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Derek Everitt: Greetings and welcome to the Terex Corporation Fourth Quarter 2025 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. We do ask you to limit yourself to one question and one follow-up. If you would like to ask a question, simply press star followed by the If you would like to withdraw your question, press star 1 again. Thank you. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Derek Everitt, Vice President, Investor Relations. Good morning, and welcome to the Terex Corporation Fourth Quarter 2025 Earnings Conference Call. Derek Everitt: A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website. We are joined today by Simon Meester, President and Chief Executive Officer, and Jennifer Kong-Picarello, Senior Vice President and Chief Financial Officer. Their prepared remarks will be followed by a Q&A. Please turn to Slide two of the presentation, which reflects our safe harbor statement. Today's conference call contains forward-looking statements, which are subject to the risks that could cause actual results to be materially different from those expressed or implied. These risks are described in greater detail in the earnings materials and in our reports filed with the SEC. Derek Everitt: On this call, we will be discussing non-GAAP financial information including adjusted figures that we believe are useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in the conference call materials. Please turn to slide three. I'll hand it over to Simon Meester. Simon Meester: Thanks, Derek, and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in Terex Corporation. Last week, we concluded our merger with REV Group, the defining milestone in Terex Corporation's transformation. With this combination, we've created a leading specialty equipment manufacturer with premium brands across multiple industries. With a strong manufacturing footprint, a leading technology play, and clear tangible synergies across the portfolio. We'll begin with our 2024 acquisition of ESG, which delivered value immediately. It is now being amplified by bringing Terex Corporation and REV together, creating greater scale and an even more resilient new company. REV generated approximately $2.5 billion of revenue and $230 million of adjusted EBITDA in its recently completed fiscal year, with the majority coming from essential low cyclical end markets. Beyond strengthening the predictability of our growing earnings and free cash flow, the merger also reduces our overall capital intensity, giving us greater flexibility to create additional shareholder value. Simon Meester: I want to thank both the Terex Corporation and REV teams for their tireless efforts to close this transaction ahead of schedule. It's only been a few days since closing, but the teams are already working hand in hand to execute our integration and synergy plans. We completed the ESG integration in 2025 and captured synergies ahead of expectations. We're using the same integration playbook for the merger with REV. The integration will be straightforward. REV businesses are joining Terex Corporation as a standalone operating segment with no organizational changes outside our corporate functions. Our new specialty vehicle segment will include emergency vehicles, and will continue to be led by Mike Vernick, and recreational vehicles, which will continue to be led by Gary Gunther. Both Mike and Gary bring deep REV experience, assuring continuity while driving further improvements. We expect to deliver roughly half of the $75 million run rate synergies within the next twelve months and the full amount by 2028. Most early savings will come from eliminating duplicate corporate costs. But the synergy potential goes much deeper. Over the last sixteen months, we have reshaped the Terex Corporation portfolio, creating what I believe is the most intrinsically synergistic, resilient, and competitive portfolio in our history. We now have significant scale in specialty vehicles that share similar operational and go-to-market characteristics. This creates not only near-term efficiencies, but also meaningful opportunities for operational improvement and long-term growth across Terex Corporation. With regards to the strategic review of the aerials business, which we announced during our last call, we have been receiving strong inbound interest from a number of interested parties. We're being deliberate in our evaluation of the interest and the best approach to maximize shareholder value. Turning to slide four. Combining with REV significantly shifts our end market exposure. We now serve a large diverse addressable market with stable, attractive growth profiles. Customers across these verticals value life cycle services, creating sizable opportunities to expand our aftermarket and digital offerings. Emergency vehicles benefit from stable and growing municipal budgets tied to maintaining required response times among the growing population. In waste and recycling, growth is fueled by population and recycling trends coupled with ongoing replacements. Customers also accelerate upgrades to unlock the value of new vehicle innovations and digital solutions where we are the clear industry leader. Utilities are poised for strong growth from 2026 onward as demand on the US electrical grid increases, particularly from data center expansion. Industry forecasts call for 8% to 15% annual CapEx growth through 2030. Altogether, we now have multiple channels into nearly every Minnesota municipality in the United States, which collectively spends $100 billion per year on capital equipment, a tremendous long-term opportunity. In construction, we continue to see robust infrastructure activity supported by government funding. The pipeline of mega projects continues to expand, providing a tailwind through at least 2030. We're seeing momentum building in Europe, and strong growth continues in the Middle East and India, where MP already has a solid foundation. Let's move to a summary of our financial results on slide five, handing it over to Jen to go into more detail. I'm proud of our team for delivering on our 2025 expectations, navigating numerous challenges throughout the year. Their performance and the strength of our portfolio enabled us to deliver earnings per share of $4.93, consistent with our outlook, EBITDA of $635 million or 11.7%, free cash flow of $325 million, and a cash conversion of 147%, all in line with our expectations. Looking to 2026, we see positive momentum across most of our segments, to varying degrees. Environmental solutions bookings grew 16% year over year in Q4, led by utilities. MP achieved its highest margins of the year in Q4 as efficiency and tariff mitigation initiatives took hold and bookings accelerated, particularly in aggregates and material handling. Aerial secured nearly a billion dollars of new orders in Q4, up 46% from the prior year, and specialty vehicles recorded strong bookings the last three months with a roughly two-year backlog coverage coupled with strong momentum on margin expansion. This positions Terex Corporation for a strong 2026. And with that, I will turn it over to Jen. Jennifer Kong-Picarello: Thank you, Simon, and good morning, everyone. Let's look at our Q4 results on slide six. Our fourth quarter financial performance was largely in line with our expectations. Environmental solutions continue to grow and deliver consistently strong margins. Operating margin of the year, Materials processing achieved its highest and our sales grew year over year in the quarter following four quarters of decline. Total net sales of $1.3 billion grew 6% year over year. Excluding ESG, our legacy sales grew by 5%. Q4 operating margin was 9.3%, up 150 basis points versus the prior year due to improved performance in all three segments. Interest and other expenses of $43 million was $4 million higher than Q4 last year. And the fourth quarter effective tax rate was 8.1% driven by favorable one-time tax attributes. EPS for the quarter was $1.12, or 35¢ higher than last year. EBITDA was $141 million or 10.6% of sales, 140 basis points better than last year. We generated $172 million of free cash flow in Q4, which was $43 million greater than last year due to higher operating income and improved working capital performance. Let's turn to slide seven for our full year results. Net sales grew 6% to $5.4 billion at the full year contribution from ESG acquisition more than offset declines in Aerials and MP, and legacy sales declined 11%. Operating margin of 10.4% was 90 basis points lower than 2024 due to lower volumes in Aerials and MP, and higher tariff costs which mainly impacted Aerials. This was partially offset by improved margins and tariff utility, and the accretive additions of ESG. Interest and other expenses of $172 million increased by $89 million due to financing costs associated with acquiring ESG. Our full year effective tax rate of 17.2% was consistent with last year, as favorable one-time tax attributes from the previous divestiture offset higher US dollar income. Earnings per share of $4.93 was consistent with the outlook we provided for the entire year. We improved our full year free cash flow by 71% to $325 million representing a conversion rate of 147%. Despite volume and tariff headwinds throughout the year, our teams continue to execute working capital improvement plans and delivered on a full year free cash flow expectation. ESG incremental cash flow more than offset the interest expense associated with the financing. We continue to improve our operating cash flow and working capital efficiency giving us more options to return value to shareholders. Please turn to Slide eight to review our segment results. Starting with environmental solutions. Our ES segment finished 2025 with another excellent quarter, generating $428 million of sales, representing 14.1% year over year growth on a pro forma basis. The strong growth was driven by improved throughput and delivery of utility and refuse trucks. For the full year, sales increased 12.7% on a pro forma basis to $1.7 billion. Q4 operating margins of 18.5% were 90 basis points better than the prior year, driven by improved performance in utilities, while ESG margins were consistent with the prior year. On a full year basis, the segment achieved 18.8% operating margin, 220 basis points better than the pro forma 2024 result, driven by improvements in both businesses. I was very pleased with the ES segment performance in 2025, particularly the high degree of collaboration with the ESG and utility teams, executing synergies, and operational improvements that will benefit Terex Corporation going forward. Turning to Slide nine. MP fourth quarter sales of $428 million were 2.5% lower than last year. Excluding the divested clean businesses, MP sales increased by 2.8% in Q4 on a like-for-like basis. Growth in aggregate was the primary driver, as sales grew in every global region, with the strongest growth coming from Europe. On a full year basis, sales of $1.7 billion were 11.6% lower than 2024, mainly due to channel adjustments we experienced in the first half of the year. As the operating margins continue to improve, reaching 13.7% in the quarter, as efficiency improvements and pricing actions ramped up in the quarter. The positive margin trajectory and increased bookings set MP well heading into 2026. Please turn to slide 10. Aerials closed at 2025 on a positive note with year over year sales growth of 6.9%, including growth in North America and EMEA. Average Q4 operating margins of 2.6% was consistent with our expectations, 200 basis points better than prior. Tariff headwinds, including the expanded 232 tariffs, that was implemented in August, could not be fully mitigated in the period. As ongoing supply chain and cost reduction will continue in 2026. Please turn to Slide 11. Q4 bookings of $1.9 billion grew 32% compared to last year on a pro forma basis, with positive trends across our segments. In environmental solutions, we continue to see positive momentum in bookings, which grew 16% year over year, up 13% on a trailing twelve-month basis, led by strong demand for utilities vehicles. A healthy backlog of $1.1 billion provides strong forward visibility for the segment heading into 2026. MP bookings increased 24% year over year or 32% when you exclude the divested clean businesses. The growth was flat by aggregate, and material handling, more than offsetting some moderation in concrete. MP ended 2025 with $71 million more backlog than the prior year, $100 million higher when you adjust out the divested clean businesses from 2024. Finally, Aerials bookings of $971 million was up 46% compared to prior year, driven by replacement demand from our national test branch. While growth was strongest in North America, we also saw growth in EMEA and Asia Pacific, providing good visibility into 2026. Now turn to slide 12 for our 2026 outlook. We are operating in a complex environment, with many macroeconomic variables and geopolitical uncertainties, and results could change negatively or positively. The outlook we are providing today reflects our current portfolio and does not account for any cost to achieve the synergies, purchase accounting adjustments, nor other nonrecurring items. Following the close of REV transaction last week, our 2026 outlook reflects the newly combined company, including eleven months of REV. With positive momentum from strong Q4 bookings and backlog in every segment, we expect 2026 sales to grow approximately 5% on a pro forma basis to $7.5 to $8.1 billion. We further expect pro forma EBITDA to grow by approximately $100 million or 12% year over year to between $930 million and $1 billion, or 12.4% EBITDA margin at the midpoint. Our EBITDA outlook includes approximately $28 million of synergies for 2026 in line with our goal to achieve $75 million of run rate synergies within two years. We anticipate interest and other expenses to be approximately $190 million, consistent with pro forma 2025 based on average debt outstanding of about $2.7 billion. The effective tax rate is expected to be higher at 21% driven by higher US dollar income. As expected, the merger has a modest 3% dilutive effect on EPS in 2026 due to higher number of shares outstanding post-merger. We expect 2026 EPS between $4.50 and $5 with a share count of 111 million shares, as compared to a legacy Terex Corporation range of $4.80 to $5.20. For modeling purposes, approximately 15% of our full year EPS is expected in the first quarter, as it will only include two months of specialty vehicles earnings and seasonally lower volume and legacy Terex Corporation. We expect 2026 cash conversion of between 80-90% of net income, including transaction costs, and cost to achieve synergy. Our net leverage is expected to improve over the course of the year. Looking at our segment, we expect environmental solutions to grow mid-single digits in 2026, led by utilities, where we continue to see strong demand for bucket trucks and digger derricks used in the electric power market. We are currently anticipating roughly flat sales on ESG, with upside potential in the second half as we get more clarity on fleet requirements for a second half prebuy and EPA emission regulations. We continue to see growth in our market-leading digital solutions in the waste sector and expanding into utilities and concrete. We would explore opportunities to expand this technology into emergency vehicles during integration. ES achieved strong profitability in 2025, and we anticipate similar full-year margins in 2026 as synergy execution and productivity offset the unfavorable mix from higher utility scope. Turning to MP. We expect the segment to inflect back to full-year growth in the high single-digit range in 2026 on a pro forma basis, excluding clean. Fleet utilizations and aging equipment resulted in strong bookings in aggregate, handling, and environment. We also expect margins to improve in 2026 due to higher volume, productivity, and pricing action. Our new specialty vehicle segment entered 2026 with roughly two years of backlog. We expect sales growth of high single digits from a comparable pro forma prior year total of $2.2 billion excluding divested Lund and Midwest RV businesses. We also expect meaningful margin improvement in SV compared to the prior year period EBITDA margin of approximately 12.5% on a pro forma basis due to higher throughput, price, and ongoing operational improvements. Finally, in Aerials, we anticipate 2026 sales and margins to be similar to 2025. We have good visibility heading into 2026, with $906 million backlog following strong Q4 booking. Overall, I'm very excited about our opportunity to grow and continue the financial performance of our new company in 2026. Turning to Slide 13. In 2025, we maintained our commitment to invest in our businesses to fuel organic growth, with over $118 million in capital expenditures, targeted at automation, innovation, throughput, and efficiency improvements among other growth accelerants. As expected, we returned $98 million to shareholders through dividends and share buybacks last year. We purposely structured the merger to maintain a strong balance sheet and flexible capital structure to enable organic investments and lower net leverage. That said, we have not assumed any since in debt repayments as they do not mature until 2029. Please turn to slide 14, and I'll turn it back to Simon. Simon Meester: Thanks, Jen. 2025 was a consequential year in the long history of Terex Corporation. We successfully completed the integration of ESG, navigated multiple macro and market headwinds, and ultimately delivered on our original 2025 guidance. We also announced and have now completed our merger with REV. With this merger, we have created a leading specialty equipment manufacturer with a highly complementary and synergistic portfolio serving a diverse set of attractive, resilient, and growing end markets. Our focus has already shifted to executing the REV integration, capturing at least $75 million of synergies, and delivering on the commitments we've made across each of our segments. I'm excited about the road ahead, and I know our team is energized as we continue to build the new Terex Corporation together. And with that, I would like to open it up for questions. Operator: At this time, I would like Your first question comes from the line of Tim Thein with Raymond James. Please go ahead. Timothy W. Thein: Great. Thank you. Good morning. First question on the MP segment. And you highlighted strength in aggregates in material handling within the order comments, which is it's sustained, would or should should be good in terms of product mix. I'm curious on the pricing side. And kind of what your visibility in terms of what you have in the backlog. With respect to, you know, crushing and screening being an important piece there, some of your larger international competitors are facing some sizable tariff headwinds in North America. So maybe you can just talk about kind of what you're seeing your expectations just around you know, that pricing, tailwind that you highlighted in the fourth quarter, how that's kind of influencing your outlook for '26? Jennifer Kong-Picarello: Hey, Tim. Good morning. This is Jen. So the pricing, we you know, we do not disclose them specifically on the segment basis. But you could see that we have a progressive step up in our margin profile in Q4 versus Q3 for MP, and a large portion of that is driven by price. Going through the P&L. We expect that with the strong backlog that we ended in December, that's slow to and it progressively step up again and throughout the year for 2026 by quarter. Timothy W. Thein: Okay. Good. And, Jen, I apologize if if I missed it. But within with the Aerials specifically, the kind of the interplay with tariffs and how you're expecting price cost to play out? Just more broadly for Aerials in '26? Guessing it's more of a second half story, but maybe you can just, comment on that. And, again, apologies if I missed that. Thank you. Jennifer Kong-Picarello: Right. So the Aerials in the prepared remarks, we say that we're expecting kind of flat revenue and also kind of flat margin profile. We expect that in 2026 that we have more headwinds in Aerials given that the tariff is gonna be twelve months of impact versus about approximately six months of impact in 2025. That translates rounding on a on a number standpoint about $60 million more and we're offsetting that to productivity and price. For a net impact of flat. Throughout the year. And first half of the year, we expect that that's the price cost neutrality to be more skewed towards the second half of the year. At the end of year, we're gonna be flat. Holding our margins. Timothy W. Thein: With a flat top line. A little less favorable in the first half, a little bit more favorable in the half. Got it. Thank you. Jennifer Kong-Picarello: Thanks, Tim. Operator: Your next question comes from the line of Jerry Revich with Wells Fargo. Please go ahead. Jerry Revich: Yes. Hi. Good morning, everyone. Simon Meester: Hey. Good morning. Jerry Revich: Hi. Simon, I wonder if you could just talk about the REV integration. So I saw the divestiture, the business has been operating really well in terms of driving higher efficiency rates. Can you just talk about the plan for the business from here relative to what we heard from the REV team, maybe six to nine months ago, and any update on order cadence and expectations for bookings as well. It sounds like there's more opportunity from a manufacturing standpoint but I'm wondering if you could just expand on that, please. Simon Meester: Yeah. No. Thanks for the question. So it's been it's been nine days, now since we closed, so we're very excited. We yeah. Obviously, it's mostly a throughput story because again, going into 2026, our specialty vehicle segment legacy REV, if you will, that still operates with about a two-year backlog. And they they did report relatively strong bookings again in their last fiscal quarter. So it's mostly just to make sure that we we keep burning that backlog down as much as we can. So it's gonna be all about throughput. Now there's obviously price in that backlog, so it's gonna be a combination of price and volume that's gonna drive the the margin improvement in 2026. But it it's mostly just making sure we keep that operational momentum. That's why we were so eager on making sure that we you know, keep the that we keep the organization intact that we we can just purely focus on making sure we keep that momentum going into 2026. Jerry Revich: Super. And separately, in ESG, I was pleasantly surprised with the bookings, it sounds like, within the high part of the portfolio or more resilient than what I have thought three months ago given what the waste companies have been talking about. Truck plans, can you just expand on what you're seeing? Is that the impact of the EPA '27 certainty? Or if you wouldn't mind just double clicking on the Yeah. Really good performance within Heil. Simon Meester: Yeah. Obviously, I I I would say the segment, the environmental solutions segment, recorded outstanding performance in 2025, and a lot of that was driven by by Heil, by ESG. But, also, we saw synergies kicking in with utilities, so we saw the utilities business stepping up as well, but, you know, ESG is leading the charge, if you will, in terms of top line. And now in 2026, we see the kind of flipping. So utilities is now accelerating a little bit more than ESG. We're we're we're expecting ESG to be kind of flattish from a top line perspective. And most of the growth coming from coming from utilities. But, yeah, we're we're we feel that that segment has a has a lot of momentum. We don't see that slowing down any anytime soon. So we're very pleased with how ES is performing. Jerry Revich: Thank you. Operator: Your next question comes from the line of Angel Castillo with Morgan Stanley. Please go ahead. Angel Castillo: Good morning and thanks for taking my question. Just wanted to unpack a little bit more on the aerial side. So you had a very strong quarter for bookings there and you talked about replacement demand from the rental customer. Can you just talk a little bit more what you're hearing from the customer base broadly in this space? And one of your competitors talked about a little bit of pull forward potentially into the quarter. Did you see any of that? Or how are you seeing, in particular, maybe orders in January and February kind of following that stronger fourth quarter? Continuing that? Simon Meester: Yeah. If you look at our if you look at last year, we had strong book to bill in both Q4 and Q1. I think average both quarters was about a 150. This this year, Q4 coming in over 200%, we expect Q1 to be somewhat north of a 100%, but it's probably fair to assume that both quarters will average again at about 150% book to bill. So that kinda sets our guidance of being flat because we expect Q1 to be a little softer than 1100%. But overall, yeah, going into the year with five, six months of of coverage is obviously gives us a good forward good forward visibility. But the reality is most of the demand is still just coming from mega projects coming from the nationals, Europe is picking up a little bit. Not not that material. But we haven't baked any major recovery with the independents in into our into our guide for 2026. We we expect that to happen. More in 2027. Angel Castillo: That's very helpful. Thank you. And then could we just unpack a little bit more just on the commentaries around ES? I think if you could talk about the back there as well. It sounds like utilities are seeing a nice uplift. So just the shape of that into next year. And then if you could, I guess, Jen, if you could unpack the margin dynamic a little bit. It sounds like utilities should be a positive for margins, a nice tailwind there. And you expect, I think, if I heard correctly, ESG flattish, but it sounds like there's some factors maybe weighing on that margin and keeping the full segment more flattish for the full year. So if you just unpack the puts and takes and maybe talk about it on a quarterly basis, that would be helpful. Jennifer Kong-Picarello: Good morning. So I'll take the margin question, and then I'll let Simon take the backlog questions. So you're right. For the margin, when we said in the prepared remarks that the margin is flattish, I'm referring to a percentage wise. And value wise, it still increased. So the higher top line growth coming from utilities will drive an unfavorable mix. However, it's being offset by the synergies going through in the ES reportable segment. Also driven by the productivity that they have been working to. In 2025, we communicated that that a utility division within the ES segment has demonstrated progressive growth in the margin profile. We expect that to continue into 2026 as the team actually relay out the Waukesha factory and also, looking at, standardization. Simon Meester: Yeah. And then on the on the backlog so yeah. ESG did did an outstanding job in 2025 leading the industry, quite frankly, in terms of throughput and and reducing lead times. And so going into 2026, we see lead times now kinda have normalized in ESG. So we have we're back to kinda pre-COVID levels backlog coverage. So three, four months forward visibility. We didn't put any EPA pre-buys into our outlook for ES and that's why we're kinda holding them flat and and and utilities is actually the backlog continues to increase, hence the reason we're expanding our capacity in the particular segment which is already ramping up as we speak. So we're we're expanding expecting to add about 20 to 30% capacity in utilities just to keep up with the the rising demand. Angel Castillo: Very helpful. Thank you. Operator: Your next question comes from the line of Jamie Cook with Truist Securities. Please go ahead. Jamie Cook: Hi, good morning. I guess two questions. First, Simon, on the specialty business or REV Group, it sounds like the backdrop for 2026 is good with the extended visibility backlog two years out. I'm just wondering if there's obviously, it's a new acquisition. So to what degree is there conservatism in your forecast for specialty? And if there was, would that come from? Is it just getting more, burning through more backlog? You know? So just sort of your assumptions, you know, around there where there would be upside. And then my second question, just on Aerials, understanding you can't say that much, but it seems like the backdrop for selling that business is probably better versus when you initially announced it with a view that aerial markets have clearly bottomed potentially. You know, positive upside surprise. So anything you can tell us, is is that asset more to people just because it sounds like we should be getting some cyclical tailwinds? Thank you. Simon Meester: Yeah. Thanks for the question. So on on specialty vehicles, yeah, there's obviously a lot going on. The team is working you know, flat out to make sure that we we can actually start bringing the backlog down a little bit. So I I where where we see any upside, I mean, the the team actually performed really strongly year over year 2025, 2024. We just wanna make sure that we we maintain that that operational momentum. So I don't know if there's any particular upside I can call out. I'm very comfortable with the guide that we that we have laid out. And, you know, we it's now it comes down to execution. On Aerials, yeah, I mean, we've said this in in October. We believe it's a well-known asset. We we we believe it's it's well documented how how that how that business performs through the cycle. It's a very strong brand, you know, celebrating sixth year anniversary this year at at ARA, which we're looking forward to. I can obviously not disclose too much because it's an active process, but yeah, we were we were very pleased with the the inbound interest that that we received. And we're gonna be very deliberate in in evaluating the interest. And and and decide on the best approach for our shareholders going forward. Jamie Cook: And it's Jamie. If I could just add in the our new reportable segment of SV the incremental margin on the higher volume is gonna be in that range of 30% at the gauge. With the highest in Q2 and Q3 and tapering down to Q4 due to seasonally lower revenue due to the weather. So I think while we we have baked in a very strong margin profile, that's supporting our $100 million of EBITDA margin expansion in the midpoint of our range. Jamie Cook: Thank you very much. Operator: Thank you. Your next question comes from the line of David Raso with Evercore ISI. Please go ahead. David Michael Raso: Hi. Thank you. First on the dilution, a little bit less than, I think, The Street was thinking. And I took a notice the share count seemed to be a little bit lower when you said a 111 for the year. Is there maybe I missed it. Was there some share repo in that number? Just trying to get the math from now just doing the basic conversion of the of the, you know, roughly 49.3 million shares that REV Group had. Even the interest expense, little bit little bit lower than I would have thought. So I'm just trying to understand exactly the dilution being only about 25¢. Jennifer Kong-Picarello: Hey, David. Good morning. So the I think the two part of your question first one in terms of the 111 million of share count, that's because we only acquired that's a weighted average number. And because we only issued them in February. So that equates to a 111 million, but full year is a 115 million. I think that's maybe where you're looking at. Second question in terms of the dilution, yes. In fact, during the merger, I was we have alluded to the fact that it's gonna be a mid-single digit of EPS dilution given that the share count the higher share count cannot be fully offset by the eleven months of REV earnings. That translates to the to to be about 3%. Just for share count loans. And then 2% based on a tie higher tax rate that's where we are. David Michael Raso: Oh, that's helpful. Yeah. I I read the slide on 12 as share count 111 was for the full year. Not not just for the quarter. Okay. That Jennifer Kong-Picarello: That's weighted average for the full year. Correct. David Michael Raso: The the one the sorry. The the one eleven or the one fifteen, just to be clear? Jennifer Kong-Picarello: The one fifteen I'm sorry. One eleven is the weighted average for the full year. David Michael Raso: Okay. The proceeds from an aerial sale just curious now that you're know, a little bit further in the process, You own REV Group, the merger is done. You've obviously been able to move forward with some of the divestiture of a piece of the the RV business. Given where the state of the portfolio is, we can, you know, debate the the right multiple you could get maybe for Aerials. But when you think of the proceeds for that sale, whatever it may be, can you give us a little more clarity how you're thinking about that now? Jennifer Kong-Picarello: Yeah. So know, right now, on day one on day nine of our close, the immediate priority is to strengthen the balance sheet to preserve the flexibility. Given that we funded this merger to you both shares and and cash. It's right now still too early to tell depending, you know, when we actually find a strategic option for Aerials and at when where we're trading in terms of the share price. But we will have several options, you know, a a return value to the shareholders through the share buyback. We could do an early debt pay down to strengthen our balance sheet, reduce interest, and further improve our leverage, or we reinvest in our business especially in utilities and specialty vehicles that is going supported by the circular tailwind. But at this point, I think it's too still too early. We we really like Simon Meester: the optionality that is ahead of us here, but our immediate focus as you will appreciate, is on integrating REV focusing on execution, focusing on on delivering on our earnings and the cash conversion. And then we really like the optionality that at the end of the road here. David Michael Raso: I appreciate it. Thank you. Simon Meester: Thanks, David. Thank you. Operator: Your next question comes from the line of Mig Dobre with Baird. Please go ahead. Mig Dobre: Yes. Thank you for taking the question. Good morning. Sticking with specialty vehicles here, I I guess a a couple questions. First, how are you thinking about the recreation component of this business longer term? You're obviously in portfolio adjustment mode. Which is why I'm asking. And when we're kinda thinking about the moving pieces to margin here, if I heard you correctly, and better in your guidance, about 12-12.5% operating margin. Simon Meester: How do you view the longer term potential here if we're thinking two to three years out? Simon Meester: Yeah. Thanks, Mig. I'll I'll take the first one, and, Jen, maybe you can weigh in on the second question. So on on the RV business, yeah, first of all, the announcement that was sent out, yes, on Midwest that process was already was already ongoing. Before we closed the merger. So don't don't read too much into that that we are in adjustment mode. I would actually say we are in integration mode. We are much more focused on what's right in front of us, and that is making sure that we integrate the two companies that we build our synergy pipeline, that we focus on execution, of the four segments that we now own, and that's really our most immediate focus. And now going into 2027 or beyond, I can't say we won't be continuing to make some adjustments to our portfolio, but what's right in front of us is integrating REV and executing. Do you wanna take the more two questions? Jennifer Kong-Picarello: And, Mig, I think your question on the EBITDA for 12.5%, you're referencing to the new reportable SV sec and that is without Midwest and Lance, and that was last year on a pro forma basis, eleven months. As you know, you're very familiar with REV. We have publicly disclosed a 2027 target at the enterprise level ranging for that 280 basis point margin improvement from 2025 to 2027. And at this point, we see that they're at the top end of the range. And heading towards that direction. So I think for modeling purpose, you could do you know, model that out over the next two years. But they are in line with what they have communicated in their last December 2024 Investor Day, but at the top end of the range. Mig Dobre: That's helpful. Thank you. Lastly, you gave us some context on tariffs, which is good. I'm wondering more broadly from a price cost standpoint, how are you thinking about 2026 and what's embedded in here? Steel has gone up quite a bit of late, and maybe you can comment on any hedges or the cadence of price cost as the year progresses? Jennifer Kong-Picarello: Right. So the terms of steel, you know, we do not import raw steel. And 70% of what we use as an HRC you're right, Mig that you know, the the steel price has increased as expected. As vendors try to sell from The US. We will continue to monitor that closely and execute our hedging contracts. So right now, we have our Q1 and Q2 of our HRC consum still consumption hedge. At a favorable rate of 10 to 15% lower than the forward price. And any of the imported steel fabricated parts is really part of our $130 million of tariffs that we dig into our guide. Of this $4.50 to $5, and that includes REV. Simon Meester: Thank you. Jennifer Kong-Picarello: You're welcome. Operator: Your next question comes from the line of Avi Drosowitz with UBS. Please go ahead. Avi Drosowitz: Hey, good morning. Thanks for taking question. So in terms of the capacity increases within environmental solutions, how much are you expanding capacity are you expecting those to come online? How's that split between yeah. Simon Meester: We're expanding capacity in our utilities business, not in not not in ES per se. We're ramping up our facility in Waukesha, Wisconsin. And we're adding about 20 to 30% capacity over the next two years. And some of that roughly half of that will maybe slightly less half than half of that will come online in 2026. And sorry. I forgot. What was the second part of your question? Avi Drosowitz: Yeah. It was really how, you know, how is this split? And you know, what what is the overall capacity increase that you're thinking of? Simon Meester: Yeah. So it's it's utility says is the smaller segment within environmental solutions, and and we're adding about 20 to 30% over the next two years in utilities. And the reason we feel that that's a justified investment because I mentioned in my prepared remarks that we expect CapEx to grow 8% to 15% for the next five years in utilities just by the nature of upgrading the grid. And, obviously, we we we sell and make products that will help upgrade the grid. So we we expect that that market will be quite bullish for us for the next three to five years. Avi Drosowitz: That makes sense. And then I guess in the sec you had said last year that you were looking at about $25 million of synergies from environmental solutions. By the 2020 So just kinda curious where you are on that progress and if that $25 million plus number is still how you're thinking about for the exit rate for this year. Jennifer Kong-Picarello: Yes. Hi. Good morning. Yes. We actually exited our first year of integrations above that $25 million of run rate synergies. That's the reason why that even with the high utilities growth in 2026 that caused an unfavorable mix in terms of margin, we're still able to hold the margin percentage due to the synergies dropping to into 2026 within the environmental solution segment. Avi Drosowitz: Alright. Simon Meester: Got it. Great. Thank you. Jennifer Kong-Picarello: You're welcome. Thanks. Operator: Your next question comes from the line of Kyle Menges with Citigroup. Please go ahead. Kyle David Menges: And congrats on closing the REV Group deal. I did wanna just double click on the ESG guidance a little bit. I mean, talking about flat guide and I was thinking maybe that would imply that the OE sales portion of that could be down a little bit this year. So I'm curious just what should give investors confidence that this might just just be a blip here in 2026 versus maybe the first year of a softening of this refuse recycling cycle. Yeah. Just just so we're we're we're aligned here. We're we're guiding mid-single digit growth for the environmental solutions as a whole, and then ESG is within that environmental solution we're we're guiding flat for 2026, excluding potential prebuys in the second half twenty twenty six. That would be upside to the guide. So, yeah, we don't we see that that end market as fairly noncyclical. We don't see any kind of we actually see continued growth going into 2030, The only reason we we see ESG within environmental solutions kinda slowing down the growth rate a little bit is just because we're caught up on lead times. We're now back to largely being a a book to bill business, which which is where we were before COVID, So we don't take that as a leading indicator that business might be peaking. It's quite the contrary. We think that that business has a lot of upside. And for for more reasons than than than just GDP growth. There's also fleet modernization going on. There is all sorts of new technology going into that space. So we we see multiple angles for growth in that segment. Great. And then just a couple of questions on Aerials. Sounds like you're planning some pricing for '26. Just would would be good to hear how how the those negotiations have gone, and is as you're entering '26 with the the customers. And then just a a a quick one, just anything to call out in your mix in '26 versus '25 as far as nationals versus independents? Simon Meester: Thank you. Yeah. So for 2026, we we we continue to see most demand coming from replacement in North America and in in Europe and mostly from the the mega projects. We do not we did not bake in any kind of meaningful recovery in in local private construction spend in 2026. We see that more happening in 2027. Fleet utilization is is up year over year. Our our Our national customers are are are quite bullish for the next couple of years because of the mayor projects alone, but the real uplift for the segment will come when local and private construction comes back up. And we we see that happening in 2027 and not in 2026. So that's why the the guide is kind of a little bit of moving sideways here because because of the the private construction spend not not picking up until 2027. Thank you. Operator: Thank you. Your next question comes from the line of Steve Barger with KeyBanc Capital Markets. Please go ahead. Steve Barger: Thanks. Good morning. Simon Meester: Good morning. Simon, on slide four in the emergency vehicle section, there's a note that there's a mandated replacement cycle. What category of vehicles is that, and what percentage of the fleet turns over annually because of mandates? Simon Meester: I that's a good catch. I think that is that every ten years, think you're talking refuse. Steve Barger: Just emergency vehicles. Simon Meester: Emergency vehicles. Let me just look that up where on slide four in the footnotes. Steve Barger: In the let me get back there. It's yeah, emergency vehicle. So the the leftmost box the second bullet large installed base with a consistent and mandated replacement cycle? Simon Meester: Oh oh, I'm sorry. I I got you now. I thought I was looking in the footnotes. You're talking on slide. Okay. Got it. Yeah. Yeah. Yeah. So so, obviously, needs to stay fresh and there is a mandated replacement cycle. There's not a a real number tied to it, per se, but, yeah, within emergency vehicles, municipalities, you know, wanna keep their their fleet with the maximum uptime possible, and that's why they have specific kinda goals and targets around their replacement cycle. That's what that means. Steve Barger: Okay. And I know it's really early in owning REV, but you are maintaining So my question is, just given the size of the backlog and where lead times in the industry are, do you see a path to accelerating production which can result in a higher growth rate maybe not this year, but as you look into '27, and and '28, Simon Meester: Yeah. I mean, the the the industry is obviously investing in in in adding capacity. And optimizing throughput as it should because backlogs need to come down. I mean, they're at two years plus and bookings continue to be strong. And so just to make sure that we, as an industry, industry, that we keep working on bringing our backlogs down, you know, we're we're in investing in capacity, and so and so are we. There's a there's a you know, our our main location in Florida, and our location in South Dakota, we're investing in capacity expansions and and capacity upgrades. And so we think that the kind of the sustainable target for backlog coverage is about a year. And but it it it might take another two years or so before we get to that kind of backlog level. But, yeah, bringing down the backlog is what the focus is right now. And that will lead to a more clear growth. Steve Barger: Right. So so is it possible that business could grow in double digits assuming orders hold up and the backlog coverage is there? While you try and bring those lead times down? And, again, not this year necessarily, but at some point, Simon Meester: Yeah. For now, we are already ahead of you know, specialty people. The segment is already ahead of their Investor Day kinda commitment. And so can we we we don't wanna count ourselves too rich here. We're guiding high single digits, and we think that that's probably a a more realistic outlook, and that's what we're guiding today. Steve Barger: Understood. Thanks. Simon Meester: Yeah. Thank you. Operator: There are no further questions at this time. I will now turn the call back over to Simon Meester for closing remarks. Simon Meester: Thank you, operator. If you have any additional questions, please follow-up with Jen or Derek. And with that, thank you for your interest in Terex Corporation. Operator, please disconnect the call. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Thank you for standing by or on hold for the Blackstone Mortgage Trust fourth quarter and full year 2025 investor call. At this time, we are gathering additional participants and should be underway shortly. We appreciate your patience and ask that you continue to hold. Good day, and welcome to the Blackstone Mortgage Trust fourth quarter and full year 2025 investor call. Today's call is being recorded. At this time, all participants are in a listen-only mode. At any time, please press 0. If you would like to ask a question, please signal by pressing 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal. At this time, I would like to turn the call over to Tim Hayes, Vice President, Shareholder Relations. Please go ahead. Tim Hayes: Good morning. And welcome, everyone, to Blackstone Mortgage Trust's Fourth Quarter and Full Year 2025 Earnings Conference Call. I am joined today by Timothy Johnson, Chief Executive Officer; Tony Marone, Blackstone's Global Head of Real Estate Finance; Austin Pena, President; and Marcin Urbasic, Incoming Chief Financial Officer. This morning, we filed our 10-Ks and issued a press release with a presentation of our results, which are available on our website and have been filed with the SEC. I would like to remind everyone that today's call may include forward-looking statements, which are subject to risks, uncertainties, and other factors outside of the company's control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the risk factors section of our most recent 10-K. We do not undertake any duty to update forward-looking statements. We will also refer to certain non-GAAP measures on this call, and for reconciliations, you should refer to the press release and 10-Ks. This audio cast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent. For the fourth quarter, we reported GAAP net income of $0.24 per share, while distributable earnings were negative $2.07 per share, and distributable earnings prior to charge-offs were $0.51 per share. A few weeks ago, we paid a dividend of $0.47 per share with respect to the fourth quarter. With that, I will now turn the call over to Tim. Timothy Johnson: Thank you, Tim. Blackstone Mortgage Trust reported strong fourth quarter results, further building upon the positive momentum in earnings power and credit performance achieved throughout 2025. We reported $0.51 per share of distributable earnings prior to charge-offs in the fourth quarter, an increase of over 20% from Q1 and covering our dividend for the second consecutive quarter. Our loan portfolio is now 99% performing, reflecting strong progress on loan resolutions in the quarter. We have actively rotated our portfolio, concentrating new investment in our highest conviction themes. We closed approximately $7 billion of investments in 2025, nearly 85% of which were in multifamily and industrial loans, our growing net lease strategy, and two bank loan portfolios we acquired at discounts. We have strategically broadened BXMT's scope to target these complementary investment channels, supporting capital deployment over the past year and reinforcing earnings power, with greater diversification and duration. Turning to markets, the real estate credit market today is highly liquid and underpinned by solid real estate fundamentals, with new construction still sharply lower from pre-cycle levels and value steadily increasing. CMBS issuance accelerated in 2025 to its highest level since the GFC, up 40% year over year, demonstrating a significant increase in debt capital availability as performance in the sector has improved. As a result, we have seen the deal dam start to break, with more enthusiasm from investors to transact. We see this in our loan origination business, where new loan requests in January were up 50% from the prior year. Within this backdrop, the breadth and expertise of our global real estate debt platform, with over 170 professionals, is a differentiator, providing BXMT access to a proprietary pipeline of diverse investments across the US, Europe, and Australia. In 2025, our global platform closed over $20 billion of private loan originations and acquisitions and traded more than $15 billion of real estate securities. The robust data and insights gained from our private and publicly traded market activity guide our investment decisions and position us well to source attractive opportunities across various markets. With such a wide funnel and a well-invested portfolio, we can pick and choose our spots and lean in where we see compelling relative value. Our activity also informs our balance sheet and capital market strategy. BXMT has capitalized, executing over $5 billion of corporate and securitized debt transactions in the past twelve months, including $2.8 billion of corporate term loan repricings and extensions, which reduced our weighted average borrowing spread by nearly 90 basis points year over year. These transactions extended the duration of our liabilities, drove funding costs lower, and further diversified and strengthened our capital structure. Market tailwinds are also supporting performance within our portfolio, with no new impaired loans or watch list additions in the fourth quarter. We expect to see opportunities to selectively exit our owned real estate properties, further supporting earnings as we more efficiently redeploy capital into our core investments. We will remain patient and disciplined with our approach, focused on maximizing long-term shareholder value. While we delivered an attractive 21% total return for shareholders in 2025, we see a strong case for additional upside in the stock. BXMT shares still trade below book value. Our current dividend yield of 9.5% implies a 540 basis point spread to the ten-year treasury, approximately 40% above our tightest level, which was achieved when rates were much lower. In contrast, spreads in liquid real estate credit and the broader credit markets have tightened, with triple B CMBS spreads and high-yield bond spreads within 10 to 20% of their all-time tights. This valuation gap is wide and emphasizes the highly compelling relative value proposition of BXMT's stock today. We believe the credit trends in our portfolio and earnings power of the business should warrant further retracement to historical levels, a view we have expressed with another $60 million of share repurchases this quarter and approximately $140 million since establishing our program in July 2024. Before turning it over to Austin to discuss our fourth quarter investments and portfolio in more detail, I want to thank Tony Marone, who will be stepping down as CFO of BXMT to focus on other responsibilities within Blackstone. Tony has been instrumental in BXMT's growth since inception, joining us through the Capital Trust acquisition in 2012. I am grateful for his service to the company and our shareholders and wish him all the best. I would also like to congratulate Marcin Verbasic, who will be stepping into the role of CFO, completing the transition started when he joined the company in 2024. With that, Austin, over to you. Austin Pena: Thanks, Tim. Starting with our investment activity, we closed $1.5 billion of investments in the fourth quarter, including $1.4 billion of new loan originations and approximately $100 million of net lease acquisitions at share. Consistent with our approach in recent quarters, our Q4 loan originations were 100% secured by multifamily and industrial assets, about 80% of which diversified portfolios. This included a $419 million loan on a 94% leased 11-asset portfolio of high-quality industrial properties located across the US and owned by a top-tier sponsor. By leveraging the scale and sector expertise of our platform, our team was able to quickly underwrite this loan and provide certainty of execution, capturing an investment which we believe provides attractive relative value. We like lending on portfolios like this. They diversify BXMT's credit exposure across multiple markets and tenants, limiting the impact of idiosyncratic risks via cross-collateralization. In addition to our new origination activity, we continue to be successful in harvesting opportunities from within our existing portfolio, proactively working with sponsors to retain high-quality investments that were likely candidates to refinance. Given our position as the existing lender, we are able to modify terms and extend duration while maintaining attractive economics relative to new deals in the market today. Our investment portfolio stands at $20 billion, up from $19.5 billion last quarter, and includes our $18 billion loan portfolio, $1.3 billion of owned real estate, and over $900 million of investments at share held in our bank loan portfolio and net lease joint ventures. Today, the net lease assets and acquired bank loans now represent 5% of our portfolio, up from zero at the beginning of 2025. These strategies, which generate fixed or contractually increasing cash flow streams over time, naturally complement our floating rate lending strategy and provide strong relative value in today's investment environment. Our loan portfolio ended the year at 99% performing. We resolved $575 million of impaired loans during the quarter, reducing our impaired loan balance to just under $90 million, most of which relates to a loan secured by a San Francisco hotel, which we expect to take ownership of in the first quarter. We upgraded six loans in Q4, including one impaired office loan and one watchlist office loan, both demonstrating leasing progress and cash flow growth. As Tim mentioned, we did not impair or downgrade any new loans to the watchlist this quarter, and one of our watchlist loans repaid in full. We continue to apply a rigorous approach to managing our remaining watchlist loans, of which nearly half have been restructured or modified, with significant recent equity commitments, with several others in various stages of negotiation. Our loan portfolio is now 50% multifamily and industrial, while office exposure continues to decline, down approximately 50% since year-end 2021. So far, in Q1, we have collected over $300 million of additional office repayments, further reducing our exposure and driving turnover in the portfolio. Nearly half of our loans are located in international markets, with almost 40% in Europe, where over the past year we originated approximately $2 billion of loans backed by industrial portfolios. These investments have a weighted average LTV of 68%, strong in-place cash flows, and provide compelling relative value, with loan spreads nearly 100 basis points wide of comparable quality US transactions. Similar to the US, European industrial markets are benefiting from limited new supply and e-commerce tailwinds driving demand, resulting in positive net absorption and just mid-single-digit vacancy rates in our core markets. We continue to leverage the extensive resources of the Blackstone Real Estate platform to manage our owned real estate and execute business plans to best position them for an eventual exit. Importantly, we carry these assets at a 50% discount to values at the time of loan origination, and half are located in New York and the San Francisco Bay Area, markets where we see broadly improving fundamentals and investor demand. We currently have one multifamily property in Texas under contract to sell, with several other assets well-positioned for potential sale this year. Meanwhile, our net lease portfolio continues to scale, ending the year at over $300 million at share, with another $200 million in closing. Our strategy remains focused on essential-use retail with attractive credit characteristics. The portfolio our team has constructed to date generates over three times rent coverage, with 2% built-in annual rent escalators and lease terms extending over fifteen years on average. Importantly, we continue to acquire these assets at discounts to replacement cost. In 2025, we acquired two portfolios of granular low-leverage performing loans from regional banks at discounts to par. Today, these portfolios represent approximately $600 million of principal balance at BXMT's share, and our thesis is playing out as expected, with strong credit performance and improving real estate fundamentals and capital markets driving $80 million of repayments since acquisition, enhancing returns for BXMT as loans purchased at discounts repay at par. We expect a ripe environment for bank consolidation to bring additional opportunities like this to market. Our platform is an established leader in the space, having acquired $23 billion of loan portfolios from banks since December 2023, positioning us well for future transactions as a reliable and trusted counterparty. Overall, we are pleased with the strong investment and asset management results our company achieved in 2025, and our team is excited about the opportunities we see ahead in the coming year. With that, I will pass it over to Tony to unpack our financial results. Tony Marone: Thank you, Austin, and good morning, everyone. Starting with our fourth quarter results, BXMT reported GAAP net income of $0.24 per share and distributable earnings, or DE, of negative $2.07 per share. DE included $434 million of reserve charge-offs, largely related to the resolution of five impaired loans, as well as the write-off of three subordinate loans, which collectively drove performance of our loan portfolio to its highest level in three years. These subordinate loans were previously impaired, effectively carried to zero, and as part of our regular quarterly assessment, were deemed unrecoverable in the fourth quarter. Excluding these items, DE prior to charge-offs was $0.51 per share, up $0.03 from the prior quarter and $0.09 from the first quarter of the year. For the second consecutive quarter, DE prior to charge-offs covered our quarterly dividend of $0.47 per share, as we continue to drive earnings power through loan resolutions, capital deployment, and accretive corporate debt refinancings and stock buybacks. Notably, DE benefited from $18 million of NOI from owned real estate in Q4, up from $6 million in the prior quarter, as we recognized a full quarter impact from properties taken under the balance sheet in Q3. Our hotels represent one-third of our owned real estate portfolio, which ended the quarter at $1.3 billion across 12 properties. We anticipate cash flows from owned real estate to decline in Q1, which typically experiences seasonal softening relative to other calendar quarters. However, we expect the portfolio to consistently generate positive DE and provide further ballast to earnings and dividend coverage over time, as we eventually exit these assets and repatriate capital into new investments at target returns. We also recognized $21 million of depreciation and amortization, or D&A, related to our owned real estate in the fourth quarter, which is included in GAAP earnings but excluded from DE. Accumulated D&A is also reflected in our book value, which ended the year at $20.75 per share. In total, book value includes $0.47 per share of accumulated D&A and $1.76 per share of total CECL reserves, of which $1.24 is attributable to the general reserve and $0.52 to asset-specific reserves. Our total CECL reserve declined nearly 60% quarter over quarter as a result of the reserve charge-offs I mentioned earlier. Importantly, these charge-offs had a de minimis impact on book value, executed largely in line with carrying values. Looking back over the course of 2025, book value benefited from a net $33 million CECL recovery from resolutions executed above carrying values. This, alongside stock buybacks, added $0.30 per share to book value this year. Earnings from our unconsolidated joint ventures also continued to grow, generating $7 million of DE in Q4 versus $3 million in the prior quarter. This was driven by income and repayments in our bank loan portfolios, which accelerate their unamortized purchase discount, and the continued growth in our net lease portfolio Austin mentioned earlier. As a reminder, our balance sheet reflects our $217 million net equity investment in the net lease and bank loan portfolio joint ventures. But as also noted, on a gross basis, our share of the investments in these strategies totaled $940 million and are a growing component of our increasingly diverse investment portfolio. Turning to BXMT's capitalization, our balance sheet remains in excellent shape. We ended the year with $1 billion of liquidity, debt to equity within our target range, and weighted average corporate debt maturities of 4.3 years, with no maturities until 2027. As Tim mentioned, we have been active in securitized debt markets, positioning our balance sheet for further resilience. We priced a $1 billion CLO in January, our sixth CLO transaction, and completed our inaugural European CMBS issuance in December, which adds yet another tool to our toolkit and demonstrates the constant innovation of our financing strategies by our capital markets team. We ended the year with 15 bank counterparties providing $19 billion of total borrowing capacity. We added one new counterparty in 2025, and another just recently in February. Given our strong track record as a borrower and the deep relationships with these lenders across Blackstone, we have successfully added or converted nearly $6 billion of credit facilities to a non-mark-to-market construct, driving total non-mark-to-market borrowings from 67% at the beginning of the year to nearly 85% today. As my tenure as CFO comes to an end, I can confidently say that all aspects of BXMT's business are in great shape, and the company is on strong footing to capitalize on opportunities as real estate and capital markets continue to recover. I am thrilled for Marcin to take the CFO role at an exciting time for the company, and I look forward to watching him and the rest of the team continue delivering strong results for BX shareholders. I will now ask the operator to open the call to questions. Thank you. Operator: As a reminder, please press 1 to ask a question. We ask you to limit yourself to one question to allow as many callers to join the queue as possible. We will take our first question from Doug Harter with UBS. Doug Harter: Thanks. Obviously, you have been kind of showing your support for the stock through share repurchase. I am sure you saw what the actions of one of your competitors earlier this month. Just thoughts on other ways you might look to kind of validate or support the value of the loans in the portfolio? Timothy Johnson: Thanks, Doug. This is Tim. You know, I think that, you know, we certainly take a look at all opportunities to maximize shareholder value in the market. I think we feel really good about the direction of the stock to date given the performance in 2025 and where we stand. You know, we still have a discount to book value to make up, but a relatively modest one. So we will continue to look at all options during the quarter, as you mentioned. A really good tool in the toolkit was definitely stock buybacks, and we analyzed everything that we have in terms of optionality in markets, but we feel really good about where we stand today. Doug Harter: Great. I appreciate that. Thank you. Operator: We will take our next question from Jade Rahmani with KBW. Jade Rahmani: Thank you very much. Could you provide your views on the REO portfolio? Do you see upside in key assets? And can you also discuss the New York office REO that took place in December 2025 based on the disclosure? Looks like an attractive basis. So I wanted to get your thoughts there. Austin Pena: Yeah. Jade, hey. It is Austin. You know, I would say with respect to REO, I think the way we look at that, as we have discussed before, it is really a go-forward analysis in terms of our decision-making there. These are really investment decisions that we think are really well informed due to the really unique data and information that we have access to. Specifically, we are seeing some improved fundamentals and investor demand in places like New York. With respect to that asset, as you mentioned, it is an asset in New York that we hold at a very low basis, significant discount to the value when the loan was originated. We are seeing improvement in markets like that. As we think about the potential to exit these assets over time, as I mentioned in my earlier remarks, we do think several assets are well-positioned to look to exit over the course of the year. We will be very thoughtful and strategic about that. We are selling one asset in Texas. We are also seeing positive trends in San Francisco. As we go through the rest of the year, I think we will start to look at those sale opportunities as the market opportunities sort of present themselves. Jade Rahmani: Thank you. And just a follow-up on the New York REO. Could you give any color as to origination, vintage, current occupancy rate? And also, dollar amount of CapEx you anticipate spending on the asset? Austin Pena: Yeah. You know, this was a loan that we originated pre-COVID. As I mentioned, we hold it at a very significant discount to the prior value at origination. The asset is pretty well leased today. There has been strong leasing demand. To the extent further leasing were to appear, were to materialize, I think we would look at that and analyze whether that would be accretive for us to invest the capital to capture those leasing opportunities. That is really how we look at all investment in our REO assets. I would say to the extent you look at our prior disclosures, this loan was impaired and we had a significant reserve against it. When we think about the go-forward opportunity in terms of exiting the asset, I think that we do see the opportunity to capture additional upside potentially on that asset and others over time. Jade Rahmani: Thank you very much. Operator: We will take our next question from Chris Moeller with Citizens Capital Markets. Chris Moeller: Hey, guys. Thanks for taking the questions and congrats on really solid progress on loan workouts in the quarter. I see in the 10-Ks that you guys made a $75 million investment in the Blackstone fund. Can you just talk about the type of investments that will go into that fund? And if there is any overlap on what you guys are already doing? Austin Pena: Yeah. This is Austin. I can take that. As you mentioned, we did make an investment in a new Blackstone-managed real estate credit fund. That fund will be focused on high-quality core plus real estate in the US and Canada. We really think it is a great example of BXMT's ability to deliver unique and compelling investments for our investors due to the scale of our platform and our affiliation with the Blackstone real estate credit business. I should note that BXMT pays no fees for this fund commitment. The investments will be sourced, underwritten, and managed by our team. Ultimately, we do think that adding some exposure to this profile investment to BXMT is a good risk-adjusted return. Adding investments in a diversified way with this type of profile we think is quite attractive for BXMT. Chris Moeller: Got it. And that is a good segue into my follow-up. So I guess you guys have made some small relative to your size investments over the last year or so. The agency multifamily lending JV, the net lease, the investment, and the bank loan JV. So I guess my question would be, what do you guys expect BXMT to look like over the coming years? And I guess, how does the bridge business fit into that? Is it going to stay the primary focus? Or will those other businesses kind of grow over time? Austin Pena: Yeah. I think, as you noted, you have seen an intentional effort for us to diversify the portfolio. I do not think we are going to be, we are going to always be a large lender in our core lending strategy that is not going away. But when you look at the profile of the investments that we have been making, adding net lease, adding the granular bank loan portfolios, these other ways to further diversify the earnings composition and profile of the investments that we have within the company, that is definitely intentional. Over time, we would expect to continue to pursue that strategy. In any way, if there is any way for us to really just diversify our credit exposures and risks, and generate the risk-adjusted returns that we believe are compelling for the company, we are going to continue to pursue that. Chris Moeller: Got it. Makes a lot of sense. Appreciate you guys taking the questions today. Operator: We will take our next question from Gabe Pogue with Raymond James. Gabe Pogue: You guys provided some detail on the new origination front as it pertains to industrial. Can you put any color around what you guys are doing in multifamily? And then a second question, I will just give it to you now, is how are you thinking about total leverage? You are almost 3.9 times right now. How do you think about that going forward? Austin Pena: Thanks. Yeah. Hey, it is Austin. Thanks, Gabe. I will take the first part of that question, then I will pass it over to Marcin for the second point. In terms of multifamily, we really like the opportunity we see in multifamily today. With respect to the performance that we have seen in our portfolio, our multifamily is 100% performing. When we think about the opportunity set in that space, we really just like the setup for multifamily and rental housing in general. It is a structurally undersupplied market. New construction starts are down 60% from peak. It is a really highly liquid and granular asset class. That is why you see us lending in that space. When you look at the performance in our portfolio, I think that has been demonstrated. That is the profile, I would say, and the reason we are in that area. Maybe, Marcin, if you want to handle the second part of it. Marcin Urbasic: Sure. Happy to. Look, I think our leverage, we think of it in terms of where it is within our target, as Tony mentioned, it is within our target where we are. It is a function also of what type of leverage we have. As Tony mentioned, a lot of our financing is non-mark-to-market. We have been active in addressing different maturities within our corporate debt profile as well as reducing costs on both the asset financing and corporate financing. It is a function of investment opportunities, where the balance sheet is, what is available to us from a financing perspective in the market. We are very thoughtful about it. But, again, within our targets, and we will maintain where it is. Operator: Thank you. We will take our next question from Rick Shane with JPMorgan. Rick Shane: Thank you guys for taking my questions. And Tony, thank you for all your help over the years. And Marcin, congratulations on the new gig. Most of my questions have been asked and answered at this point, but, you know, as we sort of look forward to 2026, it feels like the expectation is given where you are in leverage and unless there is additional equity capital available at some point, the portfolio will be roughly flat in size, maybe modest growth. I am curious about the timeline as you resolve loans and redeploy capital potentially from REO resolutions, what you think the path back to normalized ROE might look like? Austin Pena: Yeah, Rick. Hey. It is Austin. I can take that. As Marcin mentioned, the portfolio is, we think we are pretty well invested. I do think that we have capacity. We have liquidity of $1 billion today. But we think that is actually a good position to be in. We have a very broad pipeline. There are a lot of opportunities. But given the position we are in, we can be pretty selective across that pipeline. In terms of the REO timeline and exiting those assets, as I mentioned earlier, I think some of those assets are pretty well-positioned for us to look at exiting over the course of this year. Some others may take longer. But we do think that those loans or those assets are earning, generating a below-target ROE. As we exit those positions and redeploy that capital at our target returns, that should be supportive of earnings over time. Rick Shane: Got it. Okay, that is helpful. And then just one other question. As you continue to or as you have substantially exited your nonaccruing assets and assets with specific reserves, and starting to deploy a little bit more capital, what should we think about as an initial general reserve on new loans, sort of ballpark range so we can start to sort of dial in what our overall reserves will look like? Austin Pena: Yeah. I think if you just look at the general reserve today, I think that is a pretty good proxy for where we see the reserve for the vast majority of the portfolio as being appropriate. As we grow the portfolio or shrink the portfolio, I think that is a pretty good place to look. Rick Shane: Right. Thank you guys so much. Operator: We will take our next question from John Nicodermis with BTIG. John Nicodermis: Thank you, and good morning. Obviously, we were encouraged to see the significant headway made on your impaired loan during the quarter. Was that more a matter of strategy and timing on your team's end or for the specific assets? Or was there a notable shift in the broader market as a whole that made these resolutions more achievable? Thanks. Timothy Johnson: Thanks, John. This is Tim. I would say it is reflective of a couple of things. One, just the strength of our asset management team and their ability to work through challenges pretty swiftly. We have a large-scale team. It is one of the benefits of our platform. That is certainly a part of it. I think market liquidity does help as well. There is more transparency in the market in terms of valuations today that makes decision-making a little quicker for both owners and lenders to figure out which direction to go in. I think that is reflective of a stabilized real estate market where we sit today with valuations steadily stable and increasing. That is just a better backdrop for quicker resolutions in general. John Nicodermis: Great. Thanks, Tim. Really helpful. And then the other one for me, your loan portfolio mix now sits at half collateralized by multifamily or industrial properties. Obviously, these are high conviction sectors for BXMT. But what are you thinking for the target allocation for your portfolio between those two asset classes going forward? Thanks. Austin Pena: Thanks, John. This is Austin. I would say first and foremost, our top priority in terms of capital allocation is really finding the right investments with the best risk-adjusted returns. That allocation will obviously depend on where we see those opportunities over time. As we said earlier, we are very focused on diversifying our portfolio across sectors and geographies. You see that in sector selection. You see it in the geographic concentration of the company. You have seen us further diversify into things like the net lease and the bank loan portfolios that we have acquired. You have also seen us allocate capital towards buying back stock. As Tim mentioned, $140 million since inception of that program, where we thought that offered a compelling risk-adjusted return. Ultimately, what really matters to us is performance. So, really just trying to set up our company to deliver for investors over the long term. John Nicodermis: Thanks, Austin. Appreciate the time. Operator: Thank you. We will take our final question from Harsh Hemnani with Green Street. Harsh Hemnani: Thank you. So you mentioned the transaction market in the US is becoming more transparent, more liquid. Does that sort of start to pivot some of the deal volume that has been more levered towards Europe over the last years? Does that start to shift a little bit more to the US? And then maybe how do you weigh the pros and cons between a more liquid transaction market, more visibility into values, but also somewhat lower spreads that are available today versus a year ago? Austin Pena: Yeah. It is a great question. I think you are right. You are seeing more liquidity in the US. You certainly have seen that in 2025 in our CMBS market and early in 2026. With much more liquidity. I think that is overall a positive for the business. It just means there is more velocity to the portfolio, and you see that in the loan repayment activity. You see that in loan repayments of loans that have been pre-rate hike cycle and pre-COVID repaying. I think that generally is helpful. We are in, I would say, a liquid but more normalized market today, which is a good operating environment for us. As we said at the beginning, having the scale of our platform, the different styles of investment capabilities we have, the global reach, we can really look across the full set of opportunities and pick and choose what we want to do. Austin referenced it before. We are pretty well invested today, so we have the luxury of looking for the best relative value out there in the market. Even though spreads have tightened, back leverage has tightened as well. So that is offset a bunch of that spread tightening. But the opportunity set today still feels compelling and deal activity is increasing. So that is a pretty good setup for us overall. Harsh Hemnani: Got it. And then maybe on you mentioned backlog with this as well. And it feels like the CLO market has opened up. Of course, you guys issued a CLO in January. How are you sort of weighing the cost of capital between CLOs and bank facilities today? And how should we expect that financing mix to shift over the course of the year? Austin Pena: Yeah. Harsh, it is Austin. I can take that. I think what you saw us really do over the course of 2025 was really a broad approach across all the different capital markets that we are active in. And a very proactive one. As we mentioned earlier, we accessed about $5 billion of transactions across term loan CLO markets. As we think about the CLO market versus where we can finance our assets on facilities, obviously price is important. Structure is also important. The goal is to build a well-structured, well-diversified balance sheet and really have a healthy mix across all those markets so that we can be nimble when the market opportunities present themselves. As we mentioned earlier, we reduced our corporate term loan borrowing spread by about 90 points over the course of the year. That is very significant. We have been adding more credit facility counterparties, 15 different counterparties today, which really allows us to drive down the cost of that capital. When we think about having all these different options available to us, we think that ultimately benefits the company. I think you will continue to see really a mix of activity across all those different channels. Operator: Got it. Thank you. That will conclude our question and answer session. At this time, I would like to turn the call back over to Tim Hayes for any additional or closing remarks. Tim Hayes: Thanks, Katie, and to everyone joining today's call. Please reach out with any questions. Goodbye.
Operator: Good morning and welcome to Taylor Morrison Home Corporation's Fourth Quarter 2025 Earnings Webcast. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to introduce Mackenzie Aron, Vice President of Investor Relations. Please go ahead. Mackenzie Jean Aron: Thank you, and good morning. Appreciate you joining us today. Before we begin, let me remind you that this call, including the question and answer session, includes forward-looking statements. These statements are subject to the Safe Harbor statement for forward-looking information that you can review in our earnings release on the Investor Relations portion of our website at taylormorrison.com. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those identified in the release, and in our filings with the SEC and we do not undertake any obligation to update our forward-looking statements. In addition, we will refer to certain non-GAAP financial measures on the call. They are reconciled to GAAP figures in the release where applicable. Now, I will turn the call over to our Chairman and Chief Executive Officer, Sheryl Palmer. Sheryl Palmer: Thank you, Mackenzie, and good morning, everyone. Joining me is Kurt Van Hyfte, our Chief Financial Officer, and Erik Heuser, our Chief Corporate Operations Officer. I am pleased to share the results of our fourth-quarter performance and look forward to sharing an update on our strategic priorities for 2026. Our fourth-quarter results met or exceeded our expectations across nearly all key operational metrics despite challenging market conditions. These results concluded a solid year of performance in 2025, during which we delivered nearly 13,000 homes at an adjusted home closings gross margin of 23% and generated 40 basis points of SG&A expense leverage on essentially flat home closings revenue. Coupled with $381 million of share repurchases, these results drove a 13% return on equity and 14% growth in our book value per share. With the majority of homebuilders having already reported year-end results, it's clear that Taylor Morrison Home Corporation's 2025 performance stands apart. Among our peers, we delivered one of the highest home-closing gross margins in the industry. We were the only to achieve year-over-year SG&A leverage and modestly increased our closings volume, while the industry was generally flat to down, which together drove more resilient bottom-line earnings and returns. In a year characterized by softer consumer confidence and heightened pricing competition and inventory levels, we believe that these results reflect the effectiveness of our diverse operating model and broad consumer reach across our national footprint of well-located communities. Given the market's persistent affordability, which is felt most heavily among first-time homebuyers, our portfolio's unique concentration on move-up and resort lifestyle customers has helped us navigate the market's headwinds. We pride ourselves on developing thoughtfully designed communities, often with amenities in prime locations and offering a balanced mix of spec and to-be-built home offerings that meet the needs and aspirations of our customers. I believe this is perhaps Taylor Morrison Home Corporation's greatest competitive advantage: the desire to deeply understand our consumers, respond to their feedback, and deliver a home-buying experience that is second to none. It is this unrelenting focus on our customers that has recently earned us the reputation as America's most trusted builder for the eleventh consecutive year and to Fortune's most admired companies list. I believe these strengths—our diversification, attractive product offerings, and consumer-centric philosophy—will be even more critical to our success as we move forward. While there are reasons for optimism, industry-wide inventory levels remain elevated, and consumers remain highly attuned to competitive dynamics in the marketplace and are closely weighing incentives, pricing, and spec offerings in their purchase decisions. While affordability has improved over the last year alongside lower interest rates, wage growth, and price discovery, I believe consumer confidence in the broader economic and political outlook will be critical for further demand recovery. That said, I am cautiously encouraged by the sales success we achieved in 2025 and by the early momentum thus far in 2026. Our fourth-quarter monthly absorptions outperformed typical seasonal patterns as our pace held steady from the third quarter, defying the average mid-single-digit sequential decline historically experienced. This is notable considering that we carefully manage pace and price community by community and, in some cases, chose to be more patient as peers pushed through inventory into year-end and held incentives on new orders stable sequentially. This momentum continued into January, even with the winter storm disruptions, and early signs are positive as the spring selling season generally kicks off in full force this week. The fourth-quarter strength was driven primarily by our premier Esplanade resort lifestyle communities, which experienced 7% year-over-year net order growth. This was followed by a low single-digit decline in move-up sales, while non-Esplanade resort lifestyle and level orders were down in the mid to high single digits. On a mixed basis, our orders by buyer group stayed relatively consistent quarter-over-quarter at 31% entry-level, 49% move-up, and 20% resort lifestyle. From a market perspective, sales were strongest in our East and West areas, with most of our Florida markets, California, and Phoenix increasing year over year, while our central region was slower due to softness across Texas, particularly in Austin. As we look ahead, I expect 2026 to be another solid year for our organization, albeit one focused on setting the stage for a re-acceleration of growth in 2027 and beyond. I'd like to walk through the moving pieces that are influencing our outlook for this year, while Kurt will provide the specifics of our guidance in just a moment. Given slower sales of to-be-built homes in 2025, we entered this year with a lower-than-normal backlog of just over 2,800 homes. As a result, this year's home closing deliveries and margins will be more dependent on sales during the spring selling season than is typical for our business. Positively, we expect to accelerate the number of new communities in 2026 from 2025, with well over 100 new outlets planned, including over 20 new Esplanade outlets, which are already supported by deep interest lists. The majority of these outlets will open for sales in the first half of the year and begin contributing closings in the second half and into 2027. In addition, the improvement in construction cycle times over the last two years has greatly enhanced our production flexibility, with homes now able to start well into the third quarter and still close by year-end in many of our markets. Based on targeted consumer groups in the move-up resort lifestyle segment, where personalization is valued, we expect new community openings to help shift our sales mix back to a more balanced mix of spec and to-be-built orders. We are already seeing signs of this shift back to more historic preferences, with to-be-built sales in January gaining 700 basis points of share versus the fourth quarter when we sold a record number of intra-quarter spec closings. Given the meaningfully higher average gross margin on to-be-built homes, we believe this mix shift will be an important driver of our long-term margin potential. However, in the near term, while we have reduced our spec home inventory by 24% since 2025, we still ended the year with nearly 3,000 unsold homes, including just over 1,200 finished homes. We are focused on continuing to responsibly sell through this inventory while being highly selective in putting new specs into production. This inventory management is expected to temporarily impact our gross margins in the first half of the year. Looking further out, we continue to target growth over the next many years, including a continued aspiration to reach 20,000 closings, but we will not do so simply for growth's sake. Our capital allocation and strategic priorities are firmly rooted in generating attractive returns on our invested capital throughout housing cycles. With competitive pricing pressures unlikely to meaningfully abate in the foreseeable future and housing fundamentals continuing to evolve, we are taking proactive steps to ensure our portfolio remains well-positioned to perform regardless of the market backdrop. For one, we are limiting incremental land investment in non-core submarkets that primarily cater to the most price-sensitive buyers. While these locations make up only a small portion of our overall portfolio, greater pricing pressure and a reliance on spec inventory in these areas has compressed margin opportunities versus comparable core markets. Over time, this shift will allow us to concentrate our efforts on serving more discerning entry-level demand, where our offerings are more strategically aligned. As Erik will discuss, we believe we are best able to meet the need for affordable single-family housing through our differentiated Built-to-Rent platform, Yardley. With a model that is both financially sustainable and supported by compelling demand tailwinds, we also expect to reinforce our focus on the first and second move-up segments, which have long represented the core of our company's expertise and customer base. These buyers value the choice, community development, and prime locations that distinguish our offerings and often invest in lot and option selections that help sustain above-average margin and returns. In 2025, these combined lot and option premiums represented nearly 19% of our base price. In addition, demographics in the move-up segment are highly supportive of future growth, with outsized net population gains projected among 40 to 55-year-olds over the next decade, behind only those aged 70. At the other end of the consumer spectrum, we will also continue to invest in the differentiated strength of our resort lifestyle brand, Esplanade. Unlike traditional active adult offerings, Esplanade communities deliver a lifestyle-first experience, complete with luxury amenities and concierge-level services that extends well beyond the home itself. This unique value proposition drives superior home prices and gross margins that consistently exceed the balance of our business. With a strong pipeline of Esplanade communities coming soon and opportunities for brand expansion in many of our markets, we expect this segment's contribution to our bottom line to grow meaningfully in the years ahead. And finally, we are doubling down on innovation across the organization. From the sales floor to purchasing, land due diligence, financial services, and back-office functions, we have made significant strides in deploying our proprietary digital sales tools to reduce friction during the customer journey and AI-enabled processes to enhance efficiency and manage cost. For example, we have developed a proprietary AI-powered platform that today houses digital tools and AI agents spanning purchasing, sales, customer service, financial services, and employee resources. On the sales floor, our customer 360 agent gives field leaders a comprehensive real-time view of our customer's journey from contract through warranty. In purchasing, AI-powered tools allow our teams to analyze purchase orders and query procurement data using natural language, while also enabling our purchasing standardization initiatives. We will continue to scale these technologies to better serve our customers, streamline our operations, and strengthen our competitive position. With that, let me now turn the call over to Erik. Erik Heuser: Thanks, Sheryl, and good morning, everyone. At year-end, we owned or controlled 78,835 home-building lots, of which 54% were controlled off-balance sheet. This compares to 86,153 lots at the end of 2024, of which 57% were controlled. The decline in our controlled ratio, which we expect to be temporary, reflects the impact of normal course takedowns in a few of our larger assets that were being seller-financed, as well as recent walkaways from controlled lot deals as we have reevaluated our pipeline against current market conditions. Over the long term, we continue to target a controlled ratio of at least 65%, as we seek to optimize our capital efficiency and manage portfolio risk. Based on trailing twelve-month home closings, we owned 2.8 years of lots out of a total of 6.1 years of controlled supply at year-end. This was similar to 2.8 years owned and 6.6 years controlled at the end of 2024. The majority of our lots remain in prime locations within core submarkets, where we see the strongest long-term fundamentals. While we selectively invested in tertiary locations as work-from-home expanded, we have since shifted that limited portion of investment allocations back to core markets. Notably, 85% of our 2025 investment approvals were deemed to be in core locations based on consumer desirability. Core recent consumer research reinforces this focus. Most of our buyers view their chosen community as core, and they consistently tell us that the overall community design is as or more important than the home itself. Furthermore, 80% of our buyers say that wellness is important to their purchase decision, and even a higher percentage in our Esplanade communities, where hundreds of residents hold wellness club memberships. As a result, we believe our emphasis on prime locations, thoughtful community development, and amenity offerings positions us well, particularly as national new home supply remains elevated, especially at the entry level. In 2025, homebuilding land investment was approximately $2.2 billion, down slightly from $2.4 billion in 2024. This was below our prior full-year target of approximately $2.3 billion, reflecting our cautiousness in approving new land deals and additional phases in the current market environment. With a healthy land pipeline already controlled, we expect to invest around $2 billion in 2026, with a renewed emphasis on opportunities for move-up and resort lifestyle positions, consistent with the strategic priorities discussed by Sheryl. Before wrapping up, I'd like to now spend a moment discussing our build-to-rent business, Yardley. Yardley develops rental communities akin to horizontal apartments that lend a single-family living experience, complete with private backyards and amenities, with the affordability and flexibility of renting. Developed exclusively as rental homes, these communities provide a desirable and affordable solution for consumers looking for an alternative to traditional multifamily rental options. Unlike traditional single-family rentals of scattered homesites, our Yardley communities are zoned and mapped as single tax parcels and transact like multifamily assets. Representing approximately 10,400 home sites across nine markets in Arizona, Texas, Florida, and The Carolinas, and supported by our $3 billion land bank with Kennedy Lewis, we believe that we are well positioned to continue to efficiently and prudently scale this unique rental offering in the years ahead, as less than 10% of Yardley's total units are fully on our balance sheet. Now I will turn the call to Curt. Curt VanHyfte: Thanks, Eric, and good morning, everyone. I will review the details of our fourth quarter and full year 2025 financial performance. For the fourth quarter, reported net income was $174 million, or $1.76 per diluted share, while our adjusted net income was $188 million, or $1.91 per diluted share, after excluding the impact of pre-acquisition abandonment charges and the loss on the extinguishment of debt related primarily to the redemption of our 2027 senior notes. For the full year, reported net income was $783 million, or $7.77 per diluted share, while adjusted net income was $830 million, or $8.24 per diluted share. In addition to the fourth-quarter adjustments noted previously, full-year earnings were also adjusted for real estate impairments, additional pre-acquisition abandonments, and warranty charges incurred earlier in the year. Now to sales. Net orders in the fourth quarter totaled 2,499 homes, which was down 5% year-over-year. This decline was driven by moderation in our monthly absorption pace to 2.4 homes per community from 2.6 a year ago, partially offset by a 1% increase in our ending community count to 341 outlets. This was supported in part by improved cancellation trends. As a percentage of gross orders, cancellations were 12.5%, down from 15.4% in the prior quarter and 13.1% a year ago. As Sheryl noted, we have well over 100 communities expected to open this year, including over 20 new outlets in Esplanade communities. These openings are expected to drive high single-digit outlet growth to 365 to 370 outlets by year-end. For the first quarter, we expect to end with around 60 communities. Turning to closings. We delivered 3,285 homes in the fourth quarter, at an average price of $596,000, generating home closings revenue of approximately $2 billion. Compared to our guidance, closings volume was at the high end of our expected range, and the average price was slightly ahead of expectations. For the full year, we delivered 12,997 homes at an average price of $597, generating approximately $7.8 billion of home closings revenue. Cycle time improvements continue to be a major driver of efficiency. During the quarter, we achieved about one week of sequential improvement, leaving us more than five weeks faster year over year and over nine weeks faster than two years ago. These improvements enhance our ability to flex production and manage inventory, allowing us to start homes later for year-end closing dates. In the fourth quarter, we started 2.1 homes per community, equating to 2,136 total starts. We ended the quarter with 5,682 homes under construction, including 2,956 specs, of which 1,232 were finished. Our total spec count was down 11% sequentially as our teams continued making progress in rightsizing our inventory positions by community, with these focused sales efforts expected to continue through 2026. Based on our backlog, sales expectations, and cycle times, we currently expect to deliver around 11,000 homes this year, including around 2,200 homes in the first quarter. We expect the average closing price to be approximately $580,000 in the first quarter and between $580,000 to $590,000 for the full year. Turning to margins. Our home closings gross margin was 21.8%, slightly above our prior guidance of approximately 21.5%. This compares to 22.1% in 2025 and 24.8% in 2024, reflecting higher incentive levels and a greater mix of lower margin spec home closings. During the quarter, spec homes accounted for 72% of sales and 66% of closings, up from 61% and 54%, respectively, in 2024. For the full year, our home closings gross margin was 22.5% on a reported basis and 23% adjusted for inventory impairments and warranty charges. This compares to a reported margin of 24.4% and an adjusted margin of 24.5% for the full year 2024. In the first quarter, we expect our home closings gross margin, exclusive of any inventory-related charges, to be approximately 20%, reflecting a higher share of spec homes as we prioritize the sale of existing inventory. Beyond the first quarter, we expect gross margins to improve gradually throughout the year, driven primarily by an increase in the share of to-be-built home deliveries and a modest reduction in incentives as the year progresses. However, the ultimate level of incentives will be highly dependent on consumer demand during the spring selling season and interest rates. We expect construction costs to be relatively stable, while lot costs are expected to be up in the mid-single-digit range. As we gain greater visibility into the spring selling season, we will look to provide greater detail on our full-year margin expectations. We also maintain strong overhead discipline. Our SG&A ratio was 9.9% of home closings revenue in the fourth quarter and 9.5% for the full year, a 40 basis-point improvement compared to 2024. This expense leverage was driven primarily by lower payroll-related costs, while ongoing strategic consolidation efforts and efficiencies created by our digital tools further improved our cost management. For 2026, we expect our SG&A ratio to be in the mid-10% range. During the quarter, we incurred net interest expense of approximately $12 million, up from approximately $6 million a year ago due to an increase in land banking activity. In 2026, we expect net interest expense to increase modestly year-over-year. Financial services posted another strong quarter with revenue of approximately $49 million. The team achieved an 88% capture rate, supported by competitive mortgage offerings and strategic alignment with our homebuilding operations. Among buyers using our mortgage company, qualification metrics remained strong in the quarter, with an average credit score of 750, a down payment of 21%, and household income above $183,000. In addition to the strong average credit profile, our customers and backlog were secured by average deposits of approximately $44,000 at quarter-end. Now on to our balance sheet. We ended the quarter with strong liquidity of approximately $1.8 billion. This included $850 million of unrestricted cash and $928 million of available capacity on our revolving credit facility. At quarter-end, our net homebuilding debt-to-capitalization ratio was 17.8%, down from 20% a year ago. During the quarter, we repurchased 1.2 million shares of our common stock for $71 million. For the full year, we repurchased a total of 6.5 million shares, representing approximately 6% of our beginning diluted share count, for approximately $381 million. As seen in this morning's earnings release, our Board of Directors approved an increase and extension of our share repurchase authorization to $1 billion. This program expires on December 31, 2027, and replaces our prior authorization. We remain committed to disciplined and returns-driven capital allocation strategies, including the return of excess capital to our shareholders after investing in profitable growth opportunities and prudently managing our liabilities. In 2026, we expect to repurchase approximately $400 million of our common stock. Inclusive of this repurchase target, we expect our diluted shares outstanding to average approximately 95 million for the full year, including approximately 98 million in the first quarter. Now I will turn the call back over to Sheryl. Sheryl Palmer: To wrap up, I'd like to share a few closing thoughts on recent news headlines regarding the administration's focus on addressing the needs for greater housing affordability and accessibility. As I shared last quarter, we have been encouraged by constructive dialogue with the administration and progress being made in Congress to advance housing legislation, and we are prepared to participate in meaningful policy solutions. As you heard this morning, our focus on delivering the right product to our customers, whether that be home buyers or renters, is this organization's guiding mission. We believe we have the platform to greatly scale our business as market opportunities present themselves, and we will maintain our longstanding discipline around capital allocation and investment strategies to create long-term value for our customers, communities, and shareholders. Before I close, I want to express my sincere gratitude to our entire team for delivering a strong finish to 2025 and for the effort I know you will demonstrate as we move through 2026. Together, we will continue to push our company forward and achieve even greater success as we refocus and recommit to all that makes Taylor Morrison Home Corporation so unique. Thank you to everyone who joined us today. And let's now open the call to your questions. Operator, please provide our participants with instructions. Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, to withdraw your question, press star 1 again. Pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Matthew Bouley with Barclays. Your line is open. Please go ahead. Matthew Adrien Bouley: Hey. Good morning, everyone. Thank you for taking the questions. Wanted to start around sort of the long-term view around the mix of the business, the buyer segments, and geographies. Interesting commentary there around, you know, where you'll be leaning in and out of land investments in the future, and sort of the favorable demographics for the move-up population going forward. So I guess the question is, number one, where do you see the entry-level mix going over time? And number two, just kinda, you know, anything around the know, specific geographies or submarkets to kinda help us understand, you know, where do you think you have the right scale, where you continue to lean into, versus sort of where do you wanna deemphasize? Thanks. Sheryl Palmer: Thanks so much, Matt. Appreciate the question. As far as the ultimate mix of entry-level to the business, you know, we've generally been running something like a third, a third, and a third. And I would expect that you'll see the first-time buyer come down a bit. But once again, it's not it's not necessarily about departing from the first-time buyer business. It's refocusing the business geographically where we don't, you know, buy land in what I would call those more fringe or tertiary locations that attract a very different entry-level buyer. And as we see movements in the markets, I think we've been we've proven, we've seen over the years, and we thought maybe it could be a little bit different during COVID that those more tertiary locations might provide, you know, a different experience coming out of COVID. But the honest truth is it's just not the case. That the further out you get when markets slow down a bit, we see those come to a very different stock, and the level of incentives required to get those first-time buyers into a house. It's tough. So it's not necessarily about, once again, leaving. You've heard us over the years talk about the professional first-time buyer, Matt, where that's generally a dual-income. I mean, more than 50% of our business today is millennials. And we're seeing more than half, if I'm not mistaken, Erik, of those millennials already buying their second house. So it's really a subset of the first time. As far as geographic penetrations, I think we've talked over the last few quarters that we've pulled back some investment in California. A bit, recognizing some of the underwriting constraints that we've seen there. So I think you'll see that, you know, geographic shift mix. Beyond that, I would think you'll continue to see us invest across our markets. When I look at the business, Florida continues to be, you know, we continue to be very bullish on it. And it continues to be the home of our Esplanade brand. So I think you'll see continued penetrations Florida, Texas, you know, different slight different in California, Phoenix, very steady for us. Colorado, I don't think you'll see huge shifts in the geography. Matthew Adrien Bouley: Okay. No. That's perfect. Thank you for that color, Cheryl. Really detailed. Second one, spec versus to be built mix. Think I heard you say 72% spec sales in Q4, and that you've sort of mixed somewhat back towards to be built year to date if I heard you correctly. So is the intention to get back to 50%? And can that happen in 2026, or sort of what's the timeline and intention around that mix? Thank you. Sheryl Palmer: It's a great question. Hard for me to be 100% certain where that mix lands. What I'm excited about is we are seeing the consumer show up differently, Matt. I mean, last year, it's not like we ever changed our strategy and we wanted to sell less to be built. But what we definitely saw is the consumer you know, our industry trained them, and the honest truth is that the incentives were stronger with an inventory home. And the closer that home got to completion, the stronger the incentives. And the buyer really began to appreciate the impact of that. What we've seen since the first of the year is they're showing up with more of a desire to buy what they want, where they want it, how they want it. They want to appoint the house in a way, lot premiums, have become quite important again. So, yeah, we've seen 700 basis points in January over the average of to be built in the fourth quarter. We have seen that continue in February. So I'm very encouraged about that. I'm not sure we were ever 50/50. We were probably 60-ish, Curt. And, you know, it's kinda moved on the margin five percentage points. Fifty fifty would be ideal. And maybe over time, Matt, as we continue to evolve the portfolio further away from the more attainable buyer, we might see that. I would be pleased but surprised if we saw a 50/50 mix in 2026. Curt VanHyfte: Agree? No. I agree. And I think, Matt, over the course of the year, we're gonna work our way through that. That's something that's not gonna happen overnight. Just kind of where we've made great progress with our spec inventory. I think as Cheryl had some, but we still have a little bit higher number of finished inventory than maybe we would like. So we'll continue to work our way through that and balance that with bringing in some of these to be built sales, especially on some of the new outlets that we'll be opening over the course of the year. Sheryl Palmer: New Esplanade. So yep. I hope that helps, Matt. Operator: Your next question comes from the line of Alan Ratner. With Zelman. Your line is open. Please go ahead. Alan S. Ratner: Hey, guys. Good morning. Thanks for all the details so far. I it. Of course. First question, you know, similarly on the mix of the business. I just wanna make sure I'm thinking about kinda esplanade the right way in terms of, it it sounds like you know, a lot of the community growth or at least the the the share coming from Esplanade is going to continue to rise. I know you showed that off at your Analyst Day last year. '25 and where you see that in in '26 and beyond, should we think of any We look at absorptions, kinda where they were running at in mix shift there, either higher or lower as more of the business comes from Esplanade? I think generally those are higher absorption communities, but I just wanted to confirm that. Sheryl Palmer: I'd say, actually, Alan, I think they're actually quite consistent. With the rest of the business. You know, we might have a couple positions with I mean, as you know, we probably have four or five communities per Esplanade. So we might have some that, you know, run-in a low three, some that run in a high. But I think on average, they're pretty consistent. Just for clarity as we talk about those 20 new outlets, that's probably four or five new communities. But I wouldn't see any significant change in the pace. We'll continue to aspire as we see some market bend. To get back to that annualized pace of the low grade. As I said in the prepared remarks, it's just not our intention to just throw inventory in the ground and sell it all costs given, I think, the value creation that we have with our land holdings. Alan S. Ratner: Makes sense. Second question on on the cost side. I know you mentioned that your outlook is for pretty flattish construction cost this year. And certainly, I think cost has been a nice tailwind in general for builders over the last year or so. You know, we're starting to see lumber prices, tick back up again. There's a little bit of increased chatter about maybe some cost increase announcements around the New Year, which I think are fairly normal for this time of year. But, you know, you have the the the headlines around ice raids still out there. So just curious, is there any risk to that outlook based on what you're seeing here in the first six weeks or so of the year? And know, generally speaking, where do you see know, cost trending beyond? Curt VanHyfte: Hi, Alan. Great question. Just kinda a little backdrop on the cost side. You know, we saw tremendous you know, teams did a lot of work in 2025. On our house cost initiatives. Very proud of what we were able to accomplish. And to your point, lumber here more recently is starting to run up a little bit. But our teams continue to focus on house cost reduction strategies, working with our trade partners, working with our suppliers, and so we think we have the ability to hope you know, to offset some of those potential headwinds that are out there. Through just our continued work on optimizing the business, whether it's through our discussion with our trade partners or suppliers or just our continued work on optimizing our floor plans, you know, value engineering our new communities, know, all those different type of tactical things. So it's something that we're we're looking at and watching and something the teams are very focused on. Alan S. Ratner: Thanks a lot. Appreciate it. Operator: Your next question comes from the line of Trevor Allinson with Wolfe Research. Your line is open. Please go ahead. Trevor Scott Allinson: Good morning. Actually, you've got Paul Przybylski on. I apologize if I missed this. But morning. Could you bridge the sequential gross margin to decline for 1Q among leverage incentives, land inflation mix? Etcetera. And I think you said the incentive environment was stable in 4Q, if that remains the case. In 1Q, should we expect a gross margin in 2Q similar to 1Q? Curt VanHyfte: Great question, Paul. Yeah. We're not gonna probably talk further beyond Q1 today. I think in our prepared comments, we did talk about a gradual increase in margins over the course of the year just because of the change in mix to a higher concentration of to-be-built homes. And, of course, as we work our way through our existing inventory. You know, from Q4 to Q1 sequentially, the margins are down, I think, 180 basis points, and that is in large part from a mix standpoint. A, we pulled in some higher ASP and higher margin homes in 2025 into Q4, and as a result, now we have a few more of those entry-level kinda tertiary kind of community closings coming through Q1. And so as we work our way through that, you know, we'll see our margins in line with that guide that we put out there. And relative to incentives, as Cheryl alluded to in her talking points, they were modestly in line from an order perspective. But they were kind of they at the end of the day, they stay they're they're remaining elevated, so to speak, from Q4 into Q1 from a closing perspective. Sheryl Palmer: And maybe, Curt, the only other thing I might add is, obviously, Paul, we're gonna take price as the market allows. You know, I was interested that in the fourth quarter, we did see base prices increase in more than half of the communities that had been opened the prior year. And more than a quarter of our total communities. And so if the opportunity exists, we're gonna continue to take base price increases, reduce incentives, which is where we're getting the confidence to say we expect Q1 to be the low point of the margin. Trevor Scott Allinson: Okay. Thank you. And then I guess, you know, you talked a lot about, you know, the 100 new community openings this year. How have absorptions been performing in your new communities relative to legacy? Are they still seeing the historical spread? Sheryl Palmer: Historical spread. I mean, I'm excited about the new communities we're opening. I can give you a couple examples I might have mentioned in prior quarters that we were opening a new community in Phoenix. It's over 1,200 lots. I think we have five positions. We opened it in the fourth. Some of it the September, one or two one position in October. We've got well over 100. Units sold in there already. So I would say PACE is there really, really strong. One that's been a beautiful master plan called Verdin. When I look at some of our Esplanade preopening activities and what we call our signature VIP events, I mean, some of these communities have waiting lists or interest lists, not waiting. We haven't started sales. Interest list of hundreds to thousands of names. So there is this activity that we're seeing. We're also seeing traffic generally has picked up in the first of the year. When I look at web traffic, year over year up in most all of our divisions. So both new and old, I think we are starting to see a little traction and know, it's early days. Like I said, generally, we see spring kick off after Super Bowl, so here we are. So if we can continue that, then I think that gives us some upside to the year. Trevor Scott Allinson: Great. Thank you very much. Good luck. Sheryl Palmer: Thank you. Operator: Your next question comes from the line of Michael Dahl with RBC Capital Markets. Your line is open. Please go ahead. Michael Glaser Dahl: Thanks for taking my questions. Cheryl, just to pick up on the last comment around kind of the seasonal improvement and similarly, your opening comments about the improvement. Obviously, like, it hasn't been a very normal period of time the past number of months. So can you just help us dial that in a little bit more? Like, obviously, seasonally, you should see traffic pick up 4Q better than normal seasonal sequential change in orders, but off worse than normal. So what are we actually talking about in terms of quantifying kind of pace dynamics that you've seen over the past couple of months or or January into February, more specifically? Sheryl Palmer: Yeah. No. It it's a fair question. And, you know, you don't I don't wanna get too over my ski tips, Mike. But what I would tell you is, you know, the improvement we saw through the fourth quarter, December being better than November, that would be something relatively unusual in my tenure. January, better than December. Okay. We should expect that, and the good news is we got it. And like you said, given the volatility that we've seen over the last year, I take each of these as, you know, positive green shoots. I'd say it's a little and honestly, and I think we said it in our prepared remarks, what made January even more I wanna probably a better word than sensational, but strong was the fact that we had a real significant weather event and, you know, a large part of the country. We have we were closed in many of our communities for days in Texas and the Southeast, and we still saw a nice January finish. And I give a lot of credit to our virtual tools on the ability to be able to continue to work with these consumers even when they couldn't come into the sales office. February, we're ten days in, a little early. I would say, you know, generally similar. You know, I'm not I it's it's hard to make a trend in ten days. We've got some communities that are doing really well and ahead of pace and some that aren't quite there yet. We had a strong finish. We've also had weather into early February. So all in all, I'd say generally supportive of kind of normal seasonal trends to your point we haven't seen in some time. So it's nice to see that momentum building. Michael Glaser Dahl: Okay. Thanks. And maybe just one quick one on that just to put a finer point on that. Are we talking absorptions now flat year on year, up year on year? So down a little year on year, but then my second question is really then on the, I wanna make sure I understand your incentive comments appreciating you're not guiding beyond 1Q when you consider conceptually 1Q the low and incentives improving. Are are you really just saying incentives should improve as a function of your build-to-order mix, or do you also expect just from a market level incentives to improve through the year? Sheryl Palmer: Well, obviously, if we get continued traction, and continued pickup in market. Like I said, we'll continue to take price when we can use incentives. We've also seen some relief from interest rates. I mean, still somewhat volatile. I think we're probably in the 6.1 range over the last few days. Know, sometime last year, that was closer to mid to high sixes. I think you've got a number of things working, and I think, you know, once again, we have the programs, Mike, to help the customer and not spread those incentives like peanut butter. The to be built mix will certainly be a piece of it as well, but I wouldn't just point to that. I think there's a number of factors that would, help us. Now having said that, competitive pressure and seeing what others offer is gonna continue to also have an impact on the incentives the consumer continues to expect. But all in all, I'm hoping there's some discipline across the market and we see a pullback in incentives and have the ability to take price. Pace, I don't know that I've seen I've looked at Kurt year over year. I mean, I think you know, we had a strong first quarter last year. So my instinct, it's probably a little down year over year, Mike, but I I need to verify that. But just you know, going into the investor day last year, we had a really nice strong first quarter. But offsetting that, you're gonna see some good community count growth as you saw us going from a low 340 to something closer to 360 in the first quarter. Michael Glaser Dahl: Okay. Great. Appreciate it. Thanks, y'all. Sheryl Palmer: Thank you. Operator: Your next question comes from the line of Michael Rehaut with JPMorgan. Your line is open. Please go ahead. Michael Jason Rehaut: Thanks. Good morning, everyone. Thanks for taking my questions. First, I just wanted to make sure I heard it correctly, and and sorry if this is being a little repetitive. But just wanted to appreciate the trend of incentives that you guys have offered in from the beginning of the fourth quarter to the end of the fourth quarter. I think you said it was relatively consistent, but I just want to make sure I heard that right. And, also, when you think about the first quarter gross margin guidance, how much of that is reflective of just higher incentives flowing through more broadly versus mix and maybe flushing out some of the impact of selling some of the excess spec that you have in? Sheryl Palmer: I'll let Kurt get into the particulars, but, Mike, I I really as Kurt said in his prepared remarks, I mean, we have a lot of inventory that we want to even though we're gonna continue to get those to be built to hopefully a different customer, need to work through that inventory in the first quarter, so we are expecting some pressure there. And if you look at just the ASP that we articulated for the first quarter, and how far you know, it's slightly lower than what we saw in the fourth quarter. I think it speaks to the mix. And you know, as we've said, the more affordable positions we require greater incentives, so we're anxious to work through those. And then see the to be built be a healthier piece of the mix. Curt VanHyfte: Yeah. And then, Mike, on the incentives in our prepared comments you did hear it correctly. They were relatively flat Sequentially from Q3 to Q4. As we kinda I think we alluded to that last quarter that gonna con you know, that we would have elevated incentives to move through based on that spec penetration for Q4 closings as we work through the inventory. Operator: Your next question comes from Rafe Jadrosich with Bank of America. Your line is open. Please go ahead. Rafe Jason Jadrosich: Hi. Good morning. Thanks for taking my questions. Just for following up on the comment on incremental land investment in the non-core submarkets sort of shifting away from that. Obviously, it makes sense given the context of what's going in the market at the entry level today. When you think about are you finding better land deals at the move-up and resort lifestyle sort of price points? Is there just less competition in those markets? Or are you just more bullish on the long-term fundamentals on move-up with your lifestyle versus entry-level? Can you just talk a little bit more about the shift there and why the returns will be higher at move up and then compare it to entry level? Eric Heuser: Hi, Rafe. Eric. Yeah. Good question. It's really kind of a light pivot to where we've come from, right? If we were to look historically we've really been at that 15% kind of exposure to kinda to kind of that tertiary entry level. And, you know, coming out of COVID, as Sheryl suggested, we saw such strong demand there, and really we're discerning how much of that work-from-home was gonna be kinda sustainable. And so it moved up to 20 to 25%, call it. And so it's really a repivot back to 15%. Direct to your question, I would say, yes. When you think about the competitive landscape and some of the peer group that's very focused on that entry level I would suggest that the land market has yielded some opportunity for us, especially as the market has evolved. So I would say, yes, it's in it's what we're good at. It's what we've been historically focused on. From an opportunity standpoint, that's where we're seeing some of the opportunity, and I would expect some good performance looking forward. Sheryl Palmer: And the only thing I'd throw on top of that, Rafe, is you know, when we're talking about the first time buyer environment today, with every sale, it's really working through with them. Can they make this work? When you look at the move up and the Esplanade buyer, it's really should I? Given just the confidence things we've talked about. They have the capabilities. They have the balance sheet. They just wanna make sure that the time, it makes sense for them and they have the time. You know, it's the right time to do it. It's a very different formula when you're dealing with this first-time buyer and how many consumers we have to, you know, pre-approve to try to get the folks that actually can make the final purchase. And we don't see that that is gonna significantly change, in the foreseeable future. Rafe Jason Jadrosich: Okay. That's helpful, and that makes sense. And then just following up on the land side, mid-single-digit lot inflation for '26. For the land that you're contracting today, what's the inflation that you're seeing and is there a point here where we'd expect some relief like this rollover in 2027? How do we think about that through the year? Eric Heuser: Yeah. As far as the land conditions out there, yeah, and as you know, when we expressed in fourth quarter, you know, we really focused on pairing to really the core opportunities, the cream of the crop for us, and I think others have done that too. And so you are seeing kind of a stabilization in the land market, that's resulting in something that approximate zero. So kind of low single digits in terms of land appreciation expectations in the market today. So we are seeing and as we expressed in third quarter too, we've experienced a lot of success in working with sellers and renegotiating pretty much everything that comes through the investment committee. Rafe Jason Jadrosich: Thank you. That's helpful. Operator: Your next question comes from the line of Kenneth Zener. With Seaport. Your line is open. Please go ahead. Kenneth Robinson Zener: Hi, everybody. Hey, Ken. Could you comment on the I know and you mentioned Austin, but could you talk about what the dynamics were that Saudi order rates for that whole segment come down? First. And then second, are you guys going to try to it sounds like you're probably gonna run start in line. With orders, or is there gonna be more of a front end load this year? That's it. Thank you. Sheryl Palmer: Maybe I'll take the first one, and then, Kurt can grab the second. You know, when I think about Texas, it has been a little bit more of a mixed bag, Ken. You know, Austin has probably seen the greatest pullback of volume. But, honestly, our locations are, I believe, best in market. And so we continue to see a strong margin. So we've been okay holding the line a bit there and not giving away quality irreplaceable communities. The good news in Austin is we have seen spec inventory drop more than half over the last year. Land activity continues to be tough, and but the teams are being very diligent in making sure we don't get ahead of ourselves. Houston and Dallas, you know, slowed down year over year, but not what we saw in Austin. We did see Paces hold serve in Dallas. And Houston Paces are ahead of the company average. So like I said, a little bit of a couple of different stories. Similar to Austin, though, margins have held up well in all of Texas. So I think Texas provides the perfect example of the important trade-offs we'll make between price and pace, but we'll take a lower volume to protect the margin. As I look forward, Texas is an important part of the portfolio. I expect the state of Texas to be the highest population growth over the next, you know, three to four years. Curt VanHyfte: And then on the starts front, Ken, the last couple of quarters, we've, I guess, understarted to sales as we've kinda worked our way through our inventory. But on a go forward basis, I envision us being more sticky to the sales standpoint. From a start standpoint on a go forward basis. So that's what kind of we're looking at as we're sitting here today. Kenneth Robinson Zener: Thank you. Operator: Your next question comes from the line of Alex Barron with Housing Research Center LLC. Your line is open. Please go ahead. Alex Barron: Yes. Thank you. I think you just answered one of my questions. The other one was I think there was you know, more price discounting activity from yourselves and other builders in the fourth quarter, but you feel like that's mainly a 2025 thing and that the type of incentives that are now in 2026 has gone back to primarily, you know, rate buy downs and that type of thing, closing costs. Sheryl Palmer: Yeah. I think that will continue to be part of the mix, Alex, as we've said. We continue to personalize our incentives by consumer. You know, when you're dealing with the resort lifestyle, honestly, for them, it's not as much about mortgage buy downs as it is maybe a credit in the design center as they customize their home. I think the competitive market will help guide us there, but once again, I think we're gonna try to hold the line. Certainly, we have some quality assets and large master plans where we're gonna be very careful about the inventory we leak in to make sure that we can protect the values. Alex Barron: How are you guys thinking in terms of specs per community or spec starts? You know, I know there's different price points that you guys are working with, but maybe, like, especially at the entry level, how are you guys thinking about what's the ideal number of specs for your strategy? Curt VanHyfte: Yeah, Alex. We have what I would call a spec management kind of program that we kind of follow. It's a subdivision-by-subdivision or community-by-community kind of basis analysis. In entry-level communities or multifamily communities, we'll tend to have maybe a little bit higher spec counts in those communities. And then as we work our way up the consumer segmentation kind of profile, to the move up and resort lifestyle, we'll have fewer specs that we'll have in the program. But at the end of the day, it all comes down to it's a community by community analysis and what, you know, what the demand is. And so we're looking at those all on an individual basis. Alex Barron: Got it. Okay. Best of luck, guys. Thank you. Operator: There are no further questions at this time. I will now turn the call back to Sheryl Palmer, CEO and Chairman, for closing remarks. Please go ahead. Sheryl Palmer: Well, thank you very much for joining us today where we had the opportunity to share our 2025 results, and we look forward to talking to you at the end of the first quarter. Take care. Operator: This concludes today's call. Thank you.
Operator: Welcome to the Angi Inc. Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. After introductory remarks, there will be an opportunity to ask questions. Note, today's event is being recorded. I would now like to turn the conference over to Andrew Russakoff, Chief Financial Officer. Please go ahead. Good morning, everyone. Rusty here, CFO of Angi Inc. And welcome to the Angi Inc. Fourth Quarter Earnings Call. Andrew Russakoff: Joining me today is Jeffrey W. Kip, CEO of Angi Inc. Angi has also published a shareholder letter which is currently available on the investor relations section of Angi's website. We will not be reading the shareholder letter on this call. I'll soon pass it over to Jeff for a few introductory remarks and then open it up to Q&A. Before we get to that, I'd like to remind you that during this presentation, we may make certain statements that are considered forward-looking under the federal securities laws. These forward-looking statements may include statements related to our outlook, strategy, future performance, and are based on our current expectations and on information currently available to us. Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent quarterly report on Form 10-Q, our most recent annual report on Form 10-K, and in the subsequent reports that we file with the SEC. The information provided on this conference call should be considered in light of such risks. We'll also discuss certain non-GAAP measures, which as a reminder include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call. I'll also refer you to our earnings release, shareholder letter, our public filings with the SEC, and again to the investor relations section of our for all comparable GAAP measures. And full reconciliations for all material non-GAAP measures. Now I'll pass it off to Jeff. Jeffrey W. Kip: Thanks, Rusty. Thanks, everyone, for joining. Just like to start, we are fairly happy with where we've gotten to right now over the last three years. We've given up about half a billion of lower quality revenue. But at the same time, we've doubled our EBITDA and cut our capital expenditures in half, meaning we've swung from real negative free cash flow to real positive free cash flow. At the same time, we moved our homeowner NPS more than 30 points. We've cut our churn by more than 30%. We've improved our customer success rates more than 20%. Actually, in the fourth quarter, we've turned our customer repeat rate positive, about 10%. So we're pretty happy with the progress we've made. We're making a material stair-step improvement in our year-over-year revenue changes, probably seven to 900 basis points. Actually, in January, we grew very modestly. Although year on year, we don't fully expect growth in the first quarter. But we're pretty happy with where we are. We're very optimistic. On top of that, we've reset our margins. We've cleared the capital to invest in long-term profitable growth. And we're just very excited about our prospects in the AI landscape. I'm gonna talk a little bit about that. I think there's a few things to talk about. I think we should talk about LLMs, marketplaces, software, and agentic coding. Different areas, different layers of emphasis there. First of all, when we look at LLMs, we see it as a great opportunity. We're very happy to see LLMs enter and be places where homeowners and consumers generally who have lower knowledge and maybe less frequent interaction go to discover and explore. We've been very successful, building an acquisition on Google, which is effectively the predecessor of the LLMs. Google obviously has its own LLM, where homeowners and customers go to explore, research, and discover. We've been very effective because we have built a network, a deep, broad, and skilled network which Google still finds very valuable as a partner to serve its customers, and we believe the LLMs will as well. We have started working actively, working with every LLM. We have had conversations that are in effective dialogue. We've announced a deal with Amazon's Alexa. We have an app submitted to another major LLM. We're talking live about two technical integrations based on the same technology we built for the app we submitted. And we feel very good about the opportunity there. We think that it's harder for LLMs to go out and build the deep and engaged customer base that we have. Again, we were able to do it and maintain it and sustain it. All the time while Google tried to do the same. So we feel pretty good about our competitive position. We think we can serve as excellent partners to LLMs. In fact, we've deployed LLM technology in our SSR path, in our SR path, in the core customer experience, which we are training with our own proprietary data and experience to make sure that we can land the homeowner to better match. About 35% of our homeowners touch that part of our technology and experience. They convert about 3.3 times as well to a pro selection as the customers that don't. And so as we train that technology, we think that's positioned us better to interact with the LLMs. Our approach with the LLMs is that we can pick up the context and the conversation that the homeowner is having with the LLM at the beginning when Rusty says, have water on my floor. What do I do? Or the LLM can have the full discovery with Rusty and get to the point where we say, okay. We think there's a leak at the base of your toilet. We need a plumber, we can take that information and bring the right plumbers. So we think we can do that effectively. Obviously, pros have separate marketing channels than we do. They go direct to Google. They do a number of things. We actually think longer term we can help them there because we think we're probably at scale, the best there is at finding homeowners who need help from pros. But we think that we will still exist and be able to grow in this environment and we're just very excited to have competition at the top of the funnel and be able to diversify our channels. Let's just talk briefly about then know, our role as a marketplace, some of the things that are being said about software out there and agentic coding. You know, fundamentally, let's focus on Angi as a marketplace. We are an agent. We tap customers on one side. We have data and systems of record. On the other side. We are effectively the execution layer and the UI layer in between. And we get the homeowner's job done, which is finding a pro who can do their home job well, and we get the pro's job done, which is finding a homeowner whose job they can do well. And we act as an agent. We believe that using agents will allow us to be even more effective at what we do and, again, use our proprietary data and systems of record and experience to be stronger and faster at development here in addition to the existing network and customers and the resulting network effects that we already have. A competitor may be able to build an alternate marketplace technology metaphorically overnight in their garage now but they cannot build our network nor our homeowner reach. Or our brand. So we think we're very well positioned. We think further that when you think about software, we think now we have the ability to extend our agents and actually integrate with all of the software out there that our customers use better. For example, we believe that we can act as the post lead communication between the pro and the homeowner to clarify things for the pro, to book the appointment into the pro calendar. Perhaps even book the appointment into the homeowner calendar, send follow-ups, etcetera. We believe we can ultimately integrate also with ERPs and HR systems and anything else that helps the pro move through the chain to get the job done. And so we believe we're well positioned to actually extend our mission. Today, if five homeowners come to us with a job, three of them hire a pro, which is not that different than what we study when homeowners call a pro. Get to something more like seven out of 10 hire a pro once they've made a phone call. But so that's pretty good. Of those three, only one hires a pro. We believe that by using agents we can drive that up to two and then towards three, which will dramatically improve the value created, the retention, the repeat, and our ability to extend the marketplace. So we're actually very excited about this. And then the final piece, I'll just briefly state obviously, there's a lot changed even in the last week or so with agentic coding and what's being written there and the possibilities. We're extremely excited here. Again, we can build something in our metaphorical garage over the weekend. We think this gives us great opportunities to extend our software by using agents and invest and regrow our whole network and business. So overall, we're very excited about the entire landscape. Let's talk a little bit about now, I'll talk a little bit about our business and revenue. And then we'll take questions. Trajectory and then I'm going to let Rusty talk a little bit about margins. First, I'd say we're roughly in the same place we were before. Maybe modestly lower. Previously, we were talking about getting to a little bit of growth in the first quarter and getting to mid-single digits in for the year. I think now we're looking at very modest negative growth but still a material sequential acceleration in the first quarter and maybe low single for the year? What's the difference? The difference is obviously we had pressure. We discussed it on our last call from growth Google SEO and our network channel. In the third and fourth quarters. Between our November call and now, we think that that pressure is extended and so we have gotten more conservative on those channels in the year. What we've historically been able to do is take actions to work on our product, etcetera, and actually change the trajectory of these channels. If you look at just Google SEO, we were down 35 to 40% year over year in mid-2024. We brought that into the double digits, mid-double digits by the end of the year and we expected to continue that trend. We were metaphorically punched in the mouth again in spring and fell to the range of 35 to 40 again, but then we sequentially improved into the low to mid-twenties by mid-year. Then we got hit again in the late summer and thus we were where we were going into the year. What we've done is we've essentially said we don't think we're gonna make progress back. Again, and we're gonna assume Google SEO stays down at that lower level for the year. We're doing something similar with our network channel where we basically have assumed we're not going to improve it in the rest of the year and we're going to kind of get to the second half of the year and stay at that lower level we were in the second half of last year. So we've effectively gotten conservative. We think it's more prudent to look at our full-year revenue that way. And really our focus is on our proprietary business which again we grew 17% in 2025. We're expecting high single low double digits in the first quarter there. We believe that that business can be a solid mid-single digit plus ideally double-digit grower long term. We put a great deal of investment there. We've executed very well and frankly, we've seen our repeat growth, turn in the fourth quarter. So we actually think that the high-quality branded traffic is coming back. And with all of our improvements in the customer experience and what we see in customer behavior, we think it's time to lean back into branded, advertising where we're running TV and streaming and social. We've done this effectively for years. We're basically in a return from the lower level we were at in 2025 to the level we're at in 2024. Which is an effective level for us to spend that, and we think we can do it well. Just talking about the quarters briefly and then I'll hand over to Rusty. In the first quarter, compares get more difficult February, March, in our proprietary channels. We ramped two areas of Google last year first in February, March, and then April, May, which was Google Display. And then Google Search Partners. We got some effective revenue growth, but as we watch that traffic season we actually saw lower win rates than the rest of our channel. And we effectively, scaled them both down. That makes the second quarter in particular difficult compare and a little bit more difficult compare in February, March. So we expect the first quarter with the kind of 60-ish percent, network decline baked in to come in at minus one to minus three. We expect the second quarter to come in at flat maybe a little bit down. And then we expect to get the mid-single digit in the second half of the year as the network channel stabilizes, flattens out and we're able to grow our proprietary and effective long-term rate. And we're optimistic we can do better but that is prudently where we want to guide right now. Again, looking out over the course of the year, we basically think low single digits, let's call it one to three. That's impacted by a few 100 basis points worse of Google SEO and network outlook. It's impacted to the positive side by our brand spend. And then in the first quarter, again, there's a little bit of delay in the product roadmap that came with a rift. Sometimes you have to make a short-term sacrifice for the long-term good of the business. And the first quarter is going to be a bit negative at minus one to minus three. So again, I think we're overall very pleased. It's not quite as high as we want it to be, but again 700 to 900 basis points of acceleration from Q4 to Q1, focused on growth in this year and very strong performance overall and our proprietary channels. And with that, I will let Rusty just talk about our margins and our EBITDA progressions. Andrew Russakoff: Great. So starting with Q1, as Jeff mentioned, we're gonna be deploying dollars for offline marketing which we had in Q1 of last year. We had pulled back on and spent virtually nothing as we were shifting to homeowner choice at that period of time. So that includes increasing our spend in the U.S. It also includes some spend internationally where historically, PV has worked well in Europe in Q1. We had backed off kinda during COVID and after COVID. And now we're reinvesting back, behind the brands. And it also includes $3 million of new creative. We're also begun to ramp up online pro marketing. All of that will drive revenue and profit but on a lag with only part of that returning in the quarter. And so quarter over quarter versus the fourth quarter, our sales and marketing goes up by about eight points as a percent of revenue. Then revenue increases seasonally as you get into Q2 and Q3 with some benefit as well from the Q1 spend flowing into the future quarters. Directionally, we should add $35 to $40 million of incremental revenue into Q2, versus Q1. Where we'd expect also to spend kinda $10 to $12 million more in marketing to acquire the extra SRs. But we won't have any additional creative to expense in the second quarter, and both pro acquisition and fixed costs will be directionally flat on a dollar basis. But better on a percentage basis as the higher revenue comes in, in Q2 and Q3. So together, that will deliver incremental EBITDA in the kind of mid $20 million range versus, Q1 EBITDA in Q2, and gets you to overall EBITDA in the mid-forties for both Q2 and Q3. Then as we go from Q3 to Q4, if we look at last year, our revenue declined seasonally by about $25 million quarter over quarter. If we assume a similar dynamic this year, and roughly kind of 50% margin flow through, and on top of that, we typically expect to pull back on offline marketing during the holidays about $5 to $10 million that directionally gets us back to low $40 million range for adjusted EBITDA in the fourth quarter. Next, I wanted to give a little bit of context as well about the restructuring and how the savings flow through in the context of our overall guide for the year. So the way to think about the restructuring at a high level is that the objectives were threefold. So one, get the cost structure in the right place. Two, create room to make the meaningful investments we're talking about, while, three, also delivering profit growth on a year-over-year basis. So the way to think about the $70 to $80 million of savings then is that first, it's on an annualized basis. So that results in in-year savings in the mid-sixties with $25 million of that as cap labor. And the right reference point for that is what our total cost base was going to be for the year. So if you look at 2025, we had $223 million of fixed OpEx plus $60 million of capex that gets you a total cash fixed cost basis of $283 million which is how we kind of view our capital our cost structure. Now prior to the restructuring, our exit rate finishing the year would have had our fixed cost base increased by roughly $20 million year over year. And post the restructuring, we now expect that number to be approximately $40 million lower year over year which means $60 million in total of reduction off of the pace. That allowed us to free up capital now for long-term ROI positive investment in growth. While still delivering the $10 to $15 million of profit growth year over year we've guided to in terms of higher adjusted EBITDA and lower capitalized wages. And the key investment areas are, as Jeff said, first, the brand marketing. It's an area where we took our foot off the gas in 2025. We pulled back pretty significantly from our historical trend levels. And we are leaning in now with all the positive trends in the customer experience. Second, the online pro marketing, which will be LTV positive, in network and SEO traffic. That we've been discussing for the past few quarters. And which we're forecasting conservatively as Jeff mentioned, so that there are no expectations of turnaround in these channels embedded in our guidance. Of low single-digit overall revenue growth for the year, and if you fast forward to the end of the year, we'll be a mid-single-digit grower, with proprietary growth higher than that and comprising over 90% of the business accelerating and now with better cost leverage, than 2025. So that the top-line growth can have more financial impact over the medium term. Alright. So with that, why don't we open up, go to the queue and we can open up for Q&A. Operator: Yes, sir. First question today comes from Eric Sheridan at Goldman Sachs. Please go ahead. Eric Sheridan: Thanks so much for taking the question and thanks for all the details in the shareholder letter and the prepared remarks. Just coming back to the broader discussion about AI, maybe two if I can. First, curious how we should be thinking about the rollout of AI features as you discussed on the customer side of the platform looking out over the next twelve months and how that gives you, some visibility or confidence interval in some of what you're talking about with respect to a return to growth on the platform more generally? And the second would be, how does owning a consolidated supply side data you know, sort of position you relative to what you want to accomplish when partnering with LLMs? Curious on that. Thanks so much. Jeffrey W. Kip: So I'd say on the first the main area where we put focus on AI in the customer path today is, the AI helper in our SR path. What we are doing with that is we're continuing to experiment with how we have more homeowners use it effectively because what we're interested in doing is driving up the number of homeowners who connect with the right pro. Again, 35% of our homeowners currently do it and are 3.3 times as likely to actually choose a pro in our, you know, UX and UI. We'd love to drive that to fifty and sixty and sixty-five, and we're currently actively running tests. We recently ran a test that picked up about 5%. And so we're pleased with that. And we're going to continue developing there. We are looking at other applications such as what I referenced with post lead communication which we think can again help stabilize and get the homeowner to meet the pro and move towards a job done well. And we're looking at how we might apply it in other areas of the product, what as well. That is as I said sort of a backdrop to integrating with LLMs, the more effective we are there, we're working with a white label LLM on our platform, the more effective we are there. The more trained our data and our AI implementation is when we interact with the context that comes to us from an LLM that a homeowners entered there. And your second question what was the second question? Eric Sheridan: About the supply side. Jeffrey W. Kip: Okay. The supply side. Sorry. Again, the way we look at the world is you have customers, you have agents which have generally historically been human agents or software algorithms with again, UX and UI in between, and you have a system of record or a data layer. The system of record or the data layer is what allows you to perform the agentic task well. If I have the data on the customers, I can be far more effective as an agent on the customer's behalf. If I'm a human agent and I don't know my customer, I can't really deliver my product or service well without understanding the customer. So we fundamentally already have a system of record about customer behavior, success, etcetera, where we can understand our customers. And so when we go and we take our pro customers and actually our broad homeowner experience, so when we go to an LLM and we see a set of context or searches or queries come in, we can take that and compare it to our customer data effectively, run it through algorithms, use an agent, and make the connection better than if we didn't have that. So that's a reasonable moat we have at the scale we operate at for the number of years we've operated at. And we think it puts us in a very good position to effectively partner with the LMs in the same way that we've effectively partnered with Google by taking clicks with some context from Google and matching the homeowners successfully on our platform. Worked well for them in terms of monetization, worked well for us and it's ultimately working better and better in terms of the customer experience. Eric Sheridan: Great. Thank you. Operator: Thank you. And our next question today comes from Sergio Segura with KeyBanc. Please go ahead. Sergio Segura: Hey guys, good morning. Thanks for taking the question. I had two. First, just hoping you can explain the rationale for tripling the brand's brand this year and why it's the right timing to do that now? And what kind of lag we should expect before that spend translates into incremental service requests? That's question number one. Then question number two is just on the proprietary channel as you lap homeowners choice this year, how should we think about the normalized growth rate for that channel? Thank you. Andrew Russakoff: Thanks, Sergio. It's Rusty. So first on the brand spend, if you put into the context of what this company has spent, on offline marketing over its history, we're really now just going to be, in 2026, returning to 2024 levels. So it's not last year, we took a step back as we were digesting the changes from homeowner choice but we're not stepping we're not increasing to levels that are you know, above anything where we've spent profitably in the past. I can talk a little bit about how our approach and how we, get confident with our ROI. So you know, in TV, in particular, we have a data partner that has, is connected through on a decent percentage of TV sets across America. And we're able to actually pair the IP addresses of people when they see our ads. And pair that against the IP addresses of people who submit service requests. So we have pretty good visibility into kind of the uplift from our TV spend. You know, it's not as precise as other digital channels, but we we've honed this over a couple of years. And we have pretty good visibility relatively to be able to measure the ROI from our TV spend. And then kinda at the back half of last year when we were spending TV at but at lower levels, we kinda dialed in, changed our strategy a little bit and our channel and station daypart mixes. And so we're getting a pretty good ROIs on that spend. So between that, the results, our ability to measure this, and having the the strongest brand in the industry, and be profitable. we feel pretty confident that we can spend at these levels. Yes, would just add it takes a little while to build. So your first quarter incremental spend is going to pay back the least well. But it's going to ultimately pay back long term. There's a tale of months on this stuff. And as we add the incremental is taking a little more to pay back. So, you know, we're gonna pay back, I don't know, three quarters in year with a tail outside of the year. But the the the other point I want to make is we we we kinda went on defense last year. We made a material change to the UX. We were working on correcting our customer experience. We wanted to ride through that in the first quarter and then we wanted to deliver our target adjusted EBITDA last year, which we did. And so we pulled back our marketing spend to sort of make sure we would do all that. I think with the way our customer experience has moved and with the upside we now have, with not only homeowner and choice in, but we've rewritten most of the questions in our Q and A. We've implemented the AI helper in the Q and A. We've moved all our pros into a product where they can choose task and zip. Our new pros who are coming in online are looking at the job before they opt into them. We have a multiplier effect on the level of matching, and we believe we should go back on offense. Going back on offense just means going back to the 2024 spend where over time we believe we were better than breakeven. Although, again, there is a tail on that. So we do feel pretty good about it and it is baked in to our overall revenue growth. Alright. And then, your second question, Sergio, was about kind of normalized growth rate for proprietary. So we're now we're splitting out and we're showing you our proprietary and network revenue on a revenue basis now. So Q4 was 23% and for the full year of 2025 it was 17%. So that's, you know, good visibility into kind of the two pieces of our business. And, you know, for 2025, you have a grower like that and you have decliner on the network side. That ends up combining to be a decline or overall. But as we kind of progress forward on the proprietary side, we're saying overall revenue and in the year in the mid-single-digit range. Probably be high single digits that means for for the proprietary business. And going forward, proprietary revenue, we think, is high single digits, continues there. Or even low double digits. Depending on where we can get with pro capacity. And continuing to make progress in our paid proprietary channels. And the impact of branded marketing. Sergio Segura: Okay. Thank you. You can go to the next question. Operator: Our next question comes from Daniel Kurnos with Stacks. Please go ahead. Daniel Kurnos: Great, thanks. Good morning. Rusty, you actually just brought up the first question I had, which is since you guys are leaning back in now and we're starting to see, you know, the advancement in proprietary SARs, just curious since the network is still declining nominally, what is happening with pro capacity? And then secondarily, you guys flagged on the last earnings call and in the shareholder letter that you're doing a global, platform consolidation. So maybe, Jeff, just give us an update where you are on that front, any disruptions that we might expect to see. I think you called out one in your prepared remarks but just curious if there's anything else we should be expecting on that front. Thank you. Jeffrey W. Kip: Let me take the second question first. By cutting the organization by 40%, we think we've extended by a quarter or two the timeline in getting to our final single platform. But we have built our timeline in a way that we do not believe there will be a disruption to the business. And what in fact we are doing is we are going to deliver in stages. So first up on the rebuild is our new homeowner experience. Our current homeowner experience, which comes from the start of what we call the SR path where the homeowner enters the funnel and starts answering questions to choosing a pro and then managing their post-selection project in a projects page. That's the core homework experience. That's the first thing we're gonna get rebuilt. It's rigid technology. It's old. It's very difficult to iterate quickly and improve, and we are rebuilding in what we would call a componentized way. But the componentized and more flexible way is we can skip steps we can pick up from different channels at different stages of the flow. If, for example, we had somebody in a hardware store and we had a QR code, and they were looking specifically at a mini split. To do heating and cooling in their addition. We could pick up right there that they're in the mini split aisle and be very clear very quickly on where to drop the mini experience, which would boost conversion, it would boost matching. We cannot do that today. Somebody who scans a QR code with a mini split in front of them has to start with you know, what's your zip code, what's your category. So it's gonna enable a bunch of things including making even better any integrations with LLMs and other partners. That is the first thing we're going to deliver and then we're going to move on to delivering the pro experience and so forth. Now we could change order. I think we're currently looking at software we might build with agentic coding and how that's gonna work. But that being said, we don't anticipate disruption to the business. We actually anticipate enhancing the business and the customer experience as we go. And maybe we're a quarter or two later than we initially anticipated. But there's a lot of green left to cover there. Andrew Russakoff: I'll cover pro capacity. So, the past couple of years, but in particular last year, we've completely changed the way that we acquire pros and organize our Salesforce. Especially with the single pro initiative where we're selling a single product or a sales force on a single platform. We've changed up the prospect mix and the kind of offer strategy. So we're selling much bigger pros. With bigger packages but less pros. So our nominal amount of average monthly active PROs is still down year over year. But the capacity per pro is up. Our revenue per pro is up. And the overall capacity of the network is actually up, when you net those two factors against each other. Now the complexion of that will change a little bit next year as we lean into selling more large pros and we're talking large pros, we're talking quite large pros. So those will be fewer in number, but much, much bigger. So they'll have less of an impact on our kind of nominal accounts, but they'll drive a lot of capacity. And then on the completely flip side, as we ramp up online enroll, we'd expect those to be kind of lower capacity, smaller pros but we'll be able to acquire them at a much greater scale. So then when you look at our acquired pros, you can see we've actually you know, we're we were down 23% this quarter but versus Q1 we were down 41%. So that those year over year declines have been narrowing. And as we roll out online enroll and ramp up that, we expect our acquired pros to flip over into year over year growth in 2026, and then that on a lag will result in the growth in our overall average monthly active pros in 2027. So that is how it all kind of comes together where we have capacity growth already right now in the network year over year just based on the mix shift in the pro base. We'll get to acquired pro growth in 2026 due to online enroll and then overall kind of nominal network growth in '27? Daniel Kurnos: Very helpful. Thanks, guys. Operator: Thank you. And our next question comes from Stephen Ju at UBS. Please go ahead. Stephen Ju: Alright, great. Thank you. So Jeff, so instead of just thinking about AI as being you know, a challenge, there's probably an opportunity for Angi to present a differentiated consumer experience going forward. Given the data that you have. So from a tech stack perspective, you know, what do you need to build or change to take advantage and move up the marketing funnel and become that destination platform. And secondarily, sort of a macro question here. We're, of course, getting different cost currents. So I was wondering if you can weigh in on what you're seeing. Thanks. Jeffrey W. Kip: Okay. I'll take the first question. I'll let Rusty take a shot at the second one and add, if I could be helpful. Look, think basically in terms of the tech stack, what we've said is we have legacy technology which we've got to replace with modern tech technology as a single platform. We are doing this all shall we say AI first. Which means our intent is to integrate AI. We've always used machine learning and algorithms but we can use effectively conversational AI interfaces and obviously the advanced capabilities of LLMs to improve the customer experience. So anything we do new, we are doing with the idea of being AI first in the product. I think secondly, we are thinking about how we build new pieces of software with the genetic code that may actually replace some of our legacy technology or augment. What we have to be able to do then is integrate effectively, through APIs or otherwise to deploy that new software. So I think we have to put some thought into how we do that. But this is actually sort of timely. We are in the middle of shifting to a new modern platform at the same time that really high-powered agentic coding has arrived and we are going AI first. So everything we are doing is with the thought of just as I described in response to Dan's question, we want to be able to deploy in a more componentized way to multiple surfaces and channels and we want to be AI first in the deployment in order to drive the right matching and actually ultimate job done well, which drives value and actually growth and long-term resilience of the business. Andrew Russakoff: Yeah. And then on the macro, reflecting back on 2025, there was kind of April Liberation Day volatility recovered a little bit from there. And then heading into the kind of the end of the year, you can see in the consumer confidence surveys, you know, kinda down 20 to 30% in the last couple of months of the year and pointing in the same direction for January. And so what we've seen and talking to partners and competitors and such is a little bit of weakness and pressure on volumes. We see a little bit lower mix down in kinda job values and consideration overall is what we're seeing and what's embedded in our in our numbers and our outlook. Overall, what we tend to see if it gets into a recessionary environment, is, you know, it gets a little bit harder to get SRs. It's a little bit easier to retain the pros. And our business generally has a pretty material amount of ballast due to the fact that we're two-thirds of the business is in kind of nondiscretionary tasks. Whether you cut it by service request, leads, revenue, and pros. Stephen Ju: Thank you. Operator: Thank you. And our next question today comes from Cory Carpenter at JPMorgan. Please go ahead. Cory Carpenter: Hey, good morning. I had two as well. Just hoping you could talk a bit about the revenue per lead decline. I know you called out that in the shareholder letter. So just maybe expand on what you're seeing there. Then secondly, with share repurchases paused, I think you're not able to do share repurchases for a period of time going forward. After the spin. So maybe just help us with how you're thinking about capital allocation. The coming quarters. Thank you. Andrew Russakoff: Thanks, Cory. Yes, so on the revenue per lead, we mentioned that it's we're delivering additional leads to subscription pros. The way the subscription product works is that pros pay kind of a fixed amount. And we deliver leads up to that value. If we're able to kinda optimally just get it exactly that amount, that's not really how it works. If we have a homeowner that comes in, submits an SR, and the only pros available are people who are already kind of at their subscription caps. We wanna deliver the best experience. And so we still will deliver that lead to these pros. So it's possible that subscription pros get additional leads that we're not able to monetize. So that'll show up as higher leads even though we're not able to get additional revenue for it at the moment. And, mechanically, that just results in downward pressure on revenue per lead. What's going on beneath the surface is that we have the ability, we have features and functionality that we'll be rolling out to allow us to monetize better monetize some of those additional leads similar to how the functionality and the product works. In Europe, and just in terms of the phasing of how we rolled out a single pro and the subscription product in 2025, it was on the road map, and it's just coming out, over the next couple of months. Okay. And then capital allocation. I think as you pointed out, we bought the prudent amount possible post spin. It's usually a two-year window, so that would put us at next April 1. And I think there's a couple of things. One is we have $500 million of debt on our balance sheet coming due in 2025. So we're keeping our eye on that. And thinking about where we finance. We think we're in great position with that. We think that between the cash flow, we generate year our balance sheet and our credit line we have that actually fully covered. So that's just a consideration in terms of capital structure and capital deployment. We would not be against value creating tuck-in acquisitions, but we don't have any in mind. We would do them at appropriate multiples and make sure that they weren't creating too much complexity in creating. So we'd never rule that out. And then I think we have to see where things play over the next year and where we get to in terms of next April 1. And I think long term, we would obviously with our ability to generate cash, if our stock stays at the levels it's at, we would still think about buying in the stock and I think you could never say that a dividend is off the table either. So there's nothing imminent on that. Again, we're more than a year away from doing more share buybacks but I think we're in a pretty stable position and I think that's how we're thinking about it. Andrew Russakoff: And I'll just jump in for one sec just because, Jeff, you said that the bonds are coming due in 2025, but there's 2028. But there's oh, I missed Yeah. I just wanted to correct the record. Sorry. Yeah. August 2028. Jeffrey W. Kip: Thank you. Yeah. No problem. Operator: Thank you. And our next question today comes from Brad Anderson of RBC. Please go ahead. Brad Anderson: I had a couple follow-ups. I sorry. On the first one, may have missed this, but can you just quantify what the current exposure is to the SEO headwinds at this point? And then just kinda how to think about how that evolves over time? And then second, on the Google competitive front, can you just remind us sort of or describe a little bit what's having kind of the most acute impact, whether it's just kind of the usual run of the mill algo changes, including content versus maybe Google advantaging some of their own service provider customers. Or maybe a bit of both? Just help us zoom in a bit closer on kind of what's happening there and how you manage that. Andrew Russakoff: Yeah. So, on SEO, currently at around 7% of SRs, leads revenue, is coming through SEO. So that that's kind of the current exposure that's obviously been coming down over the past couple of years. And the way as we mentioned, the way that we're thinking about it going forward is that you know, we'll continue to treat that as a source of homeowners that we wanna be able to continue to acquire. But, generally, Google is incented. To continue to capture as much on their own of their own real estate as possible and not make it available to everybody else. So we're planning the business accordingly. To be able to take as much of that share as we can. But we're, also focused, primarily on growing our proprietary sources of traffic through every other channel. And that's how we've been able to continue to we've been able to grow our proprietary revenue 17% overall this past year, and now notwithstanding that we've had kind of a piece of it, which was this SEO headwind. Working against us. Jeffrey W. Kip: Yeah. And I think if you look forward, you have to understand that there's a couple points of drag on our proprietary the next couple of years in our mid-single-digit plus outlook for proprietary that we gave for the back half of the year and we're hoping to exit higher. And obviously, that number shrinks every year as the percentage goes down. I think the way we look at this is that you know, unless there's some external intervention, we don't think Google has any incentive to give anybody any free traffic. It's obviously how they built their platform and their business, but they have somewhat aggressively moved away from it over the last period of years. So I think in general, the free real estate has receded a great deal and that's Google. I also think there's been some algorithm changes that have moved back and forth. I'm not sure that they've net impacted us a lot more than others over the last couple of years, and those are sort of always going back and forth and we have a team who's always working to try and make sure we stay on the right side of those, understand them and react. But in general, our approach is to put out high-quality pages that get good engagement and we think ultimately Google's algorithms are designed to reward that. That being said, we do not think they will increase free real estate and not only do they have a disincentive to do so, but now I think they have outside competition. I think secondly, everybody knows ten years ago or so they moved more aggressively into the local services advertising space in addition to their map product. And so they actually created a product which a lot of our pros use alongside of us. I don't think it's more effective than us. Know, some pros would argue we're better, maybe other pros would argue they are. But we've still effectively built our business with that going on, but they took more of the SERP that way. They've also pulled more paid ads up in the SERP. And then I think finally, obviously AI overviews are a different matter. We're actually surfacing really well there, but not getting the clicks. Again, Google doesn't have right now a lot of incentive to have people leave the AI overview or the Google AI mode ecosystem. They are working towards selling ads there and we are actively engaged in understanding how to buy ads there. I referenced their AI Max product, on the last call. And how we're expanding gradually wherever it makes sense. Into using that product versus the tROAS and the TCPA or some of their other bidding products and they would tell us that it gives us better exposure potential paid ads in AI mode and so we continue to lean in there. Again, we've been extremely effective buying on Google. We grew our SEM well over 50% in the last year. And we think we can be effective. We don't think they're taking ads away. So we do think that we'll be able to continue to buy, but we also think they have no incentive to let anybody drive down the highway for free anymore. Because they are trying to grow and be a business. Brad Anderson: That's great color. Thanks, guys. Operator: Thank you. And our next question comes from Youssef Squali with Truist. Please go ahead. Youssef Squali: Thank you so much. So maybe just a follow-up on that last question around AI and LLMs. Can you just remind us what are the various LM platforms you're integrated with today in the process of being integrated with and any early learnings or any early insights into kind of how that traffic is kinda behaving and, you know, kinda the the the the cost of customer acquisition through that Again, understanding it's pretty early. And then Rusty, remind us again of the difference in margin profile of service requests and leads across proprietary network channel, please? Jeffrey W. Kip: So Youssef, we're not going to name names publicly until we name names publicly. We have literally had some dialogue with every one of the major players. We've submitted an app to one of them. We're working actively on an with another one. We did make an announcement about Amazon Alexa who is in turn talking to another LLM and we've talked to the other. So we're looking across all of them. We do not have anything live right now, and we are getting a little bit of modest traffic free from some of the platforms, but it's sort of hard to parse and it's performing the same way as other organic traffic I would say. We don't have a lot to report, either naming names or we don't have much data because we don't have much actual flow. But we are actively in the mode of getting our app up and working and we've been able to test those in controlled environments and we think it's going to work very well. We think the best proof of concept there is what's happening when we deploy with an LLMR on our site where we, you know, 3.3 x our conversion to an actual, pro selected. Andrew Russakoff: Yes. And then on the profit profile of the of the SRs through the different channels, it used it previously was network channels were more profitable prior to homeowner choice. By introducing homeowner choice, part of the dynamic was intentionally was that we want to bring that experience to be to parity with our proprietary experience, which involves some intentional an extra step of choice where you have to choose the pros and it makes it you know, by by doing that, we reduce some of the profitability of the the network experience. And now it's pretty comparable between the two channels. Maybe a little bit higher on network channel. But it's pretty comparable. Youssef Squali: Okay. That's helpful color. Thank you both. Andrew Russakoff: Alright. I think we have time for one more question. Jeffrey W. Kip: One more, though, not a not a multi-question. Operator: Yes, sir. Our next question comes from Matthew Condon at Citizens. Please go ahead. Matthew Condon: Great. Thank you so much. Just wanted to ask maybe a follow-up on an earlier question. Just the leads per service request, that increased pretty meaningfully in 4Q. And I was just wondering if you could help explain the underlying dynamics there. And then maybe just a quick follow-up, just on consumer marketing expense, I know that you were leaning into brand spend in 2026, but 4Q also saw a pretty big step up or acceleration in consumer marketing expense. Just wanted to hear any thoughts or anything that you guys are seeing that maybe led you to lean in 4Q? Thank you so much. Jeffrey W. Kip: So in terms of the fourth quarter, I think we saw a couple 100 basis points of accelerated as a percent of revenue but it was actually consistent with the second quarter. So I don't think it was a material acceleration either. It was a decline in total spend and a modest increase, but consistent with the second quarter. I would say overall through the year as we lose SEO, and we lean into our paid channels where we're effective, we have seen an increase in marketing as a percent of revenue just as you follow through the year. I think that that's how we think about the third to the fourth quarter. And then the first question. Yeah. The leads per SR, Matt, it's very similar to the response to Corey's question. Where we have additional leads that we're sending to subscription pros. Right? So when the homeowners come in, we have subscription pros on the platform. And they're available even though that we've kinda capped them out and they're they're maxed out on what their contract values are. We're continuing to connect them to the homeowners and that just results in kinda mechanically more leads, on HSR. Jeffrey W. Kip: So look, let me just wrap up. With a couple of key points, which is when we started this year, think we said revenue growth would be minus 12% to minus 16 really driven by homeowner choice. We landed the plane, gave up over $250 million of the network revenue. We landed the plane at minus thirteen. The center of our range was kind of a 140 to a 145 of adjusted EBITDA. That did include too high confidence, $5 million one-time income items. We delivered one forty without those two tens. As we look out to next year, our one forty-five to one fifty excludes those two tens, which we still think are coming in. If you added them back in, we'd be at one fifty-five to one sixty. The other thing I just sort of point out in terms of profitability is finished last year with 140 of adjusted EBITDA and 60 of CapEx. The delta is 80 when you take the CapEx away from the adjusted EBITDA. We're going to 145 to 150 minus 55, which means we're gonna be solidly at mid-teens growth. On modest revenue growth, but we are returning to revenue growth. We've actually done it in January. We're just not forecasting it because of comparisons and product slippage in the first quarter. And then we're going to proceed essentially on the same path with some more conservative expectations going forward. So we entered the New Year having taken the action we took in January with the reduction in force and the restructuring with more durable margin, back to historical investment in our long-term brand asset. We are the leading brand in the industry. We let the investment slip last year for very specific reasons. But we're going back on offense because we feel extremely good about the movement we've made in customer experience. We believe we have a tailwind with all of the change that came in through the year. We believe we have material opportunity on the large pro side of the business. If you look at pros with 10, 20 employees or more, they're two-thirds to three-quarters of market. We're under 1% penetrated there. We're 4% plus penetrated in the small pro. We think we have very significant opportunity and we're investing there. And we think we have all kinds of opportunity. I won't go through my whole opening remarks on AI, think we're super excited and optimistic, and we think we're on the same trajectory but stronger in terms of profit and cash flow than we were before. And we think we have a nice solid durable business here that as an agent as we've always been can really accelerate in the AI world. So with that, thanks everybody, for coming. Appreciate your listening and we look forward to working with you and talking to you in the quarters to come. Operator: Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day. Operator: Everyone else has left the call.
Operator: Welcome to the GXO Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. My name is Daryl, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If anyone should require operator assistance during the conference, please note that this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements, the use of non-GAAP financial measures, and the company's guidance. During this call, the company will be making certain forward-looking statements within the meaning of applicable securities law which, by their nature, involve a number of risks, uncertainties, and other factors that can cause actual results to differ materially from those projected in the forward-looking statements. A discussion of factors that can cause actual results to differ materially is contained in the company's SEC filings. Forward-looking statements in the company's earnings release or made on this call are made only as of today. And the company has no obligation to update any of these forward-looking statements except to the extent required by law. The company also may refer to certain non-GAAP financial measures as defined under applicable SEC rules during this call. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earnings release and the related financial tables are on its website. Unless otherwise stated, all results reported on this call are reported in United States dollars. The company will also remind you that its guidance incorporates business trends to date and what it believes today to be appropriate assumptions. The company's results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic conditions, and consumer demand, and spending, labor market, and global supply chain constraints. Inflationary pressures, and the various factors detailed in its filings with the SEC. It is not possible for the company to actually predict demand for its services, and therefore, actual results could differ materially from guidance. You can find a copy of the company's earnings release, which contains additional information regarding forward-looking statements and non-GAAP financial measures in the Investors section on the company's website. I will now turn the call over to GXO's Chief Executive Officer, Patrick Kelleher. Mister Kelleher? You may begin. Patrick Kelleher: Good morning, and thank you for joining our fourth quarter and full year 2025 results call. Joining me today are Baris Oran, Chief Financial Officer, and Kristine Kubacki, Chief Strategy Officer. GXO delivered a strong finish to 2025, setting a solid foundation to accelerate organic growth and profitability in 2026 and beyond. When we spoke last quarter, I shared some of my early observations about GXO, where I see opportunities to improve the business to accelerate organic growth, and sharpen operational execution. I'd like to spend most of my time today discussing the recent leadership actions that position us well to grow and expand margins. First, let me share the highlights from our record quarterly and full year performance. For the fourth quarter, we delivered record revenue of $3.5 billion and record adjusted EBITDA of $255 million. We did the same for the full year. Total revenue was a record of $13.2 billion with every region delivering organic growth. And full year adjusted EBITDA was a record at $881 million. Even against a dynamic macro backdrop, the strong results we delivered clearly demonstrate the value we create for our customers and the resilience and predictability of our business model. New business wins were $1.1 billion in 2025, providing good visibility to accelerating growth in 2026. During the fourth quarter, we won significant business in both strategic and established verticals, including notable contract wins in the life sciences sector, several aerospace and defense sector wins, as well as a notable win with a global apparel brand. We have $774 million of expected incremental new business revenue already secured for 2026. This is an increase of over 20% compared to this time last year. I'll let Baris and Kristine discuss our financial outlook and new business wins in more detail in a few minutes. But I'm pleased to announce that we've released our 2026 financial guidance today, which at the midpoint shows accelerating organic growth, adjusted EBITDA margin expansion, and an increase of 20% adjusted diluted EPS growth at the midpoint. I want to recognize and thank my GXO teammates for these results. Together, we are building a culture anchored in speed, accountability, and customer intensity. And that culture is directly fueling our performance. As I shared last quarter, GXO has very strong fundamentals. We are the industry leader in tech-enabled fulfillment. We have strong regional businesses, deep operational expertise, and a compelling commercial engine. Our scale, global footprint, and expertise set us apart in both execution and capability breadth. And we are well-positioned to lead what's next in the deployment of automation, robotics, and AI versus peers. My focus right now is to bring our strengths together to operate as one global organization. Deliver faster growth, higher margins, and sharper execution. Over the past five months, we've announced new leadership in three key areas: commercial, operations, and our Americas and Asia Pacific region. These changes are primary accelerators designed to, number one, scale consistent operating standards across the organization to sharpen execution and drive margin expansion. Number two, to sharpen growth priorities and go-to-market disciplines to accelerate organic growth and three, grow our market share in the US. I see opportunity to strengthen our operating model by moving from regional strength to global leverage. Our regions are strong. And there's clear upside from better connecting what already works across the network. Operating in a higher gear will come from deploying consistent operating standards, sharing best practices, and standardizing what is best in class. To be clear, it is not about one standard for customers. We will continue to deliver the customized solutions that set us apart. It is about establishing one way of working as a global team. The new chief operating officer role is a critical step in enhancing our operating model. Bart Beeks joined us in January after more than two decades at CEVA Logistics, most recently as COO. He brings decades of industry experience and proven expertise in driving increased productivity, efficiency, and greater value for our customers. Bart's mandate is to scale a single operating methodology across our global network, creating a flywheel effect spanning solutions, and seamless implementations. To service delivery, continuous improvement, and renewals. Productivity gains will come from better labor planning, network-wide best practice replication, and operational visibility. All key levers behind margin expansion. Bart will also lead the operationalization of our automation and technology strategy, as we accelerate our leadership in this area. We are already at the leading edge of AI in our industry and we plan to move even faster in AI and robotics this year, particularly with humanoid robots. A key focus will be the continued rollout of GXO IQ, our AI-powered warehouse operating system. GXO IQ's AI capabilities are already improving labor planning, inventory distribution and movement, forecasting, and workflow management across several of our largest sites. We see the technology amplifying our competitive differentiation as supply chains become more complex and data-intensive. This has the potential to be a real game-changer for us. As we move through the year and into 2027, we expect to drive clear productivity benefits, as we increase proprietary AI applications across our footprint. I'm also very excited about our progress with physical AI and humanoids. I believe humanoid technology will be a game-changer for our industry and we have the pole position. GXO was the first to deploy this tech in a live operating facility. As we've collaborated with top robotics developers, we are driving significant improvements in the sophistication of warehousing tasks that can be undertaken. Commercially, I also see significant opportunities to operate in a higher gear. Not all growth is equal. And we will be very deliberate about where we lean in. It is about building a clear unified global approach to customer relationships, and pricing with an initial focus on accelerating sales in select B2B verticals and longer-term identifying geographies for expansion. Karen Baumer joined us two weeks ago as chief commercial officer from ABB Industries. She brings expertise in commercial strategy, and driving growth across the energy, industrial automation, and retail technology sectors. Her mandate is to tighten execution through more consistent global engagement, sharpen go-to-market execution and strategy, ensure pricing reflects the value that we deliver, and improve the speed and consistency of our commercial processes. As we discussed last quarter, the growth opportunity in the contract logistics industry is huge. With a total addressable market exceeding $500 billion, we see meaningful opportunity to increase market share, by expanding the pipeline and improving our conversion rates. The good news is that we're already accelerating our momentum in priority B2B growth verticals, aerospace and defense, life sciences, industrial, and technology, specifically data centers. We achieved another sizable win in life sciences in the fourth quarter, and won several aerospace and defense contracts with Boeing and BAE Systems among others. While continuing to see strong demand in omnichannel retail, a core strength. Bridging both elements of growth and operational execution is our North America Division. We have a great platform in North America, with leading positions across the consumer, technology, aerospace, and industrial verticals. The US is our largest and most immediate growth lever to accelerate organic growth given market demand, vertical mix, and the scale advantages that we can unlock. Also expect this market to be the epicenter of technological innovation as we look to capitalize on opportunities with AI, and humanoids to drive greater warehouse productivity. Michael Jacobs, who I've known for more than twenty years, took the helm of our North America business three months ago. He is intensifying focus on operational performance, increasing labor productivity, and winning new business by reallocating investment to solutioning, sales, and digital marketing to realize the opportunity that we see. These three leadership changes are strategic accelerators. It's about running the playbook with greater alignment, scale, and pace. In closing, in 2026 and beyond, we have a solid foundation to build on, and I'm very excited for the future. Profitable growth is the priority. And over the past five months, we've moved with speed. Strengthening the leadership team that will execute on the opportunity ahead, simplifying our structure, accelerating expansion in priority B2B verticals, and coming together as one team to define the ambition of the company for the future. With that, I will hand the call over to Baris. Baris Oran: Thanks, Patrick. GXO has built momentum through 2025, with the fourth quarter performance reflecting the power of our resilient business model. With record revenue, adjusted EBITDA ahead of our original full-year guidance, and robust free cash flow, we are delivering on our commitment to drive profitable growth. For the full year of 2025, we generated record revenue of $13.2 billion, growing 12.5%, of which 3.9% was organic. We delivered adjusted EBITDA of $881 million, growing 8%. Our adjusted diluted earnings per share was $2.51, and we delivered adjusted net income of $292 million. In 2025, GXO delivered record revenue of $3.5 billion, up 7.9% year over year, of which 3.5% was organic. Every region delivered organic revenue growth, highlighting the value of our contractual business model, throughout a dynamic trade and macro environment. We delivered record adjusted EBITDA in the fourth quarter of $255 million, ahead of the implied midpoint of our guidance at $249 million. We delivered net income in the fourth quarter of $43 million and adjusted net income of $101 million. Our diluted earnings per share was $0.37 and our adjusted diluted earnings per share was $0.87. Our free cash flow in the fourth quarter was $163 million and we delivered our target adjusted EBITDA to free cash flow conversion for the full year. We remain disciplined in our capital expenditure and working capital management, which allows us to continue to invest in our business with high returns. Our record operating return on capital remained consistently strong, driven by solid operating performance. Our leverage levels improved to 2.5 times net debt to adjusted EBITDA, even after executing $200 million in share buybacks in 2025, at an average price of $37.34. We also successfully completed our first European bond offering, securing EUR500 million on competitive terms, and using the proceeds to refinance upcoming maturities. Our balance sheet is strong and positions GXO for long-term growth. The integration of Wincanton is moving at pace, and we are on track to deliver the run-rate cost synergies of $60 million by 2026. We also expect to gain significant revenue synergies over the coming years. Given our excellent operating performance in 2025, I'm pleased to share our 2026 guidance, where we expect to deliver organic revenue growth of 4% to 5%, adjusted EBITDA of $930 million to $970 million, an increase of 8% at the midpoint, adjusted diluted earnings per share of $2.85 to $3.15, an increase of 20% at the midpoint, and adjusted EBITDA to free cash flow conversion of 30% to 40%. With strong operating performance, a solid financial foundation, and a robust sales pipeline, GXO's resilient and predictable business model continues to deliver exceptional value to both our customers and shareholders. With that, over to you, Kristine. Kristine Kubacki: Thanks, Baris. Morning, everyone. With the fourth quarter and full-year results demonstrating the strength and resilience of our business model, I want to provide more context on the drivers of growth, the durability we see across our business, and how we're positioning GXO for the next phase of value creation. Patrick has been clear about our priorities of that strategic roadmap: accelerate organic growth and expand margins. And from where we sit, two aspects of GXO's story continue to gain traction: the resiliency of our contractual, highly diversified business model and the durability of our organic growth across cycles. These pillars enabled us to deliver another record year of performance in a dynamic macro environment. And more importantly, they give us confidence about the future. On growth, we are making significant progress building our global relationships with blue-chip customers and expanding across geographies and into high-growth verticals. During the fourth quarter, we won $248 million in new contracts, bringing full-year 2025 wins to $1.1 billion. Critical to growth are significant opportunities in fast-growing, high-value verticals such as life sciences, aerospace and defense, and industrial, specifically data center infrastructure. These areas remain a strategic focus for us, and I'm excited to share the meaningful progress we've made this quarter. First, in life sciences, we're gaining good momentum in the $34 billion life sciences vertical. Even with the largest win in the quarter, with another notable win in Q4, our life sciences pipeline continued to grow quarter over quarter, with several new strategic opportunities. Second, we're seeing increased activity in aerospace and defense, and industrial across all our regions. During the quarter, we further expanded our partnership with Boeing, won new business including BAE Systems and Thales, the direct result of the Wincanton acquisition. We also established a defense advisory board in the US comprised of defense industry experts. This board will provide market insight and strategic guidance on business development. Third, we continue to build momentum in the fast-growing data center market, a critical part of the rapidly expanding AI and cloud infrastructure ecosystem. As a key logistics partner, the complex supply chain, we are well-positioned to capture share in the $28 billion technology vertical. During the quarter, we secured five new contracts, including for the first time wins across multiple regions with a leading hyperscaler, demonstrating our ability to scale globally with high-growth customers. Looking to the growth outlook for 2026, our $2.3 billion sales pipeline is robust and well-diversified across regions and verticals. Altogether, our recent wins translate to $774 million in incremental revenue already for 2026, up over 20% from where we were at this point last year. This gives us confidence in our 2026 full-year guidance and provides visibility into our long-term growth trajectory. The second priority Patrick outlined was strengthening our operating model to drive even better profitability. Core to driving operational excellence is our leadership in automation, technology, and AI. GXO IQ accelerates this differentiation, bringing best-in-class consistency and security while driving clear productivity benefits for our customers. We began successful pilots of GXO IQ in the second half of last year and are excited by the early results, especially in the areas of proactive replenishment and slotting. GXO IQ is expected to go from pilot to scaling across more than 50 existing sites this year. And in automation, by 2026, we expect to have nearly 20,000 robots in operation, plus several humanoid pilots launched across all three regions. We have a strong foundation and are poised to scale these market-leading capabilities further. This will serve as a powerful lever for long-term profitable growth. And we look forward to sharing more about our roadmap at our Investor Day later this year. And with that, I'll pass the mic back to the operator to begin Q&A. Operator: Thank you. We will now be conducting a question and answer session. You may press star 2 to remove your question from the queue. Patrick Kelleher: One moment please while we poll for your question. Our first questions come from the line of Stephanie Moore with Jefferies. Please proceed with your question. Stephanie Moore: Great. Good morning. Thank you. You know, for Patrick and you know, maybe this would be one that Karen would be able to answer as well when she's had a little more time in the role. But as you think about your market-leading position and industry vertical strategy, can you speak to your just overall philosophy on making sure GXO's value is appropriately recognized by your customers and ultimately, what that can mean for pricing, churn, and, you know, really organic growth in the future? Thanks. Patrick Kelleher: Yes, Stephanie. Good morning, and thank you for the question. Our vertical focus is absolutely critical, I think, to the organic growth agenda. In that, we want to make sure that we have in the market verticals, client-aligned solutions that are really addressing specific challenges that our customers face in the verticals that they're competing in. Client-aligned solutions will deliver the most value for the customer, and we think that will come with pricing power in terms of being able to commercialize the value that we're creating for customers in the right way. And that is why I think the specialized agenda around those industry verticals, particularly as we're stepping into the strategic industry verticals of aerospace, defense, industrial technology, and life sciences, we can bring significant value for customers and we want to commercialize that the best way. Stephanie Moore: Understood. Thank you. And then, actually, just a follow-up to the guidance commentary. Baris, can you walk through how we should think about the cadence through 2026? You've announced some pretty big wins to start the year and the like. So maybe just how we should think about how growth and EBITDA flows through as the year progresses. Thanks. Baris Oran: Sure. On the EBITDA phasing, the phasing we expect this year reflects the timing of specific project start-ups and exits. These quarterly swings tend to be immaterial on a full-year basis. These have been reflected in the percentages we provided in our presentation. We have high visibility due to new businesses we have already won. And we expect to have new wins more business, throughout the year. Stephanie Moore: Alright. Thanks, everybody. Thank you. Operator: Our next question has come from the line of Chris Wetherbee with Wells Fargo. Please proceed with your questions. Ryan: This is Ryan on for Chris. Just to follow-up on that last one. The second half run rate looks to be a little bit more elevated, I guess. What does how should we think about that? You know, as we exit 2026 into 2027 from a fairly strong base? Patrick Kelleher: Yeah. This is Patrick. Maybe I can take that to start. And then Baris can close out with a few comments. When you look at the contract logistics industry in our business, the typical sales cycle is six to nine months with a ramp-up period to start up new operations, which could take up to six months. We exited 2025 with a great book of new business wins, $775 million already identified to implement this year. And we are selling opportunities and closing opportunities right now that we expect to start in the second half of the year. Our pipeline exited 2025 at $2.3 billion. Pipeline as we stand today is $2.5 billion and growing, especially in the strategic industry verticals that we're participating in. And so we think we're going to see the benefit of new business wins from that pipeline accelerating in the fourth quarter. And then especially into 2027. Baris, anything to add there? Baris Oran: Yes. On the EBITDA side, remember, we have an integration that we kicked off late 2025. And you will see the benefits of that even more visible in our numbers in the second half of this. Kristine Kubacki: Hi. This is Kristine. I just thought I'd add a little bit to double click about why we are so excited about where and the momentum that we're seeing in the business. As you know, we have a huge addressable market, and, you know, it's over $500 billion. Our core markets, you know, around consumer-facing, we're seeing good momentum there in terms of pipeline wins. But in the new verticals that Patrick just spoke of, we're really unlocking and seeing some very good trends, you know, in aerospace and defense, I mean, that's a and industrial, it represents hundreds of billions of dollars of TAM. In fact, we have over $200 million in the pipeline, and that's even after notable wins with BAE, with Boeing, with Thales, and even BMW. So we're very excited about the strategic initiative that we have in aerospace and defense. And then in life sciences, you know, $34 billion TAM for us. That pipeline has more than tripled in the last twelve months, and that's even having our largest win in the fourth quarter come from the life sciences. And, of course, I talked about the tech side. We're seeing, of course, very strong momentum there. And even as we enter January, more opportunities are popping up for us, and we're very excited about how that plays out and more wins coming as we move through 2026. Ryan: Thank you. Appreciate the color. Then I guess just on the fourth quarter, organic growth came in a little bit light, you know, versus our expectations. You maybe walk us through what happened in the quarter? Maybe you could touch on peak season dynamics and how volumes shook out by vertical and geography? And then on the cost side, you know, seems like there was solid productivity that beat our expectations. Can you help us frame why that doesn't carry fully through to, like, 1Q and 2Q EBITDA? Thanks. Baris Oran: Let me take that. Our growth was very strong in Q4 with the net new business wins and milder volume trend, especially in Continental Europe and UK. The delta between Q3 and Q4 is primarily driven by the volumes. And if you look into 2026 onwards, our guidance implies in 2026 an EBITDA margin expansion around 20 basis points. At the same time, we are making targeted investments to drive our productivity faster and accelerate our organic growth. Absent these factors, margin would have expanded faster this year. But we are taking a multiyear strategy which we will outline at an Investor Day at a later phase. And you will see a clear margin opportunity when we benchmark ourselves in the market against GXO's own history. Ryan: Thank you. Appreciate the color. Operator: Thank you. Our next question is come from the line of Ravi Shanker with Morgan Stanley. Madison: Hi. Sorry, this is Madison on for Ravi. Thanks for taking my question. I was just wondering what you guys are thinking about in terms of timing for Investor Day if we should be expecting that sometime this year. Patrick Kelleher: Yes. That's definitely 2026. And we'll be out with the date for that shortly. Madison: Got it. Okay. And then I was wondering if you could talk about your macro assumptions that you have baked into the low end and high end of the guidance range. And kind of what you're also assuming at the midpoint, if it's just a continuation of what we're currently seeing right now. Baris Oran: Let me go over some of the numbers. We do expect an acceleration in organic growth in 2026. We already have $774 million of incremental revenue secured, or roughly 6% gross growth. This will continue to grow, and we expect our new business wins to provide the growth uplift. The inflation pass-through and retention rates seem to be roughly the same 2025 to 2026. We are assuming flat volumes in our operations, which we believe is prudent. Patrick Kelleher: Yes. And I think that's very important to highlight. So guidance for this year is assumed on flat volume as we consider the overall macroeconomic situation and really anticipating how that is going to materialize and taking a very conservative view there. As a respect with respect to current customer volumes. So the lever for this year is really about organic growth driving top line. Madison: Got it. Thanks for the color. Operator: Thank you. Our next questions come from the line of Scott Schneeberger with Oppenheimer. Please proceed with your questions. Scott Schneeberger: Thanks very much. Good morning. I guess I'd like to follow-up on that guidance question and ask at the low end of the range and at the high end of the range, what are some items that you all are considering most of what could what could put you at the high end and the low end? What are you worried about, and what are you most excited about heading into the year? Thanks. Patrick Kelleher: Sure. I can take that. In terms of our guidance on revenue, we feel very good about the revenue that was won in 2025 carrying into 2026. $775 million as mentioned. Feel very good about the current pipeline growing from $2.3 billion to $2.5 billion from the beginning of the year to now, and that continues to accelerate. The sensitivity around the top line will come with speed in which those new business wins can be implemented, and how quickly we're realizing profitability from that. And that really underpins the low end of the range. In terms of the high end of the range, it really is about bringing to life new business wins from the current pipeline and the timing of the implementation of those new business wins this year. Baris Oran: To move on to EBITDA, and the guidance there, that is about not only driving organic growth, which contributes to EBITDA but also progressing our agenda of productivity and cost improvement in the business. Of which we have a number of areas of focus. Talked about Bart Beeks coming on as COO. He is driving already. Productivity improvement initiatives centered around especially labor planning. Where we think we have a big opportunity. Michael Jacobs is really amplifying that in our business in North America. That coupled with our agenda on robotics automation and AI, and driving those technologies into our business for productivity improvement, cost improvement, and finally, a focus on our overall SG&A and operating costs, making sure that we're responsibly spending those dollars getting the best leverage out of SG&A as we move through 2026. Will all be the levers that we're focused on to deliver within EBITDA range that we put forth. Scott Schneeberger: Great. Thanks. And following up, it sounds like, Patrick, you alluded to earlier, we probably have to wait to Investor Day to get a taste of how you're thinking about margin long term, and we look forward to hearing about that. Any color on that now would be great. But, a more specific question in the near term, just with regard to investments, you're clearly making them here, as Baris mentioned, you know, we would see a higher margin if not for these investments. What is the strategy with balancing investments at this juncture in the business, and what type of are you making right now in 2026? Thanks. Patrick Kelleher: Sure. Maybe with respect to the margin improvement opportunity, yes. We will be providing details associated with that in the Investor Day 2026, but I can confidently say right now we are aiming to deliver at margin levels at or better than our peer group. I am very confident from my experience that GXO is well-positioned as a foundation to achieve that. In the Investor Day 2026, we will put definition to the plans associated with getting there and the timeline in which we think we can achieve that. But I feel that is well within reach. Baris, second. Hand it over to you for the second question. Baris Oran: Sure. You look into the type of investments we are making in 2026, which are included in our guidance, by the way, there are primarily two buckets. One is improving our growth and capabilities in the new strategic verticals, such as digital marketing, defense advisory board, and aligning our systems to capture more aerospace and defense business. Number two is structurally increasing our cost efficiency by investing further in labor management systems, GXO IQ, AI, and simplifying our ERPs. That is all included in our EBITDA bridge. Scott Schneeberger: Excellent. Thank you. Operator: Thank you. Our next questions come from the line of Richard Harnett with Deutsche Bank. Please proceed with your questions. Richard Harnett: So just a quick follow-up on that last question. I know it's a heavy investment year for all good things, but in light of the question around or, Patrick, your answer just around, like, you know, all these productivity enhancements that are being put in place today. Is there upside risk to the margin outlook for 2026 if things go right? 20 bps of margin expansion, can it be better? Or is this really just going to be more longer-tail projects and it's going to be maybe more of a 2027 plus type development. And then just I wanted to hear more, you know, data centers. You guys spoke about them a couple of times on that plan that you we had someone in the US data center play report very strong orders this morning, so timely. Like you mentioned, the vertical is a key pillar in your growth strategy. Christine, you've talked about how you service this market, but maybe it'll be helpful to get, like, an update there and how your automation plan sort of play into serving the vertical. In a more differentiated way, if at all. Patrick Kelleher: Yeah. Sure. So on the margin point, I'm very excited to share the detailed plans margin opportunity that we have in the 2026 Investor Day. We feel very good about the range that we're providing in terms of EBITDA and revenue performance this year, the resulting margins associated with that. We're very focused on growing in the high-margin verticals, and we talked about those in the B2B verticals. Very focused on pricing and making sure that we're getting paid the value that we're delivering. And that is really important this year to make sure that that is set in motion. We're driving for site-level productivity. We've got a number of initiatives underway being led by Bart. And that really is about driving towards even more global operating standards driving to a higher level of maturity on our labor planning, and then especially leveraging AI. I think our guidance contemplates the results that we can deliver from the initiatives that we have in place today. And finally, leveraging SG&A more effectively as we accelerate growth. We have a $2.5 billion pipeline today. It's working that pipeline higher, certainly, that can only lead to a good performance. So we're very focused on organic growth as well as the performance levers that we talked about. Kristine Kubacki: Yeah. Richard, this is Kristine. Just to give you a little bit more about on the tech side. As I mentioned, we're very excited about this. It represents a $28 billion TAM. And as you mentioned, it's only just expanding from here and expected to grow over the next several years at a very high pace. You know, for us, it fits right into our wheelhouse because it is a very complicated and complex supply chain that we're supporting everything not only from the start-up and the of the data center, but also the life and logistical support. It's really just one of the core competencies that we have from a very complex set, you know, operation that we're supporting there. It is a high-value vertical for us. So we're very excited in terms of the opportunities. Just alone in the last six months, as I mentioned, we've seen the pipeline more than double and that's on that's even with the five contracts that we signed in alone in the fourth quarter. And, again, that was the first time also we've seen that in multiple regions. So our business is expanding from a geography standpoint. So we're very excited about the opportunity set ahead, and we have a huge vertical to go unlock for us. Richard Harnett: Okay. Thank you. Operator: Thank you. Our next questions come from the line of Patrick Creuset with Goldman Sachs. Please proceed with your questions. Patrick Creuset: Hi, Patrick, Baris, and Kristine. First of all, what timeline would you set yourself to start to see some meaningful commercial traction? And therefore, organic growth lift off in your US business? And sounded perhaps from your previous guidance comments that we could see something maybe towards the latter part of this year already, but rough timeline there to see that accelerate. Second question on margins, same one really. I mean, when would you think we start to see some progress there in terms of converging towards the margin levels we see at your larger European peers? And the rollout of best practice and AI tools you mentioned I mean, is that something that already drives much stronger guided second half EBITDA performance? Thank you. Patrick Kelleher: Yes, sure. Let me take those and then, Baris, maybe you want to comment. From a North American market perspective, I think we are already seeing traction in terms of an accelerated growth agenda there. We've got a fantastic opportunity, great foundation, particularly in the strategic verticals that we see as very contributing to our growth going forward. There's a total market opportunity in North America, $250 billion. Michael Jacobs, who I said I've known for twenty years, he's been in the seat now for three months. And already intensified focus on operational performance. Increased labor productivity, which only makes us more competitive in the market, and he's really driving towards winning new business and allocating resources to solutioning sales and digital marketing, and I think that's critical to converting the pipeline that we have there. I think it's important to remind that the sales cycle for this business is six to nine months. Within a period of about six months to start up new business to realize full profitability of opportunities that are won. And so I think our guidance for 2026 accurately reflects stepping into that growth based on sales and start-up cycle. And that has us very excited for 2027 as well. It's a key focus of mine to reenergize our customer relationships in the region, and that's going to be a key focus of mine in this new era of growth and stronger execution that we've talked about. With respect to your question on margin expansion and margin opportunities, I believe firmly now six months in that there is a structural margin opportunity for GXO. In the near term, Baris can comment, our margins have been diluted by the delays to the Wincanton integration process, that begins to correct itself in 2026 as we deliver the $60 million run-rate synergies, which will be in place full run-rate by the end of the year. But, again, given my experience, I see no reason why GXO can't be performing at or better than our industry peers. We're definitely going to outline how that happens in the Investor Day 2026. Baris Oran: If I may add a couple of things on the Wincanton integration. Wincanton has traded solidly and is a contributor to our incremental year-over-year EBITDA results. We began the integration in the third quarter. We realigned the organization structure. And we are beginning to combine support functions, procurement benefits, become more obvious in '26 and beyond. Total to date integration benefits were around $15 million by 2025, including some in 2024. By 2026, as Patrick highlighted, we expect both businesses to be fully integrated, cost savings program to be implemented, and meaning we will enter 2027 with a full run-rate of $60 million. Which should provide us another $20 million year-over-year benefit is included in our guidance for 2026. In addition to cost synergies, the combined GXO, Wincanton teams are already contributing on new opportunities for new customer tenders which will accelerate GXO's growth protein to our target verticals. Patrick Kelleher: To the last question on productivity improvement, I would highlight especially our initiatives around rolling out GXO IQ. We are really excited about the opportunities AI presents for our business. GXO IQ is the path to implement AI across our 1,200 operations and how we're bringing AI to life. Kristine, maybe you can comment on our progress there. Kristine Kubacki: Hi, Patrick. Just to give you a little bit of background, I mean, we've been deploying proprietary AI modules across our sites for about eighteen months now, and it's in a number of sites. We got our actually, our first nonpilot savings just last year in 2025, so we're seeing very good things. We have gone from the pilot stage of GXO IQ in the second half of last year, and we're going to begin scaling that to more than 50 sites as we go through 2026. And then, you know, most of our new start-ups from here, so that will be existing sites, some existing sites, and then most new startups will be launched on the GXO IQ platform. So we're very excited about the things that we're already seeing, the opportunities in the pilots that we did in 2025. We will provide more details of how this rolls into the margin opportunity over the long term at our Investor Day later this year. Patrick Creuset: Thanks. Can I ask a follow-up just on that AI point? Just in terms of conceptually, what are the exact cost buckets that GXO IQ tackles? Is it sort of site-level SG&A more group functions, or something else? Patrick Kelleher: We have two dimensions that we're chasing in terms of our AI strategy. The one is, as you referenced on SG&A, improving overhead efficiency, refocus on our own operations. That's our functional activities. We'd look to leverage our corporate functions like HR, IT, finance more effectively. And AI plays a big role in that. We see ourselves leveraging market-available AI to drive those improvements. The second dimension is driving innovation within customer warehouse and transport operations. So some examples of that, we have AI modules deployed for dynamic route planning, proactive replenishment, slotting, forecasting, those will all drive to impact the cost basis for how we execute in our operations sharing that value with our customers, as we drive to lower cost, better service, the solutions that we provide. So we expect great results from those two areas of focus. Got a number of deployments already underway. And seeing good results of the work that we're doing. Patrick Creuset: Very clear. Thank you. Operator: Thank you. Our next questions come from the line of Jason Seidl with TD Cowen. Please proceed with your questions. Uday Khanapurkar: This is Uday Khanapurkar for Jason Seidl. Thanks for the question. Maybe a couple for Baris. On the organic growth guide, I think based on 26 locked-in wins. Appears to imply, like, a mid-single-digit churn rate. So maybe if you could confirm the algo there. Just curious if that implied churn is an estimate based on typical churn at this point in the cycle, or have those conversations with customers concluded? And then maybe if you see some support from the broad market, could you see, you know, outperformance on that this year? Baris Oran: Yes. On the retention rates, we assume steady retention for 2026 similar to 2025. And the inflation pass-through is also specifically valid for this business model. That's what makes us resilient. And as Patrick highlighted, we are assuming flat volumes in our existing operations, which we believe is prudent for 2026. We won already 6% of our gross growth and there will be more wins coming up this year, which is going to uplift our growth numbers. Uday Khanapurkar: Right. That makes sense. And maybe just to follow-up on the so you said the flat volume expectations for '26 embedded in the guide. On the US side, there's a few signals pointing to inventories being drawn down quite low and an impending restock. So, you know, maybe potentially better volume throughput in warehouses in the US. Is that something that you're seeing? And is the offset in the guide maybe implying a softer UK and Europe, or are your US trends maybe more discrete from the market? Baris Oran: In Q4, our trends in North America and the US were stronger than Continental Europe and UK. For 2026, it's early to call for the entire year. We just take a flat number for prudence. Just take it as prudence. Nothing more than that. Uday Khanapurkar: Alright. Fair enough. Very helpful. Thank you very much, guys. Operator: Thank you. Our next questions come from the line of Jeff Kaufman with Vertical Research Partners. Please proceed with your questions. Jeff Kaufman: Thank you very much, and congratulations with all the levers moving around and the changes going on. I just wanted to on the question on the operating environment I hear everything you're saying in terms of the new verticals and where we're on growing, but I want to see what the aggregate market is doing. I mean, it did look like US growth slowed a little bit. France and Italy slowed a little bit on the continent based on your numbers. Can you just tell us on the macro side, where you're seeing changes incrementally positive and negative either on a geographic or an industry vertical basis? Patrick Kelleher: Sure. I think the most important thing to call out there is that contract logistics outsourcing as an industry is increasing. Customers are increasingly looking at outsourcing as a very viable alternative to in-source execution of supply chain. I think the challenging macroeconomic environment only intensifies the value proposition that we have for our customers. We are able to invest in robotics automation AI, humanoids in a way that our customers cannot do for themselves. We have the people and the expertise to solve complex supply chain challenges. So as customers and potential customers are under challenging situations on a global basis across multiple geographies, the value proposition of contract businesses, our business, only strengthened. So we are not pinning our forward growth trajectory based on just the performance of the overall broad economy. We want to be a part of solving customer problems and opportunities in the challenges that they face in good times and bad. And I think for the thirty-two years that I've been in the supply chain, industry, contract logistics, specifically, the industry has continued to grow regardless of those macros. We'll be very responsible in terms of how we are guiding on our performance within the year, as it relates to how volumes are going to materialize for customers in the year. But as we look to the long term, we're really confident that we're playing in the right industry. It's a growing industry. We are a market leader in the industry, and we've got a great opportunity to capitalize on that industry growth. Jeff Kaufman: And just to follow-up on that, and I think in Kristine's presentation, she was talking about humanoids and how tech is changing. But and I know you'll hit this on the Investor Day, but can you talk a little bit about AI and how that's changing where automation versus, say, the warehouse automation concept that you were selling twelve or even twenty-four months ago? Patrick Kelleher: Yeah. Sure. You know, a simple example, I think, is there's an opportunity to use AI to solve for the completion of repetitive tasks that our team members don't want to do. There's efficiency in getting those repetitive tasks done either more quickly or more cost-effectively. But the bigger benefit that we're seeing as AI is becoming more sophisticated is the upstream and downstream impacts that AI focused on a process can have on other connected processes. So when we look at AI that we have deployed in one of our large e-commerce warehouses, today for forecasting where we're able to use AI to forecast demand in the e-commerce environment, which is inherently unpredictable, we are able to do Monte Carlo analysis around how a forecast may come in based on weather, promotional, and so forth. And create models for labor planning to be able to respond quickly to what actually happens in reality. So AI, in that case, didn't necessarily make the picking and processing activity more cost-effective, but it made the labor planning more cost-effective allowing us to put labor in the operation when it's needed, when it could be most productive, eliminating a team member downtime, people who are there without work to process, and we are really focused at not only leveraging AI for discrete activity, which is where I think we were a couple of years ago as an industry, but how do we look at the connected benefits of various AI tools, improving processes, and how do we improve overall execution and as a result of that. And I think that for me, paints a very exciting landscape for where AI and then humanoids and robotics and automation play driving cost reduction service improvement for our customers. Jeff Kaufman: Thank you very much. Operator: Thank you. Our next questions come from the line of David Zazula with Barclays. Please proceed with your questions. David Zazula: Wondering if I could ask on how the rollout with NHS is going. I think you'd previously talked about some opportunities to expand that relationship. Have those talks progressed at all, and any outlook on the NHS side? Thank you. Patrick Kelleher: Sure. So the NHS business implemented late third quarter and all the way through the fourth quarter of last year, that is continuing on plan and our team members in the UK are doing a fantastic job of providing amazing service to the NHS. And we're very pleased with how that is progressing. We have built up a pipeline with the NHS. We're progressing on that. We're confident that there's a great opportunity to grow our relationship there as well as that being a great foundation for continued growth in life sciences and the relationships that we're building. Through that execution for NHS and the capabilities that we're able to bring to market as a result of work that we're doing, especially from the Wincanton acquisition and our team members who came from Wincanton are just amazingly talented in this area. We're already seeing the benefits of that in the pipeline. And as mentioned, some of the new business wins that we had in the fourth quarter. David Zazula: So if I'm hearing you right, it sounds like having NHS as an anchor customer gets you into ecosystems that you didn't have access before. And that's creating some incremental commercial opportunities? Patrick Kelleher: I think that is absolutely correct. And we see ourselves in that growing with not only the NHS, but that is the foundation for growth in the space. And that is very similar to the approach that we're taking in aerospace and defense, by the way. We have a great foundation of business in aerospace and defense, only enhanced by the acquisition of Wincanton capabilities they brought there. And we're seeing similar momentum in terms of building on that foundation. And, Kristine, maybe. Kristine Kubacki: Yeah. David, just to add color a little bit there. I think as we announced the NHS deal back in the fourth quarter of last year, that is really the landmark deal that's got us in the marketplace and really got noticed. We added, you know, great names like Siemens Healthineers and Fresenius. And as I mentioned, that in the last twelve months, the pipeline in life sciences alone has more than tripled. So, really, that's a result of the importance of the NHS win. And now with the start-up, going very successfully, we think that momentum only continues. David Zazula: Great. Thanks for the color. Operator: Thank you. Our next questions come from the line of Kevin Gainey with Thompson Davis. Please proceed with your questions. Kevin Gainey: Patrick, Baris, Kristine. Maybe if you could touch on the North American expansion. How you're thinking about it as an opportunity for organic growth. Or maybe you would want to visit that via acquisition and then does the North American market represent maybe the most outsized organic growth opportunity for GXO? Patrick Kelleher: Sure. I can answer that very quickly. North America is a priority for organic growth. And it will be the primary driver. Organic growth will be the primary driver of growth in North America. See a great opportunity there. We've got a great foundation of the business. We are underrepresented in North America. In contrast to our participation in the UK and Europe. And so we are very confident that we have upside there. We're executing that to that end. Pulling in the question on M&A, our M&A strategy is to invest in areas where we can accelerate our growth. We want to be very selective around M&A. Our M&A priorities really center on North America, and the strategic verticals that we're focused on, aerospace, defense, industrial technology, life sciences as I've mentioned. Don't have M&A in our short-term agenda. That'd be in the next couple of months. From a capital allocation perspective, we're very focused on investing in organic growth. We want to continue to deleverage the balance sheet which will get us greater flexibility as we move through 2026. Baris, how many? Two and a half times right now? Baris Oran: Yeah. And moving towards two. At the 2026. And then beyond that, from a capital allocation perspective, we'll take a very balanced approach as it relates to M&A opportunities and share buyback. But to round out your question, North America is a big focus for organic growth. Kevin Gainey: Appreciate all the color there, Patrick. And maybe for Baris, just one last one on cash flow conversion. Talk maybe if you could talk about the confidence in raising the guide there and what drove that. Baris Oran: Yep. We have lower M&A transaction costs in 2026. And we do have an opportunity to improve our working capital management throughout the year. Our CapEx has been as a percentage of revenue will be roughly the same. The delta will come from less transaction costs and better working capital management. Kevin Gainey: Perfect. I appreciate this. Taking my questions. Operator: Thank you. Ladies and gentlemen, that is all the time we have for questions today. I'd like to hand the call back over to management for any closing remarks. Patrick Kelleher: Thank you, operator. Before we close, for me, the message is really clear. I want to leave this with you and a straightforward message that GXO is accelerating. Deliberately and from a position of strength. Our fundamentals are very strong, the team is aligned, and GXO is poised to perform in a higher gear. We see clear opportunity to unlock organic growth and margin expansion through sharper commercial focus, greater operational consistency at scale, disciplined execution of our US growth opportunity. While several leaders have joined only recently, the increased alignment across our leadership team is already proving to be an accelerant. Strength is further reflected in GXO's recent recognition as one of Fortune's most admired companies. This recognition would not have been possible without the dedication and performance of the entire GXO team. And the vision of our founder, Brad Jacobs, who stepped down as chairman at the end of last year. Our future path will always be rooted in the foundations of culture, and performance that Brad espoused. I heard him say recently, move boldly and with speed and I think that personifies our path at GXO. On behalf of our employees, I want to thank Brad for his leadership in building a truly category-defining company and we wish him continued success. With that, thank you for your questions and your continued interest in GXO. Look forward to speaking with you again soon. Thank you so much. Operator: Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time. Have a wonderful day.
Operator: Good day, and welcome to the Crown Crafts, Inc. Third Quarter Fiscal Year 2026 Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to John McNamara, with Three Part Advisors. Please go ahead. John McNamara: Thank you. Good morning, everyone, and thank you again for joining the Crown Crafts fiscal year 2026 third quarter conference call. With us on the call this morning are Crown Crafts President and Chief Executive Officer, Olivia Elliott, and Vice President and Chief Financial Officer, Claire Spencer. During today's call, the company may make certain forward-looking statements, and actual results may differ materially from those expressed or implied. These statements are subject to risks and uncertainties that may be beyond Crown Crafts' control, and the company is under no obligation to update these statements. For more information about the company's risk factors and other uncertainties, please refer to the company's filings with the Securities and Exchange Commission, including its annual report on Form 10-Ks and the Form 10-Q for the quarter ended December 28, 2025. With that, I would now like to turn the call over to President and Chief Executive Officer, Olivia Elliott. Olivia? Olivia Elliott: Thank you, John, and good morning, everyone. As we noted in the press release issued earlier today, we believe our third quarter results demonstrate the resilience of our business model and the diligent efforts of our team as we work to overcome the challenging demand environment and the ongoing effects of higher tariffs. Net sales for the third quarter were $20,700,000 compared with $23,400,000 in the prior year quarter, while net income increased to $1,500,000 from $900,000 a year ago. We are committed to driving profitability as we continue to execute on pricing and cost actions to offset the sales environment. While we are encouraged by the positive performance in our bibs, toys, and disposable categories during the holiday season, the macro backdrop remains difficult for our category. Elevated U.S. tariff rates have raised product costs and contributed to uncertainty from certain China-based suppliers, while consumer spending remains uneven and price-sensitive. Third quarter gross margin was 23.5% compared with 26.1% in the prior year quarter, despite our ongoing mitigation efforts. Also impacting gross margin were certain one-time costs that Claire will speak to in a moment. Within this environment, we are staying focused on what we can control. For starters, we are very excited about our product pipeline. Earlier this week, we announced Manhattan Toys' relaunch of Groovy Girls, an iconic line of soft fashion dolls that will be available starting in May 2026. This relaunch reflects the strength of Manhattan Toy's portfolio and our commitment to internal product development. We believe Groovy Girls will create opportunities with specialty customers and in direct-to-consumer as we broaden our reach in the juvenile space. Operationally, our supply chain team continues to work closely with our sourcing partners in China and other regions to manage through tariffs, freight, and capacity constraints. The majority of our products are produced by foreign contract manufacturers with the largest concentration in China, and we remain focused on quality, compliance, and reliability while also continuing to evaluate alternative sources of supply where appropriate. Our inventory strategy has been deliberately conservative as we aim to minimize exposure to excess inventory in a volatile pricing and tariff environment. We also continue to execute on cost initiatives, with further plans to consolidate certain internal operations. During the quarter, we incurred $600,000 in severance expenses in connection with these consolidation efforts. These actions are designed to eliminate redundant activities, reduce payroll and administrative expenses over time, and create a leaner operating structure that can better absorb external factors such as tariffs and raw material volatility. Shifting gears, we ended the third quarter with a solid balance sheet and liquidity position. We continue to view cash flow generation, debt reduction, and disciplined capital allocation, including our regular quarterly dividend, as key pillars of our shareholder value proposition, and we believe our brands, customer relationships, and category positions have us well prepared to enhance long-term shareholder value as conditions normalize. With that, I will now turn the call over to Claire, who will walk you through the financial details for the quarter. Claire? Claire Spencer: Thank you, Olivia. For the 2026, which ended December 28, 2025, net sales were $20,700,000 compared with $23,400,000 in the third quarter of the prior year. Gross profit was $4,900,000 compared with $6,100,000, and gross margins were 23.5% versus 26.1%. The change in gross margin was driven primarily by higher tariffs on products imported from China and one-time licensing expenses in connection with the insurance claim I will speak further on in just a moment. Marketing and administrative expenses increased by $600,000 to $5,000,000 in the current year quarter due to severance expenses incurred in connection with operational consolidation efforts. As a percentage of net sales, marketing and administrative expenses were 24% in the third quarter compared with 18.8% in the same period last year. Other income and expense was a positive contributor in the third quarter. Other income benefited by a $2,500,000 insurance proceeds received during the quarter related to certain claims made by the company under a representation and warranties insurance policy, purchased in connection with the recent acquisition. The net impact of these insurance proceeds to income before tax expense, excluding certain legal and licensing-related expenses, was $2,100,000 in the current year quarter. Income before tax expense for the quarter was $2,100,000, up from $1,300,000 in the prior year quarter. Income tax expense was $600,000, up from $400,000 a year ago. And net income for the quarter was $1,500,000, an increase from $900,000. Basic and diluted earnings per share were $0.14 in the 2026, which was up from $0.09 in the 2025. Turning to the balance sheet, we ended the quarter with total assets of $76,100,000. We had $10,600,000 of additional availability under our revolving credit facility. Inventories were $31,200,000 at quarter end, compared with $27,800,000 at fiscal 2025 year-end, reflecting our seasonal builds ahead of Chinese New Year. Total debt at quarter end was $16,400,000, and we were in compliance with all financial covenants. Net cash provided by operating activities for the nine-month period was $7,100,000, up slightly from $7,000,000 in the prior year period. In summary, third quarter results reflect ongoing tariff-driven margin pressure and a continued soft demand environment, offset by cost actions and non-recurring items such as severance expense and insurance proceeds. We believe our balance sheet, liquidity, and disciplined approach to expenses provide us a solid foundation as we navigate the current environment and position the company for improvement as conditions normalize. With that, I will turn the call back to Olivia for some closing remarks before we open the line for questions. Olivia? Olivia Elliott: Thank you, Claire. We entered this fiscal year fully aware that we would be operating against a difficult backdrop, including elevated tariffs, shifting retailer behavior, and a cautious, value-focused, and uneven consumer environment. The third quarter did not change that reality, but it did reinforce our conviction that our strategy, anchored in strong brands and licenses, disciplined cost management, conservative inventory management and sourcing decisions, and a focus on cash generation, is the right one for Crown Crafts. At the same time, our capital allocation strategies focus on growth-oriented investments in our business and the return of capital to our valued shareholders. We remain confident in the long-term fundamentals of the infant, toddler, and juvenile category, in Crown Crafts' ability to be a trusted partner to our customers, licensors, and consumers. I want to thank our employees for their hard work and dedication, our customers and licensors for their continued partnership, and our shareholders for their ongoing support. With that, we'd now be happy to take your questions. Operator? Operator: We will now begin the question and answer session. Our first question comes from John Deysher with Pinnacle. Please go ahead. John Deysher: Good morning, everyone. Thanks for taking my question. Hey, John. Hello, Olivia. Just curious, the sales decline you had all your acquisitions for both quarters, I think. Where was the softness on the revenue line? Olivia Elliott: The softness is really in the bedding category. So from the toddler bedding perspective, it's a category of business that just isn't required. I mean, you need sheets for a crib, that type of thing, but you can skip the toddler bedding set altogether. And so in this environment, we're seeing where the consumer is maybe trading down and not buying the bedding set, but buying just a blanket instead. And so a bedding set can be maybe a $50 item, whereas a blanket is more like a $12 item. So we're still seeing the category be popular, it's just what the consumer is buying right now. John Deysher: Okay. So it was just about all bedding? Olivia Elliott: It was all bedding. John Deysher: Okay. Okay. And you mentioned China was a major source. What percentage of the product comes out of China roughly right now? Olivia Elliott: Almost all of it. I mean, it's in the high 90%. John Deysher: Okay. Alright. Gotcha. And then in terms of the reimbursement, not reimbursement, the benefit of $2,500,000 from insurance claims. Could you provide some color there? That's a big number. Fortunately, it went your way, but I'm just curious what the backstory is there. Claire Spencer: It relates to a product category that was dropped at retail not long after we did the acquisition. And so we made a claim under the reps and warranties insurance, and it went our way, as you said. That also included a couple of one-time costs associated with that same category of business, which was a licensing shortfall and then some inventory that we closed out at a pretty deep discount. John Deysher: Okay. So let me just make sure I understand that. So you made the acquisition and then a product was dropped and you submitted a claim because you thought you were going to have that product going forward? Is that right? Claire Spencer: That's correct. John Deysher: Okay. That's interesting. Okay. Alright. Well, I'm glad your agreement specified that. Okay. And do you expect any more like that going forward? Claire Spencer: Not that I'm aware of right now. John Deysher: Okay. Good. John Deysher: Okay, great. I appreciate the color. Thank you. Operator: Our next question comes from Anthony Lebensky with Sidoti and Company. Please go ahead. Anthony Lebensky: Good morning, everyone, and thanks. I just have a couple of things here. Can you just comment on the pricing? How much did that contribute to the quarterly revenue? Just wondering if you could comment on that. Olivia Elliott: You just mean on retail price increases? Anthony Lebensky: That's correct. Olivia Elliott: So as of October, we have pretty much gotten all of the price increases through all of our retailers. And I think we mentioned in the last quarter, the first quarter that the tariffs went through, was in our June quarter, we had tariff increases but not a lot of retail price increases. And so it takes a period of time to get all of those prices through. So as of October, the last of the major retailers took the price increases. And so third quarter was kind of a mix. We had half of the quarter where we didn't have them, and then half of the quarter where we did. Anthony Lebensky: Got you. Okay. Alright. And then in terms of the cost actions that you have taken, can you comment, can you give any specifics as to what the annualized cost savings might be as we think about the business going forward? Olivia Elliott: We're still working on that number. We're going through our budgeting process now for our next fiscal year, and we'll know a little bit more where we can make some of those cuts now. It will take a little bit of time. I think a lot of it's going to be in some of our IT contracts and other contracts where currently each of our subsidiaries has to have a separate agreement. But we can only do that when the current contracts roll out. So it's going to be something that you might see part of in this fiscal year, and then we won't really fully realize the full amount until the next fiscal year. So hopefully by June, when we have our next call, we'll be able to give more color. Anthony Lebensky: Alright. Well, thank you very much. Olivia Elliott: Thank you. Operator: The next question comes from Igor Navigordativ with Lares Capital. Please go ahead. Igor Navigordativ: Good morning and thank you for taking my question. I am a bit surprised that you still get 90% of all your products from China given the difficult trade relations between the United States and China. So what is your contingency plan if the tariffs will go up again to 100%? What would you do? Olivia Elliott: We are actively looking at sources in other countries. We've been doing that for some period of time and we have other contacts, etcetera. But right now, we stuck with China for several reasons. One, being the biggest is quality and safety. As you know, we deal with infant products, and so we have to take time to make any changes because we need to make sure that the product is very safe and that the proper quality control standards are in place. So while we're exploring those and we have been for the last year or so, we're taking it slowly. But we do have those contacts. We've been to Cambodia, Pakistan, India, any number of other countries that we're making those contacts. Toys would be the hardest, particularly the plastic toys, because those are molded and you can't just pick up your mold out of the current factory and move it to some other factory. So we would have to rebuild those molds. So that would be the toughest category for us. Igor Navigordativ: To follow-up on this, I know there's a lot of moving parts and tariffs have been moved back and forth several times. What is your effective tariff rate right now on average versus pre-April? How much would it be today? Claire Spencer: I do not have kind of an effective tariff rate. I mean, obviously, the current 20% rate is on all categories of business. But it varies widely. So for example, toys, the only duty and tariff on it is the 20%. Whereas on diaper bags, the total of all of that is above 60%. So it just varies very widely. Everything else kind of falls out in the middle. Igor Navigordativ: Do you have I see that you mentioned the price increases in October, the last price increases. Do you think you'll be able to raise prices further? Or do you think unless something changes, you're done for now? Other than normal pricing? Olivia Elliott: Unless something changes, we're done for now. I just don't think that the consumer can absorb any price increases right now, and the price increases that have already gone into effect are impacting sales. Igor Navigordativ: Understood. Okay. Thank you very much. Operator: Thank you. The next question comes from Doug Ruth with Lennox Financial Services. Please go ahead. Douglas Scott Ruth: Olivia, under difficult circumstances, I feel that you and the company have done a wonderful job. And I'm grateful for what you've done for the shareholders. I have some questions now. Where will the Groovy Girls be sold? Olivia Elliott: So initially, in specialty stores and on our own website, manhattantoy.com is the initial goal. I mean, the hope is eventually that we'll roll it out to some larger retailers, but we would need to change the product a little bit so that you don't take the same product to both channels or then you ruin one channel. Douglas Scott Ruth: Yes. I understand. How would you be selling them overseas as well? Olivia Elliott: Yes. So it will be sold internationally through our distributors. Douglas Scott Ruth: And then I noted that, year over year, the inventory was down about 4%. Are you is the company happy with the present inventory level? Olivia Elliott: I mean, I'll use the word happy, yes. I mean, I always think that we could have less inventory, but some of our planners disagree with me. So yes, I think overall, the inventory levels are good. Douglas Scott Ruth: Okay. And then, you had previously talked some about the international sales. Could you tell us some about what's going on with the Disney license? Like I know you got the Disney license in Canada, and how has that been going? Olivia Elliott: So the Disney license in Canada, our license for that started this calendar year, so just in January. And so we've already talked to some of the larger retailers, the product from the old licensor is kind of selling out and we're in process of putting the product in for our product. Douglas Scott Ruth: Okay. And then also I think you were talking about having a different distributor in Canada for the Sassy Toys and the Manhattan Toys. Is there any update on that? Olivia Elliott: Yes. So we think that's going well. That transition just also started happening, kind of in December, January. But I think that's going to be a very good partnership for us. Douglas Scott Ruth: And then, I also heard you mention that you had 33 international distributors for like the Fancy Toy and the Manhattan Toy. Can you give us some ideas of what's happening there? Olivia Elliott: I don't know if that's the exact number. We have more than 30 distributors in probably more than 50 international countries. And so, you know, that's going well. We're continuing to try to sign up more distributors and expand the countries. But that's certainly been a focus for us and I think it's going very well. Douglas Scott Ruth: And then how about the Q3 sales? Were the international sales higher in there any way you could maybe give us a percentage of how much they might be increased? Olivia Elliott: We don't have that number sitting here with us. And I don't think we've disclosed that specifically. So I think I'll have to pass on answering that question. Douglas Scott Ruth: Okay. I noticed that you had increased the advocate budget, and then I had heard you talk previously that you were doing some things, like, with Facebook and Instagram. Could you maybe tell us a little bit more about what's going on with that? Olivia Elliott: So we're continuously trying to increase our presence both in the marketing and the advertising side. I mean, it's just a part of doing business now. It's the way you get your consumer. And so we've increased it a little bit this year, and I think that you'll see us budget more and spend more in the next fiscal year. Otherwise, it's very hard to get the consumer now. Douglas Scott Ruth: Is the company thinking anything more about the warehouse? I believe that possibly one of the leases is coming up. Is there any talk about that at all? Olivia Elliott: We still put that on hold right now. We are extending the lease in Minnesota to coincide with the termination of the lease in California. And we'll pick back up on that conversation probably toward the end of this calendar year. You kind of need about an eighteen-month lead time to choose a location, do a lease, and then do whatever kind of build-out needs to go to the new location. So probably I'm going to say maybe November, we'll start that conversation again. Douglas Scott Ruth: Okay. With this insurance policy, the representation and warranty insurance policy, how who figured out to buy that? How did that come about? Olivia Elliott: You mean getting the policy itself? Douglas Scott Ruth: Is that a normal, is that something that the company maybe does when you make an acquisition? Or is this something that was unique? Olivia Elliott: It was something specific to this acquisition. It was just part of the agreement. Douglas Scott Ruth: Well, whoever came up with that, I would like to give I would like the company to consider giving that person a bonus. If it was you, I think you should get the bonus. That was an outstanding idea to come up with that. I've never heard of that before, and it really worked out for the company and the investors' favor. So that's really a great idea. Olivia Elliott: I don't think I can take credit for that one. It was kind of a mutual agreement. So, I appreciate the comments. Douglas Scott Ruth: Oh, okay. I want to thank everybody who is involved in it and, of course, the people that who did it know who they are. But thank you for doing that. And thank you, and thank you, Claire, for your contribution and you really did a great job. Thank you for that. Claire Spencer: Thank you, Doug. Operator: We have a follow-up question from John Deysher with Pinnacle. Please go ahead. John Deysher: My follow-ups have been answered. So thank you and good luck going forward. Olivia Elliott: Alright. Thanks, John. Thank you. Operator: Our next question comes from Greg Bennett with Retail. Please go ahead. Greg Bennett: Hey, good morning. I think in a previous conference call, there was some discussion about Target was going to get out of some of their, I guess, store categories and that they may be the impression I got is that they may be looking towards you or somebody else. Can you comment on that? Olivia Elliott: I think what you're talking about is just that Target's been taking a lot of their programs to private label and direct sourcing them. And so we've had a couple of categories in the past, one of them being our bib category, and then one of them being the diaper bags, that have been taken away from us and given, they've gone private label and gone direct source. Greg Bennett: So they're not bringing yours back? Because they were gonna get to somewhere like... Olivia Elliott: Right now, we have not been able to get those back. We certainly are trying, and we hope to. But at this point in time, we've not gotten them back. Greg Bennett: Okay. Thank you. Operator: This concludes our question and answer session. I would like to turn the conference back over to Olivia Elliott for any closing remarks. Olivia Elliott: Thank you all for your support and interest in Crown Crafts. We look forward to updating you on our next call in mid-June. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning or good afternoon. Welcome to the QuidelOrtho Fourth Quarter and Full Year 2025 Financial Results Conference Call and Webcast. [Operator Instructions] Please note this conference call is being recorded. An audio replay of the conference call will be available on the company's website shortly after this call. I would now like to turn the call over to Juliet Cunningham, Vice President of Investor Relations. Thank you. Juliet Cunningham: Thank you. Good afternoon, everyone. Thanks for joining us. With me today are Brian Blaser, President and Chief Executive Officer; Jonathan Siegrist, Chief Technology Officer; and Joe Busky, Chief Financial Officer. This conference call is being simultaneously webcast on the Investor Relations page of our website. To assist in the presentation, we also posted supplemental information on our IR page that will be referenced throughout this call. This conference call and supplemental information contains forward-looking statements, which are made as of today, February 11, 2026. We assume no obligation to update any forward-looking statement, except as required by law. Statements that are not strictly historical, including the company's expectations, plans, financial guidance, future performance and prospects are forward-looking statements that are subject to certain risk, uncertainty, assumptions and other factors. Actual results may vary materially from those expressed or implied in these forward-looking statements. Please refer to our SEC filings for a description of potential risk. In addition, today's call includes discussion of certain non-GAAP financial measures. Tables reconciling these non-GAAP measures to their most directly comparable GAAP measures are available in our earnings release and supplemental information on the IR page of our website. Lastly, unless stated otherwise, all year-over-year revenue growth rates given on today's call are on a constant currency basis. And now I'd like to turn the call over to our CEO, Brian Blaser. Brian Blaser: Thank you, Juliet. Good afternoon, everyone. I'd like to begin today's call with a brief reflection on my experience since joining QuidelOrtho in May 2024 and then focus on how the work we've done positions the company for the future. And I'll highlight key progress from 2025, which includes strong mid-single-digit growth before turning the call over to Jonathan to discuss our recent progress in R&D. When I joined the business, QuidelOrtho was a company I knew well and respected with broad and differentiated portfolio spanning the entire patient care journey. It was clear that the opportunity ahead was not driven by structural issues, but more about optimizing our business model and executing more consistently and with greater discipline to unlock the full potential of the portfolio. Early on, I conducted a comprehensive review of the business with the leadership team across our portfolio, operations, commercial execution and talent. And from that work, we established 3 clear priorities: putting customers at the center of everything we do, strengthening operational and financial performance and accelerating product development to support long-term growth. In 2025, we did exactly what we set out to do. We realigned our cost structure, strengthened execution rigor and improved the way the organization operates day-to-day. To date, our actions have generated $140 million in cost savings, expanded adjusted EBITDA margins to the low 20s and increased our financial flexibility. And we did this while delivering strong growth in our labs business, supported by our recurring revenue business model. And importantly, we believe the changes we made in the business will be lasting in nature and designed to be sustained. And with that context, I'd like to turn now to our Q4 financial highlights, which will be in constant currency, unless otherwise noted. Joe will provide greater detail on our Q4 and the full year results as well as provide our 2026 financial guidance later in the call. Fourth quarter revenue was $724 million as reported with 7% growth in Non-respiratory, excluding Donor Screening. Our Labs business reported strong growth of 7% in Q4, driven by continued strength in clinical chemistry. Respiratory revenue declined as expected due to COVID-19. However, we saw strong flu revenue growth of 6%. For the full year, we achieved our 2025 financial guidance with $2.73 billion in revenue as reported. Excluding Donor Screening, Non-respiratory revenue grew 5%. Our Labs business had strong mid-single-digit growth at 6% for the full year and represented 55% of total company revenue, pointing to the strength of our underlying business. Respiratory revenue totaled $402 million as reported. Operating expenses decreased by 5% as a direct result of our company-wide cost savings initiatives. Adjusted EBITDA margin was 22%, in line with our 2025 guidance and representing a 240 basis point improvement over the prior year. Our full year results included a significant non-cash goodwill charge in our GAAP results that was recorded in Q3. And let me be clear that this was an accounting reset that reflects post-pandemic market valuations. It does not impact our cash, our operations or our ability to invest in the core business engine you see performing today. In closing, we're pleased with our 2025 performance and progress against our priorities. Looking ahead, our objective is to maximize the value of QuidelOrtho by delivering superior outcomes for our customers and over time, converting that value into attractive returns for shareholders. We are guided by a clear financial and operating framework, driving above-market growth, expanding margins through execution and mix, generating strong cash flow and strengthening the balance sheet. These are long-term objectives that reflect the earnings power of the business when executed consistently. And to support this, we have aligned the organization to optimize the customer experience and drive effective execution across every dimension of the business. We are sharpening our focus by prioritizing higher growth markets and being selective in how and where we deploy capital, while also continuing to build a strong leadership team and a culture grounded in quality, accountability and continuous improvement. Our progress this year would not have been possible without the dedication of our employees around the world. Together, we are rebuilding a culture that is grounded in continuous improvement and positioning the company for long-term success. And as teams evolve, leadership transitions naturally occur. Today, we announced that Joe Busky has decided to retire as CFO in June. We have initiated a search for his successor, both Joe and I are fully committed to ensuring a smooth transition. Joe has built a highly capable finance organization and has been instrumental in achieving our cost savings initiatives over the past 18 months. I want to sincerely thank Joe for his many contributions to QuidelOrtho and wish him all the best in his retirement. Thank you, Joe. Delivering on our ambitions requires a strong and disciplined R&D team. As I mentioned earlier, this was an area we identified as needing improvement, and we were pleased to welcome Jonathan Siegrist in late 2024 to lead these critical functions. Jonathan has played a key role in advancing our continuous improvement culture in R&D, and he has several important innovations underway. So, I asked him to join us today and provide a deeper look at what's ahead. Jonathan? Jonathan Siegrist: Thanks, Brian. It's a pleasure to be here today, especially as we share our strong results for both the quarter and the year. As Brian noted, QuidelOrtho has undergone a significant transformation, and R&D has been central to that journey. Over the past year, I've had the privilege of leading and advancing our overall R&D organization, including our regulatory and clinical teams. In a short time, we've upgraded talent, modernized our R&D processes and strengthened our product pipeline to support sustained growth, both in the near term and the long term. We reorganized the team to be more efficient and scalable, strengthened our regulatory and quality teams with external domain expertise and fostered a culture of scientific rigor, process excellence and deep cross-functional collaboration. By prioritizing the critical few programs with the greatest impact, we've built a much stronger and more productive R&D organization. That focus delivered tangible results in 2025. In Q4, we received FDA clearance for our high-sensitivity troponin eye assay on the VITROS platform and are preparing to begin U.S. shipments within the next few weeks. This extends a proven offering in the U.S., supporting timely clinical decision-making in emergency and acute care settings. We also received FDA clearance of our ID MTS Direct Antiglobulin Test Card, or DAT card on the Vision immunohematology platform. Combined with our recently cleared Ortho Elution kit, QuidelOrtho now offers the only complete gel-based DAT solution from polyspecific to monospecific. In addition, in 2025, we launched our new informatics middleware solution, QuidelOrtho Results Manager. Starting with our Labs business, Results Manager system brings significant value to our VITROS customers, enabling them to manage their laboratory workflow with an agile and user-friendly experience and sets the stage for us to expand Results Manager to the rest of our portfolio, with immunohematology and Point of care plan next. These are just a few of the exciting examples of momentum we generated in 2025, and it helps set the stage for what's next. Looking ahead, we're excited about new products that we expect to launch in 2026, including multiple platform launches enabled by a smart mix of organic R&D and inorganic strategic partnerships. We believe these new platforms spanning systems, informatics and automation will deliver strong customer value and drive meaningful assay menu pull. In Clinical Labs, we plan to launch VITROS 450, the first new VITROS platform since 2019 as the successor to the VITROS 350. Built on our novel waterless dry slide chemistry, it's a fully modernized system designed for key OUS markets. We expect to launch later in the first half of this year and early feedback has been very positive. We're also partnering to offer new innovative immunoassay platforms for OUS markets that will expand our menu with more than 25 new assays on these systems not currently available on VITROS today, within a total menu of over 70 assays on these new partner systems. Together with VITROS 450, this will create a combined offering that provides us with opportunities to compete for additional full menu tenders in attractive OUS segments. In molecular, we're excited for LEX to wrap up the final stages of their 510(k) and CLIA waiver FDA review for the LEX molecular diagnostics platform and are looking forward to commercializing this technology for the benefit of our customers. LEX is designed to deliver speed and sensitivity with true PCR chemistry and a fully automated swab to result system for point of care. This will make it one of the fastest and most intuitive PCR platforms on the market. Overall, we've made rapid and steady progress improving the R&D organization and the strength of the product portfolio we're building for the future and remain focused on continuous improvement as we go forward to deliver on the exciting product pipeline ahead. Now, I'll turn the call over to Joe to cover the financial results. Joseph Busky: Okay. Thanks, Jonathan. It's been a great pleasure working with you, Brian, and the entire QuidelOrtho leadership team. I'm honored to have been a part of this team. While my retirement is still months away, I remain fully committed to the company. I will sincerely miss the teams I've had the privilege to work so closely with over the past 6 years. We've made great strides over the past 18 months, and I fully expect that we'll continue to make progress on our revenue growth, margin expansion and cash flow generation going forward. So now let me take you through our fourth quarter and full year 2025 results, which are detailed on Slides 3 and 4 of our earnings presentation on our website. Total reported revenue for the fourth quarter of '25 was $724 million, compared to $708 million in the prior year period. This 2% year-over-year increase was achieved even as COVID and Donor Screening revenue declined. Excluding COVID and Donor Screening, our reported revenue growth for the quarter was 7%. Breaking down business unit and regional results for Q4 and the full year on a constant currency basis, our Labs business continued to demonstrate durable underlying demand, growing 7% in the fourth quarter and 6% for the full year, underscoring the strength and stability of our largest business. Immunohematology also delivered steady growth of 3% for the full year, while maintaining its leading global market position. Our Triage business performed very well in '25 with revenue up 16% in Q4 and 7% for the full year, reflecting strong execution and expanding adoption. And respiratory revenue declined 14% in Q4 and 20% for the full year due to lower COVID testing. We saw a strong start to the '25, '26 flu season with a 6% increase in the fourth quarter, bringing our full year flu growth to 3% year-over-year. Now from a regional perspective, excluding COVID revenue, our North America region was up 4% in Q4, but down 2% for the year as expected due to the wind down of the U.S. Donor Screening business. Excluding Donor Screening, North America was up 2% year-over-year. Europe, Middle East and Africa growth for the quarter was flat and up 4% for the year, while impressively increasing their adjusted EBITDA margins by more than 900 basis points. Latin America and Japan and Asia Pacific growth excelled in '25. Latin America increased 17% in Q4 and 18% for the year, while Japan, Asia Pacific improved 4% for the quarter and 6% for the year. And finally, China grew 5% in Q4 and 3% for the full year. Now moving further down the P&L. Fourth quarter adjusted gross profit margin was 44.9% compared to 46.8% in the prior year period, a decline of 190 basis points due to tariffs, higher instrument placements and product mix. For the full year, though, our adjusted gross profit margin was 47.4% versus 47%. The 40 basis point increase was primarily driven by cost mitigations, offset by tariff impacts. Fourth quarter non-GAAP operating expenses of $229 million, comprised of SG&A and R&D slightly increased year-over-year due to the timing of sales and marketing expenses. Non-GAAP operating expenses for the full year were $894 million, which reflects a 5% or a $52 million decrease resulting from our cost savings initiatives. Fiscal year '25 GAAP results included a $701 million noncash goodwill impairment charge recorded in Q3 related to prior acquisition accounting. This charge cleans the slate with goodwill now reset, our forward GAAP earnings should more closely track our operational value. In Q4, adjusted EBITDA was $153 million and adjusted EBITDA margin was 21%, which was flat to the prior year period. For the full year, adjusted EBITDA was $597 million with a 22% margin, which is a 240 basis point increase compared to the prior year. Adjusted diluted EPS was $0.46 in the fourth quarter and $2.12 for the full year, representing growth of 15% year-over-year. Turning now to the balance sheet on Slide 6. We finished the year with $170 million in cash and $80 million in borrowings under our $700 million revolving credit facility. We generated $87 million in free cash flow in Q4. Excluding one-time cash items, we generated $135 million in recurring free cash flow. For the year, we used $77 million in free cash flow. Excluding one-time cash items, we generated $100 million in recurring free cash flow or 17% of adjusted EBITDA. This fell short of our 25% conversion goal, primarily due to $15 million to $20 million of ERP system issues and $20 million of sales that occurred late in Q4. Both of these receivables were collected in January of 2026. At the end of the year, our net debt to adjusted EBITDA ratio was 4.2x, which was above our target due to cash collection timing just mentioned. Now I'll provide our full year 2026 financial guidance, which is summarized on Slide 7 of our earnings presentation. Based on our current business outlook, we expect the following. Full year '26 reported revenues of between $2.7 billion and $2.9 billion, with quarterly revenue phasing similar to '25. Foreign currency exchange to be neutral from the full year based on currency rates as of January of '26. The Labs business continues to grow in the mid-single digits, immunohematology to grow in the low single digits and the U.S. Donor Screening business wind down to be substantially complete by midyear '26. Point of care growth is assumed to be relatively flat at the midpoint of our guidance, which is based on a typical flu season of $50 billion to $55 billion annual market tests. We also anticipate that COVID revenue will be flat at $8 million for the full year '26. We expect Triage cardiac growth to continue in the high single digits. For Molecular growth to decline slightly with the discontinuation of the Savanna business given our planned acquisition of LEX Diagnostics. We anticipate minimal revenue contribution from LEX in 2026 and have factored in the expected dilutive impact in our guidance. We expect China to grow in the low single digits based on current market information. Adjusted EBITDA is anticipated to be between $630 million and $670 million, which equates to adjusted EBITDA margin of approximately 23.3%, a 130 basis point improvement compared to full year 2025. We expect gross profit margin to be relatively flat to full year '25 and adjusted diluted EPS between $2 and $2.42. Included in this range is approximately $20 million in higher depreciation versus '25 related to growth in our instrument reagent rental agreements, as well as 2025 incremental investments in systems. For the full year, we expect $250 million in depreciation. We expect strong free cash flow between $120 million and $160 million, which factors in $50 million to $60 million in onetime cash use associated with our New Jersey facility consolidation and direct procurement cost savings initiative. Interest expense to be approximately $200 million based on current debt structure, CapEx to be between $150 million and $170 million and an effective tax rate of approximately 24% for the full year. So, by the end of '26, we expect net debt leverage to be approximately 3.8x as we progress towards our goal of between 2.5x and 3.5x. To conclude, we achieved our 2025 financial goals. Our cost savings initiatives meaningfully strengthened our results as reflected in our year-over-year EBITDA margin expansion. Looking ahead, we will continue to aggressively pursue further margin and cash flow improvement in '26, while also investing in our future top line growth. So, with that, I'll ask the operator to please open up the line for questions. Operator: Of course. [Operator Instructions] Our first question comes from the line of Tycho Peterson of Jefferies. Tycho Peterson: I want to hit on free cash flow, the guide here because it did come in lower than expected in the quarter. And you guys had kind of messaged, I think, at several different venues that you're confident in recouping the cash flows. So, can you maybe just talk on -- did anything happen in November and December when it seemed like most of those cash flows will come back? And then you talked about a step down in onetime outlays in '26 and the end of the ERP conversion. So maybe just all seemingly good guys in flight. So why are we not seeing better conversion in the timelines that you've laid out here for cash flow? Joseph Busky: Hey, Tycho, it's Joe. So as just mentioned in the script, the Q4 cash flow came in a little lighter than expected. We came in at 17% as a percent of full year EBITDA versus the 25% of adjusted EBITDA that I mentioned earlier for really the 2 reasons that I mentioned in the script, and that is we had about $15 million to $20 million of that system-related AR that we had assumed we were going to collect in Q4, but unfortunately, it spilled into January. We collected that in January. And then the second item that I mentioned was that we had some very late revenue in the quarter of about $20 million that, again, I had originally anticipated we would see that revenue a little sooner in the quarter and would have a chance to collect it in Q4. But given the way the flu season unfolded, that revenue came in very late, and therefore, we collected that cash in January. So, there's about $40 million, $45 million of cash that we thought originally would be collected in Q4 that slipped into Q1, January. We've already collected it, to be clear. So, it's timing with Q1 only. And that difference, if we had collected that $40 million, $45 million in Q4, we would have been right at our target. And then as you move to '26, we had talked about -- it's in the script, when I talked about the cash flow, the midpoint of our cash flow range was $140 million. And I want to be clear, Tycho, that's real cash flow. That's not adjusted cash flow. And so, when you factor in the onetime items for the New Jersey facility consolidation and the direct procurement, this is the $50 million to $60 million that I've been messaging for several months now. And that puts our, if you will, recurring free cash flow at around $200 million, which according to that same metric would be a little over 30% of our EBITDA at the midpoint. So, we -- I think we are making really good progress with cash flow. We just had some timing between Q4 and Q1. Tycho Peterson: Okay. That's helpful. And then maybe to dig into the strong performance in Lab, you had a nice acceleration even on a multiyear comp there. Can you maybe just talk a little bit about how sustainable you think these trends are? And any kind of delineation on chemistry versus immunoassay, how you're thinking about that for the year? Joseph Busky: Yes. Thanks for the question, Tycho. Yes. So, if you look at our underlying growth rates really across the business, I think things look strong. Labs was at 7% for the quarter, 6% for the year, Point of care 7%. We had strong Triage growth at 16% in the quarter. The IH business was rock solid at 3% growth for the year. And if you look across our regions, I think we have really nice regional performance as well. I would point specifically to EMEA and LatAm, where in EMEA, we grew 4%, but we did it at the same time as we improved the margins by 900 basis points. LatAm growth was at 18%. JPAC very solid at 6%. So, as I think about the ability to sustain our growth moving forward, I think about a few things. First of all, we've got really solid market positions in all of our segments. We have excellent brand recognition. We're winning new business. Our renewal rates are high. We -- as you pointed out, in the Labs business, we continue to benefit from being underpenetrated in immunoassay generally in the Lab segment, where our historical strength has always been more in clinical chemistry. So that's a nice growth opportunity for us. And our low OUS market penetration continues to be a growth opportunity for us just generally. And I think moving forward, we've got -- we'll have LEX coming into the business. We are strengthening our competitiveness here with the VITRO 450 and the OUS system partnership that Jonathan discussed. So, just generally, I'm thinking -- I'm bullish on our growth rate moving forward. I think we're well positioned kind of across our business units to perform well. Tycho Peterson: Okay. That's great. And just last one quickly on China. What are you assuming in the guide for the year? And then I'll hop off. Joseph Busky: Low single-digit growth in '26. Same as '25. Operator: Our next question is from the line of Jack Meehan of Nephron. Jack Meehan: I wanted to pick up where Tycho left off there on China. Since the press release you had a couple of weeks ago, I was wondering if there was any update that you could share in terms of dry slide and VBP? Brian Blaser: Yes. Hi, Jack, nothing really new there. We did put out a pretty extensive statement on the website that kind of covers all the angles of that. But just to recap, the Jiangxi provincial HSA had made a statement that it was going to explore launching a nationalized VBP program, value-based procurement program for dry chemistry test strips in 2026. And as far as we know, there still has been no detailed proposal on that. There's been no indication of what products would be included in that or if our products would be included. So, we're waiting to hear details at this point. Just to reiterate, we think that if our products were included, the estimate of the impact might be between 0.5% and 1% of total company revenue, and that's something that we would look to offset somewhere else in the business. So still waiting to hear more on that, but no new news to share at this point. Jack Meehan: Okay. Appreciate it. I wanted to see if I could get a mark-to-market update on Sofia. I was wondering, just as I was looking at the flu and COVID trends, specifically, how much of the flu sales in the quarter were ABC. I was just wondering if maybe conversion from legacy COVID to ABC might have driven any of the shift you saw in the strength in flu versus the COVID decline? Joseph Busky: Jack, it's Joe. The revenue from the combo product or ABC, as you referred to it, is still continuing strong, well over 50% of the total flu revenue. And actually, it's been very consistent for the last 2-plus years. And so, it's -- the combo test has proven to be very durable. Now whether there's some transition, as you mentioned, from stand-alone COVID to that, I can't really speak to that. But I do know that the combo test as a percentage of the total has been very consistent now for 2-plus years. Operator: Our next question is from the line of Andrew Brackmann of William Blair. Andrew Brackmann: And Joe, I'll save my farewell until next quarter. But maybe I'll start with you on a question on the guide and particularly EPS guidance. So, I think the low end of your range is actually below your 2025 EPS actual. Obviously, you've got interest expense that's going to be higher for the full year. But as you sort of think about the lower end of the range, can you maybe just talk to us about some of the assumptions that are embedded here to get you closer to that $2 versus maybe that higher end? Joseph Busky: Yes. Hey, Andrew, the guide that we put out just now for '26 has a wide range just like it did the guide for '24 and '25. We -- unfortunately, because of the respiratory portion of our business and the sort of a bit of uncertainty that we have in that business, we have to have a wide range for respiratory. And so, if you think about the range for revenue, it's pretty tight on the Non-respiratory business. As I've been saying to you guys for a long time now, that business is super predictable, and we don't need a lot of range on that. So, most of the range on the guide is respiratory. And so again, the midpoint is where we want everyone to go to the midpoint of the guide I just gave is where I think everyone should look to go. And so, what is going to drive it to the low end or the high end? Well, the midpoint for respiratory guide is going to be, like I said, that $50 million to $55 million test market. And if it drops down to maybe $40 million, $45 million, you're going to go to the low end of the range, if you up to $60 million, $65 million, you're going to go to the high end of the range. And again, you guys know this, we've seen flu markets of all those sizes over the last several years. So, that's why we have to pick up all sizes of the market in that range. And when you have that wide of a range for revenue, it just drops down. So, the EBITDA guidance and the EPS guidance just fall right from those revenue numbers. Now again, I don't think it's probable we go to that low end. I think, and again, I want everybody to look at the midpoint of the range. I think that's where people should be. But I also want to call out what I said in the script a few minutes ago is that we do have depreciation and amortization going up about $20 million year-over-year from $25 million to $26 million. And so that is -- that's about a $0.21 -- $0.22 impact to the adjusted EPS. And so, as you think about where that EPS range is for '26 relative to '25, that's a big impact. There isn't as much of an impact on interest expense. Interest expense is going up, I would say, slightly from '25 to '26. I wouldn't say it's going up tremendously. Most of that where you might be thinking why is this EPS so low? It's because of the increase in depreciation. Andrew Brackmann: Okay. That's very helpful. And then, Brian, maybe a question for you. You started the call sort of with a reflection of your time in the CEO chair. As you sort of think about the future here, the next couple of years of that continuous improvement sort of outlook that you outlined there, can you maybe sort of talk to us about some of maybe the future areas you're focused on for driving that improvement, specifically as it relates to maybe some cost savings? Brian Blaser: Well, yes, if you consider cost savings specifically, I'm still very focused on getting the company to the 25-plus EBITDA range, 25% EBIT margin range. And I'm pretty confident in our ability to project into that range for a number of reasons. First, starting in the middle of the year, I think we're going to see a 50 to 100 basis point improvement just from exiting the Donor Screening business that we've announced for a long time. We've got a very rich pipeline of projects in place. We've been working on these direct and indirect procurement projects for some time now. We've got a nice portfolio of projects that span multiple years, as well as our plans to optimize our manufacturing footprint further. We still have a lot of opportunity to optimize profitability in a number of regions. I pointed to the 900 basis point improvement we made in EMEA. We've got other opportunities as we look globally. And we do benefit not only from a growth standpoint, when we place integrated systems, because of the immunoassay volume, but that improves our product mix as the immunoassay margins are higher than our clinical chemistry margin. I think we'll see the benefit of margins in LEX as we start to achieve molecular level margins from that platform as it comes online. And so, I think we get probably to the mid-20s with a lot of our procurement initiatives, continued staffing optimization, the Raritan New Jersey footprint optimization. I think the high 20s come as LEX becomes a bigger component of our product mix. And we still do have some work to optimize staffing. We've done a lot of work there. So, those are the things I'm thinking of on the sort of the cost side of the coin. On the growth side, we're really turning to how can we optimize our portfolio with new menu additions for our existing products, and we're starting to create the financial flexibility that we can start contemplating what our new systems will be that will allow us to project into higher volume segments and drive additional growth for the company. So, a lot of great things ahead of us here, and I think very positive on both the top and the bottom line. Joseph Busky: Hey, Andrew, before we go to the next question, operator, Andrew, hang on, Juliet, just reminded me on your first question that I left out a piece of information that I probably should have informed you on that when I talked about the higher depreciation in '26 versus '25, the $20 million. I probably should have mentioned that, that's driven by really 2 main things. It's the reagent rental capitalization in '25 was about 14% higher than in '24. And so, we had a -- this is a good thing. We're placing more boxes in instrument location or customer locations. And so that's part of it. And then the other big piece is the systems, the capitalization. You guys have heard me talk a lot about the ERP system conversions, and we spent a lot of money on the system conversions that are done. And so, we had to transfer and that's all been capitalized in late Q3, early Q4. And that's -- those 2 things are really driving that higher depreciation when you look at '26 versus '25. So, sorry, I missed that [indiscernible]. Operator: Our next question comes from the line of Patrick Donnelly of Citi. Patrick Donnelly: Joe, maybe one for you just on the margin front. Can you talk about the gross margin? They were a little bit soft relative to what we were looking for. I know you called out the tariff piece, maybe a little bit of mix. It would be helpful if you talk through that. And then just the right way to think about the go forward, I guess, those gross and op margins as we work our way through '26, maybe just a little bit of progression and cadence on that front would be helpful. Joseph Busky: Yes. Hey, Patrick, so the gross margins in Q4 were down and I would say that it was down due to, I mean, 3 main things. There definitely was some tariff impact. When you think of -- and again, I'm talking about Q4 '24 to Q4 '25, we're down. It's the tariff impact. We had more instrument revenue in Q4 '25 versus the previous year. And then we also had some other, I would say, negative product mix impacts for Q4. When you look at the full year '25, we were actually up 40 basis points for the full year '25 versus '24. And then as you look forward to '26, I would say that we're going to be relatively flat on the GP margin line. And again, we've got some additional tariff impact in there in '26 that you didn't have early in '25 and also some product mix impact. As a good guy, we definitely have some direct procurement initiatives. But I think those direct procurement initiatives are going to start hitting more robustly as you move through '26 and into '27. As I've been saying, these direct procurement initiatives take a little time. They're very complex. So, I do think we're going to get over the short term, as you move from '26 into '27 and '28 even, we're going to see more gross margin improvement. And Brian and I have a goal to get our gross margin really up much closer to 50% as we move through the next couple of years. And that's going to be a combination of the direct procurement initiatives that I just mentioned, as well as you think about LEX. And once we get through the dilutive stages or the early stages of LEX, molecular margins do typically have higher margins than antigen. So, we do expect LEX over time is going to benefit our gross margins. Patrick Donnelly: Yes. Maybe on that point, we left off on LEX, Joe. It might be one for Brian. Just in terms of any milestones we should be keeping an eye out. I know it sounds like dialogue with FDA is continuing to move forward on LEX. Just what we should be looking out for confidence on the time lines and when we should expect to start to see some revenue there. Brian Blaser: Yes, I'll ask -- yes, I'll actually ask Jonathan to comment on that since he's in the middle of it. Jonathan Siegrist: Yes, sure. Happy to. Thanks for the question, Patrick. Yes, with regards to LEX, we had talked about LEX back in May. We certainly would have hoped to have clearance right about now, but it's not unexpected, especially given it's a brand-new platform, which take a little bit longer through its first FDA cycle. A reminder that this is a CLIA waiver as well. So, we're looking at not only assay, but the hardware, the software, cybersecurity, the usability as well. All indications we have right now is that it's really going according to plan. And I know from our own FDA review submissions, we've seen FDA taking their deep review of the process. So, everything is going according to plan. No issues we see at the moment, just kind of waiting for that to work its way through the rest of the process with the FDA. And then as we spoke about before, once we get the other side of that, we'll be continuing with all of the acquisition activities and timing and processes that are associated with that. Operator: Our next question is from the line of Lu Li of UBS. Lu Li: Maybe just following up on some of the R&D pipeline that Jonathan just mentioned. I guess like maybe on the VITRO system, it seems like all the new product launches are OUS opportunity. So, I wonder like any plan for the U.S. side? And then also, how should we think about the assay pull for opportunity in the coming years? Brian Blaser: Yes. So, we're going to be issuing a press release with more details on this agreement that Jonathan discussed in his remarks. But basically, our OUS markets are becoming a larger part of our business and more important for our growth profile. And we've recognized that we need to strengthen our portfolio to take advantage of the growth opportunities in those markets, and that's what this partnership is designed to do. It provided us a way to move quickly with really some very high-quality solutions for the benefit of our customers. So more to come on that. We'll get some details out in the next few days on that. As for systems based focus on our U.S. markets, they take a little longer to develop. As I mentioned, we now have some financial flexibility to start investing in those new systems that will -- that are at this point, probably years away. Our near-term focus, though, is going to be on really heavily focused on content and menu addition for our current systems. Jonathan Siegrist: Yes. And I think, Brian, this is Jonathan. I would add on the U.S. side, obviously, with adding our high-sensitivity troponin assay, that rounds out our offering on the menu side here in the U.S. really well. Brian mentioned earlier in the call and reiterated here our OUS opportunities both on the immunoassay side to round out the menu offering, which is what that partnership helps us with on tenders. And then on the VITRO's 450 that I spoke about earlier, that's really hitting those lower volume segments, but it's also important on that design to hit a particular COGS target that we've done. So, from an OUS perspective, it's fundamentally and strategically about tenders and hitting with a lower piece -- lower cost capital, some of those lower volume segments, which is why you'll hear us continue talking about all the OUS opportunities in front of us. Lu Li: Got it. And then maybe I will squeeze my 2 short questions into one. On the Lab side, the 7% growth, how much of that is coming out from the instrument? It seems like you have a good instrument quarter. So, I'm wondering how much is coming from that? And then also one on leverage. Any initiative in terms of like the debt refinancing in 2026 that could potentially lower the interest expense? Brian Blaser: Hey, Lu, I can take the instrument revenue piece of that. For Q4, the instrument revenue was relatively flat to prior year. So, really, none of that growth is being driven by instrument revenue. Jonathan Siegrist: And the leverage. Brian Blaser: I'm sorry, what was the -- I... Jonathan Siegrist: The question was around leverage. Brian Blaser: We just went through a pretty extensive debt refinancing. And at this point, no plans for further refinancing the debt. Operator: Our next question comes from the line of Andrew Cooper of Raymond James. Andrew Cooper: Maybe first, I just want to drill in on free cash flow a little bit more again. I appreciate guiding to the reported metric. I think that makes it a little bit clear. But even if we add back that $50 million or $60 million you called out of sort of onetime that drags against it, you're still looking to get to like 30% conversion in '26. So, obviously, a little bit shy of that 50-plus longer-term goal. Is that 50-plus still the right bogey? And if so, when should we think about bridging towards that number? Joseph Busky: Hey, Andrew, we've been pretty clear that the target there is 50%. I don't think I said over 50%. It's 50%. And I've also -- I thought we've been saying pretty clearly that it's not -- it was never going to be a '26 goal. It was more going to be a run rate within '27 once we get further along with the direct procurement initiatives. And the cash flow goals are really kind of tethered pretty closely to the margin goals. And that's more a mid-'27 thing. So, what we had said was that we would make progress in '26. And so, I think we came in a little bit less than I thought in '25 at 17%. When you look at -- again, that's a recurring free cash flow metric, but we are making progress from that 17% to the 30%. And obviously, as I said, we're going to be -- there's a full core press within the organization on cash flow right now. And we're going to be looking under all rocks to try and find ways to increase cash flow and get ahead of that and do better than that 30%. But that -- right now, that's the bogey we're putting out there for '26. Brian Blaser: Yes. I would just add that cash flow is -- yes, I would just add that cash flow is a company-wide focus for us and including incentive -- executive compensation incentives that will directly be tied to cash flow targets for the first time this year. So, it's a major focus for the organization. Andrew Cooper: Okay. That's helpful. And then maybe just one more on the partnership. I appreciate we'll get some more details, it sounds like relatively soon. But when we think about really what's being solved for there, I know Jonathan just talked about some of kind of getting where you need to on margins or being able to get into tenders. How much of this is, hey, here's the 25 assays that are not available on your existing system and those have kept you out of tenders versus bringing a solution that maybe makes a little bit more economic sense in some of these settings. Jonathan Siegrist: Hey, Andrew, this is Jonathan. I'll take that one. So, yes, it's a good read behind the question. A good chunk of it is going to be that tender gap fill if you will. I think the other important thing here is, again, we'll be talking more soon about the specific of the partnership. But one other detail, it's a couple of different systems we're partnering on. So, the other element of this partnership is it's going to get us a little bit higher throughput systems that the partner has. So, it's a big part of tenders for sure, but it's another part of us being able to go upstream a little bit from a customer and a throughput perspective in those OUS markets as well. Operator: Our next question is from the line of Casey Woodring of JPMorgan. Casey Woodring: And first, Joe, congratulations on retirement. Maybe following up on Patrick's earlier question on margin progression. How should we think about the direct procurement initiatives hitting the margin line in '26? It doesn't sound like a lot of that's baked in this year unless I misinterpreted your comment there. And I would also be curious to hear what the guide assumes for free cash flow in 1Q. It sounds like you have about $40 million in the bank already that was carried over from last year. So, I guess, how do you see the free cash flow progression from 1Q over the course of the year to get to your guidance range? Joseph Busky: Hey, Casey. Thanks. So, we definitely have some direct procurement savings built into the '26 guide, but there are definitely some offsets within GP. Like I said, there's tariff impacts, there's product mix. There's some LEX dilution built into the guide, not significant, but that's definitely an offset. And so that's why we're guiding GP margin to be relatively flat even though there is direct procurement savings into -- or built into the guide for '26. I do think there'll be more direct procurement savings that will go into the '27 guide, but obviously, more to come on that. And as far as free cash flow, and again, just to be clear, we are -- this quarter and for '26, we're now guiding to real cash flow and not this adjusted metric anymore, but we will be providing more color on the onetime cash. Like I said, we're -- the midpoint of our guide for '26 is $140 million of real free cash flow, and there's about $50 million to $60 million of onetime, which gets you to that $200 million for recurring. And I would say that similar to the last 2 years, despite that some of that timing difference between Q4 '25 and Q1 '26 that I mentioned in the script, I still think that the majority of our cash flow is going to be generated in the second half versus the first half of the year. And that's consistent with the last 2 years. I don't think there's really any change there. And so, yes. Casey Woodring: Okay. Got it. And maybe as my second question, I just had a few on the high-sense troponin approval on VITROs that you guys called out. Any thoughts on if that could be a meaningful contributor this year to revenue? And I would also just want to ask on the Point of care piece, too. I think you guys had targeted a launch on high sense troponin in Point of care, I think it was in '24. So, any thoughts on potentially getting into that space anytime soon? And then maybe just lastly, across VITROs and Point of care, just curious what the TAM is in high sense troponin and if this could be a real growth area for you guys over the next several years. Brian Blaser: Yes. I think -- well, first of all, as it relates to the Point of care high sense troponin, I'm not sure what was communicated there, but it's something that in theory, we'd really like to do. We're still working on a number of technology challenges there to be able to provide that in the United States. We are seeing a strong contribution with the high-sense troponin assay outside the United States. And so, we would like to pursue a pathway to commercialize the assay here in the U.S. As it relates to the Labs high-sense troponin that we launched, by itself, I don't -- it's not really going to have a huge impact on our short-term growth rates. I think over the long-term, it would have become a competitive factor for us. But that said, it will help us compete a little better in the higher volume segments where that particular assay is growing in importance. And so, we're happy to get it on the system. And it will -- it's certainly going to help. It won't hurt, but I don't think we can point to major step function growth there as a result of a single assay. Operator: Our last question for today's call is from Bill Bonello of Craig-Hallum Capital Group. William Bonello: I just want to go back once more to the cash flow guide and outlook. So, you talked about the onetime uses of cash that are going to occur this year and gave us sort of a proxy for what sort of recurring cash flow could look like. I guess as you consider your plans beyond 2026, it would be helpful to get a sense of whether you're going to have additional sort of what you might consider onetime cash investments that you're going to have to make? Or is $200 million or so the right starting point to be thinking about 2027 free cash flow? Joseph Busky: Yes. Bill, it's Joe. So, we have said already that the onetime cash would come down significantly. And you go back to 2024, we had over -- well over -- it was probably like $210 million of onetime cash in 2024. It came down to about $175 million in 2025. And then like I said, the $50 million to $60 million in '26 guide. For '27, I would expect it to be a similar number, probably around maybe $40 million to $50 million of onetime cash in '27. And it's the same 2 topics. It's the Raritan, New Jersey facility shutdown that takes into '27 to complete. And it's the direct procurement initiatives, which will require some onetime resources in the areas of R&D and quality and regulatory. That is also going to go into '27. And so -- but beyond that, I don't have a lot of visibility to other onetime cash at this point that we would utilize. And so, that's all good news. As you think about our free cash flow expanding, and I do think that the free cash flow will expand as our EBITDA margin continues to go up, and we continue to look at the working capital. I do think there is opportunity in inventory in '26 and '27 that we will go after. And then, of course, the onetime cash starts to really go away. And so, as you think about those areas as well as starting to whittle down the interest expense as we either refinance the Term Loan B, which I anticipate us doing at some point this year because it does look like rates are going to come down, that brings down interest expense. And we'll do everything we can to limit reagent rental cash and try to flip customer's cash instrument sales. We've got some initiatives in place to flip that mix a little more. We'll look to limit CapEx. And so, through all those things, all those levers, that's how we get up to that 50% conversion rate of adjusted EBITDA. So, that's sort of the path forward, if that makes sense, hopefully? William Bonello: Yes. No, that does. And then I guess I just wanted to revisit your comments on gross margin. I thought that as part of your answer and maybe you were talking about full year and not Q4 sort of year-over-year decline in gross margin. But I thought in answer to Patrick's question, you had cited more instrument revenue as one of the factors impacting gross margin. But then later in response to a question that somebody asked about what was instrument -- how much of the -- to what degree was -- were instruments contributing to the higher Lab growth, you said that instrument was kind of flat year-over-year. So, I'm just trying to reconcile the 2. Joseph Busky: Yes, you're right. It is -- for Q4 on its own, Bill, it's mostly product mix and tariffs. That's right. It's offsetting. Operator: That will conclude today's Q&A session. So, I'll now pass it back over to Brian Blaser to close us off. Brian Blaser: Thank you, operator, and thank you, everyone, for your time and continued interest in QuidelOrtho. To wrap things up, we delivered on our 2025 commitments, executing against the priorities we outlined, strengthening our business, expanding margins and driving solid growth across our portfolio. Looking ahead, our focus remains clear, accelerating growth, expanding margins and strengthening cash flow while further improving the balance sheet. So thank you again, and we look forward to updating you next quarter. Operator: Thank you. That will conclude today's call. Thank you for your participation. You may now disconnect your line.
James Fitter: Thanks very much, and good morning, everyone, in Australia. Good afternoon to those in the United States, and good evening to those here in Dublin, where I am calling from, joined with me by Darragh Lyons, our CFO; Niall O'Neill, our Chief Product Officer; and Toni Pettit, our Company Secretary. Firstly, as always, I just want to draw your attention to the legal disclaimer, and as usual, remind you that we are a calendar year-end. So we're presenting our full year results for the year ended December 2025, and then our reporting currency is in euros. We have released this deck for those of you who are on the phone rather than the webinar, we have released the deck to the ASX. That has not yet been published. So apologies to that. But hopefully, we'll be able to get through this with the deck as is. So the agenda today, we're going to talk about, obviously, the 2025 financial results, provide commercial and sales updates. Niall is going to talk through our product innovation. I'm going to address where we are on our AI journey. And then, of course, we'll provide an outlook and hopefully provide ample time for some Q&A. So just a reminder, Oneview Healthcare is a global leader in connected care experience solutions. We have been listed in Australia for 10 years, and we are enjoying commercial success on 4 continents. As part of that, we're proudly partnered with 3 of the top 25 hospitals in the United States, which remains our key focus of attention. Nearly 85% of our business today is in the United States. Just a reminder of how [indiscernible] value for our customers. We have 4 key pillars. Firstly, enhancing the patient experience, really empowering the patients to be more control of their own environment, providing them with a digital journey to get them home safer, faster, better informed. Secondly is to enhance the care team experience. And as those who know the company well will know that this has been a massive focus since the pandemic. Obviously, if we're putting technology in the room, we better make sure that it's driving operational efficiency. Thirdly, the technology is improving safety and outcomes through intelligent sensing, anticipating risk and monitoring adherence to protocols and providing a layer of transparency that typically isn't available without systems like ours. Fourthly, and most importantly, we're optimizing operational efficiency for hospitals and moving to more of a proactive delivery of care rather than a reactive delivery of care. So for 2025 and review, on Page 9, we have the financial snapshots. I'm not going to steal Darragh's thunder because he's going to talk to them in detail in a very few minutes. But I would just draw your attention to the new user interface, a really important part of the product we're delivering this year that Niall is going to refer to. In terms of business and innovation highlights for the year, I think perhaps the most significant for the company last year was Michael Dowling joining the Board of the company, which was effective from the 2nd of December last year. Michael, for the last 23 years, has been the CEO of the largest health system in New York. It's the largest private employer in New York with over 140,000 employees. And Michael brings with him unparalleled expertise in healthcare. He's going to bring us incredible insights into the way that enterprise healthcare is run and reimbursed in the United States. But perhaps most importantly, he brings a huge level of optimism, a growth mindset that I think is going to be incredibly exciting for us as a company as we embark on this next chapter of growth. And I think if I'm thinking about where we are today, I don't think we've ever had as much momentum in the business. And a big part of that has been generated by Michael joining the Board. So a huge welcome to Michael, and we're super excited to have him as part of the Oneview team going forward. We're delivering a next-generation experience, which Niall is going to talk to today around the new front-end user interface, and that obviously has some really exciting elements of AI embedded into design. And I'll let Niall talk at length around how that's going to drive greater value for us and our customers. So why don't I pass it across it to Darragh, who's going to talk through the numbers in some detail for you. Over to you, Darragh. Darragh Lyons: Thanks, James. Good evening, and good morning, all. So we posted a 21% increase in revenues in 2025 compared to 2024, and that increase was driven by a EUR 1.6 million increase in non-recurring revenue and a 7% growth in our annual recurring revenue channel. That strong momentum that we have seen and adding 18 new logos over the past few years is the driver of that revenue growth that we were able to deliver in 2025. Our growth was negatively impacted by the weakening Australian dollar, and in particular, the U.S. dollar during 2025. Almost 80% of our revenues are now generated in the United States. So on a constant currency basis, our year-on-year growth was actually over 25%. With the larger proportion of non-recurring revenues in 2025 compared to 2024, our gross margin declined by 3 percentage points to 64% in 2025. Our margins within the recurring and non-recurring revenue channels are holding. So the decline in the overall gross margin is due to mix only. Our operating EBITDA loss for the year reduced by 8% to EUR 8.1 million, and the decrease is attributable to the higher revenue generation during 2025. Our cash OpEx remained consistent with 2024. But of significance is the decline that we're seeing in our cash OpEx during the second half of 2025 following the restructuring that we executed in May 2025 and also some other efficiencies that we're driving through the business, and we are doing that on an ongoing basis. So our H2 2025 cash OpEx was 9% lower than the first half of 2025 and was actually 13% lower than the same period, so H2 2024. And as we'll cover later in the presentation, we expect to drive further efficiencies in our OpEx during 2026. Turning to the balance sheet on the next slide. So our cash position at 31 December, 2025 was EUR 4.6 million, and the decline in our cash over the course of the year was broadly in line with the operating EBITDA loss that we had in the year. Our net working capital position is broadly consistent with the prior year balance sheet. Importantly, on our balance sheet, I would refer to the strong inventory balance of EUR 2.9 million that we have on the balance sheet. That's largely comprised of proprietary hardware. And that does give us a benefit in terms of insulating us against potential future pricing or tariff volatility and gives us strong cash generation potential from our planned deployment activity during 2026. Turning then to our live endpoints. So at the end of December 2025, we had 14,880 endpoints live. As we previously highlighted at our half year results, our net deployment growth in 2025 was impacted by the decommissioning of about 900 endpoints at an Australian customer due to budgetary constraints. But notably, our new endpoint additions are generating more than double the revenue per endpoint compared to the decommissioned endpoints. Also important to note on this slide is the 31% acceleration in deployment activity that we've enjoyed during the second half of the year compared to H1 2025. And that is attributable to the efforts that we're making in terms of making our deployments more efficient, and obviously, the momentum that we're seeing in terms of adding new customer logos over the past few years. So on the next slide then, as we look forward, we are continuing to see efficiency, and we've invested a lot of time and resources into gaining efficiency in terms of deployments. And we're now at a position where we can turn on endpoints at new customers within that 90-day window. That efficiency and the continued momentum we're seeing across our existing and new customer logos is giving us the potential to add 20% endpoints -- increase in endpoints by the end of 2026 to land at just under 18,000 endpoints at the end of '26. So that's the target for 2026. So I'll hand it back to you, James. James Fitter: Thanks, Darragh. So let me just get into the commercial and sales updates. So as Darragh already mentioned, we've had a really fertile period over the last 3 years, adding 18 new logos, which is almost double the number that we landed since the IPO. So it's been a really fundamental change. And in the first couple of weeks of this year, we announced a very significant development that Baxter had us added to the group purchasing organization of one of the 10 largest health systems in the United States. Again, it will be impossible to overstate the significance of that. This is a really important development for us and for the Baxter partnership, and I think really speaks to the power of that partnership, which we'll talk a little bit later further in the presentation. But I wanted to help give you a sense of what these logos mean in terms of our commercial strategy because it's incredibly hard. Those of you who followed the company so patiently know that the sales cycle in this business is incredibly challenging. It's typically 18 months to 2 years. But once you're in, you have a unique opportunity to build partnerships and relationships with some of the most sophisticated health systems in the country, which is what we've done. And this concept of landing and expanding is very, very powerful. It's even more powerful for us because in the last 15 months, we've added 3 significant new products to our portfolio with the Digital Whiteboard and Digital Door Sign and MyStay Mobile. And those products, as we've specified before, give us the ability to basically grow our revenue with existing customers by nearly 100%. So on this Slide 18, you can see we've just highlighted some of our older legacy customers dating back to 2014. You can see in green the initial deployment we have at those customers. And then you can see the expansion that we've received since then. And in pretty much every case, the expansion has been multiples of the initial deployment. In the case of customer A, we will be fully deployed across their enterprise. At customer D, we've been fully deployed across their enterprise since 2014. Customer B is the exception. You'll note there, there's a lot of endpoint potential in gray. That endpoint potential is a function of the fact that, that customer made a very major acquisition in 2024 and we have not yet been able to convert that customer's acquisition, but we do know that they do not have a solution like ours, and we think there's a real opportunity to do that in the fullness of time. So as we think about the 18 logos that we've landed in the last 3 years, those 18 health systems together manage 11,631 licensed beds. You can see the vast majority of those beds that we've landed have been in the United States with just over 500 here in Ireland, which we're very excited to have our first European customer and a fairly small number of 183 customers at Adeney and Avive in Australia. And I just want to explain a little bit of the logic behind why these health systems are so focused on providing an equitable patient experience. Firstly, the obvious point being that if you visit one of these large health systems like NYU and you turn up at their flagship facility where they have the state-of-the-art Oneview experience, they don't want you going to one of their other fully-owned facilities and finding yourself back in the sort of 1980-style patient experience that a lot of health systems are still running. So the patient experience is important. They want to have a consistent baseline experience. That helps reduce variation that can often contribute to inequity. They want to provide consistent access to health information, to education, to care plans. They want to reduce disparities tied to literacy and language. Most importantly, perhaps they want to have data and real-time dashboards to surface any inequities in utilizations and response patterns. And if you don't have it across the entire system, it's obviously impossible to do that. And I think amongst some of our more Midwestern-style customers, there's a real desire to make sure that their flagship facilities in major cities are also delivering the same experience to rural low-income and more underserved communities. So there's a real desire to standardize across the enterprise, and we've seen that. I think it's a consistent theme amongst the customers that we have secured. So what's that mean in terms of addressable market? And I think there's been a little bit of confusion in the market when we made the decision last year with these new products to move away from focusing on beds to focusing on endpoints. So the endpoints are defined as any revenue-generating data point in the room. So that could be the TV, it could be the tablet, it could be the digital whiteboard or it could be the digital door sign. So in every room, we now have 4 revenue-generating opportunities, which creates amongst these 18 customers, 46,000 endpoints that we are able to target. And in recent contracts, we are averaging around 2.5 endpoints per room. So if we were to assign that across the 18 logos that we won on the 2.5 point average, we'd have an addressable market of nearly EUR 16 million in average recurring revenue. Now I would point out there's a slight disparity between licensed beds, which is the number of beds that's approved by the state licensing agencies with staffed beds. So staff beds are the number of beds that are physically available based on the staff on hand. So the licensed bed number might be slightly higher, but it would be relatively consistent. But I think it really speaks to the opportunity. And on Slide 21, we try to provide a visual of that, where you can see that where we finished the end of the year 2025 with these logos are in green, the forecast delivery for 2026 is in orange and the white space, which is the gray bars, shows the potential opportunity that we have to deliver new products and expand across these enterprises. And I think what this tells you is we're very early in our journey. And if you think back to some of the earlier examples I showed from 2014 and 2016, in the fullness of time, we'd expect to be filling in a huge amount of this white space. And I would point out that this graph does not include any beds from the Baxter general purchasing organization we announced back in January. And that health system would in itself be larger than these 18 new logos combined. So I think that gives you a bit of a sense of the opportunity that, that system is putting before us, and that's what's leading to so much momentum in the business. So as we think about the endpoints in the room, again, I just want to -- I think this is a Slide 22 is a really important reminder of the power of the Baxter partnership. So I think as most of you know, Baxter is through their Hillrom acquisition one of the largest suppliers of smart beds in the United States. They're one of the largest suppliers of nurse call. They're one of the largest suppliers of infusion pumps. There really aren't too many health systems in the country that they don't touch. So as we think about the smart room of the future, which is the vision that Niall has built for us over the past few years, we have a series of data points. They're all being orchestrated by a common ecosystem. So we are controlling the patient TV. We're controlling the tablet. We're controlling the door sign, the whiteboard, the voice assistant, which Niall is going to speak to momentarily. And then Baxter is providing the bed, the nurse call and the precision locating or the RTLS system within the room. The one piece that neither of us are delivering is the camera and computer vision, which has been the driver of the virtualization of care. And again, I think those who know the company well know that our strategy on that has been to create a virtual care API and to certify the leading vendors in this space. So Caregility was the first. We've now also licensed care.ai, Artisight and Teladoc through that API to be able to deliver their capabilities through the Oneview platform. So that's the -- I hope gives you a sense of the synergy between ourselves and Baxter. And the Baxter partnership is obviously starting to deliver. The news we announced in the 4C was obviously hugely significant. It brings a real confidence I think to the sales organization at Baxter that one of the 10 largest health systems in the country has embraced what we're doing. In terms of the partnership itself, we have over 156 qualified opportunities in the pipeline. We have delivered already some significant integrations into the Voalte Nurse Call. Niall is actually presenting at their national sales conference next week in Dallas. And we've got further active engagement going on, on the co-innovation pipeline. So I think we are really blessed to have this partnership. It's opening opportunities with these large integrated delivery systems, which for a smallish company like ours would be almost impossible to access on our own. So with that, I'm going to pass control of the deck to Niall, and he is going to share an update on the innovation road map. Over to you, Niall. Niall O’Neill: Thanks, James. So AI is having a really significant impact on software development. And we've been thinking a lot about this in 2025. We've redesigned our software development life cycle. So this is the way in which we deliver and deploy our software to leverage AI. And really, that's around the goal of velocity with quality. We want to make sure that we're moving quickly, but with the quality that is so important to our customers. So we've continuously improved this delivery life cycle during 2025 and we continue to improve it now. We're now on our third iteration, leveraging Agentic AI as part of our software development life cycle. And we have set maturity targets for each of the phases of the SDLC. And our goal in 2026 is for us to be at least 4 out of 5 for maturity for our key phases of requirement definition of software build and software test, which are the really sort of intensive, resource-intensive parts of software delivery. And this relentless focus that we have is already bearing results. And I think the most tangible example is we will be previewing our new Ovie Console product. I'm going to talk a little bit more about that at the upcoming U.S. trade shows, so ViVE in a couple of weeks' time and then HIMSS in March. And this product will have gone from concept to pilot in 2026 with just one high agency engineer using AI to deliver the product. So not needing an entire team, but one person working with agency and using AI. Another data point, every quarter, we survey our engineering team. And the share of the team that report time savings of more than 15% daily grew from 58% to -- sorry, to 76% in 2 quarters, and we fully expect that trend to continue in the next quarter's survey. We're taking the approach and the learnings from this AI transformation of software development and we're now building a repeatable playbook that we're going to apply across the organization as part of our move to become an AI native company. So we move with velocity and quality, not just in software delivery, but in all aspects of our business. So I want to talk a little bit about our new user interface. Our focus in 2025 from a product delivery perspective was delivering our new user interface. So this is for our MyStay TV and MyStay tablet products that patients use in the hospital room. And this new design have 3 goals. The first was to provide a simple, intuitive and accessible experience for all types of users. And one example you can see on the right-hand side here is the ability to increase the tech size. It sounds like a very simple thing, complex to design for and was one of the most requested features from our customers. The second thing is providing a personalized interface with demographic-specific layouts. So this enables us to meet the needs of pediatric users. It enables us to -- or it makes it easier for patients to select the language if they're non-English speaking. And it also introduces concepts like AI suggested meals to help patients who have very restrictive diet orders and they find it hard to be able to order something digitally through Oneview because their diet order is so restrictive to be able to easily order meals. And every meal ordered through the Oneview system is effort avoided for our customers and for their staff. And the third goal is that it facilitates Ovie. So Ovie was originally conceived as a voice assistant. So those of you that would have been following us would have seen reference to Ovie or a voice assistant in 2025. We previewed this at trade shows last year. As we've shown this to customers and they've been able to use Ovie and test it and provide feedback, this has really evolved. This concept has evolved, and it's evolved into this concept of a digital care assistant that helps patients help themselves. But it's not just focused on the patients, it also ensures that the care team can focus on what matters. Interruptions are a huge problem for nursing as they try to provide care during the day, they're getting constantly interrupted and Ovie is all about trying to reduce those interruptions. Ovie runs on Oneview devices, tablet, television, a voice assistant and on clinician devices. So it's supporting patients, it's helping manage non-clinical needs and it's also giving staff real-time visibility. So just to kind of drill into that a little bit more in terms of the personas. So for patients and families, Ovie provides real autonomy. So they can request meals, they can request comfort items or non-clinical needs via voice. And this is all about reducing their reliance on the call light, so having to call their nurse for everything. They can also control their environment, so lights and lines, temperature, the system using simple voice commands. Beyond that, it also delivers timely prompts. So on their home screen, it will give them reminders whether that reminder is about ordering a meal, whether it's about watching education that they need to watch, whether it's about preparation for discharge. And it will also answer natural language questions instantly. So when is my procedure? What meals can I order? The types of questions that patients either just don't get answered or have to interrupt their nurse to get answers. For nurses, Ovie will reduce interruptions by routing those non-clinical request, things that the nurse doesn't actually have to fulfill for the patient, directly to the right team. Nurses are able to monitor the patient's experience in real-time. So they'll have visibility of who's using the Oneview system, who's not using it, who's ordered meals, who might have not completed their education or who might have requested services. They can also access care information hands-free in the room via Ovie Voice. So for our customers that don't have a dedicated whiteboard in the room, for example, the nurse will be able to come into the room and say, "Hey, Ovie, open the whiteboard" and that will allow them to access important care information all without having to touch the pillow speaker or the tablet. And when Ovie detects an issue requiring nurse follow-up, it will escalate appropriately. And by automating repetitive workflows and reducing these interruptions, this noise, Ovie really is all about protecting nursing focus so they can stay centered on clinical care. For operations and care support staff, those teams will be able to receive those non-clinical requests. So that would be something like a drink of water, a blanket, a request for a chaplain visit, non-clinical needs without the bottleneck of having to go through the call lights or without nurses having to mediate the fulfillment of those requests. They'll also be supported in driving activation and utilization. So many of our customers will have volunteer or care support roles that will go and visit patients and help them use the system. And every patient using Oneview is more value for our customers. And it will also provide visibility into the experience and into these operations, and that's all about helping operational leadership pinch points, demand surges, delays or issues so they can address those. Often, that is not visibility that exists in one system today. And finally, for leaders and for patient experience teams, we have the ability to move from a reactive rounding model where leaders or patient experience teams will just go and try and visit every single patient and ask them the same set of questions about their experience to a proactive guided rounding approach where you actually focus on the patients based on what's happening and based on patient needs. For example, where a patient has provided feedback through the Oneview system that is negative to focus on those patients and trying to address their issues. Leaders can also monitor operational and experiential performance, whether that's at the unit level or the hospital level, again, trying to spot those risks before they impact satisfaction. And I think this is a key shift for Oneview while we have provided care team-facing products in the Australian market that have filled the gap that hospitals without electronic health records have for these types of tools. These will be our first star-facing products in the U.S. market. And these are not competing with the electronic health record, they are complementing it. Where the electronic health record is focused on clinical care, we are focused on experience and operations, and this is going to help us drive greater value and support end-to-end as well as integrated workflows. So the Ovie ecosystem is made up of 4 products. Ovie Engage is that context-aware widget on the patient's home screen that you would have seen on the new user interface. It ensures that patients are aware of what they need to know or do all towards a safe and timely discharge, which is very important that patients leave hospital timely, but also prepared. It's built into our new user interface, as I mentioned. And this will be launching at the ViVE show later this month in L.A. It will also be live with customers in the coming months. Ovie Voice is the natural language voice assistant. It builds on the prototype that we launched in 2025. And we have now integrated Ovie Voice with MyStay TV and MyStay Tablet, enabling patients to engage with and control the system as well as ask those questions and make requests. Ovie Voice will go into pilot in 2026. And the new front-end was a key enabler for this, hence, our revised timing on this pilot. Ovie Console, as I mentioned, is a new star-facing product, providing that staff visibility into operations and experience. One of the #1 requests we've had from customers is they want real-time data. They want an understanding of the experience and understanding of operational needs and Ovie Console will provide that visibility and control. We really think about it as mission control for all of the non-clinical aspects of care. Ovie Console is in development at the moment. We will be showing a first iteration at ViVE, and we will be piloting it in the coming months. And finally, the last piece of the jigsaw is Ovie Rounds. This is a smart rounding tool, as I mentioned. Like all of the Ovie products, it will use context to ensure that staff focus on the right patients at the right time to recover service where needed. Ovie Rounds is still in prototype stage. We will be showing it at ViVE to get feedback. And our plan would be that we would deliver it in 2027, subject to customer validation. So just to bring all of this together, Ovie is an intelligence engine that connects our products and it connects hospital systems to enable self-service, to focus patients and staff on what's most important and to drive workflow automation. Ovie's superpower, and this is the hard bit, is all of the context that it has about the patient, the environment and the patient's care, as James alluded to. And it's the context that come from Oneview, it's context that comes from the electronic health record, from the building management systems, from real-time location systems and all of the systems that we integrate with today, all of that hard work we've done over the years has given us this ability to have this unique context. Patients can ask questions, request services or provide feedback. For example, if a patient asked a question that requires a virtual nurse, Ovie can create a follow-up action that is visible on Ovie Console and alert a virtual nurse in the command center that the patient needs help. That virtual nurse can then call straight into the room with seamless integration to virtual care. They can address the patient's question with that full context for the patient. They have the clinical record and the electronic health record and they have the insight into the patient's experience and operations in Ovie Console. Ovie is always available, always monitoring and always orchestrating to ensure that care is timely and efficient. And with that, I will hand it back to James. James Fitter: Thanks very much, Niall. So I want to just talk about -- obviously, it goes without saying, the world is very confused about the impact that AI is going to have on software companies and I think on the industries in general. And I just want to remind everyone that this is a journey that we've been on. Niall has been doing a phenomenal job. We were the first ASX-listed company to be ISO 42001 certified, which means that our artificial intelligence management systems have been independently verified by the International Standards Organization. That's something we're incredibly proud of. We have taken a very serious focus around the governance and the privacy, because what we all know about healthcare is that trust and security are the 2 most important things. And without that, we really don't have a business to stand on. So I think as you just heard from Niall, we are leveraging AI across every aspect of our business. Today, we appointed Greg -- Dr. Greg Jackson as our AI Transformation Lead. Greg has worked with all of the operational leaders here at Oneview to identify ways that we can automate and ways that we can challenge the way we've been doing business historically. He's identified 54 different projects that we can -- that we have then scored and sized. And we have given him 3 tasks to commence with to start working across every aspect of the business, whether it be HR, finance, project management, software development, Niall has already spoken to. And I think for anyone who's involved in the technology industry, it's never been a more exciting time. For us, we see this as a massive enabler of our business, something that's accelerating our product development. Niall talked about velocity and quality. They're the 2 things that we're focused on. And there is no doubt we are going to be able to deliver a much better quality product at a much faster velocity for our customers, which is going to create more value, it's going to allow us to deliver the Ovie feature set, and it's going to allow us to fill in all of that white space amongst those 18 logos that we looked at earlier. The reason it's so difficult for someone to compete with us is just how hard it is to be successful in healthcare. So we've been on this journey, as you know, for over a decade. We have won some of the most discerning health systems in the country, and we've retained those relationships for over a decade. That is our moat. It's incredibly difficult for anyone to come in. The easiest part about our job is building the software. The hardest part is how do we comply with the operational workflows, with the integrations in the back end of the hospital, with the compliance and the complexity that goes with that. And we're also deploying physical infrastructure in patient rooms and supporting multiple operating systems. So this is a really incredibly complex business. As Nader Mherabi, the CIO at NYU Langone likes to say, listen, James, what's great about your product is it looks really simple on the front-end, but it's really complex on the back-end. And I think any good piece of software has that feature. So on Slide 33, I think we've just tried to visualize that and talk about what looks very simple on the surface is incredibly complex beneath the surface. And just managing the hardware remotely, the device management, making sure that the privacy and PHI of the patients is cleansed on admissions, discharges and transfers is a really significant undertaking. So as important as AI is and as exciting as it is for people building software, doing what we do is incredibly complex. And I would go so far as to say, a couple of guys in a garage are going to have a really hard time competing with what we do. So with that, let me talk about the outlook. As you heard earlier, great revenue growth for the year, up [ 21% ] following 5% growth last year, best growth we've had since the pandemic. That's not a coincidence. We're seeing a real turnaround in operating margins in the United States. I don't think it's a coincidence. If you look at the listed hospital operators in the U.S. at HCA and Tenet, they're both trading at all-time highs. I think most of our customers for the first time since the pandemic, returned to some semblance of profitability last year, which means that capital budgets are being more freely available, and that's obviously really manifesting itself in the 18 new logos we've added in the last 3 years. Really proud of the work that JP's team has done around our deployments. As you saw, we had a 31% acceleration in deployments in the second half of last year. And I think that's only just scratching the surface in terms of the potential. And obviously, we've been added to this general purchasing -- group purchasing organization of one of the 10 largest health systems in the country, and we are super excited about what that's going to bring in 2026. And then on the cost side of the business, as Darragh mentioned, we've sort of passed the peak of innovation. The work that Niall's and Declan's teams have been doing has been stellar. We've delivered and shipped 3 super impressive new products in the last 18 months. We're about to deliver the biggest change to the product suite in our history with the new front-end. And with that comes all of the embedded AI features that Niall has already spoken to. That Ovie ecosystem I think is going to be incredibly powerful. And then on the cost front, as Darragh already mentioned, we've seen a very significant decrease in our OpEx since 2025. And as you see in this chart on Page 35, we're forecasting another significant decrease in OpEx in 2026. So what does that mean as we think about the path to breakeven, which of course, is the promised land that everyone on the phone is aspiring to, as are we. Our OpEx very clearly peaked in the second half of 2024. We now have unparalleled access to the U.S. market through the Baxter partnership. And again, I can't overstate how powerful that is in terms of opening doors for us. As you saw earlier, we've got really material revenue growth opportunities within the existing portfolio from upselling our new products and expanding within those footprints. And in order to facilitate that, we've invested in a world-class account management team, which is run by Gabi Mitchell in the U.S. And Gabi has been adding some really important resource to that team this year because we also know that our best salespeople are our customers. So happy customers and the network effect is what drives the business. And then we've got AI enhancing the velocity and quality of our software, as I already mentioned, and shortening our deployment time lines. And we know that the Ovie ecosystem and the feedback we've already had is going to drive fresh value and that's going to give us pricing power, which we've already demonstrated this year that we have, but we think that's going to help us sustain that as we move forward. So just in closing, in terms of performance, revenues heading in the right direction, OpEx heading in the right direction, great commercial traction with the new logos we've added in the last few years and the upside of the Baxter pipeline. The new product suite that I think Niall has spoken to today, I think is incredibly exciting. It's certainly very exciting for our customers. And then the productivity gains that we're seeing across the business are pretty significant. And of course, it would be remiss of me not to mention the usual risk factors. We've obviously seen some regulatory uncertainty with the current U.S. regime, which could delay capital spending. We haven't seen any evidence of that, but it's always a risk. And obviously, the Baxter pipeline, the conversion of that pipeline is beyond our control. But certainly, we're very pleased with the progress to date and certainly very excited about the breaking news earlier this month. So with that, I will pause and pass it across to questions. Operator: [Operator Instructions] Your first phone question comes from Dan Hurren from MST Marquee. Dan Hurren: We're still -- the accounts have only just come through on the ASX. So look, I'll take all the detail of the accounts offline. But I just want to ask about endpoints and understand the transition to endpoints rather than beds. But you previously talked about new endpoints being significantly more valuable than those being acquired. Is there anything you can teach us about revenue per endpoint into the future? James Fitter: Darragh, do you want to take that one? Darragh Lyons: Yes, sure. So Dan, so we previously disclosed at the half year that our revenue per endpoint was about EUR 1.50 per day. So that -- and that revenue per endpoint is solid during the second half of the year as well. So it obviously -- that's a blend of the 4 different products that we now have. And it will depend on ultimately the mix of those products that we deploy over time. But obviously, with the core platform that we have, as we previously disclosed, there's a 92% upsell. So for every bed that we previously have won, there's a 92% upsell in terms of adding those additional endpoints. And obviously, we have a lot of legacy customers that these new products that we've developed over the past few years weren't available when we signed those customers initially, which was the slides that James referred to earlier. So that there is a significant white space in terms of expanding into those customers. Dan Hurren: Look, I've got another question. I'm not sure what you'd be willing to say about this, but would you -- I did want to ask you about the appointment of Mr. Dowling. He's a very important person in the U.S. hospital community, and particularly within the Northwell Group. But as far as we know, Northwell is not an existing customer. So am I right to draw some conclusions there? James Fitter: Look, Northwell is not an existing customer, but they have been in our sales pipeline for some time. And I should stress that, that won't be Michael's decision. That would be the people who run technology and patient experience there. Look, what I'd say, Dan, just to give you a sense of the scale of Northwell. I mean, Northwell did USD 18 billion in revenue in 2024, which I think is 50% more than Ramsay did. So I guess, the analogy I would give is, if an outgoing CEO of Ramsay was to suddenly turn up on the Board of Oneview Healthcare, that's kind of the magnitude of Michael's business that he's been running. But more importantly, he's just someone who has a deep passion for patient experience. He's obviously seen in us a technology platform that resonates with him as the CEO of one of the larger health systems in the country. But I don't think you can draw any conclusions and assume that just because he's joined the Board that we're going to win Northwell. Dan Hurren: Okay. All right. Can I just push that a little bit further? Okay. Let's just -- I'm not sure taking any real conclusions from your comment there. But I mean, we've got a new potential logo with 16,000 beds. If I personally would assume that Northwell is 9,000 beds, which looks to me you've got a chain of 120,000 endpoints to which you have, to varying degrees, a warm welcome. So does this make your endpoint target for FY '26 look modest? Are you being modest there? Or is this more about the length of the sales cycle? James Fitter: Well, Darragh is a very conservative man. Let me just say that. Operator: [Operator Instructions] There are no further phone questions at this time. I'll now hand back to your speakers to address any of your webcast questions. Toni Pettit: Thanks, Harmony. There's just one question here from Tom Ford from [ Myuna ] Investments. And he says, thanks for the presentation. What is the annualized run rate impact of the overhead cost reductions delivered in H2? Darragh Lyons: Yes. Thanks, Toni. I'll take that one. So our run rate in H1 2025 was just under EUR 8.4 million. And obviously, then the second half OpEx has come in at just over EUR 7.63 million. So there's over EUR 700,000 saving in the second half of the year. So we will carry that through in terms of -- as we look forward to 2026. So that's a 1.4 -- over EUR 1.4 million saving on an annualized basis. So as the chart that James presented there in the outlook section on OpEx, we are continuing to drive further efficiencies in the business. So we'd expect that OpEx level that we had in the second half of '25 to hold during the first half of 2026, while we drive through some of these further efficiencies and then to really see the benefit -- further benefit of those efficiencies during the second half of the year and obviously then through into 2027. Toni Pettit: There are no further questions, Harmony. Operator: We do have a follow-up question on the phone from Dan Hurren from MST Marquee. Dan Hurren: I didn't want to hog all the questions, but if there's space. Look, another question for Darragh. Thanks for the OpEx guidance. That's great. But can you just talk specifically around gross margin and the expectations for FY '26? Darragh Lyons: Yes. Sure, Dan. So I think we saw a slight decline in gross margin in 2025. And that was, as I said, driven by the mix of non-recurring, which is the lower margin revenue in our business and the recurring revenue. So we'd expect that sort of gross margin to hold into 2026 as well around that level because we've obviously guided only a modest increase in terms of deployments in 2026. So yes, I would still assume that sort of mid-to-low 60s is where we're going to end up on gross margin. Dan Hurren: And just one more. Look, I'm sort of -- I don't want to sort of understate the excitement around the product itself, but just sort of bring it back to numbers. But how will those AI tools affect operating costs in the long term? Does this just suggest there are savings to be had just on your cost page there? Darragh Lyons: So Dan, do you mean in terms of Oneview or the hospital? Dan Hurren: Sorry, talking about the Oneview implementation. Does this change the cost of implementation and so forth in the future? James Fitter: No, no, because I think the beauty of the new product is that the configuration tooling work has been done in parallel with it. So it's actually going to be simpler and hopefully faster to deploy than a legacy product. Operator: There are no further questions at this time. I'll now hand back to Mr. Fitter for closing remarks. James Fitter: Thanks, Harmony. That's all from us. If anyone has any follow-up questions and would like to ask them privately, I think everyone knows where to find us. So thanks very much for your time.
Operator: Welcome, everyone. The Heineken Full Year 2025 Results Call will begin shortly. [Operator Instructions] Raoul-Tristan Van Strien: Good morning and good afternoon, everyone, from Amsterdam. Thank you for joining us for today's live webcast on our 2025 full year results. Your host will be our Chief Executive Officer, Dolf van den Brink; and our Chief Financial Officer, Harold van den Broek. Following the presentation, we will be happy to take all your questions. The presentation includes expectations based on management's current views and involve known and unknown risks and uncertainties, and it is possible that the actual results may differ materially. For more information, please refer to the disclaimer on this first page of the presentation. I will now turn over the call to Dolf van den Brink. Rudolf Gijsbert van den Brink: Thank you, Tristan, and good morning afternoon, everybody. Now after 6 years and with some understandable mixed emotions, today is my final full year results presentation as CEO. It is not a farewell though, I am and will be fully focused and committed to the business through the end of May. And as you all know, I love this great company, and I will miss it dearly. My priority for the coming months is to leave Heineken in the strongest possible position with momentum, clarity and ambition. It is a natural moment to reflect on how far we have traveled since launching EverGreen in 2020 in the midst of COVID and to look ahead as we move into the disciplined execution of EverGreen 2030, our new 5-year growth strategy. Over the last 6 years, we launched a fundamental transformation of the company, delivered EverGreen 25 and navigated a demanding external environment. We have made meaningful progress in future proofing Heineken, growing the Heineken brand by more than 50%, consolidating our global leadership in 0.0, strengthening our advantaged footprint with significant deals in India, Southern Africa and Central America, while saving over EUR 3.5 billion in cost and digitizing the business, I am very proud of what we, as a team, have achieved, and there's more to do. The next chapter is our sharpened EverGreen 2030 strategy, which we introduced at the Capital Markets event at Seville. We now have a sharpened focus on 3 strategic priorities, and the task ahead is accelerating disciplined execution. Growth. It is the foundation of our business and remains our #1 priority. Productivity, which fuels reinvestment and healthy profit flow-through. Future fitting Heineken, enabled by our digital backbone and evolving operating model. Harold will explain how we are accelerating the disciplined execution of these priorities over the next few years. With this clarity, we aim to deliver superior and balanced growth and attractive shareholder returns while future-proofing Heineken. We track this through the Green Diamond, which we have now strengthened with ROIC as our capital efficiency KPI. Let's take a closer look at the key highlights of 2025. First, we delivered a well-balanced performance in challenging market conditions. In our growth pillar, we grew revenue through quality volume. We gained or held market share in more than 60% of our markets and in about 80% of our priority growth markets, which is even more important. In our productivity pillar, strong over-delivery of growth savings supported our margin expansion. On capital efficiency, we generated another year of solid cash flow and improved ROIC. And looking ahead, we expect operating profit to grow between 2% and 6% in '26. This is before the additional profit and earnings accretion from the FIFCO acquisition we completed last month. So let's take a closer look at our financial highlights. Total volume declined by 1.2%, reflecting softer markets in the Americas and Europe, partly offset by consolidated volume and license volume growth in APAC and resilience in Africa and Middle East. Within that, the momentum behind the Heineken brand continued to grow 2.7%. Net revenue increased 1.6%, and net revenue per hectoliter grew 3.8%, driven by disciplined pricing and positive mix. Operating profit grew 4.4% with a 41 basis point margin expansion and net profit grew faster at 4.9%. Diluted EPS (beia) came in at EUR 4.78 million, and we are proposing a total dividend of EUR 1.90 per share, a 2% absolute increase, indicating a payout to 39% of net profit. We're also expanding our payout range for future years to be 30% to 50%. Harold will cover this in more detail later. Although our volume declined in the year, and it's not yet where we wanted to be, the quality remained high. To better reflect our evolving asset lines approach in China, Latin America and Africa, Middle East, we will going forward report total volume, combining consolidated volume, which declined 2% and license volume, which grew almost 18%. Our mainstream brands outperformed the total portfolio declining only slightly and local power brands delivered solid growth for several major markets, including Cruzcampo in the U.K., Harar in Ethiopia, Tecate Original in Mexico and Kingfisher in India. Heineken 0.0 grew slightly. Our global brands grew almost 2% led by Heineken, up nearly 3%. The broader premium portfolio also performed well, supported by strong local brands such as Kingfisher Ultra in India, Bernini in South Africa and Legend Stout in Nigeria. This high-quality volume supported 2% net revenue growth with positive price/mix across all regions. Our productivity programs ensured solid revenue to profit conversion contributing to operating profit growth of 4.4%, in line with our guidance. Let me turn to the Heineken brand, which continues to lead our portfolio. Heineken delivered another year of growth in 2025, increasing by almost 3%, with 27 markets growing at double-digit rates. Heineken continues to stand out for its creativity in both idea and execution. At a time when people seek more real-world connection, Heineken champions socializing in a way that's authentic to who we are, supported by our global partnership with Formula 1 and Men's and Women's UEFA Champions League. Heineken 0.0 grew slightly. Inventory adjustments in Brazil, its largest markets, partly offset good growth in Spain and the United States, and it maintained its position as the world's largest alcohol-free beer brand. It is Heineken Silver that truly drove the growth for the brand. Silver grew by almost 30%, led by Vietnam in China. As you can see on the chart, Silver now represents about 15% of the total Heineken volume close to 9 million hectoliters. It can now be considered one of the most successful innovations in the history of the Heineken company. As part of the growth pillar in our sharpened EverGreen 2030 strategy, we're expanding our global brands. We are applying the principles of the centrally governed Heineken brand model across the broader global brand portfolio, strengthening consistency and discipline in execution. Across the global brand portfolio, we delivered 1.9% total volume growth in 2025, which shows solid progress. We have already spoken about Heineken. Amstel, our shadow premium brand connects friends around the world with a distinct social character. Amstel delivered another strong year across all 4 regions, with continued momentum in Brazil, a doubling of volume in China, revitalizing launch in Romania and a double-digit growth in South Africa. Birra Moretti continued to unlock food pairing occasions across Europe, supported by good performances in Switzerland and in France. Tiger remains a cornerstone of our success in Myanmar, while Tiger Crystal, a more refreshing sessionable member of the family, delivered strong results and contributed to the brand's revitalization in Vietnam. Desperados reinforced its relevance in markets with its bold flavors and Latin-inspired positioning resonates strongly with GenZ consumers, especially in Nigeria and in Spain. Productivity is our second strategic priority, and it's vital to support our growth agenda. This year, we delivered over EUR 500 million in gross savings, with increased flow-through to profits seen in our 41 basis point margin expansion. Our focus to boost cash led to a cash conversion of 87% after posting 103% last year, allowing us to deliver EUR 2.6 billion of free operating cash flow. Harold will expand on this and also how we will accelerate the EverGreen 2030 productivity agenda. When we look at our third strategic priority, future proofing our business, brew a better world remains our framework for delivering our environmental, social responsibility ambitions. On responsible consumption, we continue to lead the category by ensuring 0 alcohol options are widely available and easy to choose. In '25, our operating companies invested 26% of Heineken brand media to promote this message, reaching 1.4 billion consumers. On carbon, we continued progressing towards our 2030 net zero ambition for Scope 1 and 2, reducing emissions by 38% over the last 3 years. On water, we improved efficiency across all breweries to 2.9 liters per liter of beer. On the social pillar, we continue building a culture belonging by equipping leaders and colleagues across the company. In '25, women held 31% of senior management roles. With that, let me move to the regions. Starting with Africa, Middle East, where we delivered strong revenue growth, substantial profit improvement and overall market share gains. Net revenue grew 16%, with stable volume and strong price/mix reflecting earlier pricing actions as inflation eased, operating profits increased 60% supported by the transformed cost base of the past 2 years and a strong top line growth. Notably, in euros, operating profit grew more than 30%. In Nigeria, last year's cost base and capital structure adjustments, combined with continued discipline resulted in strong financial performance. Despite the soft markets, Nigerian Breweries gained significant share across lager, stout, beyond beer and nonalcoholic malts. Premium brands, Heineken, Desperados and Legend Stout all delivered double-digit growth. At Heineken Beverages in Southern Africa, commercial execution strengthened through the year. Our beer portfolio grew with Amstel delivering particularly strong results in South Africa. Bernini, our wine-based spritzer continued to grow and expand its consumer base. I would also like to highlight Ethiopia. The business improved steadily as the economy stabilized following the currency devaluation. We reinforced our market leadership and now secured the #1 position in the North too supported by continued momentum from Bedele and Harar. Turning to the Americas. Our business showed resilience. Markets softened as the year progressed, requiring agility while keeping strategic investments on track. Even in this environment, we gained overall share in the region. Net revenue declined 1% and beer volume was down 3%, while price/mix recovered strongly in the second half, up 2%. Operating profit declined 2%, decycling last year's significant step-up. In Mexico, despite macroeconomic and geopolitical uncertainties, the beer category remains resilient. Our system strength, supported by the Six store network and effective revenue management delivered solid financial results. Growth was broad-based. Tecate Original, Indio, Carta Blanca performed steadily, and Miller High Life surpassed the 1 million hectoliter mark in premium. In Brazil, after rebalancing and reducing excess inventory in the first half, the market softened in the second half. Based on sell-out data, we captured significant market share. Investment increased again in '25, including the opening of the new 5 million hectoliter Passos brewery. Amstel maintained strong momentum, supported by our CONMEBOL Libertadores partnership and the success of Amstel Ultra. In premium, Heineken gained share and Eisenbahn delivered double-digit growth. The United States remains challenging, further impacted by tariffs introduced in the first half. We continue to work on strengthening our portfolio, including the return of The Most Interesting Man for Dos Equis last month. Heineken 0.0 remains a highlight, delivering its seventh consecutive year of depletion growth. Moving on to APAC, where we delivered growth across all metrics and gained overall market share. Total volume increased 4% with consolidated beer volume slightly up and license volume up 27%. Net revenue grew 4%, supported by strong price/mix of almost 5%. Operating profit grew 5%, driven by strong performances in Vietnam, India and Myanmar. In Vietnam, volume grew high single digits as the market returned to positive momentum, a strengthened route to consumer and effective portfolio expansion enabled outperformance in both on and off-premise channels, accelerating our leadership position. Heineken grew in the high 30s, led behind Heineken Silver, while Larue Smooth continued expanding its footprint. In India, volume grew mid-single digits ahead of the overall market. As the country's largest brewer, we continued shaping the category, expanding our reach and transforming our sales model. Kingfisher maintained its growth trajectory, supported by cricket sponsorships, while the premium portfolio grew strongly led by Kingfisher Ultra, Ultra Max, Heineken Silver and our latest innovation, Amstel Grande. In China, Heineken Original and Silver delivered another year of double-digit growth supported by strong execution and high-impact sponsorship such as Masters Tennis and the Shanghai Formula 1. Amstel also doubled volume through distribution gains and excellent in-market execution. With the increasing contribution of royalties and share of associate profits, China became a top 3 market for the group in delivering net profit in 2025. Turning to Europe. Our performance was mixed in a challenging environment. Overall market share contracted slightly due to retailer disruptions, although we gained share in the on-premise channel. Net revenue in total volume each declined 3% with price/mix just above 1%, supported by pricing and a stronger premium portfolio. Operating profit declined almost 5% as volume deleverage and inflation more than offset the strong growth savings, including continued progress on supply chain rationalization, brewery closures and the refinement of our intermarket sourcing model. In the United Kingdom, our broad portfolio, innovation pipeline and continued investment in the Star Pubs estate supported solid financial performance. Cruzcampo continued its exceptional trajectory, now in its third year. Murphy's Stout outperformed the growing stout categories through distribution gains and expanded draught presence. In cider, premiumization continued with strong growth from Inch's and Old Mout. We also received top honors in the Advantage Survey, where customers rated us the #1 supplier across all FMCG companies in both on-trade and the grocers in the off-trade. In Western Europe, extended negotiations with off-premise buying groups weighed on performance. These discussions focused on protecting long-term sustainable category development were fully resolved in the second half, with distribution and shelf space recovering as the year progressed. Despite the disruptions, we gained on-premise share and continue to see strong contributions from our premium portfolio including Gallia, Texels and STELZ. Our global brands also performed well in selected markets, including Heineken in Italy, Birra Moretti in Switzerland, Amstel in Romania and Desperados in Spain. And let me now turn to our newest operating company. On January 30, we completed the acquisition of FIFCO after receiving all regulatory approvals. This transaction significantly strengthens our presence in Central America, and advances EverGreen 2030 by bringing together a portfolio of high-quality assets that enhances our long-term growth platform. It deepens our advantaged geographical footprint in markets supported by strong macroeconomic fundamentals and favorable demographic trends. Through this acquisition, we gained full control of Costa Rica's leading beverage company, including our common brands such as Imperial, a well-established PepsiCo franchise and attractive adjacent businesses in wine, spirits and in proximity retail. We also assumed full ownership of HEINEKEN Panama, a consistent strong performer that has repeatedly outpaced market growth. In addition, the transaction provides an equal partnership in Nicaragua's leading brewer, Compa��a Cervecera de Nicaragua, expands our access to a scalable food and beverage platform in Guatemala and adds fast-growing beyond beer brands in Mexico. The acquisition is expected to be value accretive enhancing our operating profit margin and earnings per share, while strengthening our strategic position across a dynamic, high-growth region. On day 1, we welcomed our new colleagues to the Heineken family and began the integration process, which is expected to complete in 2026. We have appointed a strong integration team to ensure business continuity while driving growth. Harold will take you through the financials of FIFCO, which will be accretive to earnings in '26. And with that, over to Harold to discuss the financials. Harold Broek: Thank you, Dolf, and good morning all. I'm pleased to take you through the financial highlights of our full year 2025 results and the outlook for 2026. And starting with our top line performance on Slide 17. We posted an organic growth of EUR 0.5 billion or 1.6%, a 2.1% volume decline was more than offset by a positive price/mix of 4.1%. Pricing contributed 2.8% and mix added another 1.3%, a result of continued premiumization and strong execution behind our global and local power brands. Pricing was more pronounced in Africa, Middle East, covering for local input cost inflation and currency devaluation, while in Europe and Americas, our revenue per hectoliter growth was very moderate. Currency translation dampened revenue by almost EUR 1.5 billion, reflecting the strengthening of the euro against some of our key currencies. The minor consolidation effect of minus EUR 84 million relates to our exit of Sierra Leone and a brewery sale in Eastern Congo. Turning to operating profit. where we delivered EUR 4.4 billion of operating profit (beia) growing 4.4% organically and resulting in an operating profit margin (beia) of 15.2%, up 41 basis points organically versus last year. The EUR 467 million of organic net revenue (beia) growth on the previous page translated to EUR 198 million organic operating profit growth, a conversion rate of 42%. With negative volume leverage, moderate pricing and continued investments in brand and digitalization, gross savings from our productivity programs were a critical driver. Variable cost per hectoliter increased by low single digits, with meaningful differences across regions, ranging from mid-single-digit decrease in Europe, low single-digit increases in Americas and Asia Pacific and high single-digit inflation in Africa, Middle East. Marketing and selling investment as a percentage of net revenue reached 9.9%, up 6 basis points compared to the prior year. Investments concentrated on our priority growth markets, including Brazil, Mexico, U.S., South Africa, Vietnam, U.K. and India, with a meaningful step-up in sponsorships and in trade execution, and particularly in Africa, Middle East and Asia Pacific. Marketing and selling expenditure on our 5 global and 25 local focus brands accounted for over 80% of total spend. On a regional level, the main contribution to operating profit growth was the Africa Middle East region, where operating profit grew 62%, as Dolf said, benefiting from a transformed cost base from productivity savings delivered over the past 2 years and revenue growth outpacing inflation. Operating margin (beia) improved over 400 basis points, now reaching 12.8% for the year 2025. In APAC, operating profit grew by 5.8% with strong contributions from Vietnam, India and Myanmar, held back by Cambodia. In the Americas, operating profit declined 1.9%, incorporating the tariff impact on imports into the USA. Also worth bearing in mind that we cycled a strong prior year comparison where the region grew operating profit by almost 25%. And finally, in Europe, operating profit declined 4.9%. Decreases in Poland, Austria and France outweighed growth in the U.K. and Spain. Lower material and energy costs and strong growth savings include a further European supply network rationalization were more than offset by volume deleverage and general inflation. Consolidation changes had a negative impact of EUR 36 million. Translational currency effect was EUR 290 million negative, again, mainly caused by the strengthening of the euro. Let me turn to the other key financial (beia) metrics on Slide 19. On the second line, you see that our share of profit (beia) from associates and joint ventures grew 5.3% organically, over half driven by strong mid-teens growth of our CRB partners in China. Net interest expenses (beia) decreased by 1% to EUR 522 million, reflecting a lower average net debt position and a lower average effective interest rate of 3.4%. Other net financing expenses improved by almost 18% to EUR 199 million due to lower losses from currency revaluations on outstanding foreign currency payables, especially in Nigeria, following our successful rights issue and subsequent balance sheet restructuring at the end of last year. Net profit increased by 4.9% organically to EUR 2.66 billion, which includes an increase in income tax expenses and noncontrolling interest. The effective tax rate (beia) was 27.2% compared to 27.9% in 2024. The improvement mainly reflects changes in the profit mix. All in all, and factoring in the share count reduction from our share buyback, this resulted in a constant currency EPS (beia) increase of 3.6% to EUR 4.78. We will propose at the AGM of this year a dividend increase of 2.2 per share to EUR 1.90. This equates to an equivalent amount of EUR 1.046 billion to be returned to shareholders through dividends. Finally, our net debt-to-EBITDA ratio was 2.2x at the end of the year below the long-term target of below 2.5x. When we consolidate FIFCO in 2026, we will see a moderate uplift and as per our policy, we'll aim to bring this back to below 2.5x target at pace. Let me now turn to the free operating cash flow. We generated EUR 2.6 billion of free operating cash flow in 2025, a strong cash conversion of 87% following last year's peak 103%. We are pleased with this performance. The year-on-year decrease of EUR 456 million should be seen in conjunction with last year's strong working capital improvements, which contributed approximately EUR 1 billion to our free operating cash flow for 2024. This year, we further improved working capital by over EUR 300 million, with main working capital as a percentage of net revenue, improving by almost 1%. Because the improvement is less than last year, the effect is negative, as shown in the EUR 523 million adverse impact. CapEx amounted to EUR 2.4 billion, representing 8.3% of net revenue (beia) in line with our guidance. Many investments related to our new Passos brewery in Brazil, our Star Pubs in the U.K. and in our digital backhaul. Cash used for interest, dividends and income tax decreased in aggregate by EUR 78 million. Let us now turn to our capital allocation priorities. As a reminder, in our value creation model, we prioritize capital allocation towards organic growth. We do so with a disciplined financial framework, with a prudent approach to debt. We remain committed to our long-term below 2.5x net debt-to-EBITDA ratio. We maintain a regular dividend policy as we've had for decades as an important and consistent source of shareholder returns. Going forward, we bring the dividend payout policy range to 30% to 50% of net profit before exceptional items and amortization of brands, so net profit (beia) compared with the prior range of 30% to 40%. We pursue value-enhancing acquisitions for long-term profitable growth. And with the FIFCO acquisition completed in January, we're excited to welcome the brands, the customers and the people to Heineken. Actively shaping the portfolio also means resolving or exiting operations where we see limited possibilities for sustained value creation. And as previously indicated, we consider returning excess capital via share buyback. This time last year, we announced a EUR 1.5 billion program and completed the first EUR 750 million tranche last month. We will shortly announce the start of our second EUR 750 million tranche. We outlined our EverGreen 2030 strategy last October at the Capital Markets Day in Seville. Let me now take a minute of how we accelerate execution in 2026. As Dolf already mentioned, our priorities are clear, with growth as our #1 priority. We are directing resources to strengthen our growth profile staying close to consumers and customers. At the same time, we are increasingly leveraging our global scale to improve productivity and simplify how we operate. A key focus is on how we build and manage our brands. All our global brands, representing almost 40% of total volume and now adapting the Heineken brand model, combining a pioneering spirit with a structured repeatable way of building brands that support consistent execution and better value delivery. Amstel's progress over the last year demonstrates the impact this can have. We are also increasing the breadth and space of our innovation. In 2026, we will have around 3x as many launches and pilots in our priority segments, which allows us to respond more effectively to changing consumer needs. Freddy AI will become a core enabler of our marketing and brand building processes. And by the end of 2026, most markets will be onboarded, representing close to 80% of our global marketing and selling investment. This will deepen consumer and customer relevance and enable excellent execution at speed and scale with improved ROIs over time. To fuel the growth and the profit, we are stepping up productivity initiatives and make changes to our operating model. We are moving to a simpler, leaner Heineken centered on empowered operating companies. In selected regions, we are transitioning to multi-market operating companies or MMOs. 4 MMOs will already go live in Europe in the next 6 months. We're accelerating the leveraging of our global scale, including further expanding our global supply networks and enlarging the scope of Heineken Business Services. The transition to a single global digital backbone will further standardize data and processes, enabling automation and productivity, and we are moving to a smaller, more strategic head office. Concretely, we will streamline our supply chain through brewery digitization and selected closures, exit markets where we do not see a path to sustainable growth and transition around 3,000 roles to Heineken Business Services to double its scale and broaden the services it provides. Across these initiatives, we expect a net reduction of between 5,000 and 6,000 roles over the next 2 years. Time lines will vary by market, and we will support impacted colleagues with care, respect and appropriate assistance. These actions are designed to deliver the EUR 400 million to EUR 500 million of annual gross savings and allow us to continue investing in our brands and capabilities while supporting healthy operating profit growth. Now then the outlook for 2026. We remain prudent on the macroeconomics and the consequent household spending in several markets. At this stage of the year, we do not expect the consumer environment to materially change. We anticipate operating profit to grow between 2% and 6% on an organic basis. As just highlighted, we accelerate the disciplined execution of EverGreen 2030 at pace, invest behind our growth and step up needed cost interventions. As such, we expect gross savings to be at the upper end of our medium-term guidance range. In terms of variable costs, we expect a low single-digit rise, primarily from currency effects on local inflation in Africa. The effective interest rates and the other net finance expenses are expected to be in line with 2025 and our effective tax rate to be in the range of 27% to 28%. And lastly, the completed acquisition of the FIFCO Beverage and Retail business is expected to be accretive to EPS in 2026. Now let's double-click on the financials of FIFCO. As a reminder, we acquired the business at 11.6x EV EBITDA multiple for a EUR 3.2 billion cash consideration. This means that our net debt-to-EBITDA ratio will increase moderately and expect to be back below 2.5x by 2027. At the time of the deal announcement in September, we gave you the '24 financials. The '25 financials do not differ materially. Net revenue of $1.15 billion and an operating profit of $276 million. These figures are, of course, based on the local accounting policies. The integration team will now start to align reporting with the Heineken accounting policies. And like I said earlier, we closed the transaction on the 30th of January. For the 11-month period, we expect FIFCO to be circa 2% to 3% accretive to EPS in 2026. To summarize, for 2025. We achieved a well-balanced performance in challenging market conditions. In the growth pillar, we delivered revenue growth consisting of quality volume with solid market share gains. In the productivity pillar, our teams realized another year of strong growth savings, the key driver of the operating margin expansion. We are pleased with the progress on capital efficiency with solid cash flow and an improving ROIC. And for 2026, in a similar market context as 2025, we accelerate the execution of EverGreen 2030, putting our growth strategy in place and taking bold productivity measures to unlock investment space and enable profit expansion. We expect operating profit (beia) to grow in the 2% to 6% range. Thanks for listening. And now over to you for questions. Operator: [Operator Instructions] Our first question comes from Sanjeet Aujla from UBS. Sanjeet Aujla: Dolf, just a quick word to wish you all the best for your next steps and thanks for all the openness and transparency over the years. I've got 2 questions, please. Firstly, can you just go into a little bit more on the pricing actions in Americas in Q4 and how your market share has responded to that? And is that perhaps behind some of your cautiousness on volumes into '26? And secondly, just digging a bit deeper into Europe, where are you on distribution and shelf space now following the resolution of the retailer disputes, are you anticipating to recoup that fully in 2026? Rudolf Gijsbert van den Brink: Very good. Thanks for your kind words, Sanjeet. Let me take a first step and then Harold can complement. Just on Europe, already in the second half, distribution and shelf space has been recovering month-over-month. On shelf space, there were some gaps left, but we are very confident that in the spring resets, those will be completely closed. We're also making very good progress on the retail negotiations for this year. And again, no regrets on biting the bullet last year, as very important strategic principles. And in our view, the long-term sustainability of the category were in play in those negotiations, and yes, the outcome of those negotiations, even though taking longer than expected, were acceptable to us. On pricing in the Americas, did you picked up that we took pricing up a bit to the back end of the year, but also in response to input cost. Our market share in the aggregate in Brazil has been very strong on sell-out. And we all know that at the beginning of the year, we had to stock resets impacting our sell-in. But on sell out market share has been very strong throughout. In Mexico, we had very strong market share indeed for the first 9 months, and that came a bit under pressure in the last quarter indeed. But in the aggregate, we are confident, and we are happy with where we are at. Harold, anything to add on that one? Harold Broek: Yes. Maybe on that last point, just to piggyback on that because Sanjeet, your question is also looking forward. And I think it's fair to say that we are happy with where the pricing and the promotional level of activity is at this moment in the run going forward. As you know, these things really go in waves, and we take pricing on our own demand by taking competitive realities into account, and we felt that we really had to adjust in the second half of the year, especially as what Dolf just said. But we are happy where it is, and we don't expect an overhang from that going into 2026. Operator: Our next question comes from Chris Pitcher from Rothschild & Co Redburn. Chris Pitcher: And I echo Sanjeet, Dolf, wishing you well in the future. And leading on from that comment, in Seville, it really felt like you presented the next chapter for Heineken. So it really was a surprise to read that you've decided to leave. I appreciate you're moving into the execution phase right now. And this morning, on interview, you said the Board has completely supported that strategy. I'm just trying to understand the role of the CEO over the next 2 to 5 years because there's obviously a lot of operational execution required with FIFCO, about 10% of the global workforce impacted either through transitional reduction. But also from a branding perspective, brand set that EUR 15 billion target for your international brands. And 3 out of the 5 actually saw volumes decline this year. So what is the challenge? Is it more of an operational execution? Or is it more on the brand side? And could you perhaps just give us a bit more color on Tiger, which seems to be sort of struggling in its positioning versus Heineken? Rudolf Gijsbert van den Brink: Very good. Thanks, Chris. Yes. A couple of thoughts. First of all, indeed, it is very important. And the words of Peter Wennink, the Chairman of our Supervisory Board in that press release a couple of weeks ago, we are very intentional that there is very explicit alignment between the Supervisory Board, the Executive Board and executive team that EverGreen 2030 is our strategy. It's clear, it's compelling, and it provides a lot of, yes, clarity and direction to the company. So that stands now and in the foreseeable future. It is all about accelerating disciplined execution. The announcements that we included in our release today on productivity, on FTE reductions should be seen very much in that spirit. And we're not slowing down. We are accelerating. We are now really operationalizing and double clicking on the priorities as we presented them in the interview, and more to come in the months and years ahead. On the branding, we indeed believe that about 10, 15 years ago, we made a governance change on brand Heineken, which ultimately unlocked systemic growth on the Heineken brand. It's amazing its year-over-year through all the disruption and turbulence of the last year, every year, the Heineken brands kept on growing. Last year, it was growing. It was up double digits in 27 years. So that governance model with a much more clear global governance and direction, but is now going to be applied on the other global brands. Amstel is a fantastic example that already moved a bit earlier, and you see the results with an acceleration of the performance of the Amstel brand across all regions. The incredible success in Brazil, now the doubling in China, South Africa returning to significant growth, but also in Europe in markets like Romania, where we are launching it. Moretti and Desperados, also a little bit because of mix effect because Europe is such a big proportion of those brands. And the home markets or some of the large markets, for example, Poland, for Desperados do impact a little bit the brand. But we are very confident that when the step-up in that brand confidence, there's a lot of potential for brand Desperados and Moretti. And we keep rolling out Moretti to new markets in Europe, and we keep expanding Desperados on a global level with, for example, in the Africa region, fantastic results in Nigeria, C�te d'Ivoire and other places. Tiger is disproportionately impacted by Vietnam because underlying the brand is doing well. Vietnam,of course, being such a big part of the brand. And there, we are really in a revitalization of the brand. Actually, Tiger Crystal is now in absolute terms, larger than Tiger Original and continuously grow. And actually, we are approaching the moment where the decline on the underlying Tiger Original business is smaller than the increase on Tiger Crystal. And in a way, what happened with the Heineken brand, the Heineken brand was under pressure for about a decade until the launch of Heineken Silver. And Silver has done an amazing job revitalizing brand Heineken across the APAC region. And we think with Tiger Crystal something happening similarly with Tiger. So let me leave it at that. Operator: Our next question comes from Simon Hales from Citi. Simon Hales: And I just echo as well everyone else's comments, Dolf to you. Thanks for all your insights and wisdom over the last 6 particularly challenging years for the industry and all the best for the future. I've got a couple as well, please. Obviously, you talked in your presentation and in the press release this morning about being prudent still on the consumer backdrop coming into 2026 and you've issued that 2% to 6% organic guidance for the year. So what factors do you think will drive you to the upper end or the bottom end of the range? Is the first question. What should we be bearing in mind there? And then secondly, around AI adoption in the business in 2026 and specifically AI adoption through Freddy's in marketing. What's that really going to mean do you think, for savings in marketing in the short term? How should we think about the overall marketing spend levels in 2026? I think from memory Dolf back in Seville at the end of last year, you talked about aiming to get A&P or marketing above 10% as a percentage of sales. You're on the cusp of that. Should we see you get there in 2026? Rudolf Gijsbert van den Brink: Yes. Very good. Thanks, Simon. Thanks for your kind words. Let me take the second part and then over to Harold. On the AI adoption. So first of all, the old AI machine learning has been adopted across the business for many, many years, particularly in supply chain, but also beyond. Of course, AI is different ways, whether it's the generative AI, your customer service, whether it's more agentic AI across operations, we're really moving at pace and in a focused way, focused on clear use cases that we are done scaling across our network. Marketing is indeed, as you were saying, particularly prone to the use of the more, let's say, future AI possibilities. What we announced, what Bram announced in Seville, the launch of Freddy AI, which is kind of our global internal marketing engine, which we're building, and it's built completely with AI in mind. And indeed, with time, it should unlock significant savings. To what extent we will reinvest these savings or whether we will let them go to the bottom line is to be determined along the way. We are not expressing ourselves at this point. We are very proud that even in a challenging year for the industry last year, we're able to expand our marketing investments in absolute terms. Indeed, we went up in basis points to very close to the 10%. And we, for this year, are still planning an absolute increase in our marketing investments. But indeed, yes, a lot of organizational focus and attention is now into the building, designing and scaling of Freddy AI now and for the years to come. Harold, if you can take the one on the prudent guidance. Harold Broek: Sure, well. The guidance, and indeed, it starts with a recognition to link it to what Dolf just said that it's important for us to continue to invest in the category and continue to invest in our brand portfolio and continue to invest in the digitization of Heineken. And we are basically being realistic that as from quarter 4 exit rates to quarter 1 starting rates, we don't see a material change in the consumer environment, neither in the economic certainty or uncertainty that the world is at the moment, offering us. So in that sense, I think Dolf is right that we're cautious on the macroeconomics and the economic sentiment determined to invest in the long-term health and strategic pillars of the growth of this organization and by stepping up productivity, ensure that we have got the flex to deal with those realities. And we talked, Simon, before about the fact that we are not giving, let's call it, good summer, bad summer ranges. We are really now starting to pivot to different scenarios in different markets aggregating that up and that's where the 2% to 6% range is coming from. So we'll just have to see how things are evolving in 2026, but we got the ammunition to keep on investing in growth. Operator: Our next question comes from Richard Withagen from Kepler. Richard Withagen: And also from my side, Dolf, all the best for the future. Now the 2 questions I have is the first one, you mentioned the aim to accelerate the growth of the global brands using the Heineken brand model. So maybe you can elaborate a bit in what way has the brand building of the global brand is different from the Heineken brand. Is it perhaps in terms of innovation, commercial execution, less resources, perhaps some background on that? And then the second question is back to Europe. Yes, we saw volume pressure from the retail disruptions and negotiations. Can you tell us what specific commercial changes are being implemented to avoid a repeat of those disruptions? And do you expect volume growth in Europe in 2026? Rudolf Gijsbert van den Brink: Thank you so much. Let me take the first one and then Harold if you can take the second one on Europe. So on the difference in the model, I don't want to go into too much detail, but the governance of Brand Heineken is firmly done from the center. And it means that positioning campaigns, tech lines, commercials are all centrally developed and sometimes adopted or customized for differences across regions. With some of the other global brands, take Moretti until very recently, brand ownership and governance was done out of Italy. But the team in Italy doesn't have the kind of global perspective that is now needed going forward. And the same applies to the other global brands. So this is really about strong global brand team centered in Amsterdam with a global perspective and really taking ownership of positioning the brand strategies, the core campaigns, really leveraging also the benefit of scale and skilled insights if you'd like. And we started moving that already a bit early with Amstel and you see the incredible success and acceleration of performance that was the consequence. Harold, over to you. Harold Broek: Yes. So let me tackle the Europe question. So first, it's important to realize that if you look at the volume growth in Europe, about 2/3 of the volume drop that we saw in Europe was related to market and market specific circumstances and about 1/3 was impact from the negotiations that we were just talking about. We also previously spoke about the household sentiment, the consumer sentiment in Europe that has been relatively subdued, and as a consequence of that, we really saw a trend towards more price-sensitive or value-seeking consumer. We spoke about that previous. Important to note that both in 2025 as well as the outlook for 2026, we believe that we are seeing price mix management that is below the level of CPI inflation that we see. And therefore, bringing affordability more back into the category. The second thing is what Glenn and team is doing is really starting to focus on growth pockets, whether this is our start-ups in the U.K., the Cruzcampo brand that we really see another 50% growth coming from there in the U.K. And we still believe that there are great growth opportunities in France, which is a growing market as consumers prefer increasingly beer over wine. And the same is true in some of the other southern markets with different propositions and innovation that Dolf was also talking about. So it is really about growth pockets, innovation, premiumization in selected markets, but also making sure that affordability comes into play. And in order to finance that and increased investment in brands and categories, we really need to take the cost out as a result of which we've really driven that productivity lens globally but also specifically in Europe. So that's the equation that we follow. Operator: Our next question comes from Olivier Nicolai. Olivier Nicolai: I would echo everyone else's comments. Thank you very much, Dolf. I got 2 questions, please. First of all, could you give us a little bit more color on Asia Pacific. In Q4, beer volumes has been slowing down about minus 3.4%. How much shipment phasing there is related to the debt, which is obviously going to benefit Q1? And if you could help us to quantify this, that would be great. And then secondly, a question on the free cash flow, EUR 2.6 billion. That was ahead of expectations. Could you give us a bit more details on how much upside do you see there going forward, particularly when it comes to net working capital and inventory specifically? And is it realistic to go back towards EUR 3 billion its year. Rudolf Gijsbert van den Brink: I'm for sure going to leave the second question to Harold. Let me take the APAC question. First of all, we -- let me emphasize, we are very happy with our performance across APAC. And I think the footprint is working very, very well. Vietnam, of course, is such a critical market for us. And after the incredible market disruption in '23, the stabilization in '24, '25 was really the year where both the market returned to growth but also where Heineken Vietnam really resumed market share gains. So we significantly outpaced the growth of the market across regions, across channels, both on and off-trade, premium and mainstream. So it's a very broad-based recovery of market as well as our relative performance momentum. There's always the timings of debt and those kind of things that impact a bit quarter-by-quarter performance. But in the aggregate, we're very happy with the performance of Vietnam. India, as we -- this is such a critical strategic pillar of the company now. I think we all agree, it's probably the largest frontier market globally in terms of upside on per capita and in absolute terms. We're very happy by the job done by the team after initially also, yes, a job to kind of integrate and normalize and standardize the business to Heineken standards. We are now really starting to see the fruits of, yes, the commercial strategies coming to life. The back end of last year was really impacted by weather. It was extraordinarily cold and wet in Q3 going into Q4. But from a market share performance, we're very happy with India, both on the core Kingfisher brand, which is by far the leading brands in the country, but also in particular, our premium portfolio with Kingfisher Ultra, Heineken, Amstel Grande, what have you. Cambodia is probably the market that has been the biggest drag on our results in Q4. They were playing against a large number of local players with a lot of overcapacity, not everybody playing to the same rules. So that remains a concern that we are focusing on. But in the aggregate, very happy with the APAC performance. Again, we keep reiterating in the organic results you're probably referring to, you don't have China, which is an absolute success story. This is such an important strategic pillar of the company now. We keep growing double digits. Brand Heineken up double digit again, and now Amstel becoming a sizable second engine, which is only at the beginning of the curve. And as we revealed in the press release or actually in my comments, I believe, it's now a top 3 market in terms of absolute net profit contribution, if you take the income from associates plus royalty income. So this -- yes, we sometimes feel frustrated and it's also one of the reasons where Tristan proposed to update the volume definition to give more visibility to the license volumes because actually, strategically, this is becoming a very important part of the business and relatively asset light. Let me leave it there. Harold, on the cash flow? Harold Broek: On the cash flow, I like the challenge. But there is a reason why we said we were pleased with our performance because we are -- as we said at the Capital Markets Day, really paying more and more attention to free operating cash flow delivery, but also return on invested capital as we extensively discussed then. It also is important to realize what we're doing with that free operating cash flow. We continue to invest in the organic side of the business, but the addition of FIFCO is a really, really important jewel that gives us coverage, great coverage with great brands in Central America. You will have noted that we're expanding our dividend range from 30% to 50% and are increasing our dividend slightly but slightly nonetheless. And we are announcing the second tranche of our share buyback program. So the free operating cash flow is an important metric for us to also enable sustainable shareholder value creation in the long term. The EUR 3 billion is a good ambition to have, but I'm not going to commit to it in 2026, as you will understand. Our real focus is to sustainably bring the cash conversion rate up to 90%. And you will have seen that all the levers are in play. Our net working capital improved as a percentage of revenue by 1%. Our CapEx, we really talk about growth without CapEx. Don't take this too literally. But we are really getting the leverage out of our existing capital base, and importantly, management focus, both better forecasting, but also action. Cash actions are really stepping up in that space. So that's the message that we're trying to signal, whether it leads to EUR 3 billion, time will tell. Operator: Our next question comes from Laurence Whyatt from Barclays. Laurence Whyatt: I once again echo everyone's thoughts, Dolf, best of luck for the future. I really appreciate you've taken the time over the past few years to help us out. A couple of questions for me. Firstly, on Mexico, I appreciate you've taken quite a bit of price in recent years and again in Q4. But what strikes me about the Mexican market is just sort of the lack of the premium segment. It seems to have a very low percentage of premium beers sold in Mexico. And so whilst I appreciate you're working on the price element, is there something more that could be done on mix within Mexico just to sort of get that percentage of premium beers up? And of course, I would have thought that leads to greater profitability there as well. And then secondly, on your Heineken 0 brand, we've seen a number of line extensions over the past year and a couple of more announced just this year. Some of those extensions are on sort of fruit flavors. I'm just wondering how you see this sort of strategy evolved? How close can you get to sort of more of a soft drink type of brand with the Heineken 0 as you add more and more fruit and whether those line extensions you're expecting to bring new consumers into the beer space? Do they go into the alcoholic side of Heineken once they try these line extensions? Sort of how do you see the nonalcoholic part of Heineken impacting the rest of the Heineken brand? Rudolf Gijsbert van den Brink: Very good. Very good questions. So thanks for your words, Laurence. On Mexico, indeed, historically, the premium segment has been small. I know from my own experience leading the market a bunch of years ago, that it is not for lack of trying on our behalf nor the competition. I think it might also be a reflection that the absolute price level in the market is, for example, compared to Brazil, much higher. So I think it might also have to do a little bit with the affordability of mainstream creating maybe less space to go above. Having said that, we do see premium segments now accelerating. In our portfolio, we see it with Miller High Life, which crossed the 1 million hectoliter mark. I remember doing the first license deal with, of course, many years ago, and it was -- Miller High Life was a rounding error and it's now becoming actually a meaningful brand at scale with very fast growth. The same for Dos Equis our affordable premium brands. So we do believe that there's an opportunity, but it might go a little bit at a different pace than it has been going in other markets like Vietnam or in Brazil. On the 0.0, the line extensions had come in 2 shapes. It's the flavors under the regular 0.0. We piloted them last year, and we are now really scaling them. And of course, a couple of key markets like now the U.S. and the U.K. And we have the ultimate, which is the triple 0, including 0 calories, which we piloted in the Northeast of the U.S. and which is expanding now too. So we're indeed experimenting, learning different ways rather than go to big global launches in one go. We're really kind of feeling our way to see where the consumer is at. But we are very confident that there's very good upside there. On the question on soft drinks, we do believe it's not about us trying to be a soft drink. I think it's the other way around. We believe that by extending our 0.0, we can play into premium adult natural beverages, which is clearly complementing soft drinks, and it's an area where soft drinks cannot go as easy as we can using a beer brand as a brand carrier makes it more adult. Given it's 0.0 beer, it's more natural. Typically, it has much lower sugars, much lower calories. So we believe -- and it commands premium pricing in a very significant way. So we really like where this is going and where the first generation of 0.0 beer started very close to beer occasions at moments that somebody chose for a no alcohol option. We do believe indeed that we can start to unlock new occasions that were not accessible before, as the 0.0 segment is maturing. And as the global leader, we should take the leading role in pioneering that. So we're pretty excited about it. Laurence Whyatt: Just maybe to follow up on Ultimate. Do you see that playing a different space to where the current 0.0 beers are? Are they taking share from each other? Or do you think that's really opening up a new market. Rudolf Gijsbert van den Brink: No, we do believe that, that's a new market. Where Heineken 0.0 Original, really plays into less beer drinkers or for certain occasions where people -- unlike a lunch occasion or a business dinner occasion where people rather stay in control and not have the alcohol version. The Ultimate plays into complete new occasions around sports moments, after sports occasions. That's why the global sponsorship with Padel is interesting in this regard. So we're really trying to -- in the end of the day, marketing is about growing consumer penetration, and that's what we're trying to do very intentionally with these line extensions. Operator: Our next question comes from Sarah Simon from Morgan Stanley. Sarah Simon: Dolf, you will be missed. I had 2 questions, please. First one was on FIFCO. You've given us some numbers in terms of the performance in dollars, but can you give us a bit more color around how the business performed organically in 2025, and also what you're kind of expecting in terms of what things are looking like for '26? And the second question was around sort of following on from Laurence's question on 0.0. You obviously had basically flat Heineken 0.0 volumes during the year. And I appreciate your comments about distributor inventory resets. But what do you think your 0.0, let's say, sellout is globally? And how does that compare with what you think the market is doing? Rudolf Gijsbert van den Brink: Yes. Thank Sarah. Let me take the second, and then maybe Harold can comment on the FIFCO question. So our largest Heineken 0.0 market globally is Brazil, and that was, as said, highly disrupted by the stock reset in Brazil. In the key and core markets, like, for example, the U.S., Heineken 0 continues to do very, very well. And in the aggregate, we need to be careful that we don't make new forward leading comments, but 0.0 should drive disproportionate growth across our portfolio. We remain very bullish. We believe consumer penetration is still low and building. We are unlocking new occasions as per the prior discussion. Globally, it's still low single-digit percentage of the total beer category. In Europe, it's nearing 4%, 5% in core markets like the Netherlands. Spain, it's 10%. I don't see no reason why this can't be 10% of global beer in XYZ years. We were the first mover about a decade ago. We have been very intentional about scaling and for sure, we will continue. So we would see '25 performance as an outlier due to some very specific cyclical reasons. But underlying, we are very confident in our low and no strategy portfolio and business momentum. Harold? Harold Broek: Yes, let me be brief on FIFCO. So first, I think it's important to reemphasize that this is really about long-term strategic fit. We're very happy with the brand portfolio. We're very happy with our market share positions. We're very happy with the grip that we have also through retail outlets. So we really believe that for the long term, this is a fantastic opportunity for us. And let's remind ourselves also that compared to the other markets, the per capita consumption is still relatively low. So we do see growth opportunities in the Central America, but in particular, in the Costa Rica market as well. Then in terms of the trading question that you're asking is pretty much in line with 2024. So no big dramas there. It's also very much in line with what we had assumed for 2025. So no surprises coming there. And yes, there has been likely many of the American markets, some impact from macroeconomic uncertainty, for example, tourism have been down a little bit, and that may have had some impact on market category growth momentum, but nothing that worries us at all going forward. Operator: Our next question comes from Andrea Pistacchi from Bank of America. Andrea Pistacchi: And Dolf, also on my part, thank you for the open interactions, insights and all the very best. Two questions, please. First one, I wanted to go back to Brazil a minute, please, which showed a sequential improvement in Q4. You gained share in the market, but could you maybe talk about the health of the market? Are you seeing signs of improvement as we go into this year? How constructive do you feel about Brazil recovery in '26? And also how is the new brewery opening proceeding? And will it drive cost savings already this year? My second question is actually on the multi-market operations. Could you talk a bit about the scope of these multi-market operations? How large are the clusters? Is this mainly a European initiative? Or is it global? And the pace of moving towards these MMOs and what do you see as the main benefit besides cost savings? Rudolf Gijsbert van den Brink: Thank you, Andrea. And let me take the first one and Harold will take the second one. So on Brazil, again, overall, on sellout, we are very happy and pleased with our ongoing market share momentum, really driven by brands Heineken and the Amstel brand, but now also Eisenbahn really picking up and some of the more super premium brands. The market did slow down remarkably in the second half of the year, the market is going into decline. We are deliberately cautious on the short-term outlook on Brazil. We don't want to look too much into January numbers. Let's wait for the Nielsen numbers also to see what that is looking like. We're really focusing on what we can control, which is brand portfolio, which is our relative pricing decisions, which are our activation plans. And there, again, we feel very confident also for this year. The brewery Passos is very important because of its physical location. We were trucking a lot of beer from the Northeast to the Southeast where the bulk of our volume is. And so there is Immediate logistical savings, there is government incentive savings. So even though our volume is not expanding at a rapid pace in the short term, this will come with an optimized P&L. And that was also one of the reasons why we did pursue that opening. Harold, on to the MMO question. . Harold Broek: Yes. So first, the reason why we're doing this MMO is really that we see opportunity to be stronger together as Glenn would call it. Most of the FMCG companies that we know of have already started to do that. And we do believe that there is opportunity, but very importantly, a dedicated management team at country level will continue to exist. So this is not really about taking the eyes of consumers and customers. It really is about pulling resources where we believe they are better equipped to do that above a single market and really pull, therefore, that together in a multi-market structure. We will look at this geography by geography. We have already some of these multi-market operations in play and the biggest one that we know is, of course, Heineken beverages in South Africa, where we already see leveraging portfolio, leveraging distribution systems, leveraging support offices is really benefiting the total of the cluster. So this is not new to us, and it's something that we really want to start looking seriously into, but in a very managed deliberate, intentional way. The scope, therefore, in Europe is centered around 4 Czech Slovak, Romania, Bulgaria, Benelux and the Germany, Austria, Switzerland cluster or multi-market organization. And as we already said in the earlier question, the benefits are not only about cost savings, it's really also about taking, let's call it, distraction away so that country organizations can focus on customers and consumers. And that the rest, the parent -- the biggest one in the multi-market organization does a lot of the administrative work and that is what we are trying to do. So it has cost benefits but certainly also focused benefits. Operator: Our next question comes from Celine Pannuti from JPMorgan. Celine Pannuti: First of all, I see a lot of changes that are happening in the organization. And clearly, on the EverGreen strategy. So I wanted to congratulate you, Dolf, on this. And obviously, wishing you a lot of luck for the future. My first question probably related to the EverGreen strategy where you said that top line growth is the core focus. In '25, you grew 1.6% organically. And I'm trying to understand how to unpack that for '26? You say -- I mean, obviously, price/mix accelerated into the quarter, although you seem to be saying that price/mix, you want to be a bit more careful about that. At least that was for Europe. So if you could try help me understand how the price/mix should develop in '26 versus the '25 level? And in an environment where, obviously, you are quite cautious as well about our demand, do you think that aiming for flat volume in '26 is achievable for you? So that's my first question. My second question is regarding profit delivery, the 2% to 6%, I think you made a comment about how this was really driven by EMEA. I would like to understand for '26 the balance of that by region? And as well, is there any balance we should think about H1, H2, given, I think, still some FX transaction in the first half of the year? Rudolf Gijsbert van den Brink: Thank you, Celine. Let me have a first go at it, and then I'm sure Harold has a thing or 2 to say on this. Let me start by the profit guidance of 2% to 6%. So we trimmed it a little bit and it's a combination of a couple of things. One is just to remain a bit prudent on the short-term expectations from the category. In different places, there's different drivers, affordability concerns or we have macroeconomic disruption still playing in parts of the footprint. Mid and long term, we remain confident explicitly so and that the category should sequentially improve to growth again. But in the short term, we rather err on the side of being a bit cautious on the category assumption. Very importantly, another reason is that we really want to maintain flexibility to keep investing in growth in digitizing the business, et cetera. As I said earlier, very pleased that even in a challenging lean year like last year, we were able to increase our absolute marketing selling expenses, increasing marketing selling as a percentage of revenue by some basis points. And so that guidance is also really set with that intention in mind to remain flexibility to keep those investment level in place even if there's unforeseen turbulence. Harold, over to you on the question on pricing and revenue. Harold Broek: Yes. Of course, going forward, we're not going to comment on pricing, certainly not specifically market by market for obvious reasons, Celine, you know. But maybe it's good that we look back towards 2025, which makes me a bit more comfortable to speak about it. And I think what we're trying to signal is a bit consistency in our behavior. And therefore, you really need to look at the revenue per hectoliter growth region by region, where in Africa, we indeed continue to predict input cost inflation from foreign exchange and local inflation, and we will take pricing for that if and when and how we can, like we did in 2025. In the other side, Vietnam is a good example of that, and Dolf alluded to that in the beginning. We see a very important opportunity to continue to manage the mix, because the growth of Heineken is a premiumization strategy, but in a 0.25 liter can. And that is an important component of the price mix that you see in Vietnam. And that is really what we are trying to do. To balance affordability, price-seeking consumer, but still going after premium because the consumer is prepared to go premium as long as it fits the pocket and the cash outlay like, for example, with 25 cl can. So revenue management is a very important part of our pricing strategy, not just pure pricing. And that's how we're trying to get this right market by market, region by region, and we will do in developed markets, particularly in Europe, be very cautious about the consumer environment not to overprice and really start paying attention to volume as well. Celine Pannuti: Any commentary on the balance of operating profit delivery? Harold Broek: Yes, between half 1 and half 2, well, you know that we're always aiming to be consistent and predictable, which the world would say the same. So I think we are trying to be very agile in approach to balance that out and give you line of sight, but it depends on factors and as Dolf already alluded to, we also have our investment strategy and are not here to manage quarter-by-quarter short term. We really are wanting to get this right for the long term as well. So we'll do our best, but cannot promise. Rudolf Gijsbert van den Brink: I think we're going to the last question. Operator: Our last question is from Trevor Stirling from Bernstein. Trevor Stirling: You'll be relieved to know there's only one question. But firstly, let me reiterate what everyone else has said, Dolf, and in particular, I look forward to saying it in person over a cold one tomorrow. The question, Dolf, clearly, 1st of June 2020, a world a lot has happened in those intervening years. When you look back, what do you think is your biggest learnings here in terms of what's worked, what hasn't worked? Yes, just reflections on your time as CEO. Rudolf Gijsbert van den Brink: Thank you, Trevor. And certainly looking forward to a cold one, with all of you together tomorrow end of day, always a -- yes, a happy moment to look forward to. Yes, I actually just realized that today, it's February 11, and it was on February 11, 2020, that I was informed that I was going to be nominated as the next CEO of Heineken. And I was living in Singapore at that moment, and it all looked rosy. And I was really worried about how to step in the footsteps of Jean-Francois, given the incredible momentum, the role, the category, the business was happening. And little did we know that living in Singapore, it was just days or 1 or 2 weeks later that COVID erupted in Asia and then later in the world. And I took a plane on May 25, was a one-way plane with KLM and air stewards were wearing ski goggles because people still believe that the virus could penetrate your eyeball, it was just bizarre. And then starting in June 1 from home, sitting behind the screen, trying to figure out this team's thing and what have you, this Zoom thing. So it has been a bizarre period. What I'm super proud of Trevor is that already before COVID, I felt that we had to pick up the pace of change in the company because the pace of change in the world was accelerating. And again, that pace of change in the world has capital accelerating time and again over the last 6 years. And EverGreen as we designed it with the executive team in the second half of 2020 was explicitly designed to future-proof the company in a fast-changing world. And we did that across different dimensions. It was future-proofing our footprint by exiting some markets and doubling down on high-growth markets with good fundamentals like India, South Africa and now more recently with FIFCO, it was doubling down on growth segments like premium beer, low and no beer and beyond beer with varying levels of success, some things moved more smoothly than other. We always knew, and I remember speaking with some of you 6 years ago, that you said Heineken is fantastic and the brand and the culture, but you guys don't do cost productivity. And we very explicitly tried to change that. I am proud of the progress we have made, taking EUR 3.5 billion of cost out, and there's still more to do. And that's what EverGreen 2030 is all about. We were behind on digitizing the business, including the boring ERP part of it, and we're really advancing at pace, making considerable investments not just in money but also in organizational resources to make sure that our digital backbone is future-proofed. And we did it on sustainability and people, too. All in all, proud of the progress, incredibly proud of the 87,000 people at Heineken. We lay the foundation, we were not done. More is needed. We are humble in that sense. And I hope you got that spirit and tone when we were together in Seville. And EverGreen 2030 is our sharpened clear expression of our ambition levels building on progress and learnings and at the same time, very clear in the priorities for the company. And as such, it was the toughest decision of my career, if not my life because I love this company dearly. It is the right moment for me personally to take a professional and personal reset, but I do that with full confidence in the future of this beautiful company and that I'm leaving the company in very capable hands with Harold and the rest of the executive team and with a clear strategy. So thanks for that question, Trevor. And again, looking forward to expand if needed over a beer or otherwise when we see each other tomorrow end of day. Raoul-Tristan Van Strien: Thank you very much. We will see most of you tomorrow afternoon. Take care. Harold Broek: Thank you. Rudolf Gijsbert van den Brink: Thanks, everybody. Bye-bye. Operator: Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.
Operator: Ladies and gentlemen, welcome to the Schindler Full Year Results 2025 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Lars Brorson, Head of Investor Relations. Please go ahead. Lars Wauvert Brorson: Thank you, Valentina. Good morning, ladies and gentlemen, and welcome to our full year 2025 results conference call. My name is Lars Brorson. I'm Head of Investor Relations at Schindler. I'm here together with Paolo Compagna, our CEO; and Carla De Geyseleer, our CFO. As usual, Paolo will discuss the highlights of our 2025 results and our 2026 market outlook, and Carla will take us through the financials. After the presentation, we are happy to take your questions. We plan to close the call at 10:30 local time. And with that, I hand over to Paolo. Paolo, please go ahead. Paolo Compagna: Good morning, everyone. I'm pleased to be back to report on our '25 results. But today, before I dive into the results, let me take this opportunity to take a step back and reflect on the journey over the last few years. You have seen we have titled our first slide, operational recovery completed as we see 2025 as marking the final year of our operational recovery. For those of you who have followed us for a while, you will recall that in '22, we faced severe supply chain challenges, steep declines in many of our major new installation markets and a significant drop in earnings and cash flow, and the company had to perform an emergency landing. Four years on, after some very difficult decisions taken by our majority shareholders and the Board at the end of '21, and thanks to the hard work and dedication of nearly 70,000 employees, I'm pleased to say that we have emerged from this period as a stronger and more resilient company. Well, one could say Schindler is back. We have made clear structural improvements to our supply chain. We have enhanced our product competitiveness and innovation and strengthened our global footprint and maintenance portfolio, including exiting smaller markets where returns were not aligned with our objectives. And from a financial perspective, the company has delivered 12 consecutive quarters of year-on-year EBIT margin improvement with high cash conversion. That is something we are really proud of. Now looking ahead to '26 and beyond, accelerating growth becomes our key priority, but without compromising on our commitment to the continuous improvement in operating margins. This I'd like to underline. An important part of the strategy is the commercialization of innovative standardized New Installation and Modernization products and our industry-leading digital offering for our Service customers. More on that shortly. Now let me touch on the highlights of 2025. Firstly, we delivered on our promises by achieving our financial targets. Growth was a little softer than we would have liked, but it was another year of a strong operating performance with a reported EBIT margin coming in at 12.6% versus our initial expectation of around 12%. I'm pleased to see that the efficiency initiatives launched over the last few years yielded good results, something we will build on in '26. Second, I'm comfortable saying that we are back in Modernization. I was very open with you 2 years ago that we were behind and having to catch up. Today, I believe we are increasingly leading in terms of competitiveness and momentum of our product portfolio, and I'm very optimistic about '26. In '25, Modernization orders were up 19%. And importantly, revenue was up 12% as backlog execution accelerated in the final quarter of the year. I'm confident that we can continue to expand our capacity and execute successfully also in '26. Third, a word on product momentum. We see signs that our efforts on product portfolio in the last years are starting to yield commercial results. And this will support us executing our strategy to accelerate profitable growth. The rollout of our standardized modular platform has been completed according to plan, positioning us well for NI recovery in our key markets. The rollout of our U.S. mid-rise product has clearly exceeded our plans in '25 and sets us up, I believe, for a continued market share gain in '26, too. And in Modernization, we continue to industrialize our operation and standardize our product portfolio. We are seeing very good traction with our standardized packages, and it is not only driving growth, but also enhancing our competitiveness and supporting our journey towards higher profitability in Modernization going forward. Fourth, despite the pressure in '25 from lower NI conversions and our decision to be more selective in recaptures, we continue to make good progress on our maintenance portfolio, which was up mid-single digit in value terms in '25. I believe we have an industry-leading retention rates on our portfolio, but I still see potential for this to improve. That will come in part as we leverage connectivity to improve the offering for our customers and to drive incremental digital revenue streams. Fifth, we delivered on operating cash flow of CHF 1.5 billion for the year, a second year of very strong cash conversion. Carla will elaborate on this. But this strong cash flow allows us to invest back into the business whilst also accommodating our shareholders with an increased payout. And I'm pleased to announce that the Board has proposed a dividend of CHF 6 for '25 as well as an extraordinary dividend of CHF 0.80. Let me touch on our China operations. I told you at the beginning of '25 that we had to take some tough decisions in order to realign our organization and set us for the future growth opportunities, especially in Modernization and Service. Now we are starting to see encouraging signs of operational improvement as we enter '26. A big thank you to our Chinese colleagues for all the effort in '25. Finally, a word on sustainability. We continue to make a good progress on our agenda. In 2025, Schindler's sustainability management system was recognized with an EcoVadis Platinum medal, ranking Schindler in the top 1% of the more than 150,000 companies worldwide. In addition, Schindler was once again included in the CDP A list of companies operating according to the highest environmental standards. So let us now look back at the global elevator and escalator market development in '25. Turning to Slide 4. Focusing on our updates on what we said in October after our Q3 results versus the year ended. First, we saw a strong Q4 in the U.S. new installation market, while demand in Brazil also developed slightly better than anticipated. Therefore, our assessment for Americas in 2025 has been revised to low single-digit growth from earlier flat. Second, we witnessed a strong finish to the year in India and Southeast Asia, lifting the Asia Pacific market growth comfortably above 5%. And finally, the Service and Modernization markets saw a good development in line with our expectations. So how did we perform in this market environment last year? Turning to Slide 5. First, in Service, our maintenance portfolio units continued to expand with the strongest growth in Asia Pacific, excluding China. In Americas, we saw a modest decrease as indicated already in October. This was a result of our increased selectivity when it comes to recaptures that we decided to pursue as well as from softer conversions. Given the normally longer lead time, especially in North America, the decline in our NI orders from 2023 was still having some impact last year. In Modernization, we have been able to maintain the strong momentum and saw double-digit order growth across all regions, except for Asia Pacific, excluding China, due to a lower level of large project bookings in both Q4 and full year. China was the standout with growth of close to 50% as we benefited from the massive equipment renewal program with well over 100,000 elevators replaced throughout the country. In New Installations, our global order volumes declined by over 10% due to China, where, as mentioned before, we have been repositioning our operations to be ready for capturing future growth opportunities. In the rest of the world, our NI orders grew mid-single digits, driven by solid growth across the Americas as well as in Asia, excluding China and notably in India. Now moving to our market outlook for '26 on Slide 6. We expect the Service markets to continue to expand across all regions with the lowest growth rate in the Americas and the highest in Asia Pacific, driven by India. The Modernization markets will continue to see robust mid- to high single-digit growth across the world. In China, the so-called bond program is expected to continue on an even larger scale, and we currently estimate another double-digit growth for the Chinese market also in 2026. In new Installations, we anticipate the global market to decline by more than 5% due to China, where the market is expected to suffer another contraction of more than 10%. While key real estate statistics saw double-digit declines with home starts by floor area falling around 20%, and this is now following at 3 years of 20% plus declines and also to be considered the higher tier cities, which earlier in the year performed relatively better than smaller cities, deteriorated sharply, especially in the final quarter of '25. Across the EMEA region, we expect good development in the Middle East to be coupled with important German market returning more firmly to growth as already evident from the double-digit pickup in multifamily building permits based on latest data available. Significant state support is aimed at easing the chronic housing shortage and stimulating investment, including increased funding for social housing, fiscal incentives such as the 5% aggressive depreciation for new rental residential buildings as well as the so-called Bau-Turbo initiative to fast-track housing projects. And we anticipate Asia Pacific, excluding China, to continue to expand by high single digit with broad-based growth across the region, led by India and Southeast Asia. With that, let me turn over to Carla to walk us through our financial results in more details. Carla Geyseleer: Thank you very much, Paolo. Good morning, everybody. So I propose we start with Slide 8. So that is our usual summary slide of the quarter compared to the last 4. So overall, Paolo mentioned it already, very pleased with the progress that we have made on the profitability over the recent years as well as our continued high cash conversion. I also acknowledge, as Paolo mentioned, that there is room for improvement in terms of growth, something I will touch on shortly when we discuss the '26 guidance. Firstly, reflecting on '25, Q4 marked the 12th consecutive quarter of year-on-year improvement for operating margins. So our reported EBIT margin was up 180 basis points versus quarter 4 in '24 and our adjusted margins up 100 basis points. For the full year, our reported EBIT margin landed at 12.6% versus our initial expectation for the year of 12%. So a very satisfactory performance, and I'm pleased to see that the efficiency initiatives launched over the last few years yielded good results in '25. Secondly, we had a strong end of the year for operating cash flow. Quarter 4 came in at CHF 523 million and the full year at CHF 1.5 billion, just shy of what we have seen the year before. Finally, our net profit continues to increase versus last year in both absolute and margin terms despite the decline in financial income as well as the FX headwinds. Now moving to our order intake development on Slide 9. You heard Paolo saying that our global New Installation order volumes declined by over 10% in '25. In quarter 4, our NI order volumes declined by over 15%. So clearly, a soft quarter for our New Installation business, driven primarily by China, down mid-30s in the quarter as we remain -- and we remain committed to our strategy of pricing discipline and as we continue to reposition our operations here towards future growth opportunities. So even though China made up less than 10% of our group order intake in '25, it continues to be a burden to our growth. We also had slightly softer development in the quarter in some of our Southern European and Middle Eastern markets, partly due to fewer larger projects here. So overall, a quarter with limited organic growth as a decline in New Installation almost fully offset the growth in Service and Modernization. Now if you look at the full year '25, order growth in local currencies came in at 3.1%. Excluding China, however, order intake grew 5.4%. So our growth in '25 was very much driven by Modernization, which grew 19% for the full year and 15% in quarter 4. Growth here was broad-based in '25 with strong double-digit growth across our 3 regions: EMEA, Americas and APAC, with China clearly a standout, up close to 50% in '25, driven by the government's bond program. Service orders grew mid-single digits organically in which combined with the strong MOD growth offset the decline in New Installations. Now finally, a word on currency. So the FX translation headwinds amounted to more than CHF 450 million on our order intake in '25 due to the strength of the Swiss franc versus major currencies, notably the dollar. And it's worth noting that these FX headwinds are not abating. Rather based on current FX spot rates, they will intensify in the short term. Now in terms of order backlog, it was up 1.2% in local currency at the end of '25, driven by Modernization, which was up double digit. Our backlog margin was stable sequentially in quarter 4, but still clearly up year-on-year. Especially the backlog margin in our U.S. business was stable sequentially in Q4, and we are starting to make progress on repricing our backlog here for the tariffs implemented in '25. We expect these repricing measures to continue over the coming quarter. Now moving on to our revenue development on Slide 10. The organic growth, both in the quarter and the full year, was driven by Modernization, up 22% in quarter 4, 12% for the full year '25. You will recall that we spoke of some operational challenges during '25 in terms of scaling up our delivery capabilities in Modernization, so we were pleased with how the year ended. And going forward, we continue to make good progress on scaling our capabilities and driving more efficient backlog execution. Now outside of Modernization, revenue in New Installation was down high single digit in '25, driven by China, which was down mid-20s, whilst other regions were down low single digit for our New Installation business. Service was up mid-single digit in '25. Now moving to Slide 11, operating profit performance. Let me say that I'm proud of what the organization achieved in '25 in terms of efficiencies. We have spoken over the last few years of shifting the corporate culture towards a mindset of continuous improvement, and we are really starting to see that more clearly, which is driving our financial performance. We delivered 12.6% reported EBIT margin in '25 and 13% in the final quarter of the year. And you can see the operational improvement of CHF 35 million in quarter 4 and CHF 163 million for the full year. That reflects primarily good progress in SG&A savings, but also supply chain and procurement savings, which continued to deliver in '25. Price and mix were contributors, but less so than efficiencies. One important operational achievement in '25, which I want to flag was the implementation of the ERP system in our U.S. operations. The U.S. is now fully integrated with the rest of our global organization. And as we complete this integration, leverage our global ERP platform, this should yield further operational efficiencies. Now restructuring costs in '25 came in at CHF 54 million, slightly lower than the up to CHF 70 million we had guided to initially, partly as some of our initiatives shifted into '24. So that meant that restructuring costs were below the level of '24 and hence, a small positive in the EBIT bridge. Now moving to the net profit. You can see that net profit grew to CHF 277 million in quarter 4, reflecting a 9.9% margin, close to CHF 1.1 billion for the year with a margin of 9.8% despite lower interest income and onetime financial gains in last year's period. So I'm very pleased with that result. Now moving to the operating cash flow on Slide 13, which reached CHF 523 million for the quarter and CHF 1.5 billion for the year, just shy of last year's exceptionally strong performance. Again, the uptake in our operating earnings drove the strong performance in '25, whilst net working capital improved, but less so than in '24 and hence, a headwind in our year-on-year bridge. This moderation in net working capital came partly as a result of less down payments for our New Installation business in '25. Now moving to Slide 14. So happy to share that the strong cash generation in '25 also allows for further distribution to our shareholders. So I can report, Paolo mentioned it already, that the Board has proposed an ordinary dividend of CHF 6 per share for '25 as well as an extraordinary dividend of CHF 0.80, reflecting a payout ratio of 72%. This higher dividend should also be seen in light of our solid balance sheet with our net liquidity position further boosted in '25 from the reduction in our Hyundai stake and the lower interest rate environment in Switzerland as well as our continued focus on delivering a more competitive yield for our shareholders. Now let me also mention a word on the share buyback program, which we launched in November '24. And this program has been running according to plan with the total number of shares, both registered and participation certificates bought back during '25 amounting to over just 700,000 shares for an amount of CHF 200 million. Now before I move on to discuss our '26 guidance, allow me a moment to zoom out a bit to give you a bit of a broader perspective on our financial performance. So if you look at the bottom 3 charts on this slide, I think you'll appreciate the quality of our business model. Cash conversion and return on capital compared to most other industrial sectors, both are high and stable. I'm very pleased to see the progress that we made since '22. That means that our balance sheet continues to strengthen, ending the year with a net liquidity of CHF 3.9 billion. Now this cash compounding wouldn't be possible without a stable and a growing top line. And as you can see from the top 3 charts, our long-term growth level is really healthy, led by a strong Service growth and with a balanced regional exposure. I think that is very important to remember at a time when we and the broader industry go through a bit of a softer patch in terms of growth. Now being a Swiss company has also meant facing significant currency headwinds over the past decade with FX shaving off over CHF 3 billion cumulatively of our top line over the last 10 years. Now moving towards the end and giving a bit of perspective on the '26 guidance. So for this year, we expect to achieve low to mid-single-digit revenue growth in local currency and an EBIT reported margin of 13%. As Paolo said, we are looking to accelerate the profitable growth and believe we have the right strategy to do so. In terms of revenue growth in '26, we expect to see continued strong growth in MOD, up double digits in local currency in '26, whilst New Installation should start to stabilize, consistent with our market outlook of recovering new installation markets ex China. But of course, with some lead time before that impacts our revenue. Going forward, in '26 and beyond, we also see an opportunity to complement our organic growth with inorganic initiatives across key strategic markets. Looking back over the last 3 years, we acknowledge the contribution from M&A has been lower than usual as our efforts have been more internally focused. But going forward, with the benefit of a sound financial position, I expect us to increase the pace of selective bolt-on acquisitions. Now as for the margin guidance of 13% in '26, it's very much driven by continued productivity improvements, increasingly from field efficiency. We expect an acceleration here to offset a moderation in procurement and SG&A savings such that we can achieve the same overall level of incremental savings in '26 as we did in '25. Now let me touch on the midterm margin guidance, which we will update later in the year. But let's be clear, we continue to expect a continued improvement of current levels over the midterm. One important difference to '25, however, will be the impact from mix. As you know, we have benefited significantly over the last few years from positive mix as our Service business grew strongly, whilst New Installations declined. But as our New Installation business expectedly starts to stabilize and Modernization grows strongly, the margin tailwind from mix will neutralize in '26 or perhaps even turn modestly negative. And finally, in terms of restructuring costs, we expect up to CHF 60 million in '26 on a par with the level in '25 and still burdening our reported EBIT margin. Now a word on tariffs, which I believe we have managed well in '25. As I mentioned, with the U.S. tariff costs now reflected in our backlog, we will continue to work hard at mitigating the impact, including making price adjustments to offset the impact. In terms of the annual gross P&L impact from tariffs, we estimate that to be around CHF 18 million based on current tariff levels, so lower than the initial estimate of CHF 33 million, which we provided to you in April last year. Again, we expect to offset most, if not all, of that with pricing and cost mitigating actions. So to conclude, let me end by thanking together with my colleagues in the Executive Committee, our close to 70,000 employees across the globe for their tremendous efforts in '25. And as we start out in '26, I believe we are in a great position to execute on our strategy, which we look forward to sharing with you at our upcoming Capital Markets Day. And with that, I hand back to Lars. Lars Wauvert Brorson: Thank you, Carla. Yes, as Carla mentioned, let me remind you of our Capital Markets Day scheduled for the 3rd of June this year at our headquarter here in Ebikon in Switzerland. We look forward to seeing as many of you as possible here on the day. Now with that, Paolo and Carla are happy to take your questions. In the interest of time, please, can I ask you to limit yourself to 2 questions only. And with that, operator, please, let's take the first question. Operator: [Operator Instructions] The first question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I will take two, but I'll take them one at a time. The first one in terms of your order organic growth rate, it seems significantly lower, I think, than some of the peers that we have seen reporting recently. You mentioned China, but some of them also have pretty big China businesses. You mentioned large projects. Can you give us a little bit more of a color? Was it unintended, you didn't take some of those large projects. Did you lose some market share for some other reasons? Just breaking down the competitive landscape context to understand this lower number than peers? Paolo Compagna: Well, there's a very simple answer to a complex question. There are 2 main reasons for the development of our OIT, which you see. Number one, yes, China was down for us. And this we have communicated. One reason is also the adjustment in structure we have initiated last year. We talked about it was mid of the year, and this kept us quietly busy till end of the year. So yes, in China, for us, it was kind of expected that we would take less of the market than possibly, I don't know, our competitors. There's a second and rightly so, you said, a second momentum, which had an impact on our OIT, and it is the deliberate, more selective approach when it comes to large projects. And here, I'd like to be very clear. We have to separate, let's say, the mass business in NI, residential, commercial and selected large, large projects, which -- we shared this in Q3 and also over Q4, we were very selective in also key markets not to take things which would feed what we call the boa constrictor, you remember, 3 years ago once again. And both had the impact, which you see, especially in NI. Daniela Costa: Got it. And then the second question is just on margins. So you've hit the 13%, and you've exceeded what you've expected earlier in 2025. And I think in the press release, you call it that the operational recovery phase is completed. I believe some time back, you talked about getting your margins over the long run to best-in-class peers, which are still a bit higher. So should we interpret this that the route to get there is just more dependent on just operating leverage? Or are there still any idiosyncratic actions? Just how do we read this operational phase is completed and the ambition to get to best-in-class peer margins over the long run, how do we get there? Paolo Compagna: Yes. So my statement is clear. The operational recovery, which we started mid of '22, this we see as completed as we gave ourselves a target, which was also shared with the market, and we aim to be there in the course of this year finally. So hence, bear with us until we meet at our Investors Day in summertime, where we will then share with you also what are our next steps and plans. But as Carla mentioned before, very clearly, and I said it before, our intention, our plan, our commitment is to continue a journey of margin expansions while we accelerate growth is what we internally call now '26, the profitable growth agenda, which then we will share more details in June when we meet. But thank you for your question. It's very important to be mention here and today that the journey is not an end. We have just moved now from one phase to the next. But yes, the recovery we started. Remember, factories, key markets, we shared this all with you. This we see as completed. Operator: Next question comes from Vivek Midha from Citi. Vivek Midha: I have one question and one follow-up, please. On the order intake, still a similar development to the third quarter on the Americas Service business, the slight decline in the unit growth. Just thinking ahead to 2026, is this something we should expect to persist through the first half of 2026, given your continued selectivity, maybe some lingering effects from the weaker 2023 NI order intake. When does this start to fade out in your view, in your orders? Paolo Compagna: Vivek, we shared in Q3 the impact of our strategy, especially on portfolio selectivity in recaptures, right? These are recoveries from the market, which we don't intend to change. However, the soft contribution from NI conversions from '23, this we expect to be over in the course of this year. So hence, to your question, we would not expect the same trend continuing in '26. Vivek Midha: Understood. Just following up on that. When you say for 2026, so should we already expect that to be visible by the first quarter? Paolo Compagna: That's a valid assumption. Now Q1 is always -- I think Q2, Q3 is where we should see a change in the trend in the U.S. market in portfolio for us. Vivek Midha: That's very clear. My other follow-up, if I may, is on the 2026 margin guide. How much are you assuming as raw material or commodities headwind within your guidance? Carla Geyseleer: Thank you for that question, Vivek. Of course, we will see some headwinds when it comes to the raw materials, especially in the copper and aluminum, also to a certain degree, steel in the U.S., but that has all been included in our guidance, yes. So we consider that. Vivek Midha: Okay. Understood. Do you have a number? Could you maybe quantify that for us, please? Carla Geyseleer: Yes. I mean this could go up to CHF 15 million, even CHF 20 million depending on the scenario that will pack out, yes. Operator: The next question comes from Andre Kukhnin from UBS. Andre Kukhnin: I'll start with one on the growth guidance, the low to mid-single digit. You've got 3% orders growth in 2025. I guess that underpins the lower end of the low to mid-single digit. Could you just talk about what kind of variables are out there? And how do they need to evolve for you to land in the higher end in that kind of mid-single-digit mark for 2026, please? Paolo Compagna: Andre, if I look back to '25, the order intake growth was a mixed picture between what we could have in China, which was, as I shared before, lower than expected. And I must say, in the rest of the world, our growth was significantly higher. So now looking to '26, your question is how confident can we be to get to a higher growth rate? And why can we talk about profitable growth? The answer is very clear. Outside China, and allow me to do this separation for all transparency, we expect to further grow a bit higher than last year. And in combination with a little recovery in China, this would lead to the guidance we have shared this morning. So we are quite confident that we can get to OIT growth we have communicated. So a combination of China little recovery and further expansion outside of China. Andre Kukhnin: Great. And my second question is kind of a follow-up, but I just wanted to see if we could build a couple more pieces of the profit bridge for 2026. Carla, could you help us with how much was the mix help in 2025 that you now guide to be neutral or slightly negative? And also for Service growth for 2026, what would you anticipate compared to the mid-single digit in 2025? Carla Geyseleer: Look, I mean, first important, I would say, contribution will come also in '26 from the efficiency. So that will continue. And I clearly outlined that. So it's not because, let's say, procurement and SG&A saving and supply chain savings are maturing that we will see less incremental because, obviously, it is our intention to monetize more on the other efficiency, mainly in the New Installation, Modernization and to a certain degree also in the Service business. So that is definitely one important element. The other important element is that we see also more stable markets when it comes to pricing, especially in NI and MOD and I'm really talking about outside China. So that goes, of course, hand-in-hand with the recovery, although, I mean, a gradual recovery that we see in some of our key markets. So that definitely will also play a role. In terms of mix -- well, in the overall margin uptake, we said always, well, in some of the prior years, it could have gone -- it was around 1/3 of margin uptake. We are fully aware of that. So we consider that, that full neutralizes actually in 2026. It could be even, as I said, slightly negative depending then on how the growth of the Modernization goes and the recovery of the New Installations. Operator: The next question comes from John Kim from Deutsche Bank. John-B Kim: Two questions, if I may. Can you comment on your Modernization order book versus capacity? I know in Q3, there were some issues on kind of throughput and delivery. I'm just wondering where you are on that journey. And then the second question, just a clarification around the tariff number. So CHF 18 million, is that a number we should be using in our bridge? Or should we think about that against the backlog, i.e., more than 1 year? Paolo Compagna: John, let me elaborate on MOD, which is a very good question. As last year, and I was saying before, you remember, we had to catch up on Modernization growth, which now in '25, we could do. And as I said, we intend to continue in '26. If we look at the execution, which is nothing else than the translation into capacity to execute the backlog, we could accelerate throughout '25 as we were able to build up resources in almost all key markets. And we continue to do so. Hence, as of the top line contribution, the execution is supposed to continue to accelerate. And our resources, which you say is capacity, will be continuously adjusted. However, for the backlog execution of '26, we are quite already prepared. But we continue to invest as we expect, as I said before, Modernization also beyond '26 to be a significant business driver. But for '26, the resources are almost there. Carla Geyseleer: John, Carla, I will take the question on the tariffs. The CHF 18 million that I referred to, that's actually the gross impact. So as we are going through the usual mitigation measures, I expect very little to impact our P&L. Operator: The next question comes from James Moore from Rothschild & Co Redburn. James Moore: Carla, I think I've got one for Paolo and one for Carla. Maybe product momentum first, if I could. And just going back to your comments, Paolo, in terms of the standardized modular platform rollout and also the kind of standardized MOD packages. Is there any way you could say what percentage of the way through the rollout we are for NI and MOD? And what proportion of revenue in '25 was already attributing to the new standardized? And what you'd expect it to be when it's all rolled out and when you think you get to that point? I guess that's the first question. And maybe I'll come back with the second. Paolo Compagna: James, now connection was a bit weak. Is this about the level of standardization. Carla Geyseleer: It's very -- you are difficult to understand. Paolo Compagna: We got it. It's about the level percentage of standardized solution, right, within NI, right? James Moore: Yes, If I -- just to repeat, so you can hear it. Just if you could say what proportion of revenue was standardized in '25 for NI and MOD? And what you think it will be when you get to the end of the journey and when that is? Paolo Compagna: Okay, very good. So we've got -- actually in our own program, we have progressed, I would say, NI, more than the half. In Modernization, we have to separate between full replacements and partial replacements. In the full replacement, we have a very high level of standardized solution already. In partial replacement, we are already 50% of it, and it's continuing to increase. Second part of your question, by when do -- or what could be the ultimate target of standardization in both businesses? Well, we would love to see one day in New Installation, a standardization level of 85%, 90%, one could say, and similar one day Modernization, while admitting for everyone to remind that Modernization is also due to the complexity -- we were talking about this last year, remember, of the complexity of the existing portfolio, which makes it much more difficult to get to a high level of standardization. So here, I think the whole industry is working hard to get to this level, also to have 80% plus of standardization will take longer. But ultimately, it's what we have to get to. James Moore: Very helpful. I wondered if I could ask about margin mix in 2 dimensions, really. Just behind the 130 basis point expansion in your adjusted EBIT margin in the full year, could you provide some qualitative color on margins by type and region? I guess, would it be possible to say if NI, MOD and Service margins all expanded? And if you could rank them, that would be great. And I'm trying to avoid asking for a number. But equally, could you do the same regionally? Did all move forward? Or did we see China stepping back? And what really drove the uptake regionally as well? Carla Geyseleer: Yes. So first of all, what is important to share that is that the uptake of the margin is really based on a big number of operations. So it is globally spread. So it's not a few that are fueling the uptake. It's really globally, you can say that the -- everybody is contributing to the uptake of the margin, I would say, with the exception clearly of China, which is anyway a bit of a different market now. So that's from a market perspective. Secondly, when you look at, okay, where is the efficiency really coming from? Well, our 4 building blocks, they are not new. They have been clearly communicated on a regular basis. So still in '25, the major impact is coming from supply chain and purchasing savings. That is number one, followed by the SG&A savings because there clearly, our restructuring plans are paying off and are yielding results and then followed by the efficiency in NI, MOD and EI. And obviously, they had quite a good basis already this, what I call operational efficiencies. In '25, we can really see them accelerating. And obviously, that will continue in '26 and that increment in that area will offset the less increment that will be generated in terms of the SG&A. So that is to give you a bit of flavor where it is coming from. Obviously, I referred already to pricing. Pricing was healthy outside of China. So that clearly has also a contribution. So that's, in a nutshell, how the bridge actually looks like between '24 and '25. Operator: The next question comes from Martin Flueckiger from Kepler Cheuvreux. Martin Flueckiger: Two questions. Firstly, I would just like to get back to the slides, I think the first one, yes, operational recovery completed, it's called, where you described the growth in your maintenance portfolio being mid-single digit in local currencies. Just wondering whether you could break that down in terms of units and pricing growth as well as also that more than 40% of equipment being cloud connected. I was just wondering how much of that is just connection without customers paying for it? Or put differently, how much of that more than 40% is actually paying clients? That's my first question. I'll come back with the second one. Paolo Compagna: Yes. Without going now to which market has developed how, the mid-single-digit growth, Martin, on portfolio is actually well distributed everywhere. And I like in all [indiscernible] with may be a bit difference on China as always. As obviously, the big reduction in NI sales of the last year is hitting also the growth of the portfolio. But for the rest of the world, the development, especially in value was equally distributed. So I would not have any region or country to say, oh, there we did a big either pricing or whatever increase. So it's well distributed, and we are very happy about that. Then considering... Martin Flueckiger: Sorry, I think there's a misunderstanding here. I was referring to the split between unit growth and pricing within that mid-single-digit growth rate in local currencies. It's not the geographic contributions I'm interested in. I'm more interested in the volume pricing effects there. Paolo Compagna: No. Well, it's -- I think it's both low single digit -- it's low single-digit growth in both. So it's quite equal. So it's not that we have a significant unit growth with low value. I can say -- and this is maybe also important to understand that the portfolio growth came also with a quite equal price and value development. So it's both similar. Martin Flueckiger: That's helpful. And with regards to the more than 40% connectivity, are all of these paying for connectivity or just a part? And if yes, what's that part? Paolo Compagna: Well, difficult to say in detail which part it is. Then also the connectivity, I must say a larger part is contributing with a paid service, but by end, the level of paid services is very different country by country. So then if we have to say the number of the percentage of the connected units, how many do contribute, I would say the percentage is significant. The magnitude of the contribution of the connectivity is very different country by country. Martin Flueckiger: Okay. That's very helpful. And then my second question would be on BuildingMinds. I think a topic we haven't touched upon in any of the quarterly calls for quite a while. Just wondering how happy are you with the developments? And how much longer are you going to invest into BuildingMinds? And what are the operational, let's say, improvements or developments that you have seen in connection with the start-up? Paolo Compagna: Yes. So well, it's two questions in one. Let me summarize. BuildingMinds is now in the phase of scaling up the business model. As shared before, the platform has been completed and the team in BuildingMinds is now working on scaling up the business model, hence, in growing the business. The second part of the question, connectivity as a contributor. Connection to Schindler in the business, this is limited to some countries in which we have joined or shared customers. But on a broader base, this remains a separate entity. Operator: Next question comes from Martin Husler from Zurcher Kantonalbank. Martin Huesler: I also have two questions. First question, could you please share your ideas on M&A, maybe in terms of segments and regions? And up to what size would you consider M&A transactions? Paolo Compagna: Yes, Martin, as Carla was sharing before, we were all the time looking at very selective bolt-on M&As. And here, I have to also add in some selected markets. What we like to do now more in '26 and beyond is to expand the number of markets we will be ready to invest. And coming to the size, well, a bolt-on acquisition can have different size, right? It depends of the target. So there might be no direct limit. However, for us, it was always important to identify targets in whatever specific country, which do fit to our organization. This is what made our M&A strategy in the past successful, and it is something we aim to keep in mind. Martin Huesler: And then maybe the second one on cash returns to investors. Why do you flag an extraordinary dividend of CHF 0.80 and not just increased your dividend to CHF 6.80. Maybe can you also expect a new share buyback program after November '26? Carla Geyseleer: Well, I mean, thank you, Martin. I very much appreciate the question. But if you allow me, I would like to give more insights on shareholder return policy and share buyback programs in the Capital Markets Day later on in the year. Operator: The next question comes from Rizk Maidi from Jefferies. Rizk Maidi: I'll keep them quite short. If I start with the order intake, I mean, I take the China drop and you're being quite selective. But even outside of China, it's quite a big difference versus what we've seen from some of your peers. I'm just wondering if you could just elaborate on the competitive dynamics around large projects and how competitive pricing is? And if you don't think you can get the returns expected on these large orders, then why perhaps some of your peers could actually take them on? I'll stop there. Paolo Compagna: Well, we normally don't comment on what competitors take in. But let me explain what we have done in '25 and what we intend to do in '26. And this is a clear combination of reaction to markets, which, by the way, Carla was mentioning some of our key markets, let us also look at Europe. And you remember, I was quite concerned the last years when it came, by example, to Germany. Now we see also Germany coming to a more positive momentum. What does it mean? In terms of order intake, yes, it's clear, '25, we were selective. We were more selective in the range of the large projects, especially in countries, mainly China, where we were on top of it also reorganizing our structure. In terms of pricing development, here, I'd like to distinguish between these large projects and, let's say, the residential commercial day-to-day business, let's call it this way, in which we see in many markets, pricing opportunities coming up for '26, which will allow also to work more intensively on order intake without jeopardizing our commitment to margins. How much this will be possible to complete? The answer, when it comes to large projects, well, some large projects we do and we will continue to do. Would we accept everything which some of competitors might accept in there. This, I don't like to say we would do. However, all in all, I think the '25 order intake, yes, was very much driven by these 2 decisions and '26 without changing the strategy that much, we are quite confident that we can generate a higher OIT just also by, let's say, business outside of large projects. Rizk Maidi: Understood. And then very quickly, a follow-up. Can you, Carla, maybe comment on the incremental savings in '25? So roughly ballpark, is it CHF 150 million to CHF 170 million. And same thing, if you could just quantify the mix impacts. I'm getting roughly to 40 to 60 basis points, just if you can comment on those. Carla Geyseleer: I would say you're in the right direction, yes. Operator: Next question comes from Vlad Sergievskii from Barclays. Vladimir Sergievskiy: My first one would be on Modernization growth into '26. Obviously, you are building the delivery capabilities, and we see accelerating top line growth in MOD in Q4 already. As you continue to grow it in '26, would you expect MOD backlog to actually decline in '26 or the new demand will still be strong and MOD backlog will still grow? So that's my first question. Paolo Compagna: Vlad, that's a very good question. So first, your assumption should be right. We intend to further grow in Modernization, OIT, but also top line, it means revenue. So hence, we are working to also expand our execution capabilities. Will the backlog continue to grow? Well, I think a little backlog growth should be there, but this will depend very much of how much we can accelerate execution. So therefore, both assumptions are right. Yes, we continue to grow. Yes, we expect higher top line contribution from modernization and maybe a slightly backlog growth, too, as we expand also the execution capability. Vladimir Sergievskiy: Okay. That's very clear. The second one is a very quick one. How do you see the bridge between adjusted EBIT and reported EBIT in 2026? You mentioned CHF 60 million of restructuring costs. Is there anything else in this bridge? Carla Geyseleer: Yes. Well, I mean, it's very restricted to the restructuring costs and the BuildingMinds. And obviously, BuildingMinds has become, I mean, less of a drag also compared to 2025. So yes, there are only duty elements, and I would like to keep it like that. You remember that a couple of years ago, we said, look, I mean, if it's recurring cost, it needs to go into the pure operational, and we like to keep the adjustments to a minimum. Lars Wauvert Brorson: We will take one final question, operator, please. Operator: The last question for today comes from Aron Ceccarelli, Bank of America. Aron Ceccarelli: My first one is on cost savings. You've clearly done a remarkable job over the last 3 years on executing on these efficiencies. If I take your slide of EBIT bridge for 2025, could you perhaps strip out the numbers of cost savings out of this CHF 163 million operational improvement, please? And when you look at 2026, you talked about operational efficiency to basically be the same ballpark of what you deliver on procurement. Can you maybe talk a little bit about in the real world, what are you accelerating there? That would be my first question. Carla Geyseleer: Yes. Thank you for the question. So in '25, I mean, a major part from these operational improvements are coming from what we call the SG&A savings and the supply and procurement savings. So these are the 2, I would say, major ones because they matured already these initiatives and obviously, they yielded very, very well. It doesn't mean, of course, that there were, of course, also efficiency savings in the operation, as I just mentioned before, in the New Installation and in the Modernization, and obviously, they will accelerate in '26. So overall, when we talk about these savings, we aim to go for a similar level in '26 than what we have seen in '25. However, the composition is slightly different. Aron Ceccarelli: And if I look at the CHF 163 million, is it fair to assume that 50% of those kind were savings? Or is it less -- just to have a rough idea? Carla Geyseleer: Yes, yes, absolutely. Yes, I confirm that, yes. Aron Ceccarelli: Around 50%, okay. And my second question is on China. You changed management, I think, at the end of the first half. Clearly, we saw a deterioration on orders and sales there in a tough market. Perhaps could you talk a little bit on real world, what are you guys doing now there? And where are we in the process of the restructuring, please? Paolo Compagna: Yes. The restructuring we have announced last year has been executed, and it consisted in a reset of the leadership team, which has been done. So this was done in the second half of last year, and it has been completed as well as a reorganization of the branches, which has been executed to a large extent last year. So actually, the restructuring we have announced in Q3 last year has been executed in Q4 with some minor actions still to come now in Q1. So hence, we expect in the course of this year,to see first impacts coming out of those actions. Operator: Yes, ladies and gentlemen, that was the last question. Back over to you, Lars Brorson for any closing remarks. Lars Wauvert Brorson: Thank you very much, operator. Thank you all for attending today's call. Please feel free to reach out to me and the IR team for any follow-ups you might have. I know there are a couple of follow-up questions in the queue. So please do reach out. The next scheduled event is our presentation of the Q1 results on April 23. You'll also find our reporting calendar for 2026 at the end of today's presentation deck. So with that, thank you very much, and goodbye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Johannes Narum: Good morning, ladies and gentlemen, and welcome to Storebrand's Fourth Quarter and Full Year 2025 Results Presentation. As usual, our CEO, Odd Arild Grefstad will present the key highlights, followed by CFO, Kjetil Krokje, who will dive deeper into the numbers. At the end of the presentation, participants in the team's webinar will have a chance to ask questions. Details on how to join the webinar are found on the Investor Relations website. But without further ado, I give the word to our CEO, Odd Arild. Odd Arild Grefstad: Thank you, Johannes, and good morning, everyone. I am excited to share a strong set of results for the fourth quarter today. Before we jump into further details, I will start with a few reflections on the progress we have made in 2025. 2025 was another year of clear progress and strong performance. We achieved a record high NOK 5.7 billion result. This means we surpassed our target outlined in the Capital Markets Day in 2023 by 14%. We also saw 26% growth in the operational result for the full year. A large share of the operational result came from short-tailed insurance and capital-light savings products. This leads to increased quality of earnings. Return on equity was 16% for the full year, surpassing the target of 14% significantly. 2025 was also a solid year for our Savings customers as they received NOK 147 billion in returns. To enhance customer experience and strengthen scalability, we invest selectively in AI and digital platforms. I'm therefore pleased to see clear progress in this area. One example is our AI-based customer service chat for insurance that recently ranked first in the market. AI-driven customer interaction is key to scalability going forward. In December, we updated the market on our strategic direction and set financial targets for 2028. The organization is now in execution mode with full focus on operational improvements and scalability across business areas. As shown in this graph, Storebrand has delivered solid result growth over the last 3 years. Two factors are important to understand this progress. First, it is a result of a group strategy built for capital-efficient value creation within Savings and Insurance. Our diversified business with strong synergies makes us resilient in various scenarios. Second, the progress is driven by great execution. My 2,600 colleagues bring our priorities to life through an action-oriented culture built on teamwork and shared goals. I want to thank all Storebrand colleagues for your dedication and contribution throughout 2025. Let me now turn to the highlights for the quarter. Storebrand delivered a group profit of NOK 1,515 million in the quarter. The operational result was NOK 1,131 million, up by 61% year-on-year. The underlying operational result is the best ever for the quarter and for the full year. The record high result is driven by significant growth in insurance with premiums up by 20% from the last year, together with increasing profitability. Within Savings, the result development in asset management stands out positively. Cost control remains a key priority, and I'm pleased to see cost development in line with what we outlined for the year. Turning to capital distribution. I'm pleased to confirm a 15% increase in dividends to NOK 5.4 per share. On share buybacks, Storebrand has a long-term ambition to distribute more than NOK 12 billion by the end of 2030. By the end of 2025, NOK 5 billion of this has been completed. Reflecting solid capital and liquidity positions, we aim to conduct NOK 2 billion in share buybacks during 2026. This will be done in 2 tranches of NOK 1 billion with the first one starting today. We keep executing our strategy to grow our capital-light business areas. This strategy is built for Storebrand to take 3 commercial positions. A, to be the leading provider of occupational pension in both Norway and Sweden. B, to be a Nordic powerhouse in asset management. And c, to be a fast-growing challenger in the Norwegian retail market for financial services. We take these positions and unlock growth by using our strategic enablers and group synergies. So let me dive into our progress. Across the group, we can once again report double-digit growth. This is due to both structural growth in the savings business, increased market shares in insurance and banking and supportive markets. Let me start with the first strategic position, being a leading provider of occupational pension in Norway and Sweden. In 2025, we saw double-digit growth in both Unit Linked reserves and corporate insurance premiums. Contributing to this, we captured the largest share of the net customer flow in the individual pension market in 2025. In Sweden, SPP keeps expanding. A highlight in the quarter was the broadening of the distribution agreement with Danske Bank. SPP will be the sole provider of pension services to Danske Bank, an important valuation of SPP's solutions. Our second strategic position is to be a Nordic powerhouse in asset management. Several of our flagship funds performed very well in the quarter, taking performance-related income to NOK 475 million for 2025. Within alternatives, our second Nordic real estate fund has experienced strong investor demand and completed its second close. We are very happy to see that investors value our long-term Nordic strategy. In addition to this, AIP management, where Storebrand has a 60% stake has developed well. With support from existing investors, AIP reached the first close of EUR 2 billion for its newest clean energy fund. The AMU growth is supported by positive net flow over the last years. An important competitive advantage is our group synergies, where the growing pension business provides a steady flow to asset management. Over the past years, external assets have grown faster than captive assets, showing that our offering is competitive in the market. Finally, the third strategic position. Storebrand aims to be a growing challenger in the Norwegian retail market. We are very pleased to have partnered with Santander in the fourth quarter, a leading player in the market for car financing. This further strengthens our capabilities in the car distribution channel and will be an important driver for our growth strategy. Growth in retail insurance was a key highlight. 26% growth in portfolio premiums in 2025 has increased our market share in P&C to almost 8%, and this is up from almost 7% a year before. To sum up, 2025 was a year of clear progress with strong result growth, improved return on equity and increased capital distribution. Johannes, back to you. Johannes Narum: Thank you, Odd Arild. Now let's take a closer look at the numbers. Kjetil, please go ahead. Kjetil Krøkje: Thank you, Johannes. Let's start with the key figures for the quarter. The quarterly result of NOK 1.515 billion is 42% better than last year, driven by strong results from insurance and asset management. The operating momentum into 2026 is strong with solid growth, pricing measures flowing through in insurance and record high AUM levels across the business. Storebrand delivered 16% return on equity for the full year and increased underlying earnings per share. If we move to the balance sheet, the solvency margin is reduced by 1 percentage point in the quarter with both higher own funds and capital requirement. This is still a very robust balance sheet that provides resilience if financial markets were to become more volatile. The expected return on our investments in the guaranteed business is well hedged and still 180 basis points above the guaranteed rate. In order to pay dividends and fund share buybacks, we need both solvency and liquidity. As you can see on this slide, we have around NOK 3.7 billion in liquidity as of the start of 2026. With strong remittance from subsidiaries, we will be able to increase ordinary dividends by 15% and execute our share buyback program of NOK 2 billion in 2026. The projected upstreaming of capital secures long-term predictability in our capital distribution in addition to strategic flexibility to support organic growth and accretive bolt-on opportunities that can occur. It's fair to mention that remittance is particularly strong this year, driven by strong results, tax loss carryforward and because of strong upstreaming from the bank due to the implementation of CRR3 for Norwegian banks. This should be considered when forecasting future remittance from subsidiaries and the consequent liquidity position of the holdco. Storebrand provided a remittance outlook at the Capital Markets Day in 2025 that includes further details on expected remittance levels from 2026 onwards. The solvency margin ended at 194%, down from 195% last quarter. Post-tax results contributed positively. This was offset by regulatory factors and accrued dividends in the quarter. The announced buyback program of NOK 2 billion is expected to reduce the solvency ratio with approximately 3% at the Q1 reporting and another 3% in connection with the next tranche. With the current level of solvency, buffers and interest rates, the balance sheet is very robust to fluctuations in the financial markets. Let's go a little deeper into the results line by line at the group level and then turn to the reporting segments. The top line growth for the full year was 13%. The insurance result is up 49%. The increase in insurance is mainly attributed to significantly improved results in the Retail segment, supported by repricing measures and continued volume growth. Operational cost is within our guidance of NOK 6.9 billion, excluding performance-related costs and extraordinary strong sales in P&C. For 2026, we expect to have around NOK 7.3 billion, NOK 7.4 billion in operational cost before currency and performance-related costs. All taken together, this leads to an improvement in the operating results of 2026 for 26%. The financial result is strong, and this leads to a group result of NOK 5.7 billion, NOK 700 million higher than the ambitious targets we announced at the 2023 Capital Markets Day. The tax charge for the quarter was 20%. This is within the normal range. The tax rate was lowered by currency movements and the asymmetry in how tax is calculated on assets and currency derivatives, while higher earnings from the Asset Management segment increased the tax rate. For the full year, the tax charge was 15%. The low tax rate was caused by lower taxes in our Swedish operation and currency movements. Our tax guiding is still 19% to 22%. This table shows the same numbers as on the previous page, but split into the business lines, savings, insurance and guaranteed. Storebrand's front book continues to grow strongly, while the guaranteed back book shows relatively stable results. The segment Other is mainly return on company capital and cost of debt. Let me start with the Savings segment. In Unit Linked, assets under management are growing double digit, fueled by structural market growth. Top line margins are reduced by 4 basis points year-on-year. The bank delivers a weak fourth quarter caused by periodization of loan losses and reduced net interest rate income driven by lower margins on deposits. The bank will implement measures to actively improve the deposit base and continue to cross-sell to improve the income base. The bank delivers an ROE of 10.5% for the full year. Asset Management contributes very well in the quarter with strong performance in active funds and event-driven income from the alternatives business. The business delivers positive net flow and keeps the share of external capital at 54%, while internal capital is also growing strongly. Within insurance, the combined ratio for the last 12 months has fallen to 92%. This is down from 97% last year and 102% the year before. The full year improvement is in line with previous communication. And with implemented measures, we maintain our CMD guiding for a combined ratio at or below 90% for the full year 2028. Despite strong profitability measures to get back to the targeted levels, it's pleasing to see that churn is within normal variation and that the growth in premiums and market shares continues. Zooming in on the quarter, we still see strong growth and result development within retail, whilst we see more moderate results in corporate due to weak disability results in Group Life. However, I'm pleased to see that in the corporate P&C offering, it's continuing to scale at satisfactory profitability levels. In Guaranteed, results are satisfactory. The guaranteed reserves as a percentage of total reserves continue to fall. We deliver improvements to profit sharing in Norway and Sweden, in line with the levels communicated on the CMD in 2023. Over to the Other segment. The company portfolios in the Norwegian and Swedish life insurance companies and the holding company amounted to NOK 28 billion at the end of the quarter. The returns range from 3.1% in the Swedish portfolio to 4.8% in the Norwegian portfolio for the full year. Storebrand is funded by a combination of equity and debt. Interest expenses for the group amounted to NOK 175 million in the quarter, excluding hedging effects. Let me close off the results with a slide that zooms out a little, but represents a story many of you are familiar with. Both savings and insurance, which is the future Storebrand business model and the runoff business in Guaranteed are improving profitability. And the runoff business require less capital as it runs off. This means that we have produced improved cash results while we have spent excess capital to buy back shares. This has led to higher earnings per share and a significantly higher return on equity, a development we aim to continue in the years ahead. In addition, Storebrand has ambitious sustainability targets across the group. I will not go through this in detail now, but you can look forward to a comprehensive reporting in our annual report, which will be published in the middle of March. With the results we present today, we deliver on our 2025 ambitions, and we have excellent momentum in the group to deliver on our newly announced 2028 ambitions. And with that, I will hand it back to you, Johannes. Johannes Narum: Thank you, Kjetil. We're now happy to take questions from our audience. Johannes Narum: [Operator Instructions] The first question comes from Hans Rettedal Christiansen in Danske Bank. Hans Rettedal Christiansen: Congrats on a good end to 2025. And I was just wondering if we could dig a little bit into the results in the Savings segment and in particular, the asset management. And just wondering how much of that result we should kind of extrapolate going forward. Performance fees can obviously vary from quarter-to-quarter, but looking a bit away from that and thinking about the event-driven fees that you're reporting in Q4, I guess, net the Q4 result is up some NOK 100 million, which I guess is also attributable to that. Can you talk a bit about sort of what we should expect from ongoing fundraisings or planned fundraisings for 2026 and the impact of those -- that's the first question. And the second question is on the Unit Linked business, specifically the transfer balance, which looks again like it's sort of trending downwards. Just trying to triangulate your updated fee margin guidance given in the CMD. I'm wondering what sort of front book margins you're seeing now versus back book and when in 2026, you would expect the turn in the transfer balance for that business? Kjetil Krøkje: Thank you, Hans. Let's start with the Asset Management segment. Around NOK 150 million came from performance-related fees in the fourth quarter. In addition, we had around NOK 70 million in event-driven fees. Of course, looking forward and into 2026, we do expect some both event-driven fees and performance-related fees throughout the year. We have said that for AIP, we have now just closed a EUR 2 billion -- done a the first close of a EUR 2 billion fund, and we expect through the end of 2026 or early '27 to do the final close and do another EUR 1 billion in that fund. So that should affect the event-driven fees also in 2026. On the Unit Linked transfer balance, well, let's first start by saying that this is -- we're still in a structurally growing market. We grow this AUM base by 13% last year. And that being said, this has been a market where the pricing on risk has not been profitable for the last years. We have been very disciplined and priced it to profitability in our books. We have also seen a small part of the portfolio migrates to own pension account. And of course, we are very happy with our market share of 22% throughout 2025 in own pension account, but this is still lower than the around 30% we have in the occupational schemes. So these factors altogether explains the NOK 2 billion roughly transferred out in the fourth quarter. And again, we're not happy with it. It's not something we're pleased with. So we are, of course, working with measures here to make that transfer balance neutral and positive again throughout 2026. And I guess on the margin side as well, we can comment on that, 4 basis points down this year compared to last year. We gave a guidance on the CMD that the margins are expected to be in the 45 to 50 basis points range out in 2028. And I think the development we have seen this quarter points in that direction that we will be in that range when we come 2028. Johannes Narum: Thank you, Hans. We have a next question from David Barma in Bank of America. Please go ahead, David. David Barma: Two on the Insurance segment, please. First on Disability, where we've seen a deterioration of the trend in Q4. Can you run us through the measures and price increases you're putting through in that space. And in group life, in particular, are you able to pass everything through in your '26 renewals? And then on the retail part of the business, so Q4 appeared to be a really good quarter for the industry, but you're flagging that you took some reserve release in the period, implying the underlying profitability would have deteriorated a bit more compared to the last quarters. So can you talk about that, please, and how you're pricing compared to the market so far into the year? Kjetil Krøkje: Yes. No, I can start on that. And when we look at the Insurance segment as a whole, on the retail side, we've been hit by the Storm Amy on one hand, but we've also seen some runoff gains and a little bit lower large losses in the quarter than we normally would expect. On the other hand, we have had a reserve strengthening in the corporate segment that kind of takes it the other -- goes in the other direction. So all in all, the 93% we report in this quarter is a pretty good -- it shows pretty good the temperature on the -- of the underlying business. Odd Arild Grefstad: And we're very pleased, of course, to meet the target of 90% to 92% with a 92% combined ratio for the full year. Kjetil Krøkje: And when it comes to disability and pricing, we have sent through high double-digit pricing and based on the customer, quite high price increases now for this year's renewal. It's fair to say that disability is a long-tail business. It's been something we have had not the best results in over some time. So it's a really important focus area for us to be able to price this up at the right level or consider other measures to make sure that this does not -- will be a drag on the results also going forward. So it's an extremely important focus area for us internally at present. Odd Arild Grefstad: Yes, it's an important focus area for us and for the whole society in Norway with the disability. We see still high disability levels in the society. We have now priced our main portfolio in a way where we have profitability, especially the ones that is linked to our Unit Linked business, we see a healthy development. There is still some smaller portfolio, which we see long tail and need for, as we saw in this quarter, reserve strengthening, but that is minor portfolios altogether. And we work with different measures. We talked about price increases here, but we also have our well concept that we now have given -- delivered to all our 400,000 customers, where we have expertise in-house, medical expertise where we can also be very fast on delivering solutions for people that are in the phase of getting into sick leave or disability. And we see very promising results out of this system and this program. Johannes Narum: Thank you, David. We have a next question here from Roy Tilley in Arctic Securities. Please go ahead, Roy. Roy Tilley: So 2 questions from me. Just the first one on insurance. You announced a letter of intent with Knif a couple of weeks ago. Just wondering if you could say anything more about that company and what the plans are and whether or not you see a merger is likely at some point, it's a small one, but still interesting. And then just secondly, I saw some news that you are moving Kron, the customers to the Storebrand platform. And to my understanding, at least initially, it means that the available mutual funds on the platform will drop from around 500 to around 80. So just wondering if you've seen any pushback from customers on that switch or what you're hearing from customers from the group. Odd Arild Grefstad: Yes. I should start on Knif. First of all, it's very early days, of course, in the development of this relationship. We are looking into that as we speak. But it's very interesting to see. Knif is a company or a system that has a very strong position within the nonprofit sector in Norway and have different financial solutions for the nonprofit sector. As a part of that, also an insurance company that has around 1% point market share within corporate insurance. And around 0.3% market share within retail and premiums around NOK 800 million. And of course, with Storebrand's very strong synergies, especially on capital when it comes to insurance, this is an interesting company for us to also have a cooperation with. And we think also that they have a position within the nonprofit sector that can be broadened and can be a very important element for growth within that sector for Storebrand with a broad overview of our products. Kjetil Krøkje: And on the move from Kron to the life insurance company, this is only the pension customers that we -- that are moved to the regulatory platform of Storebrand Life Insurance. All interaction will still happen on the Kron platform, so that's important. And all the savings customers in Kron using Kron for mutual funds, et cetera, they will still have the wide fund offering that they have today. And then we are building up a wide fund offering also through the platform in Storebrand Life Insurance. There has been some moves out in connection with the move, but not anything significantly. And we still think that they will have a market-leading both solution with Kron as the platform and with the Storebrand as the actual provider in the back. So, so far, so good. Odd Arild Grefstad: I think more than 90% of the customers that moves over to Kron, we had 2 solutions now for pension, and we merged that into one solution that is the leading solution we have from the life insurance company and 90% coming for the more fund-based solution will have the same fund selection when they move into Kron. And for the ones that has some special funds that we see that there is not a part of this platform today. We add some funds to cover up for that. And altogether, I think we meet the expectations in this portfolio in a very good way. Johannes Narum: Thank you, Roy. We have a next question from Farooq Hanif in JPMorgan. Please go ahead, Farooq. Farooq Hanif: My first question on insurance. Would you be willing to give some sort of guidance on the pathway to less than 90% for 2026. There's always a tension between pricing, profitability measures and your desire to grow share. So can you explain or help us with where you are in that journey in 2026? And then turning to remittances. I mean, you did flag extraordinary remittances in 2025 at your CMD, and you're guiding towards remittances being closer to the net cash result in future years. But when you say closer to, are there any other pockets of surplus capital that might still come through that you could talk about in the remittance ratio in '26. Kjetil Krøkje: Well, let's start with insurance. We've said that we should be at 90% or below in 2028. And the way we see it is that, that will be a gradual improvement from now and until 2028. And it's also fair to say that insurance business fluctuates a little bit, so there might be some fluctuations around that straight line. So that is kind of the best expectation we have for 2026. Odd Arild Grefstad: But then again, delivering 92% now for the full year 2025 means that we are very well in line meeting that target. Kjetil Krøkje: Absolutely. And when it comes to remittance, as you said, it is stronger this year. And one of the reasons for that is both the fact that we are in the last year on nonpayable tax that would, all else equal, reduce remittance with some NOK 0.8 billion next year. And also the fact that this year was changes in the standard model in the bank that released capital as we went over to CRR3. So the main pockets of remittance capacity in this system comes from either earnings or from the capital that are in the life insurance companies. And I think we've given a pretty clear guidance that, that will be NOK 1 billion above the results also for next year. So I think that's the best expectation we can give for now, Farooq. Farooq Hanif: And if I may just quickly return on insurance. No change, I guess, in your ambition to grow share here at the current pace? Odd Arild Grefstad: No, I think we feel that we really are a challenger in this market. And with 4 large competitors in the Norwegian market, we really feel that we have a good momentum, a very strong brand name and the opportunity to grow our market share with profitability in this market. Kjetil Krøkje: And as we have said many times, it has to happen with profitability and with the profitability targets we have set, but it's still a good market to grow in. Johannes Narum: Thank you, Farooq. We have a next question from Thomas Svendsen in SEB. Thomas Svendsen: Two questions from me. First, on this agreement with Santander. I guess they have a large market share of car financing in Norway. So what was your value proposition. Why did you win over competition to get this deal? And also, do you see more opportunities, distribution opportunities in the car channel? Kjetil Krøkje: So I guess on Santander, we have been in dialogue with them for a while. It's obviously both the fact that we are now a larger and more robust P&C setup. So we could be a full partner with Santander in -- together with them, offering good services to the customers. And obviously, it's always a discussion about price. It's a discussion about service levels where we were deemed to be the best partners. Odd Arild Grefstad: I also want to mention, I had my own meetings with them actually. And what they also tell us is that the Storebrand brand name is an extremely strong brand name, as you know, for insurance, makes it easy for the dealers out there to also use that brand name in connection with car financing. Kjetil Krøkje: Yes. And when it comes to other opportunities, I think this is a significant one. We're always having our eyes and ears open, and we are exploring some other dialogues, but we will revert to that if something materializes. Thomas Svendsen: And then the second question on the bank there. So should we expect you to sort of have this loan loss charges or impairment charges every Q4? Or should we expect more equal charging throughout '26. Kjetil Krøkje: Yes. No, I think when you look at '24, we had more equal charging throughout the year. This year, we were at the same nominal level of loan losses for the full year, but it was back-end loaded. I think going into 2026, I would expect it to be more equal throughout the year. Johannes Narum: We have a next question from Michele Ballatore in KBW. Please go ahead. Michele Ballatore: So 2 questions. So the first is going back to Non-Life. If you can maybe explore a little bit more in terms of the pricing trends, both in retail and in corporate, if there is any -- I mean, I guess the claims environment is pretty good. I mean, is there any sign of softening that you see or anticipate for maybe the second half of 2026. So this is the -- as I said, both in retail and corporate. And the second question is about -- I mean, we have seen in the past couple of days, the impact of news about AI in asset management hitting pretty strong on asset managers. So it's debatable if it's a threat or if it's an opportunity. I just wanted to have your view on this. Kjetil Krøkje: Yes. I can start on the pricing. What we see in insurance, and this is both in retail and corporate is that we've been through a pricing cycle now in the Norwegian market with extremely high inflation, both driven from the currency movements with a weakened NOK and the general value chain disruptions that happened after COVID, leading to high inflation on car parts, building parts and more. In addition, we were hit by higher frequency in the Norwegian market, arguably driven by the large proportion of EVs in the Norwegian car market. So what we have seen that we've gone from years with almost 20% increase in prices at the highest point to a downward trend where over time, we expect the pricing within insurance to go back to a more inflation plus like pricing. We're not there yet, but that is what we expect to happen over time. Odd Arild Grefstad: And your question on AI, was it the use of AI within asset management or. Michele Ballatore: No, it was more -- I mean, there is a debate on the market, especially when it comes to asset managers, especially in the past couple of days about is this a competitive force? Or is it an opportunity? Because it looks like from the market reaction, people are worried -- more worried about the, let's say, incumbents. Kjetil Krøkje: Yes. No, I think you see a couple of examples. You see it in insurance. You saw some trends in Australian insurers with new services going up where you get custom quotes on insurance through AI-based platforms. You've also seen similar things in asset management. That obviously, like I remember earlier, the risk of kind of big tech moving into finance, that is still an ongoing threat that can take many forms. We don't see a lot of it concretely right now, but it's obviously on our strategic radar. And then on the other hand, I think when we work with AI internally, just as Odd Arild mentioned with the Chatbot and more, we see quite interesting opportunities for scaling both customer dialogue kind of directly, but also down in settlement processes and these kind of processes, which are quite labor-intensive today, but where you can scale the business without really adding much new people, but adding new AI-based tool. So it's a little bit on both sides that it's both potentially a threat to some part of the business model, but also a lever where you can drive operational efficiency. Johannes Narum: Thank you, Michele. We have a follow-up question from Hans in Danske Bank. Please go ahead, Hans. Hans Rettedal Christiansen: So I just wanted to go back to the Slide #13 on the liquidity bridge that you have and you provided -- you say that you're going to have NOK 5 billion in liquidity by year-end. I think you previously said you want to have somewhere between NOK 3 billion and NOK 4 billion in the holding company at any given time. So you have sort of NOK 1 billion to NOK 2 billion more at year-end. So going back maybe to the previous question on Knif, it's not completely obvious to me exactly what kind of discussions that you're having there is? Is that part of the capital allocation sort of split given the liquidity bridge and sort of what price expectations are there, there? And maybe just linking that to what your liquidity expectation or capital allocation plans are for going into 2027. Odd Arild Grefstad: Well, let's start on that. First of all, you see we gave the guidance now in our Capital Markets Day, both around, of course, as we have done for a long time, solvency and over capitalization and also targeted levels with a soft closing around that for liquidity. Very pleased now to announce another year with a 15% increase in dividends and also an increase now in share buybacks this year. Then we expect, but it's still to see coming through high remittance and a very strong liquidity positions year-end 2026. That is, of course, both possible to use for -- if we need to support any subsidiaries, if we do a bolt-on M&A as Knif might be one-off, but also another set of flexibility for the Board to make the decisions around capital allocation by year-end 2026. So that is how we view it. We have clear guidance now for what we have said. And then if we have this NOK 5 billion, that gives a good starting point for the discussion with the Board, I think, a year from now. Hans Rettedal Christiansen: Just to follow up on that, the sort of -- your hope is to acquire Knif at some point throughout the year. Odd Arild Grefstad: It's very early days. We have started to look at Knif now and have a good relationship with them. We think a combination of insurance company with Storebrand can be a good thing to do. As I said, altogether around NOK 800 million in premiums. That can give you an indication, of course, of the size. And if you know the metrics, also the price for a company like that, but that is where we stand today. Johannes Narum: Thank you, Hans. We have a follow-up question from Farooq in JPMorgan as well. Please go ahead, Farooq. Farooq Hanif: I'm aware this is a bit of a silly question I'm going to ask now for an earnings call. But can you talk briefly about what you're doing about this autonomous cars debate and remind us again of your share of car in your retail business versus other lines? Kjetil Krøkje: Yes. I can start. Well, the facts, I think, is around 8% now in market share on cars in the P&C lines. I think the development we have seen now in Norway is that autonomous cars hasn't really come here yet as this is not regulatory approved. It's probably one of the hardest places to do fully autonomous cars due to the geography and the winters we have here in the North. But obviously, at some point, you will have more driver assistant and maybe also fully autonomous cars going into Norwegian roads. And then there's always the debate on what will that do to claims ratios? Will OEMs take a larger share of the market. I think all we can do is to position ourselves well, both towards the OEMs and towards the end customers and continue to work with both to make sure that we are an important part of the value chain going forward. I don't know, Odd Arild, if you have. Odd Arild Grefstad: No, that's fine. Johannes Narum: Thank you, Farooq. It looks like we've covered all the questions. So that wraps up today's presentation. We look forward to seeing you again on the first quarter result presentation on April 29. Thank you for attending, and goodbye.
Operator: Welcome to the Randstad Q4 and Full Year 2025 Results Conference Call and Audio Webcast. [Operator Instructions] I will now hand the word over to Sander van't Noordende, CEO. Mr. Sander van't Noordende, please go ahead. Alexander van't Noordende: Thank you very much, Alba, for that introduction, and good morning, everyone. I'm here with Jorge and our Investor Relations team to share our Q4 and full year 2025 results. First of all, 2025 has been a year characterized by great strides in our transformation, while I would say, navigating the cycle and demonstrating a resilient performance. It's also been a special year as we celebrated Randstad's 65th anniversary, a milestone reflecting our enduring commitment to being a true partner for talent. The market environment in Q4 was in many ways similar to what we saw throughout the year. We remain in a stagnant job market, but we see more resilience in Temp with good growth in Southern Europe, and we see further signs of an early cyclical pickup in U.S. Operational. As mentioned in the previous call, the Professional and Perm markets remain challenging, particularly in Northern Europe, while APAC remains resilient. Against this backdrop, we delivered solid results. We achieved revenues of EUR 5.8 billion and an EBITDA of EUR 191 million with a margin of 3.3%. For full year 2025, we delivered revenues of EUR 23.1 billion, 2% lower year-on-year, and an EBITDA of EUR 720 million with a margin of 3.1%. So I'm very proud of how our teams navigated their markets during the year with a consistent focus on delivery of results while transforming the business. So whilst 2025 was a challenging year, we came out of the year in a much better place than we went into it. First of all, from a growth perspective, we now have over 50% of the business in growth compared to around 25% at the end of 2024. From a profitability point of view, we reap the benefits of our cost discipline with EUR 181 million lower cost in 2025 than in 2024, and our recovery ratio was very strong at 71% for the year. From a productivity point of view, our focus on delivery excellence through our talent and delivery centers is making us a more [Technical Difficulty] organization. And as a [Technical Difficulty] we achieved 3% productivity gains in Q4 and 1% for the full year. This discipline led to a solid free cash flow of approximately EUR 600 million, further strengthening our balance sheet. In light of this, we will propose a dividend of EUR 1.62 or EUR 284 million, in line with our capital allocation policy. We started 2026 with stability in our volumes. Our exit rate in December was solid and the January revenue trend is flattish. Of course, we remain laser-focused on serving our clients and talents while steadily executing our partner for talent strategy. In Q3 and Q4, I visited all major countries, and on the ground, you can really feel the energy and excitement for our transformation. Our people get it and want to lead the market as we continue to move our business model toward a digital-first talent company where we deliver [Technical Difficulty] scale through our platforms. While there is still work to do, we are seeing the clear benefits of this transformation in how we run the business day-to-day. First of all, we continue to [Technical Difficulty] life sciences, e-commerce and logistics, health care and, of course, all the digital hot skills around AI, cloud, data and analytics. Together, these segments delivered EUR 9 billion in revenue this year, growing 2% year-on-year. Looking at our specializations. In Operational, we've seen good commercial progress and sustained momentum with an increase in clients' visits paying off. In Digital and Enterprise, we signed several new blue-chip clients in semiconductors and financial services. However, professional job flow was impacted by a combination of year-end slowdown and low hiring confidence. With our digital marketplaces generating approximately EUR 4 billion in annualized revenue, we are running the business at a higher clock speed. In Q4, we saw around 1.4 million shifts self-scheduled by our talent, an increase of 30% quarter-on-quarter. Clients and talent clearly like the new models. We will further accelerate our digital-first strategy, and that's why I'm very pleased to welcome David Koker, who will be Randstad's first Chief Digital Growth Officer. David knows how to build digital experiences at scale and brings over 25 years of experience in driving commercial and platform growth across Europe and Asia, most recently at Booking.com. Finally, none of this is possible without the best team in the industry. Despite the pace of change, our employee engagement remained above benchmark at 7.7. And we also continue to invest in our people's future by providing AI readiness training to all of our colleagues. And you will understand that with everything we've done in 2025, both operationally and strategically, we couldn't be better positioned for a more complete recovery with profitable growth as we are more specialized, more digital and more efficient. Jorge, over to you. Jorge Vazquez: Thank you, Sander, and let me shed some extra color on our results. So good morning, everyone. All in all, we saw a continuation of the trends observed throughout the year. And always first from a momentum perspective, once again, the seasonal pattern continued as we added 15,000 talent working sequentially since Q3, again, versus 10,000 last year. Earnings-wise, Q4 and Q3 were very similar. It was somewhat of an erratic quarter, I would say, in what was overall a step towards a stronger exit rate in December and the start of January. That is encouraging, and we'll talk more about that later. We also continued to gain field productivity and materialized structural cost savings in indirect costs achieved even while increasing digital investments. Lastly, disciplined cash conversion, allowing us to balance deleveraging with shareholder returns in line with our capital allocation policy, and also more about that later. But let's start and break this down, starting with the regional performance now on Page 8. In North America, we continued to see good progress this quarter with a pickup in the industrial pockets of our business. In U.S., our Operational business grew 6%, significantly ahead of the market. And we see this as a very testament to our new way of working, centering on the digital marketplace and central delivery. Elsewhere, Professional is down 10% and Digital this quarter was flat, but with solid operational leverage. Enterprise was minus 3%, with demand in RPO becoming more muted as we reached year-end. Meanwhile, in Canada, we continued to grow. Permanent hiring showed also some signs of stabilization, albeit at a low level, declining still 14% as hiring confidence remains low. The EBITDA margin for North America came in at 3.6%, up 20 basis points year-over-year. This represents a recovery ratio of above 100%, meaning we've been able to expand EBITDA year-over-year more than the gross profit we lost with productivity continuing to increase in Operational. And now moving to Northern Europe on Slide 9. In Northern Europe, we continued to navigate challenging markets, though as we exit the year and enter 2026, exit rates in December and January suggest bottoming out or sequential improvement. In the Netherlands, organic revenue remained subdued at minus 7% with hiring freezes in government and large professional clients. Q4 [Audio Gap] this quarter an increase of the sickness provision, reflecting a rise in long-term sickness rates and going forward as well probably to stay relatively high, and a EUR 5 million one-off dotation into the new pension scheme. Looking ahead, the new Temp CLA and the Future Pensions Act, WTP, effective of January 1, will increase some of the wage components. It is still too early to tell what the legislation impact will be, but at first glance, we see higher bill rates offsetting some of the pressure on volumes. We also celebrate 1 year of the acquisition of Zorgwerk, which continues its impressive growth and synergies path, reinforcing our position in health care as a structural growth segment. In Germany, things remain challenging with revenue at minus 10%, driven still by subdued automotive, though manufacturing is stabilizing. More importantly here, our structural improvements on the cost side, as you can see, are paying off, ensuring a profitability base and positioning us for a stronger company into 2026. Belgium declined 5% with operation at minus 4% against tougher comparables. And finally, Poland, 7% growth, Switzerland, 6% growth, continued to lead growth, offsetting the subdued Nordics, still at minus 14%. And now moving on to the segment Southern Europe, U.K. and LatAm on Slide 10. France remains a story of a 2-speed market. On one hand, we see resilience in our industrial pockets, and this is most visible in in-house, which grew this quarter at 13%. On the other hand, the SME segment is still down double digits, leading to an overall operational decline of 4%. Professionals were down 14% year-over-year. And this quarter, health care saw sequentially less revenue, impacted primarily by legislative changes that came into effect in December. Our leaner structure enabled us to deliver an EBITDA margin of 5.4%, up 130 basis points year-over-year. Italy posted its seventh consecutive quarter of growth. Operational grew 6%. Profitability landed at 5.7%, reflecting strategic investments ahead of the Randstad talent platform rollout. Iberia remains a stronghold, plus 5%, led by Spain, up 6%, where growth investments are paying off. Elsewhere, the picture is mixed. The U.K. remains tough. And across these regions, conversion does continue to increase, resulting in a 3% EBITDA margin. And now let's move on to Asia Pacific on Slide 11. Japan continued its solid growth at plus 6%, and we continue to invest to capture structural opportunities, particularly in digital engineering, where we're growing 7%. India delivered double-digit growth as we continued to invest in growth segments, while Australia and New Zealand declined 7% against steep comparables in a subdued market. Overall, the EBITDA margin for the region came in at 3.3%. And that concludes the performance of our key geographies. But now let me walk you through our combined financial performance on Slide 13. Let's start with the revenue. So looking at the revenue mix, we see the trends of the last few quarters continuing. Operational specialization continued to improve throughout the year and is now flat. Professional and Digital remained broadly stable throughout the year, albeit still at a low level. In Enterprise, we saw after several quarters of solid growth in RPO, demand softening in this quarter, resulting in a 4% decline. If we move down, gross profit and OpEx remained very similar to Q3 levels, and this resulted in an EBITDA margin of 3.3%, stable sequentially and year-over-year. Underlying EBITDA came in at EUR 191 million, and it's worth noting that we again faced an adverse FX impact of around EUR 8 million. Adjusting for that, our operational profitability was very close to last year's level. Integration costs and one-offs this quarter amounted to EUR 34 million. And for the full year, one-offs totaled EUR 125 million with the largest focus on structural cost reductions in Northern and Western Europe. Regarding amortization and impairment, we recorded an impairment of EUR 9 million related to our digital business in Belgium, reflecting the ongoing weak market conditions there. Net finance income of EUR 5 million for the quarter, where fair value adjustments, reversal of impairments on our loans and financial commitments resulted this quarter in a gain of EUR 18 million, effectively offsetting our regular interest expenses for the quarter. The effective tax rate was 31% for the year, within our guided range. In 2026, we expect a similar tax rate guidance of 29% to 31%. And this all leads to an adjusted net income of EUR 135 million for the quarter. And with that, let's now dive deeper into the gross margin slide on Page 14. A few things about margin. So Temp margin was down 20 basis points year-over-year. Operational business remains more resilient versus Professional and Digital specializations. There we continue to see a geographical divergence with Northern Europe below group average and Southern Europe continuing to do better. And as we mentioned before, an adverse FX impact in 2025. Incidental items also took an impact in the Netherlands, as mentioned earlier, and that overall brought the gross margin in Temp down 20 basis points. Perm contribution was down 20 basis points as well with a little sign still of stabilization in key perm markets remaining challenging. In HRS and other, this quarter was flat. RPO decline, 3%, 4%, is pretty much in line with group level, therefore, not impacting the overall gross margin mix. This is the market at the moment. Overall, looking back at 2025, the impact of geo mix, enterprise clients and specialization mix with Operational being more resilient carries a Temp margin decline that will progressively unwind with different market dynamics. Which brings me to the OpEx bridge on Slide 15. And remember always, this one is sequential. Underlying operating expenses were EUR 880 million, once again, like throughout the year, moving in lockstep with gross profit. This means OpEx has stayed broadly in line sequentially, with seasonality and strategic investments offsetting cost -- offset by cost savings. The payback of the one-offs executed throughout the year remained well below the 12 months reference we normally provide. And the real story here is our 71% recovery ratio. Over the last 3 years, we have become structurally more agile. Our structural changes to how we conduct and support our business have improved our ability to recover the decline in gross profit by reducing operating expenses or to convert more of gross profit into EBITDA in the countries where we see growth. Today, we have more revenue also going through delivery centers. We have more parts of our process done digitally, and we have more and more revenue in our digital solutions. At the same time, in parallel, we continue to drive structural indirect costs down. Linking this back to our Capital Markets discussions in May, I am pleased to share that we've achieved north of EUR 100 million in net structural savings for 2025. And with that in mind, let's now move on to Slide 16, which we discuss cash flow and balance sheet. Turning to cash flow. Our underlying free cash flow for the quarter was a positive EUR 213 million, reflecting mostly seasonality. For the full year, free cash flow totaled close to EUR 600 million, up EUR 260 million year-over-year, reflecting good cash conversion, while year-end timing was supportive in 2025. DSO came in at 56.7 days, up slightly by 0.5 days sequentially. Net debt, therefore, decreased EUR 274 million year-over-year, and our leverage ratio now stands at 1.3. Consistent with our capital allocation, we proposed a regular dividend of EUR 1.62 per share. This reflects 64% of adjusted net earnings, which equals the floor when we temporarily exceed the 40% to 50% range. And that brings me on Slide 17. All in all, we see further volume stability, especially in our Operational business with 50% of the business in growth to continue, and for the remaining 50%, we see support by improving end markets or annualization of some of the sharper declines of last year. In concrete, we are encouraged by the revenue trends, with a better exit of the quarter than we started and January coming in at 0.4% decline per working day. Q1 2026 gross margin is expected to be broadly stable sequentially as we see more adverse effects and the lower Perm and RPO business offsetting some of the improved mix. Operating expenses are expected to be lower modestly quarter-over-quarter, and I believe it should be at least in the range of $10 million to $15 million, a reflection of our efforts taken this year. Lastly, the number of working days will be the same. For Q1, we stayed the course, balancing growth, strategic initiatives and then to protect relative profitability, although we never optimize for a quarter and we set ourselves for the year and the years to come. And to summarize, 2025 was an important year for Randstad, finishing better than we started and setting us up for a better 2026. In terms of growth, decline rates eased over the year, and we entered 2025 at minus 5% and we finished with 50% in growth, and in the rest, bottoming out. Started 2026 crossing the line in terms of growth. And more structurally, we continued to position ourselves where growth is, our growth segments, and successfully integrated Zorgwerk. In terms of field productivity, we continue to change how we work, digitizing more and with real revenue now flowing through our marketplaces in various countries and markets, with especially our Operational and Digital business marketplaces showing good progress. SG&A and indirect costs, we also took more than EUR 100 million structural costs that are now not coming back. In terms of profitability, the short-term plan was adaptability, but the long-term plan is about structurally building operational leverage and resilience, breaking the linear model, as we normally discuss, and the expectations that come with it. If anything, in 2025, we've become more structurally more agile and scalable, proven by the 71% recovery ratio and despite continued investments. This has allowed us to deliver strong adaptability and now set the performance frame for 2026. That concludes our prepared remarks, and we now look forward to taking your questions. Operator: The first question comes from Remi Grenu from Morgan Stanley. Remi Grenu: A few questions on my side, if I may. So the first one would be on organic growth. So good to see that it's trending in the right direction, I guess, going into 2026, but there is still a little bit of a gap with some of your competitors. So I'd like to understand how you would explain that gap and how you intend to bridge it. So is it about the necessity to reposition the business on more supportive segments? Is it about hiring more FTEs to generate volume? Or maybe a little bit of issue with the pricing positioning versus competitors? So just want to have your take on that competitive landscape and how you intend to bridge the performance gap. The second question is on what you alluded to in the Netherlands. So there is this Dutch law coming into effect in July, if I'm not mistaken. So I just wanted to understand if you feel like the employers -- I mean, the clients you're discussing with have already adjusted ahead of the change? Or if you feel that there could be additional pressure in the second half of this year? And if so, if it's possible to quantify it a little bit given the revenue exposure of the company to that country? And then the third one would be on your Enterprise business. So I think you said it was a little bit softer this quarter. What has driven that softness? Is it company-specific large contracts you would have lost or which would be ramping down? Or are you seeing largest employers being a little bit more cautious on hiring trend going into 2026? Alexander van't Noordende: Well, let me take a step back because, of course, it's all about growth here. So let me just sort of reflect on what's going on here. So let's maybe first make a few comments on Q4. As Jorge mentioned it, the way we see Q4 is that we had a little bit of a blip in a few parts of our business, and the blip was primarily in October and November because December and January have shown encouraging results. And I speak specifically about France, Belgium and Germany. And the story is with different reasons, more or less the same for those big 3 countries. In Enterprise, your question is a good one. The main issue in enterprise is that we have seen somewhat lower hiring in Q4, basically some of our larger clients putting on the brake, stepping on the brake, not stopping, but reducing hiring in Q4. We have, at the same time, signed up a bunch of new clients which we are bringing up to speed in Q1, and hopefully, the revenues for those clients will start to come through in Q2 and definitely in Q3. So that's sort of the Q4 reflections. Then if we look forward, we see that 50% of our business is in growth, and we are optimistic about the other 50% also improving from here on. What's driving that? Well, first of all, just sort of the macro headwinds are easing. Interest rates have been coming down. Inflation is easing. This whole thing about trade is more like the new normal. Clients are dealing with it, are knowing what to do, have taken their measures. So that's -- the uncertainty is somewhat dissipating. The labor markets are getting unstuck. We see more mobility. We see some people -- more people leaving, some layoffs even here and there. So there's more dynamics and more mobility in the labor market. All of that could indicate a cyclical pattern, if you will. Temp is definitely more resilient and North America operational is leading the way here. That's great. In Europe, as I said, in those big 3, 4 countries, we see an encouraging start of the year as well. So that's all positive, I would say. Then last but not least, and this is really important -- I mean, obviously, we have been building a more resilient and agile Randstad. And what does that mean? That means, first of all, a better experience for our clients and talents because that's why we are here on earth, that's how we make a living. But also all of that is fully focused on creating more leverage. So you have to realize that over the last years, we have been investing more than EUR 500 million in new processes, systems, talent centers, delivery centers, technology, and all of that is creating not only a better experience, but it's also creating more leverage in our business. That's talent centers. We have to meet the talents where they are, and the talents are online. So we have talent centers complemented with technology, increasingly AI, by the way, to get more efficient -- to be more efficient in getting talent in the door. That's delivery centers, the central delivery for clients that have multiple locations with dedicated teams focusing on improving the fulfillment at those clients. And the results that you see left and right are actually quite staggering. Then the DMP, and North America is a case in point. If there's one example of operational leverage, it's the DMP. If the client is asking for 100 people more, we can deliver those people -- we can deliver those 100 people more tomorrow with 0 marginal cost. That is how a DMP works, and that's extremely, extremely powerful. So all of that to say that we're steering the business in a very disciplined way, as you know. So we're aiming to do the same in 2026 as we have done in 2025, is steering with an ICR and IRR above historical levels, like we did in 2025, and you know we had 71%, which is, of course, something that we are extremely, extremely proud of. So in short, I would say I'm actually pleased to get another 4 years in Randstad because I haven't been more optimistic at the beginning of the year in my tenure in Randstad. And you may know the saying every dog has its day. I think my day as a dog has maybe come starting in 2026. So I'm optimistic. Jorge Vazquez: Just one -- Remi, your second question, if I'm not mistaken, was about the Netherlands. So just to be clear, the new temp CLA and the changes you were alluding to, they actually start on the 1st of January. We are working with our clients. It's a bit too early. I think, by and large, the increase we see in wage components, let's put it like this, will offset, if any, the volume pressure that we might see. But for now, that's what we are working on, yes. Operator: The next question comes from Andy Grobler from BNP Paribas. Andrew Grobler: Just the one from me and a follow-up. Just in terms of gross margin, could you talk a little around the underlying pricing you're seeing in the constituent parts? And essentially, to what extent is the downward trend in gross margin about -- just about mix versus like-for-like changes? And particularly on that, your guide into Q1, sorry, and the moving parts inherent within that? Jorge Vazquez: And let me basically just take a step and look at the full year and then how we enter 2026, because some of these things start potentially changing as we enter the year. So in terms of gross margin -- I mean, let's separate things. There's a service mix as always and then there's a temp margin. And I think we talk a lot about pricing, but I should also think I'll talk more about the market and the market we have today and how the industry is supporting different clients, different geographies and what we see. Today, we have a Randstad that from a geographical perspective has growth and is supporting more clients in countries where there's a slightly lower temp margin, think Spain, think Italy versus, let's say, the Central European countries. But that's basically a geographical mix. We also have a client base at the moment in an industry that is leaning towards a bigger share of large clients, think in-house, think very large enterprises. And that, of course, brings as well a client mix impact. And thirdly, and not the least, if you look at our specializations, and it's in line somehow with previous cycles that we've seen before. What is holding up better is clearly the Operational business. It's flat even at the end of the year, crossing into growth already. And we see the higher skilled specializations, think of professional, digital, still with, let's say, year-over-year declines. Meaning, again, the higher margin specializations declining and the lower margin specialization continuing to increase. Now this is the market we have today. And if I look at 2025, we have basically around, I would say, 60 basis points delta on our gross margin, if you kind of normalize it throughout the quarters. And I would say 40 basis points -- Andy, that's the mix. It's the market we have today. I don't like to talk about mix because this has consequences for OpEx, has consequence for everything. It's where we have market and it's where we are gaining, it's where we're going to operate. We also had an impact of 20 basis points from perm and a positive impact somehow from RPO as RPO was basically throughout the year growing faster than the group. That means approximately 60 basis points in 2025. If we now look at 2026, what is likely to happen, right? This 40 basis points from the temp side of things, so the geo, the client and specialization -- we don't really know, we want to grow everywhere. But clearly, they are starting to annualize or will start to ease. If there's growth, more growth in the U.S., if it continues to be supported in Southern Europe, one way or the other, some of the things will annualize in the higher-margin accounts, and we should start seeing things bottoming out on at least easing the comparisons that we had. The same with client mix. I can't tell you we want to grow in every single client segment, but somehow, if we look at previous years, once things indeed increase towards large clients, the years after start analyzing. And the specialization is the same. We're crossing over into growth and operational, but we still need to see how professional, how digital will evolve into 2026. Remember, we have pockets in digital. Look at United States, we're either in growth or flat. So it's already a very different start of the year than we had in 2025. And then perm, we continue still to count on 20 basis points, potentially 10 for now. We'll see how things ease throughout the year. RPO, Sander alluded to it. The positive impact has now in Q4 kind of faded away. On the other hand, it will be about balancing business as usual with new implementations. And the pipeline and FX adds particularly in Q1. And remember, a lot of the bigger fluctuations happened in Q2, Q3 and Q4. So as we now ease into the year, FX will have an impact in Q1 and not in Q2. So at least if things don't change, less in Q2, Q3 and Q4. So again, into 2026, we see pretty similar margin trends as 2025, and potentially as we go into the year, easing off in some of the components. Andrew Grobler: Okay. And just one follow-up in terms of the in-house sort of large clients versus SMEs. In fairly broad terms, can you talk about the difference in gross margin between your average in-house solution and your more sort of branch-led SME business? Jorge Vazquez: Yes. I would say, I mean, probably 10 to 15 -- it depends on the markets, right, Andy. Andrew Grobler: Yes, inside France, for example. Jorge Vazquez: 10 to 15 basis points roughly, I would say, on average at group level. I don't specify for country. Operator: [Operator Instructions] The next question comes from Rory McKenzie from UBS. Rory Mckenzie: It's Rory here. I wanted to ask about the impact of the digital marketplaces. How much do you think is visible in these numbers? If it's now annualizing at nearly 20% of revenues, you called out 1.4 million self-scheduled shifts. Can we see that at all in the North American growth rate? Do you think that's been a part of why you've seen that improve? Has it allowed you to protect margins more? Or really do you think we're still waiting to see more of those benefits over time as market volumes recover? I know there was another restructuring charge in the quarter as well. So maybe could you say how much of that is relating to kind of the structural reshaping compared to maybe adjusting to the market conditions? Alexander van't Noordende: Well, where can we see the impact of digital marketplaces in our numbers? Well, first of all, in North America, in Operational. I think that part of the growth is because of our digital marketplaces, because once clients ask more, we are much faster and at much lower cost, of course, to deliver those additional FTEs. The digital marketplace is also differentiating us in the marketplace because some clients are saying, with Randstad, we have access to talent that we otherwise would not have. So it gives us a leg up in competing against our competitors for new clients. We have seen the productivity in terms of EWs per FTE now surpassing the level of 2019. So that's a good sign. So you can see it in the U.S. at scale. The other places that we can see the impact of the digital marketplace are in health care. So in health care in the Netherlands, there has been a big shift from freelance to temp. Without the digital marketplace, we would not have been able to make that shift at the pace that we have been doing over the course of 2025. And it's actually quite phenomenal what that team has pulled off there over the last year. Similar dynamics both in France, where we have, of course, some challenges with regulation. But because we have the digital marketplace, we're better to navigate that. And last but not least, I would say, in Australia. Finally, in Randstad Digital -- and I spent time with the team last week. About 80% of our fulfillment is now coming directly from our community in our digital marketplace in Randstad Digital in the United States. Obviously, you can imagine that means faster, that means more productivity and the likes. Now obviously, this is all EUR 4 billion on an annual basis. So we're now going to work hard to expand that to other markets most likely, so markets that we are focused on in 2026, Belgium, Italy, Switzerland, Japan, Poland, just to name -- Canada, just to name a few. So this model works. Clients and talent like it. We can now look at the business and run the business in a much more granular way. And frankly, we are start to -- we're only touching the surface -- scratching the surface of the opportunity that the digital marketplace is offering us in terms of talent availability, efficiency, precision, relationship with talent, redeployment. We're just scratching the surface. So I'm extremely optimistic. This model is working, and more to come. Jorge Vazquez: Rory, any follow-up question? Rory Mckenzie: Just about the -- maybe the disruption charge in Q4, and how much of that is related to kind of reshaping the business to get the most out of this platform compared to adjusting to the cyclical conditions? Jorge Vazquez: The one-offs. Yes, sorry. Yes. Sander, can I just complement something from a finance perspective? Everything you heard from Sander, what excites me, Rory, is it's structurally changing the ability that the company has, becoming more agile, but also gearing up and converting. So a lot of what we sought was the art of the possible. We now see the benefits of digital and the benefits of everything we're doing, starting to basically be possible also in our industry and in Randstad. And that's quite exciting. In terms of one-offs, let's be clear, they continued elevated in 2025, though lower than in 2024 and 2023. More important I would argue, when we make these decisions in terms of allocating capital to it, is the return on them. And from that perspective, if I look at the return we had from the one-offs, you can actually already see this very clearly in Q4 and as we enter into Q1. So a large part of, almost EUR 30 million, EUR 35 million actually, reduction in OpEx we had in Q4, I would say almost 2/3 of that were directly driven from the one-offs done this year. And we are well below the 12-month target that we set ourselves internally. And that will support us again into Q1. Operator: The next question comes from Marc Zwartsenburg from ING. Marc Zwartsenburg: Two questions from me as well, first on the EBITA margin in North America. The progress, 20 basis points year-on-year, it was a bit higher than previous quarters, but still conversion ratio of 100%. But how should we think about that margin in 2026? Should we see that the productivity gain from the digital marketplace and the self-placement or self-scheduling to feed through and the step-up -- really a step-up in the margin in '26, because now it's a bit volatile in the progress on the year-on-year? Can you maybe give a bit more color on what we should expect there in terms of margin progression? And then following up on that, on the cost base. You already mentioned we should see the cost base will be relatively flat or slightly lower in Q1. How should we think about that throughout '26? Will you be able to offset all the inflationary because inflation is coming down, that you will be able to offset that? And that you can keep that OpEx level rather flat throughout the year? How should we think about that? And also in relation to the one-offs, how many one-offs will we see in '26 to keep that going? That's it. Jorge Vazquez: Okay. I mean, first on the U.S. So yes, in terms of we want to see a step-up in profitability. There's a few things at play, Marc, as well. The exciting thing is we're seeing 10% productivity gains. You can see it in our numbers already in the U.S. overall, even more parts in our Operational business, where a lot of this model is already helping us supporting growth. We still see perm somewhat subdued. Props still to recover as you've probably been reading on other players in the market. RPO also not necessarily yet in sustainable growth, though Sander alluded to it we are winning new business or we're implementing new clients. So there's a few variables there. But in short, yes, we want to see and we will see a step-up in profitability in North America. In terms of the cost base, let's -- and the one-offs, let's look at it. We're actually starting the year at a lower level. I mean, I want to make a side note. We're now probably have the OpEx way below 2018, 2017 even levels of OpEx. So clearly, let's say, a lot of the OpEx we have incurred and we have perhaps inadvertently structurally had through COVID, a lot of it has been corrected back. And to the question of one-offs, the point here is making sure that it will not come back, because this is also eliminating and improving how we work and basically making sure they work differently. The point of having incurred these one-offs is to make sure this does not come back, these costs. So we are a leaner and meaner Randstad as we now prepare to cover -- or to go over into growth in 2026. If we then look at the exact OpEx level, look, we'll start low in general with the seasonality of the year. We see growth in many markets and it's stepping up. So I don't want to make obviously a comment about our OpEx will stay flat throughout the year, but it's optional for us. So we can choose depending on how much growth we see and how we want to support potential opportunities in growth, how to develop our OpEx going from Q1 onwards. And we will never sacrifice growth for a quarter result or performance. But yes, we have the option within us. Marc Zwartsenburg: That's very clear. And then from a cash flow perspective on the one-offs, is there any cash outflow to be expected from the one-offs still in '26? Jorge Vazquez: Yes. I mean, look, as we continue to roll out -- again, they were lower this year. I don't expect them to -- I mean, I expect them again, if anything, to exist to be lower than 2025. But remember, I also told you very clearly, from a cash allocation, this is probably one of the best -- well, we shouldn't talk about it like that. But from a return perspective, it is way below the 12 months. There is likely to be some one-offs, but things are bottoming out. It's more about continuing to roll out better ways of working and our functional target operating models. That's basically where we -- what we are focused now. Operator: The next question comes from Simon Van Oppen from Kepler Cheuvreux. Simon Van Oppen: I would like to extend on Remi's question about the Netherlands. So we saw that revenues in the Netherlands was down 7% on an organic basis against an easier comparison base, while your corporate staff was actually up by 60 people in the Netherlands. And Jorge, you mentioned increase in wage components potentially offsetting volume pressure around regulations. But how should we look at profitability in the Netherlands for 2026? And can we expect further pressure on profitability with potentially higher number of FTEs due to more administrative work around the new regulations? Jorge Vazquez: So let's -- first of all, on the Netherlands. So if you look ahead, yes, there's a big legislation change. I just told you that the first view we have is -- and remember, we're #1 here clearly. So it's where we also can add responsibility to lead the market in terms of implementation of legislation. And in that respect what we see for now is bill rates offsetting some of the volumes. We also see Zorgwerk stepping up and in growth territory. So you see a lot of things into Q1 that support growth. And from a headcount perspective, this is probably a big change, one of the biggest change we had over the years in the Netherlands. So there is a temporary ramp-up, let's say, of people to help us, basically making sure that everything is in order for our clients and for our talents. Remember, we're #1. So for many companies, we are their partner, the one partner in the Netherlands in terms of managing flexibility and contingency on talent. And in that respect, we are basically making sure that everything is ready for this particular quarter. Also take into account -- if you look at some of the one-off -- or the restructure costs that we've taken, they are primarily concentrated in Northern Europe, and, of course, that also includes the Netherlands, as we adjust to the running rate of the 7%. So we're not standing still. We're making sure that the legislation is well implemented. There's always opportunities and risks, but more important, we're also focusing on making sure that the business is balanced for 2026. Operator: The next question comes from Vasia Kotlida from Barclays. Vasiliki Kotlida: I have 2 questions. First one, you mentioned new client wins. Can you please give some color on what industries and geographies? And the second is about the January trends. These are almost flat. Is that comp related or a genuine pickup in activity from Q4 that was up minus 2%? Alexander van't Noordende: Yes. On the new client wins, a couple of exciting deals in RPO and MSP in Life Sciences and in Financial Services, primarily, I would say, in North America and a couple also here in the core of Europe. So good news there. Jorge Vazquez: Yes. On the second question on the growth rate, Vasia. If you look at Q1, I mean, Sander alluded to it, we have 50% of the markets already in Q4 in growth. So again, those markets continue to be in growth, and in many of them, even encouraging signs. Also in volume -- I mean, we are literally crossing into volume growth already. And Q4 was probably the first quarter, I would say, since Q2 2022 that we were flat in employees working. So things clearly seeming to bottom out. And we see strong momentum in the U.S. and Southern Europe. We also see a stronger or a better, I would say, exit rate in France. It's in line with market data. We just talked about the Netherlands, where we have slightly higher bill rates, and we also have Zorgwerk in growth. And in general, also, if you look at some of the more challenging markets like particularly in Q4, Belgium and Germany, let's say, the blip we saw in comparables in Q4, we now go back to the trend of Q3, so again, improving into Q1. So overall, we see supported revenue trends into Q1. Operator: The following question comes from Simon LeChipre from Jefferies. Simon LeChipre: A follow-up on gross margin. So you are pointing to top line momentum improving into Q1 and particularly in North America, which should help gross margin. But your guidance suggests gross margin being down 90 bps year-on-year in Q1, which is a sequential deterioration. It was minus 40 bps in Q4. So how do you explain this? And my follow-up question is on -- so your 3% EBIT margin floor. I mean do you expect to break it in Q1? And are you confident to maintain this level at least for the full year? Jorge Vazquez: So I mean, we don't -- Simon, we don't necessarily give guidance for a quarter. I think what the tone -- and Sander was quite clear on it, and I'm happy to confirm it from a financial perspective. We've built operational -- I mean, we can talk about adaptability in 2025. I think the year is more important than that, mainly because we've built operational gearing throughout -- let's say, for Randstad. So in terms of looking to 2026, I mean, given the current economic scenarios we see and even a range of them, I'm pretty sure we've built the ability to improve the results and profitability going forward. If I look at the gross margin in particular, I think -- again, I tried to when talking to Andy to try to break out a little bit from the fog and the mist of one quarter and the other. We had incidentals in Q4 and Q1 last year. So that kind of mixes up things a little bit. But what you see into Q1, you see still a perm environment that is more negative than we had expected. You see probably -- but okay, we cannot obviously predict that -- a very subdued FX impact. Remember, Liberation Day and a lot of the swings or the corrections we got in exchange rates happened in Q2 last year. And we see RPO a little bit negative vis-a-vis what had been throughout 2025. And this offset some of the better mix that we have. If anything, it better notch up as we go into 2026 for some of the annualization of our geo clients and specialization mix, as I explained before. Operator: Our next question comes from Konrad Zomer from ABN AMRO - ODDO BHF. Konrad Zomer: On the bill rates in the Netherlands, I understand that some of the bill rates have gone up as much as 15%, mainly due to the pension regulatory changes. What could be the time delay in terms of volumes to come down? Because if temps get more expensive, I can see why employers would be more hesitant to recruit. And also, I think the minus 0.4% in January is certainly good. But what would be the impact specifically from these regulatory changes in the Netherlands? Jorge Vazquez: Yes. So first, Konrad -- I mean, I don't want to go into, let's say, the very, very -- very detailed. But the 15% is -- it's -- I mean, I'm not -- we don't see that, so I'm not -- I think it's way -- just to be absolutely clear for everyone, that's way, way too high. I think there's 2 things happening, just to be absolutely clear. There's a pension scheme, as you very well know, the pension -- the Future Pension Act, and there's the collective labor agreement changes. And these 2 things, we don't expect them to be not even almost half of what you just -- let's say, half of what you just mentioned. And it's too early to tell what the impact will be, if any, on volumes. What I would say is the first impression is -- or the first signs that the uplift you might get from, let's say, the bill rate effect, the wage components, seems to offset some of the pressure we might have on volume. But more about that later. We don't see more than that. And it's the same with any legislation. There's always a big uproar, and in the end, things normalize into the normal level of flexibility in an economy. Operator: We have time for one last question. The question comes from Maarten Verbeek from the IDEA! Maarten Verbeek: In the third quarter, you mentioned that your digital marketplace generated EUR 4 billion in annualized revenue, and exactly the same you mentioned today. So why haven't we seen any progress quarter-on-quarter? And in addition to that, have you set yourself a target for annualized revenue, what you would like to achieve in the fourth quarter of '26? Alexander van't Noordende: Yes, good question. Well, first of all, how we -- so of course, we need to add more countries and more scope to the digital marketplaces to grow. Yes, North America grew from Q3 to Q4. But let's say, in the bigger scheme of things, that's not a massive number, as you can understand. So it's just a matter of technicalities. As I said, in 2026, we will add more markets, somewhere around 5 to 7 markets with the digital marketplace. So we will add more scope, and therefore, we'll grow. I think it's too early to put a number on that because -- I mean, you can imagine that requires work, that requires go-live. So let's not put a number on that just yet. We'll keep you updated throughout the year. Jorge Vazquez: Martin, any follow-up question? Unknown Analyst: No, thank you. That's it. Thank you. Alexander van't Noordende: Okay. With that, thank you all for joining the call. And before we wrap it up, as always, I would like to thank all our Randstad employees and our employees working for their hard work in Q4 and the hard work they're going to do in Q1, of course. And we wrap up the call here. Thank you very much.
Jonas Ström: Okay. Good morning, all, and a warm welcome to ABG Sundal Collier's Q4 results presentation. Before we kick off the presentation, I would like to mention that we will, as usually have a Q&A session after the presentation and should you want to raise a question, please use the Q&A function in Teams, and we will answer all your questions in turn. We ended the year on a high, and we are entering 2026 from a position of strength. We have continued to build momentum during the year, and we have proven our ability to deliver with market conditions in 2025 sometimes being helpful and sometimes being anything but helpful. We have continued to focus on what we can influence, namely, how we advise our clients, how we execute on our advice and our own growth strategy and how we resolve situations that arise either because of market conditions or client-specific circumstances. And we have continued to focus on ensuring our own profitability, also short term, enabling us to make long-term investments to take investment costs that will drive long-term profitability. Business-wise, we are happy to observe continued strength within our debt capital markets operations and not least within our M&A operations with record high revenues for us in 2025. Conditions in equity capital markets have gradually improved during the year and IPO activity picked up somewhat in 2025, especially in Sweden. Even though IPOs tend to be the product that is the most sensitive in our product portfolio to general volatility, either economically or politically induced, we observed that our backlog when it comes to IPOs is in a better shape entering 2026 versus 2025. We continue to improve our firm to become the Nordic investment bank of choice, the investment bank of choice for clients, talents and investors. We continue to focusing on strengthening our positions in our core operations as well as developing our business by broadening our offering to new client groups, such as private banking and alternative investments. On that note, strengthening our position, we are pleased with having succeeded in joining forces with FIH Partners in Denmark, the by far top-ranked independent financial adviser in Denmark for a decade. And we are doing that at a point in time with all-time high revenues in our current Danish operations. By continuing on this track, we are committed to our long-term targets of increasing revenue per head by at least 20% versus the 2024 level and to deliver a mid-cycle operating margin of at least 25%. So in the fourth quarter that just ended, this resulted in us if we flip to the next slide, looking at the numbers, please. Delivering revenue growth of 15% to NOK 720 million. This growth is a result of, especially in the quarter, a strength in our M&A operations. But looking at the entire year, we have had solid contributions from all geographies and product areas as well as sectors. In the full year, we ended up with revenues of NOK 2.172 billion, a top line growth of 12% with, as alluded to earlier, broad contribution from all geographies with Denmark delivering all-time higher revenues and solid growth from both Sweden and Norway as well. Continuing with our operating margin that increased with 2 percentage points from 21% to 23%. That includes -- the 23% includes costs for setting up our new business initiatives, private banking and alternative investments and that had a negative effect on the operating margin of some 3 percentage points in 2025 versus some 2 percentage points in 2024. We delivered earnings per share at NOK 0.26 in the quarter, up from NOK 0.21, an increase of 24%, highlighting the operational leverage in our business. Year-to-date, our EPS ended up at NOK 0.66 versus NOK 0.56 on a fully diluted basis last year, including the investments once again in our new business initiative, having a negative impact on EPS by NOK 0.07 this year and NOK 0.06 last year, respectively. So let's continue looking at the macro and market backdrop. The markets continue to be supported by low volatility in the quarter, even though we had some spikes in the quarter with VIX sitting well above the 20 level a couple of times, introducing short-term hesitation amongst the investor community. But we are at a low level, and we feel that the conditions have stabilized. Credit conditions have also continued to improve. Credit spreads, as illustrated on the right-hand side of this chart, continue to tighten, and we have seen the very strong conditions in debt capital markets in Q4 continuing into the start of this year. So with strong credit conditions, low volatility and a market that seems to be very, very reluctant to take everything that is stated from a political point of view. As granted, we feel that we have stronger conditions for us to deliver looking at the market situation 2026 versus 2025. Continuing with the next slide and looking at how our main markets within Investment Banking have performed in the Nordics during the year and the last couple of quarters and starting off with equity capital markets. The headline number is, of course, impressive with an increase of 77% to NOK 139 billion in total volumes in the fourth quarter, 2025. This is slightly distorted by one or two large transactions and the biggest one being the DKK 60 billion rights issue in Orsted in Q4, a transaction that is typically not part of our addressable market. Excluding that and maybe one other one-off, so to speak, transaction, ECM volumes were actually down both in the quarter and full year, as you can see, excluding these rights issues on the left-hand side of the chart. Debt capital markets on the contrary, the headline number is very representative for actual underlying performance in markets being very, very strong. 2025 was a record year in terms of volumes overall. And we are pleased with our own position within DCM, strengthening our position in Sweden to become the #1 player in DCM high-yield 2025. The uptick and recovery seen from 2021 is, to some extent, of course, cyclical, but not only that, it is a structural growth we are witnessing. The very vibrant Nordic DCM market has attracted many non-Nordic issuers as well looking to tap into the opportunities offered here. And finally, looking at the M&A market, that continues to be, well, stable or muted depending on how you want to look at it. In the absence of the expected pickup in activity levels, such as structured processes, not the bilateral ones we've seen dominating the arena so far, number of transactions is still rather muted. Volumes actually down by 5% in the quarter year-on-year. And more or less flat, up by 4% full year -- over full year last year. Okay. Moving over, looking to the next slide on how we performed against this backdrop. In our Corporate Financing operations, we delivered revenues at NOK 736 million in the full year, which is down by 7% versus 2024. As you can see on the right-hand side of this slide, we closed numerous transactions during the quarter with a widespread between both ECM and DCM sectors and geographies. A couple of IPOs during the quarter, one in India for Orkla and one in Norway and lots of secondary placings, our DCM operation was highly active, as you can see in the quarter with quite a few large transactions completed. Moving over to the next slide, please, looking at how we did in our M&A business. Well, we delivered what can be, I'd say, best described as a stunning set of numbers. Revenue accelerated during the year, with Q4 ending up at NOK 334 million, up by 55% and versus Q4 last year, and we reached a revenue level of NOK 829 million for the full year, which is up by 44%. This is by far a record in terms of M&A revenues for us, outperforming the general activity in the market. And as you can see on the right-hand side of this slide, we closed quite a few high-profile transactions during the quarter, yet again, with a decent spread between sectors and contribution from all geographies. Let's continue with looking at our Brokerage and Research operations. The headline number in terms of revenues has been remarkably steady over the last 4 or 5 years, with revenues around the NOK 600 million mark. We actually reached above the 2021 post-MiFID world record level with NOK 606 million in revenues, which is up by 7% year-on-year. But looking under the hood, there are differences, as always, between our different desks, locations and products, with Norway equity sales yet again, delivering impressive growth, not least from new brokerage clients and I'd say, stability elsewhere. I would also like to highlight the strong performance within our Research department. We cover some 400 companies, which is amongst the highest of all Nordic investment banks, which is crucial for our ability to deliver on both Brokerage and IPOs over time, of course. In the latest Prospera survey, we achieved top 3 positions in 23 sectors, including the #1 position in important sectors such as Bank and Financials in Sweden, and Shipping, Seafood, Materials, Real Estate and Construction in Norway. Well done, all. Okay. So over to the next slide, please, looking at our headcount that has been rather or very stable, I would say, over the last couple of years. We have a continued focus on growth of front staff. We have in these numbers included our new business initiatives of which private banking is the biggest one, which is in line with our strategy. But the average year-to-date of 332 FTEs is basically flat versus same period last year. We are ready to grow that number now. We have, meanwhile, slimmed -- continued to slim our Support and Operations division slightly, and we will continue to focus on leveraging our well-invested platform further, not least as illustrated by the acquisition of FIH in Denmark. And as you can see on the right-hand side of this slide, we have come a long way in our target of improving revenue per head by at least 20% versus 2024. The task ahead now is to keep and improved that level slightly while increasing number of FTEs, mainly on front operations. That is the most important definition for us when it comes to continued profitable growth. Okay. Let's continue looking at our operating cost level. That increased by 10% to NOK 1.681 billion, which is an increase by, yes, 10% basically. While we have kept the compensation to revenue ratio steady around 55-plus percent, the increased profitability obviously is the main driver for the increase in costs due to our variable remuneration model. IT systems, where inflation comes with a bit of a lag, increased costs for IT systems and increased activity levels on our front operation contributes further to that slight cost increase, as do our investments in our new ventures, even though the year-on-year effect is marginal. But looking at our underlying fixed cost base in Q4 eliminating the still negative effects from the weak and -- weaker NOK, especially in relation to SEK, the underlying cost base is flat year-on-year. So let's flip to the next slide and talk about -- a bit about our capitalization and the proposed dividend, which is NOK 0.55 per share. That proposal reflects our commitment to distribute excess capital back to shareholders through cash dividends and buybacks. It should be noted that the core capital effect from the acquisition of FIH, the goodwill effect, is some NOK 100 million or NOK 0.18 per diluted share. NOK 0.55 in dividend allows for both a healthy cash distribution and buybacks while maintaining solid capitalization, as you can see on the right-hand side of this graph. So before we conclude, I would like to draw your attention to our acquisition of FIH Partners. By joining forces with FIH, we will significantly strengthen our position in Denmark. We are joining forces with a firm that is #1 within Danish M&A and also has been ranked as the #1 financial adviser in Prospera for basically the last decade. This is a firm that has closed over 200 transactions with some EUR 110 billion in deal value. We are welcoming some 27 professionals to the ABG family with a combined plus 200 years of experience. If we continue with the next slide, yes, we are joining forces also with FIH at a point in time where, as I alluded to earlier, we are delivering our best year ever in Denmark. From our combined #1 position in Denmark, we can now offer a much broader product portfolio, such as bonds or IPOs, for instance, to a larger client group. We are convinced we are a perfect fit with both of us having a strong partnership culture and eagerness to win. We take nothing for granted, but our own ability to deliver top-notch services and advice to our clients as well as potential clients. By joining forces by -- with FIH, our clear ambition is to fortify the #1 position within Danish M&A and build a market-leading position within ECM and DCM. This is exactly in line with our strategic ambitions to strengthen our positions in core markets and to leverage our already well-invested platform. So with that, I'd like to summarize the key takeaways from Q4 and the full year. We had a strong year and a strong quarter, not least. In the quarter, revenue is up by 15% and 12% for the full year. This year, the main driver behind our growth, both in the quarter and full year is our remarkably strong M&A operations. Having said that, ECM conditions improved during the year and the IPO window reopened, particularly in Sweden. DCM continued on a high level, and we kept our strong position overall in the Nordic high-yield segment. Brokerage and Research continued to deliver stable and solid revenues throughout the year. And we demonstrated our ability to execute on our strategy with the acquisition of FIH, at the same time as ABG Denmark delivered its best year ever. The development over the last couple of years with better contribution and stronger positions across all geographies has strengthened our diversified business model further. So with that, I'd like to open up the floor for questions should there be any. Operator: Yes, we have received one. That is, what is your current pipeline visibility? Jonas Ström: Yes, that's a very good question. Pipeline is one thing in terms of gross numbers, the absolute number. Quality is another thing. And I think the best way to measure quality, high versus low, is to look at how diversified the pipeline is. Diversified in terms of products, sectors and geographies. And from that point of view, I'd say that we are in a better shape pipeline-wise than in a long time. As always, the obvious disclaimer is that market conditions short term can obviously be a bit of an obstacle. But once again, having such a diversified pipeline entering 2026 makes me comfortable we are on a continued path to growth. Operator: I believe that was it from the audience today. Jonas Ström: Okay. Yours truly and Kristian Fyksen, our CEO in Norway, are ready to take on any questions, should you have any follow-ups. We will be talking to media and we stuck short term, but please do not hesitate to reach out. I'd suggest that you contact Anna Tropp if you have any further follow-ups, and we will try to revert as soon as possible. Thank you for tuning in this morning.
Operator: Hello. Welcome to the Alfen 2025 Full Year Results Conference Call hosted by Michael Colijn, CEO; Onno Krap, CFO. [Operator Instructions] I would like to now hand the call over to Michael Colijn. Mr. Colijn, please go ahead. Michael Colijn: Thank you, Maria. Good morning, and welcome to Alfen's Full Year 2025 Earnings Call. Thank you all for taking the time to join us today. I'm Michael Colijn, Chief Executive of Alfen, and I'm delighted to be leading this trading update with you today. Joining me is Onno Krap, our CFO, who will talk you through our financial performance later in this presentation. Today's agenda is structured to give you a comprehensive view of our 2025 performance and our path forward. I'll begin with the highlights of 2025. We'll then dive into each of our 3 business lines. Onno will follow with our full year 2025 financials. I'll then outline our strategy update. We'll conclude with our 2026 outlook before opening the floor for your questions during our Q&A session. 2025 was a challenging year for Alfen. At the same time, our focus on cost control and operational discipline allowed us to maintain a stable adjusted EBITDA margin at 5.8% of revenue. This highlights the resilience of our business in a difficult market environment. Since joining Alfen 4 months ago, I spent significant time getting to know our organization's employees and partners, engaging with key customers, major supply chain partners and our investors. The past period has reinforced my view that Alfen is a company with potential. Alfen's products and services are crucial for the European energy independence and energy transition. Looking ahead to 2026 and 2027, we are focused on translating Alfen's strong strategic position into performance. To capture our strategic position, Alfen has embarked on company-wide transformation to align organizational capabilities with the revised strategic focus of customer centricity, product excellence and digitalization. This transformation is essential as we work to navigate current market conditions and position Alfen to better capture future growth opportunities. Looking ahead to 2026, this will be a transformational year in which Alfen repositions for profitable growth. We expect revenue to be between EUR 435 million and EUR 475 million with an adjusted EBITDA margin between 4% and 7%, while maintaining CapEx below 4% of revenue. I will dive deeper into our transformation and 2026 outlook later in this webcast. Let me turn to our Smart Grid Solutions business. In 2025, SGS generated revenue of EUR 189 million compared to 2024 revenue of EUR 210 million. Market conditions remained mixed throughout 2025 with headwinds in smart grid solutions caused by labor shortages, regulatory constraints and grid congestion, while underlying demand drivers linked to electrification remained intact. Activity increasingly centered on battery energy storage integration, transport distribution stations and the rollout of SF6 free substations in preparation for European regulation. We maintained a balanced revenue mix with 70% of revenue generated by high-volume transformer substation sales to grid operators and 30% by project sales. Our adjusted gross margin remained stable at 22.4% compared to 22.8% in 2024. Looking ahead, we are starting to see regulatory tailwinds that will benefit both the product and project smart grid business over time. For example, the European grid package published in December and the Dutch Environmental and Planning Act will contribute to increasing the speed of permitting and the availability of capacity on the transmission grid. Installation capacity will also be increased by the scaling plan 2030 published in November 2025, where Dutch DSOs, contractors and government launched a plan to accelerate grid infrastructure deployment. And Alfen is prepared to capture a significant part of that growth. Our EV charging business faced significant headwinds in 2025, with revenue ending at EUR 120 million compared to EUR 153 million in 2024. This decline was driven by increased competition in the EV charging home segment and reduced installation rates in the public segment. Our adjusted gross margin for EV charging improved significantly to 43.4% compared to an adjusted margin of 36.1% in 2024, primarily due to lower component prices. A significant achievement at the end of 2025 was the introduction of 2 innovative chargers, the Eve Single Plus and Eve Double Plus. These new products feature vehicle-to-grid ready capabilities, compatibility with a wide range of vehicle brands and energy systems, smart charging capabilities with OCPP 2.x compatibility, ancillary services for charge point operators, reduced installation costs for charging plaza applications and the secure ad-hoc payment options by dynamic QR codes. Over 2025, the battery electric vehicle market in the EU regained momentum with high double-digit growth rates in car registrations year-on-year across the EU. Importantly, European Union legislation continues to confirm the electric future with both short and midterm accelerators. Even though the European Commission has lowered several 2035 CO2 tailpipe emission reduction targets for cars, this still shows the future of mobility is electric. New initiatives such as greening corporate fleets and the automotive omnibus further support market development. We also see that market uptake will be increasingly driven by economic and customer preferences, such as the superior total cost of ownership and performance compared to internal combustion engine vehicles. These economic and customer preference factors are overtaking the importance of regulation in driving EV adoption. Our Energy Storage Systems business demonstrated resilience in 2025 with increasing revenue by 1.6% to EUR 125.6 million compared to EUR 123.7 million in 2024. This growth occurred despite market headwinds as energy storage system prices kept falling sharply in 2025. The gross margin for energy storage system was 22% in 2025 compared to 29% in '24. This was due to revenue recognition timing effects and an increased share of large-scale battery projects with a lower margin. Despite these challenging market conditions, we achieved several significant commercial wins during the year, and I give you 2 examples. For NOP Agrowind, Alfen will be doing the full engineering, procurement and construction scope for a 49-megawatt, 196-megawatt hour battery electric system, including the grid integration. Additionally, Alfen will be manufacturing 56 Mobile X units for Greener Power, Europe's largest temporary battery fleet. On the innovation front, we launched a new inverter design, significantly reducing noise levels and making the system more suitable for urban and other noise-sensitive environments. This development strengthens our competitive position as energy storage systems increasingly move into densely populated areas where noise considerations are critical. The backlog for energy storage systems for 2026 revenue was EUR 122 million at the end of 2025. This positions us well for 2026, and we still expect to book some orders in the first half of the year that will contribute to revenue in 2026. I now hand over to Onno to walk us through the 2025 financial performance. Onno? Onno Krap: Thank you, Michael. Our revenue in 2025 was backloaded towards Q4 due to a number of end of the year projects that were commissioned. We delivered revenue of EUR 120.1 million, representing a 12% decline compared to EUR 135.7 million in Q4 2024. This year-on-year Q4 decline was driven by lower EV charging revenues and by lower revenues in smart grid solutions. Smart grid solutions revenues in the Q4 2024 comparison base were higher than normal due to the production catch-up to recover from lower output early in 2024. Our adjusted gross margin for Q4 2025 remains stable, 24% of revenue in Q4 2025 compared to 25% of revenue in Q4 2024. The lower adjusted gross margin was driven by lower margin in energy storage solutions due to revenue recognition timing effects and a lower margin in smart grid solutions due to a relatively high share of transport distribution stations delivered with a lower margin compared to private domain stations. This gross margin effect was partly offset by a higher gross margin in EV charging due to lower component prices. Adjusted gross margin in Q4 2025 was lower than earlier in the year due to a business line and mix effect, relatively more revenue in ESS, relatively more. We also delivered a number of mid-voltage distribution stations at slightly lower gross margins. Adjusted EBITDA for Q4 2025 was 4.6% versus 5.7% in Q4 2024. This reduction was driven by a margin as well as a deleveraging effect. Looking at our full year 2025 income statement, I'll walk you through the key financial metrics and how they compare to our 2024 performance. Starting with revenue, we generated EUR 435.6 million in 2025, which leaves us at the lower end of our updated revenue guidance of EUR 430 million to EUR 480 million, as we already indicated during our Q3 earnings release. The decline represents a 10% decrease from EUR 487.6 million in 2024. Our gross margin for 2025 was EUR 124.9 million, representing 28.7% of revenue compared to EUR 115.4 million or 23.7% of revenue in 2024. The significant improvement in gross margin percentage was mainly driven by a large amount of one-off costs in 2024, totaling to EUR 24 million, among others, a provision for the moisture issue as well as a provision of obsolete EV charging inventory. When we look at our adjusted gross margin, which provides a clear view of our underlying operational performance, we see it remained relatively stable at 28.1% in 2025 compared to 28.6% in 2024. To calculate our adjusted gross margin, we exclude a provision of EUR 1.8 million in obsolete inventory for EV charging components, offset by a EUR 4.1 million reduction of the moisture issue provision. Moving to our operational costs. Personnel costs decreased significantly by 15.2% to EUR 73.8 million in 2025 from EUR 87.1 million in 2024. Our adjusted personnel costs exclude EUR 1 million in restructuring costs and some minor other adjustments. Other operating expenses also declined meaningfully by 21.1% to EUR 25.7 million in 2025 compared to EUR 32.5 million in 2024. Our adjusted operating expenses exclude EUR 1.2 million in one-off transformation costs for R&D and EUR 0.8 million in share-based payment expenses. In the next slide, I will explain in more detail how our adjusted operational expense have changed as a result of our cost control efforts and rightsizing. EBITDA improved from a negative EUR 4.2 million to a positive EUR 24.8 million, mainly driven by the absence of previously mentioned significant one-off items in 2024. Adjusted EBITDA remained stable at 5.8% of revenue, while dropping in absolute terms from EUR 28.5 million to EUR 25.5 million. Adjusted net profit remained stable at EUR 3.2 million. Throughout 2025, we implemented significant cost reduction measures. These actions were necessary to align our cost structure with revenue developments. Total personnel expenses and operational costs were reduced by 16.8%, our most substantial cost reduction in absolute terms came through organizational rightsizing, where we reduced our workforce from 1,053 FTEs at the end of 2024 to 923 FTEs by the end of 2025. We achieved meaningful reductions in other operational expenses, which decreased by 21.1% to EUR 26 million in 2025. These savings came from multiple initiatives across the organization. Moving forward, we will continue to maintain this disciplined cost and efficiency approach. Our net debt position continued to improve throughout 2025, demonstrating our commitment to maintaining a healthy balance sheet. Looking at the most important balance sheet movements. Current assets decreased by EUR 46.2 million, driven by further inventory reductions and a reduction of trade receivables as our end of year 2024 position was higher than normal on higher volumes of substations towards year-end and a number of battery outstanding receivables. On the liability side, noncurrent liabilities decreased by EUR 6.8 million, caused by a reduction on provisions and scheduled repayments of borrowings, while current liabilities decreased by EUR 44 million due to a reduction of trade payables as we paid our year-end bills. Our net debt position improved further from EUR 32.7 million at the end of 2024 to EUR 20.7 million at the end of 2025. Operating cash flow was EUR 32.5 million positive in 2025 compared to EUR 55.8 million in 2024. Operating cash flow was highly influenced by the inventory reductions in 2024 as well as in 2025. Further, we remain well within our bank covenant requirements. Our net debt to adjusted EBITDA ratio stayed below the maximum threshold of 3:1 as stipulated in our banking agreements. This improved net debt position gives us a solid financial foundation as we navigate through 2026 transformational phase. Our working capital position showed significant improvements throughout 2025, declining from EUR 92 million in 2024 to EUR 77 million at the end of 2025, reflecting our disciplined approach to inventory management and improvements in AR position. The most notable improvement came from our inventory reduction efforts. Between 2023 and 2025, we reduced overall stock levels and strategic down payment by 45%, equivalent to EUR 79 million. In 2025 alone, we achieved a substantial 20% decrease in inventories, representing EUR 20 million in reductions. This was driven by several key factors, selling a number of long-term energy storage inventory items and continuing to sell EV and battery charging inventory. Moving forward, we will continue to focus on further bringing down EV charging inventories to optimize our working capital position. Trade receivables decreased significantly in 2025 by EUR 32.9 million, mainly reflecting the normalization of elevated receivable levels at the end of 2024. These higher levels were driven by the ramp-up in volumes with grid operators in the second half of 2024, following the resolution of the moisture issue that had affected the Smart Grid Solutions business. On the payable side, our trade payables was reduced by EUR 40.9 million as certain larger accounts payable position were due towards the end of the year. The effect of our energy storage business on our working capital position continues to be positive. This continued positive impact is dependent on a continuous flow of energy storage contracts incoming for which prepayments are due. Overall, the working capital improvements contributed meaningfully to our positive operating cash flow of EUR 32.5 million in 2025. I now hand over to Michael Colijn, who will walk you through the strategy update and outlook. Michael Colijn: Thank you, Onno. When we look at the energy transition today, one thing becomes very clear. The ideal solutions are those that are cybersecure, easy to deploy and compact. And the reason for that lies in the underlying market trends that are shaping demand across the sector. First, the trend of electrification continues and is now combined with the need for energy security. Geopolitical tensions remind us that independent and cybersecure infrastructure is not optional. It is essential. This means customers are increasingly demanding electricity systems that are strengthened, controlled locally and protected against cyber threats. Second, we continue to integrate more renewables, and that push is decentralizing the grid. As solar and wind capacity grow, we need smarter grid connections and energy storage to close the gap between moments of high generation and high demand. But these trends introduce new challenges. We see rising grid congestion driven by electrification outpacing the expansion of the grid infrastructure. This creates pressure on our customers to find solutions that reduce or avoid the need for new grid connections. As a result, demand is growing for smarter energy assets. And finally, we are seeing execution constraints in the downstream value chain. Permitting cycles are long, qualified labor is limited and space is often scarce. This puts a premium on compact systems that are easy to deploy. Our strategy and our portfolio are best designed exactly to address these needs. Everything we do starts with our purpose, securing the electricity needed to keep life happening every day, everywhere. Today, energy security is more critical than ever. Our customers rely on us because our products must always be safe, reliable and trusted, especially as electricity is increasingly the backbone of mobility, communication, heating and industry. But being reliable isn't enough. We have to deeply understand our customers, not just what they ask for, but what they actually need to operate, grow and stay resilient in a world that is rapidly changing. Anticipating those needs is what sets us apart. And the role we play goes far beyond the customer relationship. Electricity is at the heart of society because when something goes wrong, when the lights go out or systems fail, households, businesses and entire communities feel the impact immediately. We, as Alfen, exist to prevent that. We believe deeply in the energy transition, and we believe in keeping electricity safe and reliable. And we believe in growing our business so that we can deliver reliable energy wherever and whenever society needs it. That sense of responsibility has shaped us for decades, and it will continue to guide us as we transform for the future. We take sustainability as a given. When we look at the environmental pillar of ESG, we have SBTi validated CO2 reduction targets and have achieved strong CO2 reduction across Scope 1, 2 and 3 in 2025. We are even on track to meet our 2030 SBTi validated target for Scope 1 and 2 already in 2026, ahead of time. On the social dimension, we're committed to being a responsible employer. For example, Alfen trains new technical personnel through the Alfen Academy. From a governance perspective, we maintain the highest standards of business ethics, transparency and accountability, and we are proud to be able to say that in 2025, there were no violations or irregularities reported on, for instance, the code of conduct. These efforts are also externally recognized as we are ranked in the top ninth percentile by the 2025 Sustainalytics rating. Let us now dive into what Alfen offers at a glance. Across our 3 business lines, we provide end-to-end solutions that are designed, engineered and built in Europe, supported by our own R&D, production, project management and service organization. In smart grid solutions, we deliver distribution substations and grid infrastructure that help operators strengthen the grid and enable electrification. Customers choose us for reliability, compact design, ease of deployment and integrated functionality. In EV charging, we offer highly reliable AC chargers for home, business and public locations with strong interoperability, smart charging capabilities and remote service built in. Our focus is on reliability, connectivity and ease of installation. And in energy storage systems, we provide multi-megawatt stationary solutions and mobile storage systems that help customers manage limited grid capacity, integrate renewables and optimize energy use. Here, we win on end-to-end service, local grid expertise and performance guarantees. Together, these business lines give us a diversified complementary yet resilient offering, one that directly responds to the needs of the market. Alfen operates across Europe with our headquarters and primary manufacturing facilities located in the Netherlands. We have established a strong presence in key European markets with our core markets being the Netherlands, Germany, Belgium, France and the Nordic countries. We build scale by growing with our customers. As they expand, we expand with them. For example, in the United Kingdom, we followed our battery electric storage systems. Local presence is core to our model. It allows us to serve customers with speed, high quality and deep market understanding. Today, we already operate with local sales and service teams across many European countries, and that network continues to grow. Each new country we enter often starts with one business line, but that local presence becomes a stepping stone to build out the next, especially in regions such as Southern Europe. This allows us to grow in a disciplined, scalable way. And once we achieve overlap between our business lines in the market, we unlock a major advantage, the ability to offer integrated solutions, for example, across Benelux, Germany and the Nordics. This European footprint, combined with our local depth, positions us strongly to support the energy transition wherever our customers need. Looking across our 3 business lines, we see sustained strong growth. Starting with smart grid solutions, we see increased demand from grid operators who are under pressure to expand and strengthen grid infrastructure to accommodate electrification. In the private domain, we observed increasing demand in the key segments such as fast charging, commercial and industrial storage, which are illustrative for the broader market environment. Also in EV charging and energy storage, we continue to see strong sustained double-digit growth across Europe. On the EV charging side, the number of installed charge point keeps rising as electric vehicles become more affordable and increasingly attractive for consumers. In energy storage, growth is even steeper. As more renewables enter the system, the need for storage to balance the grid increases rapidly. These long-term views reaffirm that Alfen is present in the right markets. To capture these growth opportunities, we are embarking on a comprehensive transformation. The goal of this transformation is threefold: to get closer to our customers, to achieve product excellence and to further digitalize our offering. Our transformation is guided by 4 core principles that will shape every decision we make and every initiative we undertake. The first of these 4 is total customer confidence. We want to build complete trust by being reliable, responsive and locally present across Europe, so we retain customers for the long-term and grow with them. The second is perfect product foundations. This means consistently delivering high-quality products that meet customer needs today and anticipate their needs tomorrow while optimizing the total cost of ownership. The third is smart services innovation. We will add more value to our customers through bundled, relevant and dependable solutions, enabling a step change in how we support them. And finally, a fighting fit model. We will evolve our structures and ways of working to enable the aforementioned 3 principles and to ensure we operate safely and effectively as we scale. These 4 principles define how we will transform and how we will position our company for the next phase of growth. Let me provide a couple of concrete examples of how these 4 principles will translate into action across our organization. For total customer confidence, we're building out 24/7 response capability and increasing our local-for-local presence. Under perfect product foundations, we're adopting a more networked approach to engineering and moving to modular, scalable software development. For smart services innovation, we're investing in remote monitoring and predictive maintenance, and we're equipping our field teams with remote diagnostics to resolve issues quickly. And within our fighting fit model, we're implementing a new operating model with clearer P&L accountability, and we're optimizing end-to-end processes within each business unit. For every business unit, we have developed a strategy that will guide commercial activity, European expansion and product and digital solution development. In smart grid solutions, we are concentrating on the 5 strongest growth segments, including public networks, fast charging, logistics, C&I sites and rail with a more proactive market outreach. We are also expanding in Europe by leveraging our existing relationships in private segment grid solutions. Across all markets, we will continue to differentiate through reliability, compactness, ease of deployment and our turnkey integrated offering. In EV charging, we continue to focus on AC charging for the home, business and public segments. Towards the future, we are simplifying the portfolio from 5 to 3 AC charger types to reduce cost and complexity while continuing to stand out with reliability, smart charging features, interoperability and strong remote aftersales support. Geographically, we will expand our core markets into Italy, Spain, Portugal and plan for re-entry into the U.K. And in energy storage systems, we are increasing commercial efforts in both utility scale and mobile solutions and further expanding into fast-growing C&I segments. We will prioritize our existing core countries with selective expansion based on clear criteria. Our edge remains our end-to-end service capability, local grid expertise, performance guarantees and particularly in mobile, our interoperability and plug-and-play peak shaving functionality. Together, these strategies give each business unit a sharp commercial focus while ensuring we differentiate through reliability, innovation and local customer relevance across Europe. As part of our smart services innovation, we are strengthening and expanding our digital solutions across all business units to improve performance, efficiency and customer experience. In smart grid solutions, customers can already configure substations directly through our webshop, influencing production planning in real time. And we are developing the station of the future, integrating predictive maintenance and remote connectivity into transformer substations. In EV charging, we are launching 2 major digital upgrades, a new mobile installer app that reduces on-site installation time by up to 90% and our new EVE control platform, which will provide advanced asset management, full remote service and simpler configuration of chargers. And in the battery energy storage, TheBattery Connect platform gives customers full visibility and control over their systems. It processes massive volumes of data in real time, enabling continuous optimization and fast reactions to any system alerts. These digital solutions are already creating value today, and they will become an even stronger driver of reliability, uptime and customer satisfaction as we scale. To support our transformation and accelerate our execution, we will adopt a business unit structure. Each business unit will be led by a dedicated business unit director. This structure brings several advantages. First, it moves us closer to the customer. More of our organization will be directly connected to customer-facing roles, giving us faster insights and quicker responses. Second, it allows for faster strategy execution. Strategic direction can be translated more directly into team priorities without unnecessary steps or complexity. Third, it increases accountability. Each BU will own its business outcomes end-to-end below the management Board, ensuring clear responsibilities and stronger performance management. And finally, it reflects the different dynamics in each BU, whether it's product versus project environments, commercial go-to-market approaches or operational requirements. At the same time, we will continue to leverage shared support functions and other synergies. This gives us the best of both worlds, greater speed and customer focus within each BU while still capturing synergies across the company. To fully enable our strategy, we need to strengthen the capabilities of our organization. By Q2 2026, we will transform both the skeleton and the nervous system of the company, the structure that supports how we work and the culture that guides how we behave. First, on the structural side, the skeleton, while maintaining overall headcount, we will reallocate capacity towards the capabilities that are critical for our commercial growth strategy. This means strengthening areas such as digital solutions, project management and service. As part of this shift, we do anticipate reductions in some areas and increases in others. And to support this transition, we will take a restructuring provision of approximately EUR 4.5 million in 2026. Second, on the cultural side, the nervous system. We will embed a company-wide culture focused on customer centricity. We have defined and will roll out consistent leadership behaviors across the organization, and we will clarify roles and accountabilities to ensure everyone knows what they own and how to contribute. Together, these changes will help us get closer to the customer, improve reliability and further digitalize our offering. Looking ahead to 2026, this will be a transformational year for Alfen. We recognize that before we can accelerate growth, we must first transform our operations and complete the organizational changes necessary to position us for sustainable success. This year will be about building the foundation for top line growth. For 2026, we are guiding revenue between EUR 435 million and EUR 475 million. Let me provide some context on how we see each business unit contributing to this guidance. The 2026 backlog for energy storage systems is at EUR 122 million, and we still expect to book several orders that will lead to revenue in 2026. Smart grid solutions revenue is expected to increase both in the project business as well as in the product business. For 2026, we expect a decline in EV charging segment, while the product portfolio is being renewed and competitive pressure persists. Our adjusted EBITDA margin guidance for 2026 is between 4% and 7%, and our CapEx is expected to remain below 4% of revenue. Looking beyond 2026, our ambition for 2027 is to return to profitable growth. By then, we expect our transformed organization, strengthened commercial strategies and enhanced digital capabilities to position us to capture significant growth opportunities across all 3 business lines. These investments we are making in 2026 are specifically designed to establish Alfen as the partner of choice for customers across Europe's energy transition. Thank you very much. We now open the floor for questions from our analysts. Operator: [Operator Instructions] Our first question comes from Nikita Papaccio. Nikita Lal: The first one would be on EV charging inventory. Could you give us any indication where are you currently? And what is the targeted level? The second one is on the decision to re-enter the U.K. in the charging business after exiting this, I think, last year. Just wanted to understand what has changed the situation in the U.K. What do you expect there? And what might be the cost to re-enter the country again? And the third one on the timing of your restructuring provision of the EUR 4.5 million. The organizational structure should change in Q2. Should we expect the provision to be booked in Q2 as well? Onno Krap: Nikita, this is Onno. Thanks for the questions. On EV charging inventory, we are currently -- at the end of 2025, we are at EUR 28.8 million in inventory for EV charging. The expectation is that there's around EUR 10 million of excess inventory still in there, and that will be brought down over the, let's say, next 2 to 3 years. We won't bring that down full year 2026 yet. So we need a little bit longer for that. Michael Colijn: On your second question regarding the U.K. re-entry plan for EV charging. I believe it was absolutely the right decision for the company to reduce its number of geographies last year when it had to realign and strengthen its core while reducing headcount. In our revision of our strategy for this year, we looked at how we would enter the U.K. and with what purpose. And there are 2 significant differences between the way we were operating prior to last year's withdrawal. The first is that we've taken a local-for-local approach, building teams in countries that can understand regulation, be close to the customer and really support the business there, both in terms of sales, service and project management. And the second, especially relevant for the U.K., is that we grow with our customers. We have several customers that have indicated with whom we're doing business already in different geographies that they wish to expand their portfolio with us into the U.K., and we are looking to do that together with them, thereby reducing risk on market traction, reducing operational expense to trigger the market and allowing us to grow neatly next to our customers. Onno Krap: I will take the question on restructuring. The expectation is to book most of the restructuring provision in Q2. It could be that a portion will still move into Q3. And the expectation is also that the cash outflow is around -- is most likely in Q3. Operator: Our next question comes from Ruben Devos from Kepler Cheuvreux. Ruben Devos: The first one is just on the gross margins. I think if my math is a bit right that the Q4 adjusted gross margin came in around 24%. I think in the rest of the year in '25, you were around 29% to 30%. So I think you've talked about mix effects from more storage revenue and a shift towards these lower-margin transport distribution stations in smart grids. So if the '26 sales guidance assumes growth in both storage and in smart grids, should we expect that same mix of Q4 to somewhat persist throughout the year? That's the first question. Onno Krap: Your analysis is right. Those are the main drivers for the somewhat lower margin in Q4. And also, if you take a look at the guidance that we have given by product line or by business unit, then SGS somewhat higher, battery somewhat higher and EV charging somewhat lower. That does mean something -- that does mean that our average margin will come down in 2026, and that's also reflected in the guidance that we have given on the EBITDA margin. Ruben Devos: Okay. And just to further build on that, I think you also talked a bit about '27. You're guiding for a year-on-year improvement in revenue and adjusted EBITDA margin. I think not too long ago, you were sort of talking about getting towards a low double-digit EBITDA margin in the mid-term. So maybe could you help us understand what a realistic 2027 exit rate would look like? Is low double-digit still on the table at this point as a mid-term objective? Or do you have a bit of a new look on that? Onno Krap: Yes. I don't really want to go beyond the guidance that we have been given so far. So the guidance for 2027 is moving in the direction of profitable growth and to -- and we're giving that guidance for a reason, and I don't want to basically go beyond that, and I'll mention any numbers on that. Ruben Devos: Okay. Fair enough. Then just a final one on the backlog of energy storage. I think it was a EUR 127 million, of which EUR 122 million for '26 delivery. That looks already like a strong coverage, right, relative to the sales you realized last year. I think you also talked about project execution timing that would drive the conversion. So basically, my question is how much sort of contingency is built into the guidance for this year for potential project delays? And what is -- if 1 or 2 larger projects slip into '27, how impactful could that be? Onno Krap: Yes. Good question. So -- but we -- if we take -- currently taking a look at the backlog that we already have and taking a look at the planning of the backlog from an execution and revenue recognition perspective, then we do see that the revenue is somewhat front-end loaded. So that basically gives some confidence that we have -- we have some cushion if something gets delayed, it gets delayed to Q4 and not delayed into 2027. And with respect to the orders that we still expect basically on top of the EUR 122 million that will lead to revenue in 2026, they have to come in relatively soon. So let's say, within the next 2 months, and that has to do with the fact that we do see increasing lead times of some key components, sometimes even going up to 40 weeks. So you can imagine that if we get an order in, let's say, in April with lead times of more than 40 weeks, it's difficult to realize those still in 2026. So timing is of the essence here also to book the initial orders to realize revenue in 2026. Operator: The next question comes from Jeremy Kincaid from Lanschot Kempen. Jeremy Kincaid: I have 3 questions, but let's start with the first one. On your EV charging guidance, you're obviously talking to continued competitive pressure and a decline from '25 to '26. But obviously, this year, you've launched some new products with -- which have new innovations. And I think I also read that you undertook a pricing reset. And so even after these steps, you're still going to be losing market share. So I suppose my question is, what is it going to take for you to stabilize market share or even grow? Michael Colijn: Thank you for the question. I think the steps that we are taking in the EV charging space are threefold. First of all, there's ongoing simplification of the portfolio, whereby the features inside the chargers are being designed to meet the latest expectations of our customers in terms of energy management, load balancing, VTG capability. And the other part is that each charger will be made more suitable across a larger number of geographies. The third element, which is playing on the minds of our customers is in terms of uptime, ease of installation, ease of use and really ensuring that we are best-in-class once again, which we were for a long, long time, and we did not pay enough attention to that in the last few years, and we've now launched the development of these new chargers, and we expect them to have the traction that we need. The initial response from our key customers is very positive, and we look forward to regaining traction with them during this year. Jeremy Kincaid: Okay, sure. And then on smart grid solutions, you're also talking to a broader international expansion. I think in the past, you've talked to the fact that you're reluctant to do that because grid networks are different. Are you able to talk to the rationale for the geographic expansion now? Michael Colijn: Absolutely. I think there are 2 markets that we serve within the general smart grid solutions area. One is the public one where we serve the grid operators. And what we're talking about here today is not that. We are discussing the private market, such as fast charging hubs, logistics, the C&I market, solar and wind farm support. These are behind the meter, specifically designed to support larger energy consuming or energy-generating projects, whereby standardization is possible across geographies, and there is not the need to meet complex grid requirements that we see in the public market. Jeremy Kincaid: And then the final question, Michael, if you look -- to look 5 years into the future, which of your 3 business units do you think would be the largest? Michael Colijn: Well, I'm in love with all 3 of them. So we are happy to focus on them. And joking aside, I think the strength that we will build out in the future is the synergies between them start to become more visible as projects become larger. To give a few examples of what we've done in the second half of last year, we've combined SGS, smart grid solutions with charging capability for really large international distribution companies. We've built out a combination of battery with smart grid solutions where peaks and troughs in demand can help those solutions where grid connections are difficult. And we've seen an increase in the number of smart grids at local level where we combine our SGS solution with either a battery or charging or simply getting the grid locally strengthened. Those type of synergies, we expect -- we see them, and we expect a bigger uptake in the future because intrinsically, we see an increasing complexity of the grid at the decentralized level, and that's where we're playing. Jeremy Kincaid: Sure. Okay. I suppose a final comment, it would be helpful to receive some sort of measure on that interconnectedness going forward to be able to assess that. But I fully understand your point. Operator: The next question comes from David Kerstens from Jefferies. David Kerstens: I've got 2 questions, please. First of all, on your revenue guidance, I think you upgraded that slightly from low single-digit back in November to growth of up to 9%, maybe 4% on the midpoint. What's driving that upgrade? And when you compare that with the market growth data that you provided in the strategy update, should we assume a further acceleration towards double-digit growth longer-term? That's my first question. Onno Krap: Okay. So I'll start with that one. Break out the revenue guidance, I think to a certain extent, Michael already also gave an indication there is in smart grid solutions, we do foresee modest growth or relatively low growth with the grid operators for this year. But in the project business, where we are also -- we expect some decent growth and we classify the work that we do for the mid-voltage distribution station, we classify that in our project business. That's where we expect a significant part of the growth coming from in the SGS business. If I then move to battery business, I think we tried to explain kind of the foundation of our guidance very much already backed up by the EUR 122 million in backlog that we have in portfolio already, plus the number of orders that we have visibility on and we expect to book in the next 2 months. So that's basically driving the guidance on batteries. And then we also see for 2026, a decline in EV charging. And -- but of course, I mean, that's something that's a position that we are not satisfied with. And I think all our efforts during 2026 will be focused on making sure that we reverse that trend, become more competitive and reverse that to a growth in 2027. That combined basically led us to guide you on 2027 that it will be profitable growth without, at this moment in time, putting any percentages on that. We will do that as soon as we have more visibility in that direction. David Kerstens: Okay. I understand. Second question is on the geographical expansion in EV charging. You already touched upon the expansion and re-entry in the U.K. You talk about increasing competition in EV charging. I was wondering how do you now see the competitive landscape in the various markets like Italy and Spain, which you are now targeting as well as in the U.K. I think there are many -- from what I understand, many local brands. And how do you expect for Alfen to build a position in these local markets? And what would be the associated cost for marketing to get into that market again? And will you mainly focus on the home segment? Or is this mainly in the public domain where you're looking to expand in these markets? Michael Colijn: Okay. A couple of questions there. Let me strip them down. First of all, the strategy is for us to be local for local and where we expand into the geographies based on our customers' wishes to expand. We see some pull from customers that are choosing Alfen because of reliability and a long history in EV charging. And we do see an increased competitive landscape in terms of the number of competitors, both local and international. When we look at the ability to drive innovation and our ability to maintain cost, we believe we have positioned ourselves for being very competitive across the different geographies in Europe. And we're not doing a single bet on a single country, you can see from our expansion plan that it is a multipronged approach, whereby volume is one of the key deciders for us to play in the geographies that we've mentioned today. In terms of the segment, the highest volume segment is the home market, followed by business and then finally, public. We believe that the mix of being in all 3 gives us an advantage in terms of platform, in terms of scale and in terms of being able to offer our customers what they're looking for. David Kerstens: And can you talk about the associated cost of this geographical expansion? Does it require advertising campaigns to expand in the home market? Michael Colijn: Not really. This is a relationship-based business-to-business market that we're in. We're not looking to develop a brand image around the charging facility. Operator: The next question comes from Thijs Berkelder from ABN AMRO ODDO BHF. Thijs Berkelder: First question on guidance 2026 on margins. In November, you still guided for 5% to 8% adjusted EBITDA margins, as I recall. And now you pushed that down to 4% to 7%. Can you explain the reason why you're pushing the margin guidance down? And why would you in '26, not be able to beat your '25 margin? What are the key factors there? And maybe David already hinted at larger -- higher marketing costs, other extra costs whatever -- can you explain? Onno Krap: Sure. It's actually twofold. One is based on the fact what I mentioned on kind of the mix that we see for 2026 between business units. SGS and batteries are increasing, but they have a lower gross margin than our EV charging business and EV charging business is declining somewhat. So in the mix, we see a reduction in our gross margin. I already said, okay, that -- I already said that that's a trend that we have to reverse, but that reversal will -- we're working on that to reverse that towards 2027. At the same time, we're also saying this 2026 is a transformational year. And transformation means change and change doesn't always come for free. So we expect certain costs and maybe even certain inefficiencies during 2026 that lead to additional costs and therefore, pushing down our overall EBITDA margin. And that's why we came to the guidance between 4% and 7%. And if you take the midpoint of that one, in absolute terms, that will be EUR 25 million, and that's more or less the same as where we are in 2025. Thijs Berkelder: Okay. Then coming back on the EUR 25 million as a starting point and roughly translating into -- I'm looking now more -- much more at cash flows. Your cash flow from operations, excluding working capital effect last year was around EUR 20 million, I think, and that's before your, let's say, necessary investments in personnel for technology, what have you of close to EUR 10 million. So net of that, it's only EUR 10 million and after lease payments you have to pay off around EUR 8 million. You have very minimal organic cash flow left in '25 and in '26, given your guidance and the cost you will have to pay, it won't be much different. How as a CFO, are you looking or protecting your downside? Given all the staff reductions, I would have expected at least in terms of guidance that the low end of the margin guidance would not be further guided down. Onno Krap: Yes. No, I think your analysis is correct. We need around EUR 30 million to EUR 32 million in EBITDA to be autonomously cash flow positive. And so from that perspective, 2026 will be a year where that will not -- will be approximately EUR 5 million to EUR 6 million negative. At the same time, we do still expect for 2026 certain improvements in working capital, especially in inventory. We still have -- and I just elaborated on that one. We still have some excess inventory in EV charging, and we still have a couple of items in batteries that we expect to reduce during 2026. So from that perspective, and without basically really giving guidance on that, I mean, I'm not overly worried about the fact that we won't be generating cash next year. And then definitely to put towards 2027, I think we need to see an improvement to basically also create -- reach an EBITDA that will be in itself cash flow positive. And from there on, we build on further. Thijs Berkelder: Yes. Third question is on, Michael, you're optimistic on your end markets. Your end markets are growing, maybe even now starting to accelerate a bit further. But to catch that growth also abroad, are you not scared that your working capital management is now too tight and simply your balance sheet situation and cash flow requirements will prevent you from growing with the market and will only force you to not grow with the market? Michael Colijn: I think for 2026, we see that we are not growing as fast as the market, also not in our outlook because we believe this rebalancing is necessary. Indeed, when growth picks up, there is a challenge of balancing cash flow and growth capital needed. I would say I would be -- it's a happy challenge to face in the future when we are looking at cash needed for accelerated growth. What I can say on the 3 different segments that we serve, when we look at the battery storage side, payments are usually upfront that really helps us in managing cash, and we've seen some of that already in 2025. When we look at our SGS performance, we see that our grid operator companies are getting better at their forecast prediction and there is a balance in their payments versus their offtake. And so I'm not too concerned about that either. When we look at the EVC charging, increasingly, we are working and we are working in this year towards having framework contracts in place, whereby the predictability of the volume becomes better. Having said that, we see that already with those customers, their payment cycles are stable and good. And as we grow with them, I wouldn't expect sudden unexpected growth leading to a lack of payments as we ramp up. So of course, we are watching this carefully, but I'm not overly concerned about the growth because of those reasons. Operator: The last question is from Luuk Van Beek from Degroof Petercam. Luuk Van Beek: A couple of questions. First, on the cost savings. Previously, you indicated that you were already at to, say, a minimum cost level that cutting further would hurt your commercial and innovation capabilities. Now you see room to still make further cuts basically in the organization and then free up money to invest in your new strategy. Can you explain how you have found new ways to save costs basically? And if we can see the OpEx and the personnel cost level of H2 as a sort of run rate for next year? That is the first one and I'll come back later with other ones. Onno Krap: Okay. Yes, on the cost savings side, the cost saving on personnel, you mainly see during 2025. And so we brought down the number of FTEs by around EUR 120 million -- [indiscernible] the change that we are, at this moment, looking for, for 2026 in the organization is not so much focused on cost savings. It's much more shifting a certain part of the organization into an area where we see more need for it in digitalization, in projects and in services. So the focus here is not on cost savings. The focus here is redirecting capabilities from one side of the organization to the other to basically make us stronger and to accelerate growth. Apart from that, especially if you take a look at our OpEx, I would call it the discretionary spending, we will continue to focus there and making sure that when we spend money on outside vendors that we always think twice and make sure that we spend it wisely in order to make sure that it contributes to the health of the organization or to basically making sure that we generate more revenue. I think that's the approach. I think maybe coming back to the question of ties, and we are not trying to starve the organization. That's not what we're trying to do. But we're trying to be very conscious on where we're spending the money, how we're spending it and to make sure that it is optimal and not in the direction of starving the company. I think that's in no ways what we're trying to accomplish. Luuk Van Beek: And then I have a question about the gross margin in EV charging, which was supported by lower component costs in H2. At the same time, you are cutting your prices, obviously, to be more competitive. How do you look at the balance between further support from lower component costs and a negative impact from pricing cuts going forward? Onno Krap: Okay. Now there is an impact of lower components costs we saw more or less starting to happen in Q2 last year and continued in Q3 and Q4. Expectation is that we will also see that effect in 2026, not so much that components costs will become even lower. But I mean, this effect is here to stay. At the same time, we continue to see competitive pressure. That's also where some of the guidance is coming from that -- in 2026, we will see some lower revenue. To counteract that, we will definitely also work on pricing. So my expectation is that gross margins for 2026 will definitely not go up. And we will use a little bit of the room that we're currently seeing in our margins to make sure that we stay -- that our pricing stays competitive. Luuk Van Beek: Okay. That's clear. And then last quarter, you mentioned that you had a new type of transport distribution station, which was much larger the turnkey. Can you comment on the build the progress? Do you still expect that it will become a significantly larger part of your revenues in smart grid solutions this year? Onno Krap: Yes. We -- the part of the growth that we are currently forecasting or guiding in 2026 is actually coming from the increase in these transport distribution stations. So definitely, we see that increasing, and we see actually also for the longer-term quite some opportunities there. Those are stations that are significantly larger or significantly more from a pricing perspective, larger than the ones that we sell on a regular basis. And we have a pretty strong position there at this moment in time, and we intend to build that further in the years to come. Luuk Van Beek: And my final question is about the reporting. You will now move to the organization by business unit. Does it also mean that we will get the EBITDA by business unit in the future? Onno Krap: It's likely that we will move in that direction. Timing of that will still depends, but it's likely that at a certain moment in time, we will move in that direction. Operator: Thank you. And with that, I will now turn the call back to Mr. Colijn for any closing remarks. Please go ahead. Michael Colijn: Thank you all for joining us today for Alfen's Full Year 2025 Earnings Call. We look forward to updating you on our transformation and financial performance during our Q1 trading update on May 13. Have a good day. Operator: Thank you. You can now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Mips Year-end Report 2025 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, Max Strandwitz, CEO of Mips. Please go ahead. Max Strandwitz: Thank you, operator. Good morning, everyone. My name is Max Strandwitz, and I am the CEO of Mips. With me today, I also have our CFO, Karin Rosenthal, and we will take you through the Mips presentation of the Q4 year-end report of 2025. So if we start with the key highlights, it was a good end of the year. Strong development with 18% organic growth in the fourth quarter. We did grow in all categories despite the challenging conditions. And our year-to-date organic growth ended at 21%. Of course, with year-to-date, we mean full year. The good momentum in Europe continued. We saw an organic growth of Europe of a little bit more than 30%, which is, of course, a fantastic number given that we grew 137% the year before. So despite a very strong comparator, we continue to see good performance in Europe. And if we look at the full year split of sales, Europe actually contributed to 43% of the total net sales of Mips, which is something that we have been very happy about and of course, part of our ambition to be less dependent on the U.S. market and having a better sales split between Europe and U.S. market. But also the U.S. sales developed well. We did grow close to 30% organically also on the U.S. market, which is a little bit surprising given the challenging consumer market that we see. We saw a little bit of a change in momentum when it comes to the U.S. market, and I will come back to that a little bit later in the presentation, but good performance also in the U.S. market. When it comes to the Asian market, not our biggest part of our sales, we saw a softer market with soft development, especially relating to the Chinese market, where we saw a very hesitant consumer. Of course, we did a very exciting acquisition in December through the ingredient brand Koroyd, great complementary portfolio to Mips and the brand with global potential, which is also something that we appreciate a lot. I will talk a bit more about that also later in the presentation. We had a good development of the underlying profitability. A lots of ins and out in the quarter. The decrease in EBIT that we saw is fully explained by the impact of legal cost, the ForEx headwind and transaction cost. And if we would adjust for the negative impact of the legal cost and the transaction cost related to the acquisition of Koroyd, we would actually be very close to a 40% EBIT margin, actually 39.8%. We have had a legal dispute that will continue. And we will continue to support our customers in the defense of the legal dispute, similar level to 2025 expected also in 2026. And just as a reminder, in 2025, we spent SEK 43 million in this legal dispute. The Board of Directors is proposing a dividend of SEK 2.50 per share, which is corresponding to 55% of net earnings, a little bit ahead of our financial ambition of having a dividend distribution of at least 50% of net earnings. And of course, also adding Koroyd to our business, we remain confident in our long-term strategy and the journey towards our financial targets. So if we start with the Mips Group's acquisition of Koroyd and a summary of what we actually did acquire. We see it much more as a merger rather than acquisition because, of course, it's 2 great companies coming together. But first of all, strategically, really important to look at the strategic fit. And actually, when it comes to the acquisition, we actually see that it strengthened 2 out of 3 already existing strategic pillars. The first one, of course, of our pillars is to grow our existing business of rotational protection solutions in helmets for Sports, Moto and the Safety category. That, of course, will remain unchanged because that's Mips key focus areas. But if we look at other areas like capture new opportunities within helmet safety, of course, Koroyd and impact technology is a great addition to that. And also the third one when it comes to opening up new channels and markets, of course, having the opportunity to expand into body protection, also having customers in tactical and so on, of course, opens great opportunities for further growth. If we look at the culture fit, which is, of course, extremely important when you look at acquisitions, Koroyd has many similarities to Mips. First of all, it is a very vision and purpose-driven company to make active life safer. It's market leader within its niche. Ingredient brand, which is, of course, trusted by consumers and leading product brands. It's very much a science-led and technology-driven company. They have world-class testing and simulation capability, just like Mips. Scalable asset-light supply chain, high EBIT margin despite significant R&D spend. Important to note that Koroyd will continue to operate as an own brand. The current strong leadership and operational team will continue to lead the Koroyd business. But of course, both brand teams see many synergies when it comes to product development and of course, product portfolio expansion. If we look a little bit more on the details of the transaction, the purchase price amounts to EUR 40 million on a cash and debt-free basis, corresponding to a multiple of 8x adjusted 2025 EBITDA. In addition, the sellers have the possibility for an additional earn-out up to EUR 25 million, corresponding to a multiple in total of 13x if we compare against the same adjusted EBITDA of 2025. The transaction was financed through a combination of existing cash, and we also have arranged with a credit facility. And of course, the acquisition is expected to contribute positively to Mips earnings per share, EBIT sales growth, both on a short and a long-term basis. And I think it's also important to note that Mips and Koroyd will be consolidated under the same group first time in the Q1 reporting. If we look at another very important area for us, it's, of course, what we do in sustainability, and we are really proud about the work that we have done there. We have had great development also in 2025. First of all, Mips was ranked #1 in Carnegie's sustainability rankings within consumer goods, which is something that we are extremely happy about. AAA rated at MSCI and also top rated at small and mid-cap enterprises at CDP. So really starting to get also great recognition externally for our sustainability work. Of course, when it comes to sustainability, it's not the awards that really makes a difference. It's what you actually do. And of course, we have 3 key targets, which we delivered against. And the first one is, of course, to continue to reduce our emissions, and we did that during the year. And including 2025, we have now delivered 49% of our 2030 ambition. And that, of course, is in line with our long-term ambition. We have also been quite successful when it comes to increase the usage of recycled materials in our products. And today, and that is, of course, in 2025, the usage amounted to 34% of our total usage. And Mips has also, of course, a well-developed factory audit program. And we have increased our average score from social audits to above 90%, which is actually ahead of our 2030 ambition. So really happy with the progress that we did in sustainability. In Sports, we see that the progress continues. We are happy with the development that we see there. Good quarter with 17% organic net sales growth in Sports. We did see strong growth in the European market. And like I said, that's on the back of a very strong comparator last year where we actually grew 137% in total. So we now had 6 really, really strong quarters in Europe and of course, start to see that the impact, of course, also showing up in the total sales of Mips as a company. We did see also good growth when it comes to the challenging U.S. market. We saw in terms of market data, a little bit of a trend shift when it comes to Mips addressable markets. And if you look at bike, for instance, we saw actually for the first time in a long time that the addressable market grew 1% when it comes to volume in bike, and it actually grew 5% when it comes to price. So of course, a lot of the customers have initiated and taking price increases to compensate for tariffs, but good to see that also in terms of volume growth in bike helmets, we saw that there was a positive progress. Then when it comes to snow, same ratio, 2% volume growth. If we look at the total market when it comes to U.S. dollar and price, it actually grew with 6%. So of course, still soft market, but at least it has started to go into positive territory. We also see that our customers coming from quite a low inventory level, now have started to refill their inventory. Every one of them, as you have seen in previous quarter, has been a little bit careful in terms of filling up their inventory because of the uncertain tariff situation. And of course, it's also good to see that bike continues to develop well overall. We had the ninth quarter in a row with growth in bike, which is something that we're also happy about. And of course, we continue to see good volume growth also in snow, both in the quarter and year-to-date. We did launch our collaboration with Mikaela Shiffrin, of course, the greatest Alpine skier of all time. So something that we think is a great ambassador for the Mips brand that also can help us to increase the awareness of Mips globally and of course, committing to the overall vision of Mips of driving the world to safer helmets. And I think it's also important to note that the shift that we have really been doing in snow, where you only take a difference of the last Olympic versus the current Olympics. When we look at our athletes this time, we actually see that more -- a majority of the people that are wearing a ski helmets is actually a helmet equipped with Mips. So something that, of course, we are very happy to see. And the long-term positive outlook in the Sports category remains. If we look at the development in Moto, we saw good development also there. 32% organic net sales in Moto in the quarter, year-to-date net sales now amounting to 22% organic growth. And we saw good development also in both off-road and on-road category. And good to see that the volumes are coming back in Moto after a challenging period and the impact of the U.S. tariffs. We continue to roll out a lot of new innovations in the Moto category and, of course, are quite excited about 2026. And no change to the long-term outlook, good opportunity to continue to grow in the category. In Safety, we saw organic net sales growth of 41% in the quarter. If we look at the year-to-date performance, it's 42%. We, of course, have seen during the year and also the quarter that performance is impacted by the implementation of tariff and related cost increases where we have seen some delay in ordering. If we look at the underlying in-market performance, we actually see that we have great sellout with new brand wins and also new products. And of course, during the quarter, it was also the world's largest fair when it comes to occupational health and safety. In Germany, it's only every second year. And there, of course, again, the interest for Mips in the industry was confirmed. The long-term ambition remains unchanged. It's also good to see that the acquisition of Koroyd can also accelerate our growth in this category and make our offering even more relevant in the category as such. So if we look at the category performance, like I said, in Sports, Q4, 17% organic growth, 20% full year. In Moto, 32% in the quarter and 22% full year; and Safety, 41% and 42% full year. With that, I hand over the presentation to Karin. Karin Rosenthal: Good morning. I'm Karin Rosenthal, CFO of Mips, and I will take you through the financial part of the presentation. We saw a good development in the fourth quarter with an increase in net sales of 2% and adjusting for FX due to a stronger SEK versus U.S. dollar, net sales increased 18% organically. Gross profit increased with 2% and a good gross margin of 72.9%, same as last year. We saw an underlying improvement in profitability. EBIT was down 24% to SEK 47 million versus SEK 62 million last year, which is fully explained by legal cost of SEK 7 million, transaction costs due to the acquisition of Koroyd of SEK 5 million and ForEx. EBIT margin decreased by 11 percentage points to 31.8% versus 42.9%. Excluding legal costs and transaction costs, EBIT margin was 39.8% in the quarter. The higher spend in OpEx is fully explained by the legal costs, the acquisition costs and the ForEx. So we have also continued to invest in our strategic priorities. We had a good operating cash flow in the quarter with SEK 52 million. And if we look at the financial KPIs, organic growth of 18%, 32% EBIT margin and operating cash flow of SEK 52 million. If we turn to next page and look at the development for the full year. Net sales increased with 10% and adjusting for the FX due to a stronger SEK versus U.S. dollar, net sales increased 21% organically. Gross profit increased with 12%, and we saw a gross margin of 73.4% versus 72.5% last year. And the increase was mainly explained by the increase in sales and the sales mix. We have an underlying improvement in profitability. EBIT was down 11% to SEK 156 million versus SEK 174 million, which is mainly explained by the legal costs of SEK 43 million and the FX. EBIT margin decreased 6.9 percentage points to 29.2% versus 36.1%. And excluding legal costs and transaction costs, EBIT margin was 38.2% for the full year. So the higher spend in OpEx is fully explained by legal costs and the ForEx, and we have continued to invest in R&D and marketing during the year. We had a strong operating cash flow of SEK 148 million versus SEK 142 million last year. So the financial KPIs, 21% organic growth, 29% EBIT margin and operating cash flow of SEK 148 million. If we look at the balance sheet and cash flow, we have cash and cash equivalents of SEK 214 million versus SEK 382 million last year. During December 2025, Mips obtained a revolving credit facility of SEK 300 million to finance the acquisition of Koroyd. The net debt versus adjusted EBITDA amounted to 0.5x. The operating cash flow in the quarter was SEK 52 million, and the Board proposes a dividend of SEK 2.5 per share, corresponding to 55% of net earnings. And then over to you, Max. Max Strandwitz: Yes. So if we then summarize the quarter and the full year, good year -- good development in the quarter with 18% net sales growth. We did grow in all our 3 categories despite challenging conditions. Good performance also year-to-date, of course, with 21% organic growth. And of course, as we are growing significantly faster than the market, we are gaining market share, of course, both in U.S. and the important European market. We do expect the positive development to continue with, of course, less hampering effects from the tariffs, which we saw in 2025. Good to see also, I wouldn't say it's a turnaround, but a little bit positive signs of the U.S. consumer in Q4 when it comes to helmet. And of course, good to see also that the U.S. brands are also refilling their inventory again. Of course, the exciting complementary acquisition of the ingredient brand, Koroyd, will, of course, strengthen our position in helmet safety further and offer possibilities for product extensions in adjacent categories, which is, of course, something that we are quite excited about. Good underlying improvement in profitability. The decrease that we saw is fully explained by legal cost, ForEx headwind and transaction costs. And we remain positive on our long-term outlook and of course, the delivery of our financial targets. And with that, we open up for questions. Operator: [Operator Instructions] The first question comes from the line of Emanuel Jansson of Danske Bank. Emanuel Jansson: Hope you can hear me. And a couple of questions from my side. And on the organic growth seen here in the quarter, can you provide some color on the sequential development during the quarter, maybe especially regarding the U.S. market. And so did you see any acceleration or de-acceleration over month-over-month? Max Strandwitz: Yes. I think, I mean, overall, it was relatively equally spread. I would say that in the end of the quarter, we saw a little bit of an uptick of the U.S. market, of course, potentially also from a little bit stronger sales, at least than we anticipated from the U.S. market and, of course, refilling the stock. So it ended a little bit better than it started. Emanuel Jansson: And given that the Chinese New Year falls later this year versus what it did in 2025, can we assume that some of the normal Q4 sales has shifted into the first quarter of 2026 regarding especially bike sales or bike helmet sales? Max Strandwitz: Yes. Given that, of course, during my 10 years at Mips, I don't think that the Chinese New Year has been so late, which means that they have at least 1.5 months more to produce and, of course, ship. So yes, we see a good momentum also into Q1 when it comes to order momentum and so on. And part of that is, of course, attributed to a later Chinese New Year. When you normally see an earlier Chinese New Year, of course, then to be able to make the season, of course, you produce maybe a little bit more in Q4 because, of course, then the Chinese New Year comes and you don't have time to hit the market before the season starts. Emanuel Jansson: That's very clear. And jumping back to the U.S. market, where I think the growth was quite impressive. And can you maybe share us some insights on which categories or customers that drove this growth most strongly in this quarter? Max Strandwitz: Yes. I think, I mean, first of all, if we look at the total market, which means, of course, not only the addressable market for Mips, it was actually shrinking with 1%. So it was slightly down and the addressable market was up. And when we look at the addressable market for Mips, we look at helmets above USD 30. There is a couple of brands that is doing really well on the market at the moment. Giro, which is one of our bigger customers is doing exceptionally well, and they're gaining a lot of shares. Also, we see Smith Optics also doing well, especially in the mountain bike segment, and we also see that the Fox brand is doing well. So a couple of brands that is really outperforming at the moment. And of course, all of those are heavy Mips customer, and that helps a lot. Emanuel Jansson: And should that also be attributable to more premium type of helmets that are doing better versus the -- towards the end consumer? Max Strandwitz: Yes. I think when we segment the market, and of course, there is different ways of slicing the market. I would say top premium market, we have never seen actually especially weak market. It seems like that consumer is immune to whatever setbacks happen. So they seem to buy products anyway. And then we talk really premium product. What was a little bit of a shift in this quarter is that we also see in mid-price levels that the consumer is coming back, which is a bit of a change. And of course, with that consumer also comes quite a lot of volume. And of course, that has a direct contribution to the volume development. Emanuel Jansson: Perfect. That's really interesting. And heading then back to -- heading to Europe, I mean, 50% organic sales growth during 2025 and you increased your market share and increased market penetration, what should we think is a sustainable growth rate in 2026, you think, given that you have grown into size, but you still have plenty more to do in that region? Max Strandwitz: Yes. I think, I mean, we do have fantastic momentum in Europe, would be fantastic even if Europe can pass ahead of the U.S. market would be really a good sign of the really establishment that we have done in the European market. So I do expect continued good growth in Europe. There is a couple of regions where we have started, of course, in a fantastic way. Germany has been very favorable for us. We see good development there. Then, of course, we also see in France that the market development is really, really good for us. Switzerland, of course, not a lot of market data, but really high penetration. Nordic is a good region. What has been the key change also is that we see that the south of Europe is starting to also appreciating, first of all, helmet use and of course, also helmets with rotational technologies like Mips. I think what also was a bit fantastic for 2025 is, of course, that in Italy, they also started to mandate helmets when you're skiing and so on. And of course, that, in general, of course, start to increase the awareness on helmet safety in general, but also, of course, these type of mandates from governments also help to make people more safety conscious. So there were a couple of different things helping, and we see that trend continuing. And also what has been a big change for us in Europe is that we don't only sell well in premium helmets, but we see also that we can reach down and, of course, target consumers also in lower price points. And again, with lower price points comes also higher volumes. Emanuel Jansson: Perfect. And last 2 questions here. On the Koroyd acquisition, can you share anything about how the business developed during Q4? Max Strandwitz: Yes. I mean we do not comment too much about it because, of course, it was not owned by Mips as such. And of course, those numbers has not been audited by us as was not part of the due diligence and so on. They continue to see good momentum. They have developed well when it comes to safety and of course, also sports, and that was the key growth driver. So no change to the momentum than they have seen prior quarters. And of course, we expect that to continue also into 2026. And then, of course, we do see some customer synergies across the board, both ways, where, of course, we have been talking to a lot of customers, a lot of brands are excited of combining both Mips and Koroyd into helmets, which is something that, of course, is part of the strategic rationale of the acquisition. For us, Koroyd will always be a premium offering. And of course, we will work with a select amount of brands, but at least the start of the discussion has been very positive. So I think we can also get some sales synergies and of course, really excited to show what we can do both in 2026. But of course, as helmet project sometimes takes a little bit time, of course, also in 2027. Emanuel Jansson: Perfect. And final question here. And correct me if I'm wrong, but I just think that the previous communication regarding legal costs indicated that it would gradually decrease during 2026. But I mean, given now the rhetoric now in Q4, it seems to be more or less in line with 2025. Has anything changed? Or what should we expect here going forward in the nearest quarter when it comes to legal costs? Max Strandwitz: No, you're correct when it comes to the previous communication, we did expect slowdown of cost, which you partly saw already in Q4. We are, of course, still preparing for the case. We are doing a lot of investigations and of course, preparing us to make sure that we are as prepared as possible. It's always difficult when it comes to legal cases. Sometimes they can end very quickly. And of course, that's normally the best resolution. But since we do not know exactly how long it will go, we decided to take a little bit more cautious communication on this. So I wouldn't say that nothing have materially changed. It's more us being a little bit more cautious on the communication. The only thing we know is what we spend in 2025. And then, of course, it's probably the best to assume a similar kind of momentum in '26. I hope I'm wrong, but I think the cautious view is probably better at this moment. Operator: The next question comes from the line of Carl Deijenberg of DNB Carnegie. Carl Deijenberg: So a couple of questions from my side. First of all, if I could ask on the quarterly seasonality in the acquired entity, how does that compare relative, let's say, legacy Mips when we look at the quarterly distribution going into '26? Is that a material difference on net sales and earnings contribution on a quarterly level? Or how should we think about that? Max Strandwitz: Yes. Just to make sure I understand. So it was in terms of the quarterly phasing when it comes to Koroyd. Carl Deijenberg: Right. Exactly. Max Strandwitz: Sorry. So yes, you do see a similar pattern to Mips, where you have the smallest quarter when it comes to Q1. Of course, that's normally the case all the time because, of course, you have Chinese New Year, factories close and so on. So it has a similar phasing pattern than Mips when it comes to Q1. When it comes to the rest of the quarter, which means Q2 to Q4, given that they are a little bit more exposed to safety, they have a more, I would say, flat phased, maybe that's not the right word, but they have a more equally spread sales across the rest of the 3 quarters. Carl Deijenberg: Okay. Perfect. And then I also wanted to ask on a similar topic. I mean when you look at their '25 development, did they have any quarters that were exceptional in any way when we look at the sort of quarterly comparisons also going into '26. Did they, for example, see a similar development as you did in Q2 on Liberation Day and so forth or anything to keep in mind there when we model the quarters? Max Strandwitz: Yes. I mean everyone in the industry, of course, had quite a hiccup when it comes to liberation. They -- at least the ones that have U.S. exposure. And of course, they have a big U.S. exposure and so on, even bigger than we had. So of course, they saw an impact of that. So I wouldn't say it's materially different. It's difficult for us, of course, to comment too much of the quarters because, of course, -- this is a relatively small company and, of course, focused mainly on full year delivery and so on. We have a quarterly split, but without having audited quarter-by-quarter, it's, of course, difficult to give too many comments. But it seems like quite a normal seasonality from a business exposed to industrial safety and snow as such. Carl Deijenberg: Okay. Good. Then I also wanted to just follow up on the sort of guidance on the legal costs going into '26. And then, yes, for the full year, you were right about SEK 40 million and roughly SEK 7 million here in Q4. And I'm also just wondering a little bit on the phasing here because annualizing that guidance, that's obviously quite a step-up relative to the exit rate of SEK 7 million here in Q4. So is the run rate now going forward, is that going to be around SEK 10 million per quarter? Is it going to be come up already here in Q1? Or could you say? Max Strandwitz: No, I think SEK 10 million is probably a fair assumption. And of course, given that these costs tend to fluctuate, I think it's much better to have like an even phasing of SEK 10 million per quarter. Carl Deijenberg: Okay. Great. Then finally, also, I just wanted to ask geographical development for you or at least what you disclosed. Just if you could share a little bit more details on the development in China, particularly given it's obviously a quite big contraction here year-on-year and also sequentially relative to Q3 despite the seasonality. So any further granularity to add there? Max Strandwitz: Yes. I think, I mean, as any company exposed to the Chinese market, of course, especially when it comes to consumer demand, you see a very hesitant Chinese consumer. It's not a huge part of our business. It's actually quite a small part of our business. We see that the Chinese consumer is much more hesitant. You have also seen at some of the big retailers shutting down a lot of shops because, of course, the Chinese consumer, a lot of them has a lot of money invested into property. And that, of course, has been everyone's pension retirement plan and so on. Now there is a big uncertainty what happens on the property market. The Chinese consumer appreciate cash and, of course, have started to save a lot of cash, and that means that they are not spending. You see that across the board when it comes to all consumer brands. Some of the partners we talk to, they say that the market is down 70% to 80%. I think that's a little bit rough, but at least we see a very soft Chinese market at the moment. There has been some initiatives by the Chinese government, but they don't seem to have that effect yet. But of course, we know that China normally can change a lot of things. And of course, we see quite a lot of excitement when it comes to winter sports. We also start to see that Viking is a big category. So I think the Chinese consumer will come back. But for me, it's very difficult to speculate exactly when. So I will continue to have quite a negative view at least on the Chinese consumer for 2026. Operator: There are no further questions via the phone. I will now hand over for questions via the webcast. Max Strandwitz: Yes. So the first question was about legal costs, which we have explained. Then the second question is, what is the medium term to expand in Moto industrial segment? And what is the impact of tariffs that you see in U.S. in 2026? And then the third, based on the same question, do you see demand supply pricing has normalized. So when it comes to Moto, like I said, we started to see an uptick in volume already after the implementation of tariffs. I think it's great to see that the off-road category is really coming back also in terms of volume. And we start to see more customers also on the on-road segment, which is something that has been lagging behind. We do see a lot of attention to the new standards that is coming into play and making it a lot tougher for helmet brands to pass the new standards without the rotational technology. And of course, that's what we do. And that, of course, is supporting the plan. And of course, this is not something that has happened overnight. But when it comes to development in motorcycle helmets, development time can easily be 3 years. So a lot of these projects has already been done. And of course, that's what we are rolling out, and that will generate the growth that we have been seeing. When it comes to industrial safety, I think most companies will probably 41% in the quarter organic growth, 42% full year is a great number. I think we should be able to do more. Of course, we were a bit surprised by the tariff implementation and of course, the pricing effect. And it's not so much about the helmet, but it's normally quite big companies. And of course, helmets is a small portion of what they actually sell. And sometimes, of course, they need to price up their whole segment when it comes to tariffs and so on. And then, of course, the attention to helmet is pushed back. We have a couple of really big volume projects with so-called round or brim helmets, full brim helmets for the U.S. market, which is very much what is in style. They will be launched during -- or have already been launched, but will start to be produced in Q1 and onwards. And that, of course, will generate a lot more volume. Then, of course, adding Koroyd business, also industrial safety, we were a lot more relevant. And of course, we can do even more when it comes to helmet. So I think in industrial safety, when it comes to our customer acquisition plan, I think we have all the customers that we need in order to reach the plans that we have set. For us, it's really making sure that we support the sell-through of the Mips equipped product and making sure that we get bigger penetration in their total portfolio. So quite excited about what happens in safety. Like I said, 42% is a good organic growth. But of course, I'm not always known as a patient man and of course, want to have more, and that's what we are gearing up for in 2026. And then when it comes to our recruitment plan for 2026, of course, Mips is a company that is growing. We also plan to grow the Koroyd business. And of course, the key focus that we have at the moment is to add more people in R&D. We have always had a ratio of Mips and a ratio I like because it's very simple, one engineer, one person in the rest of the company, and that's really a ratio that I think is effective. when you are a company which is very innovation focused and so on. Koroyd is 1 to 3 at the moment. So I really hope that we can get that up to the same ratio as Mips and continue to do a lot of innovations. And like I also explained in the report, we are doing a lot when it comes to creating a lot more innovation. We're also stepping up in terms of the amount of innovation. So we see a lot of new great Mips products coming out. Koroyd has a fantastic portfolio, especially when it comes to adjacent areas like body protection, gloves and so on. So really happy to share what we are going to do there. So key recruitments will be engineers. And then, of course, as any company that scales up, even though we both have a fantastic scalable business model, we need to add also resources everywhere else, but it, of course, will be in a much more scalable way. We are an asset-light model and so on. And of course, the amount of headcount will not increase in line with the growth that we expect to see in 2025. And then it's -- can you provide any update on project volumes versus the prior period, given that the revenues came down a little bit during the year. So we actually saw in Q2 and it started to stabilize in Q3 that a lot of our brands, they focus very much their engineering resources around relocations. So relocations outside China. And then, of course, we start to see that the volume is coming back again. And already in Q3, we saw on par with previous year and so on. And at the moment, we have great project momentum, and we can actually not do all the projects that we have in the pipeline. And of course, that's why we're also recruiting more engineers. And then, of course, it's a question on you can talk about the developments of new safety models or customers over the period, given the significant trade shows like World of Concrete that took place over the quarter. And of course, World of Concrete was in January. There, of course, we supported a lot of our brands. And the key focus there was, of course, to really drive the rollout of the full brim helmet. Full brim helmets is a big thing in the U.S. That's where you have the main part of the volume. Mips was first implemented in more like climbing style helmets. And now we see that we also go into full brim helmets. That's where you also see a much bigger part of the volume. And that's also where you see a big part of Koroyd's business is in full brim helmets. That's where they see most part of the volume. So I think that's basically all the questions that we have. Of course, if there is any follow-ups or you need to find out more, you know where to find us. If not, then speak again next quarter. Thank you for listening in. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Sonja Horn: Welcome to Entra's fourth quarter presentation brought to you here from Oslo. Let me start by enlighting you on what you can see on this picture. This is Christian Krohgs gate 2 in Oslo, our planned redevelopment project, which we, in the quarter announced that we have entered into a partnership with Skanska to develop. So moving on to the highlights. Rental income of NOK 787 million in the quarter. That is NOK 20 million up compared to same quarter last year, meaning also that the effects from previous divestments have been offset by an increase through projects feeding into the management portfolio. Net income from property management of NOK 425 million in the quarter, that is up with NOK 108 million compared to same quarter last year, mainly explained by the completion and divestment of our project in Trondheim. The net value changes in the quarter were NOK 56 million. And in that, we have also included the positive value uplifts on the investment properties of NOK 111 million. Profit before tax of NOK 476 million in the quarter, and our EPRA NRV is up with NOK 2 per share to NOK 169 in the fourth quarter. We've had a good quarter in respect of operations with a positive net letting of NOK 4 million, and we have also completed 3 projects this quarter, one new build project in Trondheim, which also has been forward sale. So upon closing of that transaction, we have taken a gain of NOK 101 million in the fourth quarter. And our Board has decided to propose a dividend of NOK 1.10 per share for the second half of 2025, and this will be then decided at the Annual General Assembly on April 21. In addition to that, the Board has also decided to initiate a share buyback program of up to 0.5% of the company's shares based on the gains realized on the Trondheim transaction. Moving on to operations. We have, as I said, had a good quarter in respect of letting. Pleased to see that gross letting came in at NOK 183 million in the quarter. And if we look at the year as a whole, it's also been an active letting year where we signed a total of NOK 555 million. So right up there with historic best levels. If you look at our terminated contracts, NOK 80 million in the quarter. Out of that, approximately 57% is related to contracts which have been resigned in the Entra portfolio and the net letting then of NOK 4 million this quarter. A few comments on the largest contracts you can see at the bottom of the page. We were pleased to see that we prolonged and renegotiated with the Police, getting a good uptick on rent and signing 9.5 years new lease there. We will do some refurbishments for the Police here. And upon completion of that, we will prepare this asset for sale seeing that it's in a nonstrategic area for us. In Christian Krohgs gate 2, Skanska has signed 7,500 square meters. I'll get back to that shortly. In Kaigaten 9, Tide has signed 2,000 square meters, and that's also a project which we now will be preparing to start a refurbishment of this building, which is located right next to the train station in Bergen. Our occupancy is down with 40 basis points in the quarter to 93.8%. And as I have commented on in previous quarters, we expect to see more fluctuations in our occupancy ratio going forward, explained by a mix of factors. Firstly, the terminations and negative net letting we've had in the past quarters will potentially affect the occupancy going forward if we do have not let those vacated -- terminated space before the new leases -- sorry. This may translate into increased vacancy if we do not sign new leases on this space before the existing tenants move out. This is, however, fully reflected in our rental income bridge. If we take a look at also the timing of new projects will affect the vacancy and also the completed projects returning back into the management portfolio with some remaining vacant space will typically also affect the occupancy. So this quarter, the increase in vacancy is explained by the fact that the Brynsengfaret 6, one of our projects is feeding back into the management portfolio with an occupancy ratio of 83%. So if we move on to the projects which were completed in the quarter, Brynsengfaret 6, we had a refurbishment project here of 35,000 square meters. This has been completed in line with expectations, leaving us with a yield on cost of 5.8% and the building has now reached an energy class of C in line with the EU taxonomy. In Sandvika, we have a small project, 3,400 square meters, which is a courthouse building let to on a 20-year lease to the courthouse administration. This has been completed with some increase on costs, leaving us with a yield on cost of 4.6% versus the initiated reporting of 5.3%. And finally, in Trondheim, the new build project, which we completed is also part of a larger project totaling 48,000, which has been realized in 3 phases over the last 6 years. So when concluding this project, we have built 2 sections here, the new regional office for the Norwegian Broadcasting Corporation and one section of office. Both have been sold to the 2 buyers, the Norwegian Broadcasting Company and the existing previous buyer of the Trondheim portfolio. The total project cost here is NOK 611 million. That is NOK 73 million lower than what we initially started reporting on. And this is reflecting several factors. Firstly, we have managed to materialize some learning effects compared to the second phase, which was done with the same contractor and also the same team. We did a very favorable timing on that contracting. And also, we have transferred some of the lease-related risk and cost to the buyers as part of the forward sale. The transaction value of NOK 845 million includes also a tenant-specific outfitting of NOK 77 million for the Norwegian Broadcasting Company, which was settled as part of the transaction. And the return on investment on the project here is 25%. So this also is from a sustainability project perspective, quite an impressive project right up there amongst the top buildings in Norway, which also is part of the reason why we managed to do a decent or very good, I would say, transaction pricing on this building. If we move -- look at the completion of the entire Holtermanns project, I would say that it is a very good example on how we manage to combine high-quality development, disciplined risk management and transactions and creating good value. If you took a look at the ongoing development portfolio, we only have 2 projects on this list now. Both of them are progressing according to plan with the remaining CapEx of around NOK 270 million. And in Nonnesetergaten 4 in Bergen, we have increased the occupancy from 83% to 91% in the quarter. The cost is up slightly with NOK 5 million, but that is also financed through tenant investments. And the Drammensveien 134 project at Skoyen, also here, we've seen that up slightly in the quarter. We continue to have a disciplined approach to investment, prioritizing CapEx to solving the letting activity on vacant space. And as already mentioned, we will now prepare to start the project in Kaigaten 9 in Bergen and start reporting on that from the second quarter. That building is located right next to Nonnesetergaten on this list, meaning that we also expect to benefit a bit from the lease activity or letting activity and lease pipeline we already have on Nonnesetergaten 4. We also announced that we did a transaction in the fourth quarter with Skanska, where we sold 50% of the share in our building in Christian Krohgs gate 2 as part of a larger JV structure established for the redevelopment of this asset. This asset is located only 3 minutes walk from the central station, which you can see is around the high-rise buildings in the background there. And the transaction was based on a gross property value of NOK 550 million, which was 2.7% above our Q3 book values. And as part of the transaction, Skanska has also signed a lease contract for 7,500 square meters in 10 years in the new project. And they have also prolonged their existing lease with us in their current location at Sundtkvartalet, which is located, you can see on the map, the top right corner of this picture. That was a project which was materialized in the same JV structure with Skanska almost 10 years ago. And in addition to that, Skanska will act as a turnkey contractor for the construction of this project. And we clearly see that this partnership provides a very capital-efficient way for us to start the redevelopment of this project, which also will benefit this very strategic area for Entra, enhancing the qualities of the neighboring surroundings. The transaction closed in the first quarter and the project start is planned for the second quarter this year with the completion in the end of 2029. So that leaves us also with 4 years to solve the vacant -- remaining vacant space, seeing that we start the project with a pre-let ratio of 35%. I would also like to take the opportunity to update you a bit on the ongoing transformation on the area around the Oslo Central Station. Entra has approximately 190,000 square meters in their management portfolio in the area surrounding the Central Station. And this part of the city is going through a transformation. This is the most central communication hub in Norway. And I remember when I came into Entra more than 10 years ago, we started setting targets that we would push rent levels about NOK 3,000 per square meters in this high-rise building, where you can see that the current top rent is now around NOK 5,000 per square meter, which means that we, in the past 10 years, already have seen a 60% increase in rents in this area. Now on the photo on the right side here, you can see that the CBD East, which has been developed over the last 20 years in Oslo. In this area, top rents are now at NOK 6,500 per square meters. While on the north side of the tracks, rents are between -- top rents between NOK 4,000 and NOK 5,000 per square meter. So we clearly see that this gap is going to be narrowed over the years to come and the projects which start in the neighboring area will also reinforce and strengthen this transitioning, which has already started. So we also continue to work on optimizing our project in Stenersgata 1 Phase 2, which is located in the bottom left of this picture next to the NOK 4,000 mark. That's the Phase 1 of that building project. And once we get the anchor tenant we're looking for, we will also be able to start that project. A few words on the Norwegian economy. It has remained robust through the global market volatility in 2025, and we are well positioned with the Norwegian oil fund also to stabilize the economy through fiscal policies and public spending. Mainline GDP growth is expected to be somewhere around 1.5% and 1.7% going forward. Employment growth has remained stable around 0.7% in the last couple of years and is expected to stay around those levels also going forward. In Oslo, however, we've seen that in 2025, the employment growth was lower, around 0.3%, and that was also mainly driven by the public sector, which currently is transitioning into more space-efficient workplace strategies, meaning that we are not getting much tailwind from the employment growth in the Oslo market currently. The key policy rate has been reduced to 4% in September. Expectations from Norges Bank has been that we could potentially see further rate cuts with cut per year over the next 3 years. CPI for January, however, came in higher than expected with an adjusted CPI of 3.4% versus the Norges Bank's forecast or estimates of 2.9%. So forward interest rates now indicate lower probability of rate cuts in the near term. Entra's contracts are indexed based on the November index. And from January, that means 3% indexation for our portfolio. If we move on to the letting market, we have seen that the total volumes signed in 2025 were in line with expectations, slightly lower maybe than what would have been expected based on the future expiries in the market database. We have, however, seen that the tenant search activity picked up through the fourth quarter coming also into the first quarter and are currently also seeing quite a lot of activity in the letting market. The vacancy is currently around 7% in Oslo, expected to remain around those levels with some variations between clusters, some clusters also above 10%. Same goes for Bergen vacancy levels. Now if you look at the expected market rental growth for the next 3 years, according to our consensus report top right, the growth is expected to be around 12% over the next 3 years. If we look into Areal statistics database, we have actually seen that in the inner city center of Oslo, the area which I previously showed on the map, the market rental growth from the fourth quarter in '24 until the fourth quarter of '25 in the top segment was actually 13%, which clearly supports that there is willingness to pay for the CapEx required to deliver projects in this area. New build volumes are expected to remain low in the next years with -- seeing that we also have had a few new project starts in the recent years. A few words on the transaction market. The financing markets are available and lending sentiment is positive with credit margins tightening through the fourth quarter, both in bank and bonds. The transaction volumes for 2025 came in at around NOK 87 billion, slightly below normal historic levels. We saw that the segment split, office represented 22% of that volume, while more normal levels would be between 40% to 45%. So more activity than within segments like logistics and also residential portfolios. The prime rent in Oslo -- sorry, prime yield in Oslo is currently around 4.5% and is expected to remain around those levels going forward according to our consensus report. We can see that we have seen transactions supporting those prime yields and also that there is continued interest for prime assets and also central city offices in the market, primarily from equity buyers on these current yields. And our assessment is that at these yield levels and with the forecasted consensus on inflation, equity buyers are still able to achieve their return targets with 7% to 8% potential. And that we also see that the market players are confident or comfortable that we will see a real rent growth also in the years to come. So that also supports the current yield levels. Okay. I think that leaves it for me for now, and we'll get some more details from you, Ole. Ole Gulsvik: Thank you, Sonja. In Q4, our financial performance improved compared to previous periods. Rental income came in at NOK 787 million, up from NOK 767 million in the fourth quarter last year. We had positive -- net positive impact from realized projects of NOK 19 million and also a positive impact from CPI growth of NOK 17 million. This was partly offset by negative like-for-like of NOK 10 million due to increased vacancy as well as a negative NOK 5 million due to divestments. The rental income is NOK 15 million higher compared to the bridge that we presented in the third quarter. This is a larger than normal deviation due to a combination of positive one-offs as well as letting effects. Net income from property management came in at NOK 425 million, up from NOK 317 million in the fourth quarter last year. In Q4, we had positive gain from the forward sold development project, Holtermanns veg in Trondheim of NOK 101 million. Adjusted for this gain, we report underlying result improvement in the quarter, supported by both rental income growth and by reduced financing costs. Profit before tax came in at NOK 476 million, which includes both the mentioned gain from the Holtermanns veg project as well as positive NOK 56 million in net value changes. In the fourth quarter last year, we had net value changes positive of NOK 457 million, which explains the reduction in pretax profit from the fourth quarter last year to the fourth quarter this year. I have already gone through the rental income part, but I will give you some more flavors on the other P&L items. OpEx came in at NOK 80 million or 10.2% of rental income. This is above previous quarters. In Q4, the OpEx was particularly high due to timing of maintenance cost and to a certain degree, higher vacancy cost. The OpEx percentage level for the full year of 2025 is a realistic indication of the cost level also going into 2026. If we look at other revenue, other costs, this was net positively impacted by the gain of NOK 101 million on the forward sold Holtermanns veg project in Trondheim, as mentioned earlier. Admin cost is up to NOK 55 million due to increased personnel costs and a couple of nonrecurring items in the quarter. We have managed to scale the admin costs for several years by offsetting some of the wage increases with efficiency measures and other cost reductions, and we target to continue to improve the admin cost ratio also for 2026. Net realized financials came in at NOK 336 million, which is down NOK 10 million to previous -- or to the last quarter. This is due to lower debt following the settlement of Holtermanns veg. Value changes in our investment properties were positive with NOK 111 million, and I will come back with more on this later on in the presentation. We had negative value changes in our financial instruments of NOK 55 million, and this is mainly due to 1 quarter shorter duration in our positive market value positions from 2021 and 2022. And the value of the interest rate hedges will gradually be reduced until maturity. And this gave then a profit before tax of NOK 476 million. Moving then to our rental income development. Looking forward, the model indicates rental income in the first quarter to be NOK 794 million. This is NOK 13 million higher than the bridge we presented in the third quarter. For 2026 as a whole, the total rental income in the bridge is up nearly NOK 40 million compared to the bridge that we presented in the third quarter, of which nearly NOK 10 million is due to higher-than-expected CPI, about NOK 15 million is related to letting effects. And lastly, some of the compensation we did for one-offs in Q3 was too conservative, and we, therefore, rebalanced our model slightly. This graph is not the guidance. It just highlights the rental income based on reported events in existing contracts. There is upside to this bridge as also presented in previous quarters. Firstly, we aim to let out existing vacant space, which has a total rental income potential of NOK 211 million. In addition to this, we have available vacant space in the reported ongoing project portfolio with an annual rent potential of NOK 21 million. And lastly, there is a market rent reversal potential of NOK 161 million. Moving then to our property value, which is slightly down to NOK 63.6 billion in the quarter. Divestments of negative NOK 841 million is related to the sale of Holtermanns veg. Value changes were positive with NOK 111 million in the quarter, which is a limited value increase of only 0.15%. The positive value impact is predominantly a slight increase in the CPI for 2026 compared to the estimates in previous quarters, and this was partly offset by a rent reduction on certain specific assets in the quarter. The deviation between the appraisals has come gradually down over the last few quarters and is now only 0.5%. CapEx in the quarter was NOK 249 million, which has also come gradually down over the last few years. We will continue to have a disciplined investment strategy going forward and prioritize defensive CapEx to increase occupancy and realize market rent uplift. The portfolio net yields now stands at 5.04% and 5.70% fully let at market rent. On the right-hand side, you can see that the net asset value increased from NOK 167 per share to NOK 169 per share in the quarter. In addition to this, we also paid out NOK 1.1 in dividend in the fourth quarter, which brings the total dividend since the IPO to NOK 38 per share. Moving then to our debt metrics, which continued to improve in the quarter. The ICR looks like have bottomed out and improved to 2.14 measured over the last 12 months. Leverage ratio also improved going from 48.8% to 48.0% and the net debt-to-EBITDA is down to 11.0. The debt metrics in the fourth quarter is supported by the gains of the Holtermanns veg sale. However, we will continue to have a conservative approach when it comes to both leverage and interest risk going forward. And we, therefore, expect a gradual positive development in our debt metrics going forward. This is supported by the running cash flow from our property management, a conservative and disciplined capital use as well as potential for value increases in our property portfolio over time. We have created a solid financial platform in 2025 with an average time to maturity for total debt of 3.6 years. The debt capital market was open with tightening spreads also during the fourth quarter. We issued NOK 750 million in new green unsecured bonds, both 6-year fixed bonds, which we swapped to NIBOR plus 118 basis points, and we did floating bonds at 5.5 years at 113 basis points. In total, we have issued NOK 6.7 billion in bonds during 2025, and the debt capital market remains attractive and open in the beginning of 2026. As you can see in this graph to the right, we have undrawn bank credit lines of NOK 7.7 billion committed until 2028. We have reduced our bank lines during the quarter to optimize our funding cost, but we still have ample available liquidity in the next 24 months. We also see that the bank spreads are coming in during the quarter, and we will continue to work to optimize our total funding costs during 2026. On the left-hand side, you can see that 68% of our debt financing is now green, and we have the capacity to issue more green debt with our existing environmental-friendly property portfolio. Moving then to the cost of debt. The all-in net financial cost is down to 4.31%, while interest rate on our interest-bearing debt is slightly up to 3.97% in the quarter. The forward curve has shifted slightly upwards in the fourth quarter. However, our interest rate forecast is more or less unchanged from what we presented in the third quarter as we compensated higher interest rate outlook with lower credit margins in our bank debt during the quarter. As you can see in this graph, we estimate slightly increasing but relatively stable interest rates going forward, and this is due to improved credit margins, our existing hedges as well as future policy rating cuts according to market expectations. As Sonja mentioned earlier, the Board has proposed to pay out NOK 1.1 per share in dividend for the second half of 2025. This corresponds to 32% of the cash earnings or the underlying cash earnings in the period. This is the same amount as we paid out in the first half of the year, which gives a total dividend of NOK 2.20 per share in 2025. In addition, the Board has decided to initiate a share buyback program of up to 0.5% of the outstanding shares with the proceed from the gain from the Holtermanns veg project in the fourth quarter. This totals approximately NOK 100 million in value. The shares will be proposed to be canceled at the Annual General Meeting at the 21st of April. The Entra share is currently trading at approximately 33% discount to net asset value. And with the share buyback, we are efficiently buying our own assets at 15% discount. And we believe this is a good investment and creates shareholder value. Dividends and buybacks combined total capital distribution yield of approximately 2.4% and 36% of the cash earnings in 2025. The capital distribution level is in line with the revised dividend policy to distribute a minimum 30% of cash earnings with room to distribute more capital over time as financial conditions permits. Sonja Horn: Okay. Thank you, Ole. So before I do some closing remarks, I think it's good to also reflect a bit about on the achievements we've had through 2025. First of all, we improved our financial performance and debt metrics. We have had solid gross letting volumes in what I would describe as a more muted demand environment in the Oslo market. We have had property value changes. So we're back in the positive territory here. And the financial flexibility has been secured through the restructuring of our bank facilities and also by reestablishing Entra in the bond market. We have clearly articulated our return targets and supported that by capital discipline across the portfolio and resumed semiannual distributions to our shareholders. We are also well positioned now to capitalize on previous investments in environmental qualities with an already very energy-efficient portfolio. And from that to a few closing remarks, we've had -- pleased to see that we are now once again proposing cash dividends of NOK 1.1 per share and also that we are initiating a share buyback program based on the proceeds from the Trondheim sale. In the fourth quarter, we also see examples that we are able of unlocking value from the project development and transactions with the successful divestment in Trondheim and also the capital efficient and very value-accretive project realization we expect to see in Christian Krohgs gate 2. The letting market fundamentals continue to look promising, supported also by a stable Norwegian economy, where we expect to see also positive employment growth going forward. And I'm pleased to see that the activity in the tenant market picked up during the fourth quarter and also feeding into the first quarter this year. And we are now also seeing the first signs of market rents reaching the breakeven levels we need to see to have accretive projects, particularly in the city center of Oslo. So Entra will continue to deliver future rental income growth driven by CPI, letting of vacant space and capturing the reversion potential in the portfolio and also selective projects going forward. So when we look forward, the priority is clear. We continue to focus on improving profitability through increasing the occupancy and capturing reversion potential through selective project development and asset rotation and continue to have a disciplined approach to capital allocation, preserving our balance sheet strength and funding flexibility and also deploying capital where we find it to be most accretive or also through capital distributions. So I think that sums it up for today. And let's see if we have any questions, Isabel? Isabel Vindenes: Yes, we have got one question in. Can you please provide more details on the rental market demand and discussion with potential tenants and the risk for higher vacancy? Sonja Horn: Okay. So that's 3 questions. Let's see. A bit more flavor on the market. As I said, we are in a market where we have employment growth, which is a positive. What we saw through 2025, however, is that in Oslo, the employment growth was driven by the public sector tenants, which are currently reducing their space when renegotiated -- renegotiation. And in the private sector, we have experienced through 2025, more wait-and-see mode. I hope to see that we'll see more activity also within the private sector going forward following that we have at least had a few rate cuts. So hopefully, a stable demand side, that's our base case going forward. And if you look at where do the tenants want to go? They want to go more into the city center. So the tenant search activity, which we see now are much more heavily dominated towards the city center locations. And if you look at the city center locations, our products are in the less expensive parts of the city center compared to CBD. So we can offer relative more value in our products than other locations in the city center. So I'm very confident that we will be able to bring our occupancy up. Having said that, we also experienced that the letting processes are very timely because our tenants need time to reassess how they want to sit and work. And we can easily use on the large searches more than a year before they conclude. And on the shorter ones, the absolute shortest is 3 months. So it will take time to get the contracts signed. But based on our leads pipeline now, we have good activity, progressed also leases but then again, there's competition. So if you get -- if you win them, I'm very confident that we'll see occupancy come up in the short term, but we probably also will lose some of these competitions we are in. So I'm -- I think it's difficult to give clear guidance exactly on how our vacancy will develop in the short term. But I'm very confident that we're going to bring occupancy back about north of those 95% over time. But where we'll be through this year, somewhere between 93% and 95%, maybe, but it's difficult to be very precise on that. Maybe also a few notes on net letting because we know also that we have 3 large tenants in this -- 3 of our large tenants in Entra who are on lease searches, and they will probably also conclude through 2026. So we're well prepared, work very well to ensure that we are going to be the preferred landlord. But at the same time, if you lose one of those, it will also affect our net letting through 2025. So it's a bit binary how we end up. But these large leases, they will still be sitting with us 1 through 2027, 1 through 2028 and 1 through 2029. So that also tells you that tenants are planning 4 years ahead, giving us time to solve the letting if they should choose to go elsewhere. So a long answer. I hope that was helpful, but we are, of course, available for chat if somebody wants more flavor on that. Isabel Vindenes: Thank you, Sonja. There are no further questions today. Sonja Horn: Okay. Thank you all for following us, and feel free to get in touch if we can help with some more information. Have a nice day.
Operator: Ladies and gentlemen, welcome to the Schindler Full Year Results 2025 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Lars Brorson, Head of Investor Relations. Please go ahead. Lars Wauvert Brorson: Thank you, Valentina. Good morning, ladies and gentlemen, and welcome to our full year 2025 results conference call. My name is Lars Brorson. I'm Head of Investor Relations at Schindler. I'm here together with Paolo Compagna, our CEO; and Carla De Geyseleer, our CFO. As usual, Paolo will discuss the highlights of our 2025 results and our 2026 market outlook, and Carla will take us through the financials. After the presentation, we are happy to take your questions. We plan to close the call at 10:30 local time. And with that, I hand over to Paolo. Paolo, please go ahead. Paolo Compagna: Good morning, everyone. I'm pleased to be back to report on our '25 results. But today, before I dive into the results, let me take this opportunity to take a step back and reflect on the journey over the last few years. You have seen we have titled our first slide, operational recovery completed as we see 2025 as marking the final year of our operational recovery. For those of you who have followed us for a while, you will recall that in '22, we faced severe supply chain challenges, steep declines in many of our major new installation markets and a significant drop in earnings and cash flow, and the company had to perform an emergency landing. Four years on, after some very difficult decisions taken by our majority shareholders and the Board at the end of '21, and thanks to the hard work and dedication of nearly 70,000 employees, I'm pleased to say that we have emerged from this period as a stronger and more resilient company. Well, one could say Schindler is back. We have made clear structural improvements to our supply chain. We have enhanced our product competitiveness and innovation and strengthened our global footprint and maintenance portfolio, including exiting smaller markets where returns were not aligned with our objectives. And from a financial perspective, the company has delivered 12 consecutive quarters of year-on-year EBIT margin improvement with high cash conversion. That is something we are really proud of. Now looking ahead to '26 and beyond, accelerating growth becomes our key priority, but without compromising on our commitment to the continuous improvement in operating margins. This I'd like to underline. An important part of the strategy is the commercialization of innovative standardized New Installation and Modernization products and our industry-leading digital offering for our Service customers. More on that shortly. Now let me touch on the highlights of 2025. Firstly, we delivered on our promises by achieving our financial targets. Growth was a little softer than we would have liked, but it was another year of a strong operating performance with a reported EBIT margin coming in at 12.6% versus our initial expectation of around 12%. I'm pleased to see that the efficiency initiatives launched over the last few years yielded good results, something we will build on in '26. Second, I'm comfortable saying that we are back in Modernization. I was very open with you 2 years ago that we were behind and having to catch up. Today, I believe we are increasingly leading in terms of competitiveness and momentum of our product portfolio, and I'm very optimistic about '26. In '25, Modernization orders were up 19%. And importantly, revenue was up 12% as backlog execution accelerated in the final quarter of the year. I'm confident that we can continue to expand our capacity and execute successfully also in '26. Third, a word on product momentum. We see signs that our efforts on product portfolio in the last years are starting to yield commercial results. And this will support us executing our strategy to accelerate profitable growth. The rollout of our standardized modular platform has been completed according to plan, positioning us well for NI recovery in our key markets. The rollout of our U.S. mid-rise product has clearly exceeded our plans in '25 and sets us up, I believe, for a continued market share gain in '26, too. And in Modernization, we continue to industrialize our operation and standardize our product portfolio. We are seeing very good traction with our standardized packages, and it is not only driving growth, but also enhancing our competitiveness and supporting our journey towards higher profitability in Modernization going forward. Fourth, despite the pressure in '25 from lower NI conversions and our decision to be more selective in recaptures, we continue to make good progress on our maintenance portfolio, which was up mid-single digit in value terms in '25. I believe we have an industry-leading retention rates on our portfolio, but I still see potential for this to improve. That will come in part as we leverage connectivity to improve the offering for our customers and to drive incremental digital revenue streams. Fifth, we delivered on operating cash flow of CHF 1.5 billion for the year, a second year of very strong cash conversion. Carla will elaborate on this. But this strong cash flow allows us to invest back into the business whilst also accommodating our shareholders with an increased payout. And I'm pleased to announce that the Board has proposed a dividend of CHF 6 for '25 as well as an extraordinary dividend of CHF 0.80. Let me touch on our China operations. I told you at the beginning of '25 that we had to take some tough decisions in order to realign our organization and set us for the future growth opportunities, especially in Modernization and Service. Now we are starting to see encouraging signs of operational improvement as we enter '26. A big thank you to our Chinese colleagues for all the effort in '25. Finally, a word on sustainability. We continue to make a good progress on our agenda. In 2025, Schindler's sustainability management system was recognized with an EcoVadis Platinum medal, ranking Schindler in the top 1% of the more than 150,000 companies worldwide. In addition, Schindler was once again included in the CDP A list of companies operating according to the highest environmental standards. So let us now look back at the global elevator and escalator market development in '25. Turning to Slide 4. Focusing on our updates on what we said in October after our Q3 results versus the year ended. First, we saw a strong Q4 in the U.S. new installation market, while demand in Brazil also developed slightly better than anticipated. Therefore, our assessment for Americas in 2025 has been revised to low single-digit growth from earlier flat. Second, we witnessed a strong finish to the year in India and Southeast Asia, lifting the Asia Pacific market growth comfortably above 5%. And finally, the Service and Modernization markets saw a good development in line with our expectations. So how did we perform in this market environment last year? Turning to Slide 5. First, in Service, our maintenance portfolio units continued to expand with the strongest growth in Asia Pacific, excluding China. In Americas, we saw a modest decrease as indicated already in October. This was a result of our increased selectivity when it comes to recaptures that we decided to pursue as well as from softer conversions. Given the normally longer lead time, especially in North America, the decline in our NI orders from 2023 was still having some impact last year. In Modernization, we have been able to maintain the strong momentum and saw double-digit order growth across all regions, except for Asia Pacific, excluding China, due to a lower level of large project bookings in both Q4 and full year. China was the standout with growth of close to 50% as we benefited from the massive equipment renewal program with well over 100,000 elevators replaced throughout the country. In New Installations, our global order volumes declined by over 10% due to China, where, as mentioned before, we have been repositioning our operations to be ready for capturing future growth opportunities. In the rest of the world, our NI orders grew mid-single digits, driven by solid growth across the Americas as well as in Asia, excluding China and notably in India. Now moving to our market outlook for '26 on Slide 6. We expect the Service markets to continue to expand across all regions with the lowest growth rate in the Americas and the highest in Asia Pacific, driven by India. The Modernization markets will continue to see robust mid- to high single-digit growth across the world. In China, the so-called bond program is expected to continue on an even larger scale, and we currently estimate another double-digit growth for the Chinese market also in 2026. In new Installations, we anticipate the global market to decline by more than 5% due to China, where the market is expected to suffer another contraction of more than 10%. While key real estate statistics saw double-digit declines with home starts by floor area falling around 20%, and this is now following at 3 years of 20% plus declines and also to be considered the higher tier cities, which earlier in the year performed relatively better than smaller cities, deteriorated sharply, especially in the final quarter of '25. Across the EMEA region, we expect good development in the Middle East to be coupled with important German market returning more firmly to growth as already evident from the double-digit pickup in multifamily building permits based on latest data available. Significant state support is aimed at easing the chronic housing shortage and stimulating investment, including increased funding for social housing, fiscal incentives such as the 5% aggressive depreciation for new rental residential buildings as well as the so-called Bau-Turbo initiative to fast-track housing projects. And we anticipate Asia Pacific, excluding China, to continue to expand by high single digit with broad-based growth across the region, led by India and Southeast Asia. With that, let me turn over to Carla to walk us through our financial results in more details. Carla Geyseleer: Thank you very much, Paolo. Good morning, everybody. So I propose we start with Slide 8. So that is our usual summary slide of the quarter compared to the last 4. So overall, Paolo mentioned it already, very pleased with the progress that we have made on the profitability over the recent years as well as our continued high cash conversion. I also acknowledge, as Paolo mentioned, that there is room for improvement in terms of growth, something I will touch on shortly when we discuss the '26 guidance. Firstly, reflecting on '25, Q4 marked the 12th consecutive quarter of year-on-year improvement for operating margins. So our reported EBIT margin was up 180 basis points versus quarter 4 in '24 and our adjusted margins up 100 basis points. For the full year, our reported EBIT margin landed at 12.6% versus our initial expectation for the year of 12%. So a very satisfactory performance, and I'm pleased to see that the efficiency initiatives launched over the last few years yielded good results in '25. Secondly, we had a strong end of the year for operating cash flow. Quarter 4 came in at CHF 523 million and the full year at CHF 1.5 billion, just shy of what we have seen the year before. Finally, our net profit continues to increase versus last year in both absolute and margin terms despite the decline in financial income as well as the FX headwinds. Now moving to our order intake development on Slide 9. You heard Paolo saying that our global New Installation order volumes declined by over 10% in '25. In quarter 4, our NI order volumes declined by over 15%. So clearly, a soft quarter for our New Installation business, driven primarily by China, down mid-30s in the quarter as we remain -- and we remain committed to our strategy of pricing discipline and as we continue to reposition our operations here towards future growth opportunities. So even though China made up less than 10% of our group order intake in '25, it continues to be a burden to our growth. We also had slightly softer development in the quarter in some of our Southern European and Middle Eastern markets, partly due to fewer larger projects here. So overall, a quarter with limited organic growth as a decline in New Installation almost fully offset the growth in Service and Modernization. Now if you look at the full year '25, order growth in local currencies came in at 3.1%. Excluding China, however, order intake grew 5.4%. So our growth in '25 was very much driven by Modernization, which grew 19% for the full year and 15% in quarter 4. Growth here was broad-based in '25 with strong double-digit growth across our 3 regions: EMEA, Americas and APAC, with China clearly a standout, up close to 50% in '25, driven by the government's bond program. Service orders grew mid-single digits organically in which combined with the strong MOD growth offset the decline in New Installations. Now finally, a word on currency. So the FX translation headwinds amounted to more than CHF 450 million on our order intake in '25 due to the strength of the Swiss franc versus major currencies, notably the dollar. And it's worth noting that these FX headwinds are not abating. Rather based on current FX spot rates, they will intensify in the short term. Now in terms of order backlog, it was up 1.2% in local currency at the end of '25, driven by Modernization, which was up double digit. Our backlog margin was stable sequentially in quarter 4, but still clearly up year-on-year. Especially the backlog margin in our U.S. business was stable sequentially in Q4, and we are starting to make progress on repricing our backlog here for the tariffs implemented in '25. We expect these repricing measures to continue over the coming quarter. Now moving on to our revenue development on Slide 10. The organic growth, both in the quarter and the full year, was driven by Modernization, up 22% in quarter 4, 12% for the full year '25. You will recall that we spoke of some operational challenges during '25 in terms of scaling up our delivery capabilities in Modernization, so we were pleased with how the year ended. And going forward, we continue to make good progress on scaling our capabilities and driving more efficient backlog execution. Now outside of Modernization, revenue in New Installation was down high single digit in '25, driven by China, which was down mid-20s, whilst other regions were down low single digit for our New Installation business. Service was up mid-single digit in '25. Now moving to Slide 11, operating profit performance. Let me say that I'm proud of what the organization achieved in '25 in terms of efficiencies. We have spoken over the last few years of shifting the corporate culture towards a mindset of continuous improvement, and we are really starting to see that more clearly, which is driving our financial performance. We delivered 12.6% reported EBIT margin in '25 and 13% in the final quarter of the year. And you can see the operational improvement of CHF 35 million in quarter 4 and CHF 163 million for the full year. That reflects primarily good progress in SG&A savings, but also supply chain and procurement savings, which continued to deliver in '25. Price and mix were contributors, but less so than efficiencies. One important operational achievement in '25, which I want to flag was the implementation of the ERP system in our U.S. operations. The U.S. is now fully integrated with the rest of our global organization. And as we complete this integration, leverage our global ERP platform, this should yield further operational efficiencies. Now restructuring costs in '25 came in at CHF 54 million, slightly lower than the up to CHF 70 million we had guided to initially, partly as some of our initiatives shifted into '24. So that meant that restructuring costs were below the level of '24 and hence, a small positive in the EBIT bridge. Now moving to the net profit. You can see that net profit grew to CHF 277 million in quarter 4, reflecting a 9.9% margin, close to CHF 1.1 billion for the year with a margin of 9.8% despite lower interest income and onetime financial gains in last year's period. So I'm very pleased with that result. Now moving to the operating cash flow on Slide 13, which reached CHF 523 million for the quarter and CHF 1.5 billion for the year, just shy of last year's exceptionally strong performance. Again, the uptake in our operating earnings drove the strong performance in '25, whilst net working capital improved, but less so than in '24 and hence, a headwind in our year-on-year bridge. This moderation in net working capital came partly as a result of less down payments for our New Installation business in '25. Now moving to Slide 14. So happy to share that the strong cash generation in '25 also allows for further distribution to our shareholders. So I can report, Paolo mentioned it already, that the Board has proposed an ordinary dividend of CHF 6 per share for '25 as well as an extraordinary dividend of CHF 0.80, reflecting a payout ratio of 72%. This higher dividend should also be seen in light of our solid balance sheet with our net liquidity position further boosted in '25 from the reduction in our Hyundai stake and the lower interest rate environment in Switzerland as well as our continued focus on delivering a more competitive yield for our shareholders. Now let me also mention a word on the share buyback program, which we launched in November '24. And this program has been running according to plan with the total number of shares, both registered and participation certificates bought back during '25 amounting to over just 700,000 shares for an amount of CHF 200 million. Now before I move on to discuss our '26 guidance, allow me a moment to zoom out a bit to give you a bit of a broader perspective on our financial performance. So if you look at the bottom 3 charts on this slide, I think you'll appreciate the quality of our business model. Cash conversion and return on capital compared to most other industrial sectors, both are high and stable. I'm very pleased to see the progress that we made since '22. That means that our balance sheet continues to strengthen, ending the year with a net liquidity of CHF 3.9 billion. Now this cash compounding wouldn't be possible without a stable and a growing top line. And as you can see from the top 3 charts, our long-term growth level is really healthy, led by a strong Service growth and with a balanced regional exposure. I think that is very important to remember at a time when we and the broader industry go through a bit of a softer patch in terms of growth. Now being a Swiss company has also meant facing significant currency headwinds over the past decade with FX shaving off over CHF 3 billion cumulatively of our top line over the last 10 years. Now moving towards the end and giving a bit of perspective on the '26 guidance. So for this year, we expect to achieve low to mid-single-digit revenue growth in local currency and an EBIT reported margin of 13%. As Paolo said, we are looking to accelerate the profitable growth and believe we have the right strategy to do so. In terms of revenue growth in '26, we expect to see continued strong growth in MOD, up double digits in local currency in '26, whilst New Installation should start to stabilize, consistent with our market outlook of recovering new installation markets ex China. But of course, with some lead time before that impacts our revenue. Going forward, in '26 and beyond, we also see an opportunity to complement our organic growth with inorganic initiatives across key strategic markets. Looking back over the last 3 years, we acknowledge the contribution from M&A has been lower than usual as our efforts have been more internally focused. But going forward, with the benefit of a sound financial position, I expect us to increase the pace of selective bolt-on acquisitions. Now as for the margin guidance of 13% in '26, it's very much driven by continued productivity improvements, increasingly from field efficiency. We expect an acceleration here to offset a moderation in procurement and SG&A savings such that we can achieve the same overall level of incremental savings in '26 as we did in '25. Now let me touch on the midterm margin guidance, which we will update later in the year. But let's be clear, we continue to expect a continued improvement of current levels over the midterm. One important difference to '25, however, will be the impact from mix. As you know, we have benefited significantly over the last few years from positive mix as our Service business grew strongly, whilst New Installations declined. But as our New Installation business expectedly starts to stabilize and Modernization grows strongly, the margin tailwind from mix will neutralize in '26 or perhaps even turn modestly negative. And finally, in terms of restructuring costs, we expect up to CHF 60 million in '26 on a par with the level in '25 and still burdening our reported EBIT margin. Now a word on tariffs, which I believe we have managed well in '25. As I mentioned, with the U.S. tariff costs now reflected in our backlog, we will continue to work hard at mitigating the impact, including making price adjustments to offset the impact. In terms of the annual gross P&L impact from tariffs, we estimate that to be around CHF 18 million based on current tariff levels, so lower than the initial estimate of CHF 33 million, which we provided to you in April last year. Again, we expect to offset most, if not all, of that with pricing and cost mitigating actions. So to conclude, let me end by thanking together with my colleagues in the Executive Committee, our close to 70,000 employees across the globe for their tremendous efforts in '25. And as we start out in '26, I believe we are in a great position to execute on our strategy, which we look forward to sharing with you at our upcoming Capital Markets Day. And with that, I hand back to Lars. Lars Wauvert Brorson: Thank you, Carla. Yes, as Carla mentioned, let me remind you of our Capital Markets Day scheduled for the 3rd of June this year at our headquarter here in Ebikon in Switzerland. We look forward to seeing as many of you as possible here on the day. Now with that, Paolo and Carla are happy to take your questions. In the interest of time, please, can I ask you to limit yourself to 2 questions only. And with that, operator, please, let's take the first question. Operator: [Operator Instructions] The first question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I will take two, but I'll take them one at a time. The first one in terms of your order organic growth rate, it seems significantly lower, I think, than some of the peers that we have seen reporting recently. You mentioned China, but some of them also have pretty big China businesses. You mentioned large projects. Can you give us a little bit more of a color? Was it unintended, you didn't take some of those large projects. Did you lose some market share for some other reasons? Just breaking down the competitive landscape context to understand this lower number than peers? Paolo Compagna: Well, there's a very simple answer to a complex question. There are 2 main reasons for the development of our OIT, which you see. Number one, yes, China was down for us. And this we have communicated. One reason is also the adjustment in structure we have initiated last year. We talked about it was mid of the year, and this kept us quietly busy till end of the year. So yes, in China, for us, it was kind of expected that we would take less of the market than possibly, I don't know, our competitors. There's a second and rightly so, you said, a second momentum, which had an impact on our OIT, and it is the deliberate, more selective approach when it comes to large projects. And here, I'd like to be very clear. We have to separate, let's say, the mass business in NI, residential, commercial and selected large, large projects, which -- we shared this in Q3 and also over Q4, we were very selective in also key markets not to take things which would feed what we call the boa constrictor, you remember, 3 years ago once again. And both had the impact, which you see, especially in NI. Daniela Costa: Got it. And then the second question is just on margins. So you've hit the 13%, and you've exceeded what you've expected earlier in 2025. And I think in the press release, you call it that the operational recovery phase is completed. I believe some time back, you talked about getting your margins over the long run to best-in-class peers, which are still a bit higher. So should we interpret this that the route to get there is just more dependent on just operating leverage? Or are there still any idiosyncratic actions? Just how do we read this operational phase is completed and the ambition to get to best-in-class peer margins over the long run, how do we get there? Paolo Compagna: Yes. So my statement is clear. The operational recovery, which we started mid of '22, this we see as completed as we gave ourselves a target, which was also shared with the market, and we aim to be there in the course of this year finally. So hence, bear with us until we meet at our Investors Day in summertime, where we will then share with you also what are our next steps and plans. But as Carla mentioned before, very clearly, and I said it before, our intention, our plan, our commitment is to continue a journey of margin expansions while we accelerate growth is what we internally call now '26, the profitable growth agenda, which then we will share more details in June when we meet. But thank you for your question. It's very important to be mention here and today that the journey is not an end. We have just moved now from one phase to the next. But yes, the recovery we started. Remember, factories, key markets, we shared this all with you. This we see as completed. Operator: Next question comes from Vivek Midha from Citi. Vivek Midha: I have one question and one follow-up, please. On the order intake, still a similar development to the third quarter on the Americas Service business, the slight decline in the unit growth. Just thinking ahead to 2026, is this something we should expect to persist through the first half of 2026, given your continued selectivity, maybe some lingering effects from the weaker 2023 NI order intake. When does this start to fade out in your view, in your orders? Paolo Compagna: Vivek, we shared in Q3 the impact of our strategy, especially on portfolio selectivity in recaptures, right? These are recoveries from the market, which we don't intend to change. However, the soft contribution from NI conversions from '23, this we expect to be over in the course of this year. So hence, to your question, we would not expect the same trend continuing in '26. Vivek Midha: Understood. Just following up on that. When you say for 2026, so should we already expect that to be visible by the first quarter? Paolo Compagna: That's a valid assumption. Now Q1 is always -- I think Q2, Q3 is where we should see a change in the trend in the U.S. market in portfolio for us. Vivek Midha: That's very clear. My other follow-up, if I may, is on the 2026 margin guide. How much are you assuming as raw material or commodities headwind within your guidance? Carla Geyseleer: Thank you for that question, Vivek. Of course, we will see some headwinds when it comes to the raw materials, especially in the copper and aluminum, also to a certain degree, steel in the U.S., but that has all been included in our guidance, yes. So we consider that. Vivek Midha: Okay. Understood. Do you have a number? Could you maybe quantify that for us, please? Carla Geyseleer: Yes. I mean this could go up to CHF 15 million, even CHF 20 million depending on the scenario that will pack out, yes. Operator: The next question comes from Andre Kukhnin from UBS. Andre Kukhnin: I'll start with one on the growth guidance, the low to mid-single digit. You've got 3% orders growth in 2025. I guess that underpins the lower end of the low to mid-single digit. Could you just talk about what kind of variables are out there? And how do they need to evolve for you to land in the higher end in that kind of mid-single-digit mark for 2026, please? Paolo Compagna: Andre, if I look back to '25, the order intake growth was a mixed picture between what we could have in China, which was, as I shared before, lower than expected. And I must say, in the rest of the world, our growth was significantly higher. So now looking to '26, your question is how confident can we be to get to a higher growth rate? And why can we talk about profitable growth? The answer is very clear. Outside China, and allow me to do this separation for all transparency, we expect to further grow a bit higher than last year. And in combination with a little recovery in China, this would lead to the guidance we have shared this morning. So we are quite confident that we can get to OIT growth we have communicated. So a combination of China little recovery and further expansion outside of China. Andre Kukhnin: Great. And my second question is kind of a follow-up, but I just wanted to see if we could build a couple more pieces of the profit bridge for 2026. Carla, could you help us with how much was the mix help in 2025 that you now guide to be neutral or slightly negative? And also for Service growth for 2026, what would you anticipate compared to the mid-single digit in 2025? Carla Geyseleer: Look, I mean, first important, I would say, contribution will come also in '26 from the efficiency. So that will continue. And I clearly outlined that. So it's not because, let's say, procurement and SG&A saving and supply chain savings are maturing that we will see less incremental because, obviously, it is our intention to monetize more on the other efficiency, mainly in the New Installation, Modernization and to a certain degree also in the Service business. So that is definitely one important element. The other important element is that we see also more stable markets when it comes to pricing, especially in NI and MOD and I'm really talking about outside China. So that goes, of course, hand-in-hand with the recovery, although, I mean, a gradual recovery that we see in some of our key markets. So that definitely will also play a role. In terms of mix -- well, in the overall margin uptake, we said always, well, in some of the prior years, it could have gone -- it was around 1/3 of margin uptake. We are fully aware of that. So we consider that, that full neutralizes actually in 2026. It could be even, as I said, slightly negative depending then on how the growth of the Modernization goes and the recovery of the New Installations. Operator: The next question comes from John Kim from Deutsche Bank. John-B Kim: Two questions, if I may. Can you comment on your Modernization order book versus capacity? I know in Q3, there were some issues on kind of throughput and delivery. I'm just wondering where you are on that journey. And then the second question, just a clarification around the tariff number. So CHF 18 million, is that a number we should be using in our bridge? Or should we think about that against the backlog, i.e., more than 1 year? Paolo Compagna: John, let me elaborate on MOD, which is a very good question. As last year, and I was saying before, you remember, we had to catch up on Modernization growth, which now in '25, we could do. And as I said, we intend to continue in '26. If we look at the execution, which is nothing else than the translation into capacity to execute the backlog, we could accelerate throughout '25 as we were able to build up resources in almost all key markets. And we continue to do so. Hence, as of the top line contribution, the execution is supposed to continue to accelerate. And our resources, which you say is capacity, will be continuously adjusted. However, for the backlog execution of '26, we are quite already prepared. But we continue to invest as we expect, as I said before, Modernization also beyond '26 to be a significant business driver. But for '26, the resources are almost there. Carla Geyseleer: John, Carla, I will take the question on the tariffs. The CHF 18 million that I referred to, that's actually the gross impact. So as we are going through the usual mitigation measures, I expect very little to impact our P&L. Operator: The next question comes from James Moore from Rothschild & Co Redburn. James Moore: Carla, I think I've got one for Paolo and one for Carla. Maybe product momentum first, if I could. And just going back to your comments, Paolo, in terms of the standardized modular platform rollout and also the kind of standardized MOD packages. Is there any way you could say what percentage of the way through the rollout we are for NI and MOD? And what proportion of revenue in '25 was already attributing to the new standardized? And what you'd expect it to be when it's all rolled out and when you think you get to that point? I guess that's the first question. And maybe I'll come back with the second. Paolo Compagna: James, now connection was a bit weak. Is this about the level of standardization. Carla Geyseleer: It's very -- you are difficult to understand. Paolo Compagna: We got it. It's about the level percentage of standardized solution, right, within NI, right? James Moore: Yes, If I -- just to repeat, so you can hear it. Just if you could say what proportion of revenue was standardized in '25 for NI and MOD? And what you think it will be when you get to the end of the journey and when that is? Paolo Compagna: Okay, very good. So we've got -- actually in our own program, we have progressed, I would say, NI, more than the half. In Modernization, we have to separate between full replacements and partial replacements. In the full replacement, we have a very high level of standardized solution already. In partial replacement, we are already 50% of it, and it's continuing to increase. Second part of your question, by when do -- or what could be the ultimate target of standardization in both businesses? Well, we would love to see one day in New Installation, a standardization level of 85%, 90%, one could say, and similar one day Modernization, while admitting for everyone to remind that Modernization is also due to the complexity -- we were talking about this last year, remember, of the complexity of the existing portfolio, which makes it much more difficult to get to a high level of standardization. So here, I think the whole industry is working hard to get to this level, also to have 80% plus of standardization will take longer. But ultimately, it's what we have to get to. James Moore: Very helpful. I wondered if I could ask about margin mix in 2 dimensions, really. Just behind the 130 basis point expansion in your adjusted EBIT margin in the full year, could you provide some qualitative color on margins by type and region? I guess, would it be possible to say if NI, MOD and Service margins all expanded? And if you could rank them, that would be great. And I'm trying to avoid asking for a number. But equally, could you do the same regionally? Did all move forward? Or did we see China stepping back? And what really drove the uptake regionally as well? Carla Geyseleer: Yes. So first of all, what is important to share that is that the uptake of the margin is really based on a big number of operations. So it is globally spread. So it's not a few that are fueling the uptake. It's really globally, you can say that the -- everybody is contributing to the uptake of the margin, I would say, with the exception clearly of China, which is anyway a bit of a different market now. So that's from a market perspective. Secondly, when you look at, okay, where is the efficiency really coming from? Well, our 4 building blocks, they are not new. They have been clearly communicated on a regular basis. So still in '25, the major impact is coming from supply chain and purchasing savings. That is number one, followed by the SG&A savings because there clearly, our restructuring plans are paying off and are yielding results and then followed by the efficiency in NI, MOD and EI. And obviously, they had quite a good basis already this, what I call operational efficiencies. In '25, we can really see them accelerating. And obviously, that will continue in '26 and that increment in that area will offset the less increment that will be generated in terms of the SG&A. So that is to give you a bit of flavor where it is coming from. Obviously, I referred already to pricing. Pricing was healthy outside of China. So that clearly has also a contribution. So that's, in a nutshell, how the bridge actually looks like between '24 and '25. Operator: The next question comes from Martin Flueckiger from Kepler Cheuvreux. Martin Flueckiger: Two questions. Firstly, I would just like to get back to the slides, I think the first one, yes, operational recovery completed, it's called, where you described the growth in your maintenance portfolio being mid-single digit in local currencies. Just wondering whether you could break that down in terms of units and pricing growth as well as also that more than 40% of equipment being cloud connected. I was just wondering how much of that is just connection without customers paying for it? Or put differently, how much of that more than 40% is actually paying clients? That's my first question. I'll come back with the second one. Paolo Compagna: Yes. Without going now to which market has developed how, the mid-single-digit growth, Martin, on portfolio is actually well distributed everywhere. And I like in all [indiscernible] with may be a bit difference on China as always. As obviously, the big reduction in NI sales of the last year is hitting also the growth of the portfolio. But for the rest of the world, the development, especially in value was equally distributed. So I would not have any region or country to say, oh, there we did a big either pricing or whatever increase. So it's well distributed, and we are very happy about that. Then considering... Martin Flueckiger: Sorry, I think there's a misunderstanding here. I was referring to the split between unit growth and pricing within that mid-single-digit growth rate in local currencies. It's not the geographic contributions I'm interested in. I'm more interested in the volume pricing effects there. Paolo Compagna: No. Well, it's -- I think it's both low single digit -- it's low single-digit growth in both. So it's quite equal. So it's not that we have a significant unit growth with low value. I can say -- and this is maybe also important to understand that the portfolio growth came also with a quite equal price and value development. So it's both similar. Martin Flueckiger: That's helpful. And with regards to the more than 40% connectivity, are all of these paying for connectivity or just a part? And if yes, what's that part? Paolo Compagna: Well, difficult to say in detail which part it is. Then also the connectivity, I must say a larger part is contributing with a paid service, but by end, the level of paid services is very different country by country. So then if we have to say the number of the percentage of the connected units, how many do contribute, I would say the percentage is significant. The magnitude of the contribution of the connectivity is very different country by country. Martin Flueckiger: Okay. That's very helpful. And then my second question would be on BuildingMinds. I think a topic we haven't touched upon in any of the quarterly calls for quite a while. Just wondering how happy are you with the developments? And how much longer are you going to invest into BuildingMinds? And what are the operational, let's say, improvements or developments that you have seen in connection with the start-up? Paolo Compagna: Yes. So well, it's two questions in one. Let me summarize. BuildingMinds is now in the phase of scaling up the business model. As shared before, the platform has been completed and the team in BuildingMinds is now working on scaling up the business model, hence, in growing the business. The second part of the question, connectivity as a contributor. Connection to Schindler in the business, this is limited to some countries in which we have joined or shared customers. But on a broader base, this remains a separate entity. Operator: Next question comes from Martin Husler from Zurcher Kantonalbank. Martin Huesler: I also have two questions. First question, could you please share your ideas on M&A, maybe in terms of segments and regions? And up to what size would you consider M&A transactions? Paolo Compagna: Yes, Martin, as Carla was sharing before, we were all the time looking at very selective bolt-on M&As. And here, I have to also add in some selected markets. What we like to do now more in '26 and beyond is to expand the number of markets we will be ready to invest. And coming to the size, well, a bolt-on acquisition can have different size, right? It depends of the target. So there might be no direct limit. However, for us, it was always important to identify targets in whatever specific country, which do fit to our organization. This is what made our M&A strategy in the past successful, and it is something we aim to keep in mind. Martin Huesler: And then maybe the second one on cash returns to investors. Why do you flag an extraordinary dividend of CHF 0.80 and not just increased your dividend to CHF 6.80. Maybe can you also expect a new share buyback program after November '26? Carla Geyseleer: Well, I mean, thank you, Martin. I very much appreciate the question. But if you allow me, I would like to give more insights on shareholder return policy and share buyback programs in the Capital Markets Day later on in the year. Operator: The next question comes from Rizk Maidi from Jefferies. Rizk Maidi: I'll keep them quite short. If I start with the order intake, I mean, I take the China drop and you're being quite selective. But even outside of China, it's quite a big difference versus what we've seen from some of your peers. I'm just wondering if you could just elaborate on the competitive dynamics around large projects and how competitive pricing is? And if you don't think you can get the returns expected on these large orders, then why perhaps some of your peers could actually take them on? I'll stop there. Paolo Compagna: Well, we normally don't comment on what competitors take in. But let me explain what we have done in '25 and what we intend to do in '26. And this is a clear combination of reaction to markets, which, by the way, Carla was mentioning some of our key markets, let us also look at Europe. And you remember, I was quite concerned the last years when it came, by example, to Germany. Now we see also Germany coming to a more positive momentum. What does it mean? In terms of order intake, yes, it's clear, '25, we were selective. We were more selective in the range of the large projects, especially in countries, mainly China, where we were on top of it also reorganizing our structure. In terms of pricing development, here, I'd like to distinguish between these large projects and, let's say, the residential commercial day-to-day business, let's call it this way, in which we see in many markets, pricing opportunities coming up for '26, which will allow also to work more intensively on order intake without jeopardizing our commitment to margins. How much this will be possible to complete? The answer, when it comes to large projects, well, some large projects we do and we will continue to do. Would we accept everything which some of competitors might accept in there. This, I don't like to say we would do. However, all in all, I think the '25 order intake, yes, was very much driven by these 2 decisions and '26 without changing the strategy that much, we are quite confident that we can generate a higher OIT just also by, let's say, business outside of large projects. Rizk Maidi: Understood. And then very quickly, a follow-up. Can you, Carla, maybe comment on the incremental savings in '25? So roughly ballpark, is it CHF 150 million to CHF 170 million. And same thing, if you could just quantify the mix impacts. I'm getting roughly to 40 to 60 basis points, just if you can comment on those. Carla Geyseleer: I would say you're in the right direction, yes. Operator: Next question comes from Vlad Sergievskii from Barclays. Vladimir Sergievskiy: My first one would be on Modernization growth into '26. Obviously, you are building the delivery capabilities, and we see accelerating top line growth in MOD in Q4 already. As you continue to grow it in '26, would you expect MOD backlog to actually decline in '26 or the new demand will still be strong and MOD backlog will still grow? So that's my first question. Paolo Compagna: Vlad, that's a very good question. So first, your assumption should be right. We intend to further grow in Modernization, OIT, but also top line, it means revenue. So hence, we are working to also expand our execution capabilities. Will the backlog continue to grow? Well, I think a little backlog growth should be there, but this will depend very much of how much we can accelerate execution. So therefore, both assumptions are right. Yes, we continue to grow. Yes, we expect higher top line contribution from modernization and maybe a slightly backlog growth, too, as we expand also the execution capability. Vladimir Sergievskiy: Okay. That's very clear. The second one is a very quick one. How do you see the bridge between adjusted EBIT and reported EBIT in 2026? You mentioned CHF 60 million of restructuring costs. Is there anything else in this bridge? Carla Geyseleer: Yes. Well, I mean, it's very restricted to the restructuring costs and the BuildingMinds. And obviously, BuildingMinds has become, I mean, less of a drag also compared to 2025. So yes, there are only duty elements, and I would like to keep it like that. You remember that a couple of years ago, we said, look, I mean, if it's recurring cost, it needs to go into the pure operational, and we like to keep the adjustments to a minimum. Lars Wauvert Brorson: We will take one final question, operator, please. Operator: The last question for today comes from Aron Ceccarelli, Bank of America. Aron Ceccarelli: My first one is on cost savings. You've clearly done a remarkable job over the last 3 years on executing on these efficiencies. If I take your slide of EBIT bridge for 2025, could you perhaps strip out the numbers of cost savings out of this CHF 163 million operational improvement, please? And when you look at 2026, you talked about operational efficiency to basically be the same ballpark of what you deliver on procurement. Can you maybe talk a little bit about in the real world, what are you accelerating there? That would be my first question. Carla Geyseleer: Yes. Thank you for the question. So in '25, I mean, a major part from these operational improvements are coming from what we call the SG&A savings and the supply and procurement savings. So these are the 2, I would say, major ones because they matured already these initiatives and obviously, they yielded very, very well. It doesn't mean, of course, that there were, of course, also efficiency savings in the operation, as I just mentioned before, in the New Installation and in the Modernization, and obviously, they will accelerate in '26. So overall, when we talk about these savings, we aim to go for a similar level in '26 than what we have seen in '25. However, the composition is slightly different. Aron Ceccarelli: And if I look at the CHF 163 million, is it fair to assume that 50% of those kind were savings? Or is it less -- just to have a rough idea? Carla Geyseleer: Yes, yes, absolutely. Yes, I confirm that, yes. Aron Ceccarelli: Around 50%, okay. And my second question is on China. You changed management, I think, at the end of the first half. Clearly, we saw a deterioration on orders and sales there in a tough market. Perhaps could you talk a little bit on real world, what are you guys doing now there? And where are we in the process of the restructuring, please? Paolo Compagna: Yes. The restructuring we have announced last year has been executed, and it consisted in a reset of the leadership team, which has been done. So this was done in the second half of last year, and it has been completed as well as a reorganization of the branches, which has been executed to a large extent last year. So actually, the restructuring we have announced in Q3 last year has been executed in Q4 with some minor actions still to come now in Q1. So hence, we expect in the course of this year,to see first impacts coming out of those actions. Operator: Yes, ladies and gentlemen, that was the last question. Back over to you, Lars Brorson for any closing remarks. Lars Wauvert Brorson: Thank you very much, operator. Thank you all for attending today's call. Please feel free to reach out to me and the IR team for any follow-ups you might have. I know there are a couple of follow-up questions in the queue. So please do reach out. The next scheduled event is our presentation of the Q1 results on April 23. You'll also find our reporting calendar for 2026 at the end of today's presentation deck. So with that, thank you very much, and goodbye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Greetings, and welcome to the Urban Edge Properties Fourth Quarter and Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Areeba Ahmed, Investor Relations Associate. Please go ahead. Areeba Ahmed: Good morning, and welcome to Urban Edge Properties 2025 Year-End Earnings Conference Call. Joining me today are Jeffrey Olson, Chairman and Chief Executive Officer; Jeffrey Mooallem, Chief Operating Officer; Mark Langer, Chief Financial Officer; Heather Olberg, General Counsel; Scott Oster, EVP and Head of Leasing; and Andrea Draven, Chief Accounting Officer. Please note today's discussion may contain forward-looking statements about the company's views of future events and financial performance, which are subject to numerous assumptions, risks, and uncertainties in which the company does not undertake to update. Our actual results, financial condition, and business may differ. Please refer to our filings with the SEC, which are also available on our website, for more information about the company. In our discussion today, we will refer to certain non-GAAP financial measures. Reconciliations of these measures to GAAP results are available in our earnings release and our supplemental disclosure package. At this time, it is my pleasure to introduce our Chairman and Chief Executive Officer, Jeffrey Olson. Jeffrey Olson: Great. Thank you, Areeba, and good morning. 2025 was another strong year for Urban Edge Properties. We generated FFO as adjusted of $1.43 per share, representing 6% growth, driven by the continued execution on our signed but not open pipeline and 5% same property NOI growth. During the year, we continued to set new leasing records. We executed 58 new leases at a record same space cash rent spread of 32% and achieved record shop occupancy of 92.6%. New lease spreads have now exceeded 20% for four consecutive years, reflecting strong demand and limited availability of high-quality retail spaces throughout our market. Given these dynamics, we expect new lease spreads will remain above 20% in 2026. Leverage has clearly shifted to owners of high-quality shopping centers. Our infill densely populated portfolio continues to attract leading retailers, especially for anchor space. Nearly all our national retailers are telling us how difficult it is to expand in our markets due to limited supply, supporting our expectation for healthy rent growth in the coming years. Our signed but not open pipeline continues to be a key driver of growth. In 2025, we commenced over $16 million of new annualized gross rent, including openings from Trader Joe's, Burlington, Ross, Nordstrom Rack, Atlantic Health, Tesla, and many high-performing shop tenants like Cava, Shake Shack, First Watch, Starbucks, and Club Pilates. A remaining signed but not open pipeline is expected to generate an additional $22 million of annual gross rent, representing 8% of current NOI. Our development and construction teams continue to be key drivers of value creation. During the year, we completed 14 projects totaling $55 million, generating unlevered yields of 19%. We currently have $166 million of redevelopment projects underway, expected to generate a 14% unlevered return. Over the past three years, FFO as adjusted has grown at an average annual rate of 6% to $1.43 per share in 2025. This exceeds our 2023 Investor Day target of $1.35 per share and ranks among the highest growth rates in our peer group. This outperformance is a testament to several factors, including our best-in-class team, favorable shopping center fundamentals, and accretive capital recycling. During this period, we acquired nearly $600 million of high-quality shopping centers at an average 7% cap rate while disposing of approximately $500 million of non-core lower growth assets at a 5% cap rate. Looking ahead to 2026, our goals include achieving FFO as adjusted growth of at least 4.5%, same property NOI growth above 3%, and returning leased occupancy toward our historical high of approximately 98%. Our acquisition guidance includes a $54 million shopping center under contract. While we have not included additional acquisitions or dispositions in our guidance, we remain on the hunt for growth opportunities and have several deals in early stages of underwriting. Looking to 2027 and beyond, we expect to increase FFO by at least 4% annually. Our growth outlook is highly visible, with a significant portion coming from six anchor repositioning projects, including Bruckner, Bergen, Cherry Hill, Hudson, Plaza At Woodbridge, and Yonkers. These projects will include new retailers, including BJ's, Trader Joe's, Burlington, HomeGoods, and Ross, and high-quality shop tenants such as Chipotle, Chick-fil-A, T-Mobile, and Cava. Through 2027, more than 80% of our same property NOI growth is expected to come from executed leases, LOIs, and contractual rent increases. Based on the expected timing of rent commencements, we believe 2027 NOI growth will be approximately 5%. We are proud of our sector-leading performance over the past three years and remain well-positioned to build on this momentum in 2026. I will now turn it over to our Chief Operating Officer, Jeffrey Mooallem. Jeffrey Mooallem: Thanks, Jeff, and good morning. Our fourth quarter results capped an exceptional three-year run at Urban Edge Properties, characterized by continued leasing momentum, disciplined redevelopment, accretive capital recycling, and ongoing enhancements to our tenant roster. Let's get into some of the details as well as the reasons why we are so bullish that this run will continue. During the fourth quarter, we signed 47 new leases totaling more than 200,000 square feet, including 14 new leases at an 11% same space spread, and 33 renewals at a 17% spread. That brought our total for the year to 58 new leases for over 360,000 square feet, at a same space spread of 32% and 104 renewals for over 1,000,000 square feet at a spread of 11%. On a portfolio our size, any given quarter can have an outlier or two. But a 32% spread on new leases across the entire year is direct evidence of the competitive tenant demand and increased pricing power that we've seen across our portfolio. Year-end same property lease occupancy was 96.7%. Anchor occupancy ended the year at 97.5%, down 50 basis points from last year, while small shop occupancy rose to a record 92.6%, up 170 basis points from last year. The decline in anchor occupancy is a result of taking back one space, at home at Ledgewood Commons, which we expect to re-tenant soon at a strong overall spread. Nationally, shopping center vacancy remains near historic lows. Supply constraints are especially pronounced in the Northeast, where new construction represents only 0.2% of total supply. Finding land and securing entitlements is extremely difficult in our markets. And even if you do, current market rents do not support today's ground-up development costs. We believe the current supply imbalance will continue, allowing us to negotiate even better lease terms, both economic and non-economic. As it relates to our SACS exposure, we had two SACS OFF 5TH locations at the end of 2025. Our location in East Hanover, New Jersey was paying about $800,000 a year of gross rent and closed in January. The space has excellent visibility in a strong submarket, so we expect to re-tenant it accretively in short order. Our location at Bergen Town Center is one of only 12 OFF 5TH stores that will remain open at full rent. That list includes some of the best retail assets in the entire country, such as Woodbury Commons in New York, Buckhead Station in Atlanta, the Gallery at Westbury Plaza on Long Island, and Sawgrass Mills in Florida, just to name a few. Further testament to how special an asset Bergen Town Center is. Turning to development, we stabilized three projects in the fourth quarter totaling $12 million of investment as rent commenced for Tesla at Total Commons, Dave's Hot Chicken at Yonkers Gateway, and First Watch at Bergen Town Center. These projects will generate about a 26% yield. We also activated four new projects totaling $28 million, bringing our redevelopment pipeline to $166 million with a projected unlevered yield of 14%. As usual, nearly all of our active redevelopment projects are tied to executed leases. At Sunrise Mall in Massapequa, New York, we executed a lease termination with Dick's Sporting Goods in the fourth quarter, the last tenant remaining at the mall. This clears one of the final hurdles needed to advance the project, and it will enable our application for an Amazon distribution center on approximately one-third of the Sunrise Land to advance quickly through the entitlement process. While the Amazon approvals remain our focus, we are in discussions with a variety of users for the remainder of the site, and we hope to have more to announce later this year. And finally, on the capital recycling side, we have executed an agreement to acquire a property in New Jersey for approximately $54 million. The asset is located in a dense, high-income submarket, is 95% leased, and it will generate an accretive yield for us from day one. Closing is expected by the end of the first quarter, so we should have further details on this property on our next call. With that, I'll turn it over to our CFO, Mark Langer. Mark Langer: Thank you, Jeff, and good morning, everyone. We delivered another excellent quarter, capping off a very successful 2025. FFO as adjusted was $0.36 per share for the fourth quarter and $1.43 per share for the full year, representing 6% growth over 2024. Same property NOI, including redevelopment, increased 2.9% for the fourth quarter and 5% for the full year. This growth was driven primarily by rents commencing from our signed but not open pipeline and higher net recovery income, partially offset by higher snow removal expenses, which had a 110 basis point negative impact on same property NOI growth in the quarter. Full-year FFO as adjusted benefited from lower recurring G&A and extracting operational efficiencies as we continued to make progress reducing costs. Our balance sheet remains very well positioned, with total liquidity of $849 million and no amounts drawn on our line of credit. During the quarter, we paid off the $23 million mortgage at West End Commons at maturity using cash on hand. We have no debt maturing until December 2026, with three mortgages aggregating $114 million coming due at a blended 4% interest rate, which we expect to refinance or repay. We ended 2025 with net debt to annualized EBITDA of 5.8 times, below our target of 6.5 times, which provides us with flexibility to seek growth opportunities. Subsequent to the quarter, we amended our line of credit with a new $700 million facility maturing in June 2030 with two six-month extension options and simultaneously executed two $125 million twelve-month delayed draw term loans with a five-year and seven-year maturity. While we do not have immediate plans to draw on the term loans, the delayed draw feature allows us to do so for twelve months from closing and provides us with added flexibility as we pursue our growth plans. Turning to our outlook for 2026, our initial FFO as adjusted per share guidance range is $1.47 to $1.52 per share, reflecting 4.5% growth at the midpoint. Key assumptions within guidance include same property NOI, including redevelopment growth, of 2.75% to 3.75%. Our NOI guidance reflects the full-year fallout from SACS at East Hanover and assumes credit losses of 50 to 75 basis points. On the revenue side, our NOI growth assumes $6 million of gross rent is recognized in 2026 from our signed but not open pipeline, of which 75% is expected to come online in the second half of the year. Therefore, year-over-year NOI growth is expected to build in the second half of the year with lower growth rates in the first two quarters. As I noted, we continue to carefully manage G&A expenses. In 2025, our total recurring G&A was $34.5 million, a decrease of 4% from the prior year. In 2026, we expect recurring G&A to be $34.5 million to $36.5 million, an increase of 3% at the midpoint. As for capital spending, we have $166 million of active redevelopment projects, with $86 million remaining to fund. We expect to spend about $70 million to $80 million during 2026 on these projects and have also budgeted $20 million in maintenance CapEx. As announced in our press release, our Board recently approved an 11% increase in our dividend, to an annualized rate of $0.84 per share, reflecting an FFO payout ratio of about 56%. We expect the dividend to grow as earnings and taxable income grow, while we focus on preserving free cash flow to fund our active redevelopment pipeline that is generating healthy returns. This new dividend reflects the projected growth in our taxable income in 2026. In closing, we are well-positioned to continue driving earnings growth by delivering redevelopment and anchor repositioning projects, obtaining attractive economics on new leases, sourcing new acquisitions, and maintaining a strong balance sheet. With that, I'll turn the call over to the operator for Q&A. Operator: Thank you. If you'd 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'd like to remove your question from the queue. It may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question. Ronald Kamdem: Hey. Great. Just two quick ones. Starting with the shop occupancy, you know, obviously a pretty strong year. 170 basis points year over year. Just hoping you could give some comments on sort of what your expectations going forward in terms of how much more upside is there in that number? Thanks. Jeffrey Mooallem: Ron, good morning. It's Jeffrey Mooallem. Yes, we've messaged pretty consistently that we think that we can get to a steady state somewhere in that 94% range. Once you start getting above 94%, you're really looking at maybe are you not being strategic enough with some of your shop space? There's always gonna be some static vacancy that comes from turning over, you know, vacancies, from tenant A to tenant B. There's always gonna be some, you know, functionally obsolete, you know, back of house storage type space that sits there on our report. When you start backing those out, we feel like 94, 95, 96 is really about as much as we want to push it. This has been an opportunity for our leasing team now that we're into this rarified air on shop occupancy to actually go back around some of the existing tenants and look at, you know, is this a tenant we could get out? And we can replace at a really healthy spread? So it's not just what's vacant today, but it's also about over, you know, better improving the leasing on what's actually occupied. So 93, 94 is probably a good safe bet for us in 2026. Helpful. My second question was just I think capital recycling has been a big theme for you guys. Just maybe talk a little bit more about sort of the acquisition pipeline and some of the cap rates. And then on the disposition side, sort of what are you sort of willing to put on the table this year? In the portfolio? Thanks. Jeffrey Olson: Ron, it's Jeffrey Olson. I mean the acquisition market is maybe as competitive as I've seen it. So cap rates are continuing to come down. There's been a lot of increased interest in the space from institutions. There are a lot of lenders out there, the banks, the insurance companies that are lending at very attractive rates. So the good news is that it makes our existing assets more valuable and will probably allow us to do more capital recycling than we had originally intended because we should be able to get better cap rates on what we're selling. Finding properties at attractive valuations is hard. This property that we found in Bridgewater, we're super excited about that one. I think we're getting that at a cap rate that's north of 7.5%, and it has decent growth attached to it. The tenants include the likes of Chipotle, Shake Shack, Cava, and there's also a health and wellness component to it. I'm hoping that we're gonna be able to use the proceeds from that asset to serve as a 1031 exchange for a center that is Kohl's anchored in New Jersey that would actually be accretive on a cap rate basis first year as well. And if so, it would take Kohl's from being our number three ranked tenant by revenue down to number seven. Then we also have a space in Framingham, Massachusetts that we'll take back from Kohl's that would reduce their exposure even further. So that is the plan as of the moment. Ronald Kamdem: Helpful. That's it for me. Thanks so much. Jeffrey Olson: Okay. You bet. Thank you. Operator: Thank you. Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question. Michael Goldsmith: Good morning. Thanks a lot for taking my question. Can you walk us through the same property NOI growth path over the next couple of years? You did healthy growth in 2025 of 5%. You're pointing to 2026 midpoint of 3.25%. And then mentioned earlier, Jeff, that 2027 will be approximately 5%. So can you kind of walk through what are the puts and takes that drive the deceleration in '26 and then should drive the reacceleration in '27? Mark Langer: Thanks. Sure. Good morning, Michael. It's Mark. So let's just talk from '25 to '26, your first question about the deceleration. Really two things I would point to that are behind that. First is just the fallout from at home last year as well as SACS that we talked about this year. That's a little under $2 million of NOI headwind there. Then I think it was actually you had asked even on our last call whether there was any one-time benefits that came through in '25, and we talked about a 125 basis points of lift for some pretty sizable out-of-period collections that we got in '25 as well as some prior year CAM bills. And so those items, you know, we put more in the one-time bucket. And look, it's not unreasonable to think that we could have other, you know, one-time benefits this year, but unless we have visibility of them, we don't bake them into guidance. So between some of the tenant fallout and those one-timers, that will get you to the deceleration. The second question regarding how do we then pick up in '27, that's really the beauty of what Jeff talked about with our visibility from just the signed but not open pipeline. That we can see 80% of NOI growth coming from stuff that's already executed that we have to deliver. And that maps, Michael, to what we've disclosed kind of in our signed but not open bridge. So those would be the two big factors. Michael Goldsmith: Mark, thanks for that. That's really helpful. And then just as a follow-up, I think last year, you started with a bad debt guidance of 75 to 100 basis points, believe, in your prepared remarks, you talked about 50 to 75 basis points. So can you talk about what's the what changes this year and does that reflect just kind of those in the watch list that, you know, the names that you kinda talked about just in the prior response coming out, and that gives you a cleaner portfolio based on what you see right now for '26? Thanks. Mark Langer: Yeah, Michael. Look, I think it's a function just of some of the changes in the environment. When we sat here last year, the names that we were worried about between Party City and Michael's and Joanne's and At Home which, you know, did file but took longer than we thought. So, really, the bad debt guidance this year is lower just because when we look through our portfolio tenant by tenant and really think about, you know, where is the most elevated risk of someone that's really gonna fall out, we just feel better about the environment with our tenancy today than we did, you know, last year, a little bit on the margin. As you said, you know, the 50 to 75. So it's really just a function of our assessment, you know, looking through the tenancy of the portfolio today. Michael Goldsmith: Thank you very much. Good luck in 2026. Mark Langer: Great. Thank you. Operator: Thank you. Our next question comes from the line of Michael Gorman with BTIG. Please proceed with your question. Michael Gorman: Thanks. Good morning. Mark, if I could just go back to the same store for a second, you mentioned the tenant fallout. You also mentioned snow removal costs in the fourth quarter, I thought I heard. And I'm just wondering what you might have baked into the 2026 guidance for the winter storms that have already gone through the Northeast that might be having an impact there. Mark Langer: Yes. I mean, January was certainly off to a tough start. So what I can tell you, Michael, is our guidance range this year accounts for our estimate of what we incurred in January. We're still going through and closing the books for that. Luckily, February, while brutally cold here in the Northeast, knock on wood, you know, hasn't had additional snowfall. So we feel that we've appropriately provisioned for snow in our guidance. Michael Gorman: Okay. That's helpful. Thanks. And then maybe just switching to the redevelopment pipeline. You talked about it a bit in the prepared remarks. 14 projects completed successfully last year. I think another 13 are gonna complete this year. You know, you have a few listed out as potential starts. Can you just talk about additional opportunities, especially if acquisitions are going to remain challenging to maybe accelerate starting new redevelopment projects in the existing portfolio? Thanks. Jeffrey Mooallem: Yeah. Good morning, Mike. It's Jeffrey Mooallem. Yeah. I think you can think about our redevelopment program in two buckets. One of which is really the kind of blocking and tackling stuff that we consistently get these double-digit yields on where we're re-tenanting an anchor space, we're adding a pad, we're maybe expanding a building somewhere. You know, the sort of the day-to-day, for lack of a better term, development work that we do here where we're repositioning our portfolio and constantly trying to improve it and enhance it. And if we can do that with better tenancy, maybe add some GLA, maybe turn a vacant old bank pad into a new restaurant pad, and do that in that 14, 15, 16% yield range. We're doing that all day long, and that comprises our $166 million redevelopment pipeline. The second component of it is what we would call sort of the bigger undertakings that frankly don't, you know, get reported every quarter because they don't come along every quarter. So things like Sunrise Mall, Jersey City, New Jersey, Hudson Mall, Yonkers, Bruckner. Some of our bigger projects where we are maybe having to go through a year or two of entitlement work, in order to get to where we wanna get to, and they might involve some demolition. They likely will involve an anchor tenant, like an Amazon or, like, Walmart. Those projects take longer and are more complex and cost more money. But they add significant growth to us when they do come online. The perfect example being in 2027 when we'll see a lot of our heavy lifting at Bruckner come online. So, you know, we generally like to play in those two fields. I don't think you're gonna see us buying a lot of vacant land and building ground up, as I mentioned in my remarks. It doesn't really pencil out for anybody these days. And when we have the opportunity to hedge the portfolio in either a small bucket or a large bucket, that's what we're trying to do. Michael Gorman: Great. Thank you for the time. Operator: Thank you. Our next question comes from the line of Michael Griffin with Evercore ISI. Please proceed with your question. Michael Griffin: Great. Thanks. Three Michael Gs in a row. Gotta love it. Jeff, my question to you is just on the leasing on the quarter for new lease spreads came in at about 11%. I know that these things can be choppy quarter over quarter, and it seems like you're projecting 20% new lease spreads for the year ahead. But I mean any kind of puts and takes or things just on the quarterly number that maybe it came in a little bit lighter? Can you give us some context around that? Jeffrey Mooallem: It was just a low number overall. It was only on 37,000 square feet of space. So I think you have to look at it more on a four-quarter rolling basis. Michael Griffin: Great. That's some helpful context. And then maybe just going back to kind of the capital recycling theme. Is there an opportunity, I guess, within your centers to potentially carve out and dispose of the, you know, anchor tenant that might be there for a while, but has flat lease escalators. Right? You know, I think about, like, the Home Depot at Hanover Common. Right? High-quality tenant in a great center, but probably doesn't have a lot of growth there. Is that, I guess, a capital recycling avenue that you can then redeploy those proceeds into higher growth opportunities while still maintaining, you know, some of the other tenants within the center? Jeffrey Olson: Yes. I mean, I think it is. What we don't want to do is chop up the center. So in East Hanover, because Home Depot shares a parking lot with other tenants, it just makes it more complicated, and we want to be in control. But we absolutely have, you know, freestanding Home Depots and Costcos and Lowe's that operate independently, where the land is subdivided or it will be. So, we do think that's an attractive source of capital. And we've been using that over the last several years. So we have sold some spaces back to Home Depot and others. Michael Griffin: Great. That's it for me. Thanks for the time. Jeffrey Olson: Okay. Appreciate it. The next Michael G, please. Operator: Thank you. Our next question comes from the line of Floris Van Dijkum with Ladenburg Thalmann. Please proceed with your question. Floris Van Dijkum: Thanks. I'm definitely not a Michael G. So thanks, guys, for taking my question. So getting maybe a little bit more into the capital recycling which you guys have done incredibly well over the last couple of years, mind you. But as cap rates have compressed in your core markets, maybe talk about the, you know, the cap rates added and, you know, the spread that you've historically achieved. How is that? It looks like it's shrinking if I look at what you did the assets you sold last year and the asset you bought in Massachusetts. There's a 50 basis point spread there. It's still positive. But you used to be able to get significantly higher spreads on your capital recycling. How do you see that transpiring going forward? Maybe if you can talk a little bit about that and what you think is happening to cap rates. Jeffrey Olson: Yeah. I mean, spreads clearly have narrowed. So I think achieving a 200 basis point spread, as we've done, is unlikely. But I think what's highly likely is that, you know, that spread of 50 basis points, call it, that we did last year, when you look at the growth rate on what we're buying versus what we're selling, I think there may be a two to 300 basis point spread in growth on an annual basis. So we are looking to use capital recycling to accelerate our internal growth by selling some high-quality, you know, good credit assets that might have 1% growth and exchanging those in an accretive manner initially with assets that might be growing at two and a half to 3% and might have some opportunities for redevelopment in the future. Floris Van Dijkum: Thanks, Jeff. Maybe my follow-up. If you could talk a little bit about two assets in particular. One, Gateway, which has very low rents. Curious as to what you're doing to optimize rents and growth in that asset. And then Bruckner, which, obviously, you're spending a lot of capital, which should be one of your best assets when it's fully completed. And do you think you can do something like what you've done in Bruckner at Gateway going, you know, I guess is my question? Jeffrey Mooallem: Hey, Floris. Good morning. It's Jeffrey Mooallem. Yeah. Let's take Gateway first. I mean, as you're right, big piece of property, sitting in Everett, Massachusetts, you know, Boston skyline on the horizon right next to Encore hotel and soon to be right next to the new Major League Soccer stadium in New England. So it's just a fantastic piece of land. Unfortunately, it's got a lot of tenants with a lot of long-term leases, so we could snap our fingers and get space back, I think you'd see us, you know, be able to meaningfully move the needle on what that asset could look like and the rents that we could achieve on it. But, like a lot of these types of power centers, it'll be a longer, slower one. As we get space back, we're able to re-tenant it. Would love to add a Trader Joe's or a Sprouts or a high-end grocer there. We just don't have a space for them. So that will be something we continue to talk about internally. But, right now, it's pretty much fully leased. There's one small vacancy that we have a lot of interest in. But, until we can get some of the anchor and junior anchor space back, there's not a lot more we can do there. Bruckner is a perfect example, though, of what happens when an opportunity does present itself. Losing the Kmart there gave us the opportunity to really rethink not just the Kmart and the Toys R Us that was in front of it, but the whole shopping center. And if you look if you were to go out to Bruckner today, you would see a pretty heavy construction site. And if you go out to Bruckner a year from now, you would see a Chick-fil-A on the corner open for business, a Chipotle open for business, and hopefully a BJ's Brewhouse and a Ross Dress for Less open for business. So when you add those kinds of tenants, you're adding effectively a third grocer with BJ's to the ShopRite and the Aldi that are already there. When you add those kinds of tenants and you bring in more soft goods, we have Marshalls, we've got Burlington. Now we'll be adding Ross and another soft goods tenant next to Ross. And then, of course, you add food offerings like we'll be able to put in, anchored by Chipotle and Chick-fil-A. Like, that asset really does become a complete redevelopment and one that we're incredibly proud of. Jeff likes to say that when he started Urban Edge, it was the ugliest shopping center he ever saw. And now we all kinda think it's one of the nicest shopping centers, certainly in, you know, in the five boroughs. So, Bruckner is a good litmus test for where we'd like to get to, but we have to have the space back first to get it. Jeffrey Olson: And to put Bruckner in context, I think our NOI was around $7 million last year at Bruckner. And in 2028, we're expecting it will increase by $8 million to $15 million. So it's driving a lot of growth over the next several years. Floris Van Dijkum: Thanks, guys. Jeffrey Mooallem: Thanks, Floris. Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Olson for any final comments. Jeffrey Olson: Great. We appreciate your interest in our company and look forward to seeing you soon. Thank you. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Royalty Pharma Fourth Quarter Earnings Conference Call. I would now like to turn the conference over to George Grofik, Senior Vice President, Head of Investor Relations and Communications. Please go ahead, sir. George Grofik: Good morning, and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma's fourth quarter and full year 2025 results. You can find the press release with our earnings results and slides to this call on the investors page of our website at royaltypharma.com. On Slide two, I'd like to remind you that information presented in this call contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from these. We refer you to our most recent 10-K on file with the SEC for a description of these risks. All forward-looking statements are based on information currently available to Royalty Pharma, and we assume no obligation to update any such forward-looking statements. Non-GAAP liquidity measures will be used to help you understand our financial results, and the reconciliation of these measures to our GAAP financials is provided in the earnings press release available on our website. And with that, please advance to Slide three. Our speakers on the call today are Pablo Legorreta, Chief Executive Officer and Chairman of the Board; Christopher Hite, EVP, Vice Chairman; Marshall Urist, EVP, Head of Research and Investment; and Terrance Coyne, EVP, Chief Financial Officer. Pablo will discuss the key highlights, after which Christopher will discuss our transaction pipeline. Marshall will then provide a portfolio update, and Terrance will review the financials. Following concluding remarks from Pablo, we will hold a Q&A session. And with that, I'd like to turn the call over to Pablo. Pablo Legorreta: Thank you, George, and welcome to everyone on the call. 2025 was truly a landmark year for Royalty Pharma, as we executed successfully towards our goal to be the premier capital allocator in life sciences with consistent compounding growth. Slide five summarizes a strong momentum over the year. Starting with the financials, we delivered strong double-digit growth in both portfolio receipts, our top line, and royalty receipts, which are our recurring cash flows. We raised our guidance three times in the year and delivered full-year results slightly above the top end of our most recent update. This tremendous momentum was driven by the strength of our diversified portfolio. We maintained strong returns in our business with a return on invested capital of 15.8% and a return on invested equity of 22.8% for the year. By combining strong growth and attractive returns, we believe we have a clear path to drive shareholder value creation. Looking ahead, our 2026 full-year guidance implies 3% to 8% growth in royalty receipts, which reflects the strength of our base business. As usual, our guidance is based on our current portfolio and does not include the benefit of any future transactions. In 2025, we also completed one of the most transformative steps in our company's evolution through the internalization of our external manager. This brought together our valuable intellectual capital and our unique royalty portfolio. We are already seeing benefits from improved alignment and governance as well as from a significant reduction in costs. Turning to capital allocation, we announced $4.7 billion of transactions on attractive therapies during the year and deployed capital of $2.6 billion. At the same time, we returned $1.7 billion of capital to shareholders. We repurchased 37 million shares for a total of $1.2 billion and paid over $500 million in dividends. And we increased our dividend by 7% in 2026, consistent with our mid-single-digit growth target. We are also delighted to see multiple positive clinical and regulatory updates across our portfolio, including FDA approval of Mycorso and positive Phase III results on TERNFIA. Looking ahead, we see the potential to unlock significant additional value from our large and, we think, underappreciated development stage pipeline, whereas Marshall will highlight we expect multiple pivotal readouts in the relatively near future. As many of you know, slide six is a particularly favorite of mine, as it demonstrates our consistent double-digit growth on average since our IPO. We have delivered this impressive record year in, year out, regardless of the market backdrop. This speaks to the quality of our asset selection and our unique business model. Slide seven underscores an important trend. In 2025, the biopharma market reached $10 billion in announced transaction value for the first time ever. The strong growth trajectory is clear. Over the past five years, the average annual value nearly doubled versus the prior five years and is nearly triple the level of fifteen years ago. This is a market that Royalty Pharma pioneered and that we continue to lead in both share and innovation. Most importantly, we expect this growth to continue, driven by the increasing recognition of the benefits of biopharma royalties, huge demand for capital in life sciences, and the incredible pace of scientific innovation. On slide eight, my final slide, we show that we are executing exceptionally well against our financial targets. On our 2022 Investor Day, we introduced clear targets for top-line growth and capital deployment. And I am pleased to report that we delivered on both. We achieved compounded annual portfolio receipts growth of 13%, squarely within our target range of 11% to 14% for the 10% or greater top-line growth over the decade as a whole. We have also reached our five-year capital deployment target of $10 billion to $12 billion approximately one year ahead of schedule. Furthermore, I am incredibly proud of the breadth and quality of the deals we have announced, and our transaction pipeline remains strong. I could not be more excited for the potential to scale our capital deployment given the strong fundamental tailwinds underpinning our business. Now before turning the call over to Christopher, I'd like to offer a bigger picture perspective on Royalty Pharma, particularly in an environment of significant uncertainty. Royalty Pharma is a unique compounding machine. We grow consistently, year in and year out, and delivered an impressive 16% growth last year. Our business delivers consistent returns to our shareholders. You will hear later from Marshall, we have also a number of potential value-enhancing pipeline readouts in the near term. Our business is resilient, and in a time of uncertainty, we believe we offer a very compelling investment proposition. And with that, I will hand it over to Christopher. Christopher Hite: Thanks, Pablo. It's my pleasure to give an update on our transaction pipeline and the growing demand for Symphony synthetic royalties, the attractive non-dilutive funding paradigm that we pioneered. Beginning on slide 10, this provides a broad overview of the investments we made in 2025 in our transaction funnel. As you can see, we were incredibly busy and reviewed more than 480 potential royalty transactions. This resulted in 155 confidentiality agreements signed, 109 in-depth reviews, and 35 proposals submitted. Our disciplined and highly selective approach resulted in us executing eight transactions for nine therapies, or just 2% of our initial reviews, for an announced value of $4.7 billion. Slide 11 expands on the funnel with a longer-term perspective on our investment activity. Since 2020, the year of our IPO, the team has nearly doubled the volume of initial reviews conducted and has more than doubled the number of in-depth reviews. The growth in our funnel has come during periods of both strong and more restrictive capital markets, highlighting how the benefits of royalties are becoming more widely recognized. Furthermore, we are encouraged that the growth in our in-depth reviews, which is where our team spends more time and due diligence, has kept pace with initial reviews, indicating that an increasing number of high-quality biopharma companies are evaluating royalties as part of their capital structure. Moving to slide 12, 2025 was our strongest year ever for synthetic royalty transactions, with four synthetic deals totaling more than $2 billion. This was over five times higher than the transaction value in 2020. In each of the four transactions, we acquired a royalty on a potentially transformative best-in-class therapy. And 2026 has continued in a similar fashion with its synthetic deal on Teva's potential vitiligo therapy, Teva 408, for up to $500 million. Let's look more broadly at the synthetic royalty opportunity on slide 13. 2025 set a new record for synthetic royalty transactions, with the market value jumping by about 50% versus the prior year to $4.7 billion. The graphic on the right shows that over the past five years, biopharma funding has been dominated by equity, licensing deals, and debt. Synthetic royalties have been a small part, just 5%. From our ongoing partnership discussions, we see synthetic royalties being routinely discussed at the board level and C-suites as an important and growing funding modality. Why is this? Simply put, synthetic royalties solve funding problems in a way that equity and debt can't, and are increasingly being recognized as an important part of a biopharma company's capital structure. More specifically, compared with traditional debt and equity financing, they offer greater flexibility, no operational restrictions, they are non-dilutive to equity holders, and they can be tailored to the individual needs of a company. This drove our groundbreaking transaction with Revolution Medicine. And given our leadership in this space, we believe we are optimally positioned to benefit from this important paradigm shift in biotech funding. So to close, we are confident that synthetics will be an important growth driver in the coming years. With that, let me hand it over to Marshall. Marshall Urist: Thanks, Christopher. I want to discuss two important aspects of our portfolio today. First, I'll look back at 2025 capital deployment to highlight some key themes. And then second, to look forward toward important 2026 events in our broad development stage portfolio. Slide 15 demonstrates how well we executed against our capital deployment strategy in 2025. Deployed capital of close to $900 million in the fourth quarter alone, highlighting our scalable and flexible diligent deal execution capabilities. We acquired existing royalties on approved products Ambutra, for ATTR amyloidosis, Epirizvi for SMA, as well as the synthetic royalty on the expected approval of Denali's groundbreaking therapy for a rare condition called Hunter syndrome. We also acquired existing royalties on Nuvalence's two lung cancer therapies that are expected to be FDA approved in 2026 and 2027. This busy quarter took our total capital deployment for the year to $2.6 billion, which resulted, as Pablo highlighted, in the achievement of our five-year capital deployment target of $10 billion to $12 billion one year ahead of schedule. Taking a step back shows how we were able to deliver balanced capital deployment to our shareholders year in and year out, with 67% of our 2025 investments in approved products and 33% in development stage therapies, right in line with our historical average. What's also remarkable is the diversity underlying our $4.7 billion in announced transaction value. As a reminder, announced value is a broader measure than capital deployment that includes potential future payments and obligations in addition to upfront amounts. 2025 was also the first year that synthetic royalties exceeded existing royalties in committed capital, reinforcing Christopher's comments about the important role of synthetic royalties in the biopharma funding ecosystem. Slide 16 summarizes the four exciting transactions that we completed over the last three months for a combined announced value of $1.4 billion. The first thing to note is that the transactions cover four very different therapeutic areas, marketers, and development stages, showing how our investment approach consistently produces diversity in our royalties. Second, two of the four transactions are synthetic royalty deals, including Denali and most recently, Teva's potentially transformative vitiligo therapy, TEV-408. The existing royalty transactions cover Nuvalence's two development stage drugs for small cell lung cancer, and the residual royalty in Roche's blockbuster Evirizvi. Third, these largely are or are expected by consensus to be blockbuster medicines. This highlights our disciplined focus on innovative, first or best-in-class medicines to drive our diversified, sustainable, and attractive growth profile. Next, I'll turn to our development stage pipeline and upcoming events. We're exceptionally well positioned for our next wave of value creation with one of the deepest and most innovative development stage pipelines in the industry. Slide 17 shows that our portfolio already delivered a number of successful Phase III readouts and regulatory approvals in 2025. Most recently, the FDA approval and launch of Cytokinetic Mycorso and Obstructive hypertrophic cardiomyopathy. And these events together will lead to several new royalty-generating launches this year. Now unlike many biopharma business models, Royalty Pharma is not defined by any single clinical trial outcome. Slide 18 shows that there is much more to come from our development stage pipeline, with multiple pivotal readouts expected over the next twenty-four months. 2026 will be an exciting year. We'll see the first phase three data on Revolution Medicine directs on Rasib in pancreatic cancer, a drug which has the potential to revolutionize this devastating disease. We'll also see the results of the first outcomes trial for our investments in the LP little a class of drugs with Novartis' policarcin. We continue to believe that the LP little a class could be the next major class of cardiovascular disease drugs, and we're perfectly positioned with the two lead pipeline products in pelicarcin and Amgen's olpasiran. We'll also see data for Biogen's litifilimab in lupus late this year or early next year. And while not on this slide, we expect to see data this year for Mycorso in nonobstructive hypertrophic cardiomyopathy, which is a potentially large new indication. In 2027, we expect pivotal data from Sanofi's rexalimab in multiple sclerosis and from J&J's seltorexant in major depressive disorder. We'll also see the LPA outcomes trial from opaciran. Each of these potentially transformative therapies would add very significant royalties to our top line. More broadly, we work look across our entire pipeline of 20 development stage therapies, we estimate combined peak sales of over $43 billion on a non-risk adjusted basis, which could translate to over $2.1 billion in peak annual royalties to Royalty Pharma. So to close, there is really significant but underappreciated potential in our pipeline. In the next two years, we'll see multiple events that could unlock substantial value. At the same time, this isn't it, and our ongoing capital deployment will allow us to expand and repopulate our pipeline in the years to come. And with that, I'll hand it over to Terrance. Terrance Coyne: Thanks, Marshall. Let's move to Slide 20. This slide shows how our efficient business model generates substantial cash flow to be reinvested. Royalty receipts grew by 17% in the fourth and 13% for the year, reflecting the strength of our diversified portfolio. When we add in milestones and other contractual receipts, portfolio receipts, our top line grew 18% in the quarter and 16% for the year. As we move down the column, operating and professional costs equated to 6.7% of portfolio receipts in the fourth quarter and 8.9% for the year. The quarter clearly demonstrates the benefit of cash savings from the internalization transaction, which we completed in May. Net interest paid was de minimis in the quarter, reflecting the semiannual timing of our interest payment schedule, with payments primarily in the first and third quarters together with the interest we received from the cash on our balance sheet. For the year, net interest paid was $242 million. Moving further down the column, we have consistently stated that when we think of the cash generated by the business to then be redeployed into value-enhancing royalties, we look to portfolio cash flow, which is adjusted EBITDA less net interest paid. This amounted to $815 million for the quarter and $2.7 billion for the year. Our margin for the year of around 84% again demonstrates the high underlying level of cash conversion and efficiency in the business. Capital deployment in the quarter of $887 million took us to $2.6 billion on a full-year basis, reflecting the high level of transaction activity you heard about earlier. Lastly, our weighted average share count declined by approximately 5% in the quarter versus the prior year period, and by 5% for the year, reflecting the impact of our share buyback program. Slide 21 provides more detail on the evolution of our top line in 2025. Royalty receipts, which we consider our recurring cash inflows, grew by 13%. Key drivers were the strong performance of Voronego, Trelegy, Tremfya, and the cystic fibrosis franchise, with very little contribution from new acquisitions made in the year. Portfolio receipts grew by 16% at the high end of our guidance of 14% to 16% and well ahead of our initial guidance of around 4% to 9%. Slide 22 updates our recently introduced portfolio return for the full year. Return on invested capital has been remarkably stable, at around 15% on average from 2019 to 2025, was 15.8% in 2025. Return on invested equity, which shows the impact of conservative leverage on our equity return, has been consistently in the low 20% range and was 22.8% in 2025. Both figures for 2025 included a benefit from the sale of the MorphoSys development funding bonds. As a reminder, we sold the MorphoSys development funding bonds in the first quarter for proceeds of $511 million, which resulted in an IRR of approximately 25% on our investment. As I have said previously, we are in the returns business, and these metrics show that we are continuing to invest at attractive returns that will drive long-term value for our shareholders. Slide 23 shows that we continue to maintain the financial flexibility to execute our strategy and return capital to shareholders. At the end of 2025, we had cash and equivalents of $619 million. In terms of borrowings, we have investment-grade debt outstanding of $9.2 billion, including the $2 billion of notes we issued in the third quarter, and the weighted average duration of our senior unsecured notes is around thirteen years. Our leverage now stands at around 3x total debt to adjusted EBITDA, or 2.8x on a net basis. We also have access to our $1.8 billion revolver, which is undrawn. Taken together, we have access to over $3.5 billion of financial capacity through cash on our balance sheet, the cash our business generates, and access to the debt markets. Turning to our capital allocation framework, we deployed $2.6 billion of capital on attractive royalty deals in 2025. At the same time, we returned a record $1.7 billion to our shareholders, including share repurchases of $1.2 billion and our growing dividend. Slide 24 provides our full-year 2026 financial guidance. We expect portfolio receipts to be in the range of $3.275 billion to $3.425 billion. This assumes growth in royalty receipts of around 3% to 8%, reflecting the strong underlying momentum of our diversified portfolio. Our guidance takes into account the loss of exclusivity for Promacta as well as the launch of biosimilar TYSABRI in the United States and the potential impact of IRS. It also reflects an expected decrease in milestones and other contractual receipts from $128 million in 2025 to approximately $60 million in 2026. Importantly, and consistent with our standard practice, this guidance is based on our portfolio as of today and does not take into account the benefit of any future royalty acquisitions. Payments for operating and professional costs are expected to be in the range of 5% to 6.5% of portfolio receipts in 2026. This significant reduction when compared with 8.9% in 2025 is primarily the result of cost savings from the internalization of the manager. Lastly, interest paid is expected to be around $350 million to $360 million in 2026. Based on our semiannual payment cycle, we anticipate interest paid to be around $175 million in each of the first and third quarters, with de minimis amounts payable in Q2 and Q4. The year-over-year increase reflects interest payments on the $2 billion in notes issued in September 2025, for which the first payment will be paid in the first quarter. This guidance does not take into account interest received on our cash balance, which was $34 million in 2025. As a final consideration, we expect to issue equity performance awards, which is our long-term incentive compensation program, due to the success of investments in 2020 and 2021. We expect equity performance awards to be approximately $85 million in 2026, with approximately half of that value reflected in the share count over the course of the year. This is very similar to the $81 million in equity performance awards that were earned in 2025. Slide 25, my final slide, drills down deeper into our 2026 top-line guidance. We expect royalty receipts to benefit from multiple growth drivers, including established royalty streams on Trelegy, Tremfya, and Evrysdi, as well as the strong launch trajectory of Voronega and the recent royalty acquisitions on Ambeltra and Ambutra. Together, we expect these drivers to allow us to absorb the impact of the LOEs on Promacta and Tysabri while still driving royalty receipts growth of 3% to 8%. Portfolio receipts, of course, include the more variable milestones and other contractual receipts, which are expected to be approximately $70 million lower in 2026, as I already noted. To close, we delivered a strong fourth quarter and full year, and our guidance for 2026 puts us well on track to achieve our long-term financial objectives. With that, I would like to hand the call back to Pablo. Pablo Legorreta: Thanks, Terry. To conclude, I would like to stress how delighted I am with our performance in 2025. I started out by saying it was a landmark year. On all key measures, growth, returns, strengthening our portfolio, and maintaining market leadership, we delivered. I want to close on Slide 27 with a reminder of why we believe we are well-positioned to drive strong value creation. First, we are the clear leader in the rapidly expanding biopharma royalty market with strong fundamental tailwinds, reflecting the huge demand for funding life sciences innovation. Second, we have a best-in-class platform for investing in the most transformative and innovative products marketed by premier biopharma companies, and we expect to remain the undisputed leader. And looking ahead, we are excited about the prospect of expanding our team and platform in China. So stay tuned. Third, we have an incredible track record of delivering consistent and attractive returns, including an IRR and return on invested capital in the mid-teens and a return on invested equity of over 20%. Lastly, we expect to deliver strong global utility top and bottom-line growth through 2030 and beyond. As a result, we are confident we are on track to generate annualized total shareholder returns of at least the mid-teens over the next five years. With the manager now internalized, our shareholders are positioned to benefit from durable value creation in 2026 and beyond. With that, we will be happy to take your questions. We will now open up the call to your questions. Operator, please take the first question. Operator: For your name to be announced. And to withdraw your question, press 11 again. The first question comes from Geoffrey Meacham with Citi. Your line is now open. Geoffrey Meacham: Alright. Great. Thanks for the question, guys. Just have two. The first on dividend and buybacks. Last year, you guys had a big step up. How sustainable is that looking to 2026? Do you feel like that could have been better spent on royalty deals? I guess I'm just trying to get a sense for how the deployment mix can evolve. And the second question is, have thawing of the capital markets this year. Is there an accretive way for royalty to get more involved in, say, privates or crossovers or even IPOs? I wasn't sure how you view the returns there versus a more mature process. Thank you. Pablo Legorreta: Sure, Jeff. Thanks for your question. Terry, why don't you take the first question, and then Christopher can answer the second one on capital markets? Terrance Coyne: Sure, Jeff. So at the time of the internalization, we laid out what we call our dynamic capital allocation framework, where we're thinking about how we're going to deploy capital based on the relative attractiveness of the royalty opportunities weighed against the relative value of our stock price relative to intrinsic value. So think when you look at 2025, it's a pretty good example of how we think about it. We started the year. Deal activity in the beginning of the year was a little bit slower. And our stock price was, we thought, at a really attractive valuation. And so we accelerated our share repurchases in the beginning of the year, particularly in the first quarter and also into the second quarter. And then as deal activity picked up a lot in the second half of the year, we dialed back our share repurchases. And we spent a lot of capital on new investments, which we think drove really, we will drive really attractive long-term returns. So I think going forward, we're going to continue to take the same approach. We're going to look at relative value. Right now, I would say, you know, we feel really, really excited about the pipeline and the opportunities for royalties. But we're going to continue to return capital to shareholders through share repurchases and dividends. But I think the priority right now is probably a little bit more biased towards the royalties. Christopher Hite: And on your second question, Jeff, following the capital markets, I mean, and whether we could get more involved potentially with private companies. We, you know, we're very focused on high-quality pharmaceutical products, biopharmaceutical products. And if they're housed within a private company, you know, we look at those all the time. And our focus really is on investing in high-quality assets. We have made some investments, you know, on private companies over the years, you know, small equity investments associated with potential royalties, and that's something we always do. But I think we're excited really with just the growth of the opportunity set, whether the markets are strong or weak. You've seen our reviews and our opportunity set grow in any environment in the capital market. So that's really the focus. You know, we're really hunting for really high-quality assets wherever they are. Geoffrey Meacham: Great. Thanks, guys. Operator: Thank you. And our next question will come from Michael Nedelcovych with TD Cowen. Your line is open. Michael Nedelcovych: Hi. Thanks for the questions. I have two. My first is on Alephrek. I know the arbitration around the royalty is ongoing, so my question is not about the royalty, but rather about the product's end market performance. We're now past one year into the launch of the drug. How has Vertex's conversion of CF patients over to Alifrac been tracking relative to your assumptions? At peak, Vertex expects to convert the majority of patients. Do you agree with that outlook, and how long do you think it could take? That's my first question. And then my second question relates to your view of the general medicine and cardiometabolic disease categories, which I know is kind of a broad topic. But there's something of a debate as to whether long-acting injectables or daily orals are best positioned to capture the largest slice of the commercial opportunity in diseases like high cholesterol, hypertension, and obesity. Do you have an opinion on this? If you were to wade more deeply into the chronic disease waters, should we expect Royalty Pharma to exhibit a strong opinion on drug delivery format, or would you try to diversify? Thank you. Pablo Legorreta: Sure. Thanks for your question, Mike. Terry, why don't you take the first one on alastrex, and then Marshall can take on the second question. Terrance Coyne: Sure, Mike. So it's a great question. When Alistair first launched, I think there was from investors a lot of debate about how rapid the conversion would be. And I think there were many that thought that the conversion would be pretty rapid. And we had a different view at the time that we thought that it would be gradual. And it's really because TRIKAFTA is just an amazing drug that's totally transformed that disease. And so, you know, it's sometimes hard to switch from something that's working really well. So I think by and large, it's been pretty consistent with what we thought. It has been gradual but steady. I think it's tough for us to speculate at this point on what percent will ultimately go to Elliptrak. But I think either way, what we laid out at our Investor Day I think is how we think about it long term. Where, you know, we think that by 2030, even with a lot of patients switching to a LiftTrak and under a downside case, where we are not successful in the arbitration, that we still would recognize portfolio receipt or royalty receipts from the CF franchise of around $800 million, which is above what our initial sort of downside range was a couple of years ago. So overall, we expect CF to remain a really important contributor over the long term, and it was great to see 2025, it actually grew our royalty receipts actually grew 7% for the year even in the face of, you know, conversion to ElivTrak where we're currently getting a lower royalty rate. Marshall Urist: Great. Mike, good morning. And to your question on general medicine products and the cardiovascular and the cardiometabolic market, specifically. You know, first of all, I'd just make a general comment, which is, you know, when we look at that whole area, general medicine, you know, cardiovascular disease, cardiometabolic disease. You know, we're certainly excited about that and see a lot of opportunity there in the future, and it's a place where, you know, we continue to look for opportunities, you know, like you've seen us do in the past. I think to your question specifically about, you know, what will sort of be a preferred delivery option, you know, I would point to the lessons that we've seen from, you know, current markets. Right? You know, you look at next-generation cholesterol agents. Right? You have kinda two very different dosing profiles there, and, you know, they've both found success. So I think the incredible thing about those markets is they're so big. There's such a diversity of, you know, patient need and preference that, you know, there's opportunities for lots of different profiles, and you'll see us approach it in the same way we've done in the past, which is, you know, finding a combination of a differentiated product that's important to patients in the hands of a marketer that we believe, you know, certainly with our partnership, could maximize the value of that product. And, you know, we continue to look for those opportunities and, you know, we'll bring the same discipline and patience that we have in the past. And when we find the right thing, we will certainly go after it vigorously. Michael Nedelcovych: Great. Thanks so much. Operator: Thank you. And the next question will come from Terence Flynn with Morgan Stanley. Your line is open. Terence Flynn: Great. Thanks for taking the questions. I had two as well. Christopher, you mentioned on one of your slides that this is the first year, I think, that synthetic royalties and announced value has exceeded traditional royalties. So just as you think about the trend this year, do you think that will continue on mix? I know it's a little bit opportunistic, but just how do you think about that going forward? And then one for Marshall, on LP, again, you know, you guys are levered to a few of the late-stage products here. Novartis' trial, as everyone knows, was delayed to the second half of this year. So just how do you think about that in terms of likelihood of success for maybe this trial, but then any implications for the second readout, which I believe we're gonna get from Amgen in '27. Thank you. Christopher Hite: Yeah. Thanks for the question, Terence. And actually, it was actually Marshall on his slide that he commented on the one pie chart where synthetics were a little bit larger than the existing royalty capital deployment, at least around the announced value of the deal to 44% last year versus 40% for an existing royalty. Look. The bottom line is we're super excited about the synthetic royalty market as we've said at our analyst day and on these calls. I think you're really seeing that come through. The Deloitte survey really highlighted, I think, the growth and the awareness of how we can work with companies and why synthetic royalties are a better solution in some cases and in a lot of cases, compared to debt or equity financing for companies. And so we see the excitement in the sector every single day. We're getting calls every single day around that opportunity, and for us, it's really always just maintaining discipline and investing in really high-quality opportunities. But, you know, the opportunity set is there, and we see the growth continuing for sure. Marshall Urist: And then, Terence, your question on LP, so no change in our enthusiasm there. As we've been highlighting, you know, we are really excited about the potential of this class. The news on the timing, I think as we talked about in the past, you know, when you run a first-in-class outcomes trial, you know, a big question is, of course, gonna be the event rate. And specifically, in this case, you know, this is a population where, you know, the exact event rate hasn't really been characterized. Certainly, in a group of patients who are, you know, pretty well treated in terms of other factors like LDL cholesterol. So, you know, in our mind, there was always a pretty significant range on what the event rate could be and what the timing would be. So, you know, to see it kinda shifting around a little bit here is not it doesn't come as a particular surprise to us and doesn't change our view. We're still eagerly awaiting the results from Novartis this year. Thank you. Operator, next question, please. Operator: And our next question will come from Asad Haider with Goldman Sachs. Your line is open. Asad Haider: Great. Thanks for taking the questions and congrats on all the continuing strong execution. I have two. First for Marshall, just on the broader portfolio, just appreciate all the framing on the catalyst part. But maybe just based on your own diligence and sizing of the markets and the opportunities, what assets do you think are still most underappreciated? And current Wall Street models? And then, I have one for Christopher. Christopher, you've talked in the past about the China opportunity as an area of strategic importance and focus. Any updates there would be helpful. When could these opportunities start to become a funnel into the transaction pipeline? Thank you. Marshall Urist: Great. Thanks, Asad. Good morning. So as we look at the pipeline, I think there are, you know, the biggest takeaway for us, and we think about how the world looks at our pipeline is, I think it's also just important to take a step back and think about the aggregate potential there. And I think that was one of the things that we wanted to highlight was, you know, there's very significant potential for value creation right now in our pipeline. As we mentioned in the prepared remarks, you know, about $2 billion or so of potential non-adjusted peak royalties. You think about that in the context of where our top line is today, you know, that's a very significant potential. And we'll continue to add there. We'll continue to add to the development stage portfolio and then, of course, the marketed portfolio as well. When you look across here, you know, we do get a significant number of questions on LC little a and revolution medicine. But the other ones, the other products we highlighted here, you know, Biogen ladafilumab, we'll have phase three results here coming up. Sanofi, brexalumab, we've highlighted the non the post c d 20 or non c d twenty part of the market in real need for new targets. In MS is exciting to us. And then another product that we highlighted was J&J's depression product that is a little that is off the radar, but, you know, but J&J has, you know, has put a lot of development resources into, and we'll update her for that next year. So, you know, what we really like is the diversity of it, the depth of our development stage pipeline. And, you know, taking a step back and thinking about the aggregate potential for value creation for our shareholders in the next few years. Christopher Hite: And then on the China question, you know, we are very excited about that opportunity. You know, I showed a slide in the Analyst Day that I think in 2020 there were only two out-licensing deals out of China into the Western sort of multinational companies that created royalties. And it's almost like every day you wake up and you're reading about a new deal where Western multinationals are in-licensing something out of China. So that opportunity set is, you know, we're very excited about it. Multiple teams have gone to China multiple times last year. And so then I think we did, you know, a deal last year with b one, which, yeah, certainly, I think a lot of the Chinese companies look at b one as a leader and a company that, you know, formerly was based in China. And they saw that transaction we did for Indaltra, which was, you know, $885 million upfront, and I think that definitely opened a lot of eyes of the Chinese companies that we've spoken to around the opportunity to monetize their royalty streams. And then I would just remind you that a lot of those transactions are at somewhat of the earlier stage in nature, you know, so we are really tracking and following those deals and how they progress within the multinationals, the western multinationals, clinical pipeline. And, you know, we are eagerly awaiting the opportunity to put those into the funnel to your point. And then lastly, I would just say, you know, we are looking at expanding our team and our platform in China and hope to have an announcement on that in the very near term. Operator: Thank you. And the next question comes from Christopher Schott with JPM. Your line is open. Christopher Schott: Great. Thanks very much. You recently did a deal with Teva for its IL 15. Can you talk a little bit more about what attracted you to that asset? And maybe as part of that, just bigger picture, think this is a bit earlier than historically Royalty Pharma has gone. And is that a trend we should be thinking about of royalty looking maybe more mid-stage assets as you get larger and kind of can diversify the portfolio more? The second one for me was on Verengio. That launch has ramped really nicely. I think it's an asset that's a little less understood by the Street. Maybe just elaborate a little bit more on just how you're thinking about growth for that product from here and how large of an asset that could become for Royalty Pharma over time? Thank you. Pablo Legorreta: Sure. Christopher, how are you? So Marshall will take the questions, but, you know, maybe yeah. Go ahead, Marshall. Marshall Urist: Sure. Christopher, thanks for those two questions. So first of all, on Teva. So what attracted us there? You know, it was a few basic things. You know, first was vitiligo is a market that has real unmet need, and there's real need in it that as an autoimmune indication where there just hasn't been enough innovation for patients. And two, you know, the science of it not to get too far into the details, but the target IL of the product that we invested in with Teva is, you know, is really kind of fundamental to the biology and pathophysiology of vitiligo. And so that, you know, made a really strong story for us. And then third, you know, like we said, you know, we got a sense of, you know, some, you know, looking at the available data and, you know, that that's certainly intrigued and excited us. And, you know, that came together to get us really excited about this market that, you know, is underappreciated and has blockbuster potential. And you asked about the structure, and are we thinking about, you know, is this any sign of moving earlier? You know, not at all. I think it's consistent with what you've seen us do, which is be creative in structure to where we can tranche capital over time. And that's really effective because you'd think about it, we're making a relatively small investment here to help fund the phase two b of $75 million. And then we will have, following that, the option to significantly scale up that investment to help fund the phase three. So, you know, that's a very powerful mechanism to us and a very powerful structure. You've seen us do it that allows us to access more innovation, be a better partner, be a more flexible partner in a way that doesn't at all change the kind of risk profile of our portfolio for our shareholders. So, you know, we think it's a very cool structure and another example of how we've been innovating, you know, with royalty-based financing to expand the opportunity and expand the role. Second question, thanks for asking about Voronego. You know, we couldn't be more thrilled with how that product is launched and how Servier has done with it. You know, that product, again, another great example of serving a profound unmet need. So, you know, it's had a very strong launch. We continue to be excited about its potential. You know, we've talked about how, you know, this is a drug that could have, you know, a very long duration of therapy as it kinda helps to control and helps to control the growth of these low-grade gliomas. And could be, you know, we saw very significant commercial potential there. I think at our last update, we've shown it's very well on its way to being a blockbuster product. And, you know, if you look at the trajectory there, I think we still feel great about the trajectory that it's on and excited to see what the future holds. Operator: The next question will come from Ashwani Verma with UBS. Your line is open. Ashwani Verma: Hi. Thanks for taking my question. I had a portfolio question and one on the P&L. So maybe just on the portfolio like Mycorzo, how are you thinking about the potential implication for this upcoming non-obstructive HCM study? There's a fair bit of heterogeneity in this patient population, and KEMZARIS has also failed. Just curious if you're thinking about it as sort of like an upside driver or expected to work. And then on the operating and professional cost, the run rate that you provided for 2026, is this a good way to think about just paying on a going forward basis? Or is there any additional phasing out of the impact that's not reflected on the internalization front? Thanks. Pablo Legorreta: Sure. Thanks for the question, Ashwani. Marshall will answer the first one on Mycorzo, and then Terry can address the question on P&L and operating expenses. Marshall Urist: Hi, Ashwani. Good morning. Thanks for the question on Cytokinetics and Mycorzo. So first, just I think it highlights, as we mentioned in the prepared remarks, you know, we're really happy to see that approval and it's a great example of how our development stage portfolio, you know, can continue to drive and contribute to our top-line growth in portfolio receipts. We are super excited to see, you know, commercialization in Cytokinetics has been a great partner for us, and they've put together a great team. You know, specifically to your question on non-obstructive cardiomyopathy, you know, our base case when we made this investment was it was premised on the currently approved indication of obstructive disease. So, you know, we did not assume that this trial turned out positively when we made the investment. That being said, I think, you know, the data that they've shown in phase two is compelling. They've had the opportunity, I think, to learn from, you know, learn from Camzius' experience there. And so, you know, I think we'll we are with you and the world waiting to see, you know, with excitement to see what this trial holds. But, you know, our basic thesis for this investment was really focused on obstructive disease. Terrance Coyne: And then, Ashwani, your question on operating professional costs. We're very pleased with how things are tracking. At the time of the announcement of the internalization, we said we expected to realize $100 million in savings in 2026, and we're on track to realize that. Looking out a little bit longer term, we continue to feel like we're on track to get to that 4% to 5% range over time. So things are going really well, and we are, you know, realizing a lot of the benefits financially of the internalization. Operator: Thank you. The next question will come from Umer Raffat with Evercore. Your line is open. Umer Raffat: Hi, guys. This is Mikey Furey in for Umer. Two questions for me. Thanks for taking my questions. The first on J&J, they're talking about what's next in immunology with their oral IL-23 icotide. Do you feel or view that as incremental market expansion or as a cannibalization risk to Tremfya over time? And my second question concerns Trelegy. GSK described Trelegy as a durable respiratory franchise and noted the Trelegy legacy team supporting the Nucalis COBT launch while they invest behind longer-acting options. How do you think about Trelegy's contribution to your portfolio over the next few years given what I just said? Thank you. Pablo Legorreta: Thanks, Mikey, for those two questions on two great products. Go ahead, Marshall. Marshall Urist: Yep. Hi, Mikey. So your first question on the IL-23 oral at J&J and whether or not we saw that as market expanding or would have an impact on Tremfya. We definitely see it as market expanding. I think, you know, that is a great product, but Tremfya is a great product as well, and you're seeing that in the very strong momentum in the inflammatory bowel disease launch for Tremfya. And I think that echoes J&J's comment that they see, you know, that they see very significant potential for both products when they look forward. So we're still very enthusiastic about Tremfya's trajectory. And, you know, we think an oral product just is a new option for patients, potentially even at different stages of their disease. Your second question was on another one of our another product we really like, and that's Trelegy. You know, GSK has one of the strong respiratory franchises out there. You know, you've seen that in the performance of Trelegy, which has, you know, I think, continued to outperform people's expectations in terms of the durability of that growth. And, you know, we are certainly excited about Trelegy's growth from here even as, you know, GSK does what you would expect, which is continue to deepen and broaden their respiratory franchise. And we don't believe that's gonna come. We don't believe Trelegy is gonna pay any kind of price because of that. Operator: Great. Thank you. And the next question will come from Jason Gerberry with Bank of America. Your line is open. Jason Gerberry: Hi. Good morning. This is Tina Ramadan on for Jason. Thank you for taking our question. Just had two follow-ups to prior discussion points. I guess, first on the China market. Could you characterize how future deal structures may differ in China from the way you've kinda done historical deals if at all? Like, are you finding that the diligence process comes with any added or expected process-related hurdles that impact normal efficiency? And then second is just on the on the LP lowering class readouts. How important in your view is the treatment effect size coming above or below 15% to 20% risk reduction due to the commercial peak sales opportunity? Thank you. Pablo Legorreta: Sure. Maybe I'll take your China question. And, you know, we don't foresee any change in the way we structure transactions and how we actually diligence them. You asked us about diligence. It's exactly the same process that we follow for products. You know, just realize that what is likely to happen in China deals is that we would be buying a royalty from a Chinese company that licensed a product to a company in the US or Europe, and they did that because, you know, the vast majority of Chinese companies do not have clinical and marketing infrastructure in the US and Europe. They need a partner to help them run the trials in the US, in Europe, and eventually to market the products. So the payer of the royalty will be a US or European company, like in the case of the deal we did with b one. The marketer is Amgen. And for us, you know, the payer is Amgen, the credit risk is Amgen, so, you know, we feel very comfortable. Now in terms of being effective in that market, you know, we have mentioned on this call that what we need is presence locally. And that's something that, you know, you will see very soon from us with a local team with exceptional people. And it's a market that we intend to build and really focus on because we do see, you know, very significant opportunities coming from China. Thank you for the question. Marshall Urist: And then your second question on scenarios around the effect size in the upcoming Novartis LP trial. There's no question, and you won't surprise me to hear us say that the effect size does matter. I think we should, given that, you know, we're a few months away at this point from seeing this data, you know, I think there will be a lot of discussion, I am sure, based on, you know, based on what it all shows. And I think it will matter, you know, in the range that you talked about. You know, the types of patients who benefited, were there any subgroups where there was particularly strong benefit or had a particular impact on benefit. And I think, you know, the physician community will work that out for who are the patients most likely to benefit. So, you know, again, you know, just I think it does highlight the incredible potential of our development stage portfolio. We're really excited to see this. You know, after waiting a few years at this point for this event, as you might imagine, we are eager to see it and discuss the data with everybody. Thank you. Operator: I am showing no further questions in the queue. I would now like to turn the call back over to Pablo for closing remarks. Pablo Legorreta: Thank you, operator, and thank you to everyone on the call for continued interest in Royalty Pharma. If you have any follow-up questions, please feel free to reach out to George Grofik and his team. Thank you, everyone. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
William Lee: All right. Good morning, everyone, and welcome to our interim results presentation. It's great to be back here in-person seeing you all. After -- I think, it's been informed -- quite a long gap. It's also very happy to be doing it on the back of a good set of H1 results, which always helps. So let's crack on and have a little look through these. In terms of structure -- actually, I'm going to go through in terms of some of the highlights. Marc is going to talk through the financials in more detail, and then I'm going to give some highlights before we do the Q&A on our progress against some of our strategic priorities. So first of all, positive news in terms of revenue with this real pickup that we saw in Q2. Still underlying quite mixed market conditions, two standby areas probably for us has been the demand from our customers who make the equipment, the semiconductor manufacturing equipment, and that's for our encoder product line and also significant interest from the defense industry, which is a more broader cross sector of products. Real significance, I think, for us, though, is not just the responding to the market conditions and the great job we do there, but it's actually on our emerging businesses and the progress that we are making. So these are the bets that we are placing, the investments that we're making for the future for the long term of Renishaw. And I'm going to go through with you later on some of the progress that we have made there. And thirdly, I just wanted to stress -- clearly, we are an organization. We pride ourselves in our investment in engineering, in R&D for our long-term growth. The output of that is what is key, and we have had some really significant new product launches recently, genuine excitement, particularly from our sales team on the opportunities that they now see for making the most of these. In terms of operating margin, improvements there despite currency headwinds, and we'll look through there. And actually, we're really looking forward to a strong revenue and profit growth for the year ahead, and we released our guidance for that. We have a little look through some of the key performance indicators and some of the themes coming through here. First of all, than the -- very much that strong growth coming through in Q2. As I said, some areas strong. Other areas such as our sales of machine tool sensors, CMM sensors, the machine tool builders, the CMM builders, they're still quite sluggish overall actually. But the -- the one we always talk about is the extreme is the German machine tool market, which is still quite challenging. In terms of operating margin and flow through on to the bottom line, then we have taken actions there to improve to support this. We had a GBP 20 million cost reduction exercise and also the closure of our drug delivery business, which has supported that margin development. Also as a business, we very much are focusing on cash and cash flow conversion of making sure we are making the most of the assets that we've invested in over the last few years. We have seen some pressure on that though. We have had the impact of restructuring costs on that number. And also, we are investing at the moment in working capital as we respond to the production demands of our customers. Okay, that's some of the highlights. I'm going to hand over to Marc now to go through the financial numbers. Marc Saunders: Great. Thank you, Will. So I'm going to start by looking at some of the highlights from our income statement. As well as I said, we've had a record first half with reported revenue growth at 7.1%, rising to 11.5% at constant currency. We've seen growth in all 3 segments, and we've also seen an improving order book in all 3 segments and also all 3 regions. When we look at regional revenue performance, however, the picture is a bit more mixed. So if we look at the Americas first, really strong growth here, 15% at reported rates -- more than 15%, more than 20% at constant currency. And that was driven by strong demand coming through for high-value capital equipment, so things like our additive manufacturing machines or 5-axis co-ordinate measuring machines. So that's been a real success there. This region has also benefited from around GBP 5 million of higher pricing and surcharging to offset tariff duties that were introduced during 2025. When we look at APAC, also a really strong performance here. So growth of more than 10% at reported rates, more than 15% at constant currency. And here, the key positives were rising demand from the semiconductor and electronics manufacturing equipment sector for our position encoders and also really good growth, really good demand for our Equator flexible gauge from the consumer electronics subcontract manufacturers. So that's the story in APAC. EMEA was a bit of a different picture. Here, turnover down around 5% at both reported and constant currency basis. We've been reporting some subdued demand here in the EMEA region for a little while and that continued throughout the first part of the half, but we did see a pickup in demand later in the period, and we ended the period with the order book stronger. We also implemented a new sales ERP system in September in some territories, and that did have an impact during the half. But hopefully, you can see from the Q2 versus Q1 performance, we've seen a real step up here in the region, it's actually the biggest step up of all of our regions from Q1 to Q2. So we're moving in the right direction there. On an operating profit level, an increase of 11.4% to GBP 57.5 million and an improved operating margin by 0.6 percentage points. The moving parts there, as Will has touched on currency in one direction, organic margin improvement and another more of that in just a moment. But when we look at the income statement, perhaps the most notable thing you'll see is an 8.5% reduction in our gross engineering costs, which reflects some of the cost reduction actions that we've taken in the last 6 months. Operating -- sorry, profit before tax grew by a similar amount, 11.5% to GBP 64.1. Effective tax rate in the period was 21.1% at reported rates rising to 21.8% on an adjusted basis, and that's perhaps more representative of what we expect to see coming through in H2. And then finally, our dividend payment remains unchanged at 16.8p. Right, let's take a look at the operating margin evolution, and I'm comparing now the first half of the prior year with the first half of this year. So we're starting with 15.1% that we reported last year. And on the left-hand side of this bridge, you can see the external headwinds that we face largely from currency, but then being offset by the organic margin improvement we've generated through cost reduction and operating leverage. Starting with currency, that's been a headwind for us for some years now. We've seen progressive weakening of the U.S. dollar and the Japanese yen against sterling over several years. And we are exposed, of course, to this currency fluctuations because many of our costs are in sterling. Most of our revenues are in other currencies. And so we seek to manage that through the use of hedging contracts, forward currency contracts over 24 months. And over the last few years, our contracts have done a good job in helping to offset some of the movements we've seen on a year-to-year basis. And indeed, last year, when we looked at the prior year, we saw a particularly strong performance from our contracts and that was as a result of us taking them out at the time when sterling was much weaker than it is today. So they paid out handsomely last year. That has not been repeated to the same extent, but when we look at this year, our contracts have still done a good job, raising about GBP 5 million of revenue to offset roughly GBP 5.2 million of operating margin change as a result of moving exchange rates. But overall, when we wrap that up, we've got GBP 8 million less in currency income, in contract income, GBP 5.2 million of movement in currency, so GBP 13.2 million, 3.6 percentage points of margin. So a significant headwind. With tariffs, that's impacted our revenues by around 1.4%, but had no impact on operating profit, and as a result, has had a small degradating -- degrading effect on operating margin. Moving to the positive side of the equation. Cost reduction. Will mentioned, we ran two cost reduction programs over the last year, a company-wide operating cost reduction initiative aiming to remove GBP 20 million of cost from our run rate on an annualized basis. And we also closed down the loss-making drug delivery aspect of our neurological business, aiming to save around GBP 3 million on an annualized basis. Pleased to say those savings have started to come through. The combined impact of those programs has been roughly a 7% headcount reduction for us at a group level to just below 5,000 employees at the end of December. And we've seen GBP 9 million of savings coming through, so 2.4 percentage points in the first half, and we expect to achieve that GBP 23 million of annualized savings on an ongoing basis here forward. So that's coming through as planned. The other side of it has been operating leverage. So we've generated an 11.5% constant currency growth in the period. That has resulted, obviously, in more gross profit, which is more than offset inflationary pressures that we've seen in our cost base around things like pay benefits, health insurance. All right. So that's the margin story. I'm going to now just walk through each of the 3 segment performances for you, starting with Industrial Metrology, our biggest segment. So here, the story is solid revenue performance growth of 4.3%, rising to 8.8% on a constant currency basis. The growth drivers here were our emerging systems and software businesses. So these are our 5-axis co-ordinate measuring machines, our flexible gauges and metrology software that supports both of those products and helped use us to make the most of them. It's really pleasing to see growth in this area. These are emerging businesses, and we're really targeting top line growth. And here is a key part of our growth strategy. So it's really pleasing to see that coming through. Another success story here is our calibration products. This is an established product line, and we've seen growing demand here, particularly coming from the semiconductor and electronics manufacturing sector. So those machine builders actually use our calibration products in their factories to help them to make and pass off their machines. So we've seen rising demand coming from there as activity levels have risen. By contrast, we've seen flat sales for the sensor part of this segment. So that's our co-ordinate measuring machines, machine tool probes and also the styli and accessories that go with them. So that's been flat overall, some high points in Asia, in consumer electronics, but weaker general demand in -- particularly in Europe and particularly in the automotive sector. So when we look at the operating performance of this business, it's roughly flat in margin terms. We saw essentially currency headwinds being pretty much offset by the combination of cost saving and operating leverage, but we ended up at pretty much the same operating margin. Let's move on to Position Measurements or our other large segment. This did strong growth in the period. So we saw 7.4% rising to more than -- yes nearly 12% sorry, at a constant currency basis. And this was something of a game of two halves. We definitely saw a really notable pickup in this business in the second quarter. And we've got great momentum going into second half. The drivers of growth here were strong performances from our established open optical and magnetic encoder businesses. We've mentioned semiconductor and electronics manufacturing equipment. That's been a key driver. But actually, we've also seen strong demand from general factory automation and robotics, particularly for the magnetic encoded line. By contrast laser encoders have seen a reduction compared to a really abnormally strong period in the prior year. These are used in front-end semi and wafer inspection. And yes, we had an abnormally strong comparator to go against. But we're actually really confident in the long-term future of this business. We think this is volatility rather than a trend. We've seen rising order book, and we've launched new products in this area. So we're really confident about the long-term prospects. When we look at operating performance, we've seen similar effects that we saw in the Metrology business. So currency headwinds offset by cost savings to an extent, but here, the product mix change has been quite significant in this period comparator. So we've reduced by about 4 percentage points up to 23.4%. So still a strong for operating performance here. And I think the more meaningful comparison to take is if you look at the comparison against the whole of last year, which was 22.5%. So the first half really was a bit of an abnormal period. So we've got good momentum here, good top line growth and improving underlying margins. Finally, Specialized Tech. So the smaller segment, but the one that's grown the fastest in this period. So growth of more than 25% at a constant currency basis. So really strong growth. And that has been almost largely coming from our Additive Manufacturing business within here. So we have a strategy here of selling to key accounts, and we've seen many of those adding to their fleet of machines as they ramp up production. But we're also targeting new customers, and we've seen quite a lot of those coming in, in this period, and we've seen particularly strong demand from both new and existing customers in the aerospace and defense sector. That's been the notable change in demand in the period. Spectroscopy down slightly, slightly stronger in America, slightly weaker elsewhere, but we've seen good order momentum on that recently, normally has a stronger H2. So looking forward to that this year. And in neurological, that's the smallest part of this product group, and the key sort of thing here is that we completed the closure of the loss-making drug delivery aspect in the period. So when we wrap all of that up and look at the moving parts on margin, we can see a real step change in performance here, 22 percentage points of margin improvement. We're now just short of breakeven on this segment. The moving parts there, yes, currency, again, slightly less proportionately than the others because of slightly different regional sales patterns. We've seen cost reduction, obviously, coming through with both the company-wide program and the focused drug delivery activity. But the large majority of the margin improvement coming through here is from operating leverage with the growing AM business. So that's been the key driver of margin improvement. Right, lastly from me, just a quick look at return on capital and cash generation. So we focus on return on invested capital to make sure that we're allocating resources to profitable investments. We saw an improvement here to 13.2%, so 0.6 percentage points. We have a target of 15%. So clearly, we have some way to go. And the way we're going to get there is by driving our operating margins, but up to our target range and also keeping a lid on investment in capital. We have had a period of higher investment in recent years in property. That's now behind us, and we're operating at a lower level of CapEx. So in the first half, CapEx was GBP 17 million, and we're expecting to run at a rate of about GBP 40 million for the year as a whole, and that's focused mainly on plant and equipment to support capacity and productivity growth. And that's part of the cash generation story. The other side is working capital. We have ramped up working capital in the period. Obviously, we've seen a bit of an inflection in demand in Q2 and that's triggered us, obviously, to increase our production rate, drawing in more piece balls, more work in progress, et cetera. So that has -- we've seen that during the period. So our cash conversion overall is just below our target at 68%, but we think we're doing all the right things here in terms of keeping a lid on CapEx and making sure we're supporting growth with our balance sheet. Finally, our cash balances, currently just over GBP 240 million at the end of the period, so down compared to the summer, and this reflects the outflows that we've seen on the cost reduction activities, on working capital and on the dividend payment in respect of H2 last year. All right. I think that's enough for me. I'll hand back to Will. William Lee: Lovely. Thank you very much, Marc. So, as I said, I'd like to now talk through some of our strategic priorities and a little bit of a look more into the future. And I'm going to focus on the first 3 of these because I think the cash generation and ROIC, we have already touched on. So the first area here is the key strategy for us, which we've always talked about of long-term growth through product innovation. It's our key overriding strategy. To set the scene for this. I just want to reflect back firstly, on our long-term value creation model, something we've shared and many of you will be familiar with. Just to go through, if we look on the left here, then we can see that the markets that we operate in, that GBP 6 billion addressable market, and really most importantly, the fact that they are favorable markets that we think on average, are growing by more than 5% a year. You can see the drivers in the 4 boxes around the addressable market. What we've seen recently probably is acceleration here, all the news on AI and the data centers there really feels like it's accelerating the growth from the electrification area there. We are certainly seeing, I think, continued acceleration of our customers also looking at the adoption of the automation and so had to automate processes right across from machining to metrology, but for a range of things there. And we're also seeing probably a broader one, which maybe cuts across slightly differently with all these of the expenditure on defense. And it's really how do we help customers there with manufacturing agility, ramp-ups, new technologies to go in there. So positives, some changes going on there from our market. The key bit for us then is how do we outperform. And on the top right, you can see those 3 key themes. So the first is growing in existing markets. This is how do we sell more sensor technology normally to the machine tool -- the machine builders around the world, whether that is semiconductor or machine tool. And we'll also talk -- we'll often talk about this in terms of the number of dollars we get per machine tool spend or sold for the machine tool industry, for example. Next, increasing technology value is about us selling the increasingly complicated systems. So capital goods together with the software to enable them. And then thirdly is looking in terms of moving into new markets. And to be clear, this is very close adjacent to new markets to where we are already operating. With all of these, the innovation side being disruptive, having the USPs is absolutely key for us to succeed and give our sales teams around the world, the strongest advantage that we can. I'm really pleased that actually, despite reducing engineering expenditure, what we are seeing is a really strong pipeline of products that we have recently launched. And also, we've got a really healthy pipeline of products to come through for the future. I just want to highlight a few that are kind of really key for our strategy and for our success. So if we first will look at Industrial Metrology, we've had a really strong reception for the Equator-X and MODUS IM Equator software that goes with it. Equator-X brings very high-speed measurement to the shop floor, and it does it without the need for a master part to compare with. So our customers immediately get the benefit that it brings. The real enabler with it is the software, which dramatically deskills the level of knowledge needed to be able to program the device. So what we have with the combination of these two is, amazing performance on the shop floor, Metrology where you need it at the point of manufacture and also far simpler for our customers to deploy and far more flexible in terms of the range of different parts that they can measure. This is really key for us. You can see there's excitement from our existing sales team all around the world and what they can do with the customers that liked our existing products but need this. But there's also excitement in terms of the new routes to market that we can open up. So people who are selling already a machining and manufacturing solution where this can be a part of it, they can own it and they can sell it. So a lot going on there and a lot to do. From position measurement, Marc talked earlier about -- with our laser encoder product line being sold into the wafer inspection, the great thing here is this is always a market where the challenges of the next generation of wafer technology is getting smaller, these customers always have really tough metrology challenges. And we've really stepped forward with our next generation of laser encoder in terms of the performance that we are now giving to those customers. Again, had a chance to meet some of them recently, really positive on the relationship that we have with them. ASTRiA, we have talked about. So this is actually a new area for us using inductive. Again, it's been really well received by the market in terms of the metrology performance that it delivers. And then finally, from a specialized technology point of view, Strada is our new Raman instrument. And Raman traditionally is an instrument used for the Raman expert in the Raman map who will do things. Strada is designed to simplify. It automates the Raman process from a hardware, dramatically simplifies the software. So it's Raman for the non-Raman person. So if you want to solve a problem, you can do it with this, you don't need to know anything about the technology that is inside. So this has opened up different opportunities, different markets for us with Raman. And finally, LIBERTAS is new software that we have launched to go with our Additive Manufacturing business. So what this does is, when you are making a part additively, you have to put in supports to hold it in place? And what LIBERTAS does is by doing very clever novel scanning strategies dramatically reduces the number of supports that you need. So what this does is it speeds up the cycle time. You don't have to build these supports, you save time. You save waste because you're not processing the material. And you also save post processing time because there's a lot less than the support material to remove after the build. So it's pushing forward the productivity of our machine for our customers. What it also does actually is really improve. The tricky service on additive part is the bottom and the surface finish of that with our new software is really noticeably moved and a step change in performance there. This was really well received by a number of our customers. So a strong healthy product launches there, much more to come in the future. So while we absolutely see that our future is the growth, what we've been clear on and talked to you about is making sure that the business is as focused and as lean as it can be to support that growth. If we look at the initiatives that we have going forward, then in terms of this graph, you can see that, I guess, Marc earlier brought this up in terms of the 15.7% that we ended up with this half year now that we've just announced them. For the rest of this year, we still see continuing to have some currency headwinds, some benefit from the cost reduction program and then actually the flow-through of the margin from the revenue development taking us up to our end of year results. The interesting bit really is going forward, we set ourselves targets on this. Some of that will be achieved by the revenue flow in the future of looking at the growth strategy -- that innovation that growth strategy, but the other bit is on the development on productivity across the group. We're in early stages on this. I guess we've already done some activities, which we talked about, we are very much now in the planning stage of what are the best opportunities that we have as a business going through that and then working on the program to deploy that. So when we're back up here for Capital Markets Day in June, it's going to be a great chance to update you in more detail on those plans and what we intend to do. And thirdly, I want to spend a little bit of time on the emerging businesses. As I highlighted at the start, I think, overall, this is the bit that is the most encouraging for me with the developments that we have seen here. So right across the board on our different reporting segments, we have emerging businesses. What we have looked at here over the last several years, there's quite a bit of work and focus on these areas. And you all have seen, if you've been monitoring for a while that some of these businesses are ones that we have divested or closed. Some of them are ones that we've had for a while, but we've made quite significant strategic changes on them. And those ones, I would classify as the Metrology, CMM and gauging systems and Additive Manufacturing that both had and in some respects, quite a similar of really focusing down, understanding what our differentiators are targeting key customers and making sure we are very clear what we are about. And it's been great to see both of them really starting to do well. Additive, in particular, this time that strategy of focusing on customers with volume opportunity focusing on a highly productive single-sized machine is really starting to pay dividends. And what we're now seeing is a repeat orders coming through, both from actually the customers that we talked about in the past, whether that's of the medical that we talk about, but it's really also being accelerated now with interest and customers in defense, understanding the opportunities that Additive gives for them. Now what we also did when we exited from some of the businesses that we didn't feel were going to meet the criteria for what we wanted for the long term of the business was we did pick out some of the best areas of innovation that we felt we had across the group and tried to accelerate those. And as Marc talked about when he was talking about the position measurement both in closed optical encoders, really starting to go well. But I think that for me, the star here is definitely on the inductive encoders, FORTiS, I talked about it in the innovation. We went -- we've launched this as our MVP of saying we're just going to do one size. We're going to get it out. We're going to really hit the deadlines. The team did a fantastic job of doing it. The feedback from customers, the metrology is superb, the ease of use is superb. And now we have customers saying that they really want to switch over to our technology, design us on the existing platforms and designs us on new platforms. Now this is designed for a broad range of industries. The one at the moment where it feels like it's hitting the sweet spot is on the defense industry. We have actually recently decision that we need to invest more from an engineering and a manufacturing point of view to make the most of the immediate opportunities that we have here. These businesses all take time to come through, but this is one that feels like it is working at a different pace to what we are used to. Really important for us. I mean we're talking through with the team internally, moving these emerging businesses through into established is key. We have a lot of exciting R&D going on for the future, some of which is going to power existing businesses, but some of it is the new emerging businesses of the future. So we need to make space for it to come through so we can invest in it by migrating some at the moment. So lots of positivity going forward. But with us, there's always the uncertainty in the markets that we operate in, but we certainly feel like we have momentum going into H2. And I'm really pleased to give a positive revenue and profit trading guidance for the year ahead. Thank you very much. We now have time for Q&A, which is great to be doing in person. Lacie Midgley: Will and Marc, it's Lacie Midgley here from Bloomberg Intelligence. Just a couple for me. First, I guess, on the China strategy. At the full year, we talked a little bit about the entry-level market there, perhaps kind of looking at lower-priced alternatives to some of your core products. I know we're not quite -- we're not far on from the full year in that description, but is there any update on the strategy there and how that's evolved and any progress you can update us on? William Lee: Yes, certainly. So I think -- I'm just trying to think back to exactly what we said at full year, but certainly, what we are looking at now is, we have certain products which are established, but we can tweak and adjust so that they are limited in performance for an entry-level China market, so where we can target and go after business at a lower price to the customer. We're doing that in a quite a limited way in testing things out. So that's very specific. We're also getting the innovation engine and it's interesting here, particularly probably on some of the more sensor technology side of the business. The innovation engine has come up with some really good ideas on stripping manufacturing costs and simple designs, particularly encoders there is some really quite exciting stuff for the future coming through that allows us to target the entry-level market at a different price point. Now people always worry about this in terms of what does that mean in terms of threat of the different areas. But actually, this is stuff which is designed such that it's only suitable for entry level. What we always see in things like the encoder market is things gradually moving on. So some areas will become more commoditized and as that happens, we'll have new opportunities elsewhere, so... Lacie Midgley: That's really helpful. And on Additive Manufacturing, I mean it's clearly moving in the right direction, which is great to see. I think these are obviously much bigger ticket items for you. So not many are going to be needed to kind of move that specialized technologies aisle. I mean you talked to the defense customers. But in terms of size, are these smaller end users? I'm just trying to think about how significant the move is there? How quickly we get to that becoming an established business? And Is this about kind of expanding AM usage and really embedding the technology with your existing customers? Or is it growing the base and new customers, I think you've talked to both of those, but a bit of extra color on that would be helpful. William Lee: Yes, I think both of those are key. And often, we'll try and say, look, we're focusing on existing customers and repeat business and not doing too much and then new customers will come along. So absolutely, we're targeting existing and new. Size of the customers can range from really large to far more dedicated specialists supplying into industries. I think the most important bit across the board on this is people embracing and understanding the benefits designing for AM and showing them to their customers that this is the advantage you can get and what we can do for you now with this. So it feels like for a long time, and we've had this on machine tool pros, we had it on Equators, we had it on the ballbar product in calibration of us doing the marketing. Once the customer starts saying, this is what it can do, things start to really accelerate. There will, for sure, be ups and downs on that journey. As you say, with big ticket items, it doesn't take that much to change. It's also different for us from a manufacturing point of view, ramping up with encoders is somewhat different to ramping up with the scale and complexity of an AM machine. Mark Jones: Mark Davies Jones at Stifel. A couple of things, please. Firstly, slightly longer-term question, but obviously, it's frustrating in some ways to see all the good organic progress and profitability eaten up by FX and I'm not going to ask you about hedging strategy, but more about the cost space. I mean you are unusual in having so much of your R&D and manufacturing located in the home market rather than pushing that out into the regions. Is there any change in the thinking about that? Or do you think that's caught your ability to sort of control the technology go-to-market? William Lee: Yes. That's a very good question and one that we are considering at the moment. My honest though, is probably the reason that we would be moving any manufacturing would be for geopolitical access reasons. Because honestly, as we have things in terms of single point of manufacture, areas, we feel is extremely efficient. So we are -- this is one of our strategy decision topics of what we should be doing and are there certain products? It could be some of the stuff that was tied in with the question on low cost, which are ones that we decide we make further afield. I don't think we'd be doing this to try and -- the primary reason for doing this would not be to give ourselves more stability from a currency point of view. It would be a nice benefit from it. Mark Jones: Okay. And just a little one. I won't ask you about share buybacks because you can't say anything. And given the strength of the numbers and the strength of the balance sheet, is a flat dividend a bit mean? Is there some sort of reweighting to your thinking around that? William Lee: So we target a dividend cover of 2. And if you look at the midpoint on the profit for the end of the year, then this would give us that with a flat divi. Clearly, I guess we have an optimism around the business, but it is 1 quarter that things have happened, we don't want everyone to get carried away. So just, I guess, that the -- probably the fuller answer to that is on a capital allocation point of view, this is more of a strategic question for us to go through as a Board of thinking of how we want to run the business and use that cash or return that cash. So that's the bigger question for the future, not addressed by a divi really. Richard Paige: It's Richard Paige from Deutsche Numis. Two from me as well, please. On the defense, it sounds as though -- I may have been getting this wrong, but your growth is going to be ahead of the market. There's new applications that -- or new customers you're winning within that. Can you just elaborate on sort of end use within the defense market? William Lee: Yes, really broad. So we will have -- so ASTRiA, we talked about, which will be something that defense customers could integrate. Additive Manufacturing can be something that parts can be made with versus a lot of indirect stuff probably through machine tool, CMM builders and et cetera, which will allow the metrology and the precision of both machine parts needed for going into defense. So direct and indirect, a real mixture there. In terms of where we are on investment curves, I'm not sure that we really know, to be honest. Richard Paige: And the other word that normally goes with defense, aerospace, we haven't spoken about it much here, but obviously, with the industry ramp and so forth, expect that to be a reasonably strong area of demand for you as well? William Lee: Yes, I'm not sure exactly what our aerospace numbers are at the moment, but it's not... Marc Saunders: I would say that's probably we're seeing that coming through with our AGILITY sales, particularly in the Americas. That's -- we've got a lot of key customers that are in the aero engine sector in particular, but also airframe to a lesser extent. So that's been a driver of performance more recently in the nondefense element of A&D, although obviously, there's some overlap there in the engine business, they tend to serve both sectors. William Lee: I think one key when you're thinking about Additive Manufacturing, and I think this is a good thing for all of us. But if you're working with an aerospace, there is an awful lot of checking balances, review. So it's a very long development time that you're working with a customer before you get sales. Defense is far quicker on things that maybe don't have as long a lifetime. Marc Saunders: And perhaps if I could just add as well, I think there's quite a lot of new business formation going on at the moment in some of the later -- the more recent platforms that are being developed for modern warfare. There's new players entering the business, and we're seeing some of that within our customer base as well as repeat business coming from established customers. Bruno Gjani: It's Bruno Gjani from UBS. Just because we were on that defense topic, I just have a small follow-up. When you mentioned on the inductive encoder side that you were winning some customers and you were now being spec-ed in on some new accounts, does that specifically relate to defense? Because if that's the case, I was wondering whether if now you're being spec-ed in, you could actually see a material rise within that product line? Or how are you sort of thinking about that component? William Lee: Yes, this is still small. We have one size of ASTRiA at the moment. And it's great with the customers. They love it. But suddenly, it's okay, I need this size and I need this size and I need this size, which does create some engineering and manufacturing work. So, yes, that's going to be a positive. It's quick in our terms that we think for encoder business development, but it's still not going to have a material impact in the next year or so. Bruno Gjani: Understood. And it reads as if the emerging product line businesses were really strong within the half and the quarter. I was just wondering if there was any way you could maybe roughly quantify the contribution to growth from those emerging products or might not be? William Lee: I think probably at the moment, I think, take the positivity, but probably we're better off keeping it just the reporting segments that we have. Bruno Gjani: Understood. Were there any subtle differences in terms -- the order trends that were really encouraging or sort of read to be really encouraging ahead of revenue growing really well, the order book was growing. Were there any subtle differences within what you observed in order intake, particularly as it relates maybe to Q2? So for example, I'm thinking of you called out machine sensor as being actually quite flat in the half. Did you see any sort of pickup on the order intake side there that's worthy of calling out or not really? It's sort of similar drivers to revenue? Marc Saunders: Not worth calling out, I would say, on the machine tool sensors. Yes, the places that we saw the stronger growth were also the places that the revenue picked up. There's a strong correlation there. So additive and position measurement into semi, those were probably the highlights. But generally, automation demand for the wider position encoder business as well. Bruno Gjani: And just a final one that I was sort of wondering on is on laser encoders in terms of the mix headwind in the first half, what I wanted to get a sense of is whether the mix in the first half is abnormally low within laser encoders and therefore, there's a potential for that to grow in the coming, say, 12 to 24 months? Or was it that the mix in the first half of last year was abnormally high and actually we're at a normal level today? Marc Saunders: No, the latter is more the case. So it was an exceptional period in the prior year. I'd say the laser encoder product line has been a real success story for us over the last sort of 10 years or so. And we have a strong niche position in wafer inspection. And that is obviously tied to front-end semi and the trends in that market look decent at the moment. So -- and we've seen rising order book. So we're optimistic that if you look through the perturbation of the prior year, there's a nice growth story here. Mark Jones: Sorry, can I do a couple more? Defense, I don't remember being in your sort of breakdown of end markets being a big chunk in prior years. So could you give some sort of sense of the scale of that for you? I know it's tricky with your routes to market. William Lee: Yes. I think we normally talk about 5%. It feels like that's creeping up at the moment. And it's probably being quite impactful in certain areas that we've talked about. Marc Saunders: So it normally sits within what we call -- I mean, aerospace normally is where defense sits. We just -- we haven't called it A&D and perhaps we should. But the bulk of that historically has been civil. But yes, the defense proportion of that is rising. And as a share of the total, it feels like it's increasing overall as well as other segments so, yes less buoyant. Mark Jones: Okay. And the other one is you talked about geopolitical considerations in where you put your manufacturing. How about where your customers do? There's been all this talk about kind of reshoring and much less evidence of it actually driving investment. Are you seeing any of that coming through? William Lee: I think it's really hard to say. What we are certainly seeing is some of our customers where we would have shipped product to a certain country now saying, okay, actually, over the next 6 months, we are migrating manufacturing to a different area. Some of that's going the other way. So that's countries moving out actually. So -- and then there's a broadening in other areas. So it's actually quite complicated. We met with some of the electronics equipment manufacturers recently. And I think we probably need to understand a little bit more about why they are going to certain areas and what those trends are going to be. And for us, that doesn't matter much because we'll do the work with the design teams and then it tends to be just where we deliver the products to. Mark Jones: No, I guess I was also looking at the strength in the U.S. And is that -- do you think more product specific than market? William Lee: I think that is -- there's a good capital investment going on there at the moment. Again, probably some of the underlying manufacturing with the component side of it is maybe less. And we see some things going in, some things going out. So clearly, if you're a manufacturer that's going to be exporting, making stuff in the U.S., you may decide you're better off not making it there, which we have seen. Much of the complaints of our U.S. team. They're doing all the work and then moving the business to a... Harry Philips: It's Harry Philips from Peel Hunt. Just one question, please, on the order book. You talk a lot about the order book in the statement, but obviously didn't give us a number. So I'm assuming it's reasonably short cycle. I mean, in terms of the book-to-bill, given the revenue growth you've had in the period, can you at least give us an idea of where the book-to-bill might be against that? And then is it -- would it be right to assume that the order book is reasonably short cycle, maybe Additive Manufacturing apart or is that not? William Lee: It's not and it is. I think the one thing we would always put in as a caveat. So you're right with the Additive. On encoder, what we will see is when our customers start to get more stressed because they really think they've got orders coming through and they often don't find out until the last minute, they will start to put on call off orders and they'll give us a 12-month, 18-month order with predicted volumes, which will go on to our order book. Then they will cancel that extremely quickly if they change their mind, but they will also show it when they want to double that. So it's -- we look at the order book and it gives us a feeling, but you can't rely on it either. Marc Saunders: We know that some of it will be -- will melt away. Harry Philips: I mean just precisely on that point, I suppose twofold is does that heat, if you like, give you a window around pricing? I mean, if you get extreme demands in terms of potential demand -- I suspect you don't want to sort of mess up online, but -- and then the second is how you plan your manufacturing around that? Because clearly, if you sort of responded directly to those order flows, you could load your cost base. And then as you say, if you then get a cancellation, you're left with sort of stranded cost type stuff. So how do you sort of -- what's the very sure way of interpreting that sort of front end into manufacturing curve? William Lee: You say smooth as though it's anything but -- and normally when these things happen. So clearly, we're trying to work on very uncertain data, and we talk about many things, even if there's investment going in, the end customer may not decide on which supplier they want to use. Those suppliers may all be using our encoders somewhere, but they may be using different encoders from us. So you can't even say, okay, we know it's going to come. Let's make this because then this customer gets it and they want something different. With us, it is just trying to make sure as much as possible long-term strategy is migrate customers to our latest technology. That's far more designed for automated assembly, so we can ramp up and then it's supply chain holding up for us to be able to respond. Safety stocks and when we look at it in terms of our invested capital, we are high there because we know this happens in the markets that we operate in, we have to deal with that. So -- and then there's just a lot of panic that goes on to try and make everything happen as quickly as it can. It is on the more commoditized stuff and quite complicated of understanding because often we'll be -- we may even be dual sourced. So it's us and a competitor are both designed into a product and then it may be then who can supply better, quicker and whatever else. Marc Saunders: I'll just add, we are also increasing our use of temporary labor in some parts of the supply chain for things like cables for encoders, which are -- there's a lot of them to be made, and we use more temporary labor in our plants in India. William Lee: Do you want to go first and then you've got... Unknown Analyst: Just have a quick follow-up -- not a follow-up, but a question on ERP. Could you perhaps provide an update in regards to how that's planning out in terms of phasing, strategy, sort of key milestones to come? William Lee: Yes, we can. So it's certainly been a challenge. We have -- having done a small -- our Canadian office, which went relatively smoothly. We've now done our most complicated U.K. center. We experienced an awful lot of challenges. I think it's fair to say we are through the worst of that now, but we still have a number of challenges that we want to make sure it are resolved and working smoothly before we roll this out further with Germany being our next company that will transfer over to D365. So yes, it has not been a pleasant experience and a lot of lessons have been learned. Unknown Analyst: On the tool builder market. It sounds as if Europe has been soft for a while. I was just wondering whether you're seeing any signs of green shoots as it relates to German stimulus spending in '26 and beyond? Or are those not apparent yet? William Lee: The last conversation I had was back at the end of last year with the head of a German machine tool company, and they were talking about this being a 5-year recession like they saw back in the '90s of a really tough time. I didn't think it was going to get any worse. it's really tough over there, domestic market, export market. It's -- and I think as we talked about, we've seen some of them being taken over. So yes, it's tough. Unknown Analyst: Lastly, could we touch maybe upon humanoids? There are some companies in the market, sort of traditional industrial companies with, let's say, less expertise in automation and robotics that have been talking about this quite a lot, and the financial market has rewarded them for it. Do you have a suitable product today that could serve that market? Do you have any existing relationships with humanoid OEMs? And do you view it as a potential opportunity, say, over the next 5 to 10 years? William Lee: Okay. So I thought the first thing is are we going to do a humanoid robot, which would be easy? No, no. We are definitely not going to do that. So the bit we are talking with some people around here is on the encoder, the retro encoder technology. In our view, probably this is going to end up being a quite commoditized low-end market and the price point they'll be looking at is not going to be attractive, and we've got better opportunities to go after. So it's something we look at, we'll monitor, but I don't see it being significant for us. Unknown Analyst: Rich Hill from Jefferies. I just a couple of questions just looking at margins. Looking at Position Measurement, obviously, you had one of the largest margin movements kind of out in the division. Just wanted to ask, you kind of talked about FX and the mix. Just whether there's anything else in there, perhaps more costs falling in there comparatively. And I guess to Bruno's question earlier with it perhaps normalizing, just how you kind of see that in the second half, whether kind of that bit of growth in the order book for the laser encoders will kind of offset it a little bit for the second half? Marc Saunders: I'll take that. Yes. So I mean, I don't think we see anything sort of particularly different in terms of sort of cost base escalation going on in there. We did reduce costs slightly less in the position measurement sort of side of the organization and some of the other areas in the cost reduction process, but that was because we had some areas that we were really seeking to invest in and some of the emerging elements of the product line that we felt we wanted to allocate resource to. So it had a slightly lower proportionate, but we're talking 1% or so. It's not a huge factor in this. So no, the primary driver in the short term was mix, but we're seeing it's well into the 20s in operating margin and I think long term going in the right direction. Unknown Analyst: Okay. And then if I may, just chance to question looking at your kind of emerging products, and we've heard the kind of importance to your strategy going forward. Just in terms of margins, and I appreciate not specifics, but the assumption being that they're lower kind of margin to as they come in, as you gain that market share. But just looking at that kind of profile as they become more developed, I guess, what kind of time frame or any other details you could give us there would be great. William Lee: So do you mean in terms of gross margin, sorry, or bottom line? Unknown Analyst: Bottom line. William Lee: Okay. Yes. So if they're emerging, they are definitely ones that are not hitting our profitability targets. So at the moment, they're at different stages. So we have targets on when different ones should be getting into better stages of profitability. And ones like CMM engaging are far more established than some of the ones that we have just launched. Marc Saunders: Chris, have we got anything online? Chris Pockett: Nothing yet. Marc Saunders: Okay. All right, then closing remarks. William Lee: Yes. So if there are no more questions, I guess in terms of overall, great to be back here in person. As I said at the start, it feels like a really good H1 set of results, still lots of uncertainty as there always is with us going forward in the short term. For me, I think the leading message would be on the medium to long term. If you look at the opportunities we have from the innovation engine and also the progress we're making on those emerging businesses and the focus areas that we have there, that's the excitement that is within the business and the excitement that should be around Renishaw. So thank you all very much.