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Haj Narvaez: Good afternoon, ladies and gentlemen, welcome to our earnings call to discuss BPI's results for the fourth quarter and full year of 2025. I'm Haj Narvaez, your moderator for this session. Just as a reminder, we're conducting this briefing in a hybrid manner with our BPI speakers and panelists here in our headquarters at Tower 2 of Ayala Triangle Gardens, Makati City. We also have some participants who are dialing in remotely. I am pleased to introduce you to our speakers and panelists this afternoon. First, TG Limcaoco, our President and CEO; Eric Luchangco, CFO and CSO. They will also be joined in the panel for the Q&A by Tere Marcial, Head of BPI Wealth; Ginbee Go, Head of Consumer Banking; Louie Cruz, Head of Institutional Banking; Jenny Lacerna, Head of Mass Retail Products; and Dino Gasmen, Treasurer and Head of Global Markets. We are also joined by the rest of the BPI leadership team in this call. This afternoon's agenda will begin with opening remarks from our President and CEO, TG Limcaoco, followed by our CFO and CSO, Eric Luchangco, who will walk you through the fourth quarter and full year performance highlights as well as provide updates on our digital platforms and strategic initiatives. The floor will then be open to questions from the audience. Please note, the call is being recorded and legal disclaimers apply. Now let me turn you over to TG for his opening remarks. Jose Teodoro Limcaoco: Thank you very much, Haj, and very nice. Welcome to everyone joining us on this call today, both here at Tower 2 and virtually. Very happy to report that despite the domestic issues that this country faced, though it's the second half of last year, BPI managed to a 7.4% increase in our net interest -- net income after tax to PHP 66.6 billion, the details of which our CFO, Eric Luchangco, will go into. This was really driven from my perspective by our disciplined funding and our disciplined pricing on loans, which also grew 14.7%, much faster than the industry and allowed us to maintain our NIMs. Our net interest income grew 14.7% for the year. We also managed to keep OpEx growth at 9.9%, much slower than previous years. And really for me, one of the big achievements here was our ability to manage our tech spend, which if most investors will recall in the early years was growing at 28%, 25%. Previous year, we grew at about 14%. And this year, we only grew at 12%. We see that, that tech spend should continue to moderate going forward as we make changes in our tech stack and look at other vendors to supply our technology. Part of Eric's presentation today will also be to give more details on our provisioning. I know there's been some questions about that. And so we're happy to present some of our thinking behind it and also to take questions in detail about our provisioning and the risks we are taking as we shift our book to more consumer-oriented. Eric will also delve into a review of our progress on our strategic initiatives, but I'd really like to point out our success in 3 fields: our sustainability, our transformation of our branches and our agency banking. Then finally, I think we'll have a Q&A at the end, where I will be joined by our major business leaders as well as the rest of the senior team is here physically present. So in line with our real desire to be as open to our investors, we'll answer any questions. So with that, Eric, I'll turn it over to you. Eric Roberto Luchangco: Thank you, TG, and good afternoon, and thank you to everybody joining us for our fourth quarter and full year 2025 earnings call. We're pleased to report that the bank delivered another year of strong results, leading to another year of record income, the highlights of which are as follows: on profitability, the bank delivered a solid full year net income of PHP 66.62 billion, a 7.4% increase from the previous year, driven by strong revenues and positive jaws. Fourth quarter earnings of PHP 16.13 billion, up 14.7% year-on-year, highlights strengthened profitability. without the typical seasonal boost. Overall, sustained performance led to a robust full year return on equity of 14.5% and return on assets of 2%. The balance sheet continued to expand with loans up 14.7% year-on-year to PHP 2.6 trillion, while deposits rose 8.6% to PHP 2.8 trillion. The bank maintained a solid financial position with liquidity and capital buffers comfortably above regulatory minimums. Capital strength remains robust with an indicative CET1 ratio of 13.9% and a CAR of 14.7%. Overall, asset quality remained healthy with sufficient cover. The NPL ratio stood at 2.18%, rising 6 basis points year-on-year, but improving 11 basis points quarter-on-quarter. Coverage remained adequate with NPL cover at 94.9%. The bank continued to expand its consumer -- its customer franchise, growing its client base to PHP 18.2 million. Our nationwide reach accelerated through a network of 7,000 agency banking partners, enabling faster and more accessible services. Our wealth management business strengthened its role as a key growth driver, achieving record net funds contribution and record AUM of PHP 1.9 trillion. In the fourth quarter, we delivered a net income of PHP 16.13 billion, down 8% on the sequential quarter, primarily from higher provisions and the usual spike in operating expenses that we experienced in the fourth quarter. Compared to the same quarter last year, net income rose 14.7% as strong revenue expansion more than compensated for the 8.9% increase in expenses and a 233.3% increase in provisions. Total revenues grew 19.3% with net interest income up 15.5%, supported by a 14.7% loan growth and a 22 basis point improvement in NIM. While fee income increased by 16.3% pre-provision operating profit rose a robust 32.1%. For the full year 2025, we delivered a record net income of PHP 66.62 billion, up PHP 4.57 billion or 7.4%, supported by record revenues that more than offset higher operating expenses and provisions. These results included revenue of PHP 195.28 billion, up 14.8%, driven by record net interest income of -- which was up 16.0%. Trading income of PHP 8.29 billion, which surged 21.3% as we capitalized on declining interest rates in the third quarter to lock in some gains. Record fee income of PHP 38.96 billion, up 9.1% on sustained volume growth in key fee businesses. Operating expenses were up 9.9% from volume-related expenses and continued investment in people, products and technology. Pre-provision income at PHP 103.17 billion was up PHP 16.83 billion or 19.5%. Provisions increased 168.9% to PHP 17.75 billion, resulting in a net income of PHP 66.62 billion. Looking at the shareholder returns, earnings per share grew for the fourth straight quarter -- for the fourth straight year, reaching PHP 12.62 per share, a 7.1% increase from the previous year. Sustained earnings supported profitability with ROE at 14.5% and ROA at 2%. Moving on to the balance sheet. Total assets reached PHP 3.65 trillion, reflecting a 10% year-on-year increase, driven by higher loans and securities investments. Gross loans grew by PHP 2.62 trillion, up 14.7% year-on-year and 8.5% quarter-on-quarter with broad-based expansion across all segments. Deposits increased 8.6% year-on-year to reach PHP 2.84 trillion, primarily from growth in time deposits. CASA ratio finished the year at 60.7%, while the loan-to-deposit ratio reached 92.4%. Credit demand remained strong with gross loan growth accelerating 8.5% in the fourth quarter. Year-on-year, loan growth eased from 18.2% in 2024, but remained robust, increasing by PHP 336 billion or 14.7% and outperforming the 9.7% industry average for universal and commercial banks. Non-institutional loans accounted for close to half of that growth, rising PHP 163.9 billion or 25.8% year-on-year. Non-institutional loans posted steady gains with SME loans up 79.7%, credit card loans up 31.9%. Personal loans up 28.3%. Personal loans include PHP 16 billion of teachers loans, which increased 83% year-on-year. Auto loans was up 22.9% with auto loans including PHP 5 billion in motorcycle loans, which also increased 23% year-on-year. Mortgage loans was up 15.7% and microfinance loans up 15.3%. This loan expansion highlights the bank's strong momentum even against a higher base following robust expansions for noninstitutional loans in 2024 and 2023. On NIMs, our annual NIM has expanded consistently since 2021, reaching 4.59% in 2025, up 28 basis points from last year, fueled by a 26 basis point jump in asset yields, supported by a larger share of retail and SME loans and a slight decline in funding costs. On a quarter-on-quarter basis through -- on a quarter-on-quarter basis, though, NIMs fell by 4 basis points to 4.58%. This was mainly due to a drop in loan yields from the institutional loans as this segment adjusts faster to the policy rate movements. Please note that in the left chart, we also show a risk-adjusted NIM, which is based on NIM adjusted for the net NPL formation. Despite the drop in policy rates, risk-adjusted NIMs for 2025 hit 3.97%, up 36 basis points year-on-year, which is our highest figure over the past 5 years. On funding, we're optimizing funding by shifting from time deposits to bond issuances, which are supported by incentives for sustainable financing, resulting in a lower effective yield versus top TD rates. While deposits remain the core funding source, borrowed funds grew 37% and now account for 7% of total funding. Key funding ratios remain fairly stable with a loan-to-deposit ratio of 92.4% and loan to total funding at 85.7%. We continue to prioritize strengthening our deposit base with greater focus on CASA. Our CASA mix remains predominantly retail, comprising 77% of the total, including contributions from microfinance and SMEs. Growth in CASA is being driven by the core mass and mid-market segments, driven by expansion in the client base and higher average balances. We saw sustained growth in fee income, up 9.1%, led by our biggest fee businesses, cards, wealth management and insurance, which collectively contribute about 60% of total fees. Card fees grew by 13.8%, driven by an 8% increase in customer count, 17% increase in transaction count and 4% increase in average transaction amount, contributing to a 21% increase in billings from retail, cash advances and installment loans. Wealth management fees increased 6.6% on record net contribution from clients. AUM soared 18.7% to close the year at PHP 1.91 trillion, led by a 16.2% increase in private wealth, 23.7% increase in personal wealth and a 17.7% jump from the institutional business. Wealth's client base reached 1.46 million, up 26.3% year-to-date September -- year-to-date September, our market share in the trust industry rose by 35 basis points to 21.1%. And we hold a commanding market share in investment funds at 31% and a 30.5% market share in employee benefits. Income from insurance, up 11.4% is comprised of: one, equity income from joint ventures; two, royalty fees; and three, branch commissions. In 2025, equity income was up 13.6%, royalty fees up 21.6% and branch commissions up 4.6%, following a high base in '23 and '24, driven by the launch of new products. These increases were partly offset by the decline in fees from retail loans, which was down 10.2%, largely due to the absence of last year's one-off collections from housing loan penalties and late payment charge adjustments following the curing of CTS accounts. ATM and digital channels down 3.9% as the bank discontinued its e-wallet loading service for GCash and Maya. Remittances down 2.8% due to heightened competition from a new market entrant, leveraging InstaPay and PESONet-enabled transfers. Branch service charges down 2.6%, owing partly to 4 fewer banking days versus last year and the continued migration of over-the-counter transactions to online channels. Credit quality remains healthy even as portfolios expands into higher-yielding segments. NPLs increased to PHP 56.9 billion, but the NPL ratio remained broadly stable at 2.18%. Provisions totaled PHP 17.75 billion, bringing credit cost to 75 basis points for the year. NPL coverage remains adequate at 94.9% and strengthens to 122.9% under BSP Circular 941, providing a solid buffer against potential credit losses. Across segments, except for institutional loans and in particular, SME -- SME, mortgage, microfinance and auto loan segments, all recorded year-on-year increases in their respective NPL ratios. The credit card NPL ratio increased by 38 basis points year-on-year to 4.68% and remained stable quarter-on-quarter. The rise in NPL is largely driven by test programs, which account for 59% of the volume, while regular programs account for the remaining 41%. Delinquencies are concentrated in 3 groups: younger clients, aged 40 and below, lower income borrowers earning less than PHP 40,000 per month and post-pandemic acquisitions booked between 2022 and 2024. The personal loan NPL ratio also increased, rising 172 basis points year-on-year to 7.16%. Similar to cards, deterioration is coming from younger and lower income borrowers, including 2025 vintages, accounts sourced through -- and accounts sourced through universe expansion programs. To mitigate further deterioration, we tightened credit score cutoffs with early post-implementation results showing reductions in NPL ratios. We also enhanced early-stage delinquency detection and strengthened collection efforts. These measures are expected to support improved NPL performance in 2026. The microfinance NPL ratio increased 25 basis points quarter-on-quarter and rose by 277 basis points to reach 13.3%. The rise was primarily driven by a test program that offered higher loan amounts and longer tenures to existing clients. The quarter-on-quarter uptick increase reflects the impact of recent typhoons in the Visayas, which disrupted operations of certain BanKo borrowers. Overall, however, recent loan bookings are performing better than -- better following the tightening of credit score requirements. SME NPL ratio remained stable, but increased 192 basis points year-on-year to 7.25%, largely driven by strong loan growth. SME loan balances doubled in 2024, which initially kept NPL ratio low. As loan growth more recently moderated slightly, the NPL ratio normalized into the 7% to 8% range, which reflects typical SME portfolio behavior. NPL formation is mainly coming from regular or non-program loans in the lower ticket segment, select high-ticket exposures -- sorry, and select high-ticket exposures. While high-ticket cases represent less than 1% of the total NPL accounts, their larger loan sizes impact the overall NPL levels. No significant concentration has been observed by industry or by geography. Delinquencies are broadly distributed, indicating portfolio-wide, not sector-specific drivers of NPL formation. Finally, in addition to NPL coverage, we report ECL coverage at 100.9%. As shared during our previous earnings calls, our provisioning approach is anchored on ECL, which provides a forward-looking estimate of potential losses. Operating expenses rose by 9.9% year-on-year, primarily driven by technology, manpower and other expenses, which includes marketing, rewards, business volume-related expenses and third-party fees. These investments have strengthened the bank's position. We added 2 million new customers since the start of the year, bringing our total customer count to 18.2 million. We enhanced our nationwide reach in a cost-effective way, rationalizing our branches while expanding our agency banking partners. We achieved operational efficiencies, reducing cost-to-income ratio further to 47.2% in 2025. CET1 capital stood at PHP 401 billion, up PHP 34.9 billion from last year on net income accretion. The CET1 ratio declined 115 basis points quarter-on-quarter, but was flat year-on-year as earnings generation offset the drag from a higher dividend payout and robust loan growth. Capital ratios remained well above regulatory and internal thresholds and sufficient to support continued loan expansion. Strong earnings has supported sharp increases in capital distribution with the implementation of the variable dividend payout effective 2022. In 2025, the bank declared a total cash dividend of PHP 4.36 per share, up 10.1% from 2024 and 142% from the fixed dividend payout -- dividend amount paid out in 2021 and the prior years. We show here a table that shows the revenues associated with loans, covering the full year 2025, 2024 and 2023 and the respective net NPL formation for each loan book for the periods. From 2023 to 2025, revenues across the loan book increased by PHP 40.4 billion, which is more than 3x the PHP 12 billion increase in net NPL formation. The non-institutional segment contributed PHP 33 billion in revenues, surpassing the PHP 17.3 billion increase in net NPL formation, a pattern observed consistently across all loan segments. The loan revenue uplift is driven by the sharp growth in noninstitutional volume, which in turn drove the shift in loan mix toward higher-yielding segments and the increase in fee income associated with higher loan volume. Revenues have outpaced the cost. Despite the rise in provisions, the pivot toward noninstitutional loans has delivered value and validates the bank's direction to grow the share of noninstitutional portfolio in the loan mix. While institutional loans are and will remain a core part of our portfolio, noninstitutional loans have -- are the segment with a greater growth opportunity, consistently delivering loan yields averaging above 12%, even after factoring in credit costs or net NPL formation. Non-institutional loans continue to show grower -- greater risk-adjusted returns. Non-institutional loan growth has outpaced institutional loan growth, contributing to the uplift in overall profitability as there is greater availability of untapped opportunities here. Just to highlight again the higher relative returns on the noninstitutional segment, we show you a comparison of the return on assets for both the institutional and noninstitutional lending segment as well as the resulting ROA for the bank's lending business. For this exercise, please note that we used ECL formation, which largely dictates our current provisioning rather than the net NPL formation or our actual provisions in arriving at the ROA. This way, we net out the effect of higher overlays in prior years as this can be seen -- as can be seen, the non-institutional lending business has delivered ROA of around 4% or higher over the period versus the sub-3% ROA of the institutional lending business. The increased share of noninstitutional loans results in a blended ROA for the lending business of 3.2% in 2025, above the bank's overall ROA of 2% for the same year. Segments that posted the highest adjusted ROE with each enjoying a figure north of 3.5% were personal loans, credit cards and microfinance. We believe this justifies the increased allocation of resources towards the noninstitutional loans and shows that the risk-adjusted returns of the noninstitutional business, including those of unsecured segments, remains stellar, notwithstanding concerns about periodic spikes in the rate of the NPL formation. At this point, allow us to update you on what we have accomplished in 4-plus years since we first shared with you our key strategic initiatives, which include increasing the share of consumer and SME loans or the non-institutional segment in our loan book, establishing ourselves as the undisputed leader in digital banking, using branches as sales stores more than service points, closing the gap in funding leadership and promoting sustainable banking. Our lending business continues to show strong momentum, underpinned by sustained growth across all segments. Our loan growth -- our loan portfolio expanded PHP 2.62 trillion -- to reach PHP 2.62 trillion, rising 14.7% year-on-year and posting a solid 14.3% 3-year CAGR. Both institutional and noninstitutional segments contributed significantly, but noninstitutional lending remains the primary growth engine, growing at an exceptional 29.5%, 3-year CAGR, while institutional loans accelerated at a very respectable 9.5%. This faster growth has driven a big shift in our loan mix. By 2025, noninstitutional loans accounted for 30.5% of total loans from only 21.1% in 2021. This achievement places us 1 year ahead of schedule in reaching our loan mix target of 30% noninstitutional, which underscores the strength of our execution and growing relevance of our consumer franchise. Overall, we've gained significant market share since 2021, as shown on the right-hand table. Market share in gross loans was up 170 basis points, credit cards up 245 basis points, auto up 520 basis points and mortgage loans up 465 basis points. As expected, the expansion of noninstitutional loans increased the NPL level, but the NPL ratio continued to decline due to the faster growth of the loan portfolio and write-offs in the noninstitutional loan book. Credit cost was 93 basis points in 2021 or 18 basis points higher than in 2025, reflecting the elevated provisioning during the COVID-19 period to maintain sufficient NPL and ECL coverage. In line with our commitment to digital leadership, the bank continued to scale 7 client engagement platforms, which are delivering steady growth in enrolled and active users. Transaction volumes continue to shift toward digital channels, supported by new partnerships, enhanced functionalities and continuous platform improvements. Starting from the left, the BPI app, our main operating app for retail clients, now includes a buy-and-sell U.S. dollar facility, regular subscription plans for investments, mobile check deposits and virtual privileged cards, which broadened the app's role in facilitating everyday financial transactions. We also enhanced payment efficiency by reducing the InstaPay fee to PHP 10 and adding over 600 new billers. In addition, BPI to BPI transfers remain free and continuous refinements to the consumer interface and navigation are improving overall ease of use. For VYBE, our e-wallet, sign-ups have reached 2.5 million with 78% being VYBE Pro users. The BPI BizLink facility for corporate clients introduced key upgrades, including web approvals via SMS OTP, mobile multifactor authentication, pay foreign with multicurrency and express check deposit to seamlessly migrate clients to the mobile app and provide ease of transaction approval. The BPI BizKo app for SMEs now serves nearly 30,000 users boosted by e-payroll and salary on-demand services, which aim to bring unified payments for clients and drive usage. The BPI BanKo app remains central to financial inclusion, offering simplified deposits and access to accessible revolving credit. BPI Wealth Online serving high net worth individuals grew active users to 2,800, up 82% year-on-year through sustained activation initiatives. Finally, BPI Trade continues to strengthen engagement among equity investors, with higher transaction count in 2025 and new features such as eRegistration, eDeposit and eReserve to widen accessibility. Across all platforms, we continue to expand capabilities and open banking -- in open banking and improve UI/UX for a more seamless experience. As of December 2025, we have 131 API partners, up from 74 in 2019, supporting over 17,000 brands, up from only 749 in 2019. Despite our strong push towards digitalization initiatives, we continue to invest in our physical network by opening branches in targeted growth areas, even as we consolidate and co-locate branches to optimize our footprint. In 2025, we further rationalized our branch footprint, opening 3 and relocating and consolidating 37 others. The remaining branches will be redesigned into phygital, prime phygital and flagship format, depending on the target segments, customer experience and location. This approach allows us to deliver a differentiated customer experience by leveraging on our both physical stores and digital capabilities. Our branches have undergone a significant shift in their role from primarily handling day-to-day transactions to serving as advisory centers. A few years ago, only 30% of branch personnel time was dedicated towards advisory, while 70% was spent on operations. As of December 2025, operations work has decreased to 46%, while advisory now accounts for 54%, a significant shift that reflects our transformation towards higher-value customer engagement. At the bottom of the slide, we highlight the branch performance following its transformation into a physical -- into a phygital format, 6.5% increase in monthly gross acquisition, 31.8% increase in average monthly net acquisition, 8.6% increase in deposit ADB, 11% increase in digital customers and an improvement of 15.5 percentage points in the internal NPS survey for branch stores. Closely linked to our branch rationalization initiative is our growth in our agency banking, which continues to strengthen the bank's presence beyond branches. We expanded the agency banking network to 32 partners and 7,000 partner stores, driven largely by partnerships with leading brands that strengthened our footprint, particularly in Visayas and Mindanao. What began as product onboarding partner stores has scaled rapidly. 987 of these stores are now enabled for a deposit-withdrawal transactions across 18 partner brands, thereby broadening our ability to serve customer segments nationwide. In 2025, all products -- in 2025, total products sold reached [indiscernible], a fivefold increase from the [indiscernible] recorded in 2024. This growth was supported by a significant jump in productivity to 74 from only 15 in 2024, with insurance and deposit as a primary product. Deposits and withdrawal transactions grew sharply, supported by an increase in enabled stores and stronger marketing efforts. Transaction value and volume were nearly 12x that in 2024, reinforcing agency banking as a viable initiative to increase deposits. More clients can now access a transaction facility with the rollout of RRHI touch points, covering 7 brands and 474 stores using a barcode generated in the BPI mobile app. Looking ahead to 2026, we will accelerate the expansion of transaction capable stores to 2,000 and elevate the customer experience. We will deploy dedicated brand ambassadors who will guide clients through product increase applications and cash transactions within partner stores. The bank delivered a solid deposit growth from 2021 to 2025, with deposits rising 45.2% to PHP 2.8 trillion. Both CASA and time deposits increased, although the growth was led by time deposits, resulting in a decline in the CASA ratio by 16 percentage points to 63.2%. Despite the headwinds in CASA, market share in total deposits improved 67 basis points to 12.04% in 2021 to 12.71% in 2025. Corporate CASA growth remains challenged, while enrollment and transaction activity on the BizLink -- on BPI's BizLink increased overall penetration and client engagement show room for improvement. To address this, we continue to enhance our capabilities to become the main operating bank of our clients and capture the full ecosystem of their transactions. This includes positioning BPI as the aggregator by enabling real-time payments and notifications, multichannel reporting and innovative collection solutions. These initiatives aim to strengthen client engagement and accelerate CASA growth. Retail deposit acquisition continued to be our core strength, the number of new-to-bank deposit clients grew at a 30% CAGR over the past 5 years, driven by digital onboarding which surged 240%, far outpacing the 14% CAGR for branch-acquired accounts. By December 2025, CASA booked via digital channels reached 38x its 2021 level. We also managed to increase the average balances of existing or tenured CASA year-on-year. Our client base now stands at 18.2 million as we onboarded 2.2 million customers in 2025, further advancing our financial inclusion efforts. The year was marked by major ESG milestones, including the bank's larger sustainability bond, the PHP 40 billion SINAG bond, which was 8x oversubscribed, the conversion of 70 BPI branches to 100% renewable energy and BPI's pioneering membership in the Alliance for Green Commercial Banks in Asia. This Friday, we will issue and list the 2-year peso BPI Supporting Individuals to Grow, Lead and Achieve bonds or BPI SIGLA bonds. This will carry an ASEAN Social Bond label as affirmed by SEC. Other highlights include, under responsible banking, 4 new sustainability-focused products in insurance and remittance, BPI-developed AI programs for environmental and social due diligence on global and local investments, numerous ESG-focused financing deals with key deals supporting solar, wind and water projects in the Philippines and Southeast Asia. For responsible operations, BPI is the first Philippines bank to publish its decarbonization strategy road map for Scope 1 and Scope 2 GHG ambitions. By December 2025, we had a total of 44 IFC EDGE-certified green branches, doubling from 22 last year. The bank expanded its customer touch points through the May BPI Dito initiative to 32 partner brands and over 7,000 stores nationwide. Finally, for sustainability, governance and risk management, BPI expanded its sustainability framework, adding 17 new eligible green, blue and social categories. The bank also refined its E&S exclusion list and introduced a consolidated human rights policy aligned with the united declaration of human rights. Allow me to conclude with a summary on profitability. We delivered continued improvement in profitability for the fourth consecutive year of record income led by revenue growth. On the balance sheet, we delivered strong broad-based loan growth led by noninstitutional segments, while the bank's liquidity and capital positions remain above regulatory thresholds. On asset quality, we remain -- we maintain strong asset quality with sufficient cover. Finally, we sustained strong ROE and delivered increased dividends. We closed 2025 with confidence in our strategies and momentum. We navigate a challenging environment. We remain focused on delivering consistent performance and creating value for all our stakeholders. Thank you, and we will now open the floor for questions. Haj Narvaez: Thank you, Eric. Before we open the floor to your questions, please allow us a minute or 2 to set up at the venue. [Operator Instructions] For those on site, you may use any of the mics available at the floor or you may raise your hand, and we will have someone hand the mic to you. Just as a reminder, please identify yourself by your name and company, so we can address you accordingly. For the benefit of everyone attending this call, whether in person or online, we would like to encourage you to ask your questions during the session. Please note that we will refrain from taking questions after we end this call. Joining us here in front with TG and Eric, our senior leaders. First, Tere Marcial, Head of BPI Wealth; Ginbee Go, Head of Consumer Banking; Louie Cruz, Head of Institutional Banking; Jenny Lacerna, Head of Mass Retail Products; and Dino Gasmen, Treasurer, and Head of Global Markets. Perhaps we can take -- if there's anyone in the audience to ask questions. Please go ahead, DA. Daniel Andrew Tan: DA from JPMorgan. First question on asset quality. Fourth quarter, if you look at NPL formation, we estimate it to be around PHP 7 billion. It's higher than third quarter. So I just want to understand, any reason behind it? Any one-offs in fourth quarter that, that moved up? Eric Roberto Luchangco: No specific one-offs. Really, it's just some of the movements that we saw, the movement in the -- movements in -- for one thing, like I said -- like we've said, we're focusing on the ECL as one of the -- as the key basis on which we're going to be providing because, again, it's forward-looking. There were some adjustments to the MEVs. That's when you saw the weak GDP numbers from the third quarter move into our model, and therefore, that created some of the adjustments that we're looking at. Daniel Andrew Tan: But if you look at NPL formation, any -- which segments drove the formation in the fourth quarter? Eric Roberto Luchangco: So it was credit cards was one of the significant contributors to that. Actually, that was probably among them, probably where we saw the bulk of the movement. Daniel Andrew Tan: And so your fourth quarter credit costs around close to 100 basis points? Just fourth quarter, right? Going forward, what do you expect these looking into 2026? Eric Roberto Luchangco: So moving forward, credit cost, we estimate in the kind of 80-ish -- in the 80-ish basis point range. Daniel Andrew Tan: And the drivers behind is what you mentioned earlier on the tightening of credit standards and so on. Is that fair? Eric Roberto Luchangco: The driver to keep it in check. Daniel Andrew Tan: The driver to keep it lower than fourth quarter. Eric Roberto Luchangco: Yes, yes. Daniel Andrew Tan: All right. So that's my question on asset quality. Just another one on growth. So looking into this year, given the macro situation as well, we've beaten actually loan growth in fourth quarter. But do you think this year, what's the outlook on that one? Eric Roberto Luchangco: So overall -- obviously, we kind of carry forward this, in a sense, a lack of momentum that we've had over the third and fourth quarter into the beginning of the year. And yet, we remain -- we continue to believe that there is the opportunity for this to turn around quickly. A lot of the slowdown has been sentiment-driven rather than fundamentals-driven, which means that with a turnaround in sentiment, which can happen quickly, things can turn around. That being said, we approach the year with a fairly cautious approach, but with the mindset that we will retain the ability to move quickly as we see the circumstances turning around. Daniel Andrew Tan: Any guidance on growth and across segments? Eric Roberto Luchangco: Loan growth, you mean? Daniel Andrew Tan: Yes. Eric Roberto Luchangco: So loan growth, we expect to be in the low teens. So basically, weaker than the 14.7% that we saw last year, but still in double-digit territory. So call it in that kind of maybe 12% to 13% range. Daniel Andrew Tan: And just last one for me on treasury, I think last year, pretty punchy number around PHP 8 billion. Any thoughts on how we should think about this year? And also within the PHP 8 billion, how much would you say is customer flow or more recurring type of treasury? Dino Gasmen: Yes, thank you for the question. Good afternoon, everyone. Well, last year's trading income was driven really a lot by changes in monetary policy, the BSP cut by, I think, about 125 basis points. The Fed also was cutting last year. So I think that provided the opportunity to generate trading gains. Looking at 2026, I think the expectation is much less cuts. Our own economies are saying probably 50 basis points from the BSP. In the U.S., I think the forecasts are very diverse. Some say none, some say 2 to 3. So I think this year, trading gains are probably going to be less. The opportunity, I think, is on the steepness of the curves, a lot of -- well, the carry should be good this year because of the steepness of the curves. Lastly, on close. I think -- I'm not sure right now, but I think about 20%, 30% of that workflows. Haj Narvaez: We actually have a question in the Q&A box. The first question -- the question in the Q&A box is from Yong Hong Tan of Citibank. I'll actually passes over to Louie Cruz. How is corporate client sentiment for this year? Are they turning more cautious or more positive after the government budget? And are CapEx loans coming back? Luis Geminiano Cruz: Thank you, guys. Good afternoon. Okay. For this year, comparing it to last year, when we started 2025, we had a very good visibility of the pipelines of all the projects. And you can see significant projects. For this year, it's slightly lower versus last year, but the thing is, they have standby facilities. So it's -- I guess, you can see how corporates are taking now. They're more cautious. But they're also seeing opportunities given how the market would go first half or second half, depending on how this whole issue would come out this year. So the facilities are there, but the visibility compared to last year is slightly lower. Now for institutional banking overall, the growth that we're seeing, we're seeing about 8% to 9% still on the growth based on the visibility. But all this will all depend also on the working capital and the opportunity on that because not most of them will really avail at this point. But given where the rates are going, again, companies will have that opportunity to borrow. And the facilities will -- are there ready, and it all depends on the utilization now to bring up the growth moving forward. Haj Narvaez: Thank you, Louie. Actually, Yong Hong also has a question on consumer growth. I think the answer here's we're looking at low 20% level in terms of year-on-year growth in consumer. Jose Teodoro Limcaoco: Let me just put it in perspective. The target for this year for the bank is to try to grow our loan portfolio anywhere from 11%, 12%. 12% to 13% actually is what we're aiming for. But of course, like anything else, that's what we feel we can achieve, but it all depends on how the macro situation turns out. From segment basis, we're looking at corporate loans -- sorry, institutional loans about 9% -- 8%, 9% and the consumer sector growing maybe 20% to 25%. Now as Eric said, the malaise we feel in this country today is, for me, really driven by confidence. I don't think there's anything structural in the country. It's just people feeling uncertain about what's going on, looking for direction. And I think that's something that can turn very quickly. And so the bank is prepared if things turn very quickly. Of course, there are some other things that we need to watch out for. You have to look at what the sentiment of the auto distributors are. When you talk to them, they're quite bullish, right? They're looking at some growth this year. When you look at the mortgage business, you're looking at 2026, and you have to realize that in 2026, we are now really 4 years, 5 years away from the pandemic when nothing got started, right? No new projects. So that's got to play in. So if we can see 20% growth in the consumer sector, which is about 30% of our book and you see 9% growth in the corporate sector, which is about 70%, that will give you something like 12.5% growth. And that's why we feel that's something that should be achieved. The cards business is something that we continue to be quite optimistic about, but also it's a business that we watch very carefully. In the fourth quarter last year, we had significant NPL. We had scored degradation and therefore, we took provisions for that. But that is something that we have looked at and that we are correcting. Again, it's part of our process where we experiment, we look for new cohorts, we look for new clients, run a few programs. And if it works, we expand it. If it doesn't work, then we cut it very quickly. Haj Narvaez: Thank you, TG. We also have a question that was typed in from Felix Mabanta of Metro Bank. He's asking for some color on the credit card loan growth of 31.9%. Is the growth more a function of existing loans being rolled over? Or is it coming from new credit card customers? Jenelyn Zaballero Lacerna: So to answer that question, it's really a combination of growth in different parts of the business. If you recall, pre-pandemic, we're just acquiring about 200,000 cards per annum, and we're at 400,000 cards per annum post-pandemic. And our retail sales is growing at about 21%. But one of the things that's driving our growth would be installment, which is growing at about 37%. So the installment loans are the ones that you see in the stores, where you can actually purchase appliances, bigger ticket items at terms, and also loans which are targeted offers to customers, who we feel are qualified for our loans. So it's really a combination of those 3 things. Thank you. Haj Narvaez: Thank you, Jenny. Wanted to check if anyone from the audience had questions. Go ahead. John Liam Limbo: I am Liam from F. Yap Securities. I just have a couple of questions. The first question is, with the less than ideal sentiments and possible sunsetting this year of the interest rate easing, what can we expect for provisioning in 2026? Eric Roberto Luchangco: So for provisioning, I think that's about -- in the -- about in the 80-ish basis points, 80 to 89 basis points in that range is kind of what we're expecting. John Liam Limbo: All right. For my second question is for the dividend payout ratio related to the factors that I have discussed earlier. What can we expect for -- in terms of the ratio for 2026? Eric Roberto Luchangco: It's still a bit early to be very specific about that. Obviously, our dividend payout ratio is a result of where we think loan growth is going to be versus how much income we're generating. But just as a rough guide, given the fact that we think loan growth is going to be a little more muted this year, there's probably room to increase dividend payout ratio a bit. Haj Narvaez: We have a question that's also typed in by Rafael Garchitorena of Regis. Could you please break down the 11 basis point Q-on-Q drop in loan yields. Presumably, it was led primarily by the institutional book. Rafa, confirming this, I think we mentioned this in the call -- in the message earlier, it's primarily driven by the institutional book. If you'll notice also, the weight of the institutional book also went up Q-on-Q given it was quite strong on a Q-on-Q basis. Thanks. We have actually another question. This time, it's from Abigail Chiw of BDO Securities. May we know the outlook for NIMs and NPL levels this year as BPI continues to build up the consumer loan book? Eric Roberto Luchangco: Yes. So in terms of the NIMs, we expect that NIM should be fairly stable given that we think that rates are still on a slightly easing trend, right? As mentioned by Dino, our forecast is 2 more rate cuts over the course of this year. But the rate cuts from last year will actually also be filtering into the book, so that will create downward pressure on our NIMs. However, we expect to continue to shift the loan book -- to continue to shift the loan book towards the noninstitutional segment, and that should provide a balancing effect. So NIM should be fairly stable. And then on NPLs, I think we're looking for it to remain kind of within the range, but slightly growing because of the continued shift towards the noninstitutional loan book should create some -- a little bit of a lift there, but that's consistent with the direction that we're heading in. Haj Narvaez: Thank you, Eric. Another -- well, at this time, it's a question on asset quality that was typed in. This time, it's from Melissa Kuang of Goldman Sachs. She's asking on the auto loan side. Could you please elaborate on the key factors contributing to the observed increase in auto loan, nonperforming loans during this period? Ma Cristina Go: Yes, Melissa. Thank you for the question. The pressure on the NPL for auto loans is coming from our strategy of really going more expansive in our market. So it's coming from the lower income, lower risk score segments, which we've then after that tightened as we go into more and more lending programs, we adjust, we tighten the score and the underwriting parameters. So we've seen the source of these accounts to be coming primarily from dealer-generated accounts. And therefore, we've shifted our books into more of the branch-generated accounts, focusing on our prequalified depositor programs. But not to say that we will totally stop or terminate our lending programs. We are looking at balancing risk and reward. So pricing for risk and -- because we still see a lot of opportunities as we go more down market. That's really where the growth opportunities would be. Haj Narvaez: Thank you, Ginbee. Again, we'd like to open the floor to any questions from the audience. Okay. There's a question about -- sorry, there's a question here from Yong Hong Tan again of Citibank asking for the average risk weight of the corporate versus noncorporate segment. And I guess I'll direct this towards you, Eric, but just a question about the capital position looking ahead. Eric Roberto Luchangco: Risk weighted, 100% for corporate, right? And then mostly 100% across the noninstitutional except mortgage is what, 20%, right? Haj Narvaez: Yes, [ it was less ]. Eric Roberto Luchangco: And then sorry, what was the second part of the question? Haj Narvaez: Next question is actually about how we feel about our capital position moving forward. Eric Roberto Luchangco: Actually, what we think we've got more than sufficient capital, right? This level of practically 14% is more capital than we think we need. It gives us room for continued loan growth. And in fact, we think we can bring it down from where we are, which is why -- part of the reason why I also mentioned there's potential for dividend payout to increase moving forward. Haj Narvaez: Thank you, Eric. Okay. There's a question from Priya Ayyar. She's actually asking about the consumer lending space. Are we seeing any deterioration in the client profile? How much do we see the share of consumer moving forward, I guess, over the medium term? Jose Teodoro Limcaoco: Well, I guess the strategy has always been to try to increase the share of the consumer book as part of our total loan book. Therefore, we will continue to aggressively grow the consumer loan book. Growth in the consumer loan book arises from 2 things. One, it's taking more market share from our core clients, meaning, obviously, we have bank clients, depositors who bank with several banks. We try to get those clients as borrowers at the branch. Then you also have the core -- what would be the traditional client base, I guess, the upper segment of what we would call the easy to lend to. That one, we try to get them and try to get market share from our competitors by working more closely with dealers, with brokers, giving them offers. The other way to grow your loan book is by targeting new segments. And that's where we have to use our data. That's where we have to be a little more aggressive, and that's where we're willing to take risks by opening up into new markets, studying them and working very closely to shut it down if it doesn't work as it did in, I think, the -- sorry, the third quarter in 2024, and to grow those segments where it's successful. And maybe here, this is where we go, and I'll turn it over to Ginbee to talk about some of the programs where we're targeting the lower -- with our nontraditional segments, the lower end of the market as we try to expand our customer base. We have a MyBahay program and we had some programs auto side. Ma Cristina Go: Yes, TG. So on the new markets that we're looking at, again, we mentioned this earlier, we really want to make credit accessible to more Filipinos. That's part of the bank's aspiration to be more financially inclusive. In which case, we've introduced a number of programs to this end. One was the MyBahay and MyKotse, which TG mentioned. It basically addresses affordability, and that means extending the loan tenure, lowering the down payment. And so it's not just about interest rates. Because the lower income segment, monthly amortization -- budgeting for monthly amortization is more important. So that's how we're able to also manage the risk because the yields on these assets would be higher to be able to cover for the higher provisioning or credit cost. So new markets and the use of data would be critical for us to be able to manage the risks on this front. Other opportunities for us would really be on process improvements. We do realize that the ability to turn around and process loans will be critical for us to get and book high-quality accounts. So the faster you are, the better quality accounts will go to you. And that's what we're continuously addressing. And on this end, we're really looking at AI, piloting agentic AI for -- particularly for auto loans this year, but eventually rolling off to other types of loans. Third would be the OneScore. We're looking at it as a credit scoring at customer level because we understand that our customers have different loan borrowing needs. And so the ability to look at it from a total customer standpoint and manage the risk of that customer will also be critical for us, not just capturing opportunities, but managing the risks. Jose Teodoro Limcaoco: And then the last area, obviously, the new products which we're offering, which traditionally have not been. So ever since we took Robinsons Bank, we have motorcycle loans, which was totally nonexistent for us in 2023, it started 2024. And that's a very different model because we work very closely with our shareholder who runs the dealership. So there's quite good synergy there. We're not doing it with all dealers. We're just doing it with dealers of our shareholder. We also have grown a business in teachers loans. Today, that book is PHP 16 billion when we took over Robinsons Bank. I think that was PHP 4 billion, right, so in 2 years. And the secret with teachers loans is really distribution. So today, whereas Robinsons Bank was only doing it through Legazpi Savings, which very limited reach, today, we're distributing teachers loans across the country through our 800 branches plus even some of the BanKo branches. Then finally, cannot let go -- not notice the success we've had in our business bank, the SME book, which 4 years ago, was a PHP 16 billion book, and last year ended at PHP 64 billion. And that's really working with SMEs trying to understand who are the SME, standardizing the product, standardizing the distribution and working with the channels to get it there. And that one is a great success story because they're, we've used data first to identify the businesses that couldn't qualify just looking up by their cash that goes to our accounts. And then secondly, we actually turned it around and looked at individual accounts and look at their data and identify them as actually SMEs banking with us as individuals and turn them into SME clients. That's a secret for growth. We -- these -- just these 3 products alone can contribute to a significant share to the growth of our consumer. Haj Narvaez: Thank you, TG. We have a question from Aakash Rawat from UBS. Aakash Rawat: Great. So three. the first one is, so TG talked about environment which is not looking very positive, strong demand-wise. I'm just wondering what drove very strong loan momentum in the last quarter of 2025? Is it a few chunky downs from some corporates, any particular sectors? And have you seen that momentum in 2026 year-to-date? That's the first question. Jose Teodoro Limcaoco: So let me get this. You're asking the -- if we can -- any color on the strong fourth quarter loan growth, right? Louie, any big ones on the corporate side. Luis Geminiano Cruz: For the fourth quarter, it's quite clear and it's very public that the one that drove loan growth was really power, and the projects that were supposed to be completed in 2025 were mostly completed in 2025 despite the macro issues that we were experiencing. This was -- actually, this was really the growth that drove the fourth quarter. Now will this momentum continue in 2026? Unlikely during the first half, but you still see a good flow of CapEx in projects that remain significantly present. So -- but it was real purely on a timing and opportunistic basis. Aakash Rawat: The second one is, what is the loan exposure to the BPO industry? And are you seeing any change in the demand outlook there? Or is it broadly stable over the last 12, 18 months? And when these companies set up their facilities in Philippines, do they borrow from the local banks or the majority of the funding comes from the parent? Luis Geminiano Cruz: For the BPO, our exposures mostly on working capital short-term basis, and we service the flows. So basically, on the loan side, it's very limited in terms of the portfolio. I don't think it's generating even close to 2%, but I can check on that. But generally, the borrowings is from the parent. Aakash Rawat: The working capital loans is 2% of the loan book. Is that correct? Luis Geminiano Cruz: In and out based on outstanding, that's correct. Aakash Rawat: And the last one is just on your thoughts on [ RRR ]. Do you think we see any cuts this year or not? Jose Teodoro Limcaoco: Frankly, Aakash, I don't think there will be any this year. I would like some, but I don't think he'll give it to us this year. Haj Narvaez: Okay. Eric, there's actually a question from Julian Roxas from Philippine Equity Partners. He's asking for OpEx growth outlook for 2026 and our view on CIR for 2026. Eric Roberto Luchangco: OpEx loan growth, I think we'll continue to try and keep that in check. As I think in 2025, we were able to keep that a bit tighter than it had in the previous years. And we'll look to kind of replicate that performance for 2026, which means that the CIR will depend on revenue growth. Of course, the less revenue grows, the more we're going to force the tightness on the cost-to-income ratio. So we saw actually a very strong improvement in cost-to-income ratio in 2025. I think that will not necessarily be -- we may be a chance to try and replicate that in 2026, but we'll try to keep to at least that cost-income ratio, at least maintain. But I'll always be pushing for tightening up in that area. Haj Narvaez: Thanks, Eric. Before we proceed, any questions from those in the audience? If none -- this is actually a 2-part question. I think I can pass it to Dino, then to Eric. With regard to our shift towards bond funding, could you just kind of describe the benefits of going to the bond market versus paying for top rate TDs? And maybe you can talk about some of the incentives that come along with that or are the other benefits? And then what's our view in terms of incremental issuance in 2026? Dino Gasmen: The intermediation costs on bonds is much less, particularly on the research side if the issuance is ESG themed. So there is a requirement of such issuance is 0 compared to 5% for regular time deposits. So that's a huge advantage already for bond issuances. Apart from that, it's very long term, usually long term. So more steady than regular time deposits. What are the prospects for this year? Well, we just issued our new bonds, yes, SIGLA bonds. We may go back. I think we'll probably go back to the peso bond market as well as the U.S. dollar bond market later this year. Yes, I think that's it. Haj Narvaez: Actually, Danielo Picache has -- Danielo actually was the one who asked the question, Danielo of AB Capital Securities. But he has -- the second part of this question is on NIMs. Reminding -- wanted to be reminded again of the NIM sensitivity per 25 basis point BSP cut. And what's the -- what lift do we get from a shift in mix towards noninstitutional loans? Eric Roberto Luchangco: Yes. So same as -- the NIM sensitivity is the same as we've said over the last few years. It's -- we're looking at per 25 basis point cut in policy rates, approximately 4 basis points of NIM movement after 1 year. So no change from the previous years. Haj Narvaez: Thank you, Eric. And we also have a question from Daniela Hernandez of IFC. She's asking which segments will be driving the consumer loan growth or the noninstitutional loan growth? Eric Roberto Luchangco: Yes. So I think -- more or less, we expect generally those that were strong this year, which is most of them, that they will continue to be strong. So the trends remain essentially the same. Ginbee, in case you want to add? Ma Cristina Go: Yes. So wee see -- we're still very optimistic on the growth of the consumer loans, primarily driven by unsecured lending, which would comprise of credit cards, personal loans, micro finance, SME loans. And then, of course, we still see loan growth coming out of our secured mortgage and auto loans, but probably more tepid on mortgage, as TG mentioned earlier, we are already seeing that the turnovers of housing projects 4 years ago has contracted coming from COVID. And then on the vehicle sales, we're also seeing some softness there. But we have been bucking the trend, which means that all our lending programs and our focused initiatives to drive faster and more affordable loans are coming into fruition. And so we're -- we continue to look at defying the trends in both mortgage and auto. And that's why we still are continuing on our guidance of 20% mix growth. Haj Narvaez: Okay. Go ahead, TG. Jose Teodoro Limcaoco: I just want to add to what Dino was saying on bonds. I'm like one of the biggest guys who keeps on forcing Dino to try to look at more bonds. Not only is there an advantage in the reserve requirement if they're green or blue. But the fact that there's no deposit insurance, saves some. The fact that your -- if you do a bond over a year, the effective DSD cost is significantly lower. The fact that if you do a bond, you -- it's better for your LCR ratios, which allows you to be more nimble on your lending. So much more advantages to doing a bond than the typical deposit. Deposits, we're competing with our friends across the street every day. Some days, there's illogical pricing, whereas bonds, you can manage it very well. And over time, you fix your funding. So I'm a big believer in funding with bonds. So Dino, please. Haj Narvaez: Okay. Are there any more questions over there? It's Gilbert, go ahead. Unknown Analyst: What's the -- can we say operating expenses of 10% increase is the new normal annually? Unknown Executive: It's only a target. The 10% is the budget. Haj Narvaez: Thank you, Gilbert. Anyone else from the audience? Okay. Go ahead, DA. Daniel Andrew Tan: Sorry. Can I have a follow up on that? Any scope to lower -- go lower than 10%? I know you're potentially rationalizing some branches still, tech expense as well and so on. Jose Teodoro Limcaoco: It's really -- I mean, you have to set a budget, right? You set a budget because you need to plan on what you'll spend at the start of the year. A lot of that is manpower, right? So that one is, more or less, we can fix. Then the next one is premises, that one we can fix. The premises are -- is growing because we're depreciating our build-out with the renovation of the branches. We certainly want to transform the role of the branches more from the transactional -- and you have heard me say this many times, right? We need to bring them into the phygital world so that we can sell. And that's driving the expanse in what we call, premises. Then there's technology. Technology is something we have invested because we had that tech debt. So I think in '22, it rose 23%; in '23, it rose 24%; in '24, it rose, I think, only 14% or 15%; and last year, it was only 12% or something. I think we're beginning to get our tech spend under -- get it to be normalized this year. We are transitioning out of a major vendor on managed services into a new vendor and another global vendor, where we think we'll see savings of about 30% to 40% on that, and we intend to do that more and more with some of our major tech vendors. So there's a whole process there. And finally, the last component is like marketing costs, which are really driven by -- a lot of that is variable, right? We spend because it generates revenues. And as long as there is a marginal lift in the revenue from the spend, we're willing to do that. So I don't think you should be very focused on what's the growth in the marketing -- sorry, what's the growth in the OpEx spend. But really, is it driving also -- what's it a percent to your revenues because we do have a lot of what we call variable. For example, the rewards we do, right, the points we offer, the rewards and commissions we offer, that's all variable. Daniel Andrew Tan: Okay. Very clear. Can I ask one question on wealth? Just this year, you've been mentioning PHP 1.9 trillion in AUM. Just want to understand how much is the growth? And how much is net new money versus portfolio growth? And then going forward, what are your thoughts on the outlook? Maria Marcial-Javier: So DA, for 2025, I think it's about 19% in terms of AUM growth. Net new money would account for bulk of that. On average, depending on the portfolio, it could -- the -- so one is net new money, the other one is the return on the portfolio. So depending on the portfolio, it could range between maybe 5%, 6% for conservative and maybe for some of our products, as much as 30% for growth products. So -- but in large part, 19% is net new money. Haj Narvaez: Thank you, Tere. Any more questions from the audience? Go ahead. Unknown Attendee: Just one question on the consumer loans, particularly on credit cards. Can you share with us the mix between discretionary spending and nondiscretionary spending in 2025? And how does it differ in 2024? Unknown Executive: So we look at it as essential spending and discretionary spending. So for 2024 -- beginning 2024, we really see a lot more essential spending, basic necessities, basic needs. But there's some certain -- there are specific categories within the discretionary spending that are outpacing essential, like travel for certain segments. So it's difficult to answer as a whole portfolio because we really do segments across the portfolio and not just one whole. So essential, obviously, is something that has been growing for the past couple of years, but definitely in the discretionary spending, we see pockets where travels are more higher than essential and higher-end dining can also be higher than essential in certain segments. Unknown Attendee: Can you give us an idea on like percentage points how they increased year-on-year? Unknown Executive: Retail spending is increasing about 21% per annum. So that's where the essentials and the discretionary spendings are launched. Unknown Attendee: Congratulations on a great set of results. For Tere, I guess, on BPI Wealth, the 19% growth in net new money, is that -- how is that in perspective historically? Is it above your average growth in net new money? And maybe you can give us color what's driving that 19% growth? How BPI sets itself apart from a lot of other banks that want to grow the wealth segment nowadays. I think everybody wants to grow in the wealth segment. Maria Marcial-Javier: So in terms of -- Gino, in terms the 3 subsegments within wealth, so we look at private wealth, we look at personal wealth and then we look at institutional. As mentioned by Eric earlier, the highest growing -- the highest growth in terms of those -- across those 3 segments was personal wealth. And that's really because of rising affluence. I think it grew almost 25%. And then almost equally, about 16%, 17% was the growth we saw in private wealth and institutional. How does that compare versus -- in the last 3 years, we've grown at about that clip, maybe 15% to 18%. And if you look at our chart in terms of AUM over the past 5 years, we have shown a significant increase in our market share. Just last year alone, I think it was around 30 basis points. We only have up to September. So it's been really encouraging. It's a function of the market because we're seeing really a lot of shift towards wealth products. And at the same time, this whole rising affluence will show faster growth, especially on the retail as well as the mass affluent and even the high net worth, given the growing sophistication. So we're still quite positive towards -- for 2026 and beyond. Haj Narvaez: Thank you, Tere. We have a question that was put in by [ Chang Ki Hong ] of JPMorgan. He mentioned that -- I mean, we did hear a few times that segments of younger consumers, consumers with income below about PHP 40,000 are driving higher NPLs in auto, personal and credit cards. Generally, how much do these customer segments account for a lot of the growth? And if you scale back on these consumer segments, will the growth outlook for these loans be brought down? Ma Cristina Go: Maybe I can answer that, [ Chang Ki ]. We have seen the growth of the younger consumers, the appetite for credit to really be high potential. And so that's why we continue to have lending programs to be able to test the ability of these segments to manage their credit. And a lot of our lending programs are really around the lower income, as I mentioned earlier. As well as the younger segment because naturally, if you're younger, then you naturally have lower income as well. How -- they've contributed to the NPL formation and we actually expected that primarily because they're new to credit. And usually, it takes time before they get seasoned. Now what we're trying to do is as we tighten the parameters, increase the required credit score, increase the required income level, we also see opportunities in the higher quality segment, and that's what we are trying to unlock. Peeling the onion further through data, looking at opportunities to cross-sell and be able to provide additional loan and credit to those that are existing to bank and therefore, with bank transactions that we can underwrite, but also to others who are outside of the bank, the new to bank but are existing to credit. So these are the opportunities that we're looking at unlocking the potential of credit scores, such as TransUnion and CIBI so that we can capture opportunities that may not necessarily be just within the books of BPI. Jose Teodoro Limcaoco: And let's just to be very clear, there is nothing wrong with NPL as long as you're pricing it properly. And I think that's the beauty of the diverse products we have. Now certainly, there is an interest rate cap on card. So that one, we're a little bit limited as to how far down market we can go. But that's why we have personal loans where we can do smaller ticket items, price it properly. We have -- clearly, we have, like SME, we can price based on the risk of the particular SME, we can price anywhere from 14% to 27% depending on the risk. Certainly, when you face what I would call the traditional consumer products like mortgage and auto, there you're a little limited because of the competition, right? And some of my friends have been burned by not understanding. And that's where I think BPI understands the market better than anyone else. Yes, we can go down market there, but it's got to be priced properly, and we're prepared to walk away when the pricing is wrong for the kind of risk that people are offering. Ma Cristina Go: I will also add, we talk a lot about underwriting, but we don't talk enough about recoveries and collections. And that's really another big opportunity for us because we're able to use data and able to use our branches and our expanse networks to be able to really recover and improve our collections. We monitor our curing rates and our flow rates very, very intently, and that's how we're able to do that. That's why we have also very good LGDs in our -- particularly in our collateralized or secured loans. Haj Narvaez: Thank you, Ginbee. Thank you, TG. Just wanted to check again any more questions from the audience? Okay. We've actually gone through our questions. Thank you, everyone who's put up some questions. Again, we'd like to highlight, BPI is always welcome, we always welcome your feedback and likewise, take them into careful consideration. Before we end the call, maybe call on TG for some final thoughts? Jose Teodoro Limcaoco: Thank you, Haj, and thanks again to everyone for participating in this call. And thanks to my colleagues here for joining me and being more transparent with our investors. To be frank, 2025 actually ended better than we had thought when we were looking at the way we thought the year would end. Back in September and October, we were a little more bearish on what the results came out. So we're very pleased with the final results. January has started actually not so bad, not so bad. And so it gives me hope that 2026 will be a decent year. Now my gut feel here is that, yes, I've called it the malaise of -- what sentiment of the economy. But it's -- guys, it's really about confidence. There's no structure. We don't have a war. We don't have -- it's purely sentiment driven. And I think that sentiment can turn very quickly. And therefore, as an organization, we're being prepared for that. We do have our plans for the year. We do want to be more capital efficient this year. So we have hinted at increasing dividends and a higher dividend payout because we think we have sufficient capital, and we want to maintain the return on equity that's closer to 15 than the 14.5 that we added. So with that message, I think let's look forward to 2026. Again, thanks to everyone for participating today. Thanks, Haj, for being a great host, and we'll see you in 1 quarter -- sorry, at the ASM. Haj Narvaez: Yes. Thank you, TG. Thank you, TG, Eric and the rest of the BPI senior management team. Ladies and gentlemen, this concludes today's earnings call. Thank you again for your participation. Those likewise joining online, you may now disconnect. And for those on site, please do join us for some refreshments. Thank you.
Erkka Salonen: Good day, ladies and gentlemen. I'm Erkka Salonen from Finnair Investor Relations, and it's my pleasure to welcome you to this Q4 2025 Earnings Call. I'm joined by our CEO, Turkka Kuusisto; and our CFO, Pia Aaltonen-Forsell. After the presentation, we have a Q&A session, and you may present your questions either by dialing in or using the chat function of the webcast. But with these words, I hand it over to you, Turkka. Turkka Kuusisto: Thank you, Erkka, and very good afternoon to all of you joining us today. And today, we have shared, in my opinion, very good news earlier when we published our Q4 report that indicated a very strong profitability development, especially driven by the continued strong demand and solid execution. Pia will discuss, in short, the result in detail, but I would characterize it as a sum of multiple factors. Of course, we benefited from the lower than -- lower fuel price. But at the same time, when we added into the equation the increased cost from the environmental compliance, other regulatory charges, I would say that the cost management and effectiveness was extremely well executed with -- among the Finnair team. At the same time, we still saw and we will see a strong demand, especially in the Japanese and European market that performed, in my opinion, relatively well. That led into a close to a 1% revenue growth, but above all or more importantly, our comparable operating result increased almost by 29% versus the compared, that already was actually a significant improvement from 2023. As you recall some months back, mid-November, we announced our long-term financial targets and also the updated strategy. And therefore, I'm also very happy that already now, we start to see pieces of evidence that the strategy execution or implementation has started with good velocity. As a concrete example of regaining the trust after the, let's say, more difficult or disruption shadowed first half, we restored the confidence of our customers and also discuss about the employees, but also the external stakeholders that we have as a concrete example being that with Pia's lead, we did successfully issue a EUR 300 million bond just before the year closing. If and when we will take the regional perspective, as mentioned, our investment in further strengthening the Japanese foothold after the double crisis is paying off. All in all, the Asian markets continued double-digit growth, both in terms of capacity and revenue. And then if I take a deep dive into our foothold or market presence in Japan in the summer season of 2025, we flew 25 weekly frequencies between Helsinki and multiple destinations in Japan. And we are going to actually further strengthen that for the next summer season when we are adding 3 additional weekly frequencies from Helsinki to Osaka. Also, as already mentioned, Europe as a traffic region performed relatively well during Q4, whereas the domestic part was a bit more soft in terms of load factor development. And then Middle East, when we kind of characterize the profile of the business performance, we need to continue to keep in mind or bear in mind that we don't -- didn't fly anymore from Copenhagen or Stockholm to Doha under the Qatar Airways collaboration or umbrella. So therefore, the revenue development and the ASK development is extremely negative. Big question, of course, still related to how will the North Atlantic traffic develop during the forthcoming quarters. Still in Q4, we saw some softness in terms of ASK development and also load factors. But here, we need to continuously also bear in mind that our ASKs, 9% is allocated to the North Atlantic traffic, and we, of course, continue to monitor the development extra carefully. Then speaking of customers, obviously, when the first half of '25 was overshadowed by complex CLA negotiations that led into severe disruptions, we faced, of course, declining NPS. But I'm extremely happy when I started to see already in September that the NPS is recovering very rapidly after we were capable of stabilizing the operation and continue to fly with the kind of recognized Finnair quality and safety and functionality. So therefore, in Q4, which is the most demanding winter season, the NPS among the total customer population of ours graded 33, which is a good result in network carriers global benchmark. And if and when I'll take the core customer perspective, that is the core of our new strategy among the top tiers of Finnair Plus frequent flyer program, we are actually currently trending above 40. And as you can see from the chart on the right-hand side, the number of passengers continue to grow by 2% year-over-year. Then also maybe related to the disruptions that we faced during the first half of '25, it's important to address that we haven't witnessed significant changes in the capacity market share in our core markets. So these 2 charts, in my opinion, provides a lot of information that our stronghold in Helsinki and our stronghold in the Europe-Asia traffic is holding extremely well, and we will continue to develop our market presence accordingly. And then with this slide, I try to capture the highlights of 2025. So basically, the year was split into 2, difficult first half because of the industrial action and associated disruptions that caused directly more approximately EUR 70 million of negative EBIT impact. And then of course, we were not capable of flying the ASK plan that we had planned for the first half, but ever since we got the CLA disruption behind us early July, we were capable of stabilizing the operation very quickly and actually then, started to implement our profitability improvement actions. And then towards -- through Q3 towards Q4, we improved the momentum and velocity and therefore, very happy with the result. Report a full year result of EUR 60 million in form of comparable EBIT. Unflown ticket liability also grew by some 7%, which is a good forward-looking indicator that how the ticket sales did develop during the fourth quarter. Pia will discuss this in more detail. And then on the right-hand side, on the bottom right-hand side, you can see that the Board of Directors yesterday decided to propose a EUR 0.09 capital return to be decided in the AGM held later in this quarter. But maybe with these words, I would leave it for Pia to discuss the financials in more detail. Pia Aaltonen-Forsell: Thank you, Turkka, and good afternoon, ladies and gentlemen. I just want to say a big thanks to our team, to our customers and to our partners. It's a great privilege to be able to present so strong quarterly figures, as Turkka said, on the back of a start of the year that was still very challenging on many fronts. I think we have ended the year on a very strong note. And therefore, I wanted to offer you a few sort of quarterly time series here with some comparisons on some of the key figures, just to sort of have that perspective. I'll start a bit with the top line and the revenue. As Turkka explained, we are in a market momentum in our key markets that's already a bit more positive. So we have seen some growth in the demand have seen some growth in our top line of about sort of 1% on a full year basis, which is pretty much equal to also, if you count in the wet leases, is how much we added to the capacity sort of holistically during the year. Please still keep in mind that due to the earlier strike situation, we did have cancellations, we have paid compensations, et cetera. Those all, of course, impact the top line as well. If I look at the quarter itself and especially, if I think about sort of the different parts of our business, maybe there's a few words still worth sort of mentioning. We have seen growth sort of through our different categories. So the ticket revenues, we've also seen this increase on the ancillary side. Ancillary is very important from our strategic perspective. The growth was not that fast during the quarter. The comparison period a year ago had a very strong campaign towards that end of the Q4 in '24. So that sort of impacts a little bit the comparison here, but we are still continuing on a good path. That is really important for us, I mean, already reaching over EUR 50 million impact per the quarter. And finally, cargo was sort of fairly stable in the period. Maybe those words are enough on the revenue side. Then let's turn our attention to the middle of the page, which is the graph on the operating profit. So the comparable operating profit to be exact. And you see our result was a stellar EUR 62 million for the fourth quarter. This is the strongest fourth quarter on record that we could find using the current accounting methods. And when you compare it to a year ago where we made EUR 48 million, we actually had a bit of strike impact, although it was EUR 5 million a year ago in the figures and none in this period. But from a cost perspective, there were a few external factors that are worth mentioning. I'll say first that we were supported year-on-year in the development by fuel prices and also a weaker dollar, that did bring us on a quarter-on-quarter comparison, maybe EUR 15 million of benefit. On the other hand, we also had higher sustainability regulation-related costs that's added more than EUR 10 million per quarter, as well as higher navigation and landing costs that also added about EUR 10 million per quarter. So the headwinds of these external factors were actually bigger than the tailwinds. Nonetheless, we still had a EUR 50 million uptick, and this came very much from somewhat higher sales, so we were growing, and we were able to do that in a good way also then sort of being able to use the scale benefits, have a good operational performance, and that helped us then to improve the result year-on-year. Finally, Turkka talked about the unflown ticket liability. I think that's a good sign of the momentum that we have right now that keeps on a stronger side, 7% increase sort of year-on-year. Of course, our business has a lot of seasonality. So you do see the quarterly variance here, but we are on a very good path. I have one more slide really from the profitability perspective. And I wanted to talk to you about revenue RASK and CASK, and just give still some perspectives into that development. I'll start on the revenue per available seat kilometer, the RASK key figure here. And many of the things that I mentioned before on the revenues obviously play in here. I think if you look at the sort of year-on-year development, we can say it's a bit of a sort of hanging in there, sort of making the best of the situation in a challenging year with the strikes, et cetera, during the first half. So clearly, there's been an impact out of that holistically. If we look at yields, I think it's worth still picking up on what Turkka also said, showing the geographical areas before. Though we see a positive development holistically year-on-year throughout Asia, particularly Japan has been a very important market for us, as Turkka said, we also see a good development in Europe if we look at the full year. But the North Atlantic traffic, that has been also from a yield perspective under pressure, and that's due to the sort of holistic situation that we face in that market, and I think that put a little bit of a lead or a little bit of a pressure here on our yield development. So kind of keeping all of that in mind, I still think we have a decent development through the year. On the cost side, the lower fuel costs are helping us, but those other higher regulatory costs as well as landing, navigation costs, et cetera, they all come through here. So you can still see that we've done a good job in mitigating some of the impact. And I think just looking from everything, there's also some seasonal variance. I take one example, maintenance cost. I think we managed really good in the fourth quarter. And obviously, sort of between the quarters, there could be a little bit of changes. I think we have also structurally made some changes as we are through '23, through '24, and a little bit in '25 also done some lease buyouts that are, to some extent, then shifting between the lines, the cost of maintenance. That does give me a nice bridge now to my final page, which is more on cash flow and balance sheet. So let's have a look there. Our cash flow was robust. Obviously, cash flow very much built on the operative performance, the result as well in itself. I think there's only one thing that I wanted to pick up from the cash flow side page here that you can see on the slide that you see on the left-hand side, and that is to explain that if you are keen on details, look sort of from our reporting a year ago, we had a bit of a reclass there on the credit card holdback that sort of boosted from a reporting perspective the figure in the year-on-year comparison. But I think sort of operationally, a good performance in this quarter. Let's talk a little bit about CapEx. Going forward, we do expect a CapEx amount, EUR 400 million to EUR 500 million per year. We are also guiding sort of about that midpoint for 2026. You can see that in 2025, we were coming towards a little bit lower figure. Actually, the gross CapEx was less than EUR 200 million. There was quite a lot of buyout still in this. It was a bit north of EUR 100 million, so lease buyouts, and there was also a EUR 64 million of sort of more maintenance-related CapEx and then some investments, for example, into digital, et cetera. So that was really what we were working with in '25. Looking into '26, this will increase a bit, aligned with the communication that we had on our CMD in November. And finally, it's good to end the year with a robust cash position and still with a good leverage, 1.8, and a good cash to sales ratio, as you can see in the chart to the right. So I think we have a good setup for starting to work into 2026. And on that note, Turkka, please, over to you. Turkka Kuusisto: Thank you, Pia. So to some extent, recapping what we said in connection with the Capital Markets update we held in the middle of November. The strategy is pretty much now centered around the customers and more specifically, core customers because the network setup that we have, have, of course, changed because of obvious reasons. But now after 3 fiscal years since the Russian airspace was closed, Finnair has now demonstrated that we can operate a profitable network carrier even though the Russian airspace is and most likely will remain closed for the time being. So therefore, we have highlighted the focus on traveling to and from Finland while continuously keeping in mind that we are still extremely important transfer carrier for international passengers who connect from Helsinki to European destinations, for instance. This Japanese example that I provided you with earlier is a concrete piece of evidence that we are very strong in Europe, Asia traffic even though the Russian airspace is closed. So the strategic priorities that we shared also with you a few months back pretty much now focus on further optimizing this rebalanced or repivoted network of ours and continuously searching for new route openings, for instance. At the same time, of course, taking good care of the safety, reliability and convenience and functionality of the operations that we run, which enables us to monetize on our commercials, providing more choice through modern retailing. And as you can see from our numbers that the revenue received or collected from the ancillary sales was more than EUR 50 million again during the fourth quarter. There was a bit of a hold or pause in the growth rate, but there is an item affecting the comparability because last year around, we did have a very extensive Avios points sales campaign, but what we continue to forecast is a very solid growth on the ancillary side. And then, of course, when we get a more intimate relationship with our customers, we can then extract the full benefit out of the Finnair Plus frequent flyer program. Then taking from the kind of this 30,000 feet to more grassroot level, concrete examples, we are opening 12 European destinations for the summer season 2026. And very exciting news, published a few weeks ago when we communicated that we will be opening a route from Helsinki via Bangkok to Melbourne. And while at the same time, adding this third daily flight from Helsinki to Bangkok, again to kind of strengthen our presence in the Far East Asia market. Of course, we continue to invest in addition to aircraft and the new fleet scheme into other areas as well. AI and digitalization and other technologies will influence significantly that how an airline like Finnair will be run, operated and led in the future. And we do have a lot of initiatives ongoing, where we can utilize the next-generation technology, be it fuel efficiency, route optimization, back-end processes and such. And speaking of digitalization, we will also continue to invest in the, let's say, digital footprint or digital experience of Finnair in form of new mobile applications, for instance, that will be launched later this year. And then as a maybe final remark from my side related to strategy and on the journey ahead. Of course, given the double crisis, maybe even the longer legacy when it comes to an organization undergoing a significant transformation. And then, of course, the CLA spring that we faced, we want to now invest with extra care when it comes to further developing the engagement, cultural development, leadership and also employee well-being at Finnair. And I was extremely positively maybe even surprised at how much our engagement score increased when we measured it last time in the midpoint of November and December. So it, again, gives us a lot of confidence that we have selected a right path. We are on the right journey with our colleagues that represent 5,800 kind of professionals across the entire organization. To kind of finalize the presentation phase, outlook and guidance provided today. We expect that the global air traffic will continue to grow 2026. We estimate that our total capacity measured by ASKs will grow approximately by 5% during 2026. And then, of course, when giving outlook and forward-looking statements, we continuously need to keep in mind the macro volatility, geopolitical tensions and also the fuel price volatility. But given all this, we are today estimating that our revenue for full year 2026 will be within a range of EUR 3.3 billion to EUR 3.4 billion, and the comparable operating result to be within a range from EUR 120 million up to EUR 190 million. So I guess that with these words, we will close to presentation and open for Q&A. Erkka Salonen: Yes, indeed. Thank you, Turkka. So now would be a convenient time for any questions you may have. Please follow the operator's instructions or use the chat function. Operator: [Operator Instructions] The next question comes from Jaakko Tyrvainen from SEB. Jaakko Tyrväinen: Sorry, I didn't hear the early part of the presentation, so if I'm repeating here. But could you give some color where you are about to play the capacity increase in '26? The point that it will be mainly Europe and Asia routes? Pia Aaltonen-Forsell: Yes, Jaakko. And I think maybe some of that was mentioned, but I think it's very well worth repeating. So of course, looking into Asia, we are further strengthening Japan with 3 more weekly routes during -- or weekly during the summer season. And as well, we have launched the Melbourne route from winter season of '26, and that will then also mean that we fly to Bangkok 3 times per day. So that's sort of the Asia part of it. And then when it comes to Europe, I think, for the summer season, we have launched quite a few sort of interesting destinations, if you are interested in Stavanger or Umea or Luxembourg, and there's plenty more there, all in all, 12 of them. So I think we have a plan that has already raised some attention and some interest, and that's what we are up to now. Jaakko Tyrväinen: Great. And then what about the competitive environment at the Helsinki Airport now that given that all the players should have kind of published their route plans for '26, how you're looking the upcoming competition for the start of the year? Turkka Kuusisto: Of course, competition is something that we will face on daily basis. This is a globally competitive business and sector. When it comes to Helsinki Airport specifically, we kind of knew that there might be an opening from Middle East to Helsinki. And therefore, we already actually -- we are one step ahead by introducing this third daily connection from Helsinki to Bangkok to mitigate the impact. And then at the same time, it's extremely important to put this into a context -- into context. Our traffic area, Middle East represents some 3% of our ASKs and revenues, and this specific route from Helsinki to Dubai, we fly it only during the winter season. So I wouldn't like to underestimate the impact, but I would kind of position it there for the time being rather insignificant, especially given the connectivity beyond Helsinki. So should one kind of arrive at Helsinki, 70% of the passengers will continue to somewhere else with our aircraft. Jaakko Tyrväinen: Excellent. Then if we think about the guidance and the EBIT version of it, if we exclude the industrial actions impact in '25, which factors are you seeing being the kind of the most important profit growth drivers for '26? Is it volume, pricing perhaps or costs? Pia Aaltonen-Forsell: Yes. Thanks, Jaakko. I think the volume part, the growth part here is an important driver. I mean we are seeing ASKs growing approximately 5% and you also see that in the top line guidance there, the EUR 3.3 billion to EUR 3.4 billion that we are expecting on the revenue side. So clearly, that's a big driver because that then also helps us to keep kind of spread the cost in many cases over sort of a bigger spectrum. But of course, we will need to keep the cost control, and we will also need to deliver on other parts of the strategy. That includes, for example, the ancillary sales, and that as well includes certain efforts that we are making in digitalization and AI that will also help us on the cost side. But it's more the growth and the revenue sort of in that context. Jaakko Tyrväinen: Good. And then the final one from my side. Did I get it right in your presentation that there will be further material inflation when it comes to traffic charges in '26? Pia Aaltonen-Forsell: At least in my presentation, Jaakko, the point I tried to make was to really describe the impact in '25, which even in the quarter was EUR 10 million per quarter. And I think there was a big sort of pressure sort of following COVID and the losses, of course, of many of these, let's say, national very regulated agencies. So at least sort of as far as I can see right now, many of those really step changes that were needed to sort of cover for history probably occurred during '25, but that doesn't mean that this is without inflation, but probably the big step change has occurred. Operator: The next question comes from Joonas Ilvonen from Evli. Joonas Ilvonen: It's Joonas from Evli. Congrats on very strong earnings. You already talked about the cost side of Q4. But could you elaborate a little bit? I mean when I look at your cost line items, is there anything to highlight there? I mean, lines like passenger and marketing as well as aircraft materials and overhaul? I think they were all like slightly lower than estimated. So would you say that this kind of so-called, as you said, solid operational execution, is it repeatable throughout 2026 as well? Because in my opinion, if you were able to be as successful in terms of cost over 2026, then you would have basically no trouble reaching the upper end of your EBIT guidance. So is there anything to like highlight? Or do you think how repeatable this kind of cost performance is? Pia Aaltonen-Forsell: Thank you, Joonas. I think 2025 saw many sort of particular challenges also when it comes to sort of maintaining the customer satisfaction when we had cancellations earlier and also kind of handling those situations. So I think we sort of came into a more normal environment then during Q4. So maybe there is room to say, yes, there is a bit of a sort of better situation that we have reached. I would, however, point out that when it comes to maintenance, so I see there is a little bit of sort of just timing topics, whether they occur in one quarter or in another. So I don't see that we structurally would have achieved a situation where we have lower maintenance cost. We are, of course, at the moment, still having an aging fleet. So that is one that I just think there were maybe more a bit of sort of quarterly variations. There is a structural change, but it only goes kind of in between lines because when we have bought more of the leasebacks, it means that some of the costs that were previously shown separately under sort of maintenance cost could now go into the depreciation line because some of the bigger overhauls would be treated as CapEx when they are to our own equipment. So there is a slight change, but that, of course, is not impacting the EBIT line as such. Joonas Ilvonen: All right. That's clear. And then about your revenue guidance, you already talked about this a bit. And you say you expect your capacity to grow 5% this year. But overall, I think your revenue guidance is -- I mean you expect quite robust growth. So to what extent beyond higher capacity do you expect passenger load factors and ticket prices to contribute to growth? Pia Aaltonen-Forsell: There is definitely -- just looking at the market environment and then the capacity growth in combination with our guidance, I think we are seeing some improvements in the load factor throughout the yield. And I don't want to comment on the yields in particularly. I just -- I think it's just good to sort of look at the full network that we have and the ability that we still have to boost Asia to some extent. So this sort of a mix thing is a good one to consider. Joonas Ilvonen: So you're basically still following the development of North Atlantic demand closely, but you're quite confident on Asia and Europe going to develop well also in 2026? Pia Aaltonen-Forsell: I think we have seen North Atlantic sort of continue kind of on the same path that we have seen before. But long term, we are still having capacity on those lines. And let's see when's that time for the changes. Operator: The next question comes from Pasi Vaisanen from Nordea. Pasi Väisänen: This is Pasi from Nordea. If I may start with this new route openings. So these new connections you have announced, are they supporting or kind of declining your average yield? I would assume that there are no easy wins available anymore. So how you are making the calculations for these new routes in terms of your kind of economical reasoning of the opening? Turkka Kuusisto: I guess time will tell what the yields will be eventually. But there is, of course, very diligent analysis behind when we are opening a new route. But especially the new openings in the Nordic region, we feel that there is currently a bit of a vacuum when it comes to providing regional flying from many of the Nordic destination to a Helsinki hub that then provides connectivity beyond Helsinki. Then when it comes to the Toronto route, that is a kind of a reopening for the summer season '26. And then this Bangkok-Melbourne route that we communicated, too early to tell. But of course, it's a combination of optimizing your yields and then also capturing new passengers or passenger flows to your entire network. So that's maybe something that we will revert to when we meet you for the next time. Pasi Väisänen: Yes, I see. And secondly then kind of looking at your investment program. So if you're now kind of buying new or kind of used planes in this spring, are these planes already included on your 5% capacity growth guidance on this year or not? Pia Aaltonen-Forsell: So we have a plan for growing capacity, and we have a plan of the CapEx as well, which is somewhere like around EUR 450 million for the year. And this is like sort of including also then the capacity increases. Of course, these are all plans and estimates at this point in time, but this is sort of how they hook together. Turkka Kuusisto: Yes. And it's always a combination of then maybe switching your balance from wet lease operation to your, let's say, new, although secondary acquired or secondhand acquired fleet. So therefore, again, too early to tell. Pasi Väisänen: Yes. But this investment guidance is in line with the 5% estimated capacity growth guidance for this year? Turkka Kuusisto: Yes. Yes, that's correct. Pasi Väisänen: Yes. And were there any kind of one-offs in last year, let's say, coming from the strikes or the accidents, which actually would kind of somehow be on comparable for the 5% increase on capacity on this year? Or is it on comparable basis excluding those one-offs? Pia Aaltonen-Forsell: I think it is on comparable basis. I mean, of course, the strikes impacted holistically the year including the top line. But I mean, we have reported the full figures and we still continue to fly throughout the year. Pasi Väisänen: Yes. And then when looking at your guidance for the full year in terms of operating profit, so kind of the fuel price is already up by 12% year-to-date on this year. So is this peak on the fuel costs also included on your full year guidance? Or have you made the kind of calculation regarding the end of December situation regarding the expected cost for fuel? Pia Aaltonen-Forsell: Yes. Pasi, we are updating a minimum once a week sort of the full view relating to kind of what's the current price, what's the forward curve, what's our hedging ratio. This is kind of the -- one of very important drivers for our profitability. So my answer is yes. I mean we are standing here now today with sort of very recent updates of how we view the year. But obviously, we also recognize that this is a big reason for fluctuation. That is why we have a range in our EBIT guidance. And that is also why we wanted to sort of even specify that, hey, if we see a 10% change in the fuel price, that would be like approximately EUR 34 million delta in the result sort of from where we stand today. Operator: The next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Yes, congratulations on good results in this quarter. Sorry, just to repeat, just to make sure I understand correctly from your last question. The 5% growth, that is on what was actually flown in '25? Or is it on what was originally planned? Pia Aaltonen-Forsell: It is what was actually flown, on what was actually flown. Yes. Andrew Lobbenberg: Yes. Good. And are you able to tell us what the percentage capacity changes by region, North Atlantic, Asia, domestic Europe, can you give us that for the year? Pia Aaltonen-Forsell: I don't have the percentages here for you, but based on the route openings and how we have described that, it's clear that there is more focus on Asia and then regionally within Europe. Andrew Lobbenberg: Is there any reduction on the North Atlantic? Or does it go up because you're adding Toronto? Or are you pulling down some of those frequencies that came in this year? Pia Aaltonen-Forsell: I don't think that we have any sort of significant pull-downs. Obviously, we are sort of constantly monitoring the load factors, et cetera. But Toronto is added as we have informed. But really, if I sort of look at the kind of the balanced picture of the world and where we are, there is then much more emphasis on the growth in Asia and in Europe. Andrew Lobbenberg: And that growth in Asia, that's 3 weekly frequencies to Japan, is that what you were saying? Or is it 3 routes? Pia Aaltonen-Forsell: Yes, from weekly frequencies. Turkka Kuusisto: The 3 additional weekly frequencies from Helsinki to Osaka. So after that addition, we have 28 weekly frequencies from Helsinki to Japan. Andrew Lobbenberg: Yes. Cool. And nothing changes otherwise, China, Korea, India? Turkka Kuusisto: No. No big changes. No. Andrew Lobbenberg: Yes. Okay. Then can I come back to the maintenance cost and the lease buybacks? Obviously, I should know this. But can you remind me how many aircraft in the year you bought back and how many were bought back in the fourth quarter? Pia Aaltonen-Forsell: I think there was 3 or 4, but none in the fourth quarter. So obviously, this is a cumulative approach from something that we also did already back in '24. Actually, we did most of the lease buybacks already back in '23. So that shouldn't like bring any more sort of a year-on-year change between '24 and '25, but it's all sort of building into the status that we have. Andrew Lobbenberg: And so there's no onetime effect from lease buybacks in the fourth quarter? Pia Aaltonen-Forsell: No, no, no. I wouldn't say so. But it's a structural change. If you look over time, you would see those sort of shifts from the maintenance to the depreciation, those sort of particular sort of maintenance activities. Andrew Lobbenberg: Yes, yes, yes. Makes sense. But when you did do them, did you have a onetime gain? Because other airlines recorded onetime gains releasing maintenance provisions. You have them, right? Pia Aaltonen-Forsell: So we have released maintenance provisions accordingly, but I don't think that had any significant impact during 2025. Andrew Lobbenberg: Despite doing 4 airplanes? Pia Aaltonen-Forsell: So these were -- if you look sort of across our fleet and the ones that we were doing, then my answer is no. It didn't have a significant impact. Andrew Lobbenberg: Okay. Because like Norwegian had a really big impact from it, but I guess there were newer, shinier planes. Pia Aaltonen-Forsell: Must have been shinier. Andrew Lobbenberg: And then I guess what I'd love is an update, and apologies, I also missed the start of the call and also perhaps, I'm just forgetting from the Capital Markets Day. Can you just remind us of what the status is of the fleet renewal on the mid-haul or short haul? Turkka Kuusisto: So if you are referring to the partial renewal of the narrow-body fleet. Andrew Lobbenberg: Exactly, yes. Turkka Kuusisto: Yes. Thank you. So we're still working with the project or program. And as I said, in connection with the CMU events that we want to run a very thorough and diligent process. And therefore, unfortunately, today, we are not yet in the position of disclosing news, but I would expect that during the weeks to come, we should be over the finish line. So I kindly ask for extra patience. Andrew Lobbenberg: Right. And is anything associated with that in your CapEx guide for this year in terms of deposit payments? Pia Aaltonen-Forsell: I think within that sort of EUR 400 million to EUR 500 million or EUR 450 million range that we have, I don't also have any sort of significant items relating to that. There could be something, but it's really more on this sort of shorter-term buying used or arranging so that we can use, used aircraft, et cetera, that we also spoke about in the CMU. There are sort of more -- that is kind of closer in time. Therefore, it's also including in our plans for this year as well as then the capacity increase for this year. Operator: [Operator Instructions] The next question comes from Kurt Hofmann from Air Transport World. Kurt Hofmann: Regarding Australia, it's quite an interesting move you do and as such, the route is quite an -- I can imagine, quite an investment. What are your expectations on this Australia route? And on the North Atlantic, do you see -- many of your colleagues see some uncertainty on the North Atlantic market. Do you see some overcapacity this coming summer and you have to adjust maybe the North Atlantic network? Turkka Kuusisto: So if I start with the North Atlantic traffic, of course, we follow the booking curve very diligently. And then if we need to react, I think that we are well positioned to fine-tune or optimize the weekly schedule to North America. So let's see. But too early to draw conclusions because we are still in the, let's say, the hot season of selling tickets to the summer season '26. When it comes to the Melbourne route, that is, of course, a new opening for Finnair, and it has received quite a lot of interest. Too early to tell that how the ticket sales or the booking curve will develop. I'm personally actually visiting Melbourne next week to strengthen the relationship. And it's also about the kind of tactics or activity that we wanted to do that we added this third daily connection from Helsinki to Bangkok. So it opens us an opportunity to -- with rather low risk level to test this avenue. And we are, of course, doing it with our oneworld partners to also attract kind of a shared interest. So let's see how it develops, but I find it as a fascinating opening. Kurt Hofmann: Yes, I fully agree. And you're one of only a few carriers, which is doing Australia from Europe. Regarding fleet, as the Qantas A330s, I remember from our last call, they will return in the future. What's your plans on the A330? You need all of them or you maybe phase them out, some of them because on the route network, the range is not enough to do more nonstops with them? Turkka Kuusisto: No, I guess that's, again, kind of a multifactor optimization exercise how the booking curve development will kind of develop towards the summer season. Then of course, A330s, as you know, are very good workhorses and the spare part availability is rather limited for the time being. So we might consider a hot spare. But then if the kind of the passenger volumes are developing according to our plan, then we will utilize it in our own flying. So we have multiple avenues to get benefit from the assets that will be returned from Qantas. Kurt Hofmann: Yes. Okay. And one topic as now you resized your last A350, do you think for a new order on wide-body aircraft for a future fleet, maybe, let's say, A330neos in the future or A350, you have to think about this as well? And when you need new narrow-bodies, how many new narrow-body aircraft you would need actually in the future? Turkka Kuusisto: Time will tell. We will now want to finalize this campaign that we are running when it comes to partial renewal of the narrow-body fleet. And as we've communicated, we have 15 aircraft, 5, A319s; and 10 A320s that are approaching the end of their life cycle. So that is the most urgent need. But then, of course, we need to take into consideration the projected market and passenger volume growth. So that will be kind of the equation through which -- by which we will then eventually decide that what's the size of the narrow-body fleet investment also quantity-wise. Then when it comes to wide-bodies, too early because we still have one incoming A350, which is a fantastic aircraft, especially in the current geopolitical situation. And as you mentioned by yourself, those 2, A330s that will be returned from Qantas to us, I think that we are well off now when it comes to wide-body capacity. Kurt Hofmann: Okay. Final question. If the airspace one day via Russia will open again, and we have for sure no signs at the moment, how fast you can react to restore flights again via Russia? Turkka Kuusisto: That's, of course, very complex question. So if I take the easiest part when it comes to day-to-day operations, that is, I guess, the most -- the quickest activity when you could get back to those 24-hour rotations. But then there are other big questions related to -- over flight rights, insurances and such. So quite a lot needs to happen on the, first, in the political field and then the system level before we can go into the operational level and then landing slots and what have you. But then from the operations standpoint, we are -- we can move very quickly, but quite a few steps must happen before running into the operational questions and the implementation plan. Kurt Hofmann: Thank you very much. That's from my side. And I think I will meet you soon in Helsinki in about 2 weeks. Erkka Salonen: It seems that there are no further questions, so we can conclude the call. Many thanks for joining, and have a nice day. Turkka Kuusisto: Thank you. Have a nice afternoon. Pia Aaltonen-Forsell: Thank you.
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.
Melanie Kirk: Hello, and welcome to the results briefing for the Commonwealth Bank of Australia for the half year ended 31 December 2025. I'm Melanie Kirk, and I'm Head of Investor Relations. Thank you for joining us. For this briefing, we will have presentations from our CEO, Matt Comyn, with an overview of the results and an update on the business. Our CFO, Alan Docherty, will provide details of the results, and Matt will then provide an outlook and summary. The presentations will be followed by the opportunity for analysts and investors to ask questions. I'll now hand over to Matt. Thank you, Matt. Matthew Comyn: Thanks very much, Mel, and good morning, everyone. It's great to be with you today to present the bank's half year results. We recognize the cost of living pressures, global uncertainty and rapid change are weighing on many Australians. In this environment, we've remained focused on supporting and serving our customers. That focus has delivered disciplined growth across our core customer segments. Cash net profit increased by 6% on the prior comparative period and earnings per share increased by $0.19. We maintained strong liquidity, funding and capital positions. And our operating performance and capital position has allowed the Board to declare a fully franked dividend of $2.35, up $0.10 on the prior corresponding period. This marks the 11th consecutive period of DRP neutralization. There are 2 features of this result to stand out. The first is the market context. We've seen high credit growth, low loan losses, supportive funding markets and intense competition. The second, which is a key strength, has been maintaining stable margins while growing volume at or above system across all major segments. Over the past 12 months, mortgage balances grew by $45 billion or 7% and business lending grew by 12% at 1.3x system. Deposit balances increased by $44 billion in the half. This was our strongest domestic deposit and lending balance growth in a half year reporting period since 2008. Australia is currently experiencing relatively strong nominal growth and private sector demand. In this environment, banks play a critical role in supporting credit growth for productive investment while maintaining unquestionably strong capital positions. Doing this sustainably requires profitable banks that can generate capital organically to support the economy. The last time credit growth was at this level, apart from a brief period during COVID, returns across the industry were materially higher. In normal conditions, such an environment would favor disciplined competition so that scarce capital is deployed where it earns an appropriate return. However, the competitive landscape is materially shifting due to differing business models, regulatory settings and architecture, customer offerings and return hurdles. Against this backdrop, we believe CBA is uniquely positioned to adapt and perform strongly. Our deep customer relationships and franchise strength allows us to compete effectively and profitably. That profitability allows us to support higher growth across the economy, invest to improve the customer experience and deliver consistent returns for our shareholders. Disciplined growth and margin management drove operating income growth of 6.6%. Operating expenses increased by 5.5%, excluding restructuring and notable items. This reflected inflationary pressures and higher investment in technology, resilience and our frontline teams to improve customer experience. Credit conditions remained very benign, contributing to 6.1% cash profit growth. The performance and long-term health of our franchise is underpinned by a simple relationship-led model. Deep trusted customer relationships drive more frequent and meaningful engagement. That engagement provides deeper insights into customer needs, enabling us to deliver superior customer experiences. Over time, this creates enduring value for customers and sustainable returns for our shareholders. This model has long underpinned our leadership in retail banking and over the past year -- over the past several years, has accelerated growth in our business bank. Technology continues to amplify this advantage, enabling more personalized, timely and scalable customer engagement. Our financial performance reflects customer focus, disciplined execution and investment in our franchise. We track the strength of our customer relationships through Net Promoter Score, and this remains an important indicator of trust and advocacy. We currently hold leading NPS positions among major banks in consumer and institutional banking. And following 15 months at #1, we dropped to the second position in business banking in the half. Operationally, this is translating into scale and momentum across the group. On average, each week, we settle more than 3,000 home loan purchases, lend around $900 million to businesses and process almost 150 million payments, and alert customers around 280,000 times to suspicious card activity. We continue to build scale and depth of primary customer relationships, which underpins long-term franchise health. We've consciously increased investment in data, technology and AI to improve customer experience, safety, security and operational resilience. The retail bank has performed well with pre-provision profit growth of 5%. We've maintained the leading Net Promoter Score for 38 consecutive months. Retail MFI share has increased slightly to 33.5%, but remains below its 35% peak. Customer engagement remains a core strength with 9.4 million CommBank app users and 14 million daily log-ins. We now hold 12 million retail transaction accounts, a 35% increase since the start of COVID and an increase of 585,000 in the past year. As a result, our deposit growth has been strong. Home loan balances increased by 7% in the past year to $622 billion. 97% of these customers hold a transaction account with us. Digitization and technology continue to drive performance in home lending. 70% of proprietary home loan applications are auto decisioned on the same day. We're focused on continuing to strengthen our MFI share and investing in AI-enabled digital experiences. The Business Bank has had another period of strong performance. Pre-provision profit growth was 8% and cash profit growth was 14%. MFI share increased to 26.9%, which is a 310 basis point increase since the start of COVID. We added 85,000 transaction accounts in the past year, which is a 7% increase. And the business bank is now the Commonwealth Bank's largest source of transactional deposits. We grew lending at 1.3x system, increasing balances by $18 billion in the year. Business Banking lending balances have increased by 87% or $78 billion in the past 6 years, supporting growth and jobs in our economy. Approximately 90% of business loans are linked to a CBA transaction account, reflecting the depth of our primary relationships. This supports credit quality with loan losses of 6 basis points in the half. It also allows us to use data and automation to substantially improve lending and servicing processes. For small businesses, we've doubled the volume of loans auto approved through BizExpress over the past 2 years and have reduced annual loan maintenance activity by 85%. We also launched a national AI, cybersecurity and digital capability initiative, supporting up to 1 million small businesses to lift productivity and competitiveness. The combination of deep customer relationships and prudent lending growth is delivering sustained earnings performance. Our institutional business is also performing well with pre-provision profit increasing by 13%. We've regained the #1 position in NPS, supported by improvements in client experience and execution. Our institutional bank plays an important role in providing $64 billion in net deposit balances and supporting markets activity. We've seen growth in new transaction banking mandates, enabling the institutional bank to further support the group in deposit funding. The markets business has had a particularly strong half. We led the market in debt capital market performance and last year topped the Bloomberg combined lead table. In New Zealand, ASB performed well with operating income growth of 8%. ASB is the highest reputation score of the major banks in New Zealand and has been a Digital Bank of the Year for the past 4 years. ASB saw 1.3x system growth in home lending and business and rural lending. Deposits grew at 1.2x system. Customer deposits and home lending balances have both increased by 41% in the last 6 years by $26 billion and $24 billion, respectively. The credit environment remains benign. Troublesome and nonperforming exposures decreased following upgrades or external refinancing activity. The number of home loan customers in hardship declined by 28% since June 2024, and we remain well provisioned for a range of economic scenarios. We hold total provisions of $6.3 billion, which is $2.8 billion above our central economic scenario. Our balance sheet remains strong with 79% deposit funding. Our weighted average maturity of long-term funding is 5.2 years and liquid assets are $199 billion. Our capital ratio of 12.3% is $10 billion above minimum regulatory requirements. A strong balance sheet allows us to invest for the long term and respond to any deterioration in market conditions. We've seen record inflows of deposits in the half. We've also seen $15 billion increase in redraw balances and offset accounts. Customers having surplus funds available is a significant predictor of arrears performance, and so this behavior has a positive capital impact. 87% of home loan customers are now in advance of their scheduled repayments. On average, 35 payments in advance. When adjusted for redraw and offset savings, household debt has now returned to levels not seen since 2015. The transmission of monetary policy in Australia means that our banks pay very competitive interest rates on at-call household deposits compared with other markets. On average, at-call deposits in Australia are attracting an interest rate, which is 5x higher than in the U.S. and 10x higher than in Europe. We've seen a strengthening in the economy in the past 6 months, driven by consumer demand. Spend has been increasing across all customer age cohorts. Most age groups are broadly maintaining discretionary spending and increasing savings levels. GDP growth in mid-2026 was 2%, more than double the same period a year ago. Most noticeably, economic growth has shifted from being primarily driven by public demand to being driven by household consumption. Last week, we saw the Reserve Bank raise interest rates to 3.85% in response to inflation, which is running higher than the target band. Almost 1/3 of the increase in the CPI basket is driven by housing with utilities a substantial contributor to that category. Our purpose, building a brighter future for all guides how we allocate capital, manage risk and invest for the long term. It reflects our long-term commitment to Australia, our customers and our communities. Some of the ways we're delivering on our purpose include significantly increasing funding for new residential housing development, delivering $190 million in benefits to consumers through CommBank Yellow, migrating our core banking system to the cloud to improve resilience, delivering 30% more technology changes, reducing critical incidents and improving recovery times by 65%, rolling out new AI tools and training programs to our teams to build capability and deliver better customer experiences and maintaining our strong balance sheet settings, sending around 40,000 alerts a day to customers about suspicious activities and deploying more than 2,900 AI bots to engage and disrupt scammers. Importantly, our strong performance enables us to continue supporting our 18 million customers, protect communities, support Australia's economy and invest for the long term. As cost of living pressures persist, we are providing targeted support to households under strain, including 63,000 tailored payment arrangements for customers most in need. We supported more than 79,000 households to buy a home, including through dedicated support for first home buyers. And we lent $25 billion to businesses supporting growth, jobs and economic activity. We're investing $1 billion a year to help more people protect themselves from scams and fraud. Our strong balance sheet allows us to support customers and communities while delivering sustainable long-term returns for shareholders, including $4.4 billion in dividends this half, benefiting more than 14 million Australians. We will continue to support our customers, protect communities and invest for the long term to provide strength and stability to the Australian economy. I'll now hand to Alan to take you through the result in more detail. Alan Docherty: Thank you, Matt, and good morning, everyone. Starting with the results overview. We've set out the key aspects of our current operating context, how we are responding and how those actions are contributing to the long-term strengthening of our franchise. At a macro level, we are seeing strong system growth in both credit and money supply. Competitive intensity within the banking sector remains elevated. Technological innovations continue at pace and geopolitics remains a source of potential tail risks. Against that backdrop, our response has been deliberate and disciplined. We have carefully managed volume and margin trade-offs, continue to invest and extend our leadership in both technology and proprietary distribution and maintained conservative balance sheet settings. This approach is yielding strong financial outcomes. Pre-provision profit growth is healthy. Our dividend per share continues to reflect the strong compositional quality of our earnings. And our balance sheet settings give us confidence in our ability to continue supporting customers, growing the franchise and delivering sustainable returns to shareholders over the long term. This slide sets out the usual reconciliation between statutory and cash profits for the half. There were only modest movements in the usual noncash items during the period. As such, both statutory and cash profits on a continuing operations basis totaled around $5.4 billion. Breaking down the components of that cash profit, Operating income grew 6.6% year-on-year as our investments in technology and proprietary distribution continue to yield strong operational outcomes. That top line performance allows us to continue to invest in the franchise with underlying operating expenses increasing 5.5% on the prior comparative period. Notable expense items totaled $170 million over the last 6 months, largely due to the settlement of a long-standing legal proceeding in New Zealand during the September quarter. Loan impairment expense was flat year-on-year and lower versus the second half, reflecting the benefits of our conservative settings and the resilience we continue to see in customer and portfolio credit quality. This resulted in growth in cash profits of a little over 6% on both the prior corresponding period and the second half of last year. It's worth noting that the effective tax rate for the half was 30.3%. Looking ahead, you can assume that will settle closer to 30% for the 2026 financial year. On operating income, we delivered growth of 6.6% over the prior comparative period. Net interest income increased strongly, up $761 million, supported by profitable above-system growth in lending and deposits. Other operating income also contributed, growing $163 million over that period, assisted by one-off gains. This slide sets out some of the drivers of long-term franchise strength that we have been targeting, deeper customer relationships, deposit-led growth in our core segments that underpins and proceeds lending growth and productivity improvements within our frontline teams. Our retail bank continues to build foundational banking relationships, adding 3 million net new transaction account customers over the past 5 years. In home lending, we continue to prioritize and grow proprietary distribution with $55 billion of new fundings originated over the last 6 months through our own channels. And our strategic focus on business banking continues to deliver strong outcomes with double-digit compound annual growth in both deposits and lending over recent years. Our investments in building a more digital, customer-focused and streamlined business bank for our people and our customers can be seen in the productivity improvements delivered over the last 5 years with fundings per banker up 65% over that period. Turning to the net interest margin and looking at the movement over the most recent 6-month period. The main driver of the 4 basis point reduction over the half was the increased mix of low-margin liquid assets and institutional repos. Excluding those items, margins were 1 basis point lower with competitive pressures and the impact of a lower cash rate, largely offset by the replicating portfolio and the favorable portfolio mix effect of strong deposit growth. Margins were a little stronger in the December quarter, largely due to the benefit of higher swap rates on our replicating portfolio. You can see here that we're managing margin outcomes carefully, balancing competitiveness with returns and staying focused on building lasting primary relationships with our customers rather than chasing unprofitable volume growth. On operating expenses, they increased 5.5% on the prior corresponding period. The drivers are largely unchanged over recent years. We are seeing inflationary impacts on wages and IT vendor cost inflation continues to run higher than CPI. At the same time, we continue to invest behind the franchise with higher cloud consumption and software licensing costs and our ongoing investment in technology infrastructure and AI capabilities alongside enhanced frontline capacity and operational resilience. We are self-funding much of that investment through productivity initiatives, realizing approximately $222 million in incremental cost savings over the past 6 months. Turning to credit risk. Loan impairment expense for the half was $319 million, broadly consistent with the prior comparative period and improving versus the second half. Across the portfolio, we continue to see broadly stable to improving conditions. Households have been supported by the strength of the labor market and rising disposable incomes. We have seen this reflected in higher prepayments and lower consumer arrears. In the corporate portfolio, troublesome assets and nonperforming exposures continue to trend lower as a proportion of the portfolio. Given the uncertainty in global macro and geopolitics, we've maintained strong provisioning coverage. Total recognized provisions are approximately $6.3 billion. And importantly, we continue to hold a material buffer above the central scenario. This slide provides the usual additional detail on sectoral considerations. We marginally reduced base provisioning and forward-looking adjustments in areas where conditions have improved, including consumer, construction and retail trade. This was partly offset by an increased level of provisioning relating to our downside economic scenarios where we take into account the risk of exogenous shocks to the domestic economy. Overall, our approach to provisioning remains grounded, forward-looking and appropriately conservative. Our funding and liquidity profile has continued to strengthen. We continue to be predominantly deposit funded, supported by a strong deposit gathering franchise. Total customer deposits grew at an annualized rate of 10% over the last 6 months, taking our customer deposit ratio to 79%. We also maintained a historically low proportion of short-term wholesale funding. This combination of deposit growth, consistent term issuance across diverse funding markets and strong liquidity buffers, we remain well positioned to support the current strong level of customer demand for lending growth. On capital, our common equity Tier 1 ratio remained at 12.3% with organic capital generation continuing to support franchise growth and dividends. Growth in risk-weighted assets was largely a function of lending volume growth with credit risk weightings remaining broadly stable over the past 6 months. The interim dividend increased $0.10 to $2.35, representing a headline payout ratio of 72% and a normalized payout of 74% after adjusting for the benign first half loan loss rate. The dividend will be fully franked and the dividend reinvestment plan will be offered with no discount and fully neutralized. Delivering franchise growth while maintaining returns above our shareholders' cost of capital allows sustainable and consistent accretion and dividend per share over the long term. This slide sets out our long-term approach to capital management. We prioritize profitable franchise growth as the first and best use of organic capital generation. We invest in line with our strategic priorities aimed to pay sustainable dividends, and we carefully manage our share count and surplus capital in a disciplined way. Over time, you can see we've balanced capital generation with capital distribution, supporting franchise growth when lending demand is elevated, while also returning excess capital to shareholders, primarily through dividends as well as through the selective utilization of buybacks. Ultimately, we remain focused on optimizing long-term shareholder outcomes while maintaining the balance sheet resilience that underpins our ability to support our customers and the broader economy through the cycle. In closing, this long-term approach has again assisted in delivering consistent and superior shareholder returns. Our combination of a high return on equity and strong payout ratio continues to compare favorably with domestic and global banking peers. Our strategic investments are yielding measurable improvements in franchise growth and productivity, underpinning our continued outperformance in net tangible assets and dividends per share. I'll now hand back to Matt for the economic outlook and closing remarks. Thank you. Matthew Comyn: Thanks very much, Alan. Australian economic growth has strengthened more quickly and proven more resilient than expected. This was driven by increases in consumer demand and rising investment in AI and energy infrastructure. Household consumption has risen, including across discretionary categories. Supply side constraints mean that the economy is struggling to meet this increased demand. And as a result, inflation is now expected to remain above the Reserve Bank's target band for some time, placing further upwards pressure on interest rates. Australia has remained highly resilient despite a volatile global environment. To date, there has been limited economic impact from trade and tariff disruptions. A global AI investment cycle is supporting growth. Elevated geopolitical risks are likely to generate ongoing shocks, reinforcing the importance of economic and operational resilience. We will continue supporting our customers with their financial resilience during this period. We're optimistic about the prospects of the economy and we will play our part in building a brighter future for all. So in summary, the market has seen a period of high growth, low loan losses and intense competition. The Commonwealth Bank is well placed to adapt and perform against this backdrop. We remain committed to supporting and protecting our customers, reimagining customer experiences by investing in technology and AI and providing strength and stability for the Australian economy and delivering sustainable returns. We will stay focused on consistent, disciplined execution and investment for the long term to deliver for our customers and build a brighter future for all. I'll now hand to Mel to go through your questions. Melanie Kirk: Thank you, Matt. For this briefing, we will take questions from analysts and investors. When the line opens for you, please introduce the organization that you represent and limit your questions to 1 to 2 maximum questions. The briefing will then have the -- sorry, we'll then take the first question from Andrew Triggs. Andrew Triggs: Matt, in your prepared remarks for the first quarter trading update, you talked about the competitive concerns -- sorry, the competition concerns you had and potential responses and onsettings. Could you sort of elaborate on those? You seem to have sort of reiterated some of those comments this morning. And specifically, what size of the balance sheet are you referring to there? It does seem at odds with a stable underlying margin in the half and the slight improvement in NIM that you've seen in the December quarter. Matthew Comyn: Yes. No, thanks. Look, I guess I'd contrast between -- as I said in the opening remarks, I think the strength of this result has been our ability to maintain a very good and disciplined volume growth and a part of that is underlying stability in the margin performance across all of our customer-facing segments. I think when we look at, let's say, last calendar year, I think the market is and the competitive context is shifting. I think clearly, this demonstrates our ability to be able to perform well in that. But I mean, if you look at the period of the last 5 years, we've seen the most rapid growth by one competitor in household deposit share growth. In fact, I think it will be close to double the previous growth rate. I think we've seen a pretty sharp reduction in household balances. I think the greatest over that 5-year period outside the major banks. I think even if you went back to 2008. And I think that's interesting in the context of the backdrop. We've got, as we talked about, higher system credit growth. We've seen that clearly in retail and also in non-retail. We expect that there's going to be a maintenance of higher credit growth on the back of higher nominal growth and of course, I hope a pickup in investment. If you look at the organic capital generation across peers and really the sort of volume and NII returns that are being generated, I think that sort of marks quite a shift. Against that sort of credit environment, you'd actually expect there to be much greater pricing discipline. And look, clearly, there are different choices that are being made around business model and customer proposition. Some part of that's being informed by the regulatory architecture and choices. I mean it's for us to understand and adapt to the environment to be able to execute as well as we can, both in the 6- or the 12-month period, but also most importantly, to position the organization for the future. And we think a lot about how do we build on the scale, durability, resilience, investment in the franchise while continuing to perform well in any given period and deliver sustainable, reliable returns to our shareholders. Andrew Triggs: And maybe perhaps for Alan. Just the pick apart maybe a little bit more of the slight improvement you referred to in NIM in the second quarter. You put that down to the replicating portfolio, but that tends to come through more slowly. What were the other drivers? And given we've had a rate hike in February, potentially another one in May, what does it mean for the outlook for the NIM into the second half? Alan Docherty: Yes. Thank you, Andrew. Yes, between Q1 and Q2, I guess there was a couple of things that changed. I mean, importantly, the replicating is a major factor. The 5-year swap rate, I think, increased 30 basis points between Q1 and Q2. And as the tractors gone through over that period, we've seen the pickup there. Also, there was a bit more of a cash rate headwind in Q1. So if you look at the weighted average overnight cash rate that was down, I think, 40 basis points Q1 to the second half of last year and only down a dozen basis points over the second quarter relative to the first. So you had that cash rate headwind in Q1 sort of be much more neutral, I guess, in Q2. And the other aspect was very strong growth as we've reported in particularly business transaction accounts in that December quarter. So that was pleasing. And so we picked up a bit of a mix benefit on BTA growth through Q2. Now an element of that is seasonal, we get seasonally stronger growth in the December quarter. But you can see what the changes we've seen in swap rates. So that will continue to feed through in our tractors in the period ahead. Melanie Kirk: The next question comes from Jon Mott. Jonathan Mott: Jon Mott here from Barrenjoey. I've got a question on Slide 96. I know it's a long way in, but if we can just click over there. Just looking at the deposit side and well done, just really shows the strength of the franchise with the great growth of the deposits coming through. But I wanted to drill down into it. So if you look at the growth in retail transaction accounts, pretty steady, good numbers growing 3% in the half, 5% year-on-year. It's been growing pretty steadily. But then when we look over at the retail deposit mix, a big jump, and I think this is the biggest jump you've ever had in transaction deposits in the retail bank. And if you go on the average balance sheet, you can also see they're coming in noninterest-bearing deposits, so excluding offset accounts. You're seeing huge growth. And given the comments from the first quarter, it didn't appear to be there. So it really looks like it's come through in the December quarter. To put it into perspective, I just backs that the average transaction account in Australia jumped by $700 from just over $10,000 to $10,700. So what happened in that December quarter to see such massive growth, not in the number of transaction accounts, but in the balance? And when you think about how it's going to go going forward, is this just a seasonal and then get drained into savings or higher interest rate accounts over this next half? Or are you going to see really strong growth in noninterest-bearing deposits really support the NIM through the second half of '26 and into '27? So can you just explain what happened? Alan Docherty: Yes. I mean one element of that transaction account growth is growth in the offset accounts. We've seen very strong consistent growth in offset through both Q1 and Q2. I mean that's, I think, a healthy sign of continued growth in excess savings across the economy, and we called out in the -- in one of the macro slides, the improvement that you can see in the savings rate that we continue to see through the course of that half. Yes. And in terms of the performance of the underlying ex offset growth in the retail bank, that's continued to improve. I mean we've seen relatively consistent growth in average balances per retail customer account. So that's continued to grow in the period. And of course, we've continued to attract more customers. And so very strong growth, another, I think, year-on-year, 600,000 growth in customer transaction accounts in the retail bank. Retail customer numbers are up 3 million over the 5-year period. So again, that's been relatively steady. But I think it's a function of just that continued growth in savings across the broader economy, and we've seen a large share of that come through the retail bank. Jonathan Mott: Okay. Just digging into that a bit more. I just going over to the retail bank in the actual result. And if you look at the noninterest-bearing transaction accounts in the -- you can see there, this obviously excludes offset accounts. Big jump again there by $4 billion. So is there anything in particular that happened in that fourth quarter that just drove this much higher because this isn't you're seeing steady customer account growth, it's unusual. And then obviously, this implies what happens into the next half. Alan Docherty: Yes. No, I mean it's very pleasing. I think a more like-for-like comparison is going to be December to December growth in noninterest-bearing trend in the retail bank. We do get a fair amount of seasonality into that June period. So going into June, as you come out of the March quarter into June, you tend to have a higher level of spot non-retail transaction account deposits, which then dip quite significantly into the 30 June period. We see a lot of switching, particularly small business owners injecting cash in other businesses as they get to the 30 June financial year-end. So we've been pleased with the growth, probably the better underlying measure of that growth, I think, is the year-on-year 6% growth between the $47.5 billion we had this time last year and the $50 billion that we landed at 31 December. So yes, strong growth, but I wouldn't annualize the 6-month growth. Matthew Comyn: Yes. I think there's a bit of seasonality for sure. And Jon, I think Alan touched on it all. I mean, obviously, we'd like to think with all the work that we're doing around the engagement of main bank proposition that's attracting higher balances. We did see obviously a run-up in incomes across the economy. But I think it's hard to then just extrapolate the fourth quarter was strong for us in a number of areas, including both in business and retail deposit growth at an account and average balance number. Melanie Kirk: The next question comes from Richard. Richard Wiles: I've got a couple of questions. The first relates to the mortgage market and the second relates to the benefits of scale. So on the mortgage market, your major bank competitors have been pretty clear in communicating their desire to invest in and grow their proprietary distribution. So that leads me to ask whether your expectation that you can grow at or above system in the mortgage market is premised on a belief that you won't lose any share of proprietary distribution or that third-party broker share of the industry's mortgage origination will fall from its current levels? Matthew Comyn: Yes. Look, Richard, I mean, we don't, as you know, sort of -- we, at any period, seek to grow sort of at or around system. We're going to make lots of different choices. I think there's a couple of different sides to it. Clearly, the proprietary distribution has been a strength for some time, and the team have executed really well. I think we're now, we think, 54% of proprietary mortgage origination. On one side, the other banks joining and having a greater focus on that, maybe that helps a little bit to change the perception or customer preference more broadly in the market. I mean, secondly, the broker channel is a really important distribution for us and it will be going into the future. So I mean, it's predicated really on the continuation of what we have been doing. And I think we'll be able to maintain between both our CBA Yello brand, BankWest, which is obviously heavily concentrated in broker and our digital proposition, a balanced portfolio in terms of distribution. And then, of course, while serving our customers, we've sought to optimize for cohorts and individual segments where there's structurally higher margins like there are in investor. Richard Wiles: Okay. And my second question really relates to some of the slides and your comments pointing to very strong growth in the franchise since 2019, whether it be deposit balances or number of customers or number of accounts, you called that out in your opening remarks. That should suggest that you'll get increasing benefits from scale. But if we look at the cost-to-income ratio, in rough terms, it's somewhere in the mid-40s. That's where it is today. That's where it was back in 2019. Do you think it's fair to view the cost-to-income ratio as a measure of whether you're delivering benefits from scale? And can investors expect or cost-to-income ratio at CommBank over the coming years? Matthew Comyn: Yes. Look, I mean, it's -- and look, I'm certainly a believer in increasing returns to scale and how they might compound over a long period of time. I think the drivers, particularly on the cost side for us, I guess, as we reflect over the last, whatever, 5 or 8 years have been deliberately targeted in a couple of areas. First and foremost, we've significantly increased the investment, and we think that's really important to both underpin the durable competitive advantages. But I think that's one of the major sources of scale. And we've substantially increased sort of operational and regulatory risk management. Of course, without giving any sort of clear guidance, you might recall early on in our collective tenure, we gave some cost-to-income ratio guidance and then the cash rate promptly fell several times after that. So we're not likely to repeat with that. Richard Wiles: That was early 2019. Matthew Comyn: It was. It was, Richard. We remember it well, I'm sure you do. So look, I think we definitely have aspirations to perhaps over the medium term, definitely shift the trajectory of that cost. But we also, I guess, in any period, we're prepared to sacrifice near-term returns if we believe that we can deliver the best long-term outcome. And I do think the next 5 years will be quite different in terms of where the investments will come from. I do think there's a lot of consistency around technology. Probably the other area that I think occurs to Alan and I in this result is in terms of where the increased investment over and above the areas that we're used to calling out is there's just a lot more going into resilience more broadly. And I mean cyber has been a theme. So we do think the importance of being able to continue to invest in differentiated experiences but also just core resilience and protection of our customers. You need to be able to generate a strong organic return profile to be able to fund that investment to be able to simultaneously provide lending to the economy and distribute dividends. So it's probably a long-winded way of saying no change to guidance, believe in returns to scale strongly. I think there will be opportunities for us to improve our cost trajectory and ratios over time. Melanie Kirk: The next question comes from Andrew Lyons. Andrew Lyons: Andrew Lyons from Jefferies. Alan, just a question on costs. Firstly, the first quarter, you spoke to seasonally low IT vendor costs, but the first half cost performance was a particularly good one, and it wasn't particularly apparent that, that came through in the second quarter. How should we sort of think about that seasonality comment from the first quarter? Should we be seeing a bit of a step-up in those costs being expensed through the P&L in the second half just as you continue to invest in the business? Alan Docherty: Yes. You'll notice in the detail of the investment spend disclosures we have. We have dropped the capitalization rate in the current period. We're capitalizing less, more of that's flowing through into the P&L. That goes with the change -- slight change in mix that we've seen from a strategic investment perspective. So more weighting towards productivity and growth initiatives, a little bit less proportionately on some of the infrastructure spending. The infrastructure spending by nature is more capitalization heavy than other forms of spend. There is a little bit of seasonality in Q1. We've seen some of that reverse in Q2. It's fair to say that we've called out IT vendor cost inflation pretty consistently over the past 12, 18 months. It's an area that we continue to be very cognizant of, very focused on. We see that as over the medium- to long-term potential source of above CPI, above domestic inflation source of cost growth. So it's something that we're managing carefully, but something we keep an eye on, and that's why we made the comment in the first quarter because you didn't really see it as a source of cost inflation there. But again, that was a quarterly timing issue. Andrew Lyons: Yes. Okay. And perhaps a question for Matt. It was a particularly strong result in business banking. Your loans are up 9% on PCP NIMs up 3 bps over the same period and 5 bps in the half. That does somewhat fly in the face of the view that the market is facing elevated competition driven by both the big 4 and also other players in the space. So can you perhaps just talk about the competitive environment in business banking? How do you see it playing out? And what is CBA basically doing to sort of try and insulate the margin as much as possible as you do grow? Matthew Comyn: Yes. Look, I mean, I think the competitive context is intense. And against that, I think the team have executed extremely well. I mean some of the things I think that stand out to us is a continuation of what we've now seen for many years in terms of transaction liability-led strategy, strong growth in account numbers, strong growth in balances, as Alan touched on, particularly in the fourth quarter. I think a very good track record over the last 5 or 6 years of high-quality risk identification in terms of lending, really leveraging the main bank relationship and having a much broader relationship with our customers. We've seen also capabilities that the team have developed. It is probably one of the things that stood out to us as well as like a very good performance in small business. I touched on some of the growth in products like BizExpress, which is largely unsecured, and we've gone from sort of $30 million to $130 million. Now at some level, they're still relatively small numbers, but it's been a diversification of the lending growth that's been good. Small business would probably be roughly twice the margin of some of the other segments. They've been very disciplined up and down throughout all of the segments. We monitor closely in terms of the value of deals that we won't originate due to pricing, the value of deals we won't originate due to credit conditions. And I think leveraging some of the technology both in the decisioning -- speed of decision as well through to funding but also in terms of giving us the confidence to be able to originate across broader cohorts of customers where we've got that main bank relationship. We've also been able to again, leveraging some of the technology to automate some of the account management processes, substantially free up banker time. And so we're seeing much improved productivity in terms of facilities per banker. So I think in aggregate, the team have executed extremely well. I think the result is another very strong one. Melanie Kirk: The next question comes from Carlos. Carlos Cacho: I'm Carlos Cacho from Macquarie. You spoke to in the retail section lower deposit margins due to competition and shifting into high-yielding savings deposits. Can you give us any color on the mix shift you're seeing there from lower rate products like NetBank Saver into the higher gold saver or potentially higher rates on some of the NetBank Saver accounts that's driving that. Alan Docherty: Yes. I mean, I guess that's been a consistent trend. I mean, I talked earlier about the things that had changed between the first quarter and the second quarter, but one 1 thing that didn't change was the very strong level of growth that we continue to see into the GoalSaver product. So that's running multiples of the growth rate. And we're still growing in NetBank Saver, but the key driver of savings account growth in the retail bank has continued to be GoalSaver. And so the sort of mix effect and we've called out previously the very strong level of balances that are attracting that high the bonus rate on GoalSaver. So that's now up to 87% of balance is attracting that high rate. We can see then on the quarterly trends on margin, it's a consistent headwind. So very consistent over Q1 and Q2, it was about a basis point headwind in each of those periods due to the mix effect of that the growth in that higher rate product. Matthew Comyn: Yes, I think specifically -- sorry, I was say we're using the GoalSaver product, particularly, we've got some targeted offers in market. I think we see a little bit more switching into the saving, but there's probably less churn than we would have seen in other periods from savings into TD. And I think, again, the team have done a good job of optimizing across the various customer segments and trying to make sure we're getting the right overall margin outcomes whilst growing a bit above system as well. Carlos Cacho: Great. The other question I want to ask you is more around the thinking longer-term asset investments you make. You're clearly investing a lot of money into technology and AI. And I spoke to those vendor inflation headwinds, which appear to be as the tech companies wanting to return on their investment, how do you think about return on those investments you're making? And I guess, particularly how you think about that flowing through higher revenues versus potentially more productivity or lower cost in time? Alan Docherty: Yes. I mean we've been very pleased with the yield from the investment. And I think it's particularly there's a number of proof points in this result that we've called out. I think sure that we are getting a measurable return on those investments. We called out the productivity that we've seen as we've continued to digitize, importantly, the work of a business banker. We've got much better mobile and digital platforms for our business banking customers, getting them to the sort of levels that we achieved in previous years for retail. Customers, and you see that coming through. I mean that's a big driver of the MFI growth that we've continued to see within the business bank continue to underpin the transaction account growth. And then we've got sort of 97% conversion of those transaction accounts into lending relationships, which has seen us continue to grow well above system in the business bank over the last 12 months. So yes, the yield from the technology investments we're seeing measurable returns, both on the revenue side and in the cost side. So we've been pleased with that. To your point, and again, that's why we call out the IT vendor cost inflation, there is over the next few years, we're going to continue to see where the returns emerge from newer technologies between the technology companies themselves and the corporates who have deployed those tools. Certainly, over the past period of time, we've been pleased with the return that we're generating through our franchise, but that's something that we'll continue to manage, ensure we've got compatibility with lots of different vendors. We're able to switch providers in various areas, maintain that flexibility to ensure we maintain competitive -- have a competitive tension with some of our key technology providers, which I think is going to be important for every corporate over the next 5, 10 years. Melanie Kirk: The next question comes from Matt Wilson. Matthew Wilson: Matt Wilson, Jarden.Two questions, if I may. If you look through the long term, CBA's key point of differentiation has been your largest ticker low, no cost deposit base, and you're very effective at growing it as we can see today, and your major bank peers have failed to close that gap through the decades for various reasons. But today, we have sort of 2 new challenges out there. Macquarie who's the fourth peer and perhaps should appear in every slide where there's a peer comparison now going forward to put a line in the sand and then you've got AI. If we embrace your enthusiasm for AI, then does it follow that we'll all have a personal AI bot that will automatically direct our savings and transaction accounts into the highest-yielding accounts and a machine will do that for us. And on that basis today, they move to Macquarie. I've got a second question. Matthew Comyn: Yes. Look, Matt, I think on your first question. I mean, look, I think what the result demonstrates is our ability to perform in the current context. We think we've got to see good strategic assets and sources and the team have executed really well. We're, of course, alert to lots of different shifts in the competitive context. I mean, specifically, maybe it's a little bit of a flow on to car losses. Question, in terms of AI and technology, we've got a bit of balance between sort of flexibility and scale. I think in the near term for heavily regulated institutions, I think it adds both complexity and governance. I do think one of the important things that we're certainly spending time on is where do we think AI has the potential to change the economics of the industry, what might the impact be around sort of competitive moats or enduring sources of advantage, how might that show up. I think there's lots of different ways that we envisage that we can compete extremely effectively in that environment. So I think we are both planning for the long term, lots of different sort of scenarios. We think we've got the scale to invest. We think we're uniquely placed. And I think the team are highly motivated and very focused on execution. At least in this period, I think it's a good example of it, and we certainly intend to maintain that focus, discipline and execution ability. Matthew Wilson: And then a second question, probably linked to Richard's second question as well. If we look back over the last 5 years or so, headcount at the enterprise is up nearly 20% despite investments in AI and technology that should be driving efficiencies. But at some stage in the future, there's obviously a big dividend to be reaped by taking people out of the organization. Could you comment on that opportunity? Matthew Comyn: Yes. Look, I mean, I think that's right. In banking in Australia, there's been a significant increase in headcount. At least in some of our areas, though, as well. I mean it's our approach to the management of important risk types like financial crime has strengthened considerably. There's large operational and FTE requirements with that today. When we think about that more broadly, economic crime, across scams, fraud, cyber. Clearly, the vector of threats that we need to be able to deal with is increasing on a daily basis. And absolutely, some of the technology that we're deploying at the moment in time, I think we'll be able to make a meaningful improvement to the level of automation and efficiency with which we're allowed to deliver those services. A lot of the other increases have been in and around technology. Obviously, that's supported much higher levels of investment, also into key frontline roles, notwithstanding the fact that we've been able to improve productivity on a per role basis, but I think that's enabled us to grow at a faster revenue rate than peers, which we think is important. So I guess to Alan's answer earlier, I think there's both revenue and cost benefits that are being delivered in this period. We obviously and Alan is tracking those benefits very carefully and clearly, we think it's really important to continue to sort of push for further sources of competitive advantage. I think that takes time. But clearly, we think there's some opportunities to manage the cost base over the medium term. Alan Docherty: I'd just add one point, Matt, around the 5-year growth in the FTE, of course, about half of that growth just related to the in-sourcing that we had within our technology teams. So we've moved away from third-party suppliers in many respects, brought our own engineers in-house. We're seeing a much more -- much greater velocity, much greater quality, much greater productivity over that 4, 5-year period, as we've conducted that in-sourcing. So that's been a big part of the overall FTE growth. Actually, we're seeing again -- we've called out some of the benefits we're seeing in terms of the engineering capability. Change deployments is up 30%. Over the past 12 months, we're seeing that deployment at greater pace, greater speed and greater quality. And so the work that we've done to in-source into our FTE base the engineering capability, we think is paying dividends. Melanie Kirk: Our next question comes from Brian. Unknown Analyst: Thank you. And first of all, congratulations on the stonking result. But more to the point, since you've been speaking, you put on a lazy $3 or $4 a share. So I had two questions. The first one is that if we have a look at CommBank, we can see that you've got excess liquidity, long-term funding. You look at your software. You're increasing the expensing profile. You've got incredibly strong provisioning. We're not a look at the profit after capital charge. It's up -- you're saying that you normalize the dividend payout ratio for the current low loan losses. I just would be interested to hear what is the scenario where we'd start to see your harvesting the latency. And does that basically mean that we see a continued dividend growth even when system becomes more averse? And then I have another question as well, please. Matthew Comyn: Yes. Maybe I'll start, and then Alan can add to it specifically. I mean, Vijay, as I know, we've had this conversation before. I mean a lot of that the way we think about things is sort of maximizing value over the long term. We're consistently trying to find ways to invest in the earnings potential. We're prepared to not seek to sort of maximize our performance in a particular period because we want to have the flexibility over a long period of time to both deliver very strong earnings growth and momentum but also to have substantial flexibility to be able to deal with a range of different scenarios. And so look, I think this is clearly above the central scenario. I think the largest excess we've had at $2.8 billion. This is clearly still tail risks, particularly on a global basis and some of those are hard to accurately predict and price. But I mean, I think, there's a number of different areas where we've got a lot of flexibility in the organization. But most importantly, we want to translate a lot of the investments into long-term earnings potential going well beyond 2030. Alan Docherty: Yes. I mean the balance sheet settings, we continue to take us sort of through the cycle view. As Matt says, I mean, the provisioning, we're pleased to hold the provisioning at the broadly around stable levels, albeit we're growing the lending side of the balance sheet very quickly. We've seen record levels of lending growth. So the coverage ratio, the provisions as a proportion of the risk-weighted assets has drifted a little lower. And so you've seen some unwind of the provisioning that we held maybe 12, 18 months ago. But yes, we take it through-the-cycle view. We like having that latency, and I think that gives us a more stable through-the-cycle performance, which our shareholders really value. Unknown Analyst: Just a second question, if I may. Once again, I really want to congratulate the entire management team on the results. If we have a look at some of the global in financial services, in particular, as they seem to hit a kind of more adverse environment, they basically seem to be pulling the pin quite aggressively to shared labor. I'm just wondering, when we have a look at CommBank, is there a point at which you -- how close are we at the point to which technology replaces people? And I'm not saying you necessarily have to go to retrench people, but natural nutrition probably gets you. But do we actually get to the point where we actually see basically the headcount element of the total operating cost fall. And in that context, can you see a point, Matt, and I never thought I'd ask this question where it's difficult to find more incremental to spend on technology? Matthew Comyn: I think in terms of tech spend and investment and software, I think demand across the economy still sort of outstrip supply. But I mean, clearly, the potential to be able to deliver a lot more change, I mean, significantly more than we're currently doing in year is clearly there. And I think some of the leading firms globally, outside of banking are already seeing some of that automation. Look, I think there's going to be multiple sort of speeds for how AI is adopted across the organization, how it's able to improve and automate some of the processes. I do think also it's important and certainly the approach that we're taking is thinking through that very carefully and thinking about the individual tasks and skills. I think it's really important to build the capability across the organization. I think anything that is disruptive like this technology is, it's really important to engage inside the organization, maintain the very high levels of engagement and motivation. I don't think some of the more pessimistic scenarios around labor force disruption will materialize. I think it does take quite a bit of time. I think the sort of the performance of the models is quite jagged. There's also a number of different things that you can do really well. There's others that candidly, you can't. But I think the potential over time to improve certainly the performance of every individual to provide greater output and then in time through more automation. And there's also just a number of customer processes, we think we can manage on an automated basis. I mean we believe in having to be able to service our customers in real time dealing with scams and disputes and fraud and to be able to perform and close those tasks out through an agentic framework to be able to serve many of our customers more directly and comprehensively. We've already got the capability to be able to monitor the environment and an automated basis, deploy new rules in to pick up and detect fraud. I think we're just scratching the surface of the potential here. And I don't think we're going to be talking about it in very significantly different ways at our full year results in August, but I think in a sort of 3- and a 5-year time frame, I think there certainly is some significant potential. And there's a lot of things that need to be managed as a highly regulated industry. I mean I do think sort of governance and transparency and explainability and most importantly, trust with customers and with employees. I think that will be a very important part of what we need to do well. We've obviously started communicating externally with some of the work that we're doing. And yes, I think we're trying to think about this comprehensively and over a long period of time, and we believe it's going to be a source of competitive advantage for CBA. Melanie Kirk: Our next question comes from Brendan. Brendan Sproules: Brendan Sproules from Goldman Sachs. I just have a couple of questions. Just in terms of the impact of higher interest rates as we look forward into the second half. Obviously, in this looking backwards this half had record lending growth, particularly strong deposit growth in business banking as touched on earlier on the call. But when you look back to when the cash rate was last, 4.35, you showed us a number of slides similar to Slide 18, which showed negative spending and cost of living pressures in the household sector and you also saw quite a slowdown in business credit. Just want to get your view on how sensitive you think the current system growth rate in both lending and deposits will be to these higher rates over the next 6 to 12 months? Alan Docherty: Yes. I mean, it's going to be -- to your point, I mean one of the things I called out in my opening was very strong level of credit, growth leads to very strong growth in broad money and money supply. And that's a factor that we look closely at in terms of, I mean, we see a lot of that money supply growth come through our deposit accounts. That puts more money in people's hands ultimately across the economy, and there's an inflationary element, obviously, to that mechanism. So of course, the reason that rates are being hiked as in order to maybe slow down some of that demand more broadly across the economy slowdown in that spending. And so we would expect to see some impact to that. We've had a very strong period for system growth across both home lending and non-retail lending across the system. We've got -- our economics team has got a range of between 6% and 8% across the total system credit over the next couple of years. Obviously, we're running at the top end of that as we sit here today. So I think there's maybe some -- you would expect some impact on system levels of credit growth and a higher rate environment. I guess the big question will be how many rate rises do we see from here because that will determine the sort of size of the slowdown you see from a credit perspective. Matthew Comyn: Yes. I think, I mean, if you assume there's a couple of rate hikes. I think it have a modest impact maybe even if it took a percentage point of housing credit growth. I think the non-retail credit growth has been very strong. Certainly, everything that we see is there, we think sort of higher nominal growth is going to support that. I think boosting investment is going to be an important driver of productivity. I think there's certainly investments in technology across the economy that are going to support that. And I think that's the importance of having the right sort of capital settings and deploying that lending growth into the right risk-adjusted returns, and certainly, we've kind of extended out the sort of credit growth that we've seen over the last couple of years. And I guess that's sort of our base case to make sure we're going to perform optimally in that environment. Brendan Sproules: That's great. And the second question, just on NIMs on Slide 27, obviously one of the better parts of today's result is the lack of compression on your funding cost. To what extent is this a timing issue in terms of the switch in the rate cycle that sort of happened towards the end of the fourth quarter? Obviously, with the RBA pushing rates higher earlier this month. We have seen some deposit product pricing move higher with that. To what extent is that going to play out in the second half, a bit of catch-up in terms of deposit pricing for these higher rates? Alan Docherty: Yes. I mean I think that as we've long said, I think the -- I mean, deposits are very competitive, and we're going to continue to see the mix, unfavorable mix impact of that growth in our high rate products. So I think that's likely to continue. The other element that we watch closely is wholesale funding spreads. I mean, I guess you've seen a very benign period. I mean, in the last 6 months, the 5-year funding cost and the wholesale funding markets fallen another 10 basis points. You tend to find there's a real correlation between what happens in wholesale funding markets and the level of deposit competitive intensity and deposit pricing. And so one of the forward indicators or lead indicators that we'll be looking carefully at around the likely outlook for deposit pricing and competition as that level of wholesale funding spread. We've had a benign period. We're below historic averages in a number of those long-term funding products. So we'll keep a close eye on that in terms of how that -- there's a potential for that to revert and that to lead to more deposit competition in the second half, but we don't know that today. We'll keep a close watch on that. Melanie Kirk: Our next question comes from John Storey. John Storey: Good set of results. I just wanted to touch quickly just on the business model and potential construction to business model. You've seen it in the last few days. Insurance broking firms have obviously been impacted by the threat of AI, right, in terms of distribution. Just thinking about it in terms of the mortgage market share in Australia, how prevalent brokers have become -- I mean, what are your views on the likelihood of AI disrupting mortgage brokers. So the disintermediators are becoming intermediated. And around that, how well or how prepared is CBA in terms of its own business model for something like that, that could potentially eventuate? Matthew Comyn: Yes. No. I mean, look, we've tried to think through all the various sort of potential sources of disruption not limited to mortgages and how to most effectively prepare for that. I think we feel we've got the right combination of distribution assets to perform well in that particular environment. I mean I know from speaking to a number of mortgage brokers and some of the leaders of those mortgage brokers firms, that's definitely on their mind. I think like a lot of businesses, perhaps the sort of speed and rate of disruption is also a question of debate. I think one of the things that has been important in terms of why our customers will still preference a face-to-face experience with either a mortgage broker or a proprietary lender is it's a significant decision I think people still value that. I would have incorrectly forecast the proportion of mortgages that would have gone to digital when we started sort of thinking about this 15 years ago, and it's been a lot slower. So -- but look, I think it's important to think things through and assume they're going to happen more rapidly. I think in our case, we think we're well prepared and I think there's very few sectors of the economy that aren't thinking about some of the disruptive potential and obviously, the rate and pace of change, particularly some of the genetic services that are out even in the last month. Certainly, there's been some pretty significant share price reactions to a number of global industry and software providers. John Storey: One, just quickly on a second question. Obviously, a lot of talk, I guess, is on certainly over the last few weeks, months, around increased levels of competition put in the market. And obviously, you've got a very interesting slide, Slide 73, 74, just around new business volumes that are significantly 24% half-on-half, right? I wanted to just get your views on to what extent this growth that you've often seen reflects some of the competitors actually stepping back from the market, right? So I'm thinking specifically around some of the regional banks. And then obviously, ANZ going to a period of restructuring. How sustainable is this level of new business growth that CBA is showing? Matthew Comyn: Well, I mean -- we'll see, it remains to be seen. But I mean, I think, we executed well in the period. We certainly planning to continue to do that. I mean, look, I do think it's quite interesting in terms of some of the share shift on the deposit side. And then on the asset side. I think where your returns are under pressure and you're not able to generate returns above the cost of capital, it's pretty hard to grow it system. Yes, there's disruption. I guess the other point is it occurs to us as we look at both capital ratios across the industry and where we would anticipate the DPS profile might be at some of those institutions, it would probably start -- it would tend to support pretty disciplined pricing. And so I think clearly, where there's volume share shifts between institutions, that tends to at times lead to not particularly disciplined pricing. I think it's been a really good period for the half. I think it's quite a -- I think it's an interesting equation, at least as we look forward and think about, well, if it's higher credit growth and the RWA the consumption that comes with that, shouldn't plan as a base case that record low loan losses are going to continue investment, certainly, for us, we're increasing. And we think that's important from a competitive perspective as well as to be able to support broader resilience objectives. I think -- but maybe that financial equation looks a little challenged, perhaps for some. And so I mean, look, I think we're thinking about how best to compete in that environment. And I think, hopefully, at least this 6-month period has been probably one of our better periods of execution in market. Melanie Kirk: Our next question comes from Matt Dunger. Matthew Dunger: Yes. Could I ask a deposit question in a different way? The 79% deposit funding stands out versus the peers. You flagged you're expecting higher growth in higher rate deposits and we noticed that NetBank Saver didn't reprice as much as some of your peers through 2025. So why compete on price when you're already leading deposit growth? Is there a target at CBA to continue to strengthen the deposit funding mix? Alan Docherty: Yes. I mean we're always -- we're predominantly deposit-funded and we want to keep it that way. We've been impressed with the execution on the deposit gathering and it's a foundational relationship. It drives MFI drives, as you can see in the numbers we've disclosed, relationship between retail transaction account and home lending, propensity to have your home loan with CBA higher in the business bank. So we -- it's an important part of the franchise. We want to continue to gather deposits. Now we're in a competitive market for deposits. And hence, we've got a very attractive offer on not only GoalSaver, very, very attractive rate. On GoalSaver, we've a very high proportion of balances that achieve that rate. We also got very competitive term deposit offer. So the 12-month term deposit especially that you've seen across the industry, I mean, they're up 45 basis points in the last 6 months. So it's an important part of the franchise. We'll compete effectively in there. We've got -- we've been happy with the improvement in the deposit ratio. I think as a game of inches, though on the deposit ratio. It's a large balance sheet. We're continuing to compete well for deposits. We don't have particular targets that we set around that particular ratio. We want to keep funding as much of our lending growth as possible through deposits. And pleasingly, in the 6-month period deposit growth outpaced lending growth even though we had a very high level of lender growth relative to a very high system. So we were able to retire a couple of billion dollars of long-term wholesale funding, which again helps in terms of the overall earnings profile and net interest margins. So we don't have particular targets that we set around that. We just try and keep things in balance and make sure we've got a strong deposit gathering franchise. Matthew Dunger: And if I could just follow up on the credit quality side, you're talking about bad debt charges being low. You just referenced some of the peer selling capital returns policies based on that. You've seen the external refinancing of corporate exposures, bringing down the arrears. Just wondering if this reflects your conservative lending settings. Or are you seeing competition after this corporate business as it refis out? Alan Docherty: Yes. We've continued to see -- I mean there's always going to be an element of external refinancing across each of the bank's portfolio. So we've seen some of that over the last sort of 6 and 12 months in particular, within our business bank, in particular. It's a competitive market. There's -- we've seen some continued aggressive pricing offers in market, particularly at that top end of the business bank. I think we called that out 6 and 12 months ago, that's continued in over the last couple of quarters. We are seeing some banks compete more on credit risk appetite, and we've seen some external refinancing. from our portfolio. So I think that's a function of the competitive market for business bank and that we're in at the moment. Melanie Kirk: The next question comes from Ed Henning. We might just move to the next question, and perhaps we can come back to Ed if the line comes back. The next question will take is from Tom Strong. Thomas Strong: Tom Strong from Citi. Just a couple of questions. The first on the replicating portfolio, it contributed basis points in the half, and the commentary suggested that much of that came in the December quarter. How should we think about the replicating portfolio over the next couple of halves just given the material step-up in swaps that sits sort of 50 to 100 basis points above the tractor rates now? Alan Docherty: Yes. Yes, there will be -- the tractors will perform well at current swap rates. Now the swap rates have proven to be, obviously, fairly volatile over the past 12, 18 months. But current levels of swap rate, I mean there'll be a pickup in each of the tractors. So if you think about the size of our replicate portfolio, it's something like $2 billion that we'll reinvest at current swap rates each month. And so yes, that will be a function of the where swap rates move expectations for interest rates more broadly and the level of the deposits that we choose to hedge at any point in time. So yes, that will be a supportive element. I mean the equity tractor we called out last time around, if you go back 3 years, where swap rate was then, it's pretty similar to where swap rate today in the 3-year part of the curve and so we're not going to see much tailwind on equity tractor but replicating portfolio, given it's a 5-year tractor. We've probably got another 2, 3 halves of positive earnings momentum as those if you go back sort of for years, we were still in some pretty low in a pretty low rate environment. Some of the tractors that we put on there are coming up for reinvestment at much higher current rates. So yes, 2 or 3 halves of earnings momentum from replicating remain. Thomas Strong: Great. And just a second question around business deposits. I mean we look at the strong growth in the business bank, but net of offset accounts, a lot of this growth has come from more expensive TDs and the business MFI did sort of slipped slightly half-on-half. I mean how are you seeing competition for business deposits more broadly given a number of your peers spending pretty considerably to emulate your success here? Alan Docherty: Yes, I mean, it's a competitive market for deposits both for REIT on the retail side and the business bank side. We've been pleased with the deposits that we've gathered. I mean, the new business transaction account openings have continued at pace. I think we're up 7% in net BTA accounts opened over the past 12 months. So we're pleased with that. Yes, we did -- I think there's a little bit of volatility. It's a 6-month moving average on MFI. I think we're up 40 basis points year-on-year in the longer-term trend I think we're up 300 basis points over the last 5 years. So you'll see some oscillation one half to the next. But the overall momentum within MFI, I think, goes to the good execution within that franchise over multiple years. And yes, there's been, I think, some as I mentioned earlier, we've got some attractive rates on the term deposit product as well, and that did particularly well in the 6-month period within the business bank, which we're pleased with. It's a good stable source of funding for the strong lending growth that we're doing in that division. Melanie Kirk: Thank you. That brings us to the end of the briefing. Thank you for joining us, and please reach out if you have any follow-up questions. Thank you.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the CECONOMY Q1 2025-2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I will now hand over to Fabienne Caron, Vice President, Investor Relations and Communications. Please go ahead. Fabienne Caron: Thank you. Good morning, everyone, and welcome to our Q1 results. I'm joined today by our CEO, Dr. Kai-Ulrich Deissner; and our CFO, Remko Rijnders. Before we begin, a brief reminder. Today's discussion will include forward-looking statements. Please refer to the disclaimer in the presentation for important information. This call is being recorded, and the recorded (sic) [ recording ] will be available on our website later today. With that, I'm pleased to hand over to Kai to walk you through the key highlights. Kai, over to you. Kai-Ulrich Deissner: Thank you, Fabienne. Good morning, everyone. Thank you for joining us today. Together with my partner in crime, our trusted CFO, Remko Rijnders, I will soon take you through the results of our first quarter in financial year '25-'26. But let's first recognize, Q1 is a very important quarter for us. It includes the full peak season around Black Week and Singles Day and Cyber Week and Christmas. And in that quarter, we see millions of customers visiting our stores and our app. So at least statistically, you personally will have been part of those customers, too, and hopefully, even in real life and not just statistically. But effectively, it's a stress test for us, a stress test to our business model and how well we serve customers. So the key message here today is we've delivered, and we have successfully completed that stress test. Now over the past many quarters, we said it time and again, we have been on a clear strategic journey, transforming CECONOMY from a traditional retailer into what we call a true omnichannel service platform. Quarter-by-quarter, this strategy is paying off also in this quarter. Just to remind you, we're tackling this transformation from 2 angles. First, we're building our business beyond traditional retail with some significant growth areas, as we call them, that continue to perform really well. On a full year basis, this is now already a EUR 1 billion business. But the second, the real driver here is our customers because they fundamentally changed how they think about shopping and therefore, what they expect from us. Now every team member across our 11 markets understands this shift and is very focused on delivering what we call experience electronics, putting the customer experience at the heart of what we do every day. We're creating shopping journeys that match what people today want and today need. Even though we still have a lot of work to do naturally, we're making real progress, and we're committed to getting better every day. The results we present to you today underline this, that we're on a path of progress, growth in sales and profitability and customer satisfaction and online share and in our growth businesses. We think this is an exceptional achievement in our sector, particularly in a retail environment that remains highly competitive and volatile. Together, all these elements are a strong foundation for future growth and of course, to reach our midterm targets by the end of this financial year '25-'26. For us, this makes this year so important. It's the finishing stretch of our journey since the Capital Market Day in 2023. Ladies and gentlemen, CECONOMY is on the right path strategically, operationally and financially. Our consistent performance gives us confidence, and that is why we are also confirming our positive outlook for the full year '25-'26. With that, now let's look at those details of Q1. Let me start with an overview on Slide 3. This quarter sends a very clear message. Our strategy is continuing to work and our business continues to have strong momentum because we are ruthlessly putting the customer in the center. Two points to back this up. One highlight I'm particularly proud of, our online share is at an all-time high, 30%. This is not just a number. It's a clear sign of our successful transformation from traditional bricks-and-mortar into an omnichannel retailer. Customers are choosing us across all touch points. And this seamless integration between online and offline is our core strength. Second, at the same time, we've achieved a record NPS, Net Promoter Score, so the recommendations by our customers of 61 in Q1. We read this as a signal of trust from our customers for our focus on service quality, for personalized advice and for simplifying their customer journey. Customer satisfaction is not an add-on to our strategy. It's the core of our experience electronics approach. And when you look at these 2 records together, online share and Net Promoter Score, we are strengthening our foundation and building the basis for future growth. We're improving convenience through our omnichannel capabilities, and we're elevating the experience through service and expertise. That balance is exactly what differentiates us, and it positions CECONOMY with MediaMarkt and Saturn for sustainable long-term growth even in the future. Let's turn to Slide 4. You will see here that our growth continued across all key financial KPIs. Sales, EBIT, EPS, our major performance indicators, all moved in the right direction. We grew our profitability now for the 12th quarter in a row, 3 years quarter by quarter by quarter. That's uniquely meaningful considering the challenging economy that all of us in this sector are facing. Second, sales grew by 3.4% to now EUR 7.6 billion. Adjusted EBIT in absolute figures grew by EUR 31 million or 11% to EUR 311 million in the quarter, and EPS was up 23% to now EUR 0.37. The basis of all of this, our strong sales development, was driven by 2 key factors. First, the increase reflects the strength of our international portfolio of countries. We will tell you more about our countries a bit later. Second, our growth businesses gained even more momentum, proving once again how critical they are now for our long-term profitability profile. Taken together, these developments do give us confidence, confidence that our strategy is working, that our organization is executing with discipline and focus. And that's once again why we are reiterating our full year guidance today. More on that at the end. Let's take one step further and go deeper into the operational performance with the next slide, that's Slide 5. In summary, what you can see here is the strength and the resilience of our business model during peak season. Online sales grew by 6.9%, and I will repeat that our online share increased to an all-time high of 30% and our bricks-and-mortar business also grew during that first quarter. Profitability increased for the 12th consecutive quarter, and our free cash flow was strong at EUR 1.4 billion with an equally strong liquidity position underneath. Even more customers now trust us, become my MediaMarkt or my Saturn members. We grew our loyalty customers to now 57 million. Next, our growth businesses now scale rapidly. This is becoming a defining element of our strategy. As you can see, Service & Solutions income increased significantly and so did Retail Media income. And here's an interesting one. Refurbished unit sales grew almost 400%. There is clearly more and more customer demand for affordable and sustainable options, and we are meeting it. Several of our key countries delivered excellent performances. Turkiye, Spain, Hungary, Italy, all achieved strong sales momentum and better profitability. Now we did see a softer demand in Germany and Austria, but this only shows how valuable our diversified international portfolio is, gives us balanced stability and multiple engines of growth. Overall, Slide 5 demonstrates we're scaling the right businesses. We're executing consistently across the markets, and we're thus building a more resilient and more profitable CECONOMY and MediaMarktSaturn that will continue to grow in the future. The next slide, #6, you will probably recognize. We presented each quarter to give you transparency about the development of the 9 KPIs that we introduced at our Capital Markets Day back in 2023 because these 9 KPIs represent the essence of our strategic focus. And we are getting to the finishing line now. Across the various business fields, Retail Core, Service & Solutions, Marketplace, Space-as-a-Service, Retail Media, we took big steps towards all those targets that will become due on the 30th of September 2026. You take a step back, retail at the core, strong momentum in our growth fields and all of that with a focus on the customer. That's the architecture of our journey that I've outlined. And you can see how this materializes in numbers on this slide. When you look at the structure of our EBIT development, it becomes very clear how significant our growth businesses have become for the group. Our revenue and profit mix is becoming more diversified, more resilient and more future-proof and most importantly, with more growth. As you've seen over the past quarters, this is not just a temporary effect. It marks a structural shift in how value is created within CECONOMY. We're no longer dependent on the traditional retail cycle alone. Instead, we're building a balanced portfolio that combines the stability of our Retail Core with the high margins of Service & Solutions, Marketplace, Private Label, Space-as-a-Service and Retail Media. Now next, a closer look at our peak season on Slide 8. In summary, what we can say, our teams executed exceptionally well across all major product and service categories. Let's start with product. In our Retail Core, we saw strong performance, especially in gaming hardware, floor care, toys and computing. Here's what's sold best, the Nintendo Switch 2, the PlayStation 5, as well as robot vacuum cleaners. And interestingly, we had a substantial sales increase in toys. For example, LEGO, I'm told LEGO flowers are really hot on the market at the moment. So you can see that products that are beyond our core assortment can also become favorites for our customers. PCs also sold very well, mostly driven by laptops. And in this context, here's another interesting detail. We've also just released our very first private label, so own gaming laptop. It's called the [ Experian ]. Now in parallel to this Retail Core business, at the same time, Retail Media grew substantially across the whole portfolio, nearly doubled its web shop ads volume. This business is really scaling rapidly now. And we're -- also, as we anticipated at the end of last year, we're extending our customer base for Retail Media with customers outside the traditional consumer electronics sector. For example, Opel. Opel showcased the new Opel Frontera in various MediaMarkt stores in the Netherlands, another example outside Retail Core. Services & Solutions delivered another strong quarter. This was primarily driven by bundling campaigns and by preparation of those bundles and value-added services in central warehouses, so a more efficient way of producing this. These bundles are key for us to reduce complexity for customers, it's easier to buy and of course, reduce complexity for employees as well. So they drive on the one hand side attachment of service and income, and they also drive efficiency for us. Two examples. We launched maintenance packages in Turkiye. These are designed to extend the lifespan of the device that the customer may have, improve long-term energy efficiency and even help with hygiene conditions, in particular, for household appliances at home. Now, in real life, each maintenance procedure is carried out either on site at the customer or at the service workshop by specialized technical personnel. Second example is the successful launch of what we call the SparKette bundles in Germany. Here, we focus on subscription contracts like antivirus or Microsoft 365 licenses, combined with devices like smartphones and tablets, and there's always a clear price benefit for customers. Final milestone and interesting detail here is the collaboration between our growth field Service & Solutions and Marketplace because we now also offer insurances, not just for the products that we sell in our retail business, but also for Marketplace in Germany, so for third-party products from independent sellers. As you can see, our peak season performance was really broad-based, fully in line with our strategy and operationally really strong. Now before I hand over to Remko, let me have a closer look at one of those longer term trends that we continuously emphasize, and it's circular economy on Slide 9, because this really had some extra momentum in Q1. Customers are actively choosing more and more sustainable and from their perspective, affordable alternatives. You can see that in the numbers. The BetterWay sales share increased another 2 percentage points to 16%. Now those of you who follow us more often and more regularly, please note, we had to redefine our BetterWay scope. So what you're seeing here is the new BetterWay logic. Why? Because new energy labels are being introduced on an EU level. So we withdrew categories [ without ] such a label, that's, for example, vacuum cleaners and coffee machines, and we also introduced new criteria for smartphones. That's why it's the new BetterWay scope increasing 2 percentage points to 16%. But most strikingly, perhaps and importantly, refurbished sales, mainly on the Marketplace for us, grew significantly by 380%. This came from more and more specialized sellers and thus a broader assortment. In December alone, one in 4 products sold on the Marketplace was refurbished. And finally, trade-In numbers also grew. In Spain, we already launched a more efficient trade-In platform for us internally, and it shows promising results. The technology that underlies this simplifies the customer journey, and it increases conversion, and it gives us a better return as a retailer. We'll roll out this platform in more countries throughout this year. But as you can see with all of these developments, we're not just responding to customer expectations. We're actively shaping a more sustainable, more innovative and future-oriented retail model around circularity. Now let me hand over to Remko for a closer look at those financials. Remko? Remko Rijnders: Yes. Thank you, Kai, and good morning to all of you. Now let me share some more details of our Q1 results. We will start with Slide 11. As Kai already highlighted in the beginning, this is our 12th consecutive quarter with positive EBIT growth, and this in a market which is volatile and competitive. So we can and are extremely proud of this result. Let's look at the headline numbers. We grew sales in Q1 by a solid 3.4%. This number is adjusted for currency and portfolio changes and pre-IAS 29. And our like-for-like sales grew by 3%, that is if you count only comparable selling space and stores already opened 1 year ago. Compared with our overall economic development, particularly in retail, this is a very good result. Now let's look at our regions, starting with DACH and sales. Over the peak season, we faced intensive competition and many customers held back on spending. This was most pronounced in Germany and Austria, leaving sales down with 2.9% versus last year in the DACH region. We balanced that with a better gross margin, thanks to our growth business and by running a tighter cost base, especially our location costs. Overall, EBIT margin was up 10 basis points in the quarter. In Western and Southern Europe, sales rose by 4.7% with growth in every country. Spain and Italy were particularly strong performers. On profitability, EBIT increased strongly with EUR 11 million and margin expanded by 30 basis points. Moving to Eastern Europe. Sales were once again driven by Turkiye. We are pleased to see that our restructuring measures in Poland are gaining traction, leading to a double-digit million improvement in adjusted EBIT in the quarter. For the region overall, adjusted EBIT reached EUR 46 million, equivalent to 4.1% margin, a very strong result, and we are extremely proud of a starting turnaround in Poland. Now let me turn to our largest growth business, Service & Solutions, on Slide 13. In Q1, sales grew by nearly 14% with momentum across both online and in-store channels, truly omnichannel. All service categories increased with extended warranties showing the strongest growth. We are pleased to share that extended warranties are now available on our marketplace in Germany and are being well received by all our customers. We plan to roll this out to additional countries soon. Then to online. Our first-party online sales grew also with 6.9% to EUR 2.2 billion. We recorded a particular strong performance in Hungary, Poland, Switzerland, Turkiye and Spain. And on the back of this, our online share reached a record 30%, the highest level since COVID, a very strong performance in my view. So let me come back to our EBIT development on Slide 15 in more detail. Our gross margin increased by 40 basis points in the quarter, driven by our growth businesses. This highlights that our strategy is working and helps mitigate the impact of a challenging environment. Now on cost. Our adjusted OpEx ratio improved by 20 basis points, thanks to a relentless focus on cost. We are more efficient in marketing while maintaining a stable share of voice in the market. We have also taken measures to further optimize location costs. We will remain disciplined on cost for the remaining part of the year, particularly in DACH region given the market environment. Turning to the full overview on Slide 16 from adjusted EBIT to net profit. Walking down from the adjusted EBIT of EUR 311 million, we recorded limited nonrecurring items. The bulk of those are due to IAS 29 hyperinflation accounting. Consequently, our reported EBIT reached EUR 293 million, which is a robust increase of EUR 64 million year-on-year. Our net financial result improved, thanks to Turkiye. Overall, Q1 delivered higher reported net income and EPS. EPS rose by 23% to EUR 0.37, a solid performance. Then let me continue with free cash flow on Slide 17. Overall, we generated EUR 1.4 billion of positive free cash flow, a very solid performance. This was driven by strong operating performance and seasonal working capital inflows typical for the peak season. We closed the quarter with a strong net position of EUR 2 billion. This completes then as well the financial section, and let me now hand over back to you, Kai. Kai-Ulrich Deissner: Thanks, Remko. Now what you've just heard from both of us, we continue to have positive momentum strategically, operationally, financially. And we do expect this to continue for financial year '25-'26. That's why we are confidently confirming our outlook. You can see that on Slide 19. We continue to expect a moderate increase in currency and portfolio adjusted total sales with all of our regions contributing to that sales growth. Secondly, we continue to expect an adjusted EBIT of around EUR 500 million. This is still the target for the financial year '25-'26, that we first communicated at our Capital Markets Day in 2023 and ever since. This improvement this year will be driven by the DACH region and the Western and Southern Europe. Finally, as we look ahead, let me give you a perspective on the innovation trends that will long-term shape customer demand in the future. We can see them on Slide 20. First, in household robotics, we expect major progress that will bring smarter, more autonomous solutions into everyday homes, like this picture that you can see here of a floor care robot that can actually climb stairs. We also see strong momentum in smart glasses, where the next generation will finally bring the form factor out of the niche and closer to the mass market. Finally, health tech is another innovative field that we think caters to a larger trend because in this day and age, who doesn't want to be fit. We see fast improvements in health tracking and the use of data here, new devices, new services emerging every month. For us, all of these trends will support traffic, demand and category expansion over the coming quarters. They fundamentally reinforce our belief that consumer electronics will remain one of the most dynamic retail segments. And so we're happy to be in that particular segment. Most importantly, we are ready for this and now stronger than ever. Our stores, our online platforms, our omnichannel infrastructure are well positioned to bring these innovations to consumers in Europe with advice, with service, with installation, with a full set of solutions around the product. And yes, with our partner, JD.com. But to be sure, today was about our Q1 performance, but you will have seen the result of the tender offer, and you will have seen the progress of regulatory approvals. Of course, we will continue to update you always on our website and personally at every major milestone. But to reiterate and to confirm, we continue to expect closing of that transaction within the first half of this calendar year. Now let me conclude with Slide 21, a brief summary of what this quarter tells you about CECONOMY today and about the foundation for the future. Our experience electronics strategy continues to drive higher customer satisfaction, NPS and deeper engagement, even stronger loyalty. The combination of expert advice, seamless online journeys and a growing set of value-added services is clearly resonating with customers. Our Q1 the stress test, as I called it, performance demonstrates we have a strong and balanced portfolio. Our growing high-margin businesses make us stronger. Together, they make the company more resilient, more profitable, exactly what we set out to achieve with our transformation in 2023. By now, our growth business are an integral part of our business, and they continue to grow. In all of that, [ core ] focus remains very disciplined on cost, liquidity and profitability. And with our new strategic partner, JD.com, we now have a unique opportunity to accelerate this development over 12 quarters even further in technology, in logistics, and assortment and many more. Last but not least, we're confirming our outlook for financial year '25-'26, we expect a moderate sales increase and adjusted EBIT of around EUR 500 million. Ladies and gentlemen, these are the main takeaways. We stay confident for the rest of the year. Our execution is in full swing, and we're on a path of future growth. We've started this year with strong momentum, and we're well on track to deliver on our ambitions. Thank you for your attention so far. We're now really looking forward to your questions. Operator: [Operator Instructions] We are now going to proceed with our first question. The questions come from the line of Matthias Inverardi from Thomson Reuters. Matthias Inverardi: Can you hear me? Kai-Ulrich Deissner: We can hear you perfectly well. Proceed. Matthias Inverardi: Not so surprising, I have a question concerning your Fnac Darty shares. Have you decided yet if you're going to sell them to Mr. Kretinsky or not? Kai-Ulrich Deissner: Yes. Look, we're still waiting for the concrete and detailed offer. We will then look at that offer in detail and analyze it, and then we will take a decision. No decision has been made yet. Operator: We have no further questions on the phone line. So I'll hand back for any written questions. Thank you. Kai-Ulrich Deissner: Caron tells me that we should wait for 1 minute or 2. So please do feel encouraged to ask questions. We're really very willing to engage in whatever conversation you may have. So we'll give you another minute. Operator: Currently, we have no further questions. [Operator Instructions] Fabienne Caron: Thank you. We've got a question on chat from Alex Zienkowicz from mwb research. The first part of the question is regarding gross margin. Is it purely driven by mix? Or did you benefit from a lower promotion share? Or were you better on price? Kai-Ulrich Deissner: Yes. Alex, thanks for your question. So we have stated a couple of times already that we are very [ rigous ] on to grow, but to grow profitable. So first of all, we are really analyzing the profitability per category. It's not mix driven. That's what I can already tell you. So it's a benefit on the gross margin of really [ rigous ] negotiation and pushing the products and offering the products with a better margin. That's true. But it's also related to how we do the customer journey online and offline with better accessory attached, for example, and that helps also in the mix because, of course, the average margin on accessories is for sure, much, much better. So it's a mix effect on accessories and of course, the goods margin as such by being very [ rigous ] where we want to grow and profitable to grow based on customer demand. Fabienne Caron: The second part of the question is on Poland. Can you provide more color on the EBIT improvement in Poland, please? Kai-Ulrich Deissner: This is Kai again. I'll take the question on Poland. Remko will take the next one. Now as Remko said, we are actually very proud of the initial signs of turnaround that we've seen in Poland. As you know, we are operating there in a very competitive environment. So we've done several things actually. We set up a new management structure with a new CEO and CFO, both of whom are now on board. And in particular, we improved our capabilities in online and in Service & Solutions. So the positive results in Q1 that we're here reporting are largely due to online, a much better performance in online also in technical capabilities. For example, if you remember, we introduced the Marketplace in Poland only last year. In parallel to all of this, of course, we are reviewing cost structures to get further efficiencies out of the business. But I would -- what I would highlight is, in particular, the new management structure and our increased online performance and capabilities. Fabienne Caron: The next question is from Philip Brandlein, Lebensmittel Zeitung. First part of the question, looking at the DACH region, how do you plan to improve sales and EBIT? Remko Rijnders: I will take this question. So looking at the DACH region, we started Q1 slightly below expectation from an EBIT perspective, mainly driven by top line. So what we have an -- a customer demand decreasing. So the next implementation that we are doing at the moment is to simplify it. We have a clear action plan in place where we have on the top line a lot of focus on the top 200 products. So of course, we have many more products, 15,000 SKUs online, but we focus on 200 products that make around about 40% of our sales. And what are we doing? We secure really end-to-end for these 200 products together with our partners, our suppliers that there is always availability on the products that we are really on par with pricing, that we have visibility online but also offline. So to explain, when you as a customer enter the store, these products are immediately visible. And these products also generate 40% of sales. We also make sure that the right accessories are there next to it, both on and offline to make sure that you have the right experience as a customer. On the EBIT side, we have also implemented a very strong cost program. And this cost program, we already mentioned it, is focusing on location costs, but also a lot on indirect spend. So we see that the cost percentage in Germany, percentage of sales has potential also compared to other countries. So we are really benchmarking the cost between the countries, making sure that we get on par with the cost. So to summarize it, on the top line, a extreme focus on the top 200. And on the cost line, it's really making sure that we get for every cost line in Germany on par with the benchmark of our company. Fabienne Caron: I will bundle the 2 questions together. First is from Philip Brandlein, and the next one is Paul Dean from Churchill Capital. So it's both regarding JD. First, you stated that CECONOMY is ready to accelerate with JD. What will that look like? Is that true that the Joybuy Express service will be available for MediaMarkt soon? And the second part of the question from Paul is asking regarding the AU FSR review, which has been in pre-notification stage since August last year. If you could provide more color on how is this progressing? Kai-Ulrich Deissner: And I'm happy to do that. Thank you, Philip and Paul, for the questions. Now first of all, on what's our plan with JD. Now let me remind you and reiterate, this is all about growth. So think of this as both top line and profitability growth in the future, centered around what has been the essence of our transformation here as well. So an omnichannel approach, both companies believe in both online and bricks-and-mortar and an approach centered on delivering excellent customer service. So that's the big headline what this is about. Now we've also highlighted a few areas in which we believe there is most potential for them -- for that future growth. One of them is indeed logistics. So we will be looking at faster delivery, better delivery, more reliable delivery quality for our customers. At this stage, however, it is too early to comment on specific services like Joybuy Express. But what I can confirm and what I can reiterate is that delivery capabilities are very much in focus of what we think as growth opportunities together with JD.com. That's on the first part of the question. On the second part of the question on FSR, I cannot give you any color on this. We are in very constructive discussions with JD, and we are in very constructive discussions with all regulatory approval authorities, including the European offices in Brussels, and it is all progressing, as I said, as we had anticipated to be concluded in the first half of this year. Fabienne Caron: The next question from chat comes from Darja Lema from Bloomberg Intelligence. With EUR 311 million EBIT achieved in Q1, can you provide more color on how you plan to achieve EUR 500 million by the end of the year? Does it involve cost cutting or a significant uplift from your growth businesses such as Retail Media or Services? Remko Rijnders: Yes, this is Remko. Thanks for your question. So in our EBIT, to start off with, there is always a seasonality, right? So in Q1, we reached 64% of our EBIT ambition or budget and in Q2 at 6% normally, Q3 is around about 1% and then Q4 is -- our Q4 is 29%. So looking at Q1, that's why also Kai already mentioned that our Q1 is and was extremely important to reach our EUR 500 million ambition, and we are right on track with our, yes, projection of the around EUR 500 million EBIT achievement. Now to answer your question a bit more in detail, when it comes to cost, we have said from the beginning, and we keep on doing that, when there is a soft line in DACH, mainly at the moment, we are very [ rigous ] on costs. So especially on the indirect cost, we are taking the initiatives, but also on location costs, for example. So the cost in percentage of sales needs to stay in par of reaching that EUR 500 million. Other than that, our strategy is working. That's what we have seen also in Q1. We keep our strategy. And yes, a big part of that strategy is focusing on accelerating on our growth businesses. And that's what we will do, what we believe in, has paid off for 12 quarters in a row, still paying off. And with that, we will reach the EUR 500 million. Operator: There are no further questions at this time. So I'll now hand back to Dr. Kai-Ulrich Deissner for closing remarks. Thank you. Kai-Ulrich Deissner: Yes. I'll take a deep breath to give anybody a chance to still raise their hand, but -- and wait for one more minute before I will close with a few additional comments. But just give everyone one more minute. Okay. Look, thank you for your time and your questions this morning. If you want to engage with us any further through our official channels, we're always very happy to continue those conversations. And if you can't wait for another 3 months to speak to us again, you're very welcome to join our Annual General Meeting. It happens exactly a week today. There are dial-ins for the press available, and you get to see more of this wonderful company in a week's time. And we will be happy to present our Q2 results to you on May 13. Until then, Remko, Fabienne and I wish you all the best. Thank you for your interest, and see you very, very soon. Goodbye. Remko Rijnders: Thank you. Goodbye. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a good rest of your day.
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.
Operator: Good day, and welcome to the Vertex Fourth Quarter 2025 Earnings Conference Call. All participants are in listen-only mode. After today's presentation, there will be an opportunity to ask questions. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Joseph Crivelli, Vice President, Investor Relations. Please go ahead. Joseph Crivelli: Hello, and thanks for joining us to discuss Vertex's fourth quarter results. Christopher Young, our President and CEO, and John Schwab, our CFO, are also with us today. During this call, we may make forward-looking statements about expected future results. Actual results may differ due to risks and uncertainties. These risks and uncertainties are described in our filings with the Securities and Exchange Commission. Our remarks today will also include references to non-GAAP metrics. A reconciliation of these metrics to GAAP is also provided in today's press release. This call is being recorded and will be available for replay on our Investor Relations website. I'll now turn the call over to Christopher Young. Christopher Young: Welcome everyone and thank you for joining us. It's great to join you on my first earnings conference call as President and CEO of Vertex. Our financial results for the fourth quarter came in as expected. Revenue was $194.7 million, in line with our guidance for the quarter, while adjusted EBITDA exceeded the high end of our guidance at $42.5 million. For the full year, Vertex delivered double-digit revenue growth along with solid profitability. Since this is my first time speaking to our investors and analysts, I wanted to cover a few topics. First, why I'm excited to join Vertex at this point in the company's history. Second, I'll give you a perspective from my conversations with customers, partners, and employees over the past three months. And third, my view on how we can accelerate our revenue growth. Then I'll share some exciting new business wins from the fourth quarter. Many investors have asked me what attracted me to come to Vertex. But I'll start there. First, I was drawn to Vertex's incredible blue-chip customer base, which includes over 60% of the Fortune 500. Around the world, leading enterprises trust Vertex to stay compliant with ever-changing indirect tax requirements. Our customers described to me that Vertex is trusted, reliable, flexible, and has the deepest domain expertise in the industry. Likewise, our partner ecosystem is built on strong, long-standing relationships with the key technology and implementation partners that serve this customer base. These partners consistently recognize Vertex as the leading provider of indirect tax solutions for the enterprise. At the same time, both groups want to see us move faster and drive more innovation. And meeting that mandate will be job one for us in the near term. Second, Vertex has a long-standing track record of revenue growth, profitability, and positive cash flow across economic cycles, as well as clear growth vectors for the future. Our core expansion is steady, and our land and expand motion is proven. We have a new high-growth business in compliance and e-invoicing, which exceeded our expectations in its first year and has meaningful catalysts on the horizon. Third, I believe Vertex has an incredible opportunity to transform our business and help our customers transform theirs through artificial intelligence. This aligns well with my career experience, particularly my most recent role. There, I spent considerable time building partnerships with and, in several cases, investing in companies driving AI innovation. And I did that while working closely with many of my Microsoft teammates who are developing their own AI technologies. Turning to our near-term priorities. While our full-year growth was healthy and respectable, in 2025, we saw lower entitlement growth, a moderation of new upsell and cross-sell revenue, and slightly higher customer attrition. This impacted our retention metrics, which John will discuss shortly. In looking at customer attrition, business and market factors such as M&A and bankruptcy were the single largest driver of 2025 attrition. And this is largely uncontrollable by Vertex. It's also important to note that attrition continues to be concentrated in smaller accounts. The average annual revenue per customer for lost accounts in 2025 was under $50,000, far below our overall average revenue of $138,000 per customer. Finally, I'll note that competitive losses are a modest component of attrition. And Vertex continues to win far more ARR from competition than we lose to our competition. That said, we are taking several actions to mitigate controllable attrition by expanding customer success coverage to a broader cohort of customers and leveraging AI tools to better serve our customers. Our AI Copilot in the product will help customers address more questions without needing to call us for help. We have also implemented analytics to predict potential customer attrition so that we can engage them more proactively, including personal phone calls from me to address their concerns. I'm also confident that our new product offerings, including e-invoicing and smart categorization, will help us accelerate cross-sell and upsell revenue in 2026. And we are already seeing measurable traction with both. On a positive note, revenue from new logos remained healthy and was up 20% in 2025. This included both competitive takeaways and customers who previously used homegrown solutions and switched to Vertex. It is essential that we continue to seize this opportunity. Now let's talk more about AI. Vertex is well-positioned to help tax departments improve their workflows with artificial intelligence. Indirect tax compliance is rule-dense, data-heavy, and highly repetitive. It's the type of work that lends itself well to AI transformation. And we are starting from a fortified position as Vertex software is embedded in the workflows of our customers. In addition, our customers place a premium on tax accuracy, something they have trusted Vertex with for years. And I'll add that our revenue-based pricing model insulates us from the concerns investors have around SaaS companies with seat-based licensing models. As I shared earlier, I see significant and unique opportunity for us to capitalize on these trends. And that's one of the reasons I joined Vertex. In 2025, Vertex made significant investments in AI products, tools, and functionality. This included the launch of our smart categorization offering, which is squarely in the wheelhouse of AI adoption. It reduces the manual work tax departments undertake every day to ensure their product SKUs are mapped to the correct tax rates across all jurisdictions. During the early adoption phase, we secured several marquee six-figure wins in the retail industry. To address this growing opportunity, we are broadening functionality in smart categorization to cover our full retail customer base. We will expand smart categorization to additional industries where the offering has applicability. In addition, in 2025, we expanded the capabilities of Vertex CoPilot. CoPilot, in turn, helps us understand the tasks and features customers are interacting with Copilot about, providing us with insights in the areas that are causing friction in the use of our solutions. This can help us enhance our products, develop new AI features, and inform future product development. Finally, we continue to leverage our partnership with Kintsugi. On last quarter's call, we highlighted Kintsugi powered by Vertex, which enables SMBs to automate key compliance functions while providing real-time dashboards for jurisdictional liability and exposure tracking. Then in December, Kintsugi and Vertex partnered with cpa.com to launch an AI-driven solution to help accounting firms deliver automated, accurate, and scalable sales tax compliance for their clients. This then helps our partners in the accounting industry unlock new advisory revenue opportunities. While all this is a good start, we can do much more with AI. I see a large opportunity on this front. It's my personal goal to transform Vertex into an AI-first business both in how we work internally and through the new capabilities we deliver to our customers. I will have more to share on this transformation in the near future. With that, let's review some examples of how companies are depending on Vertex to stay in compliance with indirect tax. First, wins within our installed base. It's not uncommon for enterprise customers to use Vertex in one area of the business and a competitor in another. In many cases, over time, these customers will reevaluate their tax software footprint and standardize on Vertex. As an example, a customer in the metals and mining industry dramatically expanded its relationship with Vertex in the fourth quarter. This customer had used Vertex's returns filing managed service for years, even though it was using a competitor for tax calculation. However, during an SAP S/4HANA transformation, the company made the decision to standardize on Vertex. As a result, this is now a fulsome mid-six-figure relationship, including sales and use tax calculation as well as exemption certificate manager SAP Plus tools, SAP Accelerator, and other Vertex offerings. In the fourth quarter, we also won in-store point-of-sale tax calculation for a global quick-service food and beverage retailer. This long-standing Vertex customer historically used us for tax calculation for its mobile app and gift card businesses, but a homegrown solution at the point of sale. They switched to Vertex during a redesign of their point-of-sale system, leading to high six figures of new revenue. In the Oracle ecosystem, we increased our business with a relatively new customer in the computer products manufacturing industry. Earlier this year, the customer spun out from its parent company and selected Vertex for use tax calculation. In the fourth quarter, they completed the transition and added sales tax calculation, leading to six figures of new annual revenue for Vertex. Turning to new logos, we landed one of our largest new logos ever in Europe with a leading healthcare provider. Revenue for this new customer will be well into the seven figures. This deal was catalyzed by a global SAP S/4HANA transformation led by our partners and DMA. It included value-added tax calculation across the customer's global footprint, as well as sales and use tax in the United States. The customer will also be using our end-to-end compliance offering to file returns in 30 countries around the globe. Also in conjunction with an SAP S/4HANA transformation, a major North American power utility selected Vertex as its first-ever indirect tax provider. This enterprise customer with revenue of nearly $10 billion was previously using manual solutions for use tax calculation. In addition to use tax calculation, this mid-six-figure deal, which is referred to us by our partner Accenture, also included SAP Plus tools, Vertex Consulting, and other ancillary products and services. This deal validates the greenfield opportunity for Vertex with large companies that are still using homegrown solutions for indirect tax. In the Oracle ecosystem, a software provider in the payment space selected Vertex to displace an entrenched competitor. We were differentiated by our ability to support the customer's massive scale and volume of transactions as well as our referenceability across the Oracle ecosystem. This led to low six figures of new revenue for Vertex. Now turning to e-invoicing. In our first full year in the business, we've seen strong traction with both existing customers and new logos. Accelerating demand around upcoming mandates, especially Belgium, which launched its e-invoicing mandate in January, and significant product differentiation for our end-to-end offering, which includes e-invoicing, as well as VAT calculation and compliance in a single unified platform. We continue to believe our platform is unique in the marketplace and gives us a competitive advantage. Now let me give you some color on the types of e-invoicing deals we won during the fourth quarter. Wins with existing customers included a global payments company that selected Vertex for e-invoicing mandates in Belgium, Poland, and France. A consumer products company that selected Vertex for mandates in Germany, Belgium, and Poland. And a consumer electronics company also selected Vertex for mandates in Italy, Belgium, Poland, and Denmark. Note that all of these examples are long-standing scale customers. And the e-invoicing cross-sell increased our ARR with these customers on average by over 20%. This should give investors a sense of the upsell opportunity that e-invoicing represents within the installed base. New e-invoicing logos include a 14-country win with a German building products company. E-invoicing and value-added calculation for Belgium, France, and Germany with a North American energy products company. And a deal for Belgium, Germany, France, and the UK, and Ireland for the North American healthcare products company. All these new logos were in the mid to high five-figure range, and while this is lower than our overall average revenue per customer, these initial engagements gave us a launching pad for our proven land and expand sales motion. Not just with additional e-invoicing countries, but for the full suite of Vertex tax compliance solutions. So to summarize, Vertex had a solid fourth quarter. 2025 revealed some challenges, but I am confident that we have a cohesive plan to restore accelerating growth in the business. Our AI opportunity is in focus, and our first offering, smart categorization, is making a real difference for enterprise customers while driving revenue. And we have a growing opportunity in global compliance as e-invoicing mandates continue to proliferate around the globe. All in, I believe I'm joining Vertex at an extremely opportune time. With that, I'll turn the call over to John to discuss the financials in detail. John? John Schwab: Thanks, Chris, and good morning, everyone. I'll now review our results in detail and provide financial guidance for the first quarter and full year of 2026. In the fourth quarter, revenue was $194.7 million, up 9.1% compared to last year's fourth quarter, and in line with our guidance. For the full year, revenue was $748.4 million, up 12.2% from 2024. In the fourth quarter, our subscription revenue increased 8.9% year over year to $166.2 million. For the full year, subscription revenue was $639.7 million, up 12.8% year over year. I want to provide additional details and clarity around the impact of true-up revenue on our revenue growth. True-up revenue is the payment that is owed to Vertex when a customer overruns its contracted entitlements. It is recognized as revenue in the quarter, and the payment of a true-up typically coincides with the corresponding increase in ARR. As a reminder, we historically have realized $1 to $2 million of true-up revenue in the first three quarters of the year and $2 to $4 million in the fourth quarter. In 2024, we called out elevated true-up amounts relative to expectation. However, in 2025, as we had mentioned, this did not recur. And renewing customers were generally within the usage limits of their contracted entitlement amount. As a result, true-up revenue in 2025 was approximately $10 million lower than 2024. This alone reduced our 2025 full-year revenue growth rate by just under two percentage points. Lower true-up revenue in the fourth quarter reduced the year-over-year revenue growth rate by approximately four percentage points. And the impact on subscription revenue was approximately two percentage points for the year and five percentage points for the fourth quarter. Turning now to services revenue. Our services revenue in the fourth quarter grew 10.2% over last year's fourth quarter to $28.5 million. Full-year services revenue was $108.8 million, up 9.2% year over year. Our cloud revenue was $94.6 million in the fourth quarter, up 23% from last year's fourth quarter. Note that the decrease in quarterly cloud revenue growth was due to the lapping of the Ecosio acquisition and the elimination of the inorganic contribution to the growth rate. For the full year, cloud revenue was $352.9 million, up 27.9% year over year and generally in line with our guidance of 28% growth for the year. Annual recurring revenue or ARR was $671 million at quarter end, up 11.3% year over year. At year-end, net revenue retention or NRR was 105%, and gross revenue retention or GRR was 94%, within our targeted range of 94 to 96%. Average annual revenue per customer or AARPC was $137,867, up 12.4%. And our scaled customer growth in the quarter was 12%. For the remainder of the income statement discussion, I will be referring to non-GAAP metrics. These non-GAAP metrics are reconciled to GAAP results in this morning's earnings press release. Our gross profit for the fourth quarter was $140.4 million, and gross margin was 75.7%. This compares with gross profit of $133.9 million and a 75% gross margin in the same period last year. Our gross margin on subscription software was 82.7%, compared to 81.4% in last year's fourth quarter and in 2025. And gross margin on services revenue was 34.9% compared to 37.6% in last year's fourth quarter and 28.8% in 2025. This reflects lower Ecosio margins driven by increased consulting investments to support our revenue growth. In the fourth quarter, research and development expense was $19.9 million compared to $17.3 million last year. For the full year, R&D was $71.3 million compared to $56.4 million last year. With capitalized software spend included, R&D spend was $42.8 million for the fourth quarter and $159.8 million for the full year, which represented 22% of revenue for the fourth quarter and 21.4% of revenue for the full year. The increase in R&D spending was a result of the 2025 investments in Ecosio and AI that Chris had detailed earlier. Our selling and marketing expense was $48.7 million or 25% of total revenues, an increase of $5 million and approximately 11.4% from the prior year period. For the year, our selling and marketing expense was $178 million, up 15.3% from last year. The increase in selling and marketing expense in the fourth quarter was due to costs from our Vertex Exchange conference, which was held in October. And general and administrative expense was $36.2 million, up $2 million from last year. For the full year, general and administrative expense was $149.3 million compared to $128.2 million last year. Adjusted EBITDA was $42.5 million, an increase of $4.4 million or 11.6% year over year. And full-year adjusted EBITDA was $161.5 million, representing an increase of $9.6 million or 6.3% over 2024. Both were approximately $500,000 above the high end of our guidance. This represents adjusted EBITDA margins of 21.8% for the fourth quarter and 21.6% for the full year. Our fourth-quarter free cash flow was $10.1 million, and for the full year, free cash flow was $47.6 million. This was a bit lower than expected, as the fourth quarter is usually our strongest free cash flow quarter. While collections were lower than typical for the fourth quarter, I will note that in January, we realized approximately $7 million of cash collections in excess of what we've seen in previous years. In the fourth quarter, we repurchased approximately $10 million of our shares in the open market under our stock buyback authorization at an average price of $20 per share. We have approximately $140 million remaining under our authorization. We ended the fourth quarter with over $314 million of unrestricted cash and cash equivalents and $300 million of unused availability under our line of credit. Now turning to guidance. For the full year of 2026, we expect revenues of $823.5 million to $831.5 million, cloud revenue growth of 25%, and adjusted EBITDA of $188 million to $192 million, reflecting a margin of 23% at the midpoint. For the first quarter of 2026, we expect revenues of $193.5 million to $196.5 million and adjusted EBITDA of $40.5 million to $43.5 million, reflecting a margin of 21.5% at the midpoint. Chris will now make some closing comments before we open up for Q&A. Chris? Christopher Young: Thank you, John. Before we take your questions, I want to thank all of our Vertex employees around the world for their unwavering dedication to serving our customers in 2025. Their commitment to our mission to accelerate global commerce with a global compliance platform strengthened by AI is evident in everything they do. They exemplify the strong culture that defines Vertex, and I'm truly proud to join this team and honored to be able to lead it. Earlier this year, I introduced our employees to my foundational tenets to make 2026 and beyond a success for our company and for our investors, and I'll share them with you now. First, we play to win. That mindset raises our bar on product quality, customer outcomes, and how we show up for one another. We put the customer at the center of everything we do. We are constantly asking how will what I'm doing today help a customer succeed. We earn trust through outcomes. We achieve results with speed, agility, and integrity, and we never compromise on doing things the right way. We'll move faster, adapt quickly, and never settle for less than excellence for teammates, customers, and partners. We will innovate boldly without fear. Progress demands smart risk, and we'll try new approaches, learn fast, and keep pushing the boundaries, especially where AI can remove friction and unlock value. And finally, we will communicate with candor and transparency. We'll speak plainly about what's working and what isn't and help each other improve. That's how I've operated throughout my career, and that's the ethos that I'm committed to bringing to Vertex. On that foundation, I'm confident that we will continue to win in the market, accelerate growth, and capitalize on our market position as the leading provider of indirect tax solutions for the enterprise. And with that, operator, please open the call for questions. Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone telephone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Our first question comes from Andrew DeGasperi from BNP Paribas. Please go ahead. Andrew DeGasperi: Good morning. Thanks for taking my question. Christopher, I know you've been there only a few weeks, so maybe this is a little unfair to ask. But maybe elaborate a little more in terms of what you said were the losses to competitors at the lower end of the market. Was this like a price-driven change? And I assume this is not AI-related. Is that correct? Christopher Young: That is correct. And thank you for the question. You can call me Chris. No problem on here. I appreciate it. In reference to those remarks, what I was talking about is our overall attrition. As you saw from some of the numbers, attrition was higher in 2025 than we've experienced in the past. And some of the drivers of that were, number one, M&A and bankruptcies, which we've talked about on prior earnings calls, that was up this year. And that was a significant factor in this. But the second one is that we saw our highest amount of churn in our smaller customers, those that would have had ARR of under $50,000 per year, and that compares to an average ARR per customer of $138,000 per year. So it was concentrated in smaller customers. Some of those went to competition, but when we look at our head-to-head performance with competition, we're winning more ARR from our competitors than we're losing to competitors. Andrew DeGasperi: Helpful. And I guess in terms of maybe as a follow-up to John, in terms of the confidence that you have in achieving the guidance for next year. I know this year, you've had a lot of variables to play with. How confident are you on the growth for, you know, 10-11% next year? And what sources of upside or surprises do you think could be in store for you? Is it e-invoicing? Is it the AI product that could potentially do better? John Schwab: Yeah. Thanks, Andrew, for the question. In terms of our guidance philosophy, it hasn't changed. Again, you know, we took a very thoughtful approach to setting it where we set it. We feel very good about it. And, you know, we took into consideration a lot of the activity and the things that we saw develop during 2025 into it as we set it. And so listen, our plan is to get back to that, you know, beat and raise cadence that we've had for a number of years, and we want to make sure that we took everything into consideration and set it at the right levels to do that. So we feel good about that. And listen, when I think about 2026, you know, clearly, we think there is good opportunity there for activity around the e-invoicing, which is, you know, many of the mandates are coming live at the back half of the year. And so that is certainly one of the growth vectors that we see out there that we're chasing after. And I think Chris talked a little bit about SmartCat and the activity there. I mean, that's a nice product. It's got some traction with some very big customers, and I think that's an exciting tool out there, and it's going to be interesting to see how that plays out over time. Operator: Thank you. The next question comes from Christopher Quintero from Morgan Stanley. Please go ahead. Christopher Quintero: Hey, guys. Chris, it's great to meet you. My first question is for you. So you have a really interesting background and set of experiences at Microsoft, McAfee, Cisco. Curious what parallels you can draw from your time at each one of these, and what you think will be particularly helpful from these experiences here as you lead Vertex. Christopher Young: Yeah. Thanks for the question, Chris. I appreciate it. And, you know, when I look at our company and I look at our business, there's a couple of parallels that stand out for me. The first one, I'll go to my most recent. You know, obviously, I spent a lot of time at Microsoft. A lot of the time there was, you know, when generative AI first started to change what we were seeing in the industry, including what we were doing with OpenAI. And, you know, you could see that there was going to be a real opportunity for companies to transform themselves using AI, both what they do internally and, in the technology industry, what we would deliver to our customers. And so I spent actually a lot of last year really looking at what I thought would be the industries where there was opportunity to transform. And, you know, this was one category that I thought, you know, because of where we sit, because of the kinds of work that happens in finance and accounting departments, that, you know, given the position we sit in, we can offer them AI capabilities that really take a lot of the task work off of their plates. And that's something that we think is a huge opportunity. It's why, you know, I spent time talking about what we're doing with smart categorization. You could look at returns processing as another category where it's heavily manual. And we believe there's opportunities like that to help our customers automate what they do using generative AI, which will save them time, save them cost, and improve their overall experience. If I kind of go back from there, you know, I think Vertex does have some similarities to what I saw in the cyber landscape. Cyber is one of those categories that you constantly are refreshing your content. One of the things that makes cyber companies great is they understand the threat landscape, and it's ever-changing. And in our business, the compliance landscape is ever-changing. There's constantly new tax rules. There's new compliance mandates. That's what we're seeing in the e-invoicing space. And I think one of the things that have told me about Vertex, which gives me a lot of confidence in what we're doing and our position in the market, is that they really trust our content work. They purchase from us because they see us as delivering the best content in the industry. And they recognize that it's ever-changing and that they look to Vertex to stay on top of it. You know, I had one customer tell me in specific. He said, I'm able to run a lean tax department because I rely heavily on Vertex to deliver both the accuracy of your calculations and the updates of your content where we operate that keep us up to date on what we've got to comply with across our different jurisdictions. Christopher Quintero: And then I also wanted to ask about the net retention rates. Obviously, that came down a bit. And it makes sense in the commentary you all gave. Curious about your expectations around where that should be on a kind of more medium-term normalized basis and how long you think it can take to get back there? Christopher Young: We're very focused on improving our net retention rates, and there's a tremendous amount of effort that's going in right now to both introduce our newer product offerings like compliance e-invoicing to our existing customer base. And that, you know, every customer that I've talked to, this is either something they are actively doing or it's certainly on their radar screen. You know, whether it's US customers that are doing business in other countries with those mandates or whether it's, you know, customers in Europe or in Latin America that obviously have those mandates in their home countries and in other countries where they're doing business. So we see that as an opportunity to grow, to help our customers grow spend with us, and they're looking for us to help consolidate some of the work that they're doing in that category. We believe AI is still earlier than where we are with compliance and e-invoicing, but we see AI as an opportunity there. We've introduced other additional products in our portfolio, services we're offering around returns processing, certificate exemption certificate management is another category where we, you know, we brought some new product to market just last year. So we see opportunities for growth with our customers, and we're really trying to lean heavily into new products that we can bring to them. And then, as I said on the call, we're also trying to engage customers more directly to prevent attrition. And some of that's about just understanding their needs, being proactive about that, even to the point where as we identify customers who are at risk, I'm getting on the phone with them myself and talking to them and making sure that we understand what their needs are so we can better serve them going forward. And in some cases, I've seen some examples where we've been able to turn a situation that might have been challenged into one where we're able to do more with those customers. And that's what I'm shooting for here with our team. Operator: The next question comes from Joshua Reilly from Needham. Please go ahead. Joshua Reilly: Alright. Great. Thanks for taking my questions and congrats, Chris, on joining the company here. As we think about the pipeline for 2026, it seems like the biggest swing factor for accelerating ARR growth is still winning those SAP ECC customers, given the size of those potential deals and volume of customers. Is that how you're thinking about things as well? And how is that pipeline shaping up today? Christopher Young: Yeah. We had a good 2025 in our SAP pipeline, and I shared with you all some of the wins that were part of that migration that customers are doing with SAP from ECC to S/4HANA. The way I would characterize it is I think some of the expectations that were there a year ago, we didn't realize it the way it was expected a year ago. But we do continue to see sort of a steady growth of these opportunities. And we're winning our same win rates on each one of these opportunities as they come up. But I think a couple of things that we're seeing. One is it's taking customers longer. I think you've seen some of that in the broader market space. And we're also seeing that it's not necessarily like the timing is a little harder to predict when the tax engine decision will happen in their overall migration process. But, you know, we have a very close partnership with SAP. We work very closely with their teams. We also obviously work very closely with a lot of our SIs and the big four accounting firms that work very closely in this space. They always propose us as the core enterprise solution for this because of the work and the value that we're able to bring to customers. And so, you know, we feel good about this pipeline. We feel good about our win rates. But, you know, we just want to be balanced about how we're going to see that business flow over the course of the next couple of years. Joshua Reilly: Understood. What does it look like in terms of expanding customer service or customer success to a wider group of customers? Do you need to hire more people? Can you give us a sense of what are the thresholds to get this expanded service and how quickly that's going to be implemented? Thank you. Christopher Young: It's actually one of the biggest focus areas for me with AI is our customer success and customer support. I think we can do both. We will add people in some targeted places, but more importantly, this is an area where we have an opportunity to make our team members more efficient so they can actually spend more time with customers and less time filling out paperwork on the back end or hunting for information. Understanding, you know, because as you can imagine, every interaction with a customer requires them to get information, understand what's happening in the customer's environment. We believe we're going to automate all of that with AI, and that will allow our customers to...Christopher Young: ...have a more seamless experience. By automating these processes, our team can focus on higher-value interactions with customers, addressing their needs more effectively and efficiently. This approach will enable us to expand our customer success coverage without necessarily having to scale our headcount proportionally. We are committed to leveraging AI to enhance our customer service capabilities and ensure that we are meeting the needs of our customers in a timely and effective manner. This is a key priority for us as we move forward. Operator: Thank you. The next question comes from Brett Huff from Stephens Inc. Please go ahead. Brett Huff: Thanks. Good morning, everyone. Chris, welcome to Vertex. I wanted to ask about the competitive landscape. Can you give us a sense of how you see Vertex positioned against your main competitors, and what differentiates Vertex in the market? Christopher Young: Thanks for the question, Brett. I appreciate it. When I look at the competitive landscape, I see Vertex as being very well-positioned. We have a strong reputation for delivering high-quality, reliable solutions that our customers trust. Our deep domain expertise in indirect tax compliance is a significant differentiator for us. We are known for our ability to stay ahead of the ever-changing tax regulations and provide our customers with the most accurate and up-to-date content. Additionally, our strong partner ecosystem, which includes key technology and implementation partners, further enhances our competitive position. We are recognized as the leading provider of indirect tax solutions for the enterprise, and our customers value the flexibility and reliability of our solutions. As we continue to innovate and expand our offerings, particularly in areas like AI and e-invoicing, we believe we will further strengthen our competitive advantage and continue to win in the market. Operator: Thank you. The next question comes from Samad Samana from Jefferies. Please go ahead. Samad Samana: Hi, Chris. Congrats on the new role. I wanted to ask about the AI initiatives you mentioned. Can you provide more detail on how you plan to integrate AI into Vertex's offerings and what impact you expect it to have on the business? Christopher Young: Thanks, Samad. AI is a significant focus for us, and we see it as a transformative opportunity for Vertex. We are integrating AI into our offerings in several ways. First, we are using AI to enhance our existing products, such as smart categorization, which helps automate the manual work tax departments do to ensure product SKUs are mapped to the correct tax rates. This reduces the time and effort required by our customers and improves their overall experience. Second, we are leveraging AI to improve our internal processes, such as customer support and success, as I mentioned earlier. By automating routine tasks, we can free up our team to focus on higher-value interactions with customers. Finally, we are exploring new AI-driven solutions that can provide additional value to our customers, such as predictive analytics and advanced data insights. We believe that AI will not only enhance our current offerings but also open up new opportunities for growth and innovation. We are committed to being an AI-first company and are excited about the potential impact it will have on our business and our customers. Operator: Thank you. This concludes the question and answer session. I would like to turn the conference back over to Christopher Young for any closing remarks. Christopher Young: Thank you, everyone, for joining us today and for your thoughtful questions. I am excited about the future of Vertex and the opportunities ahead of us. We are committed to driving innovation, delivering value to our customers, and achieving our growth objectives. I look forward to updating you on our progress in the coming quarters. Thank you again for your support and interest in Vertex. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Ivan Vindheim: So after this energetic start to the day, good morning, everyone, both in the room and online. And thank you to -- thank you that you are joining us this morning at our first quarterly presentation here at Salmon, our new Exhibition Center and showroom at Aker Brygge in the heart of Oslo. The Salmon is actually Norway's most visited exhibition center for farming of Atlantic salmon for natural reasons and came in with the Nova Sea acquisition. The Salmon is also Oslo's best fish restaurant according to TripAdvisor, so then it must be true. Everyday, Joe is always right about food and food experience. So if you have happened to be in Oslo, and you're looking for something good and healthy to eat, you now know where to go. And here we also find Mowi's only Mowi cooler in Norway with an assorted selection of our fantastic products. So for those of you who are physically present in the audience this morning, if you haven't already, please take a look on the way out after the presentation. I think it will be worth your while. That was this morning's marketing. My name is Ivan Vindheim. I'm the CEO of Mowi. And together with our CFO, Kristian Ellingsen, I will take you through the numbers and the fundamentals this morning, and to the best of my and our ability, add a few appropriate comments to them. And after presentation, our IRO, Kim Dosvig, will routinely host a Q&A session. For those of you who are following the presentation online, can submit your questions or comments in advance or as we go along by e-mail. Please refer to websites at mowi.com for necessary details. Disclaimer is both long and extensive. So I think, we leave it for self-study, as we usually do. So with that out of the way, I think we're ready for the highlights of the quarter. And to begin with, and on a general note, after a year of soft prices, following unprecedented industry supply growth last year of 12%, prices increased as expected towards the end of the year after a rather slow start to the quarter, I think, is fair to say. And for our parts, that translated into an operational profit of EUR 213 million in the quarter on quarterly record high operating revenues of EUR 1.59 billion, thanks, first and foremost, to seasonally record high harvest volumes of 152,000 tonnes. The latter is slightly above our guidance. Otherwise, our realized weighted production costs for our 7 production countries of EUR 5.36 per kilo in the quarter was good, I would say, and slightly lower than the third quarter, and down by 5.8% year-over-year, or in absolute terms, down by EUR 47 million in the quarter and EUR 176 million for the year as a whole or NOK 2.1 billion, which are considerable amounts. And further on that note, our standing biomass cost was further down in the quarter and is now at its lowest since 2022, which is a good starting point for our P&L farming cost in 2026. So I think it's fair to say that we expect further cost reductions in the coming year, although the first half of the year will be higher than the second half as always due to our harvest profile, which is following the sea temperatures and the growing conditions in the sea, and consequently impacts our dilution of fixed costs. And this also applies to the first quarter when compared to the fourth quarter. A cost position, which was further strengthened, I would say, by our recently announced strategic feed partnership with Skretting/Nutreco, one of the world's absolute leading aquaculture feed producers, if not the leading and which in short means that Mowi will produce its feed on Skretting formula going forward in addition to capitalizing on Skretting's purchasing power. So this, I think we have ensured the best feed for Mowi farming, now also at the lowest possible cost, which is the best of the 2 worlds. And in total, we expect to save at least EUR 55 million annually in Mowi Farming, whilst also retaining our earnings in a highly profitable feed business, which is an important element in this because we expect the feed market to tighten in the years to come after a decade of overcapacity. And overcapacity, in all fairness create ourselves, and we built our 2 feed mills back in the 2010s, and from which our farming peers have benefited greatly, I think, it's also fair to say, but -- which has now worked itself out. So the table has, in many ways, turned because by piggybacking Skretting, we're offsetting the weaknesses that come with being a small feed producer like ourselves, with limited resources, including R&D, and perhaps the most important input factor in salmon farming, whilst also keeping the advantage of being vertically integrated. So firstly, I'm convinced this will make us a better farmer. I'm also convinced that this is the solution that maximizes our cash flow given our opportunity space. So this is good stuff for us. Carrying on, Consumer Products and Feed, both delivered 2 reasonably good quarters, I would say, at least all things considered, if we get back to the details later. And finally, as the last bullet point on this slide reads, our Board of Directors has decided to distribute a quarterly dividend of NOK 1.50 per share after the fourth quarter. I think that does it for the highlights of the quarter. Then we can move on to our farming volume guidance. And if we begin with taking stock of the year, we are just left behind. 2025 was another record-breaking year for us in terms of harvest volumes with 559,000 tonnes after several upward adjustments of our guidance during the year. And this is equivalent to a growth of as high as 11.4% year-over-year. As for 2026, we uphold our farming volume guidance of 605,000 tonnes, now with Nova Sea on board, and that translates to a further 8.3% growth year-over-year, which means that Mowi most certainly will outperform the rest of the industry on farming volume growth in the coming year once again. And finally, as you can see from the chart here, and as the last bullet point here says, we reaffirm our organic farming volume targets in 2029 of at least 650,000 tonnes. And the latter, we will achieve through increased smolt stocking and by means of post-smolt among other things, because we have still unutilized license capacity in Mowi in several of the countries where we operate. And post-smolt, we can increase the productivity on licenses already in operation, which are to be set into operation. So Mowi's idiosyncratic farming volume growth continues unabated after the rather quiet 2010s and is surpassing that of the wider industry and our listed peers by a large margin, cementing our #1 position in the market for the Atlantic salmon. Then from the overall farming volume picture to key financial metrics for the quarter and the year, there are a lot of numbers on this slide. So I think we'll have to focus on the most important ones now and leave the rest for later at Kristian's session. And turnover and profit in the quarter, we have just been through. So I think we can skip them here. But for year, however, turnover was EUR 5.73 billion or NOK 67 billion, which is the highest so far, but only slightly higher than 2024, as you can see from the table here due to the already addressed soft prices because our volumes were significantly up last year. And soft prices also impacted full year. Operational EBITDA of EUR 949 million or NOK 11.1 billion and full year operational profit of EUR 727 million or NOK 8.5 billion. Furthermore, net interest-bearing debt stood at EUR 2.65 billion at the end of the year. Now with Nova Sea fully consolidated and paid for. And by extension, we have increased our long-term debt target accordingly to EUR 2.70 billion, supported by a strong balance sheet and an equity ratio of 45% in addition to improved debt service capacity as a result of significantly higher volumes in all divisions, which are in the end of the day, the mainstay of our business model and the platform of our earnings. Speaking of earnings, underlying earnings per share was EUR 0.26 in the quarter and EUR 0.92 for the year, whilst annualized return on capital employed was 15.5% in the quarter and 13.3% for the year, which I would say is decent in 2025, characterized by low prices, and weak results for the industry. So when 2025 is fully settled and accounted for, I feel quite confident that Mowi once again will stand out as one of the absolute most profitable farmers in the industry, which is an important element in this. Then further on prices. I think these charts illustrate the whole value because prices were off to a good start last year actually before they began to fall, following unprecedented industry supply growth as a result of very favorable growing conditions across the board, especially in the first half of the year. And the introduction of so-called liberation day tariffs did not exactly help the situation either. So then prices remained low until we saw, as expected, an increase towards the end of the year. And after a rather brisk start to the new year in terms of supply as a result or as a final contribution from last year's exceptional growth, industry supply growth has now finally normalized, and is hovering around 0%, which stands in stark contrast to the 12% we saw last year, and which bodes well for the market balance for the remainder of this year. And yes, I would like to add to that because we believe in our tight market balance going forward in the coming years because in our view, there is no way the industry can manage to replicate previous decades, represents annual supply growth in the coming years with current regulatory limitations and technological constraints, 1% to 2% will be more than hard enough in our view. And last year, demand was 5% according to our numbers, which is a number of most groceries and proteins and meals. So with these numbers, demand should far outstrip the supply going forward. So this will be interesting to follow. Then our own price performance in the quarter, which I would say was good as it was 7% above the reference price, which is the price we measure ourselves against, positively impacted by contract share 24% in the quarter and contract prices above the prevailing spot price, in addition to good quality of our fish. But it's negatively impacted this time around by timing effects and size mix. So with that, I think we are ready to start drilling down into the different business entities, and we begin, as usual, with Mowi Norway, our largest and most important entity by far and the locomotive of our business model. And if you take the numbers first, operational profit was EUR 199 million for our Norwegian operation in the quarter, whilst the margin was EUR 2.02 per kilo and harvest volumes 98,000 tonnes, in a rather troublesome quarter biologically for 2 southernmost regions, Region West and Region South, I think it's fair to say due to issues with gills and plankton. But having said that, our farming P&L cost is still down in the quarter year-over-year, as we can see from the chart here. And the outstanding biomass cost in Norway was further down in the quarter and is now at its lowest since 2022 at the end of the year, which is a good starting point for our P&L farming costs in Norway in 2026. Whilst our 2 southernmost regions struggled somewhat in the fourth quarter, it was once again margin slam dunk by Region North with an impressive margin of EUR 2.61 per kilo on strong biology followed by Region Mid and a margin of EUR 2.26 per kilo. So hats off for that. But also our overall margin for Mowi Norway in the quarter of EUR 2.02 per kilo, I would say, is reasonably good, all things considered. Then the harvest volumes in Mowi Norway. Last year was another record-breaking year for us in Norway with 332,000 tonnes harvest volumes, which is equivalent to a growth of as high as 9.4% year-over-year. And for 2026, we maintain our volume guidance of 380,000 tonnes, now with Nova Sea on board, and that translates to a further 14.5% growth year-over-year. But our short-term goal on these assets is still 400,000 tonnes, which we hope to reach in the not-too-distant future, and which would be our next milestone in Mowi Norway, at least in terms of harvest volumes. Then our sales contract portfolio for Mowi Norway, and this one is important. Contract share in the fourth quarter was 23%, and was with that spot on our guidance, and these contracts contributed positively to our earnings in the quarter. As for 2026, since we believe in market recovery in 2026, we have chosen to be relatively low on contracts, at least so far with approximately 15,000 tonnes per quarter. So let's see how that plays out. That was the last slide on Mowi Norway, and we can have a look at our 6 other farming countries, and we begin with Mowi Scotland. Autumn is always a challenging time of year in Scotland biologically due to high sea temperatures and generally demanding environmental conditions. And in the fourth quarter, we also harvested out some high-cost sites in Scotland. So in light of that, I would say an operating profit of EUR 17 million for Scottish operation in the quarter is a good result with a margin of EUR 1.39 per kilo on 12,000 tonnes harvest volumes. And as we are talking about Scotland, it's also worth mentioning that last year was a milestone year for us in Scotland in terms of harvest volumes, as we crossed the 70,000 tonnes mark for the first time with our 72,000 tonnes. Now for this, our standing biomass was at a record high at the end of the year with cost back at 2022 levels, also in this region, which is a good starting point for new records in 2026. Then overseas to Chile. Mowi Chile continues, unfortunately, to wrestle with soft prices following high supply also out of Chile due to very favorable growing conditions in Chile, as well last year in addition to some farmers having switched to Atlantic salmon from Coho, a Pacific salmon species after doing the reverse a few years back. So just for that, I would say an operational profit of EUR 10 million for Chilean operation in the quarter is a good result on our 26,000 tonnes harvest volumes, thanks once again to the lowest cost in the group in the quarter. Otherwise, our organic growth of our farming volumes in Chile continues unabatedly with 78,000 tonnes last year and 82,000 tonnes targeted for this year. Then farming off to Canada. Mowi Canada also wrestled with soft prices in the fourth quarter and even more so as our cost level in Canada in general is higher than in Chile, which is best-in-class. But in the fourth quarter, also due to knock-on effects from the third quarter and biological issues at that time, particularly in the East. And this resulted in a loss of EUR 50 million in Canada in the quarter. But on the positive side, biology is now satisfactory in Canada, both in the East and in the West. And our costs or biomass cost is back at '22 levels, also in these regions, which should provide the basis for good earnings again in Canada, once prices recover, which brings us the two smallest farming entities Mowi Ireland and Mowi Faroes. In Ireland, we harvested close to nothing in the quarter. So there's not much else to say really over and that biology is now satisfactory in Ireland after rather troublesome 2025 biologically. In the Faroes, however, we harvested 3,500 tonnes in the quarter, ending a record year for Faroes operation with almost 15,000 tonnes harvest volumes and with a margin of EUR 1.68 per kilo in the quarter and operational profit of EUR 6 million, which I would say is a good result, considering that we have 100% spot price exposure in the Faroes. And as the last bullet point on this slide says, biology was once again strong in the Faroes in the quarter. Then further out into the Atlantic Ocean and to Iceland and Icelandic Farming Operation, Arctic Fish. And to begin with, I have to say it's very encouraging to see that we are below EUR 6 again in production cost in Iceland, which gave rise to a small, but still a positive profit contribution from Iceland this time around. So hopefully, with more normal prices going forward, we can put the time of negative results in Iceland behind us. Otherwise, we harvested almost 15,000 tonnes in Iceland last year, which is the highest so far. For this year, we aim to harvest 7,500 tonnes, which is an important element in this because lack of scale in Iceland costs us at least EUR 0.5 in production cost. So more scale would have brought our cost level in Iceland closer to that of the Faroes and the results we see there. But more scale requires more investments and more investments require sensible framework conditions. So everything is connected to everything else also here. So I hope the Icelandic authorities know how to act on this. So this humble request at the end. I, think we can conclude Mowi Farming, and we want to Consumer Products or downstream business. Higher prices for farming mean higher raw material costs for Consumer Products, and more normal prices mean that the time of windfall profits for downstream business is over for now. But we shouldn't be too sorry about that because better prices are never wrong for a farmer, not even an integrated one like ourselves, although the transition phase is always a bit troublesome downstream before the higher prices find their way to the shelf. But having said that, I would still say that an operational profit of EUR 46 million in the quarter is a good result, actually, our second best fourth quarter ever, ending another record-breaking year for our downstream business in terms of earnings with an operational profit of EUR 197 million last year or NOK 2.3 billion, an all-time high sold volumes of 265,000 tonnes product weight, the latter also demonstrating good demand for our products. Then last one out this morning, Mowi Feed. The fourth quarter marks the end of another record-breaking year for our feed business as well with operational EBITDA of EUR 20 million in the quarter and EUR 67 million for the year, on 161,000 tonnes sold volumes in the quarter and 585,000 tonnes for the year. Faroes performed well last year, I think, is correct to say. And with our strategic feed partnership with Skretting, one of the world's absolute leading aquaculture feed producers, if not the leading, I think we have the very best starting point to do even better going forward, because by piggybacking Skretting, I think we have ensured the best feed for Mowi Farming now also at the lowest possible cost. And as we said earlier this morning, in total, we expect to save at least EUR 55 million in Mowi Farming annually, whilst also retaining our earnings in our highly profitable feed business in our feed market, we expect will tighten in the years to come. So once again, personally, I'm convinced this will make us a better farmer. I'm also convinced that this is the solution that maximizes our cash flow given our opportunity space. So with that, Kristian, the floor is all yours. So you can take us through the financial figures and the fundamentals. Thank you, so far. Kristian Ellingsen: Thank you very much, Ivan. Good morning, everyone, both who follow us online and those who are present here at The Salmon in Oslo for the first time. As usual, we start with the overview of profit and loss, which shows record-higher revenue for the year on all-time high volumes. Q4 operational EBIT was EUR 213 million and EUR 727 million for the year. These figures are equivalent to a return as follows: underlying earnings per share of EUR 0.26 and EUR 0.92, respectively, for Q4 and for the full year. Return on capital employed was 15.5% for the quarter and 13.3% for the year, both above the 12% requirement level, even in the year with market headwinds. When it comes to the items between operational EBIT and financial EBIT, the biomass fair value adjustment was positive in the quarter on positive price movements. Income from associated companies includes a revaluation gain on Nova Sea related to the acquisition. Net cash flow per share includes the cash payment for the Nova Sea shares and Nova Sea is fully consolidated now from Q4 onwards. Net financial items were as expected and relatively stable from Q4 '24. We then move on to the balance sheet, which shows a strong financial position. Equity ratio is 45% or 47% measured on the covenant methodology. Here is the cash flow statement. The full year '25 in cash flow items on working capital, tax, CapEx, interest paid were in total as guided, although with some internal differences between the individual items. Closing NIBD was EUR 2.65 billion, the new NIBD target is EUR 2.7 billion following the Nova Sea acquisition and volume growth through the value chain. Credit metrics based on the new target are consistent with a solid investment-grade rating. When it comes to cash flow guiding for 2026, we estimate working capital tie-up prudently EUR 200 million on further growth in farming and the rest of the value chain. CapEx is estimated to EUR 400 million, with the increase from prior years is explained by completion of 2 large construction projects in Nova Sea related to processing and freshwater amounting to approximately EUR 60 million. Interest payments are estimated to EUR 210 million and taxes to EUR 190 million. We have a solid financing in place, and the change here from the last quarter is the EUR 382 million in 5-year green bonds, which we issued in the quarter, which mature in December 2030. We issued the bonds at EURIBOR plus 1.18%, so attractive terms. Moving on to cost, starting with feed, which, of course, is a significant driver. The positive development in feed prices has led to lower cash cost and lower realized P&L costs. Feed prices have been trending down since 2023 and are down 25% from the peak. This will lead to a further P&L cost improvement in 2026. Into Q1, we see overall relatively stable raw material prices. In 2025, we saw a decline in realized P&L costs. This was driven by lower feed prices, but also other cost components were improved. The realized P&L effect in 2025 was EUR 176 million. And we expect full cost to be further reduced in 2026, but due to the impact from volumes and scale effects, cost is always lower in the second half than the first half. So there will be a temporary increase in P&L cost in Q1 as usual. We maintain a strong cost containment and cost leadership focus. As communicated in our CMD in '24, we have identified a cost reduction potential of EUR 300 million to EUR 400 million until 2029 with 2 main components. The main one is operational improvements, including post-smolt Mowi 4.0, efficiency, other initiatives. The other component is the cost savings programs, including the productivity program. And we maintain our good relative cost position with the #1 or the #2 position in the various countries we operate as illustrated in the graph below. In 2025, we identified EUR 65 million in annualized cost savings related to the cost savings program, some with effect in '25, but also with some cash and P&L effect going forward. Total -- sorry, total cost savings 2018 to '25 amount to EUR 392 million, of which EUR 251 million in farming. And there's a total of over 2,100 initiatives across different categories, including boats, treatments, nuts, health, procurement, automation, energy, travel and other items. And we have set a new target for 2026 of EUR 30 million in annualized savings. In addition to bottom-up initiatives, we have identified clear goals for various spending categories based on analysis and comparisons. And this comes in addition to the EUR 55 million net savings related to our feed partnership with Skretting. An important part of the cost saving program is the productivity program. Salary and personnel expenses represents the second largest cost item in Mowi amounting to EUR 759 million in 2025. This cost item is something we can influence through our efforts to work smarter, become more productive. And after that program was initiated in 2020, we have grown harvest volumes in Mowi from 436,000 tonnes to 605,000 tonnes, which is the guiding for this year. And in the same period, then FTEs are down from approximately 15,000 to down to 14,200 approximately. So this is an impressive productivity improvement in the period. And we have set ourselves a new target for 2026, on reducing FTEs by another 250 through the productivity program. And this is being achieved through natural turnover, through retirement, reduced overtime, reduced contracted labor, and automation and rightsizing. And this slide shows the productivity effects for different parts of the business. So a good track record here for Mowi. Then we move on to market fundamentals, starting with industry supply. In Q4, the year-on-year volume growth was 9% compared with 12% for the full year. And the increase in the fourth quarter was driven by Chile. The biomass composition in Chile indicates continued high supply in the short term, followed by a more moderate development. For the industry in Norway, the biomass composition year-end and the improved productivity experienced in 2025 for the industry. should limit the potential for significant volume growth during 2026. Demand was good in the quarter. Estimated demand growth according to our numbers, was 8% in Q4 and 5% overall for the full year of 2025. The improved demand due to lower shelf prices in retail is expected to continue in 2026. In Europe, consumption was relatively stable and in line with the development in supply. Retail demand was good and also helped by additional Christmas demand. In the U.S., consumption increased as much as 13% driven by the retail channel with the fresh pre-packed segment being the main contributor. And in Asia, we see that consumption was strong in all major markets, helped by market conditions, but also an ongoing structural shift in sales channels with more home consumption continuing to drive demand in Asia. While prices in '25 have, of course, been impacted by the unprecedented supply growth, it's worth noting that prices improved somewhat in Q4 as a positive response to gradually decreased supply. And while there is some short-term industry volume growth potential in the biomass composition, particularly in Chile, the figures indicate that there is a limited supply growth potential for 2026 overall. Our estimate is 1% industry supply growth for 2026, and we believe in modest growth, also in the coming years. But due to previous investments and measures, we estimate a higher growth for Mowi compared with the industry. The guidance of 605,000 tonnes represents 8.3% annual increase. And we also have a good track record of not only delivering on our volumes, but actually over-delivering, as shown here, based on the statistics for the last 5 years, with plus 2.2% for Mowi, which is very different from the average 5.9% miss for our peers. So with that, I conclude my walk-through, and then we are ready for Ivan and some comments on concluding remarks. Ivan Vindheim: Thank you for that, Kristian. Much appreciated. And it's time to conclude, as Kristian said, for some closing remarks before we wrap-up with our Q&A session hosted by our IRO, Kim Dosvig. And to begin with, I don't think it's very controversial to say that the fourth quarter closed out rather disappointing year in terms of prices following unprecedented industry supply growth last year of 12%. But disregarding that, I would say 2025 was another strong year for Mowi operationally with record high volumes by a large margin in all divisions to name a few. And speaking of margins, we also saw our farming margins once again at the top end of the industry scale in the regions where we operate, indicating a competitive cost position for Mowi. And further on that note, we saw our farming P&L costs come down by a whopping EUR 176 million last year, or NOK 2.1 billion, and outstanding biomass cost was further down during the year and is now at its lowest since 2022, which is our good starting point to push our farming cost a tad further down in 2026. Otherwise, we have maintained our farming volume guidance for this year this morning of 605,000 tonnes, and that's equivalent to a growth of as high as 8.3% year-over-year, which means that Mowi more certainly will outperform the rest of the industry on farming volume growth again. And finally, our downstream business clocked once again up record high earnings last year, demonstrating the strength of our vertically integrated value chain, especially when the going gets tough like last year. So once again, a big thank you to all of my colleagues who made all of this happen. It's of course, much, much appreciated. Then from one thing to another, the market balance is looking much better now with industry supply growth hovering around 0%, which stands in stark contrast to the 12% we saw last year. And if you look further ahead, as we said earlier this morning, there is, in our view, no way the industry can manage to replicate previous decades, 3% annual supply growth in the coming years with current regulatory limitations and technological constraints. 1% to 2% will be more than hard enough. And demand was 5% last year according to our numbers. So these numbers demand should far outstrip supply in the coming years. So this will be interesting to follow. And last but not least, I have to say, we are very happy about having landed our strategic review of the Feed division because truth be told, this has been a headache for us for years, as we have seen that our feed has been more expensive than that of our peers, after first having a feed that did not perform. And either is, of course, acceptable to the largest salmon farmer in the world. So by partnering up with Skretting/Nutreco, one of the world's absolute leading agriculture feed producers, if not the leading, I think we have ensured the best feed for Mowi Farming going forward now, also at the lowest possible costs. And as we said earlier this morning, we expect to save at least EUR 55 million annually in Mowi farming whilst also retaining our earnings in our highly profitable feed business. In our feed market, we expect will tighten in the years to come. So once again, I'm convinced this will make us a better farmer. I'm also convinced that this is the solution that maximizes our cash flow given our opportunity space. So this is good stuff for us. So with those closing remarks, Kim and Kristian, I think we are ready for the Q&A session. So if Kristian can please join on the stage, and then you, Kim, can administer the mic and orchestrate questions from the audience and the web. I don't know who wants to start, Kristian. Christian Nordby: Christian Nordby, Artic Securities. With your new net debt target, I assume that you want to stay around that target, not necessarily only below, and you believe in a very tight market ahead, as you said. Should we believe that all excess cash flow will just be paid out? Or do you think you will find other ways to grow beyond what you guide on? Ivan Vindheim: Over time, confirmative, but we will also, of course, continue to grow, but then the finance whatever it is separately. Unknown Analyst: [indiscernible] Carnegie. So in Chile, there's a new government and the industry seems to be quite positive in terms of deregulations could you maybe speak about that potential, both on the cost side and potentially more growth coming from Chile? And the second question just on the feed savings. When do you expect that to start hitting the P&L? Ivan Vindheim: Two good questions. If we start with Chile. So now in Chile, I've been talking about growth as long as I have almost lived and not much has happened in the past few years. And our President is only elected for 4 years, and it takes 3 years from egg to plate in this industry. So let's see things take time in this industry. So I've heard the same, but I would also like to see it. There are some constraints in Chile. So our take is what you saw on our long-term supply/demand slide earlier this morning. The next 5 years, it's really, really hard to see that this industry in total can manage to deliver much growth. So let's see. We are not visors, but at least we have some data points we are following. Feed, yes. So we have started. We have started. But you know, the circle, first, it goes to inventory and balance sheet, and then it ends up finally in the P&L. So in the P&L, I think you should think 2027 because of that. But in terms of cash, we expect to see that this will start to impact the cash flow already in March. And already in the second quarter, we expect to see considerable savings, but back to the P&L, that takes longer time. Kim Dosvig: Okay. Then we have a few questions from the web from Alexander Sloane in Barclays. He's got a question on supply. You point to 1% global supply growth in 2026, but 5% to 8% growth in Q1. What gives you confidence in this tightening? Could you have a year of another positive supply surprise? Kristian Ellingsen: Yes. Of course, we are dealing with biology here. So there is always a general disclaimer. That being said, our views on this matter is based on the biomass composition, and also recent developments and temperatures, et cetera. If you look at the biomass composition, we see that we are down on a number of individuals, both in Norway and also for the industry in general. We see that average rates are somewhat up, giving some short potential for volume growth in the near term. Reference to the question, we have seen that also now in Q1, but we believe that for the year as a whole, I think 1% is a more reasonable number. Kim Dosvig: Okay. And then his second question is on demand, 5% global demand growth in 2025. Can this be sustained at the same level in 2026? And which regions are better or worse? Kristian Ellingsen: We believe in good demand also going forward. If you look at the Q4 demand growth estimate, that was 8%. So i.e., higher than the overall a 5% figure for '25. It's also been 8% on average per year, the previous decade, as Ivan showed on the slide. So we believe in continued good demand growth. And I believe that there's a good potential also going forward. We see especially good growth in Asia, also good demand growth in the U.S. We see in the U.S., particularly good developments in the prepacked segment with 24% volume growth now in '25 on our numbers. So the potential is definitely there also going forward. Kim Dosvig: Okay. Then another question from the web from Andres in Berenberg. He's got a question on CapEx. Could you please put the EUR 400 million target for this year in a long-term context? Is this the level of investments driven by specific one-off projects or in line with a reasonable long-term trend? Ivan Vindheim: I think you should see 2026 as one-off and allocated to a transition effect related to the acquisition of the Nova Sea. So I think last year's level, adjusted for size is much better estimate for the future. Henrik Knutsen: Henrik Knutsen, Pareto Securities. Could you elaborate on your biomass status in Norway with or without Nova Sea? Ivan Vindheim: Can you please elaborate a little bit more on the question? So what are you? Henrik Knutsen: You're saying biomass is up 8.7% year-over-year, which is all regions, but Norway specifically. And yes, I guess, you're going to say that Norway is higher. Yes, but is that because you didn't include Nova Sea last year? So the question is, if you could sort of pro forma adjust your Norwegian biomass. Ivan Vindheim: Okay. A complicated question. I think we take it after this session. Henrik Knutsen: Let's do that. Wilhelm Dahl Røe: Wilhelm, Danske Bank. You mentioned sort of cost of living still impacting the American demand. I'm just wondering with new contracts going into 2026, do you see any impact of tariffs, even though you have most from the U.S. with the lower tariffs? Ivan Vindheim: Yes, absolutely. So there is no free lunch. So tariffs impact demand, but that effect I've already seen. And back to the 5% figure, Kristian just explained, that 5% figure included tariffs. But definitely, tariffs play a role here, they do. But still with 5% and the supply growth we expect for this year and going forward, this should be a tight market balance. Kim Dosvig: Okay. No more questions from the web nor the audience here. Ivan Vindheim: Okay. Then it only remains for me to thank everyone for the attention. We hope to see you back already in May, if not before, here at The Salmon. So please feel free to take a trip to The Salmon and try out some of our delicacies. I think it will be worth the trip. So with that in mind, folks, take care and have a great day ahead. Thank you.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM Ltd. Results Conference Call for 2025. All participants are present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded and will be available for replay on the company's website at www.radcom.com later today. On the call are Benny Eppstein, RADCOM's CEO, and Hadar Rahav, RADCOM CFO. Please note that management has prepared the presentation for your reference. That will be used during the call. If you have not downloaded it yet, you may do so through the link in the investor section of RADCOM's website at www.radcom.com/investorrelations. Before we begin, I would like to review the safe harbor provision. This conference call will contain forward-looking statements. Forward-looking statements in the conference call involve several risks and uncertainties, including but are not limited to the company's statements about its momentum, strategic direction and goals, market position, and trajectory. Future execution and delivery of values to customers and stakeholders, expansion within its existing customer base, and expansion of its footprint. Development of and enhancing strategic partnerships, and expected benefits and revenue from collaborations, the success of new technologies, including AI, to among other things, enhance automation pipelines, opportunities, and customer engagements, and the timing thereof, demand for its product, and solutions, and the ability to address new customer segments. And expand its market reach. Trends in the market, the expected benefit of its AI-driven assurance, and other solutions, its expectation with respect to gross margins, research and development, and sales and marketing expenses, expectations regarding the growth of 5G and AI, and its full-year 2026 revenue guidance future growth and profitability, resilience and long-term commitment. The company does not undertake to update forward-looking statements. The full Safe Harbor provisions, including risks that could cause results to differ from these forward-looking statements, are outlined in today's press release and the company's SEC filings. In this conference call, management will refer to certain non-GAAP financial measures, which are provided to enhance the user's overall understanding of the company's financial performance. By excluding non-cash stock-based compensation that has been expensed in accordance with ASC topic 718 financial income expenses related to acquisitions and amortization of intangible assets related to acquisitions, non-GAAP results provide information helpful in assessing RADCOM's core operational performance and evaluating and comparing the operations consistently from period to period. Presentation of this additional information is not meant to be considered as a substitute for the corresponding financial measures prepared in accordance with the generally accepted accounting principles. Investors are encouraged to review the reconciliations of GAAP to non-GAAP financial measures included in the quarter's earnings release available on our website www.radcom.com. Now I would like to turn over the call to Benny. Please go ahead. Benny Eppstein: Thank you, operator, and good morning, everyone. Please turn to Slide seven for our financial highlights. RADCOM delivered its sixth consecutive year of growth with a record $71.5 million in revenue, representing 17.2% year-over-year growth above the midpoint of our most recent revenue guidance of 15% to 18%. GAAP earnings per share increased by just over 65% year over year and we achieved the highest cash and short-term deposit balances in the company's history of $109.9 million with no debt. In terms of profitability, RADCOM reached record results across multiple KPIs, including earnings and operating margin, demonstrating tight cost control, strong operational efficiency, and a scalable business model. As shown on Slide eight, we delivered another strong fourth quarter with revenue up 16% year over year and $18 million. Our strong results demonstrate the solid foundation we have established for RADCOM. RADCOM continues to deliver profitability supported by our technology advantage, a top-tier customer base, and an exceptional team. Our focus now is to expand our customer base, specifically adding new Tier 1 customers to our roster to enable our next phase of profitable growth. Expanding our Tier 1 customer footprint remains a key priority, and we are actively engaged across a set of meaningful new prospects. We continue to see a healthy set of opportunities and demand remains strong. As is common with Tier 1 customers, timing can shift as engagements move from technical evaluation to proof of concept to closing. Given this momentum, we expect revenue to grow by 8% to 12% in 2026, way above the service assurance market growth. Achieving this outlook will require both new business and continued expansion within our existing customer base, and we remain confident in our ability to execute. Looking forward, our strong balance sheet is a strategic advantage, signaling to Tier 1 customers our resilience and long-term commitment. This also allows us to continue our product innovation and R&D investments, and over time, expand our footprint all while maintaining disciplined financial management and profitability. Our performance also validates the growing market value of our industry-leading solutions. We remain firmly committed to enabling exceptional user experiences while addressing our customers' evolving operational and business needs. Our results and improved profitability are a direct result of our focused execution of strategy and the ongoing value we offer to our customers, all driven by our highly skilled team. The continued advancement of our technology leadership positions us for accelerated scalable growth. Heading into 2026, we expect to maintain a disciplined focus on technology advancement, including in our 5G service assurance offering and AgenTiK AI capabilities. We will continue to support operators in optimizing their network operations, reducing costs, and driving network automation. We see continued and growing opportunities to build on our existing customer base and support sustainable long-term growth. Turning to Slide nine, where we look more broadly at the market environment, telcos are approaching a key inflection point driven by AI adoption. A recent GSMA survey conducted in partnership with RADCOM found that 71% of operators plan to implement AgenTiK AI this year. Yet, only 41% report having an end-to-end data that integrates information across the organization. This gap between AI ambition and data readiness presents a clear opportunity for RADCOM to add value by enabling operators to access reliable subscriber-focused data. This data supports multiple AgenTiK use cases and broader efforts to deliver consistently high-quality customer experiences. AI-driven demand continues to reshape network priorities. Operators are increasingly integrating AI across network layers to optimize capacity and efficiency as they continue the transformation to 5G. As we have seen, many have already moved from proof of concept initiatives to commercial deployment in 2025. In the area of AgenTiK AI, operator demand is increasingly shifting toward unified end-to-end platforms. In our recent survey, the majority of operators indicated that they are interested in deploying integrated end-to-end systems. RADCOM is well-positioned to address this need with a comprehensive solution that integrates smoothly with business and service management systems for customer support care and automation of operational workflows. This aligns well with the industry's shift toward more streamlined data-driven operations. Moving on to Slide 10, our product innovations. We continue to see growing customer interest in our advanced high-capacity data capture solution, which enables telecom operators to analyze massive amounts of data to understand the real customer experience at scale while significantly reducing infrastructure costs. We believe this solution can reduce the total cost of ownership by up to 75% compared to competing solutions, enabling broader visibility into the customer experience. As highlighted in our survey, operators are exploring AgenTiK across targeted use cases. Our focus is on developing telco-specific AI agents that deliver high accuracy, faster decision-making, and measurable operational improvements across specific domains. This capability not only enhances the value of our existing platform but also positions RADCOM to address new customer segments and expand our market reach. Turning to Slide 11, our new contract wins. In the fourth quarter, RADCOM announced a new customer win, One Global, which selected RADCOM AS to deliver next-generation AI-powered assurance across both subscribers and IoT, enabling 4G and 5G monitoring at scale for 43 million subscribers. We also expanded within an existing customer, a leading European operator, via Rakuten and Symphony to supply our network visibility solution. The solution will deliver accurate intelligent data collection across its network end-to-end. Regarding our installed base, Slide 12. RADCOM continues to support AT&T as it sustains leading network performance across the industry. In 2025, the mobility service revenues increased, reflecting ongoing customer demand and operational strength. AT&T finished the year with 120 million subscribers. One industry analyst noted that AT&T's network remains robust and is widely regarded as the most reliable network option in rural areas across the US. Within its fully virtualized cloud-native network, Rakuten Mobile continues to utilize RADCOM Assurance solutions to deliver high-performance, reliable network quality that supports scalable growth. The operator passed 10 million subscribers in December 2025 and ranked first in the 2025 Orycon customer satisfaction survey. Turning to Slide 13, we focus on our partners. We are continuing our partnership strategy with NVIDIA and ServiceNow. Our high-capacity user analytics solution is powered by NVIDIA data processing units. In field trials, it has reduced operational costs by up to 75% while maintaining full real-time visibility, making it a strong enabler of scalable 5G assurance in AIOps. We believe this partnership will start contributing initial wins over the course of 2026. Turning to ServiceNow on Slide 14. We continue to deepen our partnership and will showcase multiple joint demos at Mobile World Congress in March. Our RADCOM AIM AIOps solution is now fully integrated, certified, and available as a connector in the ServiceNow store, enabling real-time network monitoring, advanced automation use cases. We expect this collaboration to begin delivering initial wins during 2026. Go to market activities, Slide 15. In 2025, we strengthened our market presence by participating in key industry events, including Fuse in Dublin and NetworkX in Paris during Q4. We are preparing for upcoming high-impact engagements, including Mobile World Congress 2026 and NVIDIA GTC in March, to showcase our solutions, expand strategic relationships, and drive momentum. RADCOM's technology leadership continued to gain global recognition. Named to the 100 for 2025, RADCOM was recognized as one of the solution providers shaping the future of telecom and digital infrastructure. We were also finalists in the first network award for best network test and measurement and received the best AIML innovation award at the 2025 Global Connectivity Awards in London. These accolades validate our industry-leading solutions, reinforce our competitive differentiation, and highlight the value we deliver to customers and stakeholders worldwide. Before I wrap up, I want to briefly address the governance update. The board of directors has appointed board member Rami Schwartz as chairman, effective February 8, 2026, succeeding Sami Tota. Rami has served on RADCOM's board since '20 and brings deep experience in strategy leadership, governance, and scaling technology businesses. I've spent meaningful time with Rami over the last year at RADCOM and previous roles, and I'm confident in his ability to support the team as we remain focused on our growth strategy. I would also like to thank Sami for his support during my first year as CEO. Importantly, Sami will continue to serve on the board. From my perspective, the board provides the oversight and support our team needs. We are aligned on our strategy priorities and execution plan as we enter 2026, and we remain focused on expanding our Tier 1 customer footprint, advancing our technology roadmap, and delivering profitable growth. In summary, turning to Slide 16. 2025 was a solid year, defined by strong growth, disciplined operational and financial execution, and continued market momentum. We strengthened strategic partnerships with NVIDIA and ServiceNow while initiating discussions with additional collaborations. We secured a new customer, expanded our service offering, advanced AgenTiK AI solutions, and launched our high-capacity data capture solution. Turning to 2026, we remain focused on driving innovation, particularly in AgenTiK AI use cases, and delivering solutions that reduce the total cost of ownership for operators. With a robust pipeline of opportunities, we anticipate another year of double-digit revenue growth, reinforcing our leadership in 5G assurance. The company is committed to sustaining profitability, maintaining expense discipline, and leveraging its solid foundation to support long-term value operation. Our near-term focus is to continue to deliver strong operational and financial execution, converting a growing pipeline of opportunities into revenue while further expanding our presence within our existing customer base. We have established key strategic partnerships and expect to deepen these relationships to scale our business and expand our addressable market. AI remains a strong catalyst for our business, and we are investing in AI and automation to maintain our leadership in real-time network intelligence. Our customers recognize both the opportunities and challenges of AI, and RADCOM has proven its ability to deliver a total cost of ownership advantage over our peers' solutions. Operationally, we remain committed to delivering consistent profitability and cash flow while maintaining flexibility as we continue to scale organically. In conclusion, we enter 2026 with momentum and a clear set of goals. We have proven our business model and established a sound foundation for profitable growth. With that, I'll now turn the call over to our CFO, Hadar Rahav, to review the financial results in detail. Hadar Rahav: Thank you, Benny, and good morning, everyone. As a reminder, unless otherwise noted, I will refer to non-GAAP results. Reconciliation between GAAP and non-GAAP measures are provided in our press release and presentation. Additionally, all comparisons are year over year unless otherwise noted. Please turn to Slide 17 for our quarterly financial highlights. We are pleased with how our team closed the year, delivering growth in both revenue and profitability. RADCOM delivered another quarterly revenue record with total revenue of $18.9 million, up 16% year over year. At the same time, we continued to manage expenses effectively while increasing strategic investments in research and development. As a result, we delivered significant improvements in margins and record profitability. Gross margin in the fourth quarter was 77.6%, the highest since 2018. Please note that our gross margin may vary depending on the revenue mix. Operating income reached $4.3 million, surpassing the third-quarter record with an operating margin of 23%, the highest in eight years. Net income was $5.2 million or $0.31 per diluted share, compared to $3.8 million or $0.23 per diluted share last year. As shown in Slide 18, our gross R&D expenses for the fourth quarter were $4.9 million, an increase of 16.2% year over year. This growth reflects our focus on strengthening collaboration, fostering innovation, and expanding our portfolio. We plan to continue strategic investment in R&D to deliver advanced intelligent solutions with a focus on agent-to-agent and multimodal workflows while supporting our strategic partnership and productization efforts. Sales and marketing expenses for the fourth quarter were $4.2 million, a 1.4% year-over-year increase. We continue to invest in our sales capability and anticipate that sales and marketing expenses will gradually rise in the coming quarters to support pipeline growth and expansion in high-value regions. On a GAAP basis, as shown on Slide 19, our net income for 2025 was $3.6 million, a 62% year-over-year increase. GAAP earnings per share were $0.21 per diluted share compared to $0.14 per share last year. We ended 2025 with 325 employees. Hadar Rahav: Now let's review Slide 20, which presents the full-year results. In line with our full-year guidance, we finished 2025 with a record revenue of $71.5 million, an increase of 17.2% from 2024, above the midpoint of our projected 15% to 18% growth range. Our gross margin was 76.8% in 2025, up from 75.2% in 2024. Operating income increased by 55% in 2025, reaching an all-time high of $14.8 million or 20.6% of revenue, compared to $9.5 million or 15.6% in 2024. Net income for 2025 reached a record $18.4 million, accounting for 25.8% of revenue or $1.09 per diluted share. This compares to a net income of $13.5 million or 22.1% of revenue, equating to $0.83 per diluted share in 2024. Operator: As shown, Hadar Rahav: on Slide 18, our gross R&D expenses in 2025 were $18.5 million, an increase of $1.9 million from 2024, reflecting 11.1% year-over-year growth. Looking ahead to 2026, we plan to increase our R&D to further develop automation and AI capabilities and support our strategic partnership and productization goals. We received a total of $400,000 in grants from the Israel Innovation Authority during the year. To support our growth, sales and marketing expenses in 2025 were $17.3 million, up 10.5% from $15.7 million in 2024. G&A expenses for 2025 were $4.8 million, a decrease of $11,000 year over year. On a GAAP basis, as shown on Slide 19, our net income for 2025 reached a new high of $12 million or 16.8% of revenue or $0.71 per diluted share, compared to $7 million or 11.4% of revenue or $0.43 per diluted share in 2024. Turning to the balance sheet on Slide 21. We closed quarter four with a record $109.9 million in cash, cash equivalents, and short-term bank deposits, reflecting positive cash flow of $3.2 million in the quarter and $15.2 million for the year driven by our strong results. That concludes our prepared remarks. Thank you. And we will now pass the call back to the operator for your questions. Operator: Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press 1. If you wish to cancel your request, please press 2. Please stand by while we poll for your questions. The first question is from Alinda Li of William Blair. Please go ahead. Alinda Li: Awesome. Thank you. Benny, with $199 million in the balance sheet and no debt, how should we think about capital allocation in 2026, especially as it relates to M&A? Benny Eppstein: Hi, Alinda. Thanks for the question. Our first priority remains to look into M&A. And it's our first priority, this is what we are trying to accelerate, and this is what's prioritizing. So I answer your question. Alinda Li: Okay. Cool. And any changes in the guidance loss of And what are some of the assumptions in the 2026 guide? Benny Eppstein: Sure. We believe we are it's it's we're basically at the second half of our sales cycle. It's hard to pinpoint exactly when we're to close, and this is why we we we let the guidance eight to 12%. And we're assuming that we will close it in the in the first half of the year. Some of the some of the strategic opportunities. Alinda Li: Awesome. Thank you. Got it. Thanks. If there are any additional questions, please press 1. If you wish to cancel your request, please press 2. The next question is from Ryan Koontz of Needham and Company. Please go ahead. Ryan Koontz: Great. Thanks, guys. Wanted to ask about you've you've got a great run rate there with your large customer AT&T and look at your land and expand strategy. What are some of the key drivers for expanding your business with existing customers there? Is it their deployments of the 5G standalone core? Or is it adoption of AgenTiK AI? Or what are some of the key drivers we should think about for you to be able to grow the size of new accounts? Thank you. Benny Eppstein: Thanks, Ryan. I would say that we have lots of opportunities within our existing customer, including AT&T. AgenTiK is driving a lot of opportunities. Our unique dataset that we bring to the table is helping AT&T and other customers to promote their own AgenTiK plus and promote their own efficiency within operations. So this is still the main target to support our biggest customers. Ryan Koontz: Got it. And, you know, I I could certainly see how the the analytics angle know, is is a is an easy entry point for AI for for RADCOM. The AgenTiK element here, you know, how critical is that to you know, your break to to your breaking into an account today? Or is that really kind of a ladder sale kind of upsell for your basic capabilities? Benny Eppstein: I think it's a combination of both, Ryan. So it is the error analysis capabilities that are driving a lot of opportunities, including in North America and in demand, by the way. And while promoting our own core business, pushing our ACE product within existing new customers and prospects. But, definitely, the AI and the unique data set is a critical ingredient from our value proposition. Ryan Koontz: Got it. Thanks. And you know, with regards to your your data collection, I I assume these are on hardware hardware NICs for the network equipment. The NVIDIA BlueField, where is that in terms of introduction, and what sort of, you know, architecture to use if you're not using an NVIDIA based product? FPGA based? Benny Eppstein: We actually we actually using both NVIDIA based standard server and cloud-native solution in all fronts. And we still believe that our product, our software is the most efficient one out there comparing to our peer competition. Ryan Koontz: Great. Thanks. That's all I've got. Thanks, Benny. Benny Eppstein: Thank you, Ryan. Operator: There are no further questions at this time. Alinda Li: This concludes the RADCOM Ltd. Fourth quarter 2025 results conference call. Thank you for your participation. You may go ahead and disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Siemens Energy's Q1 Fiscal Year 2026 Analyst Call. As a reminder this call is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on Page 2 of the Siemens Energy presentation. The conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Tobias Hang. Please go ahead, sir. Tobias Hang: Thank you so much, Moritz. Good morning, and a warm welcome to the Siemens Energy Q1 Fiscal Year 2026 Results and Analyst Call. As always, all documents were released at 7:00 a.m. on our website. Our President and CEO, Christian Bruch; and our CFO, Maria Ferraro, are here with me. Christian and Maria will take you through the major developments during Q1 fiscal year 2026. This will take approximately 30 minutes. Thereafter, Christian and Maria are available to answer your questions. For the entire conference call, we have allowed 1 hour. Christian, over to you. Christian Bruch: Thank you very much, Tobias, and good morning, everyone, and welcome to our quarter 1 analyst call also from my side. Thank you for joining us today. I'm pleased to report that Siemens Energy had a very strong start into fiscal year 2026, capitalizing on the favorable market momentum and successful execution of the backlog. The global energy system continues to transform with increased pace shaped by electrification and the increasing need for security of supply and our portfolio is excellent, aligned with these long-term needs. In the first quarter, we booked orders of nearly EUR 18 billion, the strongest quarter in our company's history. And this demand was broad-based across regions and business areas. The market momentum remains positive for our core portfolio. As a result, our order backlog has grown to a record of EUR 146 billion, giving us strong visibility for this fiscal year and beyond. Our very strong free cash flow performance in this quarter was supported by significant order momentum and customer prepayments, including reservation agreements, especially in Gas Services, and Grid Technologies. These businesses continue to demonstrate strength, high market demand, disciplined execution and particularly in Gas Services, high service intensity, all of which contribute to high-quality cash generation. At Siemens Gamesa, we remain on the path towards breakeven. The underlying operational measures show impact in particular, the improved productivity in offshore increased service profitability and reduction of structural cost in onshore. Please note that profitability in quarter 1 also benefited from some timing effects and was therefore less negative than expected, meaning the trajectory might not be strictly linear across the different quarters of the year. I'm also pleased to announce that we have received the first order for our SG 7.0 wind turbine that is a successor to the 5.X platform. We will supply 6 turbines for 42-megawatt wind park in Germany. Given the strength of our underlying markets, clear visibility from our order backlog and the strong start into the year, we are fully on track to achieve our fiscal year 2026 guidance. While the first half of the year is historically stronger than the second half, this performance clearly demonstrates deeper operational momentum across the company, momentum built on backlog quality, disciplined execution and exposure to markets with long-term trends. Demand remains strong and broad-based across all business areas and across all regions in the first quarter. Gas Services delivered its strongest quarter ever in terms of order intake, booking 102 gas turbines. That means we matched more than 50% of last year's unit volume within just 1 quarter. The momentum was brought across all turbine frames. In total, we booked around 13 gigawatts of new gas turbine orders in quarter 1. 12 gigawatts were converted from existing reservation agreements and at the same time, we added 12 gigawatts of new reservations. This increased total commitments to a total of 80 gigawatts even after delivering 3 gigawatts during the quarter. In the data center segment, we have commitments of 22 gigawatts, of which 15 gigawatts are reservation agreements. But I want to emphasize, our growth trajectory does not depend on data centers. Demand is driven by broader structural trends, electrification, industrial expansion and the increasing need for resilient energy systems. And these fundamentals remain firmly intact. While demand for gas turbines is especially strong in the U.S., data centers still represent only 1/4 of our total global commitments. Roughly 60% continues to come from traditional applications while the rest is related to peaking, marine or FPSO applications. Grid Technologies delivered another strong quarter, driven by robust demand across both products and solutions. The U.S. contributed with several data center-related orders amounting to a high triple-digit million euro volume. And just to remind you, last year, we booked in that space around EUR 2 billion. We also saw continued demand for grid stabilization in the U.S. reflected in large [indiscernible] orders with a total amount of a low triple-digit million euro value. Globally, customers are accelerating investments in transmission capacity to integrate renewables, meet rising demand and strengthen stability. Recent events underline the importance of energy security and resilience. The sabotage of a cable bridge in Berlin, leaving more than 45,000 households and over 2,000 businesses without power for days and the winter storms in the U.S. where around 1 million people lost electricity both highlight how mission-critical modern grid infrastructure is. Such events raise awareness and increased demand for grid stabilization technologies like our synchronous condensers. Regionally, the Americas, but particularly the United States showed excellent performance. Orders grew nearly 60% on a comparable basis and revenue increased by around 25%. This means the Americas are now nearly at parity with EMEA in order intake, a remarkable milestone that reflects the rising importance for the global energy transition. That said, EMEA also remained very strong with almost 20% growth in both orders and revenue. Significant wins in Poland and Turkey further demonstrate customers' trust in our technology and long-term reliability. In Asia and Australia, we also recorded more than 20% order growth. Revenue moderated due to a very strong prior year comparison from large offshore wind project in Taiwan but the underlying demand picture remains solid. Regional diversification continues to be a priority. A good example is the well-balanced gas services order backlog. The U.S., Middle East and Europe account for roughly 80%, almost evenly split among the 3. Quarter 1 orders in Gas Services were 40% from the U.S., 35% from Europe and 15% from Middle East and China. Across Gas Services and Grid Technologies, the pricing environment remained favorable and supported high-quality profitable growth as it is accretive to our backlog margins. In Gas Services, favorable pricing momentum continues with current reservation agreements being signed with higher pricing versus current orders. Let me now give you a progress update on our Elevate program, which we introduced in detail at our Capital Markets Day in November. We are fully on track with our capacity additions. And last week, we communicated more details around our U.S. investment program, which we already indicated at our Capital Market Day. I will provide more details on this on the next slide. In Europe, our grid technologies expansion is also progressing strongly. We have tripled production for wind transformers in Austria and together with our partner, KONCAR, opened a new transformer tank manufacturing facility in Croatia in January. We continue to strengthen our supply chain resilience through long-term partnerships. Our investment in ASTA Energy, a company which listed publicly on January 30, ensure secure access to critical copper components for our grid infrastructure portfolio. And both S&P and Moody's upgraded our credit ratings, reflecting the improved balance sheet, improved cash performance and stronger resilience of the company. We also drive forward the implementation of our new operating model, simplifying structures, reducing overhead and increasing accountability across the organization. As part of that transformation, we also increased AI capabilities and our workforce to work more efficiently and unlock new productivity improvements across the company. Across all 3 pillars, Elevate is continuously making a meaningful contribution to our performance. Progress can be seen in our margin development, cash conversion and operational stability. Let me provide you more details on our U.S. investment program. We currently execute investment projects for around $1 billion to expand manufacturing in the United States and expand our workforce as part of this effort. This includes also strengthening of the supply chain and establishing 2 training centers for qualification of workforce. Across 6 states, we are particularly strengthening the Grid Technologies and Gas Service business. In Mississippi, we are building a new high-voltage switchgear plant and expand the transformer capacity. In North Carolina, we are resuming gas turbine manufacturing as already indicated at the CMD and increasing large transformer capabilities while expanding also research and development. In Florida, we are boosting our blade and vane production and upgrading our innovation center, including an AI grid lab together with NVIDIA. In Alabama, we are scaling production of key generator components, and in New York and Texas, we are also upgrading compression equipment facilities. This expansion will add 1,500 new jobs on top of our 12,000 excellent employees in the U.S. And last year, the U.S. accounted for 29% of our global order volume, underlining its strategic importance. We are fully committed to supporting the growth of electricity in the U.S. market by driving local capacity exactly where the market needs it. Let me briefly focus on Grid Technologies, where we are scaling at an impressive speed. I am proud of the progress we made with our new production sites in Austria and Croatia. In Austria, Siemens Energy has opened a new wind transformer plant in Wollsdorf, following an investment of more than EUR 100 million creating around 100 new jobs and at the same time, tripling our wind transformer production. The facility was completed in just 13 months and has more than 25,000 square meter of production space enabling an annual output of up to 2,000 offshore wind transformers for customers in 70 countries. Combined with our long-established right side, Siemens Energy now supplies transformers for 80% of the world's offshore wind parks, solidifying our leadership in this critical segment of the energy transition. Moving to Croatia. The opening of our new Transformer tank factory near Zagreb, our joint venture with KONCAR adds more than 400 manufacturing jobs and provides capacity for approximately 160 custom large power transformer tanks per year, strengthening our global supply chain. And this is part of a broader EUR 260 million expansion program aimed at doubling regional transformer capacity to 45,000 MVA by 2031. The new factory also bolsters Europe's manufacturing resilience by supplying heavy-duty tanks for HBDC, generator step-up transformer and auto transformers up to 550 kV supporting the accelerated grid build-out required to integrate renewables at scale. And with this, I would like to hand over to Maria. Maria Ferraro: Thank you, Christian, and good morning, everyone, from my side. Very pleased to be here with all of you, and let's start to go through the details of Q1 fiscal year '26. Moving on to Slide 10, looking at the group results. Orders reached a record high of EUR 17.6 billion, up 34% year-on-year on a comparable basis. Our book-to-bill ratio was 1.82 and as Christian mentioned, order backlog hit a new record of EUR 146 billion. This is up from EUR 138 billion in Q4 of fiscal year '25. That's more than EUR 8 million in addition. Again, giving us excellent visibility for fiscal year '26 and beyond. Revenue was EUR 9.7 billion, up 12.8% year-over-year on a comparable basis, with all segments contributing to revenue growth. Just as a note, foreign exchange headwinds, primarily driven by a weaker U.S. dollar weighed on the top line by roughly 400 basis points year-over-year. Looking at profit before special items. This was EUR 1.159 million with a margin of 12%. This is more than double last year's 5.4% or up by 660 basis points. And regarding FX impact in profit, just for clarification, looking at our currency movements, it does not have a material impact on our profitability. And again, this goes to what Christian was mentioning earlier. It's due to our global footprint with strong local for local sourcing and affecting hedging strategies. Looking at net income, this rose to EUR 746 million, up EUR 494 million year-over-year. Special items was negative EUR 152 million, mainly due to the sale of the Indian wind business. However, strong operational performance led to notable earnings improvement overall. Free cash flow reached a record EUR 2.9 billion, nearly doubling last year's result. This was driven by strong orders, reservation fee and some timing effects. Cash flow continued to show strong seasonal patterns at the start of our fiscal year. Now let's take a quick or a closer look into our order backlog. Order backlog, as mentioned, reached a new high of EUR 146 billion. 45% of our backlog relates to service business. Again, this is recurring profitable revenues for many years ahead. For the current year, revenue coverage stands at approximately 90% for the remainder of the year. Already for next year, fiscal year '27, we have approximately just over 70% coverage. The growing backlog demonstrates increasing resilience due to broad-based demand geographically as well as across all businesses. Additionally, our order backlog margin further improved as a result of the positive pricing development and environment. Therefore, overall, our growing backlog and healthy margin, again, provides a strong foundation for our financial performance. Now let's talk about the drivers of free cash flow in the next slide. As mentioned, cash flow was very strong this quarter. Free cash flow pretax was EUR 2.9 billion, driven by strong profit development and customer advanced payments, including reservation fees. This is linked to our increase in orders. Regarding CapEx, we had a slow start for cash out relating to CapEx with EUR 347 million year-to-date. However, we are expecting roughly 5% of revenues or approximately EUR 2.5 billion of CapEx for this fiscal year. Quick update on Siemens Gamesa quality anticipated cash out. This amounted to EUR 101 million for the quarter. And as a reminder, for the full year, we indicated and still expect a mid-triple million amount similar to fiscal year 2025. Therefore, we closed the quarter with EUR 11.8 billion in cash and cash equivalents and EUR 3.8 billion of debt, therein EUR 2.4 billion long-term debt. This results to an adjusted net cash position of EUR 7.6 billion at the end of Q1. This is compared to an adjusted net cash position of EUR 4.8 billion at the end of September or last fiscal year. At our Annual General Meeting, which is upcoming on February 26, we will propose a dividend of EUR 0.70 per share for fiscal year '25. This will result in cash out of approximately EUR 600 million anticipated in the second quarter. In addition, the announced share buyback, which was announced at the Capital Market Day up to EUR 6 billion until fiscal year '28, is intended to commence in March. And just again, an update regarding our investment credit grade ratings, which were upgraded in December 2025. Our rating by S&P was upgraded to BBB with a positive outlook. And Moody's rating was Baa1 with a stable outlook. So now let's look at the quarterly financial performance, starting with our Gas Services business on the next slide. Here, we see Gas Services delivered an outstanding performance and another strong quarter in Q1 of fiscal year '26. Orders amounted to EUR 8.8 billion. This is up 81% year-over-year, the highest order intake ever and again, driven by large unit -- new unit projects in the U.S., Poland, Turkey and Taiwan. Book-to-bill for Q1 was an impressive 2.83, leading to a record order backlog for GS of EUR 60 billion, again another all-time high. Q1 was characterized by a very strong gas market for gas turbines greater than 10 megawatts with the largest markets in the U.S. and Europe. Gas Services booked a total of 102 gas turbines for power generation and oil and gas in Q1 of fiscal year '26. Therein, 19 were large gas turbines and 83 were industrial gas turbines. Our Q1 market share for gas turbines greater than 10 megawatts stands at 43%, securing the #1 position. Revenue for Gas Services rose by just shy of 14% at 13.9% and compared to last year, again driven by strong performance in new units, which saw nearly 51% comparable growth. Profit before special items was EUR 515 million with a margin of 16.6% and up from 14.6% last year, again reflecting improved margin quality of the processed order backlog and better underlying productivity. A gentle reminder on seasonality, our H1 or half -- first half year profitability in GS is always stronger than the second half just because of the service mix. Free cash flow pretax was EUR 1.9 billion, more than doubled, benefiting from advanced payments as mentioned on large orders. Overall, a very strong quarter for GS. And now let's take a look at our Grid Technologies business. Grid Technologies continues its strong performance. Orders were EUR 6 billion, up 22% year-over-year with strong demand specifically in our product business and partly driven by data centers in the U.S. as well as large HVDC order in the U.K. Book-to-bill ratio stood at 1.95, resulting again in a record order backlog of EUR 45 billion. Revenue reached EUR 3.1 billion. This is up 26.9% year-over-year, a substantial increase mainly driven by the solutions business, but also supported by the transformer and switchgear business. Profit before special items was EUR 538 million with a margin of 17.6%. This is up 520 basis points year-over-year, again driven by continued strong operational performance. Free cash flow pretax was EUR 1.8 billion. This, again, significantly increased by around EUR 600 million year-over-year, reflecting strong operational performance and milestone payments. Another strong quarter for our Grid Technologies team, well done. So now let's move on to Transformation of Industry, which again delivered a solid quarter. Orders were EUR 1.6 billion, up 11% year-over-year, and this was supported by compression and electrification, automation and digitalization projects, including a major order in the Middle East. Book-to-bill for Q1 stood at 1.21, resulting in an order backlog -- a stable order backlog of EUR 8 billion. Revenue came in at EUR 1.3 billion, again, stable on a comparable basis to Q1 of last year. Profit before special items was EUR 154 million or 11.8% unchanged, and free cash flow pretax was EUR 94 million. This was just down due to some timing effects looking at the previous year. So thank you to TI. And now let's move on to Siemens Gamesa. As Christian already mentioned, we are seeing progress in the turnaround at Siemens Gamesa. Here, orders were EUR 1.6 billion for the quarter. This is down from last year due to timing and a large offshore order that was booked in the prior year quarter. Revenue came in at EUR 2.4 billion, this is 3.9% up on a comparable basis, supported by offshore and service business growth. Profit before special items narrowed to negative EUR 46 million. This is a significant improvement from negative EUR 374 million just a year ago. The positive development was mainly due to productivity increases in offshore and progress in the service business. Additionally, we benefited from preponements or timing effects in the quarter. Free cash flow pretax was minus EUR 545 million, and this, again, as a reminder, included the EUR 101 million quality-related cash out. So with that, I want to sum up our achievements in Q1. We had a very strong start to the fiscal year in all of our businesses across all main KPIs, order intake, revenue growth, profitability and cash flow. So now moving to the next slide, our outlook slide. Here is our outlook for fiscal year '26 and targets for fiscal year '28, which remain unchanged. However, we do acknowledge that the year started with a very strong performance. At the same time, we remain mindful of the seasonality with a stronger first half than second, that typically influences our results each year, particularly within our Gas Services business. Bookings and associated cash flow did exceed in some areas expectations. However, it's too early to draw firm conclusions from this first quarter momentum. We will continue to monitor developments closely and will provide an assessment at the half year mark. So with that, I'd like to thank you for your attention and would like to hand back to Christian. Thank you. Christian Bruch: Thank you very much, Maria. So Siemens Energy is positioned really excellently to deliver sustainable shareholder value in a strong market. We see really good structural demand, a record high and high quality order book and disciplined execution across all segments. Our long-term value creation rests on 5 levers, profitable growth, margin expansion, strong cash generation, resilient balance sheet and consistent operational excellence. And across each of these, we are making tangible progress. I am very grateful for the commitment of our people, making this company every day a bit better and supporting our customers. Well, we know that we need to deliver, and we are fully focused on doing just that, reliable execution and consistent performance. And with this, let me hand back to Tobias for question and answers. I look forward to your questions. Tobias Hang: Thank you so much, Christian and Maria. [Operator Instructions] And the first 3 people going for the questions will be first, Alex Jones from Bank of America, Max Yates from Morgan Stanley and Ajay Patel from Goldman Sachs. Alexander Jones: Maybe I can focus on gas orders. At the CMD in November, you talked about 36 gigawatts of orders over the next 12 months, but you've clearly started ahead of that run rate with 13 gigawatts this quarter. And I think Christian, on the press call earlier, you said you wouldn't call Q1 exceptional or one-off given how strong market demand is. So therefore, is there upside to that 36 gigawatt number, given the demand you see? And could momentum continue at a similar rate as Q1 in the coming quarters? Christian Bruch: Thanks for the question. And what I said in the press call is that I continue to see strong momentum in the market. It obviously will also play out how many slots we have available and how quickly 29 fills up. So don't -- I would always say don't multiply it by 4. But at the same time, obviously, we're trying really our best to continue on this. I would still be on a 36 gigawatt planning base for the time being. We might be higher than that. It could be, but it's really something where it depends on certain larger commitments. The specialty at the moment in the market is also what you see is obviously, multi-train bigger orders. And this is what moves the needle also in terms of the gigawatts. So as Maria said, for the other comments, it's a bit too early to tell to see how the things are moving, but I'm definitely positive on the market on GS. Tobias Hang: So the next question goes to Max Yates. Max Yates: So I guess my question was just around pricing. Could you give us a feel of how much of the order growth that you're getting year-over-year is driven by pricing? And then maybe as an extension of that, we know there's pricing in kind of new equipment. Could you talk about pricing on some of the longer-term service agreements as well that you're receiving with these new orders? Are you also seeing a sizable step-up in the service contracts and specifically the longer-term service agreements that you're signing with the new equipment at the moment? Christian Bruch: Yes. Thanks, Max. I mean, obviously, we see an improvement year-on-year on the margins. And we also -- the other statement, obviously, what we make, we see the incoming orders higher than the older orders. So we see continuous appreciation of the pricing on the gas turbine side. It is -- on the service side, I'm just thinking through it at the moment. As we always said, this is slightly going up, not as distinct as for the new units. Even so, obviously, I'm very positive whenever the proportion to the service business increases because it's a good service business and keep one thing in mind, you're only going to see that after '28. So, so much to put this into perspective. Tobias Hang: So the next question goes to Ajay Patel. Ajay Patel: I just wanted to ask around cash flow. Is there any reason that the shape isn't similar on cash flow this year to last year? And then in the event that we do run ahead on cash flow, is it fair to assume the capital allocation works as in 1/3 of cash flows would be allocated towards cash returns? Just want to make sure that link is the case if we do end up better than we expected? Maria Ferraro: Thank you. And of course, yes, as I mentioned earlier, we did have a really excellent start to the year, and we started in a very strong position. And I think what -- maybe to your point of how to look at the shape of free cash flow and how that develops, it is clear that, of course, the main drivers are a few, but certainly the strong order intake. And again, to what Christian said earlier, the market continues to be very positive. However, it was quite a strong quarter for orders and not to take that and divide or multiply rather by 4 and say, here's what we can expect. And in addition, one other thing. I think one of the dynamics that perhaps is not fully, let's say, understood is we do have reservation fee agreements. And in light of how that momentum is going, this is actually quite a sizable number. And also, in addition, I think one of, let's say, the efforts that we started from a while ago, is looking at our operating working capital and how do we unlock cash. So that's something that doesn't look like linear in fashion in some of our, let's say, difficult countries where we've seen that we've been quite successful in receiving some of the overdue payments there. But again, I would just state again, we had a strong year start. This is connected to volume in some areas, but we need a bit more better visibility as the year continues, and we'll come back to you. Tobias Hang: So the next 3 questions will be going to Sebastian Growe from BNP Paribas, Richard Dawson from Berenberg and Gael de-Bray from Deutsche Bank. Sebastian, please go ahead. Sebastian Growe: My question is regards to the GT segment. apparently very strong momentum, both in regards to orders and also execution and not least free cash flow. So how should we think about the order pipeline in that business? Are you in a similarly favorable position as for GS, i.e., to sell also slots to customers? And what I'm trying to better understand here is what explains the massive free cash flow strength in the quarter in GT in particular and how it might trend from here? And if I may just quickly follow up on one of your earlier remarks, Maria, that there's a sizable impact from those reservation fee agreements. Could you quantify those? Christian Bruch: Maybe you take the cash, I just briefly on -- I hope we have heard you correctly, Sebastian, because quality was very bad. So if it was about the order pipeline momentum in GT, if I have heard you correctly. And that is obviously something which continues also to be strong. And you can bet then always every quarter who is ahead, Gas or Grid, but I think in that regard, both look very strong on. Also their data centers have an impact, maybe not as distinct. It's more around the general grid replacement and stabilization. But I obviously see this strong outlook also for the year. And I think we also indicated on the Capital Market Day that we will be -- expect the orders to be higher than last year. Maria Ferraro: Correct. And maybe just to add to what Christian mentioned there with respect to GT. I mean profit also has a part to play with that and also driven by strong orders, which we anticipate and continue to anticipate in Grid Technologies. We also indicated in the GT slide that some of that was related to milestone payments, some of those slipped into Q1 as well. And of course, we expect a very strong operational performance and underlying performance within GT and that is all reflected actually in the very, let's say, strong free cash flow. There's also an element of reservation fees for GT. I think that's also important. That plays, let's say, a factor when, of course, delivery perhaps can be even further expedited. So with respect to reservation fees, no, we do not disclose the amount of reservation fees that does change, of course, in line with, as Christian outlined earlier, how much, let's say, in GS, how many gigawatts are reserved, et cetera. And the reason why is that it just it varies. It's quite variable depending upon the contract and the size and the customer. Tobias Hang: Next question goes to Richard Dawson from Berenberg. Richard Dawson: Just a follow-up on these reservation agreements. Have you started to see any customers maybe thinking twice about signing a reservation agreement given thinking gas turbines, the lead time of delivery is so long? And can you make any comments on how Q2 is shaping up for those reservation agreements? Christian Bruch: What is shaping up, sorry? Tobias Hang: Q2. Christian Bruch: Q2 is shaping up. Sorry. Well, obviously, the key thing is when can you deliver. That's the first question every customer ask and it's obviously all about '28, '29. And you get, obviously, the further you reach out 2030, 2031, and in the meantime, that goes all up to 2032. Obviously, there is a bigger hesitation than to immediately agree because everybody wants something in '28 or '29. In that sense, however, I think the fundamental interest in the reservation agreement has not changed. It's more like can you deliver certain things? And obviously, we're trying each and everything to build bridges for the customers. And I also see this, in quarter 2, continuing on the same level. However, we have to recognize that, obviously, our delivery times continue to increase, and this is simply the fact of the matter. But I hear -- let's say, I've been, last week, seeing a lot of customers myself. Interest is as high as before. Tobias Hang: So the next question comes from Gael de-Bray from Deutsche Bank. Gael de-Bray: I guess I'm wondering if the flattish service revenue you had in the Gas division this quarter was in line with your own expectations? And how we should think about that for the remainder of the year? And since that's probably a very short question. I have a second one on the pricing side. I mean, you've talked a bit about that. But when I look at the backlog increasing by 10 gigawatt on a sequential basis and by EUR 6 billion in value terms. So I guess the back of the envelope calculation is that the price per gigawatt is around EUR 600 million this quarter, which is a major step-up compared to what we saw last year, I think. So maybe some comment about that? Because I think you said prices were only going up slightly. Christian Bruch: Maybe I'll take the last one and you -- and my feedback would be no, I would not break it down in this because I think it starts to get confusing by looking on the backlog and trying to apply the percentages. So I would refrain from breaking it down in more detail. Maria Ferraro: Of course. And let me take the comment on our service revenue. As mentioned, overall, revenue had quite a substantial FX headwind of 400 bps. And this can be directly attributed by the way, to our service revenue, as you know, we have a large installed fleet in the U.S. in which that could -- that does play a part. If you take out the FX impact, I actually don't see it sluggish at all. It's actually -- for the quarter is, let's say, slightly flat. There was some onetime topics of prior year. And for the fiscal year, going in line with the pricing, we do see growth, and that's exactly what we've indicated at the Capital Markets Day. So it is FX-related, Gael. Tobias Hang: So the next 3 questions go to Phil Buller from JPMorgan, William Mackie from Kepler Cheuvreux and Lucas Ferhani from Jefferies. Phil, please go ahead. Philip Buller: Obviously, the demand environment is very strong. I was hoping to ask about the supply situation, please. The CapEx, as you say, started a bit slowly. I think it's 3.6% of sales versus a guide for 5% for the year. Should we be reading anything into that? Are there any supply issues in ramping up the output perhaps in GS or perhaps in GT? Anything changed relative to what you're expecting on the supply side? Christian Bruch: Thanks. First of all, on the build-out of the capacity, no, you should not read anything into that. I mean that's more, let's say, the classical phasing, when does the planning come? When do the contractors get their contracts. So that's more like, let's say, normal course of business. No concerns really at the moment in terms of the execution of our own capacity expansions. On the supply chain, yes, that is something which we need to watch very carefully. We had some negative impact in quarter 1 on the supply chain, in particular, obviously, on the gas turbine side. Not surprisingly, it is also on the supply chain market for the respective supplier, which is good. And we see them, obviously, also there increasing prices. We continuously work with our suppliers in terms of what can we do to expand supply chain, co-investing and the likes. But this will be by seeing this impressive demand on the gas services side, to be continuously with us over the next 2 years, I would say. And you will also see it on the customer side. That's not so much us. That's really the EPC contractors, the civil and whatever that this brings up the total installed cost, but we will need to watch this very carefully. But we are on it. And this was also the reason why we decided to invest further money -- why we invest further money in Florida in our blade and vane manufacturing. Tobias Hang: So the next question will be going to Will Mackie. William Mackie: My question will build on Phil's really. Could you -- can we check in could you remind us where you stand with regard to your ability to serve the demand in '26, '27 in GS and GT. What I mean is, what should we be planning or thinking with regard to gigawatt install or deliveries across large and industrial turbines and across the main elements of the product business in GT? Christian Bruch: Will, I have to admit you overstretch my memory a bit. I'm trying as good as I can in terms of -- I mean, the big thing in '26, which comes online is on the midsized gas turbine. That's the increase in Finspong, which is the SGT which will towards the end of the year come in. The large gas turbine pieces, obviously all come in '27. And keep also in mind that the numbers we have showed on the Capital Market Day included also a steam portion for the larger gas turbines. So in terms of delivery for '25, before I state no wrong number, I think we have to come back to you in terms of the exact planning, Tobias will get back to you on that one. Tobias Hang: So the next question will be going to Lucas Ferhani. Lucas Ferhani: It would be on the SGRE business, just on the timing effects you talked about on the margin. Can you give us a bit more information about what they are and maybe the number behind them, what would be the underlying margin be? And also just on the order side in onshore. Obviously, it's a good start, but I'm wondering what do you have in budget for full year '26 in onshore order intake? What would you think is kind of successful for the relaunch? Maria Ferraro: Yes. Let me try. I do apologize because it was difficult to hear you. So if I -- I hope I understood it correctly, but let me -- I think the first part of that question was relating to the onetime or timing effects in the quarter 1 profit. And the second one was relating to the order intake for onshore. So let me start with the Q1 profit. So of course, the Q1 profit was negative EUR 46 million, again, supported by timing effects. Particularly, I have to say, coming probably the majority more from Q2 and again, to put that into context, it was -- in total, the range was likely around a mid-double-digit amount. So some examples are the -- some of the hedging effects, so positive hedging effects and of course, those are reversed or also evened out, of course, as we continue to execute in the quarters to come. There was, as you would expect for a large project business like Siemens Gamesa, some project benefits and shifts. It happens, right, where customers take over projects or even earlier than expected. And that's what has happened also in Q1 and again, kind of to counter that and something that to think about when you think of quarter by quarter, there is, of course, ongoing uncertainty regarding tariffs. And we said that last year that in the wind power business, actually, the tariff impact was the most substantial of all of ours. So of course, we're watching that very carefully. Again, our assumptions relating to tariffs for the year fully embedded our guidance. There's nothing to indicate at this point. But nothing was additionally booked in Q1 with wind power, but perhaps could be coming to fruition in further quarters. With respect to orders for Q1, again, with respect to onshore orders, Q1 was in line with previous year. And don't forget, I think Christian just mentioned that there's some orders forthcoming. We're now having some let's say, success with the new frames, but it was in line with last year, I think, of EUR 0.8 billion, just shy of EUR 1 billion, and that was as expected. Christian Bruch: Yes. To put it briefly into perspective. So we have, let's say, on the trajectory on where we want to get it. I mean we want to achieve the, let's say, last year's order intake. Keep one thing in mind, we limited ourselves to say, look, that is the amount of turbines we want to sell for the first phase and ensure that, obviously, every -- let's say, we test really everything out, and we are very careful. And in that regard, that's the main thing. So -- but we are, I would say, bang on plan. Tobias Hang: Thanks a lot. So the next 3 questions will be going to Chris Leonard from UBS, Sean McLoughlin from HSBC and Alex Virgo from Evercore. Chris, please go ahead. Christopher Leonard: Yes, maybe as an extension on the wind side and focusing on the offshore -- European offshore wind development. Is there any comment from your side as to what we should expect in terms of potential U.K. offshore wind allocation of orders for you in '26 or '27? And equally, any comment would be helpful as well on recent European plans for the North Sea. Christian Bruch: Yes. Thanks very much for the question. Maybe a couple of comments to offshore wind. If you look on the quarter 1 order intake, also just to flag it up, there's also one offshore order in Poland, which contributed to the order intake in quarter 1. U.K., auction around 7, still ongoing discussions, not yet fully clarified, so it's too early to say. But yes, we are also looking obviously in certain projects there and discussions are ongoing. On the 15 gigawatt, which came out of the North Sea summit of 15 gigawatt per year -- out of the North Sea Summit, yes, I believe, obviously, this will be actually great for the offshore industry or good momentum. We have to see now on how this is converted into auction schemes. You may know that Germany pushed its scheme out and is rediscussing the framework, which is fundamentally a good thing because at the end, it's not about the auction, it's about the FID. So I would expect that out of this North Sea Summit, we see obviously momentum also creating in the offshore industry going forward, potentially not in '26. It's more than coming in '27 '28. Tobias Hang: Next question goes to Sean McLoughlin. Sean D. McLoughlin: Just a question on the gas turbine mix. What's your current lead time on a new midsized turbine? And how does that compare with lead times for heavy-duty equivalent? Christian Bruch: Yes, it depends really what type of midsize, what type of turbine and keeping, let's say, flexibility there. As I said before, they see and there are some slots also '27, '28, which we try to balance, and these are the midsized gas turbines than with multiple trains. There's also a decent amount of reservation agreements on the midsized gas turbines. But I would say today, you're talking about, let's say, minimum a year shorter than the large gas turbine simply because of the supply chain situation. Sean D. McLoughlin: And just a follow-up, if I may. Just thinking about the huge increase in CapEx commitment that we've had from the main hyperscalers. I mean, I guess that puts emphasis on urgency. I mean, are you seeing more interest in midsized turbines that they can effectively obtain more quickly? Or is the mix still across all your turbine types? Christian Bruch: No, absolutely. They are -- let's say, the timing effect is a predominant decision criteria at the moment. So if you can deliver faster, smaller turbines, they go from more smaller turbines. And you see also some solutions, which I deem not ideal from an efficiency perspective, if I look on lots of small gas engines or so, which we do not do ourselves, but I see some solutions discussed just to bring power to the sites. What we are seeing is -- and what is really, really good for us, we're seeing a very strong demand across all different frames of gas turbines even below the midsized gas turbines, so in that regard, we can play the full breadth of our portfolio, and that's superb. Tobias Hang: So the next question goes to Alex Virgo. Alexander Virgo: I wondered if you could just expand a little bit on that last one there. The 83 units that you've had on the industrial turbines and the color around the order backlog exposure to hyperscalers. I wondered if you could just talk a little bit about whether that number in the industrial turbines is really what's driving and underpinning the hyperscaler exposure? And the sort of extension of that, your U.S. peer has just signed a big framework agreement, multiunit framework agreement. And I think you alluded, Christian, to that in your -- maybe it was an earlier answer on your prepared remarks, you talked about the trend to multiunits in the context of the customer discussions you're having. I wondered if you could give us a sense of whether it's likely that you're able to sign something similar? Or you're seeing that in the discussions you're having? Christian Bruch: I hope also there. I heard you correctly because our -- the worst qualities from time to time on the call is not good. I mean, looking across the, let's say, how should I say, diversity of the order book. And this is what I believe I heard from you, Alex, in terms of the different areas. Obviously, it's relatively evenly distributed around the frames. I mean, yes, the biggest chunk in terms of numbers more than obviously 50% is the midsized gas turbines. You have it evenly distributed really across the different regions. Roughly 40% is U.S., as I said, 35% EU, 15% release in China. If you see the order book, for what we're currently having is roughly 2/3 is a new unit, 1/3 is service. So that is roughly the distribution around it. If you take the data centers on the 29 -- on the orders, and if you talk about the 29 gigawatts of reservation agreements which we have outstanding, it's only half of this is data centers and half of this is conventional business is what we are seeing which also means only half of this is U.S. So this is obviously the diversity, which we have in the order book. There was a second part of the question? The multiunit -- thank you, the multiunit contracts. Yes, absolutely, we see it. We not only see it in data centers. There are some applications. We don't so prominently communicate it because not every customer wants that. But there is also bigger multiunit contracts outside the data center framework, which we have been taking and will continue to take. But we also see in the data center field framework agreements for several years and obviously, lots of units under discussion and also under conclusion in our order book. Tobias Hang: So now the last 3 questions go to Vivek Midha from Citi, Vlad Sergievskii from Barclays and last a follow-up from Phil Buller. Vivek, please go ahead. Vivek Midha: Hope you can hear me well. My question is on Grid. The margin of 17.6% is very healthy and in the upper half of the full year guidance range. Historically, Grid is not a business with that obvious seasonality. So should we see the upper half of that range is a better guide for the full year margin? And can you maybe talk about the continued fixed cost degression effects you talked about last year versus pricing impact and so on? Maria Ferraro: Yes. Thank you, Vivek, for that, and thank you for asking a question on our very nice profit development at Grid Technologies. So just maybe to preface this a little bit. So they did have a strong margin in the first quarter. There are also some underlying topics like sometimes FX, hedging, et cetera, onetime positive effects but I don't want to focus on that too much for grid technologies. What they have done and what they continue to do is execute through their backlog very efficiently, looking at things like productivity. So underlying, we see a very steady positive development. And actually, you can see that not only quarter-over-quarter, but also year-over-year. So I wouldn't expect -- I mean it was high. I would really look at their guidance of 16% to 18%, right, and see how that, let's say, is quite stably developing in the next quarters. Tobias Hang: So next question goes to Vlad. Vladimir Sergievskiy: So gas turbine orders, obviously exceptionally strong in the first quarter. Could you give us an idea of how much did it extend your backlog duration in Gas Services? And also more conceptual question. Is there a natural limit to how long backlog duration could get to? Is there a point when it becomes hard for customers to plan that far upfront? Christian Bruch: Yes. Maria, do you want to take it or [indiscernible]? Maria Ferraro: How about I take the first one. Vlad, and again, please correct us. Again, it was a bit difficult to hear. But in terms of our backlog, which I showed earlier, the EUR 146 billion, of which 45% is service. This plays very nicely into the backlog of gas services. And I think we showed that quite nicely also at the Capital Market Day, where we saw a step-up in the margin not only on new units, but also on service. And what's nice about the backlog and Gas Services, which is at EUR 60 billion, by the way, overall, a new record for them is that if you look at the new units, you tend to have, depending on frame size, I think Christian just nicely described that earlier. It depends on the frame size on how long that remains in our backlog before ultimate execution. Large frames are 3 years, maybe 3 to 4 years, perhaps the smaller frames are between 12 and 24. But what's really nice about the backlog of Gas Services is the service backlog there in. And that has an average duration in terms of our long-term service program contracts of around 13 to 14 years. So that's what -- when I talk about visibility in the EUR 146 billion backlog, I don't just talk about the next year or the year after. I really talk about the visibility that we have beyond -- towards the end of the decade and beyond. And again, I think EUR 10 billion of the backlog that we see right now around will continue to be executed until the end of fiscal year, if you think about it from that perspective and then an additional, let's say, more than that between EUR 10 billion and EUR 20 billion executed into the next fiscal year '27. As a rule of thumb, again, it all depends on how much we refill the backlog and, of course, what we execute there in. Thanks for the question. Tobias Hang: So the last question now goes to Phil, once again. Philip Buller: I think a lot of the questions are trying to disaggregate the more traditional customer environment in GS versus the data center customers. So I was hoping just to clarify a little bit. I think you said a quarter of the backlog is data center now for new units, but is the book-to-bill in Q1 for those traditional customers comfortably above 1? Reservation agreements, I know you don't disclose what the cash component is, but are there any reservation payments at all from traditional customer sets? And is there -- are you seeing signs of price elasticity, specifically for that traditional customer set? I know in aggregate, pricing is very good, but I'm just trying to drill down on the situation for that more traditional customer set, please? Christian Bruch: Yes. I mean what you have to see in quarter 1 revenue on Gas is roughly EUR 3 billion, right? And you see the order intake on EUR 8.8 billion. So -- and the answer is yes. I mean you have a book-to-bill above 1 on the very conventional base. And this is why I was giving this 25% indication also. And we feel comfortable also with the existing other market. That's why I continuously say, we are not dependent on the data centers. But they are the cream on the cake. And obviously, if you have a, let's say, early slot, you can really make nice profit around this. But obviously, going forward, if we now -- and then also in terms of reservation agreements, right? These things are also in discussions with classical customers. But the timing pressure is a little bit more flexible, I would say, for utility-driven customers. But keep in mind, we have the upcoming 10 gigawatts discussion in Germany, right? I mean -- and absolutely, we are already long-term planning this in, and we want to serve this market, and we will be in and but this is all considered at the moment. So I think across the board, it's a good market for gas. Tobias Hang: So with that, we would conclude the Q&A. And Christian, I don't know if you want to have some closing remarks just at the end? Christian Bruch: No, just an invitation also to the AGM to join us there in terms of giving a look back and a look forward. No, thank you really for participating in the call. It has been an interesting quarter. I'm very, very proud of our organization on how they execute through a demanding time, I have to say, seeing the geopolitics and everything and the high workload. Big thanks to everybody who was on the call, big thanks to the team purple here at Siemens Energy. Tobias Hang: Thank you so much, Christian. So with that, we conclude the call. And if you have any questions, you can always reach out to us at the Investor Relations team. Thank you. Bye-bye. Operator: That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. A recording of this conference call will be available on the Investor Relations section of the Siemens Energy website. The website address is www.siemens-energy.com/investor-relations. Have a nice day. Bye-bye.
Ivan Vindheim: So after this energetic start to the day, good morning, everyone, both in the room and online. And thank you to -- thank you that you are joining us this morning at our first quarterly presentation here at Salmon, our new Exhibition Center and showroom at Aker Brygge in the heart of Oslo. The Salmon is actually Norway's most visited exhibition center for farming of Atlantic salmon for natural reasons and came in with the Nova Sea acquisition. The Salmon is also Oslo's best fish restaurant according to TripAdvisor, so then it must be true. Everyday, Joe is always right about food and food experience. So if you have happened to be in Oslo, and you're looking for something good and healthy to eat, you now know where to go. And here we also find Mowi's only Mowi cooler in Norway with an assorted selection of our fantastic products. So for those of you who are physically present in the audience this morning, if you haven't already, please take a look on the way out after the presentation. I think it will be worth your while. That was this morning's marketing. My name is Ivan Vindheim. I'm the CEO of Mowi. And together with our CFO, Kristian Ellingsen, I will take you through the numbers and the fundamentals this morning, and to the best of my and our ability, add a few appropriate comments to them. And after presentation, our IRO, Kim Dosvig, will routinely host a Q&A session. For those of you who are following the presentation online, can submit your questions or comments in advance or as we go along by e-mail. Please refer to websites at mowi.com for necessary details. Disclaimer is both long and extensive. So I think, we leave it for self-study, as we usually do. So with that out of the way, I think we're ready for the highlights of the quarter. And to begin with, and on a general note, after a year of soft prices, following unprecedented industry supply growth last year of 12%, prices increased as expected towards the end of the year after a rather slow start to the quarter, I think, is fair to say. And for our parts, that translated into an operational profit of EUR 213 million in the quarter on quarterly record high operating revenues of EUR 1.59 billion, thanks, first and foremost, to seasonally record high harvest volumes of 152,000 tonnes. The latter is slightly above our guidance. Otherwise, our realized weighted production costs for our 7 production countries of EUR 5.36 per kilo in the quarter was good, I would say, and slightly lower than the third quarter, and down by 5.8% year-over-year, or in absolute terms, down by EUR 47 million in the quarter and EUR 176 million for the year as a whole or NOK 2.1 billion, which are considerable amounts. And further on that note, our standing biomass cost was further down in the quarter and is now at its lowest since 2022, which is a good starting point for our P&L farming cost in 2026. So I think it's fair to say that we expect further cost reductions in the coming year, although the first half of the year will be higher than the second half as always due to our harvest profile, which is following the sea temperatures and the growing conditions in the sea, and consequently impacts our dilution of fixed costs. And this also applies to the first quarter when compared to the fourth quarter. A cost position, which was further strengthened, I would say, by our recently announced strategic feed partnership with Skretting/Nutreco, one of the world's absolute leading aquaculture feed producers, if not the leading and which in short means that Mowi will produce its feed on Skretting formula going forward in addition to capitalizing on Skretting's purchasing power. So this, I think we have ensured the best feed for Mowi farming, now also at the lowest possible cost, which is the best of the 2 worlds. And in total, we expect to save at least EUR 55 million annually in Mowi Farming, whilst also retaining our earnings in a highly profitable feed business, which is an important element in this because we expect the feed market to tighten in the years to come after a decade of overcapacity. And overcapacity, in all fairness create ourselves, and we built our 2 feed mills back in the 2010s, and from which our farming peers have benefited greatly, I think, it's also fair to say, but -- which has now worked itself out. So the table has, in many ways, turned because by piggybacking Skretting, we're offsetting the weaknesses that come with being a small feed producer like ourselves, with limited resources, including R&D, and perhaps the most important input factor in salmon farming, whilst also keeping the advantage of being vertically integrated. So firstly, I'm convinced this will make us a better farmer. I'm also convinced that this is the solution that maximizes our cash flow given our opportunity space. So this is good stuff for us. Carrying on, Consumer Products and Feed, both delivered 2 reasonably good quarters, I would say, at least all things considered, if we get back to the details later. And finally, as the last bullet point on this slide reads, our Board of Directors has decided to distribute a quarterly dividend of NOK 1.50 per share after the fourth quarter. I think that does it for the highlights of the quarter. Then we can move on to our farming volume guidance. And if we begin with taking stock of the year, we are just left behind. 2025 was another record-breaking year for us in terms of harvest volumes with 559,000 tonnes after several upward adjustments of our guidance during the year. And this is equivalent to a growth of as high as 11.4% year-over-year. As for 2026, we uphold our farming volume guidance of 605,000 tonnes, now with Nova Sea on board, and that translates to a further 8.3% growth year-over-year, which means that Mowi most certainly will outperform the rest of the industry on farming volume growth in the coming year once again. And finally, as you can see from the chart here, and as the last bullet point here says, we reaffirm our organic farming volume targets in 2029 of at least 650,000 tonnes. And the latter, we will achieve through increased smolt stocking and by means of post-smolt among other things, because we have still unutilized license capacity in Mowi in several of the countries where we operate. And post-smolt, we can increase the productivity on licenses already in operation, which are to be set into operation. So Mowi's idiosyncratic farming volume growth continues unabated after the rather quiet 2010s and is surpassing that of the wider industry and our listed peers by a large margin, cementing our #1 position in the market for the Atlantic salmon. Then from the overall farming volume picture to key financial metrics for the quarter and the year, there are a lot of numbers on this slide. So I think we'll have to focus on the most important ones now and leave the rest for later at Kristian's session. And turnover and profit in the quarter, we have just been through. So I think we can skip them here. But for year, however, turnover was EUR 5.73 billion or NOK 67 billion, which is the highest so far, but only slightly higher than 2024, as you can see from the table here due to the already addressed soft prices because our volumes were significantly up last year. And soft prices also impacted full year. Operational EBITDA of EUR 949 million or NOK 11.1 billion and full year operational profit of EUR 727 million or NOK 8.5 billion. Furthermore, net interest-bearing debt stood at EUR 2.65 billion at the end of the year. Now with Nova Sea fully consolidated and paid for. And by extension, we have increased our long-term debt target accordingly to EUR 2.70 billion, supported by a strong balance sheet and an equity ratio of 45% in addition to improved debt service capacity as a result of significantly higher volumes in all divisions, which are in the end of the day, the mainstay of our business model and the platform of our earnings. Speaking of earnings, underlying earnings per share was EUR 0.26 in the quarter and EUR 0.92 for the year, whilst annualized return on capital employed was 15.5% in the quarter and 13.3% for the year, which I would say is decent in 2025, characterized by low prices, and weak results for the industry. So when 2025 is fully settled and accounted for, I feel quite confident that Mowi once again will stand out as one of the absolute most profitable farmers in the industry, which is an important element in this. Then further on prices. I think these charts illustrate the whole value because prices were off to a good start last year actually before they began to fall, following unprecedented industry supply growth as a result of very favorable growing conditions across the board, especially in the first half of the year. And the introduction of so-called liberation day tariffs did not exactly help the situation either. So then prices remained low until we saw, as expected, an increase towards the end of the year. And after a rather brisk start to the new year in terms of supply as a result or as a final contribution from last year's exceptional growth, industry supply growth has now finally normalized, and is hovering around 0%, which stands in stark contrast to the 12% we saw last year, and which bodes well for the market balance for the remainder of this year. And yes, I would like to add to that because we believe in our tight market balance going forward in the coming years because in our view, there is no way the industry can manage to replicate previous decades, represents annual supply growth in the coming years with current regulatory limitations and technological constraints, 1% to 2% will be more than hard enough in our view. And last year, demand was 5% according to our numbers, which is a number of most groceries and proteins and meals. So with these numbers, demand should far outstrip the supply going forward. So this will be interesting to follow. Then our own price performance in the quarter, which I would say was good as it was 7% above the reference price, which is the price we measure ourselves against, positively impacted by contract share 24% in the quarter and contract prices above the prevailing spot price, in addition to good quality of our fish. But it's negatively impacted this time around by timing effects and size mix. So with that, I think we are ready to start drilling down into the different business entities, and we begin, as usual, with Mowi Norway, our largest and most important entity by far and the locomotive of our business model. And if you take the numbers first, operational profit was EUR 199 million for our Norwegian operation in the quarter, whilst the margin was EUR 2.02 per kilo and harvest volumes 98,000 tonnes, in a rather troublesome quarter biologically for 2 southernmost regions, Region West and Region South, I think it's fair to say due to issues with gills and plankton. But having said that, our farming P&L cost is still down in the quarter year-over-year, as we can see from the chart here. And the outstanding biomass cost in Norway was further down in the quarter and is now at its lowest since 2022 at the end of the year, which is a good starting point for our P&L farming costs in Norway in 2026. Whilst our 2 southernmost regions struggled somewhat in the fourth quarter, it was once again margin slam dunk by Region North with an impressive margin of EUR 2.61 per kilo on strong biology followed by Region Mid and a margin of EUR 2.26 per kilo. So hats off for that. But also our overall margin for Mowi Norway in the quarter of EUR 2.02 per kilo, I would say, is reasonably good, all things considered. Then the harvest volumes in Mowi Norway. Last year was another record-breaking year for us in Norway with 332,000 tonnes harvest volumes, which is equivalent to a growth of as high as 9.4% year-over-year. And for 2026, we maintain our volume guidance of 380,000 tonnes, now with Nova Sea on board, and that translates to a further 14.5% growth year-over-year. But our short-term goal on these assets is still 400,000 tonnes, which we hope to reach in the not-too-distant future, and which would be our next milestone in Mowi Norway, at least in terms of harvest volumes. Then our sales contract portfolio for Mowi Norway, and this one is important. Contract share in the fourth quarter was 23%, and was with that spot on our guidance, and these contracts contributed positively to our earnings in the quarter. As for 2026, since we believe in market recovery in 2026, we have chosen to be relatively low on contracts, at least so far with approximately 15,000 tonnes per quarter. So let's see how that plays out. That was the last slide on Mowi Norway, and we can have a look at our 6 other farming countries, and we begin with Mowi Scotland. Autumn is always a challenging time of year in Scotland biologically due to high sea temperatures and generally demanding environmental conditions. And in the fourth quarter, we also harvested out some high-cost sites in Scotland. So in light of that, I would say an operating profit of EUR 17 million for Scottish operation in the quarter is a good result with a margin of EUR 1.39 per kilo on 12,000 tonnes harvest volumes. And as we are talking about Scotland, it's also worth mentioning that last year was a milestone year for us in Scotland in terms of harvest volumes, as we crossed the 70,000 tonnes mark for the first time with our 72,000 tonnes. Now for this, our standing biomass was at a record high at the end of the year with cost back at 2022 levels, also in this region, which is a good starting point for new records in 2026. Then overseas to Chile. Mowi Chile continues, unfortunately, to wrestle with soft prices following high supply also out of Chile due to very favorable growing conditions in Chile, as well last year in addition to some farmers having switched to Atlantic salmon from Coho, a Pacific salmon species after doing the reverse a few years back. So just for that, I would say an operational profit of EUR 10 million for Chilean operation in the quarter is a good result on our 26,000 tonnes harvest volumes, thanks once again to the lowest cost in the group in the quarter. Otherwise, our organic growth of our farming volumes in Chile continues unabatedly with 78,000 tonnes last year and 82,000 tonnes targeted for this year. Then farming off to Canada. Mowi Canada also wrestled with soft prices in the fourth quarter and even more so as our cost level in Canada in general is higher than in Chile, which is best-in-class. But in the fourth quarter, also due to knock-on effects from the third quarter and biological issues at that time, particularly in the East. And this resulted in a loss of EUR 50 million in Canada in the quarter. But on the positive side, biology is now satisfactory in Canada, both in the East and in the West. And our costs or biomass cost is back at '22 levels, also in these regions, which should provide the basis for good earnings again in Canada, once prices recover, which brings us the two smallest farming entities Mowi Ireland and Mowi Faroes. In Ireland, we harvested close to nothing in the quarter. So there's not much else to say really over and that biology is now satisfactory in Ireland after rather troublesome 2025 biologically. In the Faroes, however, we harvested 3,500 tonnes in the quarter, ending a record year for Faroes operation with almost 15,000 tonnes harvest volumes and with a margin of EUR 1.68 per kilo in the quarter and operational profit of EUR 6 million, which I would say is a good result, considering that we have 100% spot price exposure in the Faroes. And as the last bullet point on this slide says, biology was once again strong in the Faroes in the quarter. Then further out into the Atlantic Ocean and to Iceland and Icelandic Farming Operation, Arctic Fish. And to begin with, I have to say it's very encouraging to see that we are below EUR 6 again in production cost in Iceland, which gave rise to a small, but still a positive profit contribution from Iceland this time around. So hopefully, with more normal prices going forward, we can put the time of negative results in Iceland behind us. Otherwise, we harvested almost 15,000 tonnes in Iceland last year, which is the highest so far. For this year, we aim to harvest 7,500 tonnes, which is an important element in this because lack of scale in Iceland costs us at least EUR 0.5 in production cost. So more scale would have brought our cost level in Iceland closer to that of the Faroes and the results we see there. But more scale requires more investments and more investments require sensible framework conditions. So everything is connected to everything else also here. So I hope the Icelandic authorities know how to act on this. So this humble request at the end. I, think we can conclude Mowi Farming, and we want to Consumer Products or downstream business. Higher prices for farming mean higher raw material costs for Consumer Products, and more normal prices mean that the time of windfall profits for downstream business is over for now. But we shouldn't be too sorry about that because better prices are never wrong for a farmer, not even an integrated one like ourselves, although the transition phase is always a bit troublesome downstream before the higher prices find their way to the shelf. But having said that, I would still say that an operational profit of EUR 46 million in the quarter is a good result, actually, our second best fourth quarter ever, ending another record-breaking year for our downstream business in terms of earnings with an operational profit of EUR 197 million last year or NOK 2.3 billion, an all-time high sold volumes of 265,000 tonnes product weight, the latter also demonstrating good demand for our products. Then last one out this morning, Mowi Feed. The fourth quarter marks the end of another record-breaking year for our feed business as well with operational EBITDA of EUR 20 million in the quarter and EUR 67 million for the year, on 161,000 tonnes sold volumes in the quarter and 585,000 tonnes for the year. Faroes performed well last year, I think, is correct to say. And with our strategic feed partnership with Skretting, one of the world's absolute leading aquaculture feed producers, if not the leading, I think we have the very best starting point to do even better going forward, because by piggybacking Skretting, I think we have ensured the best feed for Mowi Farming now also at the lowest possible cost. And as we said earlier this morning, in total, we expect to save at least EUR 55 million in Mowi Farming annually, whilst also retaining our earnings in our highly profitable feed business in our feed market, we expect will tighten in the years to come. So once again, personally, I'm convinced this will make us a better farmer. I'm also convinced that this is the solution that maximizes our cash flow given our opportunity space. So with that, Kristian, the floor is all yours. So you can take us through the financial figures and the fundamentals. Thank you, so far. Kristian Ellingsen: Thank you very much, Ivan. Good morning, everyone, both who follow us online and those who are present here at The Salmon in Oslo for the first time. As usual, we start with the overview of profit and loss, which shows record-higher revenue for the year on all-time high volumes. Q4 operational EBIT was EUR 213 million and EUR 727 million for the year. These figures are equivalent to a return as follows: underlying earnings per share of EUR 0.26 and EUR 0.92, respectively, for Q4 and for the full year. Return on capital employed was 15.5% for the quarter and 13.3% for the year, both above the 12% requirement level, even in the year with market headwinds. When it comes to the items between operational EBIT and financial EBIT, the biomass fair value adjustment was positive in the quarter on positive price movements. Income from associated companies includes a revaluation gain on Nova Sea related to the acquisition. Net cash flow per share includes the cash payment for the Nova Sea shares and Nova Sea is fully consolidated now from Q4 onwards. Net financial items were as expected and relatively stable from Q4 '24. We then move on to the balance sheet, which shows a strong financial position. Equity ratio is 45% or 47% measured on the covenant methodology. Here is the cash flow statement. The full year '25 in cash flow items on working capital, tax, CapEx, interest paid were in total as guided, although with some internal differences between the individual items. Closing NIBD was EUR 2.65 billion, the new NIBD target is EUR 2.7 billion following the Nova Sea acquisition and volume growth through the value chain. Credit metrics based on the new target are consistent with a solid investment-grade rating. When it comes to cash flow guiding for 2026, we estimate working capital tie-up prudently EUR 200 million on further growth in farming and the rest of the value chain. CapEx is estimated to EUR 400 million, with the increase from prior years is explained by completion of 2 large construction projects in Nova Sea related to processing and freshwater amounting to approximately EUR 60 million. Interest payments are estimated to EUR 210 million and taxes to EUR 190 million. We have a solid financing in place, and the change here from the last quarter is the EUR 382 million in 5-year green bonds, which we issued in the quarter, which mature in December 2030. We issued the bonds at EURIBOR plus 1.18%, so attractive terms. Moving on to cost, starting with feed, which, of course, is a significant driver. The positive development in feed prices has led to lower cash cost and lower realized P&L costs. Feed prices have been trending down since 2023 and are down 25% from the peak. This will lead to a further P&L cost improvement in 2026. Into Q1, we see overall relatively stable raw material prices. In 2025, we saw a decline in realized P&L costs. This was driven by lower feed prices, but also other cost components were improved. The realized P&L effect in 2025 was EUR 176 million. And we expect full cost to be further reduced in 2026, but due to the impact from volumes and scale effects, cost is always lower in the second half than the first half. So there will be a temporary increase in P&L cost in Q1 as usual. We maintain a strong cost containment and cost leadership focus. As communicated in our CMD in '24, we have identified a cost reduction potential of EUR 300 million to EUR 400 million until 2029 with 2 main components. The main one is operational improvements, including post-smolt Mowi 4.0, efficiency, other initiatives. The other component is the cost savings programs, including the productivity program. And we maintain our good relative cost position with the #1 or the #2 position in the various countries we operate as illustrated in the graph below. In 2025, we identified EUR 65 million in annualized cost savings related to the cost savings program, some with effect in '25, but also with some cash and P&L effect going forward. Total -- sorry, total cost savings 2018 to '25 amount to EUR 392 million, of which EUR 251 million in farming. And there's a total of over 2,100 initiatives across different categories, including boats, treatments, nuts, health, procurement, automation, energy, travel and other items. And we have set a new target for 2026 of EUR 30 million in annualized savings. In addition to bottom-up initiatives, we have identified clear goals for various spending categories based on analysis and comparisons. And this comes in addition to the EUR 55 million net savings related to our feed partnership with Skretting. An important part of the cost saving program is the productivity program. Salary and personnel expenses represents the second largest cost item in Mowi amounting to EUR 759 million in 2025. This cost item is something we can influence through our efforts to work smarter, become more productive. And after that program was initiated in 2020, we have grown harvest volumes in Mowi from 436,000 tonnes to 605,000 tonnes, which is the guiding for this year. And in the same period, then FTEs are down from approximately 15,000 to down to 14,200 approximately. So this is an impressive productivity improvement in the period. And we have set ourselves a new target for 2026, on reducing FTEs by another 250 through the productivity program. And this is being achieved through natural turnover, through retirement, reduced overtime, reduced contracted labor, and automation and rightsizing. And this slide shows the productivity effects for different parts of the business. So a good track record here for Mowi. Then we move on to market fundamentals, starting with industry supply. In Q4, the year-on-year volume growth was 9% compared with 12% for the full year. And the increase in the fourth quarter was driven by Chile. The biomass composition in Chile indicates continued high supply in the short term, followed by a more moderate development. For the industry in Norway, the biomass composition year-end and the improved productivity experienced in 2025 for the industry. should limit the potential for significant volume growth during 2026. Demand was good in the quarter. Estimated demand growth according to our numbers, was 8% in Q4 and 5% overall for the full year of 2025. The improved demand due to lower shelf prices in retail is expected to continue in 2026. In Europe, consumption was relatively stable and in line with the development in supply. Retail demand was good and also helped by additional Christmas demand. In the U.S., consumption increased as much as 13% driven by the retail channel with the fresh pre-packed segment being the main contributor. And in Asia, we see that consumption was strong in all major markets, helped by market conditions, but also an ongoing structural shift in sales channels with more home consumption continuing to drive demand in Asia. While prices in '25 have, of course, been impacted by the unprecedented supply growth, it's worth noting that prices improved somewhat in Q4 as a positive response to gradually decreased supply. And while there is some short-term industry volume growth potential in the biomass composition, particularly in Chile, the figures indicate that there is a limited supply growth potential for 2026 overall. Our estimate is 1% industry supply growth for 2026, and we believe in modest growth, also in the coming years. But due to previous investments and measures, we estimate a higher growth for Mowi compared with the industry. The guidance of 605,000 tonnes represents 8.3% annual increase. And we also have a good track record of not only delivering on our volumes, but actually over-delivering, as shown here, based on the statistics for the last 5 years, with plus 2.2% for Mowi, which is very different from the average 5.9% miss for our peers. So with that, I conclude my walk-through, and then we are ready for Ivan and some comments on concluding remarks. Ivan Vindheim: Thank you for that, Kristian. Much appreciated. And it's time to conclude, as Kristian said, for some closing remarks before we wrap-up with our Q&A session hosted by our IRO, Kim Dosvig. And to begin with, I don't think it's very controversial to say that the fourth quarter closed out rather disappointing year in terms of prices following unprecedented industry supply growth last year of 12%. But disregarding that, I would say 2025 was another strong year for Mowi operationally with record high volumes by a large margin in all divisions to name a few. And speaking of margins, we also saw our farming margins once again at the top end of the industry scale in the regions where we operate, indicating a competitive cost position for Mowi. And further on that note, we saw our farming P&L costs come down by a whopping EUR 176 million last year, or NOK 2.1 billion, and outstanding biomass cost was further down during the year and is now at its lowest since 2022, which is our good starting point to push our farming cost a tad further down in 2026. Otherwise, we have maintained our farming volume guidance for this year this morning of 605,000 tonnes, and that's equivalent to a growth of as high as 8.3% year-over-year, which means that Mowi more certainly will outperform the rest of the industry on farming volume growth again. And finally, our downstream business clocked once again up record high earnings last year, demonstrating the strength of our vertically integrated value chain, especially when the going gets tough like last year. So once again, a big thank you to all of my colleagues who made all of this happen. It's of course, much, much appreciated. Then from one thing to another, the market balance is looking much better now with industry supply growth hovering around 0%, which stands in stark contrast to the 12% we saw last year. And if you look further ahead, as we said earlier this morning, there is, in our view, no way the industry can manage to replicate previous decades, 3% annual supply growth in the coming years with current regulatory limitations and technological constraints. 1% to 2% will be more than hard enough. And demand was 5% last year according to our numbers. So these numbers demand should far outstrip supply in the coming years. So this will be interesting to follow. And last but not least, I have to say, we are very happy about having landed our strategic review of the Feed division because truth be told, this has been a headache for us for years, as we have seen that our feed has been more expensive than that of our peers, after first having a feed that did not perform. And either is, of course, acceptable to the largest salmon farmer in the world. So by partnering up with Skretting/Nutreco, one of the world's absolute leading agriculture feed producers, if not the leading, I think we have ensured the best feed for Mowi Farming going forward now, also at the lowest possible costs. And as we said earlier this morning, we expect to save at least EUR 55 million annually in Mowi farming whilst also retaining our earnings in our highly profitable feed business. In our feed market, we expect will tighten in the years to come. So once again, I'm convinced this will make us a better farmer. I'm also convinced that this is the solution that maximizes our cash flow given our opportunity space. So this is good stuff for us. So with those closing remarks, Kim and Kristian, I think we are ready for the Q&A session. So if Kristian can please join on the stage, and then you, Kim, can administer the mic and orchestrate questions from the audience and the web. I don't know who wants to start, Kristian. Christian Nordby: Christian Nordby, Artic Securities. With your new net debt target, I assume that you want to stay around that target, not necessarily only below, and you believe in a very tight market ahead, as you said. Should we believe that all excess cash flow will just be paid out? Or do you think you will find other ways to grow beyond what you guide on? Ivan Vindheim: Over time, confirmative, but we will also, of course, continue to grow, but then the finance whatever it is separately. Unknown Analyst: [indiscernible] Carnegie. So in Chile, there's a new government and the industry seems to be quite positive in terms of deregulations could you maybe speak about that potential, both on the cost side and potentially more growth coming from Chile? And the second question just on the feed savings. When do you expect that to start hitting the P&L? Ivan Vindheim: Two good questions. If we start with Chile. So now in Chile, I've been talking about growth as long as I have almost lived and not much has happened in the past few years. And our President is only elected for 4 years, and it takes 3 years from egg to plate in this industry. So let's see things take time in this industry. So I've heard the same, but I would also like to see it. There are some constraints in Chile. So our take is what you saw on our long-term supply/demand slide earlier this morning. The next 5 years, it's really, really hard to see that this industry in total can manage to deliver much growth. So let's see. We are not visors, but at least we have some data points we are following. Feed, yes. So we have started. We have started. But you know, the circle, first, it goes to inventory and balance sheet, and then it ends up finally in the P&L. So in the P&L, I think you should think 2027 because of that. But in terms of cash, we expect to see that this will start to impact the cash flow already in March. And already in the second quarter, we expect to see considerable savings, but back to the P&L, that takes longer time. Kim Dosvig: Okay. Then we have a few questions from the web from Alexander Sloane in Barclays. He's got a question on supply. You point to 1% global supply growth in 2026, but 5% to 8% growth in Q1. What gives you confidence in this tightening? Could you have a year of another positive supply surprise? Kristian Ellingsen: Yes. Of course, we are dealing with biology here. So there is always a general disclaimer. That being said, our views on this matter is based on the biomass composition, and also recent developments and temperatures, et cetera. If you look at the biomass composition, we see that we are down on a number of individuals, both in Norway and also for the industry in general. We see that average rates are somewhat up, giving some short potential for volume growth in the near term. Reference to the question, we have seen that also now in Q1, but we believe that for the year as a whole, I think 1% is a more reasonable number. Kim Dosvig: Okay. And then his second question is on demand, 5% global demand growth in 2025. Can this be sustained at the same level in 2026? And which regions are better or worse? Kristian Ellingsen: We believe in good demand also going forward. If you look at the Q4 demand growth estimate, that was 8%. So i.e., higher than the overall a 5% figure for '25. It's also been 8% on average per year, the previous decade, as Ivan showed on the slide. So we believe in continued good demand growth. And I believe that there's a good potential also going forward. We see especially good growth in Asia, also good demand growth in the U.S. We see in the U.S., particularly good developments in the prepacked segment with 24% volume growth now in '25 on our numbers. So the potential is definitely there also going forward. Kim Dosvig: Okay. Then another question from the web from Andres in Berenberg. He's got a question on CapEx. Could you please put the EUR 400 million target for this year in a long-term context? Is this the level of investments driven by specific one-off projects or in line with a reasonable long-term trend? Ivan Vindheim: I think you should see 2026 as one-off and allocated to a transition effect related to the acquisition of the Nova Sea. So I think last year's level, adjusted for size is much better estimate for the future. Henrik Knutsen: Henrik Knutsen, Pareto Securities. Could you elaborate on your biomass status in Norway with or without Nova Sea? Ivan Vindheim: Can you please elaborate a little bit more on the question? So what are you? Henrik Knutsen: You're saying biomass is up 8.7% year-over-year, which is all regions, but Norway specifically. And yes, I guess, you're going to say that Norway is higher. Yes, but is that because you didn't include Nova Sea last year? So the question is, if you could sort of pro forma adjust your Norwegian biomass. Ivan Vindheim: Okay. A complicated question. I think we take it after this session. Henrik Knutsen: Let's do that. Wilhelm Dahl Røe: Wilhelm, Danske Bank. You mentioned sort of cost of living still impacting the American demand. I'm just wondering with new contracts going into 2026, do you see any impact of tariffs, even though you have most from the U.S. with the lower tariffs? Ivan Vindheim: Yes, absolutely. So there is no free lunch. So tariffs impact demand, but that effect I've already seen. And back to the 5% figure, Kristian just explained, that 5% figure included tariffs. But definitely, tariffs play a role here, they do. But still with 5% and the supply growth we expect for this year and going forward, this should be a tight market balance. Kim Dosvig: Okay. No more questions from the web nor the audience here. Ivan Vindheim: Okay. Then it only remains for me to thank everyone for the attention. We hope to see you back already in May, if not before, here at The Salmon. So please feel free to take a trip to The Salmon and try out some of our delicacies. I think it will be worth the trip. So with that in mind, folks, take care and have a great day ahead. Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to the Siemens Energy's Q1 Fiscal Year 2026 Analyst Call. As a reminder this call is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on Page 2 of the Siemens Energy presentation. The conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Tobias Hang. Please go ahead, sir. Tobias Hang: Thank you so much, Moritz. Good morning, and a warm welcome to the Siemens Energy Q1 Fiscal Year 2026 Results and Analyst Call. As always, all documents were released at 7:00 a.m. on our website. Our President and CEO, Christian Bruch; and our CFO, Maria Ferraro, are here with me. Christian and Maria will take you through the major developments during Q1 fiscal year 2026. This will take approximately 30 minutes. Thereafter, Christian and Maria are available to answer your questions. For the entire conference call, we have allowed 1 hour. Christian, over to you. Christian Bruch: Thank you very much, Tobias, and good morning, everyone, and welcome to our quarter 1 analyst call also from my side. Thank you for joining us today. I'm pleased to report that Siemens Energy had a very strong start into fiscal year 2026, capitalizing on the favorable market momentum and successful execution of the backlog. The global energy system continues to transform with increased pace shaped by electrification and the increasing need for security of supply and our portfolio is excellent, aligned with these long-term needs. In the first quarter, we booked orders of nearly EUR 18 billion, the strongest quarter in our company's history. And this demand was broad-based across regions and business areas. The market momentum remains positive for our core portfolio. As a result, our order backlog has grown to a record of EUR 146 billion, giving us strong visibility for this fiscal year and beyond. Our very strong free cash flow performance in this quarter was supported by significant order momentum and customer prepayments, including reservation agreements, especially in Gas Services, and Grid Technologies. These businesses continue to demonstrate strength, high market demand, disciplined execution and particularly in Gas Services, high service intensity, all of which contribute to high-quality cash generation. At Siemens Gamesa, we remain on the path towards breakeven. The underlying operational measures show impact in particular, the improved productivity in offshore increased service profitability and reduction of structural cost in onshore. Please note that profitability in quarter 1 also benefited from some timing effects and was therefore less negative than expected, meaning the trajectory might not be strictly linear across the different quarters of the year. I'm also pleased to announce that we have received the first order for our SG 7.0 wind turbine that is a successor to the 5.X platform. We will supply 6 turbines for 42-megawatt wind park in Germany. Given the strength of our underlying markets, clear visibility from our order backlog and the strong start into the year, we are fully on track to achieve our fiscal year 2026 guidance. While the first half of the year is historically stronger than the second half, this performance clearly demonstrates deeper operational momentum across the company, momentum built on backlog quality, disciplined execution and exposure to markets with long-term trends. Demand remains strong and broad-based across all business areas and across all regions in the first quarter. Gas Services delivered its strongest quarter ever in terms of order intake, booking 102 gas turbines. That means we matched more than 50% of last year's unit volume within just 1 quarter. The momentum was brought across all turbine frames. In total, we booked around 13 gigawatts of new gas turbine orders in quarter 1. 12 gigawatts were converted from existing reservation agreements and at the same time, we added 12 gigawatts of new reservations. This increased total commitments to a total of 80 gigawatts even after delivering 3 gigawatts during the quarter. In the data center segment, we have commitments of 22 gigawatts, of which 15 gigawatts are reservation agreements. But I want to emphasize, our growth trajectory does not depend on data centers. Demand is driven by broader structural trends, electrification, industrial expansion and the increasing need for resilient energy systems. And these fundamentals remain firmly intact. While demand for gas turbines is especially strong in the U.S., data centers still represent only 1/4 of our total global commitments. Roughly 60% continues to come from traditional applications while the rest is related to peaking, marine or FPSO applications. Grid Technologies delivered another strong quarter, driven by robust demand across both products and solutions. The U.S. contributed with several data center-related orders amounting to a high triple-digit million euro volume. And just to remind you, last year, we booked in that space around EUR 2 billion. We also saw continued demand for grid stabilization in the U.S. reflected in large [indiscernible] orders with a total amount of a low triple-digit million euro value. Globally, customers are accelerating investments in transmission capacity to integrate renewables, meet rising demand and strengthen stability. Recent events underline the importance of energy security and resilience. The sabotage of a cable bridge in Berlin, leaving more than 45,000 households and over 2,000 businesses without power for days and the winter storms in the U.S. where around 1 million people lost electricity both highlight how mission-critical modern grid infrastructure is. Such events raise awareness and increased demand for grid stabilization technologies like our synchronous condensers. Regionally, the Americas, but particularly the United States showed excellent performance. Orders grew nearly 60% on a comparable basis and revenue increased by around 25%. This means the Americas are now nearly at parity with EMEA in order intake, a remarkable milestone that reflects the rising importance for the global energy transition. That said, EMEA also remained very strong with almost 20% growth in both orders and revenue. Significant wins in Poland and Turkey further demonstrate customers' trust in our technology and long-term reliability. In Asia and Australia, we also recorded more than 20% order growth. Revenue moderated due to a very strong prior year comparison from large offshore wind project in Taiwan but the underlying demand picture remains solid. Regional diversification continues to be a priority. A good example is the well-balanced gas services order backlog. The U.S., Middle East and Europe account for roughly 80%, almost evenly split among the 3. Quarter 1 orders in Gas Services were 40% from the U.S., 35% from Europe and 15% from Middle East and China. Across Gas Services and Grid Technologies, the pricing environment remained favorable and supported high-quality profitable growth as it is accretive to our backlog margins. In Gas Services, favorable pricing momentum continues with current reservation agreements being signed with higher pricing versus current orders. Let me now give you a progress update on our Elevate program, which we introduced in detail at our Capital Markets Day in November. We are fully on track with our capacity additions. And last week, we communicated more details around our U.S. investment program, which we already indicated at our Capital Market Day. I will provide more details on this on the next slide. In Europe, our grid technologies expansion is also progressing strongly. We have tripled production for wind transformers in Austria and together with our partner, KONCAR, opened a new transformer tank manufacturing facility in Croatia in January. We continue to strengthen our supply chain resilience through long-term partnerships. Our investment in ASTA Energy, a company which listed publicly on January 30, ensure secure access to critical copper components for our grid infrastructure portfolio. And both S&P and Moody's upgraded our credit ratings, reflecting the improved balance sheet, improved cash performance and stronger resilience of the company. We also drive forward the implementation of our new operating model, simplifying structures, reducing overhead and increasing accountability across the organization. As part of that transformation, we also increased AI capabilities and our workforce to work more efficiently and unlock new productivity improvements across the company. Across all 3 pillars, Elevate is continuously making a meaningful contribution to our performance. Progress can be seen in our margin development, cash conversion and operational stability. Let me provide you more details on our U.S. investment program. We currently execute investment projects for around $1 billion to expand manufacturing in the United States and expand our workforce as part of this effort. This includes also strengthening of the supply chain and establishing 2 training centers for qualification of workforce. Across 6 states, we are particularly strengthening the Grid Technologies and Gas Service business. In Mississippi, we are building a new high-voltage switchgear plant and expand the transformer capacity. In North Carolina, we are resuming gas turbine manufacturing as already indicated at the CMD and increasing large transformer capabilities while expanding also research and development. In Florida, we are boosting our blade and vane production and upgrading our innovation center, including an AI grid lab together with NVIDIA. In Alabama, we are scaling production of key generator components, and in New York and Texas, we are also upgrading compression equipment facilities. This expansion will add 1,500 new jobs on top of our 12,000 excellent employees in the U.S. And last year, the U.S. accounted for 29% of our global order volume, underlining its strategic importance. We are fully committed to supporting the growth of electricity in the U.S. market by driving local capacity exactly where the market needs it. Let me briefly focus on Grid Technologies, where we are scaling at an impressive speed. I am proud of the progress we made with our new production sites in Austria and Croatia. In Austria, Siemens Energy has opened a new wind transformer plant in Wollsdorf, following an investment of more than EUR 100 million creating around 100 new jobs and at the same time, tripling our wind transformer production. The facility was completed in just 13 months and has more than 25,000 square meter of production space enabling an annual output of up to 2,000 offshore wind transformers for customers in 70 countries. Combined with our long-established right side, Siemens Energy now supplies transformers for 80% of the world's offshore wind parks, solidifying our leadership in this critical segment of the energy transition. Moving to Croatia. The opening of our new Transformer tank factory near Zagreb, our joint venture with KONCAR adds more than 400 manufacturing jobs and provides capacity for approximately 160 custom large power transformer tanks per year, strengthening our global supply chain. And this is part of a broader EUR 260 million expansion program aimed at doubling regional transformer capacity to 45,000 MVA by 2031. The new factory also bolsters Europe's manufacturing resilience by supplying heavy-duty tanks for HBDC, generator step-up transformer and auto transformers up to 550 kV supporting the accelerated grid build-out required to integrate renewables at scale. And with this, I would like to hand over to Maria. Maria Ferraro: Thank you, Christian, and good morning, everyone, from my side. Very pleased to be here with all of you, and let's start to go through the details of Q1 fiscal year '26. Moving on to Slide 10, looking at the group results. Orders reached a record high of EUR 17.6 billion, up 34% year-on-year on a comparable basis. Our book-to-bill ratio was 1.82 and as Christian mentioned, order backlog hit a new record of EUR 146 billion. This is up from EUR 138 billion in Q4 of fiscal year '25. That's more than EUR 8 million in addition. Again, giving us excellent visibility for fiscal year '26 and beyond. Revenue was EUR 9.7 billion, up 12.8% year-over-year on a comparable basis, with all segments contributing to revenue growth. Just as a note, foreign exchange headwinds, primarily driven by a weaker U.S. dollar weighed on the top line by roughly 400 basis points year-over-year. Looking at profit before special items. This was EUR 1.159 million with a margin of 12%. This is more than double last year's 5.4% or up by 660 basis points. And regarding FX impact in profit, just for clarification, looking at our currency movements, it does not have a material impact on our profitability. And again, this goes to what Christian was mentioning earlier. It's due to our global footprint with strong local for local sourcing and affecting hedging strategies. Looking at net income, this rose to EUR 746 million, up EUR 494 million year-over-year. Special items was negative EUR 152 million, mainly due to the sale of the Indian wind business. However, strong operational performance led to notable earnings improvement overall. Free cash flow reached a record EUR 2.9 billion, nearly doubling last year's result. This was driven by strong orders, reservation fee and some timing effects. Cash flow continued to show strong seasonal patterns at the start of our fiscal year. Now let's take a quick or a closer look into our order backlog. Order backlog, as mentioned, reached a new high of EUR 146 billion. 45% of our backlog relates to service business. Again, this is recurring profitable revenues for many years ahead. For the current year, revenue coverage stands at approximately 90% for the remainder of the year. Already for next year, fiscal year '27, we have approximately just over 70% coverage. The growing backlog demonstrates increasing resilience due to broad-based demand geographically as well as across all businesses. Additionally, our order backlog margin further improved as a result of the positive pricing development and environment. Therefore, overall, our growing backlog and healthy margin, again, provides a strong foundation for our financial performance. Now let's talk about the drivers of free cash flow in the next slide. As mentioned, cash flow was very strong this quarter. Free cash flow pretax was EUR 2.9 billion, driven by strong profit development and customer advanced payments, including reservation fees. This is linked to our increase in orders. Regarding CapEx, we had a slow start for cash out relating to CapEx with EUR 347 million year-to-date. However, we are expecting roughly 5% of revenues or approximately EUR 2.5 billion of CapEx for this fiscal year. Quick update on Siemens Gamesa quality anticipated cash out. This amounted to EUR 101 million for the quarter. And as a reminder, for the full year, we indicated and still expect a mid-triple million amount similar to fiscal year 2025. Therefore, we closed the quarter with EUR 11.8 billion in cash and cash equivalents and EUR 3.8 billion of debt, therein EUR 2.4 billion long-term debt. This results to an adjusted net cash position of EUR 7.6 billion at the end of Q1. This is compared to an adjusted net cash position of EUR 4.8 billion at the end of September or last fiscal year. At our Annual General Meeting, which is upcoming on February 26, we will propose a dividend of EUR 0.70 per share for fiscal year '25. This will result in cash out of approximately EUR 600 million anticipated in the second quarter. In addition, the announced share buyback, which was announced at the Capital Market Day up to EUR 6 billion until fiscal year '28, is intended to commence in March. And just again, an update regarding our investment credit grade ratings, which were upgraded in December 2025. Our rating by S&P was upgraded to BBB with a positive outlook. And Moody's rating was Baa1 with a stable outlook. So now let's look at the quarterly financial performance, starting with our Gas Services business on the next slide. Here, we see Gas Services delivered an outstanding performance and another strong quarter in Q1 of fiscal year '26. Orders amounted to EUR 8.8 billion. This is up 81% year-over-year, the highest order intake ever and again, driven by large unit -- new unit projects in the U.S., Poland, Turkey and Taiwan. Book-to-bill for Q1 was an impressive 2.83, leading to a record order backlog for GS of EUR 60 billion, again another all-time high. Q1 was characterized by a very strong gas market for gas turbines greater than 10 megawatts with the largest markets in the U.S. and Europe. Gas Services booked a total of 102 gas turbines for power generation and oil and gas in Q1 of fiscal year '26. Therein, 19 were large gas turbines and 83 were industrial gas turbines. Our Q1 market share for gas turbines greater than 10 megawatts stands at 43%, securing the #1 position. Revenue for Gas Services rose by just shy of 14% at 13.9% and compared to last year, again driven by strong performance in new units, which saw nearly 51% comparable growth. Profit before special items was EUR 515 million with a margin of 16.6% and up from 14.6% last year, again reflecting improved margin quality of the processed order backlog and better underlying productivity. A gentle reminder on seasonality, our H1 or half -- first half year profitability in GS is always stronger than the second half just because of the service mix. Free cash flow pretax was EUR 1.9 billion, more than doubled, benefiting from advanced payments as mentioned on large orders. Overall, a very strong quarter for GS. And now let's take a look at our Grid Technologies business. Grid Technologies continues its strong performance. Orders were EUR 6 billion, up 22% year-over-year with strong demand specifically in our product business and partly driven by data centers in the U.S. as well as large HVDC order in the U.K. Book-to-bill ratio stood at 1.95, resulting again in a record order backlog of EUR 45 billion. Revenue reached EUR 3.1 billion. This is up 26.9% year-over-year, a substantial increase mainly driven by the solutions business, but also supported by the transformer and switchgear business. Profit before special items was EUR 538 million with a margin of 17.6%. This is up 520 basis points year-over-year, again driven by continued strong operational performance. Free cash flow pretax was EUR 1.8 billion. This, again, significantly increased by around EUR 600 million year-over-year, reflecting strong operational performance and milestone payments. Another strong quarter for our Grid Technologies team, well done. So now let's move on to Transformation of Industry, which again delivered a solid quarter. Orders were EUR 1.6 billion, up 11% year-over-year, and this was supported by compression and electrification, automation and digitalization projects, including a major order in the Middle East. Book-to-bill for Q1 stood at 1.21, resulting in an order backlog -- a stable order backlog of EUR 8 billion. Revenue came in at EUR 1.3 billion, again, stable on a comparable basis to Q1 of last year. Profit before special items was EUR 154 million or 11.8% unchanged, and free cash flow pretax was EUR 94 million. This was just down due to some timing effects looking at the previous year. So thank you to TI. And now let's move on to Siemens Gamesa. As Christian already mentioned, we are seeing progress in the turnaround at Siemens Gamesa. Here, orders were EUR 1.6 billion for the quarter. This is down from last year due to timing and a large offshore order that was booked in the prior year quarter. Revenue came in at EUR 2.4 billion, this is 3.9% up on a comparable basis, supported by offshore and service business growth. Profit before special items narrowed to negative EUR 46 million. This is a significant improvement from negative EUR 374 million just a year ago. The positive development was mainly due to productivity increases in offshore and progress in the service business. Additionally, we benefited from preponements or timing effects in the quarter. Free cash flow pretax was minus EUR 545 million, and this, again, as a reminder, included the EUR 101 million quality-related cash out. So with that, I want to sum up our achievements in Q1. We had a very strong start to the fiscal year in all of our businesses across all main KPIs, order intake, revenue growth, profitability and cash flow. So now moving to the next slide, our outlook slide. Here is our outlook for fiscal year '26 and targets for fiscal year '28, which remain unchanged. However, we do acknowledge that the year started with a very strong performance. At the same time, we remain mindful of the seasonality with a stronger first half than second, that typically influences our results each year, particularly within our Gas Services business. Bookings and associated cash flow did exceed in some areas expectations. However, it's too early to draw firm conclusions from this first quarter momentum. We will continue to monitor developments closely and will provide an assessment at the half year mark. So with that, I'd like to thank you for your attention and would like to hand back to Christian. Thank you. Christian Bruch: Thank you very much, Maria. So Siemens Energy is positioned really excellently to deliver sustainable shareholder value in a strong market. We see really good structural demand, a record high and high quality order book and disciplined execution across all segments. Our long-term value creation rests on 5 levers, profitable growth, margin expansion, strong cash generation, resilient balance sheet and consistent operational excellence. And across each of these, we are making tangible progress. I am very grateful for the commitment of our people, making this company every day a bit better and supporting our customers. Well, we know that we need to deliver, and we are fully focused on doing just that, reliable execution and consistent performance. And with this, let me hand back to Tobias for question and answers. I look forward to your questions. Tobias Hang: Thank you so much, Christian and Maria. [Operator Instructions] And the first 3 people going for the questions will be first, Alex Jones from Bank of America, Max Yates from Morgan Stanley and Ajay Patel from Goldman Sachs. Alexander Jones: Maybe I can focus on gas orders. At the CMD in November, you talked about 36 gigawatts of orders over the next 12 months, but you've clearly started ahead of that run rate with 13 gigawatts this quarter. And I think Christian, on the press call earlier, you said you wouldn't call Q1 exceptional or one-off given how strong market demand is. So therefore, is there upside to that 36 gigawatt number, given the demand you see? And could momentum continue at a similar rate as Q1 in the coming quarters? Christian Bruch: Thanks for the question. And what I said in the press call is that I continue to see strong momentum in the market. It obviously will also play out how many slots we have available and how quickly 29 fills up. So don't -- I would always say don't multiply it by 4. But at the same time, obviously, we're trying really our best to continue on this. I would still be on a 36 gigawatt planning base for the time being. We might be higher than that. It could be, but it's really something where it depends on certain larger commitments. The specialty at the moment in the market is also what you see is obviously, multi-train bigger orders. And this is what moves the needle also in terms of the gigawatts. So as Maria said, for the other comments, it's a bit too early to tell to see how the things are moving, but I'm definitely positive on the market on GS. Tobias Hang: So the next question goes to Max Yates. Max Yates: So I guess my question was just around pricing. Could you give us a feel of how much of the order growth that you're getting year-over-year is driven by pricing? And then maybe as an extension of that, we know there's pricing in kind of new equipment. Could you talk about pricing on some of the longer-term service agreements as well that you're receiving with these new orders? Are you also seeing a sizable step-up in the service contracts and specifically the longer-term service agreements that you're signing with the new equipment at the moment? Christian Bruch: Yes. Thanks, Max. I mean, obviously, we see an improvement year-on-year on the margins. And we also -- the other statement, obviously, what we make, we see the incoming orders higher than the older orders. So we see continuous appreciation of the pricing on the gas turbine side. It is -- on the service side, I'm just thinking through it at the moment. As we always said, this is slightly going up, not as distinct as for the new units. Even so, obviously, I'm very positive whenever the proportion to the service business increases because it's a good service business and keep one thing in mind, you're only going to see that after '28. So, so much to put this into perspective. Tobias Hang: So the next question goes to Ajay Patel. Ajay Patel: I just wanted to ask around cash flow. Is there any reason that the shape isn't similar on cash flow this year to last year? And then in the event that we do run ahead on cash flow, is it fair to assume the capital allocation works as in 1/3 of cash flows would be allocated towards cash returns? Just want to make sure that link is the case if we do end up better than we expected? Maria Ferraro: Thank you. And of course, yes, as I mentioned earlier, we did have a really excellent start to the year, and we started in a very strong position. And I think what -- maybe to your point of how to look at the shape of free cash flow and how that develops, it is clear that, of course, the main drivers are a few, but certainly the strong order intake. And again, to what Christian said earlier, the market continues to be very positive. However, it was quite a strong quarter for orders and not to take that and divide or multiply rather by 4 and say, here's what we can expect. And in addition, one other thing. I think one of the dynamics that perhaps is not fully, let's say, understood is we do have reservation fee agreements. And in light of how that momentum is going, this is actually quite a sizable number. And also, in addition, I think one of, let's say, the efforts that we started from a while ago, is looking at our operating working capital and how do we unlock cash. So that's something that doesn't look like linear in fashion in some of our, let's say, difficult countries where we've seen that we've been quite successful in receiving some of the overdue payments there. But again, I would just state again, we had a strong year start. This is connected to volume in some areas, but we need a bit more better visibility as the year continues, and we'll come back to you. Tobias Hang: So the next 3 questions will be going to Sebastian Growe from BNP Paribas, Richard Dawson from Berenberg and Gael de-Bray from Deutsche Bank. Sebastian, please go ahead. Sebastian Growe: My question is regards to the GT segment. apparently very strong momentum, both in regards to orders and also execution and not least free cash flow. So how should we think about the order pipeline in that business? Are you in a similarly favorable position as for GS, i.e., to sell also slots to customers? And what I'm trying to better understand here is what explains the massive free cash flow strength in the quarter in GT in particular and how it might trend from here? And if I may just quickly follow up on one of your earlier remarks, Maria, that there's a sizable impact from those reservation fee agreements. Could you quantify those? Christian Bruch: Maybe you take the cash, I just briefly on -- I hope we have heard you correctly, Sebastian, because quality was very bad. So if it was about the order pipeline momentum in GT, if I have heard you correctly. And that is obviously something which continues also to be strong. And you can bet then always every quarter who is ahead, Gas or Grid, but I think in that regard, both look very strong on. Also their data centers have an impact, maybe not as distinct. It's more around the general grid replacement and stabilization. But I obviously see this strong outlook also for the year. And I think we also indicated on the Capital Market Day that we will be -- expect the orders to be higher than last year. Maria Ferraro: Correct. And maybe just to add to what Christian mentioned there with respect to GT. I mean profit also has a part to play with that and also driven by strong orders, which we anticipate and continue to anticipate in Grid Technologies. We also indicated in the GT slide that some of that was related to milestone payments, some of those slipped into Q1 as well. And of course, we expect a very strong operational performance and underlying performance within GT and that is all reflected actually in the very, let's say, strong free cash flow. There's also an element of reservation fees for GT. I think that's also important. That plays, let's say, a factor when, of course, delivery perhaps can be even further expedited. So with respect to reservation fees, no, we do not disclose the amount of reservation fees that does change, of course, in line with, as Christian outlined earlier, how much, let's say, in GS, how many gigawatts are reserved, et cetera. And the reason why is that it just it varies. It's quite variable depending upon the contract and the size and the customer. Tobias Hang: Next question goes to Richard Dawson from Berenberg. Richard Dawson: Just a follow-up on these reservation agreements. Have you started to see any customers maybe thinking twice about signing a reservation agreement given thinking gas turbines, the lead time of delivery is so long? And can you make any comments on how Q2 is shaping up for those reservation agreements? Christian Bruch: What is shaping up, sorry? Tobias Hang: Q2. Christian Bruch: Q2 is shaping up. Sorry. Well, obviously, the key thing is when can you deliver. That's the first question every customer ask and it's obviously all about '28, '29. And you get, obviously, the further you reach out 2030, 2031, and in the meantime, that goes all up to 2032. Obviously, there is a bigger hesitation than to immediately agree because everybody wants something in '28 or '29. In that sense, however, I think the fundamental interest in the reservation agreement has not changed. It's more like can you deliver certain things? And obviously, we're trying each and everything to build bridges for the customers. And I also see this, in quarter 2, continuing on the same level. However, we have to recognize that, obviously, our delivery times continue to increase, and this is simply the fact of the matter. But I hear -- let's say, I've been, last week, seeing a lot of customers myself. Interest is as high as before. Tobias Hang: So the next question comes from Gael de-Bray from Deutsche Bank. Gael de-Bray: I guess I'm wondering if the flattish service revenue you had in the Gas division this quarter was in line with your own expectations? And how we should think about that for the remainder of the year? And since that's probably a very short question. I have a second one on the pricing side. I mean, you've talked a bit about that. But when I look at the backlog increasing by 10 gigawatt on a sequential basis and by EUR 6 billion in value terms. So I guess the back of the envelope calculation is that the price per gigawatt is around EUR 600 million this quarter, which is a major step-up compared to what we saw last year, I think. So maybe some comment about that? Because I think you said prices were only going up slightly. Christian Bruch: Maybe I'll take the last one and you -- and my feedback would be no, I would not break it down in this because I think it starts to get confusing by looking on the backlog and trying to apply the percentages. So I would refrain from breaking it down in more detail. Maria Ferraro: Of course. And let me take the comment on our service revenue. As mentioned, overall, revenue had quite a substantial FX headwind of 400 bps. And this can be directly attributed by the way, to our service revenue, as you know, we have a large installed fleet in the U.S. in which that could -- that does play a part. If you take out the FX impact, I actually don't see it sluggish at all. It's actually -- for the quarter is, let's say, slightly flat. There was some onetime topics of prior year. And for the fiscal year, going in line with the pricing, we do see growth, and that's exactly what we've indicated at the Capital Markets Day. So it is FX-related, Gael. Tobias Hang: So the next 3 questions go to Phil Buller from JPMorgan, William Mackie from Kepler Cheuvreux and Lucas Ferhani from Jefferies. Phil, please go ahead. Philip Buller: Obviously, the demand environment is very strong. I was hoping to ask about the supply situation, please. The CapEx, as you say, started a bit slowly. I think it's 3.6% of sales versus a guide for 5% for the year. Should we be reading anything into that? Are there any supply issues in ramping up the output perhaps in GS or perhaps in GT? Anything changed relative to what you're expecting on the supply side? Christian Bruch: Thanks. First of all, on the build-out of the capacity, no, you should not read anything into that. I mean that's more, let's say, the classical phasing, when does the planning come? When do the contractors get their contracts. So that's more like, let's say, normal course of business. No concerns really at the moment in terms of the execution of our own capacity expansions. On the supply chain, yes, that is something which we need to watch very carefully. We had some negative impact in quarter 1 on the supply chain, in particular, obviously, on the gas turbine side. Not surprisingly, it is also on the supply chain market for the respective supplier, which is good. And we see them, obviously, also there increasing prices. We continuously work with our suppliers in terms of what can we do to expand supply chain, co-investing and the likes. But this will be by seeing this impressive demand on the gas services side, to be continuously with us over the next 2 years, I would say. And you will also see it on the customer side. That's not so much us. That's really the EPC contractors, the civil and whatever that this brings up the total installed cost, but we will need to watch this very carefully. But we are on it. And this was also the reason why we decided to invest further money -- why we invest further money in Florida in our blade and vane manufacturing. Tobias Hang: So the next question will be going to Will Mackie. William Mackie: My question will build on Phil's really. Could you -- can we check in could you remind us where you stand with regard to your ability to serve the demand in '26, '27 in GS and GT. What I mean is, what should we be planning or thinking with regard to gigawatt install or deliveries across large and industrial turbines and across the main elements of the product business in GT? Christian Bruch: Will, I have to admit you overstretch my memory a bit. I'm trying as good as I can in terms of -- I mean, the big thing in '26, which comes online is on the midsized gas turbine. That's the increase in Finspong, which is the SGT which will towards the end of the year come in. The large gas turbine pieces, obviously all come in '27. And keep also in mind that the numbers we have showed on the Capital Market Day included also a steam portion for the larger gas turbines. So in terms of delivery for '25, before I state no wrong number, I think we have to come back to you in terms of the exact planning, Tobias will get back to you on that one. Tobias Hang: So the next question will be going to Lucas Ferhani. Lucas Ferhani: It would be on the SGRE business, just on the timing effects you talked about on the margin. Can you give us a bit more information about what they are and maybe the number behind them, what would be the underlying margin be? And also just on the order side in onshore. Obviously, it's a good start, but I'm wondering what do you have in budget for full year '26 in onshore order intake? What would you think is kind of successful for the relaunch? Maria Ferraro: Yes. Let me try. I do apologize because it was difficult to hear you. So if I -- I hope I understood it correctly, but let me -- I think the first part of that question was relating to the onetime or timing effects in the quarter 1 profit. And the second one was relating to the order intake for onshore. So let me start with the Q1 profit. So of course, the Q1 profit was negative EUR 46 million, again, supported by timing effects. Particularly, I have to say, coming probably the majority more from Q2 and again, to put that into context, it was -- in total, the range was likely around a mid-double-digit amount. So some examples are the -- some of the hedging effects, so positive hedging effects and of course, those are reversed or also evened out, of course, as we continue to execute in the quarters to come. There was, as you would expect for a large project business like Siemens Gamesa, some project benefits and shifts. It happens, right, where customers take over projects or even earlier than expected. And that's what has happened also in Q1 and again, kind of to counter that and something that to think about when you think of quarter by quarter, there is, of course, ongoing uncertainty regarding tariffs. And we said that last year that in the wind power business, actually, the tariff impact was the most substantial of all of ours. So of course, we're watching that very carefully. Again, our assumptions relating to tariffs for the year fully embedded our guidance. There's nothing to indicate at this point. But nothing was additionally booked in Q1 with wind power, but perhaps could be coming to fruition in further quarters. With respect to orders for Q1, again, with respect to onshore orders, Q1 was in line with previous year. And don't forget, I think Christian just mentioned that there's some orders forthcoming. We're now having some let's say, success with the new frames, but it was in line with last year, I think, of EUR 0.8 billion, just shy of EUR 1 billion, and that was as expected. Christian Bruch: Yes. To put it briefly into perspective. So we have, let's say, on the trajectory on where we want to get it. I mean we want to achieve the, let's say, last year's order intake. Keep one thing in mind, we limited ourselves to say, look, that is the amount of turbines we want to sell for the first phase and ensure that, obviously, every -- let's say, we test really everything out, and we are very careful. And in that regard, that's the main thing. So -- but we are, I would say, bang on plan. Tobias Hang: Thanks a lot. So the next 3 questions will be going to Chris Leonard from UBS, Sean McLoughlin from HSBC and Alex Virgo from Evercore. Chris, please go ahead. Christopher Leonard: Yes, maybe as an extension on the wind side and focusing on the offshore -- European offshore wind development. Is there any comment from your side as to what we should expect in terms of potential U.K. offshore wind allocation of orders for you in '26 or '27? And equally, any comment would be helpful as well on recent European plans for the North Sea. Christian Bruch: Yes. Thanks very much for the question. Maybe a couple of comments to offshore wind. If you look on the quarter 1 order intake, also just to flag it up, there's also one offshore order in Poland, which contributed to the order intake in quarter 1. U.K., auction around 7, still ongoing discussions, not yet fully clarified, so it's too early to say. But yes, we are also looking obviously in certain projects there and discussions are ongoing. On the 15 gigawatt, which came out of the North Sea summit of 15 gigawatt per year -- out of the North Sea Summit, yes, I believe, obviously, this will be actually great for the offshore industry or good momentum. We have to see now on how this is converted into auction schemes. You may know that Germany pushed its scheme out and is rediscussing the framework, which is fundamentally a good thing because at the end, it's not about the auction, it's about the FID. So I would expect that out of this North Sea Summit, we see obviously momentum also creating in the offshore industry going forward, potentially not in '26. It's more than coming in '27 '28. Tobias Hang: Next question goes to Sean McLoughlin. Sean D. McLoughlin: Just a question on the gas turbine mix. What's your current lead time on a new midsized turbine? And how does that compare with lead times for heavy-duty equivalent? Christian Bruch: Yes, it depends really what type of midsize, what type of turbine and keeping, let's say, flexibility there. As I said before, they see and there are some slots also '27, '28, which we try to balance, and these are the midsized gas turbines than with multiple trains. There's also a decent amount of reservation agreements on the midsized gas turbines. But I would say today, you're talking about, let's say, minimum a year shorter than the large gas turbine simply because of the supply chain situation. Sean D. McLoughlin: And just a follow-up, if I may. Just thinking about the huge increase in CapEx commitment that we've had from the main hyperscalers. I mean, I guess that puts emphasis on urgency. I mean, are you seeing more interest in midsized turbines that they can effectively obtain more quickly? Or is the mix still across all your turbine types? Christian Bruch: No, absolutely. They are -- let's say, the timing effect is a predominant decision criteria at the moment. So if you can deliver faster, smaller turbines, they go from more smaller turbines. And you see also some solutions, which I deem not ideal from an efficiency perspective, if I look on lots of small gas engines or so, which we do not do ourselves, but I see some solutions discussed just to bring power to the sites. What we are seeing is -- and what is really, really good for us, we're seeing a very strong demand across all different frames of gas turbines even below the midsized gas turbines, so in that regard, we can play the full breadth of our portfolio, and that's superb. Tobias Hang: So the next question goes to Alex Virgo. Alexander Virgo: I wondered if you could just expand a little bit on that last one there. The 83 units that you've had on the industrial turbines and the color around the order backlog exposure to hyperscalers. I wondered if you could just talk a little bit about whether that number in the industrial turbines is really what's driving and underpinning the hyperscaler exposure? And the sort of extension of that, your U.S. peer has just signed a big framework agreement, multiunit framework agreement. And I think you alluded, Christian, to that in your -- maybe it was an earlier answer on your prepared remarks, you talked about the trend to multiunits in the context of the customer discussions you're having. I wondered if you could give us a sense of whether it's likely that you're able to sign something similar? Or you're seeing that in the discussions you're having? Christian Bruch: I hope also there. I heard you correctly because our -- the worst qualities from time to time on the call is not good. I mean, looking across the, let's say, how should I say, diversity of the order book. And this is what I believe I heard from you, Alex, in terms of the different areas. Obviously, it's relatively evenly distributed around the frames. I mean, yes, the biggest chunk in terms of numbers more than obviously 50% is the midsized gas turbines. You have it evenly distributed really across the different regions. Roughly 40% is U.S., as I said, 35% EU, 15% release in China. If you see the order book, for what we're currently having is roughly 2/3 is a new unit, 1/3 is service. So that is roughly the distribution around it. If you take the data centers on the 29 -- on the orders, and if you talk about the 29 gigawatts of reservation agreements which we have outstanding, it's only half of this is data centers and half of this is conventional business is what we are seeing which also means only half of this is U.S. So this is obviously the diversity, which we have in the order book. There was a second part of the question? The multiunit -- thank you, the multiunit contracts. Yes, absolutely, we see it. We not only see it in data centers. There are some applications. We don't so prominently communicate it because not every customer wants that. But there is also bigger multiunit contracts outside the data center framework, which we have been taking and will continue to take. But we also see in the data center field framework agreements for several years and obviously, lots of units under discussion and also under conclusion in our order book. Tobias Hang: So now the last 3 questions go to Vivek Midha from Citi, Vlad Sergievskii from Barclays and last a follow-up from Phil Buller. Vivek, please go ahead. Vivek Midha: Hope you can hear me well. My question is on Grid. The margin of 17.6% is very healthy and in the upper half of the full year guidance range. Historically, Grid is not a business with that obvious seasonality. So should we see the upper half of that range is a better guide for the full year margin? And can you maybe talk about the continued fixed cost degression effects you talked about last year versus pricing impact and so on? Maria Ferraro: Yes. Thank you, Vivek, for that, and thank you for asking a question on our very nice profit development at Grid Technologies. So just maybe to preface this a little bit. So they did have a strong margin in the first quarter. There are also some underlying topics like sometimes FX, hedging, et cetera, onetime positive effects but I don't want to focus on that too much for grid technologies. What they have done and what they continue to do is execute through their backlog very efficiently, looking at things like productivity. So underlying, we see a very steady positive development. And actually, you can see that not only quarter-over-quarter, but also year-over-year. So I wouldn't expect -- I mean it was high. I would really look at their guidance of 16% to 18%, right, and see how that, let's say, is quite stably developing in the next quarters. Tobias Hang: So next question goes to Vlad. Vladimir Sergievskiy: So gas turbine orders, obviously exceptionally strong in the first quarter. Could you give us an idea of how much did it extend your backlog duration in Gas Services? And also more conceptual question. Is there a natural limit to how long backlog duration could get to? Is there a point when it becomes hard for customers to plan that far upfront? Christian Bruch: Yes. Maria, do you want to take it or [indiscernible]? Maria Ferraro: How about I take the first one. Vlad, and again, please correct us. Again, it was a bit difficult to hear. But in terms of our backlog, which I showed earlier, the EUR 146 billion, of which 45% is service. This plays very nicely into the backlog of gas services. And I think we showed that quite nicely also at the Capital Market Day, where we saw a step-up in the margin not only on new units, but also on service. And what's nice about the backlog and Gas Services, which is at EUR 60 billion, by the way, overall, a new record for them is that if you look at the new units, you tend to have, depending on frame size, I think Christian just nicely described that earlier. It depends on the frame size on how long that remains in our backlog before ultimate execution. Large frames are 3 years, maybe 3 to 4 years, perhaps the smaller frames are between 12 and 24. But what's really nice about the backlog of Gas Services is the service backlog there in. And that has an average duration in terms of our long-term service program contracts of around 13 to 14 years. So that's what -- when I talk about visibility in the EUR 146 billion backlog, I don't just talk about the next year or the year after. I really talk about the visibility that we have beyond -- towards the end of the decade and beyond. And again, I think EUR 10 billion of the backlog that we see right now around will continue to be executed until the end of fiscal year, if you think about it from that perspective and then an additional, let's say, more than that between EUR 10 billion and EUR 20 billion executed into the next fiscal year '27. As a rule of thumb, again, it all depends on how much we refill the backlog and, of course, what we execute there in. Thanks for the question. Tobias Hang: So the last question now goes to Phil, once again. Philip Buller: I think a lot of the questions are trying to disaggregate the more traditional customer environment in GS versus the data center customers. So I was hoping just to clarify a little bit. I think you said a quarter of the backlog is data center now for new units, but is the book-to-bill in Q1 for those traditional customers comfortably above 1? Reservation agreements, I know you don't disclose what the cash component is, but are there any reservation payments at all from traditional customer sets? And is there -- are you seeing signs of price elasticity, specifically for that traditional customer set? I know in aggregate, pricing is very good, but I'm just trying to drill down on the situation for that more traditional customer set, please? Christian Bruch: Yes. I mean what you have to see in quarter 1 revenue on Gas is roughly EUR 3 billion, right? And you see the order intake on EUR 8.8 billion. So -- and the answer is yes. I mean you have a book-to-bill above 1 on the very conventional base. And this is why I was giving this 25% indication also. And we feel comfortable also with the existing other market. That's why I continuously say, we are not dependent on the data centers. But they are the cream on the cake. And obviously, if you have a, let's say, early slot, you can really make nice profit around this. But obviously, going forward, if we now -- and then also in terms of reservation agreements, right? These things are also in discussions with classical customers. But the timing pressure is a little bit more flexible, I would say, for utility-driven customers. But keep in mind, we have the upcoming 10 gigawatts discussion in Germany, right? I mean -- and absolutely, we are already long-term planning this in, and we want to serve this market, and we will be in and but this is all considered at the moment. So I think across the board, it's a good market for gas. Tobias Hang: So with that, we would conclude the Q&A. And Christian, I don't know if you want to have some closing remarks just at the end? Christian Bruch: No, just an invitation also to the AGM to join us there in terms of giving a look back and a look forward. No, thank you really for participating in the call. It has been an interesting quarter. I'm very, very proud of our organization on how they execute through a demanding time, I have to say, seeing the geopolitics and everything and the high workload. Big thanks to everybody who was on the call, big thanks to the team purple here at Siemens Energy. Tobias Hang: Thank you so much, Christian. So with that, we conclude the call. And if you have any questions, you can always reach out to us at the Investor Relations team. Thank you. Bye-bye. Operator: That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. A recording of this conference call will be available on the Investor Relations section of the Siemens Energy website. The website address is www.siemens-energy.com/investor-relations. Have a nice day. Bye-bye.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the CECONOMY Q1 2025-2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I will now hand over to Fabienne Caron, Vice President, Investor Relations and Communications. Please go ahead. Fabienne Caron: Thank you. Good morning, everyone, and welcome to our Q1 results. I'm joined today by our CEO, Dr. Kai-Ulrich Deissner; and our CFO, Remko Rijnders. Before we begin, a brief reminder. Today's discussion will include forward-looking statements. Please refer to the disclaimer in the presentation for important information. This call is being recorded, and the recorded (sic) [ recording ] will be available on our website later today. With that, I'm pleased to hand over to Kai to walk you through the key highlights. Kai, over to you. Kai-Ulrich Deissner: Thank you, Fabienne. Good morning, everyone. Thank you for joining us today. Together with my partner in crime, our trusted CFO, Remko Rijnders, I will soon take you through the results of our first quarter in financial year '25-'26. But let's first recognize, Q1 is a very important quarter for us. It includes the full peak season around Black Week and Singles Day and Cyber Week and Christmas. And in that quarter, we see millions of customers visiting our stores and our app. So at least statistically, you personally will have been part of those customers, too, and hopefully, even in real life and not just statistically. But effectively, it's a stress test for us, a stress test to our business model and how well we serve customers. So the key message here today is we've delivered, and we have successfully completed that stress test. Now over the past many quarters, we said it time and again, we have been on a clear strategic journey, transforming CECONOMY from a traditional retailer into what we call a true omnichannel service platform. Quarter-by-quarter, this strategy is paying off also in this quarter. Just to remind you, we're tackling this transformation from 2 angles. First, we're building our business beyond traditional retail with some significant growth areas, as we call them, that continue to perform really well. On a full year basis, this is now already a EUR 1 billion business. But the second, the real driver here is our customers because they fundamentally changed how they think about shopping and therefore, what they expect from us. Now every team member across our 11 markets understands this shift and is very focused on delivering what we call experience electronics, putting the customer experience at the heart of what we do every day. We're creating shopping journeys that match what people today want and today need. Even though we still have a lot of work to do naturally, we're making real progress, and we're committed to getting better every day. The results we present to you today underline this, that we're on a path of progress, growth in sales and profitability and customer satisfaction and online share and in our growth businesses. We think this is an exceptional achievement in our sector, particularly in a retail environment that remains highly competitive and volatile. Together, all these elements are a strong foundation for future growth and of course, to reach our midterm targets by the end of this financial year '25-'26. For us, this makes this year so important. It's the finishing stretch of our journey since the Capital Market Day in 2023. Ladies and gentlemen, CECONOMY is on the right path strategically, operationally and financially. Our consistent performance gives us confidence, and that is why we are also confirming our positive outlook for the full year '25-'26. With that, now let's look at those details of Q1. Let me start with an overview on Slide 3. This quarter sends a very clear message. Our strategy is continuing to work and our business continues to have strong momentum because we are ruthlessly putting the customer in the center. Two points to back this up. One highlight I'm particularly proud of, our online share is at an all-time high, 30%. This is not just a number. It's a clear sign of our successful transformation from traditional bricks-and-mortar into an omnichannel retailer. Customers are choosing us across all touch points. And this seamless integration between online and offline is our core strength. Second, at the same time, we've achieved a record NPS, Net Promoter Score, so the recommendations by our customers of 61 in Q1. We read this as a signal of trust from our customers for our focus on service quality, for personalized advice and for simplifying their customer journey. Customer satisfaction is not an add-on to our strategy. It's the core of our experience electronics approach. And when you look at these 2 records together, online share and Net Promoter Score, we are strengthening our foundation and building the basis for future growth. We're improving convenience through our omnichannel capabilities, and we're elevating the experience through service and expertise. That balance is exactly what differentiates us, and it positions CECONOMY with MediaMarkt and Saturn for sustainable long-term growth even in the future. Let's turn to Slide 4. You will see here that our growth continued across all key financial KPIs. Sales, EBIT, EPS, our major performance indicators, all moved in the right direction. We grew our profitability now for the 12th quarter in a row, 3 years quarter by quarter by quarter. That's uniquely meaningful considering the challenging economy that all of us in this sector are facing. Second, sales grew by 3.4% to now EUR 7.6 billion. Adjusted EBIT in absolute figures grew by EUR 31 million or 11% to EUR 311 million in the quarter, and EPS was up 23% to now EUR 0.37. The basis of all of this, our strong sales development, was driven by 2 key factors. First, the increase reflects the strength of our international portfolio of countries. We will tell you more about our countries a bit later. Second, our growth businesses gained even more momentum, proving once again how critical they are now for our long-term profitability profile. Taken together, these developments do give us confidence, confidence that our strategy is working, that our organization is executing with discipline and focus. And that's once again why we are reiterating our full year guidance today. More on that at the end. Let's take one step further and go deeper into the operational performance with the next slide, that's Slide 5. In summary, what you can see here is the strength and the resilience of our business model during peak season. Online sales grew by 6.9%, and I will repeat that our online share increased to an all-time high of 30% and our bricks-and-mortar business also grew during that first quarter. Profitability increased for the 12th consecutive quarter, and our free cash flow was strong at EUR 1.4 billion with an equally strong liquidity position underneath. Even more customers now trust us, become my MediaMarkt or my Saturn members. We grew our loyalty customers to now 57 million. Next, our growth businesses now scale rapidly. This is becoming a defining element of our strategy. As you can see, Service & Solutions income increased significantly and so did Retail Media income. And here's an interesting one. Refurbished unit sales grew almost 400%. There is clearly more and more customer demand for affordable and sustainable options, and we are meeting it. Several of our key countries delivered excellent performances. Turkiye, Spain, Hungary, Italy, all achieved strong sales momentum and better profitability. Now we did see a softer demand in Germany and Austria, but this only shows how valuable our diversified international portfolio is, gives us balanced stability and multiple engines of growth. Overall, Slide 5 demonstrates we're scaling the right businesses. We're executing consistently across the markets, and we're thus building a more resilient and more profitable CECONOMY and MediaMarktSaturn that will continue to grow in the future. The next slide, #6, you will probably recognize. We presented each quarter to give you transparency about the development of the 9 KPIs that we introduced at our Capital Markets Day back in 2023 because these 9 KPIs represent the essence of our strategic focus. And we are getting to the finishing line now. Across the various business fields, Retail Core, Service & Solutions, Marketplace, Space-as-a-Service, Retail Media, we took big steps towards all those targets that will become due on the 30th of September 2026. You take a step back, retail at the core, strong momentum in our growth fields and all of that with a focus on the customer. That's the architecture of our journey that I've outlined. And you can see how this materializes in numbers on this slide. When you look at the structure of our EBIT development, it becomes very clear how significant our growth businesses have become for the group. Our revenue and profit mix is becoming more diversified, more resilient and more future-proof and most importantly, with more growth. As you've seen over the past quarters, this is not just a temporary effect. It marks a structural shift in how value is created within CECONOMY. We're no longer dependent on the traditional retail cycle alone. Instead, we're building a balanced portfolio that combines the stability of our Retail Core with the high margins of Service & Solutions, Marketplace, Private Label, Space-as-a-Service and Retail Media. Now next, a closer look at our peak season on Slide 8. In summary, what we can say, our teams executed exceptionally well across all major product and service categories. Let's start with product. In our Retail Core, we saw strong performance, especially in gaming hardware, floor care, toys and computing. Here's what's sold best, the Nintendo Switch 2, the PlayStation 5, as well as robot vacuum cleaners. And interestingly, we had a substantial sales increase in toys. For example, LEGO, I'm told LEGO flowers are really hot on the market at the moment. So you can see that products that are beyond our core assortment can also become favorites for our customers. PCs also sold very well, mostly driven by laptops. And in this context, here's another interesting detail. We've also just released our very first private label, so own gaming laptop. It's called the [ Experian ]. Now in parallel to this Retail Core business, at the same time, Retail Media grew substantially across the whole portfolio, nearly doubled its web shop ads volume. This business is really scaling rapidly now. And we're -- also, as we anticipated at the end of last year, we're extending our customer base for Retail Media with customers outside the traditional consumer electronics sector. For example, Opel. Opel showcased the new Opel Frontera in various MediaMarkt stores in the Netherlands, another example outside Retail Core. Services & Solutions delivered another strong quarter. This was primarily driven by bundling campaigns and by preparation of those bundles and value-added services in central warehouses, so a more efficient way of producing this. These bundles are key for us to reduce complexity for customers, it's easier to buy and of course, reduce complexity for employees as well. So they drive on the one hand side attachment of service and income, and they also drive efficiency for us. Two examples. We launched maintenance packages in Turkiye. These are designed to extend the lifespan of the device that the customer may have, improve long-term energy efficiency and even help with hygiene conditions, in particular, for household appliances at home. Now, in real life, each maintenance procedure is carried out either on site at the customer or at the service workshop by specialized technical personnel. Second example is the successful launch of what we call the SparKette bundles in Germany. Here, we focus on subscription contracts like antivirus or Microsoft 365 licenses, combined with devices like smartphones and tablets, and there's always a clear price benefit for customers. Final milestone and interesting detail here is the collaboration between our growth field Service & Solutions and Marketplace because we now also offer insurances, not just for the products that we sell in our retail business, but also for Marketplace in Germany, so for third-party products from independent sellers. As you can see, our peak season performance was really broad-based, fully in line with our strategy and operationally really strong. Now before I hand over to Remko, let me have a closer look at one of those longer term trends that we continuously emphasize, and it's circular economy on Slide 9, because this really had some extra momentum in Q1. Customers are actively choosing more and more sustainable and from their perspective, affordable alternatives. You can see that in the numbers. The BetterWay sales share increased another 2 percentage points to 16%. Now those of you who follow us more often and more regularly, please note, we had to redefine our BetterWay scope. So what you're seeing here is the new BetterWay logic. Why? Because new energy labels are being introduced on an EU level. So we withdrew categories [ without ] such a label, that's, for example, vacuum cleaners and coffee machines, and we also introduced new criteria for smartphones. That's why it's the new BetterWay scope increasing 2 percentage points to 16%. But most strikingly, perhaps and importantly, refurbished sales, mainly on the Marketplace for us, grew significantly by 380%. This came from more and more specialized sellers and thus a broader assortment. In December alone, one in 4 products sold on the Marketplace was refurbished. And finally, trade-In numbers also grew. In Spain, we already launched a more efficient trade-In platform for us internally, and it shows promising results. The technology that underlies this simplifies the customer journey, and it increases conversion, and it gives us a better return as a retailer. We'll roll out this platform in more countries throughout this year. But as you can see with all of these developments, we're not just responding to customer expectations. We're actively shaping a more sustainable, more innovative and future-oriented retail model around circularity. Now let me hand over to Remko for a closer look at those financials. Remko? Remko Rijnders: Yes. Thank you, Kai, and good morning to all of you. Now let me share some more details of our Q1 results. We will start with Slide 11. As Kai already highlighted in the beginning, this is our 12th consecutive quarter with positive EBIT growth, and this in a market which is volatile and competitive. So we can and are extremely proud of this result. Let's look at the headline numbers. We grew sales in Q1 by a solid 3.4%. This number is adjusted for currency and portfolio changes and pre-IAS 29. And our like-for-like sales grew by 3%, that is if you count only comparable selling space and stores already opened 1 year ago. Compared with our overall economic development, particularly in retail, this is a very good result. Now let's look at our regions, starting with DACH and sales. Over the peak season, we faced intensive competition and many customers held back on spending. This was most pronounced in Germany and Austria, leaving sales down with 2.9% versus last year in the DACH region. We balanced that with a better gross margin, thanks to our growth business and by running a tighter cost base, especially our location costs. Overall, EBIT margin was up 10 basis points in the quarter. In Western and Southern Europe, sales rose by 4.7% with growth in every country. Spain and Italy were particularly strong performers. On profitability, EBIT increased strongly with EUR 11 million and margin expanded by 30 basis points. Moving to Eastern Europe. Sales were once again driven by Turkiye. We are pleased to see that our restructuring measures in Poland are gaining traction, leading to a double-digit million improvement in adjusted EBIT in the quarter. For the region overall, adjusted EBIT reached EUR 46 million, equivalent to 4.1% margin, a very strong result, and we are extremely proud of a starting turnaround in Poland. Now let me turn to our largest growth business, Service & Solutions, on Slide 13. In Q1, sales grew by nearly 14% with momentum across both online and in-store channels, truly omnichannel. All service categories increased with extended warranties showing the strongest growth. We are pleased to share that extended warranties are now available on our marketplace in Germany and are being well received by all our customers. We plan to roll this out to additional countries soon. Then to online. Our first-party online sales grew also with 6.9% to EUR 2.2 billion. We recorded a particular strong performance in Hungary, Poland, Switzerland, Turkiye and Spain. And on the back of this, our online share reached a record 30%, the highest level since COVID, a very strong performance in my view. So let me come back to our EBIT development on Slide 15 in more detail. Our gross margin increased by 40 basis points in the quarter, driven by our growth businesses. This highlights that our strategy is working and helps mitigate the impact of a challenging environment. Now on cost. Our adjusted OpEx ratio improved by 20 basis points, thanks to a relentless focus on cost. We are more efficient in marketing while maintaining a stable share of voice in the market. We have also taken measures to further optimize location costs. We will remain disciplined on cost for the remaining part of the year, particularly in DACH region given the market environment. Turning to the full overview on Slide 16 from adjusted EBIT to net profit. Walking down from the adjusted EBIT of EUR 311 million, we recorded limited nonrecurring items. The bulk of those are due to IAS 29 hyperinflation accounting. Consequently, our reported EBIT reached EUR 293 million, which is a robust increase of EUR 64 million year-on-year. Our net financial result improved, thanks to Turkiye. Overall, Q1 delivered higher reported net income and EPS. EPS rose by 23% to EUR 0.37, a solid performance. Then let me continue with free cash flow on Slide 17. Overall, we generated EUR 1.4 billion of positive free cash flow, a very solid performance. This was driven by strong operating performance and seasonal working capital inflows typical for the peak season. We closed the quarter with a strong net position of EUR 2 billion. This completes then as well the financial section, and let me now hand over back to you, Kai. Kai-Ulrich Deissner: Thanks, Remko. Now what you've just heard from both of us, we continue to have positive momentum strategically, operationally, financially. And we do expect this to continue for financial year '25-'26. That's why we are confidently confirming our outlook. You can see that on Slide 19. We continue to expect a moderate increase in currency and portfolio adjusted total sales with all of our regions contributing to that sales growth. Secondly, we continue to expect an adjusted EBIT of around EUR 500 million. This is still the target for the financial year '25-'26, that we first communicated at our Capital Markets Day in 2023 and ever since. This improvement this year will be driven by the DACH region and the Western and Southern Europe. Finally, as we look ahead, let me give you a perspective on the innovation trends that will long-term shape customer demand in the future. We can see them on Slide 20. First, in household robotics, we expect major progress that will bring smarter, more autonomous solutions into everyday homes, like this picture that you can see here of a floor care robot that can actually climb stairs. We also see strong momentum in smart glasses, where the next generation will finally bring the form factor out of the niche and closer to the mass market. Finally, health tech is another innovative field that we think caters to a larger trend because in this day and age, who doesn't want to be fit. We see fast improvements in health tracking and the use of data here, new devices, new services emerging every month. For us, all of these trends will support traffic, demand and category expansion over the coming quarters. They fundamentally reinforce our belief that consumer electronics will remain one of the most dynamic retail segments. And so we're happy to be in that particular segment. Most importantly, we are ready for this and now stronger than ever. Our stores, our online platforms, our omnichannel infrastructure are well positioned to bring these innovations to consumers in Europe with advice, with service, with installation, with a full set of solutions around the product. And yes, with our partner, JD.com. But to be sure, today was about our Q1 performance, but you will have seen the result of the tender offer, and you will have seen the progress of regulatory approvals. Of course, we will continue to update you always on our website and personally at every major milestone. But to reiterate and to confirm, we continue to expect closing of that transaction within the first half of this calendar year. Now let me conclude with Slide 21, a brief summary of what this quarter tells you about CECONOMY today and about the foundation for the future. Our experience electronics strategy continues to drive higher customer satisfaction, NPS and deeper engagement, even stronger loyalty. The combination of expert advice, seamless online journeys and a growing set of value-added services is clearly resonating with customers. Our Q1 the stress test, as I called it, performance demonstrates we have a strong and balanced portfolio. Our growing high-margin businesses make us stronger. Together, they make the company more resilient, more profitable, exactly what we set out to achieve with our transformation in 2023. By now, our growth business are an integral part of our business, and they continue to grow. In all of that, [ core ] focus remains very disciplined on cost, liquidity and profitability. And with our new strategic partner, JD.com, we now have a unique opportunity to accelerate this development over 12 quarters even further in technology, in logistics, and assortment and many more. Last but not least, we're confirming our outlook for financial year '25-'26, we expect a moderate sales increase and adjusted EBIT of around EUR 500 million. Ladies and gentlemen, these are the main takeaways. We stay confident for the rest of the year. Our execution is in full swing, and we're on a path of future growth. We've started this year with strong momentum, and we're well on track to deliver on our ambitions. Thank you for your attention so far. We're now really looking forward to your questions. Operator: [Operator Instructions] We are now going to proceed with our first question. The questions come from the line of Matthias Inverardi from Thomson Reuters. Matthias Inverardi: Can you hear me? Kai-Ulrich Deissner: We can hear you perfectly well. Proceed. Matthias Inverardi: Not so surprising, I have a question concerning your Fnac Darty shares. Have you decided yet if you're going to sell them to Mr. Kretinsky or not? Kai-Ulrich Deissner: Yes. Look, we're still waiting for the concrete and detailed offer. We will then look at that offer in detail and analyze it, and then we will take a decision. No decision has been made yet. Operator: We have no further questions on the phone line. So I'll hand back for any written questions. Thank you. Kai-Ulrich Deissner: Caron tells me that we should wait for 1 minute or 2. So please do feel encouraged to ask questions. We're really very willing to engage in whatever conversation you may have. So we'll give you another minute. Operator: Currently, we have no further questions. [Operator Instructions] Fabienne Caron: Thank you. We've got a question on chat from Alex Zienkowicz from mwb research. The first part of the question is regarding gross margin. Is it purely driven by mix? Or did you benefit from a lower promotion share? Or were you better on price? Kai-Ulrich Deissner: Yes. Alex, thanks for your question. So we have stated a couple of times already that we are very [ rigous ] on to grow, but to grow profitable. So first of all, we are really analyzing the profitability per category. It's not mix driven. That's what I can already tell you. So it's a benefit on the gross margin of really [ rigous ] negotiation and pushing the products and offering the products with a better margin. That's true. But it's also related to how we do the customer journey online and offline with better accessory attached, for example, and that helps also in the mix because, of course, the average margin on accessories is for sure, much, much better. So it's a mix effect on accessories and of course, the goods margin as such by being very [ rigous ] where we want to grow and profitable to grow based on customer demand. Fabienne Caron: The second part of the question is on Poland. Can you provide more color on the EBIT improvement in Poland, please? Kai-Ulrich Deissner: This is Kai again. I'll take the question on Poland. Remko will take the next one. Now as Remko said, we are actually very proud of the initial signs of turnaround that we've seen in Poland. As you know, we are operating there in a very competitive environment. So we've done several things actually. We set up a new management structure with a new CEO and CFO, both of whom are now on board. And in particular, we improved our capabilities in online and in Service & Solutions. So the positive results in Q1 that we're here reporting are largely due to online, a much better performance in online also in technical capabilities. For example, if you remember, we introduced the Marketplace in Poland only last year. In parallel to all of this, of course, we are reviewing cost structures to get further efficiencies out of the business. But I would -- what I would highlight is, in particular, the new management structure and our increased online performance and capabilities. Fabienne Caron: The next question is from Philip Brandlein, Lebensmittel Zeitung. First part of the question, looking at the DACH region, how do you plan to improve sales and EBIT? Remko Rijnders: I will take this question. So looking at the DACH region, we started Q1 slightly below expectation from an EBIT perspective, mainly driven by top line. So what we have an -- a customer demand decreasing. So the next implementation that we are doing at the moment is to simplify it. We have a clear action plan in place where we have on the top line a lot of focus on the top 200 products. So of course, we have many more products, 15,000 SKUs online, but we focus on 200 products that make around about 40% of our sales. And what are we doing? We secure really end-to-end for these 200 products together with our partners, our suppliers that there is always availability on the products that we are really on par with pricing, that we have visibility online but also offline. So to explain, when you as a customer enter the store, these products are immediately visible. And these products also generate 40% of sales. We also make sure that the right accessories are there next to it, both on and offline to make sure that you have the right experience as a customer. On the EBIT side, we have also implemented a very strong cost program. And this cost program, we already mentioned it, is focusing on location costs, but also a lot on indirect spend. So we see that the cost percentage in Germany, percentage of sales has potential also compared to other countries. So we are really benchmarking the cost between the countries, making sure that we get on par with the cost. So to summarize it, on the top line, a extreme focus on the top 200. And on the cost line, it's really making sure that we get for every cost line in Germany on par with the benchmark of our company. Fabienne Caron: I will bundle the 2 questions together. First is from Philip Brandlein, and the next one is Paul Dean from Churchill Capital. So it's both regarding JD. First, you stated that CECONOMY is ready to accelerate with JD. What will that look like? Is that true that the Joybuy Express service will be available for MediaMarkt soon? And the second part of the question from Paul is asking regarding the AU FSR review, which has been in pre-notification stage since August last year. If you could provide more color on how is this progressing? Kai-Ulrich Deissner: And I'm happy to do that. Thank you, Philip and Paul, for the questions. Now first of all, on what's our plan with JD. Now let me remind you and reiterate, this is all about growth. So think of this as both top line and profitability growth in the future, centered around what has been the essence of our transformation here as well. So an omnichannel approach, both companies believe in both online and bricks-and-mortar and an approach centered on delivering excellent customer service. So that's the big headline what this is about. Now we've also highlighted a few areas in which we believe there is most potential for them -- for that future growth. One of them is indeed logistics. So we will be looking at faster delivery, better delivery, more reliable delivery quality for our customers. At this stage, however, it is too early to comment on specific services like Joybuy Express. But what I can confirm and what I can reiterate is that delivery capabilities are very much in focus of what we think as growth opportunities together with JD.com. That's on the first part of the question. On the second part of the question on FSR, I cannot give you any color on this. We are in very constructive discussions with JD, and we are in very constructive discussions with all regulatory approval authorities, including the European offices in Brussels, and it is all progressing, as I said, as we had anticipated to be concluded in the first half of this year. Fabienne Caron: The next question from chat comes from Darja Lema from Bloomberg Intelligence. With EUR 311 million EBIT achieved in Q1, can you provide more color on how you plan to achieve EUR 500 million by the end of the year? Does it involve cost cutting or a significant uplift from your growth businesses such as Retail Media or Services? Remko Rijnders: Yes, this is Remko. Thanks for your question. So in our EBIT, to start off with, there is always a seasonality, right? So in Q1, we reached 64% of our EBIT ambition or budget and in Q2 at 6% normally, Q3 is around about 1% and then Q4 is -- our Q4 is 29%. So looking at Q1, that's why also Kai already mentioned that our Q1 is and was extremely important to reach our EUR 500 million ambition, and we are right on track with our, yes, projection of the around EUR 500 million EBIT achievement. Now to answer your question a bit more in detail, when it comes to cost, we have said from the beginning, and we keep on doing that, when there is a soft line in DACH, mainly at the moment, we are very [ rigous ] on costs. So especially on the indirect cost, we are taking the initiatives, but also on location costs, for example. So the cost in percentage of sales needs to stay in par of reaching that EUR 500 million. Other than that, our strategy is working. That's what we have seen also in Q1. We keep our strategy. And yes, a big part of that strategy is focusing on accelerating on our growth businesses. And that's what we will do, what we believe in, has paid off for 12 quarters in a row, still paying off. And with that, we will reach the EUR 500 million. Operator: There are no further questions at this time. So I'll now hand back to Dr. Kai-Ulrich Deissner for closing remarks. Thank you. Kai-Ulrich Deissner: Yes. I'll take a deep breath to give anybody a chance to still raise their hand, but -- and wait for one more minute before I will close with a few additional comments. But just give everyone one more minute. Okay. Look, thank you for your time and your questions this morning. If you want to engage with us any further through our official channels, we're always very happy to continue those conversations. And if you can't wait for another 3 months to speak to us again, you're very welcome to join our Annual General Meeting. It happens exactly a week today. There are dial-ins for the press available, and you get to see more of this wonderful company in a week's time. And we will be happy to present our Q2 results to you on May 13. Until then, Remko, Fabienne and I wish you all the best. Thank you for your interest, and see you very, very soon. Goodbye. Remko Rijnders: Thank you. Goodbye. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a good rest of your day.
Operator: Good day, and thank you for standing by. Welcome to the Humana Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lisa Stoner, Vice President of Investor Relations. Please go ahead. Lisa Stoner: Thank you, and good morning. I hope everyone had a chance to review our press release and prepared remarks which are available on our website. We will begin this morning with brief remarks from James Rechtin, Humana's President and Chief Executive Officer, and Chief Financial Officer, Celeste Mellet. Before we begin our discussion, I need to advise call participants of our cautionary statement. Certain of the matters discussed in this conference call are forward-looking and involve a number of risks and uncertainties. Actual results could differ materially. Investors are advised to read the detailed risk factors discussed in our latest Form 10-Ks, our other filings with the Securities and Exchange Commission, and our fourth quarter 2025 earnings press release as they relate to forward-looking statements along with other risks discussed in our SEC filings. We undertake no obligation to publicly address or update any forward-looking statements in future filings or communications regarding our business or results. Today's press release, our historical financial news releases, and our filings with the SEC are all also available on our Investor Relations site. All participants should note that today's discussion includes financial measures that are not in accordance with generally accepted accounting principles or GAAP. Manager's explanation for the use of these non-GAAP measures reconciliations of GAAP to non-GAAP financial measures are included in today's press release. Any references to earnings per share or EPS made during this conference call refer to diluted earnings per common share. Finally, the call is being recorded for replay purposes. The replay will be available on the Investor Relations page of Humana's website, humana.com, later today. With that, I will turn the call over to James Rechtin. James Rechtin: Thank you, Lisa, and good morning, everyone. Thank you for joining us. Let me hit the headlines. We are pleased with our solid 2025 performance. We continue to feel good about our membership growth. We remain committed to a consumer-centric strategy that is responsive to what our patients and members want and need. And we also recognize that to do that, we must deliver a stable and compelling margin. That requires regularly adapting to our funding environment. We will continue to do this to adapt to our funding environment to ensure that we stay on track with unlocking the earnings potential of the business by 2028 as we laid out at our 2025 Investor Day. Now I will briefly describe the progress we are making operationally. And as usual, I will frame my comments today around the four drivers of our business. That is first, product and experience, which drive customer retention and growth. Second, clinical excellence, which delivers clinical outcomes and medical margin. Third, highly efficient operations. And fourth, our capital allocation and growth in both CenterWell and Medicaid. I will wrap up with additional commentary on the advanced rate notes. Most of my time today will be spent on Medicare product and experience given the continued concerns that have been expressed by the market. So let me start there. First, let me clarify what I believe are the real questions related to growth. Is this quality membership with attractive economics? Can we operationally absorb the growth, and are we sufficiently positioned to fund the growth? Second, let me take a moment to remind everyone how we think about growth. Our focus is on maximizing customer lifetime value and customer NPV. To maximize lifetime value and NPV, two things must be true. We must be priced appropriately to a sustainable and compelling margin, and we must retain our membership year over year. The way that we do that is by investing in an exceptional experience that fuels improved health outcomes and member retention. We also have moved away from past strategies built around loss leader plans. We design all of our plans to be priced to a sustainable margin. Adjusting for stars. Third, let me provide an overview of our growth and why we like the growth. We grew by approximately 1,000,000 members or 20% in AEP. Our retention rate improved over 500 basis points year over year. And I'm gonna keep emphasizing that that is good growth. Over 70% of our new sales were switchers from competitor plans. On average, switchers have better economics. Now I recognize that there are concerns about switchers from plan exits that our competitors have done. We did not have a high percentage of members impacted by competitor plan. We absorbed approximately 12% of these members. That is notably less than our market share. 70% of new sales were in with four stars or better. And nearly 30% of our new sales were bounce-back members. So these are members that we have seen before in previous years. We recognize them, and we are pleased with the mix. Over 75% of our new sales were from higher lifetime value channels, so they're from better sales channels. This is nearly a 10 percentage point improvement year over year, and, again, we view this as a very positive development. When we look at full year 2026, we do anticipate individual MA membership growth of approximately 25%. And I will continue to remind everybody that as we collect new information, and as the market evolves, we are continuing to manage our go-to-market strategy dynamically. We have levers to pull if and when needed, and we are constantly that. Now fourth, let me briefly touch on the economics of our growth. We expect our new members to be accretive to the enterprise in 2026. We also continue to expect that when normalizing for STARS, our 2026 pricing results in a doubling of individual MA margin year over year. My final point on growth is that we feel good about our operational capacity to absorb the growth. As we previously stated, capacity. this is a focus area for us. We are committed to not outgrow our operational and to ensure a quality experience and quality care for our members. We have been very much managing this proactively. The early signs on our ability to onboard are positive. In January, during the height of onboarding, we'll touch on just a few examples. We reduced our complaints to Medicare year over year. We improved our transactional net promoter score. So this is a measure of customer service when members interact with our service center or contact center. And we increased our completion rate for health risk assessments. And I'd also just point out that complaint to Medicare, CTMs, and health risk assessments, HRAs, these are both star metrics. Where we are ahead of where we were a year ago. In both of these areas. So let me close with this. We expect our growth to be accretive in year. But more importantly, it further fuels our ability to unlock our earnings potential by 2028 as we laid out at Investor Day. In recognition of the high level of interest in our overall growth strategy, president of enterprise growth David Dintenfass, will join Celeste, George, and me again today. For Q and A. Now let me briefly turn to clinical excellence and touch on our STARS performance. Efforts to strengthen our STARS program continue to progress as anticipated. Our outlook remains the same as previously communicated. We feel good about our operational progress so far. We continue to be confident that we are on the right track to return to top quartile STARS results in b y '28. Once the hybrid season is complete next quarter, we will provide some additional visibility into our final operating results. However, we will not speculate on thresholds. Turning to highly efficient operations, we are making meaningful progress which is evident in our 2026 admin expense ratio. Celeste will provide more color on the drivers of this improvement. And regarding capital allocation, we continue to grow our Medicaid and CenterWell footprint. Medicaid now spans 13 states. Including Georgia and Texas, which are anticipated to launch next year. We also hope to soon announce a strategic acquisition in the primary care space. Celeste will also provide color on our capital efficiency efforts that ensure that we have the capacity to fund both our member growth and some continued m and a while protecting our credit rating, which is a priority. Before concluding today, I also wanna touch on the advanced rate notice. I understand, I recognize, that there is concern around the rate notice. As I've I as I've said in the past, Medicare Advantage sits at the intersection of US fiscal pressures and a program that is incredibly popular with seniors. Every administration wrestles with how to balance these two forces. We are committed to always protecting our consumers the best we can, and we are very aware that we must do that within the constraints of the annual funding environment. If that funding environment cannot fully support our benefit structure, then we will adapt as we have in the past. But right now, we must wait and see where the final rate notice comes in. So in conclusion, we expect to keep moving forward with margin progression in 2026, adjusted for STARS. We continue to feel good about the way our member growth is setting us up for this year in subsequent years. We are making progress on Starz. We will adapt to the rate notice once it's final. Before turning it over to Celeste, I am pleased to share that Aaron Martin joined the company in January as president of Medicare Advantage and a member of the enterprise leadership team. Aaron joins Humana with vast experience in health care, including a focus on making health care more convenient, engaging, and valuable to customers. He will be working closely with George and the team over the coming months and will elevate to the president of insurance role upon George's retirement. We're excited to have Aaron on the team. And expect that you will have the opportunity to hear from him later this year. With that, I will turn it over to Celeste for a few remarks before we go to Q and A. Celeste Mellet: Thank you, James. I will begin by echoing a few key messages. First, we delivered on our commitments in 2025. We reported adjusted EPS of $17.14 in line with expectations and above our initial guidance of approximately 16.25 while electing to make higher than initially planned investments to accelerate our transformation and position us well for the future. Second, we remain confident in our customer-led strategy and 2026 membership outlook. We expect new members to be enterprise accretive in 2026 on average. More importantly, we expect the membership to drive significant lifetime value further fueling our ability to unlock the earnings potential of the business by 2028, as laid out at our Investor Day. Third, we always take an appropriately conservative approach to final guidance. For 2026, the level of conservatism in our initial guide is higher than typical to account for the dynamic environment. Fourth, we are confident in our ability to fund the 2026 membership growth and are comfortable with our capital and our debt to cap level. Finally, we are committed to delivering a stable and compelling MA margin and unlocking the earnings potential of the business by 2028. Our MA benefit strategy must and will contemplate the funding environment each year. We must drive sustainable earnings and appropriate returns for our members and our patients. to be able to provide excellent health outcomes and service. Turning to brief comments on 2025. Our results for the year were underpinned by solid performance across the insurance and CenterWell segment. The full year insurance segment benefit ratio of 90.4% came in slightly better than our guidance. The full year ratio includes a benefit set aside for a potential doc fix in 2025, which was then invested in areas such as network management, and increased administrative costs to support things such as technology in other areas that position us well for the future. I will now pivot to further details on 2026. We expect full year adjusted EPS of at least $9 with the anticipated year over year decline driven by the previous communicated bonus year 2026 STARS headwind net of mitigation. We remain confident in the overall assumptions used in our 2026 pricing. As a result, we continue to anticipate doubling individual MA pretax margin in 2026 normalizing for STARS. Meaning, if 95% of our members were in four plus star plans, consistent with 2025, we would see a doubling of individual MA margin in 2026. The expected underlying margin expansion is aided by clinical excellence and operating efficiency efforts which are progressing as anticipated. Further, early indicators such as risk scores, pharmacy claims, and hospital admits per thousand or APTs are in line with expectation. All in, after accounting for the 26 stars headwind, our initial guidance assumes individual MA margins are slightly below breakeven. Let me touch briefly on the STARS headwind. The net STARS headwind for 2026 including individual and group MA, is approximately $3.5 billion. This is net of both contract diversification and provider offset. Which as a reminder, are lower than typical due to our star support for providers. When calculating the headwind for '26, it is important to keep the membership and revenue growth in mind which is why the number is larger than what we have previously discussed with you. While we now have 45% of members in four plus star plans for '26, Our expected membership base will also be 25% higher due to the '26 member growth. Which includes strong retention. Higher retention means that we kept more members on the 3.5 star contracts than we previously expected. In addition, rated below four stars approximately 30% of new sales were on contracts for b y '26. Turning to our ongoing efficiency efforts. We expect significant improvement in our consolidated operating costs ratio for 2026. The decrease is primarily driven by operating leverage from membership and revenue growth, along with tactical cost cutting and transformation efforts. Partially offset by the impact of the star rating headwind. As outlined at last year's Investor Day, we have made meaningful progress on tactical efficiency improvements, including consolidating our supplier base and the early retirement program we discussed with you last year. These actions have contributed to year over year operating expense ratio improvements. Looking ahead, we expect our broader transformation efforts to increasingly impact results beginning this year. This includes expanding outsourcing capabilities, simplifying and standardizing processes, and leveraging technology and automation. For example, our work with partners to outsource components of some corporate functions is progressing as planned delivering improved capabilities and cost efficiencies. These items are just a sample of our multiyear transformation that is driving efficiency and changing how we operate. I will now speak to the balance sheet and our plans for funding the 26 membership growth. As I discussed throughout 2025, we have been focused on efforts to increase the efficiency of our balance sheet and fortify our foundation. These initiatives include optimizing legal entity structures, refining reinsurance and risk transfer arrangements, selling noncore assets, and managing the timing and structure of capital deployment. Of note, the capital optimization progress made to date significantly reduced the required funding for expected membership growth in 2026. Despite expected premium growth of 40% from '24 to twenty six, our statutory capital requirements will increase by less than 20%. These improvements in capital efficiency will offset over $3 billion of growth in our capital requirements from the '24 through '26 representing the overwhelming majority of the capital needed to fund 2026 membership growth. While maintaining capital with a prudent buffer above regulatory requirements and rating agency expectation. Finally, after contemplating capital to work require to fund '26 membership growth, and select small to midsized strategic m and a opportunity which we expect to fund with the sale of noncore assets, we remain comfortable with our debt to cap levels which are expected to remain largely flat year over year. We remain committed to prudent debt to capital management are focused on maintaining our credit rating. In summary, we are pleased with our solid performance in 2025 and believe '26 represents an important step forward on our journey of unlocking the earnings potential of the business by '28. Including delivering a stable and compelling MA margin. I will turn the call back to Lisa to start the Q and A. Lisa Stoner: Great. Thank you, Celeste. Before starting the Q and A, just a quick reminder that in fairness to the long list of those waiting in the queue, we ask that you please limit yourself to one question. Operator, please introduce the first caller. Operator: Thank you. As a reminder to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Our first question comes from the line of Stephen Baxter with Wells Fargo. Your line is now open. Stephen Baxter: Yeah. Hi. Thank you. We hear you on the membership growth being enterprise accretive. I mean, I guess, potentially could you expand a little bit on the level of earnings that you can drive purely outside of the MA underwriting? And then as we look at the MA underwriting margins, and I isolation, being slightly below breakeven, how would we contrast that against your retained growth versus the new growth that you expect to take on this year? Celeste Mellet: Hi. Thank you for your question. So when we talk about enterprise accretive, we are including the earnings associated with CenterWell. So if you recall last year, we had a headwind in CenterWell Pharmacy because of the decline in membership. This year, we have a significant tailwind in CenterWell Pharmacy associated with the new membership. We also will have greater patients and at CenterWell PCO and expect to see an increase in home health volumes also related to the membership growth. And all of that growth across CenterWell is very positive from a margin perspective. As it relates to individual MA margins, as I mentioned, we expect them to be just below breakeven in total in 2026. While we don't provide cohort level margin information for competitive reasons, I'm gonna give you a little more detail this year given the unique dynamics. So when you take the STARS headwind into account, the margins look largely similar for new and continuing members due to the following. First, on continuing members, they're disproportionately impacted by the STARS headwind, with the majority on contracts with less than four Stars. Absent the stars headwind, as we've talked about extensively, margin would be significantly better. New members are less impacted by the STARS headwind, so 70% are on four plus STAR plans, but 30% are on plans with less than four stars. They have a similar margin to the existing cohort for a couple of reasons. One, the cost of acquisition. Which is a little bit lower this year due to the actions we've taken, but still significant. And two, a higher MLR as associated with the new members driven by one, lower MRA if conditions have not been previously captured, and in some cases, potentially higher med costs if they have not been managed before joining Humana. So net net, the overall margin for the existing and the new cohorts are fairly consistent but for very different reasons. Stephen Baxter: Thank you. Operator: Our next question comes from the line of Justin Lake with Wolfe Research. Your line is now open. Justin Lake: Thanks. Good morning. I wanted to focus on kind of the trajectory forward. To Steve's question, you're losing you have slightly below breakeven margin in the insurance business in the new members. Can you talk a little bit about how I'm estimating you got about 2,500,000 new members here. To Humana. It's a huge cohort. How is the typical progress if we think about removing stars from the equation, what's the typical progress in margins over a three- to five-year period? How should we think about that cohort becoming accretive? And then if James, to your comments on getting back to 75%, the or I should say the top quartile on stars, what would be the net benefit in 2027 from that? Approximately compared to the $3.5 billion pit? Headwind you had this year? On a net basis? Thanks. Celeste Mellet: Justin, I'll take the first part of your question. George may add to it, and then James will jump in. In terms of the margin progression, if you think about, like, from year one to year two, you have a pretty substantial pickup as you have a more normalized marketing load. So your marketing load takes around five years fully run out, but it typically will be cut in half between the first and the second here, though. First and second year, though slightly less because of some of the actions we took this year, some of the levers that we pulled. Second, you have an improvement in your medical benefit ratio throughout the period. So you'll have an improvement in the second year, then the third year, then the fourth, then even in the fifth is probably where it normalizes. So you should have a fairly substantial increase in the first year with the combination of the marketing load being lower and then that improvement in the MLR. And then you know, slow improvement on the cohort in the years after that. George, anything you might add to that? George Renaudin: Yes, Celeste. Thanks. The other things that I would just think about is you onboard members and move them through their experience with us. Just three other things to think about that helps improve the margin as well. First, of course, is MRA, which, as we continue to work coding, getting members appropriately coded in the follow-up care that they need, as a result of the assessments that we do, we find an improvement both the coding and in their medical management. And that's the second part of that medical management also is able to kick in. We have many programs, many value-based programs as well as our care management programs that will take effect and that helps in the ongoing years. And third, if you think about how the membership comes in, they come in and typically, there's a lower share of them that are paneled to value-based partners or well-performing value-based partners. So as they progress through, they become more and more paneled to those well-performing value-based partners, which also helps improve the margin over time. So there really are three major impacts that happen as those members come in. And as we get them, into our programs and provide better outcomes for them. James Rechtin: Yeah. Let me jump into the STARS question. I presume the nature of the question is you're trying to understand the difference between 95% of membership in a four-star plan and our metric of seventy-fifth percentile. I that what is that delta? The Let me remind everybody that we have chosen to anchor on seventy-fifth percentile for two reasons. One is as changes in policy change the nature of STAR's performance across the entire industry, it is better for us to index to the industry than to a specific number. Obviously, anything that changes across the industry, you would expect to be incorporated into pricing and benefits over time. And so it wouldn't have a net impact on margin or overall profitability, but it could have an impact on the revenue. And the second reason that we anchored on seventy-fifth percentile is that from a planning perspective, we felt it was prudent to anchor on a place that gave us some planning flexibility over time. And so that was the rationale for seventy-fifth percentile. The challenge that we have in giving you a specific number is that this does, at the end of the day, tie back to where is the industry performing and what are the policy changes impacting STAR's. So we don't have a specific number that we can give you around that. But what I would again emphasize, and I know I just said this, but whatever that number is, if we're at the seventy-fifth percentile, we feel comfortable that we can accommodate that in our pricing our benefits in a way that will not have an impact that we should be able to achieve our margin expectations over time. Celeste Mellet: And if I can just add, Justin, in the numbers we laid out for you at the Investor Day, we were the 2028 number reflects or the math as I told you guys to do, reflects stars at the seventy-fifth percentile. So that is the headwind of not being at the 95% is reflected in what we've laid out for you. Operator: Thank you. Our next question comes from the line of Ann Hynes with Mizuho Securities. Ann Hynes: Thanks for the question. How did your expectations for 2026 change versus your thoughts on Investor Day? I know you didn't give guidance, but you did say 2026 would take a step back. But I think the step back is probably a little steeper than what we thought. Can you just provide what the big deltas were from then to now? Also, you said in your prepared remarks that the guidance is more conservative this year than normal years. You just go through what part of guidance you think is the most conservative? That would be great. Thank you. Celeste Mellet: Ann, I think the biggest difference between where we were at Investor Day and where our guidance played out is really the embedded conservatism in our numbers. So within the assumptions themselves, you know, we tend to always have conservatism in MRA be given that don't have a full picture until later in the year. We based on what we have today, we're feel very good about where we are. In terms of our trend, I'll share with you what's embedded in the guidance, but what we did in the end is basically haircut where we landed just given our known headwinds and tailwinds. So while some of the assumptions have conservatism embedded, there's just a broader haircut. So what's embedded from a trend perspective is cost trends that look a lot like 2025, but slightly higher for a reason I'll lay out. So as a reminder, we assume the higher end of mid-single-digit medical costs for 2025 and low double-digit RX trends, that is about where we landed. So '26 would be similar, though higher because of the lack of doc fix in 2025 and the inclusion of Doxx in 2026. Ann Hynes: Thank you. Operator: Our next question comes from the line of Benjamin Hendrix with RBC Capital Markets. Your line is now open. Benjamin Hendrix: Hey. Great. Thank you very much. I wanted to zero in quickly on the 140,000 new DSNP members to 18% growth there. Just, if you could kind of frame how that compared to your expectations both in the absolute number and then also on the profile, were they bounce-back members? Did they come from exited communities from your competitors? And, you know, the degree to which they're paneled to your value-based partners thinks. George Renaudin: Hey, Ben. Thanks. This is George. So on the DSNP, the absolute number is higher than our expectations because our overall growth is higher than our initial expectations. But as a percentage, it's slightly lower. So that's the way to think about the DSNP membership. Now to your other questions, as James said in his opening remarks, we did not gain our market share, if you will, of those plan exits from our competitors. And so that holds true across the business. And to your last question about value-based partners, as I said, the membership comes in oftentimes, not paneled at the same level as our ongoing block of business. And we would expect, as we do every year, that the amount of paneling to increase year over year. Now having said that, our duals, because most of them are on HMO products, do tend to come in paneled. So, when you think about the dual membership, versus our core membership, the dual membership would be a greater share paneled compared to the overall block of business. Benjamin Hendrix: Thank you. Operator: Our next question comes from the line of Joshua Raskin with Nephron Research. Your line is now open. Joshua Raskin: Hi. Thanks. I'll apologize for the redundancy and where I think I'm going. But as you mentioned the individual margins that are slightly negative in 2026. So going back to the Investor Day from June, is there anything you've seen that changes your view the ultimate margin profile of this now larger book of business and as you as you look out to 2028 and specifically any updated views around attaining that top quartile stars rating as well as perhaps the impact of the 2027 rate notice. Celeste Mellet: Hey, Josh. I'm gonna take a crack at your question, then James will jump in. So as you think about 2028, wanna remind you of our scale. So with the growth this year, it gives us quite a jump on achieving the 2028 target. So if you look at the operating cost ratio, the improvement is fairly significant even accounting for the STARS headwind, and that's really driven by the operating leverage from membership and revenue growth. The cost cutting that we've talked about is consistent with what we talked spoke with you about at the Investor Day. We're on track for that. And then, you know, the operating leverage does reflect you know, the investments we made in onboarding and ensuring that we have the right capabilities in place with the expanded medical base or with the expanded member base. So we are ensuring we spend the money to do it right, but still have the significant pickup. So I think about the step forward in terms of operating leverage. And as I mentioned in my opening remarks and James mentioned as well, we're gonna you know, we'll adapt to the funding environment. So we expect to continue to make good progress on 2028 and feel good about our trajectory so far. James Rechtin: Yeah. So let me hit stars, and I'll touch on the rate notice as well. On STARS, again, what I'm gonna emphasize just philosophically is the single biggest thing that we were adjusting to as we went through AEP and as we considered OEP and Roy. Is our ability to onboard, and a big portion of that is what can we absorb from a star standpoint. Again, there's only so much that you have clear visibility into early in the year. We try to give a couple of examples there with both CTMs and with the HRAs. Where we do have some early look at progress. And progress is actually quite positive. And to be clear, that's not on an absolute basis. That's on a per member basis. That is adjusted for the cohort who is onboarding. Know, the other thing I would point out on STARS, there's a couple of things that we're doing differently versus two years ago that also better positions us to manage a large new member cohort. One is we are simply starting our programs earlier in the year. So if you went back two years ago, we would really start most of our proactive programs in the second half of the year and sometimes as late as the fourth quarter of the year most of those are starting late first quarter, early second quarter. When we get our initial data on those members on those members' health status. The second thing that I would point out is we have gotten much better at using that data to do appropriate targeting. To understand who very early in the year has already cleared a whole bunch of STARS metrics. And therefore, where do we devote our resources to close gaps for those who have open gaps? So both of those things just put us in a operationally in a much better place to handle STARS. Now look, I'm also just gonna state the obvious. This is STARS. It is a relative score. There is always risk in this. You know, can we you know, can we say that there's no risk? Of course, we cannot. But can we say that we feel good about our ability to mitigate that risk yes, this has been very much top of mind. So let me flip the rate notice here for a second. I don't know that I have a lot to add over my initial comments. You know? I think everybody is well aware that the advance rate notice is you know, came in below medical cost trend. Like, that's not that's not new at this point. We you know, we recognize the pressures that are constantly being balanced here. We are you know, we are doing what we can to advocate for our members and our patients to make sure that we get to a appropriate funding level that protects their interests. And, you know, at the end of the day, you know, this is a difficult dynamic, but we will adjust to wherever the final rate notice lands. You know, like, that you know, that is the bottom line. Wherever we end up at the end of the day, we will adjust to that. And between now and then, we're gonna do everything we can to advocate for our members. Operator: Thank you. Our next question comes from the line of Scott Fidel with Goldman Sachs. Your line is now open. Scott Fidel: Thanks. Good morning. Can you give us some detail into relative to the 25% overall MA growth that breaks down in terms of PPO? Versus HMO in terms of the relative growth rates that you're seeing across there? And then, also, in terms of relative to the metric you had around the percentage of new members that you gained from competitor exits maybe hone in on the PPO specifically what percentage you estimate for the PPO product. Thanks. David Dintenfass: Yeah. Hey, Scott. This is David. We won't be able to disclose all those details, but what I would say is this, is that between HMO, PPO, and frankly, across our plan, we've tried to have a reasonable margin across all of them. That's part of the new strategy. It's not to have higher margin and lower margin plans and be worried about outgrowth in the lower margin plans. So we can't disclose the exact growth rates, but, you know, the ability for both of those to be accretive much more balanced than it has been in the past. Scott Fidel: Thank you. Operator: Our next question comes from the line of A. J. Rice with UBS. Your line is now open. A. J. Rice: Hi, everybody. I appreciate all the comments about different aspects of operating leverage and so forth. But just to make sure I got the right perspective on it, I think at the Investor Day, you talked about the transformation initiative broadly. Having a improvement from 25 to 20 to twenty twenty eight of 1.6 to 2 billion in pretax earnings. I know there's a lot of things going on this year. But in your '26 outlook, how much of that will you have realized this year, if any, And how much sort of progressively do you expect to get over the next few years to get to that? Level? I don't know if there's upfront costs, so maybe it's not having any impact to positive this year, but just some flavor how we can sort of track how you're progressing, given that's a big part of the getting to the earnings power of the company for twenty eight. Celeste Mellet: Yeah. Thanks, AJ. So there, as I said before, there are two components of the operating leverage. There's the revenue growth which is driven by member growth and then growth in CenterWell. And then the cost savings. So in terms of member growth and the pickup at least from a member volume perspective in CenterWell, we have we are close to where we would have expected to be in 2028. In terms of the cost cutting, we are only just beginning. So we expect a significant pickup in '27 and then '28. So we still have quite bit to go the same sort of trajectory as we talked about at the Investor Day. We've been very deliberate about how we do the cost cutting. We wanna ensure that we do it in a way that makes sense and is sustainable and doesn't put the business risk put business as re at risk as we do it. So still quite a bit bit to go there. So we continue we expect to continue to see upside there. Let me also remind you that we expect continued growth in terms of our clinics in Centerwell as well as progress in some of the strategic initiatives on the pharmacy side that we've talked to you about. And we also expect to continue to see improvement in the margin in group MA. We did have you know, before the STARS headwind, this year, a 500 basis point pickup due to recontracting efforts. There's still several 100 basis points to go. We still have upside in Medicaid as we continue to move through the J curve. And then moving through the J curve also on the center well PCO clinic. So all in, we still think there's there's upside through both the overall work we're doing on margin improvement as well as the cost cutting. Operator: Thank you. Our next question comes from the line of Jason Kusorla with Guggenheim Partners. Your line is now open. Jason Kusorla: Great. Thanks. Good morning. Maybe just looking back to 2025, your investments spend that you spiked out appears to be or appears to have totaled well over $550 million. Which which seemingly indicates that your individual MA business outperformed pretty well this year, kind of netting against those investments. Can you remind us how much of that investment spend is run rating into 2026? And relative to how you're thinking about guidance and your conservative posturing, are you taking a similar approach in terms of spending away any outperformance this year, or can you frame how you're thinking about further investment spend? Thanks. Celeste Mellet: Yeah. So let me hit the first part. So we your your estimate is close to about right in terms of the incremental investments. We did you know, we do have a lot that we wanna do to transform the company, we did invest there. As it relates to this year, we are not currently contemplating any incremental investments. We are continuing to just generally invest in the company. We are not cutting back on tech investments. In fact, that's a little bit higher. We're not starving the business as we move forward. We're trying to balance the short term and the long term, but we are being very mindful of our spending. And then in terms you know, and as it relates to STARS, we talked about last year being a transition year. So the overall STARS investments on a PMPM basis are down, That's driven by sort of scaling back in some of our old programs and scaling up some of a lot of the new programs, including the work we're doing about member onboarding and some of the other things that James spoke to you about. We've also found much more efficient ways to improve stars. So overall, actually, our star spend is is fairly consistent with last year on an absolute dollar basis, but on a PMPM basis, it's down significantly, and that's driven by the 25% membership growth. And I forgot the second part of the question. Jason Kusorla: If you were thank you. Just if you were going to Celeste Mellet: Oh, yeah. Sorry. You did some incremental investments for Yeah. Sorry. You know, we we if if we decide to do that, which we may, we will be very transparent. Transparent with you if we decide to make investments throughout the year, we will share that with you so you understand the operating performance versus you know, where we might be offsetting it with investments. Operator: Thank you. Our next question comes from the line of Ryan Langston with TD Securities. Your line is now open. Ryan Langston: Great. Thanks. On the higher level of bounce-back membership recapture, is there a way to generally think about how long those members have been away from Humana? And then on V28, you previously said it's about 160 basis point impact just given the sort of level of new growth. Is that still in the ballpark? Or is there anything to add there? George Renaudin: Right. On the bounce back, we'll be able to disclose specific details. We look back over several years to say where have the member has been bouncing back. And obviously, the more recent membership is a bigger percentage of the overall, but we look back several years to say which members do we actually have previous experience with, and that's the close to 30% number. And this was the second part of the question that I Celeste Mellet: Yeah. And on V28. Yeah. Your number is correct. Nothing has changed there. Yeah. Operator: Thank you. Our next question comes from the line of Elizabeth Anderson with Evercore ISI. Line is now open. Elizabeth Anderson: Hi, guys. Thanks so much for the question. I was wondering if you could talk a little bit more detail about the change in EPS seasonality this year. It's a little bit different than prior SKUs. Just wanted to better understand if that's all IRA related or if there's anything else involved in there. And then any early comments that you guys can share on OEP in terms of what you're seeing in terms of additional retention or anything else there? Thank you very much. So the seasonality is a bit different than last year. The underlying factors are the same. So the IRA is driving you know, steeper curve a steep curve, but it's I guess, aggravated, if you will, by the stars headwind. So as you you have the the loss of operating leverage from STARS, and that that sort of aggravates the second half of the year. Versus 2025. But, otherwise, outside of STARS, the trajectory would be very similar. David Dintenfass: And and it was what you asked about AEP. It's a little early to know. Again, we quoted a 500 base point improvement in AEP. I think for OEP, it's too early to know, but we do think there's upside to that. I mean, we like the momentum. As James said, we're liking the transactional NPS. There's a lot of indication that our members are liking the benefits stability. And so, we do think there's upside, but it's just early to have a number. Operator: Thank you. Our next question comes from the line of Kevin Fischbeck with Bank of America. Your line is now open. Kevin Fischbeck: Great, thanks. I wanted to ask about 2027 thoughts. Obviously, you're not concerned about how things are going to play out from a cross perspective in 'twenty six, but the market is. I want to understand how you guys believe your visibility is going to play out over the next several months? Is there anything you're doing extra to make sure that if there is an issue, it is in fact captured before you have to submit bids for 2027? And then it's not clear to me what you mean when you say you're going to factor in you know, the rate environment for 2027. Know, we've seen a bunch of companies more recently just say, we're focusing on margin, wherever membership lands, it lands. And the market seems to like that. But your LTV commentary seems leave some wiggle room to kinda say, no. I need to retain members. So, like, what does it mean? Like, to to adjust to the rate? Are you going to immediately go back to the margin trajectory you were on, or are you gonna have to balance margin and membership growth? You think about LTV? Thanks. Yeah. Hey. Thanks for the question. On the first half of that, you know, we we have a good look at member performance by around April and and then we have a better look in May. And both of those views are early enough that if we need to make adjustments in the bid, we can make adjustments in the bid. So we should have a solid enough understanding of what the current cohort looks like. At the type of bit at the time of bid and be able to incorporate that in. So we feel good about that. And by the way, that is no different than other years. So so we feel good there. On the second half of the question, yeah. Let let let me be clear. We we made a set of commitments to ourselves and to investors at Investor Day last year. And we are standing by those commitments. And and so our focus is on retaining membership to be sure but it is on getting the first goal is to get to the margin trajectory that this business needs to be on over the long term. Right? Like, we are focused on getting to the right long term sustainable, durable, attractive margin. And and and, yes, we're gonna retain as many members as we can along the way. Are we focused on new member growth? No. Like, new member growth is not the focus. It is great experience. It is retention, and it's getting to the right margin. Profile. Kevin Fischbeck: Thank you. Operator: Our next question comes from the line of Erin Wright with Morgan Stanley. Erin Wright: Sorry. A two-part question here. I'm going back to the rate notice. But is there anything specifically on the rate notice that you would have outsized exposure to relative to the industry from a coding perspective, or can you talk about some of those components of the rate notice and how you're thinking about that? And then, you know, just from a, you know, statutory capital perspective and the requirements there, the more favorable positioning, was that associated with deemphasis of certain states or jurisdictions, and is there more to do on that front? And and or more to accomplish there and then just your capital deployment there on? Thanks. James Rechtin: I'm now focused on the second question. Remind me what the first question The rate notice. Oh, the rate notice. Yeah. Yeah. Yeah. So on the rate notice, the you know, first of all, we're still working through some of the detailed analysis. But the high-level message is the changes that have occurred from a policy standpoint this year do not have the same type of variance that v 28 had. In general, most of the industry should be impacted around a pretty narrow band around the industry mean. And so even as we're working through some of the details, you know, we feel pretty confident that everybody's gonna be a margin of error around the industry beat. Celeste Mellet: Yeah. And in terms of the capital activities, we have done most of the work that we think makes sense in terms of redomestication, which is move really focusing on moving around the legal entities. There is more work that we can do that there is more opportunity for us on some of the other areas, including reinsurance. So you know, we'll we still have those in our pocket as we think about going into 2027, etcetera. But overall, we're very happy with the progress we made and expect to continue to really focus on ensuring that we have the right amount of capital in place, but not too much, which becomes a drag in terms of our overall and our ability to invest in other areas. Erin Wright: Thank you. Operator: Our next question comes from the line of Matthew Gillmor with KeyBanc. Your line is now open. Matthew Gillmor: Hey, thanks for the question. I wanted to ask about value-based contracting. Can you just remind us the proportion of MA members that are capitated? Versus other risk models? And is there any comment in terms of how that's changed that you're thinking about 2026 and future periods? George Renaudin: Hey. Thank you for the question. I appreciate that, Matthew. So the percent of membership is relatively the same about a third in full risk, a third in value-based, other types of value-based, and then the third that are in either non-value-based or just some basic pay for performance. You know, one of the things that I mentioned before is that when you have an influx of members, generally, that number comes down a little bit at the start of the year. And as the year progresses, when members are choosing primary care doctors and or we have claims-based attribution of members into panels, that number builds back up. So that's the typical thing we see. We work with many high highly performing value-based partners and do not have really a significant percent of our membership with any particular provider. And we continue to see value-based partners, wanting to grow with us. We have many value-based partners that we've been speaking to as recently as in the last month or so that want to expand significantly with us. So we feel good about where we are with the value-based partners, and very much appreciate all the good things they do for our members contribute to better health outcomes and higher quality care. Operator: Thank you. Our next question comes from the line of Lance Wilkes with Bernstein. Your line is now open. Lance Wilkes: Yeah. I wanted to on the value base a little bit. Just ask for 26, what's the impact to MLR, if any, of, of any changes to value-based care financial terms or carve outs of things, or is that fairly stable and related to value-based care? What's the what's your sense of the capacity to absorb the magnitude of risk that you're talking about? And then just a quick cleanup question. In the incremental investments that you made in twenty five, what portion of that, if any, was in would have been in the medical cost? Or attributed medical costs? Thanks. Hey. Nothing really has changed with regard to the financial performance of the value base. Providers as far as proportionally how they contribute to our margins. So what we've shared before in Investor Days and what we shared before still holds true. I won't go into many details there because, obviously, those contracts between us and our value-based providers are proprietary, but we do a lot of work with them to help support them, to help them be successful in caring for our members and improving the health of those members. So nothing really has changed there from a value-based standpoint, except for I will say that a couple things we talked about before. The first is that we did provide significant support to them in 2025. By, taking back the Part D risk, which given the volatility that can have at a relatively smaller number of membership, for our value-based partners, we didn't think it actuarially made sense for them to take on that risk so we took that back. Now significant assistance to them in '25, and we continue then to '26. Additionally, we've said before, we also have done a lot of work to help mitigate the stars impacts of '26. So we continue to work with our partners in a very collaborative way. And appreciate the work they do for us. Celeste Mellet: And as it relates to the incremental investments, I'd say 90% were in medical costs. Operator: Thank you. Our last question comes from the line of Benjamin Mayo with Leerink Partners. Benjamin Mayo: James, any meeting changes to your provider contracting strategy year? I feel like I've heard provider contracting a couple times on the call, so just wondering if something's changed to minimize that friction. And I guess I mean this through the lens of a stars question around satisfaction. Thanks. Yeah. There have been a number of things we've done. I just mentioned two with what we did with Part D and what we've done with supporting and mitigating the STARS headwinds. But we also are continuing to do many things across broader landscape. We have a whole team that is looking at how we improve our contractual relationships with our providers. In a number of ways, including, as you mentioned, reducing the friction. We did make a large announcement last year about how we're improving the prior authorization process to decrease number of things that take prioritization and to increase the automation of how we do prior authorizations as well. One of the things that we have continued to do and that we have historically been very good at, for example, is for both our rural and nonrural providers. We, essentially pay on average those claims in under fifteen days. So we think that we also appropriately help our providers with their payment rate. So there are a number of things that we do to improve, and we have teams that are very much focused on, improving this provider relationships and reducing the abrasion. They are oftentimes the face of Humana to our members, and we wanna make sure that we maintain great relationships with them. James Rechtin: Hey. With that, I'm gonna turn to the close. And as we close out, I'm gonna start I'm gonna end where we started with the key messages that wanna make sure everybody understands. Again, we're pleased with our 2025 performance. We continue to feel good about the membership growth. We remain committed to a consumer-centric strategy that is responsive to what our patients and members want and need, and we recognize that to do that, we must deliver a stable and compelling margin. So I'm just gonna say that again. We must deliver a stable and compelling margin. And that requires that we adapt to our funding environment. We will continue to do that to ensure that we stay on track with unlocking the earnings potential of the business by 2028 as we laid out at our 2025 Investor Day. With that, I would thank you for joining us this morning and for your interest in Humana, and I wanna thank say thanks to our 65,000 associates who serve our members and our patients every day. We appreciate your support, and we hope you have a great day. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
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: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the Pegasystems Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, again, press star 1. Thank you. I would now like to turn the conference over to Peter Welburn, Vice President, Corporate Development and Investor Relations of Pegasystems. Peter? Please go ahead. Peter Welburn: Thanks so much, Krista. Good morning, everyone, and welcome to Pegasystems' 2025. The words expects, anticipates, intends, plans, believes, will, could, should, estimates, may, forecast, and guidance or variations of such words and other similar expressions identify forward-looking statements which speak only as of the date the statement was made and are based on current expectations and assumptions. Because such statements deal with future events, they are subject to various risks and uncertainties. Actual results for fiscal year 2026 and beyond could differ materially from the company's current expectations. Factors that could cause the company's results to differ materially from those expressed in forward-looking statements are contained in the company's press release announcing its Q4 2025 results and in the company's filings with the Securities and Exchange Commission including its annual report on Form 10-Ks for the year ended 12/31/2025, and in other recent filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved. Although subsequent events may cause our view to change except as required by law, we do not undertake and specifically disclaim any obligation to publicly update or revise these forward-looking statements. Whether as the result of new information, future events or otherwise. Our non-GAAP financial measures discussed in this call should only be considered in conjunction with our consolidated financial statements prepared in accordance with GAAP. Are not a substitute for financial measures prepared under U.S. GAAP. Constant currency measures are calculated by applying the 12/31/2025 foreign exchange rates to all periods shown. Reconciliations of GAAP and non-GAAP measures can be found in the company's press release announcing its Q4 2025 results. And with that, I turn the call over to Ken Stillwell, Chief Operating Officer and CFO of Pegasystems. Ken Stillwell: Thank you, Peter. I'm thrilled to share the financial highlights of what's been an outstanding year for Pega. Execution by our global sales team, powered by our blueprint experiential sales approach drove top-line outperformance in 2025. And our company-wide commitment to Rule of 40, supported by robust internal adoption of AI built natively in our platform delivered bottom-line outperformance as well. Let's start with the top line. Total ACV grew 17% year over year as reported, and 14% in constant currency. Beating our guidance. Pega Cloud ACV, once again, drove that growth. Increasing 33% year over year as reported. And 28% in constant currency. That was a pretty significant acceleration from last year's 18% growth rate as reported and 21% in constant currency. And Pega Cloud ACV growth accelerated sequentially in all four quarters in 2025 in constant currency, demonstrating the power of both our cloud-first strategy and blueprint our AI design agent. Three factors drove our ACV growth acceleration in 2025. First, the blueprint revolution has been key to our growth. Blueprint moved from a promising experiment in 2024 to a fundamental change in how we sold in 2025. Enabling a completely new experiential sales process. Our Blueprint agent is now core to how we operate. Shaping everything from how we sell to how we deliver and drive client's success. Second, we have the strongest global sales execution that we've ever had. We drove a highly effective, disciplined, and scalable sales cadence worldwide, an unwavering focus on customer outcomes. Our account executives executed exceptionally well against our target account model, reinforcing the importance of focus, and discipline. And third, we've been increasing demand from our clients and partners for Pega's differentiated predictable AI agents, integrated into proven enterprise workflows. As a result of these factors, our net new ACV increased by 37% year over year in constant currency. Looking ahead, we're confident in the durability of our ACV growth. Because of the strength of our moat. Pega is deeply embedded in our clients' core operations, through vertical-specific workflows, and it's integrated at enterprise scale. Supporting hundreds of millions of users globally. Pega has become a trusted compliance backbone for our clients and for regulators worldwide. And you may have noticed that we just achieved ISO 442001 a two and a certification across Pega Cloud services. Our GenAI solutions, and our predictive and adaptive analytics capabilities. Pega's financial performance achieved several key milestones in 2025. Among them, free cash flow increased 45% year over year to $491 million. Exceeding our guidance by $51 million. This outstanding improvement in free cash flow was driven by our ACV growth and reflects the full strength of Pega's subscription model and the benefits of our subscription transition. Our strong free cash flow generation provides us with the flexibility to invest for growth, while also returning significant capital to shareholders. In 2025, our capital allocation strategy stayed firmly focused on driving long-term shareholder value. Our top priority continued to be investing in organic growth including product innovation, go-to-market capacity, where we generated consistent strong returns on invested capital. We also maintain a strong balance sheet. We ended 2025 with $426 million in cash and investments. During 2025, we repaid $468 million of debt. Repurchased $498 million of shares, and distributed million dollars in dividends. This reflects the strength and durability of our business model. Looking ahead, we are confident in our ability to sustain this balanced and disciplined approach to capital allocation. Our contractually committed backlog grew 28% as reported year over year, and 23% in constant currency. And now exceeds $2 billion as reported for the first time in Pega's history. The biggest driver of our backlog increase was the increase in Pega Cloud backlog. Which grew 36% as reported year over year. Pega cloud backlog now represents 74% of total backlog. Which is amazing. We're also really pleased that the Supreme Court of Virginia unanimously affirmed what the Virginia appellate court also unanimously recognized that the trade secret trial and resulting verdict were fundamentally flawed. What this means is that the $2 billion verdict is gone. For more details, please see the email I sent to our employees on January 8 which we filed as an 8-K. Moving to 2026 guidance. As a reminder, we provide only annual guidance, not quarterly guidance. We typically do not update guidance during the year unless we have a material acquisition. Here are our key guidance metrics for 2026. Total ACV growth of 15%, Total revenue of $2 billion an increase of approximately 15% and a very significant milestone for the firm. And free cash flow of $575 million a 17% increase over 2025. With our rapidly increasing free cash flows, our board also authorized an additional $1 billion in buyback capacity. This authorization reflects our confidence in the durability of our cash flows and our commitment to disciplined capital allocation. We don't provide quarterly guidance, I've received feedback that's helpful when I provide a few thoughts on modeling our business for 2026. First, with our subscription transition complete, you'll notice in our 2025 result, and in our 2026 guidance. That revenue growth and ACV growth are more closely aligned. Going forward, we expect this trend to continue. A dynamic some of your models may not have fully reflected yet. Now that Pega Cloud ACV is greater than 50% of total ACV, our annual revenue becomes more predictable. Second, in 2026, we expect the progression of our net new ACV to follow a more historically seasonal pattern with a significant amount of our net new ACV occurring in the second half of 2026. This timing reflects the nature of our contract renewals which are more concentrated into Q3 and 2026. As a result, we expect subscription license revenue to be back-end loaded as well. Third, as AI reshapes how Pega and its partners deliver solutions with Blueprint, we intentionally reduced our professional services billable headcount and increased our reliance on partners for delivery. So we expect full-year professional services revenue to represent roughly 10% of our $2 billion revenue guide in 2026. Finally, but also the most impactful factor is our rate of Pega Cloud ACV growth. Pega cloud ACV has accelerated for four consecutive quarters, fueled by the strength of Blueprint and strong execution. We expect this growth acceleration will continue to be driven by AI-powered automation initiatives by CIOs and executives prioritizing productivity and efficiency gains. Given these dynamics, we expect 30% in 2026. And you can see that acceleration signal in our current Pega cloud backlog growth. In conclusion, we've made tremendous progress in transforming our business model over the last several years. Looking back 2025 was a year where we positioned Pega exceptionally well for continued growth acceleration. Thanks to all of our employees for running the business with a rule of 40 mindset. We look forward to seeing investors in the next few weeks at upcoming investment banking conferences and also please mark your calendars. Our annual investor session will be held on Monday, June 8 at the MGM Grand in Las Vegas, Nevada in conjunction with PegaWorld, our annual client conference. We'd love to have you join us there in person. And with that, I'd like to hand it over to Alan Trefler. Our founder and CEO. Alan Trefler: Thank you, Ken. And it's a pleasure hearing you tick off those numbers. It's really was a terrific 2025, and though it actually feels like a long time ago, we should take a brief moment and enjoy it. Now that that moment has passed, let me tell you about what's gonna be happening in 2026. I'm really proud of our team coming into this year because what we have is the basis for some things that can be really really exciting. You know, in '25, we launched the Infinity platform as the first real agentic enterprise transformation platform. And we really extended our leadership position in the industry reports that matter the most. To our customers and prospects. You know, I love, if you go to our website, to have people see how Gartner and Forrester reflect on what we do and what we are doing. And being in this position where as a rule of 40 plus company, where you have the resources, we have the balance, I think we have the maturity, to go after this opportunity as we look to break the $2 billion a year threshold once again, it's really an exciting time. But it all comes down to what clients need. And, you know, I recently returned from Davos where I had dozens of conversations with senior leaders and global organizations. And they really mirror a lot of the discussions that we have all the time. Now there's lots of presentations and lots of noise even the occasional Super Bowl ad. About AGI, you know, artificial general intelligence. And how that's going to change the world in speculative perhaps dramatic ways. But in more normal settings, leaders are focused on the urgent practical questions. How do we leverage AI to reimagine our business? How to simplify. And modernize operations, and improve the customer experience? And, you know, the issue here isn't the AI models. We made some great decisions about being able to be pretty fungible in how we chose one model versus another for different settings. And, boy, that has turned out to be the absolutely right way to go about it. But that real question is not just the model. It's how and when do you use it. And I spoke about this at our last call, but it's so important. I think it's worth taking a few minutes and really going through it again. Our competition broadly is taking generative AI models and using them at runtime. Let me explain what that means. It means that when a customer or a staff member engages with whatever system is involved here, that model is reasoning there in the moment. From scratch. Trying to figure out what to do. And, you know, there are times when that's just fine. To tell you the truth. I mean, you know, when we use our blueprint technology, to rethink and reengineer and reenvision a set of complex business processes we do exactly that. We're using our real-time capabilities to engage with the designers. But if we're actually looking to do the work, we think it's a mistake, a serious mistake, to at runtime routinely go and call the model as if it's discovering what you're trying to do for the first time. Structurally. Our competition, whether it's, you know, Microsoft or Salesforce or ServiceNow, our competition rethinks the problem from scratch over and over again. And the slightly frightening thing is the models don't always come up with the same answers. Even in situations and regulated industries. Where coming up with the same answer is not just important. It is imperative. And people who have fallen or are falling into these traps some of them, I think, are starting to realize there's a problem here, a problem that Pega does not have, but a problem that is structural and endemic to the alternatives. And so you can hear the noise, and you can hear the wild claims. You can hear that LLMs can quote, you know, do it all. But the reality is the LLM will work best when used the right way. Now we've seen of late, think it's referred to as the SaaS pop up, sespocalypse. Where, you know, software companies have been really real live and obviously that's struck us as well as other firms. I think there's a lot of guilt by association here in this space. Let me share my views on that. First of all, there are definitely some software companies that are gonna die. The reality is every time there's a big technical shift, you see that sort of thing happen. I think, you know, software companies that are basically glorified spreadsheets with limited functionality. Yeah. You can do all sorts of magical things and Claude or even Copilot that enable you to go after those types of applications. But the applications we do for our clients the very, very large ones that we've historically worked with, and the more mid-market ones we've never gone down market, but the more mid-market ones that we've talked about wanting to open up as we look to scale up this business. That those companies really have processes that run them. And they want those processes to be respected. They want architectures that will be able to do reliable repeatable and our favorite word predictable, things. And authoring prompts is not a way to achieve that. Whereas building workflows that are intrinsically agenda. So what we've done is made it so that every workflow is able to run as an agent is able to call other agents from other companies, and is able to be part of a fabric that orchestrates processes across the enterprise and lets people interact conversational, less people interact in ways that leverage their whole collection of workflows. In ways that are at once innovative and predictable. And when we can explain this difference to organizations, we see lights go on. And it's very, very, very exciting. The thing about these set of differentiators is this is a structural advantage. This is not one of those things where one LLM is six weeks ahead of another. This is a difference in philosophy that goes to the very core and powerfully allows us to leverage our long, long history as a workflow model system. To be able to do what you need to do for customers, to be able to build a workflow that can run at scale that can be used through the power of AI and can incorporate and orchestrate AI in a way that is turning it over to a model is frankly a little bit freaky and unpredictable in my view here as well. Now having been able to do this for such a long time, I think the conjunction of this brand new SPIFI technology. Putting a real powerful sheen on Pega's traditional business is the sort of thing that I think a lot of customers are realizing can give them what they need and give them in a way that they can predict and that they can understand. Now I do have people ask, well, in this world in which you can generate vast amounts of code, right, where you can go to a cloud code or a codex or can, like, write programs. Who knows? Maybe that will be used to take out applications. Why is this still relevant? I'm gonna tell you exactly why it's relevant, more relevant than ever. It goes back to something that we've been saying literally for thirty years. The problem is not generating the first limit of code. Easy to do. The machines do it well. And for some problems, maybe that's all you need. But for the problems we solve for our clients, it's not just about day one. It's also about being able to go back in day 30 know what you have, be able to navigate it and figure out how I'm going to change it. How I'm going to evolve it. To use our trademark term, how are we going to build for change? We have the build for change system. Period. Well, that's a good trademark, which is nice, but we have the system, which I think is actually more important. And what people generating code have are, you know, instant legacies. And by the way, we use it too. Yes. You can create some really interesting things, when we're writing our systems. You wanna use the cogeneration. Because the world has changed in that way. But you want a structure. This is why I say a structural advantage. And that structure are libraries of workflows that enable the business to scale, predictability enable the business to operate objectively with reliability and able make make the software able to orchestrate between different agents, systems, and environment. And these are we believe, the fundamentals of what makes Pega special and quite quite different. Now I couldn't be fair without going back something I've talked about a lot. Which is I think the starting point for all of this, which is bluebird. Blueprint is the AI design engine. For the enterprise. It takes and it continues to get better, by the way, every every two weeks, there's something new. So if you haven't been on, blueprint.com and tried it, it's worth doing. It gets more and more exciting, and amazing every two weeks. Blueprint, the design agent, unleashes innovation. It really lets you describe what you want your business to be. It can go out to your website and see what you say about your market. It can go out to all of the all of the interfaces that you can upload into it so we can actually see how to hook this in to the actual systems that you have in your back office. And it allows you to have these instant and productive conversations with team members to be able to collaborate and to build out what you want the system to work. With. As I mentioned before, this has completely changed our go to market. We're having similar productive conversations with clients about how they want to see an application and know with certainty that they're gonna be able to get something that doesn't rely on PowerPoints. It allows on an experience that they can literally touch they can literally converse with. They can engage intently with it. And can do it in the first ten minutes. That we sit down with them? We're so excited about what this does, but I will tell you that my excitement is increased because this year, we've added features to enable not just our intellectual property, to be put into something called a vector database and incorporated in Blueprint, but to enable 10 of our best partners to be able to put their intellectual property their proprietary intellectual property, available only to them into BLUEPRINT. So when those partners are with one of their clients, they can use Blueprint as a vehicle to sell their projects. With their IP. And, you know, this is very new. But I think this is gonna be a tremendous opportunity for us to change the way we go to market by really leveraging the partners. And I'll tell you that still early stages, but these partners are enormously excited. You can see an interview with me and Ravi Kumar. The CEO of Cognizant. In which he directs his teams not just the Pega teams, but the company in general. To go and understand and use this technology. And I think Blueprint offers this chance that I have not seen before in the my history of attacker. And we've seen it turn into real results. For example, Proximus, which is the leading telecom provider in Belgium, recently used Blueprint to redesign a critical application in one day and actually get it into full production on Pega Cloud to four months. And this is so much more. Than they would have ever been able to do before. So exciting here as well. So, look, we love the term vibe coding. I don't know if it's gonna stick or not, but we're adding vibe features to Blueprint. To make it work. But all of this is much more than just five coding sort of a personal app to do something for you. This is about building enterprise systems to enterprise standards. With enterprise interfaces and reliability and the capabilities that you need to be able to run your business on it. And of course, run your business reliably and predictably. Now in addition to the apps that customers wanna have, we think that this is also a great chance to get rid of apps that customers wish they didn't have. And this is where you know, we made a recent acquisition, and this is where we built technology and we have key partnerships. With companies like Accenture and Wipro to be able to analyze existing legacy systems rethink with AI. Put them into blueprint, allow collaboration and then put them on this fast track. The legacy modernization. The thing I will tell you is it's not just faster. It's better. So I think being able to do this in conjunction with our partners is gonna allow us to accelerate our transformation. And going to allow us to achieve a whole new level of scale. And I'm really excited with the senior executives who I'm at Davos who love this stuff, actually. And they love it because if you go on to Blueprint, and you are signed on as one of these partners, we actually put their logo. We give them full credit for their IP contributing to this picture. And it's something that the bank can use in their selling motion. As well. So I think that the opportunity here out of Blueprint and where Blueprint is and will be going. Just continues to open new doors for us. So look, 2025 proved that disciplined innovation can win. And, you know, the market forces that are there, there's a lot of confusion. But the truth is the truth. Enterprises really wanna transform. They really wanna save money. They wanna do a better job for their customers. And work for us. Are at the heart of how enterprises work. Our Shutter Cloud Infinity platform was built for this moment, and predictable AI gives customers the advantages of the AI, but also really gives them the predictability of reliability so that we don't have to worry about a lot of things that I see other people agonizing about. In '26, our focus remains clear. Helping customers move from experimentation to execution, and move to outcomes from talk. And I am super excited by what I'm seeing. Pega is built for this era. We are built for change. And we are excited for what's next. Krista, you can open up the line for questions. Operator: Thank you. If you would like to ask a question, please press. We also ask that you limit yourself to one question and one follow-up. For any additional questions, please requeue. And your first question comes from Steve Enders with Citigroup. Please go ahead. Steve Enders: Okay. Great. Thanks for taking the questions this morning. I guess I just wanna start on just the deal environment and what you're seeing out there in terms of the macro. You know, understand that there's a it's like things are resonating on Blueprint and AI messaging. But just, I guess, what are you seeing in terms of deals getting across the finish line? Just how would you kind of characterize the current environment, and how you're thinking about that into '26? Alan Trefler: So, you know, I think the interesting thing about the blueprint approach and the whole way we've gone about using and pitching it is it so reduces friction around engaging the client. Because it's a very low cost, low risk transaction. For the customer to take a meeting and see what one of his systems could have been. Just need a little information. About what the systems are and what they do. And the fact is he doesn't touch him. And feel it. In the first hour. I think that's not the same as, you know, getting the check. But it does put the whole mindset at ease. So I would describe the early stages of the pipeline as really excitingly advanced. We've also used Bloomberg internally to create the workflows in our sales automation technology that enable us to evaluate a customer see what we know about them, see what's available on the web, see what other systems you know, these people who still upload us notes and TIBCO. And other sorts of things, see what other systems they have. And then actually be in a position to propose how they could do legacy transformation. And is all very fresh. It's a great use of AI. And it matches our, what we call, customer product matrix. With an actual customer and the information we have about that actual customer. And I think that also lets us open up a whole new set of conversations. Which from my point of view is pretty exciting. Ken Stillwell: I think, Steve, I'll add just a maybe a more tactical point on this. I don't I know that in my, you know, ten years at Pega, that I've seen more discussion with our clients around getting off of old legacy environments. Like, the pace at which that conversation is happening and how much people are engaging with Blueprint and how the, you know, many people or how many clients are coming, you know, to visit us that we're doing, like, we're actually doing workshops on trying to identify which systems. It's like the pace of that is I've not seen that speed. So that's really exciting for us, you know, just in terms of really the pace of digital transformation. Steve Enders: Okay. That's great to hear. And then I guess to follow-up, just in terms of, you know, I guess, the confidence on the ACV guide, you know, I guess, what is it that you're seeing out there that gives you that feeling you're gonna be able to hit that 15% and I guess the question we're getting from investors is, I think, the, you know, four q ACV number people were maybe hoping for a little bit of a better number there in seen a bit of a continued acceleration. And so I think it is, you know, like, maybe slip into '26 or just yeah. What is it that you're saying that maybe provides that perspective that you're gonna 15% for '26. Ken Stillwell: Well, I think, you know, our growth rate pretty much our constant currency growth rate paid stayed pretty consistent across the year. It was kind of right around that 14% number all through the year. So I and it was well above our guide. I think it was a fantastic year and a strong finish. In terms of the future, I think it really comes down to you know, our net retention rate. Is expanding at the same time that we're actually targeting new logos. And Blueprint is much more prominent, which really builds the bridge for us to grab new logos at a pace that we haven't been able to. So that's really what it's a combination of NRR increasing and us going you know, having the opportunity to go after new logos. And really starting to see some early success of that. Steve Enders: Okay. That's great to hear. Thanks for taking the questions. Ken Stillwell: You got it. Operator: Your next question comes from the line of Rishi Jaluria with RBC Capital Markets. Please go ahead. Rishi Jaluria: Wonderful. Hey. Hi, Ken. Thanks so much for taking my question. Maybe I wanna start by thinking about you know, the role that you can play now as enterprises actually start to live deploy agents, obviously, technology has a lot of promise. We've seen a lot of great demonstration. But just given how nation protocols like MCPU and a to a have been, you know, maybe it's been maybe these multi exempic systems are maybe been a little bit more limited. So the question I wanna ask is, as enterprises, you know, start to get a little bit more serious about deploying hundreds or thousands of agents, can you maybe help us understand, as how can that serve as a tailwind for Pega both in terms of being able to bring together, Alan, as you talked about in the prepared remarks, you know, agents from disparate systems and get them to work together. But also thinking about, you know, having helping agents trigger workflows across systems from different technological spans, because I can imagine they're not embedded to build to work with mainframe systems or on-premise data stores. Maybe just help us understand how introducing this complexity can be a tailwind for Pega, what role you can play there, and then I've got a quick follow-up. Alan Trefler: Yeah. I think this is where we have some of our I think, structural advantages. With Pega, I don't expect that customers will having to install tens of thousands of agents. I think the people who want to install tens of thousands of agents are delusional. And, you know, we went through a parallel environment years ago, around interfaces. People talked about microservices and the question was how many of these microservices should connect your enterprise? The reality is the people who put too many of them found that they went out of control. I think having an agent control tower to control your agents tells you something about the architecture, which is not a good thing. In Pega, if you have an application, that has, say, 40 or 60 workflows in it, and we have applications that have even much more than that. The Pega super agent is able to run all 40. And if any of those agents and any of those steps need to learn something from another agent that's not a Pega agent, or need to, you know, go to a third party, it can fire off an MCPA two a. Request that's already built into the system. To be able to incorporate or orchestrate what that agent does with the work of another agent here. But the idea that the competitors have will you go and you use a prompt studio to create literally thousands of agents. That are defined in English and that are gonna do the right thing reliably. That is so much weaker than saying, hey. I've got workflows that I know can run my business. I can do it at scale. I can do it do it at high volume and do it predictably. And the Pega agent is able to run any of them. Does that make sense to you? Rishi Jaluria: Yeah. No. Absolutely. That's very helpful color. You know? And then maybe I wanted to follow-up and think about Blueprint. Obviously, great to see this turn from kind of idea into reality show up in numbers, which is great to see, especially with the accelerating ACV. What I wanna maybe, understand is you know, one of the theories when you first launched Blueprint is that this could help meaningfully shorten, sales cycles and get customers from ideation to live deployment and value sooner. And I think you actually talked about that, but, you know, in kind of the time since you launched Blueprint, is there any way to quantify you know, how that has impacted whether it's, you know, on sales cycles, whether it's on, you know, just a lap time from first conversation to live deployment. Ken, you did talk about NRR improving. Maybe any message you can share to kind of quantify the impact that Blueprint has had on would be helpful. Thank you. Ken Stillwell: So we so, yeah, so I we will we're going to we'll be basically about one year into the into the blueprint data when we get closer to our Investor Day, Rishi. But I will give you I will give you some of the early signs that we're seeing. We are seeing faster pipe build, faster progression, and faster close times. Across the board with Blueprint. And so the key with that is to get into those new workflows. Even with existing clients or with new logos, so we are seeing those early signs. We'll be a little bit more precise with how some of that data because we'll kinda have about a year of that data when we get closer to Investor Day. But we are seeing the signs of it impacting all the important factors pipe build, pipe progression, win rates, you know, so we're we are seeing the early signs of that. That's what gives us you know, a key part of giving us confidence of accelerating our growth. Alan Trefler: We've seen a massive acceleration or improvement in the training time for new staff. I would say, you know, we used to we hire somebody. We often take five or six months before we look loose on a client. Everybody's in the field in a month. Plus, and a lot of that is that Blueprint just makes it so easy for them to get it. And for them to explain it to their clients. Rishi Jaluria: Gotcha. Very helpful. Thank you so much, guys. Ken Stillwell: Thanks, Rishi. Operator: Your next question comes from the line of Raimo Lenschow with Barclays. Please go ahead. Raimo Lenschow: Perfect. Thank you. On BLUEPRINT, guys, how where are we on that app modernization journey? You know, that was always the dream. In theory, you would think Blueprint and AI can really help there. But how close are we for that dream to kind of come through? That would obviously unlock a lot of opportunities with so much legacy code still out there. Alan Trefler: So the capabilities are very rich. We have out of the box interfaces with Accenture. And other partners that AWS that will enable their tooling which like, reads COBOL code and does other sorts of things, to feed into Blueprint to complement I actually prefer using things like user manuals and outcome-oriented documents. And it's I see an enormous amount of interest from clients in terms of doing that. I think this will be a good year for that. We've also made it so that BLUEPRINT can modernize you know, we have a couple of pretty old Pegasystems that are out there with some of our clients. And we've added facilities so that Blueprint can also modernize an old Pegasystem. And I think that's also positive. So the feedback we're getting clients is quite a bit of interest, and I expect that we will have several success stories of customer standing offices here, success stories at PegaWorld with you. Raimo Lenschow: Yeah. Okay. Perfect. And then one for you, Ken. Thank you. The if you look the PegaCal ACV really strong, can you talk a little bit about where are we on that client cloud getting client help people to migrate over versus new opportunities, and how that's how do you think that's gonna play out in 2026? Thank you, and congrats from me as well. Ken Stillwell: Thanks. Thank you. Yeah. So we I touched on a couple of things. I'll maybe be a little bit more explicit. Professional services, ballpark around 10% of our revenue. Pega Cloud, ACV is going to continue to accelerate. Pega Cloud ACV is going to be 30%, plus in 2026. That's translating into the revenue. Our term license will, you know, we'll still have slight, growth because clients, when they migrate, you tend to keep some level of concurrent rights as they go through that migration. Those migrations don't typically happen in, like, a weekend. They typically happen you know, application by application as they're migrating. So even though clients are moving to Pega Cloud, you do still have, like, a little bit of a slower, growth deceleration on the term license. So you'll see Pega Cloud growing 30% plus. You'll see kind of maintenance, you know, flat to slightly declining. You'll see client cloud kind of being a slower grower, just because of those concurrent rights as people migrate. The majority of our Pega cloud growth is coming from new activity, new volume, whether that be expansion of existing apps or new apps. But the pace of it migration has been pretty consistent in '25 and '24. We think '26 will be kind of same level of migration. It's kind of happening, you know, consistently across our client base. Raimo Lenschow: Okay. Perfect. Thank you. Alan Trefler: Yep. Operator: Your next question comes from the line of Devin Oh with KeyBanc Capital Markets. Please go ahead. Devin Oh: Hi. Good morning. Alan. Thanks for taking my questions here. I got a couple of quick follow-ups to start. The 15% ACV growth guide is that a constant currency basis or a reported basis? And I just quickly follow-up in on the NRA extension comment. Historically, you guys have kinda talked about at the 110% level. Is that correct? How much of an expansion have you guys been seeing from that? Ken Stillwell: It's so on the it is constant currency because our ACV is a balance sheet measure. So we are just we're only a month away from 12/31. So we're not assuming much movement on the currency. That is a constant currency number. On the NRR, we're somewhere in the ballpark of 150 basis points higher on our NRR for 2025 over 2024. And that number will probably that level of NRR will probably stay consistent into 2026. We'll see a little bit more growth from new logos and expansion through our autonomous partner selling motion. But so we're up about 150 basis points or so on NRR. Devin Oh: Got it. Super helpful context. And then maybe just switching gear a little bit. I know you guys had a pretty meaningful presence at AWS re:Invent in December. Just would love to hear some of the feedback from customers on some of your product releases, and pipeline build coming out of that event and we'd love to get an update on kind of partnership with AWS and how that is evolving in the near term. Thank you. Ken Stillwell: Maybe I'll start and then let Alan jump in. So I think the most critical alignment between AWS and Pega is that both of us are aligned with looking at legacy workflows using our tools, I. E. Blueprint, to transform, you know, using the AWS transform tool to actually adjust in the Blueprint to essentially redesign and reimplement those that work that's actually living in those legacy systems. And that gets on to Pega cloud, is aligned with AWS because that gets on to the AWS cloud. So that's just a tremendous alignment there with basically inspecting and digesting the actual activity that's happening. Leveraging Blueprint to build out those workflows, and then those running on AWS. So very good alignment between our selling teams, the AWS selling team, and the Pega selling team, to execute on that. So that's kinda what's happening around that relationship. Alan Trefler: And I'll just add. I think it's really going in a good direction. And I think you'll see a lot of AWS and PegaWorld. Operator: Your next question comes from the line of Patrick Walravens with Citizens. Please go ahead. Patrick Walravens: Oh, fantastic. Thank you. And congratulations, you guys. Alan, can you help us figure something out here? So, you know, twenty years ago, you were there when on-premise died and SaaS took over. And now it feels like we're in a similar transition. What are the characteristics that we should look for in software companies to figure out who's gonna make it through that transition and then you can overlay how Pega fits into that. But you start with just a general framework for us, I think that would be incredibly helpful to everyone. Alan Trefler: Well, sure. I obviously have some views in the same space. I would say that I think the death of SaaS may be somewhat exaggerated. But there are aspects that certain companies under more pressure or less pressure. I think the things that we find give us a lot of encouragement in this COVID environment is, you know, first and foremost, businesses have lots of stuff to orchestrate. Know, the whole Gartner quadrant, which came out last year called Vogt, business orchestration and automation technologies. Where, by the way, if you look at the picture, begs the clear number one. In both. I think it's a very, very strong area sector that's going to be strong in an agentic world especially because being able to do the orchestration and being able to do the automation is gonna be absolutely key. And that is what we do. Now I think the SaaS companies that or the non-SaaS companies that are gonna struggle are ones that are kinda little small things where you know, candidly, you could just get some COVID and then take care of it. You could run it in a spreadsheet. Know, with Copilot. There's lots of places where the barriers to entry or somebody writing some computer programming have just massively been reduced. But building a major system that does orchestration across a business and then has to worry about things. And I'll just drop in a couple of the words of art that we use, worry about things like you know, two-phase commit. How do you make sure that when you commit records to the database, that they're there and they're reliable because you're doing something that is important. Having things that have a lot of industry IP, also, I think can create a bit of a moat for companies. Though some of that can be under attack because the AI can actually use that IP too. It can incorporate a But the thing that I would say is most important is is the system built for change? Because the problem with these code-based systems that are attacking the SaaS world is they don't have a particularly visible architecture. They're just kind of written. And, you know, going after somebody else's 3,000 modules of code is incredibly daunting and very, very difficult to do correctly. In our world because you know, you can see the blueprint. We have so much scaffolding and infrastructure. We have the idea of a case. We have the idea of stages. We have the idea of steps. Have the idea of service levels, of personas. Our systems are built around the business entities of an organization. And because they're built that way, it's possible to navigate and, as a result, possible to change it. Businesses that require change I think, are gonna be the ones that are gonna be most interested in a technology like ours. And the businesses where can just write something that's gonna sit on the shelf for two, three years or months, Alright. That makes sense? Thanks, Alan. Patrick Walravens: Yeah. Yeah. That's great. That's great. Operator: Your next question comes from the line of Blair Abernethy with Rosenblatt Securities. Please go ahead. Blair Abernethy: Thanks and nice quarter. Guys. Just two quick ones for me. First, on duration on contract duration. I wonder if you just sort of talk us through how that's was trending. In Q4, particularly, you know, Pega Cloud versus your on-premise renewals? And then secondly, just looking forward to 2026, and the mid-market, what sort of, changes or how what what sort of learnings have you pulled in the last year or so? And what's your, I guess, how much emphasis are you really putting into in the mid-market next year? Ken Stillwell: So duration, Blair, has been pretty consistent. No big no big changes there. I mean, there's always, like, quarter to quarter little anomalies just because of the weight go into backlog, but there's no fundamental change in the duration that clients looking for. We're not seeing, you know, any big shift there. I think Alan's point on the on the going after I'll just generalize and say new logos as opposed to any particular segment of I think what Alan's point about blueprint how important Blueprint is to the ability for an account executive to ramp quickly, the ability for us to target and the ability for us to get into a really engaged pipeline building activity in a very short period of time is what gives us a lot of confidence around scaling the engagement aspect, whether that be through the autonomous partner selling through a partner's or through our direct target org model. We've never really had that confidence in the past because there was a long lead time to monetization of those account executives. So we're much safer in terms of trying to push for acceleration growth. Blueprint changes that completely. So that's the big that's the big focus area for us at twenty six is like, really, really running that those that that play out. To make that, really help us to help us to scale, our growth. Blair Abernethy: Great. Thank you. Ken Stillwell: You got it. Operator: We have time for one more question, and that question comes from the line of Mark Chappell with Loop Capital Markets. Please go ahead. Mark Chappell: Hi. Thank you for taking my question. Ken, I was wondering if you could just talk about the firm's investment priorities for the coming year. Ken Stillwell: Investment in terms of areas of growth of spend. Is that what you meant, Mark? Mark Chappell: Yes. That's right. Yes. I want I think so we're gonna get we're gonna get optimization across a lot of our P and L lines. Our gross margin is pretty respectable now, but it's not likely to go backwards. You know, we'll get leverage out of our R&D group as we use more, you know, kind of by coding and AI in our actual processes, including our operational processes. So we will see some gross margin kind of optimization around aspects of our business. Our sales and marketing teams, I think a lot of that is really around kind of the digital engagement and what we're doing, like, in our ability to engage with our clients in a really leveraging kind of agentic processes, how we engage. In the target org model, there will still be an investment in relationship selling because there are still on the other side of those enterprise relationships there. That is not a you know, that's we're not we're not talking to boss right, when we're doing enterprise, selling. So I think there's probably an area around some of our selling capacity, some of our investment in our partnership. In fuel, our innovation, I think, will quite frankly get some operating leverage as well as our operations. And we're, you know, we're gonna see our free cash flow continue to expand as we grow because you know, we really are starting to get to that of, you know, we're hitting the efficiency stages that you're seeing that come through in our know, in our acceleration of margin. I think one of the things that I think is really probably one of the biggest disconnects that we're seeing is there is such a disconnect between the narrative that people are talking about around what's happening in enterprise and what we are seeing with our clients. Our clients have massive amounts of transformation that they need to do. They need the agents to be guided, to be structured, to follow the rules, to execute at scale. And the concept of a digital twin type agent disrupting and changing that momentum, think, is really the disconnect that we're quite puzzled by in terms of what we're seeing with our clients and what some of the narrative is. So we're gonna continue to invest. In engaging with our clients and helping them on that journey in there's not one client that's not focused on trying to optimize their legacy systems. And this is, like, the perfect moment for us. Mark Chappell: Thanks. Then as a follow-up here, regarding the recent headcount reduction restructuring, there's a couple of articles out there mentioning that the company was transitioning to an AI-first delivery model. Wondering if you could just kinda elaborate on what that means. And practical terms. Alan Trefler: Well, I think that Blueprint is an example of an AI-first delivery model. I mean, Blueprint has completely changed. You know, Blueprint lets you go from ideation and things that used to happen on whiteboards and post its over weeks. To something where you're right on the system collaborating it and it can load into an honest to god runnable Infiniti system. So the ability to operate at not just better speed but I think better quality is very much built into what we are working on with Blueprint. And we've already achieved a chunk of that. More to come this year. Mark Chappell: Thank you. Ken Stillwell: Thanks, Mark. Operator: This concludes our question and answer session. I will now turn it back over to Alan Trefler, Founder and CEO of Pegasystems. Please go ahead. Alan Trefler: Thank you, to all who joined. We appreciate it. I just want to mention PegaWorld again. June 8 is Investor Day, so investors are free. To attend from the seventh to ninth. I think you would find it to be insightful because in this world of insane noise and the noise out there is crazy. There are real substantive differences. And you can see and touch and understand them. In conjunction with our customers and partners. So please come join us there. That will be terrific. And I will just tell you that I feel that we as a company were built for times like this. So may we live in interesting times collectively. Thank you very much, everyone. Operator: This concludes today's conference call. Thank you for participation and you may now disconnect.
Operator: Greetings, and welcome to the Chimera Investment Corporation Fourth Quarter Earnings Call. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Miyun Sung. Thank you. You may begin. Miyun Sung: Thank you, Operator, and thank you, everyone, for participating in Chimera Investment Corporation's fourth quarter 2025 earnings call. Before we begin, I would like to review the Safe Harbor statement. During this call, we will be making forward-looking statements which are predictions, projections, or other statements about future events. These events are based on current expectations and assumptions that are subject to risks and uncertainties, which are outlined in the Risk Factors section in our most recent annual and quarterly SEC filings. Actual events and results may differ materially from these forward-looking statements. We encourage you to read the forward-looking statement disclaimers in our earnings release and our quarterly and annual filings. During the call today, we may also discuss non-GAAP financial measures. Please refer to our SEC filings and earnings for reconciliations to the most comparable GAAP measures. Additionally, the content of this conference call may contain time-sensitive information that is accurate only as of the date of this earnings call. We do not undertake and specifically disclaim any obligation to update or revise this information. I will now turn the conference over to our President and Chief Executive Officer, Phillip Kardis. Phillip Kardis: Thanks, Miyun, and good morning, and welcome to the Chimera Investment Corporation fourth quarter 2025 earnings call. Joining me on the call are Subramaniam Viswanathan, our Chief Financial Officer, Jack Macdowell, our Chief Investment Officer, and Kyle Walker, the President and CEO of Home Express Mortgage. After my remarks, Subramaniam will review the financial results, Jack will review our portfolio, and then Kyle will review Home Express's results. Last year, we provided a consistent message. We said we were not playing defense; we were building a hybrid REIT designed to endure. Durable companies are built on clear thinking, long-term orientation, and discipline. Early last year, we laid out a simple actionable plan: diversify our portfolio, strengthen liquidity, and expand our fee-based income. And we were explicit about how 81% loans, 3% agency securities, and 16% non-agency securities. We ended the year at 61% loans, 16% agency securities, and 10% non-agency securities, 11% lending activities, and 1% MSRs. We are not yet where we intend to be, but the direction is unmistakable and the progress significant. We also increased third-party AUM from $22 billion to $26 billion, added advisory services to three of our securitizations, and successfully integrated our loan data into the Palisade's systems, which is already improving the performance of the legacy portfolio. And we closed on Home Express Mortgage, one of the largest non-QM originators, an acquisition that expands both our capabilities and our reach. Though we raised approximately $120 million in unsecured debt, the majority of the funding for this transformation came directly from our own portfolio, exactly as planned. Through asset sales and collapsing select securitizations, we generated approximately $485 million for an aggregate total of more than $600 million to redeploy into higher value activities. While our orientation is always long-term, we are beginning to see near-term results. Our earnings power has begun to increase, enabling us to raise our dividend by 22% quarter over quarter to $0.45 in the first quarter, and our board expects to maintain that dividend level for the remainder of the year. That combination of earnings momentum coupled with disciplined capital allocation is how sustainable value is built. As we transform Chimera into a long-term hybrid REIT, we have been clear that we are not changing who we are, but expanding how we apply our capabilities. We remain at our core focused on a set of competencies we know well. Our hedgehog nature. But as every durable enterprise learns, evolution requires clarity of purpose. Simon Sinek phrases it, it starts with why. And we know our why. We are here to give investors broad exposure to the entire real estate ecosystem through a diversified set of assets, operations, and income streams. That exposure shows up not only as dividends but as enterprise growth. Our how is straightforward: manufacture and acquire a diversified portfolio of residential assets that generates net interest income, gains on sales, and fees from operations. Our what is equally clear: consistent reliable dividends across market environments while growing enterprise value over time. Many REITs, including us, are viewed as a quasi-bond; book value is treated as principal and dividends as coupons. That is not who we are becoming. We are building an operating company with capacities to compound value while delivering a tax-advantaged dividend. As such, neither book value alone nor dividends alone tell the whole story. What matters is long-term intrinsic value per share supported by a consistent dividend. As we look towards 2026, our priorities remain unchanged. We are focused on the long game, on building a diversified residential platform capable of generating long-term value for both our customers and our investors across a wide range of economic environments. We will continue to diversify the portfolio, expand liquidity, and grow our fee-based income, both organically and through thoughtful acquisitions. As we have said before, we are not merely building a bigger company; we are building a better one, engineered for resiliency and longevity. Now I will turn it over to Subramaniam to walk you through the financials. Subramaniam Viswanathan: Thank you, Phillip. With the acquisition of Home Express, a material portion of our business is now operations in addition to our investment portfolio. As a result, we have reevaluated our financial reporting. Beginning with the fourth quarter, we now have two reportable segments: our investment portfolio and our residential origination platform. The investment portfolio segment consists of our investments and third-party advisory business, for which Jack will provide more detail. Our residential origination segment consists of the standalone mortgage origination business, for which both Jack and Kyle will provide more details. And now I will review Chimera's financial highlights for the fourth quarter and full year of 2025. GAAP net income for the fourth quarter was $7 million or $0.08 per share. And GAAP net income for the full year was $144 million or $1.72 per share. GAAP book value at the end of the fourth quarter was $19.70 per share. For the fourth quarter, our economic return on GAAP book value was negative 0.9% based on the quarterly change in book value and the $0.37 fourth quarter dividend per common share. And for the full year, our economic return was positive 7.4%, which includes $1.48 of dividends declared in 2025. As Phillip noted, this morning, the company announced first quarter 2026 dividends of $0.45 per share, an increase of 22% from prior quarterly dividends, and our board expects to continue the dividend for the remaining March 2026. Our earnings available for distribution for the fourth quarter was $45 million or $0.53 per share. And our EAD for the full year was $141 million or $1.68 per share. Turning now to our reportable segments. For the investment portfolio segment, during the fourth quarter, our economic net interest income was $65 million. The yield on average interest-earning assets was 5.9%. Our average cost of funds was 4.5%, and our net interest spread was 1.4%. For the residential origination segment, during the fourth quarter, Home Express funded $1 billion in production with a gain on sale premium of 358 basis points on loans sold and settled. Home Express EBITDA, defined as earnings before taxes, depreciation, and amortization, was $11 million for the quarter, and Home Express annualized EBITDA ROE was 16.2%. With respect to leverage, our total leverage for the fourth quarter was 5.1 to one, while Rico's leverage ended the quarter at 2.4 to one. Rico's leverage increased this quarter as we continue to increase our capital allocation to Agency RMBS securities and the addition of warehouse lines from the residential origination segment. For liquidity and strategic developments, the company ended the year with $528 million in total cash and unencumbered assets, compared to $752 million at the end of the third quarter. Cash decreased as we completed the acquisition of Home Express for cash consideration of $244 million and total consideration of $272 million. On the investment portfolio side for the fourth quarter, we added $6 million of Agency RMBS during the quarter net of sales. We continue to rebalance our portfolio as we redeemed $70 million of securities from SIM 2022 I one securitization and sold the underlying loans with a principal balance of $166 million, releasing approximately $28 million of equity. We also sold $33 million of non-agency RMBS subordinate securities. At year-end, we had $6 billion of total consolidated secured financing outstanding. $802 million related to our residential origination warehouse loans and $5.2 billion for our investment portfolio. Of this $5.2 billion relating to our investment portfolio, $3.3 billion was secured financing for agency RMBS positions. We maintained $2.9 billion of hedges against this exposure, a combination of swaps and swaptions across varying maturities. $1.9 billion of secured financing was for residential credit exposure. Of that, $1.3 billion or 66% included either non or limited mark-to-market features. $1 billion or 51% of this floating rate facilities. We also maintain $2.15 billion with a combination of swaps, options, and interest rate caps across varying maturities to hedge our interest rate risk related to residential credit exposure. For 2025, our economic net interest income return on average equity assigned to the investment portfolio was 10.8%. Our GAAP return on average equity was 4.4%. Our EAD return on average equity was 11%. And our EAD return on average tangible equity was 11.9%. And lastly, compensation, general and administrative expenses increased by $22 million year over year, which was primarily driven by the inclusion of staffing costs and G&A expenses related to Palisade's acquisition in December 2024 and Home Express acquisition in 2025. Compensation expense of our investment portfolio was lower during the fourth quarter due to the absence of severance costs that were recorded in the third quarter and a lower incentive compensation accrual in Q4. Together, these items contributed approximately $0.05 to EAD for the fourth quarter. We consider both these items to be non-recurring and do not expect these compensation-related benefits to continue to EAD in future periods. Servicing expense decreased by $2 million year over year due to lower loan balances and loan counts related to our portfolio reallocation strategy. Our transaction expenses were higher by $10 million this year, reflecting the cost associated with Home Express acquisition. To close, as Phillip noted, and our financials are beginning to show, building a diversified residential platform that is generating income from assets, gain on sale, and fees from operations. I will now turn the call over to Jack to review the portfolio and investment activity. Jack Macdowell: Thanks, Subramaniam, and good morning, everyone. 2025 was a pivotal year for the business and our capital allocation strategy. As Phillip mentioned in his remarks, we began the year with a clear objective to reposition the investment portfolio to be more balanced and liquid while strengthening our earnings power. That plan included increasing our allocation to liquid agency MBS, adding MSRs to help offset interest rate and prepayment risk in other parts of the portfolio, and applying our asset-level credit risk management capabilities to enhance performance across the loan book. Over the course of the year, we generated more than $600 million of capital through portfolio and capital markets activity, including $291 million from refinancing select investments, approximately $195 million from divesting assets that no longer met our return thresholds, and $116 million from our senior unsecured notes offering. These actions supported our portfolio allocation realignment and, importantly, positioned us to pursue a broader business transformation through the acquisition of Home Express. During 2025, we purchased over $3 billion of agency MBS net of sales and launched our MSR strategy. As a result, our capital allocation shifted from approximately 97% residential credit at the start of the year to 72% at year-end, with the balance now allocated across agency MBS at 16%, MSRs at 1%, and 11% to our Home Express lending platform. This was all carried out alongside a relatively dynamic market backdrop. Following the volatility spike in April, agency and non-spreads tightened throughout the remainder of the year. In the fourth quarter, agency swap OAS continued tightening by approximately 22 basis points, while generic non-QM AAAs were firmer by five basis points. Treasury yields had a tightening bias during the year as the front end was driven primarily by expectations for Federal Reserve easing, and longer-term yields reflected inflation and fiscal considerations. The two-year, ten-year treasury spread ended the year at 69 basis points, approximately 37 wider than where it began, with roughly 15 basis points of that occurring in the fourth quarter alongside the Fed rate cuts. Lower treasury yields helped guide mortgage rates down approximately 70 basis points for the year, with 15 basis points coming in the fourth quarter to end at 6.15%. Our book value is sensitive to yield curve dynamics because both our securitized loans and the related liabilities are recorded at fair value. As the curve steepened in recent quarters, loan values increased. However, those gains were more than offset by increases in the fair value of our securitized debt, resulting in lower reported book value. In the fourth quarter, our Agency MBS portfolio contributed positively to book value as spreads tightened, while our aggregate loan portfolio was roughly flat. However, as Subramaniam noted earlier, overall book value declined 2.7%, attributable in large part to the increase in value of our consolidated securitized debt and activities related to the Home Express acquisition. Our earnings power increased during 2025, reflecting deliberate portfolio repositioning, improvements in capital allocation, and contributions derived from the Home Express acquisition. The Federal Reserve's easing provided some benefit through the asymmetry in our liability hedge structure related to the residential credit portfolio. In the first full quarter with Home Express contributions, the business generated a distributable ROE as measured by EAD over average common equity of 11% annualized. This compares to 7.16 in 2024, representing an increase of nearly 400 basis points. During the fourth quarter, we exited approximately $33 million of legacy non-agency RMBS, releasing roughly $6.7 million of capital at a breakeven ROE of 7%. We also exercised our redemption rights on the SEM 2022 I1 investor loan securitization, sold $166 million of underlying loans, and generated $28 million of net capital after satisfying debt obligations, with a breakeven ROE of 3%. We added approximately $6 million of Agency MBS in the fourth quarter and ended the year with over $3 billion consisting primarily of specified pools selected for call protection characteristics. Performance in our seasoned re-performing loan portfolio remains stable. Prepayments were primarily driven by housing turnover, and we saw a seasonal 50 basis point increase in delinquencies during the fourth quarter. Otherwise, no other notable trends. Looking ahead, we expect 2026 to focus on continuing to unlock capital and redeploy into investments that are earnings accretive and align with our portfolio repositioning objectives. This may include exercising additional securitization redemption rights and divesting of assets that no longer meet portfolio objectives or return thresholds. We expect our capital deployment efforts will remain focused on Agency MBS, MSRs, sponsored securitizations backed by Home Express production, and other select credit investments. While positioning ourselves to capitalize on potential platform acquisitions as they emerge. Agency MBS continues to serve as the most liquid component of our portfolio, enabling efficient deployment following capital markets activity, asset sales, or portfolio runoff, while preserving liquidity for future investments and other strategic initiatives. At approximately 7.5 times leverage, the agency portfolio continues to generate run-rate ROEs in the low to mid-double digits. We are seeing strong demand for non-QM loans and related securitized products to start the year. Generic non-QM AAA spreads have tightened approximately 20 to 25 basis points year to date, surpassing 2025 levels. While we intend to retain portions of Home Express' production for our securitization program, we will continue to evaluate relative value between selling the loans in the secondary market and securitizing and retaining portions of the capital structure in our investment portfolio. 2025 represented a meaningful transition year for the portfolio and the broader business. We repositioned capital, diversified sources of earnings, and expanded platform capabilities. As Phillip mentioned in his remarks, while our core discipline remains unchanged, we believe these steps enhance our value proposition and improve the durability of our earnings profile. With that, I will turn it over to Kyle to discuss Residential Origination. Kyle Walker: Thank you, Jack, and good morning, everyone. I would like to begin by noting that the transition into the Chimera organization has gone smoothly throughout our first quarter of ownership. Although the relationship is new, we are already seeing meaningful synergies between the Chimera Palisades platform and Home Express. Home Express currently has 332 employees and is licensed to originate mortgage loans in 46 states. We primarily focus on originating non-QM consumer and business purpose loans through a network of 6,000 mortgage brokers and bankers. These loans are sold in pools to investors who either aggregate and securitize the loans or hold them in their portfolios. Home Express originated $1.04 billion in loans during the fourth quarter, representing an 18% increase over the third quarter and marks a record for our company. For the full year 2025, we originated $3.4 billion in loan volume. As Subramaniam noted, Home Express's EBITDA was $11 million in the fourth quarter. Throughout 2025, we have been focused on expanding our lending capacity by further building our sales and operations teams. We believe this, combined with our continual technology enhancements, will support the continuation of our origination growth into future quarters. We have always been very focused on our cost metrics, and we reached a new record low GAAP cost to originate in the fourth quarter of 201 basis points, which produced a debt margin of 111 basis points. In 2025, we launched a non-delegated correspondent program to serve a growing segment of mortgage bankers seeking to fund non-QM and business purpose loans. Home Express underwrites these loans to our guidelines with the bankers funding the loans in their names. We now have 55 mortgage bankers approved to deliver closed loans to Home Express. While volume in this channel was modest in the fourth quarter at $47 million, we expect it to represent a growing share of our origination volume going forward. We increased our total warehouse funding capacity to $1.35 billion in the fourth quarter, which we expect will be sufficient to fund our anticipated growth in the near term. With the anticipated continued growth of the non-QM and business purpose market, we are optimistic that our business will continue to grow, and we look forward to realizing the benefits that our partnership with Chimera can deliver. Thanks, Kyle. We are glad to have Home Express as part of the Chimera team. And as you said, we are already seeing the benefits of the partnership. Now we will open the call for questions. Operator: Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Trevor Cranston with Citizens JMP. Please proceed with your question. Trevor Cranston: Hey, thanks. Good morning. Looking at the Home Express numbers, obviously, the fourth quarter was pretty strong, both in terms of production volume and gain on sale also saw a nice jump. Can you give us an update on kind of how you guys are seeing volume and gain on sales so far in the first quarter? I know you mentioned that your AAA spreads have tightened quite a bit year to date. Thanks. Kyle Walker: We are seeing the typical seasonal reduction in volume after the holidays. But we think that 2026 is going to be a great year. We think the first quarter is going to be a pretty good quarter in comparison to last year. We are seeing the gain on sale premiums to be pretty good in comparison to the fourth quarter, and we are optimistic about the revenue for the first quarter. Trevor Cranston: Got it. Okay. That is helpful. And then as you go through the year and continue to free up capital in some cases and reposition the portfolio, can you talk about where you see the best relative value today between adding more agencies after the spread tightening that has occurred versus potentially doing securitizations of non-agency assets? Jack Macdowell: Yeah. Hey, Trevor. This is Jack. You know, one of the things that we continue to be really focused on is the portfolio construction. So there are certain objectives that we have that we have talked about in terms of what we are trying to do with the portfolio, namely, creating more balance. And part of that is having that liquid component with agencies, which I think we have done a really good job in 2025 of building up. The other bookend there would be to have somewhat of a hedge vis-a-vis our MSR allocation, which at 1% continues to be well below what our otherwise target would be. And then in between those two bookends is the credit piece of the portfolio where, you know, we think that having the Home Express production in-house and being able to securitize that and retain certain parts of the capital structure in our investment portfolio can certainly be accretive. As you point out, agency spreads have come in where we are holding leverage right now. We still see that as, you know, relatively attractive or at least meeting our return threshold somewhere in that low to mid-double digits. But I would say where we are from an allocation perspective today, we are pretty comfortable with, you know, plus or minus another 5%, I would say. So, really, for the balance of the year, that will continue to serve as our liquidity bucket. MSRs continue to be a focus of ours. And right now, as Kyle mentioned, we are seeing pretty strong demand in the secondary market for loans. So we are constantly evaluating the cost-benefit analysis of selling loans in the secondary market versus retaining them for our investment portfolio. Trevor Cranston: Got it. Okay. I appreciate the comments. Thank you. Operator: Thank you. Our next question comes from the line of Douglas Michael Harter with UBS. Please proceed with your question. Douglas Michael Harter: Thanks and good morning. Was hoping you could put the dividend increase in context, kind of how you thought about the size of that increase and how you think about kind of retaining some capital for book value growth, being able to grow the investment portfolio operating businesses versus kind of maximizing the dividend? Phillip Kardis: Hi, this is Phillip. Thanks for the question. I think as we look at that issue, what we look at is we look at it over the period of the year. We recognize as we become more of an operating company, we expect EAD to potentially be variable from short period to short period, but so how we look at it is we look at it over the course of the year, we feel like that dividend is one that will have sufficient EAD coverage on. And will provide us sufficient coverage for us to have the proper allocations to help grow, you know, the operating aspects of our business. So that is the kind of the balance we struck and to give the market some feel for where we think we will be throughout the year. Douglas Michael Harter: And I guess just on that point, would you expect going forward to kind of give guidance for the full year in the first quarter dividend or is that kind of unique to this year since it is kind of the first? Phillip Kardis: Yeah. I think, I mean, that is hard to say. As we looked at it for this year, we did think it would be helpful to the market to address the questions that you ask, which were like how much do you expect in a dividend? How much do you expect to retain? And we thought rather it would be helpful to the market to go ahead and try to lay out what our expectations were. Whether we proceed to continue to do that, you know, a year from now, we will just have to wait and see. Douglas Michael Harter: Okay. I appreciate that, Phillip. Thank you. Operator: Sure. Thank you. Our next question comes from the line of Bose Thomas George with KBW. Please proceed with your question. Bose Thomas George: Hey, guys. Good morning. On the residential segment, are you guys originating second liens at the moment? Or is that an incremental opportunity? Then where do you see industry non-QM volume in 2026 versus 2025? Kyle Walker: We currently are not originating second mortgages. We originate through a wholesale brokered network, and it is difficult with small loan amounts, like second mortgages, to originate those in a profitable manner. So we have not gotten into the second mortgage market. All the statistics and analytics that we see for non-QM and business purpose loans in 2026 are growing, increasing over 2025. So we are seeing numbers as large as 20% to 25% growth in the market. So we are anticipating that the market is going to grow and that we will get our share of the increased market going forward. Jack Macdowell: Yes. And hey, the other thing, Bose, I would just say on the second lien side, I mean, when you have a servicing business, as you know, that is a very good mechanism for sourcing second lien borrowers in a way to kind of address some of the prepayment activity associated with your MSRs. So perhaps at some point down the road, that could be more of a strategy for us. But at this point, as Kyle said, it is not something that, you know, we are originating. And then just in terms of the non-QM volume outlook, this was a major thesis for us early last year as we were sort of thinking about the acquisition of Home Express and the viability of doing that. And, you know, I think 2025 sort of supported our case, but going into 2026, I mean, we saw a considerable increase in both origination volume and non-QM in 2025, plus issuance volume. And looking out into 2026, I mean, we are projecting just on the origination volume side, that could be anywhere from $110 billion to $130 billion, which is based on modest growth in overall mortgage originations, including conventional and agencies, plus having a non-QM capture, you know, another 100 basis points or so of wallet share. Bose Thomas George: Okay, great. That is helpful. Thanks. And then actually just switching over to the change in book value this quarter and the reduction of the value related to your securitized debt. Is that happening mainly because that is more liquid than the loans on the other side? And should we just kind of see that as a timing issue? Jack Macdowell: Yeah. I mean, it is a good question. So maybe we will just address what value quarter to date. I assume somebody is going to ask that. So we are basically flat to down, call it, 30 basis points quarter to date. And the one thing and maybe it is a good time just to talk about our views of capital at risk and value at risk. There has been a pretty heavy steepening in the yield curve during 2025. I think in the prior quarters, we have talked about the impact on our loans as well as on our securitized debt. And basically, loan values have been but the value of our securitized debt has increased at a faster pace, having the effect of reducing reported book value. Okay? And while that is an important accounting outcome, it does not really change how we view our economic risk or capital at risk. And that is because a core part of our strategy is exercising the call rights that we own on our securitizations where we redeem the bonds at par. And, you know, basically, the mark-to-market fluctuations in our securitized debt, it does not affect the economics of our call option nor does it affect the earnings power of our capital. So just want to give you kind of a, you know, how we think about that. We are focused squarely on managing capital at risk, and the way that we think about that is we evaluate based on the cash flow generating capital that we have, not on the short-term valuation movements of our securitized liabilities. Bose Thomas George: Okay, great. That is helpful. Thanks. Operator: Thank you. Our next question comes from the line of Eric Hagen with BTIG. Please proceed with your question. Eric Hagen: Hey, thanks. Good morning. Maybe following up on this bullish non-QM outlook. I mean, do you think there is any room for credit enhancement levels to come down in the securitization trust? And to the extent that we ever saw more flexibility for credit enhancement levels, how do you think that would drive your appetite to take leverage on the subordinate pieces that you retain from securitization? Jack Macdowell: Yeah. Good question. I mean, look, on some deals, we see quite a bit of differentiation among, call it, AAA enhancement levels across various deals. And we see the rating agencies consistently reviewing their models as more data comes in. And you are as aware as anybody that losses have been de minimis in the non-QM sector, but we are seeing the 2022, '23 cohorts where delinquencies are creeping up. So I guess our expectation is not that there is a material decline in credit enhancement levels. And for us, Eric, I mean, we actually look at securitization in two different components. One, horizontal risk retention and vertical risk retention. So the horizontal, obviously, we have, you know, certain types of requirements with respect to how much we must retain if we are holding horizontal. And then on the vertical side, we are holding most of that would be AAAs. So for us, it is really just an economic consideration. The nice thing about securitizing and retaining the horizontal piece is that you are basically, you know, funding your investment with fixed-rate term financing, so you are not taking liquidity risk. And certainly, from that perspective, we are more comfortable taking the leverage. And if it was like mark-to-market repo. Eric Hagen: That is really helpful color. I appreciate that. Right here. As you guys know, the administration is focused on reducing mortgage rates by buying agency MBS, but the GSEs, of course, still hold a huge portfolio of mortgage loans, which they usually target for loss mitigation. Do you guys think the GSEs could ever look to sell more of the loan portfolio mainly in an effort to, like, create more room for MBS purchases? And do you think there is a deep enough market for them to potentially pursue that opportunity? Jack Macdowell: Are you talking about the, like, the NPL sales? Eric Hagen: Yes. Much. Yeah. Oh, yeah. Exactly. Jack Macdowell: Yeah. For sure. For sure. I mean, I would hope that they would. I mean, they have certainly been, you know, sellers in the past. So that could certainly be an avenue that they have used historically, and they could certainly use again to the extent that the economics made sense for them to do so. Eric Hagen: Okay. Thank you, guys. Operator: Thank you. Our next question comes from the line of Kenneth Lee with RBC Capital Markets. Please proceed with your question. Kenneth Lee: Hey, good morning. Thanks for taking my question. Just one on third-party assets under management and the growth around there. How do you think about the potential contribution of fee revenues or fee-related earnings over time? To see a meaningful pickup, would there have to be a pickup in loans under management? Or is there any other avenues that you are looking at there? Thanks. Jack Macdowell: Yes, I mean, that is certainly a focus of ours to diversify our earnings and grow our fee-earning capabilities. I mean, that group is really bifurcated into two different pieces. One, the majority of which is managing, you know, loans on a third-party basis, and that creates a couple of different fee revenue streams. So we are constantly working to, you know, grow that business both sort of with external loans, and there are also synergies with respect to Home Express production to the extent that we sell loans and we can retain the asset management function on a go-forward basis. So we are certainly looking to exploit some of those synergies as well. And then on the more discretionary, you know, credit fund side, you know, we certainly remain focused on, you know, looking at building separately managed accounts and growing fees through that channel as well. Kenneth Lee: Gotcha. And then relatedly, are you seeing in terms of client demand or interest for the loans? Is there any kind of color around the mix of either institutional investors? What types? Sounds like from the prepared remarks, you are seeing stronger demand there, but just want to get a little bit more color on that. Thanks. Jack Macdowell: Yes. If you are talking about the demand in the secondary market for Home Express' loan sales, I mean, it is a consortium of different buyers from insurance companies to dealers to, you know, asset managers who oftentimes are crossover between securities crossing over into the loan space. So, yeah, I mean, just like we have seen spreads tighten on AAA non-QM, 20 to 25 basis points start of the year, we are seeing very strong demand for non-QM loans in the secondary market from a whole host of investors. And maybe just to follow up on that question, the types of investors, I mean, you continue to see insurance companies looking to crossover and get exposure to the whole loans. So that is an area I think that we continue to be focused on to the extent that we can provide somewhat of a one-stop shop for folks who are looking to get exposure to non-QM loans, but perhaps do not have the infrastructure to manage those loans. We have the in-house capability, and we can provide that one-stop shop. Kenneth Lee: Very helpful there. Thanks again. Operator: Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back to CEO, Phillip Kardis, for closing remarks. Phillip Kardis: I would like to thank everybody for participating in our 2025 fourth quarter earnings call, and we look forward to speaking with you again for our 2026 first quarter earnings call. Thanks again. Operator: Thank you. And this concludes the conference, and you may disconnect your lines at this time. We thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to Veru Inc. Investors Conference Call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference call over to Mr. Sam Fisch, Veru Inc. Executive Director, Investor Relations and Corporate Communications. Please go ahead. Good morning. The statements made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, statements of the company's plans, objectives, expectations, or intentions regarding its business, operations, regulatory interactions, finances, and development and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties, and our actual results may differ significantly from those projected, suggested, or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings as well as in our press releases from time to time. I would now like to turn the conference call over to Doctor Mitchell Steiner, Veru Inc.'s Chairman, CEO, and President. Good morning. With me on this morning's call are Doctor Gary Barnett, our Chief Scientific Officer, Michele Greco, our Chief Financial Officer and Chief Administrative Officer, Phil Greenberg, General Counsel, and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our first quarter fiscal year 2026 earnings call. Veru Inc. is a late clinical-stage biopharmaceutical company focused on developing novel medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of two new chemical entities, small molecules, Novosarm and sabizabulin. The first one, Novosarm, is an oral selective androgen receptor and is being developed as a next-generation drug that, when combined with a GLP-1 receptor agonist, as demonstrated in our company's recently completed Phase 2 quality study, makes weight reduction more tissue selective, focusing on fat loss and preservation of lean mass and physical function, which is intended to lead to greater weight loss compared to GLP-1 receptor agonist treatment alone, with a focus on older patients with obesity. Our second asset, cabozantinib, a microtubule disruptor, is being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation to slow the progression of and promote the regression of atherosclerotic cardiovascular disease. This morning, we will focus on the update of our obesity program and we will also provide financial highlights for fiscal 2026 first quarter ended December 31, 2025. GLP-1 receptor agonists have been shown to produce significant weight loss in patients who are overweight or have obesity. Unfortunately, this weight loss is tissue nonselective with the indiscriminate significant loss of both lean mass and fat. Of the total weight loss, up to 50% is attributable to lean mass. Although the GLP-1 receptor agonist treatment has resulted in profound weight loss for many patients, the strategy for the next generation of obesity drugs should be a combination therapy with a GLP-1 receptor agonist for patients to lose fat only while preserving lean mass and physical function and bone mineral density for the highest quality weight reduction. Veru Inc. has completed a positive Phase 2b quality clinical trial conducted on 168 older patients with obesity, providing a proof of concept that Novosarm could be that next-generation drug in combination with the GLP-1 receptor agonist to make the weight loss journey more selective for only fat loss while preserving lean mass and physical function during the active weight loss period, but also notably after semaglutide was discontinued and those on monotherapy significantly prevented the regain of both body weight and fat mass such that by the end of the 28-week study, there was greater loss of fat mass while preserving lean mass for higher quality weight reduction compared to the placebo group. In September 2025, we announced a successful FDA meeting providing regulatory clarity for the development of Novosarm in combination with GLP-1 receptor agonist for greater quality weight loss in the treatment of obesity. According to FDA feedback, there are at least two possible regulatory pathways for the development of the Novosarm in combination with GLP-1 receptor agonist treatment for obesity with preservation of lean mass, which are based on incremental weight loss. First, incremental weight loss with at least a 5% placebo-corrected weight loss difference at 52 weeks of maintenance treatment with Novosarm in combination with GLP-1 receptor agonist treatment compared to GLP-1 receptor agonist treatment alone may be an acceptable primary endpoint to support efficacy for approval. Second, if the incremental weight loss is less than 5% corrected weight loss, including similar weight loss at 52 weeks maintenance treatment with Novosarm in combination with GLP-1 receptor agonist treatment compared to GLP-1 receptor agonist treatment alone, but the Novosarm treatment group demonstrates a clinically significant positive benefit such as a statistically significant and clinically meaningful benefit in the preservation of physical function, this may also be acceptable to support efficacy for approval. FDA also confirmed that Novosarm three milligrams is an acceptable dosage for future Veru Inc. clinical development. Now coincidentally, on December 19, 2025, the FDA announced that total hip bone mineral density, that's BMD, assessed by DEXA scan qualifies as a validated surrogate endpoint for drug development in postmenopausal women with osteoporosis at risk for fracture instead of the current standard that requires Phase 3 clinical studies must use bone fractures as a primary endpoint. This is relevant for our Novosarm Obesity program as it's been reported in the scientific literature that GLP-1 receptor agonist therapy affects body composition by also reducing hip BMD. In fact, the semaglutide Wegovy FDA label has recently been updated to include the safety concern of increased risk of hip and pelvic fractures based on the SELECT cardiovascular trial, which is sponsored by Novo Nordisk in over 17,000 subjects. In the SELECT trial, four to five times more hip fractures of the hip and pelvis were reported on Wegovy than in placebo in female patients and in all patients aged 75 and older. The good news for our Novosarm obesity program is that in previously published preclinical studies and rat models of postmenopausal female osteoporosis, Novosarm has been shown to have both anabolic and anti-resorptive activities that resulted in increased bone mineral density. Consequently, this means that distinct from incremental weight loss, or muscle preservation and physical function as primary endpoints, improving BMD in postmenopausal women with obesity receiving a GLP-1 receptor agonist who also have osteoporosis could be another primary endpoint going forward for Novosarm to seek regulatory approval for improving body composition. Now let's turn to the current status of our planned Phase 2b PLATO clinical study. A common and serious clinical and therapeutic challenge of GLP-1 receptor agonist treatments is that 88% of patients with obesity after one year on GLP-1 receptor agonist drug hit a weight loss plateau with a stop losing additional weight. This is based on the Cervant 1 study conducted by Eli Lilly and Company. Unfortunately, 62.6% of these patients still have clinical obesity at the time they reach the weight loss plateau. One explanation might be that the loss of muscle stimulates appetite in patients receiving a GLP-1 receptor agonist to consume more calories, which may be an important reason why patients hit that weight loss plateau. Novosarm has been shown in clinical studies to directly burn fat, preserve muscle, increase physical function, and burn more calories, which would help break through the weight loss plateau leading to incremental weight reduction. Veru Inc.'s planned Phase 2b PLATO clinical study is a double-blind placebo-controlled study to evaluate the effect of Novosarm three milligrams on total body weight, fat mass, lean mass, physical function, bone mineral density, and safety in approximately 200 older patients aged greater than or equal to 65 years of age who have obesity with a BMI of greater or equal to 35 and are initiating semaglutide treatment for weight reduction. The primary efficacy endpoint of the study is the percent change from baseline in total body weight at 68 weeks. An interim analysis will be conducted at 34 weeks to assess the percent change of baseline in lean body mass and fat mass as measured by DEXA scan. The key secondary endpoints of total fat mass, total lean mass, physical function using the Stair Climb test, bone mineral density, and a patient-recorded outcome questionnaires for physical function, HbA1c, and insulin resistance. Semaglutide was selected as a GLP-1 receptor agonist for the Phase 2b PLATO study to build on Veru Inc.'s previous clinical experience using Novosarm in combination with semaglutide in the Phase 2 quality clinical study. Further, there's now an oral form of semaglutide which may be used in combination with oral Novosarm in future Phase 3 clinical studies, making the potential bridging of the future Phase 3 clinical studies data to the Phase 2b PLATO Novosarm plus injectable semaglutide data possible. In contrast, tirzepatide injectable does not have an oral formulation. The principal investigator for the Phase 2b PLATO clinical trial will be again Steven Heimsfield, MD, Professor and the Director of the Body Composition Metabolism Laboratory at the Pennington Biomedical Research Center in Baton Rouge, Louisiana. The clinical study is expected to begin this quarter. An interim analysis to assess change in lean body mass and fat mass measured by DEXA will be conducted at 34 weeks, which is anticipated to be in 2027. I will now turn the call over to Michele Greco, CFO and CEO, to discuss the financial highlights. Michele? Michele Greco: Thank you, Doctor Steiner. On October 31, 2025, Veru Inc. completed an underwritten public offering of 1,400,000 shares of our common stock, pre-funded warrants to purchase up to 7,000,000 shares of our common stock, accompanying Series A warrants to purchase up to 8,400,000 shares of our common stock, and accompanying Series B warrants to purchase up to 8,400,000 shares of our common stock at a public offering price of $3 per share of common stock and the accompanying Series A and Series B warrants. Net proceeds to the company from this offering were approximately $23,400,000 after deducting underwriting costs and discounts paid by the company. In the prior year period, on December 30, 2024, Veru Inc. sold the FC2 female condom business to Clear Future Inc. In our financial statements, all direct revenues, costs, and expenses related to the FC2 Female Condom business are classified within loss from discontinued operations net of tax in the statements of operations. Now let's review the results for the three months ended December 31, 2025. Research and development costs decreased to $1,300,000 from $5,700,000 in the three months ended December 31, 2024. The decrease is primarily due to a wind-down of the Phase 2b quality clinical study for Novosarm as a treatment to augment fat loss and prevent muscle loss, which was completed during fiscal 2025. General and administrative expenses were $4,100,000 compared to $5,200,000 in the prior quarter. The decrease is primarily due to a decrease in share-based compensation. We recognized a gain on the sale of NTAPI assets of $695,000 in the prior quarter, which is based on nonrefundable consideration related to promissory notes previously due to Veru Inc. As the promissory notes are now settled, no additional gain is expected in future periods. In conjunction with the sale of the FC2 Female Condom business, we recorded a gain on extinguishment of debt of $8,600,000 in the prior year's quarter related to the termination of the residual royalty agreement. During the prior fiscal year, the company entered into a settlement agreement with On Kinetic Inc., whereby the company received a cash payment of $6,300,000 in Series D preferred stock and a warrant, which had a combined fair value of $2,500,000. The loss associated with the change in fair value of securities held related to On Kinetics was $100,000 compared with $300,000 for the prior period. The bottom line result was a net loss of $5,300,000 or $0.26 per diluted common share, compared to a net loss of $8,900,000 or $0.61 per diluted common share in the prior year's quarter. For the prior period's quarter, the net loss included a net loss of $7,100,000 from discontinued operations. Now looking at the balance sheet. As of December 31, 2025, our cash, cash equivalents, and restricted cash balance was $33,000,000 compared to $15,800,000 as of September 30, 2025. On both December 31, 2025, and September 30, 2025, there was $100,000 of restricted cash related to the sale of the FC2 female condom business. Our net working capital was $29,700,000 as of December 31, 2025, compared to $11,100,000 as of September 30, 2025. The company is not profitable and has had negative cash flow from operations. Based on the company's current operating plan, our cash as of the issuance date of these financial statements is expected to be sufficient for the company to fund operations through the interim analysis in the Phase 2b PLATO clinical study to assess percent change from baseline in lean body mass and fat mass as measured by DEXA scan. During the three months ended December 31, 2025, we used cash of $6,200,000 for operating activities, compared with $11,300,000 used for operating activities in the prior period. There was no cash generated from investing activities in the current period. For the three months ended December 31, 2024, we generated cash from investing activities of $17,200,000, primarily from proceeds from the sale of the FC2 female condom business of $16,200,000. Net cash provided by financing activities for the three months ended December 31, 2025, was $23,400,000, which were the proceeds from the sale of common stock and warrants in an underwritten public offering net of commissions and costs. We used cash in financing activities for the three months ended December 31, 2024, of $4,200,000 related to the change of control payment to SWK pursuant to the residual royalty agreement terminated in conjunction with the sale of the FC2 female condom business. Now I'd like to turn the call back to Doctor Mitchell Steiner. Doctor Steiner? Mitchell Steiner: Thank you, Michele. With that, we'll now open the call to the question and answer session. Our first question comes from Edward Nash with Canaccord. Please go ahead. Hey, good morning, guys. Thanks so much for taking my question. I wanted to first just add just a couple of questions. One was why not use the oral semaglutide in this study as opposed to having the optionality in the Phase 3? Is it just because of its relatively new now, its lack of real-world data? I think the reason is that trying to minimize potential difference between what we saw in the Phase 2b quality study and what we want to see in the PLATO study. And so the oral form is not exactly the same as the injectable. The injectable is a little bit better. So that means that if we show what we need to show in the Phase 2b PLATO study, then we should see even better response with an oral semaglutide that doesn't do as well as the injectable. So really it's been calculated, took a step back and said, why do you want to change and add tirzepatide now? And since you created a completely different study with different outcomes potentially. We're trying to be safe as we move towards now. With that said, it's, you know, somatostatin is the active ingredient in both the injectable and the oral. And so that could be easily bridged and what you're trying to bridge is not the efficacy, because we're going to be testing the efficacy in the Phase 3, which you want to bridge is into all the safety. And you should be able to do that. Got it. Thank you. And just one follow-up is on the with regards to the function aspect, functional aspect of the FDA allowing that as a potential approval path preservation of function. Did you guys specifically discuss with the agency about stair climb test and the specific questionnaires that you're looking to employ to determine whether or not they consider those to be sufficient for that endpoint? Yeah. So we did speak to the agency specifically about stair climb. As you know, we've done five now with the quality studies, six studies previously done with Novosarm and done by our company here at Veru Inc. with 1,000 patients using StairClimb. So we have twenty years of experience with StairClimb. And it's not just talking to the agency with this trial and other trials, also every major scientific group. And stair climb still comes out as the best way to measure what's happening in this patient population. It's most sensitive to declines and it's very sensitive to anabolic intervention. With that said, the main comments that the FDA brought up was in the conduct of the study, they wanted to make sure that we did duplicate stair climb runs. In other words, the patient goes up the stairs once and goes up a second time and then you average that. And they also wanted to make sure that in addition to loaded that we did unloaded. What that means is that when a patient goes up the stairs, they unload it means they just go up just as they are. Loaded means that you add a backpack with some weight and the concept there is just kind of clever is we're trying to normalize weight. And the way you normalize weight is that you just add back the weight that they lost when they come back to that final visit. And you do that with the plates. And so this way, you're actually measuring and challenging the patient's muscle. So that's why it becomes such a sensitive measure of intervention. And so we had those kinds of discussions with the FDA. What's open is and what we're going to focus on in the PLATO study is also what happens with the patient-reported outcomes and how the patient-reported outcomes help to further define how patients function and feel. And so that's why the Phase 2 makes more sense than jumping into a Phase 3 because that will help with the clinical meaningfulness of what we're actually measuring objectively. Got it. Thank you very much. And the next question comes from Rohan Mathur with Oppenheimer. Please go ahead. This is Rohan on for Leland. Thanks for the question. I just wanted to ask on the interim analysis plans. Are there any pre-specified decision rules with respect to futility or alteration of the sample size that are part of the criteria there? Thank you. Sure. So I have Doctor Gary Barnett, our Chief Scientific Officer. And Gary? Yes. No, there is no futility analysis or sample size re-estimation associated with this interim analysis. And as you know, the primary endpoint is weight loss. And so the interim analysis is looking at lean mass and fat mass. And so the real purpose of it is to gain confirmation that we're heading in the right direction, meaning that you're seeing the lean mass preservation and the additional fat mass loss that would at 34 weeks, that should translate to 68 weeks, a weight loss benefit. And so from a statistical standpoint, by not looking at total weight loss, plus it's too early anyway, at 34 weeks, you're not taking a statistical penalty or an alpha hit at the interim, which will affect the amount of alpha spend you have at the end of the study. Got it. And just one more for me. You go down the route of assessing functional benefit and in the case that maybe less than 5% of weight loss is observed, is there any sense for what degree of weight loss needs to be seen and is that counterbalanced by the magnitude of functional benefit? Yes. So as I said in my public statements, that question has come up before. So greater than 5% alone is weight loss, incremental weight loss you're in. If it's less than 5% and the weight loss could be similar to the GLP-1 receptor agonist, meaning that you didn't see incremental weight loss difference at all. But to show the physical function benefit, then that can be a basis for approval going forward. Understood. Thank you. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Doctor Mitchell Steiner for any closing remarks. Thank you. I appreciate everyone who joined us on today's call and we look forward to updating you all on our progress in our next investor call. Thank you again. The digital replay of the conference call will be available beginning 12 p.m. time today, February 11, by dialing +1 855-606-658 in the US and +1 (412) 317-0088 internationally. You'll be prompted to enter the replay access code which will be 7414536. Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's discussion.
Emily: My name is Emily, and I'll be your conference operator today. At this time, I would like to welcome everyone to Avantor's Fourth Quarter 2025 Earnings Results Conference Call. After the presentation, you will have the opportunity to ask any questions, which you can do so by pressing star followed by the number one on your telephone keypad. I will now turn the call over to Chris Fiedick. Chris, you may begin the conference. Chris Fiedick: Thank you, operator. Good morning, and thank you all for joining us. Our speakers today are Emmanuel Ligner, President and Chief Executive Officer, and Brent Jones, Executive Vice President and Chief Financial Officer. Press release and a presentation accompanying this call are available on our Investor Relations website at ir.avantursciences.com. Following our prepared remarks, we will open the call for questions. A replay of the call will be made available on our website later today. During this call, we will make forward-looking statements within the meaning of the U.S. Federal Securities Laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. Actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made. We do not assume any obligation to update these forward-looking statements as a result of new information, future events, or other developments. This call will include a discussion of non-GAAP measures. A reconciliation of these non-GAAP measures can be found in the press release in the supplemental disclosures package on our Investor Relations website. With that, let me hand the call over to Emmanuel. Thank you, Chris. And good morning, everyone. Thank you for joining us today. Emmanuel Ligner: I'll cover three topics to begin the call. First, project revival and our progress to date. Then our strategic objective for 2026 and how we will track our progress. And finally, my observations about the health of our end markets. I will then end the call over to Brent. We will discuss our financial performance, and 2026 guide in more detail. And after Brent comments, I will make some concluding remarks. Our previous earning call, I introduced the Avantor revival program, which is designed to sharpen our strategic focus and to improve execution across the organization. Revival consists of five pillars: evolving our go-to-market strategy, improving our operation, optimizing our portfolio, simplifying our processes, and lastly, strengthening talent, and increasing accountability. We are executing this plan with urgency, and in the three months since launching the program, we have already made important progress. Our top priority has been the go-to-market pillar. And recently, we made a fundamental shift in how we run the company. We now operate Avantor with two new business units: a product-agnostic channel and a channel-agnostic product business. Customers and their needs are at the center of this reorganization, and we believe that this delineation maximizes the possibility that every product and every service is delivered in a way that delights customers. Effective in Q1, we will alter our reporting segments to reflect this go-to-market approach and align external reporting with how we now manage a business internally. Next, we have recommitted to the VWR brand for our channel business. One of my earliest observations when meeting with suppliers or customers to the channel and our associates was that everyone refers to us as VWR. So as of a few weeks ago, the distribution channel of Avantor is once again known as VWR. We intend to capitalize on VWR's tremendous brand recognition and long-standing goodwill with customers around the world. In Q4, we launched an important update to the VWR e-commerce platform, and we have committed to invest an additional $10 to $15 million in 2026 to upgrade our customer's interface. Enhancing our digital capabilities is one of our highest priorities given their importance to so many of our customers. In the operations pillar, our new Chief Operating Officer, Mary Blend, has hit the ground running. Mary and her team have thoughtfully identified $20 million of investment to enhance our ability to serve customers. Next, we have established a revival project management office led by Allison Hosak that will coordinate our collective effort and will ensure accountability. Lastly, our team across the world has embraced revival, and I am thrilled by their willingness to make the changes necessary to maximize our potential. While I am optimistic as ever about the future of Avantor, I want to be crystal clear that 2026 will be a year of transition and investment as we reinforce the foundation of this great company. Significant investment will be made across the organization with our strategic priority in mind, driving sustainable, profitable top-line growth. We will compete vigorously but rationally, and we will work relentlessly to ensure customers are delighted about Avantor. As such, the most important metric to track our progress will be organic revenue growth rate, and we intend to demonstrate improvement over the course of 2026. We have a significant amount of work ahead, but the fruits of our labor will be meaningful when we execute our revival plan successfully. We believe that Avantor can grow at a faster rate, generate attractive margins, produce strong free cash flow, and do all of this in a far more consistent manner. Before Brent discusses the financials, I want to share what we are seeing across some of our key markets. First, let me echo recent comments from others in our industry. After a challenging 2025, our end markets feel more stable, though, naturally, some areas are in better shape than others. The biopharma end market continues to be healthy, with production levels growing at attractive rates and many companies identifying investments that will expand capacity or improve efficiency. This bodes well for future demand from this important customer cohort. The primary growth driver of our bioprocessing business is patient demand for biologics, which has remained strong. We expect demand for biologics to grow in 2026 and beyond based on customer development pipelines, the number of recent FDA approvals, and the pace at which existing therapies are being adopted. Customer inventory levels across JT Baker and other process chemicals appear to be reasonably normal, and we expect demand for our products could improve modestly in 2026, having exited 2025 with a book-to-bill ratio of more than one. On the Masterflex fluid handling side, we remain well-positioned in areas aligned with customer preferences, including single-use assemblies, fluid management, and modular processing solutions, which support flexibility and faster deployment when customers choose to invest. 2025 was a difficult year for our early-stage biotech, education, and government customers, but we are cautiously optimistic that those end markets are near the bottom. While it is difficult to predict if or when Avantor might see improved demand, we are pleased that certain headwinds facing those customers may be dissipating. The fourth quarter was one of the best quarters for biotech funding in recent years, and this momentum continued in January. Across the education and government end market, which we serve primarily with VWR, we have seen indicators of an improved funding environment in Europe and Japan, but there remains uncertainty in the U.S., which represents a large percentage of our education and government business. While we are encouraged by expectations for an NIH budget in 2026, customers remain hesitant to spend money even when it is committed and received. This, coupled with reductions in headcount and program cuts over the past year, leads us to believe that we will not see a noticeable increase in customer spend until we have an extended period of funding and outlay stability. Before I turn the call over to Brent, I want to note that we are pleased to welcome Sanjit Mehra and Simon Diggumans to our board of directors. Sanjeev and Simon add deep global leadership, financial expertise, and strategic insight. Brent? Brent Jones: Thank you, Emmanuel, and good morning, everyone. I'm starting with slide four. We delivered a Q4 largely in line with expectations, with organic revenue growth, adjusted EPS, and free cash flow at or above our guidance. For the quarter, reported revenue was $1.66 billion, down 4% year over year on an organic basis and squarely in line with our guidance. Adjusted EBITDA margin was 15.2%. Adjusted EPS for the quarter was 22¢, at the midpoint of guidance. Free cash flow was $117 million. Excluding transformation expenses, free cash flow was $150 million at the high end of guidance. Adjusted gross profit for the quarter was $524 million, representing a 31.5% adjusted gross margin. This is a decline of 190 basis points year over year, driven mainly by unfavorable segment mix and product mix, as well as price actions in the lab to protect and grow market share. Adjusted EBITDA was $252 million in the quarter, which came in at the low end of our expectations. This was largely driven by gross margin, but also some modest headwinds due to revival-related spending as we have kicked off this program in earnest. Adjusted operating income was $225 million at a 13.5% margin. Interest and tax expenses were better than expectations, and as a result, adjusted earnings per share were $0.22 for the quarter, a $0.05 year-over-year decline. In Q4, we purchased $75 million worth of stock under the $500 million share repurchase program our board of directors authorized last fall. We paid down approximately $300 million of debt in 2025 and added approximately $120 million of cash to the balance sheet. Our adjusted net leverage ended the quarter at 3.2 times adjusted EBITDA, flat to last year. Leverage increased by a tenth of a point sequentially, largely due to FX impacts on the balance sheet that were higher than our expectations, as well as lower LTM EBITDA. Turning to our full-year results on slide five. Reported revenues were $6.552 billion, down 3% on an organic basis. Adjusted gross profit for the year was $2.14 billion, representing a 32.7% adjusted gross margin. Adjusted EBITDA was $1.069 billion in 2025, representing a 16.3% margin. Adjusted operating income was $958 million at a 14.6% margin. Putting all of this together, adjusted earnings per share came in at $0.90 for the year, at the midpoint of our updated Q3 guidance. We generated $496 million in free cash flow in 2025. Excluding transformation spend, we generated $599 million of adjusted free cash flow. Free cash flow conversion was nearly 98% when adjusted for the cash costs related to transformation. Laboratory solutions revenue for the quarter was $1.116 billion, a decline of 4% versus the prior year on an organic basis, representing the higher end of our guidance of down mid-single digits. Sequentially, sales grew modestly on an organic basis. The market environment remains reasonably stable, albeit at lower levels of activity than we would like to see. The prolonged government shutdown certainly had an impact in the quarter, but we also saw some modest end-of-year budget flush that we did our best to capitalize on, particularly with equipment and instrumentation. Our channel business, which represents approximately two-thirds of the business, was down mid-single digits, with strength more than offset by headwinds in consumables and E&I. Our services business was down low single digits, and our specialty business was essentially flat, with proprietary chemicals up low single digits. For the full year 2025, laboratory solutions revenue was $4.4 billion, a decline of 3% versus 2024 on an organic basis. Adjusted operating income for laboratory solutions was $114 million for the quarter, with a 10.2% margin. Adjusted operating income margin declined 290 points year over year and 110 basis points sequentially from Q3. The primary driver of the sequential margin decline was mix, with stronger equipment and instrumentation and specialty procurement sales at lower margins. Pricing also contributed to the margin decline. For the full year 2025, Laboratory Solutions' operating income was $510 million, with an 11.6% margin. Bioscience production revenue for the quarter was $548 million, which reflects an organic decline of negative 4% versus the prior year, representing the high end of our guidance. This also represents mid-single-digit growth sequentially. Bioprocessing, representing about two-thirds of the segment, saw a high single-digit decline at the better end of our expectations of down high single digits to low double digits. Within bioprocessing, process chemicals performed as expected, down double digits year over year. This was largely due to the ongoing backlog we are carrying, as well as a particularly difficult comparable in 2024. Process chemicals were up modestly on a sequential basis. On the order side, our process chemicals business, excluding serum, had a book-to-bill of more than one for the quarter, and this order book is up high single digits year to date. While we continue to have operational bottlenecks, these did not materially impact our Q4 performance versus expectations. Our backlog did not reduce meaningfully in the quarter and remains too high, but this is receiving intense focus from the operations and supply chain teams in line with our revival objectives. As expected, single-use was up low single digits both year over year and sequentially. Controlled environment consumables were down modestly sequentially and somewhat weaker than expected. For the balance of the segment, silicones performed largely in line with expectations, and applied solutions outperformed due to electronic materials. Adjusted operating income for bioscience production was $127 million for the quarter, representing a 23.2% margin, down 340 basis points year over year. This decline is significantly due to volume-related fixed cost absorption and mix. On a sequential basis, adjusted operating income was down 100 basis points, in part due to additional spend to drive better operational performance. For the full year 2025, Bioscience Productions adjusted operating income was $518 million, with a 24.1% margin. Please turn to Slide eight. As Emmanuel noted, we have optimized our go-to-market strategy, and as a result, we are resegmenting the business in 2026. Slide eight graphically depicts the key elements of this resegmentation, as well as our new nomenclature for the business. This resegmentation reflects how we now run the business, with a product-agnostic channel on the one hand and channel-agnostic products on the other. You will find detailed disclosures in the form 8-K we filed earlier today. Please turn to slide nine. The larger segment is VWR distribution and services, coinciding with our relaunch of the VWR brand last month. This will include most of the former Laboratory Solutions segment but now will include CEC, and will no longer include our proprietary laboratory chemicals business, as well as a few other small businesses where we manufacture products. The guiding principle for the VWR distribution and services segment is a product-agnostic channel primarily composed of third-party content, but that also includes VWR-branded products. Over 90% of this segment will be our channel business, and the balance will be our services offerings, which include our on-site services, where we manage our customers' inventories and stock rooms, as well as our equipment services business. Based on 2025 revenue, the channel piece of this segment was approximately $4.4 billion, and the services piece was approximately $300 million. What we are now calling our VWR distribution and services segment represented about 72% of our enterprise revenue in 2025 and had an adjusted operating margin of 11.5% for the year. I am now on slide 10. The other segment will be bioscience and medtech products. This segment includes most of the former bioscience production segment, with the addition of our proprietary laboratory chemicals business and a few other small businesses where we manufacture products, and the removal of CEC. Again, the guiding principle for this new segment is a channel-agnostic product business. The components of this segment are process chemicals, fluid handling, NuSil, and research and specialty chemicals. As you can see by the slide, process chemicals include our proprietary JT Baker products used in production environments, from solvents to salts to excipients. Fluid handling includes our Masterflex pumps and associated tubing, as well as skids and other fluid management solutions. NuSil includes our well-known high-purity silicones that are used in medical and industrial applications. Finally, research and specialty chemicals capture the balance of our portfolio, including diagnostic chemicals, proprietary lab chemicals, electronic materials chemicals, and serum for biologic applications. For fiscal year 2025, process chemicals generated approximately $500 million in revenue, fluid handling generated approximately $400 million in revenue, NuSil generated approximately $350 million in revenue, and research and specialty chemicals generated approximately $600 million in revenue. Combined, what we are now calling our bioscience and medtech products segment represented about 28% of our enterprise revenue in 2025 and had an adjusted operating margin of 26.7% for the year. Please turn to slide 11, where I will discuss our 2026 guidance. For 2026, we expect organic revenue growth of negative 2.5% to negative 0.5%. We expect FX will contribute 1% to the top line, resulting in reported revenue growth of between negative 1.5% and positive 0.5%. We expect that VWR growth will somewhat outpace that of bioscience and medtech products during the year. We continue to drive operational recovery and process chemicals and have the benefit of a strong order book in the business. Bioscience and medtech products do face difficult comps in 2020 in its research and specialty chemicals subsegment, specifically in electronic materials and serum, as well as with NuSil. VWR will be impacted by a continuation of the various dynamics discussed on prior earnings calls. As Emmanuel mentioned earlier, we will continue to compete vigorously but rationally and believe that this business will exit 2026 on more stable footing. We are making a variety of investments to enhance our value proposition and to better serve customers, which we believe will improve the performance of this franchise over time. Moving to profitability. We anticipate that our EBITDA margins will contract by as much as 100 to 150 basis points in 2026, similar to our margin level exiting 2025. Margins will be pressured by a variety of factors, including bioscience and medtech product growth due to headwinds stated before, mix shifts, revival investments, incentive compensation reload, as well as price-cost spread. While our cost-saving initiatives remain on track, they will only offset a portion of the headwinds that we will face this year. Moving below the line, we anticipate interest expense will approximate that of 2025 as FX movements offset the benefits of debt repayment, and we anticipate a tax rate of approximately 22.5%, similar to 2025's rate. Finally, we assume a fully diluted share count of 685 million shares for the year. All this translates to an adjusted EPS outlook of 77¢ to 83¢ for 2026. We expect to generate between $50 million and $550 million of free cash flow in 2026, and we once again expect our free cash flow generation to be back-half weighted. Our guidance does not assume any share repurchases during 2026. A few comments on phasing. In Q1, we expect to generate EPS of between $0.15 and $0.16 per share. We will face the same margin headwinds in Q1 that we do for the full year, but Q1 bears the additional burden of being the historically softest quarter of the year for our industry, plus our cost initiatives will have a greater impact later in the year. We may also be impacted by the severe weather across the U.S. recently. Emmanuel Ligner: Finally, capital allocation. Debt reduction remains a top capital allocation priority as we remain committed to reducing our leverage sustainably below three times net debt to adjusted EBITDA. We built cash and paid down a meaningful amount of debt again in 2025. At the same time, we continue to believe that our current share price fails to reflect the intrinsic value of our platform, so we may choose to repurchase shares opportunistically with excess cash. With that, let me turn the call back to Emmanuel. Emmanuel Ligner: Before we move to the Q&A session, I want to spend a few moments discussing two important topics: our cost base and our go-to-market strategy. I've spent my career in organizations famous for their continuous improvement mindset, with a particular focus on eliminating wasteful spend and recycling it into growth-oriented areas. The continuous improvement mindset is central to my management philosophy. I see many opportunities for Avantor to become more efficient. At the same time, I see many opportunities to make important growth investments across the business. With our focus on revival, we will no longer report progress related to our previously discussed cost transformation initiative. Now we will continue to target those goals internally as a strategic objective separate from or in addition to revival. This doesn't mean that we are no longer focused on reducing costs in the business, but I believe that we should not have competing or potentially conflicting priorities as revival is our critical focus going forward. Through 2025, we have a run rate saving of $265 million, ahead of our original expectation. Revival is about much more than cost. It is about driving sustainable top-line growth and operating more efficiently. When you marry this to the actions already taken, this will provide a strong foundation to drive improved operating leverage and margin improvement that follows from it. Next, I want to dive deeper into the rationale for our new go-to-market strategy and the corresponding resegmentation of our business. Over the last six months, I have traveled the globe to engage with customers, suppliers, and other external partners. During those travels, too frequently, I've encountered confusion and misunderstanding about who Avantor is and what we do. This confusion ends today. Avantor is a house of powerful brands. Brands such as J.T. Baker, Masterflex, NuSil, and VWR. Each of our brands has a unique heritage, and often our brands are synonymous with attributes such as quality or reliability. Our new go-to-market strategy will facilitate sharper market positioning and will clarify our identity, allowing us to capitalize on the equity of those powerful brands. The distribution business will build on VWR's history of offering private label, third-party solutions, and services, while the product franchise offers a diversified portfolio of best-in-class manufactured products. By swapping certain business activities between the two segments, we will better organize the company to meet customer needs, as the requirements of VWR customers differ from those of a J.T. Baker customer. These pivotal changes should improve our go-to-market effectiveness by enabling each business to focus on its respective customer service needs, product life cycles, and value proposition. In addition, we have created clear operational swim lanes, which in turn will result in better operational transparency and accountability. Finally, we believe that our new structure will enable more focus and faster decision-making, as each segment is free to pursue its own strategy without any tension between a high-volume distribution engine and a product-focused manufacturing engine. To conclude, I am as excited as ever about the future of Avantor and confident that the successful execution of Revival will help us reach our vast potential. The company boasts a series of world-class assets, including its people, and I am delighted by how swiftly and energetically the team has responded to change. Avantor is in transition, and 2026 will be a year where we invest purposefully and sensibly to strengthen all aspects of our business. The ultimate goal, of course, is for the business to produce financial results that are far more attractive than what we have shown in recent years. Thank you again for joining the call. Operator, let's switch to Q&A, please. Emily: Thank you. We will now begin the question and answer session. As a reminder, if you would like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star followed by 2 to withdraw yourself from the queue. Our first question today comes from Casey Woodring with JPMorgan. Casey, please go ahead. Casey Woodring: Great. Thanks for taking my questions. Maybe just to start, you said that you expect growth in VWR to somewhat outpace that of bioscience and medtech for the year. Can you just unpack that? What are your segment growth expectations for the year? And then maybe just by quarter, can you talk about what you expect in Q1 in both segments and then the phasing throughout the course of the year? Brent Jones: Yes, Casey, it's Brent. Thanks for the question. There are some limitations on what we're guiding to there, but that comment really is driven by, as we noted in, frankly, in my remarks there, we have a number of particularly difficult comps in the bioscience and medtech products business. In serum, in electronic materials, and NuSil. Those are creating several hundred basis points drag on growth there. So that we expect will bring it somewhat below where the VWR channel would be there. So that's the primary driver. We're not really laying out phasing of the growth throughout the year. When we think of Q1 and what builds the Q1, you know, we guided to $0.15 to $0.16 for the quarter, which absolutely implies it should be the low point of the year for most financial metrics. We're not getting the other elements of it. You'd expect doing the math there that organic revenues would decline by 5% or more, which will be offset by a meaningful FX tailwind there. Casey Woodring: Okay. Got it. That's helpful. And then, you know, just curious if you highlighted that in 2026 it's going to be a year of transition and investment. Just on the latter piece, how are you weighing some of these investments, the $10 to $15 million in e-commerce versus some of the cost savings initiatives that are in place? And if you can give any update in terms of how much, by way of cost savings, Revival will generate, and if we'll see any of that in 2026? Thank you. Emmanuel Ligner: Casey, Emmanuel. I think what is very important to understand is we are absolutely not abandoning discipline and cost saving. We have cost transformation initiatives. Okay? What we really want to make sure is it's part of revival, and it's really combined with what we are starting to do. The other thing is, as I said in my remarks, look. It comes from organizations which are very well known and where I have been very well trained on continuous improvement. And what is continuous improvement mindset is really making sure they take out the waste but you also reinvest this waste into opportunities that you have. And this company on both segments has tremendous opportunities. So remember in the revival, we have a pillar which is about optimization. That's where the initiative on cost out is going on. And then at the same time, we have to invest in our e-commerce channel. We have to invest in talent as well. And so this is where we are. The goal, Casey, of revival, I mean, I don't have to remind everybody about it, but it's really about driving urgency to grow the business top line, sustainably, but also profitably. So that's the goal that we have is to really make sure that we take cost out, we reinvest, and the outcome is top-line growth profitably. Emily: Great. Thank you. Our next question comes from Brandon Couillard with Wells Fargo. Brandon, please go ahead. Brandon Couillard: Hey. Thanks. Good morning. Emmanuel and Brent, I mean, maybe the high level would be helpful to get your perspectives on the degree to which you've kinda discounted the guide because stress tested your assumptions, especially coming off the successive number of cuts last year? Just trying to get a feel for elements of conservatism that may be embedded in either the top line or the margin outlook for the year. Brent Jones: Yes. Look, Brandon, number one, very, very mindful of that. There are a huge number of moving parts that are gonna impact the P&L in '26, and the timing and the magnitude of all of them, it's difficult to reflect. But really, we've taken all the pluses and minuses here, and I would say the guide is neither conservative nor aggressive. It's very prudent. And that's really the approach we've taken here. Brandon Couillard: Okay. Then as far as the margin guide goes, I've heard you call out $15 million for e-commerce, another $20 million for, you know, your ability to serve customers. Are there any other investments that you specifically call out? Should we view those as kind of one-time in nature as we think about what the margin could look like beyond this year? Thanks. Brent Jones: Yeah. I mean, Brandon, a few things. The $20 million on the operations side is going to be much more capital than OpEx in terms of some of the digital are gonna be capital. I think a few things we were thinking about the adjusted EBITDA margin path here. Think of Q4 as a starting point and while I wouldn't exactly call that a run rate, I think that's an important jumping-off point. Then you incorporate in our comments of biotech and I'm sorry. Bioscience and medtech products or we'll probably shorthand this BMP. You know, that will probably grow at a lower rate than VWR. So then you have a segment mix issue there. And then within that, the comments I made about headwinds in serum, electronic materials, NuSil, those are really key drivers of margin. Marrying that to the VWR side, margins negatively impacted really by a continuation of the recent trends that we've seen in that business. There are some other revival investments there. Wouldn't say the magnitudes that Emmanuel called out are probably the really significant ones. And, otherwise, these are gonna be very tactical things. He's made comments about certain senior hires and all the rest of it, but that's what I would put together for the margin story. Emmanuel Ligner: And if I just add something, I think I shared that philosophy as well in my first call. It's also about self-funding. Okay? So we spoke a lot about that internally as if there's a need for investment within revival, we need to make sure we self-fund it, which means that we need to find optimization and waste in other areas to be able to reinvest. Emily: Thank you. The next question comes from Paul Knight with KeyBanc. Please go ahead. Paul, your line is now open. Please proceed with your question. Paul Knight: Sorry. My question is a two-piece. Yeah. You hear me? Go ahead. Go ahead. Emmanuel Ligner: Yeah. Yeah. We can now. Yeah. Yeah. Paul Knight: Yeah. As you look at this year, I guess we view it as an investment year. What kind of margin impact are these investments creating? Is it 100 bps? Is it 200 bps? Is it 50? Could you kinda give us a range on this, you know, implement revival, fix manufacturing a bit, fix e-commerce? What is this kind of margin impact in your view that, like, previous question, could dissipate in future years? Emmanuel Ligner: That's a very good question. I think first of all, I will qualify this year as a transition year, okay, more than an investment year. Transition means that we have a lot of change going on. We have a lot of work to do. Okay? We have to make sure that we operate and we go to market differently, and we already started. And so remember, revival that we just introduced only three months ago, and the team is really in action. And I'm super thrilled by the reaction of the team and the engagement that we have. So I will call it a transition year. I will not call it an investment year. And as I said, all the investment that we need to do will need to be self-funded. So what we are guiding today is what we're guiding, and I don't think we will go into the granularity that you're asking about how much revival is investment or not. Again, if there is more investment that we'll do, which are going to be much more material, we'll share that with you guys. Three months in the road, we already take a lot of action. We relaunched VWR, which, by the way, received great feedback from suppliers, from customers, for our own people. So the team is energized. I participated in a self-conference in America. Last week, I was in Asia for the stem cell conference. And in two weeks, we will be in Europe. The vibration is the vibe and the energy of the people is really good. So I don't know if you want to add anything, Brent, but I don't think we'll go that granular. Brent Jones: Yep. I mean, Paul, I would just I would also ground yourself in our comments on, you know, the exit rate coming out of 2025 in Q4 and the number of moving pieces we have, particularly in the bioscience and medtech business, which is, you know, very significant margin impact there. Paul Knight: Yeah. And then last question would be, what do you think the growth rate of the industry is under normalized conditions? Emmanuel Ligner: What is normalized condition? I mean, is it normalized condition from a or is it normalized condition from us and on which period, you know, during the transition year or not? I think look. What I'm I'm still really looking into this trying to really evaluate what will be the future. What is very important is that we execute what we said we will. That we got into the detail that we compete rationally, and that we, we just move on. So let me I've been here only six months, so I need maybe a bit more time to come back to you, but, this is a very good question. Paul Knight: Thanks. Emily: Thank you. The next question comes from Michael Ryskin with Bank of America. Please go ahead, Michael. Michael Ryskin: Great. Thanks for taking the question. Beat a dead horse, but I wanna go back to margins again. Just the 2026 guide, if we if we look at, you know, both 4Q and jumping point, just sort of, like, the total year over year. One thing you guys haven't talked about a lot so far than price and share gains and share losses. You would assume a little bit on the fourth quarter of lowering price to hold off the volume. So I was wondering if you could elaborate on that. I mean, is this is this a race to the bottom? Sort of, you know, how viable is that of the long-term strategy? Just could you talk about, you know, share losses, especially in the lab distribution side of things. And just you know, once you get through all of that in 2026, is this the bottom on margins? Can you expect margins to go from here? Or are we still sort in the process of figuring that? Brent Jones: Yeah, Michael. Thank you. Look, in Q4, the biggest impact on margins was mix. There was a little price and there was a little negative price in Q4. Primarily the lab business there. You know, we're being careful with all the moving pieces going forward into '26, so that's why we're using that as a jump-off point. But you know, our assumptions in the plan for next year include, I would say, when you look at the gross, or when you look at the revenue outlook, we're expecting, you know, very, very flat volume on the lab side and some price, but not a dramatic amount. And we're expecting better price on the bioscience side with a little less volume there. So let's say that, you know, we think we're in a point that we can execute against that reasonably on price, and we don't see it as a race to the bottom. Emmanuel Ligner: And I just want to maybe make one comment. We are working really hard to make sure that Q1 is the low point. Michael Ryskin: Okay. Alright. I'll follow-up offline. And then for my other question, you mentioned in your prepared remarks you had a comment about book to bill greater than one. I just want to be clear on that. Is that with bioprocess specifically? Was that one of the subcomponents of bioprocess? And just know, depending on where that is, I'm kinda trying to reconcile that with the biosciences and medtech guide, which are the implied guide for 2026. I mean, I guess, why why isn't if the book to bill greater than one, why does not translate to slightly better growth in that segment? I know you called out some tough comps, but just sort of like, you know, let's put that greater than one number in the context and what that means to. Thanks. Brent Jones: Yeah. Michael, that as well as the full year high single-digit growth was a Process Chemicals comment. Process Chemicals excluding serum there. And you know, and that certainly is a better part of the story for twenty-six. Emmanuel Ligner: And, Mike, you remember that we have some bottleneck in supply chain. We have identified the need to invest about $20 million. Mary and her team are working super hard to make sure that this is put in place. But as you know, a lot of those equipment or investment needed, it takes time. It's custom-made. It needs to be deployed. It needs to be validated. So, you know, we're super pleased to have a book to bill superior to one, but there's a few things that we need to do in supply chain to debottle the neck that we have right now. Michael Ryskin: Alright. Thanks. I'll leave it there. Emily: The next question comes from Dan Brennan with TD Cowen. Dan, please go ahead. Dan Brennan: Great. Thank you. Thanks for the questions. Maybe, I guess, the first question would just be back to the margins. I know you're not going to give a lot of granularity, but a little bit more of a bridge would be really helpful if you could. I mean, going from 16.3. I know, Brett, you said you're saying start with four q, but could you just give a little more color about how we think about organic margins, how we think about the investments, how we think about, you know, kind of other levers. You know, you're talking about mix. That would really help us since I think that's a QE's month that was down this morning. Brent Jones: Well, Dan, I think you answered a lot of the question within that. Again, the Q4 exit rate is a really important grounding point. We know, we do have a modest incentive comp reset that creates some, you know, and some merit that creates some headwind on the SG&A side. You know, we're obviously running productivity actions against those things. You know, we will have those mixed pieces on the bioscience and medtech side there. There are headwinds there, and then obviously driving, you know, driving price and lab and putting that all together. I don't think we'll have a more concise bridge for you here. That's also why we're going to EBITDA margin generally because, look, we understand where Q1's gonna be. As Emmanuel said, we expect that to be the low point, and we'll drive sustained continued improvement throughout the year. Dan Brennan: Okay. Then maybe Emmanuel, you know, you talked about the tour you did with customers and the strong receptivity on VWR, the channel business. Can you just zoom out a bit on the channel business and just give a perspective on how we might think about the outlook there, like, any comment on what your share on that business is? How you're competing with your biggest competitor there, Thermo? And kind of as we look out, you know, what you think that business could sustain from a growth and margin basis to look at a few years. Thank you. Emmanuel Ligner: Yeah. Look. Again, spent a lot of time with suppliers in particular and customers. Look after a challenging 2025, I think we're seeing some stability in the market. I think Corey and the team have done a really good job to renew really important contracts for us. As I said, with opportunity and, of course, those opportunities are licensed to hunt, I will say. Okay? So it takes time to really go and convert those things. But, we have I feel I feel that we we are looking at at at some you know, leaving 2025 in a 2026, sorry, in a better position that that we were leaving 2025. We'll continue to compete vigorously for sure, but we want to compete also rationally. Okay? I think this is very important for us. So there's a variety of investments that we are doing. We are bringing a lot of talent in that organization. Okay? We have a new relationship leader. We have a new pricing leader, which is very important. For us. We are investing into the e-commerce. We had our first release of our upgraded e-commerce platform in December, and I think the launch of re of the relaunch, I would say, of VWR, as our distribution brand is really, really resonated very, very well with the market. So I feel really encouraged by the feedback that I received from the VWR ecosystem. And, again, I think that, we would like to 2026 in a more stable footing. Emily: Great. Thank you. The next question comes from Luke Sergott with Barclays. Luke, please go ahead. Luke Sergott: Great. Thanks for the question, guys. I just wanna talk about Emmanuel. You talked a little bit about, you know, not sacrificing growth opportunities for cost savings as you had seen in the past. Can you give us some examples of what you, you know, as you're the first six months in and looking at some of these missed opportunities? You know, and how you would have done things differently, and then we can get into some more pointed questions, I guess. Emmanuel Ligner: Sure. I mean, one example, like, straight to my head is in certain, I will say, VWR specialty, we may have cut too many specialists. Okay? So when you cover a territory, you know, with mean, just to take an example, if you cover England with 10 specialists in the past, which was probably too many, Okay. Okay. But, maybe cutting down to two is too little. And that's what we are really looking at in the go-to-market pillar of revival is really looking at, the specialists, the account managers, the deployment of all those people by territory, by geography, to opportunities. And, so 10 was maybe too many. Two is too little, maybe the right number is five. And it's those types of approach that we have by country, by territory, by product segment for both VWR on one side and BMP on the other. What was the second part of your question? Luke Sergott: No. That was I mean, just what you would have done differently. Was it. I was Yeah. I guess and as we think, I mean, I'm not gonna talk on the margin, obviously, but, you know, you think about the investments here. You got the resegmentation. We've seen this kind of revitalization story before with you guys. So, you know, what are the differences in the go-to-market strategy here? What kind of investments did you need to make? And then, you know, how should we think about those investments across the two segments? Is this gonna be on, like, VWR, and we should expect that business to grow in '26? Is this just like investment and trying to hold clients in without losing any key more key customers? Emmanuel Ligner: That's a great question. Look. The basic decision for the change in the go-to-market and the resegments business is really coming from customers. And it's really about the confusion that I heard when I spent six months on the road. Okay. We have an opportunity to be clear. We have an opportunity to leverage the advantage of who we are, where we're coming from, from VWR, from JT Baker, from Masterflex, from NuSil. And it helped us to just better organize ourselves, really being much more focused on the customer's needs, and you can appreciate the customer needs of VWR customers, which want a channel, which want a fast delivery, which want very fast services, at a great price point is different than bioscience chemicals, which are, you know, designing into a process or a molecule manufacturing. And so those different needs deserve different commercial approaches, different support, and that's what really motivated our decision here. It's about better organization, it's really about making sure that we can compete, that we can be more nimble and more agile. And, of course, one thing which I think is extremely important as well, is you have better accountability across the organization. So that's really what motivated us. In terms of investment, again, we'll make investments in both segments where we see the opportunity. I gave you an example in VWR, but there's plenty of other opportunities in the BMP segment. So we'll make investments against where we need to go after opportunity. Again, the goal is to really drive sustainable, profitable top-line growth for us. Luke Sergott: Got you. Thank you. Oh, by the way, is in your guide, is VWR gonna grow? Sorry about jumping in there last minute. Emmanuel Ligner: Well, I think as I said, we feel that with the investment we're doing, with the passion that is behind, we will exit 2026 in a more stable footing. Luke Sergott: Alright. Gotcha. Thanks. Emily: The next question comes from Vijay Kumar with Evercore. Vijay, please go ahead. Vijay Kumar: Hey, guys. Thank you for my question. Emmanuel, maybe one on, you know, given the new segmentations, right. Is there what was the organic growth for VWR in bioscience medtech in fiscal '25? When I'm looking at the numbers, did bioscience and medtech grow in that '25? If it did, what was bioscience versus medtech? Just maybe some context. In this new segmentation. Is that like, how does it help you in better aligning the business? You know, you mentioned go-to-market. Right? Like, what's changed versus prior and how you go to market? Brent Jones: So here, just on the technical side, we haven't provided that historical, but it's you know, the portfolios aren't that different in the aggregate, so your growth path will be similar to what we provided on the historical segments. Emmanuel on the segmentation change. Emmanuel Ligner: Go-to-market. What change is, you know, from a customer standpoint, when you want to buy a product which is through a distribution channel, a buy-to-sell, you know, you get everything in there. Okay? Remember, one of the things that we move, I think, which was in the slide, was the CEC. And the CEC, it's love, it's mask, it's many products that you use. Across various places, but, of course, also in biomanufacturing. But you buy them through your indirect sourcing team. You buy them through a distribution. So, you know, CEC, which was part of the BPS, now it's going back to VWR because the customers buy them from an indirect sourcing organization. They buy them through VWR. So it just makes more sense for the customers. It is simpler for the customers to know which product is served by which team, by which commercial team, under which contract. So it's all about clarity. It's all about customer centricity around their demands. How do they want to be served. Vijay Kumar: Understood. That's helpful, Emmanuel. Maybe my second follow-up is, hey. Share count, Brent. You ended, I think, at six seventy-nine. Why is it going up to six eighty-five? And given what you mentioned about Q4 stability, can we expect EPS to grow in fiscal 'twenty-seven? It's a directional qualitative kind of question. Brent Jones: Yeah. But I'll take the first part and then do to Emmanuel on the second. We just diluted dilutive share is dilutive comp grants in that as well as it moves on stock price and that. So there's nothing dramatic underlying that assumption. On the diluted share count. Emmanuel Ligner: I think look. Six months in the job, three months in revival, I think it's really too early to talk about, you know, what's going to happen after this transition year. So I really want to focus on where we are today, all the work that we have to do, revival, and then, you know, we continue to understand more, learn more, and hear more from suppliers, customers, and we'll take it one quarter at a time. Emily: Thank you. Thank you. Next question comes from the Thank you. Our final question today comes from Matt Larew with William Blair. Matt, please go ahead. Matt Larew: Good morning. Thanks for squeezing me in. You have the new segments here. And obviously, on the BNP side, you referenced sort of the channel agnostic being the theme. But it also spreads not just across channels but across end markets. And customer classes. And, you know, some are more scaled than others. Last quarter, you referenced the idea of M&A. You know, wanting to bring M&A inside of a healthy organization. This year, it was about making the organization healthy. What about just from a current portfolio standpoint as you now assess the scale needed to be successful within each of these subsegments? I mean, what's your take on kind of the portfolio that sits today and where you'd like that to be? Emmanuel Ligner: Yeah. Look. We shared that in the past in terms of portfolio. We are doing a lot of work. We've done some really good Brent is leading this pillar in Tide Revival. They have targets which have been identified. And, you know, as we said in the past, everything is on the table. No taboo. Right? We are really looking at everything. And there's some things which are going on, and, of course, we will talk to them when they happen, but, we're moving full speed ahead on the portfolio. I think it's very important as well to remember that, I really want to make sure that this resegment is understood and the fact that it did us opportunity. Right? You when you look at the BMT channel agnostic, it means that the team is now open to new opportunities, open to new ways to reach customers in an area like in Asia, like I was in weeks ago, there is opportunity. And this is why we are doing this is making sure that we look at those two businesses really separately in terms of opportunity. There is opportunity, and we are enthusiastic about it. That's what we will do. But, portfolio, we're working on it. And when we have things to share with you, we will do so. Matt Larew: Okay. Thank you. Thank you. Emily: Those are all the questions we have time for today, and so I'll turn the call back to Emmanuel for closing comments. Emmanuel Ligner: Thank you. Thank you very much for joining the call today. Let me conclude by just maybe repeating what I've said in the opening remark. Avantor is in transition, and 2026 is really a year where we will invest purposefully and sensibly to really strengthen all aspects of our business. The ultimate goal for us, of course, is for the business to produce financial results that are far more attractive than what we've shown in recent years. And you have the full commitment that the team is working really, really hard on this. So thank you again for joining the call. And talk to you soon. Emily: Thank you everyone for joining us today. This concludes our call, and you may now disconnect your lines.
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.