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Leanne Sievers: Good afternoon, everyone. And welcome to Diodes Incorporated Fourth Quarter and Full Year 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instructions will be given for the question and answer session. If anyone needs assistance at any time during the conference, as a reminder, this conference call is being recorded today, Tuesday, 02/10/2026. We would now like to turn the conference call over to Leanne Sievers of Shelton Group Investor Relations. Leanne, please go ahead. Leanne Sievers: Good afternoon, and welcome to Diodes' Fourth Quarter 2025 Financial Results Conference Call. I'm Leanne Sievers, President of Shelton Group, Diodes' Investor Relations firm. Joining us today are Diodes' President and CEO, Gary Yu; CFO, Brett Whitmire; Senior Vice President of Worldwide Sales and Marketing, Emily Yang; and Vice President of Marketing and Investor Relations, Gurmeet Dalaiwa. I'd like to remind our listeners that the results announced today are preliminary as they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm. As such, these results are unaudited and subject to revision until the company files Form 10-K for its year ended 12/31/2025. In addition, management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the Securities and Exchange Commission, including Form 10-Ks and 10-Qs. In addition, any projections as to the company's future performance represent management's estimates as of today, 02/10/2026. Diodes assumes no obligation to update these projections in the future, as market conditions may or may not change, except to the extent required by applicable law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details. Also, throughout the company's press release and management statements during the conference call, we refer to net income attributable to common stockholders as GAAP net income. For those of you unable to listen to the entire call at this time, a recording will be available via webcast for ninety days in the Investor Relations section of Diodes' website at www.diodes.com. And now I'll turn the call over to Diodes' President and CEO, Gary Yu. Gary, please go ahead. Gary Yu: Welcome, and I thank you for joining us on today's conference call. As announced in our press release earlier today, we ended 2025 with fourth-quarter revenue growing 15% year-over-year and a 13% increase for the full year, which is the highest level of annual growth since 2021. Additionally, this quarter represents the fourth consecutive quarter of double-digit growth year-over-year, further highlighting the success of our design win initiative and content expansion over the past year. We have continued to see the main improvement across our target market and geographies, with the most significant growth for the full year driven by a 25% increase in the computing market, primarily for AI server-related applications, as well as double-digit increases in our automotive and industrial end markets. Also, during the quarter, we began to realize initial improvements in gross margin as product mix benefited from growth in the automotive market, which increased 6% sequentially and 24% year-over-year. We also remain focused on increasing manufacturing efficiency and minimizing underloading costs over the next few quarters to further drive future margin expansion. As we look to the coming quarter, we anticipate extending our success by delivering above-seasonal revenue results and our consecutive quarter of double-digit year-over-year growth. As we look back over this past year, the progress that has been made, I want to take this opportunity to discuss my specific near-term financial target after having been in the role of president and CEO for the past two quarters. After reaching $1,000,000,000 in revenue in 2017, our next billion-dollar goal is to reach $2,500,000,000 in revenue and a $1,000,000,000 in gross profit, or 40% in gross margin. I want to emphasize that we remain committed to achieving these long-term goals. In order to help our investors track our progress toward these goals, today, I'm introducing three-year interim financial targets which include achieving $2,000,000,000 in annual revenue with approximately $700,000,000 in gross profit or 35% plus in gross margin. This equates to a revenue CAGR of 10.5% and a 15% CAGR on gross profit dollars. Most notable, when taking into account our improved cost structure, we are expecting to deliver over $4 in non-GAAP EPS, which equals a 50% CAGR over that three-year period. This interim goal highlights the strong operating leverage in Diodes' financial model and the ability to generate significant earnings power and cash flow on each incremental dollar of revenue growth. As mentioned earlier in my remarks, we continue to prioritize product mix improvement by focusing our sales efforts and R&D dollars in key focus areas of automotive, industrial, and computing for AI-related server applications. Content expansion, design win momentum, and new product introductions will continue to be the cornerstones of our growth initiatives, combined with increased manufacturing and cost efficiencies to drive margin expansion. With that, let me now turn the call over to Brett to discuss our fourth-quarter and the full-year financial results as well as our first-quarter guidance in more detail. Brett Whitmire: Thanks, Gary, and good afternoon, everyone. Revenue for the fourth quarter of 2025 was $391.6 million, an increase of 15.4% over $339.3 million in the fourth quarter of 2024. Full year 2025 revenue increased 13% to $1.5 billion compared to $1.3 billion in 2024. Gross profit for the fourth quarter was $121.9 million, 31.1% of revenue, compared to $110.9 million or 32.7% of revenue in the prior year quarter and $120.5 million or 30.7% of revenue in the prior quarter. For the full year, GAAP gross profit was $462.4 million or 31.3% of revenue compared to $435.9 million or 33.2% of revenue in 2024. GAAP operating expenses for the fourth quarter were $108.7 million or 27.8% of revenue, and on a non-GAAP basis were $104.0 million or 26.6% of revenue. Which excludes $4.7 million amortization of acquisition-related intangible asset cost. This compares to GAAP operating expenses in the fourth quarter of 2024 of $99.0 million or 29.2% of revenue and $108.9 million or 27.8% of revenue in the prior quarter. Non-GAAP operating expenses in the prior quarter were $103.1 million or 26.3% of revenue. Total other income amounted to approximately $1.3 million for the quarter. Consisting of $7.0 million in interest income, $2.9 million in foreign currency losses, $1.3 million in interest expenses, $1.6 million loss on investment, and $100,000 in other income. Income before taxes and non-controlling interest in the fourth quarter of 2025 was $14.5 million compared to income of $12.3 million in the prior year period and $19.0 million in the previous quarter. Turning to income taxes, our effective income tax rate for the fourth quarter was approximately 14.9%. For the full year 2025, the tax rate was approximately 17.6%. For 2026, we continue to expect the tax rate for the full year to remain at approximately 18% plus or minus 3%. GAAP net income for the fourth quarter was $10.2 million or 22¢ per diluted share compared to net income of $8.2 million or 18¢ per diluted share in the prior year quarter and net income of $14.3 million or 31¢ per diluted share last quarter. Full year GAAP net income was $66.1 million or $1.43 per diluted share. Compared to $44 million or 95¢ per diluted share in 2024. The share count used to compute GAAP income per share for the fourth quarter of 2025 was 46.3 million shares, 46.4 million for the full year. Non-GAAP adjusted net income in the fourth quarter was $15.7 million, or 34¢ per diluted share, which excluded net of tax $3.9 million of acquisition-related intangible asset costs and $1.6 million of loss on investment. This compares to a non-GAAP adjusted net income of $12.5 million or 27¢ per diluted share in the fourth quarter of 2024, and $17.2 million or 37¢ per diluted share in the prior quarter. For the full year, non-GAAP adjusted net income was $56.7 million or $1.22 per diluted share. As compared to $61.0 million or $1.31 per diluted share in 2024. Excluding non-cash share-based compensation expense of $5.3 million for the fourth quarter, net of tax, both GAAP net income and non-GAAP adjusted net income would have increased by 12¢ per share. For the full year, excluding GAAP and non-GAAP non-cash share-based compensation expense of $20.3 million net of tax, GAAP and non-GAAP diluted earnings per share would have improved by 44¢ per share. EBITDA for the fourth quarter was $41.9 million or 10.7% of revenue compared to $40.7 million or 12% of revenue in the prior year period and $46.6 million or 11.9% of revenue in the prior quarter. For the full year, EBITDA was $199.2 million or 13.4% of revenue compared to $177.1 million or 13.5% of revenue in 2024. We have included in our earnings release a reconciliation of GAAP net income to non-GAAP adjusted net income and GAAP net income to EBITDA, which provides additional details. Cash flow provided by operations was $38.1 million for the fourth quarter. Free cash flow was $12.4 million, which included $25.7 million of capital expenditures. Net cash flow was a negative $9.7 million, which includes $23.8 million that was returned to our shareholders by executing on our previously announced a $100 million stock buyback program. The objective of our share repurchase program is to return excess capital to shareholders while partially offsetting the dilutive impact of shares issued under our equity incentive plans. For the full year, cash flow provided by operations was $215.5 million, an increase of $96.1 million compared to $119.0 million last year. Free cash flow in 2025 was $137.2 million, which included $78.4 million of capital expenditures. This represents a $90.8 million increase over $46.4 million in 2024. Working capital was approximately $879.0 million, and total debt including long-term and short-term was approximately $56.0 million. In terms of inventory, at the end of the fourth quarter, total inventory days were approximately 161, as compared to 162 last quarter. Finished goods inventory days were 59 compared to 62 last quarter. Total inventory dollars increased $600,000 from the prior quarter to $471.5 million consisting of a $2.1 million increase in work in process, a $1.2 million increase in raw materials, and a $2.7 million decrease in finished goods. Capital expenditures on a cash basis were $25.7 million for the fourth quarter, or 6.6% of revenue, and $78.4 million or 5.3% of revenue for the full year. Both of which were within our targeted annualized range of 5 to 9% of revenue. Now turning to our outlook for the first quarter of 2026, we expect revenue to be approximately $395.0 million plus or minus 3%. At the midpoint, this represents a 19% increase year-over-year and a slight increase sequentially, which is significantly better than typical seasonality. GAAP gross margin is expected to be 31.5% plus or minus 1%. Non-GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition-related intangible assets, are expected to be approximately 26.5% plus or minus 1%. We expect net interest income to be approximately $1.0 million. Our income tax rate is expected to be 18.5% plus or minus 3%. Shares used to calculate EPS for the first quarter are anticipated to be approximately 46.4 million shares. Not included in these non-GAAP estimates is amortization of $3.9 million after tax for previous acquisitions. With that said, I now turn the call over to Emily Yang. Emily Yang: Thank you, Brett, and good afternoon. As Gary and Brett mentioned, fourth-quarter revenue was up over 15% year-over-year, flat sequentially, and at the high end of our guidance. Mainly driven by strong demand in Asia, especially in Taiwan for the AI server-related computing. Our global POS increased sequentially, led by North America and Europe, followed by Asia. This is a good indication of the overall market recovery in the automotive and industrial market. And our channel inventory decreased again, both in terms of dollars and weeks, which are now within our normal range of eleven to fourteen weeks. I will also highlight that with the recent supply interruption in the market, we have been strategically supporting key customers on new opportunities and orders, specifically in the automotive and communication markets, while also further extending our design momentum across all end markets. Our key focus remains on building a strong win-win partnership with our customers for the long term. Looking at global sales in the fourth quarter, Asia represented 78% of the revenue, Europe 12%, and North America 10%. In terms of our end markets, industrial was 22% of Diodes' product revenue, automotive 20%, computing 28%, consumer 17%, and communication 13% of product revenue. Our automotive and industrial revenue combined was 42%, which is a one percentage point increase compared to last quarter due to stronger demand in Europe. In 2025, we introduced over 650 new part numbers, with approximately 40% of this specifically for the automotive market. We have increased our addressable content to $239 per vehicle from $213 at the end of 2024 and from $160 at the end of 2023. Our content in the AI server applications this year increased to 103 from 90 last year. Now, let me review the end markets in greater detail. Starting with the automotive market, revenue in the quarter grew 6% sequentially and 20% for the full year as the inventory situation and overall demand continued to improve. The good news is we have started to see solid bookings with longer visibility on the orders. Additionally, the supply disruption I previously mentioned is expanding content opportunities for Diodes at key automotive customers. During the quarter, we broadened our content and deepened our design momentum across all focus areas, including connected driving, comfort, style and safety, and electrification. Diodes' level shifter gained broader adoption in in-vehicle infotainment, ADAS, and zonal control unit platforms. While our timing solutions saw additional design wins in PCI Express clock generators, buffers, and low-voltage crystal oscillators supporting high-speed ADAS modules. Complementing this momentum, our USB power delivery controllers and DC-DC converters continue to see strong traction across infotainment, charging interfaces, and body electronics. While our Hall effect sensors expanded into new applications, including e-latches, steering locks, and cooling fans. In lighting and motor control applications, we achieved significant wins for multichannel LED drivers across several next-generation lighting programs. Demand for our current monitor remains strong in comfort-focused motor systems, such as power seat and power windows while our LDO solutions continue to run in wireless charging and ADAS-related subsystems. Our bipolar junction transistors portfolio also gained momentum with new program wins supporting actuators and millimeter-wave radar systems. Turning to the industrial market, revenue in the quarter was flat sequentially but increased 13% for the full year. Similar to the automotive market, the inventory situation continues to improve. We are beginning to see overall demand visibility and backlog improvement and are seeing more rush orders than ever before, which is a further indication of the market recovery in 2026. During the quarter, we saw solid momentum across power, sensing, and automation applications. Our LED driver family continued to win designs in traffic signage projects, while current monitors experienced strong demand as power supply unit volumes increased. Diodes' Hall sensor and DC-DC buck converters also maintained steady growth driven by expanding use in fan motors and energy meter platforms. Our SBR product family also remains a key enabler in industrial power with design-ins across power rack and server power manufacturers supporting AI applications. In energy-related applications, our 1,200-volt silicon carbide Schottky barrier diodes were designed into next-generation energy storage platforms. Similarly, our gate driver ICs secured new design wins in battery storage inverters reinforcing our position across industrial electrification and power control infrastructures. In the computing market, although revenue was flat sequentially, we saw the strongest growth in this market for the full year, growing 25% over 2024. The highlight in this market continued to be strong demand across multiple product categories, driven by AI server adoption and data center expansion. BIOS I2C repeaters and USB switches remained in high demand for server and AI-related server platforms from major global customers. Our DDR MOX product line also experienced robust growth as AI server and data center consumers expanded memory bandwidth to support the accelerated AI workflow. We also achieved strong momentum for our PCI Express 5.0 and 6.0 clock solutions, especially as server and mobile OEMs migrate to high-performance architectures optimized for AI systems. In connectivity and power, our USB-C source switches with integrated CC controllers along with our 20-volt low-noise LDOs continue to gain traction, especially in 15-watt USB-C power port for desktop and docking station applications. Additionally, our low-power switches saw increased adoption in data center SSD configurations, while our smart load switches captured multiple design wins for notebook power delivery systems. We also secured several design wins for our SBR product in power delivery adapters for the notebook. In the consumer market, revenue was down 5% sequentially and up 8% for the full year. During the quarter, our WLED driver gained momentum in the virtual reality headset, supporting next-generation high-brightness display architectures while our 5.0 OCT switches in USB and HDMI port protection designs expanded as connectivity requirements increased across personal electronics. Also, our bipolar junction transistor portfolio secured new design-ins across home security devices, whereas our discrete switching components remain essential for reliable sensing and control functions. Lastly, in the communication market, revenue was flat sequentially and up 7% for the full year. We're seeing strong momentum across high-speed connectivity and networking applications driven by AI infrastructures. Our bidirectional level shifters continue to win designs in smartphones, and our SBR rectifiers are also gaining traction in both smartphones and SSDs. We're also seeing growing demand for our differential crystal oscillators in smart NIC cards and optical modules, targeting next-generation 800G–1.6T transceivers supporting the industrial transition to higher bandwidth network infrastructures. And finally, our USB redrivers secured major design wins in next-generation Wi-Fi routers. In summary, our focus in 2026 is executing towards our three-year financial target to drive continued year-over-year growth momentum and margin expansion. With channel inventory at more normalized levels, and further signs of recovery in the automotive industrial market, we expect to see improvements in overall business outlook throughout the year. Additionally, our continued investment in content expansion initiatives targeting our key focus markets of automotive, industrial, and computing for AI software-related applications should contribute to our future top and bottom-line growth. With that, we now open the floor to questions. Operator? Operator: Ladies and gentlemen, at this time we'll begin the question and answer session. If you would like to ask a question, please press star and then 1 using a touch-tone telephone. To withdraw your questions, you may press star and 2. If you are using a speakerphone, we do ask that you please pick up the headset handset to ensure the best sound quality. Once again, that is star and then 1. To join the question queue. We'll pause momentarily to assemble the roster. And our first question today comes from David Williams from Benchmark. Please go ahead with your question. David Williams: Hey. Thanks, everyone, and congrats on the really solid results here and the better outlook. Yeah. I guess maybe first, Gary, you gave some pretty aggressive targets there that you've outlined. Can you kind of maybe walk us through the puts and takes and maybe, you know, how you see getting there, maybe just stepping through the trajectory would be helpful. Thank you. Gary Yu: Yes. And, David, I think that's a really, really good question. You know, first, I really want to emphasize again, we're still committed to achieving the $1 billion gross profit long-term goal. Right? And, you know, I do believe since the market is still kind of dynamic, the interim target of $2 billion revenue is an important milestone for investors to understand and model how and when we are going to achieve our long-term $1 billion gross profit target. So as mentioned in my speech, we now continue to drive and gain share in the three key end markets segment like automotive, industrial, and AI server-related applications, and also continue to improve cost structure and product mix enhancement. And the $2 billion represents a 10.5% CAGR with about $700 million in gross profit, which is about a 15% CAGR and a 35% plus gross profit percentage will deliver $4 EPS, which could equate to probably a 50% CAGR for the three-year period. And, also, to make this happen, you know, we are talking about more than a 45% gross profit flow-through for any incremental dollar contributing to our revenue, and that's very important. David Williams: That's very helpful. So I get, from the gross margin standpoint, very nice follow-through. Is that simply just the leverage, or are you seeing some of the operational efficiencies that you've worked on in the last several quarters or through the downturn? Is that really beginning to flow through? And then how should we think of the cadence of that gross margin improvement? Gary Yu: Well, actually, you know, that's a very good question too because, you know, we have been working a lot to improve our cost structure, including improving manufacturing efficiency and product mix improvement. And the most important thing is we bring the revenue up, and that's going to try to help our underloading issue in our manufacturing currently. David Williams: Right. And just one more, if I may. Just as you think about the growth trajectory through the year, how should we think about that for the full year? Gary Yu: Well, we usually don't talk about the full year, but I do get a good feeling of the market demand getting much better this year. Right, especially in the key segments that we are focusing on. As we continue to drive these kinds of initiatives, including product mix improvement, pushing more cost reduction, and manufacturing efficiency, as well as continuing to qualify NPC or process product to our And this will help minimize the underloading cost impact. So, overall, the margin improvement for 2026, to me, is very promising. Emily Yang: Yeah. I think, David, let me just add a little bit. Right? So if you look at the Q1 guidance, we actually guided a 19% year-over-year growth. Right? So even though we don't really guide the whole year, we usually, you know, say, hey, you show seasonality. If you just plug in the usual seasonality, it kind of would give you a good estimate for the year. Right? So I think you can use that as a reference. David Williams: Great. Thanks so much. Operator: And our next question comes from William Stein from Truist Securities. Please go ahead with your question. William Stein: Congrats on the good results. Regarding the new targets, I think you said that's a three-year target. Should we contemplate this interim goal as something you plan to achieve in calendar twenty-eight? Gary Yu: Yeah. Definitely. Yes. This is why I committed to the 45% drop-through. William Stein: That doesn't sound like it's sort of normal operating leverage. It sounds like it's an underutilization charge going away. Is that the way we should think about that dynamic from here through 'twenty-eight? Gary Yu: Yeah. Definitely. Underloading charge is going to be the key factor for the gross profit percent. But that isn't the only thing we want to improve. Right? Not only the underloading charge, but we also want to improve the product mix, you know, enhancement, and also want to concentrate and focus on high-margin segments like automotive, industrial, and AI-related servers. Altogether, they will contribute more gross profit dollars. And gross profit percent. William Stein: One final one if I can. You have these manufacturing services agreements that I think are coming to an end this year or maybe they're diminishing. Can you clarify that for us and help us prepare for any changes that might cause either positive or negative to profitability? Thank you. Gary Yu: Yes. You know, and your assumptions are correct. We cannot disclose too much detail about that. And they are about to actually end this year. And that's the reason we try to, you know, continue reporting our product and processing to the manufacturing in our g-fab and s-p fab. And so far, the progress is quite promising, and we do see that quite a few key customers have already adapted to the product produced from those two wafer fabs. And I will say, probably starting from next year, you'll see the benefit contributing to our gross profit percent on those two wafer fabs. David Williams: Thank you. Operator: Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Again, that is star and then one to join the question queue. And we do have a follow-up question. From David Williams from Benchmark. Please go ahead with your follow-up. David Williams: Hey. Thanks for letting me jump back in here. No problem. I get this always rough. Well, you were so efficient in answering my first question. I figured I should throw in a couple more. But, maybe just on the opportunity with Nexperia or the customer that you discussed earlier, can you maybe size the magnitude of that? And then I know that that historically has been lower-margin business. Can you talk about what you're doing to help stabilize the margin and not see the pressure here that you would typically see with that business? Emily Yang: Yeah. So, David, this is Emily. Right? So I've mentioned this before. Anytime there's a supply interruption or market strategic change, direction, or anything, it's always favorable for diodes. Right? So we're not interested in picking up a lot of deep commodity business and stuff like that. But we actually use the opportunity to work with the customer to really deepen the relationship and make it really, I would say, beneficial long-term for both companies. Right? So that's pretty much the approach we're taking. So we are using the opportunity to expand our overall portfolio as well as our print position. David Williams: And just one last one. Just kind of thinking about the lunar holiday coming up in Asia. I know that typically drives some seasonality. Are you sidestepping that, or are you just not seeing the impact or maybe talk about anything you're doing there to offset that typical weakness? Emily Yang: Yeah, Chinese New Year is pretty standard, right? Definitely, there's going to be some shutdowns and some of the customers, as well as taking the break, right? So we actually included all these estimates into our numbers. But like I mentioned, we're definitely seeing a really strong backlog, really strong bookings, strong book-to-bill, and everything. So that's the reason we actually guided a very strong Q1 estimate guidance to the street. So like I said, we're seeing a lot of recovery in the market, which is a good indication of the recovery. David Williams: Thanks again for the help. Congrats once again. Emily Yang: Thank you. Thanks, David. Operator: And ladies and gentlemen, at this time, we'll be concluding today's question and answer session. I'd like to turn the floor back over to the management team for any closing remarks. Gary Yu: Thank you, everyone, for participating on today's call. We look forward to reporting our progress on next quarter's conference call. Operator, you may now disconnect. Operator: And ladies and gentlemen, we will conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
Ulrika Hallengren: Welcome to the presentation of Wihlborgs' Full Year Report 2025. Another year comes to an end, and we can conclude that despite limited support from the economic climate and with the rental market that has remained a bit slow and cautious, we have once again delivered growth across almost all key metrics. Vacancy has also increased slightly, but we have higher rental values, higher rental income, higher operating surplus, higher income from property management and property values have all strengthened once again. This marks 20 consecutive years of growth, a track record we are fully committed to continuing. And I claim that our region has never been more positively perceived than it is today, which makes me generally excited about the years to come. Let's go to our report. We start with a summary of the last quarter, October to December. Rental income up 5%, a new record at SEK 1.111 billion, income from property management, plus 23% and excluding revaluation from joint venture, plus 8%. Net letting positive at SEK 12 million, net debt to EBITDA at 10.4x. We have good access to financing. And as I said many times before, but this still stands. Demand remains for good quality and good locations, and our tenants are willing to pay for that. And we are proud to be able to continue with a project investment that gives continued good potential for growth. The Board proposes a dividend of SEK 3.30 per share. Looking at the full year '25, rental income up to SEK 4.354 billion, plus 4%. The operating surplus increased also with 4% to SEK 3.107 billion and income from property management increased by 14% to SEK 2.038 billion or 11%, excluding joint venture revaluations. The result for the period amounts to SEK 2.220 billion, corresponding to SEK 7.22 per share, and EPRA NRV has increased by 10% to SEK 99.36 per share adjusted for paid dividend. A comparison of rental income full year '25 and '24. Indexation gives plus SEK 41 million; acquisition, plus SEK 132 million; currency effect, minus SEK 33 million; additional charges, plus SEK 37 million; and completed projects, new leases and renegotiation, plus SEK 3 million. And here is included higher vacancy as well as higher property tax of approximately SEK 20 million, plus SEK 53 million from new projects and plus SEK 20 million from new leases in the existing portfolio. And the net letting is positive again, plus SEK 12 million in the quarter, plus SEK 77 million for the full year and, in total, new leases at a yearly value of SEK 399 million signed for the year. For the last -- for being a last quarter, the volume of new leases of SEK 92 million is good and a large amount to have lease commencement during first half of '26 or in the fall for Skrovet 6 in Malmo. 43 quarters in a row with positive net letting, but let's not take anything for granted. The quarter is a short period, but looking over time, I'm very proud of how we have found good opportunities over the past years. Here are some of the tenants that we have signed during Q4, a combination of headquarters, defense development, industrial and governmental tenants as examples, new tenants, expanding tenants, but also Ericsson with no change in areas and thereby not included in the net letting, but still very important for us. Six additional years, a bit higher rent and a small investment for improvements in the property, approximately SEK 1,650 per square meter. Here, we have the net letting in a historical perspective, lettings in green terminations in light blue and dark blue stacks are the net letting. We don't win every lease opportunity, which is annoying, but we think the hit rate is quite okay. And the list of our 10 largest tenants in alphabetic order, strong customers, and they contribute with 20% of our rental income. 7 out of 10 are governmental tenants and the public sector contributes with 22% of total rental income. Rental value as of 1st of January '26 is SEK 4.990 billion per year, plus 7.4%; and rental income, SEK 4.405 billion, plus 6%. Strong figures, and this is an effect from acquisitions, indexations, investments and tenants willing to pay for the right quality. Looking at like-for-like figures, all the properties we owned a year ago, excluding projects compared with updated figures, we can see that rental value is up 2% and rental income is up 0.8%. It's good with the growth also in the like-for-like stock, but to get the growth, we aim for acquisitions and investments will continue to be important, especially in times of higher vacancy. The growth in rental value is supported by indexation of 0.9% in Sweden and approximately 2% in Denmark taking effect this year. Changes in market value of our properties, we started the year with SEK 59.168 billion accordance with the external valuation of 100% of our portfolio. We have made acquisitions, which add on SEK 2.604 billion; investment, SEK 2.738 billion; divestment, minus SEK 156 million; changes in valuation, plus SEK 859 million; and together with currency translations of minus SEK 799 million, that summarized to a value of SEK 64.414 billion. Our external appraisers, one in Sweden and one in Denmark, they value 100% of the portfolio as of year-end, no cherry picking. A bit higher valuation yields for Swedish offices market and a touch lower for industrial. The growth come mainly from investments and new leases. Here's the long-term trend for our portfolio growth from SEK 7 billion to SEK 64 billion in 20 years and growth every year without taking in any new equity from our shareholders. And these figures shows the running yield that shows how we actually perform in relation to the valuation. So not valuation yield. For the whole portfolio, the occupancy rate is 90%, excluding projects and land and with an operating surplus of SEK 3.304 billion, that gives a running yield of 5.5%. In the project volume, now Blackhornet is included with a quite high volume of new areas, but not completed yet. Fully let, the portfolio would give a running yield of 6.3%. Good earnings capacity in relation to the value of the portfolio and good cash flow generation is the foundation also ahead. Compared to a year ago, the occupancy rate is down 0.3 percentage points, but we see areas which have improved, offices in Helsingborg, for example. And everything points in the direction that rental income will improve further during the year. In the office portfolio, the market value is SEK 50.401 billion with an occupancy rate of 91%. 91% in Malmo, improved to 90% in Helsingborg, 90% in Lund and 91% in Copenhagen. The operating surplus from offices summarized to SEK 2.731 billion and running yield of 5.4%, 6.2% fully let. And the demand for logistics and production continues to be good in Malmo, especially with an occupancy of 94% for us, lower occupancy in Helsingborg at 83%, 91% in Lund with a small portfolio and 96% in Copenhagen. 86% (sic) [ 88% ] occupancy rate as a whole with a running yield of 6.2%, a total value of SEK 9.181 billion. And as mentioned before, we continue to see harder competition in the third-party Logistics segment with quick changes in need, and that also means that occupancy can improve quickly when market has new needs. As mentioned before, I assume that vacancy in the southern parts of Helsingborg will be a bit sticky since the area will go through a makeover and that will take a number of years. But once again, let's remember that even if the vacancy is high, the running yield of 6.3% is decent, especially in location where the market as such continues to be interesting. The development of our total portfolio's running yield, 5.5% brings stability, not least since the portfolio overall has a high quality and good location. And as noted before, a good increase of the running yield since 2021. And some follow-up on the sustainability metrics. This is some of our overall goals for 2025. We managed to reach over 90% certification in the office portfolio in Sweden, a bit ahead, and we have continued with the rest of the portfolio. Evaluation of suppliers have not reached the 100% goal since there are always a few on the way in, but we will continue to improve. Carbon dioxide emissions from Scope 1 and 2 now at 0.93 kilograms per square meters and energy use 76 kilowatt hours per square meters below the target of 85. New goals have been set for 2026 and forward, more on that topic in the next report. But also some sustainability highlights from Q4 '25. Our project at Vatet 1 in Lund for our tenant, Arm, is the first project to be certified according to an updated manual Miljobyggnad 4.0 Renovation and reached the highest level goals. And let's remember that every upgrade of the manual makes it more difficult to be certified. The demands increase for every update. In Malmo, we have installed charging infrastructure for heavy-duty traffic for one of our tenants, and we continue with our energy efficiency improvements. And yes, you can find The Janne Solution among them. So minus 50% at energy use at Syret3, minus 27% at Cylindern in Helsingborg; and minus 10% at Kranen 8 in Malmo, as examples. A catalog of our value and properties in our 4 cities in '25. 39% of the value in Malmo, 23% in Helsingborg, 17% in Lund and 21% in Copenhagen. The region and especially these 4 cities continue to be of high interest for future growth, both regarding population growth, which will be a challenge in many places and regarding the number of workplaces, which is important for us, supported by Danish infrastructure and a young and well-educated population in Sweden. And time for financials. Over to you, Arvid. Arvid Liepe: Thank you very much, Ulrika, and good morning, everyone. Looking at the Q4 income statement. As Ulrika mentioned, rental income during the quarter amounted to SEK 1.111 billion, up 5% and actually a record figure for a single quarter when it comes to rental income. Operating surplus was up 3% to SEK 773 million. And income from property management was actually also a record for a single quarter at SEK 556 million. However, as Ulrika mentioned, that number was affected by a positive revaluation within one of our JVs of SEK 68 million. So the growth of 23% in income from property management, excluding the JV revaluation was plus 8%, which, in my opinion, is also actually quite a good figure. We had positive value changes in the quarter of SEK 444 million and in total, a profit for the period of SEK 850 million. On the next slide, you have the balance sheet as of year-end 2025. Property value of SEK 64.4 billion, up SEK 5.2 billion versus 12 months previously. Equity stood at SEK 24.3 billion, up SEK 1.2 billion versus the year previously, despite paying almost SEK 1 billion in dividend during 2025. And borrowings increased by SEK 3.2 billion to SEK 33.2 billion in total. Looking at some key figures relating to the balance sheet and the P&L. The equity assets ratio stands at 36.9%, slightly down versus the previous year, and the LTV stands at 51.6%. I think you should bear in mind, though, looking at those 2 numbers that during 2025, we invested more than we have ever done in projects, SEK 2.7 billion. And we also actually concluded the largest single acquisition that we've ever done with a property value of SEK 2.4 billion. That is, of course, a way for us to continue to build for growth. And bearing that in mind, we are quite comfortable with those financial metrics. We're also happy to see that the interest cover ratio is now gradually strengthening and stands at a good 2.9x. The EPRA NRV as of year-end is at SEK 99.36 per share, up 10% adjusted for the paid dividend during the year. The historic development of the EPRA NRV, you can see on this slide. And in the long-term perspective, since 2009, the annual average growth in EPRA NRV actually is at 15% adjusted for paid dividends. On the next slide, you can see the long-term development of the financial metrics, equity ratio, LTV as well as interest cover ratio. And as I stated before, in relation to the targets we've set for ourselves, we are at comfortable levels. And particularly, I would like to stress that the interest cover ratio is improving and at 2.9x. That is a good reflection of our ability to generate a good cash flow. On the next slide, the earnings relative to borrowings or net debt to EBITDA now stands at 10.4x. We are comfortable with the ratio. It has gone up slightly during the year, basically due to, as I've stated before, high investments and debt financing of the acquisition made during 2025. On the next slide, you can see the sources of financing, total borrowings of SEK 33.2 billion. Half of it comes from bilateral bank agreements with Nordic banks, 33% from the Danish real mortgage system and 17% from the bond market. Nordic banks are still very much willing to lend and the terms are probably unchanged over the past few months, but access to financing from the banking system, I would say, is good. The bond market is also both active and attractive. We have, over the past few weeks, issued a 3-year bond under our own MTN program at a margin of 98 basis points and a 4-year bond at a margin of 117 basis points. And for us, those are competitive levels. Looking at the structure of our loan portfolio, you can see the details on this slide. The average interest rate stands at 3.25%. That becomes 3.29% if you include costs for unutilized credit facilities. With STIBOR at basically 2.0 and a margin of -- an average margin in our loan portfolio of a touch above 100 basis points, you could see that the loan portfolio is pretty much -- we're paying what the current market rate actually is or pretty close to it. We have an average fixed interest period of 2.7 years and an average loan maturity of 4.7 years in the loan portfolio as of year-end 2025. And on the next slide, you can see the historic development over the past 5 years of the fixed interest period and the loan maturity and there are no dramatic changes in the development of those numbers over the past few quarters. Lastly, on the number crunching slides, we can look at available funds, that is unutilized credit facilities plus liquid funds as of year-end, which stands at SEK 3.2 billion. And that gives us a good flexibility to seize potential opportunities in the market. And you can also put into perspective, the SEK 3.2 billion is that we have bond maturities in Q1 of approximately SEK 1.2 billion, but we've also issued bonds amounting to approximately SEK 1 billion since year-end. So with that, I'll hand the word back to you, Ulrika. Ulrika Hallengren: Thank you. And I'll give you an update on our investments in progress and a quick overview of our largest project. During '25, we have invested SEK 2.738 billion. It's still a record, and it remains SEK 2.144 billion to invest in approved projects, highest investment level ever in our history, and this makes us prepared for coming years. A reasonable yield on cost with 6% or a bit over 6% for new build offices and 7% or a bit above that for industrial and a good mix of refurbishment and new build in the portfolio. In Copenhagen, we are about to complete our project at Ejby Industrivej 41 for Per Aarsleff. In the beginning, we planned this project for a multi-tenant transformation, but with a 15-year lease with Per Aarsleff, it has been turned into a single-tenant building. 24,000 square meters, investment SEK 231 million and a yield on cost a bit above 6%. Completion now in Q1 '26. The large project of Amphitrite 1 in Malmo, for Malmo University is running well in accordance with plan. A bit above 20,000 square meters for Malmo University in a 10-year lease, investment SEK 1.130 billion and completion is planned to late Q4 '27. In Malmo, in Hyllie, we continue with Blackhornet 1 VISTA. SEK 884 million investment, the mobility hub has already been completed since a year ago, and the offices will be completed from now and during 2026. Yield on cost, 6.2% and approximately 40% pre-let. The attractiveness of the product shows clearly now when tenants are starting to move in, and we work hard at the coming leases. From 1st of January, the total areas in the building are included in Malmo offices as classified as projects since the areas are not ready for moving in yet. Still too much raw concrete, but completion is ongoing. Last Friday, we opened Borshuset 1 in Malmo after a large refurbishment. It's an almost iconic building right beside the train station, 6,000 square meters offices, restaurant and co-working and top rents in the Malmo perspective. Completion now in Q1 '26 and moving in will continue during '26. Pre-let, 95%. At Kranen 7 in Malmo, we will invest approximately SEK 136 million in a preschool for the municipality, 2,900 square meters zoning plan approved and completion is expected to Q3 '27. Public procurement acts for the contractor is ongoing. And at Skrovet 6 in Malmo, we refurbished 11,000 square meters, 50% pre-let to Cloetta and Media Evolution with completion start in Q3 '26. So a quick refurbishment. Investment, SEK 149 million for a total technical shift in the building and a quick change from the quite closed building, which was the result from the SAAB, the former tenant, and now open up to be a new entrant to the whole Dockan area. In Lund, we are building a new modern office right beside the Central Station, Posthornet 1, phase 2. 10,100 square meters, yield on cost, 6.5% and completion starts in Q2 '26. Pre-let, 70%, a very successful project. In the southern part of Lund, we continue the development of Tomaten. This project is for BPC, completion in Q2 '26 and investment SEK 79 million, 3,600 square meters and the yield on cost 7%. And next to that, at former Stora Raby 32:22, now named as Surkalen 1. We have been able to improve since the project started. Tenants will be both Note and Lund University. So well-used land area and long leases in total. 14,500 square meters completion in Q2 and Q4 '26. investment SEK 260 million and yield on cost 9.2%. In Horsholm, Copenhagen, we have invested for a new school for NGG. 25 years lease, 11,600 square meters and investment SEK 390 million. Completion now in January. And at Girostroget in Hoje Taastrup, refurbishment for Novo continues. 62,000 square meters, our investment is limited to SEK 423 million and completion is expected now in Q1 '26, but Novo pays rent also during refurbishment period. That was some of the ongoing projects and just a touch of possible future projects. There are 4 possible projects in the Nyhamnen area in Malmo. We own the land for Kranen 15, Slagthuset and Polstjarnan 1 and 2. Zoning plan are ongoing, and we actually see some progress. And some more possibilities in Malmo, both the industrial at Spannbucklan, for example, housing at Kranen 5 and offices at Naboland, zoning plan approved for Spannbucklan and Naboland. In Lund, we continue the work in southern part at Hasslanda, where we bought Brysselkalen '25 -- we bought it 2025 from Granitor, approximately 50,000 square meters gross floor area. And at the Ideon area, we can continue with projects both at Ideontorget and Delta 2, and we also have more building rights at the eastern side of the highway. At Vasterbro in the western part of Lund, it will be mostly housing and one way for us is to use these building rights as a trade for other possibilities. And in Helsingborg, we can add on areas for offices at Polisen and several industrial and logistic possibilities, both as fill-in and stand-alone projects for us to be ready for different kind of times and tenants, and I think we have very good opportunities. So let's summarize Q4 once again, rental income up 5% income from property management, plus 23% and excluding revaluation from joint venture, plus 8%. Net letting positive at SEK 12 million, net debt to EBITDA at 10.4x. So we see continuously good access to financing, and the Board proposes a dividend of SEK 3.30 per share. And it goes without saying, we will continue with our focus on cash earnings and our future growth. With that, we are open for questions. Operator: [Operator Instructions] The next question comes from Erik Granstrom from DNB Carnegie. Erik Granström: I had a few questions following the report. I'm wondering if you could perhaps talk a little bit about your outlook for the rental market in 2026, how it's started so far? And where do you see vacancy rates moving, given what you know in terms of project completions and so on? Ulrika Hallengren: Erik, I think the year started quite slow. January was not too exciting. But after that, things have started moving on and good discussions are ongoing. And we have quite strong rental income growth from already signed leases coming in during 2026. So I think there's many -- quite many positive signals ahead, but it took some weeks in the early year before things started to move along. As said many times before, high quality is in very -- in everybody's focus, and we have that in our portfolio. So confident about the future. But a little help from economic growth, of course, looking forward to see that. Would you continue? Arvid Liepe: No, I just want to comment also on that tenants are willing to pay for quality and location. And it is not a new trend in this quarter. We've seen it over the past few years. But we continue to see that there is a willingness to pay for good location and good quality in the premises. And you can see that also in that the top market rents in our markets are increasing, not dramatically, but a little bit. Erik Granström: Okay. And given the project completions that you have now in the first half of '26, do you think that those will improve the overall vacancy or vice versa? I'm thinking about the fact that Blackhornet will be completed in Q2 and carries a little bit higher vacancy than the rest of the project portfolio to be completed. Ulrika Hallengren: Yes. So from now, from this report, Blackhornet is -- the areas are included in the project volume. So they are completed into a very raw standard. So that can, of course, affect the figures, but the rental income will continue to increase. And you never know what happens ahead. I mean it's -- our main focus is to have a good growth in the cash flow. And of course, I'm very happy of how we have been able to be quick on the changes for Skrovet 6, for example. We will have 10 months of vacant 100%. But after that, we have signed leases and they move in from 50%. So 10 months for total refurbishment, and we have done this kind of quite quick shift in quite high volumes in the last years. So that is a good thing. And I also think that Blackhornet now when they're moving in have started, and you can see the quality in the areas. That will continue to help the new leases come in place in that area as well. Arvid Liepe: But I think -- if I may add something. Looking at occupancy, Q4 versus Q3, it was down by, I think it was 0.2%. So if we go into decimals, so a slight decrease, but nothing dramatic. Given our projects being completed and given the rental agreements that we've signed, it's fair to assume that, that would have a positive effect on occupancy during the coming few quarters. On the negative side, you have when Blackhornet is completed, that is -- there's still too high vacancy for our liking in that property, of course. But -- and exactly the timing of those effects over the coming couple of few quarters is a bit tricky to say. But I think the net effect should not be significant, but we see a potential for a slight improvement in the occupancy rate. Erik Granström: Okay. And then perhaps switching over to investment opportunities for 2026. You mentioned, and we can see that in the numbers, SEK 2.7 billion invested in projects and the portfolio. What's your outlook for 2026? Because if I look at what's left to be invested in your project portfolio, it stands at around SEK 2 billion now, and it was about SEK 3 billion a year ago. So I was just wondering how you view the pace in terms of investments and the amount for 2026, if you can give us some color on what you're planning? Ulrika Hallengren: 2026 will not be a new record year, is my estimate, but we will continue with a good pace also during '26. I can't give an exact figure, but around -- not as high as 2025. But of course, we are always looking for new investment possibilities. And exactly when the timing is right for that. We have the portfolio, so that's good. I think we have good preparation, both for offices and industrial, not at least. Lund is very interesting. Maybe we will see something more in Landskrona adding on to this, and also industrial in Malmo is interesting. So we have things going on for the 2027 as well. But for -- at the moment, the building for Amphitrite for Malmo University will be our largest project, of course. And that will go on until end '27. Erik Granström: Okay. And then my final question regards the property valuations in Q4 and for the full year, you mentioned that 100% is externally evaluated. Could you say something about what -- in terms of CPI and indexation, what is assumed for 2027? The effect on '26 is already known, but what's now assumed for '27 and on? And also in terms of valuation yields, I do know that you do not report that, but you mentioned some changes. But overall, what -- do you see any major shift in yield requirements in '25 versus '24? Arvid Liepe: We commented on the slight changes in the valuation yields. And as usual, we will not give exact figures for the full portfolio with the same logic that we've had before that it's one aspect out of many to be judged in combination of many different assumptions. Regarding the CPI assumptions in the valuations for 2027 and onwards, the assumption is 2%. But again, I would like to stress that you cannot look at 1 or even 2 parameters alone in the assumptions in the property valuations. You have to look at all the variables in order to be able to make up your mind if something is reasonable or not. And we are comfortable that our external appraisers are doing a reasonable judgment when it comes to the balance between different parameters in the model. Operator: The next question comes from Oscar Lindquist from ABG Sundal Collier. Oscar Lindquist: Yes. So a couple of questions from me. You mentioned on new lettings that you expect some contribution from Q2, Q3 this year. I was wondering on terminations, is there anything you can highlight here? Did you have any larger terminations? And what could we expect in terms of impact in the coming quarters? Ulrika Hallengren: We have -- I mean the largest termination we had, SAAB, as we have reported on before, that was from now on from 1st of January this year. We have a few terminations that starts, I think, 1st of January '27, but they are quite -- I mean for the total volume, it's SEK 12 million and SEK 12 million, something like that. So not as large as SAAB were. And I mean we also have a year to work with that, especially in the industrial portfolio, we have good potentials to find new solutions for that. So not at any larger expense, I would say. Oscar Lindquist: Okay. And I also believe that WSP has signed a lease with Vasakronan in Malmo. Has that termination come through in your numbers this quarter? Or is it expected in Q1? Or can you say anything about that? Ulrika Hallengren: No. We have that message in December. So that is part of report for 2025. And they are one of the tenants that will move. Arvid Liepe: I believe that contract will be terminated in Q2 or something. So it's not the full -- they will not pay rent for the full year 2026. Ulrika Hallengren: Okay. So a bit earlier then. I think that is one of the lease. Oscar Lindquist: Yes. And then you have -- on financials, you have SEK 2 billion in swaps maturing in '26 average rate of 1.53%. You say that -- or you mentioned that you're currently paying around market terms. What sort of effect could we expect from swaps maturing and net of new financing? Arvid Liepe: Those swaps expiring in 2026, I would expect that we have -- I mean it will have a slight negative effect on the average interest rate for the group. But we actually, of those swaps have examples of swaps being both in the money and out of the money. So the effect, it's not that all those swaps are on extremely attractive levels. But it will have a slight negative effect on the average interest rate. And at the same time, we still have both bonds and we have bank agreements where the margin we're paying is slightly above where the market is currently. So I don't expect the net effect on the group's average interest cost -- the effect will not be very large. Operator: The next question comes from Lars Norrby from SEB. Lars Norrby: Talking about expansion and record CapEx in '25. And as far as I understand it, you're not expecting the same kind of level in '26, not fully SEK 2.7 billion. Now how about acquisitions? I think you did some net SEK 2.5 billion in '25. In '26, can you handle the same kind of volume with your existing balance sheet if something comes up? And are you looking at something of any size at the moment? Arvid Liepe: If I start with the financial capacity, I think that, as I mentioned, our access to liquidity, we feel is good, and we're comfortable with the financial metrics of the LTV, the equity ratio, the net debt to EBITDA that we have. As stated before, if an attractive acquisition opportunity of -- well, significantly large would come up, we have the tool or the mandate from the AGM to issue equity. We have never used that tool, and we've had it over all the years. But it is a tool in the toolbox for -- if the right opportunity would come up. Ulrika Hallengren: And without giving any prognosis about what will happen, as said many times before, we look into all kind of possibilities, both small, which add on things piece by piece, but of course, also possibilities with larger portfolios. But it's really important that we think that we can add on some value to that. It has to be -- I mean I think it's good for us that we are a bit picky when we choose things. It should both be the right quality or possibilities and the right price, of course. But of course, we see possibilities. I mean Copenhagen continues to be interesting. And also on the Swedish side, there is possibilities. But you can never say ahead. Lars Norrby: If you're looking at Copenhagen, what type of properties and what kind of yield level are you looking at? Is it similar to what you have in the portfolio right now, meaning higher yields than in Central Copenhagen? Ulrika Hallengren: Yes. We don't want to go too low on the earnings. Of course, they are important for us. But we think there is some possibilities in a bit of a better location than we are today so that we can transform a bit, but still get a decent yield for us. So that is mostly the kind of things that might be of interest for us. Lars Norrby: Just to wrap it up from my side, for example, if Castellum would be willing to sell some of their properties in more central locations, you wouldn't be looking at them. Is that correct? Ulrika Hallengren: I don't think we will be the one that are prepared to pay the price that they are expecting. Operator: The next question comes from John Vuong from Van Lanschot Kempen. John Vuong: You mentioned something about rental income growth for signed leases. Are you referring to capital reversion? And if so, what reversion potential are you seeing in your portfolio? Arvid Liepe: I think if you talk about -- I mean reversion potential, generally speaking, as has basically been the case over many years, the rents that we have in our rental contracts today are fairly close to where the market rents are. And our markets have rarely, if ever, seen any huge reversion potential that is being able to sign or to renegotiate rents at completely different levels. Ulrika Hallengren: But when I mentioned higher rental income, I was pointing at leases that we have signed, but where tenants haven't moved in yet, but they will move in during the year. So that will give some extra income, of course. John Vuong: Okay. That's clear. And then just looking at your Malmo office portfolio, screens that the vacancy has increased by 80 bps over the quarter. Is this an issue of timing given that letting? Or have new leases been skewed to other regions? Arvid Liepe: I would say that looking at Malmo offices in the quarter, I mean that has, of course, been affected by SAAB moving out as of this past year-end. So there you would have -- and that was actually 4 leases out of 3 were terminated, if I remember correctly. And that was actually a significant chunk. So the Malmo office occupancy effect would mainly be driven by SAAB in this quarterly report. Ulrika Hallengren: And we have also added on areas from Borshuset. So Borshuset is completed, but the tenants haven't moved in yet. They will continue to move in until August. So that is vacant in the economic terms at the moment, that the tenants are eager to move in. John Vuong: Okay. And then on the leases, what's the percentage point impact on your occupancy? And maybe just looking at the number overall, is it skewed to any specific submarket within Malmo or say, building age? Arvid Liepe: No. I mean nothing different from what we tried to communicate earlier that there's still a good demand for good quality, good location. Predominantly, our office portfolio is good quality, good location with only a few exceptions. So there's no real change in that picture, I would say. Ulrika Hallengren: And the decision from SAAB to move to Lund, to a new premises there, was they wanted to combine both all the offices area and their development area, which also is a part of industrial classification in that. And Lund municipality could arrange that kind of area where they were allowed to have both engineers and also this experimental industrial things going on at the same place. And so that was the reason why they moved to Lund, and we have seen very good effects from that in the Lund areas affecting all the things we own at the Lund area, not at least. So for the region, that decision from SAAB has been a boost, I think, actually. And I'm also very satisfied with the solution that we have found with Skrovet 6, where SAAB had their largest leases before. So we have new tenants there from starting with 1st of September and adding on also from 1st of October with a totally refurbished property. So I think that solution will also be good for the Dockan area in Malmo. But of course, the timing for that, it gives us some vacancy at the moment. Operator: The next question comes from Eleanor Frew from Barclays. Eleanor Frew: A couple of questions. One is probably a slight follow-up. Can you calculate the net letting excluding leases on new developments or just including the completed stock? And can you give some color on how you see that trending if so? Arvid Liepe: I'll have to check that number because I don't have that number off the top of my head, the net letting excluding projects. Ulrika Hallengren: We have mentioned it before, but not the full year figure. But we have been positive in the net letting for the existing portfolio before. But let's check upon that because -- and I don't see if we had some new leases in new areas in Q4, but I -- let's come back to that. Eleanor Frew: Great. And then is there a reason sort of high vacancy on Blackhornet? It stands out a bit given the pre-letting and your other projects? Or more broadly, how is the momentum going in the pre-letting discussions? Ulrika Hallengren: Good discussions, high interest, but not in the pace that we are aiming for. So good -- I mean it's the best product you can find, but the decisiveness must be there from our tenants. I think what we see in a bit of a cautious market is when you have a high volume with very good quality, you don't need to take the decision now, you can wait because there's more to choose. It's not this level, so you can choose another level. So we don't really see the tempo in that yet. But patience is something you need. Arvid Liepe: Getting back to net lettings, excluding new developments. In Q4, it was still positive, also excluding leases and new developments. It will take a bit more time to look at the full year, but Q4 was still positive. Operator: The next question comes from James Cattell from Green Street. James Cattell: Just had a question on the new EPRA CapEx table on Page 25. Thank you for including that. I noticed TIs increased from SEK 499 million to SEK 802 million. Was this just a temporary increase due to a difficult letting market? Or do you expect this to be the run rate going forward? Arvid Liepe: Could you please repeat which figure you're relating to? It was Page 25, right? James Cattell: Can you hear me? Arvid Liepe: Yes, yes. James Cattell: I have some difficulties in my line. Can you hear my question? Arvid Liepe: Well, you referred to a number on Page 25 in the report, and I was just uncertain which number. So if you could repeat that and we'll see if we can answer. James Cattell: On the EPRA CapEx table, the number for tenant incentives, it increased from SEK 499 million to SEK 802 million. Yes. I was just wondering is this increase due to the difficult letting market? Or is this what the rate you expect to be going forward? Arvid Liepe: To be frank, it's actually the first time that we have calculated this number according to the EPRA definition of capital expenditure. And we've spent some time together with the EPRA team defining these different -- well, the sums, meaning that I'm actually a bit uncertain when it comes to how to project how the different parts of the sum will develop over time. So I'm not quite sure that I, off the top of my head can answer your question about how that will develop going forward. James Cattell: Okay. And do you have any idea of the split between rent-free and capital contributions on that? Arvid Liepe: I mean generally, you could say that our market is characterized by few tenant incentives and few and short rent-free periods. So I mean we basically come from a market where tenant incentives have been very, very marginal. And so we don't expect that to develop in any dramatic way. James Cattell: Okay. And do you have any guidance on what caused the increase in the joint venture property values in the fourth quarter? Arvid Liepe: Well, I mean property valuations are what they are and always very tricky to predict. We would not expect that, that type of property valuation -- property revaluations in our joint ventures will come on a regular basis, but property valuations are hard to predict. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Ulrika Hallengren: Thank you. So let's see. Do we have any written questions? Arvid Liepe: We have received no e-mail -- questions via e-mail as I can find. Ulrika Hallengren: Okay. But you're always welcome with further questions any time. So by that, thank you for today, and have a nice day. Arvid Liepe: Thank you very much.
Nicola Gehrt: Thank you so much, and good morning, ladies and gentlemen. It's my pleasure to welcome you to our first quarter 2026 results presentation here at the Congress Center in Hannover, where we will be holding our AGM later this morning. My name is Nicola, and I'm Group Director, Investor Relations at TUI, and I'm delighted to be joined for the presentation by our CEO, Sebastian Ebel; and our CFO, Mathias Kiep. We look forward to sharing with you the details of a very positive start to the new financial year, along with an update on current trading and the reconfirmation of our outlook. In the interest of time, we will keep the presentation brief before we open the floor for your questions. We kindly ask you for your understanding that due to the AGM, we will need to limit the session for 1 hour. And with that, I have the pleasure to handing over to Sebastian. Sebastian Ebel: Thank you, Nicola. A very warm welcome from all of us here in Hannover. The sun is shining the first time since a couple of weeks, but the snow is still outside, but we hope now for warmer weather. You know the agenda, it's very similar as you are -- as you know it. I will do a short introduction about the last quarter. We are very happy about the results. Last year, first quarter was good. This year, it's even better. We have seen an increase in EBIT of EUR 26 million despite the cost of the Melissa hurricane of Jamaica. I will talk about this later on. And this improvement is based on a positive HEX trading momentum, but also an improvement in Market and Airlines. And we have seen strong demand in Holiday Experiences business and we have seen the right demand for our risk capacity, which we use -- which we wanted to fill as much as possible with the right margin. And you remember that the main target for the retail is also for the sales activities to fill our assets. And by having this positive momentum, we can reaffirm the guidance -- the EBIT guidance for '26 of 7% to 10% growth. And we also see this growth for the coming years. If we go into the details, first quarter in Holiday Experiences, we were able to improve the result by EUR 18 million despite the one-off impacts in hotels. The Jamaica, you remember, Melissa, who was affecting the business in Jamaica, we had to close hotels the Riu hotels, the Royalton hotels for the whole time the first quarter, and you will see it later, we also had to cancel a significant amount of flights from the U.K. to Jamaica. Nevertheless, we have -- if we take the one-offs out in Hotels & Resorts, we would have seen a EUR 6 million improvement and without that, we are EUR 19 million below. And exclusive of Jamaica, you see that the occupancy even in winter grew by 1% and the average daily rate grew by 5%. Cruise is very strong. We have seen a significant improvement in result despite a significant higher capacity of 16%. Occupancy were up by 3%, almost reaching 100% and having the same daily rate, an outstanding result. And also Musement and winter is not so important, has seen a slight improvement. When we look at Market and Airlines, we also have seen a EUR 10 million improvement versus prior year. This includes a negative impact of Jamaica, EUR 6 million. As I said, we had to cancel flights to the island, and this had a EUR 6 million impact. For us, it has been important and it is important and will be important that we have the right risk capacity because with the right risk capacity, we can protect our margin. And the growth today in the future should come from dynamic packaging. And that we did that quite well in this quarter is shown by the load factor, which went up by 1%. And what we see is also the first benefit of our cost reduction program. Some special items we have seen and initiatives we have seen in the first quarter. We are really proud that we announce our market entry and open our network in Romania on Thursday, I will be there. And it will be after [indiscernible] which we opened 2 years ago. It's doing very well. It will be the second in the market which we opened. We had a prelaunch a couple of days ago. We see quite promising demand and good margin. And again, it will help us to fill our assets in Europe, but also outside Europe. We also are increasing our River Cruise fleet. The second Nile ship had been launched, and we have now -- we operate now successfully 6 vessels. We have put a lot of effort in improving further development in our app. We, as you may recall, we are bringing forward activities on the same global IT platform. The app was the first platform, which we not only harmonized, it's the same one. And now we do see day by day the benefit of doing so. If you look at the app today, the AI application is really a success story. And we have seen a significant conversion growth and uplift in bookings through the app. And the app is the most efficient way to book and to keep customers and to increase retention, and we are very happy. And the potential for us is huge if we compare us with best of breed. We also signed a partnership agreement with Jet2 on the Musement activity platform. We are very thankful for the trust Jet2 gave to us to integrate the Musement platform after Booking.com, easyJet and lastminute.com, it's the fourth big wholesale partner. We don't take it for granted. It's a big obligation for us like for Booking, like for easyJet, like for lastminute to deliver outstanding products to the Jet2 customers. We are growing on the hotel side. We have a strong pipeline. As you know, we opened 5 hotels in Africa. We opened 1 hotel in Vietnam. So these are -- especially these are the 2 regions where we are growing, and we want to grow further. Sustainability is key of our DNA. It's not a trend which may have faded away a little bit. For us, it's very important for our customers for the climate, and it's commercially a sound business case, and that was recognized by achieving the A rating of the CDP. And Mathias, if you like to go into the numbers. Mathias Kiep: Thank you very much, Sebastian, and a very good morning also from my side. Thank you for joining the call. As always, I want to give an overview about the performance, then the EBIT bridge and then details to P&L, cash flow and the balance sheet. And Sebastian, as you said, we are very pleased with the first quarter results and this first step into the new fiscal year. And -- if you look at this, it's really great that we not only have an operational improvement of the numbers, EUR 77 million, the highest underlying EBIT that we've ever seen in this quarter, but also another progress and step improvement in our balance sheet and the underlying financial profile. Net debt improved another EUR 0.5 billion year-on-year. This includes EUR 0.2 billion FX impact, but the underlying decrease, EUR 0.3 billion is coming from all the measures that we undertook over the last 12 months. And as elements of this progress, I would like to highlight: one, we've now also taken the final cruise ship from Marella into ownership. And as you may have seen and recall, we have also repaid early the outstanding remaining amount of the old convertible 2028. And as you said, Sebastian today is the AGM where we will return to dividend payments. That is, for all of us, a very important and great moment. So for the details, as I said, EBIT bridge, P&L, cash flow and balance sheet. Now as you saw in the front section, there's really a strong underlying development in all segments. In the hotels, please remember the impact that Jamaica has. Second, that we had a positive one-off last year of around EUR 15 million. We also called that out. And against that, we have the results in this quarter. So overall, an operationally positive development and a negative impact through these one-offs or the not repeat of one-offs. Then you see the very strong development in Cruise. And I think it's really great to say not only the capacity addition and the earnings that come from that in TUI Cruises, but also the constant improvement in Marella and in the operational development of TUI Cruises. So alone, the rate increases in Marella for the winter, we talk about 5% again. I think with the ships that we have and with the concept, that's really a fantastic achievement. Musement, really good development, strong cost control. And then as Sebastian mentioned, even despite the impact that we also see there in Jamaica with the long-haul business, a very strong operational development, and it's so important to manage the capacity, one; and second, to make sure that we continue to deliver in our own assets and business in holiday experiences. And with the EUR 77 million, a really strong start into the year, EUR 26 million more than we had the year before. Now to the P&L, two things to highlight. One, it's the first underlying result, which is positive pre-minorities in this quarter. In tourism, you normally have a negative result, also operationally in the winter. So this is even more so very pleasing to see. Also as a result, our loss per share halved effectively for that quarter year-on-year. And one contributor to that is another improvement in the interest expense that comes from all the measures that we did, in particular, the lease portfolio restructuring and taking the ships and ownership. So that's another EUR 10 million improvement that helps us to reaffirm our guidance of EUR 325 million to EUR 350 million. On this number, please remember that most of our payments dates for financial instruments are more in the second quarter, so it's quarter 2, quarter 4. So we can't take this times 4. There's a higher interest payout in Q4 and Q4 compared to Q1. And -- with that to cash flow and cash flow is in line with expectations. The very important element is that the structural savings that we worked on and that we achieved interest payments, the fall away of the regular contributions to the U.K. pension scheme and a reduction in the lease and asset financing repayments, that helps to offset the higher investments that we wanted to see in the hotel segment and that we need to do in context of the Boeing delivery portfolio. And all in all, a EUR 50 million improvement in the first quarter on the cash flow side. Coming to the balance sheet. And as I said, the EUR 0.5 billion improvement is driven by the improvement that you see in the lease portfolio, aircraft and ships in particular, and includes also EUR 0.2 billion FX movement. Now this strong performance and the strong advantage, we will not see this coming and going through the rest of the year because we will see more aircraft being delivered. I think this year, Sebastian, we talk about up to 15, maybe a bit more of planes coming from Boeing. So that will -- because they directly move on balance sheet, impact that. But overall, we continue to see a further improvement of net debt in the full fiscal year. And concluding from my side, because we got the question a lot about the mechanics for the dividend payments. So today is the AGM. We put that to road show. Shareholders are expected to approve the dividend payment. And then tomorrow, we will pay into the system. So our shares go ex dividend. And then on the 13th, there will be the payment date from the system to shareholders. And with that, back to Sebastian on the way forward, how our bookings and the guidance look like. Sebastian Ebel: Thank you, Mathias. So a good start into the new year. How does the future look like? What do we expect? If you look into Hotels & Resorts, we do see that the available bed nights will significantly grow in the second quarter, but also for the full half year. The occupancy for the second quarter is on the same level like we have seen last year. This includes -- that excludes the Jamaica effect. We are with 4% below last year when it comes for the second half year. That is not a concern to us because we are still in the ramp-up phase when it comes to Jamaica. But also, what we do see, by the way, this is also very valid for Markets + Airline. We see a late booking trend. The available -- the average daily rate increase is about 3%, which is a healthy number also to cope with the cost inflation. On Cruise, the outstanding picture remains. What we do see is that the capacity growth is getting smaller, but it's still significant. Occupancy is 4%, respective 3% in the second half up. And you should recall that the ships are 100% full. So this will further reduce to 0. But what we now can do is to optimize the price because we are so well ahead in being booked the ships. Musement, we expect a mid-single-digit growth for experiences. And this in a market which we do see is a very good result and shows that Musement is doing an excellent job. When it comes to Markets + Airline, and I would like to start to reiterate again, we slightly reduced our risk capacity, it's all about to sell the risk capacity, flight, hotel owned assets with -- in a way that we protect margin. The growth should come through the dynamic products. And by having said so, we will see a winter on the same number as last year, especially when we take into account the last-minute business. What we do see is -- I just look, for example, for the number of yesterday, we see that after the strong winter we had where the footfall was significantly down for retail, we see that the weather has normalized in the last 4, 5, 6 days, and therefore, the business has immediately picked up significantly. And for summer, we are slightly below last year. Also there, we are very confident that it will move into the same level as last year. And the focus is on protecting margin and the focus is on filling our risk capacity to fill our aircraft and our hotels. We are well hedged, as you can see, and the hedge position gives us an opportunity with today rates. And by having said so, we can reconfirm the guidance, the increase in EBIT by 7% to 10%. And as I said, a good start in the first quarter. We are confident for the second quarter, and we also expect a good summer. There's one chart left, the summary. And just to repeat, both sectors support each other. The vertical integration is -- makes our business model strong and resilient. The marketplace benefits from the exclusive products and the Holiday Experiences benefit from the strong sales. And together, we protect revenue and margin. And as I said, this should bring us to the ambitious growth guidance we have given. And therefore, we also could reiterate not only the dividend proposal for today, but also for the coming years, 10% to 20% of the underlying EPS. Nicola Gehrt: Thank you, Sebastian. Thank you, Mathias. We are now available for Q&A. Operator: [Operator Instructions] Our first question comes from Karan Puri from JPMorgan. Karan Puri: I've got two quick ones. One on the summer trading that you just mentioned. So tracking at minus 2%, how confident are you to hit your 2% to 4% top line growth guidance in that context? If you could take that one first, and then I'll move to the second one. Sebastian Ebel: As I explained, we are confident that we will achieve last year's level. Mathias Kiep: And on the revenue -- and I think you also asked about the revenue guidance, 2% to 4%. I mean if you look at Q1, there is -- on constant currency, there's a 1% improvement. Now we will also see increase of sales from our Holiday Experiences segment that also needs to be factored into this revenue guidance. And that's why we're overall reiterating our guidance also on the sales side this morning. Sebastian Ebel: And what I would like to remind you, the strong growth in TUI Cruises, you don't see in the TUI AG numbers, not in our numbers because the revenue is not consolidated. So this significant impact is not impacting TUI. So this is outside the consolidated TUI revenue number. Karan Puri: Yes. Understood. And second question was actually on your partnership with Mindtrip and other LMMs. Is it possible to maybe share some early indications of progress made with these partnerships? Anything on the distribution unit economics will really be helpful here. Sebastian Ebel: Yes. So distribution is changing. We very much believe in retail. That's key, and it's commercially a sound case because the margins and because of the early sales are strong. We're seeing and expect a very significant change from web to app and to LMMs and social media. And we put a lot of effort and investments into creating an outstanding app. We have releases every 2 weeks. It's really improving a lot, and we do see that in the numbers -- growth numbers in the significant improved conversion. So every 2 weeks, you will see new applications, including AI applications and new ways of search. We have started collaborations with LMMs and Mindtrip. We have started to sell to ChatGPT. So I'm really proud that we're there on the [indiscernible], on the lane to overtake. And at the moment, we do see that we get the first numbers of traffic. It's still low. It's still more that people get information, but they can book with us as well. And we really want to use this channel as good as possible. Operator: The next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can you just help us understand these hotel KPIs with and without the Jamaica impact? I mean, are you able to tell us what the occupancy is in Q1 and Q2, perhaps with Jamaica included, so we can see the sequential trend through to the second half? Because I'm seeing some investors concerned about what that means for the hotel trend, but that's not quite understanding how you're presenting those KPIs. And then just the second question would come down to the reduced interest costs and the impact of bringing assets back on to the balance sheet. Can you just explain whether these gains are one-off or whether they are sustainable? Are they onetime things as you bring the assets on balance sheet? Or are they all enduring improvements to the interest cost? Sebastian Ebel: I think we have stated that the Jamaica effect was EUR 15 million on the Hotel's side, and that should be reduced to 5% to 10% in the second quarter, which means that a significant part of the 4% is based on the Jamaica effect. And there, we would expect till the end of the second quarter, this should be very much normalized to it. And that's why we feel confident about the occupancy for the hotel business in general. Mathias Kiep: Yes, and on the interest results, so what you see for Q1 versus last year is really a structural improvement. And we had last year and -- a better interest environment with regard to interest income. And also, we had a smaller one-off during the year that we also published that was in H2. And that's why the guidance, the lower end is in line with what you saw as a full result in last year. But the improvement, that's what we worked on is really structural. So it's replacing leases from the past that are not with regard to market terms that we can get today with more attractive instruments or with cash proceeds. Operator: The next question comes from Leo Carrington from Citi. Leo Carrington: If I could ask two questions, please, both really about your demand. Firstly, in terms of the demand against your risk capacity adjustments, can you give a bit more color of what these -- what the shape of these adjustments was? Is it certain destinations, certain dates or across the board? I'd be interested to know how you're planning for this year? And then secondly, in terms of how we should understand consumer preferences, what's your view on the differing trends between the hotels which is perhaps more competitive, later booking trends versus cruise, which seems to remain very strong. Is it the product? Is it demographics? I'd be interested. Sebastian Ebel: As you have seen, the occupancy in Markets + Airlines in the first quarter was up 1%. This, you can put into -- relation to the slightly lower number of customers. What we have taken out and capacity is not our own flying, not our own hotels. It's third-party commitments. We had full chargers, allotments, guarantees and that we have reduced significantly because we also believe that this capacity is available dynamically. And we wanted -- just wanted to make sure that our risk capacity, the ones which we produce ourselves, we can fill for a decent margin. So it's all about third-party capacity. We haven't seen a negative impact on the hotel business, except the Jamaica business. And this is not a surprise. All the hotels, the Riu hotels, and the Royalton were closed. The Riu hotel started to get opened in January. The Royalton hotels will be opened just before Eastern because they use the time for renovations. So this is an impact which we couldn't avoid, we do see that the business is healthy. Of course, there are markets which are stronger than others. What helps is the international sales organization we have, if one market is less good, the other one is better. When it comes to consumer preference, one thing is clear for us. That's why we invest so much in international sales activities. We want to make sure that if one market is weaker, we can get the customer from somewhere else. Therefore, the share of international customers in our own assets is growing, and that gives us the confidence to really see, again, outstanding numbers there. If you look at the overall demand, the one group which is buying later are the families and also this is understandable to see. Leo Carrington: Can I just ask a follow-up on that first point on the risk capacity? Do you get the sense that this -- the allotment say in the hotel capacity that you've not taken on this year has gone to other tour operators? Or is it possible that you could actually fill it dynamically later in the season? Sebastian Ebel: Yes. That is very clearly the concept. It doesn't mean that we don't have a great relationship to the hotel. It's sometimes also the wish of the hotel. It's the wish of ourselves because then it's up to the hotel -- hotelier to know what is the best price he want to offer to get the volumes. And this uncertainty, what is the right price we take away if we still work with the hotelier on a very exclusive basis, but having a risk capacity, which is mainly -- is not there anymore, but the capacity we use is by getting dynamic rates. So the model is in the longer tail changing to dynamic. And this is something which we will see huge benefits in the future. Operator: The next question comes from Andre Juillard from Deutsche Bank. Andre Juillard: Two questions, if I may. First one on the source market. Could you give us some more color about the trend you are seeing in the U.K. and in Germany, which are your 2 first markets? And in terms of destination on the other side, you are mentioning that Greece, Balearics, Turkey and Egypt are very strong. Could you also give us some more color about the trend you are seeing if you have some new destination emerging? And also what is the most profitable one or the one on which you see the strongest operating leverage? Sebastian Ebel: I will not give you the details which one is the most profitable one. I do apologize for that. Egypt is very, very strong. Bulgaria and Tunisia, so the lower cost countries are strong. Greece and Spain are stable. Turkiye is suffering at the moment because of high inflation and low currency devaluation. So -- and it's more a family destination. If you look at our clusters, we do see strong demand for Sansiba. We also see good demand for the Middle East. For Asia, we see less good demand for the U.S. And if you look into the main markets in Europe, the Eastern European market, and that's why we are so happy to move into Romania. Germany and the U.K. are stable, but with significant competition. Germany, as I said, will see a catch-up because we had since the week before Christmas, minus 5, minus 10, minus 50, 0.5 meter snow and the footfall was really 1/3 of what we had seen before. So that's why we expect that Germany will be stable or will see a slight growth. And I would say that the U.K. market is -- the sun and beach market is -- especially mid-haul is strong. On the long haul, there might be some more weakness, but that's what we have to wait for. Andre Juillard: Do you see anything specific on the source market and destinations that was not anticipated or something which is really scary or anything special? Sebastian Ebel: I mean we are happy about the strength to Egypt because we benefit from us. Turkiye is a concern, but I mean, that's the good thing if you are more and more going to dynamic, if you can bring clients from A to B that a lower demand in one destination is -- needs some replanning but didn't kill profitability. So that's good. I mean maybe it will be interesting to see how the demand to North America will develop, but we don't fly to it. It's very small. It's not relevant for us. It's nice to have, and it clearly has an impact on the revenue numbers, but it's from a profit point of view very, very small. I think we have flight per week to Melbourne in California. That's all. So there is no -- and one hotel in Miami, the Riu Hotel. So the exposure is very, very minimal. But of course, it has an impact on the revenue side. Operator: The next question comes from Kate Xiao from Bank of America. Kate Xiao: First, I want to ask about your river cruises product, which you kind of highlighted as part of your Markets + Airlines on one of the slides. Can you talk to us about the market opportunity there? It looks like you guys are adding capacity. And what's your sense of the latest demand and pricing trends? Is it healthy? Is it stronger or weaker than ocean cruise market? That was the first question. And the second question on your Musement partnerships. You're highlighting kind of new partnerships with Jet2 on top of existing partnerships. Can you help us understand the long-term market opportunity with these partnerships? And how is the economics looking compared to kind of your own traffic? And also over the long term, what's your margin goal for this business? Obviously, you guys are ramping up profitability. What do you think is the long-term realistic margin goal theoretically? Sebastian Ebel: So on cruise and river cruise, the demand is big. I mean there's one major difference for a new ship, the profit is EUR 60 million, EUR 70 million for a river ship with maximum 200 passengers compared to 3,000, 4,000 is limited. But nevertheless, it's a great product. You get access to customers to bring into the TUI ecosystem, and therefore, we like it. So strong demand. The good thing is, and you may have heard a lot of orders, but the restricting factors are the slots in the harbors, in the city harbors. And that protects very much the margin, and we are very happy to own slots, and therefore, it's a very stable business. Can it scale to 10 ships, 12 ships? Yes, but it's still 10 ships with 200 passengers and which is just half the size of an ocean cruise ship. So it's nice -- it brings -- it's profitable, but it's good, especially good for the TUI customer ecosystem. On the partnerships, yes, you're right. It's 1 out of 4, and there are smaller ones as well. And I think it's great if our partners can sell more to their customers, profitable, and it's good for us as a producer. We have 2 focuses -- or we have a lot of focus, but 2 main focus on growth. One is through the wholesale partnerships. Second, on the own products because our business model or it could be, but we have decided not to do is not to sell the long -- I mean, we also sell the long tail, but that's not where we've spent the marketing money for. We spent the marketing money to sell the own products where the margin is not 10%, not 12%, but it's 30%, 40%. The catamarans, electric bicycles, or whatsoever, the special entries into coliseum and other things to really where we have created with our own buses, for example, own products because there, we have the big customer base. We can fill them from the first day onwards and they bring us good margin. So if we say 7 -- or 5% or 7% growth, it's mainly on own products and less focus on the long tail that comes along with the customers we have gained. And we hope, of course, if the customer who lives in Berlin wants to buy a theater ticket in Berlin, they also use our app. But there, the margin is EUR 2 or EUR 3, very limited. When this customer, for example, buys a transfer at Mallorca Airport, the benefit is EUR 20 or EUR 30 or EUR 40. So that is -- it's not scale. It's really -- of course, it's also scale, but its scale more from B2B, and it's more really incremental significant margin through own products. Operator: [Operator Instructions] The next question comes from Richard Clarke from Bernstein. Richard Clarke: Three, if I may. Just want to kind of loop back on the philosophy around the shift to dynamic packaging, and I think you say it's around sort of preserving margin. If we were to look next year into sort of 2027, I guess with -- you'd expect lower lease costs on planes, lower fuel costs with the weak dollar. And so the profitability of flying is probably going to increase for you. Could that possibly lead to a lean back into risk capacity? Or is the direction of travel always going to be towards more dynamic packaging irrespective of what the cost environment is? And then second question, just on cruise. I guess, pricing up 1%. You said in your prepared remarks, you see some opportunities to push a bit harder on price maybe beyond the current capacity growth. I guess you must be selling cruises more than a year out. So what is the pricing looking on that? Is there some expectations maybe into 2027 that we can start seeing cruise prices up sort of mid-single digits. And then lastly, a very quick one, but do you get any sense that you're losing any demand because of the World Cup in the summer of this year? So any sort of U.K. or German customers traveling over to the U.S. for the World Cup rather than maybe taking a TUI holiday? Sebastian Ebel: Thank you for the question. It's maybe an aspect I didn't get. We are in the middle of the transformation in Markets + Airlines. And the transformation is on the Market side and on the Airline side. On the Market side, it's especially to connect NDC airlines. To give you an example, last week, we -- or on the weekend, we integrated Finnair NDC into the Nordic system. And by getting this contract, we have seen a significant uplift for lower distribution cost. Of course, Finland is a small market. But with this thing to get more and more carriers on the lowest price tariffs, which we haven't had yet. This will help us to get the content and to get the content for the best price. The second part of the transformation is Airline. And in the Airline, we had 5 airlines or 6 airlines which were run separately. We brought the airlines together as one airline, two AOC and U.K. because not being part of the Europe and the European airlines. We have seen by bringing it together on the operational side, a huge cost improvement. If you look at our denied boarding compensation, it's 1/3 of what it had been because now the Belgian -- if there is an AOG in Germany, the Belgian airline that can fly and so on. What is still missing is the one commercial piece. So if you are a Spanish customer, you don't find a Spanish website where you find the flights to Frankfurt and to London. That's -- we are just doing it at the moment, as I speak, to bring this into the market. And we lose 20% or 30% of the demand because we haven't run the airline like an airline. And by commercializing the airline, and -- we will see despite the operational benefits, which we really realized this year, we will see the commercial benefits from next year onwards with a significant impact for the summer. On price in cruise, if we would -- I mean, when we increased the demand in the last 24 months and not the demand, the demand as well, but the capacity by 45%, 45% increase TUI Cruises demand. And I must say I was skeptical about not selling the volume, but price. But it was selling by far better than we had anticipated. And if we would have known that strong demand, we could probably have risen the price by 3%, 4% more. Fortunately, we are very well sold. So what we do now on the pricing side has an impact, but because the volume is small, the impact is limited. So the big impact will be in the coming years where we are good sold above the years before, but still a quite significant volume to be sold. And the last question -- the World Cup, I don't know. The effect had been strong 15 years ago, or I would say, 16 years ago. It has become slower -- smaller and smaller year-by-year. It -- one reason is 16 years ago, there were hardly big TV screens in a hotel or in your hotel room and you haven't had the live transmission. Today, it's very different. People can watch the game they want to watch on an iPad or on the computer. And therefore, I would say, yes, there is an impact, but this impact is small. Operator: The next question comes from Cristian Nedelcu from UBS. Cristian Nedelcu: The first one maybe on the Markets + Airlines, the splitting capacity dynamic versus risk capacity. I think it used to be 15% dynamic and 85% risk, I don't think it changed that much. But could you tell us how do we think about this year? We think about low single-digit declines in risk capacity and 8% growth in dynamic capacity? Or what's the range of outcomes for this year? And the second one, could we go a bit in more detail through the EBIT bridge in Markets + Airlines year-over-year? You have the forecast or the outlook for strong growth versus the EUR 200 million EBIT last year. Can we talk about the moving parts? Because we have the cost cutting 30% of the EUR 250 million that helps. But in the same time, we do have some wage inflation. We do have some inflation, I would guess, in your overhead and distribution costs. Your book revenues for the summer are down 2%. Now I'm making an assumption here. If the overall revenues are down 2% year-over-year, there's EUR 400 million lower revenues in the tour operator. How much are you cutting from your capacity cost year-over-year on accommodation airline and so on? Could you tell us a bit more the moving parts there? And what gives you confidence that you can indeed grow the EBIT in a strong way year-over-year? Sebastian Ebel: First, our main profit, and therefore, I'm always a little bit puzzled by so many questions comes to Markets + Airlines. The main driver for us is the Holiday Experiences business and the distribution makes sure that our assets are filled well. When you look at the dynamic share or the decrease in the risk capacity, it's not on our own assets, it's on third-party assets. So it has no impact on our own assets. And therefore, in the first quarter, for example, the load factor on our airline has even increased by 1%. If you ask about the split, we are not talking about a 2-digit percentage. It's a small or medium big 1-digit percentage. Mathias Kiep: Towards 20%, maybe. Sebastian Ebel: Yes, towards 20%. The future growth will come, of course, from dynamic packaging. And we -- due to the cost measures, we want to and will reduce the overhead distribution, IT cost in relation to the revenues. Operator: We have no further questions. So I'll hand the call back to the management team for any closing comments. Sebastian Ebel: Good. So we have had a good start. We are confident about the future for this year. Therefore, we could reconfirm the guidance. And we will benefit from all the measures we have taken, right capacity, a better cost structure, higher efficiency. And we are middle in the process of transformation to prepare the company for growth. And therefore, we are very confident with the guidance we have given. Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.
Operator: Thank you for standing by, and welcome to the Region Group First Half FY '26 Financial Results. [Operator Instructions]. I would now like to hand the conference over to Mr. Anthony Mellowes, Chief Executive Officer. Please go ahead. Anthony Mellowes: Thank you very much, and welcome to our First Half FY '26 results for Region Group. My name is Anthony Mellowes. I'm the Chief Executive Officer. Presenting these results with me today is David Salmon, our Chief Financial Officer. Also in the room with me is Erica Rees, our Chief Operating Officer. I'm really pleased with this set of results as we have increased our earnings growth, which is underpinned by some really strong operational results and our fully hedged interest position. Let me take you to Slide 4, which sets out our first half FY '26 highlights. Our funds from operations or FFO, was $0.079 per security, which increased by 3.9% from December 2024. The distribution per security was $0.069 per security, which was the same as our adjusted funds from operation or AFFO, which increased by 3% from December 2024. Our statutory net profit after tax of $180 million, including an increase in the fair value of our investment properties. Our assets under management has increased by 3.9% from June '25 to $5.4 billion. Our operational metrics remained resilient. Our comparable MAT growth was 3.1% per annum. Our average annual fixed rent reviews were 4.3% per annum. Our average specialty leasing spreads were 3.4% and our comparable NOI growth was 3.7%. With respect to capital management, our weighted average cap rate firmed by 10 basis points to 5.87% since June '25. We've continued the on-market security buyback program. 6.7 million securities have been purchased during the half year at an average price of $2.39 for a consideration of around $16 million. And our NTA per security has increased 3.6% to $2.56 off the back of that valuation growth. Our weighted average cost of debt of 4.6% per annum with 100% of debt hedged or fixed for FY '26 at an average rate of 2.89%. Slide 5 remains unchanged. Our strategy is to provide defensive, resilient cash flows to support secure, growing and long-term distributions to our security holders. Moving to our operational performance, which starts with our portfolio overview on Slide 7. Our occupancy has improved to 97.7%, up 20 basis points with a continued strong weighting towards those nondiscretionary tenants. 45% of our gross rent is attributable to our anchor tenants and 55% of our gross rent is to specialties and mini majors with a focus on food, liquor, retail services, pharmacy and health care. We have 87 centers that are owned 100% by Region, which are geographically diversified across Australia. Moving to Slide 8. Our positive sales momentum continues across our nondiscretionary categories. Our 3.1% comparable MAT growth is driven by supermarkets at 3.1%, our discount department stores at 3.7%, our mini majors at 1.7%, nondiscretionary specialties at 3.3% and our discretionary specialty tenants improved to 3.6%. Our specialty sales productivity is now at $10,265 a square meter. As for the majority of the market, we have excluded tobacco sales consistent with our June '25 results. Our supermarkets continue to demonstrate resilient growth as shown on Slide 9. We continue to capital partner with our anchor tenants to drive sales growth with over 53% of supermarkets generating turnover rent. We have 123 anchor tenants contributing 45% of our gross rent. 76 direct-to-boot and e-commerce facilities. 97% of stores have online sales included in the turnover rent calculation. And as I said earlier, there was 3.1% supermarket comparable MAT growth. And the turnover rent generated from 52 anchor tenants with a further 20 anchor tenants within 10% of that turnover rent threshold. Moving to Slide 10. Over 88% of gross rent is generated from nondiscretionary tenants. Our portfolio occupancy of 97.7% is up from 97.5% as at June '25. Our specialty vacancy has improved to 4.5% as at December '25 compared to 5.4% at June '25. Our portfolio WALE decreased slightly by 0.1 years to 4.8 years. Our average specialty rent increases to $930 per square meter, representing annualized growth of 5% since December 2022. Our average specialty annual fixed rents remained strong at 4.3%, and these were applied across 96% of our specialty and kiosk tenants. 79% of expiring tenants were retained, which helps to minimize leasing capital expenditure and downtime. Moving on to Slide 11. Proactive leasing continues to drive increased leasing spreads across the portfolio. Our specialty leasing benefited from slightly increasing annual fixed rent reviews and positive leasing spreads. We completed 177 specialty leasing deals with 3.4% average leasing spreads, a positive uplift on prior December periods. A strong performance from new leases with an average leasing spread of 7%, while renewals were relatively flat. The average annual fixed rent reviews increased from 3.9% in December '23, up to 4.3% in December '25. Our leasing incentives on new deals averaged 12.3%, and this is aligned with our 12-month leasing incentive for new tenants. Moving on to our sustainability update on Slide 12. We're on track to reach our net zero for Scope 1 and 2 greenhouse gas emissions by FY '30 and continue to make a positive impact in the local communities which we serve. We continue to progress towards our sustainability targets, which is spelled out in our annual sustainability report. The key focus has been on environmental, progressing with our net zero investment during the period, contributing to our solar rollout target of having 25 megawatts installed in construction or design on Region assets by the end of FY '26. In social, we continue to make a real positive impact in the communities that we operate in and have undertaken a number of community initiatives, including the uniform exchange program at Raymond Terrace in Newcastle. We also continue to sponsor 128 students through the Smiths Family's Learning for Life program. And with respect to governments, our alignment to the ASRS is on track for our FY '27 reporting. I'll now hand over to David, who will talk through our financial performance. David Salmon: Thanks, Anthony, and good morning, everyone. I'll start on Slide 14. We'll highlight the key drivers of the movement in our funds from operations, which has had strong earnings growth in the first half of FY '26, partially offset by an increase in the weighted average cost of debt. Our FFO for the first half of 2026 is $0.079 per security, representing growth of 3.9% from December 2024. There were positive contributions from the comparable portfolio NOI growing by 3.7% and the impact of our transactional activities and growth in funds under management. The FFO growth was offset by the previously flagged weighted average cost of debt increase from 4.3% to 4.6% during the period. Moving to Slide 15, where we provide further information on our financial results for the half. As mentioned, our funds from operations was $0.079 per security. Our adjusted funds from operations came in at $0.069 per security, an increase of 3% from December 2024 after additional capital this period from the leasing up of vacancies. Our distribution for the period represented a 100% AFFO payout ratio in line with guidance. Comparable NOI growth was 3.7% with moderating property expenses as well as specialty annual fixed rent reviews and positive leasing spreads. Full year comparable NOI growth guidance remains at around 3.3%. Total net operating income has grown by 5.3%, driven by the aforementioned comparable NOI growth, cost reduction phasing from the prior period, lower ECL compared to the Mosaic impacted prior period and completed developments NOI, partially offset by net asset disposals. There was strong growth in funds under management income supported by funds management platform expansion during the period. Corporate expenses were impacted by cost phasing in the prior period with costs in line with the FY '25 average over the year. Statutory profit for the period is $180 million, following an increase in the fair value of investment properties. Moving to Slide 16. As at December 2025, our total assets under management was $5.4 billion. This is a 3.9% increase from 30 June 2025 with investment property valuation growth and an increase in funds under management. NTA per security of $2.56 has increased by 3.6% from June 2025, driven by fair value uplift on investment properties. Our balance sheet remains healthy with gearing of 32.7% at the lower end of our target range. This provides us with the capacity to deploy capital when opportunities arise. 6.7 million securities were purchased during the half year at an average price of $2.39 for a consideration of $16 million as part of an on-market security buyback program. Since the announcement of the buyback program in April 2025, 8.9 million securities have been bought back at an average price of $2.37 for a total consideration of $21 million. Slide 17. Our property valuation movement shows cap rate compression and continued income growth driving the valuation increases. During the period, our portfolio increased by $129 million. The movement was driven by a $92 million fair value increase and $37 million in capital expenditure. Capitalization rates have firmed by 10 basis points since June 2025 to 5.87% on top of the 10 basis points firming in the second half of FY '25. We have 3% fair value increases since June 2025, with approximately 1.7% driven by cap rate compression and the remainder being valuation NOI growth over the 6-month period. On to Slide 18, where we talk to our funding. In November 2025, we issued a successful 6-year AUD 300 million medium term note. We saw significant interest from both offshore and Australian debt investors with the final order book being 3.6x oversubscribed. This strong demand allowed for the transaction to be priced with favorable borrowing margin of 1.22%. Proceeds from the MTN issuance were used to repay bank debt. We have total debt facilities of $1.9 billion with around $355 million of funding capacity available for us to draw on. We have no debt expiries until FY '28, and we have strong interest from both new and existing banks to enter into new facilities. Our weighted average cost of debt increased from 4.3% to 4.6% over the first half, and we expect this to decrease just slightly to 4.5% for the full year. Moving on to Slide 19. Our strong hedging across FY '26 to FY '28 provides stability and reduces exposure to near-term interest rate changes. We have high hedging levels with 100% of debt hedged or fixed in FY '26 at an average rate of 2.89%. We remain highly hedged in FY '27 and FY '28 with 87% and 70% of debt hedged or fixed in those respective years. This mitigates the impacts of any near-term rate increases, which the RBA has now commenced and is expected to continue. Our average hedged fixed rate over the next 3 years of around 3%, which is well below forecast market rates. I will now hand back to Anthony to talk through our value creation opportunities. Anthony Mellowes: Thanks very much, David. Turning on to Slide 21. We maintain our disciplined approach to continue to pursue high-quality opportunities that align with our long-term strategy. In January '26, we settled on the acquisition of Treendale Home and Lifestyle Center for $53 million at a 6.4% initial yield. It's a large-format retail center strategically located directly opposite our existing center at Treendale Shopping Center, and this also allows some improved management efficiencies. The center also has a district center and urban zoning, providing the ability to house additional retail such as additional supermarkets into the future. We remain the largest owner of convenience-based centers with a proven transactional track record that allows us the opportunity to continue to consolidate this very fragmented market. Slide 22 highlights the targeted reinvestment and increased development spend to drive earnings and portfolio performance. The table shows the first half FY '26 actual and FY '26 forecast indicative spend on our capital deployment program. In the first half of FY '26, we spent $32 million and in -- for the full year FY '26, we expect to spend around $65 million. This forecast has increased by roughly $15 million, which is mainly driven by development projects relating to center expansions across North Orange in New South Wales, Newcastle Market Town in Newcastle and Greenbank in Southwest Brisbane. Moving on to Slide 23 for funds management. Our Metro Fund continues to be a platform for growth with 2 new acquisitions. We set Metro Fund settled on the acquisition of Dalyellup Shopping Center in Western Australia for $36 million in November '25, growing our funds under management by 5.7% from June '25 to $752 million. Metro Fund also exchanged on the acquisition of 3 additional strata properties valued at $89 million at West Village in Brisbane in Queensland, which is driving further growth through these strategic acquisitions. Two of these strata properties have already settled in January '26 and the remaining Strata is due to settle by June '26. David will now talk through our AFFO growth target. David Salmon: Moving to Slide 25. To sustainably drive our medium- to longer-term earnings growth, we are focused on generating comparable NOI growth of at least 3%. Through our value creation initiatives, we aim to add another 1% to our growth rate. Our work in the capital management space to increase our hedging has mitigated some of the short- to medium-term earnings volatility generated from interest rates with a longer-term impact dependent on market movements. Based on all this, we are targeting medium to term longer growth in our FFO and AFFO of 3% to 4% per annum. Our results for the half year have aligned with this growth target, notwithstanding the flagged impact of interest costs. I'll now pass it over to Anthony, who will talk to our key priorities and outlook. Anthony Mellowes: Thanks again, David. So Slide 26 steps through our key priorities and outlook. We believe the nondiscretionary retail will continue to be resilient, and we will generate comp NOI growth through our strong leasing, increased fixed rent reviews and continued proactive expense management. Our balance sheet is supported with growing valuations, which provides us with the opportunity to develop some of our centers, also to be disciplined with our acquisitions and disposals and explore additional funds management opportunities. We're maintaining a proactive approach to capital management, including where prudent, asset recycling, on-market security buyback and interest rate hedging. Assuming no significant change in market conditions, our FY '26 earnings guidance has been upgraded to be FFO of $0.16 per security, up from $0.159 per security, a growth of 3.2% on FY '25 and AFFO of $0.411 per security, up from prior guidance of $0.14 per security, a growth of 2.9% from FY '25. This marks my final results presentation over the past 14 years. It's been a real privilege to lead the group through a period of significant progress and growth. I'm really delighted to welcome Greg Chubb as our next CEO and Managing Director, effective the 9th of March. And I'm really confident the company will continue to build on this really strong foundation. Thanks very much, and over to questions. Operator: [Operator Instructions]. Your first question today comes from Howard Penny from Citi. Howard Penny: Just the first question on -- just to talk through how you're firstly seeing the sort of upgraded guidance drivers. What really drove the increased guidance in this period? David Salmon: Howard, it's David here. Yes. Look, largely, the upgrade in the guidance from the $0.14 to the $0.141 was largely off the back of some of the transactional activity. As we flagged, we bought Treendale Lifestyle Center, the circa $50 million. Obviously, that's at a yield of over 6% compared to our funding cost. That's an upgrade in net earnings. And we also expanded the funds management platform through the acquisition of those 3 properties we flagged at West Village, which has the -- we have a 20% interest in that fund. So we have earnings accretion there, plus also we get acquisition and funds management fees as well, which go into the mix. What we are doing for the full year guidance is we are holding our comp NOI growth of 3.3% guidance that we'd flagged at the start of the year. We haven't changed that at this stage. Howard Penny: And just my second question on the Treendale acquisition. Could you just take us through why this was a great acquisition for Region? And then just a second question on that, can we expect potentially more acquisitions in the next sort of 12 to 18 months similar to this? Anthony Mellowes: Thanks, Howard. It's Anthony here. Look, this center, if you look on Google Maps at Treendale, it is directly across the road. It is -- there's a lot of retail in that space. And it just makes a lot of sense for us to own it. It's really very integrated with the whole precinct. And so we are the natural owner of that. Just like it's no real difference to we bought a large-format center in Ballarat. Again, it's basically physically linked to our existing shopping center, and there's no real difference. So it's about -- it's strategically owning that, and it's at the price that we could buy it for. We continue to remain really disciplined looking at opportunities. There's a lot of groups out there that are still offering very tight yields on assets, which is great because we own and manage over 100 of them. But we continue to be really disciplined about ensuring that they meet our long-term hurdle rates. I still believe we will continue to buy assets and find them and work them through. And I think there's some great opportunities out there, but we're going to remain really disciplined. And that's not just on acquisitions. It's also on disposals as well. We still have some, not that many assets that are really tight yields with not huge growth, but very -- there's a strong appetite from privates out there for those smaller dollar value assets, of which we still got a few there to go. But it's really just remaining disciplined to meet our long-term hurdles. Howard Penny: And maybe just one final question from me. It's good to see the joint venture starting to get more active. What's changed in that in terms of where the partner and Region are getting more active? What's changed in the expectations at the moment? Anthony Mellowes: Look, I think it's fair to say when interest rates really jumped up very quickly. The hurdle rates were increased as interest rates have stabilized and they certainly have stabilized, notwithstanding they've just gone up a bit recently. They're still relatively stable compared to the increases that we were looking at. And I think that's the major driver. And we find really good opportunities that, again, the assets at West Village, there's strategic reasons for owning the additional strata to control everything in that particular asset, but also the likes of Dalyellup was met the hurdle rates that we needed. So yes, but I'd say it's the volatility in interest rates or less volatility in interest rates has been the key driver. Operator: Your next question comes from Andrew Dodds from Jefferies. Solomon Zhang: Just firstly, I'd just be interested to hear how retail trading conditions have trended throughout January and February. It's positive to see that they held out throughout the period, but certainly, just keen to hear about how they've trended since the sort of the outlook for rates has sort of evolved over the past couple of weeks. Anthony Mellowes: Yes. Look, it's Anthony here. We haven't got the actual figures. It's a little bit too early. So it's only the Anthony Mellowes is anecdotal. It's not based on any real data because we just don't have it yet. It's continued to be -- I don't expect it to be all that different from December, November, I think January because it goes on like-for-like against January last year, I think it will be fairly much the same because we do have that high focus on nondiscretionary, which really doesn't move around a lot. I mean, I've said for the last 13 years, we get excited when it moves from 3% to 4%, and we get a bit worried when it goes from 3% to 2% because it's always around the 3%. So I expect much the same. Solomon Zhang: Okay. Great. And then on the buyback, $100 million, it looks like it's just over 20% complete now. You've been buying back stock sort of between $240 million and $225 million. So I mean, with the stock sort of trading within this range now, do you expect that the buyback will recommence once the blackout period ends? And just a follow-on, it would be good to understand just what guidance assumes in terms of completion of the buyback in the second half, too. David Salmon: Yes. It's David. Well, maybe just answer the last bit. Yes, we haven't assumed any further buyback in our guidance for FY '26. In terms of whether we intend to continue the buyback. Look, I mean, obviously, when we announced the buyback, we were trading much lower. We also had raised a fair bit of capital through some asset sales, and we're looking to redeploy that capital. We've obviously deployed that capital a bit into the buyback, about 20%, but we've also acquired Treendale for circa $50 million recently as we just talked about. So the buyback, the merits of the buyback are still there in terms of where we're trading relative to NTA and where our distribution -- implied distribution yield sits at. So the merits of the buyback is still there. But I guess it's probably been the appetite to do as much buyback is probably lessened because we've been deploying capital into some other opportunities. So I won't say a hard no or a hard, yes, but it will depend on where trading goes. But to the extent that we have other opportunities arise, we might decide to deploy that capital into those opportunities. Also, if we were to sell some assets that might come about -- that obviously gives us some surplus capital to consider in that context as well. Solomon Zhang: All right. And then just finally, just on the MTN issue. The borrowing margin you got of 122 basis points is clearly very favorable. Can I ask just what the sort of weighted average margin is across the group and how much of an earnings benefit this has provided? David Salmon: Yes. Our weighted average margin across the group is around 1.5%, that's our forecast for the year, I should say. So obviously, this is circa 1.2% is obviously bringing that debt has brought that down a little bit. It was 1.6%, I think, pre that. Look, we see there's definitely opportunities in the compressing borrowing margin market that we find ourselves in. I mean, you can do the math, $300 million at 30 bps and the annualized benefit there. That's obviously -- that's coming through a bit in FY '25, but also it will annualize in -- sorry, a bit in FY '26, that will annualize in FY '27 as well. Solomon Zhang: Okay. Thank you very much and congratulations Anthony. Anthony Mellowes: Thank you. Operator: Your next question comes from Solomon Zhang from UBS. Anthony Mellowes: No, I can't hear you, Solomon. Operator: Your next question comes from Daniel Lees from Jarden. Daniel Lees: Just a question on costs. It looks like your property expenses are down, corporate expenses up a little bit. Maybe just if you could talk through the key drivers here and how do you want us to think about costs going forward? David Salmon: Yes. It's David here. Yes, obviously, in the second half of last year, we have done a number of cost initiatives to manage our gross costs. You're seeing some of that come through this half. There was a bit of phasing of the cost benefits last year between first and second half. So what we've done is for our comp NOI growth of 3.7%, we're saying that comparable cost growth was around 1.4%. What I'd also say that the property expense reduction cost has also been impacted by asset disposals that we had in the prior period as well. But like it's fair to say that the cost growth looking forward, our target is to manage cost growth in that 3% to 3.5% growth range as well as our revenue line for that matter, which we think sets us up well for that 3% to 3.5% comp NOI growth that we talked about. Daniel Lees: And corporate costs? David Salmon: Yes, sorry, corporate costs. Look, again, there's a little bit of phasing and lumpiness in last year's split between first and second half. But our corporate costs for this half, noting that the corporate costs in terms of the dollars are a lot smaller compared to comp NOI. But our corporate costs of $7.4 million in the half is more in line with the half average from the full year last year, which was about $15.2 million for the year, about $7.6 million for the half. So I think you'll see it more in line with that in the second half going forward. Daniel Lees: Great. And then on deployment opportunities, obviously, 10-year bond rates and rates generally have shifted higher. Are you seeing that flush out any acquisition opportunities from maybe the high net worth and syndicators? Anthony Mellowes: I think it's still just a little bit early to be saying that at the moment. There was still some -- there was an asset in Tamworth that sold at a very tight 5.1%, I think, recently to a private. There's still DD happening of deals that were agreed in sort of December that they're going through their DD. So I think it's just a little bit early to be making that judgment at the moment. What I would say is at our results at June, I've said I think overall cap rates will compress to December of about 10 to 15 basis points, which is what happened. And if conditions continue, I'd expect sort of maybe another 10 basis points to June '26. Conditions have changed. I don't expect cap rates to continue to compress from December '25 to June '26. I think they'll stay fairly flat. Daniel Lees: Okay. That makes sense. And just a final one from me, if I could. On the capital deployment program on Slide 22, the $65 million, what's your estimate yield on cost for that program? David Salmon: Look, generally speaking, we're targeting a 6% plus yield on our capital deployment. Obviously, you've got a bit of variation depending on the nature of the projects. But that's -- as a rule of thumb, we target that. Anthony Mellowes: And there's timing issues. David Salmon: Well, there's obviously timing issues in terms of the phasing of the projects coming online and also you have sometimes you have a bit of downtime in -- while you're developing sites as well. Operator: Your next question comes from Solomon Zhang from Morgan Stanley. Solomon Zhang: Hello David. I'm sure there's a reason for this, but your 5.3% NOI growth. I know, David, you talked about cost savings at the property expenses line. But can you explain to me why gross rental income didn't move at all? David Salmon: Look, the primary reason that didn't move is the impact of the disposals. They have come out. So that's the primary reason. The comp growth after adjusting for the disposals was about 3% growth. Solomon Zhang: Comp growth at the gross property income line was about 3%. David Salmon: Yes, comp growth, correct. Solomon Zhang: Okay. Fair enough. The 7% leasing spreads for new leases, that's pretty impressive. Can you kind of give me some color as to the composition? Like were there still some old Mosaic boxes that you leased up at massive leasing spreads? Like I'm just trying to work out what the underlying leasing spread would have been without some of those extraordinary good boxes? David Salmon: Look, we -- maybe just to preface it with the Mosaic site, there are vacant sites that we're trying to lease, but it's -- at the same time, we see them just another vacancy we're trying to fill. So we're trying not to differentiate between all the different sites. Obviously, there were some good deals this half, and it's been quite low. Sometimes you're talking half numbers, the stats can be very sensitive to a few big deals. Maybe if I could put it this way, if you excluded the top few deals, yes, you'd be closer to that sort of 4% to 5% leasing spread range. And conversely, if you excluded the bottom few deals on the renewals, they'd be up around 2% or 3% higher as well. So yes, I mean, you do get some outliers that can skew things either way. But at the end of the day, yes, look, there is an element of Mosaic that's not into those numbers, yes. Solomon Zhang: Great. What were those bottom few deals and renewals that dragged it down to pretty much flat? Like were they a special type of retailer? Or was it a specific retailer? Anthony Mellowes: Yes. We had -- there were 3 deals that hurt us in that renewals, 2 were banks, and we wanted to keep those banks because they wanted to leave. And one was a pharmacy who, as you know, pharmacies retain the basically pharmacy license. And if they move, you can't just easily replace a pharmacy. So they were the 3 deals, 2 banks and a pharmacy. Solomon Zhang: Great. Great. And just one last one. I noticed you guys kicked off a Metro Fund III. Can I assume it's with the same capital partner as Metro 1 and Metro 2? Anthony Mellowes: Yes. Operator: Your next question comes from Murray Connellan from Moelis Australia. Murray Connellan: I just wanted to quickly drill into the Mosaic brand space, if you wouldn't mind. Would you be able to contextualize for us the amount of vacancies that still remain there, the amount of income that you've assumed going into the second half? And I guess, the drag of those vacant sites relatively speaking, in FY '26 guidance overall? David Salmon: It's David. Anthony Mellowes: What David is looking at -- look, I'll just say, Murray, Mosaic is gone, and they're just now a vacancy for us. And -- but David will run through some numbers, and we are getting better rents on the Mosaic groups. It is heading pretty close to what we suggested when Mosaic went broke. I remember what was 18 months ago, whatever. So -- but Dave run through. David Salmon: Yes. Look, just to give you a bit of context, obviously, and we have flagged this in the past that there would be a bit more leasing capital this year to help lease up those Mosaic sites. We had about $1.2 million in leasing capital on those sites for the first half, and we're forecasting roughly about double that for the full year of FY '26 to about $2.5 million. Look, in terms of how much of the Mosaic portfolio have we dealt with, we've got about 85% either leased or casually let where it's earning some sort of income. Obviously, we're looking to fully lease everything, but there is a little bit of a drag. In terms of dollars on the NOI line, there still will be a bit of drag for the full year because obviously, we've got the new rents kicking in, offset by the lost rent coming out. There'll still be a little bit of a drag, maybe $0.5 million or so for the full year, depending on how we go in the second half on things. But yes, like I said, the primary impact on AFFO for the year will be that leasing capital and that leasing capital is part of the first half higher leasing capital that we talked about earlier. Murray Connellan: Will it be fair to say that, that space is assumed to be, I guess, mostly 90% productive going into 2H? '26 on average? David Salmon: Look, we're certainly banking on having most of it in there. There might be a few delays in terms of start dates and things like that. But obviously, when we come out with our guidance at year-end for FY '27, we'll be able to give a bit more color on that. But like Anthony said, we're trying not to think about Mosaic as one big thing. At the end of the day, we're trying to fill up all our vacant sites, and this is just one part of it. Murray Connellan: And Anthony, congrats on your last set of results. All the best for the next phase. Operator: Your next question comes from Richard Jones from JPMorgan. Richard Jones: Anthony, just interested in your broader views on retail markets. Obviously, you've been around a while, and we've seen a heap of demand come through in the past 6 to 12 months. Obviously, Charter Hall have raised a lot of money and deployed in a relatively short time frame. So just interested in where you see transaction markets in light of a bit of a shift in where rates are going as well. Anthony Mellowes: Yes. Look, people get quite excited by institutions buying. The privates for 20, 30, 40 years have been the most active buyer and seller in this particular sector. And they will continue to be the most active buyer and seller for, I think, for some time. The issue is you just get institutions coming in and everyone thinks that's really interesting. But the bottom line is there's always buyers and sellers. You can go back as many years as you like, and there's roughly 40 to 50 sort of transactions a year, which is roughly 1 a week. And that's just what happens in this particular space. The difference is you've got institutions looking at the moment. So -- but I think the buyers will still be there. The sellers will still be there, and it's a really good sector. Roughly 50% of your income comes from really high-quality tenants like Woolies and Coles. The other 50% of the income comes from pretty well nondiscretionary retail, coffee shops, pharmacies, whatever you want, it's a pretty good, solid returning asset that's very consistent. And I think that's what people like. Now with rates going up, yes, it will have a bit more pressure on people's buying ability, but I don't think it's going to move it all that much. People don't necessarily buy assets. They buy them for a lot of cash often. So lending isn't always a consideration because they're private buying. Richard Jones: And just on your funds management business, can you just clarify what the rough return hurdle is for that deployment and how much you've got in committed capacity? Anthony Mellowes: Well, I was -- I'm not going to tell you a return because that's up to our partner. But I think it's fair to say it's market returns for these types of assets. Now they have a slightly lower cost of capital. And so maybe it's slightly better to buy in different times, but that can move. But look, we originally started our joint venture with them, our partnership with them for a $750 million sort of stake. We're sort of at that now. We're at over $800 million. And I think we all want to continue. We've got -- started with Metro 1. We've got Metro 2. We've got Metro 3. We're over the $750 million. And I think they have -- they like that particular partner likes this type of sector, and they have capacity to purchase in this sector. So I think where it ends, I think it comes down to the opportunities that are presented to them. Operator: Your next question comes from Callum Bramah from Macquarie. Callum Bramah: I just wondered, can you just clarify a little bit of the drivers of the expectation of comp growth to slow over the full year? Because you've still got, as you said a couple of times, 3.3% as your guide relative to, I think, 3.7% delivered in the first half. David Salmon: It's David. Yes, look, I think the simple answer there is the first half has benefited more from some of those moderating costs that we implemented in the second half of last year. And so that's also the reason why the second half is a little bit lower to get to that 3.3% for the full year. Callum Bramah: Okay. And so that's in the property expenses is what you're talking about? David Salmon: Yes, property expenses, that's right, yes. Callum Bramah: Okay. And just going or maybe a follow-up also on the lease incentives comments that you've made. So clearly, there was the step-up in the first half. And I think based on the comments around Mosaic, that continues into the second half. But should we anticipate that you step back down in fiscal '27? So I think at the moment, you'd be running at something in the order of $15 million per annum in lease incentives. So would it come back down closer to the 12% as we go forward as those have disappeared out of the portfolio? David Salmon: Yes. Look, I mean, obviously, our higher leasing incentives this half is some of the Mosaic, but obviously, it was due to a number of new tenants in general as well as Mosaic. Look, in terms of where -- I think we're guiding towards around $13.8 million for the full year on the leasing side. Yes, Prima facie, you won't have as many Mosaic tenancies to fill. But it's part of a broader environment where it depends on how many other new tenants we might get in. Obviously, our retention rates help mitigate some of that exposure. And look, you got to remember that the cost of fit-outs and things like that is not going backwards. So as well as trying to keep those new leasing incentives on new tenants around that 12-month mark, you do have cost pressures. So I won't say you can just draw a line in the sand and say whatever it was this year will go backwards by x million dollars. It will be part of a broader environment where you have to consider cost of doing fit-outs and also how many new tenancies you expect to put into the portfolio. Callum Bramah: Okay. And maybe just 2 other ones. So just on Treendale, I think the guide is for an initial yield of 6.7% -- just in relation to the commentary that sort of implies there's some sort of synergies between properties across the street. Does the 6.37% include that benefit? And therefore, maybe -- I assume maybe the cap you bought it on is lower and you've got a benefit through property management? Anthony Mellowes: Look, that's exactly right. How much -- it's not massive dollars, but there's a little bit there for us. And that's what we're going to be focusing on to maximize that. But we're not talking, it's going to move from a 6.3% to an 8% yield. But there is efficiencies there for us. Callum Bramah: Fantastic. And then just maybe if you can also just talk -- so cost of debt into the second half will be, I guess, around 4.4%. Is that fair? And then it just trends up with your hedge book a little bit into fiscal '27? David Salmon: Yes, we're guiding towards 4.5% for the full year. So I don't have a split of the second half, but yes, it would be -- implies it's slightly lower than given the first half was 4.6%. So -- and in terms of your question about the hedge book, yes, look, we've always had high hedging. Obviously, what's embedded into our hedge position is we have some callables and we have a collar as well. Inherently, if you're working out your percentage hedged and your rate, you have to make an assumption around what is going to be come into effect based on the interest rate environment. So we're assuming that both those callables are called and also that the collar will be enacted from when it kicks in, in the future. So that's the main thing that's driven our sort of movement in the hedge book since 6 months ago. Callum Bramah: And one last one, sorry to finish it maybe on a negative. But just looking at those -- the comparable MAT growth for sort of discount variety or apparel, just are there any tenants that you're particularly concerned about? Anthony Mellowes: No. In the past, we have been concerned about sort of Mosaic and that type of thing. Look, you've got the reject shop that have been taken over by an enormous discount retailer from Canada doing a tremendous job. They want to expand. So they're looking really positive. So a lot of chemists in there. Chemists are doing well. So we don't have any portfolio of tenants that we're sitting there going, we've got a big watch on them, like we have had in the past. There will be some that will come up. That's just natural, but there's nothing there at the present in those many majors. Callum Bramah: Congratulations, Anthony, on your successful tenure as CEO of the group. Operator: Your next question comes from Ben Brayshaw from Barrenjoey. Benjamin Brayshaw: I just had a quick question on the guidance for NOI growth for the Callum's chat earlier. Could you just clarify the driver around the lower NOI growth implied for the full year in the second half? You mentioned property expenses. So will property expense growth be up in the second half? David Salmon: Yes. I mean that's essentially -- yes, it's the first half benefited more from those cost savings initiatives, which kicked in, in the second half of last year. And yes, for the full year guidance, it is slightly lower because we will effectively have higher expense -- property expense growth in the second half compared to the first half, noting that what I said before, the first half only having comparable growth of 1.4%, which is obviously lower than the run rate we would be envisaging going forward. Operator: [Operator Instructions]. Your next question comes from Solomon Zhang from UBS. Solomon Zhang: Apologies for the tech issue earlier. Two questions from me. So maybe for David first. You mentioned earlier that there was some balance sheet capacity to deploy potentially on acquisitions. But I guess your look-through gearing is sitting around 35%, and I can't really recall you sitting above that mark for very long. Should we read this as increased appetite to lift gearing? Or is this more a reflection of reval unlocking deployment capacity? David Salmon: Yes. Look, in terms of that look through gearing, I think we calculate it to be a little bit lower than that, but I think sort of in the 34s. But we still have what we say is capacity to debt fund some acquisitions if we wanted to go down that path, noting that, yes, there's also the opportunity to maybe recycle some capital from other asset disposals if we wanted to do so as well. Look, I guess, at the end of the day, we look at through the lens of do we have confidence in our gearing position through the valuation cycle? Yes, we do at the moment. do we want to protect our credit rating. We're not going to do anything that's going to threaten that. We're comfortably in our credit rating at the moment, and we would like to continue to do so, and we expect to do so. And obviously, like I said earlier, the security buyback is an option, but I'd say that's been mitigated to some extent where we've deployed capital into other opportunities like Treendale. Solomon Zhang: Makes sense. So you'd be comfortable sitting in the upper half of your target range of 30% to 40%? David Salmon: I'd say going to the upper end of that is probably a bit stronger language. Maybe around the mid-30s is probably more about how we view it as a potential scenario, noting that there might be reasons why that comes down, like I said, through asset sales. So it might be more of a capital recycling situation like you've seen over the last few years. Solomon Zhang: Okay. Maybe a question for Anthony. Just looking at Slide 11, just on your renewal spreads, they were basically flat. And I know you called out the bank and the pharmacy spreads that are a bit lower. But can you just discuss the dispersion of your spreads? Anthony Mellowes: Well, I think we did -- basically, if you take out the top number of new leases, it comes from 7% down to sort of 4-ish. And if you take out the bottom 3 of the 80-odd renewals, it comes up to sort of 3%. So they're all sort of sitting in around -- the vast majority by number is sitting in and around there. And I think you're going to see a skew where in the second half, there's going to be more renewals than new leases. And I think you'll see the average spread lift from flat to positive 2 to 3s, 4s where it has been sort of sitting in the past. We have been very focused on increasing our annual -- average annual fixed rent reviews, and that has moved from sort of 3.7% to 4.3% over the last number of years. That is a lot more important because it gets -- it applies to 80% of the tenants every year versus leasing spreads only apply to 20% of the tenants each year. So maybe we have been a bit focused on increasing getting those 5% average annual fixed rent reviews through, and we've been successful at that. So I'm really comfortable where things are at. And like I said, smaller numbers do get skewed by a couple of deals, as David said earlier. Solomon Zhang: What were the re-leasing spreads in the Bank of [indiscernible]. Anthony Mellowes: What was that? Solomon Zhang: Could you quantify the actual re-leasing spreads, the percentage on those bank deals? Anthony Mellowes: No. Operator: Your next question comes from [Claire McHugh] from Green Street. Unknown Analyst: Just a quick one regarding capital allocation. I appreciate you're evaluating buybacks and acquisitions. But on the acquisition front, what unlevered IRR hurdle are you targeting? And how has this changed in light of recent increases in long-term rates? David Salmon: Look, I mean if you look at our weighted average cost of capital, it's sort of around that 8-ish sort of percent sort of range depending on what you want to assume for long-term funding rates, which has obviously been moving a lot recently. Yes. So it's for us, it's a combination of initial yield and growth opportunities. Obviously, we're trying -- in the past, we talked about wanting to get -- wanted to buy assets with a 6% yield and growth and obviously sell at tighter yields with less growth. So I think a lot of that thinking is carrying forward. What I will say is sometimes we will acquire sites more for strategic reasons. It's not always just a purely a yield discussion. But obviously, we like to do both. So -- and look, in that context, when we're deploying capital, obviously, you've got a buyback -- security buyback where we're sort of trading at north of a 6% yield and an implied growth as well. So you've got to consider all deployment of capital opportunities. But as Anthony said earlier, we're trying to be very disciplined around our capital decision-making. Unknown Analyst: Okay. That's helpful. I mean just looking at the recent deals, it would seem that Treendale looks like on an unlevered basis, you're probably going to hit sort of 8.5% to 10%. Is it fair to say that sort of that sort of return excess of 8.5% to 10% or 8% on an unlevered basis is reasonable or --. Anthony Mellowes: Yes, we wouldn't have done it otherwise. David Salmon: Yes. Obviously, the yield was good. That was a tick. And there was also obviously a strategic purchase, like Anthony said, being across the road from our center that we see there's further opportunities in the asset in terms of overall management efficiency, also the leasing opportunities that will come with the site as well. Anthony Mellowes: And there is growth out of those centers. David Salmon: Yes. That's right. Operator: Your next question comes from Connor Eldridge from Bell Potter Securities. Connor Eldridge: Just looking at the full year FFO guidance bridge from the FY '25 preso, you flagged about $0.02 per share of incremental income from transactions. It looks like that full contribution has effectively been already realized in the first half. So I guess, just to be clear, should we assume that current guidance is effectively assuming no incremental contribution from transactions in the second half and i.e., there's potential upside there? David Salmon: Our updated guidance has factored in all the transactions and funds management initiatives that we've announced. So that's all been factored into the new guidance. Anthony Mellowes: We haven't factored in any others. David Salmon: Correct. So we haven't factored any further capital initiatives like either through funds management or on balance sheet acquisitions or disposals or -- and we haven't factored in any security buyback as well. Connor Eldridge: Right. Okay. And just one more for me. Just on the tenant retention number has now dropped below 80%. Can you just help me understand how much of that, I guess, is intentional churn, upgrading the tenancy mix and whatnot versus how much of that is actually tenant driven? Anthony Mellowes: I think it's dropped from -- was it 81% or something to 79%. It's still roughly 80%. So it's just the mix that's sort of come in. David Salmon: But, I would -- just to your last point, I would say that look, there is some intentional churn on our behalf in that number that we're trying to get the most out of the assets. So the reality is if we excluded those, it would be into the 80%. So yes, that is a factor, but we just reported as it is a fact. Operator: There are no further questions at this time. I'll now hand back to Mr. Mellowes for any closing remarks. Anthony Mellowes: All right. Well, look, thank you all. And I think that was one of our -- my longest one at 58 minutes. So thanks very much and look forward to speaking to you all, all the investors as we speak to you and the analysts all this afternoon. But thanks very much. It's been a great fun since December 2012. So thank you very much, and I'll speak to you all shortly.
Operator: Thank you for standing by, and welcome to the Amotiv Limited FY '26 H1 Results Call. [Operator Instructions]. I would now like to hand the conference over to Mr. Graeme Whickman, CEO. Please go ahead. Graeme Whickman: Thank you, and welcome to the earnings call of Amotiv results for the half year ended 31st December. I'm Graeme Whickman, CEO and the Managing Director. And I'm here with Aaron Canning, the company's Chief Financial Officer. As per normal, the recording of this call, along with the material will be available later today on the website. So I'll start the call by touching on the key messages and the group performance, a review of the operating divisions, then I'll turn it over to Aaron to cover off the financial section in more detail, and then we'll conclude with a short trading update and outlook before conducting the Q&A. So let's turn to Slide 3. I believe we've delivered a solid result in what is a challenging operating environment. I think it reflected disciplined execution and the benefits of a multiyear diversification strategy in terms of where we got around revenue. Amotiv Unified continues to deliver incremental benefits with ongoing costs, margin and operational initiatives, mitigating segment-level macro pressures through a more streamlined and efficient operating model. We had strong cash conversion and coupled with disciplined capital management that supported reinvestment in the business while returning capital to shareholders. Against all that backdrop, the FY '26 guidance remains unchanged. Group revenue growth is expected with underlying EBITA growth of circa $195 million. Now turning to Slide 4, where we detail some group performance. Well, the revenue diversification has been a core pillar of our strategy. So it's pleasing to see the revenue growth of just over 3%, underpinned by new business wins, ongoing product investments and a high contribution from offshore markets. This provided an offset to some of the headwinds in 4-wheel drive and LPE, while our Powertrain division continues to outstrip what is a resilient system growth. Underlying EBITA of $98.3 million, up marginally on the PCP. It was impacted a little bit by lower 4-wheel drive margins due to domestic inflationary pressures and the ramp-up of South African plant, by the way, a market that we remain excited about in terms of future prospects. And then we got some select pricing implemented in Q2, and that's expected to support the 4-wheel drive margins in the second half. The Amotiv Unified initiatives across the group delivered meaningful cost benefits, and these partially mitigated the margin pressure from domestic cost inflation. This program has got really good momentum and further incremental benefits have been identified and expected to support H2 a little bit there and then certainly into future earnings. A great cash flow, very strong. Capital management drove EPSA up 5% and dividend growth was just over 8%. At the same time, leverage was maintained comfortably within the target range. And circa sort of $48 million was returned to shareholders in the period, inclusive of both dividends and buyback. Safety, always a pride point for the group. And therefore, it's pleasing to see continued improvement in the TRIFR, which has trended down to just down to 9.7-ish. And as an aside, our work on reducing emissions also delivered tangible benefits in the period. Now turning to Slide 5, we outline the progress made on our strategic imperatives, which represent the key areas of shareholder value creation. If you look from left to right, as mentioned earlier, we're pleased to see the momentum in cost realizations from Amotiv Unified programs, which we first announced to the market back in May at our Thailand site visit. Now we'll cover this in a bit more detail later on, Aaron will. But these activities garnered benefits across 3 of our divisions, all 3, as well as also our corporate head office costs. I'm actually really excited that the commissioning of the third Thailand plant is underway, adding capacity to the already well-utilized existing adjacent facilities up in Thailand. And this low-cost jurisdiction positions us well to win business in Europe and the U.K. And we touched a little bit on that at the full year, and I'm going to talk a bit more about that later on. As discussed earlier, revenue diversification has been an important driver of this result. With ongoing penetration of offshore markets resulting in a 14% growth in revenue outside of Amotiv's ANZ domestic market. Our operational excellence efforts were well rewarded in the half. Safety improved. Headway was made on reducing emissions with circa 850 kilowatts of solar energy commissioned at our 4-wheel drive Keysborough plant. As a result of some of the unified warehouse consolidation initiatives, Powertrain & Undercar saw an increase in DIFOT, post the latest phase of the Truganina DC consolidation. So very happy with the way that's coming together. And then finally, in terms of capital management, the buyback we announced in October '24 was completed in the half. At the same time, we increased the dividend at a higher rate than EPSA. Now moving to Slide 6. We touch on Amotiv2030 Strategic Plan to the group unveiled at the last AGM. Now as you can see from the slide, we've reduced and simplified our strategic priorities from the prior GUD2025 Strategy aligning with our divisions. And this calls for us to optimize our Powertrain & Undercar portfolio while adding 1 or 2 adjacent non-ICE categories. Solidify and defend our Australian and New Zealand Lighting, Power and Electrical business, while still growing a global niche Lighting and Power business from our established basis, both in the U.S. and Europe. Building a leading integrated 4-wheel drive Accessories & Trailering business in Australia, while leveraging key expertise to build a focused global business. And I would term that as sweating the assets, both from an engineering and also manufacturing point of view. And then finally, simplify and improve via Amotiv Unified to make us more efficient and effective. Now my point of view, Amotiv remains an attractive pure play, all centered around automotive, as you know, servicing large and resilient addressable markets, supported by market-leading brands of largely ICE-agnostic products, which in turn is supported by some really strong new product development credentials, both in terms of investment and also strong market positions, something we don't take for granted. The group is led by experienced management team focused on improving shareholder returns, through disciplined investment as backed by a strong and, I think, resilient balance sheet. Having said all that, there's lots of work to do, but we're all excited with the prospect. 2030 from a strategy point of view is designed to create a clear path to leveraging our automotive pure play to grow and create value for shareholders, underpinned, I think, by clear set of attractive investment thematics. Now let me turn my attention to some divisional updates. Right, starting with 4-wheel drive. Well, revenue was up 5.5%, driven by new business, including a full period of South African revenues that weren't present in the PCP. And this was also complemented by some continued Aussie towbar wins. I think this is a credible performance against a highly challenging backdrop. Pickups were flat in the half, net of Shark in Australia, New Zealand, and down 7% net of Shark, in January alone in ANZ. So January was an interesting month. The mix also of OEMs was challenging in Australia, as an example, in the half, with 5 of the top 10 pickups down in the half between 3% and 37% and then you sort of cast your eye to January because remember, you are generating revenue in the half, even though those vehicles have been sold in January. And if we looked at the performance in January, 6 of the top 10 pickups were down actually even more pronounced between 14% and 38%, so a little bit softer than what we're expecting. Cruisemaster. So if I turn my attention to caravans, continue to gain share, which positions us nicely for what is a weak caravan, RV market when that eventually turns. I think overall, the result reflects a cyclical and the inflation headwinds that the team are facing. It also reflects the ability of this division to win global business, and this has been leading us to invest in the growing and prospective offshore revenue pipeline. Underlying EBITA was down just over 15%. Down 12%, if you were to back out the impact of a double debt provision for an RV customer, that was around $1 million. And with that similar approach, the actual EBITA margins were down 290 basis points. Now the key driver which was delayed price realization relative to domestic cost inflation, and we signaled this to market previously. At that same time, when we're talking to you, we spoke about out-of-cycle OEM pricing, and that was secured in the end of Q2 to address a period of heightened inflationary pressure within the domestic manufacturing operations. As a result, margin is expected to improve from H2. There's also been a country mix impact as we consolidate South Africa after the full first period. Now this new facility has excess capacity, again, not new news to our investors as it's in the early stage of ramp-up. You'll be reminded, it's stood up on the basis of SKUs, but we remain confident in the ability to win business in that jurisdiction and improve utilization of margins. And of course, while it's profitable, as detailed in our FY '25 full year results, South Africa is below the margin of a mature 4-wheel operation. Within the 4-wheel drive, Amotiv Unified also positively contributed to earnings through the right sizing of the New Zealand operations, which are now profitable. So if I start to look forward, we expect the combined impact of pricing actions and higher volumes, such as Hilux in H2 and Navara in FY '27. And particularly from offshore, the likes of U-Haul and some European business coupled with the Unified efforts to improve margins from H2 and specifically beyond. Interestingly, we had some comments from our shareholders in the past and wanted to understand a little bit more about the Chinese situation. Well, the depth and breadth of our relationships with Chinese OEMs continue to improve through the half. You can see on the chart on the slide that the Chinese OEMs are becoming a larger part of the addressable market in Australia and New Zealand. Much has been made of the successful launch of the BYD Shark. Unlike some of the other Chinese OEMs, BYD has taken the approach of self-supplying towbars. But the balance of the Chinese OEM, which represents 72% as you can see on the chart of units in CY '25 have outsourced this function, and we are already pending already our customers of the 4-wheel drive business, which means we're well positioned for any OEM mix change within the Australian car parc. As mentioned earlier, capacity also has been added to our Thai facility. The 4-wheel drive team have a really strong track record of winning and retaining business and is focused on scaling these offshore operations to drive revenue growth and recover fixed cost investments supporting that margin improvement I mentioned over time. As evidence of this, I'm really pleased to announce that we secured our first European towbar contract. That's being supplied out of Thailand, so it's utilizing and sweating that asset based on the engineering capability we already have and that's our first material -- when I say material, I mean, in terms of an OEM, contract that we've been able to secure. And that volume will be expected to come in FY '27. And we expect to perhaps get some more European contracts, and that's market share gains that's taking business off the likes of First Brands and Westfalia. In the U.S., the export volumes in Thailand continue to build with growing U-Haul demand expected to support volumes into FY '27. So I'll stop there and perhaps now move to Slide 9 and the LP&E division. Now the ANZ market conditions remain challenging for LP&E, particularly across the reseller channels. Against this backdrop, the group benefited from continued execution of Amotiv Unified and increasing offshore revenue diversification, which provided a meaningful offset. Revenue reflects volume growth in the U.S. and Europe, which mitigated some of the soft reseller demand in ANZ. By category, lighting delivered growth of 1%, well done to the Vision X team in the U.S. and Europe. And that offset muted Australian reseller demand. Power Management revenue increased 3%, reflecting ongoing investment in product innovation and continued growth in the U.S. market -- and then electrical accessory revenue decreased 4%, impacted by softer Australian reseller demand, some ranging changes, but really some emerging signs of flights to value. The unified benefits were delivered through a leaner Australian operating model with total operating costs down circa 12% compared to PCP. And as a result, underlying EBITA increased nearly 9.5% with margin expansion of 210 bps, largely driven by those Unified benefits. I turn my attention to looking ahead, while the ANZ reseller dynamics are expected to persist in the second half, while Europe and the U.S. are expected to continue to grow. The full benefit of the Q2 U.S. tariff-related price increases expected to flow through into H2 with modest price increases anticipated from Q4. The net result is that we expect underlying EBITA in H2 to be marginally softer in H1, but slightly above certainly the PCP. Now let's turn to the final division, Powertrain & Undercar. This is a really pleasing result, well done to the Powertrain & Undercar division that reflects the continued resilience of the where repair market, supported by some really strong brand strength and ongoing efforts to diversify revenue. That revenue grew by almost 5%. It was driven by volume and the annualization of pricing actions across select product categories, a broadening product portfolio increased PD investment drove our performance. And when I say our performance, I'm thinking about that relative to system growth. Interestingly, the New Zealand revenue grew by 12%, and that was driven by enhanced distribution and ranging outcomes. Efficiency and margins were supported by ongoing Unified consolidation benefits and reduced EV investment. And this resulted in an underlying EBIT growth of 6.7%, nearly 7%. EV investment was further moderated through the first half, in line with the changing market dynamics and we've spoken about what we were going to do at an early stage. With that business on track to reach breakeven by the end of FY '27 on a run rate basis. Looking ahead, further Unified initiatives will be implemented through the second half as the business continues to consolidate site operation and improved returns. This also includes the consolidation of Infiniti operations into the IMG group. Operating cost benefits flowing from the first half headcount reductions, the rationalization of the ACS warehouse into Truganina and the commencement of the group procurement benefits, including freight. So that sort of wraps up the divisions. Perhaps I'll now ask Aaron and hand over to Aaron to give a bit more detail to some of the finances in the back. Aaron. Aaron Canning: Thank you, Graeme and good morning, everyone. My name is Aaron Canning, I'm the Amotiv CFO, and I'll take you through the first half financial results in more detail. On Slide 12, we highlight our group financials. As Graeme has touched on, revenue grew 3.3%. Importantly, that was all organic growth. The full-wheel drive business benefited from new business wins as well as the inclusion of South Africa for the first full half growing 5.5%. The powertrain and undercar business grew 4.9%, really driven by a broad range of categories from filtration, brakes and gaskets, which was pleasing to see. The LP&E division, Graeme has touched on was marginally down driven to a softer ANZ reseller demand offset by continued growth in both Europe and the U.S. Gross profit declined by 0.5% with margins lower due to the inflationary increases in full drive, which have been yet to be offset by the OE price increases that were announced in Q2. These will show up in the second half. U.S. tariffs also impacted the LP&E margins as our double-digit price increases announced in May 2025 post-tariff updates did not come into effect until midway through Q2 as we honored customer backorders at pricing pre-tariff pricing, We expect all of that margin to flow through to the second half, and we continue to monitor the U.S. tariff environment and are prepared to make any further pricing changes, if required to protect our margins. Operating costs pleasingly were lower by over 2%, more than offsetting inflationary increases, largely due to disciplined cost management and the benefits from our Amotiv Unified program flowing through. Depreciation and amortization were broadly consistent period-on-period. And our underlying EBITA at $98.3 million is marginally ahead of the PCP by 1.3%. And importantly, it keeps us on track for an unchanged full year 2026 earnings guidance, which Graeme will speak to in more detail later. Significant items totaled $8.3 million and largely related to restructuring activities linked to executing Amotiv Unified initiatives. In the half, a further 50 employees part of the business, predominantly across our Powertrain & Undercar for Lighting, Power, and Electrical divisions as we continue to simplify and optimize the operating model in these divisions. A more detailed breakdown of significant items are provided in the appendix on Slide 26. We remain disciplined when it comes to managing significant items, and it's worth noting we are 1 year into our 3-year Amotiv Unified journey. Although we do expect further one-off costs in the future, we see this as moderating over the medium term. There were no noncash impairments in the half, and we remain comfortable with the carrying value of our core brands and intangibles. In terms of tax, we had an effective tax rate of 29.1% in the half, marginally up on the PCP with some minor movements in the period. A further breakdown of these movements is provided in the appendix on Slide 27. We expect the full year effective tax rate to be broadly in line with the current levels around 29%. Our statutory net PAT at $46 million represents 39.4% growth on the PCP, with the prior year impacted by higher significant items, including a $10.4 million noncash impairment. Underlying EPSA grew 5.3%, largely due to earnings growth and lower shares on issue on completion of our buyback in the half. The Board has approved an interim dividend of $0.20 per share, representing over 8% growth or a 52% payout ratio. As Graeme has touched on, pleasingly, we've been able to return over $48 million to our shareholders in the period with a combination of over $18 million invested to complete the 5% buyback program and nearly $30 million in dividends paid in September 2025. Directing your attention to Slide 13, net working capital. Net working capital as a percentage of revenue improved 1 percentage point to 28.7%. Improved collections partially offset inventory -- growth and inventory balances for the period with total working capital growing at 3.1%. I'll unpack this in a little bit more detail by division. And inventory increased just under $19 million since June or 8%, it's predominantly driven by the LP&E division, which has carried higher inventory levels for our Vision X business in the U.S. and Europe post-U.S. tariff changes. In Australia, we have sought to rebalance our inventory holdings commensurate with reseller demand. This is still work in progress. And Australia represents an opportunity for us to improve our inventory position through the second half as we build our sales and operational planning capability. 4-wheel drive saw marginal increases. It's important to note in that division, the majority of finished goods inventory is made to order in that business. And it also includes the inclusion of South Africa for the period and some timing of inventory purchases. The Powertrain & Undercar division also saw some increases as we continued our work on consolidating our logistics and warehousing footprint as part of Amotiv Unified. As such, we have built inventory through the first half to manage this transition as we expect to make some further changes in Q3 as we rationalize our warehousing operations for our Clutch and EV businesses. We expect the current inventory levels to unwind in this division through the balance of the year. Our payables were broadly aligned with PCP. And pleasingly, our receivables have decreased by 4% or over $8 million against the reported revenue growth of over 3%, largely due to better compliance and a concerted effort around collections. Compared to the PCP, we do not have the one-off collection issue repeat in this period. And importantly, we see further opportunities to improve our collections through the balance of this financial year. For transparency, we executed similar levels of debt factoring around $16 million in this period versus the PCP in December 2024 and again in June 2025. Pleasingly, our cash conversion remains strong at just under 92% and ahead of our guidance. Directing your attention to the chart on the bottom right-hand side of the slide, you can see the strength and the resilience of the business across a number of periods and regardless of the cycle and broader macro environment. As we look to the full year, we do not see this changing. And we expect our cash conversion to be at line and/or ahead of our cash allocation target of 75% or more. As we turn to Slide 14, capital investment. Our investment in product development has ticked up in the period to 3.8%. It's been a key driver in underpinning our performance in our Powertrain & Undercar results. and also supporting future wins in 4-wheel drive. We expect similar levels of investment through the second half of this year. Our CapEx has moderated and down 22% versus PCP, largely in 4-wheel drive which in the prior period included investments in South Africa and Thailand. As previously advised, we expect the full year CapEx investment to be up to 10% lower than last year. In terms of our CapEx split between growth and maintenance, it is broadly balanced. It's in line with our capital allocation framework metrics and ensure as we balance investment in maintaining what we have today, with investment initiatives to generate future growth. On Slide 15, our foreign exchange exposure was well managed. The first half was impacted by a stronger USD versus the PCP. However, this was well managed within a volatile spot market. For the remainder of this financial year, we are now effectively fully hedged with further hedging being executed in January. We also have taken the opportunity in the last few weeks in particular, to take advantage of the AUD strength, and we've locked in meaningful coverage for the first half of FY 2027. If there continues to be any further AUD strength above current levels, this will mostly be an H2 '27 impact for Amotiv. In terms of our offshore earnings, it continues to provide a natural hedge to FX exposure, particularly as we increase our U.S. dollar and Asia currency earnings. U.S. dollar earnings grew 41% versus PCP, building our natural hedge in the period. Combined U.S. dollar and non-AM earnings now represent 32% of our total post-tax earnings in the half. And we see growth in offshore earnings continuing to be meaningful through the second half and beyond. On to Slide 16. Our balance sheet remains in great shape. The group's balance sheet remains in a strong position with gearing at 1.95x, increasing by 0.2 turns since December 2024. It remains well within our capital allocation framework target range of 1.5x to 2.25x. Our leverage increased marginally since June, largely due to the completion of the buyback program. I said earlier, we invested a little over $18 million in completing that in the period and some further investments in new jurisdictions in the form of working capital and operating expenses. The business continues to deliver stable and predictable cash flow earnings, as I noted earlier. Our leverage guidance remains unchanged with the expectation the business will delever through H2. Our debt profile remains long dated with nearly 2/3 of it fixed at market-leading rates. As such, recent and any future changes in the Australian domestic interest rate environment will have a relatively low impact on our cost of funds. As a guide, 25 basis point increase or decrease will have a 0.3% impact on a full year result for us. We remain strong support from aligning the group and strong appetite for further support should we need it. In terms of our cost of funds on the right-hand side, it's reduced marginally in the period by 11 basis points, largely reflecting the domestic interest rate environment. On to Slide 17. In terms of our capital allocation framework, we performed strongly against the majority of these metrics. In February of last year, we announced this framework. The framework provides visibility on how we will deploy capital against, as you can see, a set of return metrics, both for organic and inorganic investments. Importantly, these metrics, in particular, return on capital employed now form part of management's long-term incentive program. For the first half, we performed in line or ahead of all metrics with the exception of returning capital employed. This remains a key area of focus for us, and we are unhappy with our current performance in that area. And we continue and will continue to measure ourselves on a pre-APG impairment metric. On a reported basis, you can see the results provided in the footnotes to the slide. Furthermore, today, we are announcing we expect to generate an incremental $10 million annualized gross benefits from the Amotiv Unified program on exit of this financial year. And on that particular topic, I will now cover off the amount of Unified update as part of a broader update on our outlook. I'll now direct you to Slide 19. In February 2025, we announced our transformation program called Amotiv Unified. This is a 3-year program made up of a number of projects with execution staggered into 3 ways. Exiting FY '25, we delivered $15 million in gross annualized benefits with $5 million reinvested into marketing, product development and new roles. This net $10 million of benefits is included in our FY '26 guidance. We are announcing today an incremental -- in addition to that, an incremental $10 million annualized gross benefits to be realized on exit of FY '26. These further benefits will support $5 million investment into simplifying our IT platforms, further warehouse consolidations and program management resourcing through the second half of this year. The timing of these benefits at an additional net $1 million EBITA benefit in FY '26, highlighted in the table on the bottom right of the page. These benefits are helping offset revised modest pricing increases expected in the second half. These combined net benefits of the $1 million using today and the $10 million that we previously announced are included in our FY '26 guidance. I'll now hand you back to Graeme to discuss this guidance and trading update in more detail. Graeme Whickman: Thanks, Aaron. I appreciate the detail, as I'm sure listeners did as well. As you say, let's get into the trading update and outlook. So after the 4 weeks of January, if you just take January in isolation, ANZ pickups were down 7% net of BYD. And as mentioned, in Australia, 6 of the 10 pickups were down. This outcome is slightly below our expectations. And I guess that's important to note, only because obviously, we're collecting revenue from the January performance ahead of that, given we supply ahead of a sale, so to speak. Light, Power & Electrical, the AU resellers and the channels remain subdued. So whether it's a reseller or indeed the truck or the bus or the RV market, not a lot has changed there. But pleasingly, we are seeing continued momentum in the U.S. and EU. And then from a powertrain point of view, the wear and repair remains resilient with the forward workshop bookings, they're stable at sort of 1 to 2 weeks, nothing changing there, which is great. From an outlook point of view, our guidance is unchanged regardless of some headwinds and some tailwinds, we're holding point of view around the revenue growth. It's expected to grow in FY '26 and the underlying EBITA of circa $195 million. As I said, it still remains a challenging environment. Four-wheel drive new vehicle sales are trending slightly softer, but to H2 margins within this division are expected to improve due to the H1 pricing actions. LPE, the headwinds in ANZ are expected to persist. The H2 underlying EBITA is expected to be marginally softer than H1. Powertrain, the wear and repair categories are expected to remain resilient. As outlined in the Amotiv Unified slide, the incremental FY '26 net benefit of $1 million is included in our $195 million guidance. That's provided a bit of an offset to revised pricing approach to account for more modest price increases in H2. The H1 and H2 EBITA SKU expected to be broadly balanced. Cash conversion expected to be in line with capital allocation. The balance sheet strength to be maintained, and we expect to delever in H2. And as Aaron just mentioned, we got incremental $10 million of annualized gross benefits as we exit FY '26. So that's really the outlook and also the trading update completed. Of course, it would be rude of me not to finish the presentation though, by not thanking the Amotiv team who worked so hard through that first half. And so from a Board point of view, from Aaron and I, I just wanted to thank those people. I know some of them actually listen to this call because they have great interest in our results, as you would expect. So with that now, I'll hand over to the moderator, who will coordinate the questions that we have online. Operator: [Operator Instructions] Your first question on the phone today is from Mitch Sonogan with Macquarie. Mitchell Sonogan: Just the first one, just on the FY '26 guidance, I'm just trying to understand a little bit the moving parts, pretty specific on the LPE guidance. But on 4-wheel drive, you've talked to new vehicle sales being slightly softer. We expect better margins in the second half. Do you mind just giving some color on your expectations and what you've got in terms of forward visibility at this point in time? Graeme Whickman: I'll answer the forward visibility, and I'll just hand over to Aaron, in terms of the composition of the second part of the question. And I guess it links to perhaps other questions and no doubt will be asked around, say, the January performance in terms of new vehicle sales. So when you look at new vehicle sales in January, as I mentioned briefly, they were down net of BYD, 7% in ANZ. But then you sort of peel that back a little bit, Ranger was down 20%, Hilux 15%, I think D-Max was sort of 14%, Triton was up, Navara down about 35%. That revenue obviously has already been recognized in most of that context. We did expect January to be slightly softer anyway. December was relatively strong, and January can always be a bit of a funny month in terms of vehicle sales. The full visibility that sort of sits behind our point of view around the guidance across the group is generally between 2 and 3 months in terms of -- I'm talking about new vehicle sales, and I think your question specifically around probably 4 will drive more than anything method in that regard. So we have forward visibility of those sorts of sales. It's interesting that and perhaps others will ask around interest rates. It's interesting that the likes of Triton has actually been on a bit of a tear and they've actually been perhaps a bit more aggressive in terms of the discounting over the last 2 or 3 months, whereas Toyota and Ford and others have set a little bit on the sidelines but starting to come back. And so I expect that to happen a little bit more. Aaron, from a guidance point of view, did you just want to cover off the composition? Aaron Canning: Yes, I agree. Hi, Mitch. Look, just in terms of second half of 4-wheel drive, we've obviously got a couple of tailwinds into the second half. We announced the pricing around out-of-cycle OE pricing. So that will all bite in the second half. We do expect to take some more pricing in the second half around aftermarket. We obviously got the highlights -- new highlights coming into the second half as well. And we've obviously got some Amotiv Unified benefits into the second half, some quite meaningful benefits, particularly in things like freight that are going to come into the second half. So sort of bundling all those up together, we are expecting a better margin performance in H2. I would say that's not going to fully offset the margin erosion we saw in the first half versus PCP, but it's going to be materially strong. Mitchell Sonogan: Yes. Very clear. Just a second one on that. Just in terms of the Powertrain & Undercar, you've talked about first half, second half EBITA expected to be broadly balanced. Yes, again, Graeme, just maybe a little bit of color there. Any reasons why we shouldn't expect a little bit of improvement half-on-half given it has been pretty steady in resilient and a good outcome in the first half? Graeme Whickman: Yes. So the broadly balanced comments more of the group is what I was referring to in terms of the outlook. I didn't speak to the Powertrain half-on-half, you can probably get there by deduction of sorts anyway. We expect Powertrain to continue to be resilient. We're not calling out specifically anything around Powertrain in terms of the half. We mentioned LP&E and obviously, we mentioned 4-wheel drives therefore, the deduction you can do it for yourself. For the reasons that we've been speaking about, and I touched on earlier on when I was chatting and reviewing this slide, we've got further benefits that have come through in terms of Truganina consolidation. We've also got benefits of putting the IMG and the Infinitev businesses together. So we do expect a decent performance out of Powertrain in the second half. Mitchell Sonogan: Yes. And just probably more thinking about just run rate into FY '27. But just -- yes, I guess, in terms of any quick commentary on corporate costs, should we expect a similar run rate into the second half in FY '27 and Aaron talked to the $10 million gross benefits for the Amotiv Unified. Just wondering what costs will be required in '27 to achieve those ones as well. Aaron Canning: Why don't I help you out, Mitch. You're obviously looking to have a bit more color around divisional second half performance. So let me just -- I'll expand and answer to your question. So 4-wheel drive, we've touched on better margins in second half. LP&E, a little softer in the second half. Powertrain, as Graeme said, we've got a few things in the second half. They're going to support that business. In corporate, we are going to put some more costs in the second half. You heard me touch on things like resourcing around program management, really to support our Unified program. So I expect our corporate costs will go up in the second half versus the first half. And then into '27, yes, well, obviously, with the further benefits we've announced on Unified today, that's largely going to be a '27 story as only $1 million net of those are turning up this year. So we haven't finalized our reinvestment levels for 2027. But I would say that, that $10 million is providing -- will provide some buffer to further headwinds around cost and inflation to '27 to support continued growth into '27. Mitchell Sonogan: Okay. And just one super quick one. You talked to the EV investment still having a loss in '26. Can you maybe just tell us what that loss is, given you're guiding to a breakeven in FY '27, and I'll jump off. Aaron Canning: Yes. Look, we guide to it being breakeven on a run rate basis exiting '27. So the '27 year won't be breakeven, but we'll exit the year being breakeven. Look, it's less than $2 million, and it's more than $1 million. So it's pretty close in terms of where it's currently tracking. We're very happy with the EV business. Revenue growth is strong. We're making further changes around our operating footprint in terms of warehouse consolidation that's going to happen in the second half. Graeme touched on moderated investment in that space, and we're just being very cautious in relation to the changing dynamics of the car parc. But over the long term, it's a business that we see huge potential in and we're going to balance that investment with the revenue growth we're getting out from that business. So on exit, on a run rate basis, Mitch, profitable in FY '27, not profitable, though, but I've given you sort of some trend lines there for the quantum. Operator: Your next question comes from Andrew Hodge with Canaccord Genuity. Andrew Hodge: Look, a couple of my questions have been answered here. So I'll just ask around the currency. Just in terms of Aaron, you mentioned second half '26 improvement from the sequentially but down on the PCP. So can you just remind us where you were hedged in second half '25? Aaron Canning: Yes. Why don't I just give you a more definitive answer. It's less than $1 million, the impact, Andrew. So it's pretty marginal. I'm talking second half on second half, right? I think is your question. Andrew Hodge: Yes. And then into '27, have you started hedging first half '27 yet? And should we be thinking about -- I mean subject to how far hedged are you? And is what a reasonable expectation to the level that you're hedging at the moment? Aaron Canning: Second part of your question, yes. And we are so covered out to the beginning of November. Andrew Hodge: Great. And I just want to ask one question on the 4-wheel drive margins. I know you've talked about the process, the OEM price rise in order to bridge some of that gap. How much of risk is the lower-than-expected volume. So January was lower than your expectations. If that trend continued and you lost some of the volume that you were otherwise expecting, how much of a risk is the operating leverage to that margin even in the face of some price increases and not a repeat of the bad debt? Graeme Whickman: Well, obviously, the bad debt goes away. We're not trying to hurdle that. But look, we've also got aftermarket pricing that sits to the general car parc. We've also got some Unified benefits coming through, a little bit of an exchange in the last part of the second half. And the likes of Hilux, we'll get the full half of that. So those are some of the tailwinds that will sit there. In terms of the volumes, I mean, yes, there is a downside risk clearly. Although we have 2 to 3 months' worth of visibility already, Andrew, as you would expect in terms of Ford. So some of that is already, I would call that pseudo-hedged in our minds. We're watching it closely. And January, I don't think necessarily is a good barometer of either good or bad. December was a pretty strong month. Sometimes you have a bit of supply. And the other thing is that, as I said earlier on, that some of those OEMs are still not that active in the market in terms of discounting. So we're watching it closely. And naturally, there's a little bit of downside risk, but we do have some other leaders to pull and we are expecting some of that margin improvement. And then if you -- not that you've asked this, but when you then start to reflect on how does that exit FY '26 and go into '27, we still haven't even spoken about the actual delay of Navara. That's actually a full year impact of Navara, which is fantastic. U-Haul starts to increase. Kia comes in. So we're not reliant so much on -- as reliant on the ANZ market, and we think it will also pick up some other European towbar business. So we're trying to offset the ANZ cyclicality as we speak, and some of that shows up and will be showing up in the first half of FY '27. So sorry, it's a bit more of an answer than what you asked for, but I just wanted to give you more color. Operator: Your next question is from Sam Teeger with Citi. Sam Teeger: I was just keen to understand the dynamics driving a different performance between PTU and LPE in Australia, given they share a number of customers. Are you seeing retailers focus more on private label in electrical and accessories? Graeme Whickman: Well, look, I think when you separate out across the 3 areas that we speak about on the LP&E slide. And if you went to that slide, you'd see that we sort of break out lighting, power management and electrical, we speak about lighting being up, power management being up but electrical accessories being down. And that's a reflection of the reseller demand that we see at the moment. There's a mix of home brand performance that sits behind that, Sam. But at the same time, without disclosing a particular customer, we just won the globe business in one of those big 3 resellers with a Navara brand. So house brands come and go and the performance can ebb and flow. But in times of tight economic circumstance, people -- there is a bit of flight to value. We do call it out, Sam. So I think there's a bit of a mixture there. Having said that, though we are now arranging in other areas, we're doing better and some of the independents were into Bunnings and a couple of other areas like Autopro and Auto One. So we always look to offset and reduce the customer concentration. But that's how I sort of characterize it. Sam Teeger: Yes, that's good. And then on that slide, which of the LPE brands are showing most of the weakness, is it KT Cable, BOAB Offroad, National Luna or another one. And are you thinking about any potential divestments to help improve your return on capital employed? Graeme Whickman: We're doing that day by day by day in terms of ROCE. We have a point of view around what we want to achieve. And that includes brand rationalization, that includes marketing dollars being spent on particular brands where we want to put our energy. And so the likes of National Luna, BOAB and the brands we've just spoken of, they are very, very low investment and if not little at all, whereas we're concentrating, frankly, on the NARVA, Projecta and also KT. Obviously, that provides a midrange electrical accessory range compared to the NARVA. We're also in the process of taking some of those brands online. We just launched projecta.com So you can now buy directly from us on certain products through that, and we're doing that internationally. So really, we're concentrating hard on NARVA, Projecta and KT. The other ones are less of a distraction as we're going through a brand rationalization effort as part of Unified, not just in LP&E but across the other brands as well to ensure that we're spending the right dollars on the right brands. Sam Teeger: Okay. Great. And what should we expect for significant items in the second half to unlock that $10 million in incremental Amotiv Unified benefits? Aaron Canning: Sam, broadly similar to H1 levels, perhaps marginally lower. Most of it's going to be around work we're doing around our technology platforms in terms of simplifying ERP platforms and a little bit around warehouse consolidations. So it won't be any higher, but it will be in and around the same number, possibly slightly lower. Sam Teeger: Okay. Great. And I think you've touched on it a little bit, but just wanted to clarify the second half guidance, what's the assumption around the macro and interest rates? Graeme Whickman: If I just go back to the first question or that last question before we go to the assumptions. I think the other thing when you talk about significant items, Aaron, I mean, the payback in terms of the dollars being spent, I think compelling. What would you say about that? Aaron Canning: Yes, look, very compelling. And I sort of noted it in my speaker notes that we're very aware of one-off costs. We're not -- we're trying to run the business and improve the business at the same time, and we've got a very strong lens on improving shareholder returns. You can see that in our capital allocation framework. We're unhappy with where our return on capital sits. In order to make some meaningful changes, there are some costs we have to put into the business on a one-off basis. So the clear examples of it are in the first half. Unfortunately, we say goodbye to 50 people in the first half. We didn't replace those people, the payback on that is less than a year. So it has a very strong correlation with our payback metrics. Graeme Whickman: A lot of those significant items paybacks are less than a year. I mean the likes of some of the warehousing and tech stack just what Aaron's referring to, have paybacks within the sort of 1- to 3-year period, but we're determined to make sure when we're rolling out Unified that our investors can see a real playing correlation, a clear correlation of a return quickly. I just wanted to make that point before we get into. In terms of the assumptions around the full year guidance, linked to the second half, I mean look, we had expected a muted maybe slightly better year-over-year in terms of NVS and pickups in the total year. Obviously, the second half started out a bit weaker. But with the forward visibility we have, we're sort of expecting it to be sort of there or thereabouts year-over-year in terms of NVS. We're not expecting -- if you think about other OEM and OES business, which might translate between both 4-wheel drive and LP&E. We're not expecting the RV or caravan market for something spurt back. We do expect a little bit of market share gain or whether it be Cruisemaster or indeed LP&E. LP&E have just launched 48-volt systems in the projector range. The biggest caravan manufacturer is very excited about that and already taken that. We've pushed that into Crusader. We've got MDC taking that. So Caravan Show has gone very well. We're just launching our body control modules in the caravan market. So whilst the caravan markets, we're not expecting to come back, we're still expecting a little bit of market share there. Truck and bus, we're certainly not expecting to see that. That's quite low. The cyclicality is, I would say, at a really low trough, so we're not expecting that to come back. In terms of the resellers, Sam, we're not expecting that to spurt. I think the economic situation, the macro in ANZ is still very muted, as you would know. So we're not expecting that to bounce back and watching with some interest around where the interest rates are ahead and then we're expecting people to continue to service vehicles in terms of the wear and repair, and that's not abating. If anything, as you know, the car parc and some information in the latter part of the deck, the latest promotion shows that the car parc is approaching 12 years. And if there was a bit of deferral because of cost of living pressures over the last 12 to 18 months, that will have to show up at some point. So we're not expecting that to drop away and our assumptions, therefore, are relatively buoyant. And then you've heard from Aaron, there are assumptions around some of the things that are less in our control, whether it be exchange or interest rates and other bits and bobs. We've kind of got some of that covered and the rest of it, we'll see how we go. So hopefully, that gives you a flavor of the assumptions that sit behind second half and importantly, the full year. Operator: [Operator Instructions]Your next question is a webcast question from Tim Plum with UBS. This reads, January ANZ pickup sales, excluding BYD, down 7%. Some OEM models are fair bit worse than that, Ford Ranger, Toyota Hilux, Prado, RAV4. What are your thoughts on this? Is this Australian consumer demand coming off? Or is this OEM supply driven? How are you thinking about the remainder of the year from a volume perspective, and does this change, i.e. worsen if RBA announces further interest rate hikes or have you incorporated this into your thinking for second half '26? Graeme Whickman: Thanks for the question, Tim. So you're quite right. And I think I have already articulated the nuance of some of the OEM brands within the January performance. I mean, obviously, the first half was flat, net of BYD. I looked at the first half Ranger down 3%, D-Max down 11%, BT sort of 4-ish sort of was in that space, and that was more pronounced clearly in January. The same models, Ranger down 20%, Hilux 15% and D-Max 14%. I think it's actually a mix of both. I think people had a bit of pause through January. We saw January really quite a -- I won't say peculiar, but quite a variable month across all of our businesses, some strong, some a bit weaker. It seemed like workshops are coming back a bit later. People weren't necessarily spending in some of the retail-centric areas of some of our resellers and indeed, were necessarily buying vehicles on mass. I think it's a bit of -- so it's a bit of both. I think December was a strong month and therefore, a little bit of supply, perhaps constraint, not massive and then a little bit of demand off. I think the interest rates, I mean, we've been much higher than where we have, obviously, with the deceleration of the rates. And if we return another 25 basis points or 50 basis points, I don't think we'll be facing anything different than what we were 6 and 12 months ago. I do expect -- and if you were to look on the pages of Ford, indeed, Triton and others, they're just starting to spurt the market. Interestingly, Triton, if you look at where they came in for the half, they were actually up 11%. If you look in January, they bucked the trend again, they're up 36%. Now in part, that's because again, my personal point of view, in part because they have more supply in part, they're actually quite aggressive in the market. They are drawing customers out of the market with some reasonably aggressive driveway prices. Ford have just put some driveway prices. And recently, Toyota, no, I can't remember now exactly piece by piece. So I think we'll start to see more progressive incentivization of the market. And of course, the other thing with Hilux is there's not been a huge supply of them as they start to launch. So our assumptions are built on a soft -- slightly softer second half. We're watching carefully. We know we'll get a bit more business with Hilux because that's started to launch. And we obviously have the sports bar in addition to the towbar and we'll watch closely. But we also are sucking more revenue out of a few more Australian towbar contracts. And in the background, we expect right at the back end of the half, Tim, that we might see just a little bit of that offshore revenue coming, just a little bit of it, and we'll see also what happens with the U-Haul business. So kind of balancing a little bit of that. Operator: Your next question is a webcast question from Adam Dellaverde with Taylor Collison. This reads, can you discuss relative utilization levels for Thai and Australian plants at TriMotive? Is it still patchy? How does throughput today compare to when you acquired APG and what things can be done to improve margins, independent of securing higher order volumes? Graeme Whickman: Yes, sure. And thanks for the question. Look, the Thai plant's utilization is very high. Hence, why we just commissioned the third plant or in the process of commissioning that. That's useful given that we've just won some European contract and we're pitching for more European contracts. So that plant actually will be less utilized. But we're bursting at the seams and that's before, Adam, you think about a full year of Hilux sports bar you had before, and then you start to take the Navara, and we haven't spoken much about the Navara. But Navara will go from currently or in the past cycle, we used to literally deliver parts of a towbar to a domestic operation. We're now delivering the towbar, the sports bar, the nudge bar and that comes in, in FY '27. So naturally, the utilization will creep. In terms of Australia, that's still patchy. But we run a one-ship operation there anyway. It's not in the 40s, 50s, 60s, but it might be in the sort of 70s and 80s, depending on which month we're looking at because it does ebb and flow. The average batch sizes there are a lot lower. We're at 7 or 8 batch sizes, and that supports also -- also supports the aftermarket. So it's a little bit more patchy there, Adam. In terms of the margin, look, if you were to take it to a dollar value as opposed to book value, we were down $4.5 million, half over half or $1 million of that was Zone caravans and then probably about $3 million worth of pricing annualized with the pricing we've got to put in place. So you'd get back that pretty quickly. That's not discounting the fact that we're paying workforce another 4%. Our electricity bill quite higher. So you think about utilities and also the rent of that. So that pricing sort of that's the last seven tenths. So that pricing fixes the majority of that. Then you go and start thinking about AM pricing that we've spoken briefly about outside of the OEM pricing. The new business wins that are concrete in nature, Hilux and Navara, just to name 2, increasing U-Haul and the EV business -- sorry, the Kia business in Europe. And I reckon we'll win some more. Then you got Unified benefits. Freight is decent and contract labor, that's to come and then a bit of margin improvement because the Thai plant has been a bit brutal for a while. We picked up a little bit there. So there's plenty of reasons to see this business return to not just FY '25 but FY '24 type margins at a minimum as we expand. Operator: Your next question comes from Ralph Katz, private investor. This reads, how will the switch to electric vehicles impact Amotiv performance? Graeme Whickman: Thanks, Ralph. I don't know what you've been reading or what you've been following, but the EV investment around the world is crashing at the moment. You can look at Ford, they wrote-off 20-something million, Stellantis $32 billion -- sorry, I'm talking billions, not millions. Everybody is pulling out of EV investment quicker than they can, and that's just because the payback is just brutal. They were all primarily compliance plays linked to particularly the U.S. government's point of view around CAFE and a few other bits and pieces. I'm not making a judgment on whether an EV is right, wrong or different. We, as a business, are committed to reducing our emissions and have done so and actually at Scope 1 and 2 we're actually carbon neutral, so just as an aside. But the onslaught of EVs has slowed quite dramatically, Ralph. What you are still seeing is a strong Chinese level of investment, although there's 100 brands or so in China, that will go through massive consolidation. BYD recently just had a very tough period. So ultimately, at the end of the day, we're going to see not as strong as predicted ICE adoption in this particular market. We've already moved though. Our revenue, as it stands now, is roughly 75% non-ICE, it's ICE-agnostic. So we're well positioned in that regard. The adoption isn't quite as high. And where those vehicles are coming through are in small vehicles, passenger vehicles and small SUVs, which is less important to us. And where we've got pickups and the likes of electrified pickups whether it be Ford's electrified, Toyota and the like, we've been able to engineer towbars that are lightweight and actually support them. So I think we're well positioned. I don't see that as any threat. But we've already moved to a strong non-ICE position anyway. Hopefully, that answers your question in a broader context. Operator: There are no further questions at this time. I'll now hand back to Mr. Whickman for closing remarks. Graeme Whickman: Well, thank you. Firstly, thank you for your attention. I appreciate the questions. As I said earlier on, we feel we've delivered a really solid result in a challenging environment. The balance sheet is in a great place. And as you tick through many of the financial metrics, whether an allocation framework or due to the broad financial metrics, we're seeing a lot of green ticks. It doesn't mean that we don't have more work to do. We're always anxious and ambitious. With the 2030 strategy, we're keen to see the business grow, but grow in a way that's done in a quality fashion. And I'm not just talking about revenue. I'm talking about the EBIT with clear ROCE. As I said earlier on, the prospects for each of the divisions still remains strong. Reiterating guidance, I think, is very positive and some exit rates around the work on Unified, I think, also demonstrates that we're not sitting still in what is an insipid market. We remain committed and active in managing the business in a way that I think we can be pleased with. So with that, I'm sure we'll be meeting with many of you through the course of the week and whether it's at a broker lunch, dinner or breakfast and then individual shareholders. So we look forward to those conversations, both Aaron and I, and we'll see you through the course of the week. Thank you. Thank you, everybody. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Hello, everyone, and thank you for joining us today for Thule Group Q4 and Year-end Report 2025. My name is Sammy, and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Mattias Ankarberg, CEO and President, to begin. Please go ahead, Mattias. Mattias Ankarberg: Thank you very much, and welcome, everybody, to this Q4 call. I am, as always, joined by our CFO, Toby Lawton, and we'll take turns going through the presentation and then open up for Q&A. So before we get into the quarter and the details, I'd like to just take a moment to step back and look at the full year 2025. It's, of course, been an intense year and not an easy market. But in many ways, it's been a good year for Thule. And let's mention a couple of highlights. Thule has never been bigger. We have recorded the highest sales number we've ever done in 2025 and profit increases versus previous year despite, of course, a challenging market with cautious consumers, retailers, currency headwinds and tariffs, et cetera. We have done the biggest upgrade of our Sport & Cargo Carriers product portfolio in the history of Thule. And that's important because Sport & Cargo Carriers is just over 50% of our sales, and we know that new Thule products drive growth. We are seeing fast growth in our newest product categories, dog transportation, car seats and phone mounts, and we have had a very good first year together with the Quad Lock team. We've added 2 new markets to thule.com, taking our D2C footprint to 20 markets live now. And our digital channel is now a meaningful channel to launch new products and categories, which is clear to us. We continue to push cost improvements in supply chain and in other areas, but clearly visible in supply chain through the record gross margin we've seen in 2025. We are pleased and proud to see continued strong recognition for product design, again, winning the ADAC test on car seats this year with our second product and a further 17 Red Dot and iF Design Awards. And we have recently clarified and set the direction very clear going forward that we are focusing on building what we call champion product categories and driving efficiency gains. So that was the stepping back for 2025. And let's now dig into some of the details for the quarter. On Page 3, I mean, you are probably well aware that the fourth quarter is our smallest and therefore, doesn't have a big impact on the full year financials. But nonetheless, it is a quarter that's in the right direction for us with increased sales and increased profitability. Sales amounted to just over SEK 1.8 billion in reported currency, plus 20% versus previous year, excluding currency effects. We're still seeing cautious consumers and retailers in the marketplace. Organic growth was flat, 0%. Positive growth in Europe, a small positive. And negative in North America, although a bit less negative than previous quarters and particularly at the start of the year. And we also saw that organic growth number was better at the end of the quarter than when we started the quarter. Reported sales is up 9%. And then, of course, there are big currency effects in the quarter, 10% impact on the top line. We continue, as previous quarter, to see that the growth we are seeing is driven by new Thule products and new categories, including the acquired Quad Lock business. EBIT margin adjusted increased to 4.5%, which is a bit higher than last year. It actually in this small quarter is also impacted meaningfully by currency effects, and Toby will get back to that later in the presentation. EBIT up to SEK 83 million versus SEK 65 million last year. So zooming out to the full year results, sales a bit over SEK 10 billion, SEK 10.5 billion, plus 14%, excluding currency effects and a small organic growth decline of 1%. Still big currency effects for the full year, although not as big as, of course, for the fourth quarter. EBIT margin is 16% for the year, 1 percentage point lower than last year. Gross margin continues to be strong, an all-time high. SG&A is coming down in H2 excluding Quad Lock. And correspondingly, the EBIT margin is increasing during the second half of the year versus previous year. Cash flow from operations continues to -- Thule continues to generate good cash flow at about SEK 1.1 billion, which is lower than last year. And then as we talked about before, the working capital pattern has now returned to sort of historical patterns, which was not fully the case last year. The Board of Directors is proposing an ordinary dividend of SEK 8.3 per share, which is the same level as previous year. Zooming out on Page 4, 2025 is yet another year of increased sales and increased profit for Thule. This graph shows the trend since the IPO in 2014, and it's a nice continuous upward trend over time with some COVID bumps and declines, of course. Sales is also in reported SEK despite the currency effect all-time high, and EBIT increased versus previous year, taking sales to SEK 10.4 billion and EBIT to SEK 1.7 billion for the full year. So that's the top line financials. And thought we'd turn next into the category level. We are a product company after all. So I think this adds hopefully some color to how the business is performing at the moment. And overall, as I mentioned in the beginning, the growth we're seeing is coming from new products and new categories. But let's dig into the 4 product categories that we report. Sport & Cargo Carriers declined 4% in the quarter and 1% for the full year. We saw good growth from the bike carriers we launched during the spring in 2025. We see good momentum also in H2 of the new rear of cargo products that we have launched, for example, the Thule Arcos XL here in Q3. And we've seen a good start, although it's very recently launched, the pickup truck rack, Thule Xscape we launched in December in 2025. For the full year, we do see growth in Europe for Sport & Cargo Carriers, but the decline is driven by a decline in North America. It is still a challenging market. We still see the best sales performance in our premium end in the higher price points. And the retailers were, as we talked about in the Q3 call, really cautious on stocking inventory of spring/summer products as the summer product ended, which impacted, for example, bike carriers inventory levels and our sales also in Q4. RV products is growing in a market that is improving. Net sales was up 10% in the fourth quarter organically and full year 4%. And for the first time in quite a few quarters now, 2 years almost, we see that sales increase also to the OE channel, i.e., directly to manufacturers, whereas the aftermarket trend has been better for a few quarters and is growing also on a full year basis in 2025. We are really pleased to see also that quite a few of the -- we have delivered quite a few new products within RV Products segment in the last 18 months, and they continue to do well and actually drive all the net growth in terms of money for us. So on top of an improving market, we do see good performance from our new RV product just launched. And market conditions are improving step by step. And as talked about previously, the consumer interest has remained quite high over the last 2 years. The aftermarket channel has done better and better. And now we see a return to growth for us also in the OE channel, which is, of course, positive. Turning to Active with Kids & Dogs. Net sales was up organically 6% in the quarter, down 2% for the full year. We continue to see a very nice sales momentum in our new categories. Dog transportation continues to grow really well in 2025, building on a very strong start in 2024. And the child car seats also continues with a really nice sales momentum and is now the new record holder for the best category by first full year sales as we wrap up 2025. We also see continued momentum in all-terrain and running strollers, which is very positive. But similarly to what we talked about in Q3, we continue to see the cautious retailers, particularly cautious with inventory buildup for seasonal products impact -- sort of everything bike related, which impacts the category negatively, particularly at the start of the quarter. And just as in Q3, we see better consumer demand and wholesale demand and Thule.com continues to grow. Bags & Mounts is a little tricky to get the numbers right here because we have the impact of the acquired Quad Lock business reported under Bags & Mounts. But the organic growth was 0% in the quarter for Bags & Mounts, was up over 100% in terms of total sales, excluding currency effects. And 0% is a clear improvement versus the full year trend, which was minus 10%. This category now is to almost 70% made up by performance phone mounts. And the Quad Lock had another really good quarter with organic growth over 15% in Q4 and about 15% for the full year as well. The bags business or Bags & Luggage business is doing a bit better. The Thule brand is back to modest organic growth in the second half of the year, also in Q4, whereas we continue to see a decline in Case Logic and OE products in bags. So before I hand over to Toby to talk about some more financials, I thought we would return to expand a bit on the highlights that I started out sharing and in particular, some of the highlights that are important for 2026 and going forward. So on Page 7, let's start with the updated financial targets and our plan to reach them. And we shared this at our Capital Markets Day in November last year. But to recap, the financial targets that we have set are ambitious. We want to outperform the historic performance that Thule has delivered. We have pre-pandemic and also until the full -- during the full period, we've been a listed company, delivered organic sales of an average of 5% and our new sales target is to deliver 7% annual organic sales growth. The other 2 targets are not changed. They are achieving an EBIT margin of 20% and the dividend payout ratio at or above 75% of net income. We have 2 main priorities or themes to deliver on our ambitious targets. And the first one is to build bigger and more Champions and champion product categories to recap or the categories that are the core to our success and have accounted for 90% of historical sales and gross profit growth and value creation for Thule. And these are categories where we are a clear global #1 with the distance to #2 in typically in a small market or we call a pocket, a niche, where Thule is not just the market leader by numbers, but we are the leader in terms of innovation and with a clear ability to out-innovate a competitor that is innovate more and better than competition to really get payoff on our strong product development capabilities. And the first priority in our growth plan is to grow bigger Champions, that is grow the ones we have and also add more Champions. And our ambition is to go from the current 6 to 10 by 2035. We are pleased to see that we already have 3, what we call Champion candidates in our portfolio that are doing well that we can continue to develop. The second part of our plan to reach our financial targets is around efficiency and scale effects. And you may remember from the Capital Markets Day that our current EBIT margin is about 1.5 percentage points below the historical average, but the EBITDA margin is 1.5 percentage points higher than the historical average. So we have, during the COVID years, invested quite a lot in building a bigger infrastructure, particularly in manufacturing capacity that we now have room to grow into. So we are doing 2 things to take us to the margin target. First of all, we are taking a lot of cost actions and the actions that we already have initiated will drive EBIT margin up 2.5 percentage points by 2028. And then secondly, we expect and have proven historically that when we get volume growth, we do get scale effects, both on gross margin, for example, increased utilization of our manufacturing capacity and on sales and admin costs. So on that note, and on the topic of Champion product categories, it's very pleasing to just have done the biggest ever upgrade of our Sport & Cargo Carriers product portfolio. As mentioned, this category as we reported, account for just about 50% of our sales, and it includes 3 of our 6 Champions, roof boxes, roof racks and bike carriers. And we have done an upgrade in 2025, both of best sellers that we have taken to the next level with a new generation of products. We have delivered several new innovations, for example, Thule Santu, which is a cargo box combined with a bike carrier behind the car, and Thule Arcos XL just recently launched, which is a cargo box behind the car that can have capacity for skis, which is doing really well. And we've also particularly focused on North America and delivered quite a few North American-specific products that we see also really pay off. So all these actions have had a clear positive sales impact in 2025 across the geographical regions, and we are now entering 2026 with an upgraded portfolio and more news on the way. On the topic of Champion candidates, as an example, I'd like to point out the momentum that we have in dog transportation at the moment. And you may remember, we entered this category in the beginning of '24, quickly became the best new category of first year sales in the year of 2024 with the Thule Allax, the crash-tested dog crate, driving the business and then later followed up with a dog-specific bike trailer, Thule Bexey. And we've continued to see good performance in 2025 with more products added to the portfolio, increased distribution and increased awareness. And this is a category which we think has a clear potential to be a future Champion, what we call a Champion candidate. This is a niche market or a clear pocket. There are no global players, no global brands in dog transportation. We know from our own research that many Thule consumers already own a dog, of which many own 2. And the pet market is clearly growing and pet safety is clearly a growing trend within that. So we will continue to grow dog transportation in 2026, both through more products, we will share in a minute, but also continue to extend the distribution. We're also supporting our Champion categories and candidates with what we call better sales and marketing. We're reaching more consumers, but also presenting and selling more of what we have. And we are doing many activities to this end. But one example I'd just like to highlight because it's very recent, is that we held a Thule experience event in November in Malmo and in Hillerstorp in Sweden, where 50 of our global Thule brand ambassadors were showcasing our wider product portfolio and the launches coming up in front of a 500 people audience made up of big customers, important customers and global media. So we're starting to see the global PR effect very early right now with positive results, but we also perhaps, at least as importantly, have really good discussions right now with some of our biggest customers about expanding the range of Thule products in those channels. And last but not least, on a more business-oriented update, I'd like to mention something on our sustainability efforts that are paying off. It's a long-term work to meet long-term targets. And the key area for us where we're making progress is around CO2 emissions. CO2 emissions are down by almost 30% compared to the base year in 2019. That is in absolute numbers. And one of the key drivers for us to achieve this is the way we design our products and what we call eco design, where we already at the product development stage, try to think through very carefully which materials we use, reducing, for example, aluminum and steel where we can, using recycled aluminum and really designing for sustainability footprint. And one very recent example launched here just 2 months ago is the Thule Xscape bed rack system for pickup trucks, which is replacing a quite a few years old product with 60% lower emissions footprint compared to the previous version. So we are making big efforts and it's paying off and leads us on the good path towards reaching our CO2 target. So with that a bit more business-oriented update, I'll turn over or hand over to Toby to take you through some of the more financial detail. Toby Lawton: Thank you, Mattias, and good morning, everybody. I'll start off on a couple of minutes on the income statement. And firstly, looking at the Q4 numbers, the Q4 revenue, we were just over SEK 1.8 billion in the quarter, which, again, it is our smallest quarter of the year seasonally. So you have to bear that in mind. That was 9% higher than the same quarter last year. So the reported sales growth was 9%. Organic growth was flat. The acquisition impact on Q4 was 20% and FX was minus 10%. So we had a pretty big impact from FX just in quarter 4. So I'll come back to that. The gross margin in the quarter increased to 44.9% versus 41.6% last year, and that increase is mainly driven by the acquisition of Quad Lock. And here, while the margin has increased versus last year and we have a good gross profit margin, it's important to bear in mind that the actual amount of gross profit is also impacted by the FX impact on revenue. So the fact that we have a 10% negative impact from FX on revenue drops through to the absolute amount of gross profit. The adjusted EBIT in quarter 4 was SEK 83 million versus SEK 65 million in prior year. And here, there's 2 main effects. Firstly, the margin is up due to the Quad Lock acquisition, which has also the impact on the gross profit, which I mentioned earlier, but it has also improved due to lower selling and administration expenses, excluding Quad Lock, so lower cost, excluding Quad Lock. But it's negatively affected, however, from the FX impact, which I mentioned earlier, particularly on gross profit. And the FX impact in the quarter actually has an impact on EBIT margins of around 2% to 3%. So quite a big impact in the quarter. But again, it's our smallest quarter, so it shows up more in the small quarter. When it comes to the full year, we had net sales of SEK 10.4 billion. This is versus SEK 9.5 billion prior year. So reported growth of 9%. Organic growth was minus 1.3%. Acquisition impact plus 15%. And here, the FX impact is minus 5%. So not as big as in Q4. Q4 was bigger, but still a negative FX impact on the full year as well. Gross margin increased for the full year to 46%, so a record gross margin versus 42.7% last year, with the increase driven by the Quad Lock acquisition again, but also by price mix effects and also efficiencies in our supply chain. Adjusted EBIT for the full year is SEK 1,671 million, and this compares to SEK 1,622 million prior year. So we ended the year with an adjusted EBIT margin of 16.0%. And here, just to mention, the FX impact is smaller on the full year, but still has an impact of approximately 1% on a margin basis. All right. If I go to the next slide and here, a few details on our investments in R&D or our development spend, which we've had in 2025. And you may remember this graph from our Capital Markets Day presentation as well in November. And here, you can see, firstly, that the development or R&D spend ended on 7.3% of sales for the full year 2025. And that, again, is also impacted by FX, the FX impact primarily on sales. And you could say without any FX impact, we would have basically been flat versus prior year in development spend at 7.0%. As you can see from the graph here, we also increased the share of our spend on our Champion categories, which, as Mattias has talked about, those are the categories which generate 90% of the value creation or the profit growth in Thule. So it's important that we increase our spend on Champion categories. And for 2026, we are going to continue that to increase our proportion of spend on Champions, and we'll also spend less in total in 2026. And looking further forward, just we talked about this also at the Capital Markets Day, but our medium-term plan is to reduce development spend to 6% of revenue in the medium term and to spend at least 4% of revenue on the Champion categories within that development spend. So continuing to focus our spend on the Champion categories that deliver the profit growth. Okay. If I turn to the next page on cash flow. Cash flow for the full year, we generated a cash flow from operations of SEK 1.1 billion, a bit more than SEK 1.1 billion. So we continue to have a good cash flow generation in Thule. As part of that, we reduced inventories by SEK 157 million, a good reduction in inventories. We did have a target that we talked about at the start of the year to reduce inventories by SEK 200 million, but we forward integrated in Australia in quarter 4, which did have an impact on inventories that we've put into the market in Australia as part of that forward integration. So that's had an impact in the quarter. But here, it's also important to remember that over 3 years, we've delivered an inventory reduction of SEK 1.6 billion. So a big inventory reduction over the last 3 years. Overall, working capital increased by SEK 131 million for the full year, and we're back, you could say, to our historical pattern when it comes to working capital. Finally, on the CapEx line, you can see we had a CapEx spend for the full year of SEK 348 million, and that's primarily relating to the automation and extension of our warehouse in Poland. And we did actually bring forward a bit of that investment into quarter 4 to get ahead of the winter weather and ahead of plan. So that's going well. The next slide, we show our leverage. And here, you can see our net-debt-to-EBITDA leverage. And leverage is important to us, and it's something we follow very closely. And we want to maintain a conservative leverage, and we do that with a leverage of 2.0 net debt to EBITDA. You can see -- historically, we've been at a level around 1.7 to 1.8 for a lot of Thule's history. We're close to that level. We're still comfortable with our leverage, but we expect to delever during 2026 and come towards that level. And just to reiterate what I said on the cash flow slide really that our quarter 4 leverage was somewhat impacted by this inventory effect that we built some inventory in Australia as a part of the forward integration and also that we pulled forward some of the Huta investment, both of which, of course, are impacts that will help the cash flow in 2026. So we'll get that effect back in 2026. And then to the next slide, just briefly on the dividend. The Board has proposed a dividend of SEK 8.3 per share. This is the same dividend level as we had in last year, in the prior year and is also in line with our financial target, which is to distribute at least 75% of net income as a dividend. Okay. And with that, I'll hand back to you, Mattias. Mattias Ankarberg: Thank you, Toby. And I'll close off the presentation part of this with some forward-looking remarks. So on Page 17, our focus forward is now quite clear. Now we're about building Champion categories and driving efficiency gains. Starting off where we are, I mean, we are still operating in a market where both consumers and retailers are cautious. It's important to note and particularly so in North America. However, there are some positive signs in the marketplace of improvements. And the clear example is within RV products where market conditions are moving in the right directions and improving. Thule is well positioned in general, almost independent of the market with our strong brand, global market leadership in our key categories and own manufacturing in both Europe and the U.S., for example. But now we're also quite excited to enter 2026 as we have an upgraded product portfolio, not the least in Sport & Cargo Carriers. We have fast growth in our 3 newest product categories and lower cost levels. So we will continue to push the agenda at a high pace also in 2026. And to take you through some of the action points under building bigger and more Champions, we are continuing to launch quite a few new products in 2026. It is a high pace that we continue and we are focusing this on our Champion categories. So more details to follow on the next page. We're also building and adding more Champions by both growing the product portfolio in these Champion candidates, but also growing the presence in terms of sales distribution and driving awareness. And that's across dog transportation, car seats and our all-terrain and running strollers. We are, as we talked about at the Capital Markets Day, not pleased with the long-term performance around in bags, and we are turning that around by focusing on outdoor-related products and functional accessories. I'll show a few examples in a minute or mention a few examples. And lastly, we continue to support our Champion categories by selling more of what we have, reaching a bigger consumer audience. And for example, in addition to the Thule Experience event I mentioned, we are continuing to build out D2C also in 2026 with more markets for thule.com and building up the presence in Australia that we just established. To Toby's point earlier, we now have our own sales organization in place as of just a couple of months ago. We're continuing to push the efficiency and scale effect points as well in 2026. We are focusing our R&D spend and will bring the total R&D cost level or spend level down in 2026, while still spending more on our Champion product categories. We're continuing to drive efficiency in our supply chain. For example, we will continue to in-source selected components where it fits our capabilities to utilize our available capacity. And we will continue to build what we call product technology platforms. For example, harmonizing components and parts of products across our product portfolio. We have come quite far within bike carriers, for example, where we have a quite wide portfolio where we can see that we can use same components or similar components for many types of bike carriers, thereby driving synergies in purchasing, in manufacturing processes, sometimes even consolidate manufacturing lines. So that's an important work that is ongoing with much more to give and will support the gross margin going forward. And then lastly, we continue to take actions to reduce what we call the structural costs, so our setup, if you like. And we are, as you know, automating our DC in Poland for go-live in 2027, which we expect to have a significant savings of, in this case, SEK 100 million with full effect 2028. So full speed ahead on both building bigger and more Champions and driving efficiency gains. A couple of notes on the product launches coming in 2026. We have a busy launch calendar also in 2026, although not as intense as in 2025 or 2024. But more importantly, it's really now aligned and focused on building Champions and the agenda that I just talked you through. So a couple of examples. Under the first umbrella, growing the existing Champion categories. We're addressing more use cases. We're addressing more price points, both lower and higher and more North American products. Just to mention a few, Thule Epos park secure is taking our most premium bike carrier and adding parking sensors, which we think is a sought-after feature in the market and, of course, pushes the price point up and really positions Thule with a unique premium plus offer, I would say. We have just launched Thule Vero, new North American product for heavier bikes, and we are introducing Thule VeloLite very soon, which is an entry-level price point bike carrier. So we're doing many things there. We continue to invest in our next-generation Champion categories. And to take just 2 examples, we are launching our first dog basket for the bike, making it easier to bring your at least smaller dogs when you are biking. And we are, during spring, introducing a new and upgraded suite of car seats of both infant and toddler seats that are connected, have sensor-based feedback that will help prevent misuse and help the parent to be more informed when the child is safely in place in the car seats, in all, continuing to push the child safety agenda as the Thule wants to do. And then lastly, we are launching several products to turn around the bags trend, focusing our bags assortment much more on outdoor-related products and functional accessories. And we have just recently shipped what is Thule InLock to the market, which is an innovative new bike commute bag and rack solution and more products are coming just this spring. So we are a product company, and I think it's always nice to show a little bit of product before we wrap up. So bear with me, I'll go quick. But on Page 19, Thule Vero just hit the North American retailers about now. It carries up to 80 pounds of weight. So that is heavier bikes and e-bikes. It has a tilt functionality, and it has been very well received in early introductions and by the press so far. I mentioned Thule VeloLite, which is a great value bike carrier. It's our newest bike carrier that touches the entry-level price point if you're still looking for a safe platform rear car bike carrier and also comes in a one bike version. We're really looking forward to that. We've done a big push on rooftop boxes recently. We introduced Thule Force in 2025, our best-selling mid-price box. We introduced a new generation Thule Motion, our best-selling premium box a little bit before that in '24. And now in '26, we are refreshing our entry-level roof box called Thule Pulse with a new generation. We're looking forward to having a fully upgraded roof box assortment as we move into 2026. And I mentioned also quickly, Thule InLock, which we think is a really innovative bike commute bag solution, which if you are used to bike pannier, sorry, sort of shifts the system around to avoid any hardware on the bag and towards your back and puts that on the bike with a super easy slip on, slip off functionality. So we are quite excited about the new products coming out in 2026, and we are very pleased that we are focusing our product launches on the Champions we have and the Champions we are trying to build. So that summarizes the presentation part of this conference call, and we now ask the moderator to turn to Q&A. Operator: [Operator Instructions] Our first question comes from Fredrik Ivarsson from ABG. Fredrik Ivarsson: First, I'd like to drill into the margin of Quad Lock a little bit. It seems like it was very strong in Q4, if I'm not completely mistaken. And it seems like the margin here was almost as high as in Q2. And I mean, Q4 is obviously a high campaign quarter, et cetera, et cetera. So what drove the strong margin in Quad Lock? Was it gross margin? Or did you reduce costs here underlying? And then how should we think about start of Q1 and maybe for the full year, what you expect in terms of growth and then margins, I guess, et cetera, et cetera? Toby Lawton: I think -- yes, you're right, Quad Lock had a -- we had a good quarter in Quad Lock in mobile phone mounts. And I mean, it's really driven by a strong performance during the Black Week, in particular, in November when we did very well in driving revenue. And really, when we get good growth, that drops through to good margin as well for Quad Lock. So that's what's impacted margin in the quarter. And I would say going forward, as we said from the beginning, Quad Lock is slightly accretive to Thule's overall EBIT margin, and we expect the same going forward as we've seen this year. Fredrik Ivarsson: Okay. So OpEx was roughly flat Q-on-Q or in line with previous quarters? Toby Lawton: You're talking Quad Lock or? Fredrik Ivarsson: Yes, yes, yes. Toby Lawton: No. So OpEx is impacted by sales as well. So there is -- because it's a lot of D2C business, there's quite a lot of marketing spend, which is driven also from the top line. So OpEx is not flat. Mattias Ankarberg: It's not flat, but of course, we get some leverage from strong sales growth. Toby Lawton: Yes. You still get leverage, but it's not flat. Fredrik Ivarsson: Sure. Okay. And second one on the new categories, dog transportation and child car seats, which we spoke about quite a bit in the presentation. Would you be open to share some ballpark figures on the incremental sales stemming from these 2 on an annual basis? Mattias Ankarberg: Fredrik, Mattias here. It's a good question. I think 2 comments. First of all, I think you can maybe get an indication as you look at our reported categories, the Active with Kids & Dogs categories where we've been quite clear that these are the categories driving the growth for us this year, while it's been more challenging in other areas. And then secondly, we'll bring that question with us as we think about reporting going forward. It would be wrong to just sort of start throwing out numbers right now, but we'll take that into consideration for 2026. Fredrik Ivarsson: Okay. And then on product development costs, which you also spoke about, obviously, you spent around SEK 760 million in '25, and you plan to spend a bit less in '26. So what's a good number for us to have in mind when thinking about this for the current year, please? Toby Lawton: I think we're quite clear, Fredrik, we expect product development spend to go down in money, in absolute numbers, and that's the guidance we gave, yes. We're not going to have a specific... Fredrik Ivarsson: Yes. That's fair. And last one before I jump into the queue. How should we think about the FX headwind on the margin as we look into the coming quarters, Q1, Q2? Toby Lawton: Yes, I think -- obviously, it depends on what happens in FX going forward. So that's one part of it. But I think it's also worth bearing in mind that the FX movements kind of in '25, there were some quite big movements at the end of Q1 and the beginning of Q2, if I remember right. So Q1 will -- yes, if FX rates stay as they are today, Q1 will face some headwinds as well. Fredrik Ivarsson: Right. But maybe not as strong as in Q4 given the size of the quarter? Toby Lawton: I mean, yes, obviously, we're only 1 month into the quarter. But yes, FX have maybe eased a little bit in January, but we'll see where they go February, March. But yes, I think the other piece of it is that basically, it's probably bigger impact for Q1 than Q2, Q3 and Q4 if FX rates stay as they are today. Mattias Ankarberg: It's a detail, Fredrik. But for us, Q1 is also -- I mean, March is the bigger month in the quarter. And obviously, not much has changed in January versus how we ended the year in terms of impact, but we'll see as the quarter progresses. Operator: Our next question comes from Daniel Schmidt from Danske Bank. Daniel Schmidt: A couple of questions from me. And starting with -- Mattias, you mentioned in your opening remarks that organic growth numbers were better at the end of the quarter versus the first part of the quarter. And I think that also probably comes back to your comment about low restocking at the sort of previous high season, which impacted your sales at the end of Q3 into Q4 on the bike side, if I remember correctly. But when you say that, do you also mean organic growth for the legacy business because Quad Lock, of course, becomes part of the organic growth from 1st of December in your numbers? Mattias Ankarberg: Daniel, yes, you are right on all points. It is true what we said about the destocking effects. I mean, we had a pretty good -- we had organic growth in Q2 and the start of the summer. We really saw the D2C business continuing at the fall, but really cautious retailers. And I guess that cutoff between Q3 and Q4, we saw most of that in Q3, but a bit of that in the beginning of Q4. And when that was largely gone or we sort of passed that calendar dates where that's not meaningful anymore, we saw organic growth, both driven by Quad Lock, but also in the sort of previous or as you call it, legacy Thule business towards the end of the quarter, yes. Daniel Schmidt: Good. And with that in mind, and you also, of course, mentioned that U.S. or North America has been weak, but you've seen this gradual improvement also maybe in that market, although it's probably still negative in maybe all the months of Q4. Maybe I'm wrong, but that's sort of how I'll read you. But given that trend that you sort of referred to and what you say in general when it comes to the legacy business for Q4 and the fact that, I would say probably, if I remember your wording last year that you started to see retailers in North America or in the U.S. pulling the brakes quite hard by beginning of March last year. Sort of that scenario, wouldn't it be sort of quite reasonable to expect the U.S. market to be back to growth as we enter the second half of Q1? Mattias Ankarberg: Yes, we would hope so. I think overall, I think it's nice to see that things are moving in the right direction if we start with the total picture first. And on the U.S. specifically, then I think there are 2 things I always try to keep separate. One is the marketplace and one is what we're doing. And I think in terms of the market, there was clearly a big halt there in beginning of March last year after the tariff announcements. To your point, that's very true. I think on the other hand, you have seen a continued sort of decline in consumer sentiment in the U.S. throughout 2025. So if you do sort of year-on-year comparison, the underlying consumer sentiment is worse than it was a year ago, I doubt. There are signs that could pick up. And I was in the U.S. 2 weeks ago and talked to our team, of course, but also quite some customers. And I think there is now a bit of a mixed picture in terms of some being quite optimistic and others still quite cautious. So I think in the marketplace, to summarize, I'm not sure it's going to be a plus or a minus, but more importantly, I think, is some things that we have done. And I think we have seen really nice impact of the quite a few North American specific product we have delivered in the last sort of 12, 18 months. Bike carriers in the spring. And now we've just launched Thule Xscape, which is a pickup bed rack, which we haven't done a new product for pickup trucks in many years, that's out in December. So we are having better and better traction, I think. So it's hard to tell the net effect on those 2, particularly when we're talking about a quarter or even half a quarter, but I am optimistic that we will change or turn the trend around in North America in the coming quarters. Daniel Schmidt: Okay. Good. Cool. And you also talk a lot about dog crates and car seats. And I hear you when it comes to maybe breaking those numbers out as we go along into '26. But you also mentioned continued extension of distribution of dog crates in '26. Is that meaningful or sort of -- is there a lot of retailers that haven't been able to reach yet in the U.S. or maybe more importantly, in the European market? Mattias Ankarberg: Yes. I think with all our dog products, we are still both adding product portfolio, but also expanding distribution. Where we quickly got traction is in markets which had, I think, more of an acceptance or a consumer used to this product, the Nordics, DACH regions, where dog safety and dog in car is quite an established kind of product to use. But we have seen really good growth in the U.S., for example, in dog products in 2025. And to be really transparent, pretty much with just some online listings in thule.com because it's not really a product that we're used to buy at the retail stores. But now with that first success case in hand, we have some interesting conversations with pet retailers and some of the outdoor retailers in the U.S. So for sure, there's more to do in Southern Europe, in North America and in general. Daniel Schmidt: Okay. And just maybe a dumb question, but mark -- sort of weather conditions, we don't talk a lot about that, but especially, we talk about it maybe when the season is shifting. If it's sort of a late spring or early spring and so on. But it has been very snowy, I think, especially in Europe this year. Is that having any impact on your assortment? Mattias Ankarberg: Yes. Well, probably we don't focus on it too much, to be honest. We try not to spend too much on sort of these short-term effects. But in general, good snow conditions means more skiing and earlier skiing and helps boxes, for example, and ski transportation. But of course, the bike season ends a bit earlier in Southern Europe, for example. So that maybe knocks a little bit of that. But I'd probably -- and then in the U.S., where -- let's see now, we had good snow on the East Coast, but really poor snow conditions in Central and the West Coast for until, what, about maybe January or even New Year's maybe. So probably a little bit, but to be honest, I have not done the exercise to pin down if it's net positive or net negative. But if it would have been a meaningful point, we would have brought it up, of course. Daniel Schmidt: Yes. And then maybe another sort of overall question. Others are talking a little bit about sort of consumers refraining from buying U.S. brands, maybe especially in Canada. I don't know how prevalent that trend is in Europe. Are you seeing any of that? Mattias Ankarberg: No, not really. I think we -- Thule is clearly positioned as a Swedish brand. It even says Sweden on our logo. And I think in the U.S., we are -- among the sort of Thule fans, if you like, that know us really well. There is some general awareness we are produced in the U.S. Daniel Schmidt: I mean from a sort of a Yakima and all these guys, are they losing out more? And is it a competitive advantage for you in sort of Canada and parts of Europe? Mattias Ankarberg: Right. Thanks, Daniel. Now we do see competitors, I would say, having challenges, probably more driven by supply chain issues and not having manufacturing capacity in the U.S. with price hikes and sometimes, yes, other types of more qualitative discussions with the customers. But nothing I have picked up specifically on the branding to be honest with you. Toby Lawton: You can say we have a good position in Canada, but it's not the biggest market. So it's -- yes, but we already have a good position and a good market share in Canada. Operator: Our next question comes from Carl Deijenberg from DNB Carnegie. Carl Deijenberg: Could I start on the organic growth development in RV products here in Q4? Obviously, a step-up relative to what you've seen in the earlier part of the year. And maybe first, if you could share a little bit the growth split what you report or what we talk about the OE side relative, let's say, the aftermarket on the growth development in Q4 would be interesting to hear about. Mattias Ankarberg: Yes. Carl, it's Mattias here. I can start and Toby can add. But if we step back just for clarity, I mean, the RV industry has had a challenging period. And we have -- during the last year or almost 2 years now actually, still seeing pretty good consumer demand and the aftermarket has done quite well for us, while OE has declined, particularly now in the recent quarters as OEs have taken manufacturing stops, not to push more inventory into the value chain. So we're now seeing that picture turn around a bit with continued modest growth for the full year, continuously for the aftermarket channel. But Q4 is the quarter where OE is back to growth for the first time in almost 2 years. So the split is around 50-50 for us between OE and aftermarket, but it's a bit more OE in the low season Q4 because obviously, not a lot of consumers buy their new motor home in November, December, but the OE that are producing are producing ahead of next year's deliveries. So it's a bit higher. So in this quarter, specifically, the growth is driven by the pickup in deliveries to the OE channel. Carl Deijenberg: Right. Interesting. Could I then also ask a little bit on the pricing situation in the U.S. I mean you made fairly pronounced hikes in the middle of '25. And I believe you also did some, let's say, the normal adjustments here in the beginning of this year. And I just wanted to ask a little bit now when we had a couple of months with tariffs and, let's say, maybe a new cost picture for you guys and so forth, just your view on the balance you're entering '26 with also if you consider recent raw material movements and so forth. Do you feel that we are now on a sufficient level in terms of the pricing? Toby Lawton: Carl. Yes, we -- I mean, we did a price increase 1st of June last year, which offset basically pretty much all of the tariff impact at that time. Then there were some adjustments during the summer, and we actually have had the normal price increase from 1st of January this year, which you could say across the board is normally around 1.5%. It's slightly higher in North America because we're compensating for the final pieces of the tariffs that came through during the summer last year. But now we feel we're in -- yes, we're in a good position given where the tariff situation is today. That's all we can say, I think. And we've offset the impact, yes. Carl Deijenberg: Yes, yes. And maybe on the topic as well, I mean, obviously, some raw material movements have been quite extreme here in the latter parts of Q4, I guess, maybe less so on aluminum. But yes, do you expect any sort of indirect impact from what we're seeing on other raw materials billing in or anything? I guess you don't use any copper and so forth in your production, but yes, anything from that? Or do you see that you're on. Toby Lawton: No, we see -- for our raw materials, we use the main raw materials. We don't see any dramatic price movements basically. Like you said, we're not using copper. We're -- the main raw materials we use are basically aluminum, steel and some types of plastics, so. And it's a bit more stable on those. Operator: Our next question comes from Agnieszka Vilela from Nordea. Agnieszka Vilela: I have three questions, I think. Starting with Quad Lock, obviously, strong performance in 2025, plus 15% organic growth. Can you tell us what were the main growth drivers for Quad Lock last year in terms of products and geographies? And also, what are your expectations for the growth for '26? Mattias Ankarberg: Mattias here. I'll start. Quad Lock had a good year, and it's had many good years. The trend has continued with us as the owner and partner. And it's really 2 sort of growth drivers that are in combination driving the total performance. One is product development, continue to launch more products, more types of mounts to fit more types of bikes, use cases, vehicles, which expands the category. And the other one is driving consumer awareness, if you like. It's still a category that Quad Lock pretty much invented and is bringing out to the world, to consumers and reaching more consumers with the D2C direct model and also getting listings with some new retailers has been an important driver of the growth. Quad Lock has seen good growth in all geographies, but North America has been a tougher marketplace also for Quad Lock just as for the total Thule business. I think we've said a few times that we have seen historical market growth in performance phone mounts, best we can analyze an estimate of around 10%, maybe slightly above for a few years, 10% to 12%. And that's where we expect around 10% of the market will continue to develop. Of course, Quad Lock is the clear global #1. It's a Champion, and it's hard to beat the market over time and time again, but we do see Quad Lock participating both in building up that market and that 10% and in good years also have the potential to overperform. Agnieszka Vilela: Perfect. Well understood. Then maybe on the growth expectations for '26, Mattias, can you tell us like if you look at the new product categories and new products as well, how much can those add incrementally to your growth in '26? Is it like a number like 3% or 5%? How should we think about the contribution to sales coming from new products really? Mattias Ankarberg: It's, of course, I understand you asked the question, and it's a fairly relevant question. And we have a target to get to 7% organic growth. Would love to get there as soon as we can, as we talked about at the CMD in November. We've done 5% historically in a GDP market of maybe 2% to 3% growth, and we want to take that to 7%. And part of why we think we can beat historical performance is the new categories that can help us. And you may remember that we talked at Capital Markets Day that we -- to get to the 7%, we expect the same historical 5% in our sort of traditional Thule categories of Sport & Cargo and RV products, whereas the Active with Kids & Dogs and the Bags & Mounts is going to grow faster, we expect 10% to 15% that will take us to the total of 7%. So that's the contribution we are expecting, and that's the contribution we are building for. Now -- and I know you're, of course, curious about 2026 specifically. But as we've talked about many times, we are building this long term. We see that the growth is coming, but there are some market trends that are looking more promising, but still overall cautious consumers and retailers. So when those 2 curves start pulling in the same direction, we will be at our 7%. And when exactly that timing is, I think your guess is as good as ours, but we will get there. Agnieszka Vilela: Understood. And then the last question for me, probably to Toby. I mean, a lot of uncertainty in the market still. And as you also talked about the growth even. But what will be the most important drivers for your profitability development in 2026? Are there any tailwinds and headwinds that you can help us to list out? Toby Lawton: Agnieszka, I mean, I think with Thule continuing to drive growth, profitable growth has been the lever of Thule's value creation for a number of years and will continue to be for '26 as well. So that's what we're focused on investing in and delivering. Does that answer your question, Agnieszka? Agnieszka Vilela: If you can -- no, not really, sorry. But yes, maybe a comment. We can imagine FX still negative and raw materials you commented on. But then if the growth comes, maybe not 7%, but some growth maybe that you expect and you mentioned also price increases. So any -- and lower R&D. So if you could help us like to structure the significance of those factors maybe. Toby Lawton: Okay. And I mean, we work to continue to drive growth. So that's number one. But we do expect to focus R&D expenses, as we said, and we've come down in absolute terms when it comes to R&D expenses. And then we're working in the medium term as well on our efficiency improvements, which we're going to deliver 2.5% impact on EBIT margin over the medium term. So that's not all going to come in '26, but we expect to track on the way to that during 2026. And then, yes, on top of that, the scale benefits that Thule can generate from growth are substantial as well. So I think if you kind of think about those things in the way you model, then, yes, you should be on the right track. Agnieszka Vilela: Yes. On the negative side, mainly FX then or... Toby Lawton: Yes. I mean FX, -- I would firstly, make sure you understand also that our exposure on FX is mainly to the euro/SEK. So we're not that exposed to euro/dollar when it comes to profitability. It does impact the top line, but profitability is not affected much by the dollar. It's really the euro/SEK, which has obviously moved less than the dollar. And yes, we have seen some FX headwinds in quarter 4. And like I mentioned before, if it stays at the same level as quarter 1, we'll have some FX headwinds as well. But I'd say overall, I wouldn't -- yes, like I said before, you could say an impact for the full year '25 was around 1% EBIT margin from FX in '25, where we had some pretty big movements. So it's substantial, but it's not the biggest item when it comes to Thule's exposure and profitability, but it is a factor, absolutely. Operator: Our next question comes from Mats Liss from Kepler Cheuvreux. Mats Liss: Well, just coming back to R&D spending there, you mentioned some extra electronics or whatever sensors that you have on the car seats and also on some of the other products you have. Is this an important part of the R&D spend you have currently? Or is it sort of a marginal importance? Could you say something there? And maybe also if these electronic devices could be sort of an important part in growing the Champions going forward? Mattias Ankarberg: Thank you for your question. It's a very nice feature that we are, I think, very early to market with, but it's not a meaningful impact on our spend. We are developing this together with partners that have really strong knowledge in this area, and now we're applying it to the Thule product. So for the car seat example, just to give you maybe a bit more clarity, as a parent, you will be able to be informed if the car seat is installed correctly, if the buckle is tightened correctly and things like that. And you can get that information either through sound and light or in your app, Thule App. So there are some nice features that we are bringing to the market that are so far very well received by these premium retailers and some opinion leaders to push the safety agenda, but it's a very limited impact on our total R&D spend. It is very interesting, to your point, more broadly and conceptually to start thinking about the next level of safety for products. And of course, electronics and digitization is an exciting area that we are exploring in more Champions, but nothing that is imminent or will significantly impact either top or bottom line in 2026. Mats Liss: Okay. Great. And then coming back to the -- you mentioned that you will -- 4% spend on the Champions. And is those 4% sort of spent on the existing Champions? Or is it sort of developing the new ones? It's a mix, I guess, but could you say something about that? Mattias Ankarberg: Thank you for allowing us to clarify that. The 4% we are talking about for Champions is the existing 6 champions that we have. So part of that other area is to invest in the Champion candidates that we have they want to build up. And then, of course, everything else in our product portfolio that we still want to maintain. Mats Liss: And you also mentioned, well, your partners there, I just heard that anyway. The Champions, could they sort of be developed in cooperation with partners also? Or is it more sort of the Thule existing organic growth structure that developed those? Mattias Ankarberg: Our Champions are really managed by our in-house product development team. We have almost 300 product development engineers in Hillerstorp in Sweden and satellites in several countries around the world, and we do product development in-house, which we're really proud of. And maybe I wasn't super clear when I talked about the electronic component of our future connected car seats that the electronic component, the electronics that go into that product is developed by a either a supplier or a partner. Mats Liss: Great. And finally, I mean, you have all these new products there. And then again, you also mentioned the cautious consumer. But do you sort of try to, well, build an inventory now in the first quarter to maybe get ahead of the demand and push forward some interest among retailers? Or is the lead times enough so you don't need to build any inventory. Could you say something there? Toby Lawton: It's Toby here. But we -- I could say we -- I mean, we have a seasonal pattern to our inventory, number one. So we do normally build inventory ahead of the season and then reduce inventory, yes, during the season and the summer. So it's quite normal to build a bit of inventory during quarter 1. But that's just driven by the seasonality of the market really. And I don't think there are any other effects you should be looking for or thinking about. Mattias Ankarberg: We will be ready when the demand comes. I think we are planning accordingly. But to Toby's point, this will be in line with historical working capital movements. Operator: Our next question comes from Johan Eliason from SB1 Markets. Johan Eliason: Just very brief follow-ups here at the end. You talked about price hikes for '26, typically 1.5%. It was obviously more in '25, but can you gauge it a little bit? Was it 2%, 3% or what -- are we talking about as realized prices in 2025? And then just a detail, I noticed your CapEx levels for the investments in Poland went up in the second half. How will this pan out in '26 by quarter or on a total CapEx level? Toby Lawton: Firstly, on the price increases, Johan, we had the normal around 1.5% at the beginning of '25, but then we did have a special price increase in relation to tariffs in North America from 1st of June, and that was approximately 10%. It wasn't the same on every single product, but approximately 10% on average from 1st of June in North America. So that's the first question. And the second question on -- we do actually give some details in the report on the expected phasing of the CapEx in Poland. So I'm just turning to the page. But if you look in the report, I think we see -- just here, we say we expect -- I mean, the total CapEx is SEK 450 million. Of that, 33% has been taken in '25. We expect most of the rest, so a big piece of the rest to come in '26, which is 56%, and then there'll be the remainder in '27, so the trail in '27. So that's the phasing expected. Johan Eliason: And there's nothing else to focus on in the CapEx otherwise? Toby Lawton: No, it will mainly be the Huta project in '26. Yes, that will be by far the biggest impact in '26, yes. Operator: We currently have no further questions. I'd like to hand back to Mattias for some closing remarks. Mattias Ankarberg: Thank you, everybody, for joining the Q4 and full year call. Wish you a great day and look forward to talking to you again at the Q1 report. Thank you. Operator: This concludes today's call. We thank everyone for joining. You may now disconnect your lines.
Christian Gjerde: Good morning, and welcome, everybody, to this fourth quarter and full year results presentation for 2025 for Elopak. My name is Christian Gjerde and I'm the Head of Treasury and Investor Relations. Today's presentation will be held by our CEO, Thomas Kormendi; and CFO, Bent Axelsen. The presentation will last for around 30 minutes, followed by a Q&A session where the people here in the audience and the people following us online will be able to ask questions. So with that short introduction, Thomas? Thomas Kormendi: Good morning. Thank you very much, Christian, and a warm welcome to all of you here in wintry, beautiful Oslo morning and pretty cold one as well. Today, we're going through Q4. And on a personal note, let me just say it is a great pleasure to present Q4, closing off what has been a really, really strong year for Elopak. And I think on behalf of all of the Elopak team members here, my colleagues, we are incredibly happy about the result we are about to present. First things first. And just to remind everyone, what is it actually we are doing? We are on a mission where we are offering sustainable packaging. And that we do in commodities, we do it across the world. We, through this, enable nutrition and also all the time are thinking and considering how we impact and how we enable the reduction of plastics. Let's then go to the performance. And as I start off by saying, it's been a very strong quarter, and it actually rounds off what has been a momentous year for us, both in terms of results, but also in terms of the strategy execution that we have executed during this year. Now firstly, we have -- we're seeing a quarter of very solid growth around 15%. That leads to an increase in EBITDA by more than EUR 5 million and a margin level of around 14.6%, which is a strong result, and it's also driven essentially by a number of elements, including evidently the growth we're seeing, but also the pricing initiatives we have, also the operational excellence, the cost controls we've had, all of that has led to this result. I'm coming back to that. Americas, clearly with Little Rock now in place, Line 1 producing, delivers 28% growth. And also, very importantly, the Little Rock plant is now, for the first quarter, accretive to the group. Remember, we said in Q3 that we were now cash positive in Little Rock, and now we are with -- in this quarter, also accretive to the group. We also record the highest ever cash from operations, more than EUR 63 million, and that leads us to propose a dividend in the range of EUR 0.102, a total of 59% in terms of net profit. I think it's fair to say that it's been a year where we have strengthened our strategy, particularly, of course, in U.S., but also in other areas that you will see throughout this presentation. Let's firstly think about the revenue side. And this is the first year actually where we are breaking the EUR 1.2 billion mark. And we're doing that, thanks to clearly the growth in U.S., but also very solid growth in commissioning of filling machines, which will give you, as you know, is a good indicator of coming sales. It's a very strong indicator of how our customers look at the offerings we have, the equipment we have, the services we have. Looking at the EBITDA level, we are delivering roughly EUR 9 million more on a full year basis. And as you can see, increasing margin levels to about 15.3%, well in line with our midterm targets and also throughout a level in Q4, which is driven by essentially growth in America, but also growth outside of America like India. Let's go to the strategy and a couple of words around this. And some of you will have seen it before, but it is important to highlight that what we have seen throughout the last few years, '25 not being any exception, is that we are following these strategy points pretty disciplined, in fact. Clearly, it's about the realizing global growth where Americas is the #1 priority for us, frankly, in terms of capital allocation and also in how they now deliver the growth. But it also includes MENA and India. We have the strengthening leadership, which is all about our core business in Europe, our developments around delivering sustainable packaging, delivering on regulations, up-and-coming regulations. And then lastly, the plastic to carton shift. which we have talked about a number of times, and I'm going to highlight examples of that now. What we haven't talked about very often throughout these quarters are the efforts that we are doing around the operational excellence. And we do that across the group. We do it in our manufacturing facilities, reducing waste, improving our waste figures, and increasing our OEE figures, getting more out of our assets, but we also have a number of other examples on that. And let me just go through 3. Firstly, and this we always take because this is also part of our midterm targets, and that relates to safety. And while all incidents, obviously, are too many, any incident is one too many, we are seeing a development in the right track. We are down now to 4, which is for us, historically, a low level, in fact. This is a TRI level of 4. And if you go a couple of years back, we would have been at a lot, lot higher level. It's thanks to a discipline in the organization and a very high level of commitment in the team driving the safety awareness and the safety culture in Elopak. The other one, which we are very happy about because this is a strong indicator of why -- how we're going to grow in the future as well is, we maintain our fixed cost base while increasing our revenue with about 6%. Clearly, this is a testament to the fact that this is a very scalable industry. We do see the possibilities of driving more business through our organization and then hence, increase our effectiveness and productivity. And finally, on a very important point relating to our working capital, we are now seeing efforts that are finally paying off, I can say, on inventories, reductions by 17%, and also an overdue collection, which is down quite significantly. So all of that is, I think, is a sign of health how we are driving and building the operational efficiency while driving growth and securing the profitability. Now on a completely different topic, but related to plastic to carton. Very often, we talk about non-food. We talk about areas outside of our core categories. But we also focus on the business that is very close to us, the dairy business, and not only in milk, in this case, also in cream. And interestingly, and this is not something you would necessarily see everywhere. But in Germany, as an example, you will have a significant amount of cream packed in plastic cups, essentially. You can look at the slide and you see the classical plastic cups, which are used for cream. Now together with one of our close customers in Germany, NordseeMilch, we've been working on a project on replacing some of these plastic cups by cartons. This actually results in somewhere around 65% to 80% -- 85% less plastic for the retailers. So clearly, very interesting from their point of view. But also and very importantly, it also results in higher efficiency in transportation, logistics costs go down and overall TCO, total cost of ownership, which is in favor moving it from plastics into carton. It's something that is only just beginning with the end of last year when we started it. It's something we believe strongly in. We will have -- will be -- can be rolled out to more customers. A lot of that is, of course, private label in Germany. But as you will see also on the quote, we think this is a really, really good example of even in smaller parts of the -- in core categories close to our heart, how we can work on the plastic to carton replacement. Right. And I think with this, Bent, I will hand over to you and join you in a second again. Bent K. Axelsen: Thank you, Thomas. Let's jump straight to it, starting with the EMEA segment. For EMEA, we reported revenues of around EUR 222 million. That is a growth of 8%. That growth is mainly driven by the increased sales of filling machines, which was at a really high level in the quarter. That being said, this is compared to a rather softer quarter last or the year before for filling machine. And there -- back then, we also had a higher share of rental. So that is also exaggerating the growth level to some extent. The carton business and the closure business is rather stable year-over-year. What we are seeing is that there is a decline in the juice segment. This is very much driven by the high citrus prices that is depressing demand. That is then compensated by growth in the UHT segment, where we have customer wins, and we also grow with selective customers. The closure business is basically following the carton demand. In MENA, the business case is stable. We have a resilient demand in an environment that is quite competitive these days. When it comes to home and personal care, this segment is developing slower than expected. It takes more time to develop a new category, but we still believe in the long-term potential of this segment and the global mega trend. If we look at Roll Fed, as we have reported before, we see a decline in Europe, but the rate of the decline is lower. So we are hoping for that the tide will turn to some extent, and we will look forward to how that will develop in the following quarters. In India, on the other hand, the Roll Fed growth continues to be strong. We report a revenue growth of around 6% in India. And that is despite a weak season for juice where adverse weather has dampened the juice demand, and we also continue to see overcapacity and very strong competition and price pressure in the overall India market. When it comes to profitability, we are reporting EUR 31 million, slightly below last year. The margin is 14% versus 15% and that margin reduction is due to the fact that we are growing at a high rate in India. And we are selling a lot of filling machines in the quarter, and both those 2 factors dilute the average margin for the segment. On the operating cost side, what we are happy to see is that improved efficiency rate reductions are offsetting inflation and the continued increased R&D activity level. If we move to Americas, we are reporting around EUR 100 million. That is 18% growth. And on a constant currency basis, that is 28%. This is, obviously, the impact of the successful ramp-up of the Little Rock plant, where we are steadily onboarding customers throughout the quarter. In addition to Little Rock, we have very strong performance in the Canadian assets and that enable growth in the fresh dairy segments. All in all, this is also supported by a continued trend where dairies are prioritizing supply security, and they want to have a dual sourcing strategy and here, Elopak comes in. In addition to the volume growth, we also have carton price adjustments in America following the higher raw material costs. The EBITDA is EUR 23 million. That's up from EUR 19 million the year before, and the margin is improving to 23%. This is driven by the volume growth, obviously. But in addition to that, we have attractive mix effect in the business. And we're also very happy to report that Little Rock as a plant is delivering margin -- accretive margins to the group, in line with what we have talked about when we talked about this investment for the first time. So very happy to see this development. Also in America, we are seeing a benefit from improved operational efficiency, and that also includes improvements in waste. So that is good to see that we can grow and have operational efficiency at the same time. On the other hand, when it comes to our joint ventures, the results or the share of the net profit from these joint ventures are -- have declined to EUR 1.9 million from EUR 2.7 million, and that is reflecting a softer demand and change in consumer pattern in Mexico and Central America. If you go to the bridge from EUR 41 million to EUR 46 million, we start off with the revenue mix. As I mentioned, this is obviously driven by the American expansion with a strong growth. And it's also a result of price increases initiated throughout the year in Europe. And these 2 in combination are the main factors for the effect of EUR 9 million. The raw material cost base is stable. And below that, we see higher board prices that are almost offset completely by reduced LDPE prices. As you see on the chart here, we are very pleased to see that the operating costs, if you adjust for inflation, they are actually down compared to last year. And that is a result of a systematic initiative in the company where we are reducing the use of external services, stricter travel policies and generally improved efficiency in the way we are spending our money. The last bridge element, we have already talked about the joint ventures, but we see we have a currency impact of EUR 1.9 million, and that is a result of the weakening of the U.S. dollar. If we then move to the quarterly cash flow, we are very happy to report that not only this is a quarter with strong profitability, but it's also a quarter with good working capital turnover. So we start with the left, we start with the EBITDA, and we see we have a reduction of working capital of around EUR 28 million. Thomas talked about improved inventory of packaging material, reduced overdues. The high rate of commissioning of filling machine have also reduced the inventory of the filling machines. This -- we do have inventory increases in U.S. naturally because that comes with the growth. So the structural part of it is around EUR 7 million, EUR 8 million. And in the quarter, we have an unusually high account payable of around EUR 20 million, and we believe that EUR 20 million increase will reverse in the first half. So of this reduction, there will be a reversal, which will be close to EUR 20 million sometimes in first half because these accounts payables they are going up and down with the business cycle and the settlement of our raw material contracts. In addition to that, we are paying the EUR 9 million of taxes. The other is basically a reversal of the share of net profit because that is not a cash flow item, giving the EUR 63 million cash flow from operation, which is the highest figure we have seen in the quarter so far. Cash flow from investing activities is EUR 23 million. We see the investment of EUR 28 million, and that is EUR 8.5 million related to the U.S. plant. We do have our normal maintenance programs in our plants. Filling machine CapEx is lower than normal because we are selling more of the machines versus renting them out, and that reduces the CapEx. The cash flow from financing activities is minus EUR 32 million. That reflects the dividend of EUR 22 million and lease payments and interest. And as you can see from the chart, we have a reduction of around EUR 8 million in net bank debt if you compare Q3 and Q4. We want to talk about the year as well. And also for the whole year, we are happy to report that we are generating enough cash flow, both to pay dividends. We are -- for the year of '25, we are paying 1.5 year of dividends because we changed from one dividend payments per year to semiannual payments per year. So we do that. We have the investment program in Little Rock. And despite that, the bank debt year-over-year is stable. So we are very pleased to see that. And with that combination, that also brings the leverage ratio to 2x, exactly on 2, which is our midterm target. And that is a result of the profitability, the improved working capital that we have generated throughout the quarter. And I think what is good to see is that the leverage ratio as such is coming down from Q3, but so is the absolute level of debt, which is going from EUR 272 million to EUR 264 million. If we move to the return on capital employed, it's still picking up, getting closer to 16%, now 15.7%. And then we see the effect of the growth and operational leverage from our American assets. We still have some investments to do. We have invested $96 million so far in Little Rock, and we have $32 million to go for the investment in the third line that we announced in the previous quarter. So a good year with good profitability and very strong cash flow. So with that, I will give it back to you, Thomas. Thomas Kormendi: Thank you. So where does this then lead us? And I think summing up of what we have just seen here, it's clear that we talk about solid growth. We talk about EBITDA growth of more than EUR 9 million, revenue growth of about EUR 50 million, leverage ratio already now down to 2x, which is in line with our midterm target. And then the dividend for the second half of last year, leading to a full year of around 59% of our normalized net profit. And all of that actually is in line with what we said back at the Capital Markets Day for our midterm targets. And what we are seeing now when we look forward and look to the full year, we expect to deliver -- continue to deliver in line with the targets that we have communicated back then in '24. So with this, I thank you very much for your attention, and we'll hand over to you, Christian. Christian Gjerde: Thank you, Thomas. So with that, we will start with Q&A. So taking questions from the audience first. So I'll come around with a mic. Please state your name and the company that you represent. Ole-Petter Sjovold: Ole-Petter Sjovold, SB1 Markets. So 3 questions, if I may. First, on the utilization on Line 1. What sort of utilization are you currently running? And is your customer ready to receive all the products? Question 2 is, did you add on any further offtake from Line 2 and 3 during the quarter? And question 3 is on the Roll Fed market in Europe. Could you touch on the price levels you're currently seeing being offered from your competitors? Is this at sustainable levels? Or is this another antidumping potential case? Thomas Kormendi: Three questions. Let me try on the utilization. So what we said during all of last year, actually -- well, not all, after the ramp-up started is that. We saw a ramp-up somewhat slower than what we had planned. But as you can see, we mitigated that by producing more in Canada. So overall, the figures for Americas turned out very, very good. What we have seen in Little Rock is that the issues we commented on before, which had to do with some of our customers, their designs, onboarding some of their plants took longer. And we saw at the end of last year, we were getting very close to the right ramp-up speed. We also saw, which was extremely positive, that the efficiency in manufacturing, when we measured in terms of waste, et cetera, we were really, really at a level that was actually slightly ahead of what we had thought. So it was a mix. So when it comes to the full year, we did not fully ramp it up to the level that we thought, but the speed at the end was -- is right, if you put it like that, very close to being right at least. The question on Line 2 and 3, right? So what is happening now is we are installing Line 2. What is also happening is that Line 3, as you know, will be installed by the end of this year and during '27. So in the meantime, we are currently working on some movements of products just to make sure that we get the best efficiency in Little Rock from that point of view. But it's frankly more technical how we move from one or the others and you have to do with sizing and things like that. Roll Fed, so the Roll Fed market is, as we've communicated and Bent said, it's very competitive. It's very competitive. Pretty much everywhere we look in Europe, you have excess capacity and you have more capacity coming in, maybe not directly in Europe, but in the Middle East, which can also support into Europe. What we have seen in Europe is a stabilization of our Roll Fed volume to a certain extent. It's -- we have seen and we have actually walked away from quite a lot of business because it was at an unattractive margin before. And now we see that we are at a more stable level. If you ask, is it sustainable with the pricing levels we're seeing, I think the answer is no. It's not. It's not sustainable to make the kind of investments that are being made and then produce at -- with margins that are being produced. It's not sustainable. It's also a business when you look back a couple of years, you have seen companies close, you've seen bankruptcies, et cetera. It is a business with overcapacity in Europe, and it's not sustainable to supply at the margins that are, in some cases, being supplied. We are not doing it. Marcus Gavelli: Marcus Gavelli, Pareto. So just first on the filling sales machines today. Could you try to elaborate somewhat on the geographical split on that, just first within EMEA and if you can -- as most granularity is preferred, but if you could provide any color on where do we see filling machine sales firming up? And also on the order book as well, how you see that now looking into 2026 versus when you look into 2025? Thomas Kormendi: So if we look at the filling machine, we look -- we think about filling machines in 2 perspectives. Bent talks about commissioning, right, which is, obviously, very important for us. This is when they start producing and we get them out of our working cap and inventories. When we look at the order intake, we are seeing good order intake in U.S. rather -- yes, in actual U.S. in this case, U.S. but also in Europe. And we're seeing it in South Europe and also we see in Northern Europe. There is no -- I cannot give you an answer saying one or the other area right now is a lot more -- a lot stronger. Last year, South Europe for us was, from an order intake point of view, very strong actually. Bent K. Axelsen: I think it's also if you want to see the split between America and EMEA, you can look into what I believe is Note 2 where you see this split between the segments. Marcus Gavelli: And just on the -- let's call it the aseptic rollout, you're trying to -- it's at least in your IPO and CMD, you used a lot of time on the aseptic rollout and how you want to develop that into Europe. How are you seeing that? You didn't use too much time on it in the report today. You say Roll Fed volumes are stabilizing. Are we seeing that same trend in the aseptic segment? Thomas Kormendi: Yes, I think if we look at the overall market on aseptic and for us, aseptic Pure-Pak currently is Europe only. And Bent pointed out as well, the juice sales, not specifically linked to our business, but in general, is under a lot of pressure due to high raw material costs, citrus prices, et cetera. You will go into any shop here and see it's become pretty costly with juice. We see that as well on our aseptic Pure-Pak business. On the other hand, we see higher than market growth in our UHT sales. So machines that are producing clearly UHT milk, but also other non-juice related products will tend to see good sales right now. Then you have, as always, exceptions also in juice. There are some customers who do better than others. But overall, juice consumption is strained. Bent K. Axelsen: And also to add to that, I mean, there's a completely different dynamic between the Roll Fed business where we have lost market share, not only because of the pricing pressures, but because of tethered cap regulation where customers move to other formats. So there is a shift in format change -- in format preferences. So it's not all price competition. But there, we lost some market share. In Pure-Pak aseptic, we don't lose market share. It's a system where we sell the whole package. So these 2 businesses are perceived very different by our customers, and it's also run by us in 2 very distinctly different ways. Christian Gjerde: Okay. No further questions from the audience. Okay. Then we will move to the questions that we have received online. So I will start with questions from Jeppe Baardseth, Arctic Securities first. What was the gross margin, excluding India and equipment sales? And how does this compare with historical levels? Additionally, could you clarify the gross margins for equipment sales and for India, respectively? Bent K. Axelsen: So this is -- I don't know what you say, Christian, but that is probably beyond the disclosure level, but maybe I could add some color. When you sell a filling machine in Europe and many of the machines and you will find that and you'll in the notes, they are commissioned in Europe. When you have a sales, you have very limited margin. That is a fact. So you really cannot compare filling machines with blanks. When it comes to the blanks and closure business, in Europe they are rather stable and the margin level of the blanks business also are rather stable, if not slightly improving. When it comes to India, India margins do indeed impact the margin in Europe. We have not disclosed those effects accurately. All I want to say around that is that we are taking measures to not only improve pricing in Roll Fed, but also work on the raw material side, both the way we work with our suppliers from a price point perspective, but also from a value engineering perspective. I think that's probably as far as we can go to stay consistent with our disclosure level, Christian. Christian Gjerde: Yes. Thank you, Bent. Continuing then with additional questions from Jeppe. What factors are driving the slower-than-expected growth in home and personal care volumes? Approximately what share of total sales does home and personal care segment represent today? Thomas Kormendi: So let me start by the factors, what is driving -- maybe the question is why are we seeing the speed of ramp-up that we are seeing? And there are a couple of reasons for it. Firstly, I think it's important to remember, we are trying to do something new, right? We are trying to change something that has been around for many, many, many years. That takes a while. And many of these companies that will be working in these categories are large FMCG, large multinationals who frankly take their time. They have the equipment installed, they have the production base installed. There has -- it doesn't mean necessarily that everything will deliver in line with our plans or even their own plans. But there are other things in it as well, right? There are things that when you look at the non-food area, we are seeing quite a diverse picture. We look at it from a Nordics perspective, it's moving very, very fast. We see more and more equipment. We see more capacity needed. We go further down in Europe. We have retailers who, in some case, actually, in the case of Lidl will have set up a system around plastic recycling. And then that is a strong motivation for them to maintain -- to drive that business in its own right. And then we have, of course, companies and areas where we say, is it the right size? Is it the right format? Is it -- is there something around the way it looks? We are actually, as we speak, launching generation 2 of our system, which offers a different way of displaying our cartons, displaying non-food products in a more, I think, you can say, creative -- and using some of the advantages that are given through the designs, et cetera, which we think will overcome some of the obstacles in this. But I think the reality is, big FMCG areas tend to be slow moving. And there's a lot of testing going on. There is more equipment going in now. We are very committed to making this a success. We strongly believe it will be, but we have to accept that it's taken a little bit longer time. Bent K. Axelsen: I think you've [ answered ] that. So the consumer priorities in 2026 compared to 5 years ago, they have changed. So there are other concerns and carbon footprint is probably not as high on the list from a consumer perspective. The companies and the brand owners, they still have their commitments, but that not necessarily the value proposition they are bringing to the consumers where the convenience will be the key criteria. Back -- on the question of how big it is today? I think you can say that today, the non-food volume is insignificant. But when we laid out the strategy, there was an expectation and an ambition to grow more than what we have done in 2025. So it's more to report that the trajectory so far since we laid out the strategy is not at the speed that we expected it to be, albeit from a minute starting point. Christian Gjerde: Thank you, Thomas. Thank you, Bent. So continuing with one last question from Jeppe, relates to the competitive landscape in the U.S. So are we seeing any indications of additional demand following customers' supply chain derisking to call it that? Thomas Kormendi: I think you can say yes, shortly without being too specific around it. I think there is an understanding and a recognition that we are putting capacity in. We are investing in Americas. That is not done by any of our competitors. And hence, there is a sense that from a contingency point of view, it's customers who we have typically not been -- have not been ours are now coming to us as well. It is frankly also part of the plan and why we established both Line 1, 2 and 3. So I think this is in line with what we had hoped and expected. Christian Gjerde: Thank you, Thomas. That's a good segue to the next question from Charlie Muir Sands from BNP. How much of Little Rock's capacity has now been sold or committed to customers across the 3 lines? Thomas Kormendi: I'm a little bit uncertain to us how explicit we are this in terms of disclosure. What we have said, you remember, is by the time we invest in Line 1, it was sold out. That was number one. Then we said we invest in Line 2 and we didn't sell out Line 2 because we wanted this to start up and get some experience. And then when we invested in Line 3, I think we said 80%, 90% was sold out. So that is the level we have had. Now what I then said is there will be some mixes here, right? Some volume will move, and we may see some movement into Line 2 earlier, et cetera. But overall, that is where we are right now. We are evidently continuing to sell volume and ensuring that the lines will be filled when we move on. But what we're also doing, and this is very important is, we are looking at Americas from a full supply chain perspective. And in Americas, we utilize all 4 factories. So Canada, Little Rock, Mexico and the Dominican. And what we are working on now, and going to work on is to make sure that we get the full optimization between the 4 factories rather than just talking about lines in Little Rock. Christian Gjerde: Thank you, Thomas. A couple of more questions from Charlie. What is the 2026 CapEx expectation? If leverage continues to decline, what is your priority for surplus capital, higher dividends, M&A, buybacks? Bent K. Axelsen: Right. So we announced Line 3 in the third quarter. We are building the second line Little Rock in the first half of this year. And we're also doing upgrades of some of the lines in Europe. So if you go back to the Capital Markets Day, we said that overall, the CapEx level will be around 5% to 7% of the top line. With that progression of the investment program, we will be on the higher end of that range, if not more, in 2026. So given the acceleration of the growth program, especially in America, we don't expect that there will be a lot of surplus -- extraordinary surplus cash. But you have seen from the dividend, we have given out now 59% that we are always looking to -- into the balance sheet. And as long as we are investment-grade [ land ] and delivering a leverage ratio of around 2x, and then we are willing to pay the dividends. But 2026 is going to be a relatively high investment level compared to 2025 for the reason I mentioned. Christian Gjerde: Thank you, Bent. Then we have a question -- last question from Charlie, and it relates to the raw material costs for '26. So could we comment anything on how we see liquid packaging board pricing developing for '26 and also our other important raw material inputs? Bent K. Axelsen: Should I take that? Thomas Kormendi: Yes, please. Bent K. Axelsen: Thank you, Thomas. So what we are seeing is that, generally speaking, for the year of 2026, the liquid packaging board raw materials are increasing average. There are pluses and minuses based on the different product categories. But overall, the liquid packaging boards are increasing. And remember that in Europe, we are negotiating multiyear contracts with the opportunity to adjust prices annually. So you will not see any volatility or any changes in the liquid packaging board prices throughout 2026 because those are contracted with very close to fixed price. When it comes to LDPE, we have reported over a few quarters, a softening of the LDPE. And I would like to remind that we are also hedging the position on LDPE and that hedging rate is typically 70%, 80% either through the commercial contracts or through the financial instruments. Christian Gjerde: Thank you, Bent. Then I have one question from Hakon Fuglu or actually 3 questions from Hakon Fuglu. It goes back to the raw material prices again. So how are we able to mitigate the increases that we are seeing on liquid packaging board as an example? And how are you seeing this impacting volumes in EMEA? Thomas Kormendi: Maybe I can start on this... Bent K. Axelsen: Absolutely. Thomas Kormendi: On this part because what we have done this year is we have increased our pricing, adjusted our pricing in line with what Bent just said, based on the fact that raw materials are going up. Now these price increases we've implemented early on from this year. They are implemented from January. And that's the one way, of course, we are offsetting it. The other one is evidently, given that we are also living in a competitive environment, we continue to improve on the efficiencies we talked about during this presentation, operational efficiencies, all the things we can do to offset these kind of increases. Volume-wise, what we see and believe is evident when you have these price movements, there will be ups and downs in the market. But as I said in the outlook, we believe that we are going to deliver in line with our midterm targets as communicated back in '24. Bent K. Axelsen: Absolutely. And maybe to add one more thing as a mitigating factor for Elopak, which is quite Elopak specific, is the very strong growth we have in America, and that is giving us operational leverage and diluting the fixed costs. So that is also a way to mitigate and manage EBITDA margins. Christian Gjerde: Thank you, Thomas. Thank you, Bent. A couple of more questions here before we round off. So continuing with a couple of more questions from Hakon. Can you comment on end consumer demand in the U.S.? Are you seeing volume growth on milk and other dairy products? Thomas Kormendi: That's actually a very good question because what you see in U.S. is somewhat of, call it, softening or drop on plant-based. And as you -- some of you, I'm sure you will have known that recent years, plant-based gained share on the back of milk, which in turn somewhat declined. Now for reasons related to health, related to nutritional value, et cetera, there is a little bit of headwind on the plant-based side. And some of the plant-based products are seeing that more than others. What we hear, but I have to say here, because there are no really solid facts around it, but we hear that, that is then giving the milk consumption a resurgence in U.S., more protein -- focus on protein, et cetera, et cetera. As you know, the milk production and the milk consumption, but not liquid milk, but milk in general, is increasing a lot in U.S. and that has to do with cheese, spreadables, exports into China, et cetera, has been the driver there. But the liquid milk part over some years has been declining. And there are indications that, that is now turning around. But it's -- I think it's early days to say that. Christian Gjerde: Thank you, Thomas. Then we will take one last question before we close off. That's from Alessandro Foletti from Octavian. Q4 growth was much stronger than full year growth. It seems that Q4 was -- saw an acceleration. Was this all due to stronger sale of filling machines? Or did you see somewhat of a market recovery? Bent K. Axelsen: This is very much filling machines. If you are focusing on EMEA, we do have a commissioning plan. And when you make a commissioning plan that has a tendency to be quite linear in reality. Most of these contracts, these machines get commissioned in the fourth quarter. And I think if you look at December, I don't think we have ever seen so many machines being commissioning in 1 month. This is not because suddenly the interest was much higher, but it was basically a needed catch-up to get back what we lost in commissioning speed in the beginning of the year. So that would be the EMEA part. And in America, of course, then is real underlying growth, and that is not related to the market, but that is basically the market share we are getting being that second supplier to secure security of supply for the customers. Christian Gjerde: Perfect. Thank you, Bent. So that concludes our Q&A session and results presentation for today. So I would like to thank everyone for joining both here in Oslo and you joining online. Thomas Kormendi: Thank you very much. Bent K. Axelsen: Thank you.
Nicola Gehrt: Thank you so much, and good morning, ladies and gentlemen. It's my pleasure to welcome you to our first quarter 2026 results presentation here at the Congress Center in Hannover, where we will be holding our AGM later this morning. My name is Nicola, and I'm Group Director, Investor Relations at TUI, and I'm delighted to be joined for the presentation by our CEO, Sebastian Ebel; and our CFO, Mathias Kiep. We look forward to sharing with you the details of a very positive start to the new financial year, along with an update on current trading and the reconfirmation of our outlook. In the interest of time, we will keep the presentation brief before we open the floor for your questions. We kindly ask you for your understanding that due to the AGM, we will need to limit the session for 1 hour. And with that, I have the pleasure to handing over to Sebastian. Sebastian Ebel: Thank you, Nicola. A very warm welcome from all of us here in Hannover. The sun is shining the first time since a couple of weeks, but the snow is still outside, but we hope now for warmer weather. You know the agenda, it's very similar as you are -- as you know it. I will do a short introduction about the last quarter. We are very happy about the results. Last year, first quarter was good. This year, it's even better. We have seen an increase in EBIT of EUR 26 million despite the cost of the Melissa hurricane of Jamaica. I will talk about this later on. And this improvement is based on a positive HEX trading momentum, but also an improvement in Market and Airlines. And we have seen strong demand in Holiday Experiences business and we have seen the right demand for our risk capacity, which we use -- which we wanted to fill as much as possible with the right margin. And you remember that the main target for the retail is also for the sales activities to fill our assets. And by having this positive momentum, we can reaffirm the guidance -- the EBIT guidance for '26 of 7% to 10% growth. And we also see this growth for the coming years. If we go into the details, first quarter in Holiday Experiences, we were able to improve the result by EUR 18 million despite the one-off impacts in hotels. The Jamaica, you remember, Melissa, who was affecting the business in Jamaica, we had to close hotels the Riu hotels, the Royalton hotels for the whole time the first quarter, and you will see it later, we also had to cancel a significant amount of flights from the U.K. to Jamaica. Nevertheless, we have -- if we take the one-offs out in Hotels & Resorts, we would have seen a EUR 6 million improvement and without that, we are EUR 19 million below. And exclusive of Jamaica, you see that the occupancy even in winter grew by 1% and the average daily rate grew by 5%. Cruise is very strong. We have seen a significant improvement in result despite a significant higher capacity of 16%. Occupancy were up by 3%, almost reaching 100% and having the same daily rate, an outstanding result. And also Musement and winter is not so important, has seen a slight improvement. When we look at Market and Airlines, we also have seen a EUR 10 million improvement versus prior year. This includes a negative impact of Jamaica, EUR 6 million. As I said, we had to cancel flights to the island, and this had a EUR 6 million impact. For us, it has been important and it is important and will be important that we have the right risk capacity because with the right risk capacity, we can protect our margin. And the growth today in the future should come from dynamic packaging. And that we did that quite well in this quarter is shown by the load factor, which went up by 1%. And what we see is also the first benefit of our cost reduction program. Some special items we have seen and initiatives we have seen in the first quarter. We are really proud that we announce our market entry and open our network in Romania on Thursday, I will be there. And it will be after [indiscernible] which we opened 2 years ago. It's doing very well. It will be the second in the market which we opened. We had a prelaunch a couple of days ago. We see quite promising demand and good margin. And again, it will help us to fill our assets in Europe, but also outside Europe. We also are increasing our River Cruise fleet. The second Nile ship had been launched, and we have now -- we operate now successfully 6 vessels. We have put a lot of effort in improving further development in our app. We, as you may recall, we are bringing forward activities on the same global IT platform. The app was the first platform, which we not only harmonized, it's the same one. And now we do see day by day the benefit of doing so. If you look at the app today, the AI application is really a success story. And we have seen a significant conversion growth and uplift in bookings through the app. And the app is the most efficient way to book and to keep customers and to increase retention, and we are very happy. And the potential for us is huge if we compare us with best of breed. We also signed a partnership agreement with Jet2 on the Musement activity platform. We are very thankful for the trust Jet2 gave to us to integrate the Musement platform after Booking.com, easyJet and lastminute.com, it's the fourth big wholesale partner. We don't take it for granted. It's a big obligation for us like for Booking, like for easyJet, like for lastminute to deliver outstanding products to the Jet2 customers. We are growing on the hotel side. We have a strong pipeline. As you know, we opened 5 hotels in Africa. We opened 1 hotel in Vietnam. So these are -- especially these are the 2 regions where we are growing, and we want to grow further. Sustainability is key of our DNA. It's not a trend which may have faded away a little bit. For us, it's very important for our customers for the climate, and it's commercially a sound business case, and that was recognized by achieving the A rating of the CDP. And Mathias, if you like to go into the numbers. Mathias Kiep: Thank you very much, Sebastian, and a very good morning also from my side. Thank you for joining the call. As always, I want to give an overview about the performance, then the EBIT bridge and then details to P&L, cash flow and the balance sheet. And Sebastian, as you said, we are very pleased with the first quarter results and this first step into the new fiscal year. And -- if you look at this, it's really great that we not only have an operational improvement of the numbers, EUR 77 million, the highest underlying EBIT that we've ever seen in this quarter, but also another progress and step improvement in our balance sheet and the underlying financial profile. Net debt improved another EUR 0.5 billion year-on-year. This includes EUR 0.2 billion FX impact, but the underlying decrease, EUR 0.3 billion is coming from all the measures that we undertook over the last 12 months. And as elements of this progress, I would like to highlight: one, we've now also taken the final cruise ship from Marella into ownership. And as you may have seen and recall, we have also repaid early the outstanding remaining amount of the old convertible 2028. And as you said, Sebastian today is the AGM where we will return to dividend payments. That is, for all of us, a very important and great moment. So for the details, as I said, EBIT bridge, P&L, cash flow and balance sheet. Now as you saw in the front section, there's really a strong underlying development in all segments. In the hotels, please remember the impact that Jamaica has. Second, that we had a positive one-off last year of around EUR 15 million. We also called that out. And against that, we have the results in this quarter. So overall, an operationally positive development and a negative impact through these one-offs or the not repeat of one-offs. Then you see the very strong development in Cruise. And I think it's really great to say not only the capacity addition and the earnings that come from that in TUI Cruises, but also the constant improvement in Marella and in the operational development of TUI Cruises. So alone, the rate increases in Marella for the winter, we talk about 5% again. I think with the ships that we have and with the concept, that's really a fantastic achievement. Musement, really good development, strong cost control. And then as Sebastian mentioned, even despite the impact that we also see there in Jamaica with the long-haul business, a very strong operational development, and it's so important to manage the capacity, one; and second, to make sure that we continue to deliver in our own assets and business in holiday experiences. And with the EUR 77 million, a really strong start into the year, EUR 26 million more than we had the year before. Now to the P&L, two things to highlight. One, it's the first underlying result, which is positive pre-minorities in this quarter. In tourism, you normally have a negative result, also operationally in the winter. So this is even more so very pleasing to see. Also as a result, our loss per share halved effectively for that quarter year-on-year. And one contributor to that is another improvement in the interest expense that comes from all the measures that we did, in particular, the lease portfolio restructuring and taking the ships and ownership. So that's another EUR 10 million improvement that helps us to reaffirm our guidance of EUR 325 million to EUR 350 million. On this number, please remember that most of our payments dates for financial instruments are more in the second quarter, so it's quarter 2, quarter 4. So we can't take this times 4. There's a higher interest payout in Q4 and Q4 compared to Q1. And -- with that to cash flow and cash flow is in line with expectations. The very important element is that the structural savings that we worked on and that we achieved interest payments, the fall away of the regular contributions to the U.K. pension scheme and a reduction in the lease and asset financing repayments, that helps to offset the higher investments that we wanted to see in the hotel segment and that we need to do in context of the Boeing delivery portfolio. And all in all, a EUR 50 million improvement in the first quarter on the cash flow side. Coming to the balance sheet. And as I said, the EUR 0.5 billion improvement is driven by the improvement that you see in the lease portfolio, aircraft and ships in particular, and includes also EUR 0.2 billion FX movement. Now this strong performance and the strong advantage, we will not see this coming and going through the rest of the year because we will see more aircraft being delivered. I think this year, Sebastian, we talk about up to 15, maybe a bit more of planes coming from Boeing. So that will -- because they directly move on balance sheet, impact that. But overall, we continue to see a further improvement of net debt in the full fiscal year. And concluding from my side, because we got the question a lot about the mechanics for the dividend payments. So today is the AGM. We put that to road show. Shareholders are expected to approve the dividend payment. And then tomorrow, we will pay into the system. So our shares go ex dividend. And then on the 13th, there will be the payment date from the system to shareholders. And with that, back to Sebastian on the way forward, how our bookings and the guidance look like. Sebastian Ebel: Thank you, Mathias. So a good start into the new year. How does the future look like? What do we expect? If you look into Hotels & Resorts, we do see that the available bed nights will significantly grow in the second quarter, but also for the full half year. The occupancy for the second quarter is on the same level like we have seen last year. This includes -- that excludes the Jamaica effect. We are with 4% below last year when it comes for the second half year. That is not a concern to us because we are still in the ramp-up phase when it comes to Jamaica. But also, what we do see, by the way, this is also very valid for Markets + Airline. We see a late booking trend. The available -- the average daily rate increase is about 3%, which is a healthy number also to cope with the cost inflation. On Cruise, the outstanding picture remains. What we do see is that the capacity growth is getting smaller, but it's still significant. Occupancy is 4%, respective 3% in the second half up. And you should recall that the ships are 100% full. So this will further reduce to 0. But what we now can do is to optimize the price because we are so well ahead in being booked the ships. Musement, we expect a mid-single-digit growth for experiences. And this in a market which we do see is a very good result and shows that Musement is doing an excellent job. When it comes to Markets + Airline, and I would like to start to reiterate again, we slightly reduced our risk capacity, it's all about to sell the risk capacity, flight, hotel owned assets with -- in a way that we protect margin. The growth should come through the dynamic products. And by having said so, we will see a winter on the same number as last year, especially when we take into account the last-minute business. What we do see is -- I just look, for example, for the number of yesterday, we see that after the strong winter we had where the footfall was significantly down for retail, we see that the weather has normalized in the last 4, 5, 6 days, and therefore, the business has immediately picked up significantly. And for summer, we are slightly below last year. Also there, we are very confident that it will move into the same level as last year. And the focus is on protecting margin and the focus is on filling our risk capacity to fill our aircraft and our hotels. We are well hedged, as you can see, and the hedge position gives us an opportunity with today rates. And by having said so, we can reconfirm the guidance, the increase in EBIT by 7% to 10%. And as I said, a good start in the first quarter. We are confident for the second quarter, and we also expect a good summer. There's one chart left, the summary. And just to repeat, both sectors support each other. The vertical integration is -- makes our business model strong and resilient. The marketplace benefits from the exclusive products and the Holiday Experiences benefit from the strong sales. And together, we protect revenue and margin. And as I said, this should bring us to the ambitious growth guidance we have given. And therefore, we also could reiterate not only the dividend proposal for today, but also for the coming years, 10% to 20% of the underlying EPS. Nicola Gehrt: Thank you, Sebastian. Thank you, Mathias. We are now available for Q&A. Operator: [Operator Instructions] Our first question comes from Karan Puri from JPMorgan. Karan Puri: I've got two quick ones. One on the summer trading that you just mentioned. So tracking at minus 2%, how confident are you to hit your 2% to 4% top line growth guidance in that context? If you could take that one first, and then I'll move to the second one. Sebastian Ebel: As I explained, we are confident that we will achieve last year's level. Mathias Kiep: And on the revenue -- and I think you also asked about the revenue guidance, 2% to 4%. I mean if you look at Q1, there is -- on constant currency, there's a 1% improvement. Now we will also see increase of sales from our Holiday Experiences segment that also needs to be factored into this revenue guidance. And that's why we're overall reiterating our guidance also on the sales side this morning. Sebastian Ebel: And what I would like to remind you, the strong growth in TUI Cruises, you don't see in the TUI AG numbers, not in our numbers because the revenue is not consolidated. So this significant impact is not impacting TUI. So this is outside the consolidated TUI revenue number. Karan Puri: Yes. Understood. And second question was actually on your partnership with Mindtrip and other LMMs. Is it possible to maybe share some early indications of progress made with these partnerships? Anything on the distribution unit economics will really be helpful here. Sebastian Ebel: Yes. So distribution is changing. We very much believe in retail. That's key, and it's commercially a sound case because the margins and because of the early sales are strong. We're seeing and expect a very significant change from web to app and to LMMs and social media. And we put a lot of effort and investments into creating an outstanding app. We have releases every 2 weeks. It's really improving a lot, and we do see that in the numbers -- growth numbers in the significant improved conversion. So every 2 weeks, you will see new applications, including AI applications and new ways of search. We have started collaborations with LMMs and Mindtrip. We have started to sell to ChatGPT. So I'm really proud that we're there on the [indiscernible], on the lane to overtake. And at the moment, we do see that we get the first numbers of traffic. It's still low. It's still more that people get information, but they can book with us as well. And we really want to use this channel as good as possible. Operator: The next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can you just help us understand these hotel KPIs with and without the Jamaica impact? I mean, are you able to tell us what the occupancy is in Q1 and Q2, perhaps with Jamaica included, so we can see the sequential trend through to the second half? Because I'm seeing some investors concerned about what that means for the hotel trend, but that's not quite understanding how you're presenting those KPIs. And then just the second question would come down to the reduced interest costs and the impact of bringing assets back on to the balance sheet. Can you just explain whether these gains are one-off or whether they are sustainable? Are they onetime things as you bring the assets on balance sheet? Or are they all enduring improvements to the interest cost? Sebastian Ebel: I think we have stated that the Jamaica effect was EUR 15 million on the Hotel's side, and that should be reduced to 5% to 10% in the second quarter, which means that a significant part of the 4% is based on the Jamaica effect. And there, we would expect till the end of the second quarter, this should be very much normalized to it. And that's why we feel confident about the occupancy for the hotel business in general. Mathias Kiep: Yes, and on the interest results, so what you see for Q1 versus last year is really a structural improvement. And we had last year and -- a better interest environment with regard to interest income. And also, we had a smaller one-off during the year that we also published that was in H2. And that's why the guidance, the lower end is in line with what you saw as a full result in last year. But the improvement, that's what we worked on is really structural. So it's replacing leases from the past that are not with regard to market terms that we can get today with more attractive instruments or with cash proceeds. Operator: The next question comes from Leo Carrington from Citi. Leo Carrington: If I could ask two questions, please, both really about your demand. Firstly, in terms of the demand against your risk capacity adjustments, can you give a bit more color of what these -- what the shape of these adjustments was? Is it certain destinations, certain dates or across the board? I'd be interested to know how you're planning for this year? And then secondly, in terms of how we should understand consumer preferences, what's your view on the differing trends between the hotels which is perhaps more competitive, later booking trends versus cruise, which seems to remain very strong. Is it the product? Is it demographics? I'd be interested. Sebastian Ebel: As you have seen, the occupancy in Markets + Airlines in the first quarter was up 1%. This, you can put into -- relation to the slightly lower number of customers. What we have taken out and capacity is not our own flying, not our own hotels. It's third-party commitments. We had full chargers, allotments, guarantees and that we have reduced significantly because we also believe that this capacity is available dynamically. And we wanted -- just wanted to make sure that our risk capacity, the ones which we produce ourselves, we can fill for a decent margin. So it's all about third-party capacity. We haven't seen a negative impact on the hotel business, except the Jamaica business. And this is not a surprise. All the hotels, the Riu hotels, and the Royalton were closed. The Riu hotel started to get opened in January. The Royalton hotels will be opened just before Eastern because they use the time for renovations. So this is an impact which we couldn't avoid, we do see that the business is healthy. Of course, there are markets which are stronger than others. What helps is the international sales organization we have, if one market is less good, the other one is better. When it comes to consumer preference, one thing is clear for us. That's why we invest so much in international sales activities. We want to make sure that if one market is weaker, we can get the customer from somewhere else. Therefore, the share of international customers in our own assets is growing, and that gives us the confidence to really see, again, outstanding numbers there. If you look at the overall demand, the one group which is buying later are the families and also this is understandable to see. Leo Carrington: Can I just ask a follow-up on that first point on the risk capacity? Do you get the sense that this -- the allotment say in the hotel capacity that you've not taken on this year has gone to other tour operators? Or is it possible that you could actually fill it dynamically later in the season? Sebastian Ebel: Yes. That is very clearly the concept. It doesn't mean that we don't have a great relationship to the hotel. It's sometimes also the wish of the hotel. It's the wish of ourselves because then it's up to the hotel -- hotelier to know what is the best price he want to offer to get the volumes. And this uncertainty, what is the right price we take away if we still work with the hotelier on a very exclusive basis, but having a risk capacity, which is mainly -- is not there anymore, but the capacity we use is by getting dynamic rates. So the model is in the longer tail changing to dynamic. And this is something which we will see huge benefits in the future. Operator: The next question comes from Andre Juillard from Deutsche Bank. Andre Juillard: Two questions, if I may. First one on the source market. Could you give us some more color about the trend you are seeing in the U.K. and in Germany, which are your 2 first markets? And in terms of destination on the other side, you are mentioning that Greece, Balearics, Turkey and Egypt are very strong. Could you also give us some more color about the trend you are seeing if you have some new destination emerging? And also what is the most profitable one or the one on which you see the strongest operating leverage? Sebastian Ebel: I will not give you the details which one is the most profitable one. I do apologize for that. Egypt is very, very strong. Bulgaria and Tunisia, so the lower cost countries are strong. Greece and Spain are stable. Turkiye is suffering at the moment because of high inflation and low currency devaluation. So -- and it's more a family destination. If you look at our clusters, we do see strong demand for Sansiba. We also see good demand for the Middle East. For Asia, we see less good demand for the U.S. And if you look into the main markets in Europe, the Eastern European market, and that's why we are so happy to move into Romania. Germany and the U.K. are stable, but with significant competition. Germany, as I said, will see a catch-up because we had since the week before Christmas, minus 5, minus 10, minus 50, 0.5 meter snow and the footfall was really 1/3 of what we had seen before. So that's why we expect that Germany will be stable or will see a slight growth. And I would say that the U.K. market is -- the sun and beach market is -- especially mid-haul is strong. On the long haul, there might be some more weakness, but that's what we have to wait for. Andre Juillard: Do you see anything specific on the source market and destinations that was not anticipated or something which is really scary or anything special? Sebastian Ebel: I mean we are happy about the strength to Egypt because we benefit from us. Turkiye is a concern, but I mean, that's the good thing if you are more and more going to dynamic, if you can bring clients from A to B that a lower demand in one destination is -- needs some replanning but didn't kill profitability. So that's good. I mean maybe it will be interesting to see how the demand to North America will develop, but we don't fly to it. It's very small. It's not relevant for us. It's nice to have, and it clearly has an impact on the revenue numbers, but it's from a profit point of view very, very small. I think we have flight per week to Melbourne in California. That's all. So there is no -- and one hotel in Miami, the Riu Hotel. So the exposure is very, very minimal. But of course, it has an impact on the revenue side. Operator: The next question comes from Kate Xiao from Bank of America. Kate Xiao: First, I want to ask about your river cruises product, which you kind of highlighted as part of your Markets + Airlines on one of the slides. Can you talk to us about the market opportunity there? It looks like you guys are adding capacity. And what's your sense of the latest demand and pricing trends? Is it healthy? Is it stronger or weaker than ocean cruise market? That was the first question. And the second question on your Musement partnerships. You're highlighting kind of new partnerships with Jet2 on top of existing partnerships. Can you help us understand the long-term market opportunity with these partnerships? And how is the economics looking compared to kind of your own traffic? And also over the long term, what's your margin goal for this business? Obviously, you guys are ramping up profitability. What do you think is the long-term realistic margin goal theoretically? Sebastian Ebel: So on cruise and river cruise, the demand is big. I mean there's one major difference for a new ship, the profit is EUR 60 million, EUR 70 million for a river ship with maximum 200 passengers compared to 3,000, 4,000 is limited. But nevertheless, it's a great product. You get access to customers to bring into the TUI ecosystem, and therefore, we like it. So strong demand. The good thing is, and you may have heard a lot of orders, but the restricting factors are the slots in the harbors, in the city harbors. And that protects very much the margin, and we are very happy to own slots, and therefore, it's a very stable business. Can it scale to 10 ships, 12 ships? Yes, but it's still 10 ships with 200 passengers and which is just half the size of an ocean cruise ship. So it's nice -- it brings -- it's profitable, but it's good, especially good for the TUI customer ecosystem. On the partnerships, yes, you're right. It's 1 out of 4, and there are smaller ones as well. And I think it's great if our partners can sell more to their customers, profitable, and it's good for us as a producer. We have 2 focuses -- or we have a lot of focus, but 2 main focus on growth. One is through the wholesale partnerships. Second, on the own products because our business model or it could be, but we have decided not to do is not to sell the long -- I mean, we also sell the long tail, but that's not where we've spent the marketing money for. We spent the marketing money to sell the own products where the margin is not 10%, not 12%, but it's 30%, 40%. The catamarans, electric bicycles, or whatsoever, the special entries into coliseum and other things to really where we have created with our own buses, for example, own products because there, we have the big customer base. We can fill them from the first day onwards and they bring us good margin. So if we say 7 -- or 5% or 7% growth, it's mainly on own products and less focus on the long tail that comes along with the customers we have gained. And we hope, of course, if the customer who lives in Berlin wants to buy a theater ticket in Berlin, they also use our app. But there, the margin is EUR 2 or EUR 3, very limited. When this customer, for example, buys a transfer at Mallorca Airport, the benefit is EUR 20 or EUR 30 or EUR 40. So that is -- it's not scale. It's really -- of course, it's also scale, but its scale more from B2B, and it's more really incremental significant margin through own products. Operator: [Operator Instructions] The next question comes from Richard Clarke from Bernstein. Richard Clarke: Three, if I may. Just want to kind of loop back on the philosophy around the shift to dynamic packaging, and I think you say it's around sort of preserving margin. If we were to look next year into sort of 2027, I guess with -- you'd expect lower lease costs on planes, lower fuel costs with the weak dollar. And so the profitability of flying is probably going to increase for you. Could that possibly lead to a lean back into risk capacity? Or is the direction of travel always going to be towards more dynamic packaging irrespective of what the cost environment is? And then second question, just on cruise. I guess, pricing up 1%. You said in your prepared remarks, you see some opportunities to push a bit harder on price maybe beyond the current capacity growth. I guess you must be selling cruises more than a year out. So what is the pricing looking on that? Is there some expectations maybe into 2027 that we can start seeing cruise prices up sort of mid-single digits. And then lastly, a very quick one, but do you get any sense that you're losing any demand because of the World Cup in the summer of this year? So any sort of U.K. or German customers traveling over to the U.S. for the World Cup rather than maybe taking a TUI holiday? Sebastian Ebel: Thank you for the question. It's maybe an aspect I didn't get. We are in the middle of the transformation in Markets + Airlines. And the transformation is on the Market side and on the Airline side. On the Market side, it's especially to connect NDC airlines. To give you an example, last week, we -- or on the weekend, we integrated Finnair NDC into the Nordic system. And by getting this contract, we have seen a significant uplift for lower distribution cost. Of course, Finland is a small market. But with this thing to get more and more carriers on the lowest price tariffs, which we haven't had yet. This will help us to get the content and to get the content for the best price. The second part of the transformation is Airline. And in the Airline, we had 5 airlines or 6 airlines which were run separately. We brought the airlines together as one airline, two AOC and U.K. because not being part of the Europe and the European airlines. We have seen by bringing it together on the operational side, a huge cost improvement. If you look at our denied boarding compensation, it's 1/3 of what it had been because now the Belgian -- if there is an AOG in Germany, the Belgian airline that can fly and so on. What is still missing is the one commercial piece. So if you are a Spanish customer, you don't find a Spanish website where you find the flights to Frankfurt and to London. That's -- we are just doing it at the moment, as I speak, to bring this into the market. And we lose 20% or 30% of the demand because we haven't run the airline like an airline. And by commercializing the airline, and -- we will see despite the operational benefits, which we really realized this year, we will see the commercial benefits from next year onwards with a significant impact for the summer. On price in cruise, if we would -- I mean, when we increased the demand in the last 24 months and not the demand, the demand as well, but the capacity by 45%, 45% increase TUI Cruises demand. And I must say I was skeptical about not selling the volume, but price. But it was selling by far better than we had anticipated. And if we would have known that strong demand, we could probably have risen the price by 3%, 4% more. Fortunately, we are very well sold. So what we do now on the pricing side has an impact, but because the volume is small, the impact is limited. So the big impact will be in the coming years where we are good sold above the years before, but still a quite significant volume to be sold. And the last question -- the World Cup, I don't know. The effect had been strong 15 years ago, or I would say, 16 years ago. It has become slower -- smaller and smaller year-by-year. It -- one reason is 16 years ago, there were hardly big TV screens in a hotel or in your hotel room and you haven't had the live transmission. Today, it's very different. People can watch the game they want to watch on an iPad or on the computer. And therefore, I would say, yes, there is an impact, but this impact is small. Operator: The next question comes from Cristian Nedelcu from UBS. Cristian Nedelcu: The first one maybe on the Markets + Airlines, the splitting capacity dynamic versus risk capacity. I think it used to be 15% dynamic and 85% risk, I don't think it changed that much. But could you tell us how do we think about this year? We think about low single-digit declines in risk capacity and 8% growth in dynamic capacity? Or what's the range of outcomes for this year? And the second one, could we go a bit in more detail through the EBIT bridge in Markets + Airlines year-over-year? You have the forecast or the outlook for strong growth versus the EUR 200 million EBIT last year. Can we talk about the moving parts? Because we have the cost cutting 30% of the EUR 250 million that helps. But in the same time, we do have some wage inflation. We do have some inflation, I would guess, in your overhead and distribution costs. Your book revenues for the summer are down 2%. Now I'm making an assumption here. If the overall revenues are down 2% year-over-year, there's EUR 400 million lower revenues in the tour operator. How much are you cutting from your capacity cost year-over-year on accommodation airline and so on? Could you tell us a bit more the moving parts there? And what gives you confidence that you can indeed grow the EBIT in a strong way year-over-year? Sebastian Ebel: First, our main profit, and therefore, I'm always a little bit puzzled by so many questions comes to Markets + Airlines. The main driver for us is the Holiday Experiences business and the distribution makes sure that our assets are filled well. When you look at the dynamic share or the decrease in the risk capacity, it's not on our own assets, it's on third-party assets. So it has no impact on our own assets. And therefore, in the first quarter, for example, the load factor on our airline has even increased by 1%. If you ask about the split, we are not talking about a 2-digit percentage. It's a small or medium big 1-digit percentage. Mathias Kiep: Towards 20%, maybe. Sebastian Ebel: Yes, towards 20%. The future growth will come, of course, from dynamic packaging. And we -- due to the cost measures, we want to and will reduce the overhead distribution, IT cost in relation to the revenues. Operator: We have no further questions. So I'll hand the call back to the management team for any closing comments. Sebastian Ebel: Good. So we have had a good start. We are confident about the future for this year. Therefore, we could reconfirm the guidance. And we will benefit from all the measures we have taken, right capacity, a better cost structure, higher efficiency. And we are middle in the process of transformation to prepare the company for growth. And therefore, we are very confident with the guidance we have given. Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.
Operator: Ladies and gentlemen, welcome to the conference call on fourth quarter and full year 2025 results. I'm Moritz, the Chorus Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Juergen Rebel, Head of Investor Relations. Please go ahead, sir. Juergen Rebel: Good morning, everyone. This is Juergen speaking. Welcome to today's call on fourth quarter and full fiscal year '25 results. Aldo, our CEO, will comment on business and strategy. Rainer, our CFO, will focus on the financials. During the call, we are referring to the Q4 earnings call presentation that you can find on our website. Aldo, please share your thoughts on fiscal '25 and Q4 with us. Aldo Kamper: Thank you, Juergen, and good morning, everybody, also from my side. Let's start with Slide 3. 2025 was another year of disciplined execution. We built a stable foundation for further expansion as a leader in digital photonics. Our core semiconductor portfolio grew 7% year-on-year, underlining the strength of our focused positioning. And importantly, for the first time ever, ams-OSRAM holds the #1 position in the global LED market, a significant strategic milestone. Design win traction remained excellent with more than EUR 5 billion in new lifetime value added to the pipeline. Profitability also improved again, adjusted EBITDA margin up 1.5 percentage points year-on-year, driven by the accelerated execution of the Re-establish-the-Base program despite significant cost headwinds 1 year ahead of plan. We also delivered EUR 144 million free cash flow, including interest paid. And on top of that, our deleveraging plan progressed strongly. 2 portfolio transactions announced as of last week with proceeds of EUR 670 million and pro forma leverage at 2.5x. On to Slide 4. Q4 was a strong quarter. Revenues and adjusted EBITDA came in, in the upper band of our guidance, a clear beat, thanks to a super strong aftermarket lamps business. Revenue stayed almost flat compared to last year at first glance, but bear in mind, the weaker dollar cost us around EUR 55 million top line versus last year. Adjusted EBITDA increased 7% year-on-year despite FX headwinds, driven by the continued cost savings of the Re-establish-the-Base program. Let's move to Slide 5, looking at the segments. OS held up okay in a seasonally weaker quarter. Revenue dipped a bit more than what you would normally expect. I will comment on auto on the next slide. Margin dropped broadly in line with fall-through, but is still 5 percentage points higher than a year ago. CSA showed resilience after the typical peak in the third quarter, driven by good demand from custom sensor products for consumer handhelds and better industrial medical revenues compared to a year ago. Revenues were broadly stable quarter-on-quarter and slightly up compared to a year ago. However, adjusted EBITDA margins were down both sequentially and compared to a year ago, an unfortunate product mix, coupled with a strong impact from the weaker U.S. dollar and some inventory cleanup effects were the reasons for this. Lamps & Systems saw an exceptionally strong seasonal upswing. Aftermarket demand went through the roof as customers flooded us with short-notice orders after our closest competitor fell into financial troubles. We are trying to turn some of this into long-term business for sure. Specialty Lamps contributed for the last time for a full quarter before closing the transaction with Ushio later this quarter. In line with fall-through, profitability was up more than 80% compared to Q3. Overall, a good quarter across the portfolio. Now let's take a closer look at the semiconductor business on Slide 6. If you look through the weaker dollar in the noncore portfolio contribution, the clean core portfolio grew exactly in line with our semi target operating model, 8% year-on-year. The noncore portfolio was expected to be fully phased out latest by Q1 last year. However, customers kept ordering and ordering. For this, it still contributed a high double-digit million-euro revenue last year. This page highlights the underlying resilience of our semiconductor business. Automotive sequential decline, mostly seasonal. But the automotive supply chain continues to operate with extremely lean inventories and the competitive environment driven by the kind of war amongst the OEMs is unchanged. Although difficult to quantify the so-called Nexperia chip crisis at the beginning of last quarter, but we also had a bit of a negative impact on order intake. Year-on-year, softness is basically due to FX, the order pattern I just mentioned and that no real restocking in the supply chain happened. Industrial and Medical, this vertical is gradually improving. Finally, we are not out of the woods yet, but indicators are trending in the right direction. Orders in Industrial Automation and Medical came in a bit stronger, balancing the seasonal decline in horticulture, for example. Consumer, typical Q4 seasonal decline with U.S. dollar effects and the exit of the noncore portfolio. Let me hand over to Rainer for some comments about cash flow on Slide 7. Rainer Irle: Thank you, Aldo. Hello to everyone from my side. We delivered EUR 144 million free cash flow adjusted for the onetime positive cash in from changing the employee pension funds setup. Free cash flow above EUR 100 million, as we had promised. That includes a high double-digit million-euro inflow from the Austrian Chips Act. The same is true for the full year number, EUR 144 million, again, free cash flow when adjusting for the pension financing, as just described. CapEx remained disciplined, well below the 8% target. With that, let us take a look at liquidity and the maturity profile on the next slide. This is strong free cash flow in Q4. And the inflow from the change in the pension fund setup, our cash on hand was close to EUR 1.5 billion, and the available liquidity position rose to EUR 2.2 billion, backed by a diversified mix of instruments, cash revolver bilateral lines. In December, we also rolled EUR 100 million bank loan to '27. In January, we completed a EUR 200 million buyback of the outstanding '27 convertible. Including the expected proceeds from the 2 announced transactions, we have already today sufficient funds to repay the convertible bond due in '27 and the OSRAM minorities. This sets the stage for refinancing our high-yield maturities at improved terms. Back to Aldo now for a more detailed look at the full fiscal year '25. Aldo Kamper: Thanks, Rainer. Slide 9 shows how the company has been progressing despite major headwinds from currency, automotive supply chain pattern changes, precious metal and raw material prices increases, et cetera. Our IFRS top line declined by 3% on a year-on-year basis, but it's worth looking deeper. EUR 100 million FX impact and a more than EUR 100 million noncore portfolio needs to be considered. With that in mind, the underlying core portfolio would have been up 4%. That is especially true when we look at our semiconductor segment. The core portfolio grew about 7% year-on-year at constant currencies, in line with our midterm growth ambition. The year-on-year decline in Lamps & Systems stems mostly from 2 topics: the decline in the OEM business, in line with the lower number of factory new cars with traditional lamps; and the Q2 supply chain adjustment after liberation day. On top, the weaker U.S. dollar also weighed in a bit on the top line. Adjusted EBITDA margin improved meaningfully, thanks to the implementation of Re-establish-the-Base run rate savings 1 year ahead of plan. Cost headwinds have been heavy, gold, silver, rare earths and the top line impact from the weaker dollar. Let's move to Slide 10. A key highlight, one that has always been a personal ambition for me for more than a decade, ams-OSRAM is now ranked #1 packaged LED supplier globally by value. We now clearly surpassed our long-term rival to the crown, NICHIA, helped by a weaker yen, but primarily by better relative performance from us in the marketplace last year. This further strengthened our position with automotive OEMs, professional lighting customers in emerging markets such as micro emitters. On to Slide 11, design win performance. Last year was, again, a green year, great year for winning new business, underpinning our semiconductor growth model. The tally reached more than EUR 5 billion, again, the third year in a row. After a strong Q3, we also booked more than EUR 1 billion of design wins in the last quarter. On this slide, we show outstanding design wins in the triple-digit million euro lifetime value. In consumer, for example, projects in display management and camera enhancement accumulated hundreds of millions. In automotive, the EVIYOS and intelligent RGB ambient lighting projects stood out. And professional lighting and medical imaging designers also contributed exceptionally. These examples show the strong structural momentum in our business. Design wins today are the revenues of tomorrow, and our pipeline is very healthy, underpinning our growth ambitions in the semiconductor core business and along the avenues of our key engineer-emerging digital photonics applications. Slide 12 shows the next wave of structural improvements. Thanks to the great execution of our teams, Re-establish-the-Base delivered its savings 1 year early, EUR 220 million. That's a huge success, but we have to get even more ambitious in view of the persisting headwinds. We're sharpening our profile towards the clear leader in digital photonics, we also want to transform the way we work and thereby save an additional EUR 200 million of annual cost. Cost, speed, agility are our guiding principles as we reshape our operating model. We want to further reduce overheads, which includes addressing stranded costs of the divestments. We want to improve our manufacturing costs by transferring production of established products fully to Asia and the productivity push through automation across the globe. We are developing cost-optimized product platforms and also product development shall become cheaper and more efficient by developing maturing product families in Asia and by using more AI. Expensive European resources are focused on advanced digital photonics topics. In total, around 2,000 colleagues will be affected, half of them in Europe, half of them in Asia. Certainly, we also want to get our share of productivity improvements by rolling out AI, as just mentioned. Let me ask Rainer to comment a bit on the progress when it comes to deleveraging our balance sheet. Rainer Irle: Now turning to Slide 13. Last April, we communicated our accelerated deleveraging plan. Since then, we have made a strong progress. First, improving the structural profitability. As Aldo just explained, we implemented Re-estab-the-Base savings 1 year ahead of plan and are launching the new program, Simplify. Second, generating proceeds well above EUR 500 million from divestments. We delivered. We will get EUR 670 million in cash from the 2 transactions that we have announced: the sale of the specialty lamps business to Ushio and the sale of the non-optical sensor business to Infineon. The transactions will also result in a onetime profit of about EUR 450 million to EUR 500 million. And third, the solution for Kulim 2, the sale and leaseback. We continue working hard on it. There's always been interest, discussions intensified recently, but it is really too early to call when exactly we will see a deal. But we are fully convinced that there will be a solution. We have always delivered so far, and we have no intention to change that. On a pro forma basis, the leverage has significantly improved, as we will show you in a minute. But the solution for the sale and leaseback and fixing some of the stranded cost of that factory might be needed to really get to below 2x. Nevertheless, I'm convinced that we will be able to refinance the senior notes much cheaper to bring interest cost down, the key impediment for strong free cash flow performance. After refinancing the high-yield bond, it is now likely that we land at below EUR 150 million annual interest cost. On Slide 14, we already showed that last week, you see the impact of the transactions on our leverage. We discussed the update of our balance sheet as of December '25 earlier in the presentation. With that, on a pro forma basis, including the divestment proceeds, leverage drops from 3.3x to 2.5x. Excluding the OSRAM put options, net debt would stand at around EUR 850 million, implying 1.6x. This is a major step forward and a prerequisite of refinancing our '29 maturities at lower costs. And on the next slide, Slide 15 summarizes our transformation journey, as Aldo outlined last week in detail, when we announced the sale of our non-optical sensor business to Infineon. The path consists of 3 phases. From '23 to '25, as you know, we stabilized and refocused the company, divestments, portfolio shaping, Re-estab-the Base and refinancing. '26 will be a transition year, reflecting the deconsolidation of sold business and temporary stranded costs. We will have to bear a temporary drop in adjusted EBITDA due to several one-off effects. For this and for making the company over more efficient and more agile, we launched a new program, Simplify. Also financing costs remain high in '26, approximately EUR 250 million to EUR 300 million until the refinancing of the senior notes, which we have on the radar for '27. And then from '27 onwards, we enter the growth and value creation phase. We want to see growth in the core business and growth along the lines of the existing and new digital photonics applications, highly pixelated forward lighting, micro-emitter projection arrays and spectral bio and distance sensing. Based on the Simplify program and growth, we will see margin expansion. With growing profitability and the solution for the Kulim 2, we will have a fully healthy balance sheet with leverage below 2x. And we want to see our financing costs below EUR 150 million. And the low run rate of restructuring costs is the basis to deliver strong free cash flow well above EUR 200 million. Before we move on to the exciting growth avenues of some of our digital photonics projects, we have to look a bit deeper in one of the aspects of the transition phase. Precious metal prices in here, namely gold, Slide 16. Gold is an important material in the production of LEDs. You need it for corrosion-free mirrors to get the light out of the EP layers, to put it simply. In normal years, that added to the COGS bill, a high double-digit million-euro figure. The unprecedented gold rate that accelerated in '25 cost us an additional EUR 35 million, that's 2% margin of the OS division. That was in '25. The price curve is taking an exceptional shape, as you can see on the left. The peak has come down the last 10 days. But when assuming an average price of about USD 5,000 per ounce, we have another EUR 60 million cost add-on compared to '25. That would be a 4% margin impact for OS and around 2% for the group. We are mitigating as best as we can. We are hedging and that limits further risk very much but doesn't solve the problem. But then we are also reducing precious metal usage by redesigning our product. So that takes a bit. And we are launching the Simplify program. I hate to say it, but on top of the divestments and the stranded costs, the gold price and precious metal prices overall will weigh further on margins and adjusted EBITDA in '26. And with that, back to Aldo for some words on digital photonics growth vectors that we'll kick in step by step and that, we presented in detail last week. Aldo Kamper: Thank you, Rainer, and we are on Slide 17 now. Digital photonics is really opening up multiple highly attractive growth avenues across both emitters and sensors for us. On the emitter side, micro-emitter arrays are transforming 3 key markets: advanced automotive lighting with EVIYOS, where we already ship in volume and hold the clear design win lead; ultra-compact RGB micro-emitter arrays enabling bright, power-efficient and small AR displays for next-generation smart glasses; and multichannel micro-emitter-based optical links for AI data centers, wide and slow as it is called, interconnects that offer superior energy efficiency and unlock future chip-to-chip optical architectures. For each of these, we see additional revenue potential in the triple-digit million euro territory over a staggered period of time. On the sensor side, we are equally well positioned. Spectral sensing is already today a triple-digit million business, and we see it grow further, anchored in the premium smartphones and expanding further with new product generations and the right of foldables. Biosensing continues to scale as wearables at more optical measurable biomarkers creating incremental double-digit million opportunities. And finally, multi-zone direct time-of-flight sensors bring high-precision 3D awareness to smart devices, robotics and emerging humanoid platforms, with adoption curves that could drive significant revenues by 2030 and beyond. Also on the sensor side, we see additional revenue potential of double-digit million euros, in some cases, even triple-digit long term. Together, these 6 factors demonstrate our unique portfolio of emitter and sensor technologies positioned at the center of major global trends, automotive safety, AR, AI compute, personal health, intelligent robotics, each offering meaningful, scalable and compounding growth potential. Now let's quickly revisit our financial targets for 2030 that we published last week on Slide 18 now. This slide sets out our over-the-cycle target operating model for 2030 once divestitures, including Kulim 2, deleveraging, corporate simplification and debt refinancing are complete and with new applications contributing to growth. For semiconductors, we target mid- to high single-digit revenue growth starting in '27 based on a variety of growth factors that I just spoke about and the adjusted EBITDA margin of over 25%. Traditional auto lamps contributing to the group, as illustrated on the right-hand side, are expected to be flat and I guess a reliable cash source that helps fund the semiconductor transition and growth, consistently an adjusted EBITDA margin between 13% and 15%. With that, we target for the group a CapEx ratio of up to 8% of sales, which should end up typically lower than that. The group free cash flow, as Rainer explained before, well above EUR 200 million post refinancing and a net debt to adjusted EBITDA ratio below 2x. These are over-cycle targets. They reflect our operating model once the portfolio transition is complete. So let me summarize the key takeaways for Q4 and thereafter on Slide 19. Q4, we beat revenue and profitability guidance. The core semiconductor business grew 8% year-on-year on a like-for-like basis. Free cash flow was strong at EUR 144 million. RtB run rate savings were achieved 1 year ahead of plan. We also progressed well in deleveraging our balance sheet. Last week, we announced the sale of our non-optical sensor business to Infineon. Together with the sale of Specialty Lamps, we will get EUR 670 million in cash, exactly the more than EUR 500 million that we announced last year. We have ample liquidity of EUR 2.2 billion available. We bought back EUR 200 million of convertible notes in January. And most importantly, we have clearly defined the future direction of the company. We have laid out a strategic direction by creating the leader in digital photonics where we want to benefit from upcoming inflection points in this field. And we launched today the new transformation and savings program, Simplify, for saving further costs and transforming the way we work. Now on to the outlook for the first quarter. We expect revenues to come in between EUR 710 million and EUR 810 million with adjusted EBITDA around 15%, plus/minus 1.5 percentage points, based on a euro to dollar ratio of $1.19. Lamps & Systems will show the usual seasonal reduction, minus 1 month of deconsolidation of Specialty Lamps as that business will go to Ushio. Semiconductors will experience a typical seasonal decline. Given the coming change in the portfolio and the associated challenges for you in building a financial model, we also want to give some hint for the full year of '26. Group revenue might end up slightly softer than '25 given the divestments and a weaker U.S. dollar. Please remember that USD 0.1 equals roughly EUR 20 million more or less revenue per year. The move from $1.13 to $1.19, for example, would cost us another EUR 20 million in revenue. Adjusted EBITDA will be negatively impacted by several one-offs, the divestments where we effectively sell EBITDA to the buyer, stranded cost overheads that we are not transferring to the buyer, but of course, are working on as part of Simplify and higher precious metal prices and other factors beyond that. With that, we are now open for your questions. Operator: [Operator Instructions] And the first question comes from Sebastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: First of all, on the automotive market, inventories remain at a very low level across, I would say, the board. Do you see any room for kind of inventory replenishment in the coming months? And attached to that on automotive, do you see any specific risk of DRAM shortages impacting your customers and indirectly impacting your business? Second question is regarding the guide for 2026 in terms of revenue. What are the assumption in terms of asset disposals you have taken into your comment, both in terms of revenue contribution and in terms of timing, just to understand where we should land in terms of revenue in your euro term? Aldo Kamper: Yes. On auto, as you mentioned, we see overall a very short-term order behavior. Inventories at our customers are low. We've got a lot of orders, still within our lead times. So far, we are able to deal with those. Is there room for replenishment? Yes, we have been hoping for that, honestly speaking. We feel that overall, the inventories are on the low side. We have started to kind of compensate a bit for that by putting a bit more inventory into our distribution channel. But at the moment, still overall inventories stay low. And I think that's because also a lot of our customers continue to manage their cash flow extremely carefully. Whether that is smart or not, time will tell. As you mentioned, memory is getting tight. And I think people are also a bit uneasy there on what it means for overall volumes. So far, no direct implications. But yes, there's, of course, a potential in that as well. Do you want to take the guidance question? Rainer Irle: Yes. So the asset disposals kind of -- I mean, it's the business we are selling. The first one, the lamps, the industrial lamps business, that was roughly EUR 150 million of revenue and let's say, EUR 15 million of EBITDA, that will go out probably end of Q1. So in the guidance, we assume that it would still be in for 2 months, and the third month will be out. And for the non-optical sensor business, that was a revenue of EUR 200 million and EUR 60 million EBITDA, assuming that would go out mid of the year, then obviously, half of that will go out. And then there's also, yes, for both transactions, roughly EUR 30 million stranded costs that we will immediately tackle one after closing, but then we'll take up to a year to take it out. That is part of the Simplify program, the elimination of that stranded cost. Sébastien Sztabowicz: And when you come for modest, I would say, revenue decline, modest is like a moderate to mid-single digit, is making sense? Rainer Irle: Yes, that makes sense. Operator: And the next question comes from Janardan Menon from Jefferies. Janardan Menon: My question is just following on the '26 guidance but on the adjusted EBITDA margin. I'm just wondering how we should think about that. You've guided to 15% in Q1. Is that -- would that be a bottom? And should we think that things will gradually improve from there? Or when the non-optical business gets sold in the second half, will that have a sort of further negative effect on the margin as we go into the second half of the year? And then second one is just on the revenue beyond 2026, especially on the AR projection display and the AI data centers where you are targeting triple-digit million. What is roughly the time scale when you think you'll get material revenues, let's just say, materialize in low tens of millions of euros or something like that? Will that be from '27? Or is that beyond '27? Rainer Irle: Yes. Maybe starting with the EBITDA. I mean the negative impact from gold and so on, we already see today. So that is included in the Q1 guidance and that will not get worse. Obviously, then when the revenue and the EBITDA goes out, I mean that goes together and has no major impact on the margin. Obviously, the stranded cost will then come once the business is out. If we are tackling those stranded costs immediately, we will try then to see the improvement already within this year. The typical seasonality certainly is kind of in Q2 then. I mean, in Q1, we still have 2 months in of the traditional lamps business that will be done in Q2. And anyway, Q2 is typically a seasonal very weak quarter. And then you always see the improvements in the second half of the year, and we should see the same this year. Aldo Kamper: On the new growth topics, I think AR is much further along in its development than the AI topic. AR is already quite well advanced, and we will see revenues in the somewhat foreseeable future. But still, there is a bit of time before market introduction there. AI is at the moment in, I would call it, very advanced research stage, quick getting into product development stage. So you can imagine that is something for a bit later in the decade now. But once it comes, for both topics, we feel that these topics will scale quite rapidly because the markets are significant and the interest that we're getting shows that the programs that we're working on would be sizable. Operator: Then the next question comes from Robert Sanders from Deutsche Bank. Robert Sanders: I assume you've got works council approval for this restructuring and what you did with the pension trustees, et cetera. Is there anything you've done to guarantee the remaining employees as part of this deal? Just if you can give us some color. And where are these 2,000 headcount going to come out from the company? And then I have a follow-up. Rainer Irle: Yes. I mean the pension and the Simplify program are completely independent, right? So the -- I mean, the pension, what we did is we really took some time to go through all of that and kind of see where we had covered it. We basically had a double insurance and so on. So we resolved that and now the pensions are just secured exactly onetime and everything, the pensions plus the pension increases. So we clean it up, and now there's a really good system, and that helped a bit the liquidity in Q4. Now the headcount reduction from the Simplify program, and we are talking about roughly 2,000 people. A good half of that will be out of Europe with a strong emphasis of Germany, and we had already announced a few months ago the closure of one of the traditional factories in Germany. And with the traditional halogen business declining, we certainly have to do more adjustments, but it will also affect our Regensburg site, where we move some of the manufacturing of some R&D to Asia. But also, as Aldo pointed out, we will invest massively in automation and particularly on the back end, and that is then in Asia. And then we will also see a significant reduction in our Asian workforce. Because of that, automation/productivity improvement/AI. Robert Sanders: Got it. Just to follow up on a question on the previous call. I just want to double check that the Premstaetten fab, Infineon has been very clear they're going to move their volumes very quickly over to Kulim. So what percent of that fab wafer capacity is relating to the businesses that you've sold to Infineon? But that's what I just want to double check. Aldo Kamper: Well, I think actually, yes, they will move product over, but it will not be immediate. They will have to also prepare their factories for it. They have to get customer approval for it. And also, we have agreed on a smooth transition so that we have the time to develop new businesses to compensate for that. The factory has 3 areas in -- the filter making that we mainly use for the display sensors is completely untouched by this transaction. So it stays fully loaded and stays fully there. TSV, that's a specific technology on how you connect different layers in your semiconductor, is also only to a very small extent used by the type of products that Infineon is taking over. And then the more generic CMOS is where the product lines that Infineon is using is probably in the 30%, 40% range of that capacity. So that's where we see, over time, a step-wise reduction and where we feel we can compensate that by expanding, on the one hand, our internal business. We spoke about the emitter arrays, both on headlamps, but also, for example, on AR, those need to be controlled by CMOS building blocks, if you will, or steering blocks on the backside of this product, and they will increasingly come out of Premstaetten. So that's, for example, one of the internal growth factors externally beyond the business that we keep, we also see that actually the foundry business is a part of the growth story here as well as selected PMIC on customers and applications, where we have a good access and a right to play. So we feel quite comfortable with these growth factors and with the time that the transition will take because it's quite a number of smaller products. It's not one product with a huge volume that is in this product line. Industrial Automation and Medical are usually smaller programs running for a long time but are very specific in their technological needs and also in the customer approvals. And therefore, it was a logical combination that we agreed on a time schedule in the step down that allows them to do a good preparation and gives us the time that we need to then refill the fab with good new business. Robert Sanders: Got it. If I could just squeeze in one more. Just about auto LED, I mean, that business, in the past, you said, could grow at sort of 10% per year. Obviously, this year looks like a difficult year for the car industry. But is there anything that would prevent auto LED growing at 10% per year, maybe changes in mix or something that you see from today's perspective? Aldo Kamper: Well, there are 2 factors, I would say. The one hand, we see a clear push to more of these highly integrated, high-performance headlamps like EVIYOS. And we have now a variety of flavors in that, and we see really good traction now across the globe. It used to be a very European program. Then a number of the Chinese jumped on. And now with the new regulation in the U.S. also enabling adaptive driving beam, we also see much more interest from the U.S. So that category will significantly outgrow that percentage that you just mentioned. At the same time, of course, the saturation in the car with standard LEDs is already quite a bit higher. And there, of course, we are also confronted with price pressure, especially in China. You can imagine that the war amongst the OEMs has also an impact there. And that's why the efforts that we put in, in Simplify and also in a lot of the product cost optimization that we are doing, are very important to defend our shares there, but that weighs a bit on the growth rate. So overall, I would say mid- to high single digit would still be my view given the mix of topics that I just outlined. Operator: The next question comes from Craig McDowell from JPMorgan. Craig Mcdowell: The first one, just on the pension trustee piece. Can you explain what that means in practical terms for cash? What's actually happened in practice? And just to confirm, there's no restriction on the cash released from this arrangement? And then secondly, thanks for the color on the adjusted EBITDA of the divested assets. Just wondering whether you give any indication on gross margin of those sold assets as well, just to help modeling. Rainer Irle: Yes. Craig, yes, sure. Yes, I can confirm, I mean, the cash on hand that we had end of last year that included the pension transaction which was close to EUR 1.5 billion, is no restricted cash, right? It's on our bank accounts, and we can use it. We can use it for operational matters. We can use it to repay the debt. And as I said, together with the divestment proceeds, we have all the money on hand that we need to repay both the convertible and the minorities. Now with the adjusted EBITDA that goes out for the transactions, I would say that just the margins are comparable to the business we keep, though. The manufacturing services that we will then provide to the buyers, that holds true for both transactions, those typically have a lower margin. Operator: [Operator Instructions] The next question comes from Harry Blaiklock from UBS. Harry Blaiklock: Aldo, you kind of mentioned in a previous question around the Chinese market and potential pricing pressure from -- given the pressure that OEMs are seeing there. And I know you have decent exposure and the market is obviously, as you mentioned, softening after a few strong years. Can you maybe comment a bit more around the dynamics that you're seeing in that market? And then also your view on Chinese competition currently, kind of whether that's intensified over the last year or so? Aldo Kamper: Yes. I think China is a bit of a question mark for '26 now in terms of volumes. At least at the moment, it seems to start a little slower and also the projections are a bit lower. At the same time, I think if we think back a number of years, every time when things truly started to slow down, there were incentives put into the system to make sure that everybody in brackets can survive. So let's see how '26 truly plays out. China will still remain an important market, both in terms of volume but also in terms of innovation. As I said before, one of the markets where a lot of our new products get accepted very quickly and where we see high adoption rates, for example, of EVIYOS. So it is always important for us to be the clear innovation partner for our customers and at the same time, have a cost position that allows us to also continue to capture a very significant share in the more established products. But that second part requires a lot of work. I mean prices are coming down, and we need to do a lot of work to take cost out of our products to be able to continue to enjoy that business. And that's not easy. But so far, we are able to pretty well defend our shares, but there's definitely pressure, and we acknowledge that, and therefore, we take action to counter that. Harry Blaiklock: Got it. Makes sense. And then on the EBITDA margin target for the semiconductor business of over 25%. Obviously, you gave that last week, which was before the announcement of the plan, but I'm sure the Simplify plan was obviously baked into that. But I'm wondering would you be able to hit that over 25% margin target without the Simplify plan? Like does the Simplify plan provide some kind of upside to where you could have got? And -- yes. Aldo Kamper: I should say it was priced in. We didn't want to speak about it last week because it would very much confuse the messages. I think both topics, the deleveraging and the divestment, were an important topic to give the bandwidth to last week so that people, also our employees, could really understand what was going on. And now this, with Simplify this week, we give a lot more insight in how we want to defend and expand our margins. That was baked into this target. Obviously, what we, of course, will push for is to get these things implemented as quick as possible. And with that, get to the target margins as quick as possible. That's the key focus now. And then let's see how it goes. I mean with the last 2 programs, I think we have shown a pretty good track record of being aggressive, being quick, and that's what we would like to repeat. But obviously, it doesn't get easier. You need different levers, and we are now using very different levers than last time, for example, really reallocating the full standard product portfolio on the chip side from Regensburg to Malaysia, including the R&D that is associated with it to really compensate also these pressures that I spoke about before and to free up then room for highly automated innovative products, for example, on the AR side here in Germany. So it is quite a structural change that is important for competitiveness and important for innovation at the same time. Harry Blaiklock: Got it. Super helpful. And one last question, if I may, just on the consumer business and any impact that you've seen there, like obviously not -- I'm sure you haven't seen kind of tangible impact yet from the memory disruption, but any conversations that you've been having with customers about their thoughts going into the second half of the year? Aldo Kamper: Well, our customers are worried about it, but so far, say they have secured their volumes. Whether that is fully true or not, the year will tell. But it is acknowledged. Our customers are working on it. So far, no reductions in forecast or outlook yet. But can it happen? Well, AI pays top dollar to compete with a simple smartphone against that will not be trivial. At the same time, the industry have always found ways around it and to deal with it. So yes, it's too early to tell what the true impact will be at the moment. Operator: There are no further questions at this time. So I would now like to turn the conference back over to Juergen Rebel for any closing remarks. Juergen Rebel: Thank you, operator. Thanks, everyone, for joining today's call. If there are any follow-up questions, there's a lot of material on our website, and you can always reach out to the Investor Relations team. Thanks very much, and speaking to you soon. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.
Operator: Thank you for standing by, ladies and gentlemen, and welcome to Coca-Cola HBC's conference call for the 2025 full year results. We have with us Zoran Bogdanovic, Chief Executive Officer; Anastasis Stamoulis, Chief Financial Officer; and Jemima Benstead, Head of Investor Relations. [Operator Instructions] I must also advise that this conference is being recorded today, 10th of February 2026. I now pass the floor to one of your speakers, Jemima. Please go ahead. Thank you. Jemima Benstead: Good morning, and thank you all for joining the call. I'm here with our CEO, Zoran Bogdanovic; and our CFO, Anastasis Stamoulis. In a moment, Zoran will share the key highlights of 2025. Anastasis will then take you through our financial performance in more detail and discuss the outlook for 2026 before handing back to Zoran, who will discuss the strategic growth areas for the business. We will then open up the floor to questions. We have about an hour for the call today, which should give plenty of time for a good discussion. So please keep to 1 question and 1 follow-up, waiting for us to answer the first question before moving to your follow-up. Finally, I must remind you that this conference call contains various forward-looking statements. These should be considered in conjunction with the cautionary statements in our results press release this morning and at the end of our slide deck. And with that, I will turn the call over to Zoran. Zoran Bogdanovic: Thank you, Jemima. Good morning, everyone, and thank you for joining the call. 2025 was another strong year for Coca-Cola HBC. We've executed against our strategy and delivered a strong financial performance, all while operating through a mixed market environment and continuing to invest across the business for the long term. Let me call out key highlights from the year. 2025 marks the fifth year of consistent strong growth and share gains. Both our revenue and EBIT growth was strong and high quality, underpinned by continued volume momentum despite a range of macroeconomic conditions. Importantly, volume growth continues to be led by 2 of our strategic priority categories, Sparkling and Energy. And we continue to win in the market and deliver value to our customers gaining a further 80 basis points of value share in non-alcohol ready-to-drink in 2025. We also remain committed to investing in the business to unlock long-term growth. Throughout the year, we continued to invest in our 24/7 portfolio, in our bespoke capabilities, in our people and in sustainability, which we truly view as a growth enabler. In the year, we made further good progress in our most material areas: packaging, climate and water. And last, but certainly not least, in October, we took a significant step forward in our growth journey with the agreement to acquire Coca-Cola Beverages Africa, or CCBA. Disciplined execution of our strategy enabled another year of strong financial performance. Let me share the key highlights before Anastasis goes into more detail shortly. Revenue grew by 8.1% on an organic basis with volume growth of 2.8%. Comparable EBIT was nearly EUR 1.4 billion, up 11.5% organically. We also delivered 60 basis points of EBIT margin improvement leading to strong comparable EPS growth of nearly 20%. Finally, we achieved free cash flow of EUR 700 million, drove a further increase in return on invested capital and increased our dividend. As you know, in October, we announced the acquisition of Coca-Cola Beverages Africa, the largest Coca-Cola bottler in Africa. This acquisition presents a highly compelling strategic rationale, which at its core is about growth. The acquisition materially enhances our presence in Africa by bringing together 2 leading bottlers in the continent with strong track records of growth and deep commitments to investing in talent and local communities. Together, we will represent 2/3 of Africa's total Coca-Cola system volume. This combination further diversifies our geographic footprint, increasing our exposure to high-growth markets with compelling demographics, including sizable and growing populations and economies with significant potential to increase per capita consumption. The acquisition is consistent with the pillars of our growth strategy and vision of being the leading 24/7 beverage partner. CCBA is the leading player in NARTD across its markets with a winning portfolio of over 40 global and local brands, further strengthening our exceptional portfolio. We also see a clear opportunity to leverage our strength of operating in dynamic emerging markets, we can share best practices, apply our best-in-class bespoke capabilities and invest further in CCBA to drive growth. Finally, we expect the acquisition to enhance value for all stakeholders. For shareholders, it is expected to be low single-digit EPS accretive in the first full year following completion, with a clear prospect of creating more shareholder value over the long term. In terms of progress towards completion, let me outline where we are. On the 19th of January this year, we received approval from Coca-Cola HBC shareholders of the resolutions put forward at the extraordinary general meeting. Our teams continue to work through the customary regulatory filings and anti-trust approvals and preparations for the secondary listing of our shares on the Johannesburg Stock Exchange. Overall, we remain on track to complete the acquisition by the end of 2026 and are working on integration plans so we can hit the ground running. We look forward to sharing more details on the opportunities ahead for the combined group post completion. Sustainability remains at the core of our strategy, enabling us to deliver growth while creating value for the communities we serve, our partners and the environment. In 2025, we saw further recognition of our progress, placing us among the leaders of the global beverage industry with top scores across major benchmarks. Let me share a couple of highlights from 2025. We advanced our circular packaging agenda with the launch of a new collection hub in Nigeria and the expansion of deposit return systems to Austria and Poland. Recently launched systems in Romania, Hungary and Austria achieved average return rate of over 80% in 2025. Partnerships continue to be a key driver of progress. As I mentioned last summer, together with Carrefour and the Coca-Cola Company, we initiated a sustainable linked business plan with Romania piloting a program that unites suppliers to cut emissions and improve packaging sustainability. Supporting communities remains a central priority. In 2025, Europe faced severe wildfires and floods. And I'm proud that the Coca-Cola HBC Foundation was able to commit EUR 2.3 million in disaster relief. The group also announced an additional $5 million for the foundation to support communities starting from 2026. Overall, we've made strong progress towards our Mission 2025 goals with many targets reached ahead of schedule. Full results will be published in our 2025 integrated annual report in March along with details on the next phase of our sustainability journey. With that, let me hand over to Anastasis to take you through the financial results of the year in more detail. Anastasis Stamoulis: Thank you, Zoran, and good morning, everyone. So let me start with the strong top line performance. 2025 organic revenue growth was 8.1%. We delivered another year of good volume growth, up 2.8%, driven primarily by sparkling and Energy as Zoran has mentioned. I am pleased that all 3 segments achieved volume growth or maintained volumes despite an ongoing challenging backdrop. Organic revenue per case increased by 5.1% and normalization versus previous years as we expected. We continue to implement targeted revenue growth management initiatives while navigating lower levels of inflation across most markets. Overall, pricing remained the largest driver of revenue per case. However, category mix and package mix were also positive, with continued improvement in single-serve mix, which expanded by 130 basis points in the year and is now 310 basis points higher on a 3-year basis. We achieved another year of double-digit organic EBIT growth with comparable EBIT growing 11.5% to nearly EUR 1.4 billion. Our comparable EBIT margin increased 60 basis points on a reported basis to 11.7% and 40 basis points organically. This marks a record high EBIT margin for our company, which is great to see, having navigated several years of inflation and currency pressures. Let me break down the drivers of this. We improved gross profit margins by 70 basis points with good topline leverage. Operating costs overall stepped up by 10 basis points in the year. However, breaking this down a bit further, operating expenses, excluding direct marketing, improved by 30 basis points as a percent of revenue. You may recall that in 2024, we faced headwinds in our operating expense line due to currency devaluation in Egypt, which we cycled this year. However, offsetting this, direct marketing expenses stepped up by 40 basis points as a percent of revenue as we invested in activations across categories, but notably the Share a Coke campaign, the Winter Olympics and the new Finlandia marketing campaign. Let me now look to the drivers of performance by segment. I'm going to discuss these figures on an organic basis. In the Established segment, revenues grew by 2.3%. Volume was in line with last year, reflecting mixed trends across markets. Sparkling volumes were slightly ahead of last year with high single-digit growth in Coke Zero and mid-single-digit growth in Sprite. Energy continued to grow strongly, up high teens, still declined low single digits, although we delivered mid-single-digit growth in Sports Drinks. On a country basis, volumes in Italy were slightly positive despite our decision to prioritize profitable revenue growth in water in the second half of the year. Excluding water, volumes in Italy grew low single digits. In Ireland, volumes grew low single digits with consistent growth throughout the year, whereas in Austria, volumes declined in a more challenging environment. Established revenue per case was up 2.3%, driven by pricing as well as positive package and category mix. Established segment comparable EBIT declined 2.8%, primarily due to a step-up in investments, as previously noted. Turning to the Developing segment. Revenues were up 6.1%. Volumes grew 0.8% with Sparkling volumes slightly higher than last year, driven by Coke Zero and Sprite. Energy saw accelerating momentum with strong double-digit growth. Stills declined high single digits, driven by water and juices despite strong double-digit growth in Sports Drinks. In terms of country performance, the Czech Republic was a standout performer, growing volumes mid-single digits despite a tough comparative. In Poland, volumes declined for the year, though we saw an improvement in the second half of the year. Developing revenue per case increased by 5.3%, driven by pricing actions taken to manage inflation supported by a favorable category and package mix. Comparable EBIT increased by 5.6% year-on-year with EBIT margin in line with the previous year. In the Emerging segment, revenue grew by 13.2%, driven by both volume and good price mix. Emerging markets, volume grew 4.4%. Sparkling volumes increased by mid-single digits with mid-single-digit growth in Trademark Coke, Sprite and Adult Sparkling. Energy grew strongly despite cycling tough comparatives driven by affordable brands. Stills volumes grew low single digits, led by water and further supported by very strong growth in Sports Drinks on a small base. At a country level, the performances of both Nigeria and Egypt have been very strong despite external challenges with volumes growing mid-single digit and low teens, respectively. Emerging segment revenue per case increased 8.5% and moderation compared to previous years, reflecting lower levels of inflation and currency headwinds for Nigeria and Egypt. We benefited from pricing actions as well as from positive category mix. Comparable EBIT grew 23.2%, a strong rebound due to organic growth as well as cycling the impact of the foreign currency remeasurement in Egypt last year. Moving back to the group P&L. We saw comparable earnings per share grew 19.7% to EUR 2.72. This was supported by the strong EBIT delivery, lower net finance cost than previous year. As mentioned at the first half results, we have seen lower than usual finance cost this year due to several factors. We benefited from lower foreign exchange losses compared to 2024 due to greater currency stability as well as higher finance income in the year. As you will have seen from the guidance, we do expect a more normalized finance cost environment in 2026. As expected, our comparable tax rate of 27.1% was in line with our guidance range. Our return on invested capital expanded by 100 basis points to 19.4%, driven by higher profit. We have seen very good improvement in ROIC over the last 5 years, and it remains a very important metric for us. CapEx increased EUR 148 million in the year to EUR 828 million, in line with our plans, as we continue to invest in future growth initiatives, such as production capacity, ongoing automation and supply chain, digital and data solutions and energy-efficient coolers. CapEx as a percent of revenue was 7.1%, up 80 basis points year-on-year, but well within our target range of 6.5% to 7.5%. We delivered free cash flow of EUR 700 million. I'm really pleased that even in a year where CapEx stepped up materially, we have still delivered robust free cash flow. Our balance sheet remains very strong, and we closed the year with net debt to comparable EBITDA at 0.7x. Clearly, this will increase, as we complete the acquisition of CCBA. However, we expect leverage post completion to remain within our medium-term target range of 1.5 to 2x. Importantly, we do not expect any impact to our credit rating, and we have a strong commitment to sustainably maintaining an investment-grade profile. Leveraging this strong balance sheet, we have a robust and disciplined capital allocation framework, which remains unchanged. Our top priority is investing in the business organically to drive long-term growth for the company. We pursue a progressive dividend policy and target a 40% to 50% payout ratio. With another year of strong growth in comparable earnings per share, we are recommending a dividend per share of EUR 1.20, an increase of 17% from 2024. When it comes to strategic M&A, as you know, in 2025, we announced the milestone acquisition of CCBA. The strategic expansion into African markets underpins our focus on driving long-term growth and will enhance value for shareholders. We expect low single-digit EPS accretion in the first full year following completion and more shareholder value in the long term. Overall, when it comes to our capital allocation in 2025, I'm really pleased that we have delivered a combination of investment in the business, a value-enhancing acquisition, increased shareholder returns as well as a strong improvement in ROIC. As we look to the rest of 2026, we expect the macroeconomic and geopolitical backdrop to remain challenging with a mixed consumer environment across our markets. However, we have high confidence in our 24/7 portfolio, our bespoke capabilities, the growth opportunities across our diverse markets and most of all in our people. In 2026, we expect to make further progress against our medium-term growth targets with organic revenue growth in our medium-term range of 6% to 7% and organic EBIT growth in the range of 7% to 10%. Thank you for the attention. Let me pass the call back to Zoran. Zoran Bogdanovic: Thanks, Anastasis. Well, we are proud of our achievements in 2025. We are really proud of the consistency of that performance over many years now. We have now had 20 consecutive quarters of organic revenue growth despite many challenges along the way. If we look back over the last 5 years, we can see that our growth algorithm is working. We have delivered average organic volume growth of nearly 4%, a revenue growth of 15% and EBIT growth of 14%. Our diversified country footprint, unique 24/7 brand portfolio, bespoke 4 capabilities and strength of our people have driven that consistent growth. What we've learned across many years operating in a range of markets and conditions is that there is no one size fits all approach. We strike a careful balance to focus on what makes the local market unique, staying relevant and tailoring our approach while aligning with the group strategy, leveraging our global scale, tools and capabilities, particularly with digital and data insights to drive personalized execution. It truly demonstrates the resilience of our business through a range of different macro and consumer backdrops and our ability to deliver results at the group level. This gives me the confidence that we can continue to navigate unpredictable environment going forward and underpins our guidance for 2026 as Anastasis set out. Let me now take you through some of our biggest potential opportunities across our business for 2026 and beyond. Sparkling continues to be the core driver of our growth, contributing 2/3 of our group revenue. In 2025, we delivered organic volume growth of 2.5%. Coke Zero continued to perform strongly, growing low double digits and Coca-Cola 0.0 grew high teens. Together with the Coca-Cola Company, we executed locally tailored activations at key moments across the year, leveraging relevant passion points and consumption occasions. In 2025, we also rolled out the Share a Coke campaign with local programs and initiatives tailored to our markets. We successfully executed customer and consumer activations across channels to drive transaction and further strengthen brand equity. We are pleased with the campaign's performance and the positive engagement it generated. We also accelerated growth in Sprite with volumes up mid-single digits, as we continued focusing on the Spicy Meals occasion, and we activated the Turn Up Refreshment campaign over the summer. Adult Sparkling grew mid-single digits in 2025 with a strong performance from Schweppes in our African markets. We introduced new flavors, and the Flavour of the Quarter activation with promising initial results and plan to roll this out further in 2026. We also continued to roll out Three Cents, our premium mixer brand into more countries. In 2026, we will continue capitalizing on key occasions to create memorable consumption moments, including the Winter Olympics, which just kicked off last week and the upcoming FIFA World Cup. Energy continued its strong growth trajectory. Volume grew by 28% against tough comparatives, making 2025 the tenth consecutive year of double-digit growth. We also hit a milestone surpassing EUR 1 billion of revenue for the first time with a category now accounting for 9% of our group revenue. All segments contributed to growth, reflecting the strength of our diversified portfolio, which enables us to address varied market demographics and affordability needs. In Established and Developing, growth was driven by Monster supported by successful innovations such as Rio Punch and the launch of a new Monster drink with Lando Norris. Predator and Fury, our affordable offers in Africa, grew over 40%, supported by football partnerships and marketing activations that truly resonate with local consumers. We are confident we can continue to drive a strong performance in Energy and expect the category to reach a double-digit percentage of our revenues very soon. The category continues to see broad-based consumer demand, and we are excited for another year of innovation and planned partnerships, which we will complement by adding more dedicated coolers across our markets. Moving on to Coffee. At the start to 2025, we announced we had made a strategic decision with our partners at Costa Coffee to prioritize the out-of-home channel because that is where we see the greatest potential for sustainable, profitable growth. I'm pleased to see that this decision is delivering results. We are seeing strong growth in the out-of-home channel, driven by both Costa and Caffe Vergnano with volumes up 26.5%. This has been driven by growth in our existing outlets as well as recruiting new high-quality outlets. We remain very positive about the growth potential for our Coffee business. It plays a critical role within our 24/7 portfolio and helps us build stronger customer relationships in the hotels, restaurants and cafes channels. We are building a strong, credible business with unique capabilities and meaningful competitive advantages. In Stills, volumes declined by 1% as growth in Water and Sports Drinks was offset by juices and Ready-To-Drink tea, where we faced a more challenging market environment. Water volumes grew low single digits, and we remain focused on profitable revenue growth, prioritizing premium waters. Sports Drinks continued its strong momentum with volumes growing low double digits. We launched new flavors of Powerade and leveraged local sports partnerships as well as football activations featuring global ambassadors to drive transactions. In 2025, we also launched Powerade in Romania. Premium Spirits volumes grew by 12.2% with double-digit growth across all 3 segments and strong growth of Finlandia Vodka, our own brand. The new Finlandia campaign we launched in April 2025 has been positively received, contributing to increased brand awareness and share gains in key markets. Our distribution partnerships with Brown-Forman, Bacardi and Edrington also contributed to growth. In our Snacks business, 2025 marked the return to full operations of our Bambi plant following the fire in 2024. In October, we also launched Bambi snacks in Nigeria, our first entry into the African continent in this category. We implemented a bespoke plan tailored to the local market and are pleased with the early feedback. Investing in our bespoke capabilities is critical to drive best-in-class growth and allows us to continue to gain share. I want to call out the specific examples of progress in 2025. Revenue growth management is one of our core capabilities to drive profitable revenue growth. Affordability remained important in 2025, and we increased our focus on entry and smaller packs. Premiumization remains relevant for a large segment of the population, and we focused on expanding multipacks of single serves as well as driving mini-cans in relevant markets. We also continue to leverage our advanced promotion analytics tools, which led us assess the effectiveness of each promotion and make a quicker in-market decisions to drive more value for us and our customers. Within data, insights and AI, we continued to leverage AI capabilities. Two great examples include our Ignite Naija initiative, where jointly with Coca-Cola Company, we are linking consumer and customer data in Nigeria, which Naya and the Nigerian team shared with you at our Bitesize event last year. Early results indicate that this more sophisticated segmentation approach is translating into higher volume and revenue per case. We also expanded our segmented execution approach to wholesalers, leveraging shared data and outlet intelligence to provide our wholesale partners in Italy with tailored recommendations relevant to the outlets they serve. In 2026, we will continue to implement more advanced segmented execution across our markets, enhanced by AI and more -- most importantly, tailored to the local market dynamics. We are increasingly digitizing our route to market. Our dynamic routing tool, which reduced its travel time by 15% is live in 22 markets, freeing up more time for face-to-face customer engagement. We also increased placement of our Always-On connected coolers by 20%. These integrated coolers continuously send data and analytics to our systems, giving our teams immediate insights to improve in-store execution and cooler profitability. Another example is our AI-enabled logistics project, which helps reduce out of stocks by generating automated data-driven fulfillment recommendations. We launched it in Poland in 2025 and have already seen efficiency gains, and plan to scale these to more markets in '26. At the half year results, I shared with you about our digital transformation and how we've been investing in our digital commerce platforms to serve our customers and consumers who shop online. We are live with Customer Portal, our largest B2B platform, in 22 markets now. Partnering with our customers to drive value underpins everything we do at Coca-Cola HBC. In 2025, our Net Promoter Score increased to 78%, partially reflecting an increase in the number of resolved customer issues within 48 hours to 99%. This disciplined focus helped underpin a sixth year of market share gains in NARTD. Finally, we couldn't do any of this without talented people. Our latest employee survey results showed overall engagement remained strong at 88%, which reaffirms the strength of our culture and the ongoing focus on high performance, learning and development. In 2025, we scaled the Metaverse learning environment to accelerate capability building for sales teams and improve in-store execution. This is now live in 7 markets with further markets planned for 2026. To conclude, I'd like to reiterate the key messages I started with. We've had a strong 2025, the fifth year of consistent delivery with further strategic and operational progress and financial results. We've seen another year of growth in volumes, sales, EBIT, EPS and market share. Investing for the future remains critical. And in 2025, we invested across our portfolio, capabilities, people and sustainability initiatives. Finally, we are very excited about the acquisition of CCBA, a great business with strong brands and the leading market presence across Africa. We have great confidence in the opportunity ahead of us to drive sustainable, profitable growth. And before I close, I would like to sincerely thank all our colleagues, customers, suppliers and partners for their ongoing efforts and support. Thank you for your attention. And with that, let us now open the call up to questions. Operator: [Operator Instructions] We will now take the first question from the line of Sanjeet Aujla from UBS. Sanjeet Aujla: A couple for me, please. I'd like to dig a little bit deeper into Egypt. By my math, your volumes in Q4 are up around in the low mid-20% range. Can you just talk us through what's really driving that? I appreciate you're lapping some of the impact, but really keen to understand a little bit the impact of your commercial execution there and where your market share is now versus prior to the transaction. That's my first question. My follow-up is around Established. You've had 2 years of flattish volume growth in Established. How you -- what's embedded in your outlook for 2026? Do you think volumes can get back to growth? And ultimately what's driving that? Zoran Bogdanovic: Sanjeet, so on Egypt, really, really pleased with that -- with performance that came last year. First of all, just to say that we've seen in Africa, both in Egypt and Nigeria, more stable backdrop and environment. And that really then sets the good platform, where everything that we do there can be more visible. Coming back to Egypt, what we've seen last year and then Q4 is just part of that is a result of us investing in a committed and disciplined way even while we were facing very strong headwinds over the last several years. Because we were focused from the moment we started 4 years ago to work on the enhancement of our portfolio and then investing in capabilities in a very fast way, leveraging data insights to better inform revenue growth management, route to market changes and enhancements, we've done a very wide investment into upskilling of people in sales and commercial capabilities. We have changed and improved commercial policies with the way how we work with wholesalers. We have introduced new capacity, which enabled us to fulfill anticipated growing demand that we believe will come and brought new can line. We are just opening another line in like Alexandria. And then, not to forget something that's super important, Coca-Cola Company has really created some and done very strong locally relevant marketing programs in the areas that truly matter to Egyptian consumers. Those relate to music with the outstanding activation and partnership that works extremely well, driving transactions. Also football, which is a big passion point in Egypt with a partnership with a club that has the, by far, largest fan base and also more focus on behind meals. You know that Egypt is the largest country globally in terms of the Schweppes business, by far, largest in Hellenic. And that's a phenomenal business, which worked so well last year with very intentional programs being -- with which the portfolio was supported. We introduced energy with 2 brands, Monster and Fury, and that also proved to be working really well, tapping into passion points. And all that, again, gets delivered through our evolved and more developed route to market, where we are fully scaling the market, segmenting it and really adjusting how we serve the market from at-home customers as well as to out-of-home customers. So all these blended together is coming very nicely and resulting in a very strong performance. Yes, in fairness, we also know that we had lower comps, easier comps to cycle. But I think that this performance demonstrates as a good testament to the quality of work that we are doing, not for 1 year, but for many years to come, and I'm confident that Egypt is going to have another strong year in 2026. Moving on to Established. With a stable volume performance that we saw last year, we are pleased with that performance as this happened in spite of a few challenges. We've seen a couple of countries really making good performance across the year. But I will start with Italy, which finished on moderately positive volume performance, which for us was really important. And we did say that Italy will be positive in 2025. If you deduct Water, which we intentionally play in -- with selective part of customers and markets, our performance there was on a low single digit. Very encouraging to see sparkling performance of 2.2%, a strong performance of Zeros, excellent performance of new Zero Sugar Zero Caffeine, about which we have very high hopes how it will perform, not only in Italy, but much broader, and then continued strong performance also of Energy. All that resulting in a strong continued market share gains. So then, we had a consistent performance in Ireland. We've seen a good performance in Greece in the second part of the year, as well as in Switzerland, where we didn't have the best entry into the summer in terms of the weather. And also, we had, like many other CPG players, specific situation related to retail negotiations. And once this was successfully resolved in a win-win way, we have resumed full performance with full listings. And that's why we are very pleased with the second half performance in Switzerland. One country that consistently has been on a softer side is Austria, where industry also is in decline. We do see lower consumer sentiment, which is below the EU average, but in that circumstances, we see that our team has been gaining share there and has been doing some quality work, which is also reflected in single-serve growth. So to wrap up, Established, we believe that this performance in '25 present a good base, and we do expect that we will see improvement in that segment in 2026. Operator: We will now take the next question from the line of Andrea Pistacchi from Bank of America. Andrea Pistacchi: I want to follow up on established and -- on Established markets, mainly both with the first question and the follow-up. So affordability and consumer sensitivity has been a bit of a headwind in a few of your Established and Developed markets. You just mentioned Austria, I think even Romania and Switzerland. Are you seeing any signs of these pressures easing as we go into 2026? And how are you thinking about pricing and revenue management this year, specifically in these markets? And the follow-up question is on EBIT in Established. So at group level, you've delivered very strong EBIT, again, mainly driven by Emerging, but EBIT declined a little, I think, in Established markets as you reinvested in the business. Last year, EBIT was flat. So the question is how -- going forward, how are you thinking about balancing reinvestment versus EBIT growth in Established markets? Would you expect profit in Established? Can it return to growth? Are there opportunities for incremental maybe cost savings in Established? Zoran Bogdanovic: Good morning, Andrea. So I'll start, and then, I'll hand over to Anastasis for your second part of the question. So in Established, firstly, it's not one size fits all. It really varies. And we monitor and measure price sentiment and sensitivity in every single country, also dynamics with a certain level of private labels that can exist across the market. Even though I have to say that in Sparkling and in Energy, this is where private labels have the smallest share. And even in Sparkling, the private label share is in decline. However, there are a few markets, and you mentioned Romania, even though it's not in the Established, either country where we have seen somewhat better performance of the -- of private label. All of this gets this input into the overall revenue growth management framework, which then on a country level is being designed and which then produces tailored specific things for affordability initiatives as well as premiumization initiatives in every of these markets. So somehow with our reading, we do see an opportunity for positive improvements in 2026. And second part of the year in those markets have given us that time, and I have to also acknowledge that for Established as well as for all other countries, we have prepared very strong plans with additional investments behind many of the strong programs that are coming up in this year. Summer for us always is the biggest program we have. But also, there is a FIFA World Cup. There are many innovations that are coming up, and we see that being very relevant in the Established segment. And I reiterate that we are positive that we will make an improvement in the Established segment in '26. Anastasis? Anastasis Stamoulis: Yes. Thank you, Zoran. Yes, actually, to build on Zoran's point, for 2025, we saw a resilient top line performance with a revenue growth of 2.3%. Let me share a little bit more detail because you touched the profitability of the Established. Actually, the gross profit margin grew in the Established market, but as you rightfully pointed out, you saw pressure on the EBIT margin, which was mainly impacted by a targeted decision to step up our investments in the market, a joint decision with the Coca-Cola Company to accelerate further growth in the segment, and I can go over the big activations of the year, but predominantly it was a Share a Coke campaign with the investment ahead of the Winter Olympics in Italy, which is undergoing now as well. And also cycling extra investments in our people when it comes to field force execution in the market. So with that in mind, we are very pleased to see that actually, our investment strategy has been paying off. In Italy, as Zoran pointed out, we had a low single-digit volume growth in Sparkling and strong double-digit growth in Energy and share gains in both Sparkling NRTD and Energy. And similar market was Ireland with continued volume growth and share gains across. So if we look into 2026, what I can say is that we will continue to step up our investments in the market. Zoran already mentioned the FIFA World Cup, we have the Winter Olympics ongoing. We have also step up in the overall Finlandia Investment. But we do expect that all this will translate to positive volume growth that will also flow down the P&L with profitable growth and also margin expansion. Operator: We will now take the next question from the line of Aron Adamski from Goldman Sachs. Aron Adamski: Congrats on the results. I have 2 questions. First one is on your innovation pipeline. Can you give us a sense of the scale of the innovation and activation plans that you have for 2026 compared to the previous year? In particular, could you give us some color on the launch pipeline in Energy drinks? Is it comparable to the 3 big launches that you had last year? And perhaps in Sparkling, it would also be great to hear if you're seeing any uplift in Italy's volume during the January month from the Olympics activations? That will be my first question. Zoran Bogdanovic: Aron, on innovation, innovation pipeline is one of the drivers of our growth, and we are very happy that with both Coca-Cola Company and Monster Energy Company, there is a rich pipeline. So we have a number of innovations lined up for this year. Those will be very exciting flavor innovations, which, in some cases, are also coming with some partnerships. You've seen Lando Norris launch last year, which worked extremely well, and that will continue into this year with also some -- a couple of other innovations that I think will be better that we discuss when they are done. On Sparkling side, we are very excited with -- we think of it as innovation, which is Coca-Cola Zero Sugar Zero Caffeine with new graphics look and feel with excellent feedback from the market, and we see that performance of this variant within Coca-Cola trademark is igniting very strong growth. We've seen a strong growth last year, and it has been ramping up from quarter-to-quarter. Then, we will have further flavor innovations within our Adults, whether that's Schweppes or Kinley. Also, within Fanta, there are some very interesting things. And you will see some very exciting things in the way the activations will be for the Halloween, which becomes a very important part of Fanta activation. So I can -- then Powerade will be also coming up with some innovations, especially as you see that now Powerade goes so well together with the Coca-Cola brand in the sports activations, and the exciting and largest ever FIFA World Cup is ahead of us. So I can say, Aron, that we are pleased and confident that we have the right set of innovations. For us, it's very important that those innovations are driving incremental transactions, which are all delivered through very, very strong execution across all the markets. You asked also about Italy Olympics. Yes. Look, we started activating Olympics already last year in Italy. That gave us a great platform to activate and partner together with customers, driving joint programs. We've been just there last week and seeing excellent activation displays, consumer promotion, visibility, transaction driving mechanism. So I cannot single out how much is specifically because of Olympics, but I can really say that it's a very clear tailwind in what we have seen in Q4 and definitely what we will experience in Q1. Aron Adamski: Great. That's very clear. And then my second question is on FX. Given where the current spot rates are, would you expect 2026 to see some transactional FX benefits in Africa? And in the context of easier COGS backdrop that we've seen more recently, how are you thinking about the balance of price with mix and volume following several years of very high pricing that you had in Africa? Anastasis Stamoulis: Aron, let me take that one. As you have seen, we are providing our guidance. We expect a range of EUR 0 million to EUR 30 million of a headwind from translational effects. Obviously, we don't provide a transactional element, but that's well captured within our overall EBIT guidance. Yes, you mentioned the spot rates. Obviously, that's one part of the element, but we actually provide a range in the back of trying to assess our experience of a quite unpredictable environment when it comes to FX volatility, especially in the African markets. We are seeing positive signs in both economies, and there is significant inflows of foreign currency in those markets, will make FX availability easier and good signs. But as I said, that's why we provide the range across. Now, when it comes to balancing the pricing element in Africa, we always follow an adaptive and data-driven pricing strategy in those markets. We've also seen that this year, as we managed to adapt our pricing in relation to a lower inflationary pressure, a lower also FX volatility. We'll continue doing the same next year. And these are, of course, markets that we expect significant volume growth with a balanced pricing to adapt to the local market needs. So as always, nothing new. Operator: We will now take the next question from the line of Matt Ford from BNP Paribas. Matthew Ford: So my first question is just on the guidance, I suppose, the 7% to 10% like-for-like EBIT range that you've given for the year. I'd just be interested to just get your kind of take of the moving parts. How -- what do you see going right to get you to that 10% and potentially higher? And potentially, what could go wrong to get you to the lower end of that range? And then, I'll follow up with my next question. Zoran Bogdanovic: Yes. Matt, yes, you're right. I mean, we're providing a range of 7% to 10% on organic EBIT. I think we need to remind ourselves this comes on the back of a strong EBIT delivery for 2025, which is the third consecutive year of double-digit organic EBIT growth and actually proves our capability to navigate in the environment and still consistently deliver despite what happens. Now, given the timing of the year, we're a little bit early, and considering that we do believe that the markets will remain in a certain uncertainty on the macroeconomic and geopolitical landscape, we believe that the current range reflects any type of movements on other direction. So, for example, on the lower end, you would expect a worsening of the geopolitical environment, which we have a spillover effect on consumer sentiment and further FX pressures with commodity inflation. While on the upper end, it's built on the back of a stronger momentum across the markets that materialized through the year should deliver also a stronger bottom line. Matthew Ford: Okay. Great. And then my follow-up is just on Poland, naturally. I mean, Poland saw sequential improvement in Q4 following a fairly solid Q3. And obviously, in the first half of the year, you were still being impacted by the reintroduction of a competitor in a retailer in Poland. So I just want to get your sense of how much of this Q4 improvement should we see continuing into '26? And how do you think about the outlook for growth in that market in '26 and beyond? Zoran Bogdanovic: Yes. Thanks, Matt. So let me first say that we are very pleased with the performance of Poland. When you see on a broader horizon of last 4, 5 years, we've done excellent, excellent progress in terms of volume, revenue, profitability as well as significant market share gains. And understandably, with the return of the key competitor into the largest customer, of course, this would have a temporary impact. That's why, when we also see our market share performance, excluding particular customer, we do see that our performance and share gains are there. And we've seen that also in the country. We see a good -- very good performance of Coke Zero, which is up low teens. And also, just to say that in Q4, overall, we gained share in Sparkling. We also see a very strong performance of Energy, which is driven by Monster. So all in all, we have strong plans, very strong team in Poland and at the back of this very good performance over the last couple of years. And in last year, what we've seen is a return to positive performance in Q3, and then, especially in Q4, we do expect and we will see positive performance and volume growth and revenue growth in Poland also in 2026. Operator: We will now take the next question from the line of Simon Hales from Citi. Simon Hales: So my first question, Zoran, really is around the performance of the Premium Spirits business. It was very strong in the year, Finlandia, performing particularly well in a tough environment for the wider spirits industry. I wonder if you could just talk a little bit more about what's drove -- or driven that relative outperformance versus many of your spirits peers? And how do you think about that Premium Spirits opportunity as we look into 2026? That's my first question. Zoran Bogdanovic: Thank you, Simon. Look, overall, on like a helicopter review, Premium Spirits plays a strategic role in the overall portfolio, as it also strengthens our customer leverage. It provides a great blend in mixability. And that's one of the reasons why really Premium Spirits portfolio is performing well because it's not stand-alone consumption and activation, but it is also how we blend that in combination with our nonalcohol beverage portfolio, which clearly drives incremental transactions, which benefit both our non-alcohol part of portfolio, but also, of course, it benefits the Premium Spirits part of the portfolio. Secondly, we also are -- with all the partners, and I'll come back to Finlandia, with all the partners, we are increasing our penetration presence across the outlets, which means that we are increasing distribution and gaining share versus other brand companies in the market. We are also expanding a number of countries, where with Bacardi, we have increased when we started from 2, where we are now to 11 countries. So that scaling is also helping us to drive the business. And then Finlandia, we always believed that this brand has a great overlap with our territories, having 60% of its global volume across our territories. So when we took it over, we really wanted to give it a fresh kick to refresh the brand, give it more support. And that's why carefully crafted marketing campaign has been launched in April last year. And it was very well received, and it really accompanied great strong execution focus across the countries. So all that blended comes together that we are having another year of very good growth of Premium Spirits, which I want to remind also has a collateral benefit in driving the rest of the portfolio. Simon Hales: Great. That's very clear. And then, my follow-up is really on the finance cost guidance for 2026 of EUR 25 million to EUR 45 million and if you could talk about the build of that. I mean, you obviously started 2025 with pretty high finance cost charge expectations of EUR 40 million to EUR 60 million, and you basically ended the year with almost a 0 finance cost line. Why is it going to be so different in 2026? I mean, how much of the guide that you put out this morning is related to the bridging cost finance for CCBA? How are you thinking about foreign currency losses for this year within that guidance? Anastasis Stamoulis: Yes. Simon, so yes, I mean, we closed the year with EUR 1.1 million of finance cost, which was lower to our updated guidance and even lower to -- honestly, to our expectations. It was mainly driven by 2 key reasons. First of all, the greater currency stability that we had in the Nigerian naira as well as higher finance income. So if you look into next year and our guidance for next year, which is in the range of EUR 25 million to EUR 45 million, we expect a more normalization when it comes to the relevance of finance cost. Now -- so first of all, we assume ongoing income from our cash balances in Russia, which is positively contributing to the finance cost, of course. And on the other hand, we factored some higher finance costs in relation to renewing our finance structure, not related to CCBA at this stage. And of course, you rightfully mentioned the bridge financing cost, which is captured within our finance cost for the year, as this is already there. I want to remind us that this guidance does not include anything in relation to new debt for CCBA acquisition. This, of course, will be reflected, and we'll provide further guidance subject to the timing of the completion of the transaction. But I feel overall comfortable with the range that we are providing at this stage of the year and the visibility that we have. Operator: We will now take the next question from the line of Nadine Sarwat from Bernstein. Nadine Sarwat: My question is on CCBA. You announced the deal. It's been a couple of months now. And so I'm curious to hear over that time period, have you learned anything incrementally that you're able to share that makes you incrementally excited or perhaps additional areas where you see opportunities for improvement in the business? Zoran Bogdanovic: So after the announcement in October, we have immediately proceeded with application across countries where this is necessary to be done to seek the regulatory approvals for the transaction. So we are now in the period where, a, we are not the owner, and we need to wait for those approvals, which we estimate to be obtained by the end of the year latest. So during this period, what we can do, and we started doing, is integration planning. So our functional teams, together with functional teams of CCBA, started working together on the preparations and planning, which then will be executed only once we get all the necessary approvals. But, to conclude, you said the word excitement. So that's exactly the right word with how we feel about CCBA. And if we felt excited at the day of the announcement, I would say that we just feel more excited now, and we can't wait to get started with these wonderful territories, which offer abundance of opportunities that -- behind which we want to invest to drive growth. Operator: We will now take the next question from the line of David Roux from Morgan Stanley. David Roux: Just on -- I've got a question on CCBA, and then, a quick technical follow-up. So you've spoken about the deal accretion in year 1. And then, in your prepared remarks there, you went on to further note you expect it to create shareholder value in the long term. Can you remind us of how this deal will affect your medium-term targets of 6% to 7% organic growth, and then, the 20 to 40 basis points of margin expansion? And then, just my technical question, on the phasing of organic growth for 2026, there was an extra trading day this past quarter. Can you remind us of the impact across the 2026 quarters from more fewer trading days? Zoran Bogdanovic: Thank you, David. So on CCBA, very short, as we said last time, we will come back once the transaction is completed and approved. We will come back with our view on the guidance, and we will definitely take you through that. So for that, we simply need to wait that all the necessary things are done until then. And on the phasing, look, we have in Q1 4 more days, and that was in January. And we have, I think, 4 days -- or 3 days less in Q4. So that's why you will see that in Q1, we will see -- this will be reflected in the performance of Q1 and also somewhat balanced in the Q4. And for that reason, I think that informs how also phasing will be. I don't know if you want to add anything, Anastasis. Anastasis Stamoulis: No, I think Zoran captured it well. You should expect to see a bit more -- that extra volume from the first half to flow down from the revenue to the P&L, not of course, to the full extent, as there is a level of investments that we mentioned before, like the Olympics. So a little bit more on the first half of the year. And just to add on the CCBA that we -- our assessment is that, of course, once the company -- the process is completed on a new rebase of margin, we do expect that we will be delivering within a line of our guidance of 20 to 40 basis points. Operator: We will now take the next question from the line of Charlie Higgs from Rothschild & Co. Charlie Higgs: My first one is on COGS per case inflation, which I think was 3.8% in 2025. I was wondering, Anastasis, if you could give any thoughts for 2026 because European sugar is looking pretty good; PET, likewise; electricity costs are a little bit all over the place. But can you just talk about what you're seeing there? And how hedged you are on key commodities? And then I have a follow-up, please. Anastasis Stamoulis: Charlie, yes, actually, looking ahead for 2026, we are currently expecting COGS per case to increase in the low single-digit level. There is still some inflationary pressure in commodities like aluminum and PET, while as you rightfully said, there is some moderating trend in sugar. But as you know, we always follow a very robust hedging policy. And our current hedging coverage on key commodities, as we speak, is above 55% with higher coverage in sugar and aluminum, which basically means that any positive -- further positive trends in sugar will not be floating fully in the P&L, as the hedging position covers that. But we remain always focused on this with the hedging strategy and long-term contracts, and we continue to do productivity, and we'll reflect that as the year evolves. Charlie Higgs: Great. That's very useful. And then, my follow-up is just on some of the leadership changes that are happening at KO. We've got James Quincey's last outing in a couple of hours after an amazing run. We've had in the last few months, a new Head of Europe and a new Head of Africa, and also recently, the company announcing a new Chief Digital Officer. So can you just kind of put all of these leadership changes together and summarize what you think it will mean for Coca-Cola Hellenic? Zoran Bogdanovic: Charlie, so look, on the -- on that topic, I can say, first of all, we know very well all the leaders who are taking all the new roles. But let me first start to say that we believe that James has done phenomenal steering of the Coca-Cola Company and especially the way James and John and Henrique in their roles have done also gluing and bringing system so much closer together like never before. I really believe it is one of the reasons why the overall Coca-Cola system is working so well together and demonstrating such high performance. So -- and then preparation of this succession with Henrique, I think it's an exemplary case. We know Henrique really well as another phenomenal leader that we had privilege to have him on our Board, and we still do. But obviously, he will be stepping down given his new role. But we know that gave also the chance to Henrique to see Hellenic from up close. And we know that we share a strong belief in the system, in the business that we are in. And we also shared very bold ambition of how we all should think about future and how much more opportunities there are. And we will do everything from our side to support and work together in a flawless partnership that we have. And then, also 2 new leaders, both in Europe with Luisa and in Africa with Luis, excellent relationship, super strong leaders, growth mindset, drive to win, and above all, a great sense of partnership, attitude, approach that really inspires to do more better together. So -- I mean, you got me on a question that I could talk so much because we have really huge respect and trust and admiration for these leaders, and we are very privileged that we can work with them. And not to forget also Sedef, great choice of such experienced business leader to take such an important topic as digital transformation. And we already started, where with Henrique and John, we are having a Global System Digital Council, where now Sedef plays a very important role. So very exciting. And I'm very sorry, I don't have more time because I could really go on. But thanks a lot. I hope I answered your question. Operator: We will now take the next question from the line of Mitch Collett from Deutsche Bank. Mitchell Collett: You mentioned in the release some new AI capabilities that you've rolled out in 2025. And I think you say that it gives you better volume and also better revenue per case. So can you perhaps give a sense of the quantum of that uplift? And how quickly do you expect to be able to roll that out into other markets? And then, I have a follow-up. Zoran Bogdanovic: Mitch, sorry, of all the AI because that's another one where I can go for hours, but -- did you ask specifically on the one that we do in Nigeria? Mitchell Collett: Yes. I think that's the one where you say it gave you volume and revenue uplift. Zoran Bogdanovic: Yes. Yes, absolutely. No, that's -- you picked a good one because the beauty of that is that, as we and also Coca-Cola Company, we are all stepping up our data analytics and AI. But the beauty of that is when we come together, and this is an example of a case where we combine consumer data and our customer data. Bottom line of that is who shops where. And based on that, we are segmenting so that we can have segmented communication execution based on profiles of consumer segments in which type of outlets. That's the essence of that. And we've seen based on the pilot, which was just under 4,000 outlets, gave us a very good performance, definitely a better performance in volume and revenue per case than the controlled set of outlets. And for that reason, we are expanding that throughout 2026 by more than tripling number of outlets where we will be spreading this. And more importantly, all the learnings that we get from this are the backbone of how we will be then taking this further to other markets together as a joint system team. Mitchell Collett: That's great. And then my unrelated follow-up is just going back to the finance charges for this year. I think you say it includes the cost of the bridging financing. Can you just quantify how much that is? Apologies if you gave that earlier and I missed it. Anastasis Stamoulis: Yes. Mitch, you mean this year, you mean for '26, right? Yes. So in Q2, we expect it to be low single digit. Mitchell Collett: Millions, low single digits, euro millions. Anastasis Stamoulis: Yes. Yes, yes. Very low single digit million. Operator: We will now take the next question from the line of Richard Withagen from Kepler Cheuvreux. Richard Withagen: First one is on RGM. As inflation normalizes, how should we think about your current RGM strategy? So what's the medium-term algorithm between price, pack architecture, promo intensity and mix to stay in a good balance between the revenue per case growth and volumes? Zoran Bogdanovic: Richard, thank you for great question. So RGM, when I think of last 5, 6 years with everything we've been going through, I don't know how we would go if we didn't have RGM at the level that we have. This helps us in the situations of extreme conditions like we went with a very high inflation and how RGM carried us through all of that. And mind you, where on top of very strong price/mix, we have been able to deliver constantly positive volume, and that's attributed to the RGM, which takes into account so many things together. So going forward, in situation of a more stable inflationary environment, both in Europe and in Africa, this is where exactly all 3 drivers that you mentioned play a role. RGM is accounting and using end volume and price and mix. And for us, package mix, category mix are important drivers of how we are driving overall price/mix. We said for the last year that you will see more balanced play between volume and price/mix. And this is what happened. And we also estimate for -- and that's also what we estimate for 2026, where you will see even more balanced ratio between -- a combination between volume and price/mix. Now, just as the bottom line is that RGM, the core purpose, so it is to drive sustainable revenue and margin through well thought through initiatives that either tackle affordability or premiumization in every single market in their own unique way. And that's why this we call one of our prioritized bespoke capabilities behind which we are constantly investing just to get constantly better, better and raise the bar. I hope I answered your question. Richard Withagen: Yes, that's very clear, Zoran. And then my follow-up, maybe more for Anastasis, but -- you made some investments in inventories in the past few years, which I guess makes sense given the volume growth of the business. Now, in 2025, inventories actually declined year-on-year. Did you have any specific initiatives around inventories or around the broader working capital? And what can we expect going forward? Anastasis Stamoulis: Richard, thank you for the question. First of all, you mentioned the overall working capital cycle, and we are pleased how we are managing this in order to contribute to the overall free cash flow generation. Inventories have always been a focus area together with receivables, where we are making very good progress on actually keeping lowest possible overdues as a percent of receivables. But inventories as well has been a focus and part of the areas that we are working with supply chain to ensure the necessary requirement. Of course, the priority is about delivering in the market and ensuring availability, and we'll continue to do that. But I want to underline that I'm very pleased with the free cash flow generation as a combination of what has been driven from the profitable growth, the working capital cycle, while we created the space to continue to invest in our CapEx that fuels the future growth. So, yes, good progress there, and we'll continue to focus on this and keeping these levels of free cash flow generation. Operator: We will now take the last question from the line of Laurence Whyatt from Barclays. Laurence Whyatt: Just one for me, please. Just following up on one of the previous questions. I think you mentioned that you're going to have a bit of a more balanced split between volume and price/mix as you look at your guidance this year. Just wondering if you could confirm that that's what I heard, if you're expecting it to be around sort of 50-50 between the 2? Zoran Bogdanovic: Laurence, yes, you heard well where we say that it's going to be more balanced play between the 2. This really depends on every country. It may be that somewhere it's 50-50, it can be 60-40, it can be 40-60. So this is really hard to predict now. But in our algorithm, and as we think about '26, we do see that end volume and price and mix will play a role. And yes, it's going to -- we see it to be in a more balanced way. Laurence Whyatt: Just to split it up between your 3 divisions, I'm assuming that the majority of the improved volume is coming from the emerging region. Or is there any other areas you would expect a material step up? Zoran Bogdanovic: Yes, it's logical that more volume to come from the Emerging segment. Absolutely. You're right. Operator: There are no further questions at this time. I would like to hand back over to the speakers for closing remarks. Zoran Bogdanovic: Well, thank you, operator. And I just want to thank everyone for taking the part in today's call and all the questions and good conversation, and we look forward to speaking with you soon. Thank you very much, and goodbye. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: [Interpreted] Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference of the fourth quarter of fiscal year 2025 earnings results by KT. We would like to have welcoming remarks from KT IRO, and then CFO will present earnings results and entertain your questions. [Operator Instructions] Now we would like to turn the conference over to KT IRO. Jaegil Choi: [Interpreted] Good afternoon. This is Jaegil Choi, KT's IRO. Let's begin FY 2025 Earnings Presentation of KT Corp. Please be reminded that today's presentation includes K-IFRS-based financial estimates and operating results, which have yet to be reviewed by an outside auditor. We, therefore, cannot ensure accuracy nor completeness of financial and business data, aside from the historical actuals. So please note that these figures may be subject to change in the future. Let me now invite our CFO, Jang Min, to walk through the earnings for FY 2025. Min Jang: [Interpreted] Good afternoon. This is Jang Min, KT's CFO. Before presenting the earnings for FY '25, I would like to take this opportunity to extend my sincere apologies to shareholders and customers for the inconvenience and concerns caused arising out of last year's data breach incident. This incident is serving as an impetus for KT in solidifying the company's fundamental resilience in network and cybersecurity as we are committed to regaining trust from the customers. Now moving on to 2025 annual performance. Under balanced growth from B2C and B2B, KT's revenue and operating profit both saw significant growth versus last year on strong performance from core businesses, including data center, cloud and the Gwangjin-gu real estate project. Considering the base effect in 2024 of workforce transformation and even if we were to exclude profit from this year's Gwangjin-gu project, both the consolidated and stand-alone operating profit recorded more than a double-digit growth year-over-year, which is a testament to enhanced fundamental earnings capacity. Also, collaborating with global big tech companies, we launched a series of new products, and we will tap into the AX market in earnest moving forward. Following the September rollout of SOTA K, which is an AI model developed in partnership with Microsoft, we also introduced secure public cloud, which is a security enhanced cloud service back in November. We are also starting to gain more visibility in business outcomes from the Palantir partnership, particularly in respect to the financial sector of customers as we explore new business opportunities in offering consulting and solutions application. Also last November, we opened Gasan AI data center, making it the first such center in Korea commercializing the liquid cooling technology. As a large scale AI infrastructure hub located in the metropolitan area capable of running AI computation and data processing, we expect the center will play an important role in making KT Cloud cement its leadership in the market. . 2025 year-end dividend is set KRW 600 per share with a record date of February, the 25th. There was temporary financial impact in the wake of the breach incident, but under a strong commitment towards shareholder value enhancement, annual DPS was increased 20% from KRW 2000 back in 2024, rising to KRW 2,400 in 2025. Following 2025 under the corporate value enhancement plan, we are planning on KRW 250 billion of share buyback and cancellation this year. Efforts are continuing towards enhancing the corporate value at the group level as well. In December, KT Alpha announced its plan on interim dividend and cash payout, which is the first since the establishment of the company. And in January this year, Millie's Library announced its corporate value plan as well. The BoD of KT started the process to appoint CEO as of November, the 4rth and confirmed candidate Park Yoon-young as the next CEO on December, the 16th. He is known for his expertise in B2B in future technologies and is expected to take office as the CEO subject to AGM approval. KT, once again, is committed to strengthening the company's fundamentals and will do its utmost to rebuild customer trust. Regaining trust is our foremost priority under which we are taking necessary steps such as free replacement of USIMs, cancellation fee waivers and implementing customer appreciation package. These measures will increase costs in the short run, but such decisions were made because we believe customers' trust is what matters most in determining corporate value and defining the company's existence in the longer term. Going beyond the simple short-term response, we are making structural improvements across the entire security framework. Information security and innovation task force has been set up directly under the CEO as we are revamping the security governance, including further empowering the authority of CISO and integrating and reorganizing distributed legacy security organization and their roles. We are also planning on around KRW 1 trillion investment into security for 5 years to expand Zero-Trust security scale up, AI-powered integrated monitoring system and beef up access control and encryption, so as to bolster information security system in phases. Through such investment, KT will internalize security capabilities as its sustainable competitiveness. Corporate value up plan will be implemented as planned, including the KRW 250 billion of share buyback and cancellation as previously mentioned. . Now moving on to FY '25 financial performance. Operating revenue increased 6.9% on year, reporting KRW 28,244.2 billion, Operating profit increased 205% year-over-year, reaching KRW 2,469.1 billion and continuing growth from core businesses, including telecom, real estate, cloud, data center and also driven by profitability improvement efforts and one-off gains from real estate projects. On higher operating profit, net income was up 340.4% year-over-year to KRW 1,836.8 billion. EBITDA was up 35.5% year-over-year to KRW 6,349.3 billion. Next, operating expense. Operating expense was flat year-on-year, recording KRW 25,775.1 billion, due to lower labor cost and depreciation and efficient general spending despite the rise in selling expense following the growth in subscribers. Next is on the financial position, the balance sheet. Debt-to-equity ratio as of end of 2025 recorded 120.7% while net debt-to-equity ratio fell 0.4 percentage points year-over-year, reaching 37.4%. Next is CapEx. Total CapEx spend by KT and its major subsidiaries in 2025 was KRW 2,939.7 billion. KT separate basis was KRW 2,143.9 billion, while major subsidiaries spent KRW 795.8 billion in CapEx. Moving on to breakdown of business performance. Wireless revenue was up 2.8% on year to KRW 7,155.4 billion. Revenue growth was driven by subscriber expansion around 5G and 5G penetration as of end of '25 recorded 81.8%. Next, fixed line. Broadband revenue posted 1.9% year-over-year growth, reporting KRW 2,533.5 billion on the back of GiGA subscriber growth and value-added service expansion. Media business revenue grew 1.7% on year, driven by higher IPTV subscriber net addition and growth in OOH revenue. Home Telephony revenue was down 5.8% year-over-year to KRW 658.9 billion. Next, on B2B services. B2B service revenue was up 1.3% year-over-year on the back of balanced growth from telecom and AI and IT business despite the impact from streamlining of low-margin businesses. And against the backdrop of stable growth from such network-based businesses, such as enterprise messaging and enterprise Internet, AI IT has seen growth of 3.1% year-on-year on the back of AICC design and build business, et cetera. Moving on to major subsidiaries. Now despite the divestment of PlayD, our content subsidiaries revenue stayed flat year-over-year, following top line growth from StudioGenie, Nasmedia and Millie's Library. KT Cloud revenue saw rise in data center usage by global customers and with AI cloud demand expanding, revenue increased 27.4% year-on-year, reporting KRW 997.5 billion. KT Estate revenue was up 15.9% year-on-year to KRW 719.3 billion on the impact of strong hotel business and new property development projects. This brings me to the end of the FY 2025 full year performance briefing for KT. Once again, we would like to sincerely apologize for the data breach incident and the concerns it would have caused. KT will take this opportunity as a turning point in redefining itself as a company worthy of trust. On the back of growth from its core telecom business, visible results from AX business with the underpinning of the group's core portfolio, KT will yet again fortify its fundamentals in 2026. We will also implement the plan on corporate value enhancement so as to drive a step-wise increase in corporate value. We ask for continued interest from investors and analysts. For more details, please refer to the earnings presentation that we shared. Operator: [Interpreted] We will now take your questions. [Operator Instructions] The first question will be provided by Wonseok Hwang from Shinhan Securities. Wonseok Hwang: [Interpreted] I have 2 questions that I would like to ask. The first one, I would like to understand as to what the financial impact is of your customer compensation package regarding the data breach incident? And my second question is with the incoming new CEO, I would like to understand as to whether he will be keeping to the previous shareholder return stance that the company has shown? Min Jang: [Interpreted] I would like to first respond to the first question that you pose regarding the customer appreciation package that the company has implemented and its impact on the financials. We originally said that the benefit that the customers would actually feel will amount to about KRW 450 billion. But not all of that expense is going to be booked as cost under our accounts because it would actually depend on to what extent the customer actually uses up those benefits. So in terms of the cost that was actually incurred in 2025 and what is most certain to be accrued in 2026 has already booked -- has already been booked in our 2025 numbers. And with regards to additional incurrence of cost come 2026, in consultation with our external auditor, we will come up with an appropriate accounting treatment. But what I can tell you with certainty is that our performance or earnings in 2026 is going to be better compared to 2025. That is the plan that we are currently working under, and we will do our utmost to actually achieve that. Moving on to your second question. I understand that the question relates to the future approach or direction regarding our shareholder return policy and the sustainability of the company's past growth strategy going forward. Now first or first mentioned in my opening presentation, we've actually increased the DPS by 20% from the 2024 KRW 2000 per share to KRW 2,400 in 2025. In terms of the shareholder plan to be applied from 2026, it will be something that the new incoming CEO and the BoD would have to finalize on. As you would appreciate, the company's shareholder return policy has been progressive. It's been expanding year-over-year. And as I've also mentioned, our objective for this year is going to be a higher level of profit versus what we've seen last year. So the dividend plan or the shareholder return plan to be devised by the new CEO and the BoD, we expect will be in line with those -- in line with those stance. In terms of whether the growth strategy that we currently have will continue to be implemented going forward, I'm sure you could appreciate that the AX driven innovation is something that is essential across all of the industry sectors. So in light of that aspect, the new CEO has practical experience in the B2B domain and he values the commitment and the promise that the company has made to the market as well as to the shareholder. Hence, we do not expect that there will be any significant change to our strategic approach. Now having said that, with him taking the office in light of certain strategies or certain tactical approaches, those will reflect the philosophy of the new CEO. Next question, please? Operator: [Interpreted] The following question will be presented by Minha Choi from Samsung Securities. Unknown Analyst: [Interpreted] I am [indiscernible] from Samsung Securities. I would also like to ask you 2 questions. First is on the outlook for your wireless business going forward. Since the data breach incident, I understand that there was a 14 days of cancellation fee waiver period starting from the end of last year up until the beginning of this year, and I understand that there was some churn of your subscribers, I would like to know under that backdrop for this year, what is your outlook for your wireless business growth? . My second question is compared to your peers in the industry, your B2B growth seems to be much slower. Would like to understand as to the reason why and what your outlook for your B2B business going forward is? Min Jang: [Interpreted] So first off, regarding the 14 days of cancellation fee waiver, during that period of time, we had about 230,000 subscribers leave the company. But because of the net addition that we actually achieved previously, the actual all-in impact was on a full year basis, a net addition of subscribers. So that basis of net addition is what creates the revenues going forward for our wireless business in 2026. Now having said that, it is hard to look forward to, for instance, a very high level of growth of double digit from the wireless business at this point. That's why we are going to focus on more -- making our operations more efficient through rationalizing the selling expenses and distribution and improving on the offerings, which will be the efficiency measures that will help us defend our bottom line. Responding to the second part of the question, in terms of the reason why our B2B growth rate is lower compared to the industry peers and what our outlook is for 2026, first, in looking at our B2B business, you have to also incorporate our enterprise Internet, our lease line business, data center and AI business as well. And as you know, for us, we have a separate subsidiary entity under KT Cloud. So you also need to take that aspect into consideration. So if you were to also combine the KT Cloud revenue on a combined basis, you will see that our revenue growth on a year-over-year basis is 6%. And in light of the total size of the B2B market and the market share that we have in that market, 6%, does not look that low. And also on KT Cloud separate basis, the growth rate was 27.4% year-over-year, which is a quite steep uptrend, and we expect this trend to continue this year as well. Operator: [Interpreted] With no questions in the line, we would now like to close the Q&A session. Once again, thank you very much for your questions and for your interest in the company and thank you all for joining us despite your very busy schedules. This brings us to the end of KT's Full Year 2025 Earnings Conference Call. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Steinar Sonsteby: Welcome to the Q4 and 2025 numbers from the Atea Group. Welcome to icy cold Oslo, a beautiful winter day. It has been a challenging year, but a very rewarding year for everybody in the ecosystem of Atea. It's been a year of good results and we'll soon take you through all of them. But it's also been a year where we've been doing massive investments in the future of Atea and we'll touch on some of those too. Diving into Q4 first, we had a gross sales of NOK 17.8 billion, up almost 8%. EBIT came in at NOK 488 million, up almost 24%. And net profit impressively up almost 36%. All in all, it gave us an operating cash flow of NOK 2 billion. But as always, I'll leave it to Robert to give you all the good news. Robert Giori: Thank you, Steinar. [Audio Gap] growth in the fourth quarter of 2025, driven by higher sales, increased gross margins and relatively low growth in operating expenses. Gross sales in Q4 were NOK 17.8 billion, up 7.8% from last year. After adjusting for changes in currency rates, organic growth in constant currency was 4.7%. Hardware sales increased by 5.4%, driven by higher sales in mobile devices. Software and Cloud sales grew by 11% with strong growth in sales of cloud solutions. Services in last year based on higher demand for consulting and product support agreements. Net revenue according to IFRS was NOK 11.3 billion, up 6.1% from last year. Gross profit increased by 9.0% to NOK 3.1 billion. Gross margin was higher than last year due to an improved hardware margin and a higher proportion of software in the revenue mix. Operating expenses, excluding restructuring costs, grew by 6.6% to NOK 2.6 billion. Adjusted for currency movements, these costs grew by approximately 3.5% from last year. EBIT before restructuring costs increased by 23.7% to NOK 488 million. Restructuring costs were NOK 8 million in Q4 2025 as Atea Denmark reduced staff in its Managed Services business. In Q4 last year, Atea incurred restructuring costs of NOK 39 million from a cost reduction initiative in Sweden. After restructuring costs, EBIT grew by 35.1% to NOK 480 million. And net profit after tax increased by 35.7% to NOK 333 million increased by 35.7% to [Audio Gap] revenue and profit growth across the countries in which we operate. Atea's strong sales and profit performance was spread across nearly all countries in the fourth quarter of 2025. In Norway, gross sales increased by 8.5% to NOK 4.6 billion, with very strong growth in sales of software and services. EBIT grew by 12.4% to NOK 156 million. In Sweden, gross sales grew by 5.2% to SEK 6.9 billion, driven by strong demand for hardware. With higher revenue and flat operating expenses, EBIT before restructuring costs grew by 31.4% to SEK 207 million. In Denmark, gross sales fell by 4.0% to DKK 2.4 billion due to lower sales of hardware compared with last year. Last year, Atea had a very high volume of initial hardware orders on new public sector frame agreements. Despite lower hardware sales, EBIT before restructuring costs grew by 52.6% to DKK 41 million with a higher margin revenue mix and flat operating expenses. In Finland, gross sales grew by 11.0% to EUR 112.7 million as demand for products showed a strong recovery from last year. EBIT was EUR 2.5 million, a decline from last year due to an increase in staff and temporary factors, including start-up costs related to new contracts. In the Baltics, gross sales increased by 55.8% to EUR 76.8 million, driven by exceptionally strong growth in product deliveries to the public sector. EBIT increased by 16.7% to EUR 4.0 million. Atea Group Functions, which includes shared services and group costs, was a net operating expense of NOK 32 million compared with an expense of NOK 22 million last year. The difference was due to higher spending on corporate development activities. Now a word on our cash flow and balance sheet. In Q4 2025, Atea had very strong cash flow from operations of NOK 2.0 billion. As you can see from this chart, Atea's cash flow from operations is highly seasonal with strong cash inflows in the fourth quarter as Atea's sales and collections from the public sector increase and its working capital balances fall. Cash flow from operations was positively impacted by seasonal fluctuations in working capital in Q4 2025, although this impact was less pronounced than in Q4 last year. Based on the strong cash flow from operations, Atea had a positive net cash balance of NOK 1.0 billion at year-end as defined by Atea's loan covenants. This corresponds to a net debt-EBITDA ratio of negative 0.5. Atea's net debt balance at the end of Q4 2025 was NOK 6.4 billion, less than the maximum allowed by its loan covenants. Atea has a strong balance sheet and significant additional debt capacity before its loan covenants would be reached. That concludes the presentation of the fourth quarter results. I'll now hand the podium back over to Steinar to review full year results and discuss the outlook for Atea's business. Steinar Sonsteby: Thank you, Robert. As always, you have all the fun. If we try to summarize 2025, revenue came in at over NOK 60 billion. It's an impressive number, but it's even more impressive that growth in Norwegian kroners in 2025 came in at a little bit more than NOK 6.5 billion with the same number of people. EBIT at NOK 1.385 billion, up 15.4%. All in all, a very good year. But this is not new. Atea has been stable both on revenue growth and EBIT growth for many years. And on this chart, you see the last 6 years. It is almost as linear as analysts' spreadsheets with gross sales growth of 9% on average and EBIT on 10% on average. In the next couple of years, we have to scale even better on this revenue. But let me bring you in to some of the things that have happened in Atea in 2025 and that will have effect on our results in the coming years. First, of course, we are extremely happy with how we have developed in the defense sector. It's not only the national defense organizations, it's also companies delivering to defense. But during the last couple of years, we've also strengthening our activity towards NATO all over the world. And so when we signed a new agreement in the fall of 2025 with NATO and you see Robert having the honor here on the picture in Brussels, we were extremely happy but also proud. It's a contract that will change many of the operations that we do internationally and it will strengthen us and prepare us to do similar contracts with other companies that have similar needs. But as you can see on the right side, it's not the only large contract we signed in 2025 that will have impact in the next couple or even more years. We have strengthened our relationship with SKI in Denmark, but we also signed another equipment deal with NATO which is as a service which you see on the left side and so it's not one contract. It's many. And we have contracts in Norway and in the Baltics. But we are particularly proud that we will do outsourcing together with the Health regions in Finland. This is by the way one of the contracts which have led us to take on more people in Finland even though short term that might not have looked well when revenue hasn't been growing. That will change in 2026. All in all, whole bunch of new contracts that will help us going into the new year. In 2025 we also worked on the future of a daughter company called AppXite. And just before Christmas we signed a deal with Aries, a U.K.-based software company, that they will take over 51% of the company. In Q1 2026, we will recognize an EBIT of approximately NOK 150 million as a result of this transaction. So I want to say thank you to everybody in AppXite. I know that you're probably looking at this for working together for the last many years and also for working with you into the future though in a different capacity. The deal we have done with Aries and how we developed AppXite would also be something we'll talk to you about in the coming years as this will change some of the relationship we -- or possibilities that we have with Microsoft with their new incentive programs where AppXite has become a distributor that Atea and other customers of AppXite can use going forward and to maximize Microsoft's programs. Many other things have happened more internally in Atea. I've already mentioned the growth. It's actually pretty impressive when you see that this growth is probably higher than the revenue of the biggest competitors that we have in the region. But we also worked to strengthen Denmark and I'm very happy to welcome Nicolai Moresco as new Country Manager in Denmark starting later in this quarter. We also hired Hans Vigstad to take over and run our Managed Services division across all 7 countries. We have strengthened and kind of moved the focal point for Atea Global Services, which we have had in Riga for a long time and from a nearshoring to more a center of excellence. And we have moved into new and fresh offices, so our 600 people have a better environment to do that center of excellence job. Finland has been lagging a little bit on results, but we have kept on building the capacity and we have high hope for the line of opportunities in 2026. We've built, as I've alluded to, a special sales team across the countries to work with defense and NATO specifically as it has some special demands on security clearance and also the products that we deliver. It was a big day late in 2025 when Atea Logistics, our central supply chain organization, passed SEK 10 billion in revenue. We opened the new center late 2019. So that is some of accomplishment. At the same time, they changed their ERP system and we're now fully operating on an SAP solution that we later will also roll out in the different countries. And we are very happy that in 2025 in total, 16% of our customers have chosen Atea to be their main cybersecurity partner, up from 10% only 12 months ago. So a productive and very constructive and good 2025 is behind us. So what does the future look like? Well, there are challenges also that we have to face and solve in 2026. But we expect to keep on growing. We expect to keep on consolidating the market and the vendors are helping us. They want to have fewer partners in Europe and they want the partners have to be stronger and they're pushing us to develop services and be a complete shop for the customers. This gives us a possibility to keep on growing the EBIT. But there are also some challenges when it comes to the supply chain situation. And many of you are worried when you read that there is a shortage of memory, CPUs or other components. And we do recognize that this is a problem. Right now, the problem for us is not as much supply as it is unprecedented price increases. We have seen price increases on certain offers of more than 100%. Now this is not new. It's happened before. We're only 2 or 3 years away from last time. This is a little bigger though. And you know it comes from all the investments in AI forms, AI PCs, but also the fact that what we do is now a part of everything, cars, refrigerators, TVs and other equipment. It will be challenging. We feel right now we're kind of in the middle of a storm that we are dealing with hour by hour and day by day. But this will calm down. The situation will work itself out. And we think that the price increases will keep on -- or the prices will keep on being high for the rest of this year and maybe even long into the future. In many ways, you can say that we get help from price increases in getting revenue increase. We are doing a lot of activities internally and we have the flexibility with the breadth that we have in Atea to face these kind of problems. And if you look into our history, you can see we have dealt pretty well with them before. As you know, you don't have to be perfect as long as you're better than competition and we are certainly equipped to be better than competition in situations like this. We are using our balance sheet to have more inventory over a period. But we also see that this will calm down. The unpredictable will become predictable and the whole industry will deal with it. As said, we have done it before, so we're confident we can do it again. On basis of everything Robert and I have told you today, the Board will propose for the general assembly that we will increase the dividend to NOK 7.5. And it will be as normal, a repayment of paid-in capital and in 2 installments, one in May and one in November. Solid results from the company gives shareholders a solid return in the way of dividend. So that concludes the presentation for the Q4 and 2025 results and we'll now go to Q&A. Unknown Executive: Thank you, Steinar and Robert. We have several questions here. First question, I've understood there's been many changes to the vendor partner programs. How do you see this? Steinar Sonsteby: Absolutely it has been. And I'll [Technical Difficulty] a feel of what we see. But I want to start by saying that this is not new. This is actually very predictable. Partner programs are programs because the partners want to challenge us and to give us some kind of direction in where they want us to go. We actually has [Audio Gap] to manage the beast. These are huge companies that has an opinion on how they pay us and what they want us to do to get paid. During 2025, we've particularly faced 3 major changes that also have been talked about in press and in the market. First of all, of course, Microsoft changed their incentive program 1st of January in 2025, so a little bit more than a year ago. It was something that was talked about in advance. And we as everybody else was challenged. When we now look back, we feel right now that we're back on even and that means that our job in 2026 is to take advantage of the upside in the changes of the program. Another well talked about change was Broadcom buying VMware a couple of years ago and changing their partner programs. It's absolutely been challenging, more maybe for our customers than for us, with the impressive, impressive price increases that VMware and Broadcom has brought to the market. On the [Technical Difficulty] so they let all their services people in Europe go. This creates an opportunity for us. And it's a typical way of seeing this when the partner program changes. It will create some noise and maybe a little bit of chaos in the ecosystem at once. But over time, it actually is there for a reason and it gives the full service houses a bigger opportunity and it creates a consolidation of the channel. The last one I want to just mention is Cisco. I personally and we as a company have worked with Cisco for many decades. This is not the first time Cisco changes their program. This time it's called the 360 Program. And it started 1st of February this year. And so we are very fresh to it. But of course, Atea is highly certified in the new program when we start in all 7 countries. So we feel pretty confident that over time, again, we'll be able to take advantage of all the changes. So I think I'll leave it with that. Unknown Executive: Several questions here on Finland is lagging. Can you explain, please? Steinar Sonsteby: Yes. And I have to say and you are who runs Finland for us knows this, we are a little disappointed at the numbers in 2025. But it's also a part of life. We can't fight gravity. The economy in Finland has not been the strongest. On the contrary it's probably been one of the weakest in Europe. We think long term. We also won, as I said earlier in the presentation some large outsourcing contracts where we had to take on people in 2025 before revenue starts in 2026. So in short, economy in Finland has been suffering. It looks better in 2026. We have kept on building our capacity and winning contracts that will give us an upside going into 2026. We are confident that Finland will start delivering again. Unknown Executive: You note that memory-driven supply crunch. Can you help us understand how many months out in 2026 you have visibility or guaranteed deliveries? And furthermore, at which point does it start to get more murky? Steinar Sonsteby: Yes. Looking into the future have never been an exact science. But right now, it's not as if production or supply has gone down. Supply is actually increasing as we're speaking. It's just that it isn't increasing as much as demand. So in another way, you could say that if there were no limit to how much memory and CPUs that could be produced, there is really no limit to how much the IT market could grow right now. And so we don't see lack of demand as being the most difficult thing right now. We're getting most of what we're ordering on more or less normal supply time. It is the price increases that hurts us because it creates unpredictability. And in a machine like Atea and for that sake, the whole IT industry, unpredictability creates opportunities, but also problems. So demand is less of a problem today than price increases. Price increases on the other side is also helping us and also giving us opportunities in the partner programs as they are massively focused on growth. Unknown Executive: Continuation or similar question. As we enter into this uncertain territory, how bad can it get for the lower-end devices? Are they more at risk? And for higher-end devices, would you -- we have a priority and do you see better supply for the higher-end devices? Steinar Sonsteby: Again, so far, we don't see actually big supply constraints. It's not the supply side. What we see though is with price increases on a normal PC of more than 20%, that there will be a shift towards using those components in higher-end products. So we do -- we predict that we will see the shortage on low-end products when and if the shortage comes. Unknown Executive: What kind of EBIT growth would you have expected in 2026 if we assume memory and supply wasn't an issue? Steinar Sonsteby: So we have said several times during 2025 that we predict a growth in the high end of single digits in 2025. Well, we came in a little bit higher than that at 11%, 12%. We have also said that we, in 2026, see a demand which will give us a mid-single digit growth, maybe 5% to 7% and that is what we have predicted. That is also still what we think, but we think we'll do it with a little lower unit delivery, but with a higher average price. So we're still in mid-single digit growth on revenue for 2026. Unknown Executive: I have a question on hardware pricing. Any risk that you can't push forward the hardware price hikes? Also, is there any chance you might hike prices on the inventory we have to increase margin? Steinar Sonsteby: Yes. So that's a pretty detailed question. We don't have -- so starting with inventory. We don't normally have inventory the way that question dilutes to. Our inventory is actually products in work. So they've been ordered and we are doing something to it or it's product that customers have ordered and store in our warehouse. It's very little what we call open stock. So the fact that we could have had inventory where we paid less and now the price increases are giving that a higher value is unfortunately not -- or maybe fortunately, not a part of our game. Now I said in the presentation that we will use our balance sheet to do some of that going forward. But we are not gambling with currency. We're not gambling with inventory. That's not what we do. What we do is concentrating on the needs of the customers. And so our inventory going forward will be built together with the largest customers and mostly paid for by those customers. Unknown Executive: Atea is aiming for revenue growth and EBIT expansion in both Q1 and 2026. Can you elaborate on how we should think about the ingredients of EBIT margin? And would it be fair to assume that Atea is aiming for higher margins year-over-year for the group? Steinar Sonsteby: We are and have been aiming at increasing the margins and scaling on cost for years. That is what we challenge the organization for every day. We also work hard with the vendors so that they pay us fairly for that higher value that we invest to our customers. And we're very happy to see the changes that we discussed in partner program are actually rewarding that higher value that we have for customers. [Technical Difficulty] we're looking at higher margin. But when it comes to the product and services offerings and how that will change or develop over 2026, I think we'll get back to more details when we can actually talk about it as numbers. But we expect more high-end products, more AI PCs as more customers are still demanding or working on their Windows 11 strategy. We see defense buying higher-end products and they will become a larger part of our revenue. And so we absolutely see that there will be a movement. This also leads to a little bit of a pressure on the services business, which is very connected to the number of units that we sell. But that's why Managed Services is so important going into the future and especially in Europe with the sovereign discussion that are just increasing in scale. Unknown Executive: Can you give some more color on cost development in Denmark in 2026? Do you expect to front-load any costs due to any structural changes in Denmark? Steinar Sonsteby: Yes. Again, a pretty detailed question. We have done some investments in the services business in Denmark that will lead to a little bit of a higher cost into Q1 and the coming quarters. Outside that, we don't see any real cost increase as we're trying to balance where we have people and where we increase cost. But I also want to say when you do a transformation or a turnaround as we are working on in Denmark, nothing is linear. And the quarters with the lowest revenue will be where we have the lowest improvement in the short term because the cost is a little bit higher than what it was a year ago. Specifically, this is on consultancy in Denmark, where we have recruited approximately 40 to 45 consultants so far. Unknown Executive: Several questions here. How has Q1 been so far in 2026? Steinar Sonsteby: I think I'll pass on that and leave you to listen to us in April. Unknown Executive: Another question here on pricing. How should we think about price increases from the hardware providers and impact on gross margins? Steinar Sonsteby: All changes give us opportunity to work on every value that we create, also gross margin on hardware. Some of it short term will be difficult to react to and some of it actually give us larger opportunity. The way we have seen this historically, it's always difficult to see into the future, but the way we have seen this historically is that there isn't major changes. So we're not predicting a positive margin development or gross profit development and we're not predicting any major impact on the negative side. But internally, in the machine of Atea, there will be a lot of things and that's why we're talking about the price increases as demanding to the organization as we have thousands and thousands of orders every week that we handle. Unknown Attendee: And our final question. How is the competitive situation? Any changes that you see? Steinar Sonsteby: With everything that's going on in the world, competition is not my worry. I focus on what we can do and we can do a hell of a lot and I hope we've proven that today. With that, we'll conclude this presentation. Thank you for joining.
Mathias Meidell: Hi, and welcome to Hexagon Purus' Q4 2025 Presentation. My name is Mathias Meidell, and I am the IR Director of Hexagon Purus. I will be moderating from the studio in Oslo. And from the studio, I'm also joined by Group CEO, Morten Holum; and Group CFO, Salman Alam. The agenda for today includes, as usual, the highlights from the quarter, a company update, the financials and the outlook. We will end the presentation with a Q&A session as usual. So please feel free to enter your question via the function on your screen. And with that, I would like to pass the word over to you, Morten, who will take us through the highlights of the quarter. Morten Holum: Thank you, Mathias, and good morning, everyone. Thanks for joining our webcast this morning. 2025 was a challenging year. Looking back, we had 4 key points: One, after a long period of significant growth, the activity in '25 dropped dramatically, driven by significant market uncertainty that was amplified by regulatory changes, tariffs and geopolitics. That resulted in lower demand and weaker revenue compared to 2024. Number 2, we took decisive actions to adapt the operating model to a new market reality to reduce the cost base and protect liquidity. Our primary focus in '25 was to align the cost base with the near-term expected market conditions. Number 3, we also undertook an extensive review of our entire business portfolio to assess our options to improve capital efficiency to extend the liquidity runway and to preserve flexibility to support long-term value creation. And finally, number 4, we made focused efforts to diversify the customer base across our core applications, and we're able to broaden the customer portfolio. We saw the positive impact of that now in Q4, where the uptick in volume was driven by several new hydrogen distribution customers. More on that in the outlook section. After a challenging start to the year, we saw a significant uptick in Q4. On the left, you see that revenue for the quarter was NOK 468 million, representing an 18% increase year-over-year and an 85% increase from Q3 '25. The main driver for the revenue increase was significantly higher volume in transit bus, hydrogen distribution and aerospace. The higher volume also translated into improved margins. EBITDA for the quarter was minus NOK 99 million, including NOK 76 million of items affecting comparability. These are primarily related to inventory revaluations and impairments. That means that the underlying EBITDA margin was minus 5% in the quarter, significantly closer to breakeven. So, we see the positive impact of higher volume and a leaner cost base. And to the far right, we exited the quarter with an order backlog consisting of firm purchase orders of approximately NOK 728 million, more than 90% of which is for delivery in '26. I'll come back to that in a minute. Overall, we're happy to see the uptick in volume in Q4 and happy to see that the cost measures we've executed are having a positive impact on profitability. Looking at revenue composition, Hydrogen infrastructure made up the largest part of revenue in Q4 with a share of 42%. This is a decrease in relative terms from Q4 last year despite the strong sequential growth from Q3 '25. Transit bus continued to increase its relative share in Q4 compared to last year with a 10 percentage points increase, and the 6-percentage point increase in other applications is driven by higher aerospace activity in the quarter. So, for the full year, we ended at a revenue composition consisting of 29% distribution, 36% transit bus and 27% other applications, which is a mix of industrial gas bundles and aerospace, that's a significant mix shift from last year where more than half the business was in hydrogen infrastructure. Looking at the full year revenue bridge, we had significantly lower revenue for hydrogen infrastructure. Very low volume in the first half of the year. In fact, we had more volume in Q4 alone than in the first 3 quarters of the year, around 60% of the full year volume came now in Q4. So, hydrogen infrastructure is the key reason for the year-over-year revenue decline, driven by delay in new green hydrogen projects and delayed commissioning of the significant customer fleet additions that we sold in 2024. Hydrogen mobility declined by 13% from last year, where strong growth in transit bus almost offset the loss of the heavy-duty truck volume that we had in '24. On the battery electric mobility side, the volumes and movements are small, but the 9% increase is related to deliveries of battery electric trucks to Hino throughout the year. These are trucks that will be used for test and validation purposes and for customer demos. In other applications, the main growth driver was aerospace, which compensated for lower demand for industrial gas bundles. And then to the order book, we went into '26 with NOK 728 million in orders, of which 92% is for execution this year. In terms of product areas, the 3 largest areas are hydrogen infrastructure, hydrogen mobility and other applications, where the largest part of the latter is aerospace. These figures are from the beginning of the year, so they don't include the 14-truck order from Hino that we got in January, amongst others. Looking at the overall situation, we have satisfactory demand and revenue visibility through Q1 and parts of Q2. We're encouraged by the customer dialogues we're currently having and see that there is potential for growth in '26, but the market is still uncertain. And at the current run rate, the order intake is below what we need to break even. We made good progress on the portfolio review that we initiated last year. It's taken time, but we're getting traction on the different initiatives. We've been looking for ways to strengthen our financial position and extend the liquidity runway while preserving future optionality to support long-term value creation. We've had a strategic review ongoing for the BVI business, we have looked at the different parts of the HMI portfolio, and we're working on the China JV. Since last quarter, we've made progress that will materially impact the company going into 2026, both in terms of capital efficiency of the business and the liquidity runway. So, let's start with the BVI business. Now I want to give some background for the actions that we took now in January. Over the past years, we have built an industry-leading technology for battery electric heavy-duty mobility. This has been tested and validated on several customer platforms. And those that have followed us for a while will remember that we signed some very significant agreements with OEMs a few years back when the expectations were that vehicle electrification would scale quickly. So based on those signals back in the day, we scaled up, built a great organization and invested in sizable manufacturing capacity. And then the market turned. Over the past 12 to 18 months, the uncertainty around regulation and tariffs, in particular, has materially changed the near-term outlook. And we're sitting with significant capacity that can't be utilized. Looking a bit forward, we believe in the future of truck electrification and the strong positive feedback that we're getting now from the customer demo programs, we're confident that the technology that we have is competitive and attractive. But it's challenging, if not impossible, to get the business in its current form to profitability short-term. So, in response to a weaker and more uncertain market in North America, we initiated a strategic review of the BVI segment back in June, evaluating the full range of operational, structural partnership and transaction alternatives. The dialogues we have had as part of that review leads us to conclude that it's unrealistic to execute a value-accretive transaction in the current market environment. But at the same time, we believe that fleet electrification will materialize, albeit on a longer time horizon. And we're confident that the technology we have developed has substantial medium to long-term value potential. So, in response to a weaker and more uncertain North American market, we initiated that strategic review back in June. Again, as I talked about, the full range of operational, structural partnership and transaction alternatives we had under discussion. So, we decided now to operate the BVI segment scale back to a minimum level to align with the current market condition while preserving long-term strategic optionality. That means that we had to scale back the operations around 2/3 of the workforce have been let go, and we are going to consolidate our footprint to the Dallas facility, leaving the Ontario and also eventually going out of the Kelowna facility over time. We will take a restructuring cost of approximately NOK 0.7 million now in Q1 2026. As part of that, we have also renegotiated the battery cell supply agreement, eliminating the overhang of the NOK 12.9 million in prepayment that was there. And since all the CapEx now has already been taken, we will retain the ability to quickly scale back up again when demand is growing. So, in January, we received an order from Hino for an additional 14 Class 6, 7 and 8 trucks with expected delivery towards the end of the second quarter and the beginning of the third quarter of '26. Given now the significant cost reductions taken, this is expected to allow the BVI segment to operate at close to cash neutral levels in aggregate through mid-2026. A key enabler of that is the fact that a substantial portion of the components is already sitting in our inventory, which limits the need for additional working capital to complete these vehicles. And then again, with the renegotiated Panasonic contract, which eliminated the outstanding prepayment, the overhang related to that has been removed. Last week, we signed an agreement to sell 100% of the shares in Masterworks, our Westminster business unit to SpaceX. The Westminster business has performed well during the past years, partly due to significant growth in demand for cylinders for aerospace applications. Aerospace used to be a small part of the business but has recently become the dominant driver of revenue in our Westminster unit. The space exploration sector is growing rapidly due to falling launch costs and higher demand for satellites, both for commercial and national security purposes. Along with that growth comes a preference from the aerospace customers to secure full control of critical components like high-pressure cylinders by bringing the competence and the manufacturing capacity in-house. Because of that, we believe the future of our aerospace business is best developed under an industrial owner with a dedicated aerospace focus. The transaction with SpaceX secures a good industrial home for the Westminster business, while it significantly strengthens our financial position and allows us to focus more narrowly on our core strategic priorities and to reduce risk. I also want to mention a few words on China. The Chinese market remains strategically important for us, representing the largest global market for hydrogen-related mobility and infrastructure solutions and the most competitive supply chain for materials and components. Market has developed slower than expected. It took longer than we thought to establish operations there. And there have been frequent changes in regulatory requirements to qualify for local certification. But it remains the most active hydrogen market in the world today. So, we have a manufacturing plant that's operational. We have validated the process, the product and the quality by manufacturing cylinders for our European infrastructure market there last year. And we're now in the final stage of the process to receive certification for the local market. But at this point, the JV is not yet generating profits. So, to manage our liquidity situation, we've engaged in discussions with CIMC Enric regarding potential financing alternatives for 2026. We're seeking ways to minimize our cash contribution while maintaining the JV's operational continuity and market presence. And in parallel, we are jointly exploring opportunities to simplify the joint venture structure to improve cost efficiency and execution speed with the main purpose to secure our competitiveness in the Chinese market. We're well aligned with our JV partner, CIMC Enric. So, I'm hopeful that we will be able to conclude on a solution within a reasonably short time frame. So that was the company update, and I'll now hand it over to our CFO, who will take you through the financials. Alam? Salman Alam: Thank you. All right. Thank you, Morten, and good morning, everyone. Let's have a closer look at the fourth quarter 2025 results. In the fourth quarter of 2025, we posted revenue of NOK 468 million, which is 18% higher compared to the same period last year and 85% higher than the third quarter of 2025. The increase in revenue is primarily due to strong contributions from transit bus and aerospace applications. And compared to earlier this year, hydrogen infrastructure also recovered and contributed strongly to revenue in the fourth quarter. Full year 2025 revenue amounted to NOK 1.144 billion, representing a 39% decline compared to the prior year. The main driver of the year-over-year revenue decline for the full year was softness in hydrogen infrastructure, which had a very solid 2024. Operating expenses ended at NOK 568 million in the fourth quarter. The cost of materials ratio was 72% in the quarter and was inflated due to inventory write-downs, which amounted to approximately NOK 67 million in the quarter. When excluding these effects, the underlying cost material ratio was close to 59%. When looking at the full year cost material ratio the underlying cost material ratio was close to 56% which is lower than the average that we've seen in '23 and '24, predominantly, due to the fact that hydrogen distribution infrastructure made up a significantly strong revenue in 2025. Payroll related expenses were NOK 135million which is about 21% lower compared to same period last year. Other operating expenses were NOK 95 million in the fourth quarter, which is up sequentially from the third quarter driven by higher activity-related costs across warranty, freight, plant operations and engineering and testing, as well as about NOK 10 million of one-off items related to development write-offs and customer insolvency. Subtracting total expenses from total revenue, EBITDA ended at minus NOK 99 million in the fourth quarter, but this includes NOK 76 million of items affecting comparability, which then includes inventory write-downs, warranty provisions, bad debt expense and restructuring costs. For the full year 2025, EBITDA ended at minus NOK 618 million and includes NOK 186 million of items affecting comparability. Moving below the EBITDA line. Depreciation and amortization amounted to NOK 343 million in the quarter and was negatively impacted by NOK 282 million in fixed asset impairments. Of this, NOK 223 million relates to the company's BVI segment, recognized as part of the annual impairment testing based on updated assumptions and the revised business outlook for the segment following the restructuring we announced a few weeks ago. Another NOK 59 million relates to the HMI segment, which mainly reflects write-down of production equipment that is no longer in use. Losses from investments in associates ended at minus NOK 9 million in the quarter and reflects the operating activity in the part of the China joint venture, which is not consolidated. Finance income in the quarter was NOK 24 million, where NOK 3 million was related to interest income on bank deposits and NOK 21 million was related to foreign exchange fluctuations. Finance expense was NOK 83 million, where NOK 67 million is related to noncash interest on the convertible bonds and another NOK 9 million was related to interest on lease liabilities and the remainder was foreign exchange fluctuations of NOK 6 million. At the group level, we are not in a taxable position and tax expense in the quarter was negative NOK 2 million. Loss after tax then ended at minus NOK 508 million versus NOK 667 million in the same quarter last year. Moving on to the segments and starting off with hydrogen mobility & infrastructure. As a reminder, this segment is the business unit that manufactures hydrogen cylinders and hydrogen systems for storage of hydrogen on board either off-road or on-road vehicles, or for infrastructure purposes such as the distribution of hydrogen from the point of production to the point of consumption. It also includes our industrial gas business in Europe and the aerospace business in the U.S. Generally, the HMI business unit delivered a strong finish to 2025, converting a sizable order backlog into deliveries through disciplined execution. Revenue in the quarter was robust and resulted in close to breakeven EBITDA, reflecting higher activity levels and the impact of cost reduction measures implemented earlier in the year. Workforce reductions during 2025 have lowered headcount in the segment by about 30%, leaving a cost base which is better aligned with current activity. However, we continue to monitor capacity costs closely given the ongoing market uncertainty. Looking at the segment financials. Revenue in the fourth quarter was NOK 427 million for the segment, which is up 20% year-over-year and up 83% sequentially from the third quarter. The year-over-year growth was primarily driven by higher activity in hydro mobility particularly transit bus applications as well as strong growth in aerospace. Sequentially, revenue also benefited from a clear rebound in hydrogen infrastructure activity with the delivery of 27 hydrogen distribution units in the quarter. For the full year, segment revenue ended at just north of NOK 1 billion which is down 42% compared to 2024. As mentioned, 2024 had a very solid market for hydrogen infrastructure, which was much softer in 2025 and the macro environment has led customers to extend asset utilization and delay new investments combined with a pushout of new green hydrogen projects coming online. Turning to profitability. EBITDA in the quarter was negative NOK 2 million, which includes NOK 31 million of items affecting comparability, primarily related to inventory effects. Looking past these items, EBITDA was positive NOK 29 million, corresponding to a margin of 7%. The underlying profitability reflects higher activity levels combined with the cost reduction measures implemented during 2025. For the full year 2025, EBITDA was negative NOK 268 million, which is also impacted by restructuring items and other items affecting comparability of a total of NOK 118 million. Moving on to the battery systems and vehicle integration segment. This is the business unit that engages in battery systems production and complete vehicle integration of battery electric and fuel cell electric vehicles for the U.S. market. As mentioned earlier today and also as announced in January, we've implemented significant cost and operational measures in the BVI segment to align the business with the current market conditions while trying to preserve long-term optionality. These measures together with the recently received orders from Hino for 14 trucks are expected to support operations of the BVI segment at close to cash neutral levels in the first half of 2026. Operationally, the Class 8 battery electric-truck demonstration programs have been successful with vehicles tested at several leading U.S. logistics customers and very positive feedback on performance, range and reliability. That said, the U.S. market environment, the regulatory uncertainty continues to be very challenging and continues to weigh on heavy-duty electrification resulting in generally longer sales cycles and limited near-term order visibility for the segment. Revenue for BVI in the fourth quarter was NOK 39 million and primarily comprised of vehicle deliveries to Hino and lease revenue from Dallas as we sublease part of the Dallas facility to Hino. EBITDA for the segment was negative NOK 62 million in the fourth quarter, but this includes NOK 45 million of inventory write-downs. These inventory adjustments were largely a consequence of the announced scale down of the segment, which led to a reassessment of inventory composition, bill of materials and future use, resulting in certain inventory being deemed obsolete. Zooming out to the group level and turning to the balance sheet. The balance sheet amounted to approximately NOK 3.5 billion at year-end, down from around NOK 4 billion at the end of the third quarter. On the asset side, we saw sequential decreases in inventory due to the strong revenue development in the quarter, combined with the inventory write-downs we've already described. We saw an increase in trade receivables sequentially, which was in line with higher activity levels, while there was a larger-than-usual decline in property, plant and equipment due to fixed asset impairments in BVI and HMI, as mentioned earlier today. Cash at the end of the fourth quarter stood at NOK 322 million, which is down from NOK 360 million in Q3. On the liability side, the noncurrent liabilities, the increase in noncurrent liabilities reflects the payment in kind infrastructure we have on the convertible bonds. Total equity ended at NOK 579 million, which corresponds to an equity ratio of 17%. The decline versus last year and the decline versus Q3 of this year is mainly driven by losses in the period, including significant impairment changes taken across the year. These impairments are noncash and reflect balance sheet adjustments where necessary. When assessing the equity ratio, it is therefore important to consider the capital-intensive nature of the balance sheet and the long-lived asset base. At the same time, we've taken decisive actions to strengthen liquidity, reduce capital intensity and lower the cost base. And the current equity level is, therefore, not expected to constrain near-term operations. Moving to the cash flow statement, which captures the changes in the balance sheet and income statement. Operating cash flow for the quarter was positive at NOK 14 million. There were significant noncash effects in the quarter, which combined with working capital release of NOK 69 million, brought operating cash flow into positive territory for the first quarter in about 3 years. Cash flow from investments ended at minus NOK 46 million, where CapEx towards PPE was NOK 15 million and capitalized product development was NOK 26 million. The latter number is a bit higher than what we've seen in prior periods in 2025, which mainly reflects the completion and final validation of select product and technology initiatives during the quarter, especially in the BVI segment. Cash flow from financing and currency movements was negative NOK 7 million in the quarter, resulting in net cash flow of minus NOK 39 million and a cash balance at the end of the fourth quarter of NOK 322 million. This slide shows the clear step change that we've had in our cash profile throughout 2025. As we've communicated previously, cash outflow was elevated in the first half of the year, driven by lower revenue, restructuring costs, spillover CapEx from 2024 and limited working capital release. As expected, this improved materially in the second half, reflecting a leaner cost base, lower CapEx and improved conversion of inventory into revenue. Looking ahead, we expect to continue to work down inventory as deliveries are executed, which should support further working capital release. This is expected to offset a significant portion of operating losses, while CapEx will remain at low levels. In parallel, we have announced several structural measures that further supports the cash profile going forward. This includes the agreed sale of the aerospace business, which strengthens liquidity through cash proceeds at closing, discussions with our Chinese joint venture partner aimed at minimizing cash outflow to the Chinese joint venture in 2026 and the recent scale down of the BVI segment with a focus on operating close to cash neutral levels until mid-2026. Taken together, while the underlying business is still expected to consume cash in 2026, the combination of a leaner cost base, low CapEx, working capital release and structural measures is expected to meaningfully reduce net cash outflow and be supportive for our overall liquidity position. With that, I'd like to pass it over to Morten to talk us through the outlook. Morten Holum: All right. Thank you, Salman. Let's take a look at what we expect ahead. We're still facing uncertain market as we enter 2026 with limited demand visibility. We have more comfort in the short-term with a good order book for Q1 and decent visibility for Q2, but we still need to fill the second half of the year. This, by the way, is not an unusual situation to be in at this time of year in our business. We were more or less in the same spot last year, and we do have quite a bit in the pipeline that isn't landed yet. And with what we have done in terms of taking out costs, we do have a leaner cost base in both HMI and BVI with a significantly lower breakeven level. And we'll get a liquidity boost once the sale of the U.S. Aerospace business has closed. But let's walk through the 3 main product areas and look at the demand dynamics for each of them. The hydrogen distribution part of our business serves 2 main customer types, the major industrial gas players and the emerging new green hydrogen players. During 2025, we have made focused efforts towards diversifying the customer base for our hydrogen distribution modules to reduce exposure to a handful of larger customers. And we saw the impact of those efforts in Q4, where demand is increasingly coming from smaller industrial gas and logistics companies, where the use cases remain a mix of traditional gray hydrogen distribution and emerging green hydrogen applications. We remain positive on the long-term potential for our hydrogen distribution business despite near-term demand visibility being limited. It's better today than it was this time last year, but we're not back yet to 2024 levels. And while the order book visibility remains limited beyond the first half of '26, the current customer dialogues are encouraging. So, looking at the overall situation and the existing order backlog, we're planning for modest volume in '26 and currently expect the full year potential could be somewhat stronger than for 2025. Transit bus has developed quite well over the last couple of years, driven by growing demand from municipal and local public transportation authorities across Europe and even some states in the U.S. In Europe, the hydrogen buses are gaining broad momentum across the continent, backed by strong regulatory support. The EU is targeting 100% of city bus sales to be zero emission by 2030. And hydrogen is a good complementary technology to battery electric. Particularly for routes with extended range requirements, hilly terrain or in hot or cold climates. So we see an increasing number of bus OEMs introducing hydrogen platforms as part of their zero-emission offering, and that helps diversify our customer base and is also an important factor to drive adoption. Customers get more options to choose from and can select between different platforms to serve their needs. We continue to expect the overall market for transit bus to remain strong in the near to medium-term, but we expect to have lower volume on our side in '26 than in '25 due to capacity constraints at some of our customers and ramp-up limitations at others. Our overall order visibility then is good through mid-2026. On the BVI side, given the current state of the U.S. truck market, we have, as I mentioned, limited visibility and limited expectations short-term. The overall truck market is weak for all technologies with fleet operators opting to prolong asset utilization and postpone fleet replacements in light of the economic uncertainty. But it's not all dark. Many fleet operators continue to pursue long-term decarbonization strategies, and there are still many state-level incentives for clean mobility available to support those who do. But we also realize that it's going to take time to get up to the required volume run rate to breakeven. So that's why we acted now in January to dramatically reduce the cost base and the liquidity needs for that business. Operationally, the demo programs for the Class 8 battery electric truck have been very successful so far. We've had vehicles in testing at several leading U.S. logistics and distribution customers, and the feedback from these programs have been great. The truck has performed really well, both in terms of drivability, range efficiency and reliability. So with the trucks now delivered in Q4 and the ones on order, we'll be able to increase the number of demo programs and hopefully be able to convert several of those into orders. So we're focusing more short-term in this business now. With the orders received in January, we currently have visibility through the middle of the year. And we can float through that period with minimal use of liquidity. We enter 2026 with a significantly lower cost base and an extended liquidity runway, which will better enable us to navigate through the year and manage the inherent market uncertainty. Our annualized operating costs going forward will be significantly lower. Working capital requirements are also significantly lower given that we can convert things we have in inventory now to cash through sales. CapEx will also be limited given that we have completed the expansion program and have enough capacity for the foreseeable future. On top, the divestment of the U.S. Aerospace business will increase liquidity once the transaction closes. And finally, we expect to conclude on the financing arrangement for the China JV in the near future, which we expect will minimize the cash outflow to China in 2026. So, in sum, all of these measures strengthen our financial position and lengthens the liquidity runway. In terms of priorities for '26, they remain the same as they have been for quite some time. We need to fill the order book. So we've done a lot on the cost side, but we need higher revenue to reach breakeven. We will also continue working on balancing costs with the revenue outlook and continue to review and assess the business portfolio, looking for more capital-efficient ways to operate the company. And finally, all this is with the overall aim on maintaining sufficient liquidity until we have stabilized the business above the breakeven level. It's not that long ago that my main worry was centered around how to find enough people to scale up the business fast enough. For the past year, we've had the opposite challenge. And when managing that challenge, we have become significantly more short-term focused. The portfolio review is aiming to focus our operation around the most attractive parts of the business with good near-term profitability and cash prospects and avoid deploying liquidity to opportunities that are far out in time. At the same time, we also try to retain as much as we can of the future upside potential. We are the leading company in our space with a leading technology platform and leading customer positions. Markets look challenging short-term, but we're confident that our technology will be relevant in the future. So, we're restructuring our operation with that in mind. Simplifying, taking out costs to match the market conditions short-term and bridge the time until markets recover. We're not fully there yet, but we're well on our way, working on the right things, taking necessary measures, and we will continue to operate in that same way going forward. So that concludes our presentation for today, and we will now open it up for Q&A. Mathias? Mathias Meidell: Thank you, Morten. So, we can start off with a question from Frank. Does the order book of NOK 728 million still include aerospace? Salman Alam: Yes, it does. So that still includes aerospace and the aerospace-related backlog from -- if you take from Q2 to Q4 of this year is about NOK 135 million. Mathias Meidell: And then a question from Johannes here for you, Morten. Why was the aerospace business sold to SpaceX instead of using the opportunity to generate orders here? How has the company supposed to make new orders now? Morten Holum: Yes. So, the aerospace market is attractive in itself. And you have to balance out what the future is going to look like with the opportunities that you see that you have internally. And as I mentioned, the very rapid growth in the aerospace business in general and then with the pressure vessels being a very critical component of any rocket or spacecraft. In our dialogue with our aerospace customers, it's clear that they want to in-source this. So when we balance then what does the long-term look like, how much should we put into scaling this business up, we decided that at this time, it's probably best that, that business is developed under one of the space exploration companies, which gives, again, a good home for the business, but also for us, something that alleviates the liquidity concerns short-term. Mathias Meidell: Thank you, Morten. And then a question here from Enric. What is your annualized operational cost base going forward in 2026 approximately, Salman? Salman Alam: So we retain the ambition around cost cuts, as we've stated previously. So, we're still looking for NOK 350 million of savings compared to where we were at run rate at the end of 2024. So that's still the ambition for 2026. Mathias Meidell: Thank you. So that was actually the last question we've gotten today. So I'd like to thank you both for presenting. And then thank you all for following us today. And on behalf of Hexagon Purus, I would like to thank you all for spending time with us this morning, and we look forward to seeing you in the next quarter.
Operator: Thank you for standing by, ladies and gentlemen, and welcome to Coca-Cola HBC's conference call for the 2025 full year results. We have with us Zoran Bogdanovic, Chief Executive Officer; Anastasis Stamoulis, Chief Financial Officer; and Jemima Benstead, Head of Investor Relations. [Operator Instructions] I must also advise that this conference is being recorded today, 10th of February 2026. I now pass the floor to one of your speakers, Jemima. Please go ahead. Thank you. Jemima Benstead: Good morning, and thank you all for joining the call. I'm here with our CEO, Zoran Bogdanovic; and our CFO, Anastasis Stamoulis. In a moment, Zoran will share the key highlights of 2025. Anastasis will then take you through our financial performance in more detail and discuss the outlook for 2026 before handing back to Zoran, who will discuss the strategic growth areas for the business. We will then open up the floor to questions. We have about an hour for the call today, which should give plenty of time for a good discussion. So please keep to 1 question and 1 follow-up, waiting for us to answer the first question before moving to your follow-up. Finally, I must remind you that this conference call contains various forward-looking statements. These should be considered in conjunction with the cautionary statements in our results press release this morning and at the end of our slide deck. And with that, I will turn the call over to Zoran. Zoran Bogdanovic: Thank you, Jemima. Good morning, everyone, and thank you for joining the call. 2025 was another strong year for Coca-Cola HBC. We've executed against our strategy and delivered a strong financial performance, all while operating through a mixed market environment and continuing to invest across the business for the long term. Let me call out key highlights from the year. 2025 marks the fifth year of consistent strong growth and share gains. Both our revenue and EBIT growth was strong and high quality, underpinned by continued volume momentum despite a range of macroeconomic conditions. Importantly, volume growth continues to be led by 2 of our strategic priority categories, Sparkling and Energy. And we continue to win in the market and deliver value to our customers gaining a further 80 basis points of value share in non-alcohol ready-to-drink in 2025. We also remain committed to investing in the business to unlock long-term growth. Throughout the year, we continued to invest in our 24/7 portfolio, in our bespoke capabilities, in our people and in sustainability, which we truly view as a growth enabler. In the year, we made further good progress in our most material areas: packaging, climate and water. And last, but certainly not least, in October, we took a significant step forward in our growth journey with the agreement to acquire Coca-Cola Beverages Africa, or CCBA. Disciplined execution of our strategy enabled another year of strong financial performance. Let me share the key highlights before Anastasis goes into more detail shortly. Revenue grew by 8.1% on an organic basis with volume growth of 2.8%. Comparable EBIT was nearly EUR 1.4 billion, up 11.5% organically. We also delivered 60 basis points of EBIT margin improvement leading to strong comparable EPS growth of nearly 20%. Finally, we achieved free cash flow of EUR 700 million, drove a further increase in return on invested capital and increased our dividend. As you know, in October, we announced the acquisition of Coca-Cola Beverages Africa, the largest Coca-Cola bottler in Africa. This acquisition presents a highly compelling strategic rationale, which at its core is about growth. The acquisition materially enhances our presence in Africa by bringing together 2 leading bottlers in the continent with strong track records of growth and deep commitments to investing in talent and local communities. Together, we will represent 2/3 of Africa's total Coca-Cola system volume. This combination further diversifies our geographic footprint, increasing our exposure to high-growth markets with compelling demographics, including sizable and growing populations and economies with significant potential to increase per capita consumption. The acquisition is consistent with the pillars of our growth strategy and vision of being the leading 24/7 beverage partner. CCBA is the leading player in NARTD across its markets with a winning portfolio of over 40 global and local brands, further strengthening our exceptional portfolio. We also see a clear opportunity to leverage our strength of operating in dynamic emerging markets, we can share best practices, apply our best-in-class bespoke capabilities and invest further in CCBA to drive growth. Finally, we expect the acquisition to enhance value for all stakeholders. For shareholders, it is expected to be low single-digit EPS accretive in the first full year following completion, with a clear prospect of creating more shareholder value over the long term. In terms of progress towards completion, let me outline where we are. On the 19th of January this year, we received approval from Coca-Cola HBC shareholders of the resolutions put forward at the extraordinary general meeting. Our teams continue to work through the customary regulatory filings and anti-trust approvals and preparations for the secondary listing of our shares on the Johannesburg Stock Exchange. Overall, we remain on track to complete the acquisition by the end of 2026 and are working on integration plans so we can hit the ground running. We look forward to sharing more details on the opportunities ahead for the combined group post completion. Sustainability remains at the core of our strategy, enabling us to deliver growth while creating value for the communities we serve, our partners and the environment. In 2025, we saw further recognition of our progress, placing us among the leaders of the global beverage industry with top scores across major benchmarks. Let me share a couple of highlights from 2025. We advanced our circular packaging agenda with the launch of a new collection hub in Nigeria and the expansion of deposit return systems to Austria and Poland. Recently launched systems in Romania, Hungary and Austria achieved average return rate of over 80% in 2025. Partnerships continue to be a key driver of progress. As I mentioned last summer, together with Carrefour and the Coca-Cola Company, we initiated a sustainable linked business plan with Romania piloting a program that unites suppliers to cut emissions and improve packaging sustainability. Supporting communities remains a central priority. In 2025, Europe faced severe wildfires and floods. And I'm proud that the Coca-Cola HBC Foundation was able to commit EUR 2.3 million in disaster relief. The group also announced an additional $5 million for the foundation to support communities starting from 2026. Overall, we've made strong progress towards our Mission 2025 goals with many targets reached ahead of schedule. Full results will be published in our 2025 integrated annual report in March along with details on the next phase of our sustainability journey. With that, let me hand over to Anastasis to take you through the financial results of the year in more detail. Anastasis Stamoulis: Thank you, Zoran, and good morning, everyone. So let me start with the strong top line performance. 2025 organic revenue growth was 8.1%. We delivered another year of good volume growth, up 2.8%, driven primarily by sparkling and Energy as Zoran has mentioned. I am pleased that all 3 segments achieved volume growth or maintained volumes despite an ongoing challenging backdrop. Organic revenue per case increased by 5.1% and normalization versus previous years as we expected. We continue to implement targeted revenue growth management initiatives while navigating lower levels of inflation across most markets. Overall, pricing remained the largest driver of revenue per case. However, category mix and package mix were also positive, with continued improvement in single-serve mix, which expanded by 130 basis points in the year and is now 310 basis points higher on a 3-year basis. We achieved another year of double-digit organic EBIT growth with comparable EBIT growing 11.5% to nearly EUR 1.4 billion. Our comparable EBIT margin increased 60 basis points on a reported basis to 11.7% and 40 basis points organically. This marks a record high EBIT margin for our company, which is great to see, having navigated several years of inflation and currency pressures. Let me break down the drivers of this. We improved gross profit margins by 70 basis points with good topline leverage. Operating costs overall stepped up by 10 basis points in the year. However, breaking this down a bit further, operating expenses, excluding direct marketing, improved by 30 basis points as a percent of revenue. You may recall that in 2024, we faced headwinds in our operating expense line due to currency devaluation in Egypt, which we cycled this year. However, offsetting this, direct marketing expenses stepped up by 40 basis points as a percent of revenue as we invested in activations across categories, but notably the Share a Coke campaign, the Winter Olympics and the new Finlandia marketing campaign. Let me now look to the drivers of performance by segment. I'm going to discuss these figures on an organic basis. In the Established segment, revenues grew by 2.3%. Volume was in line with last year, reflecting mixed trends across markets. Sparkling volumes were slightly ahead of last year with high single-digit growth in Coke Zero and mid-single-digit growth in Sprite. Energy continued to grow strongly, up high teens, still declined low single digits, although we delivered mid-single-digit growth in Sports Drinks. On a country basis, volumes in Italy were slightly positive despite our decision to prioritize profitable revenue growth in water in the second half of the year. Excluding water, volumes in Italy grew low single digits. In Ireland, volumes grew low single digits with consistent growth throughout the year, whereas in Austria, volumes declined in a more challenging environment. Established revenue per case was up 2.3%, driven by pricing as well as positive package and category mix. Established segment comparable EBIT declined 2.8%, primarily due to a step-up in investments, as previously noted. Turning to the Developing segment. Revenues were up 6.1%. Volumes grew 0.8% with Sparkling volumes slightly higher than last year, driven by Coke Zero and Sprite. Energy saw accelerating momentum with strong double-digit growth. Stills declined high single digits, driven by water and juices despite strong double-digit growth in Sports Drinks. In terms of country performance, the Czech Republic was a standout performer, growing volumes mid-single digits despite a tough comparative. In Poland, volumes declined for the year, though we saw an improvement in the second half of the year. Developing revenue per case increased by 5.3%, driven by pricing actions taken to manage inflation supported by a favorable category and package mix. Comparable EBIT increased by 5.6% year-on-year with EBIT margin in line with the previous year. In the Emerging segment, revenue grew by 13.2%, driven by both volume and good price mix. Emerging markets, volume grew 4.4%. Sparkling volumes increased by mid-single digits with mid-single-digit growth in Trademark Coke, Sprite and Adult Sparkling. Energy grew strongly despite cycling tough comparatives driven by affordable brands. Stills volumes grew low single digits, led by water and further supported by very strong growth in Sports Drinks on a small base. At a country level, the performances of both Nigeria and Egypt have been very strong despite external challenges with volumes growing mid-single digit and low teens, respectively. Emerging segment revenue per case increased 8.5% and moderation compared to previous years, reflecting lower levels of inflation and currency headwinds for Nigeria and Egypt. We benefited from pricing actions as well as from positive category mix. Comparable EBIT grew 23.2%, a strong rebound due to organic growth as well as cycling the impact of the foreign currency remeasurement in Egypt last year. Moving back to the group P&L. We saw comparable earnings per share grew 19.7% to EUR 2.72. This was supported by the strong EBIT delivery, lower net finance cost than previous year. As mentioned at the first half results, we have seen lower than usual finance cost this year due to several factors. We benefited from lower foreign exchange losses compared to 2024 due to greater currency stability as well as higher finance income in the year. As you will have seen from the guidance, we do expect a more normalized finance cost environment in 2026. As expected, our comparable tax rate of 27.1% was in line with our guidance range. Our return on invested capital expanded by 100 basis points to 19.4%, driven by higher profit. We have seen very good improvement in ROIC over the last 5 years, and it remains a very important metric for us. CapEx increased EUR 148 million in the year to EUR 828 million, in line with our plans, as we continue to invest in future growth initiatives, such as production capacity, ongoing automation and supply chain, digital and data solutions and energy-efficient coolers. CapEx as a percent of revenue was 7.1%, up 80 basis points year-on-year, but well within our target range of 6.5% to 7.5%. We delivered free cash flow of EUR 700 million. I'm really pleased that even in a year where CapEx stepped up materially, we have still delivered robust free cash flow. Our balance sheet remains very strong, and we closed the year with net debt to comparable EBITDA at 0.7x. Clearly, this will increase, as we complete the acquisition of CCBA. However, we expect leverage post completion to remain within our medium-term target range of 1.5 to 2x. Importantly, we do not expect any impact to our credit rating, and we have a strong commitment to sustainably maintaining an investment-grade profile. Leveraging this strong balance sheet, we have a robust and disciplined capital allocation framework, which remains unchanged. Our top priority is investing in the business organically to drive long-term growth for the company. We pursue a progressive dividend policy and target a 40% to 50% payout ratio. With another year of strong growth in comparable earnings per share, we are recommending a dividend per share of EUR 1.20, an increase of 17% from 2024. When it comes to strategic M&A, as you know, in 2025, we announced the milestone acquisition of CCBA. The strategic expansion into African markets underpins our focus on driving long-term growth and will enhance value for shareholders. We expect low single-digit EPS accretion in the first full year following completion and more shareholder value in the long term. Overall, when it comes to our capital allocation in 2025, I'm really pleased that we have delivered a combination of investment in the business, a value-enhancing acquisition, increased shareholder returns as well as a strong improvement in ROIC. As we look to the rest of 2026, we expect the macroeconomic and geopolitical backdrop to remain challenging with a mixed consumer environment across our markets. However, we have high confidence in our 24/7 portfolio, our bespoke capabilities, the growth opportunities across our diverse markets and most of all in our people. In 2026, we expect to make further progress against our medium-term growth targets with organic revenue growth in our medium-term range of 6% to 7% and organic EBIT growth in the range of 7% to 10%. Thank you for the attention. Let me pass the call back to Zoran. Zoran Bogdanovic: Thanks, Anastasis. Well, we are proud of our achievements in 2025. We are really proud of the consistency of that performance over many years now. We have now had 20 consecutive quarters of organic revenue growth despite many challenges along the way. If we look back over the last 5 years, we can see that our growth algorithm is working. We have delivered average organic volume growth of nearly 4%, a revenue growth of 15% and EBIT growth of 14%. Our diversified country footprint, unique 24/7 brand portfolio, bespoke 4 capabilities and strength of our people have driven that consistent growth. What we've learned across many years operating in a range of markets and conditions is that there is no one size fits all approach. We strike a careful balance to focus on what makes the local market unique, staying relevant and tailoring our approach while aligning with the group strategy, leveraging our global scale, tools and capabilities, particularly with digital and data insights to drive personalized execution. It truly demonstrates the resilience of our business through a range of different macro and consumer backdrops and our ability to deliver results at the group level. This gives me the confidence that we can continue to navigate unpredictable environment going forward and underpins our guidance for 2026 as Anastasis set out. Let me now take you through some of our biggest potential opportunities across our business for 2026 and beyond. Sparkling continues to be the core driver of our growth, contributing 2/3 of our group revenue. In 2025, we delivered organic volume growth of 2.5%. Coke Zero continued to perform strongly, growing low double digits and Coca-Cola 0.0 grew high teens. Together with the Coca-Cola Company, we executed locally tailored activations at key moments across the year, leveraging relevant passion points and consumption occasions. In 2025, we also rolled out the Share a Coke campaign with local programs and initiatives tailored to our markets. We successfully executed customer and consumer activations across channels to drive transaction and further strengthen brand equity. We are pleased with the campaign's performance and the positive engagement it generated. We also accelerated growth in Sprite with volumes up mid-single digits, as we continued focusing on the Spicy Meals occasion, and we activated the Turn Up Refreshment campaign over the summer. Adult Sparkling grew mid-single digits in 2025 with a strong performance from Schweppes in our African markets. We introduced new flavors, and the Flavour of the Quarter activation with promising initial results and plan to roll this out further in 2026. We also continued to roll out Three Cents, our premium mixer brand into more countries. In 2026, we will continue capitalizing on key occasions to create memorable consumption moments, including the Winter Olympics, which just kicked off last week and the upcoming FIFA World Cup. Energy continued its strong growth trajectory. Volume grew by 28% against tough comparatives, making 2025 the tenth consecutive year of double-digit growth. We also hit a milestone surpassing EUR 1 billion of revenue for the first time with a category now accounting for 9% of our group revenue. All segments contributed to growth, reflecting the strength of our diversified portfolio, which enables us to address varied market demographics and affordability needs. In Established and Developing, growth was driven by Monster supported by successful innovations such as Rio Punch and the launch of a new Monster drink with Lando Norris. Predator and Fury, our affordable offers in Africa, grew over 40%, supported by football partnerships and marketing activations that truly resonate with local consumers. We are confident we can continue to drive a strong performance in Energy and expect the category to reach a double-digit percentage of our revenues very soon. The category continues to see broad-based consumer demand, and we are excited for another year of innovation and planned partnerships, which we will complement by adding more dedicated coolers across our markets. Moving on to Coffee. At the start to 2025, we announced we had made a strategic decision with our partners at Costa Coffee to prioritize the out-of-home channel because that is where we see the greatest potential for sustainable, profitable growth. I'm pleased to see that this decision is delivering results. We are seeing strong growth in the out-of-home channel, driven by both Costa and Caffe Vergnano with volumes up 26.5%. This has been driven by growth in our existing outlets as well as recruiting new high-quality outlets. We remain very positive about the growth potential for our Coffee business. It plays a critical role within our 24/7 portfolio and helps us build stronger customer relationships in the hotels, restaurants and cafes channels. We are building a strong, credible business with unique capabilities and meaningful competitive advantages. In Stills, volumes declined by 1% as growth in Water and Sports Drinks was offset by juices and Ready-To-Drink tea, where we faced a more challenging market environment. Water volumes grew low single digits, and we remain focused on profitable revenue growth, prioritizing premium waters. Sports Drinks continued its strong momentum with volumes growing low double digits. We launched new flavors of Powerade and leveraged local sports partnerships as well as football activations featuring global ambassadors to drive transactions. In 2025, we also launched Powerade in Romania. Premium Spirits volumes grew by 12.2% with double-digit growth across all 3 segments and strong growth of Finlandia Vodka, our own brand. The new Finlandia campaign we launched in April 2025 has been positively received, contributing to increased brand awareness and share gains in key markets. Our distribution partnerships with Brown-Forman, Bacardi and Edrington also contributed to growth. In our Snacks business, 2025 marked the return to full operations of our Bambi plant following the fire in 2024. In October, we also launched Bambi snacks in Nigeria, our first entry into the African continent in this category. We implemented a bespoke plan tailored to the local market and are pleased with the early feedback. Investing in our bespoke capabilities is critical to drive best-in-class growth and allows us to continue to gain share. I want to call out the specific examples of progress in 2025. Revenue growth management is one of our core capabilities to drive profitable revenue growth. Affordability remained important in 2025, and we increased our focus on entry and smaller packs. Premiumization remains relevant for a large segment of the population, and we focused on expanding multipacks of single serves as well as driving mini-cans in relevant markets. We also continue to leverage our advanced promotion analytics tools, which led us assess the effectiveness of each promotion and make a quicker in-market decisions to drive more value for us and our customers. Within data, insights and AI, we continued to leverage AI capabilities. Two great examples include our Ignite Naija initiative, where jointly with Coca-Cola Company, we are linking consumer and customer data in Nigeria, which Naya and the Nigerian team shared with you at our Bitesize event last year. Early results indicate that this more sophisticated segmentation approach is translating into higher volume and revenue per case. We also expanded our segmented execution approach to wholesalers, leveraging shared data and outlet intelligence to provide our wholesale partners in Italy with tailored recommendations relevant to the outlets they serve. In 2026, we will continue to implement more advanced segmented execution across our markets, enhanced by AI and more -- most importantly, tailored to the local market dynamics. We are increasingly digitizing our route to market. Our dynamic routing tool, which reduced its travel time by 15% is live in 22 markets, freeing up more time for face-to-face customer engagement. We also increased placement of our Always-On connected coolers by 20%. These integrated coolers continuously send data and analytics to our systems, giving our teams immediate insights to improve in-store execution and cooler profitability. Another example is our AI-enabled logistics project, which helps reduce out of stocks by generating automated data-driven fulfillment recommendations. We launched it in Poland in 2025 and have already seen efficiency gains, and plan to scale these to more markets in '26. At the half year results, I shared with you about our digital transformation and how we've been investing in our digital commerce platforms to serve our customers and consumers who shop online. We are live with Customer Portal, our largest B2B platform, in 22 markets now. Partnering with our customers to drive value underpins everything we do at Coca-Cola HBC. In 2025, our Net Promoter Score increased to 78%, partially reflecting an increase in the number of resolved customer issues within 48 hours to 99%. This disciplined focus helped underpin a sixth year of market share gains in NARTD. Finally, we couldn't do any of this without talented people. Our latest employee survey results showed overall engagement remained strong at 88%, which reaffirms the strength of our culture and the ongoing focus on high performance, learning and development. In 2025, we scaled the Metaverse learning environment to accelerate capability building for sales teams and improve in-store execution. This is now live in 7 markets with further markets planned for 2026. To conclude, I'd like to reiterate the key messages I started with. We've had a strong 2025, the fifth year of consistent delivery with further strategic and operational progress and financial results. We've seen another year of growth in volumes, sales, EBIT, EPS and market share. Investing for the future remains critical. And in 2025, we invested across our portfolio, capabilities, people and sustainability initiatives. Finally, we are very excited about the acquisition of CCBA, a great business with strong brands and the leading market presence across Africa. We have great confidence in the opportunity ahead of us to drive sustainable, profitable growth. And before I close, I would like to sincerely thank all our colleagues, customers, suppliers and partners for their ongoing efforts and support. Thank you for your attention. And with that, let us now open the call up to questions. Operator: [Operator Instructions] We will now take the first question from the line of Sanjeet Aujla from UBS. Sanjeet Aujla: A couple for me, please. I'd like to dig a little bit deeper into Egypt. By my math, your volumes in Q4 are up around in the low mid-20% range. Can you just talk us through what's really driving that? I appreciate you're lapping some of the impact, but really keen to understand a little bit the impact of your commercial execution there and where your market share is now versus prior to the transaction. That's my first question. My follow-up is around Established. You've had 2 years of flattish volume growth in Established. How you -- what's embedded in your outlook for 2026? Do you think volumes can get back to growth? And ultimately what's driving that? Zoran Bogdanovic: Sanjeet, so on Egypt, really, really pleased with that -- with performance that came last year. First of all, just to say that we've seen in Africa, both in Egypt and Nigeria, more stable backdrop and environment. And that really then sets the good platform, where everything that we do there can be more visible. Coming back to Egypt, what we've seen last year and then Q4 is just part of that is a result of us investing in a committed and disciplined way even while we were facing very strong headwinds over the last several years. Because we were focused from the moment we started 4 years ago to work on the enhancement of our portfolio and then investing in capabilities in a very fast way, leveraging data insights to better inform revenue growth management, route to market changes and enhancements, we've done a very wide investment into upskilling of people in sales and commercial capabilities. We have changed and improved commercial policies with the way how we work with wholesalers. We have introduced new capacity, which enabled us to fulfill anticipated growing demand that we believe will come and brought new can line. We are just opening another line in like Alexandria. And then, not to forget something that's super important, Coca-Cola Company has really created some and done very strong locally relevant marketing programs in the areas that truly matter to Egyptian consumers. Those relate to music with the outstanding activation and partnership that works extremely well, driving transactions. Also football, which is a big passion point in Egypt with a partnership with a club that has the, by far, largest fan base and also more focus on behind meals. You know that Egypt is the largest country globally in terms of the Schweppes business, by far, largest in Hellenic. And that's a phenomenal business, which worked so well last year with very intentional programs being -- with which the portfolio was supported. We introduced energy with 2 brands, Monster and Fury, and that also proved to be working really well, tapping into passion points. And all that, again, gets delivered through our evolved and more developed route to market, where we are fully scaling the market, segmenting it and really adjusting how we serve the market from at-home customers as well as to out-of-home customers. So all these blended together is coming very nicely and resulting in a very strong performance. Yes, in fairness, we also know that we had lower comps, easier comps to cycle. But I think that this performance demonstrates as a good testament to the quality of work that we are doing, not for 1 year, but for many years to come, and I'm confident that Egypt is going to have another strong year in 2026. Moving on to Established. With a stable volume performance that we saw last year, we are pleased with that performance as this happened in spite of a few challenges. We've seen a couple of countries really making good performance across the year. But I will start with Italy, which finished on moderately positive volume performance, which for us was really important. And we did say that Italy will be positive in 2025. If you deduct Water, which we intentionally play in -- with selective part of customers and markets, our performance there was on a low single digit. Very encouraging to see sparkling performance of 2.2%, a strong performance of Zeros, excellent performance of new Zero Sugar Zero Caffeine, about which we have very high hopes how it will perform, not only in Italy, but much broader, and then continued strong performance also of Energy. All that resulting in a strong continued market share gains. So then, we had a consistent performance in Ireland. We've seen a good performance in Greece in the second part of the year, as well as in Switzerland, where we didn't have the best entry into the summer in terms of the weather. And also, we had, like many other CPG players, specific situation related to retail negotiations. And once this was successfully resolved in a win-win way, we have resumed full performance with full listings. And that's why we are very pleased with the second half performance in Switzerland. One country that consistently has been on a softer side is Austria, where industry also is in decline. We do see lower consumer sentiment, which is below the EU average, but in that circumstances, we see that our team has been gaining share there and has been doing some quality work, which is also reflected in single-serve growth. So to wrap up, Established, we believe that this performance in '25 present a good base, and we do expect that we will see improvement in that segment in 2026. Operator: We will now take the next question from the line of Andrea Pistacchi from Bank of America. Andrea Pistacchi: I want to follow up on established and -- on Established markets, mainly both with the first question and the follow-up. So affordability and consumer sensitivity has been a bit of a headwind in a few of your Established and Developed markets. You just mentioned Austria, I think even Romania and Switzerland. Are you seeing any signs of these pressures easing as we go into 2026? And how are you thinking about pricing and revenue management this year, specifically in these markets? And the follow-up question is on EBIT in Established. So at group level, you've delivered very strong EBIT, again, mainly driven by Emerging, but EBIT declined a little, I think, in Established markets as you reinvested in the business. Last year, EBIT was flat. So the question is how -- going forward, how are you thinking about balancing reinvestment versus EBIT growth in Established markets? Would you expect profit in Established? Can it return to growth? Are there opportunities for incremental maybe cost savings in Established? Zoran Bogdanovic: Good morning, Andrea. So I'll start, and then, I'll hand over to Anastasis for your second part of the question. So in Established, firstly, it's not one size fits all. It really varies. And we monitor and measure price sentiment and sensitivity in every single country, also dynamics with a certain level of private labels that can exist across the market. Even though I have to say that in Sparkling and in Energy, this is where private labels have the smallest share. And even in Sparkling, the private label share is in decline. However, there are a few markets, and you mentioned Romania, even though it's not in the Established, either country where we have seen somewhat better performance of the -- of private label. All of this gets this input into the overall revenue growth management framework, which then on a country level is being designed and which then produces tailored specific things for affordability initiatives as well as premiumization initiatives in every of these markets. So somehow with our reading, we do see an opportunity for positive improvements in 2026. And second part of the year in those markets have given us that time, and I have to also acknowledge that for Established as well as for all other countries, we have prepared very strong plans with additional investments behind many of the strong programs that are coming up in this year. Summer for us always is the biggest program we have. But also, there is a FIFA World Cup. There are many innovations that are coming up, and we see that being very relevant in the Established segment. And I reiterate that we are positive that we will make an improvement in the Established segment in '26. Anastasis? Anastasis Stamoulis: Yes. Thank you, Zoran. Yes, actually, to build on Zoran's point, for 2025, we saw a resilient top line performance with a revenue growth of 2.3%. Let me share a little bit more detail because you touched the profitability of the Established. Actually, the gross profit margin grew in the Established market, but as you rightfully pointed out, you saw pressure on the EBIT margin, which was mainly impacted by a targeted decision to step up our investments in the market, a joint decision with the Coca-Cola Company to accelerate further growth in the segment, and I can go over the big activations of the year, but predominantly it was a Share a Coke campaign with the investment ahead of the Winter Olympics in Italy, which is undergoing now as well. And also cycling extra investments in our people when it comes to field force execution in the market. So with that in mind, we are very pleased to see that actually, our investment strategy has been paying off. In Italy, as Zoran pointed out, we had a low single-digit volume growth in Sparkling and strong double-digit growth in Energy and share gains in both Sparkling NRTD and Energy. And similar market was Ireland with continued volume growth and share gains across. So if we look into 2026, what I can say is that we will continue to step up our investments in the market. Zoran already mentioned the FIFA World Cup, we have the Winter Olympics ongoing. We have also step up in the overall Finlandia Investment. But we do expect that all this will translate to positive volume growth that will also flow down the P&L with profitable growth and also margin expansion. Operator: We will now take the next question from the line of Aron Adamski from Goldman Sachs. Aron Adamski: Congrats on the results. I have 2 questions. First one is on your innovation pipeline. Can you give us a sense of the scale of the innovation and activation plans that you have for 2026 compared to the previous year? In particular, could you give us some color on the launch pipeline in Energy drinks? Is it comparable to the 3 big launches that you had last year? And perhaps in Sparkling, it would also be great to hear if you're seeing any uplift in Italy's volume during the January month from the Olympics activations? That will be my first question. Zoran Bogdanovic: Aron, on innovation, innovation pipeline is one of the drivers of our growth, and we are very happy that with both Coca-Cola Company and Monster Energy Company, there is a rich pipeline. So we have a number of innovations lined up for this year. Those will be very exciting flavor innovations, which, in some cases, are also coming with some partnerships. You've seen Lando Norris launch last year, which worked extremely well, and that will continue into this year with also some -- a couple of other innovations that I think will be better that we discuss when they are done. On Sparkling side, we are very excited with -- we think of it as innovation, which is Coca-Cola Zero Sugar Zero Caffeine with new graphics look and feel with excellent feedback from the market, and we see that performance of this variant within Coca-Cola trademark is igniting very strong growth. We've seen a strong growth last year, and it has been ramping up from quarter-to-quarter. Then, we will have further flavor innovations within our Adults, whether that's Schweppes or Kinley. Also, within Fanta, there are some very interesting things. And you will see some very exciting things in the way the activations will be for the Halloween, which becomes a very important part of Fanta activation. So I can -- then Powerade will be also coming up with some innovations, especially as you see that now Powerade goes so well together with the Coca-Cola brand in the sports activations, and the exciting and largest ever FIFA World Cup is ahead of us. So I can say, Aron, that we are pleased and confident that we have the right set of innovations. For us, it's very important that those innovations are driving incremental transactions, which are all delivered through very, very strong execution across all the markets. You asked also about Italy Olympics. Yes. Look, we started activating Olympics already last year in Italy. That gave us a great platform to activate and partner together with customers, driving joint programs. We've been just there last week and seeing excellent activation displays, consumer promotion, visibility, transaction driving mechanism. So I cannot single out how much is specifically because of Olympics, but I can really say that it's a very clear tailwind in what we have seen in Q4 and definitely what we will experience in Q1. Aron Adamski: Great. That's very clear. And then my second question is on FX. Given where the current spot rates are, would you expect 2026 to see some transactional FX benefits in Africa? And in the context of easier COGS backdrop that we've seen more recently, how are you thinking about the balance of price with mix and volume following several years of very high pricing that you had in Africa? Anastasis Stamoulis: Aron, let me take that one. As you have seen, we are providing our guidance. We expect a range of EUR 0 million to EUR 30 million of a headwind from translational effects. Obviously, we don't provide a transactional element, but that's well captured within our overall EBIT guidance. Yes, you mentioned the spot rates. Obviously, that's one part of the element, but we actually provide a range in the back of trying to assess our experience of a quite unpredictable environment when it comes to FX volatility, especially in the African markets. We are seeing positive signs in both economies, and there is significant inflows of foreign currency in those markets, will make FX availability easier and good signs. But as I said, that's why we provide the range across. Now, when it comes to balancing the pricing element in Africa, we always follow an adaptive and data-driven pricing strategy in those markets. We've also seen that this year, as we managed to adapt our pricing in relation to a lower inflationary pressure, a lower also FX volatility. We'll continue doing the same next year. And these are, of course, markets that we expect significant volume growth with a balanced pricing to adapt to the local market needs. So as always, nothing new. Operator: We will now take the next question from the line of Matt Ford from BNP Paribas. Matthew Ford: So my first question is just on the guidance, I suppose, the 7% to 10% like-for-like EBIT range that you've given for the year. I'd just be interested to just get your kind of take of the moving parts. How -- what do you see going right to get you to that 10% and potentially higher? And potentially, what could go wrong to get you to the lower end of that range? And then, I'll follow up with my next question. Zoran Bogdanovic: Yes. Matt, yes, you're right. I mean, we're providing a range of 7% to 10% on organic EBIT. I think we need to remind ourselves this comes on the back of a strong EBIT delivery for 2025, which is the third consecutive year of double-digit organic EBIT growth and actually proves our capability to navigate in the environment and still consistently deliver despite what happens. Now, given the timing of the year, we're a little bit early, and considering that we do believe that the markets will remain in a certain uncertainty on the macroeconomic and geopolitical landscape, we believe that the current range reflects any type of movements on other direction. So, for example, on the lower end, you would expect a worsening of the geopolitical environment, which we have a spillover effect on consumer sentiment and further FX pressures with commodity inflation. While on the upper end, it's built on the back of a stronger momentum across the markets that materialized through the year should deliver also a stronger bottom line. Matthew Ford: Okay. Great. And then my follow-up is just on Poland, naturally. I mean, Poland saw sequential improvement in Q4 following a fairly solid Q3. And obviously, in the first half of the year, you were still being impacted by the reintroduction of a competitor in a retailer in Poland. So I just want to get your sense of how much of this Q4 improvement should we see continuing into '26? And how do you think about the outlook for growth in that market in '26 and beyond? Zoran Bogdanovic: Yes. Thanks, Matt. So let me first say that we are very pleased with the performance of Poland. When you see on a broader horizon of last 4, 5 years, we've done excellent, excellent progress in terms of volume, revenue, profitability as well as significant market share gains. And understandably, with the return of the key competitor into the largest customer, of course, this would have a temporary impact. That's why, when we also see our market share performance, excluding particular customer, we do see that our performance and share gains are there. And we've seen that also in the country. We see a good -- very good performance of Coke Zero, which is up low teens. And also, just to say that in Q4, overall, we gained share in Sparkling. We also see a very strong performance of Energy, which is driven by Monster. So all in all, we have strong plans, very strong team in Poland and at the back of this very good performance over the last couple of years. And in last year, what we've seen is a return to positive performance in Q3, and then, especially in Q4, we do expect and we will see positive performance and volume growth and revenue growth in Poland also in 2026. Operator: We will now take the next question from the line of Simon Hales from Citi. Simon Hales: So my first question, Zoran, really is around the performance of the Premium Spirits business. It was very strong in the year, Finlandia, performing particularly well in a tough environment for the wider spirits industry. I wonder if you could just talk a little bit more about what's drove -- or driven that relative outperformance versus many of your spirits peers? And how do you think about that Premium Spirits opportunity as we look into 2026? That's my first question. Zoran Bogdanovic: Thank you, Simon. Look, overall, on like a helicopter review, Premium Spirits plays a strategic role in the overall portfolio, as it also strengthens our customer leverage. It provides a great blend in mixability. And that's one of the reasons why really Premium Spirits portfolio is performing well because it's not stand-alone consumption and activation, but it is also how we blend that in combination with our nonalcohol beverage portfolio, which clearly drives incremental transactions, which benefit both our non-alcohol part of portfolio, but also, of course, it benefits the Premium Spirits part of the portfolio. Secondly, we also are -- with all the partners, and I'll come back to Finlandia, with all the partners, we are increasing our penetration presence across the outlets, which means that we are increasing distribution and gaining share versus other brand companies in the market. We are also expanding a number of countries, where with Bacardi, we have increased when we started from 2, where we are now to 11 countries. So that scaling is also helping us to drive the business. And then Finlandia, we always believed that this brand has a great overlap with our territories, having 60% of its global volume across our territories. So when we took it over, we really wanted to give it a fresh kick to refresh the brand, give it more support. And that's why carefully crafted marketing campaign has been launched in April last year. And it was very well received, and it really accompanied great strong execution focus across the countries. So all that blended comes together that we are having another year of very good growth of Premium Spirits, which I want to remind also has a collateral benefit in driving the rest of the portfolio. Simon Hales: Great. That's very clear. And then, my follow-up is really on the finance cost guidance for 2026 of EUR 25 million to EUR 45 million and if you could talk about the build of that. I mean, you obviously started 2025 with pretty high finance cost charge expectations of EUR 40 million to EUR 60 million, and you basically ended the year with almost a 0 finance cost line. Why is it going to be so different in 2026? I mean, how much of the guide that you put out this morning is related to the bridging cost finance for CCBA? How are you thinking about foreign currency losses for this year within that guidance? Anastasis Stamoulis: Yes. Simon, so yes, I mean, we closed the year with EUR 1.1 million of finance cost, which was lower to our updated guidance and even lower to -- honestly, to our expectations. It was mainly driven by 2 key reasons. First of all, the greater currency stability that we had in the Nigerian naira as well as higher finance income. So if you look into next year and our guidance for next year, which is in the range of EUR 25 million to EUR 45 million, we expect a more normalization when it comes to the relevance of finance cost. Now -- so first of all, we assume ongoing income from our cash balances in Russia, which is positively contributing to the finance cost, of course. And on the other hand, we factored some higher finance costs in relation to renewing our finance structure, not related to CCBA at this stage. And of course, you rightfully mentioned the bridge financing cost, which is captured within our finance cost for the year, as this is already there. I want to remind us that this guidance does not include anything in relation to new debt for CCBA acquisition. This, of course, will be reflected, and we'll provide further guidance subject to the timing of the completion of the transaction. But I feel overall comfortable with the range that we are providing at this stage of the year and the visibility that we have. Operator: We will now take the next question from the line of Nadine Sarwat from Bernstein. Nadine Sarwat: My question is on CCBA. You announced the deal. It's been a couple of months now. And so I'm curious to hear over that time period, have you learned anything incrementally that you're able to share that makes you incrementally excited or perhaps additional areas where you see opportunities for improvement in the business? Zoran Bogdanovic: So after the announcement in October, we have immediately proceeded with application across countries where this is necessary to be done to seek the regulatory approvals for the transaction. So we are now in the period where, a, we are not the owner, and we need to wait for those approvals, which we estimate to be obtained by the end of the year latest. So during this period, what we can do, and we started doing, is integration planning. So our functional teams, together with functional teams of CCBA, started working together on the preparations and planning, which then will be executed only once we get all the necessary approvals. But, to conclude, you said the word excitement. So that's exactly the right word with how we feel about CCBA. And if we felt excited at the day of the announcement, I would say that we just feel more excited now, and we can't wait to get started with these wonderful territories, which offer abundance of opportunities that -- behind which we want to invest to drive growth. Operator: We will now take the next question from the line of David Roux from Morgan Stanley. David Roux: Just on -- I've got a question on CCBA, and then, a quick technical follow-up. So you've spoken about the deal accretion in year 1. And then, in your prepared remarks there, you went on to further note you expect it to create shareholder value in the long term. Can you remind us of how this deal will affect your medium-term targets of 6% to 7% organic growth, and then, the 20 to 40 basis points of margin expansion? And then, just my technical question, on the phasing of organic growth for 2026, there was an extra trading day this past quarter. Can you remind us of the impact across the 2026 quarters from more fewer trading days? Zoran Bogdanovic: Thank you, David. So on CCBA, very short, as we said last time, we will come back once the transaction is completed and approved. We will come back with our view on the guidance, and we will definitely take you through that. So for that, we simply need to wait that all the necessary things are done until then. And on the phasing, look, we have in Q1 4 more days, and that was in January. And we have, I think, 4 days -- or 3 days less in Q4. So that's why you will see that in Q1, we will see -- this will be reflected in the performance of Q1 and also somewhat balanced in the Q4. And for that reason, I think that informs how also phasing will be. I don't know if you want to add anything, Anastasis. Anastasis Stamoulis: No, I think Zoran captured it well. You should expect to see a bit more -- that extra volume from the first half to flow down from the revenue to the P&L, not of course, to the full extent, as there is a level of investments that we mentioned before, like the Olympics. So a little bit more on the first half of the year. And just to add on the CCBA that we -- our assessment is that, of course, once the company -- the process is completed on a new rebase of margin, we do expect that we will be delivering within a line of our guidance of 20 to 40 basis points. Operator: We will now take the next question from the line of Charlie Higgs from Rothschild & Co. Charlie Higgs: My first one is on COGS per case inflation, which I think was 3.8% in 2025. I was wondering, Anastasis, if you could give any thoughts for 2026 because European sugar is looking pretty good; PET, likewise; electricity costs are a little bit all over the place. But can you just talk about what you're seeing there? And how hedged you are on key commodities? And then I have a follow-up, please. Anastasis Stamoulis: Charlie, yes, actually, looking ahead for 2026, we are currently expecting COGS per case to increase in the low single-digit level. There is still some inflationary pressure in commodities like aluminum and PET, while as you rightfully said, there is some moderating trend in sugar. But as you know, we always follow a very robust hedging policy. And our current hedging coverage on key commodities, as we speak, is above 55% with higher coverage in sugar and aluminum, which basically means that any positive -- further positive trends in sugar will not be floating fully in the P&L, as the hedging position covers that. But we remain always focused on this with the hedging strategy and long-term contracts, and we continue to do productivity, and we'll reflect that as the year evolves. Charlie Higgs: Great. That's very useful. And then, my follow-up is just on some of the leadership changes that are happening at KO. We've got James Quincey's last outing in a couple of hours after an amazing run. We've had in the last few months, a new Head of Europe and a new Head of Africa, and also recently, the company announcing a new Chief Digital Officer. So can you just kind of put all of these leadership changes together and summarize what you think it will mean for Coca-Cola Hellenic? Zoran Bogdanovic: Charlie, so look, on the -- on that topic, I can say, first of all, we know very well all the leaders who are taking all the new roles. But let me first start to say that we believe that James has done phenomenal steering of the Coca-Cola Company and especially the way James and John and Henrique in their roles have done also gluing and bringing system so much closer together like never before. I really believe it is one of the reasons why the overall Coca-Cola system is working so well together and demonstrating such high performance. So -- and then preparation of this succession with Henrique, I think it's an exemplary case. We know Henrique really well as another phenomenal leader that we had privilege to have him on our Board, and we still do. But obviously, he will be stepping down given his new role. But we know that gave also the chance to Henrique to see Hellenic from up close. And we know that we share a strong belief in the system, in the business that we are in. And we also shared very bold ambition of how we all should think about future and how much more opportunities there are. And we will do everything from our side to support and work together in a flawless partnership that we have. And then, also 2 new leaders, both in Europe with Luisa and in Africa with Luis, excellent relationship, super strong leaders, growth mindset, drive to win, and above all, a great sense of partnership, attitude, approach that really inspires to do more better together. So -- I mean, you got me on a question that I could talk so much because we have really huge respect and trust and admiration for these leaders, and we are very privileged that we can work with them. And not to forget also Sedef, great choice of such experienced business leader to take such an important topic as digital transformation. And we already started, where with Henrique and John, we are having a Global System Digital Council, where now Sedef plays a very important role. So very exciting. And I'm very sorry, I don't have more time because I could really go on. But thanks a lot. I hope I answered your question. Operator: We will now take the next question from the line of Mitch Collett from Deutsche Bank. Mitchell Collett: You mentioned in the release some new AI capabilities that you've rolled out in 2025. And I think you say that it gives you better volume and also better revenue per case. So can you perhaps give a sense of the quantum of that uplift? And how quickly do you expect to be able to roll that out into other markets? And then, I have a follow-up. Zoran Bogdanovic: Mitch, sorry, of all the AI because that's another one where I can go for hours, but -- did you ask specifically on the one that we do in Nigeria? Mitchell Collett: Yes. I think that's the one where you say it gave you volume and revenue uplift. Zoran Bogdanovic: Yes. Yes, absolutely. No, that's -- you picked a good one because the beauty of that is that, as we and also Coca-Cola Company, we are all stepping up our data analytics and AI. But the beauty of that is when we come together, and this is an example of a case where we combine consumer data and our customer data. Bottom line of that is who shops where. And based on that, we are segmenting so that we can have segmented communication execution based on profiles of consumer segments in which type of outlets. That's the essence of that. And we've seen based on the pilot, which was just under 4,000 outlets, gave us a very good performance, definitely a better performance in volume and revenue per case than the controlled set of outlets. And for that reason, we are expanding that throughout 2026 by more than tripling number of outlets where we will be spreading this. And more importantly, all the learnings that we get from this are the backbone of how we will be then taking this further to other markets together as a joint system team. Mitchell Collett: That's great. And then my unrelated follow-up is just going back to the finance charges for this year. I think you say it includes the cost of the bridging financing. Can you just quantify how much that is? Apologies if you gave that earlier and I missed it. Anastasis Stamoulis: Yes. Mitch, you mean this year, you mean for '26, right? Yes. So in Q2, we expect it to be low single digit. Mitchell Collett: Millions, low single digits, euro millions. Anastasis Stamoulis: Yes. Yes, yes. Very low single digit million. Operator: We will now take the next question from the line of Richard Withagen from Kepler Cheuvreux. Richard Withagen: First one is on RGM. As inflation normalizes, how should we think about your current RGM strategy? So what's the medium-term algorithm between price, pack architecture, promo intensity and mix to stay in a good balance between the revenue per case growth and volumes? Zoran Bogdanovic: Richard, thank you for great question. So RGM, when I think of last 5, 6 years with everything we've been going through, I don't know how we would go if we didn't have RGM at the level that we have. This helps us in the situations of extreme conditions like we went with a very high inflation and how RGM carried us through all of that. And mind you, where on top of very strong price/mix, we have been able to deliver constantly positive volume, and that's attributed to the RGM, which takes into account so many things together. So going forward, in situation of a more stable inflationary environment, both in Europe and in Africa, this is where exactly all 3 drivers that you mentioned play a role. RGM is accounting and using end volume and price and mix. And for us, package mix, category mix are important drivers of how we are driving overall price/mix. We said for the last year that you will see more balanced play between volume and price/mix. And this is what happened. And we also estimate for -- and that's also what we estimate for 2026, where you will see even more balanced ratio between -- a combination between volume and price/mix. Now, just as the bottom line is that RGM, the core purpose, so it is to drive sustainable revenue and margin through well thought through initiatives that either tackle affordability or premiumization in every single market in their own unique way. And that's why this we call one of our prioritized bespoke capabilities behind which we are constantly investing just to get constantly better, better and raise the bar. I hope I answered your question. Richard Withagen: Yes, that's very clear, Zoran. And then my follow-up, maybe more for Anastasis, but -- you made some investments in inventories in the past few years, which I guess makes sense given the volume growth of the business. Now, in 2025, inventories actually declined year-on-year. Did you have any specific initiatives around inventories or around the broader working capital? And what can we expect going forward? Anastasis Stamoulis: Richard, thank you for the question. First of all, you mentioned the overall working capital cycle, and we are pleased how we are managing this in order to contribute to the overall free cash flow generation. Inventories have always been a focus area together with receivables, where we are making very good progress on actually keeping lowest possible overdues as a percent of receivables. But inventories as well has been a focus and part of the areas that we are working with supply chain to ensure the necessary requirement. Of course, the priority is about delivering in the market and ensuring availability, and we'll continue to do that. But I want to underline that I'm very pleased with the free cash flow generation as a combination of what has been driven from the profitable growth, the working capital cycle, while we created the space to continue to invest in our CapEx that fuels the future growth. So, yes, good progress there, and we'll continue to focus on this and keeping these levels of free cash flow generation. Operator: We will now take the last question from the line of Laurence Whyatt from Barclays. Laurence Whyatt: Just one for me, please. Just following up on one of the previous questions. I think you mentioned that you're going to have a bit of a more balanced split between volume and price/mix as you look at your guidance this year. Just wondering if you could confirm that that's what I heard, if you're expecting it to be around sort of 50-50 between the 2? Zoran Bogdanovic: Laurence, yes, you heard well where we say that it's going to be more balanced play between the 2. This really depends on every country. It may be that somewhere it's 50-50, it can be 60-40, it can be 40-60. So this is really hard to predict now. But in our algorithm, and as we think about '26, we do see that end volume and price and mix will play a role. And yes, it's going to -- we see it to be in a more balanced way. Laurence Whyatt: Just to split it up between your 3 divisions, I'm assuming that the majority of the improved volume is coming from the emerging region. Or is there any other areas you would expect a material step up? Zoran Bogdanovic: Yes, it's logical that more volume to come from the Emerging segment. Absolutely. You're right. Operator: There are no further questions at this time. I would like to hand back over to the speakers for closing remarks. Zoran Bogdanovic: Well, thank you, operator. And I just want to thank everyone for taking the part in today's call and all the questions and good conversation, and we look forward to speaking with you soon. Thank you very much, and goodbye. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the conference call on fourth quarter and full year 2025 results. I'm Moritz, the Chorus Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Juergen Rebel, Head of Investor Relations. Please go ahead, sir. Juergen Rebel: Good morning, everyone. This is Juergen speaking. Welcome to today's call on fourth quarter and full fiscal year '25 results. Aldo, our CEO, will comment on business and strategy. Rainer, our CFO, will focus on the financials. During the call, we are referring to the Q4 earnings call presentation that you can find on our website. Aldo, please share your thoughts on fiscal '25 and Q4 with us. Aldo Kamper: Thank you, Juergen, and good morning, everybody, also from my side. Let's start with Slide 3. 2025 was another year of disciplined execution. We built a stable foundation for further expansion as a leader in digital photonics. Our core semiconductor portfolio grew 7% year-on-year, underlining the strength of our focused positioning. And importantly, for the first time ever, ams-OSRAM holds the #1 position in the global LED market, a significant strategic milestone. Design win traction remained excellent with more than EUR 5 billion in new lifetime value added to the pipeline. Profitability also improved again, adjusted EBITDA margin up 1.5 percentage points year-on-year, driven by the accelerated execution of the Re-establish-the-Base program despite significant cost headwinds 1 year ahead of plan. We also delivered EUR 144 million free cash flow, including interest paid. And on top of that, our deleveraging plan progressed strongly. 2 portfolio transactions announced as of last week with proceeds of EUR 670 million and pro forma leverage at 2.5x. On to Slide 4. Q4 was a strong quarter. Revenues and adjusted EBITDA came in, in the upper band of our guidance, a clear beat, thanks to a super strong aftermarket lamps business. Revenue stayed almost flat compared to last year at first glance, but bear in mind, the weaker dollar cost us around EUR 55 million top line versus last year. Adjusted EBITDA increased 7% year-on-year despite FX headwinds, driven by the continued cost savings of the Re-establish-the-Base program. Let's move to Slide 5, looking at the segments. OS held up okay in a seasonally weaker quarter. Revenue dipped a bit more than what you would normally expect. I will comment on auto on the next slide. Margin dropped broadly in line with fall-through, but is still 5 percentage points higher than a year ago. CSA showed resilience after the typical peak in the third quarter, driven by good demand from custom sensor products for consumer handhelds and better industrial medical revenues compared to a year ago. Revenues were broadly stable quarter-on-quarter and slightly up compared to a year ago. However, adjusted EBITDA margins were down both sequentially and compared to a year ago, an unfortunate product mix, coupled with a strong impact from the weaker U.S. dollar and some inventory cleanup effects were the reasons for this. Lamps & Systems saw an exceptionally strong seasonal upswing. Aftermarket demand went through the roof as customers flooded us with short-notice orders after our closest competitor fell into financial troubles. We are trying to turn some of this into long-term business for sure. Specialty Lamps contributed for the last time for a full quarter before closing the transaction with Ushio later this quarter. In line with fall-through, profitability was up more than 80% compared to Q3. Overall, a good quarter across the portfolio. Now let's take a closer look at the semiconductor business on Slide 6. If you look through the weaker dollar in the noncore portfolio contribution, the clean core portfolio grew exactly in line with our semi target operating model, 8% year-on-year. The noncore portfolio was expected to be fully phased out latest by Q1 last year. However, customers kept ordering and ordering. For this, it still contributed a high double-digit million-euro revenue last year. This page highlights the underlying resilience of our semiconductor business. Automotive sequential decline, mostly seasonal. But the automotive supply chain continues to operate with extremely lean inventories and the competitive environment driven by the kind of war amongst the OEMs is unchanged. Although difficult to quantify the so-called Nexperia chip crisis at the beginning of last quarter, but we also had a bit of a negative impact on order intake. Year-on-year, softness is basically due to FX, the order pattern I just mentioned and that no real restocking in the supply chain happened. Industrial and Medical, this vertical is gradually improving. Finally, we are not out of the woods yet, but indicators are trending in the right direction. Orders in Industrial Automation and Medical came in a bit stronger, balancing the seasonal decline in horticulture, for example. Consumer, typical Q4 seasonal decline with U.S. dollar effects and the exit of the noncore portfolio. Let me hand over to Rainer for some comments about cash flow on Slide 7. Rainer Irle: Thank you, Aldo. Hello to everyone from my side. We delivered EUR 144 million free cash flow adjusted for the onetime positive cash in from changing the employee pension funds setup. Free cash flow above EUR 100 million, as we had promised. That includes a high double-digit million-euro inflow from the Austrian Chips Act. The same is true for the full year number, EUR 144 million, again, free cash flow when adjusting for the pension financing, as just described. CapEx remained disciplined, well below the 8% target. With that, let us take a look at liquidity and the maturity profile on the next slide. This is strong free cash flow in Q4. And the inflow from the change in the pension fund setup, our cash on hand was close to EUR 1.5 billion, and the available liquidity position rose to EUR 2.2 billion, backed by a diversified mix of instruments, cash revolver bilateral lines. In December, we also rolled EUR 100 million bank loan to '27. In January, we completed a EUR 200 million buyback of the outstanding '27 convertible. Including the expected proceeds from the 2 announced transactions, we have already today sufficient funds to repay the convertible bond due in '27 and the OSRAM minorities. This sets the stage for refinancing our high-yield maturities at improved terms. Back to Aldo now for a more detailed look at the full fiscal year '25. Aldo Kamper: Thanks, Rainer. Slide 9 shows how the company has been progressing despite major headwinds from currency, automotive supply chain pattern changes, precious metal and raw material prices increases, et cetera. Our IFRS top line declined by 3% on a year-on-year basis, but it's worth looking deeper. EUR 100 million FX impact and a more than EUR 100 million noncore portfolio needs to be considered. With that in mind, the underlying core portfolio would have been up 4%. That is especially true when we look at our semiconductor segment. The core portfolio grew about 7% year-on-year at constant currencies, in line with our midterm growth ambition. The year-on-year decline in Lamps & Systems stems mostly from 2 topics: the decline in the OEM business, in line with the lower number of factory new cars with traditional lamps; and the Q2 supply chain adjustment after liberation day. On top, the weaker U.S. dollar also weighed in a bit on the top line. Adjusted EBITDA margin improved meaningfully, thanks to the implementation of Re-establish-the-Base run rate savings 1 year ahead of plan. Cost headwinds have been heavy, gold, silver, rare earths and the top line impact from the weaker dollar. Let's move to Slide 10. A key highlight, one that has always been a personal ambition for me for more than a decade, ams-OSRAM is now ranked #1 packaged LED supplier globally by value. We now clearly surpassed our long-term rival to the crown, NICHIA, helped by a weaker yen, but primarily by better relative performance from us in the marketplace last year. This further strengthened our position with automotive OEMs, professional lighting customers in emerging markets such as micro emitters. On to Slide 11, design win performance. Last year was, again, a green year, great year for winning new business, underpinning our semiconductor growth model. The tally reached more than EUR 5 billion, again, the third year in a row. After a strong Q3, we also booked more than EUR 1 billion of design wins in the last quarter. On this slide, we show outstanding design wins in the triple-digit million euro lifetime value. In consumer, for example, projects in display management and camera enhancement accumulated hundreds of millions. In automotive, the EVIYOS and intelligent RGB ambient lighting projects stood out. And professional lighting and medical imaging designers also contributed exceptionally. These examples show the strong structural momentum in our business. Design wins today are the revenues of tomorrow, and our pipeline is very healthy, underpinning our growth ambitions in the semiconductor core business and along the avenues of our key engineer-emerging digital photonics applications. Slide 12 shows the next wave of structural improvements. Thanks to the great execution of our teams, Re-establish-the-Base delivered its savings 1 year early, EUR 220 million. That's a huge success, but we have to get even more ambitious in view of the persisting headwinds. We're sharpening our profile towards the clear leader in digital photonics, we also want to transform the way we work and thereby save an additional EUR 200 million of annual cost. Cost, speed, agility are our guiding principles as we reshape our operating model. We want to further reduce overheads, which includes addressing stranded costs of the divestments. We want to improve our manufacturing costs by transferring production of established products fully to Asia and the productivity push through automation across the globe. We are developing cost-optimized product platforms and also product development shall become cheaper and more efficient by developing maturing product families in Asia and by using more AI. Expensive European resources are focused on advanced digital photonics topics. In total, around 2,000 colleagues will be affected, half of them in Europe, half of them in Asia. Certainly, we also want to get our share of productivity improvements by rolling out AI, as just mentioned. Let me ask Rainer to comment a bit on the progress when it comes to deleveraging our balance sheet. Rainer Irle: Now turning to Slide 13. Last April, we communicated our accelerated deleveraging plan. Since then, we have made a strong progress. First, improving the structural profitability. As Aldo just explained, we implemented Re-estab-the-Base savings 1 year ahead of plan and are launching the new program, Simplify. Second, generating proceeds well above EUR 500 million from divestments. We delivered. We will get EUR 670 million in cash from the 2 transactions that we have announced: the sale of the specialty lamps business to Ushio and the sale of the non-optical sensor business to Infineon. The transactions will also result in a onetime profit of about EUR 450 million to EUR 500 million. And third, the solution for Kulim 2, the sale and leaseback. We continue working hard on it. There's always been interest, discussions intensified recently, but it is really too early to call when exactly we will see a deal. But we are fully convinced that there will be a solution. We have always delivered so far, and we have no intention to change that. On a pro forma basis, the leverage has significantly improved, as we will show you in a minute. But the solution for the sale and leaseback and fixing some of the stranded cost of that factory might be needed to really get to below 2x. Nevertheless, I'm convinced that we will be able to refinance the senior notes much cheaper to bring interest cost down, the key impediment for strong free cash flow performance. After refinancing the high-yield bond, it is now likely that we land at below EUR 150 million annual interest cost. On Slide 14, we already showed that last week, you see the impact of the transactions on our leverage. We discussed the update of our balance sheet as of December '25 earlier in the presentation. With that, on a pro forma basis, including the divestment proceeds, leverage drops from 3.3x to 2.5x. Excluding the OSRAM put options, net debt would stand at around EUR 850 million, implying 1.6x. This is a major step forward and a prerequisite of refinancing our '29 maturities at lower costs. And on the next slide, Slide 15 summarizes our transformation journey, as Aldo outlined last week in detail, when we announced the sale of our non-optical sensor business to Infineon. The path consists of 3 phases. From '23 to '25, as you know, we stabilized and refocused the company, divestments, portfolio shaping, Re-estab-the Base and refinancing. '26 will be a transition year, reflecting the deconsolidation of sold business and temporary stranded costs. We will have to bear a temporary drop in adjusted EBITDA due to several one-off effects. For this and for making the company over more efficient and more agile, we launched a new program, Simplify. Also financing costs remain high in '26, approximately EUR 250 million to EUR 300 million until the refinancing of the senior notes, which we have on the radar for '27. And then from '27 onwards, we enter the growth and value creation phase. We want to see growth in the core business and growth along the lines of the existing and new digital photonics applications, highly pixelated forward lighting, micro-emitter projection arrays and spectral bio and distance sensing. Based on the Simplify program and growth, we will see margin expansion. With growing profitability and the solution for the Kulim 2, we will have a fully healthy balance sheet with leverage below 2x. And we want to see our financing costs below EUR 150 million. And the low run rate of restructuring costs is the basis to deliver strong free cash flow well above EUR 200 million. Before we move on to the exciting growth avenues of some of our digital photonics projects, we have to look a bit deeper in one of the aspects of the transition phase. Precious metal prices in here, namely gold, Slide 16. Gold is an important material in the production of LEDs. You need it for corrosion-free mirrors to get the light out of the EP layers, to put it simply. In normal years, that added to the COGS bill, a high double-digit million-euro figure. The unprecedented gold rate that accelerated in '25 cost us an additional EUR 35 million, that's 2% margin of the OS division. That was in '25. The price curve is taking an exceptional shape, as you can see on the left. The peak has come down the last 10 days. But when assuming an average price of about USD 5,000 per ounce, we have another EUR 60 million cost add-on compared to '25. That would be a 4% margin impact for OS and around 2% for the group. We are mitigating as best as we can. We are hedging and that limits further risk very much but doesn't solve the problem. But then we are also reducing precious metal usage by redesigning our product. So that takes a bit. And we are launching the Simplify program. I hate to say it, but on top of the divestments and the stranded costs, the gold price and precious metal prices overall will weigh further on margins and adjusted EBITDA in '26. And with that, back to Aldo for some words on digital photonics growth vectors that we'll kick in step by step and that, we presented in detail last week. Aldo Kamper: Thank you, Rainer, and we are on Slide 17 now. Digital photonics is really opening up multiple highly attractive growth avenues across both emitters and sensors for us. On the emitter side, micro-emitter arrays are transforming 3 key markets: advanced automotive lighting with EVIYOS, where we already ship in volume and hold the clear design win lead; ultra-compact RGB micro-emitter arrays enabling bright, power-efficient and small AR displays for next-generation smart glasses; and multichannel micro-emitter-based optical links for AI data centers, wide and slow as it is called, interconnects that offer superior energy efficiency and unlock future chip-to-chip optical architectures. For each of these, we see additional revenue potential in the triple-digit million euro territory over a staggered period of time. On the sensor side, we are equally well positioned. Spectral sensing is already today a triple-digit million business, and we see it grow further, anchored in the premium smartphones and expanding further with new product generations and the right of foldables. Biosensing continues to scale as wearables at more optical measurable biomarkers creating incremental double-digit million opportunities. And finally, multi-zone direct time-of-flight sensors bring high-precision 3D awareness to smart devices, robotics and emerging humanoid platforms, with adoption curves that could drive significant revenues by 2030 and beyond. Also on the sensor side, we see additional revenue potential of double-digit million euros, in some cases, even triple-digit long term. Together, these 6 factors demonstrate our unique portfolio of emitter and sensor technologies positioned at the center of major global trends, automotive safety, AR, AI compute, personal health, intelligent robotics, each offering meaningful, scalable and compounding growth potential. Now let's quickly revisit our financial targets for 2030 that we published last week on Slide 18 now. This slide sets out our over-the-cycle target operating model for 2030 once divestitures, including Kulim 2, deleveraging, corporate simplification and debt refinancing are complete and with new applications contributing to growth. For semiconductors, we target mid- to high single-digit revenue growth starting in '27 based on a variety of growth factors that I just spoke about and the adjusted EBITDA margin of over 25%. Traditional auto lamps contributing to the group, as illustrated on the right-hand side, are expected to be flat and I guess a reliable cash source that helps fund the semiconductor transition and growth, consistently an adjusted EBITDA margin between 13% and 15%. With that, we target for the group a CapEx ratio of up to 8% of sales, which should end up typically lower than that. The group free cash flow, as Rainer explained before, well above EUR 200 million post refinancing and a net debt to adjusted EBITDA ratio below 2x. These are over-cycle targets. They reflect our operating model once the portfolio transition is complete. So let me summarize the key takeaways for Q4 and thereafter on Slide 19. Q4, we beat revenue and profitability guidance. The core semiconductor business grew 8% year-on-year on a like-for-like basis. Free cash flow was strong at EUR 144 million. RtB run rate savings were achieved 1 year ahead of plan. We also progressed well in deleveraging our balance sheet. Last week, we announced the sale of our non-optical sensor business to Infineon. Together with the sale of Specialty Lamps, we will get EUR 670 million in cash, exactly the more than EUR 500 million that we announced last year. We have ample liquidity of EUR 2.2 billion available. We bought back EUR 200 million of convertible notes in January. And most importantly, we have clearly defined the future direction of the company. We have laid out a strategic direction by creating the leader in digital photonics where we want to benefit from upcoming inflection points in this field. And we launched today the new transformation and savings program, Simplify, for saving further costs and transforming the way we work. Now on to the outlook for the first quarter. We expect revenues to come in between EUR 710 million and EUR 810 million with adjusted EBITDA around 15%, plus/minus 1.5 percentage points, based on a euro to dollar ratio of $1.19. Lamps & Systems will show the usual seasonal reduction, minus 1 month of deconsolidation of Specialty Lamps as that business will go to Ushio. Semiconductors will experience a typical seasonal decline. Given the coming change in the portfolio and the associated challenges for you in building a financial model, we also want to give some hint for the full year of '26. Group revenue might end up slightly softer than '25 given the divestments and a weaker U.S. dollar. Please remember that USD 0.1 equals roughly EUR 20 million more or less revenue per year. The move from $1.13 to $1.19, for example, would cost us another EUR 20 million in revenue. Adjusted EBITDA will be negatively impacted by several one-offs, the divestments where we effectively sell EBITDA to the buyer, stranded cost overheads that we are not transferring to the buyer, but of course, are working on as part of Simplify and higher precious metal prices and other factors beyond that. With that, we are now open for your questions. Operator: [Operator Instructions] And the first question comes from Sebastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: First of all, on the automotive market, inventories remain at a very low level across, I would say, the board. Do you see any room for kind of inventory replenishment in the coming months? And attached to that on automotive, do you see any specific risk of DRAM shortages impacting your customers and indirectly impacting your business? Second question is regarding the guide for 2026 in terms of revenue. What are the assumption in terms of asset disposals you have taken into your comment, both in terms of revenue contribution and in terms of timing, just to understand where we should land in terms of revenue in your euro term? Aldo Kamper: Yes. On auto, as you mentioned, we see overall a very short-term order behavior. Inventories at our customers are low. We've got a lot of orders, still within our lead times. So far, we are able to deal with those. Is there room for replenishment? Yes, we have been hoping for that, honestly speaking. We feel that overall, the inventories are on the low side. We have started to kind of compensate a bit for that by putting a bit more inventory into our distribution channel. But at the moment, still overall inventories stay low. And I think that's because also a lot of our customers continue to manage their cash flow extremely carefully. Whether that is smart or not, time will tell. As you mentioned, memory is getting tight. And I think people are also a bit uneasy there on what it means for overall volumes. So far, no direct implications. But yes, there's, of course, a potential in that as well. Do you want to take the guidance question? Rainer Irle: Yes. So the asset disposals kind of -- I mean, it's the business we are selling. The first one, the lamps, the industrial lamps business, that was roughly EUR 150 million of revenue and let's say, EUR 15 million of EBITDA, that will go out probably end of Q1. So in the guidance, we assume that it would still be in for 2 months, and the third month will be out. And for the non-optical sensor business, that was a revenue of EUR 200 million and EUR 60 million EBITDA, assuming that would go out mid of the year, then obviously, half of that will go out. And then there's also, yes, for both transactions, roughly EUR 30 million stranded costs that we will immediately tackle one after closing, but then we'll take up to a year to take it out. That is part of the Simplify program, the elimination of that stranded cost. Sébastien Sztabowicz: And when you come for modest, I would say, revenue decline, modest is like a moderate to mid-single digit, is making sense? Rainer Irle: Yes, that makes sense. Operator: And the next question comes from Janardan Menon from Jefferies. Janardan Menon: My question is just following on the '26 guidance but on the adjusted EBITDA margin. I'm just wondering how we should think about that. You've guided to 15% in Q1. Is that -- would that be a bottom? And should we think that things will gradually improve from there? Or when the non-optical business gets sold in the second half, will that have a sort of further negative effect on the margin as we go into the second half of the year? And then second one is just on the revenue beyond 2026, especially on the AR projection display and the AI data centers where you are targeting triple-digit million. What is roughly the time scale when you think you'll get material revenues, let's just say, materialize in low tens of millions of euros or something like that? Will that be from '27? Or is that beyond '27? Rainer Irle: Yes. Maybe starting with the EBITDA. I mean the negative impact from gold and so on, we already see today. So that is included in the Q1 guidance and that will not get worse. Obviously, then when the revenue and the EBITDA goes out, I mean that goes together and has no major impact on the margin. Obviously, the stranded cost will then come once the business is out. If we are tackling those stranded costs immediately, we will try then to see the improvement already within this year. The typical seasonality certainly is kind of in Q2 then. I mean, in Q1, we still have 2 months in of the traditional lamps business that will be done in Q2. And anyway, Q2 is typically a seasonal very weak quarter. And then you always see the improvements in the second half of the year, and we should see the same this year. Aldo Kamper: On the new growth topics, I think AR is much further along in its development than the AI topic. AR is already quite well advanced, and we will see revenues in the somewhat foreseeable future. But still, there is a bit of time before market introduction there. AI is at the moment in, I would call it, very advanced research stage, quick getting into product development stage. So you can imagine that is something for a bit later in the decade now. But once it comes, for both topics, we feel that these topics will scale quite rapidly because the markets are significant and the interest that we're getting shows that the programs that we're working on would be sizable. Operator: Then the next question comes from Robert Sanders from Deutsche Bank. Robert Sanders: I assume you've got works council approval for this restructuring and what you did with the pension trustees, et cetera. Is there anything you've done to guarantee the remaining employees as part of this deal? Just if you can give us some color. And where are these 2,000 headcount going to come out from the company? And then I have a follow-up. Rainer Irle: Yes. I mean the pension and the Simplify program are completely independent, right? So the -- I mean, the pension, what we did is we really took some time to go through all of that and kind of see where we had covered it. We basically had a double insurance and so on. So we resolved that and now the pensions are just secured exactly onetime and everything, the pensions plus the pension increases. So we clean it up, and now there's a really good system, and that helped a bit the liquidity in Q4. Now the headcount reduction from the Simplify program, and we are talking about roughly 2,000 people. A good half of that will be out of Europe with a strong emphasis of Germany, and we had already announced a few months ago the closure of one of the traditional factories in Germany. And with the traditional halogen business declining, we certainly have to do more adjustments, but it will also affect our Regensburg site, where we move some of the manufacturing of some R&D to Asia. But also, as Aldo pointed out, we will invest massively in automation and particularly on the back end, and that is then in Asia. And then we will also see a significant reduction in our Asian workforce. Because of that, automation/productivity improvement/AI. Robert Sanders: Got it. Just to follow up on a question on the previous call. I just want to double check that the Premstaetten fab, Infineon has been very clear they're going to move their volumes very quickly over to Kulim. So what percent of that fab wafer capacity is relating to the businesses that you've sold to Infineon? But that's what I just want to double check. Aldo Kamper: Well, I think actually, yes, they will move product over, but it will not be immediate. They will have to also prepare their factories for it. They have to get customer approval for it. And also, we have agreed on a smooth transition so that we have the time to develop new businesses to compensate for that. The factory has 3 areas in -- the filter making that we mainly use for the display sensors is completely untouched by this transaction. So it stays fully loaded and stays fully there. TSV, that's a specific technology on how you connect different layers in your semiconductor, is also only to a very small extent used by the type of products that Infineon is taking over. And then the more generic CMOS is where the product lines that Infineon is using is probably in the 30%, 40% range of that capacity. So that's where we see, over time, a step-wise reduction and where we feel we can compensate that by expanding, on the one hand, our internal business. We spoke about the emitter arrays, both on headlamps, but also, for example, on AR, those need to be controlled by CMOS building blocks, if you will, or steering blocks on the backside of this product, and they will increasingly come out of Premstaetten. So that's, for example, one of the internal growth factors externally beyond the business that we keep, we also see that actually the foundry business is a part of the growth story here as well as selected PMIC on customers and applications, where we have a good access and a right to play. So we feel quite comfortable with these growth factors and with the time that the transition will take because it's quite a number of smaller products. It's not one product with a huge volume that is in this product line. Industrial Automation and Medical are usually smaller programs running for a long time but are very specific in their technological needs and also in the customer approvals. And therefore, it was a logical combination that we agreed on a time schedule in the step down that allows them to do a good preparation and gives us the time that we need to then refill the fab with good new business. Robert Sanders: Got it. If I could just squeeze in one more. Just about auto LED, I mean, that business, in the past, you said, could grow at sort of 10% per year. Obviously, this year looks like a difficult year for the car industry. But is there anything that would prevent auto LED growing at 10% per year, maybe changes in mix or something that you see from today's perspective? Aldo Kamper: Well, there are 2 factors, I would say. The one hand, we see a clear push to more of these highly integrated, high-performance headlamps like EVIYOS. And we have now a variety of flavors in that, and we see really good traction now across the globe. It used to be a very European program. Then a number of the Chinese jumped on. And now with the new regulation in the U.S. also enabling adaptive driving beam, we also see much more interest from the U.S. So that category will significantly outgrow that percentage that you just mentioned. At the same time, of course, the saturation in the car with standard LEDs is already quite a bit higher. And there, of course, we are also confronted with price pressure, especially in China. You can imagine that the war amongst the OEMs has also an impact there. And that's why the efforts that we put in, in Simplify and also in a lot of the product cost optimization that we are doing, are very important to defend our shares there, but that weighs a bit on the growth rate. So overall, I would say mid- to high single digit would still be my view given the mix of topics that I just outlined. Operator: The next question comes from Craig McDowell from JPMorgan. Craig Mcdowell: The first one, just on the pension trustee piece. Can you explain what that means in practical terms for cash? What's actually happened in practice? And just to confirm, there's no restriction on the cash released from this arrangement? And then secondly, thanks for the color on the adjusted EBITDA of the divested assets. Just wondering whether you give any indication on gross margin of those sold assets as well, just to help modeling. Rainer Irle: Yes. Craig, yes, sure. Yes, I can confirm, I mean, the cash on hand that we had end of last year that included the pension transaction which was close to EUR 1.5 billion, is no restricted cash, right? It's on our bank accounts, and we can use it. We can use it for operational matters. We can use it to repay the debt. And as I said, together with the divestment proceeds, we have all the money on hand that we need to repay both the convertible and the minorities. Now with the adjusted EBITDA that goes out for the transactions, I would say that just the margins are comparable to the business we keep, though. The manufacturing services that we will then provide to the buyers, that holds true for both transactions, those typically have a lower margin. Operator: [Operator Instructions] The next question comes from Harry Blaiklock from UBS. Harry Blaiklock: Aldo, you kind of mentioned in a previous question around the Chinese market and potential pricing pressure from -- given the pressure that OEMs are seeing there. And I know you have decent exposure and the market is obviously, as you mentioned, softening after a few strong years. Can you maybe comment a bit more around the dynamics that you're seeing in that market? And then also your view on Chinese competition currently, kind of whether that's intensified over the last year or so? Aldo Kamper: Yes. I think China is a bit of a question mark for '26 now in terms of volumes. At least at the moment, it seems to start a little slower and also the projections are a bit lower. At the same time, I think if we think back a number of years, every time when things truly started to slow down, there were incentives put into the system to make sure that everybody in brackets can survive. So let's see how '26 truly plays out. China will still remain an important market, both in terms of volume but also in terms of innovation. As I said before, one of the markets where a lot of our new products get accepted very quickly and where we see high adoption rates, for example, of EVIYOS. So it is always important for us to be the clear innovation partner for our customers and at the same time, have a cost position that allows us to also continue to capture a very significant share in the more established products. But that second part requires a lot of work. I mean prices are coming down, and we need to do a lot of work to take cost out of our products to be able to continue to enjoy that business. And that's not easy. But so far, we are able to pretty well defend our shares, but there's definitely pressure, and we acknowledge that, and therefore, we take action to counter that. Harry Blaiklock: Got it. Makes sense. And then on the EBITDA margin target for the semiconductor business of over 25%. Obviously, you gave that last week, which was before the announcement of the plan, but I'm sure the Simplify plan was obviously baked into that. But I'm wondering would you be able to hit that over 25% margin target without the Simplify plan? Like does the Simplify plan provide some kind of upside to where you could have got? And -- yes. Aldo Kamper: I should say it was priced in. We didn't want to speak about it last week because it would very much confuse the messages. I think both topics, the deleveraging and the divestment, were an important topic to give the bandwidth to last week so that people, also our employees, could really understand what was going on. And now this, with Simplify this week, we give a lot more insight in how we want to defend and expand our margins. That was baked into this target. Obviously, what we, of course, will push for is to get these things implemented as quick as possible. And with that, get to the target margins as quick as possible. That's the key focus now. And then let's see how it goes. I mean with the last 2 programs, I think we have shown a pretty good track record of being aggressive, being quick, and that's what we would like to repeat. But obviously, it doesn't get easier. You need different levers, and we are now using very different levers than last time, for example, really reallocating the full standard product portfolio on the chip side from Regensburg to Malaysia, including the R&D that is associated with it to really compensate also these pressures that I spoke about before and to free up then room for highly automated innovative products, for example, on the AR side here in Germany. So it is quite a structural change that is important for competitiveness and important for innovation at the same time. Harry Blaiklock: Got it. Super helpful. And one last question, if I may, just on the consumer business and any impact that you've seen there, like obviously not -- I'm sure you haven't seen kind of tangible impact yet from the memory disruption, but any conversations that you've been having with customers about their thoughts going into the second half of the year? Aldo Kamper: Well, our customers are worried about it, but so far, say they have secured their volumes. Whether that is fully true or not, the year will tell. But it is acknowledged. Our customers are working on it. So far, no reductions in forecast or outlook yet. But can it happen? Well, AI pays top dollar to compete with a simple smartphone against that will not be trivial. At the same time, the industry have always found ways around it and to deal with it. So yes, it's too early to tell what the true impact will be at the moment. Operator: There are no further questions at this time. So I would now like to turn the conference back over to Juergen Rebel for any closing remarks. Juergen Rebel: Thank you, operator. Thanks, everyone, for joining today's call. If there are any follow-up questions, there's a lot of material on our website, and you can always reach out to the Investor Relations team. Thanks very much, and speaking to you soon. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Gilat Satellite Networks Ltd.'s Fourth Quarter 2025 Results Conference Call. All participants are at present in listen-only mode. Following the management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press 0. As a reminder, this conference is being recorded on February 10, 2026. By now, you should have all received the company's press release. If you have not received it, please view it in the news section of the company's website, www.gilat.com. I would now like to hand over the call to Mr. Sanjay Harry of Alliance Advisors IR. Mr. Harry, would you like to begin, please? Sanjay Harry: Thank you, Hilla, and good morning, everyone. Thank you for joining us for Gilat Satellite Networks Ltd.'s earnings conference call for the fourth quarter and full year 2025. With us on today's call are Mr. Adi Sfadia, Gilat's CEO, and Mr. Gil Benyamini, Gilat's Chief Financial Officer. The earnings press release was issued earlier today, and if anyone has not yet received a copy, I invite you to visit the company's website, www.gilat.com, where you'll find the release in the Investor Relations section. Before turning the call over to management, I would like to remind everyone that some statements made during this conference call contain forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. The potential risks and uncertainties that could cause actual results to differ materially include uncertain global economic conditions, reductions in revenues from key customers, delays or reductions in U.S. and foreign military spending, acceptance of the company's products on a global basis, and disruptions or delays in the company's supply of raw materials and components due to business conditions, global conflicts, weather, or other factors not under its control. The company cautions investors to not place undue reliance on forward-looking statements, which reflect the company's analysis only as of today's date. The company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. Further information on these factors and other factors that could affect Gilat's financial results is included in the company's filings with the Securities and Exchange Commission. In addition, on today's call, management will refer to certain non-GAAP financial measures that management considers to be useful and differ from GAAP. These non-GAAP measures should be considered supplemental to corresponding GAAP figures. With that, I would like to turn the call over to Gilat CEO, Mr. Adi Sfadia. Please go ahead, Adi. Adi Sfadia: Thank you, Sanjay, and good day, everyone. Thank you for joining us today to discuss Gilat Satellite Networks Ltd.'s fourth quarter and full year 2025 results. I am pleased to report that we closed both the quarter and the year with strong performance. The fourth quarter capped a very solid 2025, reflecting consistent execution across our commercial, defense, and Peru businesses, as well as continued strategic progress. 2025 was a year of significant acceleration of our revenue growth. Fourth quarter revenue reached $137 million, up 75% year over year. Full year revenue rose to $451.7 million, up 48% with 6% year-over-year organic growth. Adjusted EBITDA also saw significant growth, with the fourth quarter reaching $18.2 million, 50% above the same quarter last year. The full year adjusted EBITDA hit $53.2 million, a 26% growth year over year. Overall, 2025 was a good and successful year for the company. Now on to the business review. I will start with the defense. Military forces are increasing their dependence on resilient satellite connectivity to support mobility, real-time intelligence, and operations in contested environments. This shift favors suppliers with proven scalable systems, strong track records, and the ability to leverage commercial technology to the defense market, all of which are attributes of Gilat Defense. Gilat Defense is gaining steady demand from long-term defense programs, ongoing upgrades, and consistent Satcom spending, giving the business clear visibility into future growth. This strengthens Gilat's border defense portfolio and supports the company's ability to capture a larger share of the growing market that values the capabilities we provide. In 2025, our defense business delivered strong year-over-year growth in new order bookings, expanding customer engagement, and our addressable market. We achieved a record year for Gilat Defense sales, driven by increased demand from U.S. and allied defense customers for transportable, high-performance SATCOM solutions. This system continued to gain traction as defense organizations prioritize flexibility, rapid deployment, and resilient connectivity across diverse operational environments. The fourth quarter marked two important milestones for the business. First, we expanded into a new market segment, Earth Observation, with an approximately $10 million order for a direct downlink solution system enabled rapid acquisition of satellite imagery and data directly from space to a transportable ground terminal supporting near real-time intelligence and situational awareness in remote or contested environments. Our transportable platform provides fast deployment, resilient, and reliable operation. Also in the fourth quarter, we saw continued traction in Israel, securing significant orders across our defense portfolio and expanding the deployment of our solutions in the region. Our decision to shift more resources into Gilat Defense, expand the sales team, and increase R&D investment are now clearly strengthening Gilat's position in the defense market. Our defense pipeline remains strong, supported by sustained global demand for secure, resilient Satcom solutions. Turning to our commercial business. Demand for advanced IFC continues to accelerate, fueled by free WiFi, growing passenger demand for high-bandwidth applications, and increasing adoption of NGSO and multi-orbit architectures across the aviation ecosystem. This trend aligns directly with Gilat's strength and long-term strategy. Our commercial business delivered a strong fourth quarter and solid 2025, reflecting continued wins, growing customer adoption, and consistent performance across our key programs. As satellite operators accelerate investment in next-generation networks, our platform continues to be selected for its scalability, flexibility, and ability to support multi-orbit mobility-driven services. SkyH4 remained the central growth driver throughout the year. During the fourth quarter, we received a $42 million order from a leading global satellite operator for our multi-orbit platform, primarily supporting IFC services. During the fourth quarter, we added two new SkyH4 customers in Asia Pacific. We continue to expand deployments with leading satellite operators as they invest in flexible, software-defined ground networks. These awards reinforce SkyH4's role as a core platform for large-scale next-generation satellite networks. We also strengthened our presence in Asia Pacific with a SkyEdge platform order for approximately $11 million from a leading regional satellite operator to provide services over VHDS satellites supporting multiple commercial applications. In addition, we received more than $16 million in orders for Gilat WaveStream Gateway solid-state power amplifiers to support LEO constellation, highlighting growing traction for our solutions as LEO networks move from deployment into operational phases. Airlines and system integrators expanded our adoption of our technology for next-generation aircraft connectivity. During the fourth quarter, we received a $7 million order for Gilat WaveStream Airstream Bucks units to be deployed as part of next-generation IFC solutions to be installed on commercial aircraft. Stellar Blue is now fully integrated into Gilat's operations, and we are benefiting from cross-company synergies. Gilat's Stellar Blue plays a key role in our IFC leadership position with enhanced offerings that drive further growth for ESA in the IFC sector. Production is ramping up, and during the quarter, we delivered approximately 190 terminals, and we expect increased deliveries with improved margins in the coming quarters. As of year-end, we have a significant backlog that will be delivered in 2026 and beyond, based mostly on orders received during 2025. To date, more than 420 aircraft are online with our ESA terminal, and cumulatively, over 1 million passengers are being served each week with our models and ESA solutions. Continuing this progress, we received a multimillion-dollar order for our Sidewinder ESA terminal from a large global avionics company, underscoring the advantage of our high-performance, lightweight, low-profile configuration that is compatible with both GEO and LEO satellite constellations. Overall, our commercial pipeline remains strong as operators transition to multi-orbit architectures to support additional services, positioning us well for continued growth into 2026. Moving to Peru. Gilat Peru delivered exceptional results during the year, closing more than $85 million in agreements from Ponatel for the upgrade of four regional networks. These awards clearly reinforce Gilat's role in Peru as a key technology and solution partner for large-scale national connectivity initiatives. These projects, which are progressing ahead of schedule, are advancing Peru's digital inclusion objectives by enabling public WiFi hotspots and high-speed connectivity to public institutions such as schools, health centers, and police stations. Looking ahead, we see this progress continuing. We expect additional large RFPs and follow-on orders during 2026, positioning Peru as an important contributor to Gilat's long-term growth in large national digital inclusion programs. Our backlog is growing, with a strong, healthy, and diverse pipeline of opportunities in each of our divisions. As such, we expect another year of top-line and profit growth. We expect 2026 revenues to be between $500 million and $520 million. We expect adjusted EBITDA to be between $61 million and $66 million. To summarize, 2025 was a strong year for Gilat, marked by a good fourth quarter, record performance in key segments, meaningful customer wins, and a significantly strengthened balance sheet. We are entering 2026 with strong momentum across the company. In Defense, we will focus on driving revenue growth through business development, R&D investment, and portfolio expansion, further strengthening our position. We intend to pursue opportunities in government and sovereign communication programs worldwide. In commercial, we will continue to drive adoption of our IFC product portfolio and expand our offering for next-generation aircraft connectivity, further strengthening our leadership position in IFC. We will also focus on expanding our SkyH4 customer base. In Peru, we plan to expand our footprint by participating in new digital inclusion initiatives and network expansion projects, building on our proven execution and local presence. Gilat is accelerating its competitive advantage through continued technology leadership in multi-orbit connectivity and the development of advanced 5G and TEN capabilities. Mergers and acquisitions will be a key strategic focus, with primary emphasis on defense-related capabilities that complement our existing strengths. Gilat entered 2026 with a strong balance sheet and with an additional $100 million equity placement in the fourth quarter, bringing total capital raised in 2025 to $166 million. This investment enhances our ability to pursue strategic opportunities and build on the milestones achieved this year. I would like to thank our employees for their commitment and performance and our customers and partners for their continued trust. And with that, I will hand over the call to Gil, our CFO. Gil, please go ahead. Gil Benyamini: Thank you, Adi. Good morning and good afternoon to everyone. Before I dive into the numbers, I would like to remind everyone our financial results are presented both on a GAAP and non-GAAP basis. I will now walk through our financial highlights for 2025. As Adi mentioned, we delivered a strong quarter and year, demonstrating continued execution across our strategic priorities and building momentum into 2026. In terms of our financial results, revenues for the fourth quarter were $137 million, representing a 75% growth compared with $78.1 million in Q4 2024. Importantly, our organic growth quarter over quarter was 28%. For the full year, revenues totaled $451.7 million, reflecting 48% growth from $305.4 million in 2024. The growth was primarily driven by the in-flight connectivity vertical. In terms of the revenue breakdown by segment, Q4 2025 revenues for the Commercial segment were $75.1 million compared with $37 million in the same quarter last year. 103% growth was primarily driven by the in-flight connectivity, mainly reflecting the contribution from Stellar Blue. Q4 2025 revenues for the Defense segment were $33.3 million, 14% higher than $29.4 million in the same quarter last year. Q4 2025 revenues for the Peru segment were $28.5 million compared with $11.8 million in Q4 2024. The increase was driven primarily by higher revenues related to new upgrade projects in four of the six regions in which we operate. Our GAAP gross margin in Q4 2025 was 28% compared with 40% in Q4 2024. The decrease is primarily attributable to lower margins at Stellar Blue as production ramps up, as well as an additional $2.9 million of amortization of purchased intangibles expenses related to the acquisition. GAAP operating expenses in Q4 2025 were $25.3 million compared with $18.3 million in Q4 2024. The increase was primarily driven by the consolidation of Stellar Blue expenses, amortization of acquired intangible assets, and stock-based compensation mainly related to acquisitions. As a result, GAAP operating income in Q4 2025 was $13 million compared with GAAP operating income of $12.8 million in Q4 2024. GAAP net income in Q4 2025 was $8.8 million or a diluted income per share of $0.13 compared with GAAP net income of $11.8 million or diluted income per share of $0.21 in Q4 2024. The decrease in net income mainly reflects higher financing costs associated with the loan taken to finance Stellar Blue acquisition, together with higher tax expenses during the quarter. Moving to non-GAAP results. Our non-GAAP gross margin in 2025 was 31% compared with 40% in Q4 2024. Non-GAAP operating expenses in Q4 2025 were $26.6 million compared with $21.9 million in Q4 2024. The increase was primarily driven by the consolidation of Stellar Blue operating expenses. Non-GAAP operating income in Q4 2025 was $15.2 million compared with $9.7 million in Q4 2024. And non-GAAP net income in Q4 2025 was $13.4 million or a diluted income per share of $0.20 compared with a net income of $8.5 million or income per share of $0.15 in Q4 2024. The adjusted EBITDA in Q4 2025 was $18.2 million, a 50% increase compared with an adjusted EBITDA of $12.1 million in Q4 2024. For the full year, adjusted EBITDA was $53.2 million, a 26% increase compared with an adjusted EBITDA of $42.2 million in 2024. Moving to the balance sheet and cash flow. Over the past several quarters, we significantly strengthened our balance sheet and liquidity position. In September and December 2025, the company completed capital raises totaling $166 million from leading institutional accredited investors in Israel. In December 2025, we also repaid an outstanding $60 million loan that had originally financed the acquisition of Stellar Blue. In 2025, we used about $6.3 million of cash on operating activities. And on a full-year basis, we generated approximately $21 million of operating cash flow in 2025. As a result, as of December 31, 2025, total cash, cash equivalents, restricted cash, and short-term deposits were $185.4 million or approximately $183.4 million net of loans, compared with $95.6 million as of September 30, 2025. DSOs, which exclude receivables and revenue of our terrestrial network construction projects in Peru, were eighty-eight days. Our shareholders' equity as of December 31, 2025, totaled $500 million compared with $391 million on September 30, 2025, resulting mainly from the capital raise and earnings. Looking ahead, reflecting our strong backlog and our visibility into 2026, we expect 2026 revenues of between $500 million and $520 million, representing 13% growth year over year at the midpoint. We expect an adjusted EBITDA of between $61 million and $66 million, a 19% growth at the midpoint. We expect 2026 commercial segment revenues of between $315 million to $335 million, a 16% growth at the midpoint. Defense segment revenues of between $115 million to $113 million, a 22% growth at the midpoint. And revenue of the Peru segment of between $60 million to $65 million, an 11% decrease at the midpoint due to lower construction revenue in 2026 and a shift to the operation phase compared to 2025. That concludes my financial review. I would now like to open the call for questions. Operator, please go ahead. Operator: Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you've connected via Zoom, please use the raise hand button located at the bottom of your screen. Your questions will be pulled in the order they are received. Please stand by while we pull for your questions. The first question is from Ryan Koontz of Needham and Company. Please go ahead. Ryan Koontz: Thanks. Appreciate the question. Nice quarter, guys. On the defense side, you know, given kind of some of the puts and takes been going on with the US budget process and how you're thinking about this year. Maybe can you update us on your visibility as it relates to the defense market both in the US and any international traction you might have? Thank you. Adi Sfadia: Hi, Ryan. On the visibility to defense, generally when we are entering a year, we have between 50% to 60% of the revenues already in backlog from the guidance. So we have relatively good visibility. We have some large projects that we are working on that can secure the year during the first half of the year. We don't see any effect of the recent shutdown in the US administration. We see increased budget and a lot of traction both in the US, in Israel, and in Europe when a defense organization requires satellite connectivity. Ryan Koontz: That's great. Thanks. And maybe shifting gears to IFC a bit. Can you update us on your roadmap there for line fit? I know you've been looking forward to that and maybe an update on the competitive landscape in IFC. Adi Sfadia: Sure. So on the line fit, as we said in the past calls, we are progressing with Boeing line fit. We expect to pass certification during the first half of the year and start delivering in the third quarter. So it seems promising and on track. With Airbus, we are in initial phases. So it takes some time and probably will drag us to next year. But this is based on initial expectations. So we didn't expect revenues from Airbus line fit in 2026. The competitive landscape stayed, give or take, the same. There is a lot of traction. Both SES and Panasonic have decent awards. Not everything is published yet. So we do see their forecast and we do expect some large orders coming in the first half of the year, hopefully, this quarter. As I said in my script, most of the guidance is already covered with the backlog that we have, that we received mostly in 2025. So all the orders that we expect to get during 2026 probably will be recognized in revenues in 2027. Ryan Koontz: That's terrific. Thanks. Maybe just touching on Peru. I know that business can be a bit lumpy. I know that they have an election plan coming up. Can you maybe talk to the kind of cadence how you expect the Peru business to unfold this year? Adi Sfadia: Sure. So in Peru, during 2025, we got an award for upgrading four regional networks that we maintain. We are in discussion with the government to upgrade the remaining two networks. We believe that we'd be able to close it before the election in the second quarter. In parallel, there are a lot of internal discussions in Peru of very large RFPs for Internet connectivity, both terrestrial and satellite in Peru. So we expect to participate in those RFPs. A lot of traction in Peru. We don't believe that the election will cancel any of those RFPs. Probably, we'll see most of the RFPs during the first quarter and during the fourth quarter of the year. Ryan Koontz: Really helpful. Thanks. I'll get back in the queue. Adi Sfadia: Thanks. Bye. Operator: The next question is from Sergey Glinyanov of Freedom Broker. Please go ahead. Sergey Glinyanov: Good morning, gentlemen. So you provided pretty positive guidance for defense, and you mentioned a new area of expanded operations in earth observation solutions. But could you put some colors on these contracts and its margin profile? Could it be a significant driver for defense revenue this year, and do you expect defense order acceleration in Q1 compared to Q4? Thank you. Adi Sfadia: Hi, Sergey. So I'll start with a general comment on the defense. We saw in revenues relatively small growth year over year. It's mainly due to the previous shutdown of the US administration that caused some delays in orders. We didn't lose any deal, but because some of the revenues are recognized based on project progress, and if the order arrives late, we are unable to recognize revenue. So we'll see it in 2026. We did see very nice more than 35% year-over-year growth in orders getting in. As for the earth observation, it typically has the same margin profile that we see on those kinds of deals, which is give or take the average of Gilat, between, I would say, 30% to 40%. Sergey Glinyanov: Great. Thank you. That's all from me. Operator: The next question is from Louie DiPalma of William Blair. Please go ahead. Louie DiPalma: Great. Adi and Gil, good afternoon. Hi, Louie. How are you? Adi Sfadia: Excellent. I'm following the private placement, what areas of M&A are you targeting? Adi Sfadia: That's a very good question. So first of all, we are open to we are not limiting ourselves to a specific segment, but our main focus is on the defense. On one hand, we want to increase our market presence both in the US, but we are also focusing on Europe. There is a lot of business in Europe, a lot of budget, especially because of the Russian Ukraine war and conflict between the Trump administration and the European countries. So they want to control their own destiny and increasing their investment in defense. And we see also a lot of traction in secure satellite communication. So we are targeting companies over there. Our main focus is to bring businesses, not to buy technology, and we'll continue to look for companies with great potential. It's something that can be significant to the company's revenues. So it could be with revenues of $50 million and above or maybe $100 million and above. And it should be accretive as soon as possible. It's not that we are not we will not buy a company that needs a turnaround, and we know how to do that. We did that in DataPath. We bought a company with less than $40 million in revenues, and close to breakeven, and now it's almost double their revenues. We're also looking to expand our addressable market in adjacent markets, for example, radar solutions, electronic warfare, and things like that. But it will be something that we are considering. We are doing internal work to define exactly where we want to focus. But also, we might be opportunistic here. In addition, we invested in the past in a startup with unique technology, a company called Crossroads, and we'll continue to look for unique technologies, either a minority investment or taking control. But it's not something that is going to change the overall financials of the company. Louie DiPalma: Great. And secondly, did Stellar Blue attain the second milestone related to the $120 million in new backlog by December? Adi Sfadia: So, no, they didn't attain the airline milestone. They achieved around slightly above half of it. A very large order that we are expecting to get slipped into 2026. We know that it's being processed. We expect to get it, if not by the end of this quarter, so early next quarter. It's not affecting our revenues for 2026 because revenues for 2026 are already in the backlog. There is a nine to twelve months lead time on the main components of the terminal. So we are pretty close for 2026. We can affect it here and there, but not materially. The order that we are expecting should be delivered mainly in 2027. And since we need to deliver it based on customer needs, if it will arrive today or within two months, it's not really a big issue from our perspective. I would like to emphasize that from our perspective, the risk of delivery and the risk of new business is mitigated. We see the very good acceptance of the antennas in the market, the very good quality, the availability of more than 95%. More than 420 aircraft are connected and more than 500 delivered in 2025. So we know for a fact that the risk that we wanted to mitigate are mitigated. We do expect to see future growth. Louie DiPalma: And what was Stellar Blue's revenue in 2025, and what is the general projection for growth in 2026? Adi Sfadia: So revenues for 2025 were about $127 million within the range that we gave between $120 million to $150 million. Today, Stellar Blue is, in 2026, closely integrated with Gilat's business. It's hard to break the P&L. We do expect from a revenue perspective to see a double-digit growth in unit deliveries. Louie DiPalma: And one final one. Did you previously indicate that you made progress with Airbus for the inclusion of Sidewinder into its line fit program? Adi Sfadia: So we do have an agreement together with SES to bring the Sidewinder to be line fit with Airbus. SES will be able to install the terminal within Airbus premises. It's not yet part of the official Airbus plan of the HBC plus. Louie DiPalma: Great. Now that is still seems fairly positive. Thanks. Adi Sfadia: I agree. Thank you, Louie. See you soon. Operator: The next question is from Chris Quilty of Quilty Space. Please go ahead. Chris Quilty: I just want to a little bit on Stellar Blue. I think the other the next set of milestones, say, for targeting those with the large strategic contracts. I think those are separate from the large order just mentioned. Which is more of a commercial customer. Can you give us an update on how they're progressing on some of those strategic orders? Adi Sfadia: Chris, you're a bit disconnected. Can you repeat the question, please? Chris Quilty: The question was whether you've made any progress with Stellar Blue on some of the strategic opportunities that they're pursuing. Adi Sfadia: Okay. So you are referring to the third earn-out. We are making some progress with one company that we cannot name yet. It's progressing well. I don't know if we'll be able to close everything by the end of the milestone, which is by June, but it seems promising. We are progressing. I want to remind you that it's not just signing the agreement. It has some technical conditions as well. It needs to come with a minimum order commitment of at least $35 million with a gross profit, which is significant, almost double the gross profit that the original units booked had. And come with a relatively significant down payment. The pause in the discussion with the customer seems like applying to those conditions, but it's still in early stages. I cannot comment if it will be closed or not. Chris Quilty: Understand. And would those products require significant changes in manufacturing or design? And where do you currently stand in the production rate? Adi Sfadia: So those future products might require significant design. A lot of our product and a lot of our design changes are approved relatively quickly because Stellar Blue's expertise is with those certifications, working based on qualification by similarity. But in some of the cases, we are offering a different variation of the terminal with a cheaper design. It really depends on the customer. In terms of production, we said at the beginning of the year that we expect to reach 60 to 70 units per month. So we reached this run rate. During the fourth quarter, we delivered 190 full terminals, including on top of it, we delivered some spare parts. We can increase this production rate with relatively small capital investment. But right now, this production rate is give or take in line with customer expectations for delivery. During the year, we delivered more than 500 units. In Q4, it was a record quarter in terms of deliveries. Chris Quilty: Understand. And should we expect the deliveries to be relatively even across the year or there's a seasonal pattern to that? Adi Sfadia: No. In 2026, we expect it to be linear across the year. Of course, it can be small changes between the quarters, but it's expected to be linear. Chris Quilty: Understand. And staying on IFC, do you have an update on, let's say, ESR 2030 terminal? I think that was supposed to be charging early this year for delivery. Is that still on track? And maybe more broadly, what are your evolving thoughts on what is the sweet spot of the flat panel antenna market both in terms of your, you know, fan or, you know, single beam, dual beam, where are you taking in the new product direction? Adi Sfadia: So in terms of the ESR 2030, we passed qualifications and we expect to start delivering production units probably in the second half of the year. It really depends when Gogo is ready to accept them. Know that Gogo is promoting the terminal and already have some small awards that they want to install those antennas. So I think it's on track for the year. As for the future roadmap, you know, the antenna currently doesn't support simultaneously dual beams. The plan is that the next generation of the product will support dual beam. But usually, it comes with customer demand. So it's really what matters to their customer. Fast time to market or he has the time to wait for a new version of the antenna with dual beam capabilities. Chris Quilty: Right. And I assume based on the earlier or the delay in the large order, the backlog probably dipped below $1,000. Where do you expect it to finish out, say, maybe by midyear and then from here? Adi Sfadia: It's a good question. We do not disclose the number of units that we have in backlog. I can say that at year-end, we are give or take at the same level that we are at the beginning of the year, maybe slightly below. We do expect to finish the year with a backlog that will cover us for at least 2027 and beyond. Chris Quilty: Great. Thanks for the update. Adi Sfadia: Thank you, Chris. Operator: The next question is from Gunther Karger of Discovery Group. Please go ahead. Gunther Karger: Yes. Thank you. Good morning. Excellent year, excellent quarter. Congratulations. My question is, we haven't heard in a long time about high-speed ground transport, like high-speed rail. There was a project on the way, I think, in China on that. Any updates on that in that area? Adi Sfadia: Indeed, I remember the project in China, I think it was ten years ago when I just arrived at Gilat, was promising back then. But since then, we didn't see a lot of traction. We do have here and there some terminals that we are selling for fast trains around the world, but it's in limited numbers. And right now, it's not our main focus. Thank you. Gunther Karger: Thank you, Gunther. Operator: If there are any additional questions, please press 1 or use the raise hand button. Please stand by when we pull for more questions. There are no further questions at this time. Mr. Benyamini, would you like to make a concluding statement? Gil Benyamini: Thank you. I want to thank you all for joining us on this call and for your time and attention. We hope to see you soon or speak with you in our next call. Thank you very much, and have a great day. Operator: Thank you. This concludes the Gilat Satellite Networks Ltd. 2025Q4 results conference call. Thank you for your participation. You may go ahead and disconnect.
Operator: Good morning, ladies and gentlemen. Welcome to Masco Corporation's Fourth Quarter and Full Year 2025 Conference Call. My name is Danny, and I will be your operator for today's call. As a reminder, today's conference call is being recorded for replay purposes. To withdraw your question, please press star then the number 2. I will now turn the call over to Robin Zondervan, Vice President, Investor Relations and FP&A. You may begin. Robin Zondervan: Thank you, operator, and good morning, everyone. Welcome to Masco Corporation's 2025 fourth quarter and full year conference call. With me today are Jonathon Nudi, President and CEO of Masco, and Rick Westenberg, Masco's Vice President and Chief Financial Officer. Our fourth quarter earnings release and the presentation slides are available on our website under Investor Relations. Following our remarks, we will open the call for analyst questions. Please limit yourself to one question with one follow-up. If we cannot take your question now, please call me directly at (313) 792-5500. Our statements today will include our views about our future performance, which constitute forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We have described these risks and uncertainties in our Risk Factors and other disclosures in our Form 10-Ks we filed with the Securities and Exchange Commission. Our statements will also include non-GAAP financial metrics. Our references to operating profit and earnings per share will be as adjusted unless otherwise noted. We reconcile these adjusted metrics to GAAP in our earnings release and presentation slides, which are available on our website under Investor Relations. With that, I will now turn the call over to Jonathon Nudi. Jonathon Nudi: Thank you, Robin. Good morning, everyone, and thank you for joining us. Please turn to Slide five. I want to start today by highlighting some of our key accomplishments from 2025, which we achieved while navigating a dynamic and challenging environment. Following that, I will turn to our financial results for 2025 and share our expectations for 2026. Starting with our plumbing products segment, we continue to demonstrate our market leadership even as we work to mitigate the impacts of higher tariff costs. Delta Faucet was awarded the Home Depot Kitchen and Bath Partner of the Year. This award recognizes the strength of our brand, customer service, and innovation. Ulta also continued to achieve notable market share gains in the e-commerce channel, driven by our industry-leading capabilities that deliver solutions for consumers. At Hansgrohe, we continue to be a global leader, gaining additional market share through premium products with industry-leading designs. Hansgrohe also continues to demonstrate leadership and commitment to sustainability, having recently received multiple awards for corporate strategy production initiatives at the German Sustainability Projects 2025 award ceremony. At Watkins Wellness, our integration of Sana 360 into our existing dealer network has generated double-digit sales growth in a market with ongoing opportunities for increased household penetration. We also introduced our cold plunge products, further expanding our presence in the consumer wellness market. In our decorative architectural segment, the strength of our brands continues to resonate with our customers. Behr was once again rated number one in interior paint, number one in exterior paint, and number one in exterior stain in a third-party study, demonstrating the exceptional quality and strength of our leading Behr brand. Our continued strategic alignment and partnership with The Home Depot led to our recognition as Supplier of the Year for the paint department in the United States and Canada, and Interconnected Partner of the Year in Mexico. Our annual pro sales are approximately $950 million, and our share of the pro paint market has grown over 200 basis points since 2019. We have continued building capabilities to enhance the buying experience for our pro customers, including expanded delivery options, loyalty programs, and a growing sales force, allowing us to further capitalize on the sizable growth opportunity in the pro paint market. I want to thank all of our employees for their resilience, commitment, and leadership, which made these accomplishments possible. Now onto our results. Please turn to slide six. Beginning with our fourth quarter, results overall were largely in line with our expectations as we continue to navigate a dynamic geopolitical and macroeconomic environment. Net sales decreased 2% or 3% in local currency, primarily due to lower volumes. Operating profit was $259 million, and operating profit margin was 14.4%. Earnings per share for the quarter was $0.82 per share. Turning to our segments, plumbing product sales increased 3% in local currency. North American sales increased 4%, driven by favorable pricing. Delta Faucet again delivered strong performance, particularly in the trade and e-commerce channels. International plumbing sales increased 1% in local currency, driven by Germany, partially offset by the weaker market in China. Operating profit for the segment was $204 million. Operating margin was 16.3% and included the impact of higher tariff commodity costs. Now turning to our Decorative Architectural segment. Sales decreased 15% in the quarter. Overall paint sales decreased double digits due to lower volume, including the impact of the favorable inventory timing in 2024 and the impact related to the customer transition of our primer and applicator business in Q4 2025. Excluding these impacts, overall paint sales decreased mid-single digits. DIY paint sales decreased high single digits, and pro paint sales grew low single digits. Operating profit for the segment was $76 million, and operating margin was 13.9%. Please turn to Slide seven as we review our full year performance. Despite a dynamic geopolitical and macroeconomic environment for most of the year, we delivered solid profitability and remained disciplined on capital allocation. Net sales decreased 3% or 2% excluding the impacts of currency and the divestiture of Kichler. Operating profit was $1.3 billion, and operating profit margin was 16.8%. Earnings per share for the year was $3.96 per share. We delivered a return on invested capital of 41%. Our strong cash flow allowed us to return $832 million to shareholders through dividends and share repurchases. Near the end of 2025, we began taking decisive actions to further position our business for long-term value creation. We established an executive committee with dual corporate and business unit representation to fully leverage our enterprise strengths. This will enable us to continue to deliver strong execution and accelerate growth moving forward. We also began implementing various restructuring actions to a greater extent than in the past, to further streamline our business, reduce headcount, and optimize operations. We incurred approximately $18 million in charges related to these actions in 2025, and we expect to incur approximately $50 million in additional charges in 2026. We anticipate the savings generated from these actions will fund additional growth initiatives and contribute to future margin expansion. As we move into 2026, we are announcing the integration of Liberty Hardware and the Delta Faucet Company. With over half of Liberty's sales branded Delta and a complementary product portfolio, this realignment enhances our consumer-driven strategy to leverage our brands, capabilities, and scale across our organization. As a result of this integration, Liberty Hardware, which was previously reported in the decorative architectural product segment, will be reported within our plumbing products segment moving forward. Turning to our expectations for 2026. We believe sales across the global repair and remodel markets will be roughly flat. This includes an expectation that both our North American and international markets in aggregate will also be roughly flat. Our expectation for our own sales in 2026 is to be flat to up low single digits. This estimate includes our expectation we will continue to outperform the market in 2026. We expect margin expansion in 2026 driven by continued mitigation of higher tariff and commodity costs, cost savings resulting from our restructuring actions, and ongoing operational efficiencies across our business. We expect plumbing margins inclusive of the Liberty Hardware business integration to be approximately 18% and decorative margins to be approximately 19%, resulting in a Masco operating margin of approximately 17%. Turning to capital allocation, our strategy remains consistent. First, we invest in our business to accelerate growth and market share gains. Second, maintain a strong investment-grade balance sheet. Third, target a 30% dividend payout ratio. And fourth, deploy our remaining available free cash flow, which we expect to be approximately $600 million in 2026, for share repurchases or value-accretive acquisitions. I am pleased to share that our Board approved a 3% increase to our dividend for 2026, raising our annual dividend to $1.28 per share and marking our thirteenth consecutive annual dividend increase. Additionally, our board authorized a new $2 billion share repurchase program, underscoring Masco's resilient business model, strong financial position, and the board's confidence in our future performance. Our M&A strategy remains consistent. We continue to selectively pursue opportunities with strong strategic fit and attractive returns, focusing on bolt-on acquisitions with our plumbing, wellness, and coatings businesses. Based on our expected operating performance and capital deployment strategy, we anticipate earnings per share for 2026 to be in the range of $4.10 to $4.30 per share. While the housing market remains pressured in the near term, we are confident that the fundamentals supporting mid to long-term home improvement demand are quite strong. US homeowner equity levels are at a record high, up more than 80% since 2019, providing greater capacity for home renovation projects. Homes continue to age, with more than 55% of US homes now over 40 years old, an age that typically requires elevated repair and remodel spending. Additionally, a large cohort of homes built in the early 2000s is now entering the prime remodeling age of 20 to 40 years. Significant pent-up demand for larger renovation projects continues to build. As consumer sentiment improves, interest rates decline, and existing home turnover increases, we expect this pent-up demand to become a tailwind for our business. With these strong fundamentals and the actions we are taking to optimize the business, we believe we are well-positioned to deliver above-market top and bottom-line growth. We plan to achieve this through our consumer-driven strategy that leverages our industry-leading brands, expanded commercial capabilities, and enhanced operational excellence. We look forward to discussing this strategy and our long-term goals in greater detail at our upcoming Investor Day on Wednesday, May 13, in New York City. Please save the date; we look forward to seeing you there. I will turn the call over to Rick to go over our fourth quarter and full year results and 2026 outlook in more detail. Rick Westenberg: Thank you, Jonathon, and good morning, everyone. As Robin mentioned, my comments today will focus on adjusted performance, excluding the impact of rationalization charges and other one-time items. Turning to slide nine. Sales in the fourth quarter decreased 2%, or 3% excluding the favorable impact of currency. In local currency, North American sales decreased 5% and international sales increased 1%. Gross margin was 33.7% in the quarter. SG&A in the quarter was 19.3%, and in dollars was in line with the prior year. Operating profit was $259 million in the quarter, and our margin was 14.4%. Operating profit was impacted by lower volume and higher tariff and commodity costs, partially offset by pricing actions and cost savings initiatives. Our EPS was $0.82 per share in the quarter. Turning to the full year 2025, sales decreased 3% over the prior year, or 2% excluding the impact of our divestiture and favorable currency. Our divestiture of Kichler in 2024 resulted in a decrease in sales of 2% year over year for the full year 2025, while currency represented a 1% increase in sales. In local currency, North American sales decreased 5%, or 2% excluding our divestiture, and international sales increased 1%. Gross margin was 35.5% and was impacted by higher tariff and commodity costs. SG&A as a percent of sales was in line with the prior year at 18.7%. Operating profit was approximately $1.3 billion, and operating margin was 16.8%. Lastly, our EPS for the full year was $3.96 per share. Turning to slide 10. Plumbing sales increased 5% in the fourth quarter, or 3% excluding the favorable impact of currency. This growth was largely driven by pricing, which increased sales by 5%, partially offset by lower volume. In local currency, North American plumbing sales increased 4% in the quarter. This performance was primarily driven by solid growth in our Delta Faucet and Watkins Wellness businesses. In local currency, international plumbing sales increased 1% in the quarter. Hansgrohe grew in many of its European markets, including its key market of Germany. This growth was partially offset by the ongoing challenging market dynamics in China. Segment operating profit in the fourth quarter increased 2% to $204 million, and operating margin was 16.3%. Operating profit was driven by cost savings initiatives and pricing actions, partially offset by higher tariff and commodity costs and lower volume. Turning to the full year 2025, plumbing sales increased 3%, or 2% excluding the favorable impact of currency. Favorable pricing contributed 3%, partially offset by lower volume, which decreased sales by 1%. In local currency, North American plumbing sales increased 3%, and international plumbing sales increased 1%. Full year operating profit was $904 million, and operating margin was 18.1%. Turning to slide 11. Decorative architectural sales decreased 15% in the fourth quarter. In the quarter, total paint sales decreased double digits due to lower volume. Volume was impacted by the favorable inventory timing in 2024 as well as the impact related to the customer transition of our primer and applicator business in Q4 2025. Excluding these impacts, overall paint sales decreased mid-single digits, with pro paint sales growing low single digits and DIY paint sales decreasing high single digits in line with our full year performance. Operating profit in the fourth quarter was $76 million, primarily impacted by lower volume and significantly higher tariff and glass antidumping duty costs at our Liberty Hardware business, partially offset by cost savings initiatives. We continue to take proactive actions to mitigate the impact of tariffs and duties and have announced the integration of the Liberty business into Delta Faucet Company. We believe this integration will provide a significant opportunity to further optimize the operations and improve the profitability of Liberty as we leverage the capabilities and scale of the combined business. Operating profit margin was 13.9% in the segment. Turning to the full year 2025, sales decreased 14%, driven by our Kichler divestiture and lower volume, which decreased sales by 6% and 8%, respectively. Excluding the impact of the prior year inventory timing benefit, pro paint sales were up low single digits, and DIY paint sales were down high single digits for the year. Full year operating profit was $457 million, and operating margin was 17.8%. Turning to slide 12. Our balance sheet remains strong, with gross debt to EBITDA at 2.1 times at year-end. We ended the year with $1.6 billion of liquidity, including cash and availability under our revolving credit facility. Working capital was 16.7% of sales at quarter-end. Working capital was impacted by tariff-related dynamics, including higher material costs and pricing, which resulted in increased working capital balances in 2025. We anticipate working capital as a percent of sales will be approximately 16.5% in 2026. Our free cash flow for the year was over $850 million, a bit stronger than anticipated, driven by disciplined cost and working capital management, achieving free cash flow conversion of nearly 100%. Given our strong cash performance, we were able to return $832 million to shareholders through dividends and share repurchases, including the repurchase of $217 million in stock in the fourth quarter and the repurchase of $571 million for the full year. Now let's turn to slide 13 and review our outlook for 2026. The guidance that is being provided today reflects the integration of Liberty Hardware into Delta Faucet Company. Therefore, Liberty's results will now be included in the plumbing product segment versus previously being included in the decorative architectural segment. For comparison purposes, we have recast our segments in 2025 by quarter to reflect this change. This information can be found in the appendix of our earnings deck on our website. Our guidance also includes the impact of currently enacted tariffs in effect in February, inclusive of the 10% reduction in China tariffs that went into effect after our third quarter earnings call. As a result of this tariff reduction, as well as proactive and ongoing changes to our sourcing footprint, we now estimate that the total annualized cost impact from tariffs to be approximately $200 million before mitigation, down from an annualized $270 million as of our third quarter earnings call. Of the $200 million annualized cost impact, approximately $80 million is related to the current 20% China tariffs, and the remaining approximately $120 million is driven by a combination of the various tariffs on countries other than China, the 50% tariffs on steel, aluminum, and copper, and the glass antidumping duties. We anticipate the full $200 million will impact 2026. This is up from the in-year impact in 2025 of approximately $150 million, largely due to the timing of tariffs as they were implemented throughout 2025. Our teams continue to actively work to further mitigate these costs and recover the cost and margin impact through a combination of levers. These include cost reductions, continued efforts to change our sourcing footprint, and pricing where necessary. We anticipate that these mitigation actions will offset the direct cost impact of the currently enacted tariffs in 2026. To provide an update on our China exposure, in 2026, we expect to import approximately $400 million from China that is subject to the reciprocal tariffs, down from our 2025 exposure of $450 million. Based on our continued efforts, we anticipate that our China exposure will be less than $300 million as we exit 2026. This represents a greater than 60% reduction from our peak exposure in 2018. From a segment perspective, with the shift of Liberty Hardware to the plumbing products segment, nearly all of our tariff exposure and impact reside in this segment. Now turning to our expected financial performance for 2026. For Masco overall, we expect 2026 sales to be flat to up low single digits, and operating margin to expand to approximately 17%, up from 16.8% in 2025. Our 2026 sales guide reflects an assumption that the global repair and remodel markets in aggregate will be roughly flat. As we think about the cadence for the year, excluding the impact of currency, we expect sales to be roughly flat to slightly up in both the first and second half of the year. We expect SG&A as a percent of sales to be in line with 2025 as we continue to invest in our business for future growth while also maintaining cost discipline. Also, as it relates to operating margins, given the timing of tariff impacts, which largely impacted our results in the second half of last year, we anticipate total Masco margin contraction in the first half of the year with expansion expected in the second half as we lap the tariff impact and as our mitigation actions continue to take hold. In our plumbing segment, we expect 2026 full-year sales to be up low single digits. We anticipate the full-year plumbing margin will be approximately 18%, up from a comparable 2025 margin of 17.6%. Margin expansion will primarily be driven by pricing discipline, operational efficiencies, and continued cost savings initiatives. In our decorative architectural segment, we expect 2026 sales to be roughly flat with the prior year. We expect our pro paint business will increase mid-single digits, and our DIY paint business will decrease mid-single digits. We anticipate the full-year decorative architectural margin to be approximately 19%, relatively in line with a comparable 2025 margin of 18.9%, with a continued focus on cost savings initiatives. With regards to capital allocation, we expect to reinvest approximately $190 million through capital expenditures, to pay a dividend of $1.28 per share, up 3% from our 2025 dividend, and to deploy approximately $600 million toward share repurchases or acquisitions in 2026. Finally, as Jonathon mentioned earlier, our 2026 EPS estimate is $4.10 to $4.30 per share. This assumes a 202 million average diluted share count for the year and a 24.5% effective tax rate, consistent with our 2025 effective tax rate. Additional financial assumptions for 2026 can be found on slide 16 of our earnings deck. With that, I would like to open up the call for questions. Operator? Operator: Thank you. We will now begin the question and answer session. In order to ensure that everyone has a chance to participate, we would like to request that you limit yourself to asking one question. To withdraw your question, please press star, then the number two. One moment, please, while we assemble the queue. Your first question comes from Matthew Bouley of Barclays. Please go ahead. Matthew Bouley: Maybe just one common question we are getting from investors now is around commodity inflation, and specifically copper. So maybe just a quick question there around how you are embedding that into your guidance for plumbing margin expansion in 2026 and maybe the sort of timing of that commodity impact? Thank you. Rick Westenberg: Sure, Matt. It's Rick. Good morning. So with regards to commodity inflation, as I am sure you have been seeing, particularly with copper, we saw that really tick up later part of last year and really the first part of this year. We are monitoring very closely. It's obviously a volatile dynamic. With regards to inflation, we saw in our plumbing segment mid-single-digit inflation in Q4, so we are seeing some of that pull through, and we are expecting mid-single-digit inflation in our guide for plumbing in the calendar 2026. So it's something that we have contemplated. Admittedly, it is volatile, and there is risk and upside depending on how things play out. As a reminder, with regards to how you think about commodities flowing through to our P&L, it's usually about a six-month lag in terms of when you see the commodity costs in the market before it hits our P&L. So that's why you are seeing it kind of later in Q4 in 2025 and in 2026. So that delay and so to the extent that there's movement one way or the other, you can envision that lag would stay true. Matthew Bouley: Okay. Perfect. Thank you for that, Rick. Matthew Bouley: Second one, pricing in plumbing. I think I heard you say 5% in the fourth quarter. And correct me if I'm wrong, but I think that would suggest price was probably above that in North America, assuming it was below that level in the international business. And so given that level of price, can you speak a little bit about what you are expecting to kind of flow through in 2026? Any kind of early reads on your initial January pricing actions in that segment and if you are expecting that to contribute additional price on top of what you've already got? And kind of how that would flow through the first half and second half. Thank you. Jonathon Nudi: Yeah. Hi, Matt. It's Jonathon. Maybe I'll start and then turn it over to Rick to get into the flow for 2026. You know, I would say really pleased with the way that our plumbing team has handled a lot of challenges in 2025, obviously, between tariffs and commodities. They were faced with a lot and really took action and really used to say a sophisticated tool to take precise pricing. And really across all of our channels. And the good news is we continue to grow share through that time period as we've taken smart pricing. We believe we are well-positioned in the market. And again, I'll let Rick talk a little bit about flow and how that will happen. But again, really pleased with the way that we are navigating this environment. Rick Westenberg: Yeah. Matt, with regards to your specific question, you heard correctly that pricing in plumbing was a 5% benefit in Q4. It's fair to assume that international wasn't as significant. I'll leave it at that. As it pertains to 2026, we've indicated that we would expect mid-single-digit pricing for plumbing in the calendar year. From a case perspective, we won't get into the details, but suffice it to say that we started to implement mitigation actions as Jonathon alluded to, really as tariffs started to take hold. Across cost, sourcing, and pricing really mid-year last year. So you can imagine as we lap that activity in 2026, you'll see some moderation with regards to year-over-year comparison. But for the full year, you can expect a mid-single-digit pricing benefit. Matthew Bouley: Okay. Thank you both. Good luck, guys. Operator: Your next question comes from Anthony Pettinari of Citi. Please go ahead. Anthony Pettinari: Good morning. Just pivoting from Plumbing to DA, I'm wondering if you could talk about assumptions for price cost in 2026. Any commodity cost trends that you call out and any pricing actions that you can talk about? Jonathon Nudi: Absolutely. This is Jonathon. As we look at DA, we are seeing some upward pressure on cost. As you likely know, we have a unique relationship with our large exclusive big box retailer and have a price cost mechanism in place. So not going to comment on prospective pricing or even our conversations with our retail partner, but given the cost that we are seeing, you know, these conversations are beginning. We'll come back at future quarters and let you know where we shake out in that space. Anthony Pettinari: Okay. And then in terms of DIY, I think you've guided down mid-single digits. Are there any kind of big picture thoughts you can share in terms of the volume pressure in that business and how much of it might just be a sort of a secular shift from DIY to pro, so maybe demand is not being destroyed, it's just being kind of shifted between the channels? I just kind of as you look back at the last, you know, three, four years, can you give us some context and how that informs your expectations for '26? Jonathon Nudi: Yeah, absolutely. So this is Jonathon. It's certainly been dynamic for sure. We do know that existing home sales correlate highly with DIY paint. It makes sense when you go to sell a home, you tend to paint it, and when you buy it, you tend to paint it again to put your own mark and style into the home. So as existing home sales were at three or four decades near lows, and then in 2025, it was challenging, and we saw that obviously in the previous years as well. As we look forward, we know that we have a strong DIY brand, one of the share leaders. We have amazing quality at great value. And we think we can actually tell our story better. It's to make sure that, you know, we get our continued growth share in the DIY market. The space that we are, you know, very excited about is the pro market. When you look at that segment, it's the biggest single segment Masco competes in. Over $10 billion. It's grown nicely, really over the short, medium, and long term. And we have a relatively small share. We have less than a 10 share. Really proud that we gained 200 basis points of share since 2019. But we are squarely focused on growing that at the depression rate. And the good news is The Home Depot, our retail partner, is very squarely focused on the pro as well. So working to take friction out of the experience from the pro, things like order online and pick up in store, which is available now, or online and have it delivered to the job site, which we can do now. The Home Depot is trialing some trade credit, which we think will make a real difference. And we've continued to increase the number of both outside and inside sales reps we have focused on the pro. So regardless of where the market goes, we like our ability to play both in DIY where we are very strong today, and that we think there's a tremendous amount of upside in pro. And we'll continue to invest in that space and, again, very aligned with our retail partner in that initiative. Anthony Pettinari: Okay. That's helpful. I'll turn it over. Jonathon Nudi: Thank you. Operator: Next question comes from Stephen Kim of Evercore ISI. Please go ahead. Stephen Kim: Yeah. Thanks a lot, guys. Appreciate all the color so far. I guess in your guide for fiscal 2026, can you give us a sense for what your expectations are for existing home sales and just anything else relevant coming out of the housing market specifically in your outlook? Rick Westenberg: Steven, good morning. We've got pretty modest expectations with regards to some of the macro drivers. From an overall R&R perspective, we're assuming both in terms of the U.S. market in which we play as well as international roughly flat. And that's contemplating volume down and pricing up, kind of offsetting one another. From an industry perspective, we, Masco, expect to outperform that and be flat slightly up or up low single digit. In terms of some of the other macro factors, existing home sales, new home builds, etcetera, pretty modest expectations, nothing significant. Differently from what we've seen in the last couple of years. Stephen Kim: And if you did see an inflection upwards in existing home sales beyond your expectations, would you be expecting that you would see that more on the pricing side? Or do you anticipate that there would be certain other sort of subcategories that would particularly benefit or see it first? Rick Westenberg: Yeah, Steven. That's a tricky one to answer. I think from a standpoint, I think pricing as we've taken price with regards to mitigating both tariff and commodity cost, that's largely in place. Obviously, we continue to monitor the market. I think from an overall variability standpoint, I would presume volume would be the biggest dynamic both in terms of upside opportunity and in terms of risk. I mean, we look at, you know, gave you the assumptions with regards to the overall R&R industry within that. Competing in the market. We look at plumbing as an opportunity for us, particularly in terms of how in Q4, for example, we gained sales in both across the e-commerce trade and retail channel. So we're seeing really good momentum in that regard, and we're continuing to drive our performance kind of relative to the market overall. Jonathon Nudi: Yeah. And, Steven, I might just add that, obviously, existing home sales are important. I've how important that is to our paint business. You know, beyond that, though, we, you know, 90% repair and remodel, and I think big picture believe that there's a lot of opportunity once the market frees up. You look at, I mentioned in the prepared remarks that home equity levels are at record highs, up 80% since 2019. Interest rates are heading in the right direction. Think the combination of some additional cuts to interest rates and then importantly, improve consumer confidence, we think that's going to be really the driver to turn the market. So whether that happens in 2026 or not, we'll see. But, again, we think that those are the key things that'll be needed for us to get back historical growth rates across our categories. Stephen Kim: Okay. Great. Thanks very much, guys. Operator: Your next question comes from Michael Rehaut of JPMorgan. Please go ahead. Michael Rehaut: Hi, good morning. Thanks for taking my questions. Wanted to hit on the restructuring actions contemplated for 2026. I assume part of that is with regards to moving Liberty over and integrating that. I just wanted to get a sense for, you know, what the dollar benefit you anticipate from those restructuring actions in 2026, and how much of that might be reinvested in the company because I heard you say, you know, fund growth initiatives versus, you know, just a fall to the bottom line, so to speak? Jonathon Nudi: Yeah. So maybe I'll start and work you out on as well. You know, obviously, markets that aren't growing historical rates, we want to take action to make sure that we have the cost structure that's needed for today and into the future. So the actions are broad, again, Liberty would obviously be a part of it, something that we pointed out. But we're really looking across our organization just to make sure we have the right footprint in terms of manufacturing base, make sure that we're leveraging our scale where it makes sense. And the idea is to take those dollars, drop some of the bottom line as we've guided. Again, we want to grow margins in 2026 and into the future. And importantly, we want to free up differential amount of dollars that we can reinvest back into creating capabilities. And we won't go into a lot of detail today, but at our May Investor Day, we'll really detail the capabilities that we're building to not only help us drive the bottom line, so things like leveraging scale with shared services and global purchasing but importantly, creating capabilities that will drive our top line even faster. So things like e-commerce and digital marketing, brand building, consumer insights. And then finally, really accelerate innovation. So, again, I'll let Rick touch a little bit on the dimensions of this year and into the future. But just know that this is an area that we'll continue to focus on. We're going to continue to drive hard from a cost standpoint just because we do want to keep growing our margins and keep investing in our capabilities as well. Rick Westenberg: Yeah, Mike, with regards to restructuring and timing, so as we indicated in our prepared remarks, we took a charge of about $18 million in Q4 2025, and we expect about $50 million of charges here in 2026. So we've embarked on restructuring actions, and we were highlighting this for a couple of reasons. One is because it's more significant than Masco has done in the recent past in terms of the extent of restructuring. All for the reasons that Jonathon mentioned in terms of the overall market dynamics, volume, etcetera. In terms of the broad-based nature, I would say in terms of benefits, those restructuring actions are going to take hold as we move through 2026. They're contemplated within our guidance, and we do have some margin expansion contemplated in our guidance for 2026. But the full benefit will be realized as we get into '27 and '28. And as Jonathon indicated, provide more visibility in terms of our margin expectations as we get into our discussion at Investor Day in May. Michael Rehaut: Okay. I appreciate that. I guess, secondly, just to follow-up on the earlier question around raw materials and where copper prices are today. You said obviously that you know, your 26 guides are confident or reflects you know, that you're aware of what's going on in the markets. I just you know, a little just for a little clarity sake, does that imply that you if copper prices today copper prices of today were to hold, that would be in effect a neutral impact on let's say, the second half of the year because there is a lag or would there need to be some additional adjustments taken to make sure that you can you know, achieve the guidance that you've laid out? Rick Westenberg: Yeah, Mike. Without giving you a specific figure in terms of what we've tagged our plan at, what I can say is we have contemplated elevated copper prices. We haven't contemplated copper prices at the levels that they've reached in the recent past, like about $6 per pound from a COMEX perspective. But that's something that we continue to monitor. We do have, as I mentioned earlier, to Matt's question, a bit of a delay with regards to when it impacts our P&L. So it does give us the opportunity to respond. Whether it's through further cost actions or pricing to mitigate those impacts. And so that's something that we continue to monitor, and we've demonstrated the ability to offset these types of headwinds in the past. And so may not be one for one from a timing perspective, and there might be both risk and upside relative to the copper assumptions. But we do monitor very closely, and we do take action accordingly. Jonathon Nudi: Yeah. I would just say, Mike, look, it's one of many risks and opportunities that we continue to look at. So I would say, we feel good about where the call is today. If it moves materially, we'll take action to make sure we mitigate it. Michael Rehaut: Right. Thank you so much. Operator: Your next call comes from Susan Maklari of Goldman Sachs. Please go ahead. Susan Maklari: Thank you. Good morning, everyone. Jonathon Nudi: Good morning. Susan Maklari: Building on your recent comments to Mike's questions, can you talk a bit about the executive committee that you formed there? Some of the initiatives that you're going to be really focused on as you think about driving that growth and anything specific that we should be focused on for 2026 as it relates to that? Jonathon Nudi: Sue, this is Jonathon. I'm happy to take that question. I'm excited about the new executive committee. And really, it was designed to do two things. One, allow us to get closer to the business as we all know the world's moving faster than ever before, including our consumers and customers. And we wanted to bring our four big BU leaders onto the senior team of the company for the first time we've done that at Masco. Businesses make up more than 80% of our total business. And we meet at least weekly. We talk about what's working, what's not, where there's challenges, and we're flowing resources to those challenges more quickly than we have in the past. And again, just being really in touch with the business is what we're shooting for. In addition to that, Behr is now reporting directly to me as, you know, they deal with our largest customer. I think that helps with decision making. It helps me be really in tune with what's happening on that important business as well as with our most important and largest customer as well. In addition to that, the goal is to leverage our scale better. Masco has a long history of driving a lot of success. We've done that in a very decentralized way. What I would say is I don't plan to centralize this company. That's not the goal at all. But the goal is to really leverage our scale where it makes sense. And to do that, we need to make sure that we do it in a smart way so as we build these strategies to leverage our scale, having the business unit leaders be a part of the strategy development. And then obviously the execution as we go to market and deploy these capabilities, things that I talked about like digital marketing and e-commerce and brand building and consumer insights and innovation, having them to be a part of the development, I think, is really important. So our goal is to keep doing what we've done historically from a margin standpoint, keep driving margins. But probably grow a bit more quickly on the top line and bring in this growth mindset bear is what we're trying to do as an executive committee. Susan Maklari: Yeah. Okay. That's great color. And then on the cash flow side of the business, you guided for working capital to come down a bit to 16.5% of sales this year. Can you talk about the path of getting there, further potential to that as conditions perhaps normalize? And then how should we be thinking about what that means for overall cash generation and the uses of that cash? Rick Westenberg: Sure, Sue. It's Rick. So with regards to working capital, you may recall, and I believe I mentioned this in my prepared remarks, as well, 2025 working capital was adversely impacted by the tariff dynamic. And what I mean by that is a couple of folds. One is this cost bled into our inventory as pricing bled into our receivables, that inflated our working capital ratios. Also, from a payment timing perspective, tariffs are due on shorter payment terms than our regular vendor payables, and so that shortened our payable days as well. And so, those impacts took hold in 2025 and were an adverse impact in terms of our working capital dynamic. In 2026, we expect more return to normalization. There'll be some residual implications, of course, for the tariffs. But 16.5% is more of where we've gone historically. And so that's more of a normalization, I would call it, with regards to our working capital. From an overall cash allocation perspective, capital allocation framework, as you know, has not changed. And we're consistently deploying capital as we've done in the past and that number one, first and foremost, investing in the business. And we guided to an expectation of approximately $190 million of capital expenditures in 2026. Second is an investment-grade credit rating, we have, you know, securely in place. Third is a relevant dividend. And as Jonathon and I both mentioned, we got support from the board to increase our dividend 3% to $1.28 per share for 2026. And then all available cash that we don't deploy to capital investments or to the dividend are available for share buybacks or M&A activity, and we indicated our expectation is that number would be about $600 million for 2026. Susan Maklari: Okay. Thanks for the color, good luck with the quarter. Rick Westenberg: Great. Thanks, Sue. Operator: Your next question comes from John Lovallo of UBS. Please go ahead. John Lovallo: Good morning, guys. Thanks for taking my questions as well here. The first one, just on Liberty Hardware, it looks like the operating margin was kind of mid to high single digits in 2025. And I'm sure that was impacted by tariffs. But that compares to sort of 16% to 17% in 2024. I guess the question is, what are your expectations for Liberty Hardware margin embedded in the Plumbing outlook? And can you remind us why this business is still considered core? Rick Westenberg: Sure, John. It's Rick. So we typically do not comment on individual business unit performance, but obviously with the shift of Liberty Hardware from our Decorative Architectural segment to our Plumbing segment, it creates a bit more visibility. And as you noted, our margins were adversely impacted in 2025. And that's really, I would say, primarily driven by a couple of things. The volumes were a bit challenged. But really even more than that from a profit margin perspective, we were hit by tariff in the glass antidumping duties. And just as a reminder, the glass antidumping duties impact our shower door sourcing, and that was at a rate of 323%. Needless to say, the team has been proactively working to mitigate and change our sourcing footprint to address that duty impact. And we're making good progress on that. And that will be something that we mitigate over the course of 2026. As it pertains to Liberty overall, Liberty is a core part of our business. As Jonathon noted in his comments, over half of the sales of Liberty are branded Delta. There's a great product complement portfolio complement that Liberty possesses in terms of kitchen and bath hardware and shower doors. That we're really excited will be even more successful with regard when we integrate it Delta in 2026. John Lovallo: Got it. And then on the paint sales side, I think you guys talked about paint being down 15%, but you called out a couple of sort of one-time items, if you will, the inventory timing and the customer transition of primer and applicator businesses. Just help sort of break out the impact of each of those two factors in that number? Rick Westenberg: Sure, John. So you're right. We identified a couple of items that provided a bit of impact in Q4. What I would say is not new news, the inventory channel build in Q4 2024 that we experienced and we had flagged as a favorable impact in Q4 2024, and an unfavorable comparison as we look at Q4 2025. That had about a mid-single-digit impact in terms of our volume and sales for the business on a year-over-year basis. And then with regards to the transition of the primer and applicator business from one of our customers, that had about a single-digit impact in terms of sales in the quarter. So we thought it was appropriate to adjust those out as it pertains to providing a more representative picture of our performance during the quarter. And our performance during the quarter, quite frankly, when you strip out some of those impacts, in line with what we saw through the course of the calendar year 2025, which was down high single digits in terms of DIY and up low single digits in terms of PRO. And we expect, as Jonathon has articulated, an improvement in that trend rate as we move into 2026 in terms of overall paint sales being roughly flat year over year. With DIY down mid-single digits and pro up mid-single digits. John Lovallo: Got it. Thank you, guys. Rick Westenberg: Sure, John. Operator: Your next question comes from Sam Reid of Wells Fargo. Please go ahead. Sam Reid: Thanks, everyone. Just wanted to circle back on the mid-single-digit plumbing pricing for 2026. If you could just disaggregate in your outlook between wholesale and retail channel pricing? We just love some perspective on how potentially those retail conversations are going. And also just how you might be managing price gaps that might be evolving between wholesale and retail employment. Jonathon Nudi: Sam, this is Jonathon. I'll take a track at this. So I would say in terms of pricing and plumbing, we feel good about where we are today, and the conversations we have with customers are being constructive, as you can imagine. Customers don't love pricing no matter the environment, so we always have to give good justification for it. We're working through that as we speak right now. We won't get into, you know, channel by channel. It's just not something that we really guide to. But I can tell you that we're putting some good discipline in place in terms of our strategic revenue management approach. And that means just having strategies by channel, making sure that we have a good idea of price elasticity and where we stand versus our competitors. And I think at the end of the day, what you really want to do is keep growing your business while you take price. And clearly, we're doing that. We're growing nicely. We're growing share in the category. Part of that is just being competitive, which we believe we are, and it's also about building brands and about innovating. So we feel good about where we are from a pricing standpoint for sure, but more importantly, a business standpoint, particularly our plumbing business in North America. Our Delta team, I think, did a fantastic job in 2025 navigating an incredible number of headwinds, and we really like where we stand today. Sam Reid: That helps. And maybe switching gears to paint. I believe in the prepared remarks, one of you mentioned job site delivery as being a lever for the paint business. We'd just love to understand how widespread job site delivery is today. Perhaps the runway and then any color on who's paying for some of the outside trade representatives. Is that being split with Home Depot, or are you bearing those costs on the paint business? Thanks. Jonathon Nudi: Yeah. Absolutely. So in terms of order online and deliver to the job site, that's something that's expanding. We started in our big markets where there's density of stores because we, in many cases, set up micro distribution sites that help with that distribution. So we think that there's plenty of runway left there. I won't give you a percentage, but again, I think it's early to mid-innings on that ability to take friction out of the system for pros. So more to come there. And the second part of the question was? Sam Reid: Just on the economics of your representatives. Jonathon Nudi: Yeah. I would say, again, without getting into a whole lot of detail, I would say it's a true partnership, one that goes back forty-three years with The Home Depot. And, in terms of how we get after this, some of it's joint. Some of it's, you know, we invest. I would say it really depends on the initiative. But, you know, we like this business a lot. We're not talking about, you know, certainly we're talking about 2026 and what we have to do to bend the curve. Importantly, we're talking much longer in terms of the horizon and what kind of investments we need to make ourselves, what kind of investments we're going to make jointly to really grow this business into the future. And I've been incredibly impressed with the partnership that's developed over, obviously, a long period. And importantly, just the candor back and forth in terms of what's working, what's not. And I have a lot of confidence that we're going to get to a better place on paint starting in 2026 and then really accelerate from there. And, you know, the last thing I would mention is we made, you know, some leadership changes at Behr over the course of the last few months as well. I'm really pleased with the focus and the attention of what's happening at that BU at this point. So I'll leave it at that. Sam Reid: Thanks, guys. Operator: Your next question comes from Trevor Allinson of Wolfe Research. Please go ahead. Trevor Allinson: Another question on DeckArc here. Margins came in a little weaker than what you were expecting in the quarter. Was that primarily volume-related or what drove the weaker margins? And then just given the lower starting point as we exit 2025, how should we think about the cadence of DeckArc margins throughout the year in 2026? Rick Westenberg: Yeah, Trevor. It's Rick. So in terms of the operating profit, margin implications in Q4, it was impacted by really a couple of factors. One is volume. As we articulated, there were a couple of impacts that we highlighted in Q4. Obviously, the Q4 2024 higher inventory in our channel and then the customer transition in Q4 2025 and then just the overall market dynamics. So volume, for a number of reasons, was impacted. And then in 2025, just as a reminder, Liberty Hardware is still part of that segment. And that was adversely impacted as we talked about by significant tariff in the 323% glass antidumping duties. And so that weighed heavily with regards to operating profit margins. Now we've been taking price and we've been doing mitigating actions. But those take time to take hold. And so there's an implication there in the near term as it pertains to the operating profit margin. As we roll into 2026, obviously you have to take into account the fact that we are shifting Liberty from our decorative architectural segment to our plumbing segment. We provided a breakdown from a quarterly cadence for 2025 on a recast basis in the appendix of our earnings deck. So I'd refer you to that, and we can certainly address questions as a follow-up. But I would say that would help, I think, provide visibility in terms of our cadence for our recast segment for decorative architectural, at least in '25. And outside of the impacts that we just highlighted for Q4 in particular, I would say there's nothing that I would note at this point for 2026. Trevor Allinson: Okay. That makes sense. Thank you for that. And then you talked about your expectations overall for the market in 2026. You talked about how you think Watkins performs relative to your overall plumbing portfolio this year? And then can you remind us roughly the size of that business as you exit 2025? Thanks. Jonathon Nudi: Yeah. I'll take a track of that. So we typically don't break out BUs within a segment. So what I would say is, you know, we really like the space that Watkins plays, wellness very much on trend, obviously, from a consumer standpoint. You look at the categories of play, spas and hot tubs only have five or six minutes of five or 6% penetration in North America. We're the share leader. We have two of the major premium brands in the space, Caldera and Hot Springs. And then saunas are kind of a phenomenon right now. It's only 1% household penetration. If you look at pop culture at all, it's amazing how much people are talking about saunas and the benefits that come with them. So, look, it's been a bit of a mixed market over the last few years. They are bigger ticket purchases. We're exiting the year with momentum from 2025. We feel good about our opportunities to grow and at least align with the plumbing segment in 2026 and probably grow even faster as we look forward, just given how much upside there is and how much on trend our products are. Trevor Allinson: Thank you for all the color. Good luck moving forward. Jonathon Nudi: Thank you. Thanks, Trevor. Operator: Next question is from Mike Dahl of RBC Capital Markets. Please go ahead. Mike Dahl: Good morning. Thanks for taking my questions. First one, just to drill down into the Plumbing guide one more time. I think if you're up low single digits with mid-single-digit price, so you're implying volumes down low singles. I think you ended up the year with volumes kind of closer to flat in plumbing. So can you just kind of dive into that a little bit more in terms of changes in your volume expectations versus what you've seen in recent trends in plumbing? Rick Westenberg: Sure, Mike. It's Rick. In your dissection of our 2026 guide is accurate, so we are guiding in terms of our plumbing volumes to be down a single digits that are partially offsetting the mid-single-digit pricing. We expect overall plumbing sales to be up low single digits in 2026. As we look back on 2025 in terms of performance, we saw some of that pricing take hold in the latter part of the year. But from a volume, we were down depending on the period 1% to 2% from an overall plumbing volume standpoint. So effectively, we're seeing more of a continuation from a volume perspective in that same ZIP code. Obviously, we're investing in many areas to, as Jonathon articulated, to grow the business. And so we are cautiously optimistic that we can improve upon that, particularly as we move going forward. And really set ourselves up to capitalize on our growth initiative and to capitalize when the industry does return to growth both from a volume and price perspective. Mike Dahl: Okay. Got it. That's helpful, Rick. And then I guess, somewhat similar, but shifting to DeckArc, you know, volumes were really down all year. They've been down for a couple of years. And even adjusting for the one-timers. So in terms of just the level of confidence or conviction getting to flat for this year, when it doesn't sound like you're assuming anything heroic from existing home sales? Just give us a little more insight into what you see in the recent trends or the conversations you've had that give you that confidence that we'll improve back to flat? Jonathon Nudi: Yeah. This is Jonathon, Mike. And I think 2025 had a lot of challenging comps, you know, with the inventory build at the end of 2024, the exclusivity on primer and applicators. So the comps certainly become more favorable, so that's one thing that's real. I would say in addition to that, I think focusing on what we can control and from our side, we can focus on building our brand and really communicating the message that we've got the best quality and the best value in the category. I think particularly in this environment, the value messaging is something that can be compelling. So we're going to step that up. I can also tell you that we are very aligned with Home Depot in terms of our strategies, and really making sure that we get every bit of growth we can out of 2026. So as we talked, we don't think the market's going to necessarily spring back to historical growth levels in 2026, but we feel good that we're going to execute at a high level and certainly see some better trends just because the comps are a bit easier for us in 2026 as well. Mike Dahl: Got it. Thanks, Jonathon. Operator: Your last question today comes from Phil Ng of Jefferies. Please go ahead. Phil Ng: Hey, guys. Thanks for squeezing me in. Jonathon, I think you mentioned on your pro paint business, with your partnership with The Home Depot, perhaps you're doing a trial on trade credit. More color on that? Is that going to be pretty broad-based and we could see an uplift this year, or is that more of a 2027 opportunity? With that partner growing in that pro side of things more broadly, do you see that as an opportunity this year? Jonathon Nudi: Yeah. I guess what I would say is we do believe that trade credit is an important unlock with the pro customer. And at the same time, I would say this initiative is really being driven by The Home Depot, and I don't want to speak for them. So I know they're, we'll be talking more about this. They have talked about trade credit in the past, and I think they believe it's a big unlock as well. So I'll let them comment on just how widespread this is, but I know that for a fact that they believe it's meaningful and something that they're very committed to growing over time. Phil Ng: Gotcha. And then you commented about the momentum you saw in plumbing in '25 with share gains. I think it was on the e-commerce side in retail. Anything to flag when we look at 2026? Any new placement in higher dose channels or the wholesale channel as well on the plumbing side? Jonathon Nudi: Yeah. So I would say, you know, we obviously have good visibility into particularly our retail sets and our plans for the year. And we feel like we're going to have a really nice year in North America at retail. We've had really incredible momentum in e-commerce over a longer arc of time, particularly led by our Delta business, you know, growing nicely and above certainly our overall average, and we feel good about the plans we have in place there as well. And at the end of the day, our wholesale channel remains very, very important for us. We've got deep relationships that go back many years. So, you know, as we've talked about this new executive committee getting closer to the business, I can tell you we review all of these key indicators on a weekly basis. Feel really good about the plans we have in place from a plumbing standpoint. So I feel very good that we're going to have another nice year from a share standpoint in North America. And Hansgrohe, I mean, we had nice strength as well in some challenged markets, particularly in China, and I believe we have plans in place to turn that. Last thing I would hit on North America, the area that's really growing the fastest is the upper premium and luxury segment of the category. And we have great brands with Brizo and Newport Brass and Axor. And those are our fastest-growing brands, whether it's in The United States or outside The US. They tend to be our highest margin brands, and we really like that space in The US alone, it's over $1 billion in terms of a segment. So we like the momentum on our performing business both in North America and around the world. Phil Ng: Okay. Thank you. Appreciate the color. Operator: Thank you. At this time, we will now turn the call back over to Robin Zondervan. Please continue. Robin Zondervan: We'd like to thank all of you for joining us on the call this morning and for your interest in Masco. Operator: That concludes today's call. Have a wonderful day. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Please stand by. Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet Fourth Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded today, February 10, 2026. Following today's presentation, there will be a question and answer session. At this time, all participants are in a listen-only mode. If you have a question, please press the star followed by the one on your push-button phone. I would now like to turn the conference over to David DeMartino, Senior Vice President, Investor Relations. Please go ahead. David DeMartino: Thank you, operator, and good morning, everyone. Welcome to Zimmer Biomet's Fourth Quarter 2025 Earnings Conference Call. Joining me on today's call are Ivan Tornos, our Chairman, President and CEO, and Suketu Upadhyay, our CFO and EVP, Finance, Operations and Supply Chain. Ivan Tornos: Before we get started, I'd like to remind you our comments during this call will include forward-looking statements. Actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties. For a detailed discussion of all these risks and uncertainties, in addition to the inherent limitations of such forward-looking statements, please refer to our SEC filings. Please note, we assume no obligation to update these forward-looking statements even if actual results or future expectations change materially. Additionally, the discussions on this call will include certain non-GAAP financial measures, some of which are forward-looking non-GAAP financial measures. Reconciliation on these measures to the most directly comparable GAAP financial measures and an explanation of our basis for calculating these measures is included within our fourth quarter earnings release, which can be found on our website zimmerbiomet.com. With that, I'll turn the call over to Ivan. Ivan Tornos: Good morning, everyone, and thank you for joining today's call. I would like to start the way that I always do, by sharing my gratitude to our Zimmer Biomet team members around the world who move our business and mission forward each and every day. Thank you for your tireless work. Thank you for your dedication to solving the most pressing challenges in health care. And thank you for your relentless commitment to serving our customers and their patients. Today, Zimmer Biomet is a totally different company than it was just a few short years ago, and this is no doubt due to your efforts. During my prepared remarks this morning, I'll cover four key areas. I'll start by summarizing our fourth quarter results and the results for the fiscal year 2025. Second, I'll provide an update on the plan which we are executing upon to evolve our U.S. Commercial organization. Thirdly, I'll introduce our 2026 guidance. Lastly, I'll briefly cover the progress that we have made across our key strategic priorities, those being people and culture, operational excellence, and thirdly, innovation and diversification. Starting with the year and the fourth quarter, I'm proud of how the team ended the year 2025, delivering on our commitments on sales growth, EPS, and free cash flow while navigating quite a complex challenge in the year. Tariff headwinds, and integrating three acquisitions within one year. From a constant currency organic revenue standpoint, we ended 2025 right at the middle of our initial yearly guidance, marking the fifth consecutive year for Zimmer Biomet growing mid-single digit or above. Looking at the fourth quarter results, we grew sales on an organic constant currency basis by 5.4% against a mid-single digit growth comparable with our critical U.S. Business increasing 5.7% and international growing 5%. Healthy end markets, new product momentum, the ongoing evolution of our U.S. Sales channel, and the recent leadership additions continue to drive an acceleration in our critical U.S. Business. U.S. Knee growth of 6% in the quarter was driven by increased penetration of Persona OsteoTide orthogoxalamus knee, which ended the year roughly around 35% penetration. Our Oxford partial cementless knee continues to deliver above expectations with adoption rates post-training continued to be very high with great conversions from competitive accounts. Notably, our DTP, Direct to Patient Awareness Campaign, in partnership with Arnold Schwarzenegger, drove accelerated momentum in the second half of the year with a personalized knee campaign yielding very meaningful results. Turning to our huge franchise, Z1 or triple taper stem penetration fueled US hip growth of nearly 8% in the quarter, with the implant C1 now representing over 35% of our US hip stems and gaining meaningful competitive conversions. Next, our robotics and navigation strategy of offering a comprehensive suite of customer-centric technology solutions continues to pay strong dividends. US technology and data, bone cement and surgical cells increased over 10% in the quarter, driven by the strongest robotic capital sales quarter in over two years. Finally, in SCT, or USCMFT, cranio maxillofacial thoracic business, continues to perform strongly growing mid-teens in the quarter led by a continuous shift in external fixation from wires to plating. Upper extremities had another great quarter, of high single-digit growth in The U.S, where our identity shoulder and OsteoFit Stemless Shoulder continue to convert competitive accounts. Looking now at 2026, we're accelerating the transition to a dedicated and specialized US sales channel. In order to drive more durable and consistent growth. By 2027, we expect the vast majority of the conversion to dedicated CVH Zimmer Biomet employees, to be complete and also expect a substantial increase in the number of reps specialized in the higher growth areas, such as SCT, robotics, and in our ASC channel. Ambulatory surgical center channel. We have already addressed one-third of these organizational changes, and have best-in-class plans and project management capabilities with third-party help to ensure a smooth transition for the last two-thirds of this evolution. With a robust innovation cycle in place, we feel it is the opportune time to move faster and we will. With that context, we now expect full-year organic constant currency revenue growth for 2026 in the low single-digit range or 1% to 3% growth, with an adjusted EPS earnings per share of $8.30 to $8.45. Which includes the contribution from Paragon 28 beginning April 21, the one-year anniversary of the deal closing. Suki will provide further details during his remarks. The evolution of the US Salesforce represents the final core initiative in a transformation of our organization, and while it might create some short-term disruption across pockets, it is by far the most crucial step in order to convert Zimmer Biomet into a durable mid-single-digit plus growth company for the long term. Turning now to our three key strategic priorities, Zimmer Biomet, starting with number one, people and culture, we remain committed to having the right people in the right roles to maintain our leading position in the key areas where we compete. Having a dedicated and specialized US sales channel, we will now enhance our ability to consistently with no surprises, execute our strategy. This will drive increased productivity while enabling us to be more competitive in high growth segments, as mentioned before, such as robotics, ASCs, and the growth drivers within SCD, we have tremendous opportunity ahead we are still underpenetrated. Secondly, on the second priority of operational excellence, we believe our disciplined cost management and robust capital allocation strategy will enable EPS growth while allowing us to invest in the business for the long term. Further, given our operating rigor, we expect to continue to grow free cash flow in the upper single-digit to double-digit range in 2026 marking the fourth consecutive year delivering meaningful free cash flow growth. Against that backdrop, we plan to prioritize meaningful return of capital to shareholders over M&A. Lastly, on our third priority of innovation and diversification, we're making significant advancements. Over the past two years, we have closed all core portfolio gaps, with the introduction of the magnificent seven platform, we now have the potential to change the standard of care with solutions such as the Oxford Partial Cementless Knee, iodine core devices recently launched in Japan, or second largest market globally, Rosa Solder, and the MBOS semi and fully autonomous AI-driven orthopedic robotic system that we acquired via the Monogram acquisition. In addition to this, we continue to invest internally and partner externally to strengthen our pipeline of new product launches, which is today 3x what it was just a few short years ago. Given the strength of our innovation cycle, we feel once again that this is the right time to accelerate the evolution of our U.S. Channel. So we can fully capitalize on a dedicated and specialized sales force. I tell you, having traveled to all key sales meetings across The US, the month of January, the excitement behind our innovation story is very high, and so is the engagement. It is now up to us to execute on the plans via this transformation. In conclusion, we are very proud of the progress in our organization, we are far from being satisfied with where we are at today. In 2026, to close our core turnaround efforts we are going to be laser-focused on The US go-to-market commercial transformation while we continue to showcase the strength of our robust innovation cycle across the globe. As we then enter 2027, we'll be ready to transform the musculoskeletal space with the launch of ENBOS, and other disruptive technology platforms, while responsibly accelerating our diversification strategy getting access to a higher growth market environment. And with this behind, in 2028 and beyond, Zimmer Biomet will look and act like a totally different company. With that, I'll now turn the call over to Suki. Thank you. Suketu Upadhyay: Thanks, and good morning, everyone. In the fourth quarter, we grew sales 5.4% on an organic constant currency basis, and delivered adjusted earnings per share of $2.42 which was up 4.8% year over year despite dilution from the 28 transaction, the impact of tariffs, and continued investments in our commercial organization. On a full-year basis, we grew organic constant currency sales 3.9% and generated $8.20 in adjusted EPS. And $1.172 billion in free cash flow. As we get into the details of these results, unless otherwise noted, my statements will be about the 2025 and how it compares to the same period in 2024. And my commentary will be on a constant currency and adjusted operating basis. 2025 organic constant currency commentary excludes the impact from Paragon 28 acquisition that closed in April 2025. Net sales were $2.244 billion, an increase of 10.9% on a reported basis and 5.4% excluding the impact of foreign currency and the Paragon 28 acquisition. Consolidated pricing was 50 basis points negative in the quarter. Our U.S. Business grew 5.7% on an organic constant currency basis. Which, as Ivan mentioned, reflects continued momentum for our recently launched products strong robotic sales, and end-of-year customer purchases and capital sales above historic levels. Internationally, we grew revenue by 5% on an organic constant currency basis, driven by continued new product momentum and strong robotic sales. Turning to our P&L. We reported GAAP diluted earnings per share of $0.70 compared to GAAP diluted earnings per share of $1.20 in the prior year quarter. Higher revenue and a lower share count were more than offset by a one-time charge related to a brand rationalization initiative and restructuring charges related to a reduction in workforce. As well as higher interest expense associated with the Paragon 28 transaction. On an adjusted basis, we delivered diluted earnings share of $2.42 compared to $2.31 in the prior year quarter. This increase was driven by higher revenue higher adjusted gross margin and a lower share count. Partially offset by an increase in SG&A and a step up in interest expense tied to Paragon 28. Adjusted gross margin was 72.4% higher than the 2024, due to lower manufacturing costs and favorable mix. Adjusted operating margin was 29.1%, lower than the prior year quarter as a result of increased commercial investments and the addition of Paragon 28. Adjusted net interest and nonoperating expenses were $71 million above the prior year driven by higher debt related to Paragon 28 and higher interest rates on refinance debt that matured in 2024. Our adjusted effective tax rate was 17.9% and fully diluted shares outstanding were 198.1 million. Down year over year due to share repurchases in 2025, including $250 million during the fourth quarter. Now turning to cash and liquidity. Had another strong quarter of cash generation with operating cash flows of $517 million and free cash flow of $368 million. We ended the year generating $1.172 billion of free cash flow, growing over 11% year over year, marking the third consecutive year of at least high single-digit free cash flow growth. We ended with approximately $592 million in cash and cash equivalents. Now regarding our outlook for full year 2026. Unless otherwise noted, my commentary will be on a constant currency and adjusted operating basis. And will include the contribution from Paragon 28 in organic growth beginning in April 2026. Marking the one-year anniversary of the deal closing. We expect organic constant currency revenue growth of 1% to 3%, with growth roughly consistent throughout the year. In addition, we expect adjusted EPS of $8.30 to $8.45 with free cash flow growth of 8% to 10%. Which would mark the fourth consecutive year of high single-digit or greater free cash flow growth. Quickly approaching 80% free cash flow conversion. This guidance contemplates end market growth in line with 2025, the risk of disruption from the U.S. Sales force transition, continued evolution of our international go-to-market models, up to 100 basis points of pricing erosion and a stable tariff and policy environment. Let's walk through the moving parts that impact our reported revenue guidance. At current rates, we expect FX to be approximately a 50 basis point tailwind to full-year revenue growth, which includes approximately 250 basis points of tailwind in the first quarter. We expect Paragon 28 to contribute around 100 basis points to reported sales growth in 2026, before being reflected in organic growth in April. As we have discussed previously, we expect our operating margins to be down about 50 basis points from 2025, which contemplates lower gross margins, dilutions from the Paragon 28 acquisition and increased investments in our U.S. Commercial channel. Operating margins in the first quarter are expected to be down about 100 basis points from the 2025, before increasing sequentially by about 100 basis points into the second quarter. For the full year, we expect adjusted net interest and other non-operating expenses to be approximately $295 million, our adjusted effective tax rate to be about 18% and to end the year with about 194 million to 195 million shares outstanding. This share count reflects a share buyback program in 2026 of up to $750 million. I'd like to close by thanking the entire ZB team for their hard work and dedication. We continue to make meaningful positive changes across the business, while investing to accelerate long-term growth. And with that, I'll turn the call back over to David. David DeMartino: Thank you, Suki. Operator, let's open up for questions. Operator: In order for us to take as many questions as possible, please limit yourself to one question. Operator, please go ahead. Operator: Thank you. Star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Please limit yourself to one question and one follow-up. Again, please press 1 to ask a question. We'll go first to Matthew Blackman with TD Cowen. Matthew Blackman: Hello? Operator: Mister Blackman, you are the Good morning. Matthew Blackman: Yes. You can okay. Good. You can hear me okay. I appreciate you taking my question. Ivan, we're obviously all focused on the near-term impact of the Salesforce optimization initiatives. But maybe take a step back, and you did touch on this a bit in the script, but tell us why now how heavy the lift ahead is, and perhaps most important, what could the business look like if is executed well? And where and when across the franchises could we see visible returns? Is it exiting it this year? Is it '27? Just any color would be helpful. Appreciate it. Ivan Tornos: Absolutely, Matt. So what what I'll do here, maybe I'll provide a longer answer than usual, and then maybe this says, some time in future questions, this morning. But maybe start with what it is that we're doing because I think, some people are confusing the what. We'll talk about the why we're doing it. I'll directly answer your question of why we're doing it right now. I'll talk about how we're doing it to reassure everyone that, we're taking a very prudent approach that is very state centric. And then when do we see the benefits? So I'll I'll break my answer in those four to five key areas. So what it is that we're doing? We're moving from being a company or rather a channel here in The US that has a lot of nondedicated employees, By nondedicated, this is not a legal ten ninety nine, WHO, two committed, not committed. We got people that have, you know, two, three jobs. Working at Zimmer Biomet. It's part of the nature of the ten ninety nine model here in The US, and that's not something that, we wanna we wanna keep wanna have 100% of our US Salesforce being dedicated. Again, not to be confused, w two ten eighty nine. Fully dedicated. So that's number one. We believe in specialization. Just like, best in class companies believe in specialization. You can have, sales rep selling hips, knees, components of technology, shoulders, etcetera, etcetera. Today, our current specialization rate is around 25%. I won't quote what is the end number, we're gonna make sure that we specialize the Salesforce so that we can compete at the level that we can compete in the higher growth segments. To that end, we add in something like 200 plus sales reps in robotics. Countless reps in SAT, ASC, etcetera, etcetera. So that is the what? Moving from nondedicated to dedicated. Why we're doing this now? Well, look. We got no gaps in the portfolio. We've done significant work when it comes to, technology in data robotics, and whatnot. We've added a ton of new products when it comes to SCT. We just gotta have dedicated people to leverage that great new product cycle. We couldn't do this three, five, ten years ago because, candidly, we didn't have the products. Not to mention we're dealing with, with other challenges. So now that we have the products, we have to leverage the channel to sell those products at a at a higher rate. Productivity rates in The US, we do a lot of third party benchmarking. Are, you know, roughly half. Of what some of our direct competitors have. So in plain English, we don't have as many cases as some of our direct competitors. That's something we're gonna be addressing. So that's the why. We're doing it because of new products. We're doing it because of timing. We're doing it because we got a pretty significant productivity gap here in The US. Not to mention our penetration in ASC and SCT, still is, still is, very high. So low penetration. How we're gonna do it? We got third party resources. We got a dedicated team. We have hired people that have done this in the previous life. I'm personally involved, in, in the project. I'm gonna continue to remain involved. So we're gonna take a stage approach to getting it done. We've done one third of this transformation already. We have locked in a significant percentage of the organization. So I feel that, we've been very prudent when it comes to we're doing it. We learn a lot from the ones that we've done. It's actually gone better than expected. We did five conversions already, late twenty twenty five, early twenty twenty six. Those are going as expected, if not better. And then just to close this summary, Matt, when are we gonna get this done by? We expect the entire transformation to be done as we exit 2027. So that is the what, the why, the how, and the when. And it is the final step in the in the transformation of Zimmer Biomet. We address the operational challenges in the past. We have addressed the leadership gaps that we had. We have built a best in class portfolio. Remediating all the gaps, and now with significant product launches, to change the standard of care, If we don't modify or use US go to market structure, we're never gonna have the durability and sustainable growth that I referenced in my prepared remarks. Thank you for your question, Matt. Matthew Blackman: Appreciate it. Thank you. Operator: We'll go next to Rick Wise with Stifel. Good morning, Yvonne. Rick Wise: You for all the comments. You highlighted in your comments, Yvonne, that the obviously the reality that Zimmer has grown mid single digits for four consecutive years Now you're offering tempered guidance and guiding to low single digit growth. Help us better understand what's embedded at a high level in that thinking. I mean, clearly, you're trying to be respectful of the uncertainties about the transition sales transition process. Ivan Tornos: But that seems to be going well. Rick Wise: So what have you baked in? And maybe help us think about the year ahead in terms of is the disruption greater in the first half and therefore the second half could be better? Just maybe help us think through those factors. Thank you. Ivan Tornos: Thank you, Rick. Actually, is five years. Of mid single digit revenue growth, not four. And we are very excited with how we exited 2025 growing in the second half five plus. But we gotta keep it or we gotta make it durable. So to your question on what's embedded in the guidance, really, we're looking at three things. Number one, obviously, is the US Salesforce transition. That that is deep priority in 2026. If it goes better than expected, obviously, your number exiting 2026 will be higher. If we don't do the job that I expect we're gonna do, then we may move towards the lower range of that guidance. So that's item number one. Number two, we pay in close at attention to the new pro new program, cycle. The adoption of these new products, namely the magnificent seven. If you look at the performance in Q4, very solid across hips and knees. Similar performance in the years in Q3. So now we need to make sure that we're gonna be able to same or better as we enter 2026. So that's the second item we're paying attention to. And and the number three, international. You know, as we've been discussing, it has been a fragile business. Now for a couple of quarters. You know? Since that one quarter, we do really well. The next quarter, something happens. Again, we gotta pay attention in making sure that we do have the right go to market models We are focusing the right growth areas in the right So those are the three things we're paying attention to. The US Salesforce transition, the new product adoption cycle, and the international international performance in key geographies. Thank you, Rick. Thank you. Thank you. Operator: We'll go next to Patrick Wood with Morgan Stanley. Patrick Wood: Beautiful. Thank you so much for taking the question. I'd love to just ask a slightly boring one, on pricing, moving to a negative 100 basis points erosion in the 26 guide, inflation is kind of at the same spot, that it was before, and I'm guessing your customers are in a pretty healthy spot from procedure volumes. Just curious why you're thinking pricing, you know, stays in the negative territory. I know that's where it was historically, but any outlook on how you think about price mix would be super helpful. Thanks. Suketu Upadhyay: Yeah. Patrick, this is Suki. Thanks for the question. So overall for the year 2025, we ended ended on flat pricing at a consolidated level, so taking all the regions into account. The fourth quarter, as I said in my prepared remarks, was down about 50 basis points. For 2026, you're right. We're saying up to a 100 basis points of erosion, which is consistent with our Analyst Day commentary almost two years ago. And as you noted, it is a significant improvement to sort of pre pandemic price price profile. The the reason you're you know, we expect to see some level of step down for between '25 and 2026 and we can talk about this a a bit over the over the last few quarters, is, we expect to see a moderation in some of the price increases we've been able to take across EMEA. We do expect Asia Pacific to be down year over year primarily because of the Japan biannual price decrease which happens. It's a normal part of our business. Also, we expect to be slightly down in China as we continue to reconfigure our go to market strategies. And The Americas are expected to be down sort of similar profile to what we saw in 2025. So when you put all those together, we do expect to see a modest step down into to twenty twenty twenty six, but, again, well within our overall guidance that we provided at our Analyst Day. Patrick Wood: Appreciate the color. Thanks, guys. Suketu Upadhyay: Thank you. Thank you. Operator: We'll go next to Vijay Kumar with Evercore ISI. Vijay Kumar: Hey, guys. Congrats on a on a nice execution Q4 on free cash, and thank you for taking my question. Suki, or Ivan, can you can you, give us a bridge from back half, right, when you did mid singles to 2% guidance at the midpoint for fiscal twenty six, how much of this is Salesforce reorg impact And and, Ivan, you mentioned that you already completed one third of this transition what's been your prior experience? Right? Like, when you look at the pacing of disruption, was it front loaded? Ivan Tornos: And when does pro productivity increase to offset this? Thank you. Thank you for the question. Look, for 2026, it is all about the Salesforce transformation. So, yes, we exited, 2025, growing strong in the mid single digit. As we provide guidance for 2026, we just wanna be responsible, in realizing that this is a significant transformation we've undertaken. I've made public commentary around the fact that in The US, we got roughly 2,500 reps across 34 territories. It's a lot of legacy issues in the channel that we're addressing, and we're gonna be responsible. We're gonna do it over two years, and we we believe there'll be some disruption. So that's why we're giving the guidance that we're giving today. So that's the answer on, you know, why we're going from call it, you know, five plus in the '25 to a midpoint of, two here as we enter 2026. What we have learned as we go through these transitions is that, disruption happens, sometimes you know, in the early stages. Know? You go and negotiate your contracts with your distributors, and, they say no. We're not interested in in the new model, and rarely have you know, towards the end. You know? Once they sign up, they sign up and they stay. And, again, many lessons learned from the work we've done already, one third behind. As a reference in my previous, answer, to to Matt, I believe it was, We already have done five additional distributor changes in the last four, five months, and they're going really, really well. And we have active negotiations going on with roughly 40% of the channel as we speak, and those are going better than expected. In terms of the would we see the outcomes? You know? Towards the '27 is when you start to see increases in productivity. Thank you. Operator: We'll go next to Robbie Marcus from JPMorgan. Robbie Marcus: Great. I know it's one, but I have two quick clarifications. Questions I have a lot of investors asking. So figure I'd get it out in the call here. First, really strong fourth quarter. Performance, particularly in The U. S. Across large joints. Just wanna make sure there was no, onetime items or or above, normal sales there. And then Suki, as you think about first quarter and first half, getting the cadence right has been really important, particularly over the past few years. And I I know you've mentioned it, in the script even. So just how do you want people to think about first quarter and first half top and bottom line you know, the guide is one to 3% on the top and bottom line. You exit it at five. So help us bridge expectations, how much disruption is built in, and and, you know, help us get the numbers set. For the beginning of the year. Thanks lot. Ivan Tornos: Thank you, Robbie. I'll I'll start, and then I'll let Suki comment on the phasing for for the year. In terms of our performance in Q4, the main driver behind the solid growth, in The U. S, and I'm frankly very pleased with where we landed, OUS. Is new product acceleration. We did benefit from, some additional capital sales in the quarter. We had, some modest uptick when it comes to, some of the sales that we do towards ASCs. But, I will say the lion's share of the performance is better execution. We did Rovi benefit internationally in knees. If you look at the knee number, we grew 8.2%. That is some of the, some of the revenue in Q3. You may recall that Q3 would be an end where we expected. Some Middle East revenue that got in Q4. But very, very pleased with the execution when it comes to new products. Both in The US and international. So do you want that about phasing? Suketu Upadhyay: Yeah. So thanks, Ravi, for the question. So on phasing, you know, it's very consistent with what I said in my prepared remarks. Which we expect on the top line for growth to be roughly consistent, plus or minus from quarter to quarter throughout the year. And that takes into account what Yvonne's talked about relative to the the sort of US phenomenon on Salesforce and and and optimization there, as well as, some of the elements that he's been teeing up for some time around international and go to market changes. So both of those have been reflected and sort of contribute to sort of that first last or sorry. 2025 into 2026, step down. Relative to P and L, from an operating margin standpoint, you know, Some of the building blocks there are we do expect gross margin to be down for the full year. We've talked about that for quite some time. We're gonna make a lot of that up. Through SG and A efficiency inside of operating margins, but we do expect that to be down 50 basis points as I talked about in my prepared remarks. Overall earnings, we expect to grow in line with constant currency organic growth. That's gonna be assisted by some of the share buyback that we plan to do this year. Now taking those building blocks into phasing, operating margins, do expect to be down in the first quarter year over year. By about 100 basis points. That's largely driven by Paragon twenty eight, which was not yet anniversaried because we we did the deal in the '25. We're gonna have higher commercial investments as part of this overall optimization in The US as as Ivan's talked about, yes, it is specialization, but it's also augmentation where we're adding reps in a couple of key areas. And then as I said, gross margin will be down in the first quarter. So, again, operating margin's down. Year over year in the first quarter, about 100 basis points from there. We expect to see a sequential step up in the second quarter as we anniversary out of 28. That'll be an increase sequentially in the second quarter of about 100 basis points. And then as we move into the back end of the year, we expect operating margins to be roughly in line with 2025. So hopefully, that gives you a bit, again, top line. Roughly consistent. Growth rate throughout the quarters plus or minus, and then the operating margins as I talked about. Ivan Tornos: Very helpful. Appreciate it. Thank you. Suketu Upadhyay: Thank you, Rob. Thank you. Operator: We'll go next to Travis Steed with Bank of America. Travis Steed: Hey. Just wanted to, of follow-up on Ravi's question in terms of on the margins, how you're thinking about the cost of the Salesforce transition? Is there what you kind of baked in on margins from from that? And then a question in terms of you've already done onethree of this transition already. So one question I get often is, like, why does it actually take two years to do all this? And when do you start to see some some green shoots here? Suketu Upadhyay: Yes. So thanks. For the call or sorry, for the question, Travis. Overall, you know, the the impact of this Salesforce transition there's a modest impact to overall operating margins inside of s g and a. I think start to see that in the fourth quarter or really the back half of last year, you're going to see that continue into into 2026. That near term headwind has been accounted for in our guidance for for 2026. But the opportunity I think, is more attractive as you think mid to longer term. One, it does give us the opportunity to to do some restructuring and and offset some of that headwind. Through, more productivity. As Yvonne talked about, we're at about half of some of our peers. And secondly, the whole idea behind this is that it generates, better revenue growth, more durable better than market growth rates. And at those levels, provides significant amount of leverage into our p and l. So near term, yes. Headwind, modest headwind, incorporated into the guide. Mid to long term, we do see being a benefit. Ivan Tornos: Then, Travis, relative to your question on why two years, no more complex that we're gonna be responsible. As I mentioned, we don't want third, so 2,500 reps. Done a third. That's what? 1,600 reps. That we gotta get through across, multiple states. So we're gonna take our time and understand it was the right sequence, looking in the contracts, We have, segmented areas by contract status, by market status, So it's a project that that we're not gonna take lightly. So that's why it takes two years. And, we're gonna go slowly to then go fast later on. Thanks. Travis Steed: Great. Thank you. Operator: We'll go next to Matt Taylor with Jefferies. Matt Taylor: Hi. Thanks for taking the the question. I wanted to just follow-up on gross margins. I know you said down for the year and we touched on pricing, but was hoping that you could go through all the the puts and takes on gross margin this year and also maybe just talk at a high level about the trajectory beyond '26 for gross profit. Or Suketu Upadhyay: Thanks for the question, Matt. Yeah. So we we expect gross margins for '26 to be in the range of 70% to 71%. It is a step down. From a pretty good year in 2025. We've been we've been sort of telegraphing that. The key drivers are really, the biggest one is around, you know, the lower growth profile as you see in the revenue We get a lot of leverage in our p and l when when when, the revenue growth rate's at a higher level. And, of course, the opposite works at a lower growth level. So, volumes are are the biggest contributor to that step down. Secondly, we've talked a bit about the FX hedge gains that we've seen in 2025. Tapering off in 2026 as we've seen a weakening of the dollar through 2025, The next big area, is is around price and geographic mix. Which we expect to be a headwind compared to 2025. And then the last piece is really on tariffs. Which on a net basis year over year is not a significant increase. But it will be choppy through the quarters primarily because of certain credits from 2025 that we expect to to realize in into 2026. So those are your moving parts. That really step you down from '25 into '26. But I would say we're making up a very large percentage of that through our SG and A restructuring that I talked about in my prepared remarks. And so while, while gross margins will be down a 100 basis points or more, we're we're we're making more than half of that up. Through SG and A efficiencies even while we're incrementally investing in some portions of our commercial business. It's too early to tell on gross margin outlook. Beyond 2026, and I think the largest component which is driving this year, will drive future gross margin, which is really around volumes and and and sales levels. But beyond that, I can tell you we continue to to emphasize efficiency continue to make great progress, in the areas of sourcing improvements, We continue to build out low cost manufacturing. I think you'll see that in the stepped up p, p, and e in 2025. And then lastly, I talked about a a pretty large scale portfolio rationalization charge we took in the fourth quarter we believe that that's going to have significant meaningful midterm and long term or benefits, I should say, into cost of goods. So So so longer term, a little bit too early to tell, Again, it will depend on on revenue growth, but but we continue to push very hard. On a number of efficiency gains and are making good progress. Thanks for the question, Matt. Matt Taylor: Thanks, Steve. Operator: Our next question comes from the line of Ryan Zimmerman with BTIG. Ryan Zimmerman: Good morning. Thanks for taking the question. I'm going to turn to Paragon actually because a lot of questions have been asked on guidance. And just ask, I mean, the contribution this quarter was lower than we expected. And if I look at the outlook, for '26, I I think it's about a 100 basis points which, again, is is a little lower, excuse me, than we expected. And so Ivan, can you just talk about kind of what you're seeing there? I mean, we have heard, obviously, you know, chatter about kind of the health of the foot and ankle market. Know, particularly in '25 being softer and and kind of what you expect and where you're seeing you know, specific parts of weakness versus maybe parts that are offsetting that. Ivan Tornos: Yes. Thanks thanks for the question, Ryan. So we we've been at it for two quarters. Right? So we've we've done two quarters as a consolidated company. They both came in at in the upper single digit range. Recall that for the year 2025, we said we'll get around 270 basis points of revenue accretion, thanks to, or due to Paragon 28. We came in roughly 20 basis points behind that. So not a not a huge gap. We have made a commitment that we're gonna grow this business double digit in 2026. Early in 2026, but we like what we see. I will say mostly everything is going in line. Our revenue, again, is slightly behind what we anticipated, but, again, only two quarters. In terms of the EPS dilution, everything is on track, if not better than expected. Committed to a 3% dilution in year one. Came in slightly better, around 1% in the second year. We expect to deliver on that. And then the integration cost and everything associated with, with Paragon is also better than expected. We're not seeing any dramatic changes when it comes to market growth. We continue to monitor that. If anything, we've seen that that the shift today is continues to move in the right, in the right direction. So we're very excited about the business. Again, two quarters behind. Just left them sales meeting in San Diego. A couple of weeks ago. I'll tell you, Ryan, that, with eight new products being launched in 2026, with, virtually the same legacy Paragon 28 employees being now, with Zimmer Biomet. Excitement is high, and we expect to deliver double digit growth in, 2026. Thank you, Ryan. Ryan Zimmerman: Thank you. Operator: We'll go next to Danielle Antalffy with UBS. Danielle Antalffy: Good morning, guys. Thanks so much for taking the question. Just on this Salesforce transition, I'm just curious sort of what gives you the confidence. Appreciate a third has been done so far. But just coming to the decision to to make this move, was it best practices that competitors, market research, physician feedback? And then I'm I appreciate you probably can't comment on 2027 right now, but, should 2027 be growth acceleration versus '26 wherever you end up, just given you'll be further along in the Salesforce transition or are there other factors we should be considering as we put a finer point on '27 on our models today? Thanks so much. Ivan Tornos: Thank you, Danielle. So let let let's start with the issue one. We're not gonna talk about 2027. That's something we'll do, later on in the year. But, right now, we're gonna focus on 2026. What gives us the confidence that this is the right time and the right project is data. No more complex than that. We look at productivity rates for Zimmer Biomet versus direct competitors that are fully dedicated, fully specialized again, I mentioned when it comes to, caseload, when it comes to overall productivity, we'd be high. And given the strength of the new product portfolio, the time to do it is now. We do a lot of benchmarking in terms of those territories that are fully dedicated and specialized versus those territories that are nondedicated. And they're nonspecialized, and it's literally night and day. We we see a much greater productivity. No surprise there, Danielle. In those dedicated and specialized territories. If we don't get The US right, and by that I mean, if we don't get The US to bid consistently, mid single digit at some point, upper single digit, this company will never realize the aspirations that we have for this company. The US is 62%, 63% of the revenue. It's north of or half of the profit of the company. We gotta get it right. So we got the leadership in place. We made a lot of changes. We got the new product, cycle in full motion. We're about to enter a new stage when it comes to innovation in 2027 with monogram. We just have to do it. So it will create some short term disruption, but it's gonna set a the company very nicely as we enter '27 and beyond. Thank you so much for your question, Danielle. Operator: Our next question comes from the line of Larry Biegelsen with Wells Fargo. Larry Biegelsen: Good morning. Thanks for taking the question. So Ivan, I wanted to ask about capital allocation. It feels like, the change in terms of prioritizing returning free cash flow to shareholders. Over m and a. So my question is, you know, why why the change? I think there was a time not too long ago when you talked about you know, diversification. And any color on what percent of free cash flow you'll return to shareholders through buybacks each year? And what can we expect you know, on m and a going forward? Thank you. Ivan Tornos: Thank you, Larry, and great to hear from you. I wouldn't say it's a change. I would say that it's a pause. Recall that we've done three acquisitions between Orthogrid late twenty four Paragon twenty eight, April '25, and then a few months after that, monogram. I mean, are pretty significant projects. And then add on top of that, this transformation of The US channel This is not the time to add, you know, more complexity. This is not the time to run, you know, more projects. This is the time to be nimble and laser focused on getting those three integrations right and, ensure minimal disruption out of this, US transformation. So that is no more complex than that. At the right time, we'll continue to diversify diversify responsibly. So, no, we're not throwing in the white towel. We aspire to have a higher weighted average market growth rate. As we continue to evolve the company. But right now, it's all about focus on these three integrations and and this project. As you might have read, we got approval yesterday from the board, to do up to $1.5 billion in buybacks. We like, where the stock of Zimmer Biomet is today. We acquired a quarter billion dollars, of shares in the 2025. We're going to continue to continue to acquire shares of consumer bond even the current valuation. Love the free cash flow generation of this business. You heard Suk in his prepared remarks. You know, upper single digit to double digit in 2026. This company generates tremendous cash flow. We got very solid firepower. I like our debt profile. So at the right time, we'll get back doing the things that we need to do. But in 2026, those are the priorities. Thank you so much. Larry Biegelsen: Thank you. Operator: We'll go next to Chris Pasquale with Nephron. Chris Pasquale: Thanks. Yvonne, you highlighted strong performances from CMFT upper extremities. But organic growth for SCT still did step down a bit. Can you talk a little bit about the other SCT segments, how they performed in quarter? And then how you're thinking about that business once Paragon becomes sort part of the organic, piece going forward? Thank you. Ivan Tornos: Sure. Thanks, thanks for the question. So net net, in the year, SCT delivered mid single digit growth again. So now there has been a cadence of quarters and years in what we've seen this business perform. To your point, CMFT mid teens growth, shoulders upper single digit, if not double digit. Sports, in and out of the upper single digit territory. Obviously, foot and ankle is double digit given para Paragon. But, we do have, two, problem children. Or trauma business and or restarted therapies, business, injections here in The US. So those are the two, those are the two headwinds that we got. And we spoke about that openly in the Q3 call that our business in The U. S. Has been struggling. We exited the year more or less in line with our expectations, but those expectations were very low. So as we enter 2026, we're gonna continue to invest in the four key growth drivers. We are in a ton of reps in shoulder, with expanding or CMFT, cranio maxillofacial thoracic salesforce, And, we put in, new processes, new people. To make sure that the true problem children from restorative therapies don't become the headwind in '26 that became in 2025. Thank you. Thanks. Operator: We'll take our next question, excuse me, from Caitlin Roberts with Canaccord. Hi. Thanks for taking the questions. So how do you see ASCs as a part of your revantular strategy? And where did you end the year with ASC penetration in hips, knees, and shoulder? Ivan Tornos: Thank you, Caitlin. So we, we ended '25, on knees and hips I do not know, to be honest with you, the final number for shoulder. But we are actually 2025 in the 20, 22% range. So 20 to 22% of all the hips and knees that were within The US were done in ASC. And I speculate the shoulder number is higher than that, right now, I don't recall the number, so I don't wanna mislead you. In this or or or strategy, we've spoken about the fact we need to have dedicated people. We need to have the portfolio. I want it to have the partnerships. And, speaking of people, really excited about the additions that we brought to the team in 2025. New president for ASCs who's a superstar, Greg Sealer, He's brought in great people across the entire US with actively hiring people, into the, into the ASC channel. Suki mentioned, it's not just specialization. It's also augmentation. So I think we are rapidly getting the right amount of people and the right type of people to win in ASCs. As far as the portfolio, there are no gaps whatsoever. We're really excited about the opportunity that monogram will bring to an ASC environment where speed, efficiency, and accuracy matters most. But addition to that, we got another, you know, seven to 10 products that make a lot of sense in the ASC. In the partnerships, we continue to see great momentum with our partnership with Geringa. We are doing new contracts We got a couple of, large groups that we are actively involved in final negotiations. We're very bullish when it comes to our ASE strategy. I will follow-up with you on the on the number for penetration for shoulder. Thank you. Operator: Awesome. Thank you. We'll go next to Joanne Wuensch with Citibank. Good morning and thank you for taking the question. Joanne Wuensch: I'll put two right up front. I'm sorry. I'm only allowed to ask one. One, AAOS, what should we be expecting there? And I suspect this is where you'll be showcasing the embossed system. How do you anticipate folding that into your robotics portfolio? And platform. Thank you. Ivan Tornos: Thank you, Joanne. As far as I'm concerned, you can ask 50 questions if you want. So but, anyway, what should you expect, at the academy meeting in New Orleans? We're gonna have a lot of new products there. We're gonna showcase again the max seven. We're gonna show next generation SCT, products But to your point, the the main event is gonna be mBOS. The fully autonomous and semi autonomous, robot. That, robotic platform that we acquired from monogram. This is technology that we strongly believe that will change the standard of care. It's definitely the step of moving from guided robotics to smart robotics. It has best in class ease of use, the speed that we've seen in the clinical trials is better than anything that is in the market today. You can literally do the cases I hope you come to the booth in a hands free approach. The workflow is as streamlined as it gets. And again, it's highly accurate, extremely reproducible. And it's got all the right, guardrails to make it the safest robot out there. So we'll be talking about all of that. We debuted, emboss at the Hippany Society Meeting In Dallas. And since then, we've gotten just tremendous feedback We expect to have a large group of surgeons, when it comes to, New Orleans. So looking forward to, sharing this excitement with you and the, the other investors. But beyond that, we'll have, you know, our entire suite of technology. And we'll we'll be describing why it makes sense to have this, category depth. Second part of your question, how you expect to integrate it? Look. We got the optionality of integrating all things into one platform if we choose to do that. But but so far, the data and the feedback validates that since not all customers are created equal, not all technologies will be created equal. We believe in optionality. We believe in large footprint robotics, small footprint robotics. Sounds like our competitors do as well now. We believe in CT scan for some customers that wanna have a CT scan. We also have a large, percentage of customers namely outside The US that want to use Imageless, which got some surgeons that wanna be more in control of the surgery. And you got some that are okay with semi and fully autonomy. So we have the optionality to to integrate at at the right time. But right now, we'd like to have the category breadth that we have and so far, as you saw in the results in Q4, it seems to be working out. Thank you so much, John. Operator: We'll go next to Matt Miksic with Barclays. Matt Miksic: Hey. Thanks so much for taking the question. Just maybe looking at some of the strength in knees and the core geographically, And maybe talk a little bit about about pockets of strength, where you're seeing success, you know, the the sort of cadence of the of the iodine coated launch in in Japan. So that the geographic could break down in any color you can provide me be great. Thanks so much. Ivan Tornos: Thanks, Matt. Look, great quarter. Q4 was a great quarter. So we delivered 6% growth in U. S. Needs and 8.2% for international. In The US, it's the combination of all the things that I mentioned in my prepared remarks. Oxford Parseus MLS continues to do better than expected and is really early in the journey. Recall is the only FDA approved partial cementless knee, which is gaining tremendous adoption in an ASC setting. Or Persona Osteo Tie or cementless platform, exited twenty twenty five, so at around 35% penetration, again, with very rapid adoption in an ASC setting as well. And, internationally, we saw great momentum with persona revision, in Europe. Exiting 2025. Recall that this is only two, three quarters into the launch. So we think that the ramp up can be very compelling as it has been here, in the, in the in The US. In terms of iodine, we had minimal Sales of iodine in Q4. The real launch has happened here in, in Q1. This is a product that we've been working on for ten years. With robust data out of the University of Yokohama in Japan. We expect to have a very meaningful contribution out of this product in international in 2026. We do in cases pretty much every day now. We get a 40% price uplift when it comes to iodine versus non iodine. And, again, the data around prolonged elution, the fixation stability, how this product, reacts to, to bacteria is just very very, very compelling. So really excited about iodine, and we're forward to, bringing this product to other geographies down the road. Thank you. Operator: This concludes the question and answer portion of this call. I would like to turn the call over to Ivan Tornos for any closing remarks. Ivan Tornos: Thank you. I'll close the way that I started with gratitude. Thanks to all of you for being here today, and thank you to the Zimmer Biomed team. Great exit to 2025. We love the performance that we saw in Q3 and Q4. Really encouraged about the opportunities we have ahead. Excited about '26. Will there be some disruption associated with The US go to market market transformation, we strongly believe this is the right step to take at the right time so that we can, create a company that we all aspire to create. Thank you for your time this morning. Operator: You again for participating in today's conference call. You may now disconnect.
Operator: All sides on hold, we'd like to thank you for your patience. Please continue to stand by. You're all set on hold. We'd like to thank you for your patience. Please continue to stand by. To all sites on hold, we'd like to thank you for your patience. To all set on hold, we'd like to thank you for your patience. Please continue to stand by. If you should need operator assistance during today's conference, To all sides on hold, we'd like to thank you for your patience. Please continue to stand by. If you should be operator assistance during today's conference, please press 0. Welcome to the Entegris Fourth Quarter 2025 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode. If you would like to ask a question, you may remove yourself from the queue by pressing star two. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star 0. I would now like to turn the call over to Jeff Schnell, VP of Investor Relations. Good morning, everyone. Jeff Schnell: Earlier today, we announced the financial results for 2025. Before we begin, I would like to remind listeners that our comments today will include some forward-looking statements. These statements involve a number of risks and uncertainties and actual results could differ materially from those projected in the forward-looking statements. Additional information regarding these risks and uncertainties is contained in our most recent annual report and subsequent quarterly reports that we have filed with the SEC. Please refer to the information on the disclaimer slide in the presentation. On this call, we will also refer to non-GAAP financial measures, as defined by the SEC in Regulation G. You can find reconciliation tables in today's news release as well as in the IR page of our website at entegris.com. On the call today are David Reeder, our CEO, and Linda LaGorga, our CFO. With that, I'll hand the call over to David. Thank you, and good morning. Before we dive into results, I want to take a moment to welcome Jeff to our team. David Reeder: We're excited to have him on board leading our IR efforts as our new head of investor relations. Our solid fourth quarter results demonstrate disciplined execution and a consistent focus on delivering on our commitments. Fourth quarter revenue, gross margin, adjusted EBITDA margin, and non-GAAP EPS were all at the high end or above our guidance range. For the full year, total revenue was approximately flat compared to 2024 excluding divestitures. Our unit-driven revenue grew approximately 2% in 2025, in line with wafer starts for the market and was led by CMP consumables, liquid filtration, and selective etch. Our CapEx-driven revenue declined 7% in 2025, consistent with the decline in industry fab construction CapEx. We are most highly correlated. The fab CapEx slowdown was most evident in our FOUP and Fluid Handling product lines within our APS division. Looking ahead to 2026, the industry backdrop appears more constructive. I'll touch on the semi market in more detail in a bit, but there are a few areas where we expect notable improvement compared to 2025, that should benefit Entegris. First, we expect to benefit in 2026 from the node transitions in both logic and memory. In logic, increased demand for two-nanometer devices is expected to meaningfully drive wafer output throughout 2026. In memory, NAND transitions are progressing. Migrating from low 250 layers to approximately 300 layers. Additionally, next-generation DRAM and HPM products are expected to be rolled out this year, and all these transitions create accretive content per wafer opportunities for Entegris. Next, we expect industry MSI growth to increase in 2026 led by continued strong growth in advanced logic and DRAM. Improving demand for NAND, stable demand for mainstream logic. Finally, we expect industry fab construction spending to grow in 2026, reversing a significant decline in 2025. This is meaningful for Entegris because two-thirds of our CapEx-related revenue is correlated to fab construction. Last quarter, my first as CEO, I shared my initial priorities for Entegris. Let me provide an update on those priorities. First is deepening customer intimacy. This includes supporting our customers' technology roadmaps. Success in this area translates into securing key positions of record, PORs, in new nodes, which will expand our served available market and increase both revenue and content per wafer. For logic devices at the most advanced node, we've secured strong POR positions and solid share in key product lines such as CMP consumables, advanced deposition and implant materials, liquid purification and filtration, and wafer handling products. In addition to this, the team is focused on winning incremental share and PORs in subsequent advanced nodes. For advanced memory, we are gaining traction in DRAM and HBM, in particular for products associated with CMP consumables and advanced packaging solutions. And for next-generation NAND devices, we have also achieved strong PR wins with solid share across key NAND-specific product lines including deposition materials, CMP, and selective etch applications. Our second priority is improving utilization by ramping our new facilities in Taiwan and Colorado while rationalizing our existing manufacturing footprint. Our Taiwan facility continues to ramp production and our Colorado facility is expected to substantially complete key customer product qualifications in 2026. And in the fourth quarter, we exited our Chester, Pennsylvania facility we expect to rationalize at least one additional facility in 2026. As I discussed last quarter, we have completed the multiyear manufacturing CapEx investment cycle that began in 2022. As a result, we expect 2026 CapEx to decline to $250 million. Longer term, we expect CapEx to return to historic levels of approximately 7% to 8% of sales. The additional manufacturing capacity we've built, combined with our current manufacturing base, enables us to deliver significantly more than $1 billion in incremental revenue with limited further investment. Our third priority is improving free cash flow. Thanks to the team's execution, free cash flow margin, which is free cash flow divided by sales, improved meaningfully reaching 12.7% in 2025 in line with our target. Higher operating cash flow in combination with reduced CapEx is expected to increase free cash flow again in 2026. This will support debt reduction and enable us to reduce net leverage to below 3.5 times exiting 2026. Underscoring our commitment, free cash flow is now part of our short-term and long-term incentive plans. Our fourth priority is increasing local for local manufacturing, particularly for China. This provides us with critical strategic flexibility and enhanced ability to serve our global customers. We expect approximately 85% of our China revenue in Q1 will be supplied by our Asia facilities, with that proportion increasing through 2026. Turning our thoughts to the semiconductor market. We expect middish single-digit industry MSI for wafer starts growth in 2026. As a reminder, about 75% of our revenue is unit-driven and is correlated to MSI. Looking closer at semi end markets, advanced logic is positioned for significant growth again in 2026, driven largely by AI-enabled applications. Fab utilization rates and advanced logic are already near 100% and our customers are aggressively investing in additional capacity. Beyond the benefits of strong unit growth, as two-nanometer significantly ramps wafer output this year, this node provides an additional tailwind as it carries both higher content per wafer and strong share for Entegris. In mainstream logic, feedback suggests inventory levels are now healthy. While we're seeing early signs of improvement, and mainstream MSI still remains well below the 2022 peak, the overall end market recovery is slow, and mixed. We also note that ongoing memory shortages may weigh on the industry's ability to supply some mainstream end markets. NAND continues to benefit from strong AI-driven demand and pricing trends. This is expected to translate into more than 20% bit growth in 2026 driven primarily by the shift to higher layer higher capacity NAND rather than a significant increase in MSI. While NAND MSI is expected to rise modestly in 2026, we expect to additionally benefit from a double-digit increase in NAND per wafer, as customers move to higher layer count advanced nodes and introduce new materials such as Moly and selective etch. If demand remains robust, flash memory makers will likely need to add significant fab capacity setting the stage for higher NAND MSI growth in 2027. DRAM is expected to see solid MSI growth in 2026. Pricing trends and underlying demand remain strong in both HBM and DDR. Tight supply in HBM, DDR5, and in advanced packaging are all expected to drive the need for additional fab capacity heading into 2027. While 75% of our revenue is related to MSI, 25% is tied to industry CapEx. There are two primary drivers of our CapEx revenue. Fab construction-related spending which correlates with approximately two-thirds of our CapEx sales and the remaining third related to WFE. Fab construction CapEx is expected to grow modestly this year after a high single-digit decline last year, with a more meaningful acceleration anticipated in 2027 as construction begins on new fabs. Additionally, we expect WFE to deliver strong growth in 2026. Overall, AI continues to be an important growth driver for the semi market and we are seeing an increased benefit from this trend. Today, more than 60% of Entegris' revenue comes from advanced logic and advanced memory. AI is, of course, not the majority of these advanced nodes, but it is an important part and the most significant growth driver. In closing, we ended 2025 with momentum. We're cautiously optimistic about the industry conditions entering 2026, We continue to focus on winning key PORs and new nodes driving higher Entegris content per wafer and revenue. The growth we expect this year should improve utilization, thus increasing free cash flow and reducing leverage. And as devices become more complex, our expertise in material science and materials purity becomes increasingly critical. Helping customers enhance performance and achieve optimal yields. As a result, we expect to significantly grow our content per wafer and outperform the market. And we will continue to focus on execution and delivering on our commitments. Before handing over to Linda, I wanted to share that given the CFO transition, we are rescheduling our Capital Markets Day from this May to the fall of this year. We'll share more details on this as soon as we can. And finally, I want to thank Linda for her many contributions and lasting impact on Entegris. We wish her all the best in the future. With that, let me turn the call over to Linda. Linda LaGorga: Good morning. Q4 sales were $824 million at the high end of guidance. Down 3% year over year and up 2% sequentially. Gross margin on a GAAP basis 43.844% on a non-GAAP basis in the fourth quarter, also at the high end of guidance. The sequential increase in gross margin was primarily driven by increased production volumes across our manufacturing facilities. Back to the Q4 P and L. Operating expenses on a GAAP basis were $256 million in Q4. Operating expenses on a non-GAAP basis in Q4 were $188 million. Adjusted EBITDA in Q4 was 27.7% of revenue, above our guidance. The GAAP tax rate in Q4 was 10% and the non-GAAP tax rate was 15.4%. GAAP diluted EPS was $0.32 per share in the fourth quarter. Non-GAAP EPS was $0.70 per share above our guidance. Sales for Materials Solutions in Q4 were $362 million. Sales were flat year over year and up 4% sequentially. Sequential growth was driven primarily by advanced deposition materials supported by demand for moly deposition within NAND. Adjusted operating margin for MS was 20.9% for the quarter. The year-on-year decline in margin was driven by slightly lower production volumes and strategic investments. The strong sequential increase in margin was driven by increased production volumes and product mix. Sales for Advanced Purity Solutions in Q4 were $465 million down 5% year on year and up 1% sequentially. The year-over-year sales decline was driven by Fluid Handling and Soups, partially offset by strong growth in liquid filtration, which had another record quarter. Sequential growth in liquid filtration and gas purification was partially offset by lower food sales. The adjusted operating margin for APS was 24.8% for the quarter. The year-on-year decline in margin was driven by cost related to the ramp of our Taiwan and Colorado manufacturing sites and lower production volumes. The sequential decrease in margin was primarily driven by unfavorable product mix and timing of operating expenses. Moving on to cash flow. Full year free cash flow was $404 million, representing a free cash flow margin of 12.7% in 2025. Nearly a 300 basis point increase year over year. This improvement was driven by our team's disciplined focus on working capital, including accounts receivable, and decreased year-on-year inventory growth. CapEx for 2025 was $299 million. Approximately 9% of sales. A quick overview of our capital structure. During the fourth quarter, we paid down $150 million of the term loan from cash on hand. And for the full year, we paid down $300 million of the term loan. At quarter end, our gross debt was approximately $3.7 billion and our net debt was $3.4 billion. Net leverage ended the year at 3.8 times. As David said, we are targeting net leverage of below 3.5 times by 2026. Moving on to our Q1 outlook. We expect our Q1 sales to range from $785 million to $825 million reflecting an increase of approximately 4% to the midpoint year over year. Gross margin of 44.5 to 45.5% both on a GAAP and non-GAAP basis. We recently completed an assessment of the useful lives of our assets, This gross margin guidance includes the positive impact from the useful life accounting change of approximately 100 basis points in Q1 on gross margin. We expect GAAP operating expenses of $229 million and non-GAAP operating expenses of approximately $181 million. EBITDA margin to range from 26.5% to 27.5%. Net interest expense of approximately $47 million. We expect our non-GAAP Q1 tax rate to be approximately 15%. We expect GAAP EPS between $0.43 to $0.51 per share. Non-GAAP EPS between $0.70 and $0.78 per share. And we expect depreciation of approximately $36 million in Q1. Looking slightly further ahead, based on our current visibility, we expect Q2 sales to increase 1% to 3% sequentially from Q1, in line with normal industry seasonality. I'd like to provide a few modeling items for the full year of 2026. We expect net interest expense will be approximately $190 million, the non-GAAP tax rate to be approximately 15%, Diluted share count of approximately 152 million shares for Q1 and approximately 153 million shares for the full year. CapEx of $250 million and depreciation of $150 million reflecting the recently completed assessment of the useful lives of our assets. Before we begin Q and A, I would like to thank the finance team, the leadership team, and the board for their partnership over the past three years. I am proud of the work we have done to strengthen the foundation of the business and position the company to capitalize on future opportunities. It's been a privilege to be CFO and I am confident in Entegris' path forward. With that, operator, let's open the line for questions. Operator: The floor is now open for your questions. If at any point your question is answered, you may remove yourself from the queue by pressing star two. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Our first question is coming from Mike Harrison with Seaport Research Partners. Your line is open. Mike Harrison: Hi. Good morning. Best wishes to Linda, and welcome Jeff to the team. Morning, Mike. One of Morning, Mike. David, I appreciate you walking through your detailed thoughts there on underlying market growth in 2026. It sounds like if we roll that altogether, you're looking at something in the mid-single-digit range, for growth overall. But I'm curious. Historically, Entegris would talk about growing three to six percentage points faster than the underlying market. As you look at the opportunities that you're seeing, you mentioned the advanced nodes in two nanometer as well as growing content per wafer in NAND. I'm just curious, are you expecting an environment in 2026 where you can get back to growing in that three to 6% range faster than underlying markets. David Reeder: Hi, Mike. Good to speak to you again. When we think about 2026, we do think the industry backdrop is a little bit more constructive than it was in 2025. And specifically, if you think about the areas in which we grow revenue, We do about 40% of our revenue is from advanced logic, about 30% from mainstream logic, and then the remainder from memory. And so when you look at 2026, it feels like advanced logic is pretty fully utilized as we add capacity there. We get the benefit of both additional growth plus more content. Mainstream looks kind of mixed, so we think we're performing on a cylinder for advanced logic. We think mainstream looks mixed but stable. And then we think memory can perform. So think of it kind of performing on three of our four cylinders. The additional piece to then layer on top of it is CapEx. And CapEx was not terribly constructive in 2025. But we do think that CapEx could be more constructive in '26 particularly the portion related to fab CapEx. So when you look at that industry back and you think about outperformance, I'll just add a couple of more points to that. One, we typically get the most outperformance when we have node transitions. Because that drives additional content per wafer. So that's typically our biggest driver of outperformance. And so while both logic and NAND node transitions look solid, we don't really control the timing and pace of that. And so and then, of course, as I mentioned, the CapEx piece is particularly fab CapEx is relatively volatile. So when we look at 26, we look at our first quarter guide, plus 4% at midpoint slightly greater than 6% at the high end of our guidance range. And, of course, we gave you a little bit of color for Q2. We feel like the setup is constructive to the extent the node transitions, both logic and memory happen. We feel like we can get back to outperformance. And then the CapEx piece looks to be a little bit more second half weighted. So I gave you a lot of details there. For contents, Mike. But did you have a follow-up? Mike Harrison: Yes. That's very helpful. I follow-up is this kind of on the margin trajectory for the year. Your guidance for Q1 calls for a little bit of sequential contraction in EBITDA margin. I assume that's just seasonality. But anything you can share in terms of how we should think about margin in '26? Presumably, you're getting back to more normal production rates yourselves. And seeing some benefits from ramping the Taiwan facility. So I appreciate some details there. Linda LaGorga: Yeah. So, thanks, Mike. Thanks for that question. You know, let me bring it up to gross margin. I know you mentioned EBITDA, but think it's important to go back to when we think about our gross margin. First, it's really stabilized in the current range. We had mentioned we called a trough at the second half of last year. And you could see based on the Q1 guidance that stabilization. The key as we drive margins, and this will drive through to the bottom into EBITDA, is the volume leverage. And so as we said, there's a constructive environment going into this year. As we see more production going through our facilities, that's going to go into our gross margin and see that improvement. That includes ramping Taiwan this year and continuing to ramp. And then as David mentioned in his remarks, we did rationalize one facility, and we plan to rationalize another one in this first half of the year. So again, all those dynamics, volume leverage, combined with Taiwan ramping, combined with some rationalization is going to help us improve gross margin with that increased production. And drive down to EBITDA. Mike Harrison: Thank you, mate. Alright. Thanks very much. Operator: We'll move next to Timothy Arcuri with UBS. Your line is open. Timothy Arcuri: Thanks a lot. David, for the full year, you said CapEx is going to be at modest. We know WFE is going to be up low to mid-20s. You know, probably more than that. What about MSI for the year? Don't think I heard you give a target for MSI for the year. David Reeder: Yeah. Good morning, Tim. MSI, we think, is middish single digits. Still early days, and, obviously, we've got Chinese New Year that's happening next week in Q1 versus the January. But when you look at MSI so there's some Q1 dynamics in there. But when you look at MSI overall for the year, our current estimates are kind of middish single digits. Agree with your commentary on WFE. That looks like gonna be strong this year. That's about a third of our CapEx related revenue. And then two-thirds of our CapEx related revenue is tied to fab construction CapEx. And when you think about that portion, it looks like there's probably not a lot of that in the first half. With it picking up perhaps even significantly in the second half and then, of course, setting up well for 2027. Did you have a follow-up, Tim? Timothy Arcuri: I do, David. Yeah. So if I just add that altogether and I run the ratios, you're probably I mean, your market's probably up somewhere close 10%, probably high single digits at least. So do you think you can outgrow that by a significant margin? I mean, is it a good is that a good level to say that, you know, you should grow revenue at least you know, high singles, probably even low, you know, doubles to get to your to get to your outperformance, you know, metrics for the year. David Reeder: Hi, Tim. I think I've given you a lot of the elements here. I think we'll probably stand pat for guiding one quarter at a time. We gave you a little visibility with respect to second quarter normal seasonality would imply kind of sequential growth of 1% to 3% from first quarter based on order pattern we feel pretty good about that range right now. And so we'll continue to give you more visibility as we see it. I think the wild card that we kind of see right now is how does that fab CapEx kind of layer in throughout the course of the year. And then how do we kinda participate in that portion of the revenue? That's the piece that, that we're really watching right now. And it's it's moved pretty significantly month to month. So that's that's the hesitancy or perhaps the conservatism that you're hearing in my voice. I wanna see how that plays out a little bit. Timothy Arcuri: Okay, David. Thanks. Operator: We'll take our next question from Christopher Parkinson with Wolfe Research. Your line is open. Christopher Parkinson: Great. Thank you. Open. You mentioned last quarter more of a concerted selling effort directed to mainstream and I was wondering if you could give us a quick update on what's underway there. David Reeder: Thanks, Chris. You know, we look at our customers in quite deep in quite a lot of detail. Particularly kind of our top 50 ish customers. And so when we look at that customer list and we look at mainstream, And so you've got we then kinda break them down into their corresponding portions of you've got kind of mainstream logic, You've got some mainstream in there that's associated with some special manufacturing, for example, silicon carbide as well as some other nodes. And so when we look at that universe, I'll start with kind of the latter. Silicon carbide was a headwind for us. In 2025. I'm talking on a year over year basis from '24 to '25. We think that is now stable and perhaps even improving slightly. Albeit slowly in '26. So we think the silicon carbide headwind where we have a very nice solution for the CMP process. We feel like that will not be a headwind for us, at least expectation wise, in 2026. So we think that will be constructive and helpful. And we continue to gain even more share in that process. When we look at the other mainstream, and I'm referring to mainstream logic, mainstream logic has a number of needs across our entire product portfolio. And so our efforts in mainstream logic become more about providing all of those solutions not just individual product lines to each of those mainstream customers. So when we look across those customers, we're trying to more deeply penetrate their wallet across our complete product portfolio. Whereas in some of those mainstream logic customers, we're only selling individual product lines. Did you have a follow-up, Chris? Christopher Parkinson: Yes. And sorry. I should've said this is Harris Fine on for Chris. For the second question, I mean, for for a while now, there's been a lot of headlines on China competition. I guess it'd be helpful to hear if you're seeing anything in terms of changing behaviors or any sort of step up in competitive intensity. And if so, where where are you seeing it? David Reeder: Good question. When we look at the China market, we think the fundamentals of the China market are very similar to the rest of the world. In other words, they care about yield and performance. And so when you think through products in our space, that improve yield and performance, you think of the Entegris products. That do both. It's one, continuing to deliver purity both at point of use and at source, and then, of course, having high purity materials that enter the process pure. And so those two products, which is really product portfolios that Entegris is built upon, that improves yield and performance. And that's competitive irrespective of kind of where you are around the world. Now then when kind of hone in specifically in China, because they compete fiercely in China, our biggest obstacle in China is being able to guarantee to those customers that that we can assure supply. So can we guarantee supply to those customers? And when we can guarantee supply to those customers, we find that they revert back to yield and performance being important. And so what you saw us do in 2025 was you saw us put a really concentrated effort into qualifying more manufacturers manufacturing overseas, specifically for the China market as well as the rest of Asia. We got up to about 85% of products, at least in first quarter, about 85% of our revenue for China, we're expecting to supply from region. And so we're able to guarantee that supply. We're gonna continue to work on that throughout 2026. Probably getting to a number you know, around or even greater than 90%. And so I think as we continue to be able to qualify more products for Asia manufacturing, we then get to guarantee supply to those customers. Then we get to compete in that market like we do around the world. And when we can compete fairly in those markets, we tend to do pretty well. Operator: We'll move next to Charles Shi with Needham. Your line is open. Charles Shi: Hi. Thanks for taking my question. Hi, David. A good result. I wanna ask you about NAND. I think we've spoken about this for a while. NAND sentiment wise, pricing wise, business wise, for your customers have inflected. But it it doesn't appear that it's inflecting for you yet. Wondering what's your best prediction as of today. When do you think that business is gonna pick up? And by the way, I did notice in your prepared remarks, double-digit content gain for this year, even on the back of pretty flattish or maybe single-digit MSI should do well for your NAND. But I just don't really feel like I see that in your March quarter guide or June guide. Is it that, like, more a second half driver? And why it's still delayed versus your customers? Thank you. David Reeder: Good morning, Charles, and thank you for the question. With respect to NAND, we think the underlying demand like you remains very strong. In fact, you started to see pricing kind of firm for NAND in the 2025, you saw the pricing continue to perform well throughout the latter half then of '25 and then continue to grow through '26. We actually think that increased wafer starts on NAND has actually been very let's call it, measured. And so we think incremental wafer starts for NAND will remain measured because what we're actually starting to see is we're starting to see some node transitions on NAND where you get a premium where the NAND producers get a premium pricing for bit density. And so we're finally starting to see some of those node migrations that we expected on NAND going from kind of, you know, call it 250 ish layer count to roughly 300 ish layer count. So as you kinda grow that layer count, kinda 20% bit density, growth on a year over year basis. It's a premium product for them. We get benefit from those incremental layers. But it effectively consumes capacity. And so I think what you're hearing from us is we like the incremental layers. Incremental layers brings higher content per wafer for Entegris, but the actual weight increase wafer starts we're waiting for the NAND producers to effectively drive those wafer starts. So this is the trade-off in environment right now that, you know, when we look at Q1, we think we've got a solid guide for Q1. We've got an indication kind of for second quarter that we feel quite comfortable with. And then we'll leave it for the producers to determine the rate and pace both of the layer count as well as incremental wave wafer growth. Did you have a follow-up, Charles? Charles Shi: Alright. Thanks, David. Yes. I do. The second question, thanks for the China color. And the amount of supply supporting the China market. But I wonder if you have a view how your China business is going to grow. In '26. And if you can, what was the China growth number for 2025? Thank you. David Reeder: Sure. So in terms of the China business growth in '26, I'll let Linda in a moment talk about the '25 growth. But the areas that we expect to grow in '26 for China, One, we think some of the CapEx related areas will grow in 2026, specifically FM and perhaps FUPS. We expect LMC or liquid filtration to perform in 2026 in the China market as well as some of the CMP products. There's probably a couple others in there, but we expect the China market to have growth in '26, and we think it's kind of underpinned by the areas that I mentioned. Linda, do you have the China growth number for 2025? Linda LaGorga: Yeah. So China has remained twenty-four and twenty-five, 21% of actual dollars are down slightly, but you know, as we've talked about before, and they've highlighted some of the reasons why our China customers like our product, We've been able to maintain, you know, very solid performance in China. Charles Shi: Thanks, David and Linda. Appreciate the color. Operator: We'll take our next question from Melissa Weathers with Deutsche Bank. Your line is open. Melissa Weathers: Hi, there. Thank you for letting me ask a question. I wanted to touch on something you flagged in the prepared remarks the potential impact of memory shortages and pricing on the electronics market and any decreased production we could see from that. I know you're calling for middish single-digit growth, which middish, that's a new word for me that I've learned today. Could you help us what are you embedding in that Outlook with respect to, like, any demand destruction from the memory shortages? David Reeder: Yeah. I think when we think about our first quarter guide, obviously, we didn't factor anything into the first quarter. We didn't really factor anything into kind of our, at least, indication for second quarter at this stage. I think, really, what we were doing was we were just flagging it as a potential. You know, we're expecting mainstream to be stable this year, perhaps even slightly improving versus 2025. But a lot of the mainstream logic a lot of that production is reliant on some form of memory. And so we're really just, at this stage, calling it out as a flag to watch for the second half of 2026. I think that's where the impact would be if there was any. Did you have a Melissa? Melissa Weathers: Yes. I did. On the capacity shutdowns that you've done in the fourth quarter and that you might do in the first half of this year. I'm sorry if I missed it, but have you given any timing on when we could expect those closures to impact gross margins? David Reeder: Yeah. Let me broaden the question out. Gross margin, and then I'll answer your question specifically. And, you know, in the third quarter, which was my first as CEO, we guided kind of a trough for gross margin between 43-44%. Third quarter gross margin was 43.6. We were able to increase that to 44% in fourth quarter. In first quarter on slightly lower volume, we're still guiding you on a normalized basis to kind of 44%. And so we feel like at this point, incremental volume growth for us will drive incremental gross margin from these levels. So from that perspective, we feel quite good about it. We were able to rationalize one facility in the fourth quarter of this year excuse me, of 2025. As we go forward into 2026, we'll get some modest benefit from that in terms of utilization. When we think about what I mentioned in the script, which was we're expecting to rationalize another facility in 2026. Then you would expect to get some minor benefit on a go-forward basis through the remainder of '26, and we'll continue to go. We'll continue to both ramp our facilities in Taiwan. We'll qualify our facility in RockRemen and we'll continue to look at our manufacturing footprint and the rate and pace at which utilization is improving and make the decisions that you would expect us to make. So, for all those reasons, we feel quite good about the trajectory that we're on. And we feel like the execution is in front of us to perform. Thank you. Melissa Weathers: Thanks, Melissa. Operator: We'll move next to Elizabeth Sun with Citi. Your line is open. Elizabeth Sun: Hi, good morning. Thanks for taking my questions. The first one, I guess, it's David, you briefly talked about AI is 5% of the wafer starts market, but I believe your content is much higher for AI-related products. So I'm just wondering if you have looked from the perspective of like, how much is AI as a percentage of total revenue? David Reeder: Good morning, Elizabeth. What we tried to give you some at least, some indication and some color in the prepared commentary. We mentioned that about 60% of our revenue in 2025 was driven by advanced nodes, so advanced manufacturing. That's both logic and memory. And then as you think about going forward, AI is a big part of that growth in advanced manufacturing. And for example, advanced logic we designate that as seven nanometers and below. And then the last kinda two generations of memory, the newest one plus current manufacturing, that's how we define it, advanced manufacturing nodes. So from that perspective, it's about 60% of our total revenue as a company. We expect that to grow going forward because we expect both incremental to come online mostly to satisfy AI, And then, of course, we expect memory to continue to grow as AI drives more growth through memory. Did you have a follow-up, Elizabeth? Elizabeth Sun: Yes. I do. Thanks for that. And advanced packaging, I understood it has been a smaller part of your total revenue, but I think I heard in your prepared remarks that you are expecting some POR wins or some and you are doing some efforts on HPM side. So I was wondering what's your expectation for advanced packaging revenue this year? David Reeder: Yeah. Advanced packaging is an area that grew nicely for us in 2025. Representing, you know, roughly a $100 million plus minus. We expect that to continue to grow nicely in 2026. And this is an area where we've made a little bit more concerted effort to grow across a number of product lines. So those product lines sampling now. And we have some others that will sample later in the year. For the advanced packaging market. So we're not expecting as much benefit in '26 as perhaps we you know, could get in '27 and beyond. But it is a growing part of the market. It is starting to look more and more like some of the more advanced nodes in terms of its complexity and the challenges that our customers face. And it's an area that ultimately will play well with some of our product portfolio. So, you're gonna see a little bit more of a focused effort from us in this space. And we're cautiously optimistic. Elizabeth Sun: Great. Thanks, David. Operator: We'll take our next question from Edward Yang with Oppenheimer. Your line is open. Edward Yang: Hi, David. Good morning, and thanks for the time. Just wanted to touch again your leverage to memory market trends. Obviously, a lot of excitement there. You just first remind us your ballpark rep total revenue exposure to memory overall and where it could go in a cycle. And maybe also clarify the trade-off between what you were talking about layer count benefit versus wafer counts, like with CMP, I would think that you'd be relatively indifferent, but perhaps in other parts of the business. You know, you get more or less revenue. David Reeder: Sure. So memory is about 30% of our total revenue. It's roughly split equally, and I'm standing back and squinting. It's on an approximate basis. So say about half of it is NAND, about half of it is DRAM. As you know, DRAM has performed very well in 2025, very high utilization rates, across DRAM. More of DRAM moving from kind of individual sales of DDR5 into HBM. And so as that migration happens, there's a, you know, some incremental content associated with that. But it's not the same as what you would get, for example, from an incremental wave. And so there is incremental content when you go from standalone DDR5 to HBM. But there would be more total benefit if you would start and generate more total wafer starts. But the technology capacity for DRAM is pretty fully utilized exiting twenty-five. And we see it remaining that way through 2026. The other half roughly of this 30% of revenue is NAND. NAND is probably around 85% utilization. That's a bit from where it was in peak in the twenty-two twenty twenty-two type time frame. What you're seeing in NAND is you're seeing that 15% available capacity starting to see it get absorbed by incremental wafer count or excuse me, by incremental layer count. And so, as those incremental layers happen, we're relatively indifferent on whether you're absorbing that capacity on an incremental layer basis or on a wafer basis. I think on a general statement, we would say we would be indifferent. I think the reality is we would probably get slightly more incremental benefit from a wafer, from a full wafer start. But we do get benefit from both. Did you have a follow-up, Edward? Edward Yang: Yeah. Yes. I do. So David, you mentioned, you know, focusing on, winning new PORs, and I was just wondering has your go-to-market approach changed there? Are you cross-selling more, you know, intra division between and and also interdivision, between material solution and advanced purity solutions. David Reeder: Yeah. I think you've seen us really a lot of the good sales focus that was in place before I joined where we've kinda continued that momentum. Since I've joined the company. I think what perhaps we've been able to focus a bit more on now is we have been able to focus a bit more on selling the complete portfolio of products. We've always engaged very well on a technology roadmap basis, so that's something we don't want to change. We want those best efforts where we're focused on our customers' node transitions and technology roadmap, many of which are kinda several years out. But then as we do that, we also want to layer that in that road map and we that engagement on road map. We want to layer in our other product lines where we bring best in class filtration, best in class purification, best in class wafer handling and fluid management and bring that together with some of these longer technology road maps such as the CMP process, the deposition process, the etch process. So, you've seen us try to make a concerted effort with not only continuing the good engagement, on the technology road map, many many many times at which it's looking at several years, but then also bring more of the other product lines along in that engagement and discussion. For today. Edward Yang: Thank you. David Reeder: Thanks, Edward. Operator: We'll move next to Bhavesh Lodaya with BMO. Your line is open. Bhavesh Lodaya: Hi. Good morning, David, and congrats on a nice quarter. And certainly, all the best to Linda, and welcome, Jeff, as well. You shared a lot of color, for the short term. So maybe a longer-term question. If I look at where MSI overall MSI stands today, we are still under prior peaks. Around 13% lower, it seems. And we don't see a week go by without news of higher and higher CapEx spend in AI. Data centers, If end market growth kind of hangs in there, I'm curious on your view as to how that plays for MSI over the next few years, next three to four years. As these capacities have brought online. David Reeder: Thanks, Bhavesh. Well, you're right. It is somewhat of a bifurcated market where we're talking about maybe we need to start new fabs but yet you're looking at MSI and you're looking at some underutilization in some areas of the market. Where you're not fully utilized as of yet. So let me maybe the best way to answer this question is to kinda break it down into its constituent parts. If you think about advanced logic which we define as seven nanometers and below, advanced logic is pretty fully utilized, particularly advanced logic below five nanometers. And so you're seeing a lot of incremental capacity and focus on incremental capacity for the most advanced nodes. And that's growing total capacity for this seven nanometer and below advanced logic category. But it's slow and it takes time to grow two-nanometer base and it takes time to then also transition to new nodes, for example, like 1.4 nanometer. But that space is pretty fully utilized or that category seven nanometers and below is pretty fully utilized. So what you need is you need more capacity to grow MSI. DRAM is also very highly utilized. So if you wanna grow a lot of MSI and DRAM, you need incremental capacity. And I think you're starting to see some of the producers of DRAM think through where and how do you add that incremental capacity and over what time frame. And so I think you're seeing the market kinda recognize that DRAM is very tight. Not a lot of incremental available capacity and how do you best drive incremental capacity? Is it through you know, incremental tools and perhaps Is it through, you know, groundbreaking? I think you'll see the market kind of make some moves on this front through 2026. NAND, there is some available utilization. My best guess is that the utilization that's available for NAND will be will be consumed by layer counts some combination of layer count and MSI growth, but I think it's more layer count than MSI. I think ultimately you get some of both. But I would say at least at this point in time, I think it's more layers with less lesser amounts of incremental wafer growth or MSI growth. And then I think ultimately that market perhaps will have to look at adding capacity. But I think that's probably the second half, perhaps even latter part of the second half. Type of decision before we see we see what's happening there. And then we're now we're now kind of on to the crux of your question. Which is mainstream. Mainstream is the bulk of the logic market. In terms of MSI. And mainstream has been slow to recover and mixed. The good news is that feedback on mainstream inventory it looks like inventory levels are relatively healthy. But the rate and pace of growth on the mainstream part or MSI growth on the mainstream part of the market. That's a bit unclear right now. And that is the bulk of MSI for logic. I'm talking total logic. The bulk of the capacity sits in mainstream. And I think that's the part that people are looking at and wondering you know, what's the rate and pace of growth in mainstream because it's such a big part of logic MSI. Did you have a follow-up, Bhavesh? Bhavesh Lodaya: Yes. In your equation here, so one side of growth comes from utilization. The other side comes from, I would say, content gains or a mix benefit. As more layers come in, Where do you put outperformance metrics in this? Do you count the content gains and outperformance, or would outperformance be over and above these two things? David Reeder: Yeah. We think of outperformance really from a revenue perspective. And so to the extent you grow layer count, it actually increases content per wafer. And so from that perspective, that incremental content per wafer would show up in revenue, and we would count that as outperformance to the market because it would be incremental kind of to what the normal market would see. So, that's how we would think about that. Bhavesh Lodaya: Got it. Appreciate the thoughts. Thanks. David Reeder: Thanks, Bhavesh. Operator: We'll take our next question from John Roberts with Mizuho. Your line is open. John Roberts: Thank you. And, Linda, best wishes, and welcome again. Jeff is also here. Could you talk about the weaker parts of the business? So it looks like, again, FUPS were probably gas filtration was probably down. Is that all related just to the new fab construction activity being down and do they continue down in the first quarter? David Reeder: Yes. So when you look at 2025, fab construction CapEx, was down high single digits, call it seven ish percent. Our CapEx related business was down about the same amount. And it was really driven by two product lines both within APS one being fluid management and the other one being FOUPS. Those were the two that were down the most and very much in line with that fab construction CapEx. So when we think about 2026, and you think about, you know, perhaps fab construction CapEx being at least flat and perhaps at this point up slightly, though to be determined how much through the course of '26. You're seeing a corresponding recovery both in both those two businesses. So our expectations for the year is that Fluid Management and Fuchs will have a better year versus 2025 on the basis of fab construction CapEx at a minimum being flat and most likely being up. But to be determined how that kind of did you have a follow-up, John? John Roberts: Well, I'll follow-up with how about the March? David Reeder: So sorry. You cut out on me. What the question was was what again? John Roberts: Will they be down will they be down in the March or more flattish in the March? David Reeder: I think at this point I'll speak a little bit on a sequential basis. We'll see ultimately how much kind of revenue for those specific product lines fall in first quarter versus second quarter. But I think it's fair to say that we're already starting to see some recovery in those product lines from an order pattern perspective for 2026. And then ultimately, the timing of whether it's first quarter or second quarter that will be determined by delivery and our customers. But I do think that we've seen order patterns improve for those product lines as we're very early here in 2026. John Roberts: Thank you. David Reeder: Thanks, John. Operator: This does conclude the Q and A portion of today's call. I would now like to hand it back to Jeff Schnell for any additional or closing remarks. Jeff Schnell: Great. Thank you for joining the call today and your continued interest in Entegris. Please reach out if you have any follow-ups. Operator: Thank you. This concludes today's Entegris fourth quarter 2025 earnings conference call. Please disconnect your line at this time, and have a wonderful day.
Operator: Good day, and welcome to the Danaos Corporation Conference Call to discuss the Financial Results for the three months ended December 31, 2025. As a reminder, today's call is being recorded. Hosting the call today is Dr. John Coustas, Chief Executive Officer of Danaos Corporation, and Mr. Evangelos Chatzis, Chief Financial Officer of Danaos Corporation. Dr. Coustas and Mr. Chatzis will be making some introductory comments, and then we will open the call to a question and answer session. Evangelos Chatzis: Thank you, Operator, and good morning to everyone, and thank you for joining us today. Before we begin, I quickly want to remind everyone that management's remarks this morning may contain certain forward-looking statements, and the actual results may differ materially from those projected today. These forward-looking statements are made as of today, and we undertake no obligation to update them. Factors that might affect future results are discussed in our filings with the SEC, and we encourage you to review these detailed Safe Harbor and Risk Factor disclosures. Please also note that where we feel appropriate, we will continue to refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, time charter equivalent revenues, and time charter equivalent dollars per day to evaluate our business. Reconciliations of non-GAAP financial measures to GAAP financial measures are included in our earnings release and accompanying materials. With that, let me now turn the call over to Dr. John Coustas, who will provide the broad overview of the quarter. John? John Coustas: Thank you, Evangelos. Good morning, and thank you all for joining today's call to discuss our results for 2025. In this quarter, it became evident that the business community continues to adapt quickly to geopolitical disruptions. Despite concerns that tariff and geopolitical uncertainty would cause a slowdown, it has not materialized. At the same time, the hype around AI-related investments has increased optimism. China's exports continued to set new records, and consequently, container volumes have reached record highs, with the Suez Canal still largely avoided by major liners, and trade patterns increasingly transforming to multipolar demand for midsized vessels has remained very strong. Against this background, we continued our strategy of securing long-term employment for our existing vessels through forward fixtures by either extending existing charters or by new charters even for late 2027 deliveries. We also continue to invest in modular container vessels. We ordered six 1,800 TEU vessels, four 5,300 TEU vessels, and two 211,000 deadweight Newcastle MAX dry bulk vessels for deliveries in 2028 and 2029. We have secured ten-year charters for four of these vessels, and the company's total contract revenue increased to $4.3 billion as of the end of the quarter, giving us great earnings visibility into the future from which we derive our ability to manage any eventual future market development. On the financing front, we completed a seven-year €500 million unsecured bond offering at a 6.875% coupon, one of the most competitively priced deals ever achieved in the shipping industry for an unsecured bond of such tenor, further diversifying the capital structure and reaffirming our access to the deep and liquid international debt capital markets. Our liquidity at year-end reached $1.4 billion, backed by a strong financial profile. We have begun exploring selective investments in the energy sector to broaden revenue sources and expand the LNG business. In this context, Danaos became a strategic investor in the Alaska LNG project, providing access to LNG transportation opportunities associated with a facility planned to produce 20 million tons per annum. The company remained focused on positioning itself at the forefront of shipping and energy growth areas for the benefit of our shareholders. With that, I'll hand the call back over to Evangelos, who will take you through the financials for the quarter. Evangelos Chatzis: Thank you, John, and good morning again. I will briefly review the results for the quarter and then open up the call to Q&A. We are reporting adjusted EPS for 2025 of $7.14 per share or adjusted net income of $131.2 million compared to adjusted EPS of $6.93 per share or adjusted net income of $133.3 million for 2024. This $2.1 million decrease in adjusted net income between the two quarters is the combined result of a $6.6 million increase in total operating costs, mainly due to the increase in the average number of vessels in our fleet, a $2.1 million legacy claim receipt that was booked in the fourth quarter of last year with no such booking in the current quarter, a $1.8 million decrease in dividend income together with a $100,000 increase in equity loss on investments, all of those partially offset by an increase of $8.1 million in operating revenues and a $400,000 decrease in net finance expenses. The increase in our containership fleet produced $5.2 million of incremental operating revenues that were supplemented by an extra $10.5 million of incremental revenues as a result of higher fleet utilization between the two periods and $2.2 million in additional revenues as a result of higher charter income from our dry bulk fleet. Those were partially offset by a decrease of $7.8 million in revenues of our container segment as a result of lower contracted charter rates and $2 million lower non-cash U.S. GAAP revenue recognition. Vessel operating expenses increased by $2.8 million to $48.4 million in the current quarter from $54.6 million in the corresponding 2024, mainly as a result of the increase in the average number of vessels in our fleet, while our daily operating costs increased to $6,377 per vessel per day for the current quarter compared to $6,135 per vessel per day in 2024. Our operating costs continue to remain among the most competitive in the industry. G&A expenses increased by $6.7 million to $28.4 million in the current quarter compared to $21.7 million in 2024. This is mainly attributed to incremental stock and cash bonus awards of $6.6 million. Interest expense, excluding finance costs amortization, increased by $4.2 million to $13.4 million in the current quarter compared to $9.2 million in 2024. This increase is the combined result of a $5.8 million increase in interest expense due to an increase in our average indebtedness of around $400 million between the two periods, partially offset by a reduction in the cost of debt service by approximately 50 basis points, mainly as a result of a decrease in swap costs between the two periods. This was partially offset by a $1.6 million decrease in interest expense due to higher capitalized interest on vessels under construction between the two periods. At the same time, interest income came in at $8.5 million in the current quarter versus $3.9 million of interest income for 2024 due to the increased average cash balances, partially offset by lower interest rates. Adjusted EBITDA increased by 0.2% or $300,000 to $190 million in the current quarter from $189.7 million in 2024 for reasons that have already been outlined earlier on this call. We also encourage you to review our updated investor presentation that is posted on our website as well as subsequent events disclosures. Let me lay out a few of the highlights. Since the date of our last earnings release, we have added $428 million to our contracted revenue backlog. As a result, our contract backlog from containerships has considerably improved and now stands at $4.3 billion with a 4.3-year average charter duration. Contract coverage is already at 100% for 2026, stands at 87% for 2027, while even for 2028, we are already 64% contracted in terms of operating days. Our investor presentation has analytical disclosure on our contracted charter book. As of December 31, 2025, our net debt stood at $141 million, and this translates to a ratio of net debt to adjusted EBITDA of 0.2 times, while 61 out of our 85 vessel fleet are unencumbered and debt-free, with an extra 16 vessels that are encumbered as being secured into our revolving credit facility but are also debt-free since we have not made any drawdowns under this facility. We have declared a dividend of $90 per share for this quarter. We continue to execute under our share repurchase program, and we currently have $65 million remaining authority to repurchase stock under our $300 million share repurchase program. Finally, as of the end of 2025, cash stood at $1 billion, while total liquidity, and that includes availability under our revolving credit facility and marketable securities, stood at $1.4 billion, giving us ample flexibility to pursue accretive capital deployment opportunities. With that, I would like to thank you for listening. Operator, we are now ready to open the call to Q&A. Operator: We will now begin the question and answer session. The first question comes from Omar Nokta with Clarksons Platou Securities. Omar Nokta: John and Evangelos, another solid update. Backlog continues to grow. Thank you. Yes. Congratulations on the continuation of your career. Thank you very much. Appreciate it. Yes. I just wanted to ask about, you know, the business is obviously on solid footing. And with the backlog expanding, we are continuing to have plant-based flexibility. And just wanted to ask maybe if you could just touch a little bit more on the LNG project. As we understand it, Danaos will be the provider of choice for ships for the project. What do you expect in terms of project timing of when a decision is made, the number of ships that you would be able to bring to the project, and then maybe a sense of duration of the charters if those come about? John Coustas: Well, the current timeline is for completion of the projects in 2030. In terms of the number of ships, there are going to be between six and ten ships required for these volumes. It depends a bit also on the exact routing where these ships are going to be employed, but it is going to be definitely from Alaska to the Far East. But of course, it is different if it is, let us say, North in Korea or a bit more south towards the Thailand area. So all that will play out a bit later. And we will need to start really placing orders practically in about a couple of years' time. In terms of duration, this project is really a very long-term project. We are talking about employment and twenty years something like that. Omar Nokta: Okay. Thank you. That is helpful. So we will see how things develop on that front. And then just a second question, and I will pass it back. The Newcastle Max orders are interesting, and they come here two or three years after you have invested in the existing Cape fleet. How should we think about further orders from here? Should we expect a series to come? And then how are you thinking about those vessels as they join your fleet? Are they additive to what you have currently? Or are you kind of thinking about them being replacement? John Coustas: Well, replacement, the fleet that we have now is, let us say, average, whatever, 14 years old. So okay, these ships can trade easily until twenty years. And in some trades even longer. On the other hand, we wanted to expand in the segment, and secondhand prices have gone dramatically up. And we decided really to move into the new buildings because we believe it is a much better value proposition. Omar Nokta: That makes sense. Okay. Well, very good. Thanks, John. Thanks, Evangelos. I appreciate your comments. Great. I will turn it back. John Coustas: Thank you. Thank you, Omar. Operator: The next question comes from Clement Molins with Value Investor's Edge. Please go ahead. Clement Molins: Hi, good afternoon, and thank you for taking my questions. Wanted to start by following up on Omar's question on the Newcastle MAX orders. Delivery is still a few years away, but should we initially expect those vessels to trade on spot? Because there has reportedly been some interest in recent weeks for long-term contracts on the Newcastle Max side. Would there be any interest to fix these two vessels on those contracts? John Coustas: Well, for the time being, no. What I mean is these vessels will be chartered. I mean, there are plenty of takers, but mainly charter them on index. And because of their characteristics, they are going to have a pretty high kind of index, which makes this investment attractive. Clement Molins: Makes sense. And following up on this, regarding your underwater Capesizes, time charter rates have gone quite well in recent months. And I was wondering, is there any appetite to fix some vessels on medium-term contracts? Or do you prefer to continue employing them on spot? John Coustas: I think that we will employ them mainly spot. If we find, let us say, some kind of extraordinary spike that we believe it is worth securing that, we can always secure it through FFAs or the vessels that we have on index can convert them on the same kind of basis. But overall, we want really to ride the spot market on these ships. Clement Molins: Thanks for the color. Makes a lot of sense. I will pass it over. Thank you for taking my questions. John Coustas: Thank you. Operator: It appears we have no further questions at this time. I would like to turn the call back over to Dr. Coustas for any further comments or closing remarks. John Coustas: Thank you for joining this conference call and for your continued interest in our story. Look forward to hosting you on our next earnings call. Operator: Thank you. This concludes today's teleconference. We would like to thank everyone for their participation. Have a wonderful afternoon.