you, Daniela. Welcome, everybody, to Am�rica M�vil Fourth Quarter 2025 report. Carlos is going to make us a summary of the results. Carlos? Carlos Jose Garcia Moreno Elizondo: Thank you, Daniel. Good morning, everyone. Well, the U.S. government shutdown in effect through the middle of the fourth quarter ended up rising uncertainty about the state of economic activity in the U.S. Not only did it have a direct impact on employment, but on account of the shutdown, several economic indicators generated by government agencies failed to be released at all. On December 10, less than a month after the shutdown ended and with still incomplete economic data, the Fed reduced the policy rate by 25 basis points in the absence of strong inflation pressures and the appearance of a softening economy. The dollar depreciated versus practically all the currencies in our region of operations in the quarter, except for the Brazilian real, the Argentinian peso, but it declined 2.3% versus the Mexican peso, 3.7% versus the Colombian peso and 5.7% versus the Chilean peso, remaining practically flat versus the euro in the quarter. Well, we added 2.5 million wireless subscribers in the quarter, 2.8 million postpaid net gains and 298,000 prepaid losses and ended up December with 331 million wireless subscribers. Our postpaid base was up 8.4% year-on-year. Brazil led the way in terms of postpaid net adds with 644,000 subscribers, followed by Colombia with 276,000, Peru with 148,000 and Mexico with 135,000 postpaid subscribers. Now in the prepaid segment, Mexico contributed 197,000 new subscribers; Argentina, 226,000; and Colombia 224,000, whereas in Brazil and Chile, we had prepaid losses of 381,000 and 315,000 subscribers, respectively. In the fixed line segment, we connected 524,000 broadband accesses, 84,000 in Mexico, 113,000 in Brazil, 57,000 in Argentina and 49,000 in Colombia. PayTV posted a good performance, adding 77,000 units. We disconnected 79,000 voice lines -- land lines. Our access lines exceeded 410 million at the end of December: 331 million were wireless subscribers, 79 million were fixed line RGUs. The growth of our mobile postpaid base and our broadband accesses, which you can see in the chart, our most dynamic business lines have been accelerated over the last quarters with that of postpaid reaching an 8.4% year-on-year increase and broadband access is expanding 5.6%. So these are some of our highest access growth rates in years. Fourth quarter revenue rose 3.4% in Mexican peso terms from a year ago to MXN 245 billion. They were up 6.2% at constant exchange rates with service revenue expanding 5.3%. The difference between the rate of growth in nominal terms versus that at constant exchange rates mainly reflects the 9.6% appreciation relative to the year earlier quarter of the Mexican peso versus the U.S. dollar. The apparent deceleration of service revenue growth, which extends to most revenue categories, stems from the incorporation of our Chilean operation from November 2024. EBITDA was up 4.2% in Mexican peso terms to MXN 95 billion, and it was up 6.9% at constant exchange rates in the year earlier quarter. As was the case over several quarters in 2022, 2024, EBITDA expanded more rapidly than revenue on greater operating leverage. Mobile service revenue growth remained strong at 6.2%, supported by postpaid revenue that was up 7.6%. Prepaid revenue growth maintained the pace in the prior quarter, which was the fastest in at least 5 quarters and with the exceptional developments here in Mexico. As you can see in the next chart, with Mexico accelerating from 2.8% to 3.8% on the back of a strong recovery of private consumption in the country. Fixed line service revenue was up 3.6% year-over-year with fixed broadband revenue increasing 6.4%. The non-Chilean operations were growing faster over the last couple of quarters, which you can see in the dotted green line. Mexico performed well with broadband revenue growth rising from 2% to really 4%. Our operating profit totaled MXN 49 billion. It was up 5.9% in nominal terms and 8.3% at constant exchange rates. While our comprehensive financing costs were roughly half those of the year earlier quarter, this resulted in a net profit of MXN 19 billion in the quarter, which was 4x larger than that of a year before. It was equivalent to MXN 0.32 per share or $0.35 per ADR. Our operating cash flow for the year 2025 came in at MXN 213 billion after deducting from our EBITDA after leases, MXN 16 billion increase in working capital and MXN 82 billion in interest payments and taxes. After CapEx in the amount of MXN 131 billion, we were left with a free cash flow of MXN 82 billion. The latter figure represents a nearly 40% year-on-year increase in our free cash flow. Shareholder distributions reached MXN 45 billion, including MXN 12 billion in share buybacks, even as we reduced our net debt in cash flow terms by MXN 20 billion. At the end of the year, our net debt to EBITDA after leases ratio stood at 1.52x and was on a downward trend. So with this, I will pass the floor back to Daniel Hajj, and we will begin the Q&A session. Thank you. Daniel Hajj Aboumrad: Thank you, Carlos. We can start with the Q&A session. Operator: [Operator Instructions] Your first question comes from Marcelo Santos at JPMorgan. Marcelo Santos: I wanted to inquire about the CapEx outlook for 2026 and coming years. Could you please provide us with an updated view? Daniel Hajj Aboumrad: Marcelo, what we have been doing is that what we think we are not -- still we're not finalizing the CapEx for this year. But our target is to be around 14% to 15% revenues. That is what we have been saying and it's what we're going to do. That's maybe around $6.8 billion to $7 billion. That's what I mean, and that's what we're targeting to do. So we are going to be in those range. We still does not finalize all the countries, but we're looking to have around that number. Marcelo Santos: Okay. As a follow-up, going forward, is it reasonable to assume a similar percentage of revenues for the coming years? I know you have not finalized, but just conceptually, does it make sense? Daniel Hajj Aboumrad: Yes, this is what we think. The next 3 years, let's say, 2, 3 years, yes, we can assume that we can have between 14% to 15%, MXN 7 billion, MXN 6.8 billion, MXN 7.1 billion, depending on spectrum, depending on a lot of things that are coming, but that's more or less what we're thinking. Operator: Your next question comes from Rog�rio Ara�jo. Andre Salles: I have one on, there is a line called pretax nonoperating expenses. It came at MXN 7.9 billion this quarter. This is well above the quarterly average of MXN 700 million in the past couple of years. So could you please remind what anchors exactly in this line? What did impact it this quarter? And also what to expect going forward? Daniel Hajj Aboumrad: In which line you said? Carlos Jose Garcia Moreno Elizondo: In nonoperating expenses... Rogério Araújo: It's within financial results, it's called other pretax nonoperating expenses. Daniel Hajj Aboumrad: The other financial expenses. We don't have it right now, but if you can talk to Daniela, we can give you the detail on what was the difference between the 4.9% to 7.8% this year -- this quarter. Rogério Araújo: Okay. No worries. I will. Can I follow up with another question as there was no answer on this one? Daniel Hajj Aboumrad: Yes, please. Rogério Araújo: Okay. Could you comment on Telefonica's announced sale of its operations in Chile, why Am�rica M�vil and Entel ended up stepping out of the deal and any early expectation of the expected competitive environment in the country with Millicom and French buying these assets? If you could also comment on potential consolidation movements across Latin America as well, if there is anything active, and expectations for consolidation in the near future? Anything you can share would be great. Daniel Hajj Aboumrad: Well, you know that we were going together with Entel to do a bid for Telefonica. We review and we decide not -- in Am�rica M�vil, we decide no go -- finalize and don't go together with Entel. So that's -- I think then I don't know if Entel decides to go alone or not. Then it was one. The other one that I heard that it was interested and then Millicom. Finally, Millicom is the one who win. I think we still have a lot of things to do in our company inside Chile. We are doing okay. We're gaining revenues. We're gaining market share. We are doing all the investments that we need, all the synergies that we need. So we still think that we're going to be a very strong and good competitor in Chile. For us, it doesn't change a lot because we're changing as a competitor landscape, it will be very good to consolidate the market. But at the end of the day, Millicom is a new entrant. So it doesn't change anything having Telefonica and to change to Millicom. Let's see. I hope that in the future, we can consolidate the market in Chile, not only in the wireless, also in the fixed. And let's see, Chile will be important to be consolidated. For us, why we were out, it was going to be a little bit complex because regulation, the split of the company, high leverage of the company, a lot of things that was going to be difficult to decide between ENTEL and us and then the value of Telefonica. So it was not an easy deal, and that's why we decided to quit and to stay where we are. But I think it's that Chile is a difficult market. Of course, it's a difficult market, but we are preparing and we're making all the investments and that we need to do to be competitive there. And as I said, hope that in the future, the market in Chile can consolidate. Operator: Your next question comes from Gustavo Farias from UBS. Gustavo Farias: I'd like to hear some thoughts on capital allocation. So given the strong growth in free cash flow, and we also saw a slowdown in share buybacks lately. So how are you thinking about capital allocation going forward? Daniel Hajj Aboumrad: Well, I think as -- Carlos said 2 things, we do very good growth in the free cash flow. We grow around 40% in the free cash flow. But he also said that we -- the target that we have, and always, we're saying that the target on debt-to-EBITDA will be around 1.3 to 1.5x debt to EBITDA. So we are a little bit above. So well, when you said we are reducing, I don't know if you are saying we are reducing in 2026 or will reduce from 2025. But it's important. We have a target on leverage, and we want to be on our target. So that's one thing. So the excess and the cash flow that we have, we're going to put it on reducing debt. Second, we have some M&A, as we said, we used to have Telefonica in Chile. We are not there, but we still have Desktop in Brazil. And we want to be financially healthy because we are not looking on M&A in other regions or material ones. No, we're not doing and looking on anything on that. But in our region where we operate, I think there's going to be consolidation in the market, and we want to be prepared to consolidate, let's say, small companies or fiber, small fiber companies. So there will be a lot of things. The competitive landscape in Latin America is changing. We're having new competitors. Small ones are getting out. I hope -- new ones coming. So there's going to be a lot of things through the next year or 2 years. And we want to be prepared. We want to be healthy, and we want to be on target, okay? Because as we said, the target is 1.3x to 1.5x. We are a little bit slightly above on that. So what we want is to be on target and use the cash flow for that and also to return for the shareholders and will be on buybacks and dividends. So that's mainly what we are going to do on the free cash flow that we have, nothing else. And as I said, we don't have or we are not looking on going to other countries -- outside of our region to do material things, no, because I read something this morning. So we are not thinking on doing nothing on that, only to be prepared to have opportunities. I think we're going to have some opportunities in the region that we have. That's what we have. So reducing debt and more opportunities. Carlos Jose Garcia Moreno Elizondo: Sorry, just to follow up on what Daniel has said, it's important to note that we, at the end of the quarter, we're still at a little bit marginally higher than the 1.5x net debt-to-EBITDA ratio that we have as our upper limit, even though we paid down debt by MXN 20 billion, okay, a bit more than $1 billion throughout the year. So we did devote some small amount of cash to a reduction of debt to remain within the limits that we have told the market, guided the market for the last 5 years. I mean these are not new limits. Gustavo Farias: Yes. Very clear. Just a quick follow-up, if I may. So considering what you just said and considering that the consolidation in Chile is now out of the table. Is it fair to assume that any, let's say, cash flow that would be directed to M&A in Chile is now redirected towards deleveraging? Daniel Hajj Aboumrad: Towards what? Daniela Lecuona: [indiscernible] Daniel Hajj Aboumrad: Well, as we said -- yes, for -- if we don't have anything else in M&A, of course, we're going to do through leverage. And if we have an opportunity, then we're going to do something there. So that's -- we don't have something. We are looking for a lot of things, small things in Latin America where we are. And if not, then we're going to do leverage and be in the lower range of our target to be prepared for opportunities. That's what we have. Operator: [Operator Instructions] Our next question comes from Cesar Medina at Morgan Stanley. Cesar Medina: How should we think of the impact of FX on your overall results? And I'm asking because the Mexican peso strength is very visible and you're exposed to different currencies and your CapEx and debt also has sort of hard currency exposure. In net, how should we think of the impact on the cash flow? Carlos Jose Garcia Moreno Elizondo: I think, as you say, this is a company that has many operating exchange rates in our revenue. And then we also have very different exchange rates on our debt. So what we were talking about a little while ago in terms of the leverage ratio, that's something that tends to move both because the EBITDA flows move in terms of, say, if you measure them in dollars or pesos, whatever. But also the net debt itself also moves a lot in terms of dollars or peso precisely because we have all of these currencies. So yes, it becomes a bit complex to manage these issues. And that's why we always highlight here in the report how we are doing at constant exchange rates because we need to take out all of the noise that is created by the exchange rates. But yes, I think net-net, I think that we have a clear idea of how we manage the company. I think in terms of financial exposure, we manage our exposure to currencies. So we really have exposure only to 3 currencies for the most part, 3, 4 currencies. And in terms of the operating cash flows, well, that obviously has to do with -- there's nothing we do in that respect. There's nothing that we do in terms of hedging cash flows. That's something that just comes up as cities. And this is why for us, it's always -- going back to what we were saying in the prior question, we need to balance the -- on the one hand, the desire to do distributions, share buybacks and also the need to adjust our leverage ratio by paying down some debt. And again, this is something that we cannot predict exactly from the beginning because it has to do a lot with where the exchange rates are. And you can see them as noise at some point, but also they are a reality. They are there. I mean we are going to be measuring our net debt to EBITDA, which we measure with the rating agencies, that we measure with you every time that we publicly report, well, we need to be consistent with what we are doing. So balancing share buybacks, balancing CapEx, balancing the net leverage that we have. That's... Daniel Hajj Aboumrad: Exactly what Carlos is saying is a balance, a balance between the capital allocation. It will be reducing our leverage, returning to the shareholders via buybacks or dividends and be healthy to be prepared if there's something in our regions that will come as an opportunity. So these 3 things we're going to balance through all this year to be okay. So that's mainly what we're talking on the capital allocation. Operator: Your next question comes from Alejandro Azar from GBM Alejandro Azar Wabi: This is just on the consolidation that we are seeing all over Latin America, Colombia, Chile, Brazil, there's even rumors on fixed players in Mexico being interested in AT&T. So my question is, how do you see the regulatory environment for AMX as it seems that we are moving to a tighter market with 2, 3 players. Do you think we should see in 5 years, 10 years, less regulatory or less asymmetric regulation where AMX currently has one? Daniel Hajj Aboumrad: Well, the only place where we have asymmetric regulation is in Mexico, all the other places, we don't have any, let's say, asymmetric regulation in all the other 20 countries that we operate, we don't have any asymmetric regulation. It's only in Mexico. What -- your question is how I see in 3, 4 years is exactly what we're saying. I see more consolidation in all these markets. And I think it's going to be good for the business to consolidate more or less. I think like not only in mobile, but in fixed, maybe 5 years or 6 years ago, there's a lot of companies putting fiber, giving the in a lot of countries, fiber plus very aggressive promotions. I'm not seeing any more these companies putting fiber. There are still companies that they are doing, more competitors, but no new ones doing that. So they are seeing that the business, it's not as easy as it looks. And so we don't -- we are not seeing new competitors, let's say, in terms of fiber. Then the other ones, maybe they are going to consolidate between them or they are going to consolidate with other ones. So there's going to be a new landscape in Latin America, and I think that's going to be good for us and for all the people who are staying here that's staying in Latin America. In Mexico, what you say rumors about AT&T? Well, they are rumors. The only thing that I can say is that AT&T is a very strong competitor. And if they sell to other ones, there are going to be also strong competitors. So nothing to say. So what we need is to do our job to to have the best 5G network, the best quality, customer care, everything systems, IT, AI and to do everything that we are doing, all the investments that we need to do to compete against or still AT&T here or if they sell to the other one. So we -- that's what -- exactly what I said in Chile. In Chile, we used to have a Telefonica competitor. Today, it's not going to be Telefonica. It's a pity that we cannot consolidate this market because this market will be good to consolidate, but it's going to stay more or less the same with 4 competitors in mobile and the same in fixed. So let's see and see if in the future, we can consolidate that market. So that's what -- yes. Carlos Jose Garcia Moreno Elizondo: Alejandro, as Daniel is saying, I mean, I do believe that you can see that there's very much of a wave of consolidation happening in the world. You look at Europe, there used to be many more players in each one of the countries, there's been a reduction. And this basically has to do with the dynamics of the industry. This industry requires scale to get the returns for the investment. And when you have a very fragmented market, there's no returns and no investment. And typically, players end up probably not in the best of shapes. So I think that this is an issue that is more and more taken into account by regulators and generally governments worldwide. Operator: Your next question comes from Marcelo Santos at JPMorgan. Marcelo Santos: I just wanted to use this opportunity to ask about the Brazilian number portability. You mentioned in your release like that Brazil is seeing sustained customer preference as evidenced by positive number portability trends, which indeed has been very strong and stronger than usual. My question is, is this portability that has been stronger mostly explained by NuCel, which you have the MVNO? Or is it mostly explained by your like Paro operation in Brazil? Just wanted to see what's driving this strong portability, which we also see using the data. Daniel Hajj Aboumrad: I think they are both, okay? There's no doubt that NuCel is helping us in number portability, and we're doing very good with them. But in the other side, we are doing strong, and we have been growing more on revenues than our competitors in Brazil. And I think that's good number portability plus new subscribers, we are doing okay. And the other thing that I'm seeing is that we are getting also very good ARPU subscribers. So we are not only in the prepaid or in the low end, we are getting also good high-end subscribers. So it's been good. That's what I can say. There is no doubt that NuCel is helping us, but it's not only NuCel. There's all the things that we have on the back of that, that is doing -- that we have been doing that. We have been always gaining number portability through the year. And in the fourth quarter, we get a strong because NuCel. So it's been good, and we are a little bit more good, a little bit more better than what we used to be. This is what I can tell you. Alejandro Azar Wabi: So just to clarify, the jump we saw in the fourth quarter, that would be attributed to sales. You were having very good portability across the year. That's Claro, but the change we saw in more recent months, that would be NuCel. Daniel Hajj Aboumrad: Part not all, but part could be -- yes, part could be NuCel, but not all is NuCel. Also it's fourth quarter. Fourth quarter, a lot of people is changing. There's new handsets that people want to change for handsets or they want to do promotions. So there's a lot of things. Operator: Your next question comes from Emilio Fuentes at GBM. Emilio Fuentes De Leon: I'm wondering, given the stellar net adds you have had in broadband in Mexico, the recent quarters, how sustainable do you see this performance going forward, specifically as we reach a higher penetration for this service in the market? Carlos Jose Garcia Moreno Elizondo: Yes. We see a good trend on net adds within the last 4 quarters in fixed broadband in Mexico. We have very good promotions in the market that the customers have received very well. The bundles with streaming increasing the speed. So we see the same trend through the year through this year, right? So we see the bundles are working pretty good with the streaming video platforms and the speeds that we've been delivering to the market are really good. We have 92% of the customers already with fiber. So we believe that we will retain the customers. We believe the trend will be more or less the same. Operator: There are no further questions at this time. I will now turn the call back to Mr. Daniel Hajj for closing remarks. Daniel Hajj Aboumrad: Well, to thank everyone for being in the call. And thank you, Carlos, Daniela, Oscar. Thank you very much. Carlos Jose Garcia Moreno Elizondo: Thank you all. Daniel Hajj Aboumrad: Bye-bye.