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Operator: Good morning, ladies and gentlemen. Before I hand over to Ms. Magda Palczynska, Head of Investor Relations, a reminder that today's call is being recorded. Ma'am, you may begin. Magda Palczynska: Good morning, and welcome to UniCredit's Fourth Quarter and Full Year 2025 Results Conference Call. Andrea Orcel, our CEO, will take you through the presentation. This will be followed by a Q&A session with Andrea and Stefano Porro, our CFO. Please limit yourself to 2 questions. Andrea, please go ahead. Andrea Orcel: Good morning, and thank you for joining us. I'm proud to present our record fourth quarter results, crowning our best year ever and concluding 5 years of UniCredit Unlocked. UniCredit Unlocked was a transformation beyond what anyone thought possible. It released UniCredit's potential, taking us from laggard to leader among legacy banks and set a new benchmark for banking. It allowed us to lead the way in all metrics, including profitable growth and distribution. It exceeded all the KPIs we set for ourselves and built an incredible momentum that sets us apart today. Some teams might see this achievement as a reason to pause and reflect, but not this team. This team is taking this momentum and using it to dramatically increase our aspirations, expand our vision and supercharge the next phase of our profitable growth. While others are now following the path we carved with UniCredit Unlocked, we are determined to leap ahead. Today, we transition from UniCredit Unlocked to UniCredit Unlimited. If UniCredit unlocked traded up our bank's potential, UniCredit Unlimited is about transcending the boundaries of legacy banks to continue to lead in the new competitive environment that includes fintechs and hyperscalers. Our people remain the linchpin across the 2 phases. They are dynamic, driven by excellence and continuously upskilled. We are able to adapt to the changing needs of our clients and the environment, delivering faster decision, better service and more creative solutions. We are an institution with a flexibility to navigate the unprecedented speed of technological change and the unpredictability of geopolitics. This is the start of a bold new era for our bank, one defined by unlimited possibility, bold ambition and fundamental rethinking of what a pan-European bank should be. We're doubling down on accelerating profitable growth, and we are doubling down on our transformation, challenging every assumed limit of what UniCredit can be. This is necessary, and it is urgent. Fintechs and hyperscalers are not slowing down and technological development is only speeding up. It challenges us and redefines the boundaries we used to take for granted. But the work we have done in UniCredit Unlocked positioned us uniquely to go beyond these boundaries. We have the credibility, the ambition, the motivation and the determination. We have the momentum and the strengths. We have a clear vision and a clear strategy. We have the proven ability to flex and adapt to manage change. The time has come to rewrite the rules of the game. This means fundamentally reimagining what a bank must look like. It means overhauling our inherited assumptions, outdated models and artificial boundaries. It means not being bound by convention, but challenging them wherever they are found. It means recognizing that the greatest risks are not change and volatility, but remaining still and yielding to artificial limitation. UniCredit Unlimited is our commitment to move beyond those constraints to think, to act and build without limits. UniCredit Unlimited will provide a new blueprint that blends the strength of the traditional banks, the agility of a fintech and the dynamism of a technology company to create a personalized offer that truly puts the client of today and the clients of tomorrow at the center of all that we do. It will enable us to continue to both grow profitably faster and generate capital more than any other bank in the market. This phase reflects our unlimited ambition for our clients, unlimited opportunities for our people, unlimited potential to deliver profitable growth and distribution for our shareholders and the commitment to provide limitless opportunities for future generation of Europeans. Just as we set the transformation trajectory in the past with UniCredit Unlocked, now we are both accelerating our quality top line growth and doubling down on transformation, leveraging modern technology and AI to push the boundaries of what is possible. With UniCredit Unlimited, we aim to exceed all expectations of what a bank can be and forge a new path for a new era of European banking. Our ambition has always been clear; to become the benchmark for banking and unlock our bank and our people's potential to deliver for all our stakeholders. From '21 to '25, we did exactly that. We maximized efficiency, both operational and capital, while reigniting quality top line growth, delivering unmatched return on tangible equity and sector-leading distribution growth. We laid strong foundation for the future, leveraging a supportive risk and cost of risk environment. We have moved decisively to become the benchmark of the sector, delivering top-tier net revenue growth, the best operational efficiency, market-leading organic capital generation and superior return on tangible equity. This outperformance is not theoretical. It is a testament to our ability to execute, to deliver what we promise and to do so consistently quarter after quarter, year after year. From 2026 to 2030, we will change gears, striving to transcend the boundaries of service, productivity and efficiency that still constrain legacy banks. We will further accelerate our quality top line growth, capturing profitable market share across the right geographies, the right client segments, the right products. We're building on the last 5 years to deliver a decade of unmatched performance and returns. The pillars to reach this success remain unchanged: Quality top line growth, operational and capital efficiency, profitable bottom line growth outside organic capital generation underpinning growing distribution. Our outcome remains unmatched per share growth at high return on tangible equity and outsized sustainable distribution for the benefit of all our stakeholders. We aim to accelerate our quality top line growth, growing net revenue at 5% annually to around EUR 27.5 billion by '28 and directionally aspire to exceed EUR 29 billion by 2030. We will double down on transformation, leveraging technology and AI to reset the efficiency frontier. This will take our cost base down 1% annually to around EUR 9.2 billion by 2028 and below EUR 9 billion by 2030. This leads to best-in-class profitable growth as we aim to grow net profit at a 7% compounded annual growth rate to around EUR 13 billion by '28, increasing our return on tangible equity above 23% and directionally, aspiring to reach EUR 15 billion by 2030 with a return on tangible equity of 25%. For shareholders, this translates into unparalleled per share growth and a continuation of our market-leading distribution story with 80% ordinary payout. And before complementing with excess capital deployment or return, we aim to deliver circa EUR 30 billion in the next 3 years and EUR 50 billion in the next 5. This is in addition to the EUR 9.5 billion related to full year 2025. We're in an enviable position of not having to compromise between being able to grow at the top of our sector and remunerating shareholders attractively also at the top of our sector. And we have excess capital available to accelerate our growth and distribution further should we choose to pursue M&A or returning it to shareholders if no better opportunity for deployment is found. These financial strengths and the structural advantage of our presence in 13 plus 1 market provides us with a unique advantage for inorganic growth. Any M&A will be approached with the same discipline applied to date. Three core elements underpin our superior equity story that intends to deliver a decade of outperformance with an unmatched combination of profitable growth and distribution. First, our winning proposition. We have proven our ability to relentlessly execute, transforming from laggard to leader. We benefit from structural advantages that are hard to replicate and even harder to match. Second, strong momentum. Full year '25 was a year of record performance achieved while absorbing more than EUR 1 billion of headwinds from rates and EUR 1.4 billion of front-loaded extraordinary charges to strengthen our future trajectory. Third, our winning strategy. UniCredit Unlimited is a plan designed to reset what best-in-class looks like. We will accelerate quality growth and redefine sector efficiency, pushing beyond traditional legacy boundaries. We have a proven and scalable transformation blueprint. This is enhanced by structural advantages, combining attractive geographic footprint, best-in-class product offering and a high-quality client franchise. This blueprint is rooted in group scale with local reach. We started by putting clients truly at the center, unifying the organization around one common vision, strategy and culture. We empowered our banks and our people. We shrunk the center to what truly adds value and benefits from scale, ensuring our banks are as independent as possible within one clear group strategy and framework. This has created a bottom-up execution-driven culture that is delivering exceptional results. We harness scale only where it generally creates advantage, product factories, technology and data and AI, procurement, unlocking synergies and raising effectiveness across the group. This federal model enhances the entire system. The group provides platforms, capabilities and direction while empowering local bank delivery for clients and drive superior performance. UniCredit Unlocked was built around one core belief that there was an unmatched potential inherent within our bank that needed to be unlocked by leveraging our structural advantages. First, our attractive geographic mix. We are the only truly pan-European bank with 13 banks plus 1 embedded across Europe with top 3 position in 90% of our markets. This gives us scale, diversification, stability, limited FX dispersion in our results, lower geopolitical concentration compared with other cross-border models, and it provides strategic optionality, including M&A opportunities across 13 plus 1 markets. Second, our high-quality client mix. We have more than 20 million primary long-standing client relationships skewed towards private, affluent and SMEs, where returns are structurally more attractive, driven by a higher RoAC, cross-selling and crossover ratio. Third, our targeted product mix. Our group product factories, combined with our granular local reach, provide a breadth and depth of offering that local competitors cannot match. All of this is brought together and leveraged by our people, continuously striving for excellence, raising standards every day and turning strategy into delivery. Our structural advantages reinforce each of our 3 financial levers, delivering an unmatched combination of profitable growth and distribution. First, operational excellence. Our pan-European footprint is geographically closed and increasingly integrated. We increasingly operate on shared platform, common infrastructure and converging processes with common products, delivering unmatched efficiency. Second, capital excellence. We combine high-margin lending with capital-light products distribution enabled by our unique product factories seamlessly connected to our distribution and a client mix skewed towards more profitable segments. This allows disciplined capital deployment at high RoAC, driving both profitable growth and capital generation. Through increasing internalization, we are retaining more value across the chain, including investment, insurance and payments. Third, quality profitable growth. We're exposed to structurally higher growth in Central and Eastern Europe with limited FX dispersion and to a fiscal stimulus dynamics in Germany. Italy remains our core capital-light growth engine, while Austria ensures resilience and further growth potential. Our federal network means we lead in cross-border solution, amplifying growth through cross-selling and upselling across market and products. This is why our outperformance is structural and gives us confidence in our superior growth and distribution over time. We have delivered top-tier net revenue growth and established ourselves as a leader in efficiency, organic capital generation and return on tangible equity. We have outperformed peers in value creation, driven by strong share price performance and distribution growth, resulting in best-in-class shareholders' returns. The past 5 years demonstrate our consistent execution and outperformance, positioning us to extend this leadership into the next 5, achieving a decade of outperformance. We have delivered a record fourth quarter and record full year, running 20 consecutive quarters of quality profitable growth. This strong momentum is broad-based across all KPIs, delivering today while building for tomorrow. We are the benchmark, and we are entering 2026 with unmatched momentum. NII, fees and net insurance, cost, organic capital generation, net profit and ROTE, all performed better than expected at the beginning of the year. The underlying engines remain strong. NII sequential growth for the first time since rates began to normalize. Fees and net insurance growing ahead of expectation, supported by investment products and the internalization of life insurance. Cost flat, entirely absorbing new perimeter, minus 1.8% without them. This allowed us to front-load more than EUR 1.4 billion of extraordinary charges in hedging and integration costs so that future profitability is cleaner and stronger. As a result, net profit reached EUR 10.6 billion in '25, up 14% with return on tangible equity increasing 1.5 percentage points to 19.2% or importantly, 22% when adjusted for excess capital compared to peers. Distribution increased 6% to EUR 9.5 billion, crowning our best year ever. On a per share basis, we accelerated further with EPS up 20%, DPS up 31% and tangible book value per share up 19%. Our revenue engine remains strong. NII proved more resilient than anticipated, fully absorbing over EUR 1 billion of rate compression. Margins remained stable, supported by quality loan growth of 4% and disciplined pass-through of 31%. We saw the first sequential NII increase since 2024, up 2% quarter-on-quarter, a clear sign that the trough is behind us. Fees and net insurance continued to grow, up 6%, driven by accelerating investment fees, supported by strong commercial momentum, internalization of life insurance in Italy boosting net insurance income. Fees and net insurance also saw a sequential pickup in the quarter, up 1%, with the ratio to net revenue reaching a top-tier 36%, up 2 percentage points. Investments, including hedging costs, were down 14% as they were impacted by preemptive hedging costs in the quarter. Investment would have been up 60% without that. The contribution from equity investment is set to materially increase in 2026 as the impact from the equity consolidation of Commerzbank and Alpha fully materializes and hedging costs decrease. Trading and balances, excluding hedging costs, declined due to a positive one-off impact on balances in '24. They would have been up 2% excluding this. Overall, our top line remains well diversified and increasingly balanced with NII stabilizing and growing fees compounding and investment poised to strengthen significantly. Our net revenue remains resilient, supported by a disciplined approach and a cost of risk that remains structurally low. Cost of risk stands at 15 basis points, continuing to benefit from strong write-backs and confirming the benign credit environment across our geographies. We have kept overlays unchanged at EUR 1.7 billion, the highest in the industry, preserving a significant buffer to mitigate future pressure on cost of risk or to further support profitability. Asset quality remains sound, net NPE ratio at 1.6%, low default rate at 1.3%, coverage broadly stable at 44%. This consistent quality across portfolio demonstrates prudent origination, robust underwriting, discipline and tight monitoring. Together, these drivers sustain our net revenue through the cycle. Our operating performance was better than expected with GOP down only 2%, 1% excluding one-off hedging costs. Costs remained flat, whilst at the same time, fully outsourcing the integration of Vodeno, Aion, Alpha Bank Romania, the internalization of life insurance and the continued significant investment in technology and people. Excluding new perimeter, costs would have been down 1.8% this year. Our cost/income ratio remains the best in the peer group, supported by resilient revenues and strict cost control and confirms our ability to deliver efficiency while continuing to invest. Even with rate headwinds and significant investment, we preserved sector-leading operating efficiency, reinforcing our competitive advantage. As a result, our core operating performance is materially better than our expectation with GOP resilient, revenue stabilizing and the bank entering 2026 with a much stronger underlying run rate. This is efficiency with purpose, streamlining where it matters, investing where it counts and ensuring that UniCredit continues to deliver sustainable high-quality growth. We delivered record profitability, taking advantage of one-off gains, life insurance stake revaluation, Commerzbank badwill recognition, favorable taxes and higher-than-expected Russia contribution, together with strong momentum to front-load more than EUR 1.5 billion of integration and one-off hedging costs to strengthen our future trajectory. Net profit reached EUR 10.6 billion, up 14%. Return on tangible equity exceeded 19% -- with return on tangible equity of 13%, reaching 22%, up 1 percentage point and best-in-class. Capital excellence continues. Organic capital generation was strong yet again, broadly in line with net profit and complemented by other one-off levers. This allowed us to support EUR 9.5 billion in dividends and share buybacks and the equity consolidation of Commerzbank that will significantly contribute to our future growth while keeping our capital position essentially stable. The decline of our CET1 from 15.9% to 14.7% was due to expected significant regulatory headwinds and additional taxes in Italy. On a pro forma basis, for the equity consolidation of 29.8% of Alpha Bank and the Danish compromise, our CET1 ratio shall increase to 14.8%, although with a timing mismatch. As such, net of regulatory headwind and Italian taxes, our CET1 ratio would have remained stable at over 15.9%, while supporting EUR 9.5 billion in distribution and circa EUR 3.5 billion from equity consolidation of Commerzbank and Alpha. Italy confirms its leadership, outperforming peers across all KPIs and acting as the group capital-light growth engine. In '25, our franchise gained strong momentum with loans and deposits growing 2.7% and 3.8%, respectively, expanding our market share in the targeted segment. This commercial strength supported a resilient top line performance despite the challenging rates environment, which hit Italy above and beyond any of our markets. Revenues were down only 3.1%. NII declined 7.8%, but excluding the impact of rates, grew 4%, giving us confidence in what we can achieve going forward. Indeed, NII shows a clear acceleration in the quarter, and we expect its sequential growth to consolidate further in the first half of 2026. Cost of risk remained stable at 27 basis points. Fees and net insurance continued to grow, up 6.5%, supported by strong commercial momentum with total financial assets, excluding deposits, up 12%. We continue to improve our efficiency while investing with cost down 2%. All this translating to a RoAC of circa 27%, the best in the country. Germany confirms its leadership in efficiency and profitability in the country, remaining the group resilient anchor. The franchise is also showing the first signs of acceleration with loans up 1%, gaining market share in the targeted client segment. Revenues increased 2.1% despite the challenging rates environment. NII was up 0.6%, visibly accelerating in the quarter, up 1.3%, giving us confidence in what we can achieve going forward. Cost of risk remained stable at 20 basis points. Fees and net insurance grew 4.4%, supported by strong commercial momentum with total financial assets, excluding deposit, up 7%. Germany continues to deliver operational efficiency while investing with costs down 4%. All this translates into a RoAC of 21.3%, the best in the country despite substantial regulatory headwinds. Austria confirmed its leadership in efficiency and profitability relative to its peers in the country, remaining another group resilient anchor. The franchise is showing signs of acceleration with both loans and deposits growing 3%, increasing market share profitably. Revenues declined 3% due to the challenging rates environment. NII was down 8%, the trend clearly reversing in the fourth quarter, but was up 5.7% sequentially. Cost of risk remains low at 5 basis points. Fees and net insurance were up 1.8%, 6.3%, excluding the disposal of Card Complete, supported by strong commercial momentum with total financial assets, excluding deposit, up 6%. Austria continues to deliver operational efficiency with costs flat while investing. All this translates into flat net profit at a RoAC of 22.6%, the best in the region, fully absorbing NII headwinds and a higher bank levy in the country. CEE confirmed its leadership in profitability and efficiency in the region, remaining the group's growth engine. The franchise shows strong acceleration with loans up 11% and deposits 7%, delivering on our ambition to grow profitable market share. Revenue rose 5.5%. NII was up 2.5%, showing strong sequential growth. Cost of risk remains low at 11 basis points. Fees and net insurance grew materially by 10.7%, supported by strong commercial momentum with total financial assets, excluding deposit, up 20%. Central and Eastern Europe continues to deliver operational efficiency with a cost/income ratio at 34.6%, absorbing most of the impact of new perimeters. All this translates into a RoAC of 27.4%. Client Solution is our product factories that converts group scale into capital-light, repeatable growth. They represent more than 90% of group fees and net insurance. It is central to how we strengthen client connection while improving the quality of our revenue mix. Client Solutions delivered EUR 11.7 billion of net revenue, up 5% and EUR 8.2 billion of fees and net insurance, up 8%. Within that, Investment continued to perform strongly with net revenue up 9% to EUR 2.5 billion, supported by the continued expansion of our offering and the strength of distribution, including strong growth in one market. Insurance, now a meaningful growth pillar, was up 15% to EUR 1.1 billion. The internalization of life insurance further strengthened our value retention and positioning. Advisory & Financing Solutions net revenue grew 17% to EUR 2.1 billion, reflecting our ability to leverage the franchise across markets and client segment. Client risk management delivered EUR 2.3 billion net revenue, up 9% with very strong RoAC, reinforcing the quality of client-driven activity. We're closing 2025 with record results and entering the new year with strong momentum and a stronger underlying run rate than expected. We beat start of the year expectation on all core operating lines. We were able to take EUR 1.4 billion in extraordinary charges, which together with our overlays of EUR 1.7 billion that remain intact and our excess capital greater than EUR 4.5 billion, further protect and strengthen our future trajectory. From first quarter of this year, we will implement an intra revenue restatement. Total gross and net revenues are unchanged. This has no material impact on the underlying growth trends of NII and fees plus net insurance. What changes is the presentation of our result aimed at improving comparability versus peers, transparency and predictability. Specifically, we will move commodities interest margin from trading to NII, certain certificate costs from NII to trading, securitization cost from fees and NII to balances and bank insurance negative indemnities from balances to fees. The managerial reclassification of hedging cost from trading to investment remains unchanged. We believe this will make for a more clear and homogeneous aggregation of the drivers of our P&L. UniCredit Unlimited is predicated on going beyond traditional boundaries. It is about disrupting, about innovating and rethinking how we grow and operate. UniCredit Unlimited is built on 2 pillars. First, unlimited acceleration. We intend to gain quality market share and grow revenues profitably faster than our peers through quality NII and fees and net insurance. This is further supported by the capital-light growth of the net income of our equity investment. Second, unlimited transformation. In parallel, we are determined to reset our efficiency frontier, not from a standing start, but by leveraging our leading position, the experience we have gained in the last 5 years getting there and the new AI and technology tools that are now available. During the next 3 years, we aim to grow our top line at 5% CAGR with net NII plus fees and net insurance, excluding Russia, at above 5%. Importantly, the earnings of our equity investment, net of hedging cost should more than offset the impact of our Russia compression and substantially exceed it on a net profit basis. To deliver our ambition on net NII plus fees and net insurance, we intend to grow market share in a targeted and profitable way as we have done in the past. Quality first, capital-light and with higher value per client. We aim to go deeper with the clients we already have and win new primary relationships that matters, focused on private, affluent, SMEs and the large corporates we are closer to. We aim to maintain our NII RoAC at around 20% through disciplined targeted profitable lending, not volume for the sake of volume. We aim to increase the weight of fees and net insurance on net revenue towards circa 38% over time, improving the quality, resiliency, profitability and capital generation of our earnings. Our equity investment growth over time is capital-light. Our unlimited acceleration stands on 4 mutually reinforcing pillars. First, our people. They remain the engine of our success, delivering impact through a shared vision and winning culture, combined with relentless execution. Second, our factories. We continue to strengthen the connectivity between our product factories and our distribution that closely interprets our clients' needs while expanding our offering, internalizing more of the value chain and scaling innovative solutions across geographies. Third, our channels. We leverage a superior omnichannel model; physical, remote and digital; with AI elevating speed, accuracy and personalization. And fourth, our digital and data. We are accelerating AI adoption across client service and advisory, technology and operation, using it to deepen relationships, improve efficiency, increase speed and unlock new value. This is how we turn scale and innovation into sustained competitive advantage. We continue to invest in our people, engaging them in the definition of our strategy and objective, providing them with personal growth opportunities, fostering a culture of ownership, empowering them, developing them through a corporate university now focusing on deepening skills in digital and in AI and continuing to hire to drive growth. Our people have been essential to our success so far, and they are essential to achieve our ambition. Our product factories combine into a powerful engine of capital-light, scalable growth. We continue to enhance their strengths and deepen their connection to the front line, ensuring that every capability we build translate directly into fulfilling client needs and hence, direct commercial impact. We're expanding our product offering so we can meet evolving client needs across Europe with greater breadth and precision. We aim to grow our share of wallet in the right segment and geographies while improving cross-selling for international clients, leveraging our Pan-European footprint. We will continue to internalize more of the value chain across key products, this allows us to retain more value, control quality end-to-end and deliver an offering that few competitors can match. And we're embedding digital solution across the entire platform, DealSync, Smart Factor, Trade Finance gate, for example. We're turning innovation into a tangible uplift in client experience, revenue and efficiency. Let's take the first example, investment. This model is already delivering. In Asset Management, we are transforming the role that a distributor can play by gradually capturing more of the value chain, internalizing the blocks in which we can add the greatest value. As such, we have created a new benchmark for what is possible in asset management, and we are not done. Our distinctive asset management platform holding a leading market share across 13 plus 1 countries now ranging from proprietary asset management to value-adding selection and repackaging of third-party mutual funds to proprietary capital protected certificate and to unit-linked in which we command a leadership in Italy with a 30% market share. Our One market funds have grown from 0 to more than EUR 30 billion in 3 years, and we aim to more than double that amount by 2028 and triple it by 2030. At the same time, our internal value retention has increased from around 60% to above 80%, and we target beyond 85% by '28 on an increasing base. This transformation improves clients' experience and returns as it gives us full control and materially strengthen the economics of our business. And we are applying the same successful formula across other factories, including insurance, client risk management and even payment using internalization, innovation and scale to create even more value. Our omnichannel setup is one of our strong competitive advantage. We combine physical branches, remote AI and people-supported advisory with digital platform into a single seamless client experience. AI is enhancing every touch point, improving speed, accuracy and personalization. Clients choose where, when and how they interact with us, and we adapt. Our network excludes 3,000-plus branches focused on high-value personalized interaction. UniCredit Direct, providing flexible and tailored remote advisory. Digital and hybrid channels, key access point for every interaction of our client. This is an omnichannel model built for today's expectation while we developed tomorrow's opportunity. A case in point, Buddy. Buddy is a tangible example that is transforming our client access, advisory and banking services and its innovative model is setting a new blueprint. It is more than a digital channel. It is a fully fledged remote branch that offers clients a full product and service catalog digitally with 24/7 access to AI or people-based support. It is seamlessly integrated with the rest of the branch network and channels and offered a tailored experience at a lower cost to serve. It has already reached 800,000 clients by the end of last year with a trajectory towards 2 million by 2028, and we expect it to continue to grow at an accelerated pace after that. The Buddy model is ready to be exported across all our 13 countries and beyond. Please do come and try it. We have several other pilots at different stages of development being experimented across the group, in Poland, in Croatia, in Bulgaria, for example, but if successful, will be rolled out more broadly. We aim to be at the forefront of what can be achieved using technology, data and AI in our sector. Their rollout is underpinning the improvement in client experience and productivity that supports our targeted gains in market share and ultimately, the quality growth of our core revenue. We follow a clear ROI-driven approach, combining group-wide critical process by process redesign with a bottom-up use case development to maximize impact. We have unified our data and AI platform, enabling control and ability to scale custom solutions. Our AI platform already ensures approximately 35% lower time to delivery and 30% lower IT cost. We have multiple AI-driven solution already in place such as UniAsk and DealSync already driving tangible results, and we are just beginning. We're in the process of leveraging AI to reshape client engagement through AI-powered service channels, next-generation virtual assistants, predictive analytics for tailored solution and smart recommendation for adviser. At the same time, we aim to further empower our people by giving them upgraded tools to enhance the quality of their work and their productivity while streamlining and automating manual processes. DealSync is a case in point example. DealSync is a tangible example of how technology and AI transform the service we can provide to clients, in this case, mostly SMEs. It is an AI-powered platform focused on matching and introducing SMEs among themselves and with investors and adviser that would otherwise not happen given their fragmentation. DealSync reduces marginal cost, expands access to capital markets and creates new business opportunities for clients and for UniCredit. Already live across all UniCredit major market, it has been recognized as an Abby innovation winner in 2025 and has already captured a market of over 4,000 SME deals opportunities since its launch 1.5 years ago. We see digital asset as a structural shift, and we're moving decisively across asset tokenization and digital money, pioneering in many areas. On tokenization, we have completed 2 proof-of-concept initiatives in mini bonds and structured notes, showing how tokenization can simplify issuance, cut cost and accelerate execution for clients. On digital money, we are a founding member of Qivalis, the European strategic systemic alternative to U.S. dollar-denominated stablecoins. We are also actively looking at our unchanged settlement instruments as demonstrated by our participation in the ECB-led PONTES initiative. All of this positions us as an early leader in real-world asset tokenization and reflect tangible progress in a space where there is often far more hype than real execution. Our ambition is clear; to become Europe's reference point for tokenization executed with a focused strategy and a defined road map. In the crypto space, our approach is more careful and neutral. We are offering interested clients access to public ETPs with underlying crypto with clear disclosure to inform on volatility and risks. We have also pioneered capital protected certificate with underlying cryptocurrencies, an innovative product that mitigates the downside risk of the asset class. The second pillar of UniCredit Unlimited is unlimited transformation. We are aiming to reset the sector efficiency frontier once again. Starting from a position of strength, best-in-class capital and operational efficiency with unlimited, we shift gears again. We move from improvement within existing boundaries to transcending those boundaries, reinventing ourselves and using new technologies and AI to support that step. On capital efficiency, we aim to further increase our net revenue to RWA to 8.6% and move beyond that by 2030. On operational efficiency, we aim to decrease the cost base by 1% per year to around EUR 9.2 billion in '28, confident we will maintain that trajectory towards 2030 and beyond. We will do so while supporting growth and investing, staying at the forefront in the future as we have done in each of the last 5 years. We continue to sharpen our capital efficiency as we remain focused on growing NII while maintaining a 20% RoAC and increase the weight of capital-light revenues, including the growth of the contribution from our equity investment in CommerzBank and Alpha net of hedges. We will continue to execute securitization above the cost of equity, enhancing capital velocity and reinforcing the quality of our lending book. In practice, this means deploying capital only when return justified, redirecting it to the right geographies, the right clients and the right products and maintaining our leadership in profitability, growth and distribution. Over the past 5 years, we simplified and streamlined our bank, proving that even a large multi-country institution in Europe can become sharper, faster and more efficient. That was a critical part of UniCredit Unlocked. It was about fixing what was inherited and building a model capable of outperforming peers. The next phase is fundamentally different. UniCredit Unlimited is not about incremental improvement. It is about rethinking the operating model at its core and the key enablers of these shifts are technology and AI. They allow us to go far beyond what manual processes or traditional structure can achieve. We are automating at scale, embedding AI into every critical workflow; accelerating execution across risk, compliance, finance, operation and HR; removing friction and eliminating repetitive tasks. With these tools, we can redirect capacity towards high-value activities, faster, critical decision-making, key value-added steps in technology and operations, deeper client engagement, delivering stronger commercial impact. Value activities are how we reset the industry operation frontier. This isn't simply about efficiency, but about thriving in a competitive environment that is rapidly shifting, having the courage to lead the change of how the work itself is done. Vodeno is our next-generation proprietary core banking platform, a cloud-native modular infrastructure that accelerates implementation, improves flexibility and reduce dependency on third-party systems. It provides enhanced internal technical expertise powered by more than 200 specialists across engineering, technology and data and AI, a sandbox to test entry in new markets and segments, validating new features and products, a foundation to scale embedded finance and Banking as a Service. It enables us to deliver a faster and lower cost to implement and cost to serve. And once validated, solution can be expanded across group at speed. Over the last 5 years, with UniCredit Unlocked, we have organically transformed this bank, driving the best total shareholder returns in the industry. With UniCredit Unlimited, we face an even more exciting and ambitious proposition that should result again in best-in-class total shareholder returns. Both Unlocked and Unlimited not only deliver for our shareholders, but greatly motivate our management and broader team alike. As such, M&A remains not a necessity, but an accelerator, executed only under our strict terms and only when it creates incremental value for our shareholders. We only execute when there is a clear strategic fit and the returns are superior to our share buybacks. Our discipline has already been proven. That said, we do retain unique optionality across 2 strategic states and 13 markets. Our winning proposition, strong momentum and forward-looking strategy with its related granular, simple levers to execute it leads to our ambition for UniCredit Unlimited. We aim to deliver once again the best combination of net profit growth at leading return on tangible equity and distributions within the European banking sector, supported by a dynamic, higher quality top line and a lower cost base, all resulting in achieving a decade of unmatched performance. We continue to believe that guiding on net revenue is more aligned on how we manage the business as the combination of NII, net of the related LLPs and fees and net insurance are interconnected in multiple ways and cannot be seen separately. All numbers that I will go through now are post the restatements I just described earlier. We aim to grow net revenue at a 5% compounded annual growth rate, reaching sound EUR 27.5 billion by 2028 and directionally exceeding EUR 29 billion by 2030 and beyond. In terms of growth levers, we aim to accelerate core revenues net of LLPs at 4% CAGR while absorbing Russia compression, 5% CAGR without it. Benefit from the contribution of our Commerzbank and Alpha investment growth, net of hedges that shall reach EUR 1 billion by '28 and more than compensate Russia. Cost of risk should remain stable at 15 to 20 basis points. Overlay shall be used as required to support that expectation. We aim to reduce our cost by circa 1% per year net of investment and other headwinds to around EUR 9.2 billion by '28 and below EUR 9 billion by 2030, leading to a cost/income ratio of circa 33% in 2028 and below 30% by 2030. As such, we aim to increase our net profit by 7% per year to circa EUR 13 billion in '28, increasing our RoTE to above 23%. Such trajectory is directionally set to continue towards 2030 and beyond. As a reminder, we can rely on a combination of substantial unique buffers to defend that performance. EUR 1.7 billion of overlays, more than EUR 4.5 billion of excess capital, EUR 1.4 billion front-loaded extraordinary charges, EUR 1 billion additional revenue from equity investment that are fully distributable. Our trajectory is underpinned by quality profitable growth, operational excellence and capital excellence. On the top line, we aim to grow more than the peer group, both in absolute term and in quality with a stable and controlled cost of risk. On cost, we aim to reset the efficiency frontier, shifting transformation from simplification to reinvention. On capital, we aim to deliver the best combination of profitable NII and rising capital-light revenues, all while maintaining one of the strongest balance sheets in Europe. Together, this will result in EPS growth and return on tangible equity at the top of the peer group. Our distribution policy reflects our confidence in the sustainability and quality of our earnings. We confirm 80% ordinary distribution split between 50% dividend, 30% share buyback. The mechanical result is cumulative distribution of circa EUR 30 billion over the next 3 years and EUR 50 billion over the next 5. This equates to a best-in-class distribution yield before considering any deployment or return of our more than EUR 4.5 billion of excess capital evaluated yearly. The numbers above do not include the EUR 9.5 billion of planned distribution for 2025. When you bring it all together, growth, efficiency, profitability, capital generation and distribution; UniCredit stands apart. We deliver the best combination of return on tangible equity, EPS growth and distribution yield among major European banks. Performance of this magnitude should be reflected in a premium valuation, providing further relative upside going forward. To conclude, UniCredit Unlocked transformed our bank, proving what disciplined execution; empowered, motivated people; and a unified operating model can achieve. Our performance confirms the effectiveness of our model, resilient, diversified, efficient and relentlessly focused on value creation. We have delivered another record year with 20 consecutive quarters of quality profitable growth, and we are entering 2026 with an unmatched momentum. We now shift decisively from unlocked to unlimited, a new phase defined by greater ambition and a fundamental rethinking of how a European bank should operate. UniCredit Unlimited is designed to transcend legacy boundaries, pushing beyond traditional banking limits through disruptive change supported by technology and AI and continued convergence of our operating model. Our people remain the linchpin of getting us there. Our superior equity story speaks for itself, market-leading growth at best-in-class return on tangible equity and an unmatched distribution trajectory, all achieved within Europe. We have M&A optionality that others do not, and we will continue to exercise the same discipline. These banks was transformed once with UniCredit Unlocked, and we are determined to do it again with UniCredit Unlimited, delivering a decade of outperformance. Thank you very much, and we'll open to questions. Operator: [Operator Instructions] The first question is from Ignacio Ulargui of BNP Paribas. Ignacio Ulargui: I will just make one in the interest of time. So I mean, if I just look to the plan, I think one of the biggest changes is the loan growth that has been changing throughout the last couple of months. Just wanted to get a bit of sense of how that 5% growth will be distributed between regions and products. Andrea, you made a couple of comments about the most profitable segment. Just wanted to get a bit of a sense on how does mortgages, SME and consumer interact on that basis? And also linked to that, what has changed really for the bank to move towards that stronger organic growth ambition? Andrea Orcel: Okay. So I'll start with what has changed, and then I'll move to loan growth, and I'll pass it to Stefano. So what has changed? The momentum we see in our business. We closed 2024 indicating that we were shifting gear and moving to accelerating growth. During 2025, if you take away all the noise, we saw that crystallizing and crystallizing better than we expected. And therefore, that gave us more confidence. As we moved into the second part of the year and in the fourth quarter, we see a momentum on all of our operating indicators; NII, fees and net insurance cost to be better than we expected and strong. And that has given us the confidence on, let's say, doubling down on the acceleration of the top line. The second thing is during the course of '25, like many others, but especially ramping up into the end of the year, we have not only continued to look at how we could continue to improve ourselves through change, through transforming the way we operate, but increasingly adopting AI and accelerating the move of new technologies into the bank. And this is just a question of acceleration. And as we did that, we witnessed that the time to achieve both improvement of that transformation was significantly faster, the impact greater and therefore, that we could apply what the team has been executing in terms of transformation over the last 5 years, but now we could attach it to tools that make the LEAP much greater on the same basis. So fundamentally, the entire processes that we would be before redesign, much more efficient, now we can redesign them and totally converge them AI-based and the leap is materially greater. So these 2 things occurred. This is combined with a realization at least of mine and the management team that we can no longer focus on competing among legacy banks. Fintechs and hyperscalers are a reality. They are entering Europe strongly in every market. And we need to have the ambition to transform a lot more to catch up on the operating side in order to reach 2030 as a bank or as an institution that can compete successfully not only with legacy banks, but also with fintechs and hyperscalers. And therefore, all of this together has given us the motivation, the tools, the drive, and we have been doing that for 4 years. We're putting it forward. So it's just a stepping up and a doubling down on the acceleration of the top line and on the transformation of our model. With respect to loan growth and growth in general. As you have seen; every single market, region, country in which we are; we are seeing a materially improvement of momentum across loan volumes, across NII. And this is very important. We have succeeded to date and intend to continue to succeed to, yes, step up our growth, yes, take market share, but defend margins. This has been a constant for us. And it's not a constant that is going away. I keep on repeating that EUR 1 billion of loan growth is worth 1/3 of 1 basis points of decline in margin. And therefore, going for volume and not margin is not a value-enhancing proposition. So we've seen that. And what is happening out there is that we have been very clear, and we've already done that increasingly in the last 5 years, but especially in the last 2, we're targeting growth. In the same way, we are targeting efficiency across the chain. We're targeting growth. Where are we targeting? In markets where we think the margins are better, our geographies. So for example, Central and Eastern Europe provides excellent opportunity to grow fast at margins that are sustainable with a high profitability, we're doubling down on that. But even within countries, there are regions within Italy that grow faster than others, we're doubling down in those regions relative to others. We always try to sustain our margins, our return on tangible equity of that. And that is very important. Secondly, client segments. Client segments are not equal. The margins, the profitability of large corporate, of medium corporate, of small corporates, of micro businesses, of private, affluent and mass are not equal. And we are privileged to have 60% of our revenues already skewed in the "most attractive segments" of SME, including micro, affluent and private. We want to increase that. And in many of those segments, the competition is fragmented and fractured, especially the more fragmented segment like small and micro businesses. And it allows us to gain shares in segments that are naturally higher margin, but with a competition that is less pressing. To do that is not as simple as saying, I'll do that. You need to have the credit models, which we have prepared for the last 2.5 years. You need to have the people trained. We have been hiring on the front end or recycling our own people to the front end for the last 3 years. You need to have the IT platform to be able to support them. You need to have the AI to personalize what we are offering. You need to have all of these things prepared to address them, we do. Then you have the products and in the products, again, the margins on a mortgage in Italy, for example, are nowhere close to the margin, and all of this is net of cost of risk on a consumer loan. We have been saying for now 4 years that our focus is on margin, not volume. So we would take the volume hits in mortgages, not because we don't offer them, we do. But because we don't drive them while we wanted to gain leadership in consumer credit, which is a critical pillar of supporting families in their spending. We now are a leader in consumer lending. Our cost of risk is below everybody else's and the margin are multiple times what we would get in mortgage and certainly multiple times above the cost of equity. We will continue to do that. Some competitors have noticed and are trying to imitate. Good luck. You need the models. You need the platforms. You need the people. You need the training, and you need to know how to do it. We've learned very well in the last 4 years, and this is a DNA of UniCredit that comes from the early 2000s. So we have it. Not many people do. That's an example in lending. But when you look at investment, it's the same thing. Money market funds does not have the same margin as a capital guaranteed certificate as a unit-linked, as a wrapped mutual fund under one markets. They address different client needs. And if I may, as we discuss the performance that I always get as an answer in fees, and I have not been able to convey that it is connected because what has a higher margin, a current account, a 0 remuneration or a money market funds. I'll let you decide on the answer. And hence, we have massively outperformed in NII and its margin this year and performed in line on volumes of fees. But all in all, we are ahead. So we treat everything we do crossing geographies, clients and products in this way. And we have developed platforms and factories that are now truly best-in-class, more modern, more AI-based, more dynamic in the responsiveness. But I'll pass to Stefano on the numbers for the loan growth, et cetera. Stefano Porro: Yes. So products, retail, reiterated focus on consumer financing as highlighted by Andrea. In relative terms, this is for geographies like Italy, Central and Eastern Europe and Austria. On mortgages, lower loan growth in comparison to consumer financing in relative terms in the next 3 years with a differentiated growth between Germany, Austria and CE in comparison to Italy for the reason highlighted by Andrea. Segments, more focus on getting market share in small business and small enterprises. However, we are expecting a higher growth than the past in the mid and large corporate segments, especially in Italy and in Germany. With regards to the geographical areas, let's start from the GDP assumptions because that's very important for us. So our assumption in terms of GDP considering our footprint are for a higher GDP than the Eurozone one, so around 1.2% for '26, increasing to around 1.7%, 1.8% for '27 and '28 with an average inflation that is slightly higher than 2%. Why I'm saying to you this because what we are expecting in light of the commercial action that we will put in place is a growth rate for the lending in line with the nominal GDP rate in CE and in Austria, while higher than the nominal GDP rate in Italy and Germany. Operator: The next question is from Hugo Cruz of KBW. Hugo Moniz Marques Da Cruz: So a couple of questions. One on OpEx target, which optically seems aggressive, but you talked a lot about the impact of technology on that. I was just wondering if you could give a bit more color both on integration charges if you have to book everything in the later years? And how do you expect the staff cost to evolve versus other admin and D&A to reach that OpEx target? And then a question on the hedging. You're booking the one-off hedging costs in Q4. What does that mean exactly for the Commerce and Alpha hedges? Are you extending the hedges for longer? And also, should we continue to assume that these recurring hedging costs for those stakes are around EUR 350 million a year? Stefano Porro: Yes. So in relation to OpEx target and evolution of cost over time, let's start from '25. So in '25, if we're excluding change of the perimeter, the costs were down around 1.8%, both on an HR cost and non-HR cost. On the non-HR cost, we have been able fundamentally by the reduction of the real estate cost to more than compensate the increase of cost in IT and marketing. When we look to the future, the trend of cost will be driven by the reduction of the HR cost. So the average number of FTEs of the group will go down during the course of the next 3 years and the connected HR cost. In relation to the non-HR cost, while we will keep on focusing on further optimizing the real estate costs that are expected to go down, the other administrative expenses, especially the IT one are not expected to go down, so are expected to be higher in light of the planned initiative that we have from an IT investment standpoint considering all the specific actions that we have discussed before. In relation to the hedging, we have lengthened the duration of our hedging in Q4. It's a dynamic hedging. So what we are expecting is to do that over the course of the next years as well. You need to expect a recurring cost of hedging. So in our ambition, we are including in the contribution from the investment that Andrea commented before, the hedging costs are included, and we are expecting to have an average hedging cost in the next 3 years of around EUR 500 million per year with a lower cost in 2026 for the action that we've taken and a progressive higher cost for '27 and '28. Operator: The next question is from [indiscernible], Goldman Sachs. Unknown Analyst: Just going back to one of the first questions. And also at the start of the call, you said that the unlimited strategy is kind of fundamentally reimagining what the bank looks like in the next 3 to 5 years. Could you kind of elaborate a little bit more on how you see that the banking environment transforming in Europe over the next 3 to 5 years? How many -- like how do you see that the fintechs and the hyperscalers entering the market? How do you see competition from these banks increasing? And kind of how do you see the larger and smaller European banks performing in such an environment? And then the second question would be on M&A. I know you made quite a few kind of comments throughout the presentation that you have the M&A optionality. But kind of how should we think about M&A in the revenue guidance and what that could potentially mean in terms of upside risk? And also, if you could comment on your relationship with Generali? Andrea Orcel: Okay. So let me start with the transformation, et cetera. So I just think that it is -- if you look at how we looked at the sector in 2020, exiting COVID, there were legacy banks that were getting back on their feet. There were various fintechs. There were hyperscalers. There was a relatively limited amount of competition. Over the last 5 years, it changed dramatically. First of all, if you take fintechs, a number of names come to mind, they are now not only curiosity, they are a reality in many markets. Now they tend to have lots of clients, but few primary clients, but they are a reality, and they are growing fast and they're learning. If you take hyperscalers on what they offer clients in terms of financial services, it's the same. I would add to that, that we now see, for example, U.S. Bank entering quite aggressively in some of the European Union markets and non-European Union markets, leveraging the higher spending technology, leveraging the relative regulation, et cetera, to gain share in the places where it hurts. So I don't think or I'm actually convinced that if you look at it 5 years from now, you don't have these, as we like to play with them balkanized competitive environment with legacy bank on one side, fintech on another, hyperscaler on another, foreign banks on another, you have one. And clients are going to look at one. And you need to look at those competitors and say, what am I missing? I think in general, legacy banks are much better on trust, are much better on quality -- on memory clients, are much better on multiple complex products and solutions, are much better at human touch. They are much worse on all the operational setup behind, on the client experience and on the service. But the flip side is that, for example, fintechs and hyperscalers have exactly the opposite problem. They need to converge where we are on the client side and on the front end. We need to converge where they are. So if you look at transformation, you need to look at a situation where we defend the front end, the primary clients, the product and everything else, providing our people with the tools, AI, technology to improve the service. Otherwise, the clients will walk away. On the other hand, we need as an urgency to become much more efficient, much faster, much more dynamic than we are on our operating machine. I'll give you one order of magnitude. If you took us in Europe, in Italy, in 2020, we probably were loosely defined about 50% of our people were at the front and 50% of our people were at the back. If you look at it 3 years from now, probably the back will be 25% and the front will be 75%. So there is a massive recycling of skill set of our colleagues from back to front as we render the entire machine much more automated, AI-driven, et cetera, et cetera. But there is also more tool at the front to allow them to provide a better service to client. I honestly do not think that if you have that, clients would prefer to be 100% serviced by a chatbot rather than a human being. So I don't think this is the death of human being. I think this is a huge opportunity for legacy banks to take back the baton. So in that, this is what is inspiring everything we're doing internally. Every process is reviewed, the organization is reviewed. The way of working is reviewed, nothing is sacred. And if we can do it faster, cheaper, better without taking undue risk, we go for it. And I think that this bank demonstrates that we like to take those decisions, and we do thrive in change, and we're going to demonstrate that over the next 5 years. With respect to M&A, I think I mentioned it because it is a question I get all the time. I always have -- I always hope that if I say it, I don't get any questions on it. But what I would say on M&A is Europe needs bigger banks. We are dwarfed vis-a-vis the U.S. and the other economic blocks. Also, bigger banks are necessary to fund the transformation that the European Union needs to undertake. Where is the money coming from? The gasoline comes from 2 places and 2 places only. Capital markets, we don't have them. And banks, we are dwarfed. So Europe needs that to fund all the ambition that we have, point number one. Point number two, M&A done at the right terms and the right strategic fits can add significant value. It is usually -- and I have done 35 years of that, no replacement for a bad strategy, a bad plan and a bad execution on an organic basis. We have a great strategy, a great plan and a great execution on an organic basis. We don't need to do it. Look at the net profit growth and at the distribution. We are privileged. We have more optionality, we look at it. We will look at it in the same disciplined fashion. As I said, we moved a little bit as I was told to be too conservative, and we look to beat the share buyback return plus the margin and not 15% return on investment anymore to align to where the cost of equity for European banks have gone. But nothing changes. What is in our earnings? In our earnings, there is 0 deployment or return of excess capital and therefore, 0 acquisition. Obviously, very small bolt-on should be putting a stride on the circa of the numbers that we're giving you, but anything more significant should be added. I think in Central and Eastern Europe, you look at bolt-on that usually go from anywhere between EUR 5 billion -- EUR 500 million and EUR 1.5 billion. So those are relevant for the excess capital. In larger markets, our 3 larger markets, they are not relevant for excess capital because anything that we would do there would require a capital raise and would need to be very well benchmarked against does that derail other plan? Does that defocus our people or not? And secondly, do the return justify it? And this is what we do. With respect to Generali, I think we speak to Generali regularly. They're one of our industrial partners. People forget that they provide most of our bank insurance products in Central and Eastern Europe. We distribute their asset management products within our network. So of course, we talk to them. The rest is a little bit fantasies of people who need to create stories, but there is nothing else on that topic, not that I know of at this point. Operator: Next question is from Britta Schmidt of Autonomous Research. Britta Schmidt: On the capital trajectory, I mean, previously, you've guided or given us some sort of indication of what organic capital growth per annum can be in the plan. Could you maybe give us some thoughts on that now that your volume target is more ambitious and tell us what the RWA growth if that is aligned with this plan? And then how do you think about the largest execution risks of this plan? Is it a weaker macro? Is it perhaps the risk that the cost benefit might be completed away and the AI benefit may be completed away or also the timing of AI deployment and regulation around that? Andrea Orcel: Maybe I'll take the second, and then I'll pass to Stefano on the first one. So the execution risk is obviously always a question of grades. But I think weaker macro affects us. But if you look at what has happened in the last 5 years, I don't think that, that is that significant. I think, obviously, within reason. But I think what affects -- what would affects banks is, number one, if competition steps up at unreasonable levels and people to just grab volume to try and deliver growth that they otherwise don't have, stop dropping margin and become not realistic. Yes, possible. I see it difficult, particularly in this environment and particularly given the capital that people have in Europe to deploy in value destructing volume. So I think the risk exists, but it is limited. Secondly, I think regulation is at the moment quite clear where it's going. It is still tightening, but it's fully embedded in the plan. I would have hoped that it stops tightening, given that we are where we are. But regardless, it is fully embedded in our plan, what we know today. I think the rest is the ability of our organization to not only continue to change as we have in the last 5 years, but step up that change. I'm very confident of what the team can do here. But the degree of change that, one, you need to fathom, taking a step back and looking at what is possible with modern technology and AI; and b, the decision that you need to take that completely disrupt the things that you're doing and how you have been accustomed to do them for a long time is tough. I think this team is uniquely positioned to do that. And there are a lot of indications that they are, but it is tough. And finally, we always talk about all this, but let's be very clear, for UniCredit, this cannot be done without taking control and dealing with the social impact. We have invested a lot in our university. It gave more than 1.5 million of hours last year to our people. This should be stepped up and almost doubled as we bring people along and we upskill, reskill and move them. But the disruption is there. And I think one thing is an Excel spreadsheet. Another thing is to doing this to people. So I think the organization needs to be given the time to absorb and do that recycling in a correct way. So these things, if you look at the numbers on the plan, we use a lot of circa. And we leave a lot of circa because if I take a spreadsheet and I look at all the things that we have identified that we can do better, Britta, I mean, the numbers are a lot better. But time, how adoption, recycling, dealing with the social impact is going to delay and correctly so the implementation of what we do. And I cannot judge that, and I do think that most CEOs cannot judge that because a lot of these changes are new, and we are not accustomed to dealing with them. So on the one hand, you want to accelerate, but then you immediately see the consequences and need to adjust for the consequences and manage them. So that, for me, that speed, we will see this year and next year, that would adjust the plan one way or the other. But at the moment, we are quite confident in the numbers we are aspiring to get and they remain what they are. I'll pass you, one second, to Stefano. Stefano Porro: Organic capital generation, we are expecting to have an organic capital generation at least equal to 80% of the net profit in the plan in order to support the distribution that we have communicated. Net profit, you have the assumption, risk-weighted assets. So we are expecting to have loan growth and as a consequence of that, growth of the risk-weighted assets, let's say, an average in the plan more than EUR 10 billion per year. However, more than EUR 10 billion capital efficiency actions per year, right? So that's why we are confident on the organic capital generation trend. Having said that, we do expect some effect that you need to take into consideration that will bring up the risk-weighted assets that are, one, operational risk-weighted asset, the more we go up with the revenues, and we're expecting to go up with the revenues, the more we have risk-weighted assets. So around EUR 6 billion in the next 3 years is important for you to take that into consideration. And then when we do the Danish compromise, you have the benefit from that, but that will increase the risk-weighted asset once we will do the Danish compromise, and it is around the EUR 6 billion, okay? Then we have some model changes and regulatory impact. The Basel IV are not material, let's say, around EUR 3 billion, then it will depend on the fundamental review of the trading book in terms of also timing of that. But we are expecting also around -- over the plan, around EUR 10 billion of risk-weighted assets that have been from model changes. Everything taking into consideration, the risk-weighted assets are going to be higher already in 2026. We're expecting something more than EUR 310 billion already during the course of 2026. Everything is factored in, in our organic capital generation and distribution trajectory. Operator: The next question is from Andrea Filtri, Mediobanca. Andrea Filtri: I link to Britta's question. I calculate abundant generation of excess capital over the next years. Do you agree that growth at this point supersedes capital return as ROI of share buybacks is lower than organic profitability and most M&A transactions? Second question, as you look into 2030, how are you approaching the adoption of the digital euro? And how can you make it into an advantage for UniCredit? Finally, clarification, you indicate a delay in the Danish compromise approval. Why is it taking so long versus prior similar cases? Andrea Orcel: Okay. So excess capital and everything else. I do believe that there has been coming out of ready '24 and now increasingly '26 to '30, one needs to combine and our strategy is exactly doing that, profitable growth with distributions. We strongly believe that we've moved from maximizing the distribution to shareholders, which, by the way, we pioneered into keep those distributions at what is still a very high level because let's call them what they are, they are outsized. But trying to capture market share and growth opportunity in the outside world because over time, an organization that does not grow for a long period of time dies. So we think there is plenty of opportunities in the market where they are for us to grow market share, but plenty of opportunities across client segment, across products. Every opportunity that we have to deploy capital profitably, we believe will then mechanically enhance distribution going forward because we are committed to an ordinary -- not total, ordinary distribution payout of 80%. So the more I grow, the more profitably, the more I have net profit, the more I distribute as opposed to grow less, have lower net profit and top up with excess capital. I think we've moved from that. And I think it's a lot more sustainable to have profitable growth at high ROTE, generate more ordinary distribution and deploy the capital to get there. And the returns, as you have indicated, Andrea, I agree with you, for now, they are much better than purely share buybacks. The only -- the reason we are keeping share buybacks in there is because I think it's a question of discipline. We need to be disciplined to return to our investors and to our shareholders what we don't use. So either we are good enough to use it at a profitability level that is above the one of a share buyback or we owe the money back to them. And therefore, we will continue to do that. But if you like, psychologically, the emphasis is on profitable growth while maintaining this high level of distribution at 80% that we have achieved rather than trying to maximize returns at decreasing returns for our shareholders. So this is what I would look at. The second thing, adoption of digital euro, I would take a broader context, Andrea, and I know you have been discussed a lot about that. My broader context is there are a lot of things changing in the digital assets, from digital assets to digital -- to stablecoin, to digital euro, to all the blockchain supporting it, to the settlement part with the European Central Bank, PONTES, which then will evolve further into something more blockchain driven. We need to be central to that. We need to address that. So we recognize we are at the beginning, but we are leading most of the initiatives in Europe across stablecoin, across tokenization of assets, across what the digital euro should look like and what it should do in order to disrupt -- to not disrupt, but help. And across also crypto, not because we necessarily want to push it, but if we have clients that want it with the appropriate warning, we need to also respect that wish. I think this is very important. We talk a lot about sovereignty and the digital euro. Let me leave you with one concept that we have at UniCredit. What about the sovereignty on stablecoin? If you go to Asia, all settlements are stablecoin denominated in dollar. If you were to step up on tokenization of assets in Europe, all settle on stablecoin denominating in dollar. So even before the digital euro that I see more a retail directed thing at the moment. On all the corporate segment, we need euro-denominated stablecoin. This is what Qivalis is trying to do, and we're going to start deploying or rolling out in September of this year. With the Danish Compromise approval, I think I will give you a broader answer because I'm not controlling who should give that approval. I think given the fact that in the last 1.5 years, maybe 1 year, 1.5 years, the Danish Compromise has been used in increasing cases, and the perimeter that it has been applied to has been used in cases that, in my opinion, the regulator did not anticipate it would be used into, but then needed to go back and look at the regulation and look at everything that goes with it. There has been an attempt, and we're not the only bank that is waiting. There are 3 others in the queue. We are the more significant. There has been an attempt to look at the entire framework and make sure the process that is followed and what the framework allows or not allows is well clear and justified for everybody. That is done now. So we have cleared that stage end of last year. And we are told that it is only from now that the actual end of the stage, the actual physical Danish compromise is going to be evaluated. So the clock "started later" because of all of that. I think futures will probably benefit from this framework, and it will be going back to being a little bit faster, but this is what we understand is the case. Operator: The next question is from Noemi Peruch, Morgan Stanley. Noemi Peruch: The 2028 net revenue target is EUR 3.6 billion higher than 2025. Could you please break down the absolute increase in NII fees and investments post restatement? And then I have a question on Alpha. You both have been talking about the synergies that you can achieve with the current setup. So if possible, could you please elaborate on the strategic and industrial pros and cons of a full takeover instead of the current setup unless you would dismiss such scenario to cool? Andrea Orcel: Okay. Let me start with 2 things and then Stefano will complete. Firstly, I think some of you have asked how ambitious, how not ambitious, how many moving parts, et cetera, et cetera. I mean, we believe that slicing and dicing is done on guidance, contrast with the business. And we will no longer break down in any indication, aspiration, guidance, NII from fees and net insurance. The reason we do that is because if you look at 2025, we guided at the beginning of the year that we would have an NII declining 7.5% to 8%. We finished the year at 5%. That was in large part due to great work by our people in managing the pass-through as they manage the pass-through and they reduced the decline to circa 5%. They obviously had less growth in fees from investments because less market funds, less other things like that. In the same way, as we had been pushing in the last few years, fees from investment, we reduced the growth and lost some market share in unit-linked. These things are all connected. I push more capital guaranteed products. I have less asset management. I have different NII. The breaking of that down, which I know what they are, but prevents the network and the empowerment of our people in every single bank because it forced them into bracket. And when the macro of the opportunity changes, there is immediately a worry that if they move on what is right, they're going to miss consensus on one subset or other, and therefore, you delay the right decision. And because we believe in empowerment, we'll keep them aggregated like that going forward, at least in terms of guidance. Obviously, when we report results, we will give you the numbers, and we will explain why they are what they are. With respect to Alpha, I think Alpha has been a fantastic accident for me. I used to not believe in anything that was -- we're going to do a joint venture, we're going to do a partnership, et cetera, et cetera. In the past, one of my ex-CEOs was saying that the joint venture partnership were same bed, different dreams and never ended up well. This is totally the opposite with Alpha. We started to help Alpha complete its privatization because we thought that the investment was worth it, obviously, and to support what we did in Romania. Since then, we stepped that up. The level of cooperation and the level of dialogue that we have between our factories here in Milan and Alpha is in certain cases greater than what we have with bank we own 100% of. There is a total embracing. The 2 teams work extremely well together. There is a very good crystallization of the value we bring to them and the value they bring to us. And this is driving not at my level or at the level of the Executive Board, but at the level of the operating team, a constant request and adjustment for new opportunities to cooperate among things. So there is no way, if I combine that with the positiveness with which not only Alpha, but the entire Greece has welcomed us that we are going to upset that in any way and anything we would do with them is only both sides felt that there were more value to be created and better value to be created. And we are not at all stressing because the value that we are creating is quite high already. It also demonstrated that given the framework we have generated in our federal group, we can add significant value cross-border in a market where we're not because we're not in Greece and all the value that we're creating has nothing to do with the merger or anything else. That is inspiring us from other things that we are doing. Now obviously, in an integration, there are a number of other things that you can do that you cannot do in a partnership. There are substantial, let's call them, cost advantages in our procurement contracts, in our cost of IT, in our cost of AI because of our scale and where we are. There are other advantages, especially in the operating machine. There is the blueprint that we believe we have in -- especially in retail. The advantages that we see in Alpha in corporate. There are a lot of things that at the moment, we're trying to maximize without a merger. So it's a soft association. We are happy. There is something more that obviously only a merger can give, but it is certainly not something that we want to do upsetting the current state of play. So we are very happy as partners. So for the time being, this is as it is. As you know, the alpha stakes does not absorb much capital, actually marginal, but it does deliver a lot of returns, not only through the consolidation, but also through the fees we book. And I'll leave you -- maybe I'll leave Stefano comment on that. So I think -- I know that everybody wants a process on a time line and when we are going to do it. We may not do it ever and be very well connected one way or the other or we may do it at some point because both sides feel it's the best for their people and their shareholders, but there is no plan whatsoever on it, and it has never been discussed. Stefano Porro: So first question, reclassification, as highlight by Andrea specifically before. So the reclassification that we start doing from Q1 is neutral from the revenues standpoint is positive for net interest income EUR 700 million, is positive for fee around EUR 100 million more, is negative for the trading EUR 700 million and it is negative for the balance around EUR 200 million. Specifically in relation to the balance, do consider that there are the securitization cost, i.e. in the next 3 years, do consider that the sum of trading and balance will go down because we will have more cost for securitization for the reason that I told you before. So we will keep on executing important capital efficiency actions, including securitization. So this will affect balance and the sum of trading and balance accordingly is assumed to go down during the course of the next 3 years. The other 2 important components are the net interest income plus fee and net insurance if you're excluding Russia, what we are expecting is a compound growth rate in the next 3 years of more than 5%. And then you need to consider, as already commented before, that the contribution from the investment net of hedge will more than offset Russia compression. However, the Russia compression on the top line, especial in 2026 will be material. In relation to Alpha, the sum of what we are getting in terms of dividend and equity contribution plus the business that we do, considering the capital absorption that we have is bringing a return on capital that is over 15%. Operator: The next question is from Andrew Coombs, Citi. Andrew Coombs: Firstly, on Slide 51, you provide your forward rate assumptions. I think you've got one hike embedded into your plan in 2027. Can you just give us an indication of what the sensitivity of the revenues are in your plan should those rates either end up 25 basis points higher or 25 basis points lower? And then the second question on provisions. You've obviously had a period of declining or stable NPEs. There is an ever so slight tick up in the gross NPEs this quarter, 2.6% to 2.7%. The coverage ratio is edged down. Perhaps you can just give us a little bit more on the drivers of that during the quarter and what's embedded into your assumptions for the through-the-cycle cost of risk guidance going forward? Stefano Porro: So first one, yes, you're right. We are expecting in the next 3 years, an average Euribor around 2% for this year, 2.1% in '27 and around 2.3% in 2028. There is an assumption of a rate cut at the end of 2027 for 25 basis points, just that one. The net interest income sensitivity, plus/minus 50 basis points is around EUR 300 million in terms of impact to the revenue, meaning reduction of the rates, EUR 300 million less. Otherwise, it's EUR 300 million more in case of rate increase. That's the sensitivity. In relation to the provision in the quarter, let's look. So the default rate of the portfolio was around 1.3% for the overall group, was 1.3% for Italy, was 1.4% for Austria and 1.5% for CE while it was around 1.1% for Germany. When we are looking at the overall trend of the portfolio, it's fundamentally stable in comparison to the previous year. In relation to the trend of the default rate in the following years, we are expecting a slight increase in default rates. This is what is embedded, but we are not expecting any significant -- neither in the evolution of default rate nor in the evolution of the NPE ratio, meaning, yes, we can have some slight adjustment like what happened during Q4, but nothing specific or problematic. The strategy of the group is the same, meaning a combination of ordinary workout management plus sales when necessary. Cost of risk, as commented, we are expecting a cost of risk from 15%, 20%, including overlays, if required. Operator: The next question is from Antonio Reale, Bank of America. Antonio Reale: Just a quick question on the moving parts of your revenue line. You've added another EUR 10 billion or so to your replicating book this quarter, which is a big number. You're now just over EUR 200 billion, and this is a clear tailwind to your net interest income growth. Then you've talked about pursuing growth in loans and deposits without diluting margins. And I think we all understand what that means. So net of restatement, I'm trying to understand what does this all mean for your NII growth here and how that squares up with the growth in fees insurance given all the work you've done and are doing our product factories. Stefano Porro: Yes. So replicating portfolio, you mentioned replicating portfolio. Yes, we are currently over EUR 200 billion of size of the replica on the hedging. We're expecting to have a positive contribution from replica of around EUR 400 million for each year in terms of contribution. We are expecting to have a net interest income increase, a progressive increase of the net interest income when we look '26, '27, '28, especially considering the impact from Russia that, as I told you, is higher on the top line and especially net interest income as assumed especially in '26. Operator: Next question is from Delphine Lee, JPMorgan. Delphine Lee: Just really 2 quick ones. Just on fees and commissions, if you could just tell us sort of what is your assumption on your current partnership with Amundi, which is maturing soon? And any impact -- negative impact that you factored in already in your plan? Then the second question, you've talked a lot about how sort of AI is going to improve your operational efficiency. If I'm not mistaken, I sort of heard earlier in the presentation that AI has already reduced your IT cost by 30%. Just wondering sort of how much more do you expect on the cost side in terms of reduction from AI specifically? Andrea Orcel: So on Amundi, you all know that the contract that we had ends mid-'27 and therefore, it ends mid'27. Until then, you have noticed that we have increased the volumes with other providers and we've won market. Every time we do that, we pay them a penalty until obviously '27. And those penalties have been paid, and we have taken a provision on those penalties -- for most of those penalties that we anticipate for this year and half of next. So that's that. With respect to AI, look, it's very difficult to tell you. I think I will refer to the same thing that everybody will tell you. If you take processes like large corporate credits process, if you take transaction monitoring, if you take KYC, onboarding, if you take onboarding, if you take all of these very analysis or labor-intensive processes, these processes, once they are redesigned, can be made more efficient, not by -- I mean, by very high percentage numbers, double-digit percentage number. Obviously, not every process in the bank can be done that. So you need to do it. And as I said, in order to do that, first, you need to redesign, then you need to determine how you're going to absorb people and then you need to do it. So this is why we continue to say circa, we took a, let's call it, a number that we feel is comfortable, but the adoption or the impact increases between '26, '27, '28. We would not have been able to step up the investment the way we wanted to step it up and still take cost down 1% per year, which, by and large, is about EUR 100 million per year on a net basis without not only stepping up on our change, but using -- but supporting that change with AI. But I don't have more than that at the moment. I would be just speculating. Operator: The call has now concluded. Thank you for your participation. Andrea Orcel: Thank you very much.
Sachiko Nakane: It's time to begin. Thank you for joining us despite your busy schedule today for ORIX's earnings call for 9 months ended December 31, 2025. My name is Nakane from Investor Relations, Sustainability Department. I'll be the master of ceremony. Thank you for this opportunity. Today, we have Operating Officer responsible for IR, Kazuki Yamamoto. And he will provide you with an explanation for about and it will be followed by Q&A and the whole program is scheduled to be approximately 1 hour. Yamamoto-san, the floor is yours. Kazuki Yamamoto: Thank you for the introduction. Thank you very much for taking the time out of your busy schedule to attend the ORIX Group's earnings presentation. I am Kazuki Yamamoto, responsible for Corporate Planning, Investor Relations and Sustainability. Let me explain the financial results for the third quarter of the fiscal year ending March 2026. Page 2 of the handout contains the key points we want to convey today. The first point is net income. Net income for the 9-month period was JPY 389.7 billion, up by JPY 117.9 billion from the same period last year. This was our highest third quarter cumulative net profit level. We achieved 89% of our revised full year forecast of JPY 440 billion announced at the time of first half results call. The second point is pretax profits. Pretax profits were JPY 567.7 billion, an increase of JPY 184.3 billion, year-over-year, and all 3 categories of finance, operation and investments saw profit growth compared to the same period last year. Growth was particularly strong in investments, and we still achieved an increase in pretax profits year-over-year, even after excluding a large gain on the sale of Greenko shares and valuation gains on the remaining stake. The third point is shareholder returns, along with first half results. We also announced the expansion of the share buyback program from JPY 100 billion to JPY 150 billion. By the end of January, we had completed buybacks equivalent to JPY 128.1 billion with a progress rate of 85%. This is the increased program. We will continue to make steady progress on acquiring shares to complete our full share buyback program. Please turn to Page 3. I will explain pretax profits for each of the 3 categories. This page shows our chart for each of the 3 categories, Finance. Operation and Investments with 9 months cumulative results for the previous and current fiscal year. First, at the top, the dark blue represents Finance. Segment profits increased by 8% year-over-year to JPY 145.5 billion with a progress rate of 81% against the full year forecast. ORIX Life reported growth in investment income, and we were able to increase finance revenues in the Australia and Asia, excluding Greater China. Next, the light blue bar, second from the top represents Operation. Segment profit increased by 17% to JPY 189.5 billion compared to the same period last year with a progress rate of 79% against the full year forecast. In the third quarter, we recorded a gain on the partial sale of shares held in Canara Robeco, an asset management company in India at the time of IPO of the company. Airport concessions and real estate operations also saw improved performance in the third quarter. Moreover, the Auto segment posted strong earnings, thanks to a robust used car market. The Ships business also boosted earnings with high asset efficiency, having leveraged synergies with Santoku Shipbuilding, which joined ORIX Group the fiscal year ending March 2024. Finally, the pink bar from the top represent Investment segment's profit -- segment's profit in this category increased by 100% compared to the same period last year, reaching JPY 261.4 billion, marking a significant increase in earnings. As outlined earlier, we booked a large gain on the sales of Greenko in second quarter and sales of Ormat geothermal power business, which also was a contributor. In real estate, we sold several properties, including Hotel Universal Port VITA as well as office buildings and rental condos. Furthermore, domestic PE investees mostly performed well, resulting in increased profit contributions. As a result, segment profits for the 9-month period increased by 40% year-over-year to a total of JPY 596.4 billion. Further, pretax profits increased by 48% year-over-year to JPY 567.7 billion. The difference of JPY 28.7 billion between the total segment profits and pretax profit is due to business expenses in the administrative departments and other areas. Steady profit growth across our finance, operations and investment segment was a key feature of our performance in the third quarter. For the fiscal year ending March 2026, while building on achievement to date, we aim to drive sustainable growth and further improve capital efficiency. In the fourth quarter, based on the business plan currently being formulated and the medium-term outlook for each segment, we will continue to take timely and appropriate actions as needed. Accordingly, there is no change to our full year net income forecast at this time. Now please turn to Page 4. This page explains ORIX's progress in capital recycling. The upper section with a light orange background shows sales, while the lower section with a light blue background indicates new investments. Also, the blue and pink circles in the central box shows the category for each of the businesses sold or bought. For the 9 months -- so for the 9-month period, we recorded JPY 196.6 billion in capital gains with cash inflow due to divestments amounting to JPY 790 billion and cash outflows from new investments amounting to JPY 700 billion in total. Now new investments are being continuously pursued both domestically and overseas, focusing on operation and investments among the 3 categories. A key investment in operations is the acquisition of our Hilco Global, a world-leading company in asset valuation. Furthermore, we have expanded our investments in aircraft supported by generally strong passenger demand. In Investments, we made a PE investment in LULUARQ, the operator of capsule toy specialty source during the first quarter. In the third quarter, a TOB for I-NET, a company listed on the Tokyo Exchange -- Stock Exchange Prime Market was executed. This initiative is part of Pathways, one of our strategic investment areas, which aims to undertake investment in AI infrastructure businesses and DX-related business fields. Additionally, we invested in AM Green convertible bonds and logistics facilities. Although not shown on this page, we announced the formation of a PE fund with the Qatar Investment Authority, QIA, last November and although this fund specializes in domestic investment, but investment in LULUARQ and I-NET were before the fund launch. So we plan to leverage the fund for use in future deals. Gains on asset sales, cash inflows and new investments are all progressing steadily. However, there is no change to our full year forecast from the revision announced at the second quarter. Now next Page 5 and 6 provide a summary of segment profits and assets. On January 1, 2026, we announced organizational reforms to restructure our 10 segments into 3 business divisions: the APAC business division, Infrastructure Business Division and Europe and America business division as well as new banking and insurance units. However, for FY '26 March end, we continue to manage our business using the existing 10 segment framework. So we will explain our results using these. For detailed information on the performance of each segment, please refer to the slides from Page 10 onwards. First, cumulative segment profit in Corporate Financial Services and Maintenance Leasing for 9 months period increased by JPY 14 billion, up 21% year-over-year, reaching JPY 80.2 billion. The Corporate Financial Services unit in the second quarter posted a profit on the sales of ORIX Asset Management and Loan Services Corporation and Nissay Leasing. The business enjoyed increased fee income from various activities, including operating lease investments. Together, these resulted in increased profits year-over-year. The Automobile unit steadily expanded earnings by successfully passing through higher maintenance and other cost increases through pricing with customers understanding. They also sustained strong used car sales. This helped the unit achieve its highest ever profit for the third quarter. The Rentec unit achieved growth in inventory style rentals of ICT equipment on Windows 11 related replacement demand and saw robust sales of used rental equipment resulting in profit growth. Despite Auto and Rentec posting growth in new auto lease executions and PC rentals, respectively, segment assets decreased by JPY 10.1 billion to JPY 1.8745 trillion compared to the previous period year-end due to the sales of ORIX Asset Management and Loan Services and Corporations. Next, Real Estate segment profit was JPY 56.9 billion for the 9 months. The Investment and Operation unit posted revenue growth of the sales of -- from the sales of Hotel Universal Port VITA as well as from the operation of Inns and Hotels. However, it experienced a year-over-year decline in segment profits, owing to the absence of the large-scale gain from the sales of 100 [indiscernible] in FY '25 March. Details concerning the outlook for the facilities operations business will be explained later. The Daikyo unit was increased profits aided by activities such as the sales of rental condos. Segment assets increased by JPY 44.3 billion compared to the end of the previous period, reaching JPY 1.2025 trillion. The main reason behind this increase was investment in the Osaka Integrated Resort project, progressing as planned. In addition, assets rose owing to the completion of several logistics facilities by the investment and operation unit. And Daikyo also increased its investment in newly built condos. The PE Investment and Concession segment achieved profit growth of JPY 27.8 billion or 42% year-over-year to JPY 94 billion. The PE Investment unit reported higher profits year-over-year due to robust performance at current domestic PE investees such as Toshiba and DHC. On a stand-alone third quarter basis, we did not execute any individual exits from our PE investments. However, equity earnings from our investment in Toshiba made significant contributions. As a result, quarterly profit exceeded both the first quarter of the previous fiscal year, which included gains from the sales of Sasaeah Holdings and the fourth quarter when the exit of Wako Pallet was realized. Regarding the Toshiba investment, while we recognize its earnings as equity method investment income, there is a 3-month lag in reflecting those results in our financial statements. Now the Concession unit continued to perform well as Kansai International Airport saw increased passenger numbers, especially on international flights. We will explain the impact of China later, but please note that earnings at -- the third quarter earnings at Kansai Airports will be reported together with ORIX's fourth quarter results with a 3-month lag. While the impact for FY '26 March is likely to be minimal, we anticipate a certain downside for the next fiscal year. Data on passenger numbers and other details for the 3 Kansai Airports up to December are shown on Page 7 for your information. The Investments and Concession segment assets was up by JPY 127.7 billion from the end of the previous period to JPY 1.1506 trillion. The main reasons include new investment in LULUARQ, the successful TOB of I-NET, making it our subsidiary from this third quarter and increased balances in equity method investments. Environment Energy segment's profit increased by JPY 109.1 billion year-over-year, reaching JPY 102.2 billion, a substantial profit increase is mainly due to gains on the sale of Greenko energy and valuation gains on the remaining stake as well as gains on the sale of Zeeklite and Ormat. We completely divested our stake in Ormat in third quarter. Domestic earnings show that solar power sales revenue decreased in the third quarter due to seasonal factors, but electricity retail sales volumes and prices remain strong. Regarding overseas operations, interest income from convertible bonds of AM Green, which were purchased in second quarter, contributed to positive performance. Additionally, over [indiscernible] sales are in the recovery trend, we continue to remain cautious on development and operation projects at this firm. Segment assets decreased by JPY 11.1 billion to JPY 1.002 trillion compared to the end of the previous term due to capital recycling. Profit of the Insurance segment increased by JPY 12.4 billion, up 20% year-over-year, reaching JPY 74.1 billion. The impact from expansion in investment assets and rotation of portfolio securities has boosted revenue. In terms of product sales, along with a single premium wholesale insurance Moonshot and income protection insurance Keep Up. Launched -- and in the first half of FY '26 March, respectively, sales of whole life insurance, RISE and Yen Can launched in December was also strong. Segment assets increased JPY 193.7 billion to JPY 3.203 trillion compared to the end of the previous term. Profit of the Banking and Credit segment decreased by JPY 2.2 billion year-over-year, reaching JPY 19.9 billion with interest rates rising, while asset management yields have gradually improved, funding costs for deposits are rising ahead of those. The main reason for the year-over-year decrease is the booking of losses from selling long-term bonds through the third quarter aimed at improving the bond portfolio. We are responding flexibly with priority on maintaining financial soundness and enhancing future profitability. Segment assets increased by JPY 115.3 billion to JPY 3.2599 trillion compared to the end of the previous term. New executions of investment real estate loans and lending to strategic areas have grown steadily. Additionally, we explained in the first quarter, a JPY 30 billion dividend was paid out to the parent company, ORIX in July of last year, helping to optimize capitalization. Profit in the Aircraft and Ship segment increased by JPY 4 billion, which is 9% higher year-over-year, reaching JPY 48.6 billion. Aircraft leasing saw increased plant sales in the third quarter, resulting in profit growth during the 9-month period. Lease rates continue to improve and the business environment remains favorable. Of note also advanced aircraft sales and booked profit contributions from the Castlelake portfolio, which was acquired in January last year, resulting in similar profit growth. Ships saw increased ship sales in the third quarter, but experienced a slight profit decrease due to the absence of the sharp rise in charter fees in some contracts seen in Q2 of FY '25 March. Segment assets increased by JPY 46.5 billion to JPY 1.2785 trillion compared to the end of the previous term. Aircraft leasing assets increased on investment of new planes, but assets in the ships unit was lower on sales on owned ships. And overall, it was flat, excluding ForEx. ORIX USA segment reached JPY 14 billion for the 9-month period, showing positive recovery, thanks to valuation gains on investments in PE booking in Q3. However, profits for the 9-month period decreased year-on-year due to the absence of the reversals of the credit costs booked in FY '25 March and the credit loss expenses and impairments booked in the same year. Credit losses and impairments mostly stemmed from real estate lending originated primarily during the post-COVID period of financial easing and legacy assets before those days, higher U.S. dollar interest rates and prolonged inflation and uncertain economic outlook stemming from tariffs and other factors also contributed. To date, we have strengthened our investment and lending standards, applied more rigorous screening to new deals and enhanced risk management to existing assets. And through these efforts, we continue to improve and reshape our portfolio. Please refer to supplementary information, Page 25 and 24 for further details of OCU performance. Segment assets increased JPY 491.6 billion to JPY 2.0856 trillion compared to the end of the previous term. Excluding the impact of the Hilco Global acquisition and exchange rate fluctuations, assets are declining, and we are steadily moving forward with rebuilding our business and portfolio rotation. Profit in ORIX Europe segment increased by JPY 9.2 billion, which is a 24% rise year-over-year, reaching JPY 47.3 billion. In the third quarter, ORIX sold a portion of its holdings in Canara Robeco in conjunction with its IPO. Additionally, Robeco Group increased net cash inflows and expanded AUM to a record JPY 500.5 billion, boosting management fees and underpinning profits. Segment assets increased by JPY 127.6 billion to JPY 796.9 billion compared to the end of the previous term, mainly due to exchange rate effects. Profit in Asia and Australia segment increased by JPY 11.4 billion, which is 41% rise year-on-year, reaching JPY 39.3 billion. Although the increase in profit this quarter was partly driven by one-off factor and valuation gains and unlisted equities, we continue to restrict investment stance in Greater China, while in other APAC regions, we expanded earnings primarily through financial income generated by local operations, resulting in overall profit growth. Segment assets increased by JPY 125.9 billion to JPY 1.851 trillion compared to the end of the previous term. Assets have increased in some regions such as Australia and India, mainly due to exchange rate effects. Please see Page 29 for graph showing a segment asset breakdown by country and region, where China has seen recent increase driven by exchange rate effects. That concludes the explanation by segment. Please turn to Page 7. I would like to add some explanation about inbound tourism. Concession centered on Kansai International Airport is reflected in ORIX's consolidated results with a 3-month lag through the earnings of Kansai Airport. So for this third quarter, we incorporate Kansai Airport's July through September performance, which contributed to higher profits. Since December, the number of Chinese passengers has declined approximately 40% year-on-year, just looking at September. And in addition, late January, major Chinese airlines announced extensions of the deadlines, allowing free cancellations for Japan-bound tickets. As a result, unfortunately, we expect downward pressure on earnings and continue for the time being. However, the number of international passengers and inbound tourists in general, well, you can see the trend after the COVID-19 pandemic and also the impact of Mainland China. You can see that on the right-hand side graph. As for real estate operations in Kansai area, there is an impact of a discount, mainly focusing on group tourists from China. And therefore, currently, it is difficult to increase the unit price. However, real estate operations directly operated by ORIX, we have been working to improve RevPAR focusing on hotels in Kansai region. The share of Mainland Chinese customers to total assets in both hotels and inns is small. And ORIX Hotels and Inns tend to specialize in individual Chinese travelers and earnings have remained steady. Meanwhile, some facilities have seen bookings slow during the Lunar New Year period. So we are carefully monitoring the situation. Real estate operations like hotels and inns are affected by inflation and rising construction costs. And therefore, we will aim for sustainable growth while carefully selecting new investments. There's basically no impact on rental cars because driving licenses issued by [indiscernible] in Mainland China are not valid in Japan. And in Aircraft and Ships segment, we continue to see steady passenger traffic, mainly from Europe and United States and solid supply and demand in aircraft. And therefore, overall ORIX's inbound tourism-related businesses appear to be well balanced. Thanks in part to the success of the Expo held last year, global interest in the Kansai region rose significantly, both in terms of the economy and opportunities. In our integrated report 2025, we highlighted a range of value creation initiatives, including the Expo Kansai International Airport, advanced opening of [ Kita ] district and the launch of globally branded hotels. We would give a broader audience and effortless way to experience the atmosphere and momentum of this region. And to that end, we are planning to introduce a video -- short video on our website. Apologies for taking a moment during this earnings presentation, but we would like to share this video teaser preview over the next 90 seconds or so. [Presentation] Unknown Executive: I believe Kansai is now entering a period of significant change. Kansai refers to a region in Western Japan centered around Osaka, Kyoto and Kobe. We know that there is a great expectation. So during the World Expo, many dignitaries are participating from around the world, we were able to show the world that Tokyo isn't the only global city in Japan, Osaka is also a global city. We want to be very active in Asia as a result. And I hope that the people understand that what we're trying to do. Thank you very much for viewing the video. Please turn to the presentation material and turn to Page 8. This is our financial strategy, consolidated balance sheet. Financial breakdown is shown on the left and key indicators on the right. Total assets increased by JPY 1.2594 trillion compared to the end of last year. Excluding the FX effect, there was an increase of JPY 800 billion. And the largest factor was the consolidation of Hilco Global. And then we have a PE investment and also assets increasing in insurance and banking. But for insurance and banking, self-funding is also possible. Long-term debt, short-term debt and deposits increased by JPY 363.4 billion, mainly due to the growth in deposits in ORIX Bank and the new bond issuance. We will continue to diversify funding sources and increase the ratio of long-term borrowings to maintain stable and competitive funding. Insurance contract liabilities and policy reserves decreased by JPY 234.2 billion. This was mainly because of higher discount rate used to measure insurance contract liabilities, resulting in a reduction of liabilities on the balance sheet. And this more than offset an increase of new single premium policy sales. And the total shareholders' equity was increased by JPY 495.2 billion, of which JPY 234.2 billion was attributable to the reduction in insurance contract liabilities. And the remaining increase primarily reflects the accumulation of retained earnings. Shareholders' equity ratio is 25.3%. The ratio, excluding deposit is still at 1.5x. On the right-hand side, the graph shows the employed capital ratio, which remained at around 90% due to capital recycling. By maintaining appropriate employed capital ratio, we aim to maintain an international credit rating at the A level going forward. Please note that the calculation model has been updated since -- from Q3. There are no changes in terms of risk tolerance or risk-taking policy, but the risk ratios are now defined at more precise business and unit levels than before. While uni-funding costs, including bank deposits are gradually rising, foreign currency funding costs, mostly in U.S. dollars continue their downward trend. We strive to reduce capital costs by leveraging our competitive A-level credit ratings and diversified funding capabilities. Please turn to Page 9. Progress in our share buyback program is as indicated in the executive summary. Payout ratio for full year is 39% of our net income per share. We want to maintain this level. Left bottom, JPY 153 or so per share, this is based on the assumption of net income forecast of JPY 440 billion. We will give further details at the end of the fiscal year. That concludes my presentation. Thank you very much for your kind attention. Operator: Thank you. We are now ready for the Q&A session. [Operator Instructions] So we have from JPMorgan [ Sato san]. Unknown Analyst: Yes, I am Sato from JPMorgan. So I'd like to ask a question about ORIX USA, a little details. However, at the time of financial results announcement this time, so the closed ORIX Capital partner, I think you have closed it. So is it related to that, is what I want you to confirm? And Hilco Global, so you have integrated the company under consolidation. And I know that you're going to be revisiting your business plan based on this acquisition. And on Page 24, earnings outlook, for example, as compared to 3 months ago or 6 months ago, it is going to be revised to downside or rather than upside. And also, if there was to be any kind of progress that is made in terms of other businesses. Unknown Executive: So first of all, OCP evaluation -- profit within the portfolio, the investees, there was a growth of EBITDA, and that was quite significant. And as a result, that evaluation gain was -- occupies the majority. And also other closed deals, so we are aspiring to exit sooner rather than later. And at the end of the day, we are considering to exit out of those investments. And as for Hilco Global, thank you for your question, has been shown, so we have 100 days plan, which is currently being executed. And so ORIX Group Global and Hilco and also out of the entire group, -- so what -- how can we enjoy the collaboration, in fact, is what we are foreseeing. On Page 25, as you can see, so Hilco Global, where it is heading to, like automotive, like parts and components and also at the same time, advisory businesses. So it is quite speedy. So without losing any kind of strength of Hilco, we would like to acquire new kind of businesses that would work out to be positive. And also OCU as a whole, Hilco Global inclusive, the overall picture of the matter is in the business plan that we are formulating currently, leveraging on our balance sheet, we are, in fact, scrutinizing the details so that the OCU business can be rebuilt, and we hope to be able to explain that at the next earnings call. So I hope this answers your question. Unknown Analyst: Well, in that case, just so that I'll be able to have a better understanding. So what was closed back in January. In the next quarter, irrespective of the size, I understand that there will be a profit that will be generated. Unknown Executive: As to your question just now, towards the closing, so there will be an evaluation that will be conducted. And so additional kind of gains on sales is not to be expected because the valuation gain has already been incorporated. Operator: From Morgan Stanley, MUFG Securities, Takemura-san, please. Atsuro Takemura: This is Takemura, Morgan Stanley. I have a question about the overall progress and your view on the progress. Third quarter was closed. In the second quarter, you upgraded the plan, and even against that plan, the progress was quite fast. So compared against the plan, what was better or worse or was stronger or weaker? Can you please share as much as possible. And also because of the high progress rate, maybe in the fourth quarter, do you expect some downside that will offset this faster progress. Unknown Executive: Thank you for your question. In the first 9 months, first of all what is progressing strongly. This is Page 3. I would like to use this page to explain. As I have mentioned, as for investment, this is JPY 261 billion and Greenko JPY 95 billion. And in terms of investment efficiency, this is very good. Toshiba noncore business divestiture and also Kioxia post IPO. So these are all captured with 3 months for LP earnings, and this is progressing faster than expected. But we're talking about the semiconductor share prices. So this is not something that we should be commenting on, but the share price level is quite high in our view. As for the operations, as we have explained, Canara Robeco again, this was very smoothly launched. And with remaining share, this is equity based investment. We will continue to move to a situation. But including the emerging markets, we see this kind of business definitely growing. And the third point I would like to mention is based on the result of the election, we expect the domestic economy to grow stronger. I talked about inbound, but automotive, lease, IT and also funding requirement. We believe all of these are moving very solidly. And until we close the fiscal year, we will continue to build up the deals, and we are really hoping that we can do better than the plan in terms of finance business as well. However, with regard to the first quarter, as I have just explained, for the full year, it seems to be good, but performance for next fiscal year or the next 3 years, we need to verify the outlook and think about the capital efficiency as well as the solidity of the earnings plan. And based on that understanding, we will continue to address the situation. So I'm not talking about specific deals or projects, but we will be evaluating things on a regular basis as appropriate. And right now, I don't have anything specific that I can mention. But we will continue to scrutinize the business plan and share information. And I hope that answers your question. Atsuro Takemura: Yes. Just one point of clarification. USA, gain on valuation, was this part of the plan? Unknown Executive: Thank you for your question. Ultimately, company's situation is always looked at in detail. So this is within our expectations, we can say. But invest in ORIX USA and ORIX Capital Partners website, when you look at website, you know who are investing and the telecom network data center service investees impacted by the AI boom in the U.S. performing very strongly. And the EBITDA growth of those companies can be incorporated at fair value, which means that this domain is growing stronger than we had expected. And this is one of the factors that was reflected in the performance in the third quarter. Operator: So next, we have from SMBC Nikko Securities, Muraki-san. Masao Muraki: I am Muraki from SMBC Nikko Securities. So I may repeat some questions, but towards the fourth quarter in terms of cost incurrence, is there anything that we need to be mindful of. So in posting some of the losses in the past, such as ORIX Bank, ORIX Life. There was some loss on sales of some fixed income products. And also in the United States, credit cost of JPY 4 billion was generated as well. So there was some credit loss that had incurred as well. So in more precise manner, I wasn't able to hear you. But with regard to Elawan, with the individual kind of project, I think you said taking a cautious and careful step. I suppose there is a goodwill. Can you carry it over the goodwill for Elawan. So I know that there are a lot of technical kind of details, financial technical details, but... Unknown Executive: Okay. I would like to answer one by one. First of all, as I have mentioned, in whatever the way the cost that may incur, so it's not that we are being careless, but such as the public AI or data center that has been remaining to be pretty robust, but also tariff related, trade related, in fact, remains to be uncertain. So therefore, it's pretty mix.and real estate although the short-term interest rate is coming down, but long term, especially super long-term interest rate is still rising. So the credit cost may be posting dollar interest rate, while it was almost 0, especially the short-term rate, especially the mortgage loan that is increasing. So some credit loss that may incur has been incorporated and also legacy assets out of the corporate is what I have mentioned is kind of corporate risk. There are certain provisioning that may perhaps prove to be necessary. So this is why every quarter -- so some of the fixed income assets that we will be kind of listing them out for seeing some risk that may generate some losses. So as for the fourth quarter, I think the same kind of procedures will be undertaken. So from that perspective, with regard to the credit cost for this year, so we will not wait until the fourth quarter. And at the regular pace, we would continue to revisit the situation so that we'll be able to in advance incorporate the losses, if there was to be any. So as you have mentioned about Elawan, on an individual project by project basis, we have been taking a very careful and also cautious stance. So Elawan's goodwill and also at the same time, the project that is in progress, for example, work in process, for example, and we have been incorporating some intangible assets as well. So the business progress as compared to our initial plan, especially at the reset of the economy and other factors taken into account, there has been some delay, however, in the project, but we are beginning to see some signs of improvement. So therefore, the plan will be reviewed. And so this is what we need to do, we know. But if there was to be any kind of aggravation in terms of the P&L, then we will not wait until the very end, but rather to review the project itself. So Elawan at the center on a midterm business plan perspective by project by project, we are scrutinizing each and every project and also reflecting the result of the assessment. And in light of all the individual assets, we would like to take necessary measures so that there will be no carryover of any kind of negative legacies onto the next term. So as has been mentioned, this year as well as the last as a result of yen's interest rate rising, if there was any loss incurring from the bond of fixed income assets, we are incorporating some of the foreseeable losses by the third quarter. In terms of the amount, it is not that sizable, to be honest. So we would not have unrealized loss, not a huge amount. And as a result of some impairment that has been conducted, there should be no further impact that we can foresee. On the other hand, life insurance, it is true that the unrealized loss is enlarging. However, basically, -- so we have -- we do kind of match it against the policy kind of asset as well. So in terms of the switchover, order churn has not been happening very much, which means that from an operation perspective, there seems to be no kind of -- the accounting kind of loss that we may have to calculate. We are not prepared to be doing so at this point in time, so I think we still have some leeways. I will not be able to say anything in definitive terms, but that's all I can share at this point in time. Operator: Daiwa Securities, Watanabe-san, please ask your question. Kazuki Watanabe: This is Watanabe, Daiwa Securities. I would like this question about Page 8. 92% at the end of September, now 89%. This is improving the employed capital ratio. And you have explained this in your presentation, but what did you change? And did the target level change. And in thinking about how to use the excess capital, do you have any updates on the capital strengthening for the insurance? Unknown Executive: Yes, please turn to Page 8 for employed capital ratio. [indiscernible] was updated in the third quarter. So I would like to add some explanation. As was said before, year-end team looks at the risk dashboard. We have been improving the dashboard. Portfolio risk management is now more detailed. We can look at this on a project-by-project basis. We are trying to do that. And the risk volume that we were looking at as a lump sum was broken down to project level and the risk level was actually lower than we expected. So the employed capital ratio is now lower. And maximum loss based on global financial crisis. That was what was used as a parameter, but we also reviewed that. So from 91% to 81%, the ratio has come down. Does it change our risk appetite? Well, this is just a result of calculating in great detail, so it doesn't directly impact our risk appetite. However, 10% investment capacity of buffer is present. And also in terms of PE ratio and the equity ratio, this is quite conservative. But as long as it doesn't negatively impact our rating, it is actually possible for ORIX to make flexible investments. And your second question about liability for Life assessment. Thank you for your question. On the left-hand side, on the table, you can see the insurance contract liabilities, reduction of JPY 234 billion. I was explaining that. And this is mark-to-market based on the long-term bonds. As you may know, toward the end of last year, 20-year or 30-year term bond issuance reduced. So there are fewer bonds that we can refer to. So what can we do now? Now the life insurance company is looking into various parameters. Financial institutions and accounting auditors, they are discussing these details in order to review the references so that we can improve the index to provide more stable evaluation of the assets. And as a result of the improvement, the life insurance company wants to introduce better indices. And if they can do that, we believe that is an improvement. And this is still in discussion. And we're just telling you what kind of initiatives are being done. So bond issuance was smaller, spread was expanding. These factors had impacts, and we wanted to make some adjustments. I hope you understand, I'm sorry that my answer is not very clear, I know. Kazuki Watanabe: So after the adjustment, if you can just step evaluation, can you utilize the excess capital for shareholder return, for example, growth investment? Unknown Executive: Well, the liability assessment evaluation, we don't need to be overly discounted. So we have to check that first. Utilization of net assets is not really the focus. We're looking at the parameter whether the parameters are accurate. We wanted to evaluate the accurateness of the parameters. Operator: Next, we have from Mizuho Securities, Sakamaki-san. Naruhiko Sakamaki: I am Sakamaki from Mizuho Securities. I have one question. So this time, from the deck, so capital profit and base profit, I think, was not incorporated because I think there is a lot of evaluation gain or evaluation profit. So how -- what was your takeaway in accordance with the previous way you were expressing? Unknown Executive: So capital gain -- as to the capital gain versus base profit, we did not incorporate such a page this time, but I think we had some mention of this. So capital gain, in fact, is shown in the capital recycling page. So let me make sure. So JPY 195.6 billion. And if you were to subtract that, you would end up seeing how much was generated as the best profit. So as a result of this JPY 196.6 billion, and so therefore, you see this was not to be kind of replicated. So therefore, some -- from investment community had said that it is quite misleading. So this is why, as a result of escalating this to the Board and we have decided to disclose on a fee category basis and Canara Robeco's gain on sales, for example. So capital gain business of finance could be a possibility as well. So it's not that we have decided to refrain from disclosing what we used to. But as for the base profit, for sure, it is steadily growing. And so therefore, we just wanted to prioritize this closure based on those 3 categories. And so the base profit versus capital gain, so we do, of course, respond. Should you have any questions and should you want the precise numbers by all means. Thank you very much. Operator: Nomura Securities, Sasaki-san, please ask your question. Futoshi Sasaki: This is Sasaki, Nomura Securities. Just one point of clarification. Performance up to Q3, pretty strong. Credit cost is posted. And in the fourth quarter, certain things may happen. And as a result, next fiscal year or the next 3 years, how is the plan shared with the management or how is it aligned? Unknown Executive: With Takahashi-san as a new CEO, more emphasis were placed on ROE. The biggest point of your question, I believe, is can we invest actively into high-quality deals. And this is a focus of our discussion internally. PE investments generating new profit. As Takahashi-san mentioned, this is one of the important strategic pillars. So wants specifically, which domain do we want to promote this? This is the most imminent discussion. And once we have the results for FY '27 March and '28 March, we should be able to aim for continuous growth in profit. But divesture will also happen and as a turnover will also happen during this time period, and we may have some new capital. So JPY 150 billion of share buyback. So we added JPY 50 billion. JPY 150 billion is not the baseline going forward. But we increased from JPY 50 billion to JPY 100 billion in the beginning of the year. So we want to be flexible in considering the shareholder return as well. So this is something that we're discussing for the short term. For JPY 100 billion of performance as we said when we made the adjustment, this is the highest in accord, and it reflects the major sales like [indiscernible]. And for next fiscal year and beyond, we have to check again. But our own watermark has -- high watermark has also increased. But we will not just look at that. We will also think about high capital efficiency investments. I don't think I'm answering your question very directly, but I hope that's okay. Futoshi Sasaki: What you have just said is profit growth will continue to some extent. And we want to increase ROE and meet the 11% target for ROE. Is that the correct understanding. Because first half and second half had slightly different nuance. Unknown Executive: Absolute amount of growth in terms of profit, I'm not saying that we are committing to that within this structure. Whatever contributes to capital efficiency, well, in terms of P&L losses, we will not be just focusing on that, we will try to do that. But the ultimate objective is increased capital efficiency. So if we do something financially and the PL profit drops from this year's high level, well, that kind of thing could happen. But business plan for next fiscal year has not been translated into financial plan just yet. But once we have a better idea, we would like to explain that perhaps at the end of the fiscal year presentation. Operator: Bank of America, Tsujino-san. Natsumu Tsujino: This time I think you had some evaluation gain and also capital gain in Asia as well as in North America as well. So with regard to PE investee in U.S. as well as in China, up until now, you had -- you, in fact, shared your idea as to being stringent in terms of the scrutinization necessary for those investees. And this is why you did not revise upward your earnings. And so why you thought that you have to remain cautious, you did manage to enjoy gain on -- enjoy capital gain or evaluation kind of gain as well. So was your outlook wrong? Or were you anticipating some loss generation from some kind of investment or investee. So this is why you have not made any kind of changes or the revision to your earnings despite the fact that you have been exceeding your expectations. So that is the first question. And then can I expect the fourth quarter to be even on upward trend. And -- but of course, it may have to be revisited perhaps. So it's just that your outlook was slightly kind of wrong and PE investee in U.S. was pretty strong. But then of course, Elawan is emerging and that is kind of encouraging you to have the heads up. Unknown Executive: So I hope that I will be able to answer to your question as you have in accordance with your intent. So in China as well as in United States, so the capital gain as well as evaluation gain as a result of the evaluation that we have conducted on an individual basis. So the risk appetite as well as the direction going forward, which I mentioned earlier, in terms of the P&L of that just as been pointed out by Tsujino. So the nuance may be slightly different from what we have mentioned in the past that is something that I will not be able to deny. So especially USP investee, in the areas of technology, for example, it is expanding on a fair value basis. So therefore, it is really based on the individual P&L. And also in the United States or North America, we were proceeding with reducing down the position. So therefore, we hope that this evaluation gain should lead us in generating the actual gain on sales. So Asia, while we enjoyed some evaluation gain, but from an accounting technicality, so it's not -- but it is recovering from the bottom, in other words, in some cases. So therefore, on an individual name-by-name basis, there were mixed situations. So therefore, in terms of the risk appetite-wise towards investment, we remain to be kind of conservative or we remain to be -- we would contain from making aggressive investment, refrain from making such investment. But at the end of the day, what is proceeding in a strategic manner -- so those, unfortunately, will start to perhaps dilute in other words, going forward. So towards the fourth quarter in each of the business lines, so while we are scrutinizing each and every business line. With regard to Elawan, that is one category and also with regard to real estate as well, we are doing the same, so that we'll be able to take necessary actions earlier rather than later. And so dependent on the business environment changes, external factor changes against such a backdrop, if we cannot foresee an immediate recovery in some of the businesses, we do not wait until the very end, but rather take earlier actions. So in other words, we will prioritize taking actions as opposed to wait and see. So from that perspective, we may have some further evaluation gain or losses. But Elawan, for example, is one. And also with regard to real estate, there will be some kind of preparation in terms of procurement and so on and so forth. So therefore, I mean, so far as we haven't gone as far as being able to explain one by one, to the investment community, but there is some kind of progress that we may be able to make going forward. So I just wanted to indicate the direction going forward. I hope this answers your question in some way or the other. Natsumu Tsujino: Well, if I could ask a question about Robeco's AUM on a Q-on-Q basis, it is increasing quite significantly. What is that the backdrop? So it is increasing by 18%. So is there anything that you can explain as an appeal? Unknown Executive: So Page 27, yes, we have shown. So the Robeco, the asset management fee is under pressure, but the AUM is what we feel the need to kind of increase on a 2-dimensional basis, but also at the same time, we are trying to enhance the profitability as well. So relatively speaking, we did manage to win the mandate for a quite sizable fund or deal. And that, in fact, was reflected. And also equity market is remaining to be strong, and on the other hand, the fee income competition, especially advisory as well as index, it needs to be tough. And so therefore, we would like to remain to be competitive and centered around Robeco, of course, in proceeding with this business. So AUM, it is true that it is growing significantly, but we hope to be able to generate growing of profit out of this growth of AUM as well as AUA. Natsumu Tsujino: Okay. Well, in that case, in this there is no kind of specific strategy that worked out to be positive. You will not be able to mention that? Unknown Executive: Well, we hope to be able to share some further details. But as to Tsujino-san knows, like index related, for example, what was build, what was not, if you were to -- you will be able to perhaps enjoy a better inflow of the fund, but the needs are quite limited. So therefore, if you were to seek for the quantity, for sure, you may be able to benefit from it. But of course, we will have to ensure, as I have said, that leads to our betterment of profitability. So this is what we need to work on. So it is not just the quantitative improvement but also we are trying to achieve qualitative improvement at the same time. Operator: Before we run over the scheduled time, this is going to be the last question. [indiscernible], please ask your question. Unknown Analyst: This is Niwa speaking. Follow up question to what Tsujino-san asked. My question is management resource allocation and also appetite for Japan. Real estate was covered broadly. And my question is, in Japan, what is better areas that you would like to focus on? And is there a sign for improvement in terms of demand for financing? 17 strategic domains have been identified by the central government. And are there some of them in line with the business that ORIX is trying to do? Unknown Executive: More domestic market, as I explained during the real estate mid-market private equity and manufacturing included new economy-related area is seeing increase in the interest rate. So lease and CapEx investments demand strengthening. This is our impression. For example, for auto lease cost increase. Well, we asked people to send that, and it was not really accepted, but recently negotiation is most smooth, retention is going up. So based on the financial capacity, tangible asset-related business is looking very promising in Japan as well. In relation to the strategic focus, ship loading, well, we are not really thinking about going directly into ship loading. So there is nothing within the 17 areas that are committed. But we believe that intermediary business will grow. For example, [indiscernible], which we made a release the other day, we are getting a good sense that this is going to be a good business. And we have adjacent areas surrounding the 17 pillars mentioned by the central government, and we will discern, identify good areas for us to enter. So that's one direction. And in addition, I'm sure that [indiscernible], but the result of the election was very clear. So looking at the governmental budget and financing, we believe that we will be able to see which private sectors will be more active and we will try to capture those. I think the budget is still yet to be discussed in detail. So we will continue to monitor that and listen to the customer needs, our customers' voices and response to their needs for financing, and we have great expectations as we try to build the business plan for next year. Unknown Analyst: Another related question. Overseas business domestic ratio compared to what you had in the midterm plan, maybe the ratio of domestic business is going to be bigger? Is that true or not? Unknown Executive: Well, the domestic market is not expected to improve dramatically. And for overseas, when you look at aircraft, for example, in aircraft, crafts and ships, in Asia, we were controlling risk taking. So we believe that there is a good expectation there. In terms of overseas versus domestic ratio, my impression is that this is not going to change largely, but hopefully, we can provide more information in May. Operator: We would like to close the Q&A session. And lastly, we would like to ask Yamamoto-san to close. Kazuki Yamamoto: Thank you very much. So the third quarter remains to be strong. Thank you for your support. And just as I had explained, so we will be revisiting the business plan. And from Takahashi-san CEO, we hope to be able to share our plan going forward at the time of the earnings call at the end of the fiscal period. So after working hard at the fourth quarter businesses, so we will then continue to seek for your understanding as well as your support. So with this, would like to bring third quarter earnings call to a close. Thank you very much for your participation.
Operator: Good morning, ladies and gentlemen. Before I hand over to Ms. Magda Palczynska, Head of Investor Relations, a reminder that today's call is being recorded. Ma'am, you may begin. Magda Palczynska: Good morning, and welcome to UniCredit's Fourth Quarter and Full Year 2025 Results Conference Call. Andrea Orcel, our CEO, will take you through the presentation. This will be followed by a Q&A session with Andrea and Stefano Porro, our CFO. Please limit yourself to 2 questions. Andrea, please go ahead. Andrea Orcel: Good morning, and thank you for joining us. I'm proud to present our record fourth quarter results, crowning our best year ever and concluding 5 years of UniCredit Unlocked. UniCredit Unlocked was a transformation beyond what anyone thought possible. It released UniCredit's potential, taking us from laggard to leader among legacy banks and set a new benchmark for banking. It allowed us to lead the way in all metrics, including profitable growth and distribution. It exceeded all the KPIs we set for ourselves and built an incredible momentum that sets us apart today. Some teams might see this achievement as a reason to pause and reflect, but not this team. This team is taking this momentum and using it to dramatically increase our aspirations, expand our vision and supercharge the next phase of our profitable growth. While others are now following the path we carved with UniCredit Unlocked, we are determined to leap ahead. Today, we transition from UniCredit Unlocked to UniCredit Unlimited. If UniCredit unlocked traded up our bank's potential, UniCredit Unlimited is about transcending the boundaries of legacy banks to continue to lead in the new competitive environment that includes fintechs and hyperscalers. Our people remain the linchpin across the 2 phases. They are dynamic, driven by excellence and continuously upskilled. We are able to adapt to the changing needs of our clients and the environment, delivering faster decision, better service and more creative solutions. We are an institution with a flexibility to navigate the unprecedented speed of technological change and the unpredictability of geopolitics. This is the start of a bold new era for our bank, one defined by unlimited possibility, bold ambition and fundamental rethinking of what a pan-European bank should be. We're doubling down on accelerating profitable growth, and we are doubling down on our transformation, challenging every assumed limit of what UniCredit can be. This is necessary, and it is urgent. Fintechs and hyperscalers are not slowing down and technological development is only speeding up. It challenges us and redefines the boundaries we used to take for granted. But the work we have done in UniCredit Unlocked positioned us uniquely to go beyond these boundaries. We have the credibility, the ambition, the motivation and the determination. We have the momentum and the strengths. We have a clear vision and a clear strategy. We have the proven ability to flex and adapt to manage change. The time has come to rewrite the rules of the game. This means fundamentally reimagining what a bank must look like. It means overhauling our inherited assumptions, outdated models and artificial boundaries. It means not being bound by convention, but challenging them wherever they are found. It means recognizing that the greatest risks are not change and volatility, but remaining still and yielding to artificial limitation. UniCredit Unlimited is our commitment to move beyond those constraints to think, to act and build without limits. UniCredit Unlimited will provide a new blueprint that blends the strength of the traditional banks, the agility of a fintech and the dynamism of a technology company to create a personalized offer that truly puts the client of today and the clients of tomorrow at the center of all that we do. It will enable us to continue to both grow profitably faster and generate capital more than any other bank in the market. This phase reflects our unlimited ambition for our clients, unlimited opportunities for our people, unlimited potential to deliver profitable growth and distribution for our shareholders and the commitment to provide limitless opportunities for future generation of Europeans. Just as we set the transformation trajectory in the past with UniCredit Unlocked, now we are both accelerating our quality top line growth and doubling down on transformation, leveraging modern technology and AI to push the boundaries of what is possible. With UniCredit Unlimited, we aim to exceed all expectations of what a bank can be and forge a new path for a new era of European banking. Our ambition has always been clear; to become the benchmark for banking and unlock our bank and our people's potential to deliver for all our stakeholders. From '21 to '25, we did exactly that. We maximized efficiency, both operational and capital, while reigniting quality top line growth, delivering unmatched return on tangible equity and sector-leading distribution growth. We laid strong foundation for the future, leveraging a supportive risk and cost of risk environment. We have moved decisively to become the benchmark of the sector, delivering top-tier net revenue growth, the best operational efficiency, market-leading organic capital generation and superior return on tangible equity. This outperformance is not theoretical. It is a testament to our ability to execute, to deliver what we promise and to do so consistently quarter after quarter, year after year. From 2026 to 2030, we will change gears, striving to transcend the boundaries of service, productivity and efficiency that still constrain legacy banks. We will further accelerate our quality top line growth, capturing profitable market share across the right geographies, the right client segments, the right products. We're building on the last 5 years to deliver a decade of unmatched performance and returns. The pillars to reach this success remain unchanged: Quality top line growth, operational and capital efficiency, profitable bottom line growth outside organic capital generation underpinning growing distribution. Our outcome remains unmatched per share growth at high return on tangible equity and outsized sustainable distribution for the benefit of all our stakeholders. We aim to accelerate our quality top line growth, growing net revenue at 5% annually to around EUR 27.5 billion by '28 and directionally aspire to exceed EUR 29 billion by 2030. We will double down on transformation, leveraging technology and AI to reset the efficiency frontier. This will take our cost base down 1% annually to around EUR 9.2 billion by 2028 and below EUR 9 billion by 2030. This leads to best-in-class profitable growth as we aim to grow net profit at a 7% compounded annual growth rate to around EUR 13 billion by '28, increasing our return on tangible equity above 23% and directionally, aspiring to reach EUR 15 billion by 2030 with a return on tangible equity of 25%. For shareholders, this translates into unparalleled per share growth and a continuation of our market-leading distribution story with 80% ordinary payout. And before complementing with excess capital deployment or return, we aim to deliver circa EUR 30 billion in the next 3 years and EUR 50 billion in the next 5. This is in addition to the EUR 9.5 billion related to full year 2025. We're in an enviable position of not having to compromise between being able to grow at the top of our sector and remunerating shareholders attractively also at the top of our sector. And we have excess capital available to accelerate our growth and distribution further should we choose to pursue M&A or returning it to shareholders if no better opportunity for deployment is found. These financial strengths and the structural advantage of our presence in 13 plus 1 market provides us with a unique advantage for inorganic growth. Any M&A will be approached with the same discipline applied to date. Three core elements underpin our superior equity story that intends to deliver a decade of outperformance with an unmatched combination of profitable growth and distribution. First, our winning proposition. We have proven our ability to relentlessly execute, transforming from laggard to leader. We benefit from structural advantages that are hard to replicate and even harder to match. Second, strong momentum. Full year '25 was a year of record performance achieved while absorbing more than EUR 1 billion of headwinds from rates and EUR 1.4 billion of front-loaded extraordinary charges to strengthen our future trajectory. Third, our winning strategy. UniCredit Unlimited is a plan designed to reset what best-in-class looks like. We will accelerate quality growth and redefine sector efficiency, pushing beyond traditional legacy boundaries. We have a proven and scalable transformation blueprint. This is enhanced by structural advantages, combining attractive geographic footprint, best-in-class product offering and a high-quality client franchise. This blueprint is rooted in group scale with local reach. We started by putting clients truly at the center, unifying the organization around one common vision, strategy and culture. We empowered our banks and our people. We shrunk the center to what truly adds value and benefits from scale, ensuring our banks are as independent as possible within one clear group strategy and framework. This has created a bottom-up execution-driven culture that is delivering exceptional results. We harness scale only where it generally creates advantage, product factories, technology and data and AI, procurement, unlocking synergies and raising effectiveness across the group. This federal model enhances the entire system. The group provides platforms, capabilities and direction while empowering local bank delivery for clients and drive superior performance. UniCredit Unlocked was built around one core belief that there was an unmatched potential inherent within our bank that needed to be unlocked by leveraging our structural advantages. First, our attractive geographic mix. We are the only truly pan-European bank with 13 banks plus 1 embedded across Europe with top 3 position in 90% of our markets. This gives us scale, diversification, stability, limited FX dispersion in our results, lower geopolitical concentration compared with other cross-border models, and it provides strategic optionality, including M&A opportunities across 13 plus 1 markets. Second, our high-quality client mix. We have more than 20 million primary long-standing client relationships skewed towards private, affluent and SMEs, where returns are structurally more attractive, driven by a higher RoAC, cross-selling and crossover ratio. Third, our targeted product mix. Our group product factories, combined with our granular local reach, provide a breadth and depth of offering that local competitors cannot match. All of this is brought together and leveraged by our people, continuously striving for excellence, raising standards every day and turning strategy into delivery. Our structural advantages reinforce each of our 3 financial levers, delivering an unmatched combination of profitable growth and distribution. First, operational excellence. Our pan-European footprint is geographically closed and increasingly integrated. We increasingly operate on shared platform, common infrastructure and converging processes with common products, delivering unmatched efficiency. Second, capital excellence. We combine high-margin lending with capital-light products distribution enabled by our unique product factories seamlessly connected to our distribution and a client mix skewed towards more profitable segments. This allows disciplined capital deployment at high RoAC, driving both profitable growth and capital generation. Through increasing internalization, we are retaining more value across the chain, including investment, insurance and payments. Third, quality profitable growth. We're exposed to structurally higher growth in Central and Eastern Europe with limited FX dispersion and to a fiscal stimulus dynamics in Germany. Italy remains our core capital-light growth engine, while Austria ensures resilience and further growth potential. Our federal network means we lead in cross-border solution, amplifying growth through cross-selling and upselling across market and products. This is why our outperformance is structural and gives us confidence in our superior growth and distribution over time. We have delivered top-tier net revenue growth and established ourselves as a leader in efficiency, organic capital generation and return on tangible equity. We have outperformed peers in value creation, driven by strong share price performance and distribution growth, resulting in best-in-class shareholders' returns. The past 5 years demonstrate our consistent execution and outperformance, positioning us to extend this leadership into the next 5, achieving a decade of outperformance. We have delivered a record fourth quarter and record full year, running 20 consecutive quarters of quality profitable growth. This strong momentum is broad-based across all KPIs, delivering today while building for tomorrow. We are the benchmark, and we are entering 2026 with unmatched momentum. NII, fees and net insurance, cost, organic capital generation, net profit and ROTE, all performed better than expected at the beginning of the year. The underlying engines remain strong. NII sequential growth for the first time since rates began to normalize. Fees and net insurance growing ahead of expectation, supported by investment products and the internalization of life insurance. Cost flat, entirely absorbing new perimeter, minus 1.8% without them. This allowed us to front-load more than EUR 1.4 billion of extraordinary charges in hedging and integration costs so that future profitability is cleaner and stronger. As a result, net profit reached EUR 10.6 billion in '25, up 14% with return on tangible equity increasing 1.5 percentage points to 19.2% or importantly, 22% when adjusted for excess capital compared to peers. Distribution increased 6% to EUR 9.5 billion, crowning our best year ever. On a per share basis, we accelerated further with EPS up 20%, DPS up 31% and tangible book value per share up 19%. Our revenue engine remains strong. NII proved more resilient than anticipated, fully absorbing over EUR 1 billion of rate compression. Margins remained stable, supported by quality loan growth of 4% and disciplined pass-through of 31%. We saw the first sequential NII increase since 2024, up 2% quarter-on-quarter, a clear sign that the trough is behind us. Fees and net insurance continued to grow, up 6%, driven by accelerating investment fees, supported by strong commercial momentum, internalization of life insurance in Italy boosting net insurance income. Fees and net insurance also saw a sequential pickup in the quarter, up 1%, with the ratio to net revenue reaching a top-tier 36%, up 2 percentage points. Investments, including hedging costs, were down 14% as they were impacted by preemptive hedging costs in the quarter. Investment would have been up 60% without that. The contribution from equity investment is set to materially increase in 2026 as the impact from the equity consolidation of Commerzbank and Alpha fully materializes and hedging costs decrease. Trading and balances, excluding hedging costs, declined due to a positive one-off impact on balances in '24. They would have been up 2% excluding this. Overall, our top line remains well diversified and increasingly balanced with NII stabilizing and growing fees compounding and investment poised to strengthen significantly. Our net revenue remains resilient, supported by a disciplined approach and a cost of risk that remains structurally low. Cost of risk stands at 15 basis points, continuing to benefit from strong write-backs and confirming the benign credit environment across our geographies. We have kept overlays unchanged at EUR 1.7 billion, the highest in the industry, preserving a significant buffer to mitigate future pressure on cost of risk or to further support profitability. Asset quality remains sound, net NPE ratio at 1.6%, low default rate at 1.3%, coverage broadly stable at 44%. This consistent quality across portfolio demonstrates prudent origination, robust underwriting, discipline and tight monitoring. Together, these drivers sustain our net revenue through the cycle. Our operating performance was better than expected with GOP down only 2%, 1% excluding one-off hedging costs. Costs remained flat, whilst at the same time, fully outsourcing the integration of Vodeno, Aion, Alpha Bank Romania, the internalization of life insurance and the continued significant investment in technology and people. Excluding new perimeter, costs would have been down 1.8% this year. Our cost/income ratio remains the best in the peer group, supported by resilient revenues and strict cost control and confirms our ability to deliver efficiency while continuing to invest. Even with rate headwinds and significant investment, we preserved sector-leading operating efficiency, reinforcing our competitive advantage. As a result, our core operating performance is materially better than our expectation with GOP resilient, revenue stabilizing and the bank entering 2026 with a much stronger underlying run rate. This is efficiency with purpose, streamlining where it matters, investing where it counts and ensuring that UniCredit continues to deliver sustainable high-quality growth. We delivered record profitability, taking advantage of one-off gains, life insurance stake revaluation, Commerzbank badwill recognition, favorable taxes and higher-than-expected Russia contribution, together with strong momentum to front-load more than EUR 1.5 billion of integration and one-off hedging costs to strengthen our future trajectory. Net profit reached EUR 10.6 billion, up 14%. Return on tangible equity exceeded 19% -- with return on tangible equity of 13%, reaching 22%, up 1 percentage point and best-in-class. Capital excellence continues. Organic capital generation was strong yet again, broadly in line with net profit and complemented by other one-off levers. This allowed us to support EUR 9.5 billion in dividends and share buybacks and the equity consolidation of Commerzbank that will significantly contribute to our future growth while keeping our capital position essentially stable. The decline of our CET1 from 15.9% to 14.7% was due to expected significant regulatory headwinds and additional taxes in Italy. On a pro forma basis, for the equity consolidation of 29.8% of Alpha Bank and the Danish compromise, our CET1 ratio shall increase to 14.8%, although with a timing mismatch. As such, net of regulatory headwind and Italian taxes, our CET1 ratio would have remained stable at over 15.9%, while supporting EUR 9.5 billion in distribution and circa EUR 3.5 billion from equity consolidation of Commerzbank and Alpha. Italy confirms its leadership, outperforming peers across all KPIs and acting as the group capital-light growth engine. In '25, our franchise gained strong momentum with loans and deposits growing 2.7% and 3.8%, respectively, expanding our market share in the targeted segment. This commercial strength supported a resilient top line performance despite the challenging rates environment, which hit Italy above and beyond any of our markets. Revenues were down only 3.1%. NII declined 7.8%, but excluding the impact of rates, grew 4%, giving us confidence in what we can achieve going forward. Indeed, NII shows a clear acceleration in the quarter, and we expect its sequential growth to consolidate further in the first half of 2026. Cost of risk remained stable at 27 basis points. Fees and net insurance continued to grow, up 6.5%, supported by strong commercial momentum with total financial assets, excluding deposits, up 12%. We continue to improve our efficiency while investing with cost down 2%. All this translating to a RoAC of circa 27%, the best in the country. Germany confirms its leadership in efficiency and profitability in the country, remaining the group resilient anchor. The franchise is also showing the first signs of acceleration with loans up 1%, gaining market share in the targeted client segment. Revenues increased 2.1% despite the challenging rates environment. NII was up 0.6%, visibly accelerating in the quarter, up 1.3%, giving us confidence in what we can achieve going forward. Cost of risk remained stable at 20 basis points. Fees and net insurance grew 4.4%, supported by strong commercial momentum with total financial assets, excluding deposit, up 7%. Germany continues to deliver operational efficiency while investing with costs down 4%. All this translates into a RoAC of 21.3%, the best in the country despite substantial regulatory headwinds. Austria confirmed its leadership in efficiency and profitability relative to its peers in the country, remaining another group resilient anchor. The franchise is showing signs of acceleration with both loans and deposits growing 3%, increasing market share profitably. Revenues declined 3% due to the challenging rates environment. NII was down 8%, the trend clearly reversing in the fourth quarter, but was up 5.7% sequentially. Cost of risk remains low at 5 basis points. Fees and net insurance were up 1.8%, 6.3%, excluding the disposal of Card Complete, supported by strong commercial momentum with total financial assets, excluding deposit, up 6%. Austria continues to deliver operational efficiency with costs flat while investing. All this translates into flat net profit at a RoAC of 22.6%, the best in the region, fully absorbing NII headwinds and a higher bank levy in the country. CEE confirmed its leadership in profitability and efficiency in the region, remaining the group's growth engine. The franchise shows strong acceleration with loans up 11% and deposits 7%, delivering on our ambition to grow profitable market share. Revenue rose 5.5%. NII was up 2.5%, showing strong sequential growth. Cost of risk remains low at 11 basis points. Fees and net insurance grew materially by 10.7%, supported by strong commercial momentum with total financial assets, excluding deposit, up 20%. Central and Eastern Europe continues to deliver operational efficiency with a cost/income ratio at 34.6%, absorbing most of the impact of new perimeters. All this translates into a RoAC of 27.4%. Client Solution is our product factories that converts group scale into capital-light, repeatable growth. They represent more than 90% of group fees and net insurance. It is central to how we strengthen client connection while improving the quality of our revenue mix. Client Solutions delivered EUR 11.7 billion of net revenue, up 5% and EUR 8.2 billion of fees and net insurance, up 8%. Within that, Investment continued to perform strongly with net revenue up 9% to EUR 2.5 billion, supported by the continued expansion of our offering and the strength of distribution, including strong growth in one market. Insurance, now a meaningful growth pillar, was up 15% to EUR 1.1 billion. The internalization of life insurance further strengthened our value retention and positioning. Advisory & Financing Solutions net revenue grew 17% to EUR 2.1 billion, reflecting our ability to leverage the franchise across markets and client segment. Client risk management delivered EUR 2.3 billion net revenue, up 9% with very strong RoAC, reinforcing the quality of client-driven activity. We're closing 2025 with record results and entering the new year with strong momentum and a stronger underlying run rate than expected. We beat start of the year expectation on all core operating lines. We were able to take EUR 1.4 billion in extraordinary charges, which together with our overlays of EUR 1.7 billion that remain intact and our excess capital greater than EUR 4.5 billion, further protect and strengthen our future trajectory. From first quarter of this year, we will implement an intra revenue restatement. Total gross and net revenues are unchanged. This has no material impact on the underlying growth trends of NII and fees plus net insurance. What changes is the presentation of our result aimed at improving comparability versus peers, transparency and predictability. Specifically, we will move commodities interest margin from trading to NII, certain certificate costs from NII to trading, securitization cost from fees and NII to balances and bank insurance negative indemnities from balances to fees. The managerial reclassification of hedging cost from trading to investment remains unchanged. We believe this will make for a more clear and homogeneous aggregation of the drivers of our P&L. UniCredit Unlimited is predicated on going beyond traditional boundaries. It is about disrupting, about innovating and rethinking how we grow and operate. UniCredit Unlimited is built on 2 pillars. First, unlimited acceleration. We intend to gain quality market share and grow revenues profitably faster than our peers through quality NII and fees and net insurance. This is further supported by the capital-light growth of the net income of our equity investment. Second, unlimited transformation. In parallel, we are determined to reset our efficiency frontier, not from a standing start, but by leveraging our leading position, the experience we have gained in the last 5 years getting there and the new AI and technology tools that are now available. During the next 3 years, we aim to grow our top line at 5% CAGR with net NII plus fees and net insurance, excluding Russia, at above 5%. Importantly, the earnings of our equity investment, net of hedging cost should more than offset the impact of our Russia compression and substantially exceed it on a net profit basis. To deliver our ambition on net NII plus fees and net insurance, we intend to grow market share in a targeted and profitable way as we have done in the past. Quality first, capital-light and with higher value per client. We aim to go deeper with the clients we already have and win new primary relationships that matters, focused on private, affluent, SMEs and the large corporates we are closer to. We aim to maintain our NII RoAC at around 20% through disciplined targeted profitable lending, not volume for the sake of volume. We aim to increase the weight of fees and net insurance on net revenue towards circa 38% over time, improving the quality, resiliency, profitability and capital generation of our earnings. Our equity investment growth over time is capital-light. Our unlimited acceleration stands on 4 mutually reinforcing pillars. First, our people. They remain the engine of our success, delivering impact through a shared vision and winning culture, combined with relentless execution. Second, our factories. We continue to strengthen the connectivity between our product factories and our distribution that closely interprets our clients' needs while expanding our offering, internalizing more of the value chain and scaling innovative solutions across geographies. Third, our channels. We leverage a superior omnichannel model; physical, remote and digital; with AI elevating speed, accuracy and personalization. And fourth, our digital and data. We are accelerating AI adoption across client service and advisory, technology and operation, using it to deepen relationships, improve efficiency, increase speed and unlock new value. This is how we turn scale and innovation into sustained competitive advantage. We continue to invest in our people, engaging them in the definition of our strategy and objective, providing them with personal growth opportunities, fostering a culture of ownership, empowering them, developing them through a corporate university now focusing on deepening skills in digital and in AI and continuing to hire to drive growth. Our people have been essential to our success so far, and they are essential to achieve our ambition. Our product factories combine into a powerful engine of capital-light, scalable growth. We continue to enhance their strengths and deepen their connection to the front line, ensuring that every capability we build translate directly into fulfilling client needs and hence, direct commercial impact. We're expanding our product offering so we can meet evolving client needs across Europe with greater breadth and precision. We aim to grow our share of wallet in the right segment and geographies while improving cross-selling for international clients, leveraging our Pan-European footprint. We will continue to internalize more of the value chain across key products, this allows us to retain more value, control quality end-to-end and deliver an offering that few competitors can match. And we're embedding digital solution across the entire platform, DealSync, Smart Factor, Trade Finance gate, for example. We're turning innovation into a tangible uplift in client experience, revenue and efficiency. Let's take the first example, investment. This model is already delivering. In Asset Management, we are transforming the role that a distributor can play by gradually capturing more of the value chain, internalizing the blocks in which we can add the greatest value. As such, we have created a new benchmark for what is possible in asset management, and we are not done. Our distinctive asset management platform holding a leading market share across 13 plus 1 countries now ranging from proprietary asset management to value-adding selection and repackaging of third-party mutual funds to proprietary capital protected certificate and to unit-linked in which we command a leadership in Italy with a 30% market share. Our One market funds have grown from 0 to more than EUR 30 billion in 3 years, and we aim to more than double that amount by 2028 and triple it by 2030. At the same time, our internal value retention has increased from around 60% to above 80%, and we target beyond 85% by '28 on an increasing base. This transformation improves clients' experience and returns as it gives us full control and materially strengthen the economics of our business. And we are applying the same successful formula across other factories, including insurance, client risk management and even payment using internalization, innovation and scale to create even more value. Our omnichannel setup is one of our strong competitive advantage. We combine physical branches, remote AI and people-supported advisory with digital platform into a single seamless client experience. AI is enhancing every touch point, improving speed, accuracy and personalization. Clients choose where, when and how they interact with us, and we adapt. Our network excludes 3,000-plus branches focused on high-value personalized interaction. UniCredit Direct, providing flexible and tailored remote advisory. Digital and hybrid channels, key access point for every interaction of our client. This is an omnichannel model built for today's expectation while we developed tomorrow's opportunity. A case in point, Buddy. Buddy is a tangible example that is transforming our client access, advisory and banking services and its innovative model is setting a new blueprint. It is more than a digital channel. It is a fully fledged remote branch that offers clients a full product and service catalog digitally with 24/7 access to AI or people-based support. It is seamlessly integrated with the rest of the branch network and channels and offered a tailored experience at a lower cost to serve. It has already reached 800,000 clients by the end of last year with a trajectory towards 2 million by 2028, and we expect it to continue to grow at an accelerated pace after that. The Buddy model is ready to be exported across all our 13 countries and beyond. Please do come and try it. We have several other pilots at different stages of development being experimented across the group, in Poland, in Croatia, in Bulgaria, for example, but if successful, will be rolled out more broadly. We aim to be at the forefront of what can be achieved using technology, data and AI in our sector. Their rollout is underpinning the improvement in client experience and productivity that supports our targeted gains in market share and ultimately, the quality growth of our core revenue. We follow a clear ROI-driven approach, combining group-wide critical process by process redesign with a bottom-up use case development to maximize impact. We have unified our data and AI platform, enabling control and ability to scale custom solutions. Our AI platform already ensures approximately 35% lower time to delivery and 30% lower IT cost. We have multiple AI-driven solution already in place such as UniAsk and DealSync already driving tangible results, and we are just beginning. We're in the process of leveraging AI to reshape client engagement through AI-powered service channels, next-generation virtual assistants, predictive analytics for tailored solution and smart recommendation for adviser. At the same time, we aim to further empower our people by giving them upgraded tools to enhance the quality of their work and their productivity while streamlining and automating manual processes. DealSync is a case in point example. DealSync is a tangible example of how technology and AI transform the service we can provide to clients, in this case, mostly SMEs. It is an AI-powered platform focused on matching and introducing SMEs among themselves and with investors and adviser that would otherwise not happen given their fragmentation. DealSync reduces marginal cost, expands access to capital markets and creates new business opportunities for clients and for UniCredit. Already live across all UniCredit major market, it has been recognized as an Abby innovation winner in 2025 and has already captured a market of over 4,000 SME deals opportunities since its launch 1.5 years ago. We see digital asset as a structural shift, and we're moving decisively across asset tokenization and digital money, pioneering in many areas. On tokenization, we have completed 2 proof-of-concept initiatives in mini bonds and structured notes, showing how tokenization can simplify issuance, cut cost and accelerate execution for clients. On digital money, we are a founding member of Qivalis, the European strategic systemic alternative to U.S. dollar-denominated stablecoins. We are also actively looking at our unchanged settlement instruments as demonstrated by our participation in the ECB-led PONTES initiative. All of this positions us as an early leader in real-world asset tokenization and reflect tangible progress in a space where there is often far more hype than real execution. Our ambition is clear; to become Europe's reference point for tokenization executed with a focused strategy and a defined road map. In the crypto space, our approach is more careful and neutral. We are offering interested clients access to public ETPs with underlying crypto with clear disclosure to inform on volatility and risks. We have also pioneered capital protected certificate with underlying cryptocurrencies, an innovative product that mitigates the downside risk of the asset class. The second pillar of UniCredit Unlimited is unlimited transformation. We are aiming to reset the sector efficiency frontier once again. Starting from a position of strength, best-in-class capital and operational efficiency with unlimited, we shift gears again. We move from improvement within existing boundaries to transcending those boundaries, reinventing ourselves and using new technologies and AI to support that step. On capital efficiency, we aim to further increase our net revenue to RWA to 8.6% and move beyond that by 2030. On operational efficiency, we aim to decrease the cost base by 1% per year to around EUR 9.2 billion in '28, confident we will maintain that trajectory towards 2030 and beyond. We will do so while supporting growth and investing, staying at the forefront in the future as we have done in each of the last 5 years. We continue to sharpen our capital efficiency as we remain focused on growing NII while maintaining a 20% RoAC and increase the weight of capital-light revenues, including the growth of the contribution from our equity investment in CommerzBank and Alpha net of hedges. We will continue to execute securitization above the cost of equity, enhancing capital velocity and reinforcing the quality of our lending book. In practice, this means deploying capital only when return justified, redirecting it to the right geographies, the right clients and the right products and maintaining our leadership in profitability, growth and distribution. Over the past 5 years, we simplified and streamlined our bank, proving that even a large multi-country institution in Europe can become sharper, faster and more efficient. That was a critical part of UniCredit Unlocked. It was about fixing what was inherited and building a model capable of outperforming peers. The next phase is fundamentally different. UniCredit Unlimited is not about incremental improvement. It is about rethinking the operating model at its core and the key enablers of these shifts are technology and AI. They allow us to go far beyond what manual processes or traditional structure can achieve. We are automating at scale, embedding AI into every critical workflow; accelerating execution across risk, compliance, finance, operation and HR; removing friction and eliminating repetitive tasks. With these tools, we can redirect capacity towards high-value activities, faster, critical decision-making, key value-added steps in technology and operations, deeper client engagement, delivering stronger commercial impact. Value activities are how we reset the industry operation frontier. This isn't simply about efficiency, but about thriving in a competitive environment that is rapidly shifting, having the courage to lead the change of how the work itself is done. Vodeno is our next-generation proprietary core banking platform, a cloud-native modular infrastructure that accelerates implementation, improves flexibility and reduce dependency on third-party systems. It provides enhanced internal technical expertise powered by more than 200 specialists across engineering, technology and data and AI, a sandbox to test entry in new markets and segments, validating new features and products, a foundation to scale embedded finance and Banking as a Service. It enables us to deliver a faster and lower cost to implement and cost to serve. And once validated, solution can be expanded across group at speed. Over the last 5 years, with UniCredit Unlocked, we have organically transformed this bank, driving the best total shareholder returns in the industry. With UniCredit Unlimited, we face an even more exciting and ambitious proposition that should result again in best-in-class total shareholder returns. Both Unlocked and Unlimited not only deliver for our shareholders, but greatly motivate our management and broader team alike. As such, M&A remains not a necessity, but an accelerator, executed only under our strict terms and only when it creates incremental value for our shareholders. We only execute when there is a clear strategic fit and the returns are superior to our share buybacks. Our discipline has already been proven. That said, we do retain unique optionality across 2 strategic states and 13 markets. Our winning proposition, strong momentum and forward-looking strategy with its related granular, simple levers to execute it leads to our ambition for UniCredit Unlimited. We aim to deliver once again the best combination of net profit growth at leading return on tangible equity and distributions within the European banking sector, supported by a dynamic, higher quality top line and a lower cost base, all resulting in achieving a decade of unmatched performance. We continue to believe that guiding on net revenue is more aligned on how we manage the business as the combination of NII, net of the related LLPs and fees and net insurance are interconnected in multiple ways and cannot be seen separately. All numbers that I will go through now are post the restatements I just described earlier. We aim to grow net revenue at a 5% compounded annual growth rate, reaching sound EUR 27.5 billion by 2028 and directionally exceeding EUR 29 billion by 2030 and beyond. In terms of growth levers, we aim to accelerate core revenues net of LLPs at 4% CAGR while absorbing Russia compression, 5% CAGR without it. Benefit from the contribution of our Commerzbank and Alpha investment growth, net of hedges that shall reach EUR 1 billion by '28 and more than compensate Russia. Cost of risk should remain stable at 15 to 20 basis points. Overlay shall be used as required to support that expectation. We aim to reduce our cost by circa 1% per year net of investment and other headwinds to around EUR 9.2 billion by '28 and below EUR 9 billion by 2030, leading to a cost/income ratio of circa 33% in 2028 and below 30% by 2030. As such, we aim to increase our net profit by 7% per year to circa EUR 13 billion in '28, increasing our RoTE to above 23%. Such trajectory is directionally set to continue towards 2030 and beyond. As a reminder, we can rely on a combination of substantial unique buffers to defend that performance. EUR 1.7 billion of overlays, more than EUR 4.5 billion of excess capital, EUR 1.4 billion front-loaded extraordinary charges, EUR 1 billion additional revenue from equity investment that are fully distributable. Our trajectory is underpinned by quality profitable growth, operational excellence and capital excellence. On the top line, we aim to grow more than the peer group, both in absolute term and in quality with a stable and controlled cost of risk. On cost, we aim to reset the efficiency frontier, shifting transformation from simplification to reinvention. On capital, we aim to deliver the best combination of profitable NII and rising capital-light revenues, all while maintaining one of the strongest balance sheets in Europe. Together, this will result in EPS growth and return on tangible equity at the top of the peer group. Our distribution policy reflects our confidence in the sustainability and quality of our earnings. We confirm 80% ordinary distribution split between 50% dividend, 30% share buyback. The mechanical result is cumulative distribution of circa EUR 30 billion over the next 3 years and EUR 50 billion over the next 5. This equates to a best-in-class distribution yield before considering any deployment or return of our more than EUR 4.5 billion of excess capital evaluated yearly. The numbers above do not include the EUR 9.5 billion of planned distribution for 2025. When you bring it all together, growth, efficiency, profitability, capital generation and distribution; UniCredit stands apart. We deliver the best combination of return on tangible equity, EPS growth and distribution yield among major European banks. Performance of this magnitude should be reflected in a premium valuation, providing further relative upside going forward. To conclude, UniCredit Unlocked transformed our bank, proving what disciplined execution; empowered, motivated people; and a unified operating model can achieve. Our performance confirms the effectiveness of our model, resilient, diversified, efficient and relentlessly focused on value creation. We have delivered another record year with 20 consecutive quarters of quality profitable growth, and we are entering 2026 with an unmatched momentum. We now shift decisively from unlocked to unlimited, a new phase defined by greater ambition and a fundamental rethinking of how a European bank should operate. UniCredit Unlimited is designed to transcend legacy boundaries, pushing beyond traditional banking limits through disruptive change supported by technology and AI and continued convergence of our operating model. Our people remain the linchpin of getting us there. Our superior equity story speaks for itself, market-leading growth at best-in-class return on tangible equity and an unmatched distribution trajectory, all achieved within Europe. We have M&A optionality that others do not, and we will continue to exercise the same discipline. These banks was transformed once with UniCredit Unlocked, and we are determined to do it again with UniCredit Unlimited, delivering a decade of outperformance. Thank you very much, and we'll open to questions. Operator: [Operator Instructions] The first question is from Ignacio Ulargui of BNP Paribas. Ignacio Ulargui: I will just make one in the interest of time. So I mean, if I just look to the plan, I think one of the biggest changes is the loan growth that has been changing throughout the last couple of months. Just wanted to get a bit of sense of how that 5% growth will be distributed between regions and products. Andrea, you made a couple of comments about the most profitable segment. Just wanted to get a bit of a sense on how does mortgages, SME and consumer interact on that basis? And also linked to that, what has changed really for the bank to move towards that stronger organic growth ambition? Andrea Orcel: Okay. So I'll start with what has changed, and then I'll move to loan growth, and I'll pass it to Stefano. So what has changed? The momentum we see in our business. We closed 2024 indicating that we were shifting gear and moving to accelerating growth. During 2025, if you take away all the noise, we saw that crystallizing and crystallizing better than we expected. And therefore, that gave us more confidence. As we moved into the second part of the year and in the fourth quarter, we see a momentum on all of our operating indicators; NII, fees and net insurance cost to be better than we expected and strong. And that has given us the confidence on, let's say, doubling down on the acceleration of the top line. The second thing is during the course of '25, like many others, but especially ramping up into the end of the year, we have not only continued to look at how we could continue to improve ourselves through change, through transforming the way we operate, but increasingly adopting AI and accelerating the move of new technologies into the bank. And this is just a question of acceleration. And as we did that, we witnessed that the time to achieve both improvement of that transformation was significantly faster, the impact greater and therefore, that we could apply what the team has been executing in terms of transformation over the last 5 years, but now we could attach it to tools that make the LEAP much greater on the same basis. So fundamentally, the entire processes that we would be before redesign, much more efficient, now we can redesign them and totally converge them AI-based and the leap is materially greater. So these 2 things occurred. This is combined with a realization at least of mine and the management team that we can no longer focus on competing among legacy banks. Fintechs and hyperscalers are a reality. They are entering Europe strongly in every market. And we need to have the ambition to transform a lot more to catch up on the operating side in order to reach 2030 as a bank or as an institution that can compete successfully not only with legacy banks, but also with fintechs and hyperscalers. And therefore, all of this together has given us the motivation, the tools, the drive, and we have been doing that for 4 years. We're putting it forward. So it's just a stepping up and a doubling down on the acceleration of the top line and on the transformation of our model. With respect to loan growth and growth in general. As you have seen; every single market, region, country in which we are; we are seeing a materially improvement of momentum across loan volumes, across NII. And this is very important. We have succeeded to date and intend to continue to succeed to, yes, step up our growth, yes, take market share, but defend margins. This has been a constant for us. And it's not a constant that is going away. I keep on repeating that EUR 1 billion of loan growth is worth 1/3 of 1 basis points of decline in margin. And therefore, going for volume and not margin is not a value-enhancing proposition. So we've seen that. And what is happening out there is that we have been very clear, and we've already done that increasingly in the last 5 years, but especially in the last 2, we're targeting growth. In the same way, we are targeting efficiency across the chain. We're targeting growth. Where are we targeting? In markets where we think the margins are better, our geographies. So for example, Central and Eastern Europe provides excellent opportunity to grow fast at margins that are sustainable with a high profitability, we're doubling down on that. But even within countries, there are regions within Italy that grow faster than others, we're doubling down in those regions relative to others. We always try to sustain our margins, our return on tangible equity of that. And that is very important. Secondly, client segments. Client segments are not equal. The margins, the profitability of large corporate, of medium corporate, of small corporates, of micro businesses, of private, affluent and mass are not equal. And we are privileged to have 60% of our revenues already skewed in the "most attractive segments" of SME, including micro, affluent and private. We want to increase that. And in many of those segments, the competition is fragmented and fractured, especially the more fragmented segment like small and micro businesses. And it allows us to gain shares in segments that are naturally higher margin, but with a competition that is less pressing. To do that is not as simple as saying, I'll do that. You need to have the credit models, which we have prepared for the last 2.5 years. You need to have the people trained. We have been hiring on the front end or recycling our own people to the front end for the last 3 years. You need to have the IT platform to be able to support them. You need to have the AI to personalize what we are offering. You need to have all of these things prepared to address them, we do. Then you have the products and in the products, again, the margins on a mortgage in Italy, for example, are nowhere close to the margin, and all of this is net of cost of risk on a consumer loan. We have been saying for now 4 years that our focus is on margin, not volume. So we would take the volume hits in mortgages, not because we don't offer them, we do. But because we don't drive them while we wanted to gain leadership in consumer credit, which is a critical pillar of supporting families in their spending. We now are a leader in consumer lending. Our cost of risk is below everybody else's and the margin are multiple times what we would get in mortgage and certainly multiple times above the cost of equity. We will continue to do that. Some competitors have noticed and are trying to imitate. Good luck. You need the models. You need the platforms. You need the people. You need the training, and you need to know how to do it. We've learned very well in the last 4 years, and this is a DNA of UniCredit that comes from the early 2000s. So we have it. Not many people do. That's an example in lending. But when you look at investment, it's the same thing. Money market funds does not have the same margin as a capital guaranteed certificate as a unit-linked, as a wrapped mutual fund under one markets. They address different client needs. And if I may, as we discuss the performance that I always get as an answer in fees, and I have not been able to convey that it is connected because what has a higher margin, a current account, a 0 remuneration or a money market funds. I'll let you decide on the answer. And hence, we have massively outperformed in NII and its margin this year and performed in line on volumes of fees. But all in all, we are ahead. So we treat everything we do crossing geographies, clients and products in this way. And we have developed platforms and factories that are now truly best-in-class, more modern, more AI-based, more dynamic in the responsiveness. But I'll pass to Stefano on the numbers for the loan growth, et cetera. Stefano Porro: Yes. So products, retail, reiterated focus on consumer financing as highlighted by Andrea. In relative terms, this is for geographies like Italy, Central and Eastern Europe and Austria. On mortgages, lower loan growth in comparison to consumer financing in relative terms in the next 3 years with a differentiated growth between Germany, Austria and CE in comparison to Italy for the reason highlighted by Andrea. Segments, more focus on getting market share in small business and small enterprises. However, we are expecting a higher growth than the past in the mid and large corporate segments, especially in Italy and in Germany. With regards to the geographical areas, let's start from the GDP assumptions because that's very important for us. So our assumption in terms of GDP considering our footprint are for a higher GDP than the Eurozone one, so around 1.2% for '26, increasing to around 1.7%, 1.8% for '27 and '28 with an average inflation that is slightly higher than 2%. Why I'm saying to you this because what we are expecting in light of the commercial action that we will put in place is a growth rate for the lending in line with the nominal GDP rate in CE and in Austria, while higher than the nominal GDP rate in Italy and Germany. Operator: The next question is from Hugo Cruz of KBW. Hugo Moniz Marques Da Cruz: So a couple of questions. One on OpEx target, which optically seems aggressive, but you talked a lot about the impact of technology on that. I was just wondering if you could give a bit more color both on integration charges if you have to book everything in the later years? And how do you expect the staff cost to evolve versus other admin and D&A to reach that OpEx target? And then a question on the hedging. You're booking the one-off hedging costs in Q4. What does that mean exactly for the Commerce and Alpha hedges? Are you extending the hedges for longer? And also, should we continue to assume that these recurring hedging costs for those stakes are around EUR 350 million a year? Stefano Porro: Yes. So in relation to OpEx target and evolution of cost over time, let's start from '25. So in '25, if we're excluding change of the perimeter, the costs were down around 1.8%, both on an HR cost and non-HR cost. On the non-HR cost, we have been able fundamentally by the reduction of the real estate cost to more than compensate the increase of cost in IT and marketing. When we look to the future, the trend of cost will be driven by the reduction of the HR cost. So the average number of FTEs of the group will go down during the course of the next 3 years and the connected HR cost. In relation to the non-HR cost, while we will keep on focusing on further optimizing the real estate costs that are expected to go down, the other administrative expenses, especially the IT one are not expected to go down, so are expected to be higher in light of the planned initiative that we have from an IT investment standpoint considering all the specific actions that we have discussed before. In relation to the hedging, we have lengthened the duration of our hedging in Q4. It's a dynamic hedging. So what we are expecting is to do that over the course of the next years as well. You need to expect a recurring cost of hedging. So in our ambition, we are including in the contribution from the investment that Andrea commented before, the hedging costs are included, and we are expecting to have an average hedging cost in the next 3 years of around EUR 500 million per year with a lower cost in 2026 for the action that we've taken and a progressive higher cost for '27 and '28. Operator: The next question is from [indiscernible], Goldman Sachs. Unknown Analyst: Just going back to one of the first questions. And also at the start of the call, you said that the unlimited strategy is kind of fundamentally reimagining what the bank looks like in the next 3 to 5 years. Could you kind of elaborate a little bit more on how you see that the banking environment transforming in Europe over the next 3 to 5 years? How many -- like how do you see that the fintechs and the hyperscalers entering the market? How do you see competition from these banks increasing? And kind of how do you see the larger and smaller European banks performing in such an environment? And then the second question would be on M&A. I know you made quite a few kind of comments throughout the presentation that you have the M&A optionality. But kind of how should we think about M&A in the revenue guidance and what that could potentially mean in terms of upside risk? And also, if you could comment on your relationship with Generali? Andrea Orcel: Okay. So let me start with the transformation, et cetera. So I just think that it is -- if you look at how we looked at the sector in 2020, exiting COVID, there were legacy banks that were getting back on their feet. There were various fintechs. There were hyperscalers. There was a relatively limited amount of competition. Over the last 5 years, it changed dramatically. First of all, if you take fintechs, a number of names come to mind, they are now not only curiosity, they are a reality in many markets. Now they tend to have lots of clients, but few primary clients, but they are a reality, and they are growing fast and they're learning. If you take hyperscalers on what they offer clients in terms of financial services, it's the same. I would add to that, that we now see, for example, U.S. Bank entering quite aggressively in some of the European Union markets and non-European Union markets, leveraging the higher spending technology, leveraging the relative regulation, et cetera, to gain share in the places where it hurts. So I don't think or I'm actually convinced that if you look at it 5 years from now, you don't have these, as we like to play with them balkanized competitive environment with legacy bank on one side, fintech on another, hyperscaler on another, foreign banks on another, you have one. And clients are going to look at one. And you need to look at those competitors and say, what am I missing? I think in general, legacy banks are much better on trust, are much better on quality -- on memory clients, are much better on multiple complex products and solutions, are much better at human touch. They are much worse on all the operational setup behind, on the client experience and on the service. But the flip side is that, for example, fintechs and hyperscalers have exactly the opposite problem. They need to converge where we are on the client side and on the front end. We need to converge where they are. So if you look at transformation, you need to look at a situation where we defend the front end, the primary clients, the product and everything else, providing our people with the tools, AI, technology to improve the service. Otherwise, the clients will walk away. On the other hand, we need as an urgency to become much more efficient, much faster, much more dynamic than we are on our operating machine. I'll give you one order of magnitude. If you took us in Europe, in Italy, in 2020, we probably were loosely defined about 50% of our people were at the front and 50% of our people were at the back. If you look at it 3 years from now, probably the back will be 25% and the front will be 75%. So there is a massive recycling of skill set of our colleagues from back to front as we render the entire machine much more automated, AI-driven, et cetera, et cetera. But there is also more tool at the front to allow them to provide a better service to client. I honestly do not think that if you have that, clients would prefer to be 100% serviced by a chatbot rather than a human being. So I don't think this is the death of human being. I think this is a huge opportunity for legacy banks to take back the baton. So in that, this is what is inspiring everything we're doing internally. Every process is reviewed, the organization is reviewed. The way of working is reviewed, nothing is sacred. And if we can do it faster, cheaper, better without taking undue risk, we go for it. And I think that this bank demonstrates that we like to take those decisions, and we do thrive in change, and we're going to demonstrate that over the next 5 years. With respect to M&A, I think I mentioned it because it is a question I get all the time. I always have -- I always hope that if I say it, I don't get any questions on it. But what I would say on M&A is Europe needs bigger banks. We are dwarfed vis-a-vis the U.S. and the other economic blocks. Also, bigger banks are necessary to fund the transformation that the European Union needs to undertake. Where is the money coming from? The gasoline comes from 2 places and 2 places only. Capital markets, we don't have them. And banks, we are dwarfed. So Europe needs that to fund all the ambition that we have, point number one. Point number two, M&A done at the right terms and the right strategic fits can add significant value. It is usually -- and I have done 35 years of that, no replacement for a bad strategy, a bad plan and a bad execution on an organic basis. We have a great strategy, a great plan and a great execution on an organic basis. We don't need to do it. Look at the net profit growth and at the distribution. We are privileged. We have more optionality, we look at it. We will look at it in the same disciplined fashion. As I said, we moved a little bit as I was told to be too conservative, and we look to beat the share buyback return plus the margin and not 15% return on investment anymore to align to where the cost of equity for European banks have gone. But nothing changes. What is in our earnings? In our earnings, there is 0 deployment or return of excess capital and therefore, 0 acquisition. Obviously, very small bolt-on should be putting a stride on the circa of the numbers that we're giving you, but anything more significant should be added. I think in Central and Eastern Europe, you look at bolt-on that usually go from anywhere between EUR 5 billion -- EUR 500 million and EUR 1.5 billion. So those are relevant for the excess capital. In larger markets, our 3 larger markets, they are not relevant for excess capital because anything that we would do there would require a capital raise and would need to be very well benchmarked against does that derail other plan? Does that defocus our people or not? And secondly, do the return justify it? And this is what we do. With respect to Generali, I think we speak to Generali regularly. They're one of our industrial partners. People forget that they provide most of our bank insurance products in Central and Eastern Europe. We distribute their asset management products within our network. So of course, we talk to them. The rest is a little bit fantasies of people who need to create stories, but there is nothing else on that topic, not that I know of at this point. Operator: Next question is from Britta Schmidt of Autonomous Research. Britta Schmidt: On the capital trajectory, I mean, previously, you've guided or given us some sort of indication of what organic capital growth per annum can be in the plan. Could you maybe give us some thoughts on that now that your volume target is more ambitious and tell us what the RWA growth if that is aligned with this plan? And then how do you think about the largest execution risks of this plan? Is it a weaker macro? Is it perhaps the risk that the cost benefit might be completed away and the AI benefit may be completed away or also the timing of AI deployment and regulation around that? Andrea Orcel: Maybe I'll take the second, and then I'll pass to Stefano on the first one. So the execution risk is obviously always a question of grades. But I think weaker macro affects us. But if you look at what has happened in the last 5 years, I don't think that, that is that significant. I think, obviously, within reason. But I think what affects -- what would affects banks is, number one, if competition steps up at unreasonable levels and people to just grab volume to try and deliver growth that they otherwise don't have, stop dropping margin and become not realistic. Yes, possible. I see it difficult, particularly in this environment and particularly given the capital that people have in Europe to deploy in value destructing volume. So I think the risk exists, but it is limited. Secondly, I think regulation is at the moment quite clear where it's going. It is still tightening, but it's fully embedded in the plan. I would have hoped that it stops tightening, given that we are where we are. But regardless, it is fully embedded in our plan, what we know today. I think the rest is the ability of our organization to not only continue to change as we have in the last 5 years, but step up that change. I'm very confident of what the team can do here. But the degree of change that, one, you need to fathom, taking a step back and looking at what is possible with modern technology and AI; and b, the decision that you need to take that completely disrupt the things that you're doing and how you have been accustomed to do them for a long time is tough. I think this team is uniquely positioned to do that. And there are a lot of indications that they are, but it is tough. And finally, we always talk about all this, but let's be very clear, for UniCredit, this cannot be done without taking control and dealing with the social impact. We have invested a lot in our university. It gave more than 1.5 million of hours last year to our people. This should be stepped up and almost doubled as we bring people along and we upskill, reskill and move them. But the disruption is there. And I think one thing is an Excel spreadsheet. Another thing is to doing this to people. So I think the organization needs to be given the time to absorb and do that recycling in a correct way. So these things, if you look at the numbers on the plan, we use a lot of circa. And we leave a lot of circa because if I take a spreadsheet and I look at all the things that we have identified that we can do better, Britta, I mean, the numbers are a lot better. But time, how adoption, recycling, dealing with the social impact is going to delay and correctly so the implementation of what we do. And I cannot judge that, and I do think that most CEOs cannot judge that because a lot of these changes are new, and we are not accustomed to dealing with them. So on the one hand, you want to accelerate, but then you immediately see the consequences and need to adjust for the consequences and manage them. So that, for me, that speed, we will see this year and next year, that would adjust the plan one way or the other. But at the moment, we are quite confident in the numbers we are aspiring to get and they remain what they are. I'll pass you, one second, to Stefano. Stefano Porro: Organic capital generation, we are expecting to have an organic capital generation at least equal to 80% of the net profit in the plan in order to support the distribution that we have communicated. Net profit, you have the assumption, risk-weighted assets. So we are expecting to have loan growth and as a consequence of that, growth of the risk-weighted assets, let's say, an average in the plan more than EUR 10 billion per year. However, more than EUR 10 billion capital efficiency actions per year, right? So that's why we are confident on the organic capital generation trend. Having said that, we do expect some effect that you need to take into consideration that will bring up the risk-weighted assets that are, one, operational risk-weighted asset, the more we go up with the revenues, and we're expecting to go up with the revenues, the more we have risk-weighted assets. So around EUR 6 billion in the next 3 years is important for you to take that into consideration. And then when we do the Danish compromise, you have the benefit from that, but that will increase the risk-weighted asset once we will do the Danish compromise, and it is around the EUR 6 billion, okay? Then we have some model changes and regulatory impact. The Basel IV are not material, let's say, around EUR 3 billion, then it will depend on the fundamental review of the trading book in terms of also timing of that. But we are expecting also around -- over the plan, around EUR 10 billion of risk-weighted assets that have been from model changes. Everything taking into consideration, the risk-weighted assets are going to be higher already in 2026. We're expecting something more than EUR 310 billion already during the course of 2026. Everything is factored in, in our organic capital generation and distribution trajectory. Operator: The next question is from Andrea Filtri, Mediobanca. Andrea Filtri: I link to Britta's question. I calculate abundant generation of excess capital over the next years. Do you agree that growth at this point supersedes capital return as ROI of share buybacks is lower than organic profitability and most M&A transactions? Second question, as you look into 2030, how are you approaching the adoption of the digital euro? And how can you make it into an advantage for UniCredit? Finally, clarification, you indicate a delay in the Danish compromise approval. Why is it taking so long versus prior similar cases? Andrea Orcel: Okay. So excess capital and everything else. I do believe that there has been coming out of ready '24 and now increasingly '26 to '30, one needs to combine and our strategy is exactly doing that, profitable growth with distributions. We strongly believe that we've moved from maximizing the distribution to shareholders, which, by the way, we pioneered into keep those distributions at what is still a very high level because let's call them what they are, they are outsized. But trying to capture market share and growth opportunity in the outside world because over time, an organization that does not grow for a long period of time dies. So we think there is plenty of opportunities in the market where they are for us to grow market share, but plenty of opportunities across client segment, across products. Every opportunity that we have to deploy capital profitably, we believe will then mechanically enhance distribution going forward because we are committed to an ordinary -- not total, ordinary distribution payout of 80%. So the more I grow, the more profitably, the more I have net profit, the more I distribute as opposed to grow less, have lower net profit and top up with excess capital. I think we've moved from that. And I think it's a lot more sustainable to have profitable growth at high ROTE, generate more ordinary distribution and deploy the capital to get there. And the returns, as you have indicated, Andrea, I agree with you, for now, they are much better than purely share buybacks. The only -- the reason we are keeping share buybacks in there is because I think it's a question of discipline. We need to be disciplined to return to our investors and to our shareholders what we don't use. So either we are good enough to use it at a profitability level that is above the one of a share buyback or we owe the money back to them. And therefore, we will continue to do that. But if you like, psychologically, the emphasis is on profitable growth while maintaining this high level of distribution at 80% that we have achieved rather than trying to maximize returns at decreasing returns for our shareholders. So this is what I would look at. The second thing, adoption of digital euro, I would take a broader context, Andrea, and I know you have been discussed a lot about that. My broader context is there are a lot of things changing in the digital assets, from digital assets to digital -- to stablecoin, to digital euro, to all the blockchain supporting it, to the settlement part with the European Central Bank, PONTES, which then will evolve further into something more blockchain driven. We need to be central to that. We need to address that. So we recognize we are at the beginning, but we are leading most of the initiatives in Europe across stablecoin, across tokenization of assets, across what the digital euro should look like and what it should do in order to disrupt -- to not disrupt, but help. And across also crypto, not because we necessarily want to push it, but if we have clients that want it with the appropriate warning, we need to also respect that wish. I think this is very important. We talk a lot about sovereignty and the digital euro. Let me leave you with one concept that we have at UniCredit. What about the sovereignty on stablecoin? If you go to Asia, all settlements are stablecoin denominated in dollar. If you were to step up on tokenization of assets in Europe, all settle on stablecoin denominating in dollar. So even before the digital euro that I see more a retail directed thing at the moment. On all the corporate segment, we need euro-denominated stablecoin. This is what Qivalis is trying to do, and we're going to start deploying or rolling out in September of this year. With the Danish Compromise approval, I think I will give you a broader answer because I'm not controlling who should give that approval. I think given the fact that in the last 1.5 years, maybe 1 year, 1.5 years, the Danish Compromise has been used in increasing cases, and the perimeter that it has been applied to has been used in cases that, in my opinion, the regulator did not anticipate it would be used into, but then needed to go back and look at the regulation and look at everything that goes with it. There has been an attempt, and we're not the only bank that is waiting. There are 3 others in the queue. We are the more significant. There has been an attempt to look at the entire framework and make sure the process that is followed and what the framework allows or not allows is well clear and justified for everybody. That is done now. So we have cleared that stage end of last year. And we are told that it is only from now that the actual end of the stage, the actual physical Danish compromise is going to be evaluated. So the clock "started later" because of all of that. I think futures will probably benefit from this framework, and it will be going back to being a little bit faster, but this is what we understand is the case. Operator: The next question is from Noemi Peruch, Morgan Stanley. Noemi Peruch: The 2028 net revenue target is EUR 3.6 billion higher than 2025. Could you please break down the absolute increase in NII fees and investments post restatement? And then I have a question on Alpha. You both have been talking about the synergies that you can achieve with the current setup. So if possible, could you please elaborate on the strategic and industrial pros and cons of a full takeover instead of the current setup unless you would dismiss such scenario to cool? Andrea Orcel: Okay. Let me start with 2 things and then Stefano will complete. Firstly, I think some of you have asked how ambitious, how not ambitious, how many moving parts, et cetera, et cetera. I mean, we believe that slicing and dicing is done on guidance, contrast with the business. And we will no longer break down in any indication, aspiration, guidance, NII from fees and net insurance. The reason we do that is because if you look at 2025, we guided at the beginning of the year that we would have an NII declining 7.5% to 8%. We finished the year at 5%. That was in large part due to great work by our people in managing the pass-through as they manage the pass-through and they reduced the decline to circa 5%. They obviously had less growth in fees from investments because less market funds, less other things like that. In the same way, as we had been pushing in the last few years, fees from investment, we reduced the growth and lost some market share in unit-linked. These things are all connected. I push more capital guaranteed products. I have less asset management. I have different NII. The breaking of that down, which I know what they are, but prevents the network and the empowerment of our people in every single bank because it forced them into bracket. And when the macro of the opportunity changes, there is immediately a worry that if they move on what is right, they're going to miss consensus on one subset or other, and therefore, you delay the right decision. And because we believe in empowerment, we'll keep them aggregated like that going forward, at least in terms of guidance. Obviously, when we report results, we will give you the numbers, and we will explain why they are what they are. With respect to Alpha, I think Alpha has been a fantastic accident for me. I used to not believe in anything that was -- we're going to do a joint venture, we're going to do a partnership, et cetera, et cetera. In the past, one of my ex-CEOs was saying that the joint venture partnership were same bed, different dreams and never ended up well. This is totally the opposite with Alpha. We started to help Alpha complete its privatization because we thought that the investment was worth it, obviously, and to support what we did in Romania. Since then, we stepped that up. The level of cooperation and the level of dialogue that we have between our factories here in Milan and Alpha is in certain cases greater than what we have with bank we own 100% of. There is a total embracing. The 2 teams work extremely well together. There is a very good crystallization of the value we bring to them and the value they bring to us. And this is driving not at my level or at the level of the Executive Board, but at the level of the operating team, a constant request and adjustment for new opportunities to cooperate among things. So there is no way, if I combine that with the positiveness with which not only Alpha, but the entire Greece has welcomed us that we are going to upset that in any way and anything we would do with them is only both sides felt that there were more value to be created and better value to be created. And we are not at all stressing because the value that we are creating is quite high already. It also demonstrated that given the framework we have generated in our federal group, we can add significant value cross-border in a market where we're not because we're not in Greece and all the value that we're creating has nothing to do with the merger or anything else. That is inspiring us from other things that we are doing. Now obviously, in an integration, there are a number of other things that you can do that you cannot do in a partnership. There are substantial, let's call them, cost advantages in our procurement contracts, in our cost of IT, in our cost of AI because of our scale and where we are. There are other advantages, especially in the operating machine. There is the blueprint that we believe we have in -- especially in retail. The advantages that we see in Alpha in corporate. There are a lot of things that at the moment, we're trying to maximize without a merger. So it's a soft association. We are happy. There is something more that obviously only a merger can give, but it is certainly not something that we want to do upsetting the current state of play. So we are very happy as partners. So for the time being, this is as it is. As you know, the alpha stakes does not absorb much capital, actually marginal, but it does deliver a lot of returns, not only through the consolidation, but also through the fees we book. And I'll leave you -- maybe I'll leave Stefano comment on that. So I think -- I know that everybody wants a process on a time line and when we are going to do it. We may not do it ever and be very well connected one way or the other or we may do it at some point because both sides feel it's the best for their people and their shareholders, but there is no plan whatsoever on it, and it has never been discussed. Stefano Porro: So first question, reclassification, as highlight by Andrea specifically before. So the reclassification that we start doing from Q1 is neutral from the revenues standpoint is positive for net interest income EUR 700 million, is positive for fee around EUR 100 million more, is negative for the trading EUR 700 million and it is negative for the balance around EUR 200 million. Specifically in relation to the balance, do consider that there are the securitization cost, i.e. in the next 3 years, do consider that the sum of trading and balance will go down because we will have more cost for securitization for the reason that I told you before. So we will keep on executing important capital efficiency actions, including securitization. So this will affect balance and the sum of trading and balance accordingly is assumed to go down during the course of the next 3 years. The other 2 important components are the net interest income plus fee and net insurance if you're excluding Russia, what we are expecting is a compound growth rate in the next 3 years of more than 5%. And then you need to consider, as already commented before, that the contribution from the investment net of hedge will more than offset Russia compression. However, the Russia compression on the top line, especial in 2026 will be material. In relation to Alpha, the sum of what we are getting in terms of dividend and equity contribution plus the business that we do, considering the capital absorption that we have is bringing a return on capital that is over 15%. Operator: The next question is from Andrew Coombs, Citi. Andrew Coombs: Firstly, on Slide 51, you provide your forward rate assumptions. I think you've got one hike embedded into your plan in 2027. Can you just give us an indication of what the sensitivity of the revenues are in your plan should those rates either end up 25 basis points higher or 25 basis points lower? And then the second question on provisions. You've obviously had a period of declining or stable NPEs. There is an ever so slight tick up in the gross NPEs this quarter, 2.6% to 2.7%. The coverage ratio is edged down. Perhaps you can just give us a little bit more on the drivers of that during the quarter and what's embedded into your assumptions for the through-the-cycle cost of risk guidance going forward? Stefano Porro: So first one, yes, you're right. We are expecting in the next 3 years, an average Euribor around 2% for this year, 2.1% in '27 and around 2.3% in 2028. There is an assumption of a rate cut at the end of 2027 for 25 basis points, just that one. The net interest income sensitivity, plus/minus 50 basis points is around EUR 300 million in terms of impact to the revenue, meaning reduction of the rates, EUR 300 million less. Otherwise, it's EUR 300 million more in case of rate increase. That's the sensitivity. In relation to the provision in the quarter, let's look. So the default rate of the portfolio was around 1.3% for the overall group, was 1.3% for Italy, was 1.4% for Austria and 1.5% for CE while it was around 1.1% for Germany. When we are looking at the overall trend of the portfolio, it's fundamentally stable in comparison to the previous year. In relation to the trend of the default rate in the following years, we are expecting a slight increase in default rates. This is what is embedded, but we are not expecting any significant -- neither in the evolution of default rate nor in the evolution of the NPE ratio, meaning, yes, we can have some slight adjustment like what happened during Q4, but nothing specific or problematic. The strategy of the group is the same, meaning a combination of ordinary workout management plus sales when necessary. Cost of risk, as commented, we are expecting a cost of risk from 15%, 20%, including overlays, if required. Operator: The next question is from Antonio Reale, Bank of America. Antonio Reale: Just a quick question on the moving parts of your revenue line. You've added another EUR 10 billion or so to your replicating book this quarter, which is a big number. You're now just over EUR 200 billion, and this is a clear tailwind to your net interest income growth. Then you've talked about pursuing growth in loans and deposits without diluting margins. And I think we all understand what that means. So net of restatement, I'm trying to understand what does this all mean for your NII growth here and how that squares up with the growth in fees insurance given all the work you've done and are doing our product factories. Stefano Porro: Yes. So replicating portfolio, you mentioned replicating portfolio. Yes, we are currently over EUR 200 billion of size of the replica on the hedging. We're expecting to have a positive contribution from replica of around EUR 400 million for each year in terms of contribution. We are expecting to have a net interest income increase, a progressive increase of the net interest income when we look '26, '27, '28, especially considering the impact from Russia that, as I told you, is higher on the top line and especially net interest income as assumed especially in '26. Operator: Next question is from Delphine Lee, JPMorgan. Delphine Lee: Just really 2 quick ones. Just on fees and commissions, if you could just tell us sort of what is your assumption on your current partnership with Amundi, which is maturing soon? And any impact -- negative impact that you factored in already in your plan? Then the second question, you've talked a lot about how sort of AI is going to improve your operational efficiency. If I'm not mistaken, I sort of heard earlier in the presentation that AI has already reduced your IT cost by 30%. Just wondering sort of how much more do you expect on the cost side in terms of reduction from AI specifically? Andrea Orcel: So on Amundi, you all know that the contract that we had ends mid-'27 and therefore, it ends mid'27. Until then, you have noticed that we have increased the volumes with other providers and we've won market. Every time we do that, we pay them a penalty until obviously '27. And those penalties have been paid, and we have taken a provision on those penalties -- for most of those penalties that we anticipate for this year and half of next. So that's that. With respect to AI, look, it's very difficult to tell you. I think I will refer to the same thing that everybody will tell you. If you take processes like large corporate credits process, if you take transaction monitoring, if you take KYC, onboarding, if you take onboarding, if you take all of these very analysis or labor-intensive processes, these processes, once they are redesigned, can be made more efficient, not by -- I mean, by very high percentage numbers, double-digit percentage number. Obviously, not every process in the bank can be done that. So you need to do it. And as I said, in order to do that, first, you need to redesign, then you need to determine how you're going to absorb people and then you need to do it. So this is why we continue to say circa, we took a, let's call it, a number that we feel is comfortable, but the adoption or the impact increases between '26, '27, '28. We would not have been able to step up the investment the way we wanted to step it up and still take cost down 1% per year, which, by and large, is about EUR 100 million per year on a net basis without not only stepping up on our change, but using -- but supporting that change with AI. But I don't have more than that at the moment. I would be just speculating. Operator: The call has now concluded. Thank you for your participation. Andrea Orcel: Thank you very much.
Operator: Good morning and welcome to the Waters Corporation Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded. If anyone has any objections, please disconnect at this time. It is now my pleasure to turn the call over to Mr. Caspar Tudor, Head of Investor Relations. Please go ahead, sir. Caspar Tudor: Thank you, Leyla, and good morning, everyone. Welcome to Waters Corporation's Fourth Quarter Earnings Call. Joining me today are Dr. Udit Batra, our President and Chief Executive Officer; and Amol Chaubal, our Senior Vice President and Chief Financial Officer. Before we begin, I will cover the cautionary language. In this conference call, we will make various forward-looking statements regarding future events or future financial performance of the company, including the expected financial and operational impact of Waters' combination with the Biosciences and Diagnostic Solutions business of Becton, Dickinson and Company. We will provide guidance regarding possible future results, as well as commentary on potential market and business conditions that may impact Waters Corporation over the first quarter of 2026 and full year 2026. These statements are only our present expectations and are subject to risks and uncertainties. Please see the risk factors included within our Form 10-K, our Form 10-Qs, our other SEC filings and the cautionary language included in this morning's earnings release. During today's call, we will refer to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are attached to our earnings release and in the appendix of the slide presentation accompanying today's call. Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the fourth quarter of calendar year 2024. In addition, unless stated otherwise, all year-over-year revenue growth rates and ranges given on today's call are on a comparable constant currency basis, and all quarter-over-quarter revenue growth rates and ranges are on a comparable constant currency basis. Finally, we do not intend to update our guidance, predictions or projections, except as part of a regularly scheduled earnings release or as otherwise required by law. I would now like to turn the call over to Udit to begin with our key messages for the quarter. Over to you, Udit. Udit Batra: Thank you, Caspar, and good morning, everyone. We delivered a strong finish to the year, achieving high single-digit reported revenue growth and low double-digit adjusted EPS growth in the fourth quarter. This reflects yet another quarter of industry-leading sales growth. Today also marks a transformative step forward as we complete the acquisition of BD's Biosciences and Diagnostic Solutions business. We are uniting world-class expertise across chemistry, physics and biology into a scientific powerhouse with category-defining brands and a shared culture of pioneering innovation. We look forward to welcoming our new colleagues later this morning. It also marks the point at which we will have full operational control over the convey business. With months of rigorous integration planning behind us, we're now moving immediately into execution, applying the same focus and discipline that have driven exceptional results at Waters. We are entering this chapter from a position of strength. Throughout 2025, we have advanced the strategic road map that we laid out 5 years ago. Commercial execution continues to strengthen with KPIs running ahead of the commitment we made at our March 2025 Investor Day. Innovation remains a powerful growth driver as we launch a new wave of pioneering innovation. Our unique exposure to high-volume testing opportunities across GLP-1s, PFAS and India generics, again, outpaced expectations. We secured key wins in our transition to Empower as a subscription-based model, and we continue to expand deliberately into our high-growth adjacencies like bioseparations and bioanalytical characterization. These outcomes reflect the strength and discipline of our simple, repeatable business model serving high-volume regulated growth markets. They also reflect the dedication of our team whose focus on customers, science and operational excellence continues to differentiate Waters. Now turning to the quarter. As reported sales and adjusted EPS landed at the high end of our guidance range. Sales grew 7% on a reported basis and 6% in constant currency, driven by high single-digit growth across our pharma and industrial end markets. Adjusted EPS grew low double digits to $4.53, on a GAAP basis, EPS was $3.77. Recurring revenue grew 9%, led by chemistry growth. Instruments grew 3%, led by yet again high single-digit LC-MS growth. TA Instruments declined for the quarter due to cautious spending in U.S. and Europe. During the quarter, we achieved strong wins in our transition to a subscription-based model for Empower, with successful adoption across multiple large pharma customers. While this reduced our overall instrument growth rate by a low single-digit percentage for the quarter, it reflects a strategically attractive shift to a model with superior economics. Together with our new feature releases, this supports accretive tailwinds in 2027 with the incremental recurring revenue that it brings. For the full year, sales grew 7% on both a reported and constant currency basis. Recurring revenue grew 8%, driven by 12% growth in chemistry. Instrument revenue grew 5%, led by LC-MS, which grew high single digits or better every quarter of the year. Adjusted EPS grew 11% to $13.13, supported by top line strength, operational excellence and effective tariff mitigation. GAAP EPS was $10.76. Let me now highlight the drivers behind our strong performance and why we expect the strong momentum to continue into 2026. Starting with commercial execution. Our KPIs continue to run ahead of external commitments, and we're progressing well towards our long-term targets. Within instrument replacement, momentum continues to build. Instrument growth is now tracking at 2.5% CAGR approximately versus 2019, up roughly 100 basis points since the start of the replacement cycle. This reflects a steady mean reversion towards the long-term historical instrument growth rate of 5%. Service plan attachment increased to 54%, reflecting approximately 400 basis points of improvement in a single year. This is the strongest annual expansion we have ever delivered and sets us up for above-average service growth in 2026, supported by the associated revenue pull-through. E-commerce penetration reached approximately 45% of consumables revenue, driving a growth tailwind along with new products across our chemistry portfolio. Contract organizations now represent 27% of pharma sales, up from 15%, 5 years ago, positioning us well among diversified sources of CapEx. Innovation is also augmenting our results. Strong growth from new products launched over the past several years has continued to compound, alongside a new wave of innovation launched throughout 2025. For the full year, Alliance iS HPLC sales more than doubled, reflecting strong adoption of our flagship platform, which reduces errors by up to 40% in QC labs. Xevo TQ Absolute mass spec platforms grew over 30%, driven by PFAS demand and the launch of the Absolute XR, which sets a new benchmark for robustness, together with class-leading sensitivity. MaxPeak Premier chemistry grew over 35%, underscoring the significant impact our technology has brought to the industry for larger and more complex molecules. Our successful strategy of entering high-growth areas further enhanced our results in 2025. In bioanalytical characterization, adoption of light scattering and BioAccord continues to build in pharma process development and quality control applications. With the launch of Xevo CDMS, we are now expanding this position to routine characterization of mega molecules such as ADCs and viral vectors. In bioseparations, we built on the success of MaxPeak Premier inert surfaces with a new generation of products designed to separate complex large molecules. These include SEC Columns for viral vectors, slalom chromatography for large oligonucleotides and affinity-based separations using specific antibodies. These new products have accelerated chemistry growth to double digits in 2025, meaningfully above our 7% historical average growth rate. For LC-MS into diagnostics, we have continued to grow our assay menu, launching IVD products covering 12 new analytes in endocrinology, and 4 new analytes in therapeutic drug monitoring over the past 2 years. Turning to our idiosyncratic growth drivers. In 2025, these drivers contributed more than 300 basis points of growth, all tracking ahead of our commitments. GLP-1 testing-related revenue more than doubled, contributing approximately 100 basis points of year-over-year growth. This reflects continued wins in development and manufacturing across the globe, supported by our specced-in position for both oral and injection-based doses. PFAS testing growth remained robust, increasing more than 40% year-over-year and adding roughly 80 basis points of growth. Demand was broad-based driven by an expanding regulatory landscape that is evolving towards food, materials and consumer product testing. India, again, delivered strong performance. Ex GLP-1 revenue grew low teens, increasing by approximately $40 million and contributing around 130 basis points of growth, tied to the ongoing patent cliff of blockbuster drugs. Taken together, we grew 7% in 2025 with all regions delivering mid-single-digit growth or better. Pharma revenue grew 9% with high single-digit growth across Americas and Europe, and low double-digit growth in Asia. In pharma -- in non-pharma end markets, industrial grew 6%, while A&G declined 1%. In China, we grew 9% for the year. Our team delivered exceptional performance by capturing renewed momentum in biotech and CDMOs, executing well in food and environmental applications and winning a series of academic and government stimulus [ tenders ]. As we now move into 2026, we expect continued organic strength supported by the instrument replacement cycle and contribution from new product innovation. We're also expanding our idiosyncratic growth driver framework from 3 drivers to 5. In addition to GLP-1s, PFAS and India generics, we're adding biologics and informatics. Biologics reflects future growth linked to bioseparations and bioanalytical characterization from progress we have already made in our high-growth adjacencies before the closing of the transaction. In bioseparations, we anticipate sustained strength driven by new chemistry products already launched and in our near-term road map serving large molecule and novel modality applications. In bioanalytical characterization, we anticipate continued placement of LC-MS, MALS and CDMS in process development and in QA/QC. There is potential upside beyond our current assumptions supported by the FDA's draft biosimilars guidance, which could drive incremental demand by shifting approvals towards comparative analytical assessment rather than clinical outcome studies. For informatics, this reflects the future expected incremental growth linked to the phased transition of Empower from our legacy license-based model to our subscription-based offering. As we have shared previously, we expect to take our informatics business from its present revenue base of approximately $300 million to approximately $500 million by 2030. The move towards subscription comes with a shift in revenue timing. Under this transition, revenue is recognized consistently over the life of the contract rather than upfront. For a typical customer converting to subscription, the breakeven point where cumulative subscription revenue equals the prior license value is reached in approximately 18 months. From that point forward, it adds incremental high-quality recurring revenue with a long-term visibility and margin benefits. We are executing this change gradually and expect it to become a more positive structural driver in the years ahead, beginning in 2027. Taken together, these 5 drivers are expected to contribute over 200 basis points of annual revenue growth accretion on a stand-alone basis between now and 2030. Turning now to our integration of BD Biosciences and Diagnostic Solutions. This combination is a significant value creation opportunity that further adds to our attractive trajectory across two main dimensions. Firstly, it strengthens our position in high-growth adjacencies across bioseparations and bioanalytical characterization by adding critical technologies and expertise. It also adds to our LC-MS diagnostics business with day 1 commercial scale, customer channel access, and automation capabilities. Secondly, it provides a meaningful execution uplift opportunity by applying our operating discipline across instrument replacement, e-commerce adoption and service attachment, we expect to replicate the same growth acceleration that we have successfully achieved in our existing businesses. Together, this positions Waters for sustainable, high single-digit growth over the long term, and well beyond the current instrument replacement cycle. The transaction also yields attractive cost synergies. Our baseline plan represents less than 5% of the combined cost base with the potential to exceed that level. Consistent with market benchmarks for deals of this size and prior large-scale integrations that our leadership team have successfully executed. To ensure we capture this value quickly and consistently, we have aligned the organization around a new operating structure. We have organized Waters into 4 divisions, where each follows our repeatable business model with simple yet sophisticated instruments, compliant software, customized consumables and world-class service. This structure enhances accountability and will provide investors with a clear transparent view into the performance of all our key segments across the company. First, Waters Analytical Sciences, formerly known as Waters Division, will continue to be led by Rob Carpio, who you all know well. The division comprises LC, mass spec, light scattering and particle analysis, together with our Empower informatics platform, chemistry consumables and our service team. Going forward, revenue from Waters Clinical Business will be reported within our Advanced Diagnostics division. Waters Biosciences, formerly BD Biosciences, will be led by Steve Conley, who has led the business for the past 3.5 years, and has played a key role in the launch of its next-generation flow cytometry platforms. The Waters Biosciences division consists of leading flow cytometry brands like FACSDiscover and FACSLyric, the Horizon Real Dyes brand of fluorescent dyes and reagents and FlowJo software. Waters Advanced Diagnostics will be led by Jianqing Bennett, who has been running our Clinical and TA business unit over the past several years, and has transformed the top line growth profile of these businesses. Jianqing has a strong background in diagnostics, having served as Senior Vice President of High Growth Markets at Beckman Coulter Diagnostics before joining Waters. The Waters Advanced Diagnostics division consists of leading microbiology testing brands, including BACTEC, Phoenix and Kiestra, as well as molecular diagnostic solutions with the MAX and COR platforms, LC-MS based solutions and point-of-care testing. Waters Material Sciences, formerly TA division will be led by Dan Rush on an interim basis while we appoint a successor to Jianqing. Dan is our Senior Vice President of Strategy and Transformation and has a long history of leading commercial and strategy teams. He served as Vice President of worldwide commercialization strategy and innovation at Bristol Myers Squibb before joining Waters in 2021. The Material Sciences division consists of products, services and informatics spanning a diverse range of materials characterization techniques, including Thermal Analysis, Rheology, and Microcalorimetry. These are used in a range of applications such as battery testing for electric vehicles, pharma and medical devices. Together, these businesses bring leading scientific capabilities serving customers in high-volume regulated applications. They're anchored by a shared operating model that leverages category-defining brands and a universal culture of pioneering innovation. In parallel, we have aligned early execution priorities to hit the ground running now that we are gaining full operational control of the Biosciences and Diagnostic Solutions business. With several months of integration planning behind us, we have clear line of sight to the initiatives that will drive the most value in the early innings of the integration. In the most recent quarter, BD Biosciences and Diagnostic Solutions results came in below expectations due to impacts that became apparent during the quarter. In China, demand weakened due to increased focus on reducing consumption in diagnostics testing, while the U.S. government shutdown affected the Biosciences business as export approvals got delayed. At the same time, the point-of-care business was impacted by a milder flu season compared to the previous year. As we look ahead, our cost and revenue synergies are firmly on track. In 2026, we will make swift and decisive progress towards achieving the objectives we've laid out. On cost synergies, restructuring, procurement savings and network optimization are key vectors that we expect to begin realizing this year. As a prudent starting assumption, we expect to realize approximately $55 million of adjusted EBIT from cost synergies in 2026. On revenue synergies, while there is meaningful opportunity across each of our work streams over time, our first priority in 2026 is enhancing commercial execution and forecasting discipline. We will quickly begin to leverage untapped growth vectors in instrument replacement, in e-commerce and service attachment, and will immediately establish a deal desk to manage pricing discipline. As a prudent starting assumption, we expect to realize approximately $50 million in revenue, and $25 million in corresponding adjusted EBIT from revenue synergies in 2026. Let me now describe the first phase of revenue synergy realization in a little bit more detail. These are the same levers you've seen us execute successfully at Waters over the past 5 years. Starting with instrument replacement. There are approximately 22,000 Flow and BACTEC instruments that are ripe for replacement. At the same time, a meaningful wave of new products are being launched, such as FACSDiscover A8, S8, A7 and BACTEC FXI. To achieve our revenue synergy target of $20 million by year 5, we need to drive an incremental 100 instrument replacements per year. To put that into perspective, during our prior indomitable replacement initiative at Waters, we delivered double that target in half the time. Our service plan attachment -- for service plan attachment, our $20 million revenue synergy target can be achieved by increasing attachment by approximately 1 percentage point per year, a rate that is more than consistent with our historical performance of more than 2% annually over the past 5 years. For e-commerce, our target is to increase adoption by approximately 4% annually, which too is a more measured growth trajectory compared to our historical performance. I will now cover our 2026 guidance. Across our existing businesses, the team is executing well with a revitalized portfolio, leveraging instrument replacement and realizing benefits from our idiosyncratic growth drivers. As a prudent starting point, these dynamics support organic constant currency revenue growth of 5.5% to 7%. Turning to the acquired business contribution. Following today's expected close of the transaction, we expect the Biosciences and Diagnostic Solutions businesses to contribute $3 billion of revenue in 2026. While the majority of headwinds that impacted the business in 2025 are already in the baseline, we have further risk adjusted our outlook to ensure a prudent starting point. We're assuming approximately 2.5% underlying growth in 2026 on an owned period basis before any benefit from execution and pricing improvements, or planned organizational simplification. Taken together with the revenue synergies I just mentioned, this results in total 2026 reported revenue of approximately $6.405 billion to $6.455 billion. These starting assumptions imply a blended year-over-year revenue growth of approximately 5.3% at the midpoint of the combined company in 2026. This is an industry-leading growth guidance and carries clear opportunity for outperformance as the year progresses. From a profitability perspective, we expect to deliver a 2026 adjusted operating margin percentage of approximately 28.1%, which is already more than 100 basis points of margin expansion compared with our deal model in 2025. This translates to full year 2026 adjusted EPS of $14.30 to $14.50, which is also an attractive starting point, reflecting 8.9% to 10.4% growth. It includes $0.10 of accretion from the transaction versus Waters' adjusted EPS on a stand-alone basis even before reaching a full year of ownership. With that, I will now turn the call over to Amol to review the financials and walk through our guidance in more detail. Amol Chaubal: Thank you, Udit, and good morning, everyone. In the fourth quarter, we delivered a strong finish to the year with as-reported sales and adjusted EPS landing at the high end of our guidance. Sales of $932 million grew 7% as reported and 6% in constant currency. Orders growth outpaced sales growth in the quarter. By end market, pharma grew 7%, industrial grew 8%, while academic and government declined 3%. In pharma, growth was led by mid-teens performance in Asia, high single-digit growth in Europe, and low single-digit growth in Americas. Instrument replacement remains strong along with new product adoption in both our instrument and chemistry portfolios. In industrial, Waters division grew low teens with double-digit strength across chemical analysis, food and environmental testing. Performance was supported by continued momentum in PFAS-related workflows, led by the sensitivity and robustness of the Xevo TQ Absolute XR mass spec system. TA division was flat, reflecting an improvement versus the first half of the year as customer spending trends continue to recover. In academic and government, strong double-digit growth in Americas was offset by year-over-year spending declines in other regions. By region, Asia grew low double digits, while Americas and Europe grew mid-single digits. Within Asia, India grew high teens, reflecting continued strength in pharma generics. In China, sales grew 3% as strength in pharma and industrial was partially offset by timing of stimulus-related funding in academic and government. By product line, instrument sales grew 3%. High single-digit LC-MS growth was partially offset by a low single-digit decline in TA system sales. We also incurred a low single-digit percentage growth impact from successful customer migration to Empower subscription agreements, which carry long-term recurring revenue benefits. Recurring revenues grew 9%, driven by 8% growth in service and 12% growth in chemistry. We again saw fantastic customer adoption of our bioseparation columns which have been a vertical success in the market. Adjusted earnings per share grew 10% to $4.53, GAAP earnings per share were $3.77. For the full year, sales grew 7% on both a reported and constant currency basis. By end market, pharma grew 9%, industrial grew 6%, while academic and government declined 1%. In pharma, all regions delivered high single-digit growth or better, led by Asia, which grew low double digits. In industrial, Waters division grew low double digits with broad-based double-digit strength across chemical analysis, food and environmental testing. This was partially offset by a 1% decline in TA division. In academic and government, the Americas and China grew mid-single digits, while Europe declined 5%. By region, Asia grew low teens while Americas and Europe grew mid-single digits. Within Asia, India grew high teens and China grew 9%. Our strength in China was driven by broad-based growth across pharma, industrial and A&G. This was supported by share gains in biotech and CDMOs, chemical and environmental workflows and A&G. By product line, instrument sales grew 5%, led by high single-digit LC-MS growth. Recurring revenues grew 8% with 7% service growth and 12% chemistry growth. For the full year, adjusted earnings per share grew 11% to $13.13. On a GAAP basis, EPS was $10.76. Within the P&L, gross margin was 61.1% for the quarter and 59.3% for the full year, which was better than expected. Adjusted operating margin was 35.2% for the quarter and 30.5% for the year. This reflects the deliberate acceleration of strategic R&D investments in chemistry and informatics, along with the impact of regional sales mix and tariff surcharges. Our operating tax rate came in at 15.7% for both the quarter and the year. The full year rate includes approximately 50 basis points of discrete benefit related to a change in U.S. tax legislation enacted in 2025. Turning to cash generation and the balance sheet. Free cash flow was $125 million in the quarter after funding $39 million of capital expenditures, and $15 million of transaction-related costs. For the full year, free cash flow totaled $677 million, after funding $113 million of capital expenditures, inclusive of tariff-related mitigation actions and $29 million of transaction-related costs. Our net debt position at the end of the year was $820 million. Now I will share further commentary on our 2026 outlook and provide our first quarter guidance. We are executing well with a revitalized portfolio leveraging instrument replacement and benefiting from our idiosyncratic growth drivers. We expect this momentum to continue into 2026. As a prudent starting point, these dynamics support stand-alone full year 2026 organic constant currency revenue growth of 5.5% to 7%. We expect favorable foreign exchange translation to provide 0.5% tailwind to organic sales, which translates to organic reported revenue of $3.355 billion to $3.405 billion in 2026. Turning to the acquired business contribution, following today's expected closing of the transaction, we expect the acquired Biosciences and Diagnostic Solutions businesses to contribute $3 billion of revenue in 2026. In setting this expectation, we have risk-adjusted the underlying growth assumptions, even though most of the headwinds that impacted the business in 2025 are already in the baseline as we enter 2026. Our guidance prudently assumes approximately 2.5% underlying constant currency growth for these businesses in 2026 on an owned-period basis before any benefit from execution and pricing improvements or our organizational changes. In addition, we expect to realize approximately $50 million of revenue synergies in 2026, reflecting the initial contribution from the first wave of commercial excellence initiatives discussed earlier. Taken together, this results in a total reported 2026 revenue of $6.405 billion to $6.455 billion. These starting assumptions imply blended year-over-year constant currency growth of approximately 5.3% for the combined company in 2026. From a profitability perspective, we expect to deliver an adjusted EBIT margin of 28.1% in 2026, consistent with our deal model. This reflects approximately 80 basis points of adjusted operating margin expansion at Waters on a stand-alone basis, consistent with our Investor Day algorithm to approximately 31.3%. An adjusted operating margin percentage of approximately 22.4% for Biosciences and Diagnostic Solutions, a $25 million contribution from the $50 million anticipated revenue synergies, and $55 million contribution from anticipated cost synergies. Below the line, net interest expense is expected to be approximately $179 million and our full year tax rate is expected to be approximately 16.6%. From a share count perspective, our updated capital structure results in approximately 94.3 million diluted shares outstanding on a full year average basis in 2026. At closing, our new share count is 98.4 million shares. This translates to full year 2026 adjusted earnings per fully diluted share of $14.30 to $14.50, and represents 8.9% to 10.4% growth. It includes $0.10 of adjusted EPS accretion versus Water stand-alone non-GAAP EPS profile due to the transaction already before a first full year of ownership. It is important to note that quarterly EPS figures are not additive to the full year EPS due to a significant change in average shares outstanding between the first quarter and the remainder of the year. For the first quarter of 2026, we are beginning the year with strong momentum across our core businesses. We expect stand-alone organic constant currency revenue growth of 7% to 9%. With tailwinds from favorable foreign exchange translation, the reported stand-alone revenue is expected to be approximately $718 million to $731 million. Turning to the acquired business contribution. We expect the Biosciences and Diagnostic Solutions businesses to contribute $480 million of revenue in the partial first quarter of 2026. This calls for a low single-digit revenue decline. Quarter-to-date trends reinforce our confidence in this outlook. Taken together, this results in a total reported first quarter 2026 revenue of $1.198 billion to $1.211 billion. For modeling purposes, first quarter average share count is expected to be $82 million and tax rate is expected to be consistent with our full year outlook. While the transaction is expected to be EPS accretive for the full year 2026, the first quarter will reflect the full burden of interest expense and the higher share count, with synergies beginning to ramp up in subsequent quarters. As a result, the first quarter adjusted earnings per fully diluted share is expected to be in the range of $2.25 to $2.35, which is flat to 4.4% growth. Embedded within this guide is stand-alone EPS of $2.50, or 10% growth versus prior year at midpoint. With that, I will now hand the call back to Udit. Udit Batra: Thank you, Amol. So to summarize, with a revitalized core portfolio, expanded high-growth adjacencies and tangible synergy levers now underway we are entering 2026 with strong momentum and a highly compelling growth outlook. Our growth outlook of 5.3% at midpoint for the combined company is appropriately prudent, yet industry-leading even before factoring in the full benefits of upcoming execution improvements, which we will now work decisively to implement. Within the P&L, we are confident in our ability to accelerate value creation as the year progresses. We look forward to updating you on our progress as we move through the year. So with that, I will now turn the call back to Caspar. Caspar Tudor: Thanks, Udit. That concludes our prepared remarks. We are now happy to open the lines and take your questions. Operator: [Operator Instructions] Our first question will come from Tycho Peterson with Jefferies. Tycho Peterson: Udit, I think the two things people really want to dig into here are obviously the BD results this morning and the numbers, obviously, have deteriorated relative to the original deal model. So maybe just talk a little bit about your take on the numbers this morning, particularly for the lagging parts of the portfolio, U.S. academic, government, China, early-stage research on the BD side. And how do we think about the path to recovery there? And then the second thing is instruments, right, and the Empower impact on that transition. I understand it's, call it, 250 basis point headwind this quarter. But how do we think about the go-forward P&L impact on instruments from this Empower transition? Udit Batra: So Tycho, thanks for the two questions. So let me start with the BD Diagnostic Solutions and Bioscience business first. Look, several issues emerged in Q4 that impacted the growth of both of those businesses that were not fully known in Q3. And I'll let Amol describe those in a few minutes. But what is important is that all of these will now be present in a lower baseline for us in 2026 to basically help us deliver the 2.5%, which we think has several upsides. Now this reminds me of Waters almost 5 years ago, right? You couple this with a host of innovative new products in both Diagnostics Solutions and in Bioscience across flow cytometry, as well as across the microbiology business and the molecular diagnostics business. You start at a fresh portfolio. And -- so we are now really squarely focused on, first, improving the operational execution, for instance, by implementing a deal desk for pricing discipline and discounting discipline, ensuring launch readiness of this fantastic portfolio, just like we did with Alliance iS and improving forecast accuracy to minimize surprises. And equally, after months of detailed integration planning, we're now ready to deliver the synergies. Be it around instrument replacement, e-commerce or service attach. And look, I mean, the service attach was starting at a 40% number, and you've seen what we've already done in 2025 alone. So we're very confident to deliver the $50 million in revenue synergies and more. You add this to what a stand-alone guidance is and you end up with over 5%, close to 5.3% in -- at the midpoint of the guide for the combined business. So we're feeling pretty good about that industry-leading growth rate as we head into 2026. Amol, do you want to comment on the dynamics of the two businesses in 2025? Amol Chaubal: Yes. I mean, look, coming into the fourth quarter, we were starting to see the DRG headwind in China. And then we knew Q4 had a higher baseline from the prior year IP onetime revenue, right? But then a couple of other things sort of crept in, which is a weaker flu season, coupled with challenges getting exemptions on shipments to China because of the government shutdown. Now as we get into Q1, three out of the four are sort of behind us in terms of the baseline for the flu season, no IP issues in the baseline for the first quarter as well as, remember, the China export ban started at the beginning of the first quarter last year. So from a baseline point of view, it's pretty clean, except for the DRG issue, which will start to come in the baseline late Q3. And quarter-to-date trends give us a lot of confidence that where we are guiding, which is a low single-digit decline for Q1 is sort of a reasonable guide. Udit Batra: So now turning to your second question on instruments. Really happy with instruments performance. LC-MS grew high single digits again. And this is like through the year, every quarter has been high single digits to double digits for LC-MS with the same drivers, instrument replacement cycle still going strong, as well as the idiosyncratic growth drivers plus the new products. TA was a drag at a low single-digit percentage to the overall instrument number given the weakness in both the U.S. and Europe. And what's great news is something that we've been telegraphing for a while is the transition of Empower from on-prem to subscription where several large pharma customers transitioned in Q4, and that was about a low single-digit headwind to the overall instrument number. So overall, LC-MS high single-digit growth. TA was a low single-digit percentage headwind just given the challenges in U.S. and Europe. And Empower really a wonderful transition that we told you that we will talk about it in the rearview mirror. Now as you look ahead into 2026, Q1 started off extremely well on the instrument side. The funnel is extremely strong. Orders grew faster than sales in Q4. So we feel very good about where we're starting. And the guide we have given for Q1 and the full year. And all the drivers are currently fully intact. And we've also accounted in the guidance that we've given for the Empower headwinds that we expect during the year as customers transition from the CapEx to a recurring revenue model. So all going according to plan and really happy with, especially the Empower transition that is happening. Amol Chaubal: Yes, I mean, it's a fantastic problem to have, right? Two of the top 5 pharmas converted. And I mean, Q1 funnel is strong, so we're not less. Operator: Your next question will come from Catherine Schulte with Baird. Catherine Ramsey: Maybe first, just for the full year guide of 5.5% to 7% after starting at 7% to 9% in the first quarter. It implies some deceleration for the balance of the year. Is that just prudence to start the year? Is it comp driven? Or are there some other dynamics we should be aware of? Udit Batra: So first on the full year guide, the 5.5% to 7%, Catherine, look, our guidance philosophy has generally not changed, right? I mean, the lower end of the guide constitutes where we think instruments are going to end up and I've given a lot of detail to Tycho's question on that front already. So we feel very good about where we're starting on the instrument side at 5.5%. And on the 7% at the top end of the guide, that is our recurring revenue, sort of, guidance for the year. This basically again constitutes several upsides that we've not baked into the guide itself. I mean we've assumed that the academic and government, drug discovery, pharma research segments don't recover. In China, we've assumed a mid-single-digit growth versus what we've done this year, which is about 9%. I mean, a fantastic growth in China, but we've assumed mid-single-digit and not included any sort of stimulus revenue. We've incorporated already the Empower headwinds from converting from CapEx to a recurring revenue. This does not include reshoring revenues. And finally, for the full year, we've assumed that chemistry is roughly 6% in our guide, while finishing the year at 12% in chemistry growth rates. So several areas to basically have risk on the upside. And so we feel pretty good about where we're starting with the guide. On Q1, Amol, do you want to talk about the 7% to 9%? Amol Chaubal: Yes. I mean in general, the momentum coming into Q1 is really strong, and that, coupled with 4 extra working days sort of supports our guide. And that then sort of derisks the remainder of the year. Catherine Ramsey: Okay. Got it. And apologies if I missed it in your response to Tycho's question. But on -- for the outlook for the BD assets, any comment on pacing there? And maybe what we should expect from a fourth quarter exit rate for BD on the path to recovery? Amol Chaubal: Yes. I mean, look, we expect sort of a low single-digit decline in Q1 and then growth sort of gradually starting to ramp up as we go through the remainder of the year as some of the headwind gets more and more rooted in the baseline, particularly as we enter Q3 and Q4 when the DRG headwind is in the baseline. Udit Batra: Yes. And Catherine, look, equally, you should know that we are squarely focused on improving the operational execution. And as I mentioned before, this is around ensuring that there is a forecast accuracy in the business. There is a pricing discipline, not just on setting the price but also on discounting, which impacts both the top and the bottom line, and we've done that successfully at Waters. And also ensuring that the launches for the new products that are coming through go extremely well and something we've done by targeting segmenting very precisely for our Alliance iS and TQ Absolute products. And equally, we're squarely focused on taking all the work that's happened in integration planning, and implementing that throughout the year to increase momentum on the revenue synergy side, instrument replacement service attach and e-commerce should contribute immediately. So feel very good about the starting point after a lot of planning. Operator: Our next question will come from Jack Meehan with Nephron. Jack Meehan: Udit, on BD, you talked a couple of times about setting up a deal desk for pricing. Can you talk about which product areas are in focus and how you think that's been optimized in the past? Udit Batra: Yes. So look, I mean, almost 5 years ago, we set up the same process at Waters, and it has two, maybe three parts. The first is a centralized examination of what the list is prices are, as well as what the discounting is, and that escalates all the way up to me as discounting requests come from the different regions. So we've -- basically, we take away the ability for regions and sales teams to discount. So any time there's a list price increase, the stick rate is much higher. This is especially relevant for products in the instrument category. Now here, you have a couple of new products that have been launched across the Biosciences and Diagnostics businesses. The most of all being the FACSDiscover line S8, A8 as well as now the S7 and A7 that are coming up. And for instruments, it's extremely important to not sort of lose the pricing discipline as you negotiate the deals, it's pretty easy to sort of giveaway pricing on highly innovative products, if you're not disciplined. And on the recurring revenue side, we see a benefit both on the service piece so that we are charging for installation, we're charging for spare parts in an appropriate way, but also on the reagent side, where there is no reason for BD to not command the same sort of price premium that our chemistry revenue does. These are highly differentiated dyes and antibodies that only BD producers, and these are of the highest quality. So there is zero reason why there should be discounting there. So we expect those to immediately impact and those impact both the top line and the bottom line, Jack. Jack Meehan: Great. And then for Amol, can you give us an update on the pro forma leverage for Waters and how you expect that to evolve over the year? And kind of similarly, what is the guide for interest expense assumed for any refinancing? Amol Chaubal: Yes. So I mean, look, we will be roughly at a net debt of somewhere around $4.6 billion, $4.7 billion, right? And that would translate to roughly around 2.4x net debt-to-EBITDA, slightly more than what we announced because the deal closed earlier than what we had anticipated, which is great. And then we expect to be below 2x within sort of 18 months' time frame. And then interest expense on a pro forma basis is about $179 million for 2026. Operator: Our next question will come from Doug Schenkel with Wolfe. Douglas Schenkel: I actually just have one topic I'd like to cover, just on the synergy targets. I think your initial year 1 guidance assumes you cut 5% to 6% of the acquired businesses OpEx, assuming I have that math right? So I guess one question would be, do I have that math right? And if so, recognizing this is on day 1, and I think it's about twice what you previously outlined. What's driving this increase? And recognizing this is a pretty big number to start, I'm just wondering how you're thinking about potential upside to that year 1 target, given what seems to be strong momentum in identifying opportunities in the early going? Amol Chaubal: Doug, so look, I mean, our underwriting model assumed roughly 4%, 4.5% of the pro forma cost base of Waters stand-alone plus the acquired business. And that had certain elements baked into it, like site consolidations, like sort of commercial and technology. And also, it did not include certain elements in the underwriting. When you compare and contrast it versus deals of this size, you typically see sort of 6% number. What Udit and Chris Ross achieved at Sigma Millipore (sic) [ MilliporeSigma ] was more like 8% number. We haven't baked in that level of targets in our underwriting because, one, we want to give ourselves some space. And we -- two, for a deal of this size, there's always skeletons that you find and gives this room to cover for that. If you now look at our guide, we're pretty much on track to deliver exactly what we said in our deal announcement. And we feel really good that after having done a lot of work over the last several months, we are well on track to deliver our deal announcement commitments. Operator: Your next question will come from Matt Larew with William Blair. Matthew Larew: Sticking with BD, maybe thinking about the revenue synergy size. The results from the most recent quarter called out a number of issues, but maybe even over the last couple of years, might be suggestive of a business in need of commercial investment to improve execution. How do you think about the level of investment needed for the business long term, and how that perhaps works with the idea of the EBIT contribution you're hoping to get from revenue synergies? Udit Batra: So Matt, that's a really good question and something that we invested a lot of time in doing the integration planning. Now you take what I mentioned on the pricing discipline or launch readiness. We have central teams that we will now deploy into the businesses, into the acquired businesses to implement this pricing discipline and train the teams locally, and eventually leave a few of these people behind to manage that on a day-to-day basis. Something we've done in the past as well. So the pricing discipline that we've seen at Waters, or TA, or clinical in the past will now be applied to the new divisions in the same way. So there will be commercial investment to ensure operational excellence, be it on launch readiness, be it on pricing. And equally, we've looked at separately the amount of resources that are going after the launches, be it the FXI on the microbiology business, be it BD COR, where it is enhancing HPV testing across the overall population. Or on the flow cytometry side, we've taken specialists and move them into the different businesses, equally investing further in commercial readiness. So we feel pretty good about the resources we've put against improving the execution rhythm, but also getting a stronger uptake of the new products. Operator: Your next question will come from Casey Woodring with JPMorgan. Casey Woodring: Great. So another strong quarter of chemistry performance. Curious if you could just unpack that for us. How much of that was price? How much was new product contribution in bioseparations? As a follow-up on pricing, can you just elaborate, you had talked about, I think it was 100 to 200 basis points of pricing improvement with a high stick rate in that business. So how do you see pricing evolving here in chemistry within that 6%, 2026 guidance framework? Udit Batra: Let me start with this, Casey, and Amol will elaborate. Look, very happy with what we're seeing on chemistry, 12% growth for the year. Seeing really nice momentum already in Q1 with the innovation. And I mean, basically, it's a mix of what you just mentioned earlier. These are highly innovative products that command a price premium. From a pipeline and product perspective, as I mentioned in the prepared remarks, we've built on the MaxPeak Premier technology, which is bio-inert -- which sort of targets bio-inert surfaces of all types. With SEC columns, with oligonucleotides, with slalom chromatography, and sort of the newest kid on the block is the affinity chromatography where we're attaching antibodies to particles. And here, super excited about what's going to come from BD with the capability in biology and antibody preparation, so we can prepare specific antibodies to conjugate to our particle. So we feel very good about what's been happening and a nice momentum already at the start of the year. Amol, do you want to talk about pricing? Amol Chaubal: Yes. I mean on chemistry alone, Casey, as we had outlined, chemistry, we are able to get an amazing stick rate on our list price increases. So for like-for-like SKU, like-for-like geography, we are generating close to 400, 450 basis points on chemistry. On the overall portfolio basis, we're generating about 200 basis points of like-for-like SKU, like-for-like geography. That doesn't include upsell, and that's sort of running ahead of what we outlined at our Investor Day. But more critically, that's a significant opportunity that lies ahead of us for BD. Remember, because Waters back pre-COVID was 50-ish basis points of year-over-year price. And now we are consistently delivering 200 basis points plus. And BD is exactly that, right? Like historically, they've done somewhere between 40 to 50 basis points and a meaningful opportunity ahead of us to reapply our blueprint that has been so successful. Operator: Your next question will come from Puneet Souda with Leerink. Puneet Souda: If I could circle back to an earlier question around the conservatism you're taking in the acquired assets growth. Obviously, those numbers are lower versus the expectations you had earlier. I understand that you're baking in pricing and KPI discipline that you're going to bring about. But you are in markets that are different to what pharma QA/QC have been. So maybe just -- I would love to understand if you could, how much of a cushion there is in these numbers? How adjusted are they? If you could give us a sense, because I think that's the #1 question we're getting from investors as to the prudence you're baking in for the acquired portfolio. Udit Batra: So let me start, and then Amol will give you the parts. Look, I mean, we're not baking in, just to sort of correct the question itself. We're not baking in the pricing improvements, or the deal desk and the launch readiness into the numbers. Amol, do you want to describe the details? Amol Chaubal: Yes. I mean, look, we are baking in primarily the headwind from China DRG. And at this point, it's only prudent to sort of bake that in. And we are also baking in some continued slowness coming out of other elements that are associated with China, or the academic and government market. But again, when you look at our own, Water stand-alone U.S. A&G performance, it's tale of two worlds, right? So there is a clear meaningful upside. If we can reapply our success to some of these parts, like what we've done in China, like what we've done with U.S. A&G. But at the beginning of the year, right out of the gate, we want to be prudent. Puneet Souda: Got it. That's helpful. And then was there any contribution from extra selling days in Q1 that you're contemplating? Amol Chaubal: So I mean, our Q1 guide reflects 4 extra working days. Operator: Your next question will come from Subbu Nambi with Guggenheim. Subhalaxmi Nambi: Amol, what does operating margin progression look like this year with the addition to BD? What prudence is in those risk-adjusted assumption given it's a cleaner base? Amol Chaubal: Yes. Look, I mean, as we came into fourth quarter, we said we have few strategic R&D investments that could accelerate growth, particularly in bioseparations and informatics, and you're seeing the results of that growth on our top line. So we took the opportunity to accelerate some of those investments without changing our long-term margin algorithm, right? So coming into 2026, we're back to 31.3%, which we feel really good about. And the BD Biosciences and Diagnostic Solutions business is coming in at 22.4%. So net of revenue and cost synergies that allows us to deliver 28.1% margin, which is perfectly in line with how we announced the deal where we said, look, we'll expand the margin of the pro forma company from 27% to 32% over 5 years. And where we are coming in on 2026 is exactly in line with little over 100 basis points in the first year. Operator: This concludes the Q&A portion of the call. I will now hand it back to Udit. Udit Batra: Thank you. Look, I mean guys, thank you very much for your attention today. As we get into the new chapter for Waters, we're starting our guidance for 2026, with, again, an industry-leading growth for the pro forma business. Really coming out of the gate strong on operational execution and synergies with $55 million on cost and $50 million on revenue side, which yields 100 basis points of margin expansion already in year 1, and almost a 1% accretion in less than a year. So I feel very good about where we're starting. Thank you very much for your support and look forward to talking to you again.
Operator: Good morning, ladies and gentlemen, and welcome to the Plus500 2025 Preliminary Results. The presentation will commence shortly. [Operator Instructions] Please note, this call is being live streamed to a webcast for a wider audience and will be recorded. I would now like to hand over to David Zruia, Group Chief Executive Officer, to open the presentation. Please go ahead. David Zruia: Good morning, everyone, and thank you for joining our 2025 preliminary results presentation. I'm David Zruia, CEO of Plus500, and I'm joined today by Elad Even-Chen, our Group CFO; and Owen Jones, our Group Head of Investor Relations. Plus500 globally diversified multi-asset offering drove strong operating momentum across several key strategic initiatives during the year, which we will highlight today. Our differentiated customer offerings, which are powered by our proprietary technology, provide us with compelling competitive advantages, and we remain committed to delivering seamless and innovative access to financial markets worldwide. The structural growth opportunities in our end markets are substantial, and we are seeking to maximize our opportunity set within them. We have started 2026 well, and we look to the remainder of the year and beyond with confidence. I would like to thank all my colleagues across Plus500 who made these strong results possible for their hard work and dedication towards successfully achieving our collective goals and strategic ambitions. Slide 2 shows the agenda for today. We will take you through the highlights for the year and the operating review, followed by a run-through of our unique technology and product set, and then we continue with the financial highlights. We will then conclude with the summary and outlook section before taking your questions at the end. There are 5 key takeaways from today's presentation shown on Slide 4. For the year as a whole, we increased the positive operating momentum we have across the group significantly, both in our OTC and non-OTC businesses. The focus on our strategic objectives remain a key priority, including product and market growth, innovation and the acquisition of higher value, more sophisticated customers alongside retention and monetization initiatives. We secured additional regulatory licenses and clearing memberships, enabling the group to deliver important structural growth over the coming years and our excellent strategic positioning and our proprietary technology drove strong financial results for 2025, including growth in revenue and EBITDA. We announced groundbreaking strategic partnerships in our growing U.S. futures business, expanding into new markets and demonstrating the increasing strength and attractiveness of Plus500 as a trusted partner with a focus on institutional collaboration and provider of market infrastructure. In an exciting development, we also entered the fast-growing prediction market space, which I will come on to in greater detail later. Finally, today, we have announced additional shareholder returns of $187.5 million, comprising dividends and share buybacks, adding to the $165 million we announced in August 2025. And even with such attractive shareholder returns, the group ended 2025 with an extremely strong financial position with cash balances of approximately $800 million and no debt. The strong financial results for 2025 extend our significant track record that stretches back to our IPO in 2013. Since then, Plus500 has generated $3.8 billion in cash from operations, $3.1 billion in accumulated net profits and of that, the company has returned approximately $2.9 billion to shareholders through $1.7 billion in dividends and $1.2 billion in share buybacks, including the $187.5 million announced today. These shareholder returns combined with a strong share price have resulted in Plus500 being the best performing share in the FTSE All-Share Index over the last 13 years on a total return basis with a cumulative total shareholder returns of over 8,700%, which is a remarkable achievement. And it was a reflection of the strong performance that saw the company join the prestigious STOXX Europe 600 Index in early 2025, an important recognition of the compounding value creation we have delivered for shareholders in recent years. Moving now to Slide 6, which focuses on some of our operational drivers and outputs. During 2025, we continue to focus on our strategic road map and accelerated the delivery of meaningful progress across the group. The drivers and outputs that you can see on the slide are all underpinned by our market-leading proprietary technology, a key competitive advantage for Plus500, which allows us to grow our business globally while creating deeper engagement with our customers by maintaining a robust, secure, seamless and reliable trading experience. As a result, 67% of OTC revenue was derived from customers who have been trading with Plus500 for over 3 years. And over 5 years, the same metric is remarkable, 50%, which has more than doubled in the last 3 years. Both achievements highlight the benefit of our focus on driving higher customer lifetime value by providing a best-in-class trading experience. Customer deposits increased significantly once again to $6.5 billion, which sets a new record for the group. And this equated to a record of approximately $27,000 per active customer. The strength of our mobile offering was also highlighted once again with 89% of OTC revenue being generated from mobile or tablet devices. Moving now to Slide 7. 4 years ago, at our Capital Markets Day, we introduced our strategic road map objectives. Since then, we have made excellent progress against our ambitious targets, transforming Plus500 into a more resilient and scaled business with diversified earnings streams. This transformation has had a significant positive impact on our quality of earnings and underpins our focus on innovation, growth and continued diversification through the development of new products and expansion into new markets. In addition, a central part of the group strategy is to deepen customer engagement and enhance customer retention by investing in and developing our customer retention technologies and initiatives, which is something we have done very successfully in recent years. Collectively, we expect the objectives within our strategic road map to position Plus500 to continue delivering sustainable compounded returns for shareholders for many years to come. Moving to Slide 8. Plus500's superior proprietary technology and its ability to quickly develop new offerings or adopt for new strategic partnership opportunities has enabled Plus500 to evolve from being a single product provider into an established multi-asset fintech group, a trusted global provider of market infrastructure services and proprietary trading platforms with a broad and diverse customer base. The Plus500 of today provides a wide range of products, services and instruments across its OTC, futures, options on futures and share dealing verticals, to which we have recently added prediction markets as we continue to see surge in demand for event-based trading contracts and we operate in attractive growing end markets with powerful structural growth drivers. Our OTC business covers 7 asset classes and our futures business can be split further into B2B and B2C offerings, which provide execution and clearing services across a growing range of global exchanges. Our non-OTC business also includes our prediction markets offering, as I mentioned, an addressable market with significant potential. We also highlight Plus500 Cosmos here, an industry-leading client portal for our B2B futures customers, which has become a meaningful source of both customer onboarding and improved customer retention in our B2B business. On the right side of the chart, we can see our share dealing platform, Plus500 Invest, which enables customers to buy and sell shares directly. Our overall offering provides customers with a wide choice of products, enabling them to tailor their approach and trading strategies. The diversification of our business remains a key part of our success, and we will continue to drive this agenda as we maximize the attractive growth opportunities in our markets. Moving to the next slide. Here, we show the increasingly important role that Plus500 plays as a provider of accredited, trusted institutional market infrastructure built on our proprietary technology and regulatory expertise. Our role has evolved significantly as the group has diversified its operations, and we now sit at the heart of the financial ecosystem, connecting institutional customers and retail customers to more than 30 different exchanges and clearing houses. We provide the mission-critical market infrastructure to a global customer base, which include individual customers, institutions and other businesses. Our futures business, which we'll discuss in more detail, continues to outperform our expectations and performed exceptionally well during 2025. The prediction market space represents a compelling and fast-growing market opportunity for Plus500 driven by retail engagement, regulated exchanges and next-gen trading tools. This new financial asset class has experienced rapid growth over the past year. Thanks to the unique strength of our proprietary technology and our trusted institutional infrastructure, we are well placed to maximize the opportunity in front of us. Prediction markets enable customers to trade on real-world outcomes in a fully regulated CFTC framework, underpinned by advanced technology and infrastructure that makes the process seamless and highly intuitive. We are thrilled to have been able to bring this engaging, exciting and fully regulated offering to our U.S. customers following the groundbreaking launch of event-based contracts on our B2C trading platform. On the back of a strong 2025, we entered 2026 with positive strategic operational and financial momentum. Here on Slide 11, we show some of the operating highlights. We delivered significant strategic progress across both our OTC and non-OTC businesses, demonstrating the increasing strength and attractiveness of Plus500 as a trusted counterparty with a focus on institutional collaboration as we enter new markets and offered innovative new products for our customers. Reflecting this status, during 2025, we announced 2 exciting partnerships in the B2B use future space, one with Topstep and the other with CME FanDuel. We continued to enhance our existing OTC offering with innovative new products, services and licenses. And as I mentioned earlier, we have entered the prediction market space with B2B and B2C offerings. In summary, 2025 was a year of strong achievements, and we are extremely excited about 2026 and beyond. I will now hand over to Elad to present the operating review section. Elad Even-Chen: Thank you, David, and good morning, everyone. It is a pleasure to present the operating overview for 2025 and such a strong set of financial results this morning. The operating review section will include an outline of our operating performance in 2025 as well as a closer look at our growing futures business, including our entry into the prediction market space. As can be seen on Slide 13, we offer our services to approximately 33 million registered customers in more than 60 countries. This global scale, combined with a tailored localized offering is an important source of both current and future value as we focus on driving activation, retention and monetization of our global customer base by leveraging our highly innovative and agile proprietary technology to drive customer engagement with our compelling multi-asset product set. Our global offering is further enhanced by our localized solutions, which include tailored products and support in a customer's native language and our best-in-class customer service, which includes our premium customer offering. On Slide 14, we show some of our operating KPIs, along with the regional performance data. As the group has consistently demonstrated historically, new customer acquisition and deeper engagement with existing customers lays the foundation for future growth, making it an investment today to drive value creation over the medium to long term. Also, as we have demonstrated in recent years, our increasing focus on more sophisticated, higher-value customers means we are well positioned to drive sustainable, high-quality growth over the long term. In 2025, we onboarded roughly 105,000 new customers, reflecting our continued focus on attracting and retaining higher-value customers and active customers remained broadly stable at approximately 242,000. Moving ahead to Slide 15, which shows customer tenure and longevity. Over recent years, we have made significant improvements in our customer retention technologies and premium account programs, increasing customer longevity materially, as shown here on Slide 15. We have a deeply embedded philosophy of driving long-term relationships with our customers by providing technology-enabled retention initiatives and by consistently providing our customers with a wide range of products and services, supported by a robust, secure, intuitive and reliable trading platforms. These improvements are working well, as shown here on the pie charts. For example, in the year of 2025, 87% of the OTC revenue was generated by customers who have been with us for more than a year, while 50% of the OTC revenue was generated by customers who have been with us for more than 5 years. This is an excellent achievement, which is more than double the equivalent metric from 2022. Over the next few slides, I will highlight the impact that our non-OTC business as a whole and particularly the futures business has had on the group's revenues, customer mix and other KPIs. Earlier this month, we completed the acquisition of Mehta Equities in India, which opens up a number of exciting strategic initiatives for us to pursue over the coming years. Mehta provides Plus500 with immediate access to the world's largest and fastest-growing derivative markets, operating under an established regulatory framework. It will also allow us to generate synergies between our existing futures operations in the U.S. and our position in India. Slide 17 sets out how our revenue, new customers and total deposit mix have evolved in recent years, driven by the growth in our non-OTC business. In the last 2 years, our futures business has established itself and grown quickly, reflecting the strength of our offering, both to retail and institutional customers. And this status is reflected in its contribution to the group's performance. In 2025, non-OTC revenues accounted for approximately 14% of the group's total revenue, equivalent to more than $100 million, which highlights the increasing importance of this vertical now. From a customer perspective, 17% of new customers came from the non-OTC businesses during the year. As David mentioned, this business continued to outperform our expectations, and we are extremely pleased with the progress we have delivered in this area. We have made progress in attracting higher-value customers and how that has impacted our average deposit per active customer since 2021. For FY 2025, aggregate customer deposits increased significantly to approximately $6.5 billion, which is a record level for the group, reflecting our increased breadth and scale of operations and the rapidly growing trust that customers have placed in Plus500. And over the last 4 years, the average deposit per active customer has grown by over 400% to approximately $27,000, which is truly remarkable. We have done this by strategically focusing on higher-value customers, leveraging our superior marketing technologies and providing a localized offering to customers, which includes local payment solutions and exceptional customer service, among others. Over the last few slides, I've highlighted the quantitative impact that the growth in our futures business has had. And now over the next few, I will focus on some of the operational highlights for 2025, starting on Slide 18. Over the last 3 years, Plus500 has established its position in the U.S. futures market with a B2B institutional and B2C retail offering, both of which performed extremely well in 2025. Across our B2B and B2C businesses, we grew our customer segregated funds to over $900 million as of the end of December 2025 versus approximately $350 million at the end of 2024, representing growth of over 2.5x, which is a fantastic achievement. This reflects both the onboarding of new customers and increased trading activity from existing ones. In 2025, we secured new Clear memberships with ICE Clear U.S. and ICE Clear Europe as well as Kalshi Klear, which will allow us to further enhance our institutional product offering and holistic clearing services to a global customer base. In the B2C business, our trading platform, Plus500 Futures, which offers a unique Omni-set solution continues to set us apart from our competitors, and it is clear that our customers value the seamless trading experience, which we offer. Turning to Slide 19. During the year and in the early part of 2026, we expanded our futures business, taking it into the increasingly popular prediction market space, leveraging our existing infrastructure and superior proprietary technology to capitalize on a high-growth opportunity for us. We have done so directly via the clearing memberships with Kalshi and also as the clearing partner for the joint venture between the CME and FanDuel. Through this exciting new product category, Plus500 customers in the U.S. will be able to trade on a wide range of event-based outcomes, including economic indicators, financial events, geopolitical developments and other measurable real-world scenarios, all cleared directly by Plus500. By integrating this fast-growing offering, we have further enhanced product choice for customers at a time when prediction markets are seeing a surge in interest and trading volumes are continuing to increase significantly. We are highly excited about our prospects in this market segment. We have the proprietary technology and regulatory expertise to cater to increasing activity from prediction markets, and our capabilities extends further to include treasury and risk management as well as best-in-class customer service for both B2B and B2C customers. The combination of our clear memberships, proprietary technology, institutional infrastructure, order routing, strong financial foundations and market expertise leave us extremely well positioned to capitalize on the growth opportunities in this expanding market. Turning to the exciting B2B partnerships shown here on Slide 20. In December, we announced our appointment as the clearing partner for FanDuel prediction Markets, an exciting joint venture between the CME and FanDuel. Then in October 2025, we announced that we had entered into a strategic partnership with Topstep, a leading U.S.-based trading education and evaluation platform, under which Plus500 will exclusively provide clearing and technology infrastructure for Topstep. Through this partnership, Topstep's large and active trader community will gain direct access to live CME group exchange markets via Plus500's institutional clearing, order routing and risk management technology. Being chosen as a strategic partner for these groundbreaking initiatives is a landmark achievement for Plus500. They reflect just how far we have come and how our status as an accredited trusted market infrastructure provider built on proprietary technology and regulatory expertise allow us to drive institutional collaboration. It also demonstrates the superiority of our operational processes and status as a global multi-asset fintech group on the international stage. As we touched on earlier, worldwide interest in both future contracts and prediction markets led to the creation of an exciting new financial asset class. This is a market with very powerful structural tailwinds as millions of people choose to access the financial markets through event contracts. At Plus500, we are performing a critical role through the power of our market-leading B2B infrastructure and B2C customer expertise to unleash the democratizing power of prediction markets. For retail customers, as you can see on the slide, our new uplifted mobile platform creates an intuitive personal user experience, opening up an exciting new financial asset class. This new financial prediction markets offering includes economic indicators, financial events, geopolitical developments and other measurable real-world scenarios. Moving ahead to Slide 22. Plus500's U.S. operation is regulated by the CFTC and is a member of the National Futures Association and the Futures Industry Association. Plus500's futures operation also holds exchange and clearing memberships with the CME Group Exchanges, the Minneapolis Grain Exchange, Eurex, ICE Clear U.S., ICE Clear Europe and Kalshi Klear. And following the completion of Mehta acquisition, 6 Indian exchanges and clearing house memberships. We will continue to target additional clearing memberships going forward. This objective will be supported by our proven track record, robust financial position and expertise in applying for and securing new clearing memberships. Thanks to our proprietary technology, financial strength, customer service and strategic collaborations, we have grown rapidly in a short space of time to become an established player in the futures market. Additionally, as part of our B2C offering, we are proud to have the Plus500 futures platform, which has gained good traction with customers, driven by its Omni-set solution and T4-Pro, our trading platform for more professional customers. Our licenses, clear memberships, strong balance sheet, partnerships and innovative trading platforms leave us well positioned to generate continued value for all of our stakeholders. Overall, our expansion into the non-OTC products was a key pillar of our strategic road map and one against which we are delivering real and accelerated growth. I will now hand back to David, who will take us through the technology section. David Zruia: Thank you, Elad. On to the next slide, Slide 24. Our technology supports all our domains from operations, product, marketing capabilities through to customer service. This means our technology delivers a broad range of services within each of these areas such as search and data analytics in marketing, payment processing and customer onboarding solutions. Our domains are built using our own technology, and they are integrated and optimized with one another, giving a holistic view of our systems. Our system architecture, therefore, enables us to operate with both resilience and agility in highly regulated markets and underpins our global best-in-class multi-asset offering. Moving ahead to Slide 25. Our proprietary technology allows us to support our customers at every stage of their journey end-to-end from customer acquisition via our established CRM system to payments through our proprietary cashier, all the way through to our unique trading solutions and product offering. Plus500 is focused on developing and delivering the most innovative and established technology, which provides our global customer base with a localized, intuitive and secure trading experience. Our industry-leading proprietary technology provides our customers with a reliable, robust and seamless trading experience across mobile devices, tablets and the web. We offer over 2,500 different underlying global financial instruments across more than 60 countries and in 30 languages via our product portfolios of OTC, share dealing, futures and options on futures and prediction markets. As you can see on this slide, the graphical user interface and overall user experience across our product offering are seamless, which enables greater levels of customer satisfaction and engagement. Plus500's new technology stack for the U.S. futures market available across various platforms, serves both retail, professional and institutional clients. This includes Plus 500 Futures, T4-Pro and Plus500 Cosmos along with advanced clearing, risk management, middle office and execution technologies. And as evidenced by our new strategic partnerships, we can offer bespoke API connectivity and other services as required in order to meet needs of prospective partnerships. For retail clients, our mobile technological solutions offer an intuitive trading experience, making futures trading accessible to all applicable customers. For institutional clients, we offer enhanced control over the end-to-end process. Plus500 Cosmos leads industry innovation with a customer portal featuring advanced risk management tools and trend monitoring services. And as noted earlier, our U.S. B2C customers can now train on a wide range of Kalshi events outcomes in a seamless way via the Plus500 Futures platform. With these advancements, Plus500 has established itself as a key market infrastructure provider in the futures industry. On to Slide 28. Shown here is our full suite of OTC products in the Japanese retail market. At the beginning of 2025, we launched our new proprietary multi-asset trading platform for the Japanese market, including OTC products across FX, indices, equities and ETFs as well as knockout options. Then in June 2025, we secured an additional commodities license, meaning we now offer a full range of OTC products to the important Japanese retail customer. It is a large and well-established market, offering significant potential to Plus500 over the medium to long term. Moving to Slide 29. I'd also like to highlight our offline marketing activity in Singapore, the UAE and Japan, 3 markets with strong long-term growth potential. Each campaign is carefully tailored to local audiences, reflecting differences in consumer behavior and [ media habits ]. In Singapore, we focus on reaching an urban digitally engaged audience in premium commuter and lifestyle locations. In the UAE, campaigns target a diverse internationally mobile audience across high-traffic commercial and leisure hubs. In Japan, activity is highly localized, emphasizing trust and repeated exposure in everyday environment. Together, these examples demonstrate how well executed off-line campaigns can serve as powerful drivers of brand recognition and customer acquisition, supporting sustained growth in markets with strong long-term potential. Turning to Slide 30. The mobile trading space has become more and more important for retail customers, and we work extremely hard to maintain our leading position in this field. Many of our customers have a mobile-first approach to trading, which is why Plus500's customer experience is seamless between mobile, tablets or web, and each interaction is designed to have the same look and feel. This provides a more consistent trading experience for our customers, which is extremely important to us. As a result, 89% of OTC revenue was generated from customers trading with us on mobile or tablet devices and 85% of OTC trades took place on mobile or tablet devices in 2025. I will now hand over to Elad, who will take you through the financials before I return with the summary and outlook section. Elad Even-Chen: Thank you, David. Shown here on Slide 32 are some of the financials and operational highlights for the year. The group delivered revenue and EBITDA growth of 3% and 2% year-on-year for FY 2025, which is a strong result and one I'm extremely pleased with. On a constant currency basis, relative to our EBITDA outcome in 2024, the EBITDA for FY 2025 is approximately 8% higher, underscoring the EBITDA potential within the group. Our focus on attracting and retaining higher-value customers enabled by our sophisticated marketing technology investments led to a significant increase in the average deposit per active customer to approximately $27,000, which reflects a group record of approximately $6.5 billion of total customer deposits in the year. This kind of progress would not have been possible without the strong foundations we have in place of best-in-class customer service and robust, reliable trading platforms, all enabled by our proprietary technology. We also grew the average revenue per customer by 8% year-on-year and positively reduced the spend per customer by 13% both of which highlight our sophisticated multichannel marketing technology and ability to attract and retain higher value customers. On Slide 33, we can see the financial performance Plus500 has delivered in recent years. The group generated revenue of $792 million in FY 2025, representing growth of 3% year-on-year. EBITDA was also extremely robust at $348 million. The strong delivery, combined with the ongoing share buyback program during the period led to a basic earnings per share of $3.93, representing growth of 10% year-on-year in 2025. I will now take you through our financials in more detail, starting on Slide 34. Slide 34 shows a breakdown of our income statement in more detail. In 2025, selling and marketing expenses reduced by 2% year-on-year, reflecting the increased efficiency of our marketing and technology during the period, equating to a greater level of ROI. That being said, our focus on attracting and retaining higher-value customers remain undiminished throughout the period. During FY 2025, our general and administrative expenses increased reflecting the group's international expansion into new local operation through both organic and inorganic growth as well as heightened foreign exchange impacts. Slide 35 shows our cost base in more detail. The group's cost base is heavily weighted towards variable costs, which accounted for 70% of the total operating costs. The flexibility within the group's cost base is a key part of its overall financial strength and is a significant source of resilience through different market cycles. In FY 2025, our technology and marketing costs decreased significantly as we further optimize the average customer acquisition cost via our multichannel marketing technology, which drives our customer acquisition. Slide 36 shows the group's balance sheet. Our strong financial position underpins all of our activities, giving us the optionality to invest both organically and inorganically and to enhance our shareholder returns where appropriate. The group ended the period with cash balances of approximately $800 million with no debt or loans, representing an extremely strong and flexible financial position. Slide 37 presents the cash flow statement. Plus500 remains a highly cash-generative business, supported by a lean cost base and proprietary technology. Since our IPO in 2013, our average operating cash conversion has been approximately at the level of 98%. In 2025, cash generated from operation was approximately at the level of $265 million and cash and cash equivalent at the end of December 2025 stood at approximately $800 million. This extremely strong cash position has enabled us to announce on shareholder returns of approximately $365 million during 2025 and an additional $187.5 million announced today. On Slide 38, we show our disciplined approach to capital allocation across the group. We always seek the right balance between maximizing shareholder returns, making strategic investment to drive future growth, carrying out highly selective bolt-on acquisitions and developing a sustainable business over the long term. We illustrate on the slide the 2 broad categories within our capital position, one, which is approximately at the level of $550 million, which includes the regulatory capital, working capital, clearing and risk management funds and the other is the surplus capital, which was approximately at the level of $250 million at the end of 2025. Both categories are there to support the ongoing day-to-day activities of the group, including our growing clearing businesses, future growth and enhanced returns to our shareholders, which I will cover now on Slide 39. Our shareholder returns policy stated at least 50% of net profits are to be distributed to shareholders via dividends and share buybacks and at least 50% of those distributions will be made by way of share buybacks. This policy will continue to apply to net profits on a half yearly basis and will continue to be based on a 23% corporate tax rate for both interim and final distributions. The Board will also consider executing special share buybacks or dividends on a half yearly basis, dependent on fiscal year results as well as on investment and growth opportunities. Accordingly, we're really pleased to announce today on an additional shareholder returns of $187.5 million, comprising $100 million in new share buyback programs and $87.5 million of total dividends, which equals to a dividend distribution of more than $1.2 per share. Thank you all, and I will now hand back to David for his final remarks. David Zruia: Thank you, Elad. Let's now move to the summary and outlook section, starting on Slide 41. As we have shown, 2025 was another excellent year for Plus500 with accelerating strategic, operational and financial progress, and we have started 2026 in a similar fashion with our announcement regarding Kalshi in the prediction market space and Mehta in India. We have also extended our track record of delivering significant returns for our shareholders, which goes back to our IPO in 2013. This has propelled us to be the best performing share on a total return basis since our IPO in 2013 to the end of December 2025, during which time we generated over 8,700% total returns for our shareholders. Putting everything together, shown here on Slide 42, is our compelling investment case. In recent years, Plus500 has evolved significantly and diversified its operations materially to become a leading multi-asset fintech group, providing trading platforms and critical market infrastructure, all supported and enabled by its leading proprietary technology and unique system architecture. Over a 13-year period as a public company, Plus500 has delivered an unrivaled track record of growth, innovation and attractive shareholder returns. We have maintained our high-margin, highly cash-generative business model as we have grown, expanded and diversified and our financial position remains extremely strong with significant levels of cash and no debt on our balance sheet. This supports our ambitions to pursue growth both organically and inorganically while returning funds to shareholders. And with our strong strategic position in growing end markets, we remain extremely well placed to capitalize on and seize growth opportunities as they emerge. And to conclude, Slide 43. Looking ahead, the opportunity for Plus500 and the growth runway has never been more significant, underpinned by our robust balance sheet, highly cash-generative business model and multiple structural growth drivers across product verticals, we are well positioned to continue delivering strong operational execution, innovation, growth and attractive shareholder returns. Over the past year, we have further diversified our business, expanding into highly attractive markets and reinforcing our position as a trusted provider of institutional market infrastructure across our growing non-OTC business lines. In our OTC business, our portfolio of international licenses, continued product innovation, expansion into new markets and deepening customer relationships give us a unique advantage upon which to build. We look to the future with confidence and are absolutely focused on executing with precision against our strategic priorities to deliver growth and value creation. Thank you for listening, and that marks the end of our presentation. We will now move on to take your questions. We have a facility via the webcast to take questions, which the moderator will explain to you now. Thank you. Operator: [Operator Instructions] I would like to remind all participants that this call is being recorded. [Operator Instructions] We currently have no questions on the webinar. So I will hand over to Owen Jones, Head of Investor Relations, to address the written questions. Owen Jones: Thank you. Good morning, everybody. We've got a few questions that have come through. So I'll read those out in the order in which they were received. Our first question comes from Hal Potter, Bank of America. He says, congratulations on an excellent set of results. Thank you, Hal. First question, all related to prediction markets. Could you give us a sense of how trading is going so far with the CME FanDuel partnership? That's the first question. Second question, Plus500 has a fantastic partner with 40% roughly market share in U.S. sports betting. Is there any reason why this partnership couldn't reach a market share close to that? And then his third question relates to the Kalshi offering. And he says, are we expecting an increase to our marketing budget to grow the customer base here? David Zruia: Yes. So obviously, for the first question, the new partnership with the FanDuel CME is just at the beginning. It's ramping up. It looks good, but it's the beginning. And obviously, as it grows, we will share more stats in the future. Elad Even-Chen: As for the second element, very much we are having strong confidence with that kind of level of offering on the B2B. We can see already kind of the metrics behind the scene. We do have the -- to say that it will go and become material. But yet again, it's kind of the combination of time. Let's not forget that the kind of initiation went out only a few weeks ago. We've seen also on the back of the different ecosystems even of yesterday of the Super Bowl, we've seen already kind of increased level of traction to come in from the B2B clearing services. So we do have a great level of comfort. Owen Jones: Yes, as a reminder, his third one was on the Kalshi offering -- marketing budget. Elad Even-Chen: So as kind of -- it's important to understand kind of the mechanics of Plus, right? As you know very much, we're doing mainly kind of online marketing, and it's a great tool for us also to bring more volumes to the system as a whole. By the way, we don't look at it as Kalshi product, but rather the prediction market as a whole because additional kind of exchange will be added there as well, and it will create even a greater level of audience. Owen Jones: Okay. Next question comes from James Allen at Berenberg. He is asking, do we expect the average revenue per customer in the prediction market space to be higher or lower versus our current activities? And his second question is relating to Topstep. Can we give any more detail about the strategic partnership with Topstep and how will it work? And how big is their customer base? David Zruia: So first of all, it's important to note that when we look at the customer, we look at it in a more holistic view. The idea is to have a super app in the U.S. current dates futures then we added the prediction, and we will keep adding more products. And as we add more customers to the platform, they will trade both prediction, futures and other products in the future. So it's not that it's either a lifetime value or ARPU for -- from that product or from that product. That said, we are in a very early beginning stages of the offering. Lifetime or ARPU is being measured across a long term. It's not after a few days and time will say what is the expected ARPU of the prediction market customers comparing to futures or OTC ones. Elad Even-Chen: But we can add that as for kind of the substance of the fact that we, on the B2C level, we are the clearer itself, so by itself, we kind of save 50% of the margin instead of kind of distributing it to another clearing party. So very much the composition of having the B2C as the full owner of that kind of offering together with the [ IB ] offering on a fully disclosed level, together with the Omnibus level that will enable us to get a greater margin than the other players in the industry. Owen Jones: Thank you. The next question comes from Ian White at Autonomous. It may have just been touched on in your previous answer, but he was asking how our partnership with Kalshi is differentiated versus Kalshi's own B2C offering and their partnership with Robinhood. David Zruia: So obviously, Kalshi as a product is a great product, but it offers trading on prediction markets products only. While when customer trades at Plus500 enjoys the ability to trade both futures, prediction markets, and as I said earlier, we are planning to add more products in the U.S. to the same app later on. It's a long-term process, but we have the plan in place. And that is the differentiation, the offering itself. Owen Jones: Thank you. We've had another question relating to prediction markets. Can we just explain how we generate revenues in this market, please? What's the revenue model for our prediction market offering? Elad Even-Chen: So there are -- as I mentioned before, there are 3 different streams, okay? Like the first one is the B2C, the one that we offer under our platform. And there, you are having like the $0.02, if it's -- the fee itself and the commission, the fee, which is very much being also distributed to the exchange and then also the commission which you generate. And that ends there. Then you do have also the other structures, which are different from one party to another. As mentioned, we are catering the B2B service from both fully disclosed level, fully disclosed, it means that we are the one to provide the platform and all the technology for the onboarding, for the cashier, for the risk management and various other parameters. There is no second to us today. And if so, very limited other kind of handful of players in the U.S. with that level of technology. Then I would say that you're having the Omnibus level. There, it's again, very much subject to the characteristics that you are having with other party. That kind of ecosystem can be associated with the deal we're having with FanDuel and the CME. And within each and every one of them, there are different level of commercials. Again, the beauty of Plus is also to have the execution together with the clearing. Owen Jones: Thank you. That's really clear. Luke, we have no more questions via this facility. So I'll hand back to you. Thank you. Operator: Thank you. That concludes today's presentation. Thank you for joining, and have a nice day.
Operator: Good morning, ladies and gentlemen, and welcome to the Plus500 2025 Preliminary Results. The presentation will commence shortly. [Operator Instructions] Please note, this call is being live streamed to a webcast for a wider audience and will be recorded. I would now like to hand over to David Zruia, Group Chief Executive Officer, to open the presentation. Please go ahead. David Zruia: Good morning, everyone, and thank you for joining our 2025 preliminary results presentation. I'm David Zruia, CEO of Plus500, and I'm joined today by Elad Even-Chen, our Group CFO; and Owen Jones, our Group Head of Investor Relations. Plus500 globally diversified multi-asset offering drove strong operating momentum across several key strategic initiatives during the year, which we will highlight today. Our differentiated customer offerings, which are powered by our proprietary technology, provide us with compelling competitive advantages, and we remain committed to delivering seamless and innovative access to financial markets worldwide. The structural growth opportunities in our end markets are substantial, and we are seeking to maximize our opportunity set within them. We have started 2026 well, and we look to the remainder of the year and beyond with confidence. I would like to thank all my colleagues across Plus500 who made these strong results possible for their hard work and dedication towards successfully achieving our collective goals and strategic ambitions. Slide 2 shows the agenda for today. We will take you through the highlights for the year and the operating review, followed by a run-through of our unique technology and product set, and then we continue with the financial highlights. We will then conclude with the summary and outlook section before taking your questions at the end. There are 5 key takeaways from today's presentation shown on Slide 4. For the year as a whole, we increased the positive operating momentum we have across the group significantly, both in our OTC and non-OTC businesses. The focus on our strategic objectives remain a key priority, including product and market growth, innovation and the acquisition of higher value, more sophisticated customers alongside retention and monetization initiatives. We secured additional regulatory licenses and clearing memberships, enabling the group to deliver important structural growth over the coming years and our excellent strategic positioning and our proprietary technology drove strong financial results for 2025, including growth in revenue and EBITDA. We announced groundbreaking strategic partnerships in our growing U.S. futures business, expanding into new markets and demonstrating the increasing strength and attractiveness of Plus500 as a trusted partner with a focus on institutional collaboration and provider of market infrastructure. In an exciting development, we also entered the fast-growing prediction market space, which I will come on to in greater detail later. Finally, today, we have announced additional shareholder returns of $187.5 million, comprising dividends and share buybacks, adding to the $165 million we announced in August 2025. And even with such attractive shareholder returns, the group ended 2025 with an extremely strong financial position with cash balances of approximately $800 million and no debt. The strong financial results for 2025 extend our significant track record that stretches back to our IPO in 2013. Since then, Plus500 has generated $3.8 billion in cash from operations, $3.1 billion in accumulated net profits and of that, the company has returned approximately $2.9 billion to shareholders through $1.7 billion in dividends and $1.2 billion in share buybacks, including the $187.5 million announced today. These shareholder returns combined with a strong share price have resulted in Plus500 being the best performing share in the FTSE All-Share Index over the last 13 years on a total return basis with a cumulative total shareholder returns of over 8,700%, which is a remarkable achievement. And it was a reflection of the strong performance that saw the company join the prestigious STOXX Europe 600 Index in early 2025, an important recognition of the compounding value creation we have delivered for shareholders in recent years. Moving now to Slide 6, which focuses on some of our operational drivers and outputs. During 2025, we continue to focus on our strategic road map and accelerated the delivery of meaningful progress across the group. The drivers and outputs that you can see on the slide are all underpinned by our market-leading proprietary technology, a key competitive advantage for Plus500, which allows us to grow our business globally while creating deeper engagement with our customers by maintaining a robust, secure, seamless and reliable trading experience. As a result, 67% of OTC revenue was derived from customers who have been trading with Plus500 for over 3 years. And over 5 years, the same metric is remarkable, 50%, which has more than doubled in the last 3 years. Both achievements highlight the benefit of our focus on driving higher customer lifetime value by providing a best-in-class trading experience. Customer deposits increased significantly once again to $6.5 billion, which sets a new record for the group. And this equated to a record of approximately $27,000 per active customer. The strength of our mobile offering was also highlighted once again with 89% of OTC revenue being generated from mobile or tablet devices. Moving now to Slide 7. 4 years ago, at our Capital Markets Day, we introduced our strategic road map objectives. Since then, we have made excellent progress against our ambitious targets, transforming Plus500 into a more resilient and scaled business with diversified earnings streams. This transformation has had a significant positive impact on our quality of earnings and underpins our focus on innovation, growth and continued diversification through the development of new products and expansion into new markets. In addition, a central part of the group strategy is to deepen customer engagement and enhance customer retention by investing in and developing our customer retention technologies and initiatives, which is something we have done very successfully in recent years. Collectively, we expect the objectives within our strategic road map to position Plus500 to continue delivering sustainable compounded returns for shareholders for many years to come. Moving to Slide 8. Plus500's superior proprietary technology and its ability to quickly develop new offerings or adopt for new strategic partnership opportunities has enabled Plus500 to evolve from being a single product provider into an established multi-asset fintech group, a trusted global provider of market infrastructure services and proprietary trading platforms with a broad and diverse customer base. The Plus500 of today provides a wide range of products, services and instruments across its OTC, futures, options on futures and share dealing verticals, to which we have recently added prediction markets as we continue to see surge in demand for event-based trading contracts and we operate in attractive growing end markets with powerful structural growth drivers. Our OTC business covers 7 asset classes and our futures business can be split further into B2B and B2C offerings, which provide execution and clearing services across a growing range of global exchanges. Our non-OTC business also includes our prediction markets offering, as I mentioned, an addressable market with significant potential. We also highlight Plus500 Cosmos here, an industry-leading client portal for our B2B futures customers, which has become a meaningful source of both customer onboarding and improved customer retention in our B2B business. On the right side of the chart, we can see our share dealing platform, Plus500 Invest, which enables customers to buy and sell shares directly. Our overall offering provides customers with a wide choice of products, enabling them to tailor their approach and trading strategies. The diversification of our business remains a key part of our success, and we will continue to drive this agenda as we maximize the attractive growth opportunities in our markets. Moving to the next slide. Here, we show the increasingly important role that Plus500 plays as a provider of accredited, trusted institutional market infrastructure built on our proprietary technology and regulatory expertise. Our role has evolved significantly as the group has diversified its operations, and we now sit at the heart of the financial ecosystem, connecting institutional customers and retail customers to more than 30 different exchanges and clearing houses. We provide the mission-critical market infrastructure to a global customer base, which include individual customers, institutions and other businesses. Our futures business, which we'll discuss in more detail, continues to outperform our expectations and performed exceptionally well during 2025. The prediction market space represents a compelling and fast-growing market opportunity for Plus500 driven by retail engagement, regulated exchanges and next-gen trading tools. This new financial asset class has experienced rapid growth over the past year. Thanks to the unique strength of our proprietary technology and our trusted institutional infrastructure, we are well placed to maximize the opportunity in front of us. Prediction markets enable customers to trade on real-world outcomes in a fully regulated CFTC framework, underpinned by advanced technology and infrastructure that makes the process seamless and highly intuitive. We are thrilled to have been able to bring this engaging, exciting and fully regulated offering to our U.S. customers following the groundbreaking launch of event-based contracts on our B2C trading platform. On the back of a strong 2025, we entered 2026 with positive strategic operational and financial momentum. Here on Slide 11, we show some of the operating highlights. We delivered significant strategic progress across both our OTC and non-OTC businesses, demonstrating the increasing strength and attractiveness of Plus500 as a trusted counterparty with a focus on institutional collaboration as we enter new markets and offered innovative new products for our customers. Reflecting this status, during 2025, we announced 2 exciting partnerships in the B2B use future space, one with Topstep and the other with CME FanDuel. We continued to enhance our existing OTC offering with innovative new products, services and licenses. And as I mentioned earlier, we have entered the prediction market space with B2B and B2C offerings. In summary, 2025 was a year of strong achievements, and we are extremely excited about 2026 and beyond. I will now hand over to Elad to present the operating review section. Elad Even-Chen: Thank you, David, and good morning, everyone. It is a pleasure to present the operating overview for 2025 and such a strong set of financial results this morning. The operating review section will include an outline of our operating performance in 2025 as well as a closer look at our growing futures business, including our entry into the prediction market space. As can be seen on Slide 13, we offer our services to approximately 33 million registered customers in more than 60 countries. This global scale, combined with a tailored localized offering is an important source of both current and future value as we focus on driving activation, retention and monetization of our global customer base by leveraging our highly innovative and agile proprietary technology to drive customer engagement with our compelling multi-asset product set. Our global offering is further enhanced by our localized solutions, which include tailored products and support in a customer's native language and our best-in-class customer service, which includes our premium customer offering. On Slide 14, we show some of our operating KPIs, along with the regional performance data. As the group has consistently demonstrated historically, new customer acquisition and deeper engagement with existing customers lays the foundation for future growth, making it an investment today to drive value creation over the medium to long term. Also, as we have demonstrated in recent years, our increasing focus on more sophisticated, higher-value customers means we are well positioned to drive sustainable, high-quality growth over the long term. In 2025, we onboarded roughly 105,000 new customers, reflecting our continued focus on attracting and retaining higher-value customers and active customers remained broadly stable at approximately 242,000. Moving ahead to Slide 15, which shows customer tenure and longevity. Over recent years, we have made significant improvements in our customer retention technologies and premium account programs, increasing customer longevity materially, as shown here on Slide 15. We have a deeply embedded philosophy of driving long-term relationships with our customers by providing technology-enabled retention initiatives and by consistently providing our customers with a wide range of products and services, supported by a robust, secure, intuitive and reliable trading platforms. These improvements are working well, as shown here on the pie charts. For example, in the year of 2025, 87% of the OTC revenue was generated by customers who have been with us for more than a year, while 50% of the OTC revenue was generated by customers who have been with us for more than 5 years. This is an excellent achievement, which is more than double the equivalent metric from 2022. Over the next few slides, I will highlight the impact that our non-OTC business as a whole and particularly the futures business has had on the group's revenues, customer mix and other KPIs. Earlier this month, we completed the acquisition of Mehta Equities in India, which opens up a number of exciting strategic initiatives for us to pursue over the coming years. Mehta provides Plus500 with immediate access to the world's largest and fastest-growing derivative markets, operating under an established regulatory framework. It will also allow us to generate synergies between our existing futures operations in the U.S. and our position in India. Slide 17 sets out how our revenue, new customers and total deposit mix have evolved in recent years, driven by the growth in our non-OTC business. In the last 2 years, our futures business has established itself and grown quickly, reflecting the strength of our offering, both to retail and institutional customers. And this status is reflected in its contribution to the group's performance. In 2025, non-OTC revenues accounted for approximately 14% of the group's total revenue, equivalent to more than $100 million, which highlights the increasing importance of this vertical now. From a customer perspective, 17% of new customers came from the non-OTC businesses during the year. As David mentioned, this business continued to outperform our expectations, and we are extremely pleased with the progress we have delivered in this area. We have made progress in attracting higher-value customers and how that has impacted our average deposit per active customer since 2021. For FY 2025, aggregate customer deposits increased significantly to approximately $6.5 billion, which is a record level for the group, reflecting our increased breadth and scale of operations and the rapidly growing trust that customers have placed in Plus500. And over the last 4 years, the average deposit per active customer has grown by over 400% to approximately $27,000, which is truly remarkable. We have done this by strategically focusing on higher-value customers, leveraging our superior marketing technologies and providing a localized offering to customers, which includes local payment solutions and exceptional customer service, among others. Over the last few slides, I've highlighted the quantitative impact that the growth in our futures business has had. And now over the next few, I will focus on some of the operational highlights for 2025, starting on Slide 18. Over the last 3 years, Plus500 has established its position in the U.S. futures market with a B2B institutional and B2C retail offering, both of which performed extremely well in 2025. Across our B2B and B2C businesses, we grew our customer segregated funds to over $900 million as of the end of December 2025 versus approximately $350 million at the end of 2024, representing growth of over 2.5x, which is a fantastic achievement. This reflects both the onboarding of new customers and increased trading activity from existing ones. In 2025, we secured new Clear memberships with ICE Clear U.S. and ICE Clear Europe as well as Kalshi Klear, which will allow us to further enhance our institutional product offering and holistic clearing services to a global customer base. In the B2C business, our trading platform, Plus500 Futures, which offers a unique Omni-set solution continues to set us apart from our competitors, and it is clear that our customers value the seamless trading experience, which we offer. Turning to Slide 19. During the year and in the early part of 2026, we expanded our futures business, taking it into the increasingly popular prediction market space, leveraging our existing infrastructure and superior proprietary technology to capitalize on a high-growth opportunity for us. We have done so directly via the clearing memberships with Kalshi and also as the clearing partner for the joint venture between the CME and FanDuel. Through this exciting new product category, Plus500 customers in the U.S. will be able to trade on a wide range of event-based outcomes, including economic indicators, financial events, geopolitical developments and other measurable real-world scenarios, all cleared directly by Plus500. By integrating this fast-growing offering, we have further enhanced product choice for customers at a time when prediction markets are seeing a surge in interest and trading volumes are continuing to increase significantly. We are highly excited about our prospects in this market segment. We have the proprietary technology and regulatory expertise to cater to increasing activity from prediction markets, and our capabilities extends further to include treasury and risk management as well as best-in-class customer service for both B2B and B2C customers. The combination of our clear memberships, proprietary technology, institutional infrastructure, order routing, strong financial foundations and market expertise leave us extremely well positioned to capitalize on the growth opportunities in this expanding market. Turning to the exciting B2B partnerships shown here on Slide 20. In December, we announced our appointment as the clearing partner for FanDuel prediction Markets, an exciting joint venture between the CME and FanDuel. Then in October 2025, we announced that we had entered into a strategic partnership with Topstep, a leading U.S.-based trading education and evaluation platform, under which Plus500 will exclusively provide clearing and technology infrastructure for Topstep. Through this partnership, Topstep's large and active trader community will gain direct access to live CME group exchange markets via Plus500's institutional clearing, order routing and risk management technology. Being chosen as a strategic partner for these groundbreaking initiatives is a landmark achievement for Plus500. They reflect just how far we have come and how our status as an accredited trusted market infrastructure provider built on proprietary technology and regulatory expertise allow us to drive institutional collaboration. It also demonstrates the superiority of our operational processes and status as a global multi-asset fintech group on the international stage. As we touched on earlier, worldwide interest in both future contracts and prediction markets led to the creation of an exciting new financial asset class. This is a market with very powerful structural tailwinds as millions of people choose to access the financial markets through event contracts. At Plus500, we are performing a critical role through the power of our market-leading B2B infrastructure and B2C customer expertise to unleash the democratizing power of prediction markets. For retail customers, as you can see on the slide, our new uplifted mobile platform creates an intuitive personal user experience, opening up an exciting new financial asset class. This new financial prediction markets offering includes economic indicators, financial events, geopolitical developments and other measurable real-world scenarios. Moving ahead to Slide 22. Plus500's U.S. operation is regulated by the CFTC and is a member of the National Futures Association and the Futures Industry Association. Plus500's futures operation also holds exchange and clearing memberships with the CME Group Exchanges, the Minneapolis Grain Exchange, Eurex, ICE Clear U.S., ICE Clear Europe and Kalshi Klear. And following the completion of Mehta acquisition, 6 Indian exchanges and clearing house memberships. We will continue to target additional clearing memberships going forward. This objective will be supported by our proven track record, robust financial position and expertise in applying for and securing new clearing memberships. Thanks to our proprietary technology, financial strength, customer service and strategic collaborations, we have grown rapidly in a short space of time to become an established player in the futures market. Additionally, as part of our B2C offering, we are proud to have the Plus500 futures platform, which has gained good traction with customers, driven by its Omni-set solution and T4-Pro, our trading platform for more professional customers. Our licenses, clear memberships, strong balance sheet, partnerships and innovative trading platforms leave us well positioned to generate continued value for all of our stakeholders. Overall, our expansion into the non-OTC products was a key pillar of our strategic road map and one against which we are delivering real and accelerated growth. I will now hand back to David, who will take us through the technology section. David Zruia: Thank you, Elad. On to the next slide, Slide 24. Our technology supports all our domains from operations, product, marketing capabilities through to customer service. This means our technology delivers a broad range of services within each of these areas such as search and data analytics in marketing, payment processing and customer onboarding solutions. Our domains are built using our own technology, and they are integrated and optimized with one another, giving a holistic view of our systems. Our system architecture, therefore, enables us to operate with both resilience and agility in highly regulated markets and underpins our global best-in-class multi-asset offering. Moving ahead to Slide 25. Our proprietary technology allows us to support our customers at every stage of their journey end-to-end from customer acquisition via our established CRM system to payments through our proprietary cashier, all the way through to our unique trading solutions and product offering. Plus500 is focused on developing and delivering the most innovative and established technology, which provides our global customer base with a localized, intuitive and secure trading experience. Our industry-leading proprietary technology provides our customers with a reliable, robust and seamless trading experience across mobile devices, tablets and the web. We offer over 2,500 different underlying global financial instruments across more than 60 countries and in 30 languages via our product portfolios of OTC, share dealing, futures and options on futures and prediction markets. As you can see on this slide, the graphical user interface and overall user experience across our product offering are seamless, which enables greater levels of customer satisfaction and engagement. Plus500's new technology stack for the U.S. futures market available across various platforms, serves both retail, professional and institutional clients. This includes Plus 500 Futures, T4-Pro and Plus500 Cosmos along with advanced clearing, risk management, middle office and execution technologies. And as evidenced by our new strategic partnerships, we can offer bespoke API connectivity and other services as required in order to meet needs of prospective partnerships. For retail clients, our mobile technological solutions offer an intuitive trading experience, making futures trading accessible to all applicable customers. For institutional clients, we offer enhanced control over the end-to-end process. Plus500 Cosmos leads industry innovation with a customer portal featuring advanced risk management tools and trend monitoring services. And as noted earlier, our U.S. B2C customers can now train on a wide range of Kalshi events outcomes in a seamless way via the Plus500 Futures platform. With these advancements, Plus500 has established itself as a key market infrastructure provider in the futures industry. On to Slide 28. Shown here is our full suite of OTC products in the Japanese retail market. At the beginning of 2025, we launched our new proprietary multi-asset trading platform for the Japanese market, including OTC products across FX, indices, equities and ETFs as well as knockout options. Then in June 2025, we secured an additional commodities license, meaning we now offer a full range of OTC products to the important Japanese retail customer. It is a large and well-established market, offering significant potential to Plus500 over the medium to long term. Moving to Slide 29. I'd also like to highlight our offline marketing activity in Singapore, the UAE and Japan, 3 markets with strong long-term growth potential. Each campaign is carefully tailored to local audiences, reflecting differences in consumer behavior and [ media habits ]. In Singapore, we focus on reaching an urban digitally engaged audience in premium commuter and lifestyle locations. In the UAE, campaigns target a diverse internationally mobile audience across high-traffic commercial and leisure hubs. In Japan, activity is highly localized, emphasizing trust and repeated exposure in everyday environment. Together, these examples demonstrate how well executed off-line campaigns can serve as powerful drivers of brand recognition and customer acquisition, supporting sustained growth in markets with strong long-term potential. Turning to Slide 30. The mobile trading space has become more and more important for retail customers, and we work extremely hard to maintain our leading position in this field. Many of our customers have a mobile-first approach to trading, which is why Plus500's customer experience is seamless between mobile, tablets or web, and each interaction is designed to have the same look and feel. This provides a more consistent trading experience for our customers, which is extremely important to us. As a result, 89% of OTC revenue was generated from customers trading with us on mobile or tablet devices and 85% of OTC trades took place on mobile or tablet devices in 2025. I will now hand over to Elad, who will take you through the financials before I return with the summary and outlook section. Elad Even-Chen: Thank you, David. Shown here on Slide 32 are some of the financials and operational highlights for the year. The group delivered revenue and EBITDA growth of 3% and 2% year-on-year for FY 2025, which is a strong result and one I'm extremely pleased with. On a constant currency basis, relative to our EBITDA outcome in 2024, the EBITDA for FY 2025 is approximately 8% higher, underscoring the EBITDA potential within the group. Our focus on attracting and retaining higher-value customers enabled by our sophisticated marketing technology investments led to a significant increase in the average deposit per active customer to approximately $27,000, which reflects a group record of approximately $6.5 billion of total customer deposits in the year. This kind of progress would not have been possible without the strong foundations we have in place of best-in-class customer service and robust, reliable trading platforms, all enabled by our proprietary technology. We also grew the average revenue per customer by 8% year-on-year and positively reduced the spend per customer by 13% both of which highlight our sophisticated multichannel marketing technology and ability to attract and retain higher value customers. On Slide 33, we can see the financial performance Plus500 has delivered in recent years. The group generated revenue of $792 million in FY 2025, representing growth of 3% year-on-year. EBITDA was also extremely robust at $348 million. The strong delivery, combined with the ongoing share buyback program during the period led to a basic earnings per share of $3.93, representing growth of 10% year-on-year in 2025. I will now take you through our financials in more detail, starting on Slide 34. Slide 34 shows a breakdown of our income statement in more detail. In 2025, selling and marketing expenses reduced by 2% year-on-year, reflecting the increased efficiency of our marketing and technology during the period, equating to a greater level of ROI. That being said, our focus on attracting and retaining higher-value customers remain undiminished throughout the period. During FY 2025, our general and administrative expenses increased reflecting the group's international expansion into new local operation through both organic and inorganic growth as well as heightened foreign exchange impacts. Slide 35 shows our cost base in more detail. The group's cost base is heavily weighted towards variable costs, which accounted for 70% of the total operating costs. The flexibility within the group's cost base is a key part of its overall financial strength and is a significant source of resilience through different market cycles. In FY 2025, our technology and marketing costs decreased significantly as we further optimize the average customer acquisition cost via our multichannel marketing technology, which drives our customer acquisition. Slide 36 shows the group's balance sheet. Our strong financial position underpins all of our activities, giving us the optionality to invest both organically and inorganically and to enhance our shareholder returns where appropriate. The group ended the period with cash balances of approximately $800 million with no debt or loans, representing an extremely strong and flexible financial position. Slide 37 presents the cash flow statement. Plus500 remains a highly cash-generative business, supported by a lean cost base and proprietary technology. Since our IPO in 2013, our average operating cash conversion has been approximately at the level of 98%. In 2025, cash generated from operation was approximately at the level of $265 million and cash and cash equivalent at the end of December 2025 stood at approximately $800 million. This extremely strong cash position has enabled us to announce on shareholder returns of approximately $365 million during 2025 and an additional $187.5 million announced today. On Slide 38, we show our disciplined approach to capital allocation across the group. We always seek the right balance between maximizing shareholder returns, making strategic investment to drive future growth, carrying out highly selective bolt-on acquisitions and developing a sustainable business over the long term. We illustrate on the slide the 2 broad categories within our capital position, one, which is approximately at the level of $550 million, which includes the regulatory capital, working capital, clearing and risk management funds and the other is the surplus capital, which was approximately at the level of $250 million at the end of 2025. Both categories are there to support the ongoing day-to-day activities of the group, including our growing clearing businesses, future growth and enhanced returns to our shareholders, which I will cover now on Slide 39. Our shareholder returns policy stated at least 50% of net profits are to be distributed to shareholders via dividends and share buybacks and at least 50% of those distributions will be made by way of share buybacks. This policy will continue to apply to net profits on a half yearly basis and will continue to be based on a 23% corporate tax rate for both interim and final distributions. The Board will also consider executing special share buybacks or dividends on a half yearly basis, dependent on fiscal year results as well as on investment and growth opportunities. Accordingly, we're really pleased to announce today on an additional shareholder returns of $187.5 million, comprising $100 million in new share buyback programs and $87.5 million of total dividends, which equals to a dividend distribution of more than $1.2 per share. Thank you all, and I will now hand back to David for his final remarks. David Zruia: Thank you, Elad. Let's now move to the summary and outlook section, starting on Slide 41. As we have shown, 2025 was another excellent year for Plus500 with accelerating strategic, operational and financial progress, and we have started 2026 in a similar fashion with our announcement regarding Kalshi in the prediction market space and Mehta in India. We have also extended our track record of delivering significant returns for our shareholders, which goes back to our IPO in 2013. This has propelled us to be the best performing share on a total return basis since our IPO in 2013 to the end of December 2025, during which time we generated over 8,700% total returns for our shareholders. Putting everything together, shown here on Slide 42, is our compelling investment case. In recent years, Plus500 has evolved significantly and diversified its operations materially to become a leading multi-asset fintech group, providing trading platforms and critical market infrastructure, all supported and enabled by its leading proprietary technology and unique system architecture. Over a 13-year period as a public company, Plus500 has delivered an unrivaled track record of growth, innovation and attractive shareholder returns. We have maintained our high-margin, highly cash-generative business model as we have grown, expanded and diversified and our financial position remains extremely strong with significant levels of cash and no debt on our balance sheet. This supports our ambitions to pursue growth both organically and inorganically while returning funds to shareholders. And with our strong strategic position in growing end markets, we remain extremely well placed to capitalize on and seize growth opportunities as they emerge. And to conclude, Slide 43. Looking ahead, the opportunity for Plus500 and the growth runway has never been more significant, underpinned by our robust balance sheet, highly cash-generative business model and multiple structural growth drivers across product verticals, we are well positioned to continue delivering strong operational execution, innovation, growth and attractive shareholder returns. Over the past year, we have further diversified our business, expanding into highly attractive markets and reinforcing our position as a trusted provider of institutional market infrastructure across our growing non-OTC business lines. In our OTC business, our portfolio of international licenses, continued product innovation, expansion into new markets and deepening customer relationships give us a unique advantage upon which to build. We look to the future with confidence and are absolutely focused on executing with precision against our strategic priorities to deliver growth and value creation. Thank you for listening, and that marks the end of our presentation. We will now move on to take your questions. We have a facility via the webcast to take questions, which the moderator will explain to you now. Thank you. Operator: [Operator Instructions] I would like to remind all participants that this call is being recorded. [Operator Instructions] We currently have no questions on the webinar. So I will hand over to Owen Jones, Head of Investor Relations, to address the written questions. Owen Jones: Thank you. Good morning, everybody. We've got a few questions that have come through. So I'll read those out in the order in which they were received. Our first question comes from Hal Potter, Bank of America. He says, congratulations on an excellent set of results. Thank you, Hal. First question, all related to prediction markets. Could you give us a sense of how trading is going so far with the CME FanDuel partnership? That's the first question. Second question, Plus500 has a fantastic partner with 40% roughly market share in U.S. sports betting. Is there any reason why this partnership couldn't reach a market share close to that? And then his third question relates to the Kalshi offering. And he says, are we expecting an increase to our marketing budget to grow the customer base here? David Zruia: Yes. So obviously, for the first question, the new partnership with the FanDuel CME is just at the beginning. It's ramping up. It looks good, but it's the beginning. And obviously, as it grows, we will share more stats in the future. Elad Even-Chen: As for the second element, very much we are having strong confidence with that kind of level of offering on the B2B. We can see already kind of the metrics behind the scene. We do have the -- to say that it will go and become material. But yet again, it's kind of the combination of time. Let's not forget that the kind of initiation went out only a few weeks ago. We've seen also on the back of the different ecosystems even of yesterday of the Super Bowl, we've seen already kind of increased level of traction to come in from the B2B clearing services. So we do have a great level of comfort. Owen Jones: Yes, as a reminder, his third one was on the Kalshi offering -- marketing budget. Elad Even-Chen: So as kind of -- it's important to understand kind of the mechanics of Plus, right? As you know very much, we're doing mainly kind of online marketing, and it's a great tool for us also to bring more volumes to the system as a whole. By the way, we don't look at it as Kalshi product, but rather the prediction market as a whole because additional kind of exchange will be added there as well, and it will create even a greater level of audience. Owen Jones: Okay. Next question comes from James Allen at Berenberg. He is asking, do we expect the average revenue per customer in the prediction market space to be higher or lower versus our current activities? And his second question is relating to Topstep. Can we give any more detail about the strategic partnership with Topstep and how will it work? And how big is their customer base? David Zruia: So first of all, it's important to note that when we look at the customer, we look at it in a more holistic view. The idea is to have a super app in the U.S. current dates futures then we added the prediction, and we will keep adding more products. And as we add more customers to the platform, they will trade both prediction, futures and other products in the future. So it's not that it's either a lifetime value or ARPU for -- from that product or from that product. That said, we are in a very early beginning stages of the offering. Lifetime or ARPU is being measured across a long term. It's not after a few days and time will say what is the expected ARPU of the prediction market customers comparing to futures or OTC ones. Elad Even-Chen: But we can add that as for kind of the substance of the fact that we, on the B2C level, we are the clearer itself, so by itself, we kind of save 50% of the margin instead of kind of distributing it to another clearing party. So very much the composition of having the B2C as the full owner of that kind of offering together with the [ IB ] offering on a fully disclosed level, together with the Omnibus level that will enable us to get a greater margin than the other players in the industry. Owen Jones: Thank you. The next question comes from Ian White at Autonomous. It may have just been touched on in your previous answer, but he was asking how our partnership with Kalshi is differentiated versus Kalshi's own B2C offering and their partnership with Robinhood. David Zruia: So obviously, Kalshi as a product is a great product, but it offers trading on prediction markets products only. While when customer trades at Plus500 enjoys the ability to trade both futures, prediction markets, and as I said earlier, we are planning to add more products in the U.S. to the same app later on. It's a long-term process, but we have the plan in place. And that is the differentiation, the offering itself. Owen Jones: Thank you. We've had another question relating to prediction markets. Can we just explain how we generate revenues in this market, please? What's the revenue model for our prediction market offering? Elad Even-Chen: So there are -- as I mentioned before, there are 3 different streams, okay? Like the first one is the B2C, the one that we offer under our platform. And there, you are having like the $0.02, if it's -- the fee itself and the commission, the fee, which is very much being also distributed to the exchange and then also the commission which you generate. And that ends there. Then you do have also the other structures, which are different from one party to another. As mentioned, we are catering the B2B service from both fully disclosed level, fully disclosed, it means that we are the one to provide the platform and all the technology for the onboarding, for the cashier, for the risk management and various other parameters. There is no second to us today. And if so, very limited other kind of handful of players in the U.S. with that level of technology. Then I would say that you're having the Omnibus level. There, it's again, very much subject to the characteristics that you are having with other party. That kind of ecosystem can be associated with the deal we're having with FanDuel and the CME. And within each and every one of them, there are different level of commercials. Again, the beauty of Plus is also to have the execution together with the clearing. Owen Jones: Thank you. That's really clear. Luke, we have no more questions via this facility. So I'll hand back to you. Thank you. Operator: Thank you. That concludes today's presentation. Thank you for joining, and have a nice day.
Edna Koh: Okay. Good morning, everybody, and welcome to DBS' Fourth Quarter and Full Year 2025 Financial Results Briefing. This morning, we announced for the full year that we achieved record income and profit before tax. Net profit came in at SGD 11 billion with ROE at 16.2%. For the fourth quarter, net profit was SGD 2.36 billion. With us today are our CEO, Tan Su Shan; and our CFO, Chng Sok Hui. Without further ado, let me invite Sok Hui to give us more color. Sok Hui Chng: Good morning, everyone, and happy Chinese New Year in advance. Okay, Slide 2. On the highlights, we delivered a strong set of results for full year 2025. Pre-tax profit rose to a new high of SGD 13.1 billion. Return on equity was 16.2% and return on tangible equity was 17.8%. Total income grew 3% to a record SGD 22.9 billion despite a challenging rate environment. Average SORA and HIBOR both fell by almost 2 percentage points, and there were adverse translation effects from a strong Singapore dollar. Group net interest income was nonetheless modestly higher, driven by record deposit growth and proactive balance sheet management. Fee income and treasury customer sales both grew double digits and reached new highs, led by Wealth Management. Markets trading income rose to the highest level since 2021. The cost-to-income ratio was unchanged at 40%. Net profit was 3% lower at SGD 11.0 billion. This was due to higher tax expenses of SGD 400 million from the consequential implementation of the 15% global minimum tax. For the fourth quarter, pre-tax profit was SGD 2.8 billion, down 6% from a year ago. Total income declined 3% to SGD 5.33 billion as higher fee income and treasury customer sales were offset by the impact of rate headwinds and the absence of non-recurring gains recorded a year ago. Asset quality remains sound. A previously watchlisted real estate exposure was prudently recognized as an NPL during the quarter, contributing to higher specific allowances. The impact was partially offset by a release of general allowances set aside in prior periods. Allowance coverage stood at 130% and at 197% after considering collateral. Capital levels stayed strong. The transitional CET1 ratio was 17.0% with a fully phased-in ratio at 15.0%. The Board proposed a final total dividend of SGD 0.81 per share for the fourth quarter, comprising a SGD 0.66 ordinary dividend, up SGD 0.06 from the previous payout and a SGD 0.15 capital return dividend. The Board remains committed to managing down the stock of excess capital and barring unforeseen circumstances, plans to maintain the SGD 0.15 per share capital return dividend each quarter through 2026 and 2027. Full year performance. Slide 3. For the full year, total income and pre-tax profit were records. Group net interest income was modestly higher at SGD 14.5 billion, a new high as record deposit growth and proactive hedging offset the impact of rate headwinds. Within this, commercial book net interest income fell 4% or SGD 549 million as net interest margin narrowed due to the rates impact. Fee income rose 18% or SGD 730 million to a record SGD 4.90 billion, led by Wealth Management. Commercial book, other non-interest income was SGD 2.13 billion. Treasury customer sales to wealth and corporate clients grew 14% to a new high, but the increase was offset by lower other income, which had non-recurring gains a year ago. Markets trading income rose 49% or SGD 452 million to SGD 1.37 billion, the highest since 2021, benefiting from lower funding costs and a more conducive trading environment. Expenses increased 4% or SGD 354 million to SGD 9.25 billion, led by staff costs. The cost-income ratio was unchanged at 40% and profit before allowances rose 2% or SGD 249 million to a new high of SGD 13.7 billion. Total allowances were 27% or SGD 169 million higher at SGD 791 million. Specific allowances were SGD 854 million or 19 basis points of loans, largely due to the real estate NPL in the fourth quarter. General allowances of SGD 63 million were written back during the year, including the release of allowances previously set aside for the real estate exposure. There was a one-time item relating to the bank's CSR commitment announced in 2023 to allocate up to SGD 1 billion over 10 years to support vulnerable communities. With SGD 100 million set aside from the year's profits, the cumulative amount since 2023 for CSR stands at SGD 300 million. Next slide, fourth quarter year-on-year performance. For the fourth quarter, pre-tax profit was SGD 2.80 billion, 6% lower than a year ago. Group net interest income declined 4%. Within this, commercial book net interest income fell 6% or SGD 239 million to SGD 3.59 billion as net interest margin narrowed due to the rate headwinds. Fee income rose 14% or SGD 131 million to SGD 1.10 billion, led by Wealth Management. Commercial book other non-interest income was SGD 486 million, within which treasury customer sales rose 13% or SGD 56 million. Expenses declined 1% or SGD 23 million to SGD 2.37 billion. The cost-to-income ratio was stable. Profit before allowances was SGD 2.96 billion, 5% or SGD 151 million lower. Total allowances were unchanged at SGD 209 million as higher specific allowances were offset by a write-back of general allowances. Next slide, fourth quarter, quarter-on-quarter performance. Compared to the previous quarter, fourth quarter net profit declined 20%. Group net interest income was marginally higher. Within this, commercial book net interest income rose 1% or SGD 34 million as deposit growth momentum was sustained. Deposits increased SGD 16 billion or 3% in constant currency terms, offsetting the impact from lower SORA. Fee income fell 19% or SGD 258 million and commercial book other non-interest income declined 16% to SGD 92 million due to seasonally lower client activity. Markets trading income fell 65% or SGD 285 million from the previous quarter's high base and seasonal factors. The business also took the opportunity to rebalance the portfolio, which will position us well for 2026. Expenses declined 1% or SGD 21 million to SGD 2.37 billion. Specific allowances were higher, partially offset by a general allowance write-back. Next slide, net interest income. Compared to the previous quarter, group net interest income was marginally higher at SGD 3.59 billion. Net interest margin declined 3 basis points to 1.93% as SORA continued to trend lower during the quarter. The impact of lower rates was offset by two factors. First, balance sheet hedges that have been proactively increased over the past few years helped mitigate the decline in net interest margin. Second, deposit growth remains strong. Deposits rose SGD 16 billion or 3% in constant currency terms during the quarter, bringing the full year increase to SGD 64 billion or 12%, the largest absolute increase in the bank's history. The growth outpaced loans and the surplus was deployed into liquid assets. This was accretive to net interest income and return on equity, though it modestly reduced net interest margin. For the full year, group net interest income was modestly higher at SGD 14.5 billion as balance sheet hedging and deposit growth offset the sharp declines in SORA and HIBOR as well as adverse FX translation from a stronger Singapore dollar. Commercial book net interest income declined 4% from a lower net interest margin. Next slide, deposits. During the quarter, total deposits rose 3% or SGD 16 billion in constant currency terms, mostly from CASA inflows. CASA, current and savings account increased in both Sing dollars and foreign currencies. Sing dollar CASA rose from seasonal year-end retail inflows and a continued shift of funds from treasury bills back into deposits. Foreign currency CASA growth was driven by both wealth and corporate clients. For the full year, total deposits grew SGD 64 billion or 12% in constant currency terms, the largest absolute increase in the bank's history with over 2/3 of the increase in CASA. Liquidity remains healthy. The group's liquidity coverage ratio was 155% and net stable funding ratio was 117%, both comfortably above regulatory requirements. Next slide, loans. During the quarter, gross loans rose 2% or SGD 10 billion in constant currency terms to SGD 451 billion. The increase was led by trade loans with modest increases in non-trade corporate and Wealth Management loans. As deposits continue to grow faster than loans, the surplus was deployed into liquid assets. This was accretive to net interest income and return on equity. For the full year, loans rose 6% or SGD 24 billion with broad-based growth across trade, non-trade corporate and Wealth Management loans. And you can see from the chart, the high-quality liquid assets for the year increased by SGD 42 billion. Fee income, next slide. Gross fee income rose 15% for the full year to a record SGD 5.86 billion. Growth was broad-based and led by Wealth Management, which increased 29% to a new high. Transaction service and loan-related fees also reached record levels, while investment banking fees strengthened. For the fourth quarter, gross fee income rose 12% from a year ago to SGD 1.38 billion. The increase was led by Wealth Management fees. Transaction service and investment banking fees were also higher. Compared to the previous quarter, gross fee income declined 13%. Wealth Management and loan-related fees fell due to seasonal factors, while transaction service fees were lower compared to a strong third quarter. The declines were partially offset by higher card fees. Next slide. Wealth Management segment. The Wealth Management segment comprises Treasurers, Private Client and Private Bank. Wealth Management was a key growth driver for the year. Full year segment income rose 9% to SGD 5.68 billion, underpinned by record investment product and bancassurance sales. Assets under management grew 19% in constant currency terms from a year ago to a new high of SGD 488 billion. This quarter, we have started to disclose net new money at the bottom of this slide. The figures include inflows from Treasures, Treasures Private Client and the Private Bank. Total inflows for the three segments were SGD 12 billion for the fourth quarter, bringing full year inflows to a record SGD 39 billion, 21% higher than 2024. For the fourth quarter, segment income rose 5% from a year ago to SGD 1.30 billion, driven by higher non-interest income from stronger investment products and bancassurance sales. This more than offset a decline in net interest income from lower rates. Next slide. Customer-driven non-interest income. This slide shows non-interest income from the commercial book that's customer-driven. While fee income and treasury customer sales are recorded under different P&L lines due to accounting treatment, both are driven by consumer and corporate demand for financial solutions and should be viewed together. For the full year, customer-driven non-interest income rose 16% to SGD 7.04 billion as net fee income rose 18% to SGD 4.90 billion and treasury customer sales grew 14% to SGD 2.14 billion. Both were at new highs, driven by broad-based growth and led by Wealth Management. For the fourth quarter, growth momentum remains strong. Customer-driven non-interest income rose 13% from a year ago around the average pace over the prior four quarters. The performance reflected our continued efforts to broaden and deepen relationships with wealth, corporate and institutional clients. Next slide, expenses. Expenses were tightly managed. Full year expenses rose 4% from a year ago to SGD 9.25 billion, led by higher staff costs. The cost-to-income ratio was unchanged at 40%. Fourth quarter expenses were 1% lower, both quarter-on-quarter and year-on-year at SGD 2.37 billion, driven by lower staff cost. Next slide, Hong Kong. Hong Kong's full year net profit rose 3% in constant currency terms to a record SGD 1.61 billion as total income increased 6% to SGD 3.52 billion, driven by higher non-interest income. Net interest income was 3% higher at SGD 2.09 billion from deposit growth. Net interest margin was slightly higher as the impact of lower HIBOR on the commercial book was offset by an improvement in markets trading. Deposits rose 10%, led by CASA inflows, while loans grew 1%. Surplus deposits were deployed into non-loan assets supporting net interest income. Net fee income rose 22% to SGD 993 million, led by Wealth Management. Other non-interest income was 7% lower at SGD 441 million as lower markets trading non-interest income was partially offset by higher treasury customer sales. Expenses increased 3% to SGD 1.33 billion from higher staff costs. Total allowances doubled to SGD 296 million, reflecting higher specific allowances largely from the real estate NPL in the fourth quarter. Next slide, non-performing assets. The NPL ratio was unchanged from the previous quarter at 1.0%, notwithstanding the recognition of the real estate exposure as an NPL in the fourth quarter. The exposure have been on our watchlist for 2 years. The borrower is currently not in default status. We reviewed the credit and took a prudent decision to downgrade it to NPL following our subjective default assessment. Next slide, specific allowances. Specific allowances for the fourth quarter rose to SGD 415 million with a large part of the increase due to the real estate NPL based on asset recovery values. The increase was partially offset by a release of general allowances that had been previously set aside for the exposure. For the full year, specific allowances amounted to SGD 845 million or 19 basis points of loans, broadly in line with our through-cycle average. Next slide, general allowances. As at end of December, total allowance reserves stood at SGD 6.28 billion, comprising SGD 2.42 billion in specific allowance reserves and SGD 3.86 billion in general allowance reserves. The slight decline in GP reserves from the previous quarter was partly due to the release of general allowances previously set aside for the real estate NPL, which were reclassified to specific allowances. As communicated previously, we set aside GP once the case is placed on the watchlist. In the event that the watchlisted case is classified as NPL, the GP set aside will be released. General allowance reserves remain prudent with the GP overlay at SGD 2.4 billion out of the total SGD 3.86 billion. So to recap, the GP overlay of SGD 2.4 billion is in addition to baseline GP generated by the model, and it takes into account stress scenarios such as heightened geopolitical and macroeconomic risk. Allowance coverage was at 130% and at 197% after considering collateral. Next slide, capital. The reported CET1 ratio increased 0.1 percentage points from the previous quarter to 17.0%, driven by profit accretion and stable risk-weighted assets. On a fully phased-in basis, the pro forma ratio was 15.0%. The leverage ratio was at 6.2%, more than twice the regulatory minimum of 3%. Next slide, dividends. The Board proposed a final total dividend of SGD 0.81 per share for the fourth quarter, comprising a SGD 0.66 ordinary dividend, up SGD 0.06 from the previous payout and a SGD 0.15 capital return dividend. This brings the total dividend for the year to SGD 3.06 per share or SGD 8.68 billion, an increase of 38% from the previous year. Assuming dividends are held at SGD 0.81 per quarter, annualized dividends will be SGD 3.24 per share, representing a dividend yield of 5.5% based on last Friday's closing share price. Next slide. In summary, we delivered record full year pre-tax profit and achieved a 16% ROE, demonstrating the resilience and adaptability of our franchise amidst rate and tax headwinds. Fee income and treasury customer sales reached new highs, led by Wealth Management, while deposit growth was the strongest in the bank's history. While rate pressures and geopolitical tensions are expected to persist, the quality of our franchise and strong balance sheet provide a solid foundation for the year ahead. Thank you for your attention. I'll now hand you to Su Shan. Tan Shan: Thank you, Sok Hui. So slide, please. So when I look back at 2025, and I think about all the things that we can't control. You can't control geopolitics. You can't control where interest rates go, you can't control where the FX goes or the market goes, and you can't control where tax goes. So we really had the perfect storm in 2025 in terms of rates, where SORA and HIBOR went in terms of the FX, strong Sing dollar and also our tax rates, as you know, went up. Notwithstanding all these really what we call a perfect storm in the macros, the fact that DBS delivered record group total income, record net -- group net interest income in spite of the rates, record fee income, but more pleasing, record net profit before tax -- sorry, record PBT, profit before tax. But more pleasing for me was the record in volumes. You saw, Sok Hui talked about the record in deposit growth, 12%. I was also very happy to see the record net new money growth, which is structural, record AUM. And I think this suggests that I think our engines are firing okay, right? So record total income and PBT. I would credit the group net interest income reaching a profit in spite of those headwinds to our teams doing a really good job both on nimble balance sheet management, on also increasing our fixed rate assets that went up to SGD 210 billion. And also all the teams firing on all cylinders on gathering deposit growth. This, I can attribute to the hard work we've done over the past in using AI, using machine learning, using contextual nudges, all the hard work that we've done to gather new-to-bank customers, to be customer-centric, to have our nudges automated and to use AI smartly. So I think the snowballing effect of volume growth is happening. In terms of markets, we had the highest markets trading since 2021. Markets trading income rose 49% to SGD 1.37 billion. And because 2025 was such a good year for trading, we decided to take advantage of it and to rebalance our portfolio in the fourth quarter. Fourth quarter normally is down, is seasonal, right? By December, everybody close their books, go on holiday. So fourth quarter is normally quite seasonal. We are off to a strong start in 2026. January was very good indeed. We saw Wealth Management as well, a record high total income at SGD 5.7 billion. And more pleasing was the Wealth Management's non-interest income, which is the fee income was up 27%. It's strong everywhere. Offshore wealth, onshore wealth, we saw growth in China, India, Indonesia, Taiwan, and then the two big hubs of Hong Kong and Singapore also, both growing very nicely. We talked about -- Sok Hui has now told us that, we will start sharing the AUM growth for all three segments. It's important for you to understand that DBS has the wealth continuum. So we look at wealth holistically because we don't believe that wealth is static. We believe that wealth grows. And so you start with the priority bank, which is Treasures. You go up to Treasures Private Client, which is where you become an A accredited investor, you start to invest more. And then you go up to the Private Bank where you get access to more sophisticated products. All that continuum, we really got very seriously. And that's what I think has been our secret sauce in growing our Wealth Management franchise. So delivering high ROE, that was really structural growth. I think all the structural stuff that we said, be it Wealth Management, be it in IBG, we saw structural growth in TMT, especially around the tech ecosystem. We saw structural growth in the financial institutions group, especially around the institutional equity space. We saw a recovery in Investment Banking, a long-awaited IPO market finally came back in 2025, both Hong Kong and Singapore are doing remarkably well. But also in payments, I think this is what I was pleased with. In terms of payments transaction services, so DBS was named the Best Bank for Cash and Corporate Banking in Asia by Coalition Greenwich. Coalition Greenwich is rated by the customers, not by us. You can't pitch for it. The customers rate you. And I think that was validation of the good work done by the GTS and IBG team. And also pleasing was the record loan-related fees. So this is where we start to win loan structuring mandates, right, as the lead bank. So loan-related fees was up 14% to SGD 733 million. And we really captured growth in the event-driven space. So it's quite a lot of big chunky deals that came in. This is event-driven, LBO, structured deals, M&A, et cetera, and that was up some 59% year-on-year. So I'm pleased to see that we are winning wallet share, mind share and going up the tiers with our clients. So asset quality remains sound. Our NPL ratio remains stable. As Sok Hui alluded, we did take a subtractive NPL in the fourth quarter. It's important to say that the customer has not defaulted, but we have watchlisted this name for some time now, and we have set aside some GP. So overall, we are comfortable on our exposures. The GP reserve remains sufficient. And just to remind you, the GP reserve, the GP overlay stands at SGD 2.4 billion. Next slide. And just to recap, again, the ordinary dividend increased by SGD 0.06 to SGD 0.66, capital returns of SGD 0.15 per quarter that will be maintained for this year and next year. And so, with the fourth quarter total dividend of SGD 0.81, we're looking at SGD 3.24 for the year going forward. And of course, being a purpose-driven bank, we want to continue to contribute. We made a 10-year commitment. We will stick to the commitment of SGD 100 million to support vulnerable segments. And we have since given SGD 300 million in contribution since 2023. Okay. So what's our 2026 outlook? I think it's hard to predict. So I tell all our clients buckle up, it's going to be a volatile year. I mean, first week of January, we have Venezuela. We had Greenland. We had -- and then further down the month, we had Bitcoin, we had dollar diverse -- well, there's dollar movements, Japanese elections, Thai elections. There's a whole host of things. It feels like a year condensed into a month, and people are getting used to such volatility. And because of such volatility, I think our customers will still want to look for stability. They want to look for resilience. They want to look for reliability, and they want to diversify their concentrator exposures, whether it's in currencies, it's in markets or in supply chains. They'll be looking for the safe haven. They'll be looking for dependable long-term partners. And here, I hope that DBS will continue to be a beneficiary of these global volatile wins, right? We want to be standing out as a safe, long-term dependable and future forward bank. So what's our outlook? Our outlook for total income will be around 2025 levels in spite of the rate headwinds. And that is because we're assuming SORA of 1.25. So the SORA has come down, as you know, some 200 bps from last year. We're predicting two more rate cuts, and we're predicting the dollar to remain strong. However, like last year, we are looking for strong growth in deposits. We continue to look for strong growth also in volumes in terms of net new money. We will continue to be nimble. There's the good thing about volatility is you get some -- you have risk, but you also have opportunities. When markets are very volatile, you can trade, you can be nimble, you can also lock in hopefully some good rates during the market falls. So we want to continue to capture this volatility that will give us hedging opportunities and also growth. Commercial book non-interest income growth to be in high single digits. But for Wealth Management, we are looking for mid-teens growth. So again, continued structural tailwinds continuing for next year. We'll also continue to grow our FIC business, our GFM business, et cetera. Continuing our cost discipline around costs, mid-single-digit expense growth, so around 4% compared to the last few years of 8%. This is indicative of where we want to go. And SP should be pretty comfortable between 17 to 20 bps. Again, depending on the macroeconomic situation and the geopolitical situation, we might have some room for GP write-backs this year as well. So for net profit, we're looking at slightly below 2025 levels. But as I said, we will maintain our cost discipline. We will maintain our credit discipline. We will maintain our operational discipline. And all this underpinned by continued work to make our tech resilient through automation and AI, to make our data resilient through focus on cybersecurity and data life cycle management. And most importantly, we will continue to upskill our people. The adoption of AI, the speed of which has been strong. And we can basically free our staff from mundane work, administration work and use AI to upskill them. And this is the work that we are doing right now, which is exciting for us. So for DBS, looking forward, we want to keep the three moats to stay ahead. What are the three moats? We believe we have a moat in data. We have good precious customer data that we can use as a moat that we got very, very seriously. We have a trust moat. I think we have proven to be a safe bank through thick and thin and trusted and a dependable bank and strong credit ratings. And we have a cultural moat. I think our staff, I'm very proud of our staff's ability to be nimble, to be agile, to work with new technologies and to work with new ways of working. So this enables us to build a long-term firm foundation for growth. That's it from me. Edna Koh: We're now happy to take questions. [Operator Instructions] First question to Chanya. Chanyaporn Chanjaroen: Rthvika and I have questions. The first one, given the record high deposit, are you looking to lend it to MAS like what you did in the previous year? Second, any colors on the Hong Kong specific provisions that you said, what do you call it, subjective assessment, but can you give details on -- or colors on that? Third question is on Indonesia. Given the outlook downgrade by Moody's, what do you see in terms of impact and particularly on your loan book? Are you lending more over there? And Rthvika has one question as well. Rthvika Suvarna: You mentioned 4Q expenses benefited from lower staff costs. Can you expand a little bit if this leads to headcount reduction and quantify it perhaps? And is this optimization continuing into 2026? Tan Shan: Okay. I mean so, and I can take all the questions together. So certainly, as we gather deposits, deposit growth have been stronger than loan growth. We reinvest the surplus deposits into high-quality HQLAs, right? So it's across the board in different good credit rating -- good credit rated, high-quality assets, government bills, et cetera. In terms of the Hong Kong SP, we cannot mention names. And you're right, it's subjective, but we are comfortable that -- because, as I said, we reduced our GP to increase our SP. So we were already prudent in the past. So this is, it shouldn't be any surprise to anyone. In terms of Indonesia, I think this will be good in the long term for Indonesia. Short term, there is some market volatility and some market pain. But I think the long-term implications for increased transparency, governance, increased free float and all that, it's a good thing, right? And the swift action taken by the authorities, I mean, right after the announcement, you saw a lot of announcements coming out from the authorities, I think, is quite commendable. Our books in Indonesia are pretty focused around the large quality blue-chip names. We've looked at it over and over again, I really don't have too much concerns about the credit quality there. It's not a big exposure anyway. So I think it should be okay. And then the fourth quarter, lower staff cost, that's because we fully -- there was the LVB integration in India, and then there was the Citi Taiwan integration. So post integration, we have a lot of dual jobs that were rolling off, right? So that was -- a big chunk of that was the rolling off of the post-integration synergies from the two countries. Looking forward, I know where your question is going. I do think that AI, whether it's generative agentic or just traditional machine learning type of AI will change the way white-collar jobs. This is the world. It's not DBS alone or Singapore or Hong Kong or Asia alone. It's the world. But companies that embrace this new technology embrace it and look to use it to your advantage. That means human and machine interaction is important. How do you train humans to work with machines? How do you train humans to use agents safely, but also to use it to increase your capacity to move them to higher order roles? Frankly, I'm excited. So the work that we are doing right now is precisely that to retrain, whether it's our engineers, our RMs, our call center people, our operations people, everybody, everybody in DBS is trying to adapt to this new way of working, which we want people to feel safe to learn and to use this new capacity, this new superpower that you now have to do a higher order role. You want to, Sok Hui? Sok Hui Chng: I think the only thing I would add is that fourth quarter, I think our results were not so good compared to third quarter. So you should expect that we accrue less bonus. So it's a natural effect of a drop in staff costs as well. Edna Koh: Anyone else have a question? Unknown Attendee: So congratulations Su Shan and Sok Hui on the strong and credible set of results, especially with the perfect storm you mentioned. Looking at the year, the different segments have carried the bank differently, retail funding, corporate lending, wealth advisory and distribution and treasury flows, each contributing their own way. Do you see DBS is getting through a transition in your earning model? Or this is already the new shape of the business? And within that, how do you see the role of the retail franchise here in Singapore and Hong Kong? And how has that changed in our mind? And what changes in customer behavior stood out for you in the year? That's first question. Second question is, with the RMB clearing role only now starting, how does it actually add to your existing transaction or treasury businesses? Does it deepen operating balances and client mandates? Or is it mainly to improve settlement efficiency for flow you already handle? How do you intend to scale that? You mentioned about AI. How is AI changing the business or how the bank is run in the efficiency or decision being made, revenue being generated? Do you have like a data value capture equivalent for AI? Tan Shan: A lot of very big questions, all of them. So to your first question, which is basically, do I see this as a new shape of DBS' business? Look, I think that we are in two big financial hubs, right, Hong Kong and Singapore. And as long as deposit growth continues to be strong, these are two big financial hubs. So Hong Kong benefits from southbound flows from China. Singapore benefits from global flows as well. So both these flows are structurally good for us. If deposit growth continues to be stronger than loan growth, then we will continue to deploy them in HQLA. That's just the trend that we're seeing. In terms of, is there a new shape? So we think it's going to continue to be a bit of a K-shaped economy. So unfortunately, the strong will get stronger. Some of the SMEs are still seeing some stress in the system. There are some segments particularly suffering more than others. And they might need more help from governments, et cetera. Then in our other core markets, we have structural strong growth in India. That will continue a pace. China looks to be in recovery. Indonesia has some short-term challenges. But again, structurally, long term, we remain constructive on Indonesia in the long term. Taiwan has been a fantastic growth story and will continue a pace because of the tech hardware as well as the onshore wealth growth. And they are also promoting onshore wealth management. So there are structural tailwinds, which we want to harness. There will be headwinds in terms of markets and rates and FX, we just had to maneuver and manage. And we have to be aware of the K-shaped kind of economy and reduce risk where we think there are still credit headwinds in some segments. Your second question around the RMB clearing role, yes, we were -- we announced it in December. We think that the role of RMB has risen as a trading currency, as an investment currency, and that will continue. So yes, there will be mandates to be won. The team is working very hard to do it. The dollar dominance will still be -- I mean, dollar is still 80% of the world's trade financing is still cleared in dollars. But RMB, euro, people want to diversify and those who trade with China may want to use RMB as a currency for trade. But as the world also diversifies and if people want to invest in RMB or they want to use it as a payment currency, I think that trend will also be there. And then AI changing -- changes to the business, I can share that we call it Operating Model Transformation, OMT for short. And here, we have different OMTs in the bank. Examples would be KYC, credit memo writing. So Kwee Juan, who's our IBG head together with Kian Tiong, our credit head, their teams have worked together to create an OMT around credit memo writing, and the AI can really help to shorten that whole process. Wealth management and retail, Tse Koon and the team also have several OMTs. Our COO office has done an OMT around operations. So using more of the chatbot to answer queries. And so there's -- we've got quite a few different OMTs, as you will. But since the advance of generative AI, we already rolled it out, and we said there are horizontal use cases, which all in country can use the DBS GPT, which we rolled out middle of last year. The first rollout, not so good. But after that, it got better and better and better. And we are seeing already people using it for myriad things from translation to what are your policies and procedures to how do I answer queries internally, externally, et cetera. So I think quite good usage, 60-over percent using it very actively. With the rise of agents, Agentic AI, we have also come up with our own framework to make sure that it's safe. We have guardrails around the use of personal agents, team agents, enterprise agents, et cetera. As for the DVC, traditionally -- when we were using machine learning AI models, which are more deterministic and rules based, we use A/B testing to derive the economic value, right, whether it's real revenue growth, cost base or loss base. But when you have -- whether it's Agentic AI, Generative AI or others to supplement what we do, I think it will be harder to separate it out, because everyone is going to be using it. So we'll have to rethink how do we do a deliver a DVC, as you said. We haven't landed. We might still try to capture the economic value based on what we've been doing in the past, which is A/B testing. But I suspect there will be a lot more in terms of capacity building and speed of the resolution of tech debt, for example, what used to take months, many months, years can now take weeks, right, for example. And that time save, we can deploy to newer things to grow, because we still need to grow. The team needs to grow on wealth. We need to grow on trading. We need to grow on financial institutions, on tech, on GTS, payments. There's so much growth that we need to build. But I think what excites us is the ability to use what we can harness from capacity to then redeploy for growth. Unknown Attendee: Can I have a follow-up question just on your K-shaped economy growth going forward? How are you tackling the kind of the lower trajectory growth area? Are you derisking those areas, repricing those areas? And those are segments as well as geographies? Tan Shan: Yes. So we've been always very supportive of our SME and SME plans, and we'll continue to be supportive. What we do is we do constant stress test. I mean, since COVID, I think this whole stress testing we've been second nature to us. And we try to stay ahead of these trends so that we can actually proactively identify the weak cases and help them through it. You can help them. You can do M&A, you can give them for warning to reduce risk, et cetera. We have certainly in our portfolio reduced risk in, for example, the consumer side, the unsecured loan space. And we've been very thoughtful in our SME space as well. Edna Koh: Ngui from Reuters. Yantoultra Ngui: Just a follow-up on Indonesia. How do you kind of plan to navigate the near-term headwinds despite the longer-term outlook? Tan Shan: Well, as I said, we have been looking at our book. And we -- I don't think there should be any panic. I think, as I said, I do believe that structurally, this is good for Indonesia in the long term. And Indonesia is a very resilient country. They've been through a lot of ups and downs, but the fundamentals of the country in terms of resourcing, in terms of their ambition to adopt AI, their ability to be resilient will still be there. As I said, I don't think our exposure is too large. We are very focused on the quality names as well. So in the short term, I'm not too worried. In the long term, I see this as a net positive. But Kwee Juan, my IBG head is here, you want to supplement anything? Kwee Juan Han: Yes. So I think for as Su Shan said, for Indonesia, right now, we are continuing to support the larger clients there. And what you see in terms of the market volatility relates to the market, whereas we lend to the operating company that are generating the cash flows, so the day-to-day is not affected by the market. And so, I think that's the differentiation that we need to see. And as Su Shan said, the overall improvement in the way the market is going to be mobile managed, it's a plus for the market itself. Edna Koh: Any other questions? Okay. Goola? Goola Warden: Anyway, congratulations for the results. It was a tough year. But I'm just wondering, you said that you want to deploy the surplus deposits into HQLA, and you mentioned that a couple of times. But is there no loan growth? I mean, because ideally, you should have put it into loan growth. That's one question. And second question is on the types of HQLA, the sovereigns and how can that be NII accretive? That's the other question. And then, of course, for NIM, what was your exit NIM? How do you see NIM developing into 2026? And has your NIM sensitivity dropped because of the way you manage your book? Tan Shan: Okay. I'll take the first, and then you can take the second. So I want to address the question on loan growth. We are still forecasting loan growth to grow by mid-single digits. So it's not like we're not seeing loan growth, we are. And as I said earlier on, we are actually structuring a lot of deals. So frankly, as rates come down, the deals will start to come in, right? January was indicative of -- if any January is indicative of the year, we're very busy on large corporate loan growth. We see growth also in other areas, even mortgages, the new mortgages coming through the door also saw steady growth. So it's not like we're not seeing loan growth. We are -- just that deposit growth was so high, right? It's higher than the actual loan growth has been quite steady at, say, 5%, 6%, whatever percent, right? So this keeps growing, but deposit growth has been stronger. That's why there's a delta. You want to address for NIM? Sok Hui Chng: Yes. So deposits, we can generally deploy deposits that come in on an average about 1 percentage point NIM. So that's not an issue. You can also write the yield curve, take a view if the rates are constructive. So putting into HQLA, frankly, is good because the ROE is very high, and we only put into mainly sovereigns. So it's not that we are taking big risk running any HQLA portfolio. So you can see it in our Pillar 3 disclosures. On the question about NIM, our fourth quarter NIM was 1.93%. Our January NIM is of 1.92%, so it's been fairly stable at the group NIM level. And sensitivity actually -- has actually increased for Sing dollars, because as more and more deposits come in, there's more sensitivity to the SORA, which is a good thing. If rates go up, you benefit more. Goola Warden: Have the deposits been coming in, in Sing dollars more than U.S. dollars? Sok Hui Chng: It's a mix. You can see the data point. I think we disclosed it as well. Sing dollar CASA, you can see grew SGD 28 billion this year. Foreign currency CASA grew SGD 19 billion. These are the chunks of deposits that came in and FDs grew SGD 17 billion. So very strong growth in the deposits. Goola Warden: So one last question on this HQLA. So does the USD go into U.S. sovereigns? And does the Sing dollar deposits go into Singapore government securities? Sok Hui Chng: No, no, it doesn't work like that. We can -- through, sort of, cross-currency swaps and all that, we will manage to the overall margin level that is actually the best for the book. Tan Shan: No, we try to optimize. Goola Warden: Okay. And then the other concern was your foreign exchange. Sok Hui Chng: We have no -- we don't take FX exposure. It's all hedged out. So just be assured, we have a good machinery to do hedging. Edna Koh: Russell, Asian Bank. Russell Pereira: Congratulations again on the record results. My question is mainly on IBG with the AI-driven investment up cycle and as well as electronics rebound, the intra-Asian growth as well as trades outside of U.S. and export, import, et cetera. Did you notice or did you see any sort of particular areas that you would like to strengthen your position in for IBG and outside of the RMB clearance? Tan Shan: Okay. I will start and then Kwee Juan, if you want to supplement. So yes, I mentioned that for IBG, there's some structural tailwinds in both TMT, which is tech, data centers, the whole AI growth in AI, CapEx, but also in financial institutions and II as people are putting more money to work in capital markets, the capital markets growth, insurance growth, all that's structural, right? And that will continue. And as money flows into the Asian markets, that structural trend will also continue. In terms of trade outside the U.S., you're right, we -- our economist calls it TOTUS, right, T-O-T-U-S. And that figure has grown certainly since Liberation Day last April. What we are seeing is more intra-regional trade in Asia. We see trade between North Asia and ASEAN, so North and South Asia, North Asia and India, intra-regional trade. We see more trade between the GCC and Asia, GCC and China. That trend seems to be continuing as well. And a lot more cooperation. So whether it's like the Queen Bee programs to Singapore, Kwee Juan has been helping leading Queen Bee's big MNCs bringing the SME or midsized companies as an ecosystem to hunt in the pack in other markets, that continues. And as people diversify their supply chains, Kwee Juan calls it international supply chains, I think we will see continued opportunities there in the long term. Kwee Juan, you want to supplement? Kwee Juan Han: Yes. So I think on the AI piece, a lot of it is around the ecosystem financing. This is short-dated financing of 30 to 60 days for a lot of your suppliers into the ecosystem for AI. So as data centers get built out, you're going to see them stuff up on other equipment. So we do see GPU as a service now becoming an area of interest for a lot of our customers. And also, at the same time, with the semiconductor, CapEx now also going up, because each of these servers require different kind of semiconductors, and that is something that we are seeing some level of activity. So all these are driven by the broader climate of data center and AI being the core for capability that people are building out too. Edna Koh: Maybe we have time for one last question if anyone has. Okay, if not then I think we can draw this time a close. Thank you everyone for your time and we'll see you next quarter. Thank you.
Operator: Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu.com Limited's Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I will now like to turn the conference over to your host for today's conference call, Huang Pu, Investor Relations Director of Sohu.com Limited. Please go ahead. Huang Pu: Thank you for joining us to discuss Sohu.com Limited's first quarter 2025 results. Ronald Powell, our chairman and chief executive officer, Dr. Charles Zhang, CFO John Lee, and vice president of finance, John Stone. Also with us are Chang Liu's CEO, Douyun Chen, and CFO, Yaobin Wang. Before Matthew begins their prepared remarks, I would like to remind you of the comments you have a statement in connection with today's conference call. You can access for the historical information contained herein. The matters discussed on the call may contain forward-looking statements. These statements are based on current plans, estimates, and projections. Therefore, you should not place undue reliance on them. Forward-looking statements involve key risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. For more information about the potential risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission. Charles Zhang: Including the notes with the annual report on Form 10-F. Huang Pu: With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed. Charles Zhang: Thanks, Huang Pu, and thank you everyone for joining our call. In 2025, our marketing services revenues exceeded our previous guidance, while online game revenues were in line with our expectations. Our non-GAAP bottom line performance, excluding the impact of the Changyou withholding income tax reversal, came in at the high end of our prior guidance. For our social media platform, we continue to improve our products and algorithms to address user needs and enhance their experiences across different scenarios. We continue to host a variety of innovative events, which generated abundant premium content, quickly promoted user engagement, and enabled us to capture more monetization opportunities. For our online games, we remain committed to long-term operational excellence and continue to deliver high-quality content updates and compelling experiences to our players. Before going through each business unit in more detail, let me first give you a quick overview of our financial performance. For 2025, the total revenue was $142 million, up 6% year-over-year and down 21% quarter-over-quarter. Marketing services revenues were $17 million, down 10% year-over-year and up 25% quarter-over-quarter. Online game revenues were $120 million, up 10% year-over-year and down 26% quarter-over-quarter. After giving effect to the reversal of previously accrued withholding income tax of approximately $285 million related to Changyou, GAAP net income attributable to Sohu.com Limited was $123 million, compared with a net loss of $21 million in the fourth quarter of last year, meaning 2024, and net income of $9 million in 2025. After giving effect to the above-mentioned reversal of the withholding income tax, non-GAAP net income attributable to Sohu.com Limited was $261 million, compared with a net loss of $15 million in 2024 and a net income of $9 million in 2025. For the full year of 2025, total revenues were $584 million, down 2% compared with 2024. Marketing services revenues were $60 million, down 18% compared with 2024. Online games revenues were $506 million, up 1% compared with 2024. GAAP net income attributable to Sohu.com Limited was $394 million, compared with a net loss of $100 million in 2024. Non-GAAP net income attributable to Sohu.com Limited was $234 million, compared with a net loss of $83 million in 2024. Excluding the reversal of accrued income tax, the 2025 income is a $51 million loss, a 40% improvement over 2024. So now I will go through our key businesses in more detail. First, our social media platform. We continue to refine our products and enhance algorithms to address diverse user needs in various scenarios. Through a mix of vibrant offline and online events across various verticals, we continue to attract and retain a large number of users, especially younger generations. Through spontaneous and active connections and communication, we consistently improve the user experience and boosted user engagement, further strengthening the stickiness on our platform. With the above efforts, we were able to cultivate a healthy platform ecosystem with an active social atmosphere. For example, in the first quarter of 2025, we successfully hosted the year's most eye-catching final for the 2025 Sohu K-Pop Dancing Award and the 2025 Sohu Video Chinese Traditional Custom Awards. These events received widespread praise, sparked enthusiastic interaction among participants and audiences, and drove extensive discussions and disseminations across multiple social media platforms. These initiatives further consolidated our position as the most influential and preferred platform in these areas and boosted the vigorous development of the platform. During the quarter, we also continued to host traditional signature events such as the 2025 Sogou Fashion Awards and the 2025 Sohu Finance Annual Forum. These events not only garnered significant attention but also contributed to the continuous enhancement of our brand influence. Additionally, we held a Halloween-themed American TV series party during the Sohu Video American TV Series Month 2025, which brought audiences lots of high-quality American movies. We have on the TV series, we also continue to steadily expand our content library with American dramas as well as other attractive TV series, original dramas, and short dramas to consistently drive traffic for our platform. For Sohu's fourth anniversary, we have a physics class, you know, I myself teach. We have conducted more than 270 live broadcasts, over 30 offline classes, and 270 online classes, multiple university seminars, and published three books. It has continuously made physics more engaging for the general public while attracting lots of leading professional broadcasters in a variety of fields of knowledge on our platform. With this highly regarded IP, we were able to further reinforce our reputation in the field of knowledge and science-based related live broadcasts and demonstrate our commitment to being a socially responsible media platform. On the monetization side, we deeply integrated advertisers to meet with the above-mentioned events and customized the marketing content. We also actively explore more monetization opportunities leveraging our deep understanding of the market. Through the dissemination of our premium content related to events, we facilitated advertisers' brand marketing while promoting the monetization value we offer. Now let me turn to our online game business. During the quarter, our online game business performed well, with revenues in line with our expectations. With fewer launches of the in-game promotional activities for TLBB PC and a net decline of our new PC game TLBB Return, online game revenues decreased on a sequential basis. In our PC game business, we raised the player level cap for regular TLBB PC, which effectively boosted user engagement. Meanwhile, we rolled out a new character development system for TLBB Vantage, providing players with fresh goals and a more engaging experience. Moving on to TLBB Return, we introduced its first new plan and continuously refined the game based on player feedback. In our mobile game businesses, we launched featured content centered on a return to classics and streamlined the gameplay for the legacy TLBB Mobile. This effectively boosted player engagement and the willingness to pay, leading to a sequential revenue increase. Next quarter, we will continue to launch expansion packs and content updates for the TLBB series and other titles to keep players engaged. Looking ahead, we remain committed to our top game strategy, user-centric approach, and will continue to deliver high-quality games to players. In terms of game development, we will adhere to sound methodologies and systematic R&D processes while planning the integration of new technology to enhance efficiency and product success rate. Regarding our pipeline, we are actively working to unlock the potential of our TLBB IP. Meanwhile, as we maintain our core competitiveness in MMORPG, we will continue to diversify our portfolio with multiple types of games and expanded product offerings with global appeal. Now I'd like to give an update on the ongoing share repurchase program. As of February 5, 2026, Sohu.com Limited had purchased 8,100,000 ADS for the aggregate cost of approximately $150 million. So we still have one-third to go to finish this part of the share repurchase. With that, I will now turn the call over to Joanna Lv. Joanna Lv: Thank you, Charles. I will now walk you through the key financials of our major segments for the fourth quarter and full year of 2025. All numbers are on a non-GAAP basis. You may find a reconciliation of non-GAAP to GAAP measures on our website. For the social media platform, quarterly revenues were $21 million compared with $24 million in the same quarter last year. Quarterly operating loss was $72 million compared with an operating loss of $69 million in the same quarter last year. For the full year 2025, revenues were $75 million compared with $91 million in 2024. The full-year operating loss was $283 million compared with an operating loss of $287 million in 2024. For Changyou, quarterly revenues were $121 million compared with $111 million in the same quarter last year. Quarterly operating profit was $45 million compared with an operating profit of $48 million in the same quarter last year. For the full year 2025, revenues were $509 million compared with $506 million in 2024. The full-year operating profit was $238 million compared with an operating profit of $196 million in 2024. For 2026, we expect marketing service revenues to be between $10 million and $11 million. This implies an annual decrease of 20% to 27% and a sequential decrease of 35% to 41%. Online game revenues are expected to be between $130 million and $123 million. This implies an annual decrease of 4% to an annual increase of 5% and a sequential decrease of 6% to a sequential increase of 2%. Both non-GAAP and GAAP net loss attributable to Sohu.com Limited are expected to be between $10 million and $20 million. This forecast reflects management's current and preliminary view, which is subject to substantial uncertainty. This concludes our prepared remarks. Operator, we would now like to open the call to questions. Operator: Thank you, management. To ask a question, please dial *1 and wait for your turn. To cancel your request, you can press *1 again. Our first question comes from the line of Thomas Chong of Jefferies. Please go ahead. Thomas Chong: Hi. Good evening. Thanks, management, for taking my question. My first question is about advertising. When I look at the Q1 advertising guidance, it seems relatively soft on a sequential basis compared to historical Q1. So I just want to get some color. Is it due to macro uncertainties? And can we talk about the trend for categories like Auto and IT sectors in Q1? Also, on the gaming guidance, because when I look at the Q1 revenue guidance on gaming, it seems like a negative or positive 1-2. I just want to see what really drives the high end or the low end of the guidance and the trend we are seeing now. That's my first question. My second question is about AI. Given that, I think there's a lot of industry discussion in overseas markets regarding whether AI will disrupt the online gaming sector. Just want to get some thoughts from management about whether AI is a possibility tool in gaming, or are we actually seeing AI may disrupt the sector in the long term? Thank you. Charles Zhang: Okay, Thomas. The first question is about advertising. The question about Q1 and softness, right? So I think it's mainly due to the seasonality because this year, Chinese New Year is kind of late. I mean, two weeks late in February. So, you know, companies are not getting a lot of things done in January or February. The overall macroeconomic situation remains similar to Q4. So that's why. And then the next is about gaming, right? For gaming revenue. Yeah. Yaobin Wang: Since we will have no new game launching in the first quarter, the level of the revenue of the first quarter depends on the existing game's performance, including such as the performance of the new content and activities that we will launch in the first quarter for TLBB PC, TLBB Return, and Legacy TLBB Mobile. So far, the performance is basically in line with our expectation. Regarding AI, we think pushing the application of AI, especially in terms of the creation of game design plans, is essential for the production of the gaming industry. Thank you. Thomas Chong: Thank you. May I quickly also ask a follow-up question back to advertising? Charles, may I ask about how we are actually seeing the trend for different advertising categories such as auto and IT sectors? I remember in the last earnings call, we were actually seeing some softness. I'm not sure if there's any improvement for auto and IT sectors. Thank you. Charles Zhang: Yeah. There is some improvement in the auto sector. There's a higher percentage of the overall revenue split. So, yeah, because, yeah, the auto industry is doing better than the IT and other FMCG. They have a higher percentage of the total pie. I mean, the overall revenue. Thomas Chong: Thank you. This is for Q4, right? We are talking about. Charles Zhang: Yeah. Q4. Yes. Thomas Chong: Got it. Thank you, Charles. Thank you. I will go back to the queue. Charles Zhang: Okay. Welcome. Operator: Thank you for the question. One moment for the next question. Our next question comes from the line of Alicia Yap of Citi. Please go ahead. Alicia Yap: Hello. Thank you. Good evening, management. Thanks for taking my questions. I have a few questions. First, I wanted to follow up on the first quarter guidance and also the 4Q. Was there any one-off revenue that was recognized in the 4Q that led to the outperformance in the fourth quarter? Any special ad campaign by any industry vertical that outperformed during the quarter? Second question is on gaming. Can management share with us the game pipeline and also the major expansion pack that you plan to release for the remaining of 2026? So that we can better assess the game revenue trend for the next three quarters. Lastly, on your guidance, the net loss guidance seems like this quarter, the $10 million to $20 million net loss that you've guided is a much smaller number than previously. Usually, the loss is around the $20 million to $30 million range. Any particular reasons why the loss is narrower than previous quarters? Also, should we expect this trend to be consistent for the remaining of 2026? Thank you. Charles Zhang: So your first question is about understanding why Q4 had growth, right? And then Q1 has softness. You were thinking that there are reasons for this. Right? Alicia Yap: That's right. That's why Q4 is stronger than your guidance. Right? Any particular special events that happened in Q4? Charles Zhang: Oh, I think Q4, we are just doing better overall. The Q1 softness or the Q1 lower forecast is purely due to the Chinese New Year's delayed timing this year. Chinese New Year is, you know, like, February 16. Right? So it's more than two weeks late than last year. So that, you know, advertisers, they just do not have much going on. Only after the Chinese New Year, after February and into March, they come back to work and start to plan for the year to add marketing campaigns. So it's purely due to Chinese New Year that our advertising is not doing that well in Q1, even compared with last year's first quarter, 2025. But the Q4 is not because there was a major event; it's just that we are doing better. The macroeconomic situation is still similar, not very good, with a lot of uncertainties. But we are just seeing a shift in the advertising industry. Traditional advertising on those media channels is not working now. People are not spending much on that, on brand marketing. But instead, we have innovative marketing solutions based on KOL or influencer marketing, online events, offline events, live streaming, all these that are consistent with our product development side, our user social media. So we have these innovative marketing solutions that differentiate us from others. So we are getting the advertising and brand marketing dollars. Especially in Q4, we had some major events, some offline events that attracted advertisers. Online KOL accounts and live streaming, all these things. So we are entering into a new age of marketing and social media time. So I hope I answered your question. Alicia Yap: Yes, you did. Thank you. Charles Zhang: So next, regarding the game pipeline. Yaobin Wang: First, regarding the game pipeline, we have a card-based RPG based on IP. It's a mobile game mixed with a hardpoint game. It is expected to launch in 2026 or early 2027, subject to its development process and testing results. Meanwhile, we also have several mini-program video games in development. We will decide if we will launch the games or when to launch the games based on their development and testing results. For the existing games, we will launch expansion packs in a similar cadence as previous years. As for the revenue trend for this coming quarter, we cannot forecast the trend right now. It depends on the performance of the expansion pack of our older games and also depends on whether we can launch new games and their performance. Thank you. Charles Zhang: Thank you. So for 2026, we have a loss, and the average loss is similar, right? Ten or twenty million. Operator: Thank you for the questions. With that, that concludes the conference call for today. Thank you all for participating. You may now disconnect your line.
Operator: Greetings. Welcome to Pagaya Technologies Ltd.'s Fourth Quarter Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. I will now turn the conference over to Josh Fagen, Head of Investor Relations and COO of Finance. Thank you. You may begin. Josh Fagen: Thank you, and welcome to Pagaya Technologies Ltd.'s fourth quarter and Full Year 2025 Earnings Conference Call. Joining me today to talk about our business and results are Gal Krubiner, Chief Executive Officer of Pagaya Technologies Ltd., Sanjiv Das, President, and Evangelos Perros, Chief Financial Officer. You can find the materials that accompany our prepared remarks and a replay of today's webcast on the Investor Relations section of our website at investor.pagaya.com. Our remarks today will include forward-looking statements that are based on our current expectations and forecasts with respect to, among other things, our operations and financial performance, including our financial outlook for the first quarter and full year of 2026. Our actual results may differ materially from those contemplated by those forward-looking statements. Factors that could cause these results to differ materially from our expectations include, but are not limited to, those risks described in today's press release and our filings with the US Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements as a result of new information or future events. Please refer to the documents we file from time to time with the SEC, including our 10-K, 10-Q, and other reports for a more detailed discussion of these factors. Additionally, non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, fee revenue less production costs, or FRLPC, FRLPC percentage of network volume, and core operating expenses will be discussed on the call. Reconciliations to the most directly comparable GAAP financial measures are available to the extent available without unreasonable efforts in our earnings release and other materials which are posted on our Investor Relations website. We encourage you to review the shareholder letter, which was furnished with the SEC on Form 8-K today for detailed commentary on our business and performance in conjunction with the accompanying earnings supplement and press release. With that, let me turn the call over to Gal. Gal Krubiner: Thank you, and welcome, everyone. 2025 was a hallmark year for Pagaya Technologies Ltd. In Q4, we achieved $34 million of GAAP net income and $80 million in operating cash flow. In the beginning of 2024, we set the goal to become GAAP net income and cash flow positive, which we continue to accelerate in the fourth quarter this year. For the full year, we achieved revenues of $1.3 billion, up 26% year over year, adjusted EBITDA of $371 million, up 76% year over year, and GAAP net income of $81 million, up $483 million versus 2024 with an EPS of $0.93. More importantly, these results and achievements were the outcome of growing and investing in our business across verticals, further expansion into first look and second look loans, and optimizing our unit economics and balance sheets. Before discussing our results and outlook, it is important to recall that 2025 was a year of discipline for Pagaya Technologies Ltd. We fine-tuned the foundations of our business and approach towards risk management and underwriting. In turn, this drives further consistency for our investors as we continue to serve our lending partner needs. All of that while being an enterprise focused on sustainable through-the-cycle growth. This discipline drove us to proactively take action later in the fourth quarter in face of persistent consumer uncertainty and trends. While our data does not indicate consumer deterioration, we have the privilege of being able to pivot our production to focus on prudent and disciplined credit performance across asset classes remain in line with our expectations. However, we pulled back our exposure to higher risk and less profitable credit deals which have potential for higher relative losses in a downside scenario. As we mature as a company, we are shifting more and more of our focus to achieve the best long-term outcomes for our stakeholders, and to avoid any downside that could arise from potential tail risks. We have built a business that is highly scalable, with key inflection points in our operating and capital structure that results in standalone operating efficiencies. We have a robust list of onboarding partners and a healthy funding position. As important, with our data moat, leadership, and commercial momentum, we are positioned to continue to take share in this vast market. A market that Pagaya Technologies Ltd. creates and one that Pagaya Technologies Ltd. leads in an increasingly profitable manner. Let me now talk about the long-term fundamentals of our business. It is clear that we have momentum and are executing on all of our business. As we have talked about throughout 2025, future growth will continue to come from the combination of recently onboarded partners, and deepening our existing relationships. Our pipeline remains robust, a testament to our product suites becoming industry standards. In the latest quarter and the months that followed, we onboarded Achieve GLS and a leading fast-growing buy now pay later provider in North America. And we expect to announce additional partner launches in the coming quarters. GLS or Global Lending Services is a leading auto finance provider that offers financial solutions to almost 20,000 franchises and independent dealerships nationwide. As I look ahead, I'm excited about more consumer lenders joining the Pagaya Technologies Ltd. network, further highlighting the potential and value added of our enterprise platform. For our existing partners, we continue to innovate meeting our partners where they are to drive higher partner usage, certification, and engagement. For instance, LendingClub recently adopted our marketing affiliate offering and became a multiproduct partner for us. We expect to end the first quarter with multiple large personal loan partners fully onboarded into our prescreen offering. Our earning power and cash flow generation will become more robust as partners continue maturing into multiproduct relationships. At the same time, we continue to institutionalize and diversify our business through long-term agreements with fee and application flow commitments, creating additional partner alignment and business stabilization. This quarter, we entered into long-term agreements with two of our largest partners in auto and personal loans. While we were to continue growing our application volume, from new and existing partners, our decision to reduce our exposure is firmly grounded in portfolio proposition, rather than growing just for the sake of growth. In fact, we are comfortable having a lower conversion rate when it is appropriate to reduce the likelihood of adverse outcomes. As a maturing business, a core pillar of our culture is to deliberately balance long-term growth and profitability against short-term metrics. Our focus on top-of-funnel growth and expansion is designed for the future, as we prioritize building an enterprise platform for the long term. As a B2B2C enabler, our partners depend on Pagaya Technologies Ltd. to manage the business for long-term strengths, and stability. And they appreciate our ability and willingness to make such proactive risk-based decisions. Turning to funding. We continue to leverage favorable market dynamics to create longer-term committed capital that enhances our capacity while reducing exposure to funding volatility. This year, and in the months that followed, we made strides in diversifying our funding sources with forward flow arrangements across all three core asset classes, personal loan, auto loans, and point of sale. Building on this momentum, we further enhanced our funding stability with the expansion into revolving ABSs across point of sale and personal loan, creating almost $3 billion of revolving capacity. As we enter 2026, our guidance and business plan are driven first and foremost by the disciplined risk framework we have developed over the years. Our accomplishments in 2024 and 2025 set us up for efficient and durable growth. We stabilized the business as we scaled, optimized our operating costs, and balance sheet, and diversified our sources of revenues and funding. Going forward, we are in the right place for balanced efficient growth. In 2026, investors should expect more measured volume thus revenue growth, as we prioritize reducing credit exposure over our market share gains at the moment. Our strategy reflects a business that is in control of its long-term growth trajectory while deploying measured risks. With our ten-year anniversary approaching, we believe this strategy reflects a company that is building an enduring platform that maximizes value creation over time. We are building a B2B2C platform. There will be a cornerstone of the US financial ecosystem that should be embedded within every US consumer lender. Leveraging intelligent AI quant decisioning as its core, our platform will operate wherever our partners are through the cycle while powering products that meet the needs of our customers. The first decade proves our model and secured our place in the market. The next decade is about scaling that foundation with greater ambition, durability, and impact. Sanjiv Das: Thank you, Gal. As we wrap up the year with our fourth consecutive quarter of GAAP net income profitability and look ahead, our growth strategy is clear. Continue to build a sustainable and profitable business, that is increasingly embedded in the US financial ecosystem, Pagaya Technologies Ltd.'s growth continues to be driven by institutional-grade scaling of existing partner relationships as well as new partner additions. In fact, we just added three new partners to our platform. Achieve, GLS or Global Lending Services, and a leading fast-growth buy now pay later provider in North America. Our onboarding process is becoming industrial grade. Minimizing partner resource requirements. All new partners have a prebuilt API integration for the Pagaya Technologies Ltd. product suite. Prebuilt product APIs along with an eighteen-month joint roadmap will enable accelerated scaling. We also established long-term agreements with all of them that encompass volumes, fees, and all other protections. Our onboarding pipeline remains the busiest in Pagaya Technologies Ltd.'s history with demand and traction from leading lenders in the country across banks, fintechs, and other lenders. In fact, a lot of these leading lenders are proactively engaging with us on all which is a testament to Pagaya Technologies Ltd.'s relevance and strong product-driven value proposition. We are planning to announce some new names in the coming quarters. With our existing partners, we've been consistently delivering and diversifying across products, including the direct marketing engine, affiliate optimizer engine, and dual look. This diversification provides Pagaya Technologies Ltd. with new volume beyond decline monetization, increased value and stickiness with existing lending partners, and most importantly, provides future growth for Pagaya Technologies Ltd. without expanding our own risk appetite. Existing partners continue to actively adopt our products. In fact, our largest existing partners signed definitive term sheets and adopted the direct marketing engine after a series of tests. And are now scaling with us across direct mail and email prescreen campaigns. Within our affiliate optimizer engine, we recently onboarded LendingClub onto Credit Karma where they will be presenting personal loan offers to consumers in partnership with Pagaya Technologies Ltd. Additionally, we are currently expanding our affiliate optimizer engine to include Experian's activate platform with the launch of our first partner and several more in the onboarding queue. Lastly, we signed several long-term agreements with leading partners to establish commitments across application flow size, quality, and controls to provide further visibility through the cycle. Turning to funding. We continue to diversify from prefunded ABS funding structure to include more committed capital structures that reduce our exposure to funding volatility. In the last few months, we have expanded our forward flow agreements into all three core asset classes. Including inaugural agreements with Castlelake and SoundPoint in auto and point of sale respectively. This broadens our Castlelake agreement into both personal loans and auto. We continue to innovate across our various ABS shelves. We introduced revolving structures, first in POS, and then in personal loans. We inked our inaugural POS ABS deal and our inaugural paid revolving ABS with twenty-six North which gives us a more diverse set of financing options and more visibility hence, greater consistency in our funding construct in the face of potential capital market cyclicality. I'd like to reflect broadly on the capital markets environment. Which remains very supportive for Pagaya Technologies Ltd. We see continued strong demand from across insurance funds, along with traditional asset managers while we are witnessing a higher level of rationality than we saw in 2025, from private credit. Overall, we would view the current environment as more of a steady state with healthy demand and execution particularly for quality assets. Turning to credit performance, we remain disciplined in our underwriting our core focus centered around gaining access to more high-quality flow from existing and new partners. We continue to leverage our unique ability to assess risk in real-time. Based on the data from over 30 lenders across three asset classes with agile decision-making. We continue to prioritize prudent risk management. While credit risk performance of our portfolio remains in line with expectations, we took proactive steps late in the year to reduce exposure to select higher volatility segments. These actions had a direct impact on our network volumes revenues, and profit in the fourth quarter. Our decision was primarily driven by the changes in risk appetite that we observed across multiple lending partners of ours in light of market uncertainty. As we discussed in our outlook, the impact of these actions will restrain growth to a measured degree in the first quarter. We expect a ramp in growth through the year due to several factors that we will discuss. Including the onboarding of new partners and continued penetration into existing relationships. Before I hand the call to EP for a detailed review of our financial performance and outlook, I'd like to reflect on the successes we've had across the business this past year. In summary, 2025 was a year of innovation, optimization, and profitability across all aspects of the business, laying the groundwork for growth in 2026 and the years beyond. Evangelos Perros: Thanks, Sanjiv. I will start with the big picture. In 2025, we achieved several important milestones that position Pagaya Technologies Ltd. up for sustainable profitable growth. Over the last few years, we have been deliberately reshaping this company, strengthening the foundation tightening the operating model, improving the capital structure, and most importantly, building a much more resilient scalable, and differentiated technology platform in consumer lending. In this past year, we made sustained investment in our data and risk infrastructure combined with intentional decisions around risk management balance sheet optimization, and how we grow. The cumulative result of all that work became evident in the financials as we're exiting 2025 with four consecutive quarters of GAAP profitability. As it relates to our 2026 growth outlook, it reflects our long-term objective to grow the platform, while remaining disciplined and adaptive in how we manage risk. And even more so in an uncertain environment. We actively manage the business as a portfolio of products partners, and risk bands adjusting exposure as conditions evolve. When uncertainty increases, the appropriate response is to reduce exposure to higher risk segments. When conditions improve, we will reassess and reallocate accordingly. We remain focused on growth from increased product usage penetration and new partners. Let me walk through the numbers. For the full year 2025, we delivered $1.3 billion of revenue, up 26% year over year, $512 million of FRLPC, also up 26%, $371 million of adjusted EBITDA, up 76% and $81 million of GAAP net income representing a $483 million improvement versus last year. This reflects meaningful progress in profitability and operating leverage showing up at scale. For the fourth quarter specifically, revenue was $335 million FRAPC was $131 million, and adjusted EBITDA was $98 million. Representing a 29% margin. We reported GAAP net income of $34 million compared to a loss of $238 million a year ago. FR EPC as a percentage of network volume was 4.9% demonstrating strong monetization while remaining disciplined on risk. Turning to network volume, we reported $2.7 billion for the fourth quarter up 3% year over year. Personal loan, auto and POS volume combined grew at a double-digit rate and was partially offset by zero SFR volume in the quarter. Personal loans remain our largest vertical at approximately 65% of total volume and grew 10% year over year. Auto and POS represented 19% and 16% of quarterly network volume, respectively. For the full year, network volume was $10.5 billion, up 9%. Excluding SFR, volume growth was substantially higher. Late in the quarter, we proactively tightened production in certain areas that remain profitable, but could exhibit higher variability of credit outcomes and maybe the first to show deterioration in a downside scenario. This was a dynamic reallocation within the portfolio away from higher risk segments with a plan to be redeployed in volume from new application flow and new products. And therefore, more balanced risk. Given our visibility into new partner onboarding, new partner and product monetization, and the operating leverage in the business, we are well positioned to make these adjustments. The decision reduced fourth quarter volume by approximately $100 million to $150 million without impacting the quarter's profitability targets. When risk moves and persists, we will adjust. We will not stretch. We are dynamic. We calibrate and continue compounding returns. Fourth quarter total revenue and other income was $335 million, up 20% year over year. Fee revenue grew 16% to $321 million and made up 96% of total revenue. Interest and investment income grew to $14 million Importantly, revenue growth continued to outpace volume growth underscoring two key trends. Improved monetization and higher revenue and profit per unit of volume and risk. Full year revenue grew 26% and interest and investment income reached approximately $40 million. FRLPC in the fourth quarter was $131 million up 12% year over year, again meaningfully outpacing volume growth. FR LPC margin expanded to 4.9% driven primarily by partner and funding mix. For the full year, FRAPC totaled $512 million also 4.9% of network volume, up 70 basis points from 2024. I want to spend a moment on a subset of fee revenue, fees from capital markets execution. This is an area where we have progressed in a very intentional way. These fees were a negative $6 million for the quarter and a negative $21 million for the year, reflecting the pricing agreements with our forward flow partners and the risk-adjusted pricing of our ABS transactions. Specifically on ABS, negative fees reflect additional cash contribution we put in our securitization structures in addition to our purchase of securities reflected in our investments in loans and securities. These cash contributions are accounted for as an upfront reduction in fee revenues and provide additional support against potential future credit loss While this does not change the underlying credit performance of the asset, it reduces downside exposure and earnings volatility associated with investments we hold on our balance sheet. Most importantly though, it also creates a clear and a tighter risk boundary for our investors. To put this into context, for every $1 billion of ABS funding, we are required to contribute a minimum of approximately $50 million of capital, i.e. 5% in line with risk retention rules. Illustratively, a 100 basis points discount in ABS pricing translates into roughly $10 million of lower upfront fees but also implies $10 million less in future impairments or up to $10 million more income, all else being equal. Now let's talk about what we view as a differentiated feature of the business, our operating leverage. Adjusted EBITDA in the fourth quarter was $98 million up 53% year over year with a 29% margin. Core operating expenses declined to 36% of FRLPC a 13% improvement year over year. Incremental EBITDA margin exceeded 100% meaning nearly every incremental dollar of FRLPC flowed through to EBITDA. The modest miss versus guidance was driven by the late quarter production adjustment. For the full year, adjusted EBITDA was $371 million, up 76% and margin expanded to 28.5% up 800 basis points. Turning to GAAP net income, we reported a record $34 million our fourth consecutive quarter of profitability compared to a net loss of $238 million a year ago. Fourth quarter GAAP net income included the positive impact of $9 million from the extinguishment of corporate notes and a nonrecurring tax-related benefit. For the full year, GAAP net income was $81 million compared to a $401 million loss in 2024. This largely reflects higher fee revenue alongside lower operating expenses, interest expense and impairments resulting in a 10% margin in the fourth quarter compared to a 6% last quarter and a negative 85% a year ago. Credit related fair value adjustments were $107 million for the year. Adjusted net income was $275 million. Diving into credit performance, results across personal loan, auto and point of sale remain in line with and within our risk tolerance. Demand for our assets remains strong as evidenced by new forward flow agreement our first ortho certificate sale since 2021, and the demand that we're seeing in the first few weeks of the year. 2025 vintages represent a more normalized product compared to 2024, particularly given the lower cost of funding from investors relative to prior years. As it relates to new production, rating agencies also validated that cumulative net losses are expected to be lower relative to prior production after reflecting our recent risk actions. Let's go to the specifics. Personal loan CNLs for the 2024 through the 2025 vintages are running 30-40% better than 2021 peak levels. Auto CNLs are running 50 to 70% better than 2022 vintages. While auto 60 plus delinquencies are higher than '24, following the year's pullback and broadly in line with 2023 levels, recoveries enroll rates are better than both 2023 and 2024, pointing to a normalized level of expected losses. For point of sale, credit rents remain stable and in line with expectations. As I mentioned earlier, realized credit performance remains in line with expectations. And our late quarter actions reflect increased uncertainty rather than observed deterioration. When uncertainty increases, even if losses have not materialized, the platform is designed to reduce exposure to the tails of the distribution. When conditions improve, we will adjust again. Palting remains robust. In the fourth quarter, issued $2 billion in our ABS program across seven transactions. Last week, we closed an $800 million ABS deal that was oversubscribed even after upside from an initial size of $600 million. With the recent announcement of our inaugural POS forward flow with SoundPoint Capital, we now have forward flow agreements across all three asset classes. We also closed our first $350 million revolving personal loan ABS with twenty-six North and combined with our two point of sale ABS revolvers, we now have about $3 billion of revolving capacity from those three transactions. Turning to the balance sheet, asset quality and mix have improved materially over the past twenty-four months, providing increased liquidity and flexibility. We ended the quarter with approximately $288 million in cash and cash equivalents, up $62 million from a year ago, and $945 million in investments, loan, and securities. As we have stated over the past year, we're leveraging our improved liquidity to make opportunistic investments to lower our cost of funding and increase profitability. In the fourth quarter, new investments in loan and securities were about $271 million of which $47 million was opportunistic in the form of ABS bonds. And we received $170 million in return of capital from prior deals. In December, we also repurchased $7 million of our corporate notes at an approximate 12.5% discount to par consistent with our stated objective of opportunistic capital deployment. Last week, we repurchased an additional $7 million of our corporate notes. Throughout 2025, discretionary investments in ABS structures, all in the form of rated loans, totaled approximately $171 million representing about 27% of the total investments in loan and securities. Combined with cash, we now hold a healthy liquidity position under a wide range of scenarios. Our objective is no longer just liquidity. We are maturing and increasingly pursuing optionality. Optionality allows us to be conservative on credit opportunistic on capital deployment, and patient on growth. In the fourth quarter, the fair value of the investment portfolio was adjusted down by approximately $50 million and we added $97 million of new investments net of pay downs. Our guidance continues to reflect $100 to $150 million of rolling twelve-month forward credit-related impairments. I want to remind everyone that this is not a forecast of losses, it's a governance on risk embedded in our guidance It reflects uncertainty and remains consistent with prior guidance. Let me close with our 2026 outlook. We remain cautious in the near term given persistent macro and credit uncertainty. We expect volume growth throughout the year driven by new application flow new partners, and increased penetration of our products. FR LPC margin is expected to be between 4-5% for the year and to revert lower within that range from current levels as a result of continued expansion in POS, contribution from new partners, and our funding mix. As just mentioned, guidance reflects the credit-related impairments, if any, of $100-150 million. Both first quarter and full year guidance reflect the full impact of last quarter's exit rate volume reduction, of approximately $100 to $150 million per month. Illustratively, the midpoint of that range represents approximately $375 million first quarter impact and $1.5 billion on a full year baseline essentially assuming current uncertainty persists, and leading to consumer and performance deterioration. If uncertainty recedes, we will adjust accordingly and swiftly. This is an important point, so let me explain. We are exiting the year with $10.8 billion of fourth quarter annualized volume. Deliberately shrinking high-risk volume by $1.5 billion on an annualized basis while still delivering year-over-year volume growth. The reduction in certain credit tiers and new volume growth are not contradictory. There are two sides of the same optimization process. For 2026, we expect network volume in the range of $2.5 to $2.7 billion, total revenue and other income in the range of $315 million to $335 million and adjusted EBITDA in the range of $80 million to $95 million We expect GAAP net income for the quarter of $15 million to $35 million For the full year 2026, we are expecting network volume in the range of $11.25 to $13 billion total revenue and other income in the range of $1.4 billion to $1.575 billion and adjusted EBITDA in the range of $410 million to $460 million We expect GAAP net income for the year to range from $100 to $150 million. With that, let me turn it back to the operator for questions. Operator: Thank you. We will now be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from John Hecht with Jefferies. Please proceed. John Hecht: Good morning, guys, and thanks for taking my questions. Maybe just go a little deeper, you know, in this concept of moving away from variable outcomes. Is it pricing in the market? Are you seeing something change with respect to payment trends? Or is this, you know, is it related to certain channel partners or certain types of products? Maybe just another layer of details on this. Gal Krubiner: Definitely, John. Appreciate the question. So before I'm going into the market dynamics, I want just to start with reiterating that that message that we gave from Pagaya Technologies Ltd.'s perspective has been the same for the last year. That we will always prioritize prudent risk management over short-term growth. And that principle that we have it you drew call it a year, a year and a half back, is now fully embedded in the way we run the company. Now the main reason for that is that we are a different type of animal. And we are not like many consumer finance platforms, that rely on marketing spend to generate volume. We don't need to grow at any cost to justify our expense base. And this structural advantage is obviously giving us more flexibility to be disciplined, especially when we see early signs of different market softness. Now when you think about that and the data we collect, it's really come to the core strengths of our platform, which is the ability to remove what we describe as tail risk or the reliability outcomes, as you pointed out, in real-time. Through the fact that we see signals across 30 plus different three asset classes, that are a lot of data that allows us to be proactive rather than to be reactive. Now the first point I would point out to your question is the market dynamics. So from a market perspective, there is just a lot of volatility. You don't need to look very hard to see that in the last period, mainly since Q4, the amount of volatility and declining rationality that we have seen has just reached a new level. Financial markets are demonstrating much volatility driven by geopolitical, private credit. You see notable shifts in sentiment. And despite the fact that the consumer performance in our production remains strong, and the ABS market are functioning well, it's definitely giving you a pause as a risk manager to ask the question of, like, what's your risk appetite and where you wanna be? Now, as I mentioned, the consumer behavior data front, we don't see a deterioration, so nothing on the CNL or the CPR. And, therefore, our 2026 outlook of the impact of credit-related impairments, if any, is in line with our 2025 guide, which is the $100 to $150 million. We did see a clear shift in our partner behavior. Several partners have moved away from expansion to cautious as they have progressed. And the early signal is exactly what our operating model is designed to capture. If you will talk with our lenders, call it Q1, Q2 last year, everyone will tell you that yeah, this is a year of going very strongly, aggressively growing 40, 50%, When you spoke with the same folks, by the end of the year, the posture the understanding of the situation was much more balanced. And as we saw that, we decide to take even one step further and to be what we call ahead of the curve. Now the way we operate and the way we do it, we do it very quickly and swiftly. Because of the technology agile advantage that we have, the fact that we can do these things real-time, so literally a decision in the middle to late of Q4, can be related to all of that, and that's becoming our basis as we think about 2026. And EP will talk a little bit more about how we think about the guidance in that respect. I think before we close the question, I just wanna emphasize that from an enterprise progression, execution perspective, what the team has done and is planning for 2026 is really exceptional. We And we are becoming a better Pagaya Technologies Ltd., not just a bigger one. So think about it that only in Q4, we added forward flow in two new asset classes, included the revolver capacity in personal loan, and onboarded two more partners. So when I think about it, from a CEO perspective, and frankly, I think you should think about it too, is that I'm very pleased with the team outcome despite the short-term reduction in risk decision that is trying very hard to avoid with any potential of downside because of a tail risk. And when I'm looking ahead on 2026, remain very focused about executing on the things we can influence in our long-term structure which is expanding our partner network, deepening our existing relationships, and proactively cutting off tail risk rather than chasing short-term volume. So to end that part, I just wanna leave you with two small nits. The first one, the fact that we have been more conservative is obviously retaining our ability to scale quickly, which is why our guide range is intentionally wide. And the second is that even in what we describe as volatile environment, the we don't wanna be over risk on, we expect to deliver a meaningful GAAP net income profitability of over $100 million in 2026. So in other words, our entire 2026 guidance range especially assume current uncertainty persists, and lead to consumer and performance deterioration that we are kind of, like, taking as part of our plan. So if uncertainty recedes, we will definitely adjust accordingly and swiftly. Evangelos Perros: Yeah. And maybe, I'll jump in so as we know to try this this action translates somewhere between $100 million and $150 million volume cut in the fourth quarter. So effectively, that's a $1.5 billion of volume into 2026. And remember, we're more than offsetting that with new with the volume from new and new products. So, effectively, what we're doing is we're replacing higher credit risk volume with volume from new products and new partners that come in as a much more balanced risk. And if you think about I'm sure you're wondering, like, okay. To jump ahead, what's next for 2026? What does that mean for the guidance? What needs to happen for that to change? I would say, you know, these reflect we we are assuming this decision does not reverse. For purpose of our guidance in 2026. And, if we are right, we would not be chasing our tail for the year. And if we're wrong, will reverse. And in that case, we would have left some money on the table for a few quarters. So something has to really dramatically change really in 2020 to go below, the guidance that we have provided. The other thing I want to point out, though, and to close the question is, just just think about in the long term, there is no real impact in the long term of the business. We're still looking at the 15-20% growth of this business, especially if you start thinking about the annualization of the new volume that comes 2027 into 2028. And the last thing is obviously to keep in mind and let that sink in, is this is still a business that's generating a $100 million plus of GAAP net even in that scenario. John Hecht: Okay. And then your follow-up question, which I think is somewhat similar to the last question in terms of where your focus is. It seems like there's more commentary about being focused on volume outside of decline monetization. Maybe talk about what products might have, like, increased momentum there and do the economics of those transactions differ from the decline monetization? Sanjiv Das: Sure, John. I'll take it. This is Sanjiv. Absolutely, I think you got it you hit the nail on its head with your question. So essentially, what's diversifying our products into the direct marketing engine that we've talked about before. We talked about the affiliate optimizer engine before. Of course, dual or concurrent look in auto where we look at loans at the same time that our partners do essentially first look. The dynamics of the direct marketing engine where we essentially help our partners grow their originations is very, very strong and very positive. And the performance is also substantially better. Same with the Affiliate Optimizer engine. We've essentially a business that has about a third of its dependency on Credit Karma and Experian continues to grow very, very strongly similar to what credit card businesses do. We are doing the same thing in personal loans. And we are substantially improving our partner presence with our existing partners in both of those both of those platforms. So that is something that has done extremely well for us. This is where the shift in the business is happening. And this is exactly where we are we are emphasizing that because of because of the performance of these products, the economics in these are substantially better. Than what we have traditionally provided because of better risk performance and better ability to charge better economics. So that's something that we definitely want to talk about. We have, as you know, 31 existing partners. Our top five partners are already on these new products. We have signed agreements on our prescreen product, which is our direct marketing product. As well as agreements on Credit Karma and the affiliate channels and we are starting to increase our our dual look performance very substantially. I do wanna emphasize one other thing that is extremely important, which is that we have also onboarded a record number of new partners. Carl talked about two that are onboarding right now. There's a third that's in process. And I fully expect that by the end of the second quarter, we will have onboarded maybe seven, potentially eight new partners, which will be like a record for Pagaya Technologies Ltd. What EP, Gal, and I are trying to do is emphasize is that we are focusing more on the shift in the business our existing 31 lenders to more profitable partners. We're also focusing substantially more on getting new partners, essentially demonstrating that we are becoming part of the financial ecosystem in US consumer lending, and we are managing the risk in a very thoughtful, responsible way as a growing franchise in the long term. John Hecht: Great. Thank you very much. Operator: Our next question is from Kyle Joseph with Stephens. Please proceed. Kyle Joseph: Hey, good morning, guys. Thanks for taking my questions. Been a lot of headlines on private credit and the alts recently. Just wanted to get you guys gave an update on the funding side, of business, but, you know, how you're thinking about funding in into your 'twenty-six outlook given all the headlines we've seen in that world recently? Thanks. Evangelos Perros: Yes. Thanks, Kyle. Thanks for the question. I'll take it. I mean, look, the demand for our product and production is very robust. Look at Q4, a couple of the things that we announced, you know, a new deal with twenty-six North, which combined with the post deals generates more than $3 billion of capacity across these two products from in in from the revolver structure of these, the sale of the certificate in auto, new forward flows in auto, and POS, the sale of the certificate that we set on OWS. So generally very strong demand and validated by the execution that we're delivering for our investors. What I would say is if you step back, 2025 was a year where you had the very frothy sort of private credit market deploying capital. And now it's becoming a little bit more normal and much more disciplined and we're actually benefiting from that. I take it I would take it a step further and say that some of the actions that we took is actually fueling more demand for our product and production You look at the last ABS deal that we did a few days ago, market with $600 million of size. And it got upsized, by 30% and still oversubscribed. So I think what you see is the platforms that have a very robust and very diversified set of investors, working that they work with, like Pagaya Technologies Ltd., we're benefiting from all of this. We'll continue to obviously, continue to try and diversify our funding further. I know that is on our pipeline. So I think we feel very good about the funding environment relative to our positioning in the marketplace. Gal Krubiner: And maybe one thing to add is that a lot of the colleagues around, which obviously, impacting this the full funding world, but, like, it's much more around the corporate side of the world. And specifically around SaaS, etcetera, and companies that have been in the sphere of trying to grab market share there. I think on the consumer side, which is a byproduct of that, but, like, you don't see that level of volatility or or or kind of, like, changes in the last quarter, but it is calling for everything to be. Kyle Joseph: Great. Thank you. And then just a just a quick follow-up, a a modeling question. For you. On on the impairment side of things, you know, given the underwriting changes you guys have made, you know, what what sort of level should we expect, you know, to get to your your GAAP EPS guidance for '26? Thanks. Evangelos Perros: Yes. Thanks. No change on that. We're still guiding to the call it under scenario in our guidance of a $100 million to $150 million range for the year. Same as it was in 2025. So no changes there, given the, ongoing credit performance. Kyle Joseph: Great. Thanks for taking my questions. Operator: Our next question is from Hal Ghosh with B. Riley Securities. Please proceed. Hal Ghosh: Hey. Thank you, guys. Got a question. Yeah. It's it's a bit counterintuitive given the macro trends we've seen. Over the year with falling inflation. Rates coming down, job market generally good, And I think EP mentioned, hey. You know? Your action in the last quarter was based on increased uncertainty not an increase in in credit losses. So just wanted to you know, could you give us any more qualitative or quantitative color on what you saw your partners doing in in in your in your response. It it just seemed a little counterintuitive. It seems like things are going in the consumer's direction to be better credits. And this is just a little bit it's a little bit need a little more flushing out. Thanks. Sanjiv Das: Hello. Hi. I think it's a it's a great observation. In fact, those are some of the countervailing forces that we had in our mind as well. At the end of Q4. On one hand, the macro was what it was in terms of inflation and rates coming down. As you pointed out, on the other hand, we're observing very specifically from our 31 lending partner platform was some of the partners that had been talking about credit expansion in the middle of the year were feeling less certain about credit expansion by the third, fourth, fourth, so the the sheer uncertainty in the market. And by that, as Gal outlined in his his opening comments, there's clearly know, geopolitical uncertainty, which was causing some uncertainty in the financial markets. There was there was some stuff going on at the at the tail end of certain certain businesses. Certain markets. And so we felt that the most responsible thing for us to do, and and that's the beauty of being a B2B2C market is that in some ways, we are shielded from the c. The b that's between the c and us responds or gives us signals that based on which we were able to take actions at what we thought would be the most marginal risk tier in the business. And it is this theme of uncertainty in the potent potential uncertainty in the credit markets that drives us to think, that we should be responsible and prudent rather than aggressive And but, you know, having said that, our ability to scale and be nimble is extremely high. So if things change in the market, which could change I mean, rates could change, the market could change by the second half of the year, But we all we need to do is basically prudently turn that back on And that's just the reason why our guidance range is is wide. But having said that, we as a management team have very, very high conviction that we will deliver profitable volumes, which is why our gas net income number, it will get. Don't even add anything to it. Or It's it's Gal Krubiner: I think the new one. Okay. One one point to take in mind, like, when you see losses, it's a little bit too late. And when you are taking a proactive before, that the way to be disciplined. So, like, you don't need always to look on the duration of your outcomes on the CNL to say, now I need to take action, and I think again, it's given where we stand and what we see. It's enough to actually say, you know what? I'm gonna be more conservative on that part of the spectrum, and that's it. Hal Ghosh: Okay. And unlike maybe 2023 when you're still building the relationships with the with the lending partners, Your your pullback in in the in some of those riskier tiers, that you know, your your your lending partners were were okay with that as well. You know, there wasn't a a relationship issue. Because I think was key in 2023, 2024 to build a platform build those relationships. In the in in this case, it was this kind of pullback is is is okay with the partner. Gal Krubiner: So a, it's a good question. B, it exactly what we told you that in 2022, it's a different situation. Yeah. Okay. And c, the answer is no. They appreciate that. From them, you know, 15% growth in the midpoint and a stronger Pagaya Technologies Ltd. is much better than 20, 25% growth. But then in three months, six months, nine months, we take it down all that. So stability is key for the actual gross number. Hal Ghosh: Yeah. That makes sense. Thank you. Operator: Our next question is from Rayna Kumar with Oppenheimer and Company. Please proceed. Rayna Kumar: Good morning. Thanks for taking my question. Could you just talk about like where you started to pull back? Like, was it a particular asset class, or was the actual taken across the board? Evangelos Perros: Hi, Reyna. It's primarily across like the entire portfolio. With a little bit more focus on the personal and auto side, because of the secular growth that we see in POS. And that was obviously the later part of the quarter, And, effectively, that's why you see that sort of as an exit rate change into 2026. Rayna Kumar: Understood. That's helpful. And then, just on your target four to 5%, FRLPC margin for '26, obviously, it's a very, wide, range that, you highlighted earlier. Can you just talk about, like, you know, how much conservatism is baked in at the low end and like, what are the puts and takes to get from the bottom to the top? And then if I can just sneak in one modeling question, if you can just tell us your assumption for 26 gap tax rate. Thank you. Evangelos Perros: Yeah. So as we have said before, as it relates to FRPC rate, appreciate obviously that is a wide range and we look to narrow that down going forward at some point. But ultimately, the way to think about think focus on FR LPC in dollar terms. So the more volume you get from your partners and newer products that come in at a lower rate, you may see sort of dilutive impact on the actual rate, but still coming in at higher volumes and therefore higher dollars, at the top line. And then vice versa, if there is potentially, let's call it, the slow run when you think about the mix of the portfolio, If you see a slow ramp for the new product, new partners, you may end up with call it, the low range of the of the rate of the guidance on volume, but obviously achieving a relatively higher FRPC. That's how a little bit how to think about that across the board. So it shouldn't materially change sort of the key dollar amounts. All the, on the, tax rate question, generally speaking, I would point to call it a 20% type of, tax rate. But, obviously, there's a lot of moving parts there because, obviously, the business is coming out from a period where it was two years ago losing money now into getting to capital and profitability. But that's what I would assume for, going forward. Rayna Kumar: Thanks for the color. Operator: Our next question is from David Scharf with Citizens Capital Markets. Please proceed. David Scharf: Hi, good morning. Thanks for taking my questions. Maybe just to sort of dive in a little more to Hal's question and and perhaps what your kind of behavior you're you're seeing from lending partners. You know, that this was you know, so far, an earning season where a lot of lenders you know, pretty much said, things are stable. There are no certainly no rush to widen their credit boxes, but there there certainly weren't indications that things were tightening either. You know, just just so we understand, did you start to see by the end of the quarter you know, more evidence of of turndowns, of of loan application by your partners that may have been approved by your partners six months earlier? Is that how we should sort of interpret the behavioral changes you're seeing? Gal Krubiner: I think the best way to look on it is many more expansion that were in play. Or in plan became not in play. So it's not to say that people are not saying, hey, we are going to continue to grow, but it has been shifted much more towards how do we do more asset classes, how do we get more to our customers rather than oh, the pricing are high and just wanna make it more aggressive. Or the losses are too low, and therefore, we're approve more type of population. So you definitely see a difference And and by the way, I think you will see on the gross numbers of all of the reporting companies. We talked about that the growth going forward from top line is not what it used to be. Last year, especially on the personal loan and other side of the business. David Scharf: Got it. No. That that's helpful. I mean, obviously, you're as you noted, your your business is in a unique position to kinda see the activities of multiple lenders as opposed to just observing your own portfolio. So that that's helpful. And then just as a follow-up, should we think about maybe the recalibration on credit extending to in reducing tail risk, does that extend to how you approach your discretionary investing in securities in addition to originations or loan approvals? Evangelos Perros: Dave. This CP. No, I think these are two different aspects, right, two sides of the network. One doesn't necessarily tie to the other. David Scharf: Got it. Understood. Thank you. Operator: We have reached the end of our question and answer session. I would like to turn the conference back over to Gal for closing remarks. Gal Krubiner: So I want to thank everyone for joining us today. As you can tell, our results demonstrate the power of the B2B2C model we have worked so hard to build at Pagaya Technologies Ltd. Increasingly diversified growth, with an underlinking focus on disciplined underwriting along with a growing list of partners and funding mechanism that keeps evolving, and improving. I look forward for 2026 and to share journey with you as we grow Pagaya Technologies Ltd. to a key partner for all US consumer lending solutions, continuingly optimizing our product suite value proposition to maximize the value we provide to our partners. We remain laser focused on the long-term potential of Pagaya Technologies Ltd. as we penetrate this enormous market opportunity a market that we created and that we lead. Thank you very much for your time today. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Welcome to Dynatrace, Inc.'s Fiscal Third Quarter 2026 Earnings Call. At this time, all participants will be in listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. At this time, I will turn the conference over to Noelle Faris, Vice President, Investor Relations. You may now begin. Noelle Faris: Good morning, and thank you for joining Dynatrace, Inc.'s third quarter Fiscal 2026 earnings conference call. Joining me today are Rick McConnell, Chief Executive Officer, and James Benson, Chief Financial Officer. Before we get started, note that today's comments include forward-looking statements such as statements regarding revenue, earnings guidance, and economic conditions. Actual results may differ materially from our expectations due to a number of risks and uncertainties discussed in Dynatrace, Inc.'s SEC filings, including our most recent quarterly report on Form 10-Q and annual report on Form 10-K. The forward-looking statements contained in this call represent the company's views on February 9, 2026. We assume no obligation to update these statements as a result of new information, future events, or circumstances. Unless otherwise noted, the growth rates we discuss today are year-over-year and non-GAAP, reflecting constant currency growth. And per share amounts are on a diluted basis. We will also discuss other non-GAAP financial measures on today's call. To see reconciliations between non-GAAP and GAAP measures, please refer to today's earnings press release and supplemental presentation, which are both posted in the financial results section of our IR website. And with that, let me turn the call over to our Chief Executive Officer, Rick McConnell. Rick McConnell: Thanks, Noelle, and good morning, everyone. Thank you for joining today's call. Dynatrace, Inc. delivered very strong third quarter fiscal 2026 results, exceeding our guidance across every metric. Through this fiscal year, we have driven a stabilization of ARR growth at 16%, three quarters of consistent double-digit net new ARR growth, annualized logs consumption that has now surpassed $100 million, a strong balance sheet, and healthy cash flow generation that have allowed us to double the size of our share repurchase program while still investing aggressively in innovation and finally, an increased ARR of 125 basis points at the midpoint that puts us on track to achieve $2 billion in ARR by 2026. Our sustained strength underscores the increasing importance of observability to the software ecosystem, accelerated demand for our end-to-end platform, and successful execution of our go-to-market strategy. James Benson will share more details about our Q3 financial performance and guidance in a moment. In the meantime, I would like to start with some highlights from our annual customer conference, Perform, illustrating the substantial evolution and differentiation of the Dynatrace, Inc. platform in capturing the AI opportunity, along with several customer and partner advancements. Perform 2026, which took place just two weeks ago, was an invigorating event where we hosted roughly 2,000 people in person, including customers, prospects, and partners, plus thousands more virtually. If you were not able to join us, I encourage you to watch the replay of our main stage presentations. Each year, Perform offers the opportunity to examine the larger forces shaping our industry. And this year, the shift is more profound than ever. I shared two primary takeaways from my opening keynote. First, observability is entering a new era, one in which it is foundational to resilient software and dependable AI environments. Second, Dynatrace, Inc. is unique in its ability to combine trustworthy deterministic AI with agentic AI to deliver reliable autonomous outcomes. And this is why we see Dynatrace, Inc. as the AI-powered observability platform for autonomous operations. Let's unpack this a bit. To start, in 2023, the AI market was estimated to be less than $200 billion, and it is now on a path to be nearly $5 trillion in the next seven years. Meanwhile, cloud and AI-native workloads are exploding. Hyperscaler growth continues to climb, now approaching $300 billion in annualized revenue from AWS, Azure, and GCP alone, growing in the high twenties. That level of growth at this kind of scale is simply unprecedented. But this astonishing scale and growth are also accelerating the challenges our customers face every day. As we have often stated in the past, workloads and data are exploding along with a massive increase in their complexity. Tools are fragmented, and it is often difficult to know whether AI results can be trusted. And without trustworthy insights, organizations understandably are hesitant to automate. One ramification of all this has become abundantly clear: AI-powered observability has become essential in an AI-first world. The question then becomes, how do organizations harness the value of observability to help deliver on the promise of AI? Dynatrace, Inc. exists for this moment. We are already helping organizations realize increased value from AI. We have been driving to this point for many years, from initially enabling organizations to be reactive to issues, to proactive through automated root cause analysis, to predictive by adding machine learning and anomaly detection, allowing customers to anticipate and resolve issues before they become customer impacting. This is our quest to help customers deliver software that works perfectly. Our third-generation platform is fully available and built for the complexity and incredible scale of modern cloud and AI-native environments. Its advancements allow us to look ahead, predict issues, and build resilience directly into the fabric of an organization. So what makes Dynatrace, Inc. unique? Our differentiation is integrated deeply into the platform's architecture. And it comes down to three things: Grail, SmartScape, and AI. First is Grail, our massively parallel processing data lakehouse and the only analytics engine purpose-built to process exabytes of observability and security data in real-time while preserving full context. This is not a general-purpose data store retrofitted for observability. Grail was architected from the ground up for modern software, where a single transaction can traverse hundreds of services across multiple clouds. In the agentic era, where every AI-driven transaction can be unique and unpredictable, real-time contextual processing is essential. Logs are a great example of why this architecture matters. When logs are unified with traces, metrics, events, sessions, and other telemetry in the same platform, they do not just add volume. They add decisive context. Once customers experience the increased value and lower cost of having logs in context with other data types, they are eager to replace their legacy logs tooling. That is why we are delighted to have exceeded the $100 million logs consumption threshold with current growth of over 100% year-over-year. Our second major differentiator is SmartScape, our real-time dependency graph that continuously maps the entire technology stack. SmartScape builds a living topology model that understands not just what exists, but how everything connects and impacts everything else. So the platform always has the current context of the environment itself. And third is AI. And this is where the first two converge. Grail provides unified data at scale, and SmartScape provides the topology and context. Together, they enable our causal and predictive AI, proven in the most demanding enterprise environments and continuously evolving to deliver optimal outcomes. This leads to our announcement at Perform of Dynatrace Intelligence, one of the biggest innovations in our history. Dynatrace Intelligence is the industry's first agentic operation system built for modern software ecosystems. By fusing our deterministic AI foundation with agentic AI across an ecosystem of agents, Dynatrace Intelligence delivers AI-powered observability that organizations can trust. With Dynatrace Intelligence at its core, our platform is purpose-built for the agentic era, enabling a future where AI-powered observability can help customers auto-prevent, auto-remediate, and auto-optimize. Similar to Grail, Dynatrace Intelligence is embedded in the platform and is not sold as a separate SKU. It is available to every customer today. We expect to monetize it in two ways. First, through increased platform usage as customers adopt AI assistance across teams, driving greater use of Grail. And second, through usage-based agentic execution, where AI-driven actions are delivered through workflows and ecosystem integrations. The durability of infrastructure software comes from deeply engineered data planes and AI control planes that operate in highly dynamic production environments. Dynatrace, Inc. has developed broad domain expertise and is uniquely positioned with Grail, SmartScape, and Dynatrace Intelligence that is built directly into the back of the platform. Each of these capabilities is complex in its own right but magnified in the Dynatrace, Inc. platform as they are designed to operate as one system, applying AI to deliver answers and automation in environments that constantly shift in composition and workflow. This foundation has been built over years of operating at scale in real-world production environments, making the Dynatrace, Inc. platform both highly differentiated and difficult to reproduce quickly or safely. We therefore strongly view broad-based AI expansion as a tailwind for Dynatrace, Inc. AI-assisted development with our Vibe coding code copilots, AI-driven software delivery compresses release cycles and increases the rate of change across already complex enterprise stacks. That raises operational risk unless teams have an observability control plane with closed-loop feedback to protect reliability and user experience. And as AI-driven systems become more probabilistic, outputs vary and issues can be harder to reproduce. AI does not reduce the need for observability. Rather, it makes observability essential for trusted insights and automation so organizations can operate with confidence. I would like to turn next to our customers. At Perform, more than 70 customers shared how the Dynatrace, Inc. platform has become an indispensable component of their software environments. Here are just a few of their incredible stories. One of the largest airlines shared how they are using Dynatrace, Inc. to help them deliver 31% better reliability, 75% fewer incidents, and a 10% reduction in mean time to resolution, leading the industry in on-time departures and arrivals for two years in a row. Canadian communications giant Telus shared how they are using AI to move from firefighting to proactive reliability, reducing the average time to resolve issues from forty minutes to five minutes. Vodafone shared how they are using AI to modernize operations at massive scale, migrating more than 2,500 users, 8,500 dashboards, and eight terabytes of daily log ingest from their legacy log provider to Dynatrace, Inc. in just two months. And Nationwide shared how Dynatrace, Inc. has helped them reduce priority one incidents by 74%. In addition, customers expressed very strong interest in our strategic collaboration with ServiceNow to advance autonomous IT operations and scale intelligent automation. At Perform, ServiceNow's EVP and GM of technology workflow products reinforced our better together vision, highlighting use cases of how customers can integrate with Dynatrace, Inc. to get greater efficiencies in their teams, accelerate agentic initiatives, and drive automation with confidence. In an agentic world, engaging in and integrating with an ecosystem of partners, including our long-standing relationships with global system integrators and hyperscalers, will be mandatory. And we are investing to deepen and broaden those relationships. In Q3, we announced deeper technical engagements with all of the major hyperscalers. We are integrating with Amazon Bedrock agent core, embedding Dynatrace, Inc. with Azure's SRE agent, and serving as the launch partner for GCP Gemini command line interface extensions and Gemini Enterprise. Finally, as the velocity of software development continues to accelerate, we have advanced our strategy to extend left to developers with the acquisition of DevCycle last month. Built on open feature, an open-source initiative originally created by Dynatrace, Inc., DevCycle is a feature management platform that helps developers, SREs, and platform teams bring progressive delivery for AI-native applications directly into the Dynatrace, Inc. platform. This solution will enable customers to accelerate their ability to release features in a controlled manner and remediate issues faster. To wrap up, we have seen impressive customer momentum over the last several quarters with dozens of 7-figure wins, rapid logs expansion, and customers standardizing on our platform for end-to-end observability. And we have delivered extraordinary innovation with Dynatrace Intelligence and the evolution of the Dynatrace, Inc. platform to deliver significant customer value. This momentum is a testament to our unique ability to provide precise and trustworthy answers that serve as the foundation for autonomous operations in delivering resilient software and reliable AI. As I hope you can tell from my remarks, we are highly enthusiastic about our opportunity ahead. James, over to you. James Benson: Thank you, Rick. And good morning, everyone. Q3 marked another quarter of strong execution as we once again surpassed the high end of guidance across all our key metrics, showcasing the growing demand for our leading AI-powered observability platform and the durability of our balanced business model. As Rick mentioned, we achieved three consecutive quarters of double-digit net new ARR growth, record new logo ARR, and we surpassed our goal of $100 million in annualized consumption for our log management solution. The combination of our ongoing go-to-market maturity and execution, the increasing necessity of observability in an agentic AI world, our leadership position in the market, and our unified platform differentiation give us confidence that the momentum in the business will continue as we look ahead. Our conviction in the business is further evident in the board's authorization of a new $1 billion share repurchase program. That is double the size of our inaugural program. I will share more information on that later in my remarks. Now let's review the third quarter results in more detail. As the business has evolved with the introduction of DPS, we have continued to look for ways to provide investors with the best KPIs of our performance. Given what we have learned as DPS has matured, and with the changes in the on-demand consumption accounting treatment, going forward, we will focus on ARR and its underlying growth driver, net new ARR. This is the primary metric that drives our subscription revenue, and it's how we measure and track the business internally. Turning now to ARR, we ended the quarter at $1.97 billion, representing 16% growth and demonstrating stabilization of ARR growth for three straight quarters. Q3 net new ARR was $75 million adjusted for foreign exchange movements, coming in well above our expectations. Net new ARR was up 11% from a year ago and represents the third consecutive quarter of double-digit growth. This strong performance was driven by both new logo ARR and steady expansion ARR, including a number of 7-figure end-to-end observability deals. In Q3, we added 164 new logos to the Dynatrace, Inc. platform. The average ARR per new logo was over $160,000 on a trailing twelve-month basis. We continue to target landing with high-quality new logos that have a greater propensity to expand. The average land size in Q3 was particularly robust at over $200,000 and helped drive new logo ARR over 21% of a robust Q3 of fiscal 2025. Our value proposition continues to resonate with enterprise customers that are outgrowing their existing DIY or commercial tooling solutions. They are seeking business value from tool consolidation and coming to Dynatrace, Inc. for the depth, breadth, and automation of our unified AI-powered observability platform. Once customers experience the benefits of the Dynatrace, Inc. platform, they are often quick to expand their usage. Average ARR per customer continues to grow and is now nearly $500,000, highlighting the continued adoption of the platform and value we provide to customers. As we have said in the past, given the significant cross-sell and upsell opportunities in our enterprise customer base, we believe the average ARR per customer opportunity could be $1 million or more over the medium to long term. Gross retention rate in Q3 remained in the mid-90s, demonstrating the strategic relevance of the Dynatrace, Inc. platform. The platform is mission-critical to our customers' operations. Net retention rate or NRR on a trailing twelve-month basis was 111% in the third quarter, consistent with the prior two quarters. As Rick mentioned, we continue to see broader usage and deeper penetration of capabilities across the platform. Notably in log management, which remains our fastest-growing product category and surpassing the $100 million annualized consumption milestone we set for ourselves. With our log strike team in place now for nine months, and our selling motion continuing to mature, we expect logs to be an ongoing source of significant ARR growth. Moving on to revenue. Total revenue for Q3 was $515 million, and subscription revenue was $493 million, both up 16% and exceeding the high end of guidance by 150 basis points driven by strong net new ARR. Turning to profitability, Non-GAAP operating margin was 30%, exceeding the top end of guidance by nearly 100 basis points driven mostly by revenue upside flowing through to the bottom line. Non-GAAP net income was $135 million or $0.44 per diluted share, $0.02 above the high end of our guidance. We generated $27 million of free cash flow in the third quarter. Due to seasonality and variability in billings quarter to quarter, we believe it is best to view free cash flow over a trailing twelve-month period. On a trailing twelve-month basis, free cash flow was $463 million or 24% of revenue. As a reminder, this includes over a 600 basis point impact related to cash taxes. Pre-tax free cash flow on a trailing twelve-month basis was 30% of revenue. Finally, as of today, we have substantially completed the $500 million share repurchase program announced in May 2024. In Q3, we increased the pace of our repurchases, buying back 3.5 million shares for $160 million at an average price of just over $45 per share. We believe the strength of our balance sheet and cash flow generation afford us the ability to continue to strategically invest in R&D innovation for our customers while also returning capital to shareholders. We announced today our board has authorized a new $1 billion share repurchase program. This program is the largest in our company's history and double the size of our previous program. And underscores our confidence in the business, our conviction in the long-term growth opportunities, and view that our shares are undervalued. We intend to be active buyers in the market at current levels. Moving now to guidance. The demand environment for observability remains robust, and the growth drivers fueling the business continue to trend positively. The landscape is benefiting from secular tailwinds of end-to-end observability, cloud modernization, and AI workload proliferation. Our go-to-market strategy continues to build momentum and consistency as evidenced by three consecutive quarters of consistent double-digit net new ARR growth. Our DPS licensing model continues to enable broader adoption and increased usage of the platform. Logs continue to be a significant source of growth for both our installed base and new logos. The combination of these strong underlying growth trends gives us conviction in the ongoing momentum of the business. As a result, we are raising full-year guidance across the board. Starting with ARR, we are raising ARR growth guidance 125 basis points to a range of 15.5% to 16%. And expect to surpass our next milestone of delivering over $2 billion in ARR. The high end of this ARR range implies another quarter of double-digit net new ARR growth. Moving to revenue. We are raising total revenue and subscription revenue growth guidance by 75 basis points at the midpoint to 16% growth. Turning to the bottom line, we are raising full-year non-GAAP operating income guidance by $9 million and free cash flow by $13 million. This translates to a non-GAAP operating margin of 29% and free cash flow margin of 26%. Finally, we are raising non-GAAP EPS guidance to a range of $1.67 to $1.69 per diluted share, representing an increase of $0.05 at the midpoint of the range. This non-GAAP EPS is based on an expected diluted share count of 304 million shares. In summary, we are very pleased with our Q3 and continued momentum through fiscal 2026. We are focused on executing to close the year out strong. And with that, we will open the line for questions. Operator? Operator: Thank you. We will now be conducting a question and answer session. I ask you to please limit yourself to one question to allow as many analysts as possible to ask questions. Thank you. Our first question is from the line of Raimo Lenschow with Barclays. Please proceed with your question. Raimo Lenschow: Hey, good morning, and congrats on a great quarter. My question was if you think about what you see in the client base in terms of understanding how your automation story is coming together, how it's important to kind of bring all the different data sources together in one place. What does it mean in terms of engagement level with clients, etcetera? Are we seeing an ongoing kind of bigger kind of debate about, like, or a bigger momentum they are building? What do you see in the pipeline in terms of deal size, etcetera? Just kind of seeing how that momentum is ongoing. Thank you. Rick McConnell: Hey, Raimo. Thanks so much for the question. I guess where I would start is end-to-end observability is what we are seeing as being very, very strong in terms of a sales play and momentum at the moment. This is where our customers are looking to expand. They are realizing that there are extraordinary tools for all. That there is a lack of expense management in that and poor outcomes. And so this is, I would say, the number one area where we are seeing momentum in the business is precisely that. And as you look to an AI-first world that's coming, it becomes even more pervasive. The end-to-end observability is a mandatory foundation to be driving those kinds of outcomes. Operator: Our next question comes from the line of Sanjit Singh with Morgan Stanley. Please proceed with your question. Sanjit Singh: Yes. Thank you for taking the question. Congrats on the stabilization in ARR growth for the last several quarters. I wanted to ask a follow-up on Raimo's question. In a world where agents are doing a lot of the investigating and the triaging on incidents versus human site reliability engineers, there's sort of two questions there. What's the pace of that change? Like, how realistic are we going to see that sort of environment in the next couple of years? And then two, from a product perspective, how does that change observability and how does that change, you know, how customers will use Dynatrace, Inc.? Rick McConnell: Hey, Sanjit. So in terms of pace of change, I think that there is still a lot of apprehension about just how much conviction organizations have in driving AI and AI outcomes. So I think it's going to evolve over a period of time. Having said that, I do think that there is a significant change in observability as we look to the future and that it really becomes, in our view, the control plane for enterprise AI. And what I mean by that is simply that observability becomes foundational to this agentic action. Without deterministic AI, without assuredness of understanding what the baseline problem is, and, of course, we use the notion of answers, not guesses here, you simply cannot take agentic action. So the steps that we see that organizations have to go through are, number one, you have to get the end-to-end observability because that's where you get the broadest, most concrete outcomes and answers. Number two, you then use that deterministic AI to develop an understanding of what actions need to be taken. And then number three, and only then, can agentic AI take over, cut some action, and probably only with a portion of the actions required for auto-protection, auto-remediation, and auto-optimization. So it is going to be a journey, but that journey is beginning today, and that journey begins with end-to-end observability followed by leverage of deterministic AI as a mission foundation for agentic AI to follow. Operator: Our next question comes from the line of Gray Powell with BTIG. Please proceed with your question. Gray Powell: Okay. Great. Thanks for taking the question. So, yeah, it was really good to see log monitoring consumption past the $100 million mark this quarter. I guess a couple of questions there. Like, how quickly has that materialized over the last year? I know that there was sort of a new iteration that you came out with in late 2024. And then what are your next milestones for the product? Rick McConnell: Thanks for the question, Gray. Again, we're very pleased. We told you last quarter that we were on the precipice of hitting this milestone, and we exceeded it. Our logs business is continuing to grow north of 100%. So by far the fastest-growing product category in the business. You're right that we've seen a significant step function increase in the acceleration of the business from last fall to now. Last fall was when we were able to get the logs product use case complete. We had the product packaging and pricing right. That evolved a little bit in the following quarter. So you saw our step function increase, and it continues to exceed our expectations. Relative to the next milestone, we have initially set our next milestone publicly. I can tell you that it will be a significant source of new ARR. We're seeing this already. Rick mentioned these end-to-end observability deals. Nearly all of them have logs embedded with them. So we expect this to be a huge source of ARR growth for the business going forward. Operator: Our next question is from the line of Will Power with Baird. Please proceed with your question. Will Power: Great. Thank you. Yes, I guess I'd echo the congratulations on the results. Great to see the ARR growth stabilizing, the strength in net new ARR. As we think about the net new ARR trends, the consumption commentary you just provided, the logs opportunity, the AI opportunity. Maybe help us think about the puts and takes that could contribute to ARR perhaps accelerating as we move into fiscal 2027? How do we think about that? James Benson: I'll take that, Will. Good question. Again, we're focused on continuing the momentum. As I said in my prepared remarks, third consecutive quarter of double-digit net new ARR growth, stabilizing ARR at 16%. If you look at the high end of our guide, it suggests that continues into Q4. So four quarters of stabilizing growth for ARR and four quarters of double-digit ARR growth. We've said that our objective is to show an in ARR. Obviously, we'll have to continue to execute like we have. The go-to-market momentum continues. We continue to benefit from large-scale end-to-end observability deals. So the changes we made are manifesting themselves in the results. We're seeing traction with partners. I'm not going to provide guidance on this call. I can tell you we're very optimistic about the momentum in the business. We'll have to see. Come May, what the guide is, but our objective is to build an acceleration in the top-line growth. Operator: The next question is from the line of Koji Ikeda with Bank of America. Please proceed with your question. Koji Ikeda: Yes. Hey, guys. Thanks so much for taking the question here. Jim, in your prepared remarks, you mentioned net new ARR and ARR are the core foundations and the building blocks of growth. But last quarter, you did give a new metric, you know, annualized platform consumption dollar growth rate of 20% plus. I wonder if you could share how that metric compared this quarter compared to fiscal second quarter. Is it directionally higher? Is it the same? Or is it lower than the 20% plus that you gave last quarter? Thank you. James Benson: It's a good question. We've shared a lot of KPIs, and we've tried to share KPIs as investors try to understand our journey with DPS. Which was certainly get them on the platform, allow them to access the platform, all offerings, and that's playing out nicely. So relative to consumption, consumption continues to grow north of 20%. So consumption is growing very healthy, consistently higher than ARR growth. Operator: The next question is from the line of Ryan MacWilliams with Wells Fargo. Please proceed with your question. Ryan MacWilliams: Hey, it's Deshaun on for Ryan MacWilliams. This year you've talked about some of the strength in large deals and large deal pipeline. Is there any update you could provide on how those large deals are progressing? And maybe whether your incremental confidence on those deals coming through has changed in the past couple of months? James Benson: Sure. I'll take that. I think what I talked about in Q2 was we continue to see a robust pipeline. That pipeline is very weighted to large deals, deals over half a million, deals over a million. And that makes sense relative to the go-to-market changes we made last year. That we were focused on these accounts that had a large or high propensity to spend. I think what you're seeing, you saw in the Q3 results that we built consistency in close rates of these large deals. Our expectation in Q4 is you'll see that again. So I think what we've done is we build consistency in our execution. You're seeing that through the first three quarters. The expectation in the fourth quarter at the high end of our guidance, you'll see that again. And it's heavily driven by this continued trend of very large enterprises looking to vendors to consolidate on, and Dynatrace, Inc. is in a very good position. You saw even new logos, new logos, five of our new logos were over a million dollars. So this is bold things existing customers and new logos, looking to Dynatrace, Inc. to be their provider of choice as this trend continues. Rick McConnell: I would just add to that also that we see AI as an enormous tailwind to the observability business overall. You have to have observability in order to drive an AI-first world. We believe that fundamentally. And the result of that is that you have to have end-to-end observability to get the best outcomes, the best underlying analytics, and insights to be able to take agentic action. So as the world shifts toward a move of autonomous operations, observability becomes foundational, and end-to-end observability is fundamental to maximizing the success of that type of deployment. Operator: Our next question comes from the line of Eric Heath with KeyBanc. Proceed with your question. Eric Heath: Hey, Rick, Jim, thanks for taking the question. I guess what stood out to me that was most impressive was the fiscal 4Q net new ARR guidance, a strong lift from what you're expecting previously. So just maybe an extension of the prior question. Hey, Eric. Could you just speak up a little bit? James Benson: Yeah. Any better? Eric Heath: That's a little bit better. Thank you. Eric Heath: Okay. Yeah. So just to the question. So the fiscal 4Q, net new ARR guide was a strong lift from what you were expecting previously. Just an extension from the prior question, your response there, any more detail you could share on what has given you the confidence in the outlook, maybe some assumptions on the close rates in those large end-to-end deals? Thanks. James Benson: Yeah. I mean, one of the things I talked about in the last call is we had very healthy close rates in the first half of the year. We saw healthy close rates in Q3. I'd say our visibility of the pipeline here, especially near term, is quite strong. That doesn't mean we expect to get every deal. But we do believe that we have very good line of sight to be able to deliver against this guide, the range that we're providing. So I think some of it is visibility. And I think it's also what I think is a continued improvement in our go-to-market maturity around having an ability to call the ball on some of these large deals. I think our ability to do that continues to improve. Operator: The next question is from the line of Keith Bachman with BMO Capital Markets. Please proceed with your question. Keith Bachman: Thank you. Good morning. I wanted to ask about new logo growth. Jim, you had called out that I think you had 164 new logos. Solid growth there. And yet if I look at the numbers, it appears you're still getting about 70% of your ARR coming from existing clients, 30% is coming from new logos. And I'm just wondering, is that the way we should be thinking about it as we look out over the next year? I think investors have some worry that, you know, the existing customer base may not sustain growth for a period of time. And so trying to understand how you might be able to expand your new logo growth and particularly maybe going not to small business, but maybe expanding the TAM a little bit. As you talked about, AI is foundational, so maybe that presents some opportunities for a broader customer audience. At the same time, there are solutions out there that are less expensive that require more work, and I'm not sure how DPS would fit into, you know, that a facilitator of new logos or is it a hindrance in that you got to make a little bit larger commitment? But just maybe talk about how we should be thinking about new logo growth over the next couple of years? Thank you. James Benson: So I'd say near term, Keith, one, I would say we're very pleased with the new logo momentum that we're having. In particular, there is a lot of momentum with just customers that are looking to Dynatrace, Inc. to consolidate fragmented tools on. So we continue to make good traction there. You should expect in the near term, kind of over the next year, that it'll be a call it roughly one-third new logo, two-thirds expansions. I would clarify. We are not even close to exhausting our ability to expand within our installed base. You know, we continue to grow. We almost have a half a million dollars now per customer. So and we have many, many million-dollar customers. So the propensity to expand is still pretty material. But near term, I think we're going to be roughly one-third, two-thirds. We do look at that, Keith, relative to what are the different velocity motions you can do to maybe land a little bit lower. I think in this cloud AI-native world, that's probably an area we continue to get some traction in. But near term, you should expect kind of the mix that I just mentioned. Rick McConnell: I would just add that with sensibly the completion of the third-generation platform that is now out there, it does enable us to do a much better job of tuning and targeting to different personas, SRE, platform engineering, particular developers. At our Perform conference a couple of weeks ago, we had a full developer day, with a ton of developers working on the product and the solution overall. We just did the DevCycle transaction, which enables us to extend left further with regard to feature management. So you can expect us to be leaning into development teams and developers as an added persona with a primary intent of generating over the course of time new logo momentum and unit volume. Not just in ACV, which is what Jim was referring to, by way of a record quarter in Q3. Operator: The next question comes from the line of Matthew Hedberg with RBC Capital Markets. Please proceed with your question. Matthew Hedberg: Great. Thanks for taking my questions, guys. Congrats on the consistency. Really good to see. I guess for either of you, I wanted to ask about the competitive environment. I guess both from smaller vendors like Cronosphere getting acquired, but I know investors are also worried that large language model providers, at some point, might do everything in software. I mean, just given that concern, you know, how do you think about the competitive risk from some of these frontier model providers as well? Rick McConnell: Hi, Matt. A lot in that question. Let me start with the first part, which is some of the acquisitions in the industry. And I would just say as we look at Cronosphere and Observe others, we really don't see them in the market very often on a direct competitive basis for us. Simply because of our target segment typically being in the global 15,000 largest accounts on the planet, and what they're looking for is end-to-end observability. And many of these solutions that you mentioned really have point solutions either focused on logs or focused on metrics. But really not an end-to-end solution that's at all comprehensive to be able to compete against Dynatrace, Inc. at that level. So we always are paranoid about competition. We're looking at moving chess pieces, especially as larger players get into the market. And so we're very observant of that, but at the same time, these smaller players haven't really been competitive in the past. With respect to this dialogue around LLMs replicating observability, that's a longer answer and something that we've been spending a lot of time thinking about to try to give you a succinct response to it. I would say number one, we view there to be a very sizable difference between enterprise software with standard workflows and infrastructure software like ours with highly dynamic workflows requiring variable evaluation of billions of interconnected data points. Secondly, as I mentioned earlier, we really do see observability as the control plane for enterprise AI. We don't believe that you can easily replace observability through vibe coding or an LLM instantiation. That can do the same thing that we do. Third, we really see our focus and our moat really as being architectural and that code-based. We have a platform with SmartScape, with Grail, with Dynatrace Intelligence, not just individual point products, and the interaction of those becomes quite sophisticated. We have AI increasing complexity across LLMs and agentic systems, not reducing it. And then finally, we built an extraordinary amount of domain expertise over more than a decade of evaluation of AI workflows or work based upon the AI analytics that we complete. And we do believe that grounding AI actions in a deterministic and explainable system is much more powerful than using and relying only on probabilistic models. So there's a lot to be had in there in terms of additional conversation, but the net of that is we see Dynatrace, Inc. as a very, very durable solution over the course of the long term for the overall environment we see for managing enterprise AI instantiations. Operator: The next question comes from the line of Patrick Edwin Colville with Scotiabank. Please proceed with your question. Patrick Edwin Colville: Thanks. Rick and Jim. And I thought your answer just then was really fascinating. I guess I just want to pivot back to the question earlier on the 4Q guide. I mean, I'm calculating the updated guide implies 22% net new ARR growth in constant currency in 4Q, which if I'm calculating that correctly, I mean, that would be the biggest net new ARR guide for a long, long time. So just can you just circle back? What gives you confidence there? Because I know that's the number one question we're going to be receiving. Like, why does Dynatrace, Inc. have confidence in that number? James Benson: Well, I'll start with why we have confidence in the number and then clarify what the guide is as far as the growth rate. We have confidence in the number because our pipeline is incredibly robust. We continue to have significant demand for durability. And so the change we made on the go-to-market side is playing out. So we have good visibility. So our visibility is what drives our conviction. That's one. I'd say relative to the guide, and this probably is just, you know, puts and takes relative to FX, that at the high end of the guide, it would imply another quarter of double-digit growth. It's not twenty, it's like in the kind of a 10 or 11% in the fourth quarter. Relative to the guide. But still quite robust, again, four quarters of double-digit net new ARR growth, which has continued in building momentum in the business. Operator: Our next question is from the line of Ittai Kidron with Oppenheimer. Please proceed with your question. Ittai Kidron: Thanks. Couple of small ones. First of all, you could give us an update on how your security strike teams are doing, if there's any progress there? And then Rick, I want to go back to your answer about LLMs and what they can do to observability. So the opportunity is very clear. Again, just on the cost side, you just announced Dynatrace Intelligence, which sounds fascinating. I guess, logically speaking, it would seem that customers would find this as the way to interact with your system longer term. I guess the question is, again, could agents, third-party agents, disintermediate you and actually replace Dynatrace Intelligence, and third-party agents can do that. And somehow again, get step removed from the customer system working in the background, and the customer is only engaging with third-party agents to interact with your system. Wouldn't that disintermediate the value that you bring to your customers? Rick McConnell: Hey, Ittai. On security, it continues to be an important business for us. It's growing nicely. We said that it would take us to get to the $100 million level than logs. A few quarters back. But we see ongoing progress there. We do see the ongoing convergence of security and observability, so no change there. And our security strategy remains to be focused on the observability buyer as opposed to the CISO where we have relationships today. So that continues to be our strategy, our focus, and our evolution of security and the security strike team. On the overall LLM environment, I think I covered it relatively completely. I would only add that no, we don't see it as highly likely that an LLM is going to be able to replicate Dynatrace, Inc. for all the reasons I described. In particular, we see that in a highly variable environment that is playing out on a day-to-day basis with all of these interconnections within that environment in large enterprises that it would be very, very difficult for any AI piece of solution or piece of software to replicate that environment for all the reasons I described. Operator: The next question is from the line of Michael Joseph Cikos with Needham. Please proceed with your question. Michael Joseph Cikos: Great. Thanks for taking the questions here, guys. It was great to get some of the data points around average land and new logo growth, etcetera. But maybe for Jim, I want to ask about DBNRR with the stabilization we've been able to demonstrate here at the 111. Can you help us think through where we are in driving an improvement in this metric just given the go-to-market maturity that you are talking to and these end-to-end observability deals as well as where are we in that DPS renewal cycle? That would be terrific. Thank you so much. James Benson: Thanks, Mike. So again, we're pleased to see a continued stabilization in dollar-based net retention rate at 1.11. I think I mentioned this in the past that our sales organization is focused on maximizing bookings. So you're going to have some quarters where you're more new logo heavy. You're going to have some quarters where you're expansion heavy. But I would say, Mike, we are still in the building phase. You mentioned DPS. That in fiscal 2027 will be kind of your first full three-year cohort classes coming, you know, your, you know, so that you'll have a one-year, two-year, and three-year cohort classes. So there is a building momentum going into fiscal 2027. That to the extent we can continue to execute, you should see an inflection in that metric. Operator: The next question is from the line of Brad Reback with Stifel. Please proceed with your question. Brad Reback: Great. Thanks. Rick, in an increasingly agentic world, do you feel you'll need to evolve your pricing kind of paradigm in order to properly monetize? Thanks. Rick McConnell: It's a good question, Brad. You know, the way that, the way that articulated in my prepared remarks and the way that we see it evolving is that we monitor the agentic world in two ways. Number one, through increased workloads and increased overall usage of the platform through Grail, through SmartScape, and in delivery of the analytics that we provide on an all-day, everyday basis. Secondly, is we do expect to monetize directly agentic workloads. So with a combination of those two elements, we do believe that there is direct monetization of the agentic AI element. If you look at Dynatrace Intelligence overall, it really does have both components. Number one, it has the component deterministic AI to evaluate what's happening in your environment with certainty and through causation and context. We then take those answers and then deliver those into an AI environment that is agentic in nature, where either a Dynatrace agent or a third-party agent through an ecosystem that is essentially orchestrated by Dynatrace, Inc. can take action, and it is through that agentic workflow that we can provide additional monetization. Operator: Our next question is from the line of William Miller Jump with Choice Securities. Please proceed with your question. William Miller Jump: Hey, great. Thank you for taking my question. I know you are guiding to 27% right now, but I was just hoping to understand how you're thinking about hiring as we zoom out. Specifically, curious if there's AI efficiencies that you're potentially getting on headcount or if some of the initiatives you've talked about are causing you to lean in further on hiring maybe in the year ahead? Thanks. James Benson: Yeah. We're not going to guide here for fiscal 2027, but I can tell you that your point about leveraging AI for internal productivity is something we continue to leverage within Dynatrace, Inc. And so in that regard, that will continue. That will certainly be a source of kind of moderating hiring in certain areas, whether they be customer support, G&A, driving more sales productivity. I think it's necessarily going to be a driver of us not hiring in the R&D space, even though we're leveraging heavily AI within that realm as well to make our developers more productive. So we'll continue to hire in R&D notably. And then I'd say hiring thereafter is going to be kind of more moderated. Operator: The next question is from the line of Andrew Michael Sherman with TD Cowen. Please proceed with your question. Andrew Michael Sherman: Hey, guys. Thanks. Jim, great to hear of the 20% plus consumption growth continued. How should we think about the gap of that between ARR and revenue growth? What drives the convergence of those two over and what timeframe would that look like? James Benson: Yeah. It's a good question. We've gotten that. That was one of the reasons why in our prepared remarks I didn't comment on consumption growth. It's very healthy, DPS is playing out the way we expected. I would say there is going to be there is certainly a lag between growing at those rates and seeing it manifest itself in an expansion. Sometimes you see an early expansion. Sometimes you do not. So I'd say that, you know, there's no simple answer to that. I'd say there isn't an elongated time period between consumption growth and then seeing ARR acceleration that comes thereafter. But, you know, again, the whole premise of getting customers onto the platform for DPS is get them to consume more. Consuming more means they're getting more value. More value means likely an early expansion because they're trialing something that maybe they weren't using before. And so even when consumption growth is healthy, there are other reasons why customers expand. They expand because there's entirely new use cases that they're looking at. And so you again look at our performance around driving double-digit net new ARR growth. Our expectation is we want to continue to do that going into fiscal 2027. Operator: Thank you. Our final question will be from the line of Brent Thill with Jefferies. Please proceed with your question. Brent Thill: Great. Thanks. Just on the go-to-market side, if you can maybe talk through the plans on the sales hiring front, rep capacity, how you're seeing, obviously, you're getting great productivity, good to see the good results. But maybe you could just walk through what you're seeing there and what you're expecting to do in terms of the overall distribution adds over the next year? James Benson: I'll take that. We continue to drive improvements in sales rep productivity. So we will continue to hire reps. It's important to remind investors that it's not just reps that drive this productivity. We've continued to get significant traction with leveraging our partner channels, notably GSIs, and the hyperscalers continue to be a source of continued improvement in productivity per rep. So hiring will continue. Have more to say about what we're going to do in that space in the Q4 call, but that's what you should expect as you think about fiscal 2027. Rick McConnell: Thanks very much to you all. That brings us to the end of our call. We very much appreciate your engaged questions, your ongoing support. To close, we believe that observability is becoming increasingly critical to the overall software ecosystem. And delivering reliable software and AI. We have very strong conviction as we entered Q4 with momentum headed into FY27. We are enthusiastic about what we see ahead from a customer standpoint and from the number of personas engaged in and requiring observability solutions to deliver the outcomes they seek. We very much look forward to connecting with you at IR events over the coming months. And we wish you all a very good day. Thank you. Operator: Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.
Operator: Hello, everyone. Thank you for standing by. Welcome to PT Indosat Tbk FY '25 Earnings Conference Call. [Operator Instructions] Please be reminded that today's conference call is being recorded. I would now like to turn the call over to your first speaker today, Pak Indar Dhaliwal. Thank you. Please go ahead. Indar Dhaliwal: Thank you, Desmond. Good afternoon, everyone, and thanks for joining us on the call today. With us on the call today, we have Pak Vikram Sinha, our Chief Executive Officer; Pak Nicky Lee, our Chief Financial Officer; as well as Pak Bilal Kazmi, our Chief Commercial Officer. I will now hand over the call to Pak Vikram for his opening remarks. Over to you, sir. Vikram Sinha: Thanks, Indar. Good afternoon, everyone. I am pleased to report a strong set of numbers in the fourth quarter of 2025, delivering on our guidance as promised for the full year. This means that we have ended the year on a solid trajectory heading into 2026. If you look at the next slide, here are some of the key highlights of our fourth quarter of 2025, where we are seeing strong performance across both financial and operational metrics. Revenue grew strongly during the quarter, and our EBITDA grew faster than revenue, reflecting our continued focus on profitability. And we have delivered strong net profit as we continue to deliver value to all our stakeholders. The key reason for our strong performance is our core cellular business is our customer ARPU, which grew 11% quarter-on-quarter to IDR 44,000, which is the highest level since merger. ARPU remains Indonesia's biggest opportunity, and we are pleased to report continued positive momentum on ARPU heading into 2026. Our initiative that we have -- we continue to deliver such as AI-powered hyper-personalization and our focus on delivering marvelous customer experience powered by strong network was the main reason driving this strong ARPU growth. We still see a lot of upside for ARPU, and we are committed to fully realize this opportunity. If you look at the next slide, one of our key initiatives launched in 2025 was our AI-powered 360-degree scam and spam protection. Scams are a huge customer pain point with more than 66% of Indonesian encountering a scam in the past 6 months, and this is a USD 5 billion issue in the country. Our solution has been in offering AI protection through an agentic platform that has 99% efficacy in detecting scams and spams. This protects customers across all channels, including voice, SMS, VoIP, WhatsApp and any popular medium. This is one of the key efforts in building our reputation as Indonesia's most trusted telco. And to date, we have delivered 100% protection to covered customers with more than 2 billion scams and spam prevented. This product is delivering us positive feedback and helping us to improve ARPU and lower our churn. This quarter also marked a landmark first step towards establishing our FiberCo along with our strategic partner. Through this transaction, we are positioning ourselves for future growth, especially in the fiber-to-home business. The 3 key objectives that this transaction give us are: number one, monetizing our asset to unlock value. In Q2, Q3, we will be receiving -- IOH will receive USD 700 million. The other important point on this partnership is that now we have a partner with deep local expertise, which will help us grow our FTTH business, but at the same time, we retain operational control over this FiberCo. The other important initiative for us is our AI Neocloud platform, which was established in 2025, we set the foundation for our future growth in 2026. Our current capacity is fully contracted with USD 28 million revenue booked in 2025. We continue to enhance our full stack capabilities along with global giants as NVIDIA, Google and others and look forward to sharing more development on this in 2026. This solidifies IOH as an investment proposition with our core performing well, and we aim to unlock further ARPU potential and drive sustained growth on mobile. The value of our fiber asset is being realized and positioned for future growth and expansion, and our Neocloud platform is set for scale in 2026 to capture the growth opportunity in AI. Finally, our guidance for 2026, where we aim to grow both revenue and EBITDA mid- to high single-digit level and our planned CapEx spend is around IDR 13 trillion. I will now hand over to Nicky for more detailed financial presentation. Chi Lee: Thank you, Pak Vikram, and good afternoon, everyone. I'm delighted to report another solid set of results for the fourth quarter, where we have continued the positive momentum from the previous quarter. Our fourth quarter revenue grew 9.3% quarter-on-quarter, driven by an increase in cellular revenue as we continue executing our strategy to accelerate growth through AI and enhanced network experience. Additionally, MIDI revenue contributed to this performance, underpinned by our Neocloud revenue. Below the revenue line, we delivered 11.6% quarter-on-quarter expansion in EBITDA, which outpaced revenue growth, reflecting our strict focus on cost leadership for growth. I will elaborate more on OpEx on our cost in the OpEx section. As a result, our EBITDA margin rose by 1 percentage point to 47.2%. Normalized net profit increased by 51.2% quarter-on-quarter, largely reflecting the higher EBITDA and an operational one-off gain below EBITDA. The one-offs include a IDR 142 billion high gain on investment at fair value through profit and loss based on an independent valuation. Our net debt-to-EBITDA ratio declined by 0.1x to just 0.39x, underscoring our commitment to maintaining a healthy balance sheet. If we move on to the next slide. For full year 2025, reported revenue increased by 1.1% year-on-year, supported by growth in both cellular and MIDI revenue. The same factors I have highlighted earlier drive the -- behind the quarter-on-quarter improvements mentioned earlier drive such improvement. Combined with continued cost leadership initiatives, this resulted in EBITDA growth of 0.8% year-on-year while maintaining a fairly stable EBITDA margin at 47.1%. At the bottom line, net profit increased year-on-year on both reported and normalized basis by 12.2% and 11.6%, respectively, primarily reflecting the flow-through effect of high EBITDA, one-off prior year tax reversal as well as operational gains arising from gain on the investment at fair value through profit and loss, gain on disposal -- asset disposals and early site lease terminations. We saw increased spending compared with both prior year and the previous quarter, driven by the strengthening momentum of our growth trajectory as we continue to capture and scale the emerging opportunities. Cost of services rose by 3% quarter-on-quarter, primarily driven by installation and partnership costs, supporting higher MIDI and VAS revenue. On a year-on-year basis, cost of services increased by 5%, similar to the quarterly trend. Personnel costs grew by 39% quarter-on-quarter, largely to do with higher variable pay for performance. On a year-on-year basis, though, they declined by 11%, again, reflecting lower variable pay components such as bonuses and incentives compared to the prior year. On marketing expenses, it increased by 16% quarter-on-quarter, largely due to subscriber acquisition and year-end seasonal promotional activities to support revenue growth. Again, on a year-on-year basis, marketing spend declined by 16%, reflecting a strategic shift towards more targeted and cost-efficient digital marketing initiatives. G&A expenses quarter-on-quarter is flat on a Y-o-Y basis, they increased by 9%, mainly driven by higher consultancy charges to support business growth. Overall, for full year 2025, OpEx increased by 1.4% year-on-year and 7.3% quarter-on-quarter, highlighting disciplined cost leadership to support and sustain our growth trajectory. Depreciation and amortization expenses increased by 2% year-on-year and 1% quarter-on-quarter due to the addition of fixed assets for network rollout to support medium- to long-term growth. In quarter 4, other operating income recorded a net income of IDR 131 billion compared to IDR 78 billion in the previous quarter. This variance was primarily attributable to gain on investment, as I highlighted earlier. On a year-on-year basis, prior year tax provision reversal and operational one-off gain contributed to an increase in other operating income from IDR 21 billion in 2024 to IDR 509 billion this year in 2025. Moving on to take a look at CapEx. It reduced by 22% quarter-on-quarter to IDR 2.54 trillion in Q4 last year due to the timing of one-off credit notes from vendor. Our full year CapEx realization of IDR 13.3 trillion was in line with our guidance. We delivered a solid improvement in our capital structure with net debt reducing 1.4% year-on-year and 18.9% quarter-on-quarter. Stronger EBITDA further enhanced our leverage profile, driving 0.01x year-on-year and 0.1x quarter-on-quarter reduction in our net debt-to-EBITDA ratio, respectively. Thank you very much. And I will now hand over to Pak Bilal for the operational performance update. Syed Kazmi: Thank you, Pak Nicky, and good afternoon to everyone. I think the headline from a commercial standpoint is positive operational trends. These are driven by solid data traffic growth, 7.6%, translating into very strong ARPU growth over a stable mobile base. What is also important to report is that our home broadband base customer grew by 24,000 customers, which translates into a 6.6% growth quarter-on-quarter. But we are also very, very excited about monetizing the impact of our 5G footprint, which now covers 24 cities in the country. In a country as big as Indonesia, one of the biggest opportunities is fixed wireless access. And there, we would like to offer our customers high-spec 5G equipment, coupled with -- I mean, you would note that for FWA, the onboarding [Technical Difficulty]. Indar Dhaliwal: Operator, can you hear? Operator: Yes, we can. We lost a little bit of audio earlier on from part. It will be best if we can restart the present. Syed Kazmi: I think we can move to the Q&A probably just from a time standpoint. Operator: [Operator Instructions] Our first question come from Piyush Choudhary from HSBC. Unfortunately we cannot hear from the participant. Allow me to move on to the next question. [Operator Instructions] Our next question come from the line of Sukriti Bansal from Bank of America. Sukriti Bansal: Congratulations on the good quarter. Just a couple of questions. Firstly, on ARPU, we've clearly seen strong growth to IDR 44,000. Can you remind us what is the exit ARPU looking like? And in terms of month-on-month, what was the trend from October to November, November to December a little bit? And also, how are we looking in January? And what is the expectation going forward? And secondly, on the MIDI revenue, clearly good growth. But in terms of GPU as a Service contribution, can you remind us for the full year and for fourth quarter, what is the final contribution that we had from this business? Because it still looks a little bit lower than what we were expecting, I think, for the full year. Also, if there's anything you can share on what is the EBITDA that we've observed from this business? That's all from my side. Operator: Thank you for your patience. We seem to have lost the speaker's line. Allow me to check and the conference will resume shortly. Indar Dhaliwal: Desmond, can you hear us? Operator: Yes, we can. Please continue. We have a question from Sukriti Bansal. Indar Dhaliwal: Just before we go into the question, apologies, we had a bit of a technical error. I think let's just start the question-and-answer flow again. So Sukriti will be the first question, and then we'll go back to whoever's question that we missed earlier. Go ahead, Sukriti. Sukriti Bansal: A couple of quick questions from me. Firstly, on the ARPU, strong growth in 4Q at IDR 44,000. Can you remind us what is the December -- what did the December exit ARPU look like? And also month-on-month, what were the trends like? And how is ARPU looking going into 1Q. Also in terms of the MIDI revenue, again, strong growth in 4Q, but it was expected that most of the GPU as a Service contribution will be coming a large part in 4Q. So can you remind us what was the final contribution from this business for 4Q and for the full year? And what is the EBITDA that we've observed from this business for the full year? And also what is the expectation going into 2026 for contribution from this business? That will be all. Vikram Sinha: Sukriti, this is Vikram. Let me start with the ARPU. I think as you saw quarter-on-quarter growth was very strong, grew 11% on a steady pace because we have seen lot of symptoms [indiscernible] in the market which is good for the [indiscernible]. As now getting at around IDR 44,000, IDR 45,000 monthly ARPU and we see a good momentum we have brought into February. So [indiscernible] see lot of upside on ARPU and based on we need to focus on that especially some of our initiative on AI led hyper-personalization in some of the products like spam and scam is also [indiscernible] overall ARPU was in the positive [indiscernible] this is what I can say. Nicky you want to take it? Chi Lee: Certainly. For GPU, the Q4 revenue is around $20 million. So the outlook for 2026 would be about $50 million to $60 million based on the current contract, but we are very confident that we will get before that happens, this is a number I can share. Sukriti Bansal: Understood. And any outlook on the EBITDA that we had from this business? Chi Lee: We don't share the margin for the contracts. Operator: Our next question comes from Piyush Choudhary from HSBC. Piyush Choudhary: Congratulations management on stellar results and strong recovery in mobile ARPU. Firstly, on the mobile segment, could you tell us whether all the initiatives which you undertook in 4Q is kind of reflected in the ARPU or you are experiencing kind of sustained growth going into 2026? And when can we expect subscribers to stabilize and start growing? So that's the first question. Secondly, on the cost side, are there any one-off items in fourth quarter? We observed rental and services cost is down 29% quarter-on-quarter. What led to it? Is there any one-off here? And any like cost kind of investments in 2023 OpEx investments because your guidance suggests of a stable margin year-on-year. So any color there will be helpful. Vikram Sinha: Let's start with the cost. Chi Lee: Yes. On the cost, Piyush, we have used to have some ups and downs true-up adjustments, things like that. So we have some of those in Q4 also, not that we don't have adjustments in Q3, right? So you are seeing some of those impact reflected in the lease cost. Vikram Sinha: Piyush, this is Vikram. I think on the mobile segment, our initiative, especially on the AI hyper-personalization, it is all data is getting trained and it is getting more effective. So I'll see -- what I'll say is we see much more opportunity getting into 2026. The other important thing to highlight is we have seen significant improvement on our churn also, especially greater than 180-day lease. So overall, we see much more opportunity and upside on ARPU and early days of Q1 also is trending on that direction. In terms of base, I think one good thing which is happening on the market with much more discipline on SIMs is a bit of a consolidation of rotational customers. So we see a very strong momentum on our daily DLR -- daily data unique users. But in terms of reported number, I think it's more of a base which last quarter, we lost around 0.5 million customers. But from an overall, it is looking very solid. And again, we will -- our aim is to have both progressive base and progressive ARPU. Piyush Choudhary: This is very helpful. Just going back on the cost side, is it possible to call out how much was the one-off adjustment in fourth quarter, like a positive attribution? And is it right to think that you are suggesting of a flat margin for 2026 from a guidance perspective? Chi Lee: Yes, Piyush, we will come back to you. I don't have the number in front of me. In terms of the guidance, we don't feel there will be a significant movement. We improved the EBITDA margin by 1%. But we will need to see how the revenue mix will change and all that. We'll give more color in the upcoming quarters. Operator: Next question, we have the line from Sachin Mittal from DBS. Sachin Mittal: Congrats management on, I think, 11% quarter-on-quarter ARPU, which is probably waiting for the results, I think higher than the industry. Two questions here. Firstly, when we look at the guidance, it's like mid-single digit to high single digit, while the ARPU is actually almost double digit. So trying to understand what are the levers to watch for? What could take it to high single digit and what could take it to mid-single digit? Is it mobile? Is it MIDI? Just to understand what to monitor from mid-single digit to high single digit, what are the variables given that ARPU is already quite solid. Secondly, could you also disclose a little bit on the expected dividend payout, how to think of the payout for this year? And any color on the dividend will be useful. Vikram Sinha: Sachin, this is Vikram. I think we wanted to stay very conservative in terms of our guidance. Last year has been a great year for learning. So we live in a very uncertain world. So we don't want to overguide. That is why we have been conservative on mid- to high. That is what I say. But ARPUs and the EBIT into the year is looking very rock solid. All our fundamentals are very rock solid. So things are heading towards close to double digit. But again, we want to not overguide the market. That is what our approach will be, number one. Number two, on dividend, while we have -- you must have seen that the net profit -- dividend is linked to net profit, there is a solid increase on year-on-year. And we have our policy on dividend very clear that we want to go up to 70% by 2028. Nicky, you want to add to that? Chi Lee: Yes. Sachin, I just share on dividend. So we've published our dividend policy last year for -- full year 2024, the payout was 55%. So our intention is to raise the payout ratio gradually to 70% for the year 2026. For 2025, we need to go through our process to determine it will be higher than 55%, but less than 70%. So somewhere within this range. But with the much better net profit, the payout -- the actual dividend should be much better than 2024. Operator: Next question, we have the line from Ranjan Sharma of JPMorgan. Ranjan Sharma: A couple of questions from my side. Again, starting with the guidance. If I just analyze your fourth quarter revenues and EBITDA, we should get to like an 8%, 9% growth in revenues and EBITDA in 2026, but your guidance is like mid- to high single digit. I mean, should we expect low growth in quarterly revenues from the fourth quarter onwards? Just trying to think how are you thinking about the guidance? The second question is, as you spin off the fiber assets, I believe you are no longer going to be a majority shareholder in this. So is it fair to assume it's getting deconsolidated? And what is the impact on revenues and EBITDA from the change in accounting? And the last question is a housekeeping question. If I look at Slide 14 of your presentation, you talk about normalized profit of IDR 1,993 billion for the fourth quarter. But if I look at Slide 24, you disclosed a net profit of IDR 1,930 billion. I know it's not material, but I just want to understand what the difference is. Vikram Sinha: Ranjan, this is Vikram. On guidance, I think we are trending towards 9%, 10% growth. So there is no reason we should go below that. But again, learning from last year, we just want to be a little prudent on early days of a lot of recovery on micro, we have seen domestic consumption getting better. So we want to watch out for this a little more. We had a very painful year last year, especially lower value customer, middle class, they were optimizing. So in quarter 4, we have seen early signs of recovery, and we expect more to come, especially on domestic demand. That is the only reason why we have put it mid- to high single digit. But today, as we speak, we are trending towards double-digit revenue growth. You want to take spin-off asset? Chi Lee: Yes. Ranjan, on the spin-off asset, the revenue will not be impacted and the impact on EBITDA would be fairly small. It will be low single digit on EBITDA. Vikram Sinha: I think Ranjan, the important thing to note is this is a very strategic transaction, which we have done, while we have been able to retain our operational control, but at the same time, we will be not consolidating. So we are in the process of finding to closing. We expect USD 700 million to IOH between Q2 and Q3, basically the timing of the closing. So you will have to wait for a little more to have the full color. But as Nicky said, the impact on EBITDA will be very small. But overall, this will help us significantly unlock a lot of value for IOH. Indar Dhaliwal: Ranjan, just on your third question, let us get back to you after the call on the net profit. Ranjan Sharma: Got it. Maybe a quick follow-up for Pak Vikram and Nicky. You are saying that there won't be any impact or there won't be any material impact on revenues and EBITDA from the deconsolidation, but you're getting $700 million of proceeds. So are these assets not generating revenues, but you're still able to get $700 million from them? That seems to be a pretty strong statement. Vikram Sinha: Yes. For revenue, we are confident. On EBITDA, Nicky will update you as we come closer. But yes, this is what I have been telling that there's a significant value unlock, which we are doing. Chi Lee: Yes, there will be some impact, Ranjan, on EBITDA as well as on EBIT, right? So -- but it's not like a huge impact because we also get savings, there wouldn't be like the maintenance cost that we need to going forward, right? So it's a mix of the net impact from various factors. Ranjan Sharma: But the impact can only be positive then, right, if these assets are not generating revenues and there can only be some costs associated with them. And now you're deconsolidating it, so the EBITDA would go up. Vikram Sinha: No. IOH will have to pay to [ Alpata ] for some of the services, which we will take from them. This is like the sale and leaseback. Operator: We have the next question from Arthur Pineda from Citi. Arthur Pineda: If I can just ask with regards to the licensing for 5G. I'm just wondering what your engagements are with the government expectations timetable [Technical Difficulty] to happen this year or next year? Indar Dhaliwal: Sorry, your voice is breaking up. You were asking about the spectrum auctions for 2026 and the time line. Is that right? Arthur Pineda: Yes. Any clarity on that? Vikram Sinha: Arthur, this is Vikram. So we are expecting in Q2, 700 MHz and 2.6 MHz to be auctioned. That is what we are getting from the regulators for now. Arthur Pineda: Any discussions with regard to pricing or payment models for the auctions? Vikram Sinha: Look, we don't want to speculate on all those things. They have been always telling that they will look into making it better. But for now, you have to take it as a base case, the way Indonesia has been. Operator: I think we have a follow-up question from Sachin Mittal from DBS. Sachin Mittal: Just a follow-up question on the balance sheet. Now that we are waiting for proceeds from the fiber divestment, even then actually our balance sheet is below 0.4x net debt to EBITDA. And the cash proceeds are there I mean balance sheet is maybe too healthy materially at this point. How do we plan to use the balance sheet to further accelerate the growth? Maybe if that's the way to think about it. Of course, GPU as a Service is a big opportunity. Could you just throw some light here if balance sheet can be used to accelerate because I think the demand seems to be quite huge in this business. The question is supply, right? Yes. Any color will be good in terms of balance sheet or GPU as a Service, if they can -- how they can be used together to further accelerate the growth in the, I don't know, near term or medium term? Vikram Sinha: Thanks, Sachin. You are right. We have a very healthy balance sheet. I think the good news is also the 5G cycle, we are seeing the cost of radio RAN coming closer to 4G. So again, we are in a very good place to unlock new opportunities, especially GPU as a service. Having said that, we are working on a few models. You will have to wait for another quarter. But one thing I can tell you that we are getting a lot of interest from both regional and global customers because we have been able to maintain the capability of running workload for AI cloud, and we will, for sure, unlock this opportunity. How we use our balance sheet, we do off balance sheet, you will have to wait for one more quarter. Operator: We also have a follow-up question from Piyush Choudhary of HSBC. Piyush Choudhary: I have 2 questions. Firstly, your interest expenses are kind of trending down. Just want to confirm if you can highlight, has there been any refinancing at a lower rate? And how should we think of this given you have very strong balance sheet and you [Technical Difficulty] now? So that's the first question. Chi Lee: Piyush, this is Nicky. Yes, yes, we get savings from many different aspects. Yes, interest would be one of them. So we've been able to secure better pricing from banks following the expansion in our business. Our balance sheet is very healthy. So best to have the banks trusting those set and willing to offer us better terms and better pricing. And also our debt is not heavy also on the balance sheet. Piyush Choudhary: Right. Could you share, if possible, what's like the latest funding cost for you? Chi Lee: Yes. I think we have shared the details in the notes if you are interested to read those details. So it's very transparent. Piyush Choudhary: Okay. And second question on GPU as a Service, where you mentioned current contracted revenue is $50 million to $60 million for 2026. I recall in the last -- in the third quarter, we were talking about $75 million number for 2026. So if you can help us understand like what changed? And this $50 million to $60 million is now contracted for 2 years, 3 years? Like what's the time frame here? Vikram Sinha: Piyush, this is all 5-year contract. So all these are minimum 5 years. Some of them will extend into 7 years. I think there is a bit of a 1 quarter slip over in terms of timing because of supply chain issues. There's also a lot of constraint on managing the end-to-end supply chain when it comes to Neocloud. So that is the delay, which is rolling over for next year also. Operator: We also have follow-up questions from Sukriti Bansal. Sukriti Bansal: Two quick questions again from my side. Firstly, again, on the GPU as a Service. So is there any guidance for the CapEx we'll be incurring in 2026 on this business? And second question is on the fiber asset. I think you mentioned that you'll be receiving $700 million in between Q2, Q3 depending on the timing. Wasn't the figure supposed to be $870 million earlier? Has something changed in the transaction? Or did I get it wrong earlier? Chi Lee: So Sukriti, this is Nicky. So on the Neocloud, we will only need to incur further CapEx when we secure new contracts. And as you would understand, the contracts are quite lumpy. So we have not included CapEx in this respect in our guidance. But for sure, we'll be updating analysts and shareholders going forward on this. On the fiber, $700 million is what we will receive and it has not been realized. I think the number you mentioned is enterprise value. And we still keep a stake in the business. Sukriti Bansal: Understood. Also, any update on competition in this business? Because from what I understand, one of your peers is Surge (WIFI) is going to launch their IRA very soon at IDR 100,000 packages. Are we already seeing some increase in competition in this business? How should we think about that? Vikram Sinha: Sukriti, this is Vikram. I think from the very beginning, we are very clear, we don't want to operate in that IDR 100,000 segment. So there is no such competition or anything which we have seen on the ground. And we are not even targeting 100,000 home customers. Operator: We have a follow-up question from Arthur Pineda from Citi. Arthur Pineda: Just a follow-up question with regard to the CapEx. For the IDR 13 trillion CapEx guidance this year, does that include the 5G build-out? Or is it the BAU CapEx? Chi Lee: It is BAU. Arthur Pineda: So this could potentially rise if you do get the auctions done in 2Q, that's how we should look at it? Vikram Sinha: I think, Arthur, there will be not significant rise on 5G CapEx because the radio price of 4G and 5G is now converging the RAN price. So -- and sometimes it is good to be late. And also we will be able to offload a lot of capacity to 5G. We are seeing a good surge on device penetration. So not significant rise, but let's wait for it once the spectrum thing and all is done. But what I can tell you at this point of time that it will not be significant rise in the [indiscernible] for 5G. Chi Lee: And Arthur, if I may just clarify, when I say BAU, we have been rolling out 5G also today in 2025, right? So it's a matter of after -- I don't know what spectrum we will get, right? So -- and at what terms, et cetera. So we will need to review what will be the pace of our 5G rollout post 5G spectrum auction. That's what I meant. Operator: We are now closing the Q&A session. No more further questions from the line. I would like to hand the call back to the management for closing remarks. Indar Dhaliwal: All right. Thank you, Desmond, and thank you, everyone, for joining us on the call. Apologies for the technical disruption we had earlier. I hope you got all your questions answered. If you have any more questions, please feel free to reach out, and we'll definitely address them. Thank you, and we'll speak to you soon. Operator: Thank you. That does conclude today's conference call. Thank you for your participation. You may now disconnect.
Operator: Hello, everyone. Thank you for standing by. Welcome to PT Indosat Tbk FY '25 Earnings Conference Call. [Operator Instructions] Please be reminded that today's conference call is being recorded. I would now like to turn the call over to your first speaker today, Pak Indar Dhaliwal. Thank you. Please go ahead. Indar Dhaliwal: Thank you, Desmond. Good afternoon, everyone, and thanks for joining us on the call today. With us on the call today, we have Pak Vikram Sinha, our Chief Executive Officer; Pak Nicky Lee, our Chief Financial Officer; as well as Pak Bilal Kazmi, our Chief Commercial Officer. I will now hand over the call to Pak Vikram for his opening remarks. Over to you, sir. Vikram Sinha: Thanks, Indar. Good afternoon, everyone. I am pleased to report a strong set of numbers in the fourth quarter of 2025, delivering on our guidance as promised for the full year. This means that we have ended the year on a solid trajectory heading into 2026. If you look at the next slide, here are some of the key highlights of our fourth quarter of 2025, where we are seeing strong performance across both financial and operational metrics. Revenue grew strongly during the quarter, and our EBITDA grew faster than revenue, reflecting our continued focus on profitability. And we have delivered strong net profit as we continue to deliver value to all our stakeholders. The key reason for our strong performance is our core cellular business is our customer ARPU, which grew 11% quarter-on-quarter to IDR 44,000, which is the highest level since merger. ARPU remains Indonesia's biggest opportunity, and we are pleased to report continued positive momentum on ARPU heading into 2026. Our initiative that we have -- we continue to deliver such as AI-powered hyper-personalization and our focus on delivering marvelous customer experience powered by strong network was the main reason driving this strong ARPU growth. We still see a lot of upside for ARPU, and we are committed to fully realize this opportunity. If you look at the next slide, one of our key initiatives launched in 2025 was our AI-powered 360-degree scam and spam protection. Scams are a huge customer pain point with more than 66% of Indonesian encountering a scam in the past 6 months, and this is a USD 5 billion issue in the country. Our solution has been in offering AI protection through an agentic platform that has 99% efficacy in detecting scams and spams. This protects customers across all channels, including voice, SMS, VoIP, WhatsApp and any popular medium. This is one of the key efforts in building our reputation as Indonesia's most trusted telco. And to date, we have delivered 100% protection to covered customers with more than 2 billion scams and spam prevented. This product is delivering us positive feedback and helping us to improve ARPU and lower our churn. This quarter also marked a landmark first step towards establishing our FiberCo along with our strategic partner. Through this transaction, we are positioning ourselves for future growth, especially in the fiber-to-home business. The 3 key objectives that this transaction give us are: number one, monetizing our asset to unlock value. In Q2, Q3, we will be receiving -- IOH will receive USD 700 million. The other important point on this partnership is that now we have a partner with deep local expertise, which will help us grow our FTTH business, but at the same time, we retain operational control over this FiberCo. The other important initiative for us is our AI Neocloud platform, which was established in 2025, we set the foundation for our future growth in 2026. Our current capacity is fully contracted with USD 28 million revenue booked in 2025. We continue to enhance our full stack capabilities along with global giants as NVIDIA, Google and others and look forward to sharing more development on this in 2026. This solidifies IOH as an investment proposition with our core performing well, and we aim to unlock further ARPU potential and drive sustained growth on mobile. The value of our fiber asset is being realized and positioned for future growth and expansion, and our Neocloud platform is set for scale in 2026 to capture the growth opportunity in AI. Finally, our guidance for 2026, where we aim to grow both revenue and EBITDA mid- to high single-digit level and our planned CapEx spend is around IDR 13 trillion. I will now hand over to Nicky for more detailed financial presentation. Chi Lee: Thank you, Pak Vikram, and good afternoon, everyone. I'm delighted to report another solid set of results for the fourth quarter, where we have continued the positive momentum from the previous quarter. Our fourth quarter revenue grew 9.3% quarter-on-quarter, driven by an increase in cellular revenue as we continue executing our strategy to accelerate growth through AI and enhanced network experience. Additionally, MIDI revenue contributed to this performance, underpinned by our Neocloud revenue. Below the revenue line, we delivered 11.6% quarter-on-quarter expansion in EBITDA, which outpaced revenue growth, reflecting our strict focus on cost leadership for growth. I will elaborate more on OpEx on our cost in the OpEx section. As a result, our EBITDA margin rose by 1 percentage point to 47.2%. Normalized net profit increased by 51.2% quarter-on-quarter, largely reflecting the higher EBITDA and an operational one-off gain below EBITDA. The one-offs include a IDR 142 billion high gain on investment at fair value through profit and loss based on an independent valuation. Our net debt-to-EBITDA ratio declined by 0.1x to just 0.39x, underscoring our commitment to maintaining a healthy balance sheet. If we move on to the next slide. For full year 2025, reported revenue increased by 1.1% year-on-year, supported by growth in both cellular and MIDI revenue. The same factors I have highlighted earlier drive the -- behind the quarter-on-quarter improvements mentioned earlier drive such improvement. Combined with continued cost leadership initiatives, this resulted in EBITDA growth of 0.8% year-on-year while maintaining a fairly stable EBITDA margin at 47.1%. At the bottom line, net profit increased year-on-year on both reported and normalized basis by 12.2% and 11.6%, respectively, primarily reflecting the flow-through effect of high EBITDA, one-off prior year tax reversal as well as operational gains arising from gain on the investment at fair value through profit and loss, gain on disposal -- asset disposals and early site lease terminations. We saw increased spending compared with both prior year and the previous quarter, driven by the strengthening momentum of our growth trajectory as we continue to capture and scale the emerging opportunities. Cost of services rose by 3% quarter-on-quarter, primarily driven by installation and partnership costs, supporting higher MIDI and VAS revenue. On a year-on-year basis, cost of services increased by 5%, similar to the quarterly trend. Personnel costs grew by 39% quarter-on-quarter, largely to do with higher variable pay for performance. On a year-on-year basis, though, they declined by 11%, again, reflecting lower variable pay components such as bonuses and incentives compared to the prior year. On marketing expenses, it increased by 16% quarter-on-quarter, largely due to subscriber acquisition and year-end seasonal promotional activities to support revenue growth. Again, on a year-on-year basis, marketing spend declined by 16%, reflecting a strategic shift towards more targeted and cost-efficient digital marketing initiatives. G&A expenses quarter-on-quarter is flat on a Y-o-Y basis, they increased by 9%, mainly driven by higher consultancy charges to support business growth. Overall, for full year 2025, OpEx increased by 1.4% year-on-year and 7.3% quarter-on-quarter, highlighting disciplined cost leadership to support and sustain our growth trajectory. Depreciation and amortization expenses increased by 2% year-on-year and 1% quarter-on-quarter due to the addition of fixed assets for network rollout to support medium- to long-term growth. In quarter 4, other operating income recorded a net income of IDR 131 billion compared to IDR 78 billion in the previous quarter. This variance was primarily attributable to gain on investment, as I highlighted earlier. On a year-on-year basis, prior year tax provision reversal and operational one-off gain contributed to an increase in other operating income from IDR 21 billion in 2024 to IDR 509 billion this year in 2025. Moving on to take a look at CapEx. It reduced by 22% quarter-on-quarter to IDR 2.54 trillion in Q4 last year due to the timing of one-off credit notes from vendor. Our full year CapEx realization of IDR 13.3 trillion was in line with our guidance. We delivered a solid improvement in our capital structure with net debt reducing 1.4% year-on-year and 18.9% quarter-on-quarter. Stronger EBITDA further enhanced our leverage profile, driving 0.01x year-on-year and 0.1x quarter-on-quarter reduction in our net debt-to-EBITDA ratio, respectively. Thank you very much. And I will now hand over to Pak Bilal for the operational performance update. Syed Kazmi: Thank you, Pak Nicky, and good afternoon to everyone. I think the headline from a commercial standpoint is positive operational trends. These are driven by solid data traffic growth, 7.6%, translating into very strong ARPU growth over a stable mobile base. What is also important to report is that our home broadband base customer grew by 24,000 customers, which translates into a 6.6% growth quarter-on-quarter. But we are also very, very excited about monetizing the impact of our 5G footprint, which now covers 24 cities in the country. In a country as big as Indonesia, one of the biggest opportunities is fixed wireless access. And there, we would like to offer our customers high-spec 5G equipment, coupled with -- I mean, you would note that for FWA, the onboarding [Technical Difficulty]. Indar Dhaliwal: Operator, can you hear? Operator: Yes, we can. We lost a little bit of audio earlier on from part. It will be best if we can restart the present. Syed Kazmi: I think we can move to the Q&A probably just from a time standpoint. Operator: [Operator Instructions] Our first question come from Piyush Choudhary from HSBC. Unfortunately we cannot hear from the participant. Allow me to move on to the next question. [Operator Instructions] Our next question come from the line of Sukriti Bansal from Bank of America. Sukriti Bansal: Congratulations on the good quarter. Just a couple of questions. Firstly, on ARPU, we've clearly seen strong growth to IDR 44,000. Can you remind us what is the exit ARPU looking like? And in terms of month-on-month, what was the trend from October to November, November to December a little bit? And also, how are we looking in January? And what is the expectation going forward? And secondly, on the MIDI revenue, clearly good growth. But in terms of GPU as a Service contribution, can you remind us for the full year and for fourth quarter, what is the final contribution that we had from this business? Because it still looks a little bit lower than what we were expecting, I think, for the full year. Also, if there's anything you can share on what is the EBITDA that we've observed from this business? That's all from my side. Operator: Thank you for your patience. We seem to have lost the speaker's line. Allow me to check and the conference will resume shortly. Indar Dhaliwal: Desmond, can you hear us? Operator: Yes, we can. Please continue. We have a question from Sukriti Bansal. Indar Dhaliwal: Just before we go into the question, apologies, we had a bit of a technical error. I think let's just start the question-and-answer flow again. So Sukriti will be the first question, and then we'll go back to whoever's question that we missed earlier. Go ahead, Sukriti. Sukriti Bansal: A couple of quick questions from me. Firstly, on the ARPU, strong growth in 4Q at IDR 44,000. Can you remind us what is the December -- what did the December exit ARPU look like? And also month-on-month, what were the trends like? And how is ARPU looking going into 1Q. Also in terms of the MIDI revenue, again, strong growth in 4Q, but it was expected that most of the GPU as a Service contribution will be coming a large part in 4Q. So can you remind us what was the final contribution from this business for 4Q and for the full year? And what is the EBITDA that we've observed from this business for the full year? And also what is the expectation going into 2026 for contribution from this business? That will be all. Vikram Sinha: Sukriti, this is Vikram. Let me start with the ARPU. I think as you saw quarter-on-quarter growth was very strong, grew 11% on a steady pace because we have seen lot of symptoms [indiscernible] in the market which is good for the [indiscernible]. As now getting at around IDR 44,000, IDR 45,000 monthly ARPU and we see a good momentum we have brought into February. So [indiscernible] see lot of upside on ARPU and based on we need to focus on that especially some of our initiative on AI led hyper-personalization in some of the products like spam and scam is also [indiscernible] overall ARPU was in the positive [indiscernible] this is what I can say. Nicky you want to take it? Chi Lee: Certainly. For GPU, the Q4 revenue is around $20 million. So the outlook for 2026 would be about $50 million to $60 million based on the current contract, but we are very confident that we will get before that happens, this is a number I can share. Sukriti Bansal: Understood. And any outlook on the EBITDA that we had from this business? Chi Lee: We don't share the margin for the contracts. Operator: Our next question comes from Piyush Choudhary from HSBC. Piyush Choudhary: Congratulations management on stellar results and strong recovery in mobile ARPU. Firstly, on the mobile segment, could you tell us whether all the initiatives which you undertook in 4Q is kind of reflected in the ARPU or you are experiencing kind of sustained growth going into 2026? And when can we expect subscribers to stabilize and start growing? So that's the first question. Secondly, on the cost side, are there any one-off items in fourth quarter? We observed rental and services cost is down 29% quarter-on-quarter. What led to it? Is there any one-off here? And any like cost kind of investments in 2023 OpEx investments because your guidance suggests of a stable margin year-on-year. So any color there will be helpful. Vikram Sinha: Let's start with the cost. Chi Lee: Yes. On the cost, Piyush, we have used to have some ups and downs true-up adjustments, things like that. So we have some of those in Q4 also, not that we don't have adjustments in Q3, right? So you are seeing some of those impact reflected in the lease cost. Vikram Sinha: Piyush, this is Vikram. I think on the mobile segment, our initiative, especially on the AI hyper-personalization, it is all data is getting trained and it is getting more effective. So I'll see -- what I'll say is we see much more opportunity getting into 2026. The other important thing to highlight is we have seen significant improvement on our churn also, especially greater than 180-day lease. So overall, we see much more opportunity and upside on ARPU and early days of Q1 also is trending on that direction. In terms of base, I think one good thing which is happening on the market with much more discipline on SIMs is a bit of a consolidation of rotational customers. So we see a very strong momentum on our daily DLR -- daily data unique users. But in terms of reported number, I think it's more of a base which last quarter, we lost around 0.5 million customers. But from an overall, it is looking very solid. And again, we will -- our aim is to have both progressive base and progressive ARPU. Piyush Choudhary: This is very helpful. Just going back on the cost side, is it possible to call out how much was the one-off adjustment in fourth quarter, like a positive attribution? And is it right to think that you are suggesting of a flat margin for 2026 from a guidance perspective? Chi Lee: Yes, Piyush, we will come back to you. I don't have the number in front of me. In terms of the guidance, we don't feel there will be a significant movement. We improved the EBITDA margin by 1%. But we will need to see how the revenue mix will change and all that. We'll give more color in the upcoming quarters. Operator: Next question, we have the line from Sachin Mittal from DBS. Sachin Mittal: Congrats management on, I think, 11% quarter-on-quarter ARPU, which is probably waiting for the results, I think higher than the industry. Two questions here. Firstly, when we look at the guidance, it's like mid-single digit to high single digit, while the ARPU is actually almost double digit. So trying to understand what are the levers to watch for? What could take it to high single digit and what could take it to mid-single digit? Is it mobile? Is it MIDI? Just to understand what to monitor from mid-single digit to high single digit, what are the variables given that ARPU is already quite solid. Secondly, could you also disclose a little bit on the expected dividend payout, how to think of the payout for this year? And any color on the dividend will be useful. Vikram Sinha: Sachin, this is Vikram. I think we wanted to stay very conservative in terms of our guidance. Last year has been a great year for learning. So we live in a very uncertain world. So we don't want to overguide. That is why we have been conservative on mid- to high. That is what I say. But ARPUs and the EBIT into the year is looking very rock solid. All our fundamentals are very rock solid. So things are heading towards close to double digit. But again, we want to not overguide the market. That is what our approach will be, number one. Number two, on dividend, while we have -- you must have seen that the net profit -- dividend is linked to net profit, there is a solid increase on year-on-year. And we have our policy on dividend very clear that we want to go up to 70% by 2028. Nicky, you want to add to that? Chi Lee: Yes. Sachin, I just share on dividend. So we've published our dividend policy last year for -- full year 2024, the payout was 55%. So our intention is to raise the payout ratio gradually to 70% for the year 2026. For 2025, we need to go through our process to determine it will be higher than 55%, but less than 70%. So somewhere within this range. But with the much better net profit, the payout -- the actual dividend should be much better than 2024. Operator: Next question, we have the line from Ranjan Sharma of JPMorgan. Ranjan Sharma: A couple of questions from my side. Again, starting with the guidance. If I just analyze your fourth quarter revenues and EBITDA, we should get to like an 8%, 9% growth in revenues and EBITDA in 2026, but your guidance is like mid- to high single digit. I mean, should we expect low growth in quarterly revenues from the fourth quarter onwards? Just trying to think how are you thinking about the guidance? The second question is, as you spin off the fiber assets, I believe you are no longer going to be a majority shareholder in this. So is it fair to assume it's getting deconsolidated? And what is the impact on revenues and EBITDA from the change in accounting? And the last question is a housekeeping question. If I look at Slide 14 of your presentation, you talk about normalized profit of IDR 1,993 billion for the fourth quarter. But if I look at Slide 24, you disclosed a net profit of IDR 1,930 billion. I know it's not material, but I just want to understand what the difference is. Vikram Sinha: Ranjan, this is Vikram. On guidance, I think we are trending towards 9%, 10% growth. So there is no reason we should go below that. But again, learning from last year, we just want to be a little prudent on early days of a lot of recovery on micro, we have seen domestic consumption getting better. So we want to watch out for this a little more. We had a very painful year last year, especially lower value customer, middle class, they were optimizing. So in quarter 4, we have seen early signs of recovery, and we expect more to come, especially on domestic demand. That is the only reason why we have put it mid- to high single digit. But today, as we speak, we are trending towards double-digit revenue growth. You want to take spin-off asset? Chi Lee: Yes. Ranjan, on the spin-off asset, the revenue will not be impacted and the impact on EBITDA would be fairly small. It will be low single digit on EBITDA. Vikram Sinha: I think Ranjan, the important thing to note is this is a very strategic transaction, which we have done, while we have been able to retain our operational control, but at the same time, we will be not consolidating. So we are in the process of finding to closing. We expect USD 700 million to IOH between Q2 and Q3, basically the timing of the closing. So you will have to wait for a little more to have the full color. But as Nicky said, the impact on EBITDA will be very small. But overall, this will help us significantly unlock a lot of value for IOH. Indar Dhaliwal: Ranjan, just on your third question, let us get back to you after the call on the net profit. Ranjan Sharma: Got it. Maybe a quick follow-up for Pak Vikram and Nicky. You are saying that there won't be any impact or there won't be any material impact on revenues and EBITDA from the deconsolidation, but you're getting $700 million of proceeds. So are these assets not generating revenues, but you're still able to get $700 million from them? That seems to be a pretty strong statement. Vikram Sinha: Yes. For revenue, we are confident. On EBITDA, Nicky will update you as we come closer. But yes, this is what I have been telling that there's a significant value unlock, which we are doing. Chi Lee: Yes, there will be some impact, Ranjan, on EBITDA as well as on EBIT, right? So -- but it's not like a huge impact because we also get savings, there wouldn't be like the maintenance cost that we need to going forward, right? So it's a mix of the net impact from various factors. Ranjan Sharma: But the impact can only be positive then, right, if these assets are not generating revenues and there can only be some costs associated with them. And now you're deconsolidating it, so the EBITDA would go up. Vikram Sinha: No. IOH will have to pay to [ Alpata ] for some of the services, which we will take from them. This is like the sale and leaseback. Operator: We have the next question from Arthur Pineda from Citi. Arthur Pineda: If I can just ask with regards to the licensing for 5G. I'm just wondering what your engagements are with the government expectations timetable [Technical Difficulty] to happen this year or next year? Indar Dhaliwal: Sorry, your voice is breaking up. You were asking about the spectrum auctions for 2026 and the time line. Is that right? Arthur Pineda: Yes. Any clarity on that? Vikram Sinha: Arthur, this is Vikram. So we are expecting in Q2, 700 MHz and 2.6 MHz to be auctioned. That is what we are getting from the regulators for now. Arthur Pineda: Any discussions with regard to pricing or payment models for the auctions? Vikram Sinha: Look, we don't want to speculate on all those things. They have been always telling that they will look into making it better. But for now, you have to take it as a base case, the way Indonesia has been. Operator: I think we have a follow-up question from Sachin Mittal from DBS. Sachin Mittal: Just a follow-up question on the balance sheet. Now that we are waiting for proceeds from the fiber divestment, even then actually our balance sheet is below 0.4x net debt to EBITDA. And the cash proceeds are there I mean balance sheet is maybe too healthy materially at this point. How do we plan to use the balance sheet to further accelerate the growth? Maybe if that's the way to think about it. Of course, GPU as a Service is a big opportunity. Could you just throw some light here if balance sheet can be used to accelerate because I think the demand seems to be quite huge in this business. The question is supply, right? Yes. Any color will be good in terms of balance sheet or GPU as a Service, if they can -- how they can be used together to further accelerate the growth in the, I don't know, near term or medium term? Vikram Sinha: Thanks, Sachin. You are right. We have a very healthy balance sheet. I think the good news is also the 5G cycle, we are seeing the cost of radio RAN coming closer to 4G. So again, we are in a very good place to unlock new opportunities, especially GPU as a service. Having said that, we are working on a few models. You will have to wait for another quarter. But one thing I can tell you that we are getting a lot of interest from both regional and global customers because we have been able to maintain the capability of running workload for AI cloud, and we will, for sure, unlock this opportunity. How we use our balance sheet, we do off balance sheet, you will have to wait for one more quarter. Operator: We also have a follow-up question from Piyush Choudhary of HSBC. Piyush Choudhary: I have 2 questions. Firstly, your interest expenses are kind of trending down. Just want to confirm if you can highlight, has there been any refinancing at a lower rate? And how should we think of this given you have very strong balance sheet and you [Technical Difficulty] now? So that's the first question. Chi Lee: Piyush, this is Nicky. Yes, yes, we get savings from many different aspects. Yes, interest would be one of them. So we've been able to secure better pricing from banks following the expansion in our business. Our balance sheet is very healthy. So best to have the banks trusting those set and willing to offer us better terms and better pricing. And also our debt is not heavy also on the balance sheet. Piyush Choudhary: Right. Could you share, if possible, what's like the latest funding cost for you? Chi Lee: Yes. I think we have shared the details in the notes if you are interested to read those details. So it's very transparent. Piyush Choudhary: Okay. And second question on GPU as a Service, where you mentioned current contracted revenue is $50 million to $60 million for 2026. I recall in the last -- in the third quarter, we were talking about $75 million number for 2026. So if you can help us understand like what changed? And this $50 million to $60 million is now contracted for 2 years, 3 years? Like what's the time frame here? Vikram Sinha: Piyush, this is all 5-year contract. So all these are minimum 5 years. Some of them will extend into 7 years. I think there is a bit of a 1 quarter slip over in terms of timing because of supply chain issues. There's also a lot of constraint on managing the end-to-end supply chain when it comes to Neocloud. So that is the delay, which is rolling over for next year also. Operator: We also have follow-up questions from Sukriti Bansal. Sukriti Bansal: Two quick questions again from my side. Firstly, again, on the GPU as a Service. So is there any guidance for the CapEx we'll be incurring in 2026 on this business? And second question is on the fiber asset. I think you mentioned that you'll be receiving $700 million in between Q2, Q3 depending on the timing. Wasn't the figure supposed to be $870 million earlier? Has something changed in the transaction? Or did I get it wrong earlier? Chi Lee: So Sukriti, this is Nicky. So on the Neocloud, we will only need to incur further CapEx when we secure new contracts. And as you would understand, the contracts are quite lumpy. So we have not included CapEx in this respect in our guidance. But for sure, we'll be updating analysts and shareholders going forward on this. On the fiber, $700 million is what we will receive and it has not been realized. I think the number you mentioned is enterprise value. And we still keep a stake in the business. Sukriti Bansal: Understood. Also, any update on competition in this business? Because from what I understand, one of your peers is Surge (WIFI) is going to launch their IRA very soon at IDR 100,000 packages. Are we already seeing some increase in competition in this business? How should we think about that? Vikram Sinha: Sukriti, this is Vikram. I think from the very beginning, we are very clear, we don't want to operate in that IDR 100,000 segment. So there is no such competition or anything which we have seen on the ground. And we are not even targeting 100,000 home customers. Operator: We have a follow-up question from Arthur Pineda from Citi. Arthur Pineda: Just a follow-up question with regard to the CapEx. For the IDR 13 trillion CapEx guidance this year, does that include the 5G build-out? Or is it the BAU CapEx? Chi Lee: It is BAU. Arthur Pineda: So this could potentially rise if you do get the auctions done in 2Q, that's how we should look at it? Vikram Sinha: I think, Arthur, there will be not significant rise on 5G CapEx because the radio price of 4G and 5G is now converging the RAN price. So -- and sometimes it is good to be late. And also we will be able to offload a lot of capacity to 5G. We are seeing a good surge on device penetration. So not significant rise, but let's wait for it once the spectrum thing and all is done. But what I can tell you at this point of time that it will not be significant rise in the [indiscernible] for 5G. Chi Lee: And Arthur, if I may just clarify, when I say BAU, we have been rolling out 5G also today in 2025, right? So it's a matter of after -- I don't know what spectrum we will get, right? So -- and at what terms, et cetera. So we will need to review what will be the pace of our 5G rollout post 5G spectrum auction. That's what I meant. Operator: We are now closing the Q&A session. No more further questions from the line. I would like to hand the call back to the management for closing remarks. Indar Dhaliwal: All right. Thank you, Desmond, and thank you, everyone, for joining us on the call. Apologies for the technical disruption we had earlier. I hope you got all your questions answered. If you have any more questions, please feel free to reach out, and we'll definitely address them. Thank you, and we'll speak to you soon. Operator: Thank you. That does conclude today's conference call. Thank you for your participation. You may now disconnect.
Edna Koh: Okay. Good morning, everybody, and welcome to DBS' Fourth Quarter and Full Year 2025 Financial Results Briefing. This morning, we announced for the full year that we achieved record income and profit before tax. Net profit came in at SGD 11 billion with ROE at 16.2%. For the fourth quarter, net profit was SGD 2.36 billion. With us today are our CEO, Tan Su Shan; and our CFO, Chng Sok Hui. Without further ado, let me invite Sok Hui to give us more color. Sok Hui Chng: Good morning, everyone, and happy Chinese New Year in advance. Okay, Slide 2. On the highlights, we delivered a strong set of results for full year 2025. Pre-tax profit rose to a new high of SGD 13.1 billion. Return on equity was 16.2% and return on tangible equity was 17.8%. Total income grew 3% to a record SGD 22.9 billion despite a challenging rate environment. Average SORA and HIBOR both fell by almost 2 percentage points, and there were adverse translation effects from a strong Singapore dollar. Group net interest income was nonetheless modestly higher, driven by record deposit growth and proactive balance sheet management. Fee income and treasury customer sales both grew double digits and reached new highs, led by Wealth Management. Markets trading income rose to the highest level since 2021. The cost-to-income ratio was unchanged at 40%. Net profit was 3% lower at SGD 11.0 billion. This was due to higher tax expenses of SGD 400 million from the consequential implementation of the 15% global minimum tax. For the fourth quarter, pre-tax profit was SGD 2.8 billion, down 6% from a year ago. Total income declined 3% to SGD 5.33 billion as higher fee income and treasury customer sales were offset by the impact of rate headwinds and the absence of non-recurring gains recorded a year ago. Asset quality remains sound. A previously watchlisted real estate exposure was prudently recognized as an NPL during the quarter, contributing to higher specific allowances. The impact was partially offset by a release of general allowances set aside in prior periods. Allowance coverage stood at 130% and at 197% after considering collateral. Capital levels stayed strong. The transitional CET1 ratio was 17.0% with a fully phased-in ratio at 15.0%. The Board proposed a final total dividend of SGD 0.81 per share for the fourth quarter, comprising a SGD 0.66 ordinary dividend, up SGD 0.06 from the previous payout and a SGD 0.15 capital return dividend. The Board remains committed to managing down the stock of excess capital and barring unforeseen circumstances, plans to maintain the SGD 0.15 per share capital return dividend each quarter through 2026 and 2027. Full year performance. Slide 3. For the full year, total income and pre-tax profit were records. Group net interest income was modestly higher at SGD 14.5 billion, a new high as record deposit growth and proactive hedging offset the impact of rate headwinds. Within this, commercial book net interest income fell 4% or SGD 549 million as net interest margin narrowed due to the rates impact. Fee income rose 18% or SGD 730 million to a record SGD 4.90 billion, led by Wealth Management. Commercial book, other non-interest income was SGD 2.13 billion. Treasury customer sales to wealth and corporate clients grew 14% to a new high, but the increase was offset by lower other income, which had non-recurring gains a year ago. Markets trading income rose 49% or SGD 452 million to SGD 1.37 billion, the highest since 2021, benefiting from lower funding costs and a more conducive trading environment. Expenses increased 4% or SGD 354 million to SGD 9.25 billion, led by staff costs. The cost-income ratio was unchanged at 40% and profit before allowances rose 2% or SGD 249 million to a new high of SGD 13.7 billion. Total allowances were 27% or SGD 169 million higher at SGD 791 million. Specific allowances were SGD 854 million or 19 basis points of loans, largely due to the real estate NPL in the fourth quarter. General allowances of SGD 63 million were written back during the year, including the release of allowances previously set aside for the real estate exposure. There was a one-time item relating to the bank's CSR commitment announced in 2023 to allocate up to SGD 1 billion over 10 years to support vulnerable communities. With SGD 100 million set aside from the year's profits, the cumulative amount since 2023 for CSR stands at SGD 300 million. Next slide, fourth quarter year-on-year performance. For the fourth quarter, pre-tax profit was SGD 2.80 billion, 6% lower than a year ago. Group net interest income declined 4%. Within this, commercial book net interest income fell 6% or SGD 239 million to SGD 3.59 billion as net interest margin narrowed due to the rate headwinds. Fee income rose 14% or SGD 131 million to SGD 1.10 billion, led by Wealth Management. Commercial book other non-interest income was SGD 486 million, within which treasury customer sales rose 13% or SGD 56 million. Expenses declined 1% or SGD 23 million to SGD 2.37 billion. The cost-to-income ratio was stable. Profit before allowances was SGD 2.96 billion, 5% or SGD 151 million lower. Total allowances were unchanged at SGD 209 million as higher specific allowances were offset by a write-back of general allowances. Next slide, fourth quarter, quarter-on-quarter performance. Compared to the previous quarter, fourth quarter net profit declined 20%. Group net interest income was marginally higher. Within this, commercial book net interest income rose 1% or SGD 34 million as deposit growth momentum was sustained. Deposits increased SGD 16 billion or 3% in constant currency terms, offsetting the impact from lower SORA. Fee income fell 19% or SGD 258 million and commercial book other non-interest income declined 16% to SGD 92 million due to seasonally lower client activity. Markets trading income fell 65% or SGD 285 million from the previous quarter's high base and seasonal factors. The business also took the opportunity to rebalance the portfolio, which will position us well for 2026. Expenses declined 1% or SGD 21 million to SGD 2.37 billion. Specific allowances were higher, partially offset by a general allowance write-back. Next slide, net interest income. Compared to the previous quarter, group net interest income was marginally higher at SGD 3.59 billion. Net interest margin declined 3 basis points to 1.93% as SORA continued to trend lower during the quarter. The impact of lower rates was offset by two factors. First, balance sheet hedges that have been proactively increased over the past few years helped mitigate the decline in net interest margin. Second, deposit growth remains strong. Deposits rose SGD 16 billion or 3% in constant currency terms during the quarter, bringing the full year increase to SGD 64 billion or 12%, the largest absolute increase in the bank's history. The growth outpaced loans and the surplus was deployed into liquid assets. This was accretive to net interest income and return on equity, though it modestly reduced net interest margin. For the full year, group net interest income was modestly higher at SGD 14.5 billion as balance sheet hedging and deposit growth offset the sharp declines in SORA and HIBOR as well as adverse FX translation from a stronger Singapore dollar. Commercial book net interest income declined 4% from a lower net interest margin. Next slide, deposits. During the quarter, total deposits rose 3% or SGD 16 billion in constant currency terms, mostly from CASA inflows. CASA, current and savings account increased in both Sing dollars and foreign currencies. Sing dollar CASA rose from seasonal year-end retail inflows and a continued shift of funds from treasury bills back into deposits. Foreign currency CASA growth was driven by both wealth and corporate clients. For the full year, total deposits grew SGD 64 billion or 12% in constant currency terms, the largest absolute increase in the bank's history with over 2/3 of the increase in CASA. Liquidity remains healthy. The group's liquidity coverage ratio was 155% and net stable funding ratio was 117%, both comfortably above regulatory requirements. Next slide, loans. During the quarter, gross loans rose 2% or SGD 10 billion in constant currency terms to SGD 451 billion. The increase was led by trade loans with modest increases in non-trade corporate and Wealth Management loans. As deposits continue to grow faster than loans, the surplus was deployed into liquid assets. This was accretive to net interest income and return on equity. For the full year, loans rose 6% or SGD 24 billion with broad-based growth across trade, non-trade corporate and Wealth Management loans. And you can see from the chart, the high-quality liquid assets for the year increased by SGD 42 billion. Fee income, next slide. Gross fee income rose 15% for the full year to a record SGD 5.86 billion. Growth was broad-based and led by Wealth Management, which increased 29% to a new high. Transaction service and loan-related fees also reached record levels, while investment banking fees strengthened. For the fourth quarter, gross fee income rose 12% from a year ago to SGD 1.38 billion. The increase was led by Wealth Management fees. Transaction service and investment banking fees were also higher. Compared to the previous quarter, gross fee income declined 13%. Wealth Management and loan-related fees fell due to seasonal factors, while transaction service fees were lower compared to a strong third quarter. The declines were partially offset by higher card fees. Next slide. Wealth Management segment. The Wealth Management segment comprises Treasurers, Private Client and Private Bank. Wealth Management was a key growth driver for the year. Full year segment income rose 9% to SGD 5.68 billion, underpinned by record investment product and bancassurance sales. Assets under management grew 19% in constant currency terms from a year ago to a new high of SGD 488 billion. This quarter, we have started to disclose net new money at the bottom of this slide. The figures include inflows from Treasures, Treasures Private Client and the Private Bank. Total inflows for the three segments were SGD 12 billion for the fourth quarter, bringing full year inflows to a record SGD 39 billion, 21% higher than 2024. For the fourth quarter, segment income rose 5% from a year ago to SGD 1.30 billion, driven by higher non-interest income from stronger investment products and bancassurance sales. This more than offset a decline in net interest income from lower rates. Next slide. Customer-driven non-interest income. This slide shows non-interest income from the commercial book that's customer-driven. While fee income and treasury customer sales are recorded under different P&L lines due to accounting treatment, both are driven by consumer and corporate demand for financial solutions and should be viewed together. For the full year, customer-driven non-interest income rose 16% to SGD 7.04 billion as net fee income rose 18% to SGD 4.90 billion and treasury customer sales grew 14% to SGD 2.14 billion. Both were at new highs, driven by broad-based growth and led by Wealth Management. For the fourth quarter, growth momentum remains strong. Customer-driven non-interest income rose 13% from a year ago around the average pace over the prior four quarters. The performance reflected our continued efforts to broaden and deepen relationships with wealth, corporate and institutional clients. Next slide, expenses. Expenses were tightly managed. Full year expenses rose 4% from a year ago to SGD 9.25 billion, led by higher staff costs. The cost-to-income ratio was unchanged at 40%. Fourth quarter expenses were 1% lower, both quarter-on-quarter and year-on-year at SGD 2.37 billion, driven by lower staff cost. Next slide, Hong Kong. Hong Kong's full year net profit rose 3% in constant currency terms to a record SGD 1.61 billion as total income increased 6% to SGD 3.52 billion, driven by higher non-interest income. Net interest income was 3% higher at SGD 2.09 billion from deposit growth. Net interest margin was slightly higher as the impact of lower HIBOR on the commercial book was offset by an improvement in markets trading. Deposits rose 10%, led by CASA inflows, while loans grew 1%. Surplus deposits were deployed into non-loan assets supporting net interest income. Net fee income rose 22% to SGD 993 million, led by Wealth Management. Other non-interest income was 7% lower at SGD 441 million as lower markets trading non-interest income was partially offset by higher treasury customer sales. Expenses increased 3% to SGD 1.33 billion from higher staff costs. Total allowances doubled to SGD 296 million, reflecting higher specific allowances largely from the real estate NPL in the fourth quarter. Next slide, non-performing assets. The NPL ratio was unchanged from the previous quarter at 1.0%, notwithstanding the recognition of the real estate exposure as an NPL in the fourth quarter. The exposure have been on our watchlist for 2 years. The borrower is currently not in default status. We reviewed the credit and took a prudent decision to downgrade it to NPL following our subjective default assessment. Next slide, specific allowances. Specific allowances for the fourth quarter rose to SGD 415 million with a large part of the increase due to the real estate NPL based on asset recovery values. The increase was partially offset by a release of general allowances that had been previously set aside for the exposure. For the full year, specific allowances amounted to SGD 845 million or 19 basis points of loans, broadly in line with our through-cycle average. Next slide, general allowances. As at end of December, total allowance reserves stood at SGD 6.28 billion, comprising SGD 2.42 billion in specific allowance reserves and SGD 3.86 billion in general allowance reserves. The slight decline in GP reserves from the previous quarter was partly due to the release of general allowances previously set aside for the real estate NPL, which were reclassified to specific allowances. As communicated previously, we set aside GP once the case is placed on the watchlist. In the event that the watchlisted case is classified as NPL, the GP set aside will be released. General allowance reserves remain prudent with the GP overlay at SGD 2.4 billion out of the total SGD 3.86 billion. So to recap, the GP overlay of SGD 2.4 billion is in addition to baseline GP generated by the model, and it takes into account stress scenarios such as heightened geopolitical and macroeconomic risk. Allowance coverage was at 130% and at 197% after considering collateral. Next slide, capital. The reported CET1 ratio increased 0.1 percentage points from the previous quarter to 17.0%, driven by profit accretion and stable risk-weighted assets. On a fully phased-in basis, the pro forma ratio was 15.0%. The leverage ratio was at 6.2%, more than twice the regulatory minimum of 3%. Next slide, dividends. The Board proposed a final total dividend of SGD 0.81 per share for the fourth quarter, comprising a SGD 0.66 ordinary dividend, up SGD 0.06 from the previous payout and a SGD 0.15 capital return dividend. This brings the total dividend for the year to SGD 3.06 per share or SGD 8.68 billion, an increase of 38% from the previous year. Assuming dividends are held at SGD 0.81 per quarter, annualized dividends will be SGD 3.24 per share, representing a dividend yield of 5.5% based on last Friday's closing share price. Next slide. In summary, we delivered record full year pre-tax profit and achieved a 16% ROE, demonstrating the resilience and adaptability of our franchise amidst rate and tax headwinds. Fee income and treasury customer sales reached new highs, led by Wealth Management, while deposit growth was the strongest in the bank's history. While rate pressures and geopolitical tensions are expected to persist, the quality of our franchise and strong balance sheet provide a solid foundation for the year ahead. Thank you for your attention. I'll now hand you to Su Shan. Tan Shan: Thank you, Sok Hui. So slide, please. So when I look back at 2025, and I think about all the things that we can't control. You can't control geopolitics. You can't control where interest rates go, you can't control where the FX goes or the market goes, and you can't control where tax goes. So we really had the perfect storm in 2025 in terms of rates, where SORA and HIBOR went in terms of the FX, strong Sing dollar and also our tax rates, as you know, went up. Notwithstanding all these really what we call a perfect storm in the macros, the fact that DBS delivered record group total income, record net -- group net interest income in spite of the rates, record fee income, but more pleasing, record net profit before tax -- sorry, record PBT, profit before tax. But more pleasing for me was the record in volumes. You saw, Sok Hui talked about the record in deposit growth, 12%. I was also very happy to see the record net new money growth, which is structural, record AUM. And I think this suggests that I think our engines are firing okay, right? So record total income and PBT. I would credit the group net interest income reaching a profit in spite of those headwinds to our teams doing a really good job both on nimble balance sheet management, on also increasing our fixed rate assets that went up to SGD 210 billion. And also all the teams firing on all cylinders on gathering deposit growth. This, I can attribute to the hard work we've done over the past in using AI, using machine learning, using contextual nudges, all the hard work that we've done to gather new-to-bank customers, to be customer-centric, to have our nudges automated and to use AI smartly. So I think the snowballing effect of volume growth is happening. In terms of markets, we had the highest markets trading since 2021. Markets trading income rose 49% to SGD 1.37 billion. And because 2025 was such a good year for trading, we decided to take advantage of it and to rebalance our portfolio in the fourth quarter. Fourth quarter normally is down, is seasonal, right? By December, everybody close their books, go on holiday. So fourth quarter is normally quite seasonal. We are off to a strong start in 2026. January was very good indeed. We saw Wealth Management as well, a record high total income at SGD 5.7 billion. And more pleasing was the Wealth Management's non-interest income, which is the fee income was up 27%. It's strong everywhere. Offshore wealth, onshore wealth, we saw growth in China, India, Indonesia, Taiwan, and then the two big hubs of Hong Kong and Singapore also, both growing very nicely. We talked about -- Sok Hui has now told us that, we will start sharing the AUM growth for all three segments. It's important for you to understand that DBS has the wealth continuum. So we look at wealth holistically because we don't believe that wealth is static. We believe that wealth grows. And so you start with the priority bank, which is Treasures. You go up to Treasures Private Client, which is where you become an A accredited investor, you start to invest more. And then you go up to the Private Bank where you get access to more sophisticated products. All that continuum, we really got very seriously. And that's what I think has been our secret sauce in growing our Wealth Management franchise. So delivering high ROE, that was really structural growth. I think all the structural stuff that we said, be it Wealth Management, be it in IBG, we saw structural growth in TMT, especially around the tech ecosystem. We saw structural growth in the financial institutions group, especially around the institutional equity space. We saw a recovery in Investment Banking, a long-awaited IPO market finally came back in 2025, both Hong Kong and Singapore are doing remarkably well. But also in payments, I think this is what I was pleased with. In terms of payments transaction services, so DBS was named the Best Bank for Cash and Corporate Banking in Asia by Coalition Greenwich. Coalition Greenwich is rated by the customers, not by us. You can't pitch for it. The customers rate you. And I think that was validation of the good work done by the GTS and IBG team. And also pleasing was the record loan-related fees. So this is where we start to win loan structuring mandates, right, as the lead bank. So loan-related fees was up 14% to SGD 733 million. And we really captured growth in the event-driven space. So it's quite a lot of big chunky deals that came in. This is event-driven, LBO, structured deals, M&A, et cetera, and that was up some 59% year-on-year. So I'm pleased to see that we are winning wallet share, mind share and going up the tiers with our clients. So asset quality remains sound. Our NPL ratio remains stable. As Sok Hui alluded, we did take a subtractive NPL in the fourth quarter. It's important to say that the customer has not defaulted, but we have watchlisted this name for some time now, and we have set aside some GP. So overall, we are comfortable on our exposures. The GP reserve remains sufficient. And just to remind you, the GP reserve, the GP overlay stands at SGD 2.4 billion. Next slide. And just to recap, again, the ordinary dividend increased by SGD 0.06 to SGD 0.66, capital returns of SGD 0.15 per quarter that will be maintained for this year and next year. And so, with the fourth quarter total dividend of SGD 0.81, we're looking at SGD 3.24 for the year going forward. And of course, being a purpose-driven bank, we want to continue to contribute. We made a 10-year commitment. We will stick to the commitment of SGD 100 million to support vulnerable segments. And we have since given SGD 300 million in contribution since 2023. Okay. So what's our 2026 outlook? I think it's hard to predict. So I tell all our clients buckle up, it's going to be a volatile year. I mean, first week of January, we have Venezuela. We had Greenland. We had -- and then further down the month, we had Bitcoin, we had dollar diverse -- well, there's dollar movements, Japanese elections, Thai elections. There's a whole host of things. It feels like a year condensed into a month, and people are getting used to such volatility. And because of such volatility, I think our customers will still want to look for stability. They want to look for resilience. They want to look for reliability, and they want to diversify their concentrator exposures, whether it's in currencies, it's in markets or in supply chains. They'll be looking for the safe haven. They'll be looking for dependable long-term partners. And here, I hope that DBS will continue to be a beneficiary of these global volatile wins, right? We want to be standing out as a safe, long-term dependable and future forward bank. So what's our outlook? Our outlook for total income will be around 2025 levels in spite of the rate headwinds. And that is because we're assuming SORA of 1.25. So the SORA has come down, as you know, some 200 bps from last year. We're predicting two more rate cuts, and we're predicting the dollar to remain strong. However, like last year, we are looking for strong growth in deposits. We continue to look for strong growth also in volumes in terms of net new money. We will continue to be nimble. There's the good thing about volatility is you get some -- you have risk, but you also have opportunities. When markets are very volatile, you can trade, you can be nimble, you can also lock in hopefully some good rates during the market falls. So we want to continue to capture this volatility that will give us hedging opportunities and also growth. Commercial book non-interest income growth to be in high single digits. But for Wealth Management, we are looking for mid-teens growth. So again, continued structural tailwinds continuing for next year. We'll also continue to grow our FIC business, our GFM business, et cetera. Continuing our cost discipline around costs, mid-single-digit expense growth, so around 4% compared to the last few years of 8%. This is indicative of where we want to go. And SP should be pretty comfortable between 17 to 20 bps. Again, depending on the macroeconomic situation and the geopolitical situation, we might have some room for GP write-backs this year as well. So for net profit, we're looking at slightly below 2025 levels. But as I said, we will maintain our cost discipline. We will maintain our credit discipline. We will maintain our operational discipline. And all this underpinned by continued work to make our tech resilient through automation and AI, to make our data resilient through focus on cybersecurity and data life cycle management. And most importantly, we will continue to upskill our people. The adoption of AI, the speed of which has been strong. And we can basically free our staff from mundane work, administration work and use AI to upskill them. And this is the work that we are doing right now, which is exciting for us. So for DBS, looking forward, we want to keep the three moats to stay ahead. What are the three moats? We believe we have a moat in data. We have good precious customer data that we can use as a moat that we got very, very seriously. We have a trust moat. I think we have proven to be a safe bank through thick and thin and trusted and a dependable bank and strong credit ratings. And we have a cultural moat. I think our staff, I'm very proud of our staff's ability to be nimble, to be agile, to work with new technologies and to work with new ways of working. So this enables us to build a long-term firm foundation for growth. That's it from me. Edna Koh: We're now happy to take questions. [Operator Instructions] First question to Chanya. Chanyaporn Chanjaroen: Rthvika and I have questions. The first one, given the record high deposit, are you looking to lend it to MAS like what you did in the previous year? Second, any colors on the Hong Kong specific provisions that you said, what do you call it, subjective assessment, but can you give details on -- or colors on that? Third question is on Indonesia. Given the outlook downgrade by Moody's, what do you see in terms of impact and particularly on your loan book? Are you lending more over there? And Rthvika has one question as well. Rthvika Suvarna: You mentioned 4Q expenses benefited from lower staff costs. Can you expand a little bit if this leads to headcount reduction and quantify it perhaps? And is this optimization continuing into 2026? Tan Shan: Okay. I mean so, and I can take all the questions together. So certainly, as we gather deposits, deposit growth have been stronger than loan growth. We reinvest the surplus deposits into high-quality HQLAs, right? So it's across the board in different good credit rating -- good credit rated, high-quality assets, government bills, et cetera. In terms of the Hong Kong SP, we cannot mention names. And you're right, it's subjective, but we are comfortable that -- because, as I said, we reduced our GP to increase our SP. So we were already prudent in the past. So this is, it shouldn't be any surprise to anyone. In terms of Indonesia, I think this will be good in the long term for Indonesia. Short term, there is some market volatility and some market pain. But I think the long-term implications for increased transparency, governance, increased free float and all that, it's a good thing, right? And the swift action taken by the authorities, I mean, right after the announcement, you saw a lot of announcements coming out from the authorities, I think, is quite commendable. Our books in Indonesia are pretty focused around the large quality blue-chip names. We've looked at it over and over again, I really don't have too much concerns about the credit quality there. It's not a big exposure anyway. So I think it should be okay. And then the fourth quarter, lower staff cost, that's because we fully -- there was the LVB integration in India, and then there was the Citi Taiwan integration. So post integration, we have a lot of dual jobs that were rolling off, right? So that was -- a big chunk of that was the rolling off of the post-integration synergies from the two countries. Looking forward, I know where your question is going. I do think that AI, whether it's generative agentic or just traditional machine learning type of AI will change the way white-collar jobs. This is the world. It's not DBS alone or Singapore or Hong Kong or Asia alone. It's the world. But companies that embrace this new technology embrace it and look to use it to your advantage. That means human and machine interaction is important. How do you train humans to work with machines? How do you train humans to use agents safely, but also to use it to increase your capacity to move them to higher order roles? Frankly, I'm excited. So the work that we are doing right now is precisely that to retrain, whether it's our engineers, our RMs, our call center people, our operations people, everybody, everybody in DBS is trying to adapt to this new way of working, which we want people to feel safe to learn and to use this new capacity, this new superpower that you now have to do a higher order role. You want to, Sok Hui? Sok Hui Chng: I think the only thing I would add is that fourth quarter, I think our results were not so good compared to third quarter. So you should expect that we accrue less bonus. So it's a natural effect of a drop in staff costs as well. Edna Koh: Anyone else have a question? Unknown Attendee: So congratulations Su Shan and Sok Hui on the strong and credible set of results, especially with the perfect storm you mentioned. Looking at the year, the different segments have carried the bank differently, retail funding, corporate lending, wealth advisory and distribution and treasury flows, each contributing their own way. Do you see DBS is getting through a transition in your earning model? Or this is already the new shape of the business? And within that, how do you see the role of the retail franchise here in Singapore and Hong Kong? And how has that changed in our mind? And what changes in customer behavior stood out for you in the year? That's first question. Second question is, with the RMB clearing role only now starting, how does it actually add to your existing transaction or treasury businesses? Does it deepen operating balances and client mandates? Or is it mainly to improve settlement efficiency for flow you already handle? How do you intend to scale that? You mentioned about AI. How is AI changing the business or how the bank is run in the efficiency or decision being made, revenue being generated? Do you have like a data value capture equivalent for AI? Tan Shan: A lot of very big questions, all of them. So to your first question, which is basically, do I see this as a new shape of DBS' business? Look, I think that we are in two big financial hubs, right, Hong Kong and Singapore. And as long as deposit growth continues to be strong, these are two big financial hubs. So Hong Kong benefits from southbound flows from China. Singapore benefits from global flows as well. So both these flows are structurally good for us. If deposit growth continues to be stronger than loan growth, then we will continue to deploy them in HQLA. That's just the trend that we're seeing. In terms of, is there a new shape? So we think it's going to continue to be a bit of a K-shaped economy. So unfortunately, the strong will get stronger. Some of the SMEs are still seeing some stress in the system. There are some segments particularly suffering more than others. And they might need more help from governments, et cetera. Then in our other core markets, we have structural strong growth in India. That will continue a pace. China looks to be in recovery. Indonesia has some short-term challenges. But again, structurally, long term, we remain constructive on Indonesia in the long term. Taiwan has been a fantastic growth story and will continue a pace because of the tech hardware as well as the onshore wealth growth. And they are also promoting onshore wealth management. So there are structural tailwinds, which we want to harness. There will be headwinds in terms of markets and rates and FX, we just had to maneuver and manage. And we have to be aware of the K-shaped kind of economy and reduce risk where we think there are still credit headwinds in some segments. Your second question around the RMB clearing role, yes, we were -- we announced it in December. We think that the role of RMB has risen as a trading currency, as an investment currency, and that will continue. So yes, there will be mandates to be won. The team is working very hard to do it. The dollar dominance will still be -- I mean, dollar is still 80% of the world's trade financing is still cleared in dollars. But RMB, euro, people want to diversify and those who trade with China may want to use RMB as a currency for trade. But as the world also diversifies and if people want to invest in RMB or they want to use it as a payment currency, I think that trend will also be there. And then AI changing -- changes to the business, I can share that we call it Operating Model Transformation, OMT for short. And here, we have different OMTs in the bank. Examples would be KYC, credit memo writing. So Kwee Juan, who's our IBG head together with Kian Tiong, our credit head, their teams have worked together to create an OMT around credit memo writing, and the AI can really help to shorten that whole process. Wealth management and retail, Tse Koon and the team also have several OMTs. Our COO office has done an OMT around operations. So using more of the chatbot to answer queries. And so there's -- we've got quite a few different OMTs, as you will. But since the advance of generative AI, we already rolled it out, and we said there are horizontal use cases, which all in country can use the DBS GPT, which we rolled out middle of last year. The first rollout, not so good. But after that, it got better and better and better. And we are seeing already people using it for myriad things from translation to what are your policies and procedures to how do I answer queries internally, externally, et cetera. So I think quite good usage, 60-over percent using it very actively. With the rise of agents, Agentic AI, we have also come up with our own framework to make sure that it's safe. We have guardrails around the use of personal agents, team agents, enterprise agents, et cetera. As for the DVC, traditionally -- when we were using machine learning AI models, which are more deterministic and rules based, we use A/B testing to derive the economic value, right, whether it's real revenue growth, cost base or loss base. But when you have -- whether it's Agentic AI, Generative AI or others to supplement what we do, I think it will be harder to separate it out, because everyone is going to be using it. So we'll have to rethink how do we do a deliver a DVC, as you said. We haven't landed. We might still try to capture the economic value based on what we've been doing in the past, which is A/B testing. But I suspect there will be a lot more in terms of capacity building and speed of the resolution of tech debt, for example, what used to take months, many months, years can now take weeks, right, for example. And that time save, we can deploy to newer things to grow, because we still need to grow. The team needs to grow on wealth. We need to grow on trading. We need to grow on financial institutions, on tech, on GTS, payments. There's so much growth that we need to build. But I think what excites us is the ability to use what we can harness from capacity to then redeploy for growth. Unknown Attendee: Can I have a follow-up question just on your K-shaped economy growth going forward? How are you tackling the kind of the lower trajectory growth area? Are you derisking those areas, repricing those areas? And those are segments as well as geographies? Tan Shan: Yes. So we've been always very supportive of our SME and SME plans, and we'll continue to be supportive. What we do is we do constant stress test. I mean, since COVID, I think this whole stress testing we've been second nature to us. And we try to stay ahead of these trends so that we can actually proactively identify the weak cases and help them through it. You can help them. You can do M&A, you can give them for warning to reduce risk, et cetera. We have certainly in our portfolio reduced risk in, for example, the consumer side, the unsecured loan space. And we've been very thoughtful in our SME space as well. Edna Koh: Ngui from Reuters. Yantoultra Ngui: Just a follow-up on Indonesia. How do you kind of plan to navigate the near-term headwinds despite the longer-term outlook? Tan Shan: Well, as I said, we have been looking at our book. And we -- I don't think there should be any panic. I think, as I said, I do believe that structurally, this is good for Indonesia in the long term. And Indonesia is a very resilient country. They've been through a lot of ups and downs, but the fundamentals of the country in terms of resourcing, in terms of their ambition to adopt AI, their ability to be resilient will still be there. As I said, I don't think our exposure is too large. We are very focused on the quality names as well. So in the short term, I'm not too worried. In the long term, I see this as a net positive. But Kwee Juan, my IBG head is here, you want to supplement anything? Kwee Juan Han: Yes. So I think for as Su Shan said, for Indonesia, right now, we are continuing to support the larger clients there. And what you see in terms of the market volatility relates to the market, whereas we lend to the operating company that are generating the cash flows, so the day-to-day is not affected by the market. And so, I think that's the differentiation that we need to see. And as Su Shan said, the overall improvement in the way the market is going to be mobile managed, it's a plus for the market itself. Edna Koh: Any other questions? Okay. Goola? Goola Warden: Anyway, congratulations for the results. It was a tough year. But I'm just wondering, you said that you want to deploy the surplus deposits into HQLA, and you mentioned that a couple of times. But is there no loan growth? I mean, because ideally, you should have put it into loan growth. That's one question. And second question is on the types of HQLA, the sovereigns and how can that be NII accretive? That's the other question. And then, of course, for NIM, what was your exit NIM? How do you see NIM developing into 2026? And has your NIM sensitivity dropped because of the way you manage your book? Tan Shan: Okay. I'll take the first, and then you can take the second. So I want to address the question on loan growth. We are still forecasting loan growth to grow by mid-single digits. So it's not like we're not seeing loan growth, we are. And as I said earlier on, we are actually structuring a lot of deals. So frankly, as rates come down, the deals will start to come in, right? January was indicative of -- if any January is indicative of the year, we're very busy on large corporate loan growth. We see growth also in other areas, even mortgages, the new mortgages coming through the door also saw steady growth. So it's not like we're not seeing loan growth. We are -- just that deposit growth was so high, right? It's higher than the actual loan growth has been quite steady at, say, 5%, 6%, whatever percent, right? So this keeps growing, but deposit growth has been stronger. That's why there's a delta. You want to address for NIM? Sok Hui Chng: Yes. So deposits, we can generally deploy deposits that come in on an average about 1 percentage point NIM. So that's not an issue. You can also write the yield curve, take a view if the rates are constructive. So putting into HQLA, frankly, is good because the ROE is very high, and we only put into mainly sovereigns. So it's not that we are taking big risk running any HQLA portfolio. So you can see it in our Pillar 3 disclosures. On the question about NIM, our fourth quarter NIM was 1.93%. Our January NIM is of 1.92%, so it's been fairly stable at the group NIM level. And sensitivity actually -- has actually increased for Sing dollars, because as more and more deposits come in, there's more sensitivity to the SORA, which is a good thing. If rates go up, you benefit more. Goola Warden: Have the deposits been coming in, in Sing dollars more than U.S. dollars? Sok Hui Chng: It's a mix. You can see the data point. I think we disclosed it as well. Sing dollar CASA, you can see grew SGD 28 billion this year. Foreign currency CASA grew SGD 19 billion. These are the chunks of deposits that came in and FDs grew SGD 17 billion. So very strong growth in the deposits. Goola Warden: So one last question on this HQLA. So does the USD go into U.S. sovereigns? And does the Sing dollar deposits go into Singapore government securities? Sok Hui Chng: No, no, it doesn't work like that. We can -- through, sort of, cross-currency swaps and all that, we will manage to the overall margin level that is actually the best for the book. Tan Shan: No, we try to optimize. Goola Warden: Okay. And then the other concern was your foreign exchange. Sok Hui Chng: We have no -- we don't take FX exposure. It's all hedged out. So just be assured, we have a good machinery to do hedging. Edna Koh: Russell, Asian Bank. Russell Pereira: Congratulations again on the record results. My question is mainly on IBG with the AI-driven investment up cycle and as well as electronics rebound, the intra-Asian growth as well as trades outside of U.S. and export, import, et cetera. Did you notice or did you see any sort of particular areas that you would like to strengthen your position in for IBG and outside of the RMB clearance? Tan Shan: Okay. I will start and then Kwee Juan, if you want to supplement. So yes, I mentioned that for IBG, there's some structural tailwinds in both TMT, which is tech, data centers, the whole AI growth in AI, CapEx, but also in financial institutions and II as people are putting more money to work in capital markets, the capital markets growth, insurance growth, all that's structural, right? And that will continue. And as money flows into the Asian markets, that structural trend will also continue. In terms of trade outside the U.S., you're right, we -- our economist calls it TOTUS, right, T-O-T-U-S. And that figure has grown certainly since Liberation Day last April. What we are seeing is more intra-regional trade in Asia. We see trade between North Asia and ASEAN, so North and South Asia, North Asia and India, intra-regional trade. We see more trade between the GCC and Asia, GCC and China. That trend seems to be continuing as well. And a lot more cooperation. So whether it's like the Queen Bee programs to Singapore, Kwee Juan has been helping leading Queen Bee's big MNCs bringing the SME or midsized companies as an ecosystem to hunt in the pack in other markets, that continues. And as people diversify their supply chains, Kwee Juan calls it international supply chains, I think we will see continued opportunities there in the long term. Kwee Juan, you want to supplement? Kwee Juan Han: Yes. So I think on the AI piece, a lot of it is around the ecosystem financing. This is short-dated financing of 30 to 60 days for a lot of your suppliers into the ecosystem for AI. So as data centers get built out, you're going to see them stuff up on other equipment. So we do see GPU as a service now becoming an area of interest for a lot of our customers. And also, at the same time, with the semiconductor, CapEx now also going up, because each of these servers require different kind of semiconductors, and that is something that we are seeing some level of activity. So all these are driven by the broader climate of data center and AI being the core for capability that people are building out too. Edna Koh: Maybe we have time for one last question if anyone has. Okay, if not then I think we can draw this time a close. Thank you everyone for your time and we'll see you next quarter. Thank you.
Edna Koh: Okay. Good morning, everybody, and welcome to DBS' Fourth Quarter and Full Year 2025 Financial Results Briefing. This morning, we announced for the full year that we achieved record income and profit before tax. Net profit came in at SGD 11 billion with ROE at 16.2%. For the fourth quarter, net profit was SGD 2.36 billion. With us today are our CEO, Tan Su Shan; and our CFO, Chng Sok Hui. Without further ado, let me invite Sok Hui to give us more color. Sok Hui Chng: Good morning, everyone, and happy Chinese New Year in advance. Okay, Slide 2. On the highlights, we delivered a strong set of results for full year 2025. Pre-tax profit rose to a new high of SGD 13.1 billion. Return on equity was 16.2% and return on tangible equity was 17.8%. Total income grew 3% to a record SGD 22.9 billion despite a challenging rate environment. Average SORA and HIBOR both fell by almost 2 percentage points, and there were adverse translation effects from a strong Singapore dollar. Group net interest income was nonetheless modestly higher, driven by record deposit growth and proactive balance sheet management. Fee income and treasury customer sales both grew double digits and reached new highs, led by Wealth Management. Markets trading income rose to the highest level since 2021. The cost-to-income ratio was unchanged at 40%. Net profit was 3% lower at SGD 11.0 billion. This was due to higher tax expenses of SGD 400 million from the consequential implementation of the 15% global minimum tax. For the fourth quarter, pre-tax profit was SGD 2.8 billion, down 6% from a year ago. Total income declined 3% to SGD 5.33 billion as higher fee income and treasury customer sales were offset by the impact of rate headwinds and the absence of non-recurring gains recorded a year ago. Asset quality remains sound. A previously watchlisted real estate exposure was prudently recognized as an NPL during the quarter, contributing to higher specific allowances. The impact was partially offset by a release of general allowances set aside in prior periods. Allowance coverage stood at 130% and at 197% after considering collateral. Capital levels stayed strong. The transitional CET1 ratio was 17.0% with a fully phased-in ratio at 15.0%. The Board proposed a final total dividend of SGD 0.81 per share for the fourth quarter, comprising a SGD 0.66 ordinary dividend, up SGD 0.06 from the previous payout and a SGD 0.15 capital return dividend. The Board remains committed to managing down the stock of excess capital and barring unforeseen circumstances, plans to maintain the SGD 0.15 per share capital return dividend each quarter through 2026 and 2027. Full year performance. Slide 3. For the full year, total income and pre-tax profit were records. Group net interest income was modestly higher at SGD 14.5 billion, a new high as record deposit growth and proactive hedging offset the impact of rate headwinds. Within this, commercial book net interest income fell 4% or SGD 549 million as net interest margin narrowed due to the rates impact. Fee income rose 18% or SGD 730 million to a record SGD 4.90 billion, led by Wealth Management. Commercial book, other non-interest income was SGD 2.13 billion. Treasury customer sales to wealth and corporate clients grew 14% to a new high, but the increase was offset by lower other income, which had non-recurring gains a year ago. Markets trading income rose 49% or SGD 452 million to SGD 1.37 billion, the highest since 2021, benefiting from lower funding costs and a more conducive trading environment. Expenses increased 4% or SGD 354 million to SGD 9.25 billion, led by staff costs. The cost-income ratio was unchanged at 40% and profit before allowances rose 2% or SGD 249 million to a new high of SGD 13.7 billion. Total allowances were 27% or SGD 169 million higher at SGD 791 million. Specific allowances were SGD 854 million or 19 basis points of loans, largely due to the real estate NPL in the fourth quarter. General allowances of SGD 63 million were written back during the year, including the release of allowances previously set aside for the real estate exposure. There was a one-time item relating to the bank's CSR commitment announced in 2023 to allocate up to SGD 1 billion over 10 years to support vulnerable communities. With SGD 100 million set aside from the year's profits, the cumulative amount since 2023 for CSR stands at SGD 300 million. Next slide, fourth quarter year-on-year performance. For the fourth quarter, pre-tax profit was SGD 2.80 billion, 6% lower than a year ago. Group net interest income declined 4%. Within this, commercial book net interest income fell 6% or SGD 239 million to SGD 3.59 billion as net interest margin narrowed due to the rate headwinds. Fee income rose 14% or SGD 131 million to SGD 1.10 billion, led by Wealth Management. Commercial book other non-interest income was SGD 486 million, within which treasury customer sales rose 13% or SGD 56 million. Expenses declined 1% or SGD 23 million to SGD 2.37 billion. The cost-to-income ratio was stable. Profit before allowances was SGD 2.96 billion, 5% or SGD 151 million lower. Total allowances were unchanged at SGD 209 million as higher specific allowances were offset by a write-back of general allowances. Next slide, fourth quarter, quarter-on-quarter performance. Compared to the previous quarter, fourth quarter net profit declined 20%. Group net interest income was marginally higher. Within this, commercial book net interest income rose 1% or SGD 34 million as deposit growth momentum was sustained. Deposits increased SGD 16 billion or 3% in constant currency terms, offsetting the impact from lower SORA. Fee income fell 19% or SGD 258 million and commercial book other non-interest income declined 16% to SGD 92 million due to seasonally lower client activity. Markets trading income fell 65% or SGD 285 million from the previous quarter's high base and seasonal factors. The business also took the opportunity to rebalance the portfolio, which will position us well for 2026. Expenses declined 1% or SGD 21 million to SGD 2.37 billion. Specific allowances were higher, partially offset by a general allowance write-back. Next slide, net interest income. Compared to the previous quarter, group net interest income was marginally higher at SGD 3.59 billion. Net interest margin declined 3 basis points to 1.93% as SORA continued to trend lower during the quarter. The impact of lower rates was offset by two factors. First, balance sheet hedges that have been proactively increased over the past few years helped mitigate the decline in net interest margin. Second, deposit growth remains strong. Deposits rose SGD 16 billion or 3% in constant currency terms during the quarter, bringing the full year increase to SGD 64 billion or 12%, the largest absolute increase in the bank's history. The growth outpaced loans and the surplus was deployed into liquid assets. This was accretive to net interest income and return on equity, though it modestly reduced net interest margin. For the full year, group net interest income was modestly higher at SGD 14.5 billion as balance sheet hedging and deposit growth offset the sharp declines in SORA and HIBOR as well as adverse FX translation from a stronger Singapore dollar. Commercial book net interest income declined 4% from a lower net interest margin. Next slide, deposits. During the quarter, total deposits rose 3% or SGD 16 billion in constant currency terms, mostly from CASA inflows. CASA, current and savings account increased in both Sing dollars and foreign currencies. Sing dollar CASA rose from seasonal year-end retail inflows and a continued shift of funds from treasury bills back into deposits. Foreign currency CASA growth was driven by both wealth and corporate clients. For the full year, total deposits grew SGD 64 billion or 12% in constant currency terms, the largest absolute increase in the bank's history with over 2/3 of the increase in CASA. Liquidity remains healthy. The group's liquidity coverage ratio was 155% and net stable funding ratio was 117%, both comfortably above regulatory requirements. Next slide, loans. During the quarter, gross loans rose 2% or SGD 10 billion in constant currency terms to SGD 451 billion. The increase was led by trade loans with modest increases in non-trade corporate and Wealth Management loans. As deposits continue to grow faster than loans, the surplus was deployed into liquid assets. This was accretive to net interest income and return on equity. For the full year, loans rose 6% or SGD 24 billion with broad-based growth across trade, non-trade corporate and Wealth Management loans. And you can see from the chart, the high-quality liquid assets for the year increased by SGD 42 billion. Fee income, next slide. Gross fee income rose 15% for the full year to a record SGD 5.86 billion. Growth was broad-based and led by Wealth Management, which increased 29% to a new high. Transaction service and loan-related fees also reached record levels, while investment banking fees strengthened. For the fourth quarter, gross fee income rose 12% from a year ago to SGD 1.38 billion. The increase was led by Wealth Management fees. Transaction service and investment banking fees were also higher. Compared to the previous quarter, gross fee income declined 13%. Wealth Management and loan-related fees fell due to seasonal factors, while transaction service fees were lower compared to a strong third quarter. The declines were partially offset by higher card fees. Next slide. Wealth Management segment. The Wealth Management segment comprises Treasurers, Private Client and Private Bank. Wealth Management was a key growth driver for the year. Full year segment income rose 9% to SGD 5.68 billion, underpinned by record investment product and bancassurance sales. Assets under management grew 19% in constant currency terms from a year ago to a new high of SGD 488 billion. This quarter, we have started to disclose net new money at the bottom of this slide. The figures include inflows from Treasures, Treasures Private Client and the Private Bank. Total inflows for the three segments were SGD 12 billion for the fourth quarter, bringing full year inflows to a record SGD 39 billion, 21% higher than 2024. For the fourth quarter, segment income rose 5% from a year ago to SGD 1.30 billion, driven by higher non-interest income from stronger investment products and bancassurance sales. This more than offset a decline in net interest income from lower rates. Next slide. Customer-driven non-interest income. This slide shows non-interest income from the commercial book that's customer-driven. While fee income and treasury customer sales are recorded under different P&L lines due to accounting treatment, both are driven by consumer and corporate demand for financial solutions and should be viewed together. For the full year, customer-driven non-interest income rose 16% to SGD 7.04 billion as net fee income rose 18% to SGD 4.90 billion and treasury customer sales grew 14% to SGD 2.14 billion. Both were at new highs, driven by broad-based growth and led by Wealth Management. For the fourth quarter, growth momentum remains strong. Customer-driven non-interest income rose 13% from a year ago around the average pace over the prior four quarters. The performance reflected our continued efforts to broaden and deepen relationships with wealth, corporate and institutional clients. Next slide, expenses. Expenses were tightly managed. Full year expenses rose 4% from a year ago to SGD 9.25 billion, led by higher staff costs. The cost-to-income ratio was unchanged at 40%. Fourth quarter expenses were 1% lower, both quarter-on-quarter and year-on-year at SGD 2.37 billion, driven by lower staff cost. Next slide, Hong Kong. Hong Kong's full year net profit rose 3% in constant currency terms to a record SGD 1.61 billion as total income increased 6% to SGD 3.52 billion, driven by higher non-interest income. Net interest income was 3% higher at SGD 2.09 billion from deposit growth. Net interest margin was slightly higher as the impact of lower HIBOR on the commercial book was offset by an improvement in markets trading. Deposits rose 10%, led by CASA inflows, while loans grew 1%. Surplus deposits were deployed into non-loan assets supporting net interest income. Net fee income rose 22% to SGD 993 million, led by Wealth Management. Other non-interest income was 7% lower at SGD 441 million as lower markets trading non-interest income was partially offset by higher treasury customer sales. Expenses increased 3% to SGD 1.33 billion from higher staff costs. Total allowances doubled to SGD 296 million, reflecting higher specific allowances largely from the real estate NPL in the fourth quarter. Next slide, non-performing assets. The NPL ratio was unchanged from the previous quarter at 1.0%, notwithstanding the recognition of the real estate exposure as an NPL in the fourth quarter. The exposure have been on our watchlist for 2 years. The borrower is currently not in default status. We reviewed the credit and took a prudent decision to downgrade it to NPL following our subjective default assessment. Next slide, specific allowances. Specific allowances for the fourth quarter rose to SGD 415 million with a large part of the increase due to the real estate NPL based on asset recovery values. The increase was partially offset by a release of general allowances that had been previously set aside for the exposure. For the full year, specific allowances amounted to SGD 845 million or 19 basis points of loans, broadly in line with our through-cycle average. Next slide, general allowances. As at end of December, total allowance reserves stood at SGD 6.28 billion, comprising SGD 2.42 billion in specific allowance reserves and SGD 3.86 billion in general allowance reserves. The slight decline in GP reserves from the previous quarter was partly due to the release of general allowances previously set aside for the real estate NPL, which were reclassified to specific allowances. As communicated previously, we set aside GP once the case is placed on the watchlist. In the event that the watchlisted case is classified as NPL, the GP set aside will be released. General allowance reserves remain prudent with the GP overlay at SGD 2.4 billion out of the total SGD 3.86 billion. So to recap, the GP overlay of SGD 2.4 billion is in addition to baseline GP generated by the model, and it takes into account stress scenarios such as heightened geopolitical and macroeconomic risk. Allowance coverage was at 130% and at 197% after considering collateral. Next slide, capital. The reported CET1 ratio increased 0.1 percentage points from the previous quarter to 17.0%, driven by profit accretion and stable risk-weighted assets. On a fully phased-in basis, the pro forma ratio was 15.0%. The leverage ratio was at 6.2%, more than twice the regulatory minimum of 3%. Next slide, dividends. The Board proposed a final total dividend of SGD 0.81 per share for the fourth quarter, comprising a SGD 0.66 ordinary dividend, up SGD 0.06 from the previous payout and a SGD 0.15 capital return dividend. This brings the total dividend for the year to SGD 3.06 per share or SGD 8.68 billion, an increase of 38% from the previous year. Assuming dividends are held at SGD 0.81 per quarter, annualized dividends will be SGD 3.24 per share, representing a dividend yield of 5.5% based on last Friday's closing share price. Next slide. In summary, we delivered record full year pre-tax profit and achieved a 16% ROE, demonstrating the resilience and adaptability of our franchise amidst rate and tax headwinds. Fee income and treasury customer sales reached new highs, led by Wealth Management, while deposit growth was the strongest in the bank's history. While rate pressures and geopolitical tensions are expected to persist, the quality of our franchise and strong balance sheet provide a solid foundation for the year ahead. Thank you for your attention. I'll now hand you to Su Shan. Tan Shan: Thank you, Sok Hui. So slide, please. So when I look back at 2025, and I think about all the things that we can't control. You can't control geopolitics. You can't control where interest rates go, you can't control where the FX goes or the market goes, and you can't control where tax goes. So we really had the perfect storm in 2025 in terms of rates, where SORA and HIBOR went in terms of the FX, strong Sing dollar and also our tax rates, as you know, went up. Notwithstanding all these really what we call a perfect storm in the macros, the fact that DBS delivered record group total income, record net -- group net interest income in spite of the rates, record fee income, but more pleasing, record net profit before tax -- sorry, record PBT, profit before tax. But more pleasing for me was the record in volumes. You saw, Sok Hui talked about the record in deposit growth, 12%. I was also very happy to see the record net new money growth, which is structural, record AUM. And I think this suggests that I think our engines are firing okay, right? So record total income and PBT. I would credit the group net interest income reaching a profit in spite of those headwinds to our teams doing a really good job both on nimble balance sheet management, on also increasing our fixed rate assets that went up to SGD 210 billion. And also all the teams firing on all cylinders on gathering deposit growth. This, I can attribute to the hard work we've done over the past in using AI, using machine learning, using contextual nudges, all the hard work that we've done to gather new-to-bank customers, to be customer-centric, to have our nudges automated and to use AI smartly. So I think the snowballing effect of volume growth is happening. In terms of markets, we had the highest markets trading since 2021. Markets trading income rose 49% to SGD 1.37 billion. And because 2025 was such a good year for trading, we decided to take advantage of it and to rebalance our portfolio in the fourth quarter. Fourth quarter normally is down, is seasonal, right? By December, everybody close their books, go on holiday. So fourth quarter is normally quite seasonal. We are off to a strong start in 2026. January was very good indeed. We saw Wealth Management as well, a record high total income at SGD 5.7 billion. And more pleasing was the Wealth Management's non-interest income, which is the fee income was up 27%. It's strong everywhere. Offshore wealth, onshore wealth, we saw growth in China, India, Indonesia, Taiwan, and then the two big hubs of Hong Kong and Singapore also, both growing very nicely. We talked about -- Sok Hui has now told us that, we will start sharing the AUM growth for all three segments. It's important for you to understand that DBS has the wealth continuum. So we look at wealth holistically because we don't believe that wealth is static. We believe that wealth grows. And so you start with the priority bank, which is Treasures. You go up to Treasures Private Client, which is where you become an A accredited investor, you start to invest more. And then you go up to the Private Bank where you get access to more sophisticated products. All that continuum, we really got very seriously. And that's what I think has been our secret sauce in growing our Wealth Management franchise. So delivering high ROE, that was really structural growth. I think all the structural stuff that we said, be it Wealth Management, be it in IBG, we saw structural growth in TMT, especially around the tech ecosystem. We saw structural growth in the financial institutions group, especially around the institutional equity space. We saw a recovery in Investment Banking, a long-awaited IPO market finally came back in 2025, both Hong Kong and Singapore are doing remarkably well. But also in payments, I think this is what I was pleased with. In terms of payments transaction services, so DBS was named the Best Bank for Cash and Corporate Banking in Asia by Coalition Greenwich. Coalition Greenwich is rated by the customers, not by us. You can't pitch for it. The customers rate you. And I think that was validation of the good work done by the GTS and IBG team. And also pleasing was the record loan-related fees. So this is where we start to win loan structuring mandates, right, as the lead bank. So loan-related fees was up 14% to SGD 733 million. And we really captured growth in the event-driven space. So it's quite a lot of big chunky deals that came in. This is event-driven, LBO, structured deals, M&A, et cetera, and that was up some 59% year-on-year. So I'm pleased to see that we are winning wallet share, mind share and going up the tiers with our clients. So asset quality remains sound. Our NPL ratio remains stable. As Sok Hui alluded, we did take a subtractive NPL in the fourth quarter. It's important to say that the customer has not defaulted, but we have watchlisted this name for some time now, and we have set aside some GP. So overall, we are comfortable on our exposures. The GP reserve remains sufficient. And just to remind you, the GP reserve, the GP overlay stands at SGD 2.4 billion. Next slide. And just to recap, again, the ordinary dividend increased by SGD 0.06 to SGD 0.66, capital returns of SGD 0.15 per quarter that will be maintained for this year and next year. And so, with the fourth quarter total dividend of SGD 0.81, we're looking at SGD 3.24 for the year going forward. And of course, being a purpose-driven bank, we want to continue to contribute. We made a 10-year commitment. We will stick to the commitment of SGD 100 million to support vulnerable segments. And we have since given SGD 300 million in contribution since 2023. Okay. So what's our 2026 outlook? I think it's hard to predict. So I tell all our clients buckle up, it's going to be a volatile year. I mean, first week of January, we have Venezuela. We had Greenland. We had -- and then further down the month, we had Bitcoin, we had dollar diverse -- well, there's dollar movements, Japanese elections, Thai elections. There's a whole host of things. It feels like a year condensed into a month, and people are getting used to such volatility. And because of such volatility, I think our customers will still want to look for stability. They want to look for resilience. They want to look for reliability, and they want to diversify their concentrator exposures, whether it's in currencies, it's in markets or in supply chains. They'll be looking for the safe haven. They'll be looking for dependable long-term partners. And here, I hope that DBS will continue to be a beneficiary of these global volatile wins, right? We want to be standing out as a safe, long-term dependable and future forward bank. So what's our outlook? Our outlook for total income will be around 2025 levels in spite of the rate headwinds. And that is because we're assuming SORA of 1.25. So the SORA has come down, as you know, some 200 bps from last year. We're predicting two more rate cuts, and we're predicting the dollar to remain strong. However, like last year, we are looking for strong growth in deposits. We continue to look for strong growth also in volumes in terms of net new money. We will continue to be nimble. There's the good thing about volatility is you get some -- you have risk, but you also have opportunities. When markets are very volatile, you can trade, you can be nimble, you can also lock in hopefully some good rates during the market falls. So we want to continue to capture this volatility that will give us hedging opportunities and also growth. Commercial book non-interest income growth to be in high single digits. But for Wealth Management, we are looking for mid-teens growth. So again, continued structural tailwinds continuing for next year. We'll also continue to grow our FIC business, our GFM business, et cetera. Continuing our cost discipline around costs, mid-single-digit expense growth, so around 4% compared to the last few years of 8%. This is indicative of where we want to go. And SP should be pretty comfortable between 17 to 20 bps. Again, depending on the macroeconomic situation and the geopolitical situation, we might have some room for GP write-backs this year as well. So for net profit, we're looking at slightly below 2025 levels. But as I said, we will maintain our cost discipline. We will maintain our credit discipline. We will maintain our operational discipline. And all this underpinned by continued work to make our tech resilient through automation and AI, to make our data resilient through focus on cybersecurity and data life cycle management. And most importantly, we will continue to upskill our people. The adoption of AI, the speed of which has been strong. And we can basically free our staff from mundane work, administration work and use AI to upskill them. And this is the work that we are doing right now, which is exciting for us. So for DBS, looking forward, we want to keep the three moats to stay ahead. What are the three moats? We believe we have a moat in data. We have good precious customer data that we can use as a moat that we got very, very seriously. We have a trust moat. I think we have proven to be a safe bank through thick and thin and trusted and a dependable bank and strong credit ratings. And we have a cultural moat. I think our staff, I'm very proud of our staff's ability to be nimble, to be agile, to work with new technologies and to work with new ways of working. So this enables us to build a long-term firm foundation for growth. That's it from me. Edna Koh: We're now happy to take questions. [Operator Instructions] First question to Chanya. Chanyaporn Chanjaroen: Rthvika and I have questions. The first one, given the record high deposit, are you looking to lend it to MAS like what you did in the previous year? Second, any colors on the Hong Kong specific provisions that you said, what do you call it, subjective assessment, but can you give details on -- or colors on that? Third question is on Indonesia. Given the outlook downgrade by Moody's, what do you see in terms of impact and particularly on your loan book? Are you lending more over there? And Rthvika has one question as well. Rthvika Suvarna: You mentioned 4Q expenses benefited from lower staff costs. Can you expand a little bit if this leads to headcount reduction and quantify it perhaps? And is this optimization continuing into 2026? Tan Shan: Okay. I mean so, and I can take all the questions together. So certainly, as we gather deposits, deposit growth have been stronger than loan growth. We reinvest the surplus deposits into high-quality HQLAs, right? So it's across the board in different good credit rating -- good credit rated, high-quality assets, government bills, et cetera. In terms of the Hong Kong SP, we cannot mention names. And you're right, it's subjective, but we are comfortable that -- because, as I said, we reduced our GP to increase our SP. So we were already prudent in the past. So this is, it shouldn't be any surprise to anyone. In terms of Indonesia, I think this will be good in the long term for Indonesia. Short term, there is some market volatility and some market pain. But I think the long-term implications for increased transparency, governance, increased free float and all that, it's a good thing, right? And the swift action taken by the authorities, I mean, right after the announcement, you saw a lot of announcements coming out from the authorities, I think, is quite commendable. Our books in Indonesia are pretty focused around the large quality blue-chip names. We've looked at it over and over again, I really don't have too much concerns about the credit quality there. It's not a big exposure anyway. So I think it should be okay. And then the fourth quarter, lower staff cost, that's because we fully -- there was the LVB integration in India, and then there was the Citi Taiwan integration. So post integration, we have a lot of dual jobs that were rolling off, right? So that was -- a big chunk of that was the rolling off of the post-integration synergies from the two countries. Looking forward, I know where your question is going. I do think that AI, whether it's generative agentic or just traditional machine learning type of AI will change the way white-collar jobs. This is the world. It's not DBS alone or Singapore or Hong Kong or Asia alone. It's the world. But companies that embrace this new technology embrace it and look to use it to your advantage. That means human and machine interaction is important. How do you train humans to work with machines? How do you train humans to use agents safely, but also to use it to increase your capacity to move them to higher order roles? Frankly, I'm excited. So the work that we are doing right now is precisely that to retrain, whether it's our engineers, our RMs, our call center people, our operations people, everybody, everybody in DBS is trying to adapt to this new way of working, which we want people to feel safe to learn and to use this new capacity, this new superpower that you now have to do a higher order role. You want to, Sok Hui? Sok Hui Chng: I think the only thing I would add is that fourth quarter, I think our results were not so good compared to third quarter. So you should expect that we accrue less bonus. So it's a natural effect of a drop in staff costs as well. Edna Koh: Anyone else have a question? Unknown Attendee: So congratulations Su Shan and Sok Hui on the strong and credible set of results, especially with the perfect storm you mentioned. Looking at the year, the different segments have carried the bank differently, retail funding, corporate lending, wealth advisory and distribution and treasury flows, each contributing their own way. Do you see DBS is getting through a transition in your earning model? Or this is already the new shape of the business? And within that, how do you see the role of the retail franchise here in Singapore and Hong Kong? And how has that changed in our mind? And what changes in customer behavior stood out for you in the year? That's first question. Second question is, with the RMB clearing role only now starting, how does it actually add to your existing transaction or treasury businesses? Does it deepen operating balances and client mandates? Or is it mainly to improve settlement efficiency for flow you already handle? How do you intend to scale that? You mentioned about AI. How is AI changing the business or how the bank is run in the efficiency or decision being made, revenue being generated? Do you have like a data value capture equivalent for AI? Tan Shan: A lot of very big questions, all of them. So to your first question, which is basically, do I see this as a new shape of DBS' business? Look, I think that we are in two big financial hubs, right, Hong Kong and Singapore. And as long as deposit growth continues to be strong, these are two big financial hubs. So Hong Kong benefits from southbound flows from China. Singapore benefits from global flows as well. So both these flows are structurally good for us. If deposit growth continues to be stronger than loan growth, then we will continue to deploy them in HQLA. That's just the trend that we're seeing. In terms of, is there a new shape? So we think it's going to continue to be a bit of a K-shaped economy. So unfortunately, the strong will get stronger. Some of the SMEs are still seeing some stress in the system. There are some segments particularly suffering more than others. And they might need more help from governments, et cetera. Then in our other core markets, we have structural strong growth in India. That will continue a pace. China looks to be in recovery. Indonesia has some short-term challenges. But again, structurally, long term, we remain constructive on Indonesia in the long term. Taiwan has been a fantastic growth story and will continue a pace because of the tech hardware as well as the onshore wealth growth. And they are also promoting onshore wealth management. So there are structural tailwinds, which we want to harness. There will be headwinds in terms of markets and rates and FX, we just had to maneuver and manage. And we have to be aware of the K-shaped kind of economy and reduce risk where we think there are still credit headwinds in some segments. Your second question around the RMB clearing role, yes, we were -- we announced it in December. We think that the role of RMB has risen as a trading currency, as an investment currency, and that will continue. So yes, there will be mandates to be won. The team is working very hard to do it. The dollar dominance will still be -- I mean, dollar is still 80% of the world's trade financing is still cleared in dollars. But RMB, euro, people want to diversify and those who trade with China may want to use RMB as a currency for trade. But as the world also diversifies and if people want to invest in RMB or they want to use it as a payment currency, I think that trend will also be there. And then AI changing -- changes to the business, I can share that we call it Operating Model Transformation, OMT for short. And here, we have different OMTs in the bank. Examples would be KYC, credit memo writing. So Kwee Juan, who's our IBG head together with Kian Tiong, our credit head, their teams have worked together to create an OMT around credit memo writing, and the AI can really help to shorten that whole process. Wealth management and retail, Tse Koon and the team also have several OMTs. Our COO office has done an OMT around operations. So using more of the chatbot to answer queries. And so there's -- we've got quite a few different OMTs, as you will. But since the advance of generative AI, we already rolled it out, and we said there are horizontal use cases, which all in country can use the DBS GPT, which we rolled out middle of last year. The first rollout, not so good. But after that, it got better and better and better. And we are seeing already people using it for myriad things from translation to what are your policies and procedures to how do I answer queries internally, externally, et cetera. So I think quite good usage, 60-over percent using it very actively. With the rise of agents, Agentic AI, we have also come up with our own framework to make sure that it's safe. We have guardrails around the use of personal agents, team agents, enterprise agents, et cetera. As for the DVC, traditionally -- when we were using machine learning AI models, which are more deterministic and rules based, we use A/B testing to derive the economic value, right, whether it's real revenue growth, cost base or loss base. But when you have -- whether it's Agentic AI, Generative AI or others to supplement what we do, I think it will be harder to separate it out, because everyone is going to be using it. So we'll have to rethink how do we do a deliver a DVC, as you said. We haven't landed. We might still try to capture the economic value based on what we've been doing in the past, which is A/B testing. But I suspect there will be a lot more in terms of capacity building and speed of the resolution of tech debt, for example, what used to take months, many months, years can now take weeks, right, for example. And that time save, we can deploy to newer things to grow, because we still need to grow. The team needs to grow on wealth. We need to grow on trading. We need to grow on financial institutions, on tech, on GTS, payments. There's so much growth that we need to build. But I think what excites us is the ability to use what we can harness from capacity to then redeploy for growth. Unknown Attendee: Can I have a follow-up question just on your K-shaped economy growth going forward? How are you tackling the kind of the lower trajectory growth area? Are you derisking those areas, repricing those areas? And those are segments as well as geographies? Tan Shan: Yes. So we've been always very supportive of our SME and SME plans, and we'll continue to be supportive. What we do is we do constant stress test. I mean, since COVID, I think this whole stress testing we've been second nature to us. And we try to stay ahead of these trends so that we can actually proactively identify the weak cases and help them through it. You can help them. You can do M&A, you can give them for warning to reduce risk, et cetera. We have certainly in our portfolio reduced risk in, for example, the consumer side, the unsecured loan space. And we've been very thoughtful in our SME space as well. Edna Koh: Ngui from Reuters. Yantoultra Ngui: Just a follow-up on Indonesia. How do you kind of plan to navigate the near-term headwinds despite the longer-term outlook? Tan Shan: Well, as I said, we have been looking at our book. And we -- I don't think there should be any panic. I think, as I said, I do believe that structurally, this is good for Indonesia in the long term. And Indonesia is a very resilient country. They've been through a lot of ups and downs, but the fundamentals of the country in terms of resourcing, in terms of their ambition to adopt AI, their ability to be resilient will still be there. As I said, I don't think our exposure is too large. We are very focused on the quality names as well. So in the short term, I'm not too worried. In the long term, I see this as a net positive. But Kwee Juan, my IBG head is here, you want to supplement anything? Kwee Juan Han: Yes. So I think for as Su Shan said, for Indonesia, right now, we are continuing to support the larger clients there. And what you see in terms of the market volatility relates to the market, whereas we lend to the operating company that are generating the cash flows, so the day-to-day is not affected by the market. And so, I think that's the differentiation that we need to see. And as Su Shan said, the overall improvement in the way the market is going to be mobile managed, it's a plus for the market itself. Edna Koh: Any other questions? Okay. Goola? Goola Warden: Anyway, congratulations for the results. It was a tough year. But I'm just wondering, you said that you want to deploy the surplus deposits into HQLA, and you mentioned that a couple of times. But is there no loan growth? I mean, because ideally, you should have put it into loan growth. That's one question. And second question is on the types of HQLA, the sovereigns and how can that be NII accretive? That's the other question. And then, of course, for NIM, what was your exit NIM? How do you see NIM developing into 2026? And has your NIM sensitivity dropped because of the way you manage your book? Tan Shan: Okay. I'll take the first, and then you can take the second. So I want to address the question on loan growth. We are still forecasting loan growth to grow by mid-single digits. So it's not like we're not seeing loan growth, we are. And as I said earlier on, we are actually structuring a lot of deals. So frankly, as rates come down, the deals will start to come in, right? January was indicative of -- if any January is indicative of the year, we're very busy on large corporate loan growth. We see growth also in other areas, even mortgages, the new mortgages coming through the door also saw steady growth. So it's not like we're not seeing loan growth. We are -- just that deposit growth was so high, right? It's higher than the actual loan growth has been quite steady at, say, 5%, 6%, whatever percent, right? So this keeps growing, but deposit growth has been stronger. That's why there's a delta. You want to address for NIM? Sok Hui Chng: Yes. So deposits, we can generally deploy deposits that come in on an average about 1 percentage point NIM. So that's not an issue. You can also write the yield curve, take a view if the rates are constructive. So putting into HQLA, frankly, is good because the ROE is very high, and we only put into mainly sovereigns. So it's not that we are taking big risk running any HQLA portfolio. So you can see it in our Pillar 3 disclosures. On the question about NIM, our fourth quarter NIM was 1.93%. Our January NIM is of 1.92%, so it's been fairly stable at the group NIM level. And sensitivity actually -- has actually increased for Sing dollars, because as more and more deposits come in, there's more sensitivity to the SORA, which is a good thing. If rates go up, you benefit more. Goola Warden: Have the deposits been coming in, in Sing dollars more than U.S. dollars? Sok Hui Chng: It's a mix. You can see the data point. I think we disclosed it as well. Sing dollar CASA, you can see grew SGD 28 billion this year. Foreign currency CASA grew SGD 19 billion. These are the chunks of deposits that came in and FDs grew SGD 17 billion. So very strong growth in the deposits. Goola Warden: So one last question on this HQLA. So does the USD go into U.S. sovereigns? And does the Sing dollar deposits go into Singapore government securities? Sok Hui Chng: No, no, it doesn't work like that. We can -- through, sort of, cross-currency swaps and all that, we will manage to the overall margin level that is actually the best for the book. Tan Shan: No, we try to optimize. Goola Warden: Okay. And then the other concern was your foreign exchange. Sok Hui Chng: We have no -- we don't take FX exposure. It's all hedged out. So just be assured, we have a good machinery to do hedging. Edna Koh: Russell, Asian Bank. Russell Pereira: Congratulations again on the record results. My question is mainly on IBG with the AI-driven investment up cycle and as well as electronics rebound, the intra-Asian growth as well as trades outside of U.S. and export, import, et cetera. Did you notice or did you see any sort of particular areas that you would like to strengthen your position in for IBG and outside of the RMB clearance? Tan Shan: Okay. I will start and then Kwee Juan, if you want to supplement. So yes, I mentioned that for IBG, there's some structural tailwinds in both TMT, which is tech, data centers, the whole AI growth in AI, CapEx, but also in financial institutions and II as people are putting more money to work in capital markets, the capital markets growth, insurance growth, all that's structural, right? And that will continue. And as money flows into the Asian markets, that structural trend will also continue. In terms of trade outside the U.S., you're right, we -- our economist calls it TOTUS, right, T-O-T-U-S. And that figure has grown certainly since Liberation Day last April. What we are seeing is more intra-regional trade in Asia. We see trade between North Asia and ASEAN, so North and South Asia, North Asia and India, intra-regional trade. We see more trade between the GCC and Asia, GCC and China. That trend seems to be continuing as well. And a lot more cooperation. So whether it's like the Queen Bee programs to Singapore, Kwee Juan has been helping leading Queen Bee's big MNCs bringing the SME or midsized companies as an ecosystem to hunt in the pack in other markets, that continues. And as people diversify their supply chains, Kwee Juan calls it international supply chains, I think we will see continued opportunities there in the long term. Kwee Juan, you want to supplement? Kwee Juan Han: Yes. So I think on the AI piece, a lot of it is around the ecosystem financing. This is short-dated financing of 30 to 60 days for a lot of your suppliers into the ecosystem for AI. So as data centers get built out, you're going to see them stuff up on other equipment. So we do see GPU as a service now becoming an area of interest for a lot of our customers. And also, at the same time, with the semiconductor, CapEx now also going up, because each of these servers require different kind of semiconductors, and that is something that we are seeing some level of activity. So all these are driven by the broader climate of data center and AI being the core for capability that people are building out too. Edna Koh: Maybe we have time for one last question if anyone has. Okay, if not then I think we can draw this time a close. Thank you everyone for your time and we'll see you next quarter. Thank you.
Operator: Thank you for standing by, and welcome to the Curbline Fourth Quarter 2025 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star. If you would like to withdraw your question, again, star one. Thank you. I'd now like to turn the call over to Stephanie Rosteperez, Vice President of Capital Markets. You may begin. Thank you. Stephanie Rosteperez: Good morning, and welcome to Curbline Properties fourth quarter 2025 earnings conference call. Joining me today are Chief Executive Officer, David Lukes, and Chief Financial Officer, Conor Fennerty. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website, at curbline.com, which are intended to support our prepared remarks during today's call. Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements. Additional information may be found in our earnings press release and our filings with the SEC, including our most recent reports on Forms 10-K and 10-Q. In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, operating FFO, and same property net operating income. Descriptions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation. At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes. David Lukes: Good morning, and welcome to Curbline Properties fourth quarter conference call. The fourth quarter capped an incredible first year as a public company for Curbline, and I could not be more pleased with our results. Let me start by thanking the entire team for their tireless efforts to position the company for outperformance. We continue to lead in this unique capital-efficient sector with a clear first-mover advantage as the only public company exclusively focused on acquiring top-tier convenience retail assets across the United States. Before Conor walks through the quarterly results and our 2026 guidance in detail, I'd like to take a moment to reflect on our first year as a public company along with our expectations going forward. In 2025, we acquired just under $800 million of assets, through a combination of individual acquisitions and portfolio deals. We signed over 400,000 square feet of new leases and renewals, with new lease spreads averaging 20% and our renewal spreads just under 10%. We generated over 3% same property growth on top of 5.8% growth the prior year. And importantly, our capital expenditures were just 7% of NOI, placing us among the most capital-efficient operators in the entire public REIT sector, an important hallmark of the convenience asset class. We believe that these results are not just reflective of a single year, but are representative of the asset class and the opportunities in front of us and help explain our confidence in delivering superior risk-adjusted returns. Specifically, one, we believe that there remains a significant addressable investment market that provides an opportunity to scale this business. Two, we believe that the convenient sector with simple and flexible buildings is aligned with consumer behavior. And three, we believe that we have the team and the balance sheet to support our growth and drive compelling returns. In a little more detail, first, our investments. We believe we currently own the largest high-quality portfolio of convenience properties in the US, totaling almost 5 million square feet. The total US market for this asset class is 950 million square feet, 190 times larger than our current footprint. Not all of that inventory meets our standards, but our criteria are clear: primary corridors, strong demographics, high traffic counts, and creditworthy tenants. And our track record demonstrates the liquidity of assets that match those, allowing us to grow via a mixture of one-off deals and portfolios while maintaining our industry leadership by acquiring only the best real estate. Even the top quartile of the convenience sector itself is 50 times larger than our current portfolio, providing a very long runway to grow. To achieve this growth in a highly fragmented sector, the company must build a significant network of relationships with sellers and brokers across our target markets. We've built that organization over the past seven years, and the results are showing. As an example, of the $1 billion of acquisitions we've completed since the spin-off of Curbline, 27% of those deals were direct and off-market with sellers, and 73% were marketed through the brokerage community. Even within those marketed deals, there were 24 different brokerage companies involved in the listing of individual properties, which highlights not only the highly fractured market but the importance of a national network of relationships that Curbline has built. Second, we invest in simple, flexible buildings that are the nexus of consumer behavior. Our strategy is clear: provide convenient access to customers running errands woven into their daily lives and leased to tenants with strong credit who are willing to pay top rent to access those customers. Unlike traditional shopping centers built for destination retailers, our properties serve customers running daily errands. According to third-party geolocation data, two-thirds of our visitors stay less than seven minutes on our properties, often returning multiple times a day. As a result, rather than purpose-built structures, we favor straightforward rows of shops that support a wide variety of uses. This flexibility drives tenant demand from an extremely wide pool of tenants, rising rents, and minimal capital outlay. On page 13 of our supplemental, you'll notice that we completed a total of 67 new leases over the course of 2025. 64 of those leases were with unique tenants, and 70% were national credit operators, both of which highlight the incredibly deep market for leasing to a wide variety of uses in our simple buildings and that credit tenants are seeking high-traffic intersections. The result for our portfolio is a highly diversified tenant base with only nine tenants contributing more than 1% of base rent and only one tenant more than 2%. Third, our team and our balance sheet are built to support our growth and structured to scale. Curbline has all of the pieces on hand to generate double-digit cash flow growth for a number of years to come. Based on our 2026 FFO guidance, we're forecasting 12% year-over-year FFO growth, which is well above the REIT sector average and is driven not just by external growth but by the capital efficiency of the business allowing us to reinvest, retain cash flow, into additional investments. In summary, I couldn't be more optimistic about the opportunity ahead for Curbline as we exclusively focus on scaling the fragmented convenience marketplace and delivering compelling, relative, and absolute growth for stakeholders. And with that, I'll turn it over to Conor. Conor Fennerty: Thanks, David. I'll start with fourth quarter earnings and operating metrics before shifting to the company's 2026 guidance and then concluding with the balance sheet. Fourth quarter results were ahead of budget largely due to higher than forecast NOI driven in part by rent commencement timing, along with higher acquisition volume and lease termination fees partially offset by G&A. NOI was up 16% sequentially, and almost 60% year over year driven by acquisitions along with organic growth. Outside of the quarterly operational outperformance, there are no other material variances for the quarter, highlighting the simplicity of the Curbline income statement and business plan. Will note that in the fourth quarter, we recorded a gross up of $1 million of noncash G&A expense, which was offset by $1 million of noncash other income. This gross up, which is a function of the shared services agreement, and nets to zero net income will continue as long as the agreement is in place and is excluded from any G&A figures or targets. In terms of other operating metrics, the lease rate was unchanged from the third quarter, at 96.7%, with occupancy up 20 basis points. Leasing volume in the fourth quarter decelerated from the third quarter but that is simply a function of less available space as overall leasing activity remains elevated. We remain encouraged by the depth of demand and the economics for available space, which we believe is a differentiator for Curbline as compared to other property types. Same property NOI was up 3.3% for the full year, and 1.5% for the fourth quarter despite a 50 basis point headwind from uncollectible revenue. Importantly, this growth was generated by limited capital expenditures, with fourth quarter CapEx as a percentage of NOI of 8.9% and full year CapEx as a percentage of NOI of just under 7%. Moving to our outlook for 2026. We are introducing FFO guidance a range between $1.17 and $1.21 per share which at the midpoint represents 12% growth. We believe that this level of growth will be the highest certainly in the retail space, and amongst the highest in the entire REIT sector. Underpinning the midpoint of the range is one, roughly $700 million of full year investments two, a 3.25% return on cash with interest income declining over the course of the year as cash is invested. Three, CapEx as a percentage of NOI of less than 10%. And four, G&A of roughly $32 million which includes fees paid to site centers as part of the shared services agreement. Those fees totaled $970,000 in the fourth quarter. In terms of same property NOI, we are forecasting growth of 3% at the midpoint in 2026. As I have noted previously, the same property pool is growing but small. And it includes only assets owned for at least twelve months as of November 12/31/2025 resulting in a large non-same property pool. That said, we don't expect as large of a gap in terms of relative growth between the two pools in 2026. Though uncollectible revenue will remain a year-over-year headwind to the same property pool, despite limited forecast bad debt activity. Moving pieces between the 2025 and the 2026, as a result of the funding of the private placement offering in January interest expense is set to increase to about $8 million in the first quarter. Additionally, we do not expect the $1.3 million of lease termination fees recorded in the fourth quarter to reoccur in the first quarter. G&A is also expected to remain roughly flat quarter over quarter. Details on 2026 guidance and expectations can be found on page 11 of the earnings slides. Ending on the balance sheet, Curbline was spun off with a unique capital structure aligned with the company's business plan. In the fourth quarter, Curbline closed on the first tranche a $200 million private placement offering with the balance funding in January. The offering brings total debt capital raised since formation to $600 million at a weighted average rate of roughly 5%. Additionally, the fourth quarter and first quarter to date, the company sold 5.2 million shares on a forward basis with $120 million of expected gross proceeds which we expect to settle in 2026. Including cash on hand at year-end of $290 million along with the debt and equity proceeds, Curbline had $582 million immediate liquidity available to fund investments, leaving a balance of less than $100 million to fund the investments included in guidance after taking account retained cash flow. Curbline's proven access to unsecured fixed-rate debt and now the ATM is a key differentiator from the largely private buyer universe acquiring convenience properties. The net result of the capital markets activity since formation is that the company ended the year with a leverage ratio of less than 20% providing substantial dry powder and liquidity to continue to acquire assets. And scale resulting in significant earnings, and cash flow growth well in excess of the REIT average. With that, I'll turn it back to David. David Lukes: Thank you, Conor. Operator, we are now ready to take questions. Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. If you like to withdraw your question, simply press 1 again. Your first question today comes from the line of Ronald Kamdem from Morgan Stanley. Your line is open. Ronald Kamdem: Hey. Thanks so much. Can you talk about the acquisition pipeline how it's building? And I know you mentioned $700 million in the guidance. What sort of cap rate is assumed into that and how has that been trending? David Lukes: Good morning, Ron. It's David. I'll let Conor talk about the pipeline. But I would say cap rates have remained, averaging just north of 6% as they have the last couple of quarters. I'll remind you, as we've said in previous quarters, that the range can actually be quite wide between mid-fives to high sixes. That really depends a lot on occupancy, the rent roll, mark to market, and so forth. But when you blend all these deals together, we're still in low sixes. Conor Fennerty: And, Ron, just on the pipeline. So as you know, our initial expectations prior to spin-off would require about $500 million of assets on an annual basis. Obviously, we've ramped that up quite a bit to $700 million this year. And at this point, for what we've either closed, under contract, or have been awarded, it's about half or we have visibility about half of that pipeline today. So there's quite a bit of visibility on closings for 2026 already. Only thing I would just caveat is there's risk to that, right, until they get through diligence. On each of those assets. But, again, I just would frame it versus either even a year ago have a much higher level of visibility on the pipeline today than we did at any point. Ronald Kamdem: Great. My second question was just, I think the same store NOI had a tough comp. And it looks like leasing spreads decelerated a little bit. Maybe could you just talk a little bit more about what happened in the quarter? And then looking forward on the 3% same store NOI guidance, presumably, that's all sort of based on renewals and no occupancy gains. But any sort of other details was baked into that in terms of bad debt and so forth? Conor Fennerty: Sure. It's Conor again, Ron. So on the leasing spreads first, you know, as I always caveat, I encourage folks to look at trailing twelve months just given how small a denominator is. And if we look at the pipeline for leasing activity in the first quarter and the second quarter of this year, would expect our newly spreads to be right back in the low twenties, which was where they were for the full year. And then I would say a similar comment on renewals. Look at TTM as opposed to just one quarter. For same property, similar response. Very small pool. We've got 50% of the assets are in the non-same store pool. So a couple shops moving out can create some volatility. It's clear that if you look at our lease rate, it's up year over year. It's effectively unchanged quarter over quarter. So the fewer spaces we got back in the fourth quarter have already leased, and we expect to rent commence in the second, third quarter for 2026. The only other thing I would just say on 2026 same property NOI it's a pretty wide range for all the reasons I just laid out of two to 4%. We do expect a pretty big acceleration over the course of the year. Because of the least occupied gap compressing. And again, that speaks to the fact that these releases just signed over the last couple months. Doesn't take a lot of it's it's a tighter timeline than a larger format center. To get those leases rent paying, which speaks to the to the property type, which is of the reasons we love it. Ronald Kamdem: And that that sorry. Conor Fennerty: Oh, yeah. Of course. Sorry. Bad debt, we've got about a 60 basis point bogey. For, the midpoint of guidance for the year. To put that in contrast or compare it to 2025. We had about 30 basis points of bad debt in 2025 for the same property pool. We are expecting a normalization. We're not seeing anything. That would cause us to expect year over year uptick, but it feels just a prudent base case for now, and we'll update that, obviously, as the course over the course of the year. Ronald Kamdem: Helpful. That's it for me. Thank you. David Lukes: You're welcome. Operator: Your next question comes from the line of Floris Van Dijkum from Ladenburg Thalmann. Your line is open. Floris Van Dijkum: Hey. Morning, guys. My question is maybe if you can talk a little bit about know, the operations. Your portfolio is big enough now where, you know, you've got some scale. Are you guys seeing any operating synergies by having multiple properties in single markets? I know you're big in Atlanta and Miami, for example. Maybe you can talk a little bit about how you know, if there's any additional synergies that you can squeeze out of having more assets in single markets? David Lukes: Thanks for the question. I would say that the synergies, I would put them in two buckets. One is G&A. And, the expense to run a property, and the second is the more you have in a certain market, the more it allows you to have a little bit of a tighter cam pool. In both of those cases, there is some truth that, you know, scaling in certain markets does give you a little bit of leverage on both of those costs. But I will say that the recovery rate on this asset class is so high that it doesn't really flow through to same store NOI or total property performance as much. So I would say that the synergies are a nice to have, but they're not a must to have with how this property type operates. Floris Van Dijkum: Yeah. Of course. It feels like the synergies are much more corporate-focused in the sense that you know, you're leveraging public company costs. And you're seeing that already as you look at just, you know, G&A as a percentage of GAV or G&A as a percentage of revenue. Maybe my follow-up in terms of capital allocation. Have you considered going I guess maybe there hasn't been a need to, but going into more value-add assets with higher vacancies or are you, you know, sticking to your knitting? Because you know, frankly, the market is telling you, go ahead and keep acquiring. David Lukes: It's a great question, Floris. I'll probably back up by saying that it is interesting to see in the entire unanchored strip category that there are different strategies that are emerging. You know, some folks focus on value-add. Other folks focus on secondary markets. Some people like short wealth, no credit. I think you see that in other property types like, you know, student housing as a part of multifamily. You know, there are lots of examples you can point to. For us, if you think about where we are in the real estate cycle right now for retail, leasing demand is high. Occupancy is high, and rents are growing. And so when we look at our strategy of scaling convenience, I think the three risks that we really don't want to take are execution risk, credit risk, and capital risk. And if you add those three together, it just tells you that the returns we can get on an unlevered IRR basis for buying high-quality real estate that's very well leased with high credit tenants. It doesn't feel worth the risk to take in order to generate slightly higher IRRs. And so that strategy for us is allowing us to be very specific about which pieces of real estate we buy. And said differently, if you're buying high-quality real estate, it's most likely to outperform in a recession that's probably a strategy that I think investors would want to see us pursue. Operator: Thanks, David. Your next question comes from the line of Craig Mailman from Citigroup. Line is open. Craig Mailman: Hey, good morning, guys. I guess just the first one, On the $1.3 million lease term fees, could you just talk about that? And just in general, kind of how much we should think about these term fees in a given year just given you that that's kind of smaller spaces and you know, good credit at this point. Conor Fennerty: It's really hard to hear you. Can you try that one more time? Craig Mailman: Oh, sorry. Can you hear me now? Conor Fennerty: Much marginally better. I think it was about term fees, Craig, and stop me in if you wouldn't mind repeating the question, though. Craig Mailman: Yeah. Just on proceeds, could you just tell us what drove the $1.3 million in the quarter? And how we should think about kind of your Easter fees on a recurring basis? Just give us a little bit of a smaller portfolio and just in general, I said that you guys have better credit. Like, was this driven by you guys, or is this a tenant driven? Conor Fennerty: Craig, okay. I'll take a stab in. Just let me know if I answered the questions. If you look at the last two years, we had just over $2 million in 2025 and just over $4 million in 2024. It does feel like and, again, if you look back in 2023 from our SEC filings pre-spin-off, that there have been some quarters where we've had chunky term fees. Some of those have been one tenant driving the entirety of the fee. Other times, they've been more fragmented. It does feel like it's a pretty I want to say recurring part of the business because of how chunky they are. But it does ex we do expect there to be kind of a normal level of term fees over the course of any particular year. I would expect that number to grow as the portfolio grows. To what's driving those, it could be a function of a number of different things. One, a tenant just deciding a space or a market doesn't work for them. Others where they go dark and paying and we come to agreement. The best thing about it, though, is to David's point, just given the economics of our business, more often than not, we wouldn't consider a term fee until it pays for the CapEx, the downtime, and most of more often than not, we're actually making money when we get those spaces back. And then the only thing I'd add is unlike a larger format or purpose of building where we gotta tear that down or spend a year repurposing that space, we generally can get a tenant back in between three and nine months. So for us, we think of it as almost like gravy. But, again, it's there's generally just a pretty wide range of reasons that drive them. It doesn't feel like it's one specific reason one specific tenant that drives the boat. Let me know if I answered your question. Would say, again, it's challenging to hear you. Craig Mailman: Yeah. That is all. Is this better? I switched microphones. Conor Fennerty: Yes. Craig Mailman: Okay. Perfect. Sorry about that. But you did answer my question. I guess on the second question, just on kind of sources of capital, you guys are sitting on a good amount of cushion here. And, you know, net debt to EBITDA even without the forward is around one times. Could you just talk about going forward the thought process on incremental equity issuance versus kind of building out your ladder, becoming a more seasoned issuer, or potentially setting yourself up to become a more seasoned issuer to lower your cost of debt here. And just the decision to use the forward, I guess, versus spot. You know, that's a it's always good in hindsight, but the stock is, you know, close to eight, 9% higher than where you guys issued the forward. Earlier this quarter. So just talk in general on that. I know you guys are issuing at least above my NAV, so it's hard to complain. But it feels like speculating on this document, you left a little bit on the table. Conor Fennerty: Sure, Craig. Well, a lot there to unpack. So I would just say starting with liquidity on hand. Have about $580 million of cash unsettled equity versus our target of $700 million investment. So to my comments from the transcript or from the opening remarks, excuse me, we only have about a $100 million funding gap for the remainder of the year. Which is pretty insignificant. We think about the enterprise value and the fact that we've got an undrawn line of credit behind that. So the question is, how do we think about sources and uses to kind of fill that gap? To your point, we now are a seasoned private placement issuer. We've got access to the bank market. We have a 0% secured debt ratio. We now have access on the ATM. It's a pretty wide range or a pretty broad menu we now have of options, as we think through. And I would just tell you the way we think about it is consistent with the way we thought about it at site centers and the way we thought about it last year plus where if equity at one point in time was accretive to the business plan, we would consider it. But we also like to your point to start to build up a market and build up a nice ladder on the private placement market, which we're already seeing compression in spreads as we continue to tap that market. So I would just tell you, it's a really wide range of menus of options, which is a fantastic spot to be. And over the course of the year, we'll decide what's the best path. But we just have I would just say, dramatic optionality just given where we are from a leverage perspective. Which is fantastic. Craig Mailman: Great. Thank you. Conor Fennerty: You're welcome. Thanks, Craig. Operator: Next question comes from the line of Todd Thomas from KeyBanc Capital Markets. Your line is open. Todd Thomas: Hi. Thanks. Good morning. I wanted to go back to acquisitions and some of the comments that you made about having visibility on around half of the $700 million factored into guidance. Are these all single you know, single off deals? Or are you seeing any portfolios included in the pipeline? And then is there a limit on the amount of volume that you can do in any given year? Are there any constraints either around your appetite or the amount that you might be able to achieve in terms of acquisitions? David Lukes: Good morning, Todd. It's David. I would say that the first part of your question is that to date, our pipeline is almost exclusively actually, it is exclusively single asset acquisitions. So I would say this is the one at a time baseline. And I think, as you know, when we went public, we did have a question mark as how much of our deal flow was gonna be portfolios versus individual assets. I think what we found is the more of our G&A that we've allocated towards the transaction side of the business and the more people we've been able to move into the field and build relationships, the more deal flow has come to us. And I would say every quarter that goes by, we're starting to see more inventory that fits our criteria as opposed to simply sifting through all of the inventory that's on the market. It is a very, very large asset class. And the addressable market for us, even if you look at the top quartile, is still a significant amount of deal volume. So I would say our confidence that we can achieve a baseline of our budget simply doing one-off deals is pretty high. If portfolios do come up, I think it's great. I would say that, so far, portfolios have been episodic as opposed to kind of a normal quarterly run rate. And given the fact that there's so much inventory on the one-off, that fit all of our filters in terms of quality, I think we're less aggressive with having to stretch for portfolios that might have assets in them that we don't want. So I think that probably answers your question, but our confidence is really high that the individual brokerage community and the sellers are starting to approach us with deals that we really find attractive. Todd Thomas: Okay. That's helpful. And then, wanted to just ask, it looked like there was perhaps a disposition in the quarter or perhaps something small. Just curious if you can discuss that. And it seems like there would not be really much in the way of dispositions just given your sort of designing and constructing the portfolio from scratch in some sense, but any sort of dispositions or, you know, kind of asset management you know, sort of associated activity that you're know, sort of anticipating in '26? David Lukes: Yeah. Todd, it's David again. As we've said prior, you know, one of the benefits of building a portfolio one at a time is that you don't really have the need to recycle. We don't have in our budget any dispositions planned. Our business plan is not about recycling. We're purely based on buying things that we want to own over the long term. Every now and then from an asset management perspective, something might come up where it simply is better to sell it. In particular, the asset this last quarter, which was very small, happened to be adjacent to a property that site centers owned. They offered us a price to buy that asset that we thought was attractive because the cost to change out a tenant and do some work on it was such that we felt it was better to exit and sell to site centers. Site centers, on the other hand, felt like they got more liquidity from owning an adjacent parcel with the property that they're trying to sell. Again, it was quite small. It went to both boards for approval, which are separate boards as you know, but I don't expect this to be a recurring issue. Conor Fennerty: Todd, just to expand that. It was a vacant piece of land. So today, this point is sub $2 million. And there's no nothing into the 2026 budget for further dispositions. Todd Thomas: Okay. Great. Thank you. David Lukes: Thanks, Todd. Operator: Your next question comes from the line of Hong Zhang from JPMorgan. Your line is open. Hong Zhang: Yeah. Hey. I guess I was wondering if you could talk a little bit about your expectations for the cadence of lease commencements this year. Conor Fennerty: Sure, Hong. I guess I would respond by kind of giving the framework of same property NOI because they should go hand in hand. We do expect acceleration in the first quarter from the fourth quarter on same property. And then a modest deceleration in the second quarter, which is a comp on uncollectible revenue and just on some CapEx recovery items. Then to my response, I think it was to Floris earlier. Do expect a pretty big pickup in the back half of the year. From commencements of the spaces recapturing the fourth quarter. So I would expect that gap to compress in the same property to accelerate in the third and the fourth quarter. Hong Zhang: Got it. Thank you. Conor Fennerty: You're welcome. Operator: Your next question comes from the line of Alexander Goldfarb from Piper Sandler. Your line is open. Alexander Goldfarb: Hey. Good morning. So just following up on the capital questions. David, you've been speaking for some time about growth profile, the double-digit growth profile over a number of years. Your acquisition pace has been tremendous. And as Conor pointed out, there's no slowdown in deal flow. Does your, like, trajectory as you think about debt normalization, has that accelerated, meaning that instead previously, if you thought thinking maybe you had five years of runway before you get to debt normalization, maybe that's sooner, in which case that double-digit growth profile that you guys outlined may actually truncate? Or the way you see it, you still are fine for the next I think you talked about five years, where you can grow sort of in this double-digit way without, you know, capital events slowing that down? David Lukes: Morning, Alex. It's David. I can turn it over to Conor for the long-term business plan, but I think the short story is accurate and that when we went public, we had a five-year business plan, and we had $500 million a year guidance what we thought we could do in the first year, and we obviously exceeded that last year. And I think our budget for this year is certainly higher as well. So I think by definition, that five-year business plan has compressed. On the other hand, I feel like the addressable market has also revealed itself to be surprisingly strong, and I think our reliance on portfolio deals has certainly gone down in our own minds. So the confidence that that cadence will continue is equally as high, but there's no question the business plan has been pulled forward a little bit. Conor Fennerty: Yeah. Alex is expanding on that. I would say the two other significant variances would be one, we've outperformed dramatically on operations versus our initial expectations. Obviously has driven a higher level of EBITDA, more retained cash flow, which extends the timeline. To David's point, we've bought more quickly. Compresses it. And then the second thing is we've already issued some equity. And just given how small our denominator is, that equity issuance expands the pipeline. So whether the five-year business plan is now four and a half or, you know, four and a quarter, you know, I'm not sure, but there are other factors that have limited our near-term needs for equity. And, again, we just have so much optionality with the balance sheet that that runway is still pretty long today. Alexander Goldfarb: Okay. And then the second question is, Conor. It seems like site is, you know, could well end up, you know, coming to an end, I guess, this year. Just that's our math. I don't want to put words in their company's face, or name. But, your 26 guidance does that contemplate sort of a complete wind down separation payment whatever resolution from site, or if something happens there, there would be some update to your guidance. Conor Fennerty: Yeah. That's a good question, Alex. So we have assumed the status quo and guidance with no changes shared service agreement in 2026. Now as you know, though, if it's terminated by site on the two-year anniversary, would 10/01/2026, there'd be a pretty significant fee paid by site to curb which would more than offset, in our view, any expenses associated with the transition. So it would be a good guy of sorts if it did occur in 2026. Given that, to your point, it's a decision by independent board of site, and curb to terminate it, didn't feel it's appropriate to put in our budget, but it would be a good guy in any scenario. Alexander Goldfarb: Okay. And just if I could just follow-up that. I know you're not giving '27 guidance but as we think about our '27, is there something that you would tell us to think about as we model '27, or you would just say, hey. Leave everything status quo right now and you know, we'll deal with that a year from now on the February call. Conor Fennerty: It would be the latter in my opinion. Alexander Goldfarb: Okay. Thank you. David Lukes: You're welcome. Thanks, Alex. Operator: Your next question comes from the line of Floris Van Dijkum from Ladenburg Thalmann. Your line is open. Floris Van Dijkum: Hey, guys. It's a quick follow-up question that if you don't mind. I was just the site prompted something about your G&A. Maybe if you can talk a little bit about where what you think your G&A is gonna be on a going forward basis once, you know, the agreement is settled down and what needs to happen internally to make sure you're properly aligned? Conor Fennerty: Sure, Floris. It's Conor. So, we mentioned prior to spin-off that we felt that Curb could be as, if not more efficient, than SITE as it relates to G&A as a percentage of GAV, which is how we look at expenses. That was about 1.1% or 1% of GAV. To Alex's question from a moment ago, what are some factors or things that have changed I would just tell you, one is operational performance. Two, we realized we could run this business more efficiently. And so as I mentioned in my prepared remarks, we're paying about $1 million per quarter to site. Effectively, what we've said to folks is that fee would essentially just be replaced by the cost that would come over from site once that agreement is terminated. So it's a long, inelegant way of saying feel like we've got great visibility. We spent an inordinate amount of time on the expense structure of CURB. I would just tell you, if we look back to versus two years ago, it is extremely it's more efficient. Our expectations will be more efficient today. It was pre-spin-off. Other than that, to Alex's point, once we have clarity on the exact timing of the resolution and termination of the SSA, provide the specifics, but I would just tell you we expect to run really efficiently pro forma for the termination. Floris Van Dijkum: So but but one to one and a half percent of GAV is sort of a good benchmark? Conor Fennerty: No. What I said was one to 1.1% of GAV. And what we're saying is, Curb, we expect to be more efficient than that. Floris Van Dijkum: Got it. Got it. That was just after we deployed the $2.5 billion initial business plan. Once you get through that, then you really start to scale the expense. Coming back to your first question from the start of the call, then you really start to scale the corporate expenses. And that's where you start to generate pretty significant EBITDA growth. Conor Fennerty: Thanks, Floris. Operator: And we have reached the end of our question and answer session. I will now turn the call back over to David Lukes for closing remarks. David Lukes: Thank you all very much for joining our call, and we look forward to speaking with you next quarter. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Greetings. Welcome to PowerFleet's third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please note this conference is being recorded. I will now turn the conference over to your host, Carolyn Capaccio of Alliance Advisors IR. You may begin. Carolyn Capaccio: Thanks, operator. Good morning, everyone. This presentation contains forward-looking statements within the meaning of federal securities laws. Forward-looking statements include statements with respect to PowerFleet's belief, plans, goals, objectives, expectations, anticipation, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties, and other factors which may be beyond PowerFleet's control. These may cause its actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical facts are statements that could be forward-looking statements. For example, forward-looking statements include statements regarding prospects for additional customers, potential contract values, market forecasts, projections of earnings, revenue, synergies, accretion, or other financial information, emerging new products and plans, strategies, and objectives of management for future operations, including growing revenue, controlling operating costs, increasing production volume, and expanding business with core customers. The risks and uncertainties referred to above are not limited to risks detailed from time to time in PowerFleet's filings with the Securities and Exchange Commission, including PowerFleet's annual report on Form 10-K for the year ended 03/31/2025. These risks could also cause results to differ materially from those expressed in any forward-looking statements made by or on behalf of PowerFleet. Unless otherwise required by applicable law, PowerFleet assumes no obligation to update the information contained in this presentation and expressly disclaims any obligation to do so as a result of new information, future events, or otherwise. Now I'll turn the call over to PowerFleet's CEO, Steve Towe. Steve? Steve Towe: Good morning, everyone, and thank you for joining us today. From an execution standpoint, Q3 was another strong quarter and an important one in demonstrating the consistency of delivery we are now seeing across the total combined business. We continue to make progress in the areas that matter most: accelerating high-margin recurring revenue growth, expanding profitability, and strengthening our balance sheet, all while maintaining disciplined execution. This quarter clearly shows the operating model we are building: focused, disciplined, and designed to deliver profitable accelerated growth scale. As we previously articulated, the heavy lift of integration is fundamentally behind us. We have been clear in recent earnings calls about the growth milestones we have set for ourselves. For some time, we have been signaling a Q4 exit run rate for FY '26 of 10% total revenue growth north of 10% growth in recurring revenue. Based on our performance exiting Q3, we feel confident in achieving those milestones, which gives us the desired momentum to press our foot on the growth accelerator in FY '27. Next slide, please. It's important to note that it's the first quarter in which our year-over-year results reflect the combined businesses. Stepping back and looking at the quarter, the key themes are increasing ARR growth, consistency, and balance to our performance. Service revenue grew 11% year over year and now represents 80% of total revenue. Total revenue increased 7% year over year, reflecting solid underlying organic performance with the prior year comp benefiting from $2 million in accelerated product revenue as per the US GAAP change communicated on the Q4 FY '25 earnings call. This means on an apples-to-apples basis, total revenue growth was 9% year over year. At the same time, adjusted EBITDA increased 20% year over year, driven by top-line growth with adjusted EBITDA margins expanding by 4% to 23%. Moving to the balance sheet, where net debt to adjusted EBITDA continues to strengthen as we exited the quarter at 2.7 times. This combination of growth, margin expansion, and balance sheet improvement reflects a business that is scaling and executing against clear priorities, and it reinforces the strength of our Unity strategy and the scalability of our Unity platform, giving us clear line of sight to accelerating growth in FY '27. Next slide, please. In Q3, we secured a truly landmark win for a highly meaningful South African public sector contract to deliver AI video and visibility services to government fleets collectively operating more than 100,000 total assets. The agreement is anticipated to represent one of the largest deployments in our history and is expected to generate meaningful recurring SaaS and services revenue with solid margins over a multiyear term. Following a phased implementation, preliminary department enrollments are highly encouraging and ahead of initial internal expectations. This award reflects the increasing scale at which government agencies are adopting data-driven fleet technologies in partnership with tier-one providers. Programs of this size typically anchor long-duration customer relationships and create a foundation for additional software and analytics adoption over time. Under this program, we will deploy Unity, including advanced visibility and AI video capabilities, to enhance safety, security, and situational awareness across a large-scale operational estate. A key differentiator in winning this contract was our partnership with MTN, which provides the scale, connectivity, and platform support required for a deployment of this magnitude. This award underscores our ability to meet the demanding requirements of tier-one customers and highlights the strength of our partner ecosystem in delivering reliable, scalable solutions. With that, I'll hand over to Jeff Lautenbach to walk through our commercial momentum and customer execution. Jeff Lautenbach: Thanks, Steve. Great to be here. Turning to customer momentum, what stands out most to me is the impetus we're building due to our key differentiators. We're seeing continued acceleration across closed wins, pipeline growth, and our selection by some of the world's leading enterprise brands. This momentum is being driven by the unique end-to-end capabilities of the Unity platform and a much more focused enterprise sales motion. I believe we're still in the early stages of what's coming next. During the quarter, we secured multiple enterprise wins with total contract values ranging from $500,000 to more than $5 million. These include statement wins with national services, logistics, and infrastructure leaders, as well as multimillion-dollar contracts with Fortune 500 manufacturing and food and beverage companies. These are meaningful enterprise deployments, and they reinforce that great brands are choosing PowerFleet to solve real complex operational and safety challenges at scale. Increasingly, customers are engaging with us around AI-based safety and compliance solutions, on-site with AI pedestrian proximity, and on-road with our advanced safety-as-a-service AI video portfolio. Our unique ability to offer connected AI video intelligence both on-road and on-site through a single unified platform is a true differentiator and increasingly is winning us big deals. Customers are looking for enterprise-grade outcomes across their enterprise end-to-end estates, and we're uniquely positioned to deliver safety and compliance across the full operational environment. That momentum is also clearly showing up in our pipeline. Our AI video pipe build increased 71% sequentially, driven by strong demand for advanced safety, compliance, and visibility solutions across global accounts. We recorded our third consecutive quarter of in-warehouse pipeline growth in North America, reflecting sustained demand for on-site safety and AI pedestrian protection use cases. In addition, our ARR pipeline increased 13% sequentially, which gives me even more confidence in the durability and quality of our subscription-led growth profile. PowerFleet is exceptionally well-positioned to capture this momentum and carry it forward into FY '27 and beyond. Next slide, please. This slide really captures the scale and quality of our global key account momentum. Today, Unity is deployed across a wide range of industries, including energy, mining, industrial, humanitarian, security, and construction, supporting multinational, multi-continental Fortune 500 organizations around the world. These customers are operating some of the most complex and demanding on-site plus on-road environments anywhere and are using Unity to manage tens of thousands of assets and billions of miles driven annually across both on-road and on-site operations. What's most compelling to me is what we're seeing inside these global accounts: delivering measurable improvements in safety outcomes, operational efficiency, and enterprise-wide standardization. That success is driving deeper multiproduct adoption across regions and use cases. In particular, customers are increasingly expanding their use of our highly differentiated AI video SaaS solutions, leveraging our unique ability to deliver video intelligence on-road and on-site within a single platform. This is a core strength of PowerFleet. We are mission-critical to some of the world's largest and most sophisticated enterprises. As these customers expand globally and consolidate their vendors increasingly into Unity's ecosystem, we see a clear path to continued growth, deeper penetration, and long-term strategic relationships. Next slide, please. Before we dive into the specifics of this slide, I want to frame it in the context of our data highway strategy and share with you some great examples of how that strategy is coming to light in the real world. At its core, the data highway is about connecting fragmented data across the enterprise, harmonizing it, and then enabling it to be consumed, acted on, and monetized in multiple ways. Our customers depend on us to deliver unified real-time connected intelligence that transforms data into operational decisions, safety outcomes, and measurable business value. Unity is that connective tissue. What you're seeing on this slide is how that connected intelligence is surfaced through one of Unity's key consumption methods: unified operations, where people, assets, vehicles, and business processes are brought together into a single connected operational layer across fleets, warehouses, and end-to-end operational environments. Across Fortune 500 automotive, retail, logistics, mining, energy, and construction customers, we are integrating Unity with core enterprise systems. ERP platforms like SAP and Oracle, HR systems, learning and training platforms, maintenance systems, and IoT infrastructure. The objective is to automate compliance, improve asset utilization, enhance safety, and fundamentally digitally transform how work gets done at scale. I'll give you a couple of examples of how this plays out. In one common use case, customers are focused on operator safety and compliance in warehouse and industrial environments. Operator training and certification data typically lives in learning systems. Employment status and role information sits in HR platforms. And physical access to equipment is enforced through badges, gateways, and IoT-enabled machinery. Historically, these systems operate independently, creating manual processes, compliance gaps, and real risk. Unity sits in the middle as the data highway. We ingest operator-level data from HR and training systems, harmonize it into a single, real-time compliance record, and connect it directly to the operational access point. Every access request becomes an automated policy-driven decision. Instant approval or denial based on certification status, role, and location, with a complete audit trail. This result is safer operations, faster workflows, and provable compliance in real-time. In another example, customers are using Unity to unify mission-critical transportation and logistic processes. Execution lives in TMS platforms. Shipment planning lives in ERP systems, and safety and visibility data is scattered across telematics and IoT systems. Without a unifying layer, no single system has a complete view of the shipment lifecycle or performance per job. Here again, Unity acts as the data highway. We ingest shipment demand from ERP, orchestrate execution through TMS integrations, and layer in real-time vehicle, driver, and IoT data. That unified data stream enables real-time shipment management, automated milestone events, and direct correlation of safety and performance metrics to individual shipments and jobs. All one connected operational workflow. Unity is becoming embedded at the heart of our customer operations, across people, assets, and processes. That makes us increasingly strategic for the customer, highly sticky, and difficult to displace. And as customers expand globally or add new use cases, the value of the data highway compounds. The unified operation capability is a key monetization engine for us by enabling multiple consumption paths, safety, compliance, operations, sustainability, analytics into a suite of customer business systems for a wide array of C-suite and operational stakeholders. All from the same integrated data foundation. We drive broader deployments, higher ARR per customer, and long-term enterprise partnerships. This is a powerful example of how the data highway strategy translates into real operational outcomes and sustained growth. Next slide, please. This slide illustrates a long-standing customer relationship with Origin Energy. A fourteen-year customer operating 2,000 vehicles. Through a phased multiproduct deployment, from compliance through to advanced AI video, Origin has delivered consistent reductions in risky driving events and has enhanced its public reputation as a direct result of the safety improvements PowerFleet has driven for them. Today, the relationship has evolved into a unified data ecosystem enabling more predictive and proactive safety management. This is a strong example of how Unity allows customers to expand value over time through a single platform. As I step back and look across the business, what gives me the most confidence is how all of these elements are coming together. Accelerated customer momentum, deeper enterprise engagement, and a data highway strategy that is translating into real operational outcomes and expanding monetization opportunities. We're seeing this play out across global accounts with Unity becoming increasingly embedded in the day-to-day operations of our customers. This is an exciting moment for PowerFleet. We're building on a strong foundation, winning with great brands, and landmark tier-one deals, positioning the company for sustained profitable growth. With that, I'll turn it over to David Wilson to walk through the financials. David Wilson: Thanks, Jeff. Before diving into the details for the quarter, a quick recap of the key pro forma adjustments. One-time expenses: This quarter's expenses include $2.3 million in one-time charges for restructuring, integrations, and transaction costs. Excluded from adjusted EBITDA and EPS for ongoing run rates. Amortization impact: Results include $5.7 million in non-cash amortization related to the MiX and Fleet Complete acquisitions impacting services gross margins by over 6%. Next slide, please. Now on to the detailed results. Where for the first time prior year comparison numbers fully reflect the impact of the MiX and Fleet Complete transactions. I'll start with services revenue. Our fleet's future is anchored in high-margin recurring SaaS revenue, and services grew 11% year over year, even as we continued to intentionally exit non-core revenue streams in line with our strategic focus. This progress is evident in our revenue mix, with services now accounting for 80% of total revenue, up from 77% in the prior year. Next slide. Turning to the full P&L, we continued to deliver strong top and bottom-line momentum. While headline total revenue grew 7% year over year, the prior year comparison included approximately $2 million of accelerated product revenue from contract and bundling at Fleet Complete, which ceased effective 04/01/2025. Normalizing for this, total revenue grew by 9% on an adjusted basis, underscoring solid underlying organic performance. Adjusted EBITDA increased 26% year over year to $25.7 million, driven by strong operating leverage and continued execution on integration and cost synergy initiatives. These results underscore the strategic rationale of our M&A actions supported by disciplined and consistent execution. Next slide. Adjusted EBITDA gross margins were stable at 67%, with a stronger services mix offset by higher services margin in the prior period. Product margins remained steady in the low 30% range. Turning to operating expenses, discipline remains a priority alongside continued investment to support growth. G&A as a percentage of revenue declined four percentage points, reflecting ongoing synergy realization and operating leverage. Sales and marketing expense increased as planned to support growth initiatives, while R&D remained stable at approximately 8% of revenue or 4% net of capitalized development costs. As investment continues in AI-enabled safety, compliance, and analytics. Looking at FY '26 as a whole, we expect the award of the large tier-one public sector tender that Steve discussed earlier to have a material positive impact on future revenue growth over time. Accordingly, we are maintaining operating expense investments to support the continued build-out of the business, which results in updated adjusted EBITDA guidance of annual growth of approximately 45% versus our prior guidance of 45% to 50%. Next slide. Closing on leverage, we exited Q3 with net debt to EBITDA of approximately 2.7 times. Based on current trends, we now expect leverage to decline to around 2.4 by year-end, compared to our prior expectation of approximately 2.25 times. With investments to support the landmark tier-one public sector win and working capital dynamics as key drivers. Last slide, please. To close, Q3 reinforces the progress PowerFleet is making as a focused integrated AIoT company that provides investors with a solid set of proof points that the accelerated growth trajectory planned for the business is coming into view. We are delivering consistent and improving high-value recurring revenue growth, expanding EBITDA margins, improving leverage, and deepening relationships with large, sophisticated customers. Importantly, we are doing so with discipline and operational consistency. Operator? Please open the line for questions. Operator: Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Your first question for today is from Scott Searle with ROTH Capital. Scott Searle: Hey, good morning. Thanks for taking the questions. Nice job on the quarter. It's nice to continue to see that double-digit SaaS growth. Hey. Maybe to dive right in, you know, could you provide a little bit more color in terms of the growth mix and contribution of new logos versus upsell and penetration of things like AI camera and warehouse? You gave some metrics, I think, in terms of the pipeline, but could you give a little bit more color in terms of the mix of the revenue stream, who's contributing? Also, as part of that, I don't know if I heard a number related to some of the MNO relationships, you know, what that's contributing now, how that's progressing across some of the different geographies? And maybe early thoughts on fiscal '27 SaaS growth. I know the target is 15%, but kind of how are you seeing that now as we're going into or getting close to going into '27, particularly with, you know, this large contract win in South Africa? And then I had one follow-up. Steve Towe: Thanks, Scott. I'll try and work through that as we get. So in terms of mix, no kind of real change. So, you know, 65-70% of our business from existing core customers, 30% from new. The new logo pipeline is developing nicely. I think Jeff showed you, you know, a lot of the wins that we'd had from existing accounts. But, you know, we're bringing over some new accounts, obviously, most notably the South African government, which I will talk about as we go. And if we talk about strength within the MNOs, then, you know, if you look at the profile of our revenue, and where we get strong, recurring revenue growth, that is through those channels. You know, there's a lot of that come through those channels, which is super positive. And in terms of that large win, then, you know, in partnership with MTN, the strength, the relationships that MTN has, you know, has really kind of, you know, I think given a lot of confidence to tier-one customers such as the South African government to look to place, you know, an absolute landmark, contract for the business. In, you know, in FY '27 and longer. So, overall, you know, that's for FY '27. I think we've pegged, you know, kind of 15% ARR growth, and that's before we kind of think about this new contract and this new opportunity that we have ahead of us. So we're very bullish. We're very excited. Both with the core business. I think, you know, if you you've heard Jeff talk about, you know, strong ARR growth. Large enterprise expansions, global accounts, you've heard a lot about the stickiness. From a retention perspective, our ability to, you know, really fuel that top line. And I think, you know, what's most pleasing is we're doing that responsibly. You know, that meets kind of double-digit team's growth is kind of where some of our larger competitors are pegged today, but we're doing it in a far more responsible way in terms of, you know, the ability for us to drive EBITDA at the same time. So we're very encouraged by the business as a whole. And I think if you think about where we started this strategy for the business of expanding partnerships, expanding into large Tier 1s, expanding our account base through AI video, and in warehouse solutions, which are those key drivers. I think it's undoubtedly that those drivers are now being seen, in reality in the numbers we're producing and, you know, our future opportunity. Scott Searle: Great. Very helpful. And, Steve, if I could just from a high level, certainly, the narrative of AI and the impact on the world and what's that doing to the software environment. I'm wondering if at a high level, you could address a few things. In terms of, you know, AI's impact in terms of the importance of fleet management unity type platforms going forward, competitive threat or complementary, obviously, since you're integrating it into the platform and the capabilities, but also things like autonomous vehicles, where they kind of fit into the equation and the long-term opportunity for PowerFleet and the industry. Steve Towe: Yeah. So we see AI as an enabler for our industry. So I think one of the challenges within the industry is it's produced too much data. And then it's been hard for customers to kind of wade through all of that data in order to understand how we can make business change. You know, the AI abilities we're bringing into the platform allow us to do that, provide very meaningful simple data to customers that they can access in real-time. The accuracy of the data and being able to kind of look to the raft of data to understand key trends in their business is only going to be helpful to what we do. So and we're seeing that in terms of the business impact that we're able to provide for customers. So on the whole, we see it as a net add. From that perspective. Then in terms of the world of autonomous vehicles, and robotics and all of that stuff, our place remains in, people need to understand what those vehicles are doing, where they are, how they're performing, etcetera, etcetera. So it will be an evolution just as technology is always an evolution for us. But we see that as one as the place where PowerFleet placed in the ecosystem will remain and potentially grow off the back of that. Scott Searle: Great. Thanks so much. I'll get back in the queue. Operator: Your next question is from Anthony Stoss with Craig Hallum. Anthony Stoss: Good morning, everybody. Steve, I'm just from a bigger picture standpoint, is the business environment better, the same, or worse now than it was six months ago? Then I have a couple follow-ups. Steve Towe: For us, it's improving. So I think, you know, that's a number of things. I think PowerFleet is improving, number one. I think six months ago, we were, you know, or a bit maybe a bit longer, we were still sort from tariffs. And I think we've been able to find our place to fight and our place to win in the market. Marketplace. So I think, you know, we've found our foothold in terms of, you know, where our solutions can be really effective. We're using our geographical spread in terms of being able to, you know, get growth across multiple verticals, multiple geographies, which I think is also helpful. And I think if you look at the compounding level of enterprise business we're doing, that's because we've been, you know, to our earlier point about can we create business change? Can we create impact on businesses? We're really doing that. So, you know, that is helping them with repeat business. You know, referenceability from our accounts. So that, you know, when you get tangible ROI, when you get the results, I mean, you remember some of the videos we put out in November about the tangibility of what our large customers are receiving. In terms of benefit from our solutions, then that brings a lot of confidence. Brings confidence in our sales teams, and we start to get that momentum. And that's really what we're seeing play out now is that momentum. Anthony Stoss: Got it. And then my last two questions. Can you maybe just provide us an update on the AT&T reps if they're fully trained and productive on all of your products now? And once it's fully ramped, how much revenue annually will the South Africa contract bring in? Steve Towe: Yeah. So I'll answer your second one first. So we're not allowed at this point to provide any financial information. But what I would suggest to analysts and investors is, if you look at bundled solutions, and you look at our ARPUs, that we get, what I would say is this contract is within our suite range in both our ARPU and margin, and then you multiply that by the number of vehicles, and, you know, we have an ability to do more than 100,000 vehicles, then I think, you know, the math speaks for itself in terms of what this will mean from a recurring ARR perspective for the business over the coming years. Five-year contract start off, and the majority of these, if you do a good job, continue. So it's super exciting for the business and a, you know, it's a material contract for the business. In terms of AT&T, then I think we mentioned last time with the government shutdown, there was a taken a little time in terms of some accreditations of some video solutions. That will all be through, and the Salesforce will have that extra part of the portfolio in their hands for the April. Anthony Stoss: Great. Thanks for the color, Steve. Operator: Your next question for today is from Dylan Becker with William Blair. Dylan Becker: Hey, gentlemen. Appreciate it. Maybe kind of double-clicking on the South African contract. You kind of just hinted at this as well too, but can you give us you're starting at or are you going to roll out to 100,000 customers or vehicles assets over time? You give us a sense to kind of look what that expansion opportunity could look like, how big of a slice or bite at the initial apple is this? And then maybe should we think about kind of the broader public sector opportunity within South Africa, but also kind of expanding across geographies over time as well. Steve Towe: Yeah. So, I mean, this will be the single largest deployment that this company has done in one go at scale. I think that's undoubtedly a fact for the company. Secondly, in terms of what this will do both with further opportunity, whether that is broader within South Africa, whether that is broader with MTN across Africa, or it's broader in terms of public sector business. These types of awards are tier-one. This is being centrally done by a treasury department because in the past, you know, there's been some challenges within individual departments doing individual deployments with, you know, different competitors that maybe didn't have the scale or the capability to manage tier-one requirements. So this could be an absolute force multiplier for us. A huge, you know, I think, landmark we call it a landmark win. In terms of its ability to show the new PowerFleet, its scale, its partners. So, highly encouraged about what this could mean to the broader business over time. Dylan Becker: Perfect. Thank you. And then maybe either for you or for David as well too, just kind of an update on where we are on the synergy road map here. Obviously, we've kind of recognized a significant amount that's allowing us to reinvest. And I know Jeff called out some pretty impressive pipeline statistics. So that's the right trade-off. But maybe how much room kind of on the synergy front versus now deployed and scaled leverage that you would see? And maybe a way to think about kind of some of the trade-off dynamics you're thinking about as we maybe think about sustaining kind of that growth acceleration into 2027? Thank you. David Wilson: Yeah, Dylan. So clearly, we've made great progress. So in terms of where we were, we're targeting $18 million for the year. There was a real opportunity, I think, to do more than that. And just based on the growth that's flowing through. We've decided not to sort of rearrange the OpEx piece as aggressively as we otherwise would. So we have, in essence, a base to grow from. So that's been important. But in terms of the 18 guide that we gave, pretty much there in terms of where we were exiting the year. In terms of where we are, if you look at OpEx as a percentage of revenue, in terms of SG&A, we guided to 40% or so for next year. We're pretty much at 40% for this quarter. So we're on track. And now it's really about how do we reengineer the cost base so we're taking more dollars out of G&A so we can invest in sales and marketing, but good progress. And real optionality. In terms of how we grow the business. But for now, the focus is much more on how do we build a firm foundation for accelerated growth. And, clearly, with the deals that we're landing, the size and the scale, very well positioned to do that. Dylan Becker: Fantastic. Thank you. Operator: As a reminder, if you would like to ask a question, please press 1. Your next question for today is from Gary Prestopino with Barrington Research. Gary Prestopino: Good morning, all. Hey, Steve. Could you maybe go into some of the expenses that you're going to be or some of the investments you're gonna have to make for this South African government contract just so we can get an idea of the magnitude of what you're spending to build the business as we go into twenty-seven. Steve Towe: Yeah. So, if you think about a deployment of that scale, which as I said, is, you know, is a major deployment for the business and supporting those types of operations. And we're doing that in a relatively short period. So as I think we noted, the enrollment has been stronger than we maybe even imagined it was going to be. These things take time. You know, we've got to get through, you know, a lot of work in terms of coordination, but you have to ramp up in terms of people, process, and systems in order to take that weight into the business while at the same time, obviously, we're growing very nicely in the main portion of the business. So, you know, there'll be a number of investments. These will be not investments just around, kind of this one project, but also very much looking at how we can optimize the business and how we can create the business model that can take this level of scale, not just on this particular deployment, but on others that are in our pipeline as well. So, you know, I think David's kind of aligned the fact that, you know, right now, we're not going to kind of cut operating expenses any further, and, you know, we'll talk in coming earnings calls in terms of, you know, that investment level. But, you know, it's not material in order for us to do, but important for us to do to make sure that we do this really, really well. And we can spin the plates of the growth that we have plus this, you know, this amazing contract ahead of us. So but what I like about it is, as I said, it's gonna be investment, which is going to support the future operating model of the business, the efficiency in that, the effectiveness of that, we just, in the short term, need to obviously make some initial investments to make sure that goes super well, and we can match the demand and, you know, really do a nice job for the customer. Gary Prestopino: Well, I guess what I'm getting at is it is it some is it a lot of it personnel related? Is it tech platform related? You know, not to lower your adjusted EBITDA guidance growth. And that's fine given the contract, but I'm just trying to get an idea or just think we need to get an idea of where that investment is coming from. What do you need more a lot more people to do this contract? Is it a tech platform issue? Is it what is? Steve Towe: Yeah. So I'll just not handle so as I said, it's people, process, and systems, internal systems. So it's the advancement of our automation capabilities. It's adding some people on the ground. You know, whether that's from a deployment perspective, a support perspective, a relationship perspective. And it's also then looking how we can optimize business processes for efficiency. So all of that costs a little bit of money. To do upfront. And, you know, if we look at the level of investment concern versus the return, it's minuscule in terms of that investment. But David, why don't you give your coat? Color and context? David Wilson: Yeah. Again, I think an important point to understand is really, what we're trading is a reduction in cost. So would it be more aggressive in terms of taking more cash cost out of the business in the fourth quarter? We're now, in essence, gonna repurpose that capacity. So as opposed to taking costs out, we have a great use for that cost base in terms of getting ready for faster growth than we had previously guided to. So you need to think about it through that lens as opposed to a lot of incremental investment going back into the business. There will be some but the vast majority of this is just really taking the dollars we're spending today because we now have a compelling use for them at putting it to use. And to see accelerated growth, you know, as we said in the November call as well, there is an opportunity we're willingly sort of sacrifice short-term EBITDA margin for accelerated growth because over time, if the accelerated growth that is the faster driver of shareholder returns. Gary Prestopino: No. That's good. That's a great explanation. And then would it be safe to assume that this contract, once it's fully implemented, will be one of your if not your largest single contract? Steve Towe: Yes. Operator: Okay. Gary Prestopino: Alright. And then just lastly, I saw the adjusted gross margin on the services side was down a little bit year over year. Was there any one-time benefits last year? Because as that services revenue starts to grow, we should get a pretty much a good continual expansion in the adjusted gross margin. David Wilson: Yeah. So a couple of points. In terms of bringing all these businesses together, over time, there is some harmonization in terms of where all the costs are mapped. So there's a degree of remapping that's happened, Gary, in terms of gross margin. In terms of year over year, there are if you think about some of the business we pulled out, in terms of some of that rationalization, it was good margin business. But it was a massive drag in terms of edge case developments, which caused a lot of friction in terms of the road map. So there's a degree of that that's going on as well. But remapping is certainly a driver in terms of the year-over-year comps. Gary Prestopino: Okay. Thank you. Operator: Your next question is from Alex Sklar with Raymond James. Alex Sklar: Great. Thank you. I got one more on the South Africa government contract. Just the mechanics of it. Can you just talk about is it an opt-in basis by municipal or department? Or is this a full commitment over time of the 100,000 vehicles? Is video safety and telematics both included? And is it kind of a fixed price per vehicle, or do you have to negotiate it by department or by municipality? Steve Towe: Yeah. So it is led by the National Treasury. In terms of commitment and cost and pricing and all that stuff. So that is all done. It is a directive, not and what people are doing now is enrolling into that, which is where we have that enrollment discussion that we had earlier. So it's not a mandate for everyone to have. It is an enrollment opportunity. The enrollment so far has been super strong, and therefore, that's the level of business that we feel confident to talk about. Alex Sklar: Okay. Perfect. And then we talked about some of the EBITDA cost from some of the higher growth investments. David, maybe just update us on free cash flow conversion of that EBITDA. Any other kind of cost that don't hit the EBITDA line that are kind of below the line just a factor for standing up some of the government contract or some of the faster growth investments fostering? David Wilson: Yeah. It shouldn't be anything significant, Alex. In terms of what we're doing. And so no major impact on that front. Alex Sklar: Alright. Thank you both. Operator: Your next question for today is from Greg Gibas with Northland Securities. Greg Gibas: Hey. Thanks, Steve and David. Thanks for taking the questions. Congrats on the recurring service growth. Wanted to follow-up on the South African Tier one win. If you could maybe speak to how competitive the contracting process was considering many providers aren't positioned to deliver on that level of scale and maybe any other key differentiators that are worth calling out that led to that win? Steve Towe: Yeah. So a number of suppliers bid for this contract. It came down to a few tier-one providers because as I said, this was a previously kind of, you know, each individual department was doing their own contract. So this was the biggest single award that had been done, you know, compared to the past. So that had to be, you know, organizations that had high levels of robustness, scale, product solution, ability to deploy, and just, you know, from an overall, I think, not only relationship perspective but governance perspective had the right capabilities to perform at a very, very top level. I mean, across our industry, this is a major, major win for the company. So MTN was a key we're very proud. And as I said, our partnership with part of that. And to have that dual relationship, I think, was a strengthener. So, you know, this is something in terms of the Unity capabilities, our referenceability, local market presence, domain knowledge, our abilities to really kind of drive, you know, data harmonization results and quality ultimately because if you think of some of these government departments that this will reach to, you have to have really, really strong quality in the data and services that you provide because a lot of them are mission-critical. So all around, I think a true test to the new PowerFleet that we've put together. And its capabilities and its strategy in terms of working with tier-one providers with, you know, levels of uniqueness in our joint propositions and scale. Greg Gibas: And to follow-up on kind of the cost side of it, you called out the initial investments associated with the deployment of the contract, you know, relating to people, processes, I think internal systems, kind of saying, hey. Trading down of a reduction of costs. But how much could you provide some color on how much is maybe recurring versus upfront that you expect those costs to be in Q4 versus recurring? David Wilson: Yeah. A lot of it is it's obviously a major, major contract. And in essence, we can now use that to build highly efficient scalable processes. So you have this opportunity to really build a template for the business as a whole. So that's what we're focused on doing. But a lot of it will leverage the existing systems that we have in place today. So it really is just reengineering how we do business, doing it in a more optimal, more efficient, better way from both a cost standpoint, customer experience standpoint. And having had that template built and baked, we can then use that template globally as well. So it's virtuous in many different ways in terms of driving incremental value. For shareholders over time. Steve Towe: And I'll just add to that that there's a lot more optimization that PowerFleet can do, is going to do across its operations. So we will continue over time to, you know, reduce costs across the business. It's just where our priority sits now. And we're actually, as I said, using this model and this deployment model to help scale that optimization across the business. It's just obviously, you know, with this growth opportunity, and the fact, I think, you know, we should also recognize we're ahead of the curve of where we thought we'd be in recurring revenue growth. Right? So that's another vector. I know we're focusing very much as we should do, on the South African contract. But, you know, the 11% growth, which is the first time that we've put out organic growth with an apples-for-apples 9% growth. And, you know, at the start of the call, I reiterated, you know, the 10% total growth and north of 10% ARR growth for Q4. So this is a business that is starting to flourish very nicely. And as we said all along, we need to make those, you know, really sound judgment calls of where to spend our time and where to put our dollars. And right now, with these kind of opportunities, we think it is a better value creation for shareholders to just throttle back a little bit on that true cost-saving exercise. As a trade-off for the growth opportunity that we have. Greg Gibas: That makes sense. Thanks very much. Operator: We have reached the end of the question and answer session, and I will now turn the call over to Steve Towe for closing remarks. Steve Towe: So thanks, everybody, for joining us again today. I'd like to thank our colleagues, our customers, our partners, and our shareholders. We look very much forward to our next earnings call and repeated updates as to our progress. You. Have a great day. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: To all sites on hold, we would like to thank you for your patience. Please continue to stand by. To all sites on hold, we would like to thank you for your patience. Please continue to stand by. Hello, and welcome to Becton, Dickinson and Company's First Fiscal Quarter 2026 Earnings Call. At the request of Becton, Dickinson and Company, today's call is being recorded and will be available for replay on Becton, Dickinson and Company's Investor Relations website at investors.bd.com. Or by phone at (800) 753-5212 for domestic calls and area code 11402220673 for international calls. For today's call, all parties have been placed in a listen-only mode until the question and answer session. I will now turn the call over to Sean Bevec, Senior Vice President, Investor Relations. Please go ahead. Sean Bevec: Good morning, welcome to Becton, Dickinson and Company's earnings call. Sean Bevec, Senior Vice President of Investor Relations, thank you for joining us. This call is being made available via audio webcast at bd.com. Earlier this morning, Becton, Dickinson and Company released its results for 2026. The press release and presentation can be accessed on the IR website at investors.bd.com. Leading today's call are Thomas E. Polen, Becton, Dickinson and Company's Chairman, Chief Executive Officer, and President, and Victor Roach, Senior Vice President and Interim Chief Financial Officer. Before we get started, I want to remind you that we will be making forward-looking statements. You can read the disclaimer in our earnings release and the disclosures in our SEC filings on our Investor Relations website. Unless otherwise specified, all comparisons will be made on a year-on-year basis versus the relevant fiscal period. Revenue percentage changes are on an FX-neutral basis unless otherwise noted. Also, references to adjusted EPS refer to adjusted diluted EPS. As a reminder, beginning October 1, we began operating under our previously disclosed new Becton, Dickinson and Company segment structure that includes Medical Essentials, Connected Care, Biopharma Systems, and Interventional, and a fifth Life Sciences segment comprised of Biosciences Diagnostic Solutions. The financials discussed here and included in the earnings release and 10-Q have been recast to reflect this reorganization. Reconciliations between GAAP and non-GAAP measures are included in the appendices of the earnings release and presentation. With that, I will turn it over to Thomas E. Polen. Thomas E. Polen: Thank you, Sean, and good morning, everyone. Before we get started, I would like to take a moment to welcome Sean to Becton, Dickinson and Company. We are very excited to have Sean join our team, and I look forward to partnering with him as we continue to communicate our strategy, performance, and growth opportunities. Turning to our Q1 performance, we delivered stronger-than-expected results, which reflect our disciplined execution, including accelerated commercial initiatives and strengthening our key growth platforms. Revenues of $5.3 billion increased 0.4%. New Becton, Dickinson and Company grew 2.5%, with broad-based growth across the markets where we have been doubling down on investments. This includes double-digit growth in biologic drug delivery, PureWick, advanced tissue regeneration, Pharmacy Automation, and high single-digit growth in APM. We delivered mid-single-digit growth across 90% of New Becton, Dickinson and Company's portfolio. Partially offset by 10% of our portfolio, Alaris vaccines in China undergoing challenging market dynamics that were in line with our expectations. We delivered an adjusted gross margin of 53.4% and adjusted EPS of $2.91, both of which were also ahead of our expectations on the strength of revenue performance and operational execution. Later this morning, we expect to close the combination of our life sciences business with Waters via a Reverse Morris Trust transaction. This is a significant milestone as we fully pivot to new Becton, Dickinson and Company and the next chapter of the company's growth. I want to thank both the Becton, Dickinson and Company and Waters teams whose exceptional hard work and transaction experience are enabling us to close nearly two months ahead of schedule. We believe this transaction unlocks significant value for our shareholders through both participation in the New Waters entity and value creation in the new Becton, Dickinson and Company. As part of the transaction, we will receive a $4 billion cash distribution. I am pleased to announce $2 billion will be deployed towards share repurchases through an ASR, and $2 billion will be deployed towards debt pay down. Both are expected to be executed in the near term, subject to market conditions. This is in line with our enhanced capital allocation strategy, which prioritizes share repurchases, reliable and growing dividends, and focused tuck-in M&A in targeted high-growth markets, all designed to steadily increase return on invested capital. With the completion of our Life Sciences transaction, Becton, Dickinson and Company enters this next chapter as a far more focused pure-play medtech company. This transformation builds on several years of deliberate portfolio shaping, including divesting three substantial non-core assets and the more than 20 strategic tuck-ins we have completed to strengthen our presence in some of the most attractive areas of healthcare. We recognized early on how the world of healthcare is changing rapidly. Providers everywhere are seeking partners who not only deliver high-quality products but who can help them transform care pathways, improve outcomes, and reduce costs. As we have previously discussed, we have identified three key trends shaping the future of healthcare that have guided our portfolio strategy. These include one, the rise of smart connected devices, robotics, AI, and informatics that transform the cost and quality of care; two, the shift of care towards lower-cost, more convenient settings, including outpatient facilities and the home; and three, rapid growth in technologies to address chronic disease, one of the fastest-growing segments in healthcare. Over the last several years, we have built multiple growth platforms, each with billion-dollar-plus potential, that position New Becton, Dickinson and Company squarely at the center of these trends. From our nearly $5 billion Connected Care business, with AI-driven advanced patient monitoring and connected medication management, to advanced pharmacy robotics, to leading platforms for biologic drug delivery at home, urinary incontinence, vascular disease, and tissue regeneration. New Becton, Dickinson and Company is positioned to lead in advancing the future of care. We have leading positions in more than 90% of the markets we serve, with over 90% of our revenues driven by recurring consumables. Every year, we manufacture more than 35 billion devices that reach healthcare providers across more than 190 countries. Few companies in healthcare are as foundational to the daily delivery of care, and that scale powers the strong free cash flow that underpins our strategy. While these trends guide where we innovate and invest, Becton, Dickinson and Company excellence guides how we execute. Together, they shape our strategy for the new Becton, Dickinson and Company. Excellence unleashed, which is expressed through our three strategic priorities: Compete, innovate, and deliver. We have begun executing on these priorities, enhancing the speed and agility of the company. I will share some examples of where we are seeing early positive momentum. Compete reflects how we are elevating our commercial capabilities to win in the fastest-growing parts of the market and deliver an exceptional customer experience. We made significant progress across our commercial initiatives this quarter, including planned sales force expansion in APM, PI, and advanced tissue regeneration, while accelerating initiatives to make PureWick at home available for our veterans. We are also seeing broad-based commercial success across the company. The Pyxis Pro launch is off to a good start, with 85% of initial orders coming from competitive conversions. Alaris delivered our strongest quarter of competitive wins since the relaunch, increasing our category share by approximately 100 basis points. Our medical essentials business also gained share across multiple categories and with major U.S. health systems, including in flush, picks, and catheters. Pharma Systems delivered significant GLP-one wins, with now over 80 novel and biosimilar GLP-one molecules contracted in Becton, Dickinson and Company delivery devices. And BDI saw continued strength with notable conversions in oncology and peripheral arterial disease and strong adoption of recent launches of PureWick Flex and Galaflex. These results reflect the strong execution of our teams and the growing impact of our commercial initiatives. Turning to our second priority, innovate. Innovate focuses on how we bring high-impact solutions to market, executing a pipeline that is now stronger, more focused, and more productivity-driven than ever. This quarter, we strengthened our innovation pipeline by completing the reallocation of $50 million of central R&D to the businesses to fund multiple new product innovations in our high-growth platforms. We also continued to scale Becton, Dickinson and Company excellence into R&D, reducing development times and accelerating future launches by six to twelve months across several areas. In surgery, we entered several new markets, increasing our served markets by over $550 million in categories that offer higher growth, higher margin, and long-term strategic value. This includes the U.S. launch of Avatene Flowable, a next-generation flowable hemostat that strengthens our position in biosurgery and enters us into a nearly $400 million market growing approximately 5% annually. We also advanced our global wound irrigation portfolio with the European launch of SurgiFor, a ready-to-use wound irrigation system that simplifies operating room workflows. In addition, we submitted SurgiFore Pulse to the FDA, a pulse lavage system that can expand Becton, Dickinson and Company's presence in this nearly $200 million market by approximately 40%. Finally, in connected care, HemoSphere Stream began targeted market release in the U.S. and Europe following October's 510 clearance. Stream's smart cable compatibility can expand its addressable market tenfold, and early feedback has been very positive. Finally, our third priority, deliver, represents our commitment to operational excellence across safety, quality, delivery, and cash flow. As a result of the Life Sciences transaction and the network consolidation initiative that we began in FY 2022, we have created a meaningfully simpler manufacturing network, reducing our network by nearly half to under 50 global sites, lowering costs, improving resiliency, and enabling scaled smart factories. We have actions underway to improve this even further. Becton, Dickinson and Company excellence continued to drive meaningful productivity improvements of 8% in the quarter, contributing to gross margin and cash flow. Finally, we achieved good progress on the $200 million cost-out program communicated last quarter, already executing actions representing $150 million or 75% of the target, with a clear line of sight to the balance. We are pleased with our strategic progress, yet we recognize there is more work to do. This is an exciting moment for the new Becton, Dickinson and Company, as we focus actions and raise our standards to outcompete, outinnovate, and outdeliver. With that, I will turn it over to Vitor. Vitor Roach: Thanks, Tom. Starting with revenue, total company revenue of $5.3 billion grew 0.4% with 2.5% growth in New Becton, Dickinson and Company. In Medical Essentials, MDS performance reflects expected order timing dynamics and volume-based procurement in China that was partially offset by continued share gains in the U.S. in our Vascular Access Management portfolio. Within specimen management, solid growth in Becton, Dickinson and Company vacutainer portfolio in the U.S. was offset by expected market dynamics in China, order timing, and a tough comparison to the prior year. Connected Care delivered solid mid-single-digit growth. Performance was led by APM, which grew high single digits on strong volume across the portfolio. MMS growth was led by pharmacy automation with double-digit growth in our LoRa platform. In our infusion business, growth was driven by sets, which were up strongly on increased utilization against last year's fluid supply shortage. Alaris pumps performance was slightly ahead of our expectations despite the expected revenue decline due to a tough comparison to the prior year. Biopharma systems grew low single digits with continued double-digit growth in biologics led by GLP-one. This was partially offset by lower demand for vaccine products in line with our expectation. Interventional delivered solid mid-single-digit growth. This includes high single-digit growth in UCC driven by double-digit growth in PureWick. In surgery, we delivered mid-single-digit growth led by strong performance in our advanced tissue regeneration and infection prevention portfolios. Low single-digit growth in PI reflects strength in peripheral vascular disease and oncology partially offset by China market dynamics. Life sciences declined in the quarter. In the U.S., results were impacted by U.S. point-of-care headwinds, a difficult prior year comparison, and market dynamics in China. In VDB, growth was pressured by market dynamics in China, lower life science research funding, and a difficult compare from prior year licensing revenue. Turning to the P&L, adjusted gross margin of 53.4% was down 140 basis points versus the prior year driven by approximately 170 basis points of tariffs, partially offset by productivity initiatives through Becton, Dickinson and Company excellence. Adjusted operating margin of 21.2% was down 240 basis points versus the prior year due to the impact of tariffs and increased commercial investments in key growth areas. Despite these declines, both adjusted gross and operating margins were ahead of our expectations. Adjusted EPS of $2.91 was down 15.2% driven primarily by the impact of tariffs. However, earnings exceeded our expectations on the strength of both revenue performance and operational execution. Free cash flow was $548 million in the quarter. Free cash flow conversion improved to 66% versus 59% in the prior year, driven by working capital discipline and capital efficiency. During the quarter, we returned approximately $550 million to shareholders, including dividends and $250 million in share buybacks. We ended the quarter with net leverage of 2.9 times and remain committed to our 2.5 times long-term net leverage target. Moving to our fiscal '26 guidance for new Becton, Dickinson and Company. All guidance we are providing today is on a continuing operations basis and reflects the expected closing of the combination of our life science business with Waters. Following the closing, the separated business will be treated as discontinued operations for the full fiscal year. Our guidance includes deployments of the $4 billion cash distribution we will receive as part of the transaction. For fiscal 2026, we continue to expect new Becton, Dickinson and Company to deliver low single-digit revenue growth. Based on current spot rates, currency is estimated to be a tailwind to revenue of about 120 basis points. Moving down to the P&L, we continue to expect adjusted operating margin of about 25% inclusive of the impact of tariffs. Interest other net is expected to be between $600 million and $620 million. Our adjusted effective tax rate is expected to be between 16-17%. Weighted shares outstanding for the full year are expected to be approximately 282 million shares. Given these considerations, we are establishing an adjusted EPS guidance for new Becton, Dickinson and Company in a range of $12.35 to $12.65. This reflects growth of approximately 6% at the midpoint, including an impact of 370 basis points from tariffs. The net estimated impact of the closing of the Waters transaction, including the deployment of the associated $4 billion cash distribution, is approximately $2.4. Therefore, our adjusted EPS guidance for new Becton, Dickinson and Company remains operationally unchanged. As we think about fiscal 2026 phasing, we expect Q2 revenue growth of approximately 2%, consistent with our full-year guidance assumption, with the balance of the year also expected to be within the low single-digit range. We expect Q2 adjusted EPS to be in the range of $2.72 to $2.82. Finally, we are pleased with our Q1 performance. However, with just one quarter behind us, we are maintaining a prudent approach to our guidance for new Becton, Dickinson and Company. Thomas E. Polen: With that, let's start the Q&A session. Operator, can you please assemble the queue? Operator: Absolutely. And at this time, lastly, to provide optimal sound quality, thank you. Our first question is coming from Travis Steed with Bank of America. Please go ahead. Your line is open. Travis Steed: Everybody. Congrats on the RMT and getting that done ahead of schedule. I wanted to ask about the guidance, both the Q2 revenue guide, the step down in Q2, and the EPS guide, as well as kind of the full year, some of the assumptions on the cadence of the year and how you are going Q2 to the second half on both revenue and earnings? Thomas E. Polen: Yes. Thanks for the question, Travis, good morning. So we are really pleased with the start of the year and Q1 performance. I think you saw our team executed well, and we saw strength across several of the high-growth areas of the portfolio. We can talk about those in just a bit. When it comes to Q2, nothing's fundamentally changed in our Q2 outlook. As you mentioned, the core growth driver supporting new Becton, Dickinson and Company growth in Q1, they all remain on, intact, and we feel really good about the trajectory of the business. Our Q2 outlook does reflect some modest timing benefits in biopharma systems and MMS that we saw in Q1. And if you adjust for that, basically Q1 and Q2 are in line with each other. I think a few things we are really pleased to be starting the year at our full-year run rate. Q2 has no ramp versus Q1. And really importantly, there's no ramp first half to second half either, right, which is a much better spot and something that we really wanted to have this year. That, as you know, we had that topic last year. And so just where we want to be, no ramp in the year, strong start to Q1, and executing, as you said, the RMT transaction ahead of schedule. Really excited about the new Becton, Dickinson and Company. Travis Steed: Great. Thanks a lot. Operator: Thank you. We will move next with Patrick Wood with Morgan Stanley. Please go ahead. Your line is open. Patrick Wood: Fabulous. Thank you so much. Tom, maybe just a midterm one around the categories you are looking at. Obviously, this year, a bit of a transition year. There are a few things like China VBP and Alaris that are kind of affecting numbers. But I guess as you look across NewCo Becton, Dickinson and Company's categories, is there any structural change that happened recently or in the past that would preclude you from sort of hitting that normalized mid-single-digit growth rate as a general framework? Anything that's changed way or the other that would make you feel better or worse about that and how you feel about that? Thanks. Thomas E. Polen: Yes. Patrick, and thanks for the question. Absolutely not. We feel really good about our portfolio. As we talked about, we have been extremely active over the last several years in very purposely reshaping our portfolio. We have done three significant divestitures starting with diabetes, obviously, Mueller, and most recently, our life science business. We have very purposely brought in 20 tuck-in acquisitions, everything from our Parata pharmacy automation to APM and a number of others. All reshaping the portfolio in those high-growth areas that we have been talking about that we identified some time ago. Today, as you mentioned, we do have some known headwinds that are in 10% of our portfolio. The fundamentals across the remaining 90% remain very strong, and they continue to perform at a solid mid-single-digit growth. We are continuing to lean in behind those areas. You are seeing us put meaningful commercial investment behind those, the $30 million of incremental sales investments, all 100% on track. You heard that update on the call, investing behind areas like VA, the Veterans Administration, PureWick now that's purely fully reimbursement for veterans. Launching a number of plastic surgery products in Europe and Brazil. Expanding our sales forces by 15% in PI and APM, right? All investing behind those growth areas. Which is again, you saw strong growth, double-digit growth, in fact, this past quarter in areas like PureWick, Biologics, tissue reconstruction, and others, you saw high single-digit growth in areas like APM, Pharmacy automation grew double digits in the quarter. So, again, we feel really good. Those are not slowing down. We do not expect them to, we expect them to continue strong through the year. We have got a great innovation pipeline that's going to continue to fuel growth in those over the next several. Patrick Wood: Love it. Thank you. Thanks for the question. Operator: Thank you. Our next comes from Larry Biegelsen with Wells Fargo. Please go ahead. Your line is open. Larry Biegelsen: Good morning. Thanks for taking the question. Congrats, Tom, on the closing of the Waters deal. Tom, maybe we could talk about the other 10% of the portfolio that's not growing mid-single digits. China VBP, what's the expected impact in fiscal 2026? When did these vaccine headwinds lap in farm systems? And any change to the Alaris expectation this year and next year that you gave us on the last call? Thomas E. Polen: Yeah. Thanks for the questions, Larry. Everything's playing out as we expected it in Q1, and we expect that to continue for the balance of the year. China was in line with our expectations in the quarter. Vaccines were relatively in line with expectations in the quarter, as was Alaris. Anything, we are seeing some really strong competitive momentum in Alaris. I think as we shared in the prepared remarks, we had a record in new competitive wins in the quarter. We gained about a full point of share just in the quarter. Those take some time to come through in our run rate as we implement those and see the consumables revenue pickup. But in terms of actual contract signed deals closed, it was a really strong quarter in Alaris, right, which is exactly what we want to see. We are coming to the tail end of, of course, remediation, so our whole sales force is focused now on competitive gains, just as we said. And so we are pleased with that. Vaccines, on the counter side of vaccines, we continue to see biologics grow very solidly. Vaccines, we expect that will continue to play out for the year as we expected, and we will have to look at that as we go into 2027. Certainly, it will be a smaller portion of our revenue, and biologic will be a larger portion of our revenue. So its absolute impact in 2027 likely will not be anywhere near what it would be in '26, but we will continue to monitor that very closely. And China, the market, I was just there in January. I think we have shared before that we expect that VOB will have gone through 80% of our portfolio by 2026. We do not see any change to that assumption. And we do continue to see positive volume growth happening in China despite the price compression in the few areas that we have discussed where VOBP is happening. So overall, we said at the beginning of the year when we gave guidance for the old Becton, Dickinson and Company, we expected those combined areas to be about 250 basis points of headwind in the full year, and that's consistent with what we outlined and how we think about it going forward. Larry Biegelsen: Thank you. Operator: Thank you. Next question comes from Robbie Marcus with JPMorgan. Please go ahead. Your line is open. Robbie Marcus: Great. Good morning and thanks for taking the questions. I will add my congratulations on the RMT going effective today. Two quick ones for me. I will ask them both upfront. One, just on the second quarter, it's the easiest comps of the year, both on a one and a two-year stack basis. So a lot of people just wanted to get help on why 2% is the right starting point for fiscal 2Q and any considerations there? And then as we get to the 25% operating, which I think is a touch better than people were thinking, you know, any one-time considerations or TSAs, MSAs, anything we should be aware of as we try and build up our models to get there? Thanks a lot. Vitor Roach: I will turn that to Vitor. Hi, Ravi. This is Vitor. So regarding Q2, so first, I think we were very pleased with Q1 performance. I think we started the year solidly, and it puts us in very sound grounds for the rest of the year. But for Q2, Tom mentioned in his remarks, nothing fundamentally changed in Q2. We have our core drivers supporting the new Becton, Dickinson and Company growth in Q1 actually continuing in Q2, and we expect that trajectory to continue for the rest of the year as well. In Q2, the only thing that happened is slight change timing situations in both farm systems and MMS. But if you normalize for those factors, you actually had a little bit of a more normalized growth between Q1 and Q2. I think the most important piece is that nothing fundamentally changed. On our Q2. We feel very confident about the numbers going forward as well. Thomas E. Polen: Both very much in line with our full-year guidance. Vitor Roach: Exactly. Very aligned with our full-year guidance. And from a margin perspective, there is no specific one-timers that we are expecting. So we are still holding the 25% as we committed before. And this is on the basis of our margin performance, which is the strongest execution of our Becton, Dickinson and Company excellence and also the favorable mix that we are driving through intentional investments in strategic areas like high growth, high margin areas like APM, UCC, surgery among others. So, we feel good about the 25 and there is nothing specific that changes the number from 25. Thomas E. Polen: And Ravi, maybe just to share a little bit more color on the margin performance. Right? We are continuing to be very focused. Our innovation pipeline, the areas where we are putting commercial investment, are all both the innovation pipeline has a notably higher gross margin than our average portfolio, and the areas that we are putting commercial behind that we have talked about also have a notably higher gross margin than our broader portfolio. So those help fuel margin. At the same time, obviously, Becton, Dickinson and Company Excellence in our operations organization is continuing to gain momentum. Right? We have been at it for a couple of years. We are still in relatively early innings. Saw us talk about 8% productivity improvements in the quarter. That's world-class levels. Really proud of the teams there and how they are executing. Also heard us talk about, I think, the first time, share some statistics around our plant network. We started the last phase of Becton, Dickinson and Company's strategy, we talked about investing behind the network. Simplification. And you are seeing the outputs of that combined with obviously the separation of our Life Science business. More than cutting our manufacturing network in half. So when we started the journey several years ago, we had a little over 90 manufacturing plants. Right? We are under 50 today. And so these are fewer plants, more scaled plants, where we are getting more leverage, more costs being spread over higher volume in these sites, also all helping to contribute to our operating margin. So that's been something systematic that we have been working on. We are really pleased with that. And when you think about that, that drop from nearly 90 to under 50 plants, about half of that, over 20, that's over 20 plant closures and a little over 20 plants going to Waters as part of the RMT, but a dramatically simplified network that we are investing behind as we go forward as well. It just helps us further on the op margin. Thanks a lot. Operator: Thank you. We will move next with Joanne Wuensch with Citibank. Good morning and congrats on getting to this phase. Two questions. The first one has to do more macro, if you are seeing anything in the quarter on things like nursing shortages, weather impacts, or anything on the ACA? And then I was hoping you could maybe flush out some of the contracts you have in for the GLPs and if there is anything noteworthy you can share with us there. Thank you. Thomas E. Polen: Morning, Joanne, and thanks for the question. So utilization as we think about just the broader hospital demand trends, we continue to see steady utilization levels in line with hospital surveys that we monitor. Say the CapEx environment, all also see remaining solid. We have not seen any weather effects through January and into February. Then I would just say, overall, too, as we think about utilization, over 90% of our revenue is consumables, particularly for New Becton, Dickinson and Company, which provides a very resilient base. And the portion that is CapEx, we are seeing that solid as well. You saw that come through very clearly in MMS. If you exclude kind of the dynamic of Alaris and the Grover, MMS grew nearly 6% in the quarter, and that includes CapEx there. So really strong. Pharmacy automation is actually one of our largest percent businesses of CapEx, and it grew double digits, 10% in the quarter. And that's a mix of both strong CapEx purchases in Europe and in the U.S. There as we think about pharmacy automation. Again, that's a big labor savings play, and that's a big part of our CapEx spending as well as helping where there are shortages of pharmacists or other clinicians. A lot of our solutions help in that environment. When it comes to GLP-1s, we are in a really good position there. Certainly, it's a modest portion of our business today, about 2% of our revenue. But it's a high-growth area and certainly a growth opportunity as we look forward. Today, we support some of the largest molecules that are on the market. We continue to have a very high win rate on both new novel molecules that are coming to market and on biosimilars. We updated some information today on the call. We now have more than 80 novel and biosimilar GLP-1s contracted in our devices. And we are continuing to see momentum in injectables. Obviously, there's always the question in the news. I know some investors of ours have asked a question about how do we think about oral injectables. Reality is, we are seeing continued momentum in injectable GLP-1s. We continue to see the largest pharma companies putting billions of dollars, some very recent announcement in multibillion-dollar investments in injectable capacity, including in the U.S. And people really view that, orals as complementary rather than displacing injectables at scale. So we are continuing to be bullish on that and continue to focus on having a very high win rate on both new novel and biosimilar molecules in the space. Thanks for the question. Operator: Thank you. We will move next with Matt Taylor with Jefferies. Please go ahead. Your line is open. Matt Taylor: Hi, thanks for taking the question. Tom, as a follow-up to that question, I think previously you had talked about the potential for the GLP-1 franchise within Becton, Dickinson and Company to get to about $1 billion by the end of the decade. Do you still feel the same way about the trajectory long term given all these deals that you signed? And maybe you could address that and where it is now, where and where it is today. Thomas E. Polen: Yeah. We still feel very much with that on track. Our growth rate continues to be very strong as we share double digits. We are nearing that halfway point on that journey now. So and again, you have not seen the number of new novel molecules coming to market that will be over the next several years. And of course, as you look at the back half of this decade, you start really hitting stride on the biosimilars. And when we talk about our biosimilar portfolio, it's very broad geographically. So our biosimilar portfolio includes biosimilars across China, Southeast Asia, Europe, Latin America, Canada, and the U.S. It's very broad globally. And so as you think about certain patent expiries, varying geographically, have good exposure across those different time points. Thank you for the question. Matt Taylor: Thank you, Tom. Operator: Thank you. We will move next with Matt Miksic with Barclays. Please go ahead. Your line is open. Matt Miksic: Good morning, Tom. Thanks so much for taking the questions and congrats on getting to the starting line, I guess, is one way to think about it. So when you mentioned just a question on the innovate part of your plan. And investments you are making in R&D. Maybe some sense of when I understand the commercial investments this year execute and compete, but when do you think we will start to see things come through the pipeline or maybe come through at a faster pace from these R&D investments that you are making in the kind of Innovate segment of strategy? Thomas E. Polen: Yes. Thank you. You are going to see those continue to come through. This year, we have got a lot of great launches happening. We talked about some of the very recent ones that are just ramping up like Pyxis Pro. We could not be more pleased with how that one's been going as we mentioned, really strong competitive share gain. Chemosphere Stream just launching now. You are going to continue to see throughout this year and into next 2027 is quite a big year for launches as is 2028. Across the portfolio. At the same time, we have shared we put $50 million that we took from efficiencies in and shifting from corporate expenses, moving that into R&D. And we just started quite a few new R&D programs as well. This fiscal year, not only what we would normally start with our traditional increase, but that bolus of money starting more projects in tissue regeneration, additional biologic drug delivery, some adjacencies in PureWick that we are really excited about, investments and also in the connected care space. The other thing that we are seeing some really positive, still early, but very positive results. As we shared, we are taking Becton, Dickinson and Company excellence commercial and into innovation. And we actually have some dedicated resources now that go across working with our different R&D teams doing kaizens to accelerate our innovation timelines. We have been doing quite a few of those. We started that really in late last year. We have been doing those throughout Q1. And we have seen a number of R&D projects where we have accelerated timelines to launch by six and even up to twelve months on that. So we are going to continue to get after that. We have got a goal to do all of our key development programs. We are focused on driving those Kaizens and accelerations. This year. They are all scheduled with the teams. And so that capability and that momentum that we saw in operations through Becton, Dickinson and Company Excellence, we are really pleased with some of the early signs that we are seeing taking those same processes and systems into innovation and also into our commercial organization. So we will continue to provide updates on that as it progresses. And we will look forward to sharing more through the year and eventually at an Analyst Day in the future on that innovation pipeline. Thanks for the question, Matt. Matt Miksic: Thank you. Operator: We will move next with Shagun Singh with RBC Capital Markets. Please go ahead. Shagun Singh: Thank you so much. I just wanted to get a better handle on the three areas of headwinds, Alaris, Vaccines, and China. It seems like vaccines in China will hopefully be behind us this year. But how should we think about Alaris beyond this year? Do you get to that 5% or mid-single digits next year? Or will Alaris be a headwind? And then just very quickly on M&A. Is there an opportunity for you guys to be more aggressive under the new Becton, Dickinson and Company strategy on M&A to help raise the weighted average market growth here? Thank you for taking the questions. Thomas E. Polen: Yes. Thank you for the question, Shagun. So on vaccines and China, I think you described those. Alaris, we communicated at the end of as we gave the guide to start this year, the Holco Becton, Dickinson and Company guide. We do expect Alaris to step up in 2027, 100 basis points headwind this year stepping up to a 200 basis point headwind in 2027. That's just again as we have fully completed the remediation. Expect to actually be at record share levels as that dynamic is happening, it's just the grow over from the remediation. That's happening there. But expect to be in a stronger than ever competitive position on Alaris. As it comes to tuck-in M&A, so as we have communicated, for new Becton, Dickinson and Company, we are very focused on a balanced capital allocation strategy. We are pleased obviously this year between the $2 billion plus share buyback that we did, $250 million buyback that we did in Q1. Plus the $2 billion buyback that we are doing now, through the ASR, but that's a significant return of capital to our shareholders. We are, as part of that balanced capital allocation strategy, we have communicated that we are focused on focused tuck-in M&A. Our focus remains on tuck-in M&A, not transformational M&A. And we do have a robust pipeline from that perspective. When it comes to the criteria for those tuck-in M&A, they remain unchanged versus what we have shared in the past. That means accretive to revenue growth and accretive from an EPS perspective. We are not looking at dilutive M&A. And we do see with the new Becton, Dickinson and Company, there are a number of very attractive high-growth sectors that we are in that we see the opportunity to supplement that WAMGR with tuck-in M&A. So more to come on that, but we will continue to do it in a focused way and very much aligned with that balanced capital allocation strategy that we have communicated. Thanks for the question. Vitor Roach: Thank you. Thomas E. Polen: Our next question, by the way, just for those who had congratulated earlier on, the deal with Waters is officially closed now. Operator? Operator: Thank you. Our next question comes from Rick Wise with Stifel. Please go ahead. Your line is open. Rick Wise: Good morning. Hi, Tom. Tom, you seem very well set up for the rest of the year. I think Vitor said it, and I apologize if these were not the exact words. But I think you said prudent guidance for fiscal 2026. You are well set up for a stable, predictable outlook without the usual second-half ramp we have seen in the past. That's great. And sort of a variation, a little bit of Matt's question. I can't believe you are investing in Salesforce the way you are. The M&A you have done, the focus on faster growth. Businesses, the cost-cutting. My question is, if there would be some upside to this thoughtfully prudent guidance, in the next two, four, six quarters. You think it would be from all the above? Is it more likely from the new products? Is it more likely to come from the expanded sales efforts? Is it that some of the growth drags are a little less? Just any color on how we should just reflect on that? And just as since this is not exactly one question, I will ask at a half. When are you going to where are you with your CFO search announcement timing and maybe talk to us a little bit about what you are looking for in your new partner. Thank you so much. Thomas E. Polen: Yes. Thank you for the questions. So when it comes to the CFO search, continue that is well underway, and we will look forward to providing an update when that is complete. In the meanwhile, of course, Vitor is doing a great job stewarding the company and obviously doing a great job here on the call. So more to come on that. But we are running a thoughtful process focused on, you know, continuity of execution and financial discipline. And obviously, it's a really important moment in the company's evolution, and we are going to make sure we get the right person there. When it comes to upsides, guidance for the year, look, again, we are really pleased with how we started the year. As we think about the areas that we are investing behind, those areas of high growth and higher margin urinary incontinence, pharmacy automation, connected care, APM. Tissue regeneration, biologics, right? Those are the areas that we are putting our investments behind, both commercially and disproportionately from an R&D perspective. And so those are areas that could be natural areas of opportunity for us. I think, you know, as Mike Feld now also as chief revenue officer, who's been running the Life Science segment, essentially as of today. He's now full-time in that role. We see opportunity the reason we created that role, it's never existed in the history of Becton, Dickinson and Company, is we have been very good commercially. You do not get to our category-leading shares in 90% of the markets in which we compete without being good commercially. We think there's another level of performance that we can reach, just like we have always been good operationally. But we are reaching and we are executing at levels that we have never executed at before operationally. We view that same opportunity exists commercially, and when we execute that, that will deliver higher growth. We are convinced of that. And so more to come there. As Mike's now fully in that role, we will provide more exposure to our investors on the programs that he's executing. It not only has to do with sales force expansion, but we have changed compensation plans for our selling organization around the world going into this year. We are putting in new tech stacks for our sales teams to help them be more effective. We are optimizing our management systems and processes with our selling organization, and Mike's leading that, working with our teams around the world. So, again, like we have seen in operations, we believe that there are opportunities, meaningful opportunities, to help accelerate growth as well through that commercial excellence and complementing that with our innovation pipeline, the growth areas that we have been focusing on and, of course, complementary tuck-in M&A over time as well. So thanks for the question, Rick. Rick Wise: Thank you, Tom. Operator: Thank you. We will move next with Josh Jennings with T.P. Cowen. Please go ahead. Your line is open. Josh Jennings: Hi, good morning. Thanks for taking the questions and congratulations on officially breaking through the tape there on the Waters transaction. Wanted to just get help thinking about the pricing environment hospitals, demands for concessions versus whether that's stepped up and just with all the innovation that's on tap for from Becton, Dickinson and Company, you know, can that help drive price premiums and pricing be a tailwind in fiscal 2026 and into the out years and help with organic revenue growth and gross margin expansion. Thanks for taking the question. Thomas E. Polen: Yeah. Thanks for the question, Josh. So we continue to see, I would say, a stable pricing environment, you know, relative there's always pressure from our customers for pricing. That's something that we have, you know, obviously navigated for quite some time. We are very focused on, obviously, articulating and delivering value to our customers and outcomes, both clinical outcomes and financial outcomes through the technologies that we provide. Pricing what we are seeing so far in Q1, details will come out further in the 10-Q that will be filed later today. But overall, pricing generally flat to slightly positive. That's up a little over 50 basis points ex China. Positive price. Offset by the pricing dynamic that we see in China. As we think about that going forward, we expect to continue to have positive pricing in the rest of the world. And as China VOBP abates as we move into 2027, we would expect and beyond that pricing dynamic to continue to be more of a positive for us as we go forward as VOBP lessens, from that perspective. I think as we think about new product innovations and pricing there, we are entering into a lot of new product categories with our products, probably more so than ever before. Historically, we have done a lot of serial innovations where we are upgrading base products. We are continuing to do that in a number of cases, but more so than ever before we are entering into new spaces. I think actually all of the new products that we shared today are brand new spaces for us. Avatene Flowable, brand new biosurgery space for us that we have never been in before, a $400 million market. Surgiaphor, which is complementary to Chloroprep, but it's for once you are in the surgery. Chloroprep's before the surgery. That's a whole new market for us. And Hemosphere Stream is really extending the hemisphere platform into the general ward. Expanding it to about 30,300 monitors, that we do not tap into today, so a brand new market. Space for us with Hemisphere Stream. So there, we make sure that pricing equals the value of the products and what they are delivering to our customers. I think the other thing is in areas, and we have a number of new products launching in pharmacy automation, for example, for central fill. Or the Pyxis Pro, which, by the way, Pyxis Pro launched at a premium to the base Pyxis. But it's all associated with very clear data that we have. That it's delivering greater economic value to our customers, right? Those areas, for example, it's meaningful helping with nursing workflow by reducing drug shortages on the floor. Or in the case of pharmacy automation, it's reducing labor costs associated with preparing medications and pills. And it's enabling many places, let's say like online pharmacies that are delivering to your home, for them to do that in warehouses, and they are starting from scratch, they never even hired in the first place there. They go straight to the robots and automation and the warehouses are delivering. Medications to home and able to do that in a cost-effective manner. So I think our solutions are well-tailored to this environment that we are in and expect we will continue to see. As is our innovation pipeline. Thanks for the question. Operator: Thank you. We will move next with Jason Bedford with Raymond James. Please go ahead. Your line is open. Jason Bedford: Good morning and congrats on the progress here. So I had a question on Alaris. Was down year over year, but you mentioned you gained 100 basis points of category share. I'm guessing the share commentary is on an installed base basis. So my questions are, one, is your expectation that you continue to gain share at this rate? And then two, just to level set what is your share position today? Thanks. Thomas E. Polen: Yes. Thanks, Jason, for the question and bringing us home here on the call. Our share position is nearing 60%. Overall. And yes, you are right. So obviously, through the remediation efforts that we have been doing over the last three years, we have been upgrading about 20% of the market per year. And so as this is now coming to the tail end of that and peaks last year, you physically can't even if we took all competitive share that's opening up, this year, we still would see declining growth and the same dynamic would happen next year just because of what it means for us in terms of the scale in which we just upgraded the marketplace. But yes, we are pleased with our performance on share capture in the first quarter. We have a very strong funnel as we go forward. And we continue to innovate very rapidly on Alaris, not only on the current platform, we have had of course, had new 510s approved since the original one that allowed us to relaunch the platform. But we are continuing to bring new features to Alaris. We have another one planned for submission late this year. That will add further new features to that. And of course, we also continue to have it and we have shared in the past a whole new Alaris platform which is moving forward very nicely through our innovation pipeline. And we will look forward to sharing more details on in the future. But we feel good about Alaris, feel good about our overall connected medication management platform. It's great to have Alaris and our new Pyxis Pro out there together as well, as we also shared Pyxis had a really strong competitive quarter in Q1 with the launch of Pyxis Pro. And has a really strong pipeline as we look forward as well. So thank you for the question, Jason. Jason Bedford: Thank you. Operator: And that will conclude today's question and answer session. At this time, I would like to turn the floor back over to Thomas E. Polen for any additional or closing comments. Thomas E. Polen: Okay. Thank you, operator. In summary, we delivered solid Q1 results that exceeded our expectations, which we believe positions us well to achieve our full-year guidance. As we navigate transitory headwinds in contained areas within our business, our broader portfolio continues to perform well, and we are actively investing in high-growth, high-margin areas. To our Biosciences and Diagnostic Solutions colleagues transitioning to Waters, I want to thank you for your passion, professionalism, and the tremendous contributions you have made to Becton, Dickinson and Company. You are stepping into an exciting new opportunity with a strong growth-driven life science leader, and we are proud of all you have accomplished and wish you every success in this next chapter. Of course, with the completion of the transaction this morning, we are very excited to fully pivot to our strategy for the new Becton, Dickinson and Company. We look forward to updating you on our progress next quarter. Thank you all for your time today. Operator: Thank you. This does conclude this audio webcast. On behalf of Becton, Dickinson and Company, thank you for joining today. Please disconnect your lines at this time. Have a wonderful day.
Operator: Good morning, ladies and gentlemen. I am your conference facilitator today, Kevin. And I would like to welcome everyone to Cleveland-Cliffs Fourth Quarter and Full Year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. The company reminds you that certain comments made on today's call will include predictive statements that are intended to be made as forward-looking within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially. Important factors that could cause results to differ materially are set forth in reports on Form 10-Ks and 10-Q and news releases filed with the SEC, which are available on the company's website. Today's conference call is also available and being broadcast on clevelandcliffs.com. At the conclusion of the call, it will be archived on the website and available for replay. The company will also discuss results excluding certain special items. Reconciliation for Regulation G purposes can be found in the earnings release, which was published this morning. At this time, I'd like to introduce Lourenco Goncalves, Chairman, President, and Chief Executive Officer. Lourenco Goncalves: Thank you, Kevin, and good morning, everyone. After several years of no real actions taken to reverse the systematic destruction of the American industrial base, we finally saw in 2025 a federal administration that values the importance of preserving and growing American manufacturing. That said, in 2025, throughout the entire year, we were still exposed to a lot of steel imports, poisoning our domestic market and creating a demand gap that negatively impacted our steel shipments and asset utilization. In response to these challenging conditions, we made difficult decisions on shutting down assets that are dragging us down. Also in 2025, we terminated our index-based slab supply contract with ArcelorMittal. The contract became very onerous in its final year when the Brazilian Slab Price Index unnaturally separated from the U.S. finished steel prices. The factors that weighed on our performance in 2025 were well known and addressable. As we entered 2026, these problems have either been resolved or are clearly improving. We have already secured more business from our automotive clients, and that will show throughout 2026 as the OEMs reshore production back to the United States. Also very important, at the end of 2025, the Canadian government has finally made a move to restrict imported steel into Canada, and that has created positive momentum in 2026 for our Canadian subsidiary Stelco. Our robust order book is the best confirmation that the business environment has already started to improve. Section 232 tariffs at 50% are, of course, a leading driver of this impact. We are seeing the benefit of melted and poured requirements in driving demand for domestically produced steel. A lot of the new galvanizing capacity in the U.S. has come online and taken share from imports, reducing the amount of hot rolled availability in the marketplace. We have been able to use the melting capacity previously allocated to orders of low-margin slabs to fulfill orders of higher-margin flat rolled products. That said, due to melted import requirements, we anticipate continued demand for our domestically produced slabs. We remain open to being a domestic slab supplier to those in need of domestic slabs, as long as we can agree on a pricing construct that makes sense. With all this positive influence, the spot steel price is sitting at a two-year high. Layering the recent cold weather stretch across the Midwest, scrap prices and electricity prices have continued to grind higher, which has increased the cost structure of the mini mills to a greater level than our own. This has given us a cost advantage as we generate a lot of our own power and use much less scrap. Even with our sizable fixed-price automotive footprint, because of our vertically integrated nature and the also significant size of our non-automotive customer base, profitability is more impacted by spot steel prices than any other company in our industry. Said another way, when hot rolled coil prices rally, we, Cleveland-Cliffs, benefit. Automotive is still our core end market, and when domestic production levels of cars, trucks, and SUVs remain weak for an extended period, the impact on us is unavoidable. Vehicle production in the United States was down in 2025 for the third consecutive year. But with this new era of policy-driven reshoring, the return to pre-COVID levels of vehicle production in the United States is inevitable. Throughout 2025, we geared up for this inevitability by signing multi-year fixed-price contracts with all major OEM customers. These agreements increased our market share and secured high-margin business that will flow through in 2026. We have the installed capacity available right now. Cliffs does not need to build new plants. Unfortunately, the transition to Cliffs Steel from the previous suppliers is not instantaneous. It takes some time before we see the full impact of these changeovers, but we will see it in 2026. The expected combination of these market share gains with an increased domestic production of vehicles will be a massive gain for our throughput efficiency, costs, and ultimately profits. One more time, differently from our competitors currently building new steel plants or announcing plans to build steel plants, Cleveland-Cliffs has production capacity available right now. Again, Cliffs does not need to build plants to be ready in 2028, 2029, or 2030. The incremental volume demanded by the automotive industry can and will be absorbed by our existing footprint. That volume carries attractive incremental margins, and thanks to our multi-year fixed-price contracts with all major automotive OEMs, there will be no pressure on the price of cars to consumers in the U.S. that could even remotely be attributed to the price of Cliffs Steel. Another example of the progress we continue to demonstrate in automotive is our successful replacement of aluminum with steel using aluminum forming equipment. Our Cliffs Steel is now stamped into exposed automotive components using existing forming equipment on a production scale basis. This Cleveland-Cliffs development demonstrates that the changeover from aluminum to steel can be easily done without requiring new tooling or capital investment from the customer. That significantly lowers the barrier to adoption and expands the addressable market for our Cliffs Steel products, particularly as the aluminum supply chain has suffered severe disruption with a succession of fire events, clearly exposing its weakness. More than ever before, Cleveland-Cliffs is seeing a clear path to replace aluminum with made-in-USA steel in major applications. We operate in a market that companies from around the world are spending billions of dollars to enter. We are already here. We already have the assets. We already have the workforce. As manufacturing activity in the United States continues to recover, Cleveland-Cliffs is the best positioned to benefit without requiring massive capital investments. I want to drill down on another factor that impacted our 2025 performance, and that was the change in dynamics in the Canadian steel market. For the last several years, even under the previous tariff regime, pricing in the Canadian market moved in tandem with the U.S. market. We acquired Stelco on November 1, 2024, four days before President Trump's election, and immediately took Stelco out of the U.S. market, redirecting Stelco's output 100% to the Canadian market. This was not driven by policy change, but rather our conviction on what's in the best interest for our shareholders and our employees on both sides of the border. Even the all-surprising change in Canada relations with the U.S. should not have affected this strategy at all. But that's not how it played out. All of a sudden, Canada became a dumping ground for producers trying to avoid U.S. tariffs, and downstream Canadian manufacturing was negatively impacted as well. Canadian pricing decoupled from U.S. pricing. Until recently, the Canadian government insisted on doing nothing about this unsustainable situation, preferring to watch its steel industry flounder for the sake of globalism. After raising the alarm louder and louder, we finally saw the Canadian government come around late in 2025. While still insufficient and limited in scope, the restrictions implemented were at least able to stop the bleeding. As a result, we have seen Canadian pricing and shipments improve in the last month. Prior to our acquisition, Stelco was a low-price exporter into the U.S. and a highly disruptive one, by the way. When you look at the big picture, what our acquisition has done to transform and improve the U.S. marketplace more than justifies and supports our return on our $2.5 billion purchase price of Stelco. In the fourth quarter, we revealed that our memorandum of understanding partner was POSCO, Korea's largest steelmaker and the world's third-largest steelmaker outside of China. The partnership with Cliffs will allow POSCO to support and grow its established U.S. customer base while ensuring that its products meet U.S. country of origin melted import requirements. Our collaboration represents a model of how allies can deepen industrial cooperation under fair and transparent trade principles. And it aligns with U.S. policy goals to strengthen domestic industry and attract foreign investment. POSCO continues to conduct due diligence as part of our recently announced strategic partnership. Both parties are focused on structuring a transaction that's highly accretive and strategically compelling for each company. The duration of these negotiations reflects the seriousness and potential scale of the opportunity. We are targeting signing a definitive agreement in 2026. This remains the number one strategic priority for both Cleveland-Cliffs and POSCO. And engagement between the teams is active and ongoing. Our MOU is non-binding, and we will only move forward on ratifying our partnership if the collaboration is accretive to Cliffs' shareholders. I would like to conclude my remarks by congratulating our employees for our remarkable safety record. In 2025, we achieved the lowest total recordable incident rate since Cleveland-Cliffs became a steel producer six years ago. Our TRIR, including contractors, which is unusual in our industry, we include contractors, was 0.8 per 200,000 hours worked. That represents a 43% improvement compared with 2021, which was our first full year operating as an integrated steelmaker. This is a direct outcome of how we manage and operate in contrast with how the predecessors used to do, with the same people and the same plants. Safety performance at this level requires discipline, consistency, and leadership at every site. We have room for improvement, but the amount of progress we have seen in safety results since forming this new iteration of Cliffs six years ago is truly remarkable. I will now turn it over to our CFO, Celso Goncalves, for his remarks. Celso Goncalves: Hey, good morning. Total shipments in Q4 were 3.8 million tons, which was slightly lower than Q3 due to heavier than usual seasonal impacts. Looking forward, Q1 shipment levels should improve back to the 4 million ton level again, driven by improved demand and less maintenance time at our mills. My expectation for full year 2026 shipment level is in the 16.5 million to 17 million ton range, an improvement from 2025 as we run our mills at higher utilizations. Q4 price realization of $993 per net ton fell by around $40 per net ton as the lagging indices on spot prices declined. Automotive volume fell, and slab prices became even more disconnected. Since these factors are largely behind us, I expect a substantial improvement in realized prices starting in 2026, an increase of approximately $60 per ton from 2025. As pricing continues to grind higher, and assuming this trend continues, we will likely see even further increases in this price as the year progresses. On the operations side, 2025 represented our third straight year of unit cost reductions, with another $40 per ton reduced last year. The much-needed rationalization of our footprint and reduction of around 3,300 employees last year was a big part of that. We have further momentum heading into 2026 as we locked in coal contracts that generate over $100 million of savings year over year and an expectation of much higher utilizations, both in melt and in our finishing operations. Combining this with some partial offsets in utilities and labor costs, we expect unit costs to decline again for a fourth straight year, down another $10 per ton in 2026. On an apples-to-apples basis with 2025, the reduction is even greater as we are also selling a richer mix this year without slabs, making the year-over-year reduction even more impressive. With that said, for 2026, the recent spike in utilities costs and change in mix will likely push costs up temporarily before normalizing into Q2. As a reminder, we generally hedge 50% of our natural gas exposure looking forward one year. On CapEx, we had a record low year in 2025 in capital expenditures as a steel company, with only $561 million spent. 2026 total CapEx is projected to be around $700 million, reflecting more normalized maintenance capital as well as some pre-work and a coke plant upgrade ahead of the Burns Harbor furnace C reline plan for 2027. Annual pension and OPEB cash obligations continue to decline. With the HRC curve where it is, automotive volumes ultimately returning, I expect to return back to healthy cash flow generation in 2026, all of which will be used to pay down debt. Asset sale processes continue, and they should bring us more cash proceeds throughout the year. We have already closed the sale of FPT Florida, and we are under contract to sell several idled properties, with agreements in principle for the majority of the rest. My expectation of the $425 million in total proceeds from these sales remains intact. Some of the larger asset sale processes remain in a holding pattern while the POSCO talks remain ongoing, but we have several options out there that we're evaluating. One major success we had in 2025 was balance sheet management, particularly in the fourth quarter. From a pure dollar perspective, our leverage remains too elevated for my liking, but the shape and format of our debt structure gives us incredible runway and flexibility. After the refinancings that we completed in 2025, our nearest bond maturity is now in 2029, and all of our outstanding bonds are unsecured. Our ABL draw is the lowest it has been since the Stelco acquisition, and our total liquidity to end 2025 was $3.3 billion. The focus this year is on generating EBITDA and cash flow. I feel much better about where we are today versus where we were twelve months ago. Looking ahead, our order book is solid, demand is improving, lead times are going out, prices are rising, costs are still coming down, tariffs are in place, the slab contract is gone, manufacturing is coming back, unemployment is low, rate cuts are here, tax refunds are coming, Stelco's contributing, autos are looking to replace aluminum with steel, POSCO is collaborating, our employees are incentivized, and our operations and commercial teams are working together towards the same goal: to maximize profitability in 2026. With that, I'll turn the call back over to Lourenco for his closing remarks. Lourenco Goncalves: Thank you, Celso. 2025 was about fixing what needed to be fixed, making tough but necessary decisions, and positioning Cleveland-Cliffs for sustainable performance in a fundamentally improved market. Those actions are now largely behind us. As we move through 2026, we are operating with a leaner footprint, a stronger order book, improving price realization, declining unit costs, and a clear line of sight to higher utilization and cash generation. With that, I'll turn it over to Kevin for the Q&A. Operator: Thank you. We'll now be conducting a question and answer session. First question today is coming from Carlos De Alba from Morgan Stanley. Your line is now live. Carlos De Alba: Yes, morning, Lourenco and Celso. Thank you. My first question is on the benefit that you expect on the cancellation of the slab contract this year. Given the running prices that we have seen, can you maybe update us as to how much EBITDA, more or less, or any other form of benefit that you expect to see from this contract expiring? And then maybe we can just on CapEx beyond 2026. Given the relining that you expect in 2027, you know, how much should we pencil in, give or take, for CapEx in 2027? Lourenco Goncalves: Yes, Carlos, I will answer the question on the slabs, and I will let Celso talk about the CapEx one. As far as the slabs, when we acquired ArcelorMittal USA from ArcelorMittal, we had that slab contract as the last item that we had to negotiate. It was more about duration than pricing formula because the pricing formula was based on the international price of slabs and referencing the Brazilian slab price just because Brazil was by far the largest exporter of slabs at the time. So, and for four of the five years, the contract worked. And then on the fifth year, magically, the separation between the price of slabs and the price of hot band turned that contract into a disaster. And we tried to negotiate the contract, but we were unsuccessful because short-term gains for them were more important than the long-term relationship. I'm fine with that. So I ate, I took like a big boy, and now they don't have their hours left anymore. So good luck on running their business here in the United States without having melted and poured slabs made in Cleveland-Cliffs. Not made somewhere else. Somewhere else does not know what they're doing. We know what we are doing. So they don't have these slabs anymore. If I can put a number on the gain, the EBITDA number by itself is to the order of $500 million just by replacing these slabs with higher margin. That's a very high-level number and should be even more than that. But $500 million is a good number to start thinking about the gain of not having. And that's just a benefit on us, not the fact that competition for automotive business became automatically weaker when you don't make our slabs available to a competitor. I'll let Celso answer the other one on CapEx. Carlos De Alba: And sorry, maybe before we move to Celso, please. Question on when should we expect to see the beginning of this around $500 million improvement in EBITDA already in Q1 or it's more Q2? Lourenco Goncalves: Yeah. Look. We are already selling the material in Q1, yes. But of course, you know how these things work. The cost flows through inventory, and you're going to see more impact in Q2 than in Q1 and then more impact in Q3 than in Q2. But that's our projection for the year. Celso Goncalves: Yeah. Carlos, if you think about it, right, HRC prices $970 or so, and the slab price was like $485. So it's a pretty immediate improvement. You know, in terms of revenue at the current price, it's like a $700 million improvement in revenue at current market prices. And then you consider, call it, $150 million increase in conversion cost to roll the slabs. That's the way to think about it on a full-year basis for 2026. Carlos De Alba: Great. Thank you. Lourenco Goncalves: Yeah. Celso Goncalves: And then as it relates to CapEx, as I mentioned, 2025 was a record low at $561 million. We had dramatically reduced spend at Stelco. We had CapEx avoidance related to idled facilities and asset optimization and things like that. 2026 will be more normalized, that $700 million, call it more normalized maintenance spend and some pre-work and pre-spend related to the Burns Harbor reline in 2027. And then beyond '27, you know, it goes to, call it, $900 million in '27 and then back down to $700 million in 2028. And the only reason that '27 goes to $900 million is largely because of that blast furnace reline at Burns Harbor. Carlos De Alba: Perfect. Thank you very much. Celso Goncalves: Thank you. Operator: Thank you. Next question is coming from Nick Giles from B. Riley Securities. Your line is now live. Nick Giles: Operator, good morning, Lourenco and Celso. So, Lourenco, you outlined the capacity you have today in attractive incremental margins on what I heard is uncontracted volumes. So you've layered in some multiyear agreements, but I was wondering if you could give us a sense for how much open capacity that is, what could still be contracted, and similar to Carlos's questions, just any sensitivity from an EBITDA perspective? Lourenco Goncalves: Yeah. Look, we have downstream capacity in pretty much every single location that we operate. Just to give you an idea, let me take a simple example. Single line galvanizing line we have in Columbus, Ohio. That was one of the first assets that were caught in the attention for POSCO. We run that line at less than 300,000 tons a year. That line has a capacity of 450,000 tons a year. We can produce all kinds of exposed parts over there. But we don't run at full capacity because the OEMs don't produce cars in the United States as much as they should. They produce in Mexico, they import from Korea, they import from other places, and that's what kind of kills our automotive business. And it has been abundantly clear since day one of the Trump administration, the directive is to produce cars in the United States. Not importing cars from Korea and putting a stamp of an American OEM on top of that is still a Korean car. It's not an American car, it's not generating American jobs. So, that's what kills our capacity utilization. We need this made-in-USA automotive production in order to utilize our capacity. What I just explained to you with numbers, for Columbus, Ohio, I can do the same thing for Rockport, Indiana, for other downstream facilities like what we call New Carlisle, Indiana, that used to be called Tech and Cult under previous ownership. We have a lot of capacity to deploy, and it's a matter of just moving from commodity type, which by the way now is extremely profitable, to a more specialized type of steel. That is typical Cleveland-Cliffs type of capability or forte in terms of the technology. By the way, we have the technology. We are a well-known and well-recognized supplier of automotive steel on an international scale. And we knew that all along. Now we have the agreement of POSCO on that. So there's nothing that we need to learn from POSCO on how to do stuff. We know how to do stuff. We just don't have the orders. But now we're going to have it. Nick Giles: I really appreciate all that detail. My second question was really just around the outlook, particularly here in Q1. HRC has obviously risen dramatically. So can you just help us set expectations around ASP and costs and maybe just volumes as well? Thanks. Lourenco Goncalves: I'll have Celso handle that for you, Nick. Celso Goncalves: Yeah. Hey, Nick. Let me give you guys some general guidance for Q1 and the rest of 2026. So for Q1, we should return back to that 4 million ton mark. And that's largely driven by improved demand in the U.S. and Canada. Q1 auto shipments are expected to improve back to the, call it, '25 levels or better. As I mentioned, ASP is expected to be up $60 a ton in Q1. All that pricing that negatively impacted Q4 is now positive for Q1. The monthly lag, the quarter lags, and spot pricing are all up. Canadian pricing is also improving. We talked about the end of the slab contract, and the automotive volumes increasing is also a benefit. The way that we calculate that, ASP has changed slightly. So let me give you guys the new kind of guidelines for that. Given the expiration of the slab contract and the increased automotive volume, the way to think about it going forward is around 35% to 40% is on a fixed full-year price with resets throughout the year, obviously. And then 25% of the volumes are on a CRU month lag, 10% is on a CRU quarter lag, and then the balance, call it, 25% to 30% is the spot and other, including the Stelco volume. So that's the way to think about ASP going forward. Costs in Q1 will likely be up around $20 a ton, normalizing into Q2. But as I mentioned earlier, on a full-year basis, the cost from 2025 to 2026 on a full-year basis is expected to decline $10 per ton, with further adjustments for a richer mix and the expiration of the slab contract. So on an apples-to-apples basis, the cost would be down even more, but should be down around $10 per ton with the current construct. I think with that, you should have everything you need to get a sense for Q1 and the full year 2026. Nick Giles: Guys, I appreciate the detail as always, and continue the best of luck. Celso Goncalves: Thank you. Operator: Thank you. Next question is coming from Lawson Winder from Bank of America. Your line is now live. Lawson Winder: Yes, thank you very much, operator, and good morning, Lourenco and Celso. Nice to hear from you, and thank you for the update. If I could ask on POSCO, like, I think there's no question that it is serious and potentially transformational for Cliffs. I was just curious, you made the remark that POSCO is still continuing their due diligence. Has Cleveland-Cliffs completed its due diligence on POSCO? Lourenco Goncalves: Look, yes. That's correct, number one. Number two, keep in mind, Lawson, they came to us. We did not look for them. So, that's a very important point to consider. So, that shows that we feel like they need us probably much more than we need them. That's my view. That said, we are proud of our negotiation and our conversation and our potential partnership. One thing to keep in mind, our Cleveland-Cliffs Board of Directors will not approve any deal that's not accretive to our shareholders. So that's what we're working on. Forming a partnership with POSCO is our number one strategic priority at this point. And based on what they said to us, that's the same thing for POSCO. We believe that we would be able to provide to POSCO the ability to meet U.S. trade and origin requirements, particularly melted import into the United States, in a short term what they need, absolutely need. They will not be able to sell here without complying with that requirement. That thing is not going to change. It's clear at this point. And this is a market that everybody wants to be in. And we are the only possibility for any company that's outside of the border of the United States to be inside the border of the United States. So, POSCO is in the pole position in a very comfortable position to have a partnership with us. We absolutely love working with them. And they seem to like working with us. Now it's a matter of finalizing an agreement that's accretive to both Cliffs and POSCO, which should not be difficult to accomplish. Lawson Winder: Thank you, Lourenco. That was very helpful. If I could ask one following question. Just on the aluminum opportunity, I mean, I think it's really intriguing. Could you maybe frame that up for us in terms of the size of the opportunity to take share from aluminum in terms of tonnages? And then what would be the timeline to achieve those tonnages? Lourenco Goncalves: Yes. Look, this was the type of thing that we have been asking for an opportunity to prove ourselves through our clients. And for some reason, they were committed to keep the status quo in place until they are no longer. Because it's not just the ones that use massive amounts of aluminum. That's obvious. That's absolutely obvious. We can't rely on a supply chain of aluminum that is very weak in the United States, and they proved that by having a succession of fires in the same plant in a space of forty days or forty-five days. And also truly dependent on aluminum produced abroad. Knowing that Canada is another country. Like they like to say, we're not a fifty-first state, yes, we agree with that. It's outside of the border of the United States. It's another country. Yes, so that's why they are subject to Section 232. And will continue to be because they are another country. So aluminum from Canada is not a strategic solution for the supply chain. And then we proved our point that stamping aluminum or stamping steel for the type of steel that we, Cleveland-Cliffs, produce is the same thing. And we proved that at this point with three different OEMs, and they know what they need to do, and we are ready for them. Timing is under their control, not my control. We are ready. We proved that. We are getting orders at a production scale basis. And this should only be growing. And the potential is the potential of the size of our aluminum utilized. The best-selling vehicle in the United States has a lot of aluminum on the outside. We are starting to produce parts for that vehicle. That's why I can tell you without triggering any problems with my clients. Lawson Winder: That's very helpful. Thank you very much. Lourenco Goncalves: Thank you. Thank you. Next question today is coming from Alex Hacking from Citi. Your line is now live. Alex Hacking: Yes, thanks. Good morning. Can you maybe quantify how big of a drag on earnings Stelco has been for the past few quarters? And therefore, kind of by proxy, how much potential upside there is if Canadian markets turn around? Just for context, you know, we're looking at a Canadian publicly traded peer that's guiding to losing, you know, over $250 a ton of EBITDA in Q4. I assume Stelco's doing better than that, but anything you could do to help quantify that? Thank you. Celso Goncalves: Yeah. Hey, Alex, it's Celso. We don't break down EBITDA by mill, but obviously, Stelco was disappointing in 2025, as you can imagine. But the good news is that they're a contributor now. We've seen a lot of improvement recently that will lead to a significant EBITDA increase in 2026. If you think of the big picture, on a net basis, even though they haven't been contributing to the bottom line, it has kind of changed the dynamics of the market. And has helped our U.S. business. And that's only gonna be amplified here as HRC pricing in the U.S. has found some footing at a higher level. So you can't really think of Stelco as a standalone. We're happy with the asset. We're happy with the people. We have great people that work for us at Stelco. But you have to think of the business as a whole. And going forward, they're gonna be a much bigger contributor to the big picture. Lourenco Goncalves: Yes. Alex, Lourenco here. Let me add a little bit more on the Stelco comparison with the competitor. The competitor had the same business model as Stelco, selling to the United States. And we bought Stelco to do one thing that the competitor is never willing to do: changing their business model to sell into Canada. And we did. Like I said in my prepared remarks, a few days before Trump was elected. Let alone Trump was in office and let alone President Trump implementing Section 232 tariffs in April. We did that in November. So we were way ahead of the game in terms of how to reposition Stelco. Another thing that we took from Stelco that we did not have before is made-in-Canada coke in our coke battery over there, which is USMCA compliant feedstock. So, there was a benefit for us. And that benefit will continue to be in place. The other thing is that if we had not had all the imports from the United States being redirected to Canada and had the Canadian government accepting that as normal course of business, we would have had a completely different 2025. It took us almost one entire year to convince the Canadian government that that was a completely unsustainable situation. And we finally, they finally made a move. A move that was a lot smaller than the move that we would like them to make. But there was enough for us to see a completely different dynamics in the domestic market in Canada. So the comparison between Stelco and the competitor is not a good comparison. Got to be Stelco for Cliffs and Stelco for Cliffs going forward. And Stelco for Cliffs in 2025 was not as good as we envisioned, basically because domestic Canadian prices went down due to the avalanche of imports into Canada. That has been put on hold. That has changed. And we will have a completely different 2026 because of that. Alex Hacking: Thanks for the color. I guess just following up, how much better can 2026 look? Like, on the price side, you know, where do you think Canadian prices should be with the new tariff policy versus where they are today? Don't know if you can comment on that at all. Thank you. Lourenco Goncalves: Yes. Like Celso said, we don't break down Stelco results into our results, so we do not disclose that, but it's easy to see that based on how bad 2025 was and use the competitors as the reference for that specific point. You'll see that there will be ninety-day, so they will be a contributor, and it will be a significant contributor to Cliffs' results. Alex Hacking: Thank you. Lourenco Goncalves: You're welcome. Operator: Thank you. Next question today is coming from Albert Realini from Jefferies. Your line is now live. Albert Realini: Hey, good morning. Lourenco, Celso, thank you for taking my question. So just Celso, I think you kind of alluded to it a bit, but the $425 million in total proceeds that are potentially under contract closure and agreement. I think you had said that doesn't include some of the larger scale assets. And I think you had mentioned that those would be on hold until anything with POSCO to be finalized. So I guess what I'm asking is, that total amount of proceeds from the asset sales could be a lot higher, and then timing would be until anything with POSCO would be finalized. Is that my understanding correct? Celso Goncalves: Yeah. So hey, Albert. So the $425 million, that's the totality of all of kind of our idle plants that we're marketing. And there's interest across the board for all of them. We've received $60 million so far. But we're in discussions to sell the rest, and that would add up to the $425 million. Beyond that, you know, we have the larger assets that we could sell that there's been some interest around. You know, specifically Toledo HBI and now we put these larger FPT assets. So that would be in addition to the $425 million. Asset sales on hold, given POSCO's interest in our business. They're looking across our entire footprint. So we don't want to jeopardize the POSCO opportunity, which is much bigger. But, you know, if, for whatever reason, if the POSCO opportunity were to not materialize, we could pick up where we left off on the larger asset sales. And we've had some meaningful interest in those as well. So that would be in addition to the $425 million. You're correct. Albert Realini: Understood. Thank you. Lourenco Goncalves: Albert, just a slight correction. I also said on the discussions, some of the discussions are already signed the contract. So we are beyond a little beyond just discussions. We have contracts in place, and it's a matter of going between binding contract and a sale agreement at closing. These transactions are real. It's a matter of time for closing. So like we have done so far, we do want that already closed. Albert Realini: Got it. Thank you for the clarity. Lourenco Goncalves: Thank you. Operator: Thank you. We reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments. Lourenco Goncalves: Thank you very much, and you guys have enjoyed 2026 as much as Cleveland-Cliffs will. I appreciate your interest in our company. Thanks a lot. Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. Thank you for your participation today.
Operator: Good day, and thank you for standing by. Welcome to the Kyndryl Holdings, Inc. Fiscal Third Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. Please press 11 on your telephone. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Lori C. Chaitman, Global Head of Investor Relations. Please go ahead. Good morning, everyone. And welcome to Kyndryl Holdings, Inc.'s Earnings Call for the Third Fiscal Quarter Ended December 31, 2025. Lori C. Chaitman: Before we begin, I'd like to remind you that our remarks today include forward-looking statements. These statements do not guarantee future performance and speak only as of today. The company assumes no obligation to update its forward-looking statements except as required by law. Actual outcomes or results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties. For more information on some of these risks and uncertainties, please see the risk factors section of our annual report on Form 10-K for the year ended March 31, 2025, as such factors may be updated from time to time in the company's subsequent filings with the SEC. Also, in today's remarks, we refer to certain non-GAAP financial metrics. Definitions and additional information about our calculation of non-GAAP financial metrics as well as a reconciliation of non-GAAP metrics to GAAP metrics historical periods are provided in the presentation materials for today's event, which are available on our website at investors.kyndryl.com. Following our prepared remarks, we will hold a Q&A session. I'd now like to turn the call over to Kyndryl Holdings, Inc.'s Chairman and Chief Executive Officer, Martin J. Schroeter. Martin? Martin J. Schroeter: Thank you, Lori, and thanks to each of you for joining us. Today, we announced a few leadership changes and important for this call, Harsh Chug has been appointed interim Chief Financial Officer. He's joining us on today's call and will walk through the quarter in more detail. Harsh is a seasoned leader with extensive experience in our business, finance, and the technology industry. We are fortunate to have his leadership to guide our finance organization as we continue to execute our priorities. With that, let's turn to the third quarter. We delivered margin expansion, higher earnings, and positive free cash flow. Our 3% top-line growth was unchanged in constant currency. We've been investing to support future growth opportunities, and the base we're building is strengthening our profitability as our mix of post-spin signings convert over time. With $3.9 billion of signings in the quarter, including 11 signed contracts exceeding $50 million each, and $15.4 billion over the last year, our trailing twelve-month revenue book-to-bill ratio remains above 1.0. And we're pleased that disciplined execution has ensured that signed contracts come with solid projected margins. While we made progress in the third quarter, I want to share some thoughts on what is different from the start of our fiscal year that drove our second-half outlook to be below what we were targeting. For some context, we're in a services business operating mission-critical systems that require multiyear customer commitments. With the accelerating pace of new AI capabilities being introduced, and regulatory uncertainties specifically on data sovereignty, long-term agreements have become more complex and therefore, sales cycles are taking longer. Additionally, the timelines for large enterprise ERP transitions to cloud solutions have extended, which has also contributed to longer sales cycles. These dynamics were particularly noticeable in Kyndryl Consult's third-quarter performance, which remained strong and delivered double-digit revenue growth but came in below our expectations. Second, the way we collaborate with IBM, one of our key alliance partners, is continuing to evolve. I'll speak more about that in a minute. Before I do, I want to discuss our earnings variance in the quarter. We've made investments to support our growth in Consult. These investments have taken longer than expected to contribute to the top line, due to the lengthening in the sales cycle that I just described. Coupled with an unanticipated decline in overall employee attrition, our labor costs are higher in the near term given the levels of turnover we've assumed. As we've demonstrated over the last four years, we will address our labor efficiencies. Importantly, we've had positive momentum in key aspects of our business, including Consult and alliances. And we have a strong foothold in the areas where market disruption is occurring, which gives us a running start as more customers are ready to scale AI and implement sovereign solutions. Therefore, we're driving towards our key fiscal 2028 targets and we remain confident in our growth strategy. As I mentioned a moment ago, it's important to put a bit more context to the evolution of our partnership with IBM. At the time of the spin-off, as we've covered many times, the commercial agreement that we inherited essentially put 40% of our revenue in a low to no margin position. We called this our focused accounts initiative. Over the last four years, we've addressed most of these focus accounts and you can see that reflected in our revenue performance and our significant profitability improvements. As we entered this fiscal year, we believed that by and large our customers who consumed IBM's innovation through our services contracts would continue to do so in a similar manner. What we are seeing is that our customers' consumption models for IBM's innovation are changing. While it doesn't change the scope of our services, or our ability to grow our services content, it does have an impact on the size of our signings and the revenue we receive over time. And as we said, this has a limited impact on our earnings. So this chart shows our revenue performance in constant currency, and you can clearly see the revenue declines through our focus accounts initiative. And these declines have continued as the evolving IBM content had a 3.5% adverse effect on revenue growth. To give you a sense of the magnitude of this, when we were spun off, the annualized run rate of our spend with IBM was nearly $4 billion. And now it is approximately $2 billion, so it's essentially cut in half. This matters because our customers will decide how to best consume our high-value services and IBM's own innovation. We continue to evolve the joint Kyndryl and IBM value proposition as the pace of modernization and mission-critical environments accelerates. The goal of the work we do together is to create greater value for our customers, and we believe it is important to understand both views of revenue growth. Now let's shift to our primary growth factors and the actions underway to execute against a clear set of priorities. Let me start with our hyperscaler alliances. At the start of the fiscal year, we expected we would deliver $1.8 billion in hyperscaler-related revenue. And after strong execution in the first half, we expected to exceed our initial target. And we are now on track to realize nearly $2 billion in revenue by the end of 2026. To step back for a second, the transformation that this business has undergone starting with nearly $4 billion in IBM spend, is now approximately $2 billion while at the same time going from essentially zero in hyper-related revenue to nearly $2 billion and growing is profound. And it demonstrates how we've transformed Kyndryl's underlying capabilities and positioned us to grow profitably and be part of our customers' future with all of our partners. We've also invested heavily in Kyndryl Consult and will continue to do so as it is a key growth driver for us. As I said before, while Consult has performed extremely well, Consult's performance in the third quarter was below our expectations. Additionally, to address the factors that have impacted our revenue and our earnings, we're leveraging our Kyndryl Bridge operating platform and building even more agentic AI into how we deliver services to our customers to drive quality enhancements and enterprise efficiency. We're consistently expanding our capabilities with a focus on AI, and our AgenTeq AI framework is resonating powerfully with our customers. We'll continue investing in AI innovation labs and in related capabilities and skills to deliver emerging technologies to customers at increasing scale. We're further expanding our presence in private cloud where we're seeing renewed demand driven by AI, data sovereignty, and security requirements. And we'll work with our alliance partners to align with those opportunities. And at the same time, we will get our cost base back in line. We're operating with a clear strategic mindset, providing innovative and world-class services that are fully aligned with our longer-term goals. We are confident in our strategic direction. We're in a business with trusted customer relationships and long-term contracts that evolve all the time to meet changing market dynamics. The operational adjustments we're making position us well as we move ahead, and as we head into a new fiscal year and drive our business toward our multiyear objectives with the strategy and actions we've just outlined, it's important to recognize the progress we're aiming to deliver and focus on delivering our fiscal 2028 targets. In fiscal 2025 and with our outlook for fiscal 2026 over this two-year period, we estimate that we will deliver approximately $1.1 billion in adjusted PTI. And less expected cash taxes of $300 million over the same period, our target is to generate $800 million in fiscal 2025 and 2026 combined free cash flow. So today, we have a strong conversion of earnings to free cash flow at the rate we've been targeting. As we continue to recognize more and more revenue from our higher margin post-spin signings, we're confident in our ability to drive toward more than $1.2 billion in adjusted pretax income in fiscal 2028. And we believe we're well positioned to convert that level of earnings into more than $1 billion in adjusted free cash flow and we still see mid-single-digit growth as we exit fiscal 2028. With that, I'd like to pass the call over to Harsh. Harsh? Harsh Chug: Thanks, Martin, and hello, everyone. Today, I would like to discuss our third-quarter results and outlook for fiscal 2026. In the quarter, revenue totaled $3.9 billion, up 3% from the prior year quarter on a reported basis and unchanged in constant currency. This represented three points of revenue growth sequentially, but behind what we were expecting. The variances versus our expectations were concentrated in our strategic markets and UK operations, which we are taking actions to address. And despite our efforts to get deals over the finish line, we have continued to experience longer sales cycles. With that said, we continue to deliver strong growth in Kyndryl Consult, which grew 20% year over year in constant currency. Kyndryl Consult now represents 25% of our total revenue in the quarter. This underscores how we are expanding our role with higher value services. While our Q3 signings decreased 3% year over year, our last twelve months' signings totaled $15.4 billion. As a result, our book-to-bill ratio was above one over the last twelve months. We continue to see strong demand for our modernization services. In fact, we recently announced a five-year contract extension with Hertz to modernize its IT infrastructure. Our adjusted EBITDA decreased 1% year over year, to $696 million. As depreciation and amortization were a larger percent of our cost in last year's third quarter. Adjusted pretax income grew 5% year over year to $168 million, which reflects incremental benefits from our three A's initiative partially offset by the incremental investments we are making primarily in Kyndryl Consult to drive further growth. Our three A's initiatives continue to be an important source of margin expansion and value creation for us. Through our alliances, we generated $500 million in hyperscaler-related revenue in the third quarter, a 58% increase year over year. This puts us on track to exceed the 50% growth in hyperscaler-related revenue that we were expecting at the beginning of the year. Through advanced delivery, powered by Kyndryl Bridge, we continue to drive automation through our delivery operations. Kyndryl Bridge incorporates more technology into our offerings, reducing our costs and increasing our already strong service levels. This is worth roughly a cumulative $950 million of savings a year to us. Our accounts initiative continues to remediate elements of contracts we inherited with substandard margins. In the third quarter, the cumulative annualized profit savings from our focus accounts was $975 million. A key takeaway point from this update on the three A's is that we have successfully implemented these initiatives and they have become a core part of our operational discipline. Turning to our cash flow, balance sheet, and share repurchases. We generated free cash flow of $217 million in the third quarter. Our net CapEx was $210 million, which is above our typical quarterly run rate, but is consistent with our expectation for the quarter. Working capital was a source of cash in the quarter. We have provided a bridge from our adjusted pretax incomes to our free cash flow. In the appendix, we include a bridge from our adjusted EBITDA to our free cash flow. And more information on the free cash flow metric calculation. Under the share repurchase authorization, we announced in late 2024, we bought back 3.7 million shares of our common stock in the quarter, which represents 1.6% of our outstanding shares at a cost of $100 million. Since the inception of the program, we have repurchased 5% of our outstanding shares. We have approximately $350 million capacity available under our authorized program. Our financial position remains strong. Our cash balance at December 31 was $1.35 billion, and we are rated investment grade by Moody's, Fitch, and S&P. Our debt maturities are well laddered from late 2026 to 2041. We plan to refinance or use cash on hand to fund a near-term debt maturity of $700 million later this calendar year. And we recently drew $1 billion under a revolving credit facility. We have increased flexibility ahead of our seasonally higher cash outflow in our fiscal first quarter as well as for other general corporate purposes, including tuck-in acquisitions. Our target has been to keep net leverage below one times adjusted EBITDA and we ended the quarter well within our target range at 0.7 times. On capital allocation, our top priorities are to maintain strong liquidity, remain investment grade, and reinvest in our business, including tuck-in acquisitions, and share buybacks. We have remained focused on winning business with healthy margins. And December was a continuation of this trend. Throughout fiscal 2023, '24, and '25, and now into the first nine months of fiscal 2026, we have signed contracts with projected gross margins in the mid-twenties and projected pretax margins in the high single digits. As our business mix increasingly shifts towards more post-spin contracts, you'll continue to see significant margin expansion in our reported results. We have again included a gross profit book-to-bill chart that illustrates how we have been creating and capturing value in our business. With an average projected gross margin of 26%, on $15.4 billion of signings over the last twelve months, we have added nearly $4 billion of projected gross profit to our backlog. Over the same period of time, we have reported gross profit of $3.3 billion. This means we have been adding more gross profit to our backlog than our contracted book of business has been producing in our P&L. Having a gross profit book-to-bill ratio above one at 1.2 over the last twelve months demonstrates how we are growing what matters most. The expected future profit from committed contracts. It also highlights the quality of our post-spin signings. And our gross profit book-to-bill ratio having been consistently above one means that we have been consistently growing our gross profit backlog over the last four years. As we have said previously, our core financial goals are to grow our revenues, expand our margins, increase our earnings, and generate free cash flow. In light of our third-quarter results, our outlook for adjusted pretax income this year is now in the range of $575 million to $600 million. We estimate that adjusted EBITDA margin in fiscal 2026 will be approximately 17.5%. We also continue to see opportunities to drive efficiency in our operations, both through advanced delivery and in SG&A functions. On the topic of cash flow, with the expected cash tax of roughly $160 million and a net use of cash for working capital, this implies free cash flow in the range of $325 million to $375 million for fiscal 2026. As Martin mentioned, the principal reasons for our revised fiscal 2026 outlook are the longer sales cycle, the expected revenue headwinds from our evolving partnership with IBM, the investments we have made to support future Consult growth, and the fact that it takes time to adjust our hiring to respond to lower attrition. With that, Martin, I'll turn the call back to you. Martin J. Schroeter: Thanks, Harsh. I want to note that today we disclosed that the filing of our quarterly report will be delayed as described by our filing with the SEC. As we disclosed, following the receipt of a voluntary document request from the SEC, the company, the audit committee of our board of directors, is reviewing our cash management practices, related disclosures, the effectiveness of internal control over financial reporting, and certain other matters. We are cooperating with the SEC. We do not expect a restatement or other impact on our financials. Due to the ongoing nature of these matters, we will not be able to comment further at this time. Before I open the call up to your questions, I want to thank the tens of thousands around the world who are providing world-class services to our customers every day. Operator, let's move to questions. Operator: As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question will be coming from Tien-Tsin Huang of JPMorgan. Your line is open. Tien-Tsin Huang: Hi. Thanks. Good morning here, Martin and Harsh. I want to ask on the outlook and the revision. I understand you can't speak to the filing here. But on the revision, given how confident you were last quarter and the revision, I'm trying to think about attribution and what really changed. I heard the sales cycles being delayed and, of course, the evolution of the IBM piece. So maybe can you just discuss what surprised you and how broad-based some of these issues were for the company? Harsh Chug: Hey, Tien-Tsin. Nice to hear your voice again. If you remember during the last quarter as we were guiding, we talked about three factors that we got confidence from. One was the acceleration in the Consult. We were expecting two points of additional growth from that and hyperscaler another additional growth of two points, and then rapid acceleration in the conversion of our sales pipeline. Those were about six points, and I think we fell short on all of them. Not that we didn't have the growth in Consult, but it was 20% on constant currency. It was not what we were hoping for. And, again, the sales cycle extension had the impact not only on the Consult but also on hyperscaler as well as the acceleration we were expecting. So that adds to about six points and the continued headwind about IBM was another factor. So those are the primary drivers, along with some of the other things, we talked about ERP conversion onto the cloud platform, and those are market dynamics that we have to deal with. And I think, Martin, you would like to add? Martin J. Schroeter: No. Look, I'd say first, thanks, Tien-Tsin. I would add as you heard, we got revenue back to flat. And as we start to share the difference between the evolving IBM relationship, you can see that without that headwind, we're actually growing the core part that matters so much to us. So the shape of that curve is kind of what we expected. As Harsh said, we were hoping and expecting to accelerate. We got good performance, but we didn't accelerate the way we had expected, and the world is getting more complex. AI is making customers rethink how their infrastructure should run. The sovereignty discussions around the world are top of mind for everybody. So we just didn't accelerate as we expected we would. Tien-Tsin Huang: Got it. No. Thank you both for that. And just my quick follow-up, just on the I think you mentioned strategic markets in the UK specifically. What are some of the changes that you might be putting in? What kind of cost might there be to do it or benefit? Just trying to understand how quickly that can be addressed. Thank you. Martin J. Schroeter: Yeah. Thanks, Tien-Tsin. So a couple of things. You know, we did as we mentioned in our prepared remarks, we did see a pretty dramatic slowdown in attrition. And then on top of all of that, or in addition to that, we have particularly strategic markets and in the UK, we were investing, a lot of that investment is local. It's domestic, which tends to be much more expensive than the center-based hiring that we're doing. So we are addressing those. It doesn't happen immediately, but we will absolutely get the wiring diagram right. We have been very successful over the last four years in freeing up people through automation and then reskilling those people to put them into roles where somebody has left the firm. And so we know the diagram, the wiring diagram works. And importantly, we also know that to the extent we make progress on this, we get to keep this. It shows up in our profit. So I feel like it's going to take us a quarter to get ourselves back on track here. Harsh, you want to take it? Harsh Chug: Yeah. I think strategic markets, if we kind of piece that part, like, I think the trend is not the same, meaning LA has done well. I think Martin mentioned data sovereignty is a bigger discussion that is happening in Europe and that is a big component of strategic markets. And that was one of the major factors in our discussions with customers there. So I would say evolution of regulation and data sovereignty has been a big factor. That certainly impacted a lot in Europe within strategic markets. Lori C. Chaitman: Operator, next question, please. Operator: Our next question will be coming from James Faucette of Morgan Stanley. Your line is open. James Faucette: Thank you. I wanted to delve a little bit deeper there on some of those factors. But first, recognizing you can't really say much about what is happening from a review perspective, but I am wondering can you talk about how much some of that review may have impacted, if at all, your forward commentary? Can we start there? Martin J. Schroeter: Sure. Let me look. As you know, you're an experienced analyst who's, I'm sure, dealt with companies that have been in these kinds of examinations. And the fact is we just can't comment until the examination is complete. So the teams are working expeditiously so we can share more. The teams are working expeditiously so we can share remediation. Having said all of that, I think the key message here is that we are not changing our fiscal 2028 goal. So we still see fiscal 2028 coming together in the time frames we talked about. And as we also said in the disclosures, we don't expect to have a restatement here. So I would say that until the work is finished, we can't comment more, but our fiscal 2028 goals are something we remain confident in, and we don't expect a restatement. So do you want to dive into some of your other deeper questions? James Faucette: Sure. No. Yeah. I appreciate that. So I guess following up on Tien-Tsin's questions, you know, and you mentioned appreciate the breakdown of the different pieces. When you look at, like, the extending sales cycles, etcetera, can you just talk about is this across all the different pieces themselves? And is there something that you can, I guess, encapsulate the types of incremental work or changes in work scope that your customers may be looking for that you hope to address as they go through these lengthened evaluation and sales cycles for you? Harsh Chug: I think it's more promising for us in terms of the types of conversations we are having. And it's largely driven by a lot of industry dynamics. And I will start with AI because it's causing a bit of industry disruption, many industries, and regular customers that we deal with, because they're getting threatened by what I call nontraditional players. So that's kind of one that starts from the business process to the application led to the infrastructure layer, so kind of that type of dynamic. And then data sovereignty and AI, which means is data going to be closer to AI or AI going to be closer to data? I think that kind of causing it because we are in long-term infrastructure modernization conversation, it becomes more complex for the decision-makers to think about the evolution of the industry, how it impacts. And I think our consult teams are deeply engaged from those modernization discussions. And I think our evolution, as Martin mentioned, not only being relevant from a partnership with IBM, as you mentioned, but relevance with a hyperscaler where we are growing and now our intent to grow deeper in private cloud, it kind of makes us a bit more relevant across. So I feel very confident that the types of dialogue we are having is much more balanced in terms of what we can bring than what could have been done at the time of spin. So it's the slowing, but the relevance of the types of discussion will make us more relevant to where customers are going than where we would have been previously. Lori C. Chaitman: Operator, next question, please. Operator: Our next question will be coming from Ian Zaffino of Oppenheimer and Company. Your line is open. Ian Zaffino: Thanks. Question will be on the buyback. Since you're doing the buyback here, what's kind of the message you're sending out here? You know, is it, and I guess, the question would be on visibility is, you know, it's been very murky. And so given the murkiness of your visibility over the past, you know, three quarters or so, you know, what gives you confidence in visibility going forward? Thanks. Harsh Chug: Yeah. I think this is Harsh. Again, the principles around how we think about capital allocation, we have to be nimble. Like, we look at every opportunity that stays in front of us. Like, first, as we mentioned, we need to have a strong balance sheet. Good financial flexibility. We do like to do tuck-in acquisitions. We have debt which is maturing, so we cannot think about how we're going to deploy. And, again, Revolver was a part of it. So we think about capital allocation more holistically. And we have to be ready for whatever opportunity presents. But at the end of the day, we want to grow this business. So investing in the business will continue to be important, whether it's investment in Kyndryl Bridge, building our own internal capabilities, hiring more resources for Consult, and tuck-in acquisitions. So I think it's going to be a balanced discussion, Martin, for you. Martin J. Schroeter: And I did want to add one more thing. You know, we've said now for a number of years that over time, the ability for us to convert profit into free cash flow would basically be the difference would basically be cash taxes. And that's what we've delivered, that's what we've been, that's what we've put on the chart in the prepared remarks. You'll see that over the last two years, our combined profit less the last two years of cash taxes is essentially where we're guiding cash flow to this year. So I think the clarity that we have and this business's ability to generate cash is exactly what we said it would be, and we see that continuing in the future as well. Lori C. Chaitman: Operator, next question, please. Operator: Our next question will be coming from James Eric Friedman of Susquehanna. Your line is open. James Eric Friedman: Hi. I just wanted to ask about the free cash flow and your comments, Harsh. You called out the working capital at $102 million. That looks good. The $217 million in free cash flow seemed fine. So when you look at the difference in your prior free cash flow, which was $550 million versus the $325 million to $375 million. I mean, it doesn't seem like it's the change in operating current assets or working capital. Is it all just the pretax income revision? Harsh Chug: Yeah. I think there are two components. One is the PTI that has a direct linkage, so it's roughly about $150 million from where we were. And working capital, while it was a benefit in the third quarter, it's going to be a bit behind for us. That's kind of the biggest driver from where I see the fourth quarter land. So I think that's kind of the balancing point, but largely driven because of the PTI change. James Eric Friedman: Got it. Lori, if I could just sneak in one more. So and you did call that out, Harsh, in your prepared remarks about the fourth quarter. I don't remember. Did you quantify where we should be thinking about working capital for the fourth quarter? Harsh Chug: We have not quantified, but that's largely the difference between the PTI and what the working capital uses. So I think you're thinking right. Cash tax, we know, and then the remaining is driven by working capital use. James Eric Friedman: Got it. Thank you. I'll drop back in the queue. Lori C. Chaitman: Operator, next question, please. Operator: And our next question will be coming from Jonathan Lee of Guggenheim Partners. Your line is open, Jonathan. Jonathan Lee: The shortfall in fiscal '26, can you talk about the building blocks in the business that give you confidence in achieving your fiscal 2028 targets? Martin J. Schroeter: Sure, sure. It's a great question. So I'd say a couple of things, and obviously, I'll ask Harsh if he has anything to add. You know, our fiscal 2028 targets when we set them out a bit over a year, almost a year and a half ago now, were really built on a few elements. One was the fact that our cash flows, which had been heavily burdened by the early cash taxes we were paying. We saw our cash flows growing faster than profit because our cash tax position now was going to be relatively stable while we improved profitability dramatically. So that's what allowed cash to grow faster, quite frankly, that phenomenon still exists. On the profit side, the primary driver is, I should say two things. One, as we've shared every quarter, every reporting opportunity, what is going into the backlog has consistently been in that high single-digit kind of 9% PTI range. And so for us, the driver of that profitability is not a trend or a building block as much as it is that over the time frames that we're talking about, the substantial majority, more than 90% of our P&L will be determined by those high 9% PTI backlog elements as opposed to the backlog we inherited. And over a year and a half ago, that year. And when we set that guide out when only half of our P&L was determined by what we put in. So the cash flow growth comes from both the profit growth and from the better cash tax position we're in that remains today. The profitability comes from the shift over time to what we've put in the backlog versus what we inherited. And that continues as well. So and then I should add the revenue component as you saw the outside of the more, outside of the harder to predict IBM content, our revenue is growing and we've taken the IBM content from $4 billion down to $2 billion. And so its impact in the future should likely diminish from the 3.5 points it has been, while at the same time our hyperscaler business is already up to nearly $2 billion, our consult business continues to grow. So the growth metrics, the growth drivers that we've had would just continue to punch bigger and bigger and bigger in the overall mix. Harsh, you want to add? Harsh Chug: Yeah. I think, two things. One is you heard on the gross profit book-to-bill, like, that continues to add. We had $4 billion added in the last twelve months versus what you saw is $3.3 billion that was used. And that's kind of one dimension. Like, what we are signing, and more and more of these signings are post-spin. So that kind of gives us the confidence. Number two, the level and relevance of our consulting in having a broader discussion about our engagement, which is across the overall ecosystem that didn't exist, like, two years or three years ago. So that kind of gives us confidence in the types of conversation because these are customers who we have had for decades. Right? So they trust us. So this is kind of becoming more relevant across the broader ecosystem. So I think those are elements. And the third point I would say is that, like, I think we're likely to be in a better opening position at the start of next year than where we started last year. So that also gives us a better starting point. Jonathan Lee: Thanks for that. If I could quickly add a follow-up. You know, when you think about some of the bookings softness or rather the elongation of sales cycles, is there any sort of time frame as to when you think you could actually close some of these deals? Would it be within the fiscal year where we seeing push outs until next fiscal? Thanks. Harsh Chug: Alright. Meaning, there is a timeline to many of these deals. Like, many of these deals are linked with renewals of our customers. Now many of these discussions start a year, two years in advance, and that's kind of the discussion. So there is a timely nature of customers, and the urgency for them to sign. So I don't think it's elongation that it's going to be multiyear elongation. This is we're talking about a couple of quarters now that can still roll into other renewals that might be coming in the future. So I think it comes to what I call more stability in terms of the shift that happens. But at the same time, as the industry gets disrupted, as AI conversation happens, it's more and more content that we start to have discussions. So I'd rather there is a slip in a deal, I'd rather have more content in my future deal than signing something which is not future-proof. I see it as an opportunity rather than something backwards. Lori C. Chaitman: Thanks, Harsh. Martin, that was our last question. Would you like to close the call? Martin J. Schroeter: So look, everybody, thank you for joining us. As we look ahead and work toward our multiyear goals, it is, I think, important to recognize all of the progress we've made to date, how that progress has translated into a much higher value services business, how it positions us to drive profitable growth, deliver higher earnings, and as we said, convert that into free cash flow. We're focused on expanding Kyndryl Bridge and its footprint and its capabilities and continuing to integrate more and more of our AgenTeq AI capabilities into our services as well as into our own operations in the way we run. We will continue to leverage the momentum that we have in Consult and the hyperscaler-related services as well as our other partners. We will further expand into the private cloud space where there is a pretty substantial, renewed demand due to all the things that are happening in the industry, AI, data sovereignty, security, etcetera. And at the same time, as we said, we will address our cost base. And as fast as we can, and we'll make sure we get that right. So thank you again for joining. We appreciate your time. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to The Hain Celestial Group, Inc. Fiscal Second Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. We do ask for today's call, you limit yourself to one question and one follow-up. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, Thank you. I would now like to turn the call over to Alexis Tessier, Head of Investor Relations. You may begin. Alexis Tessier: Good morning, and thank you for joining us for a review of our fiscal second quarter 2026 results. I am joined this morning by Alison Lewis, our President and Chief Executive Officer, and Lee Boyce, our Chief Financial Officer. Slide two shows our forward-looking statements disclaimer. As you are aware, during the course of this call, we may make forward-looking statements within the meanings of federal security. These include expectations and assumptions regarding the company's future operations and financial performance. These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations. Please refer to our annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed from time to time with the SEC, as well as the press release issued this morning for a detailed discussion of the risks. We have also prepared a presentation inclusive of additional supplemental financial information, which is posted on our website at hain.com under the Investors heading. We discuss our results today, unless noted as reported, our remarks will focus on non-GAAP or adjusted financial measures. Reconciliations of non-GAAP financial measures to GAAP results are available in the earnings release and the slide presentation accompanying this call. This call is being webcast, and an archive will be made available on the website. And now I'd like to turn the call over to Alison. Alison Lewis: Good morning, everyone, and thank you for joining the call and for your continued support of The Hain Celestial Group, Inc. Today, we will discuss the actions we are taking to advance our turnaround strategy and the results for our second quarter. First, let me start with an update on our strategic review. As previously communicated, we have been conducting a comprehensive strategic review with the goal of simplifying our portfolio, enhancing our financial flexibility, reducing our leverage profile, and maximizing shareholder value. The assessment phase involves a thorough review of our assets, operations, and market opportunities. As a result, we are executing our first decisive step to sharpen our focus on categories and brands in key markets where we can leverage our organizational strength. On February 2, we announced that we reached a definitive agreement to sell our North American snacks business to Snackrupters, a family-owned manufacturer of food and baked goods in Canada, for $115 million in cash. Proceeds from the transaction will be used to reduce debt, thereby strengthening our company's financial position and leverage profile. I am confident that in Snackrupters, we have found the right home for our beloved snack brands and the employees who support them. I want to express my gratitude to the many talented employees who have built our North American snack brands over the years. Their commitment has been instrumental to reaching this milestone. This divestiture marks a pivotal moment for Hain as we focus to grow. The simplified portfolio that emerges in North America following the divestiture is stronger financially with a more robust margin and cash flow profile to drive growth. The Hain Celestial Group, Inc.'s North America snacks represented 22% of the company's net sales in fiscal 2025 and 38% of the North America segment's net sales, with negligible EBITDA contribution over the last twelve months. The financial profile of the remaining portfolio in North America is meaningfully stronger and expected to deliver EBITDA margin in the low double digits, underpinned by gross margins above 30%. Our North America business will be healthier financially and more focused as we concentrate on three flagship categories: tea, yogurt, and baby and kids, while we continue to develop our meal prep platform. This portfolio remains diverse across life stages, is aligned with better-for-you trends, and is quite GLP-1 resistant, meeting evolving consumer needs. This recently announced divestiture is the first visible step in the execution phase of the strategic review we initiated with Goldman Sachs. This transaction is a clear example of how we intend to use the value embedded in our portfolio to meaningfully reduce debt, strengthen our balance sheet, and sharpen our strategic focus. In parallel, we are actively advancing the next phase of this review to further simplify our portfolio with a clear priority on continued deleveraging. We expect the resulting financial flexibility will allow increasing investment over time, enabling us to drive sustainable, profitable growth and create long-term shareholder value. I'd like to discuss the concrete operational progress we've made to advance our turnaround strategy and the positive changes we're driving across the organization. We are beginning to see measurable results from the steps we've taken to reshape our cost structure, enhance our operating model, and execute our five actions to win. As a reminder, our turnaround strategy is centered on five key actions to win: streamlining our portfolio, accelerating brand renovation and innovation, implementing strategic revenue growth management and pricing, driving productivity and working capital efficiency, and strengthening our digital capabilities. Underpinning our turnaround strategy is enhanced operating discipline. Early signals across forecast accuracy, inventory management, service levels, and productivity reinforce our confidence that we are enhancing operating discipline, tightening production processes, improving cash efficiency, and establishing a strong foundation for long-term growth. For example, forecast accuracy in the US rose by four points quarter over quarter, and in December, reached the highest level in the last several years. This contributed to a four-day improvement in days' inventory outstanding in North America, while international improved by nine days, driving improved cash flow. In terms of service level increases, North America was over 96% in the quarter, our best service level in recent history, enhancing our ability to meet demand and support sustainable growth. Further, we drove 13% improvement in SG&A year over year, or 120 basis points as a percent of sales, and productivity remains on track to hit our targets for the fiscal year, supporting our ability to reinvest in the business. On this improved operational foundation, we are driving Hain forward with a focused portfolio, more brand renovation and innovation, rigorous pricing and promotion execution, and enhanced digital marketing and e-commerce capabilities that position us to accelerate growth and improve profitability. Turning now to quarterly results. Our second quarter results reflect both the meaningful progress we are driving and the near-term pressure we continue to navigate, particularly from volume-driven deleverage in select parts of the portfolio. Even with these headwinds, we delivered important wins: strong cash flow, a reduction in net debt, and a clear sequential improvement in both top and bottom line trends in our international business. The core of our business is stable with continued growth in North America tea, yogurt, and in baby kids. Finger foods across both regions. Organic net sales in Q2 were flat year over year when excluding the known hotspots of North America snacks and Ella's Kitchen wet baby food, as well as Earth's Best baby formula, which is impacted by lapping supply recovery last year. SG&A performance was a standout with disciplined execution driving meaningful improvement. Adjusted EBITDA of $24 million reflected volume mix impact and cost inflation. Importantly, the actions we are taking across innovation, pricing, and brand investment should position us for a stronger second half. We remain fully committed to delivering improved top and bottom line performance in the back half of the year as these initiatives take hold, executing with discipline to strengthen our cost structure and position the business for growth. We are advancing our turnaround strategy with urgency and this quarter demonstrated meaningful strategic and operational progress. We are sharpening our portfolio and strengthening our balance sheet through the divestiture, giving us greater financial flexibility alongside an improved margin and cash flow profile. Our core categories are stable, our operational execution is improving, and the actions underway across simplification, pricing, innovation, productivity, and digital provide a clear path to sequential improvement in the back half of the year. I'll now turn the call over to Lee to review our second quarter results in more detail, along with our outlook. Lee Boyce: Thank you, Alison, and good morning, everyone. For the second quarter, we saw an organic net sales decline of 7% year over year, driven by lower sales in both the North America and international segments. The decline in organic net sales growth reflects a nine-point decrease in volume mix and a two-point increase in price. As Alison mentioned, organic net sales trends in the second quarter were flat year over year and in line with Q1 when excluding North American snacks, and Ella's Kitchen wet baby food, along with Earth's Best baby formula, which was cycling a significant return to market pipeline. Adjusted gross margin was 19.5% in the second quarter, a decrease of approximately 340 basis points year over year. The decrease was driven by cost inflation, lower volume mix, and unfavorable fixed cost absorption, partially offset by productivity and pricing. Actions already underway, including SKU simplification, revenue growth management, targeted pricing, and productivity initiatives along with efforts across key manufacturing sites to improve plant absorption, and reduce discards, position us well for margin improvement in the back half. SG&A decreased 13% year over year to $61 million in the second quarter, driven by a reduction in employee-related expenses and non-people cost discipline. As we implemented overhead reduction actions, SG&A represented 15.9% of net sales for the quarter, as compared to 17% in the year-ago period. We are nearly finished with our restructuring program to date having taken a $103 million in charges associated with the transformation program. Excluding inventory write-downs, the total charges are now expected to be $115 to $125 million reflecting a $15 million increase related to actions anticipated in connection with the sale of the North American snacks business. We remain on track to deliver the targeted $130 million to $150 million in benefits through fiscal 2027. Interest rose 22% year over year to $16 million in the quarter, primarily driven by higher spread as well as increased amortization of deferred financing fees as a result of the amendment of our credit agreement. We have hedged our rate exposure on more than 50% of our loan facility with fixed rates of 7.1%. We continue to prioritize reducing debt over time. Adjusted net loss, which excludes the effects of restructuring charges, amongst other items, was $3 million in the quarter, or 3¢ per diluted share as compared to an adjusted net income of $8 million or $0.08 per diluted share in the prior year period. We delivered adjusted EBITDA of $24 million in the second quarter, compared to $38 million a year ago. The decrease was driven primarily by lower gross margins partially offset by a reduction in SG&A. Adjusted EBITDA margin was 6.3%. Turning now to our individual segments. In North America, organic net sales declined 10% year over year. The decrease was primarily driven by lower volume in Snacks and by baby formula, partially offset by growth in beverages. Excluding snacks, organic net sales in the quarter would have declined by 3%. The core is relatively healthy with growth in tea, yogurt, and Earth's Best finger food and cereal. Second quarter adjusted gross margin in North America was 20.8%, a 440 basis point decrease versus the prior year period. The decrease was driven primarily by lower volume, cost inflation, and unfavorable fixed cost absorption, partially offset by productivity savings and pricing. Excluding snacks and eaves, which we previously announced we were exiting, gross margin would have been 28.6% in the quarter. Adjusted EBITDA in North America was $11 million, or 5.5% of net sales, reflecting a decrease of 57% from the year-ago period. The decrease resulted primarily from lower gross margins, partially offset by a reduction in SG&A expenses. Excluding snacks and eaves, EBITDA margin on a comparable basis would have been 12.8% in the quarter. In our international business, organic net sales declined 3% in the quarter, primarily driven by lower sales in baby and kids. This represents an improvement from the 4% decline in organic net sales in the first quarter, driven primarily by a moderation in declines in baby and kids. International adjusted gross margin was 18.1%, a 200 basis point decrease versus the prior year period. The decrease was driven primarily by cost inflation, unfavorable fixed cost absorption, and lower volume mix, partially offset by productivity savings and pricing. Adjusted EBITDA was $19 million or 10.2% of net sales, reflecting a decrease of 16% compared to the prior year period. The decrease resulted primarily from lower gross margins. Now turning to category performance. Alison Lewis: Organic net sales in snacks was down 20% year over year, driven by club distribution losses and velocity challenges in North America. Importantly, we are seeing velocity improvements with our recent avocado innovation and multipack optimization. And our seasonal innovation performed particularly well, with ghosts and bats for Halloween, and more recently, holiday trees. In baby and kids, organic net sales growth was down 14% year over year, driven primarily by industry-wide softness in wet baby food in The UK, as well as formula in North America, driven by lapping the return to market pipeline. We have continued to see strength in best finger foods and cereal in North America, each showing dollar sales growth of low double digits percent year over year. Ella's Kitchen Finger Food also saw organic net sales growth up high teens year over year. And while still in decline, are seeing signs of stabilization in the wet baby food category in The UK. In the beverages category, organic net sales growth was 3% year over year, driven by tea in North America, and demonstrating an acceleration from the 2% growth year over year Q1, Celestial Seasoning Bad Tea grew dollar sales in the quarter, in part due to the recent launch of wellness innovation. In meal prep, organic net sales growth was down 1% year over year. A softness in spreads and drizzles in The UK was partially offset by strength in yogurt in North America. Greek gods grew dollar and unit sales in the quarter, by high teens percent and gain share. Shifting to cash flow and the balance sheet. As Alison mentioned, we had strong cash delivery in the quarter, Free cash flow in the second quarter was $30 million, an increase of 22% compared to $25 million in the year-ago period. The improvement was primarily driven by inventory delivery, higher cash earnings, and improved payables, partially offset by lower recovery of accounts receivable. We are pleased with the progress we're making on inventory, driven by improved operating discipline. Inventory continues to be an area of focus for fiscal 2026. Days inventory outstanding improved to seventy-five days in the quarter compared to eighty-three days in Q1 2026, and seventy-seven days in the prior year period. Each day of inventory is worth approximately $3.5 million. We also made progress in our days payable outstanding, with days payable outstanding of fifty-seven days in the quarter, in line with Q1, and an improvement from fifty-six days in the year-ago period. CapEx was $7 million in the quarter, was up slightly from $6 million in the prior year period. We now expect capital expenditures to be in the low $20 million for fiscal 2026. Strong cash flow generation in the quarter for cash on hand to $68 million and net debt to $637 million, a reduction of $32 million. We also have a $144 million of available liquidity under our revolver and remain in compliance with all credit agreement covenants. Our credit facility matures in December 2026. Accordingly, have classified all of the associated borrowings as a current liability in our 10-Q. We have a disciplined approach to capital management and continue to prioritize debt reduction as the primary use of cash as we continue to act proactively to manage the upcoming maturity. Over the last ten quarters, we have reduced net debt by $140 million. We expect to generate additional operating cash flow during the balance of fiscal 2026, including the collection in January of $26 million of insurance proceeds, and ongoing working capital improvement meaningfully reducing debt obligations in the ordinary course of business. Our strategic review has yielded a multistage plan aimed at materially improving liquidity and leverage. The sale of the North American snacks business is an important first step, with net proceeds dedicated to debt repayment. Pro forma for the transaction, leverage would fall from 4.9 times at quarter end to approximately four times. As we execute the next phase of this plan, we are advancing additional actions to enhance financial flexibility, improve performance, and address the upcoming credit agreement maturity, including further asset sales and operational improvements. We believe that aligning the maturity solution timing with the execution of the multistage plan will enable us to achieve the strongest long-term outcome for the company and shareholders. We remain actively engaged with our lenders and are assessing opportunities to refinance our debt or extend maturities, while evaluating potential capital raising or strategic transactions. We believe that the successful execution of these plans will enable us to refinance, extend, or repay our debt prior to maturity from a position of strength. Turning now to our outlook. As previously communicated, we are not providing numeric guidance on fiscal 2026 operating results at this time, given the uncertainty around the outcome and timing of the completion of our strategic review. We intend to provide pro forma financials upon closure of the North American Snacks divestiture, expected in February. Looking ahead, we expect the divestiture of North American Snacks to be gross margin and EBITDA accretive, and the profile of the go-forward North American portfolio to have gross margin above 30% and EBITDA margin in the low double digits. As for fiscal 2026, we continue to expect strong cost management and productivity along with execution against our five actions to win in the marketplace, to drive stronger top and bottom line performance in the second half of the year as compared to the first half. And for the full year, we continue to expect positive free cash flow. Before I turn back to Alison, I want to underscore the actions we are taking to strengthen our financial position. We are enhancing our flexibility and improving performance through initiatives to stabilize sales, improve profitability, optimize cash, and reduce debt. The strategic review and agreement to sell our North American snacks business are important steps, and we continue to advance additional actions. With solid liquidity, strong cash delivery in the quarter, and positive free cash flow expected in fiscal 2026, we remain confident in our ability to drive improved performance in the second half and beyond. Now I'll turn the call back to Alison for some closing remarks. Alison Lewis: Thanks, Lee. In summary, I want to reaffirm our confidence in the direction we have set for the company. This quarter marks a pivotal moment in our journey. We have taken a significant first step to sharpen our focus and strengthen our financial position. We are engaging in ruthless focus, fewer categories, fewer brands, and fewer SKUs, enabling concentration on areas that better align with our strengths and core capabilities. We are making tangible progress in improving our operational health and enhancing cash delivery. The actions we have taken will drive a structural reset of our margins. And we continue to identify and remove costs from the business, freeing up fuel to invest. Q2 results demonstrate strong cash delivery, reduction in net debt, and a stable core business. We are attacking our challenges head-on and nurturing growth through our five actions to win. We are encouraged by the progress we are making as we focus on executing our strategy and building momentum quarter by quarter. While we continue to navigate pockets of pressure, we are executing with resolve, and we remain confident that the steps we are taking today position Hain to deliver sustainable, profitable growth and long-term value for our shareholders. That concludes our prepared remarks, and we are now happy to take your questions. Operator, please open the line. Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. And your first question comes from the line of Jim Salera with Stephens Inc. Please go ahead. Jim Salera: Hey, Alison and Lee. Good morning. Thanks for taking our question. Wanted to start off with maybe some more details around the decision to divest the Snacks portfolio. If we go back to the Investor Day in 2023, you guys called out a couple of different categories, you know, to focus on as you grow. Snacks was one. The baby and kids, and then beverages. I think there's six brands, three of which were snacks. And then over the preceding years, there's been a lot of focus on innovation in the Snacks portfolio, you know, getting better placement and away from home, things like that. And so clearly, something's changed. You guys think that there's more value in focusing on other areas of the portfolio. So we just love you could kind of help us bridge, you know, what changed in your thinking or what you've seen in the market from, you know, that 2023 until now to result in divesting the snacks. Alison Lewis: Sure. I'll jump in first. So good morning. Look. You know that our first action to win is all about simplifying our portfolio. We needed to take some action in North America that would allow us to really focus to grow. As we assess the various businesses, stepping back and looking at sort of rights to win and what it takes to win in a category like snacks, the reality is that there are a lot of capabilities given that this is an impulse category that I would argue are more difficult for us to develop. So if you think about impulse categories that are fundamentally demand creation categories, you need to have, you know, really heavy and intense innovation. You need to have strong marketing investment consistently. You need to have DSD-like merchandising to drive again, kind of that impulse purchase. If you look at sort of the rest of our portfolio, it tends to be more center of store in North America and center of store categories are fundamentally demand fulfillment. Demand's already there, and it's not quite as competitively intense. So that is, you know, one of the key reasons when we looked at, you know, our portfolio where was sort of the biggest opportunity for simplification. I'll also add, and you saw that, you know, snacks over the years had become somewhat financially challenged for us as a company. We had become over-reliant on the club channel. That club channel is really great when you have that business, really challenging when you don't have that business. And so again, we had to look at how do we build a portfolio that financially is structured to grow. And we firmly believe that as we divest the Snacks business, having a portfolio in North America that has gross margins 30 plus percent and has EBITDA margins in the low single digits, it's going to put us in a position where we truly can invest and truly can focus to grow. Jim Salera: Yeah. I would agree. I guess just building on that to what Alison said, I mean, the operating model, talent profile, capital allocation priorities are very different. You know? And what we called out is you kind of look forward is, Snacks, and we also said Eaves as well because that's another piece of business we previously disclosed that we've gotten out of. The gross margin profile of those businesses is 28.6. You know, the ongoing margin profile, the gross margin profile of the remainder of the North American business, we anticipate being greater than 30%. So, you know, and again, we don't like to do kind of x but if you take out a couple of things specifically around snacks, and then some, you know, some category softness that we've had in kids. You know, we were actually flat. So that speaks to kind of the rest of the portfolio. So we think we are better positioned as we move forward with a higher profitability portfolio. Jim Salera: The estimate reallocating some of the innovations? I imagine if you're not having the Snacks portfolio anymore, that frees up some internal capabilities. To then pivot to innovation in the remaining categories. Can you talk through maybe some of the stranded overhead, what those costs are? And if we could expect to see more innovation in, you know, the remaining categories whether it's in the back half of this year or maybe that's a 2027 event? Lee Boyce: Yeah. We did call out the stranded cost. I don't think, you know, we can probably didn't verbally speak to it, but it was on one of the slides. So the stranded cost impact is about $20 million to $25 million. So those are costs that are allocated to Snacks right now. We have really concrete plans to execute to mitigate the majority of those costs within the six to twelve month, time frame. And, again, you know, it will free up, you know, resources some of that would obviously would drop through, but also just free up resources as we support those innovations, as we make sure that we have kind of adequate market expenditure against the rest of the portfolio. Alison Lewis: Yeah. I'll just I do think your point is right that we will be able to put more investment and more time and energy against the innovation for the balance of the portfolio and we really are seeing, I think I've talked to you before about how we're doubling down on innovation both in our North America and our international segments. We're seeing that those innovations that we're putting in the market, whether it's single-serve yogurt and with the Greek gods, you know, or wellness tea or Earth's Best snacks, we're seeing that those innovations are driving incrementality. They're driving share growth. So innovation is absolutely critical in this segment or in the Better for You categories to bring new consumers in and ultimately get to growth and driving volume-based growth. So, yes, absolutely, we will continue to double down on innovation. Jim Salera: Great. I appreciate the time. I'll pass it on. Operator: Your next question comes from the line of Kaumil Gajrawala with Jefferies. Please go ahead. Kaumil Gajrawala: I guess a question on the divestiture in the context of cash. Obviously, you have some sort of cash coming in, but, were those businesses cash burn businesses where run rate perspective or whatever capital that was required? Like, how does that sort of bend the curve on your ability to generate cash? Lee Boyce: Yeah. I mean, the Snacks is not a significant cash-generating business. I mean, we talked about the lower margin profile within it. You know, so it's a it I'd say from an ongoing kind of cash generation perspective, we're in a very, very good position. You know, one thing we did emphasize is, you know, as you look at Q2, we did have a really strong cash delivery. We will continue to be very focused on inventory reductions, continue to make progress on payables. The second thing, especially as we go into the second half, I think we also mentioned we do have $26 million that we got on January 2. On insurance proceeds as well from a previous M&A activity. So I think we're in a good position moving forward. But to your question, I mean, the Snacks business was not a significant cash generation business for us. Kaumil Gajrawala: Okay. Got it. And you provided some, I guess, thoughts on the upcoming maturity. You know, how much flexibility do you have? Is it leaning one direction versus the other? You know, refinance versus equity versus strategic? So there's feels like there's many moving parts. Just curious how should we be thinking about what you what your options are and how much flexibility there is as the date gets closer. Lee Boyce: Yeah. So I'd say a few different things. I mean, we have a path. We're mindful of the upcoming maturities, and, you know, we're in frequent and constructive dialogue with our bank group. So, you know, what we did feel was that aligning the maturity solution with the execution of the strategic review will put us in a stronger long-term position. The key thing, obviously, with the execution of this divestiture, you did see on a pro forma basis our leverage decreased significantly, so going from 4.9 to four times. So again, we are also continuing under that strategic review to look at other options. So again, we're mindful of it. We're working through good discussion with our bank group. And we're continuing to just do a, you know, thorough evaluation of our strategy in our portfolio. So again, the four times is versus the covenant we have. That takes us all the way through to the twenty-second December, which is 5.5 times. So have significant headroom under the current. But again, we're in ongoing dialogue to make sure that we come up with the right optimal long-term capital strategy. Kaumil Gajrawala: Okay. Got it. Thank you. Operator: Your next question comes from the line of John Baumgartner with Mizuho. Please go ahead. John Baumgartner: Good morning. Thanks for the question. Like to ask, Alison, I'd like to ask a follow-up to Jim's question and the characteristics for categories that you like and you wanna pursue. The profit improvement from the snack sale is clear. You know, as you progress in the second phase of review and presumably divest more assets, how do you envision Hain as a true growth business in the end? You know, I get the resource allocation. You have some bright spots with the Finger Foods and Kids. You know, there's pockets in meals that haven't really grown over time. In babies and kids, the fertility rates are declining across your market. So how do you think about driving sustainable volume in that backdrop? Does it require larger price cuts to bring your products more within reach of, you know, sort of mainstream middle-income households and expand penetration that way? Alison Lewis: You know, as I look at again, I'll sort of focus it, I guess, on North America given that we're focused there with the divestiture. As you look at the remaining portfolio in North America, as I mentioned, first of all, the demand fulfillment aspect of it is an area where I think we had strength and we've demonstrated, you know, consistent delivery over time. As you think about growth in the remaining portfolio, we talk about some of our flagship categories being our tea business, our yogurt business, and our Earth's Best baby and kid business. What you see is in those businesses, we have strength. So if you look at, you know, we're a top three player in tea. We've shown that we can drive growth when we innovate. So our wellness innovations that we launched in June are a great example of that. They're driving share growth for us, share growth in the overall wellness category. When you look at our yogurt business, I mean that's a standout business for us with double-digit growth. Again, in a very specific area where we have strength. So whole milk, which is a growing area of, you know, interest in the overall dairy category where whole fat are something that consumers are moving more and more towards. So again, a niche area within a broader player, but an area where we can build from a place of strength. And then the same with baby and kids. When I look at our snacks business and our cereal business, where, again, you know, we're number one in each of those categories. So we have strengths. We're seeing innovations that we're launching there are delivering results, double-digit growth in fact. So, again, the idea is play to your strengths. Find those sort of spots within those categories where you already are in a top three position and keep driving that. When it comes to meal prep, there's also areas within meal prep that I would argue are underpenetrated. A great example, you know, we're number one in coconut oil in spec oils. Right? An area where less competition, we're number one. We're launching into liquid coconut for the first time in the second half of the year. 25% of households only use coconut oil, so it's an untapped opportunity for continued growth. So when you talk about sort of where does that growth sit, it's really finding those growth pockets and being close to the consumer and unlocking that with innovation, and renovation. When it comes to price cuts, here's what I'd say. I mean, price is relative to the value that you deliver. And what we've consistently seen, and I think you see this broadly across all categories, is that price relative to value. So when we're bringing innovation or we're bringing and we're seeing that added value come into the product, we're seeing an ability to, you know, sustain price or even price up. So again, the key is not so much about, you know, decreasing prices, increasing prices, it's really about what's the value that we're bringing and what's the consumer willing to pay for that value. John Baumgartner: Okay. Thanks for that. And then, for Lee, in terms of the potential or, I guess, likelihood of additional asset sales from here, are there a cost basis or tax considerations or any other factors that might limit your degree of flexibility in divesting certain businesses? Lee Boyce: There are no concerning tax considerations at this point. John Baumgartner: Okay. Thank you. Operator: Your next question comes from the line of Andrew Lazar with Barclays. Please go ahead. Andrew Lazar: Great. Thanks so much. Good morning. Alison Lewis: Hey, Andrew. Andrew Lazar: You mentioned sequential improvement. Expectation in the fiscal second half. And obviously, you also announced the divestiture of Snacks, which is expected to close fairly soon. Much of the weakness in fiscal first half was, of course, related to Snacks, so I'm curious if you also expect sequential improvement in the fiscal second half sort of on a pro forma basis. And then any thoughts or help on how we should think about the potential magnitude of such improvement? Alison Lewis: Yeah. So I think we talked in the first part of the call a little bit about sequential improvement in our international segment. We saw that from first quarter to second quarter and we expect that to continue in the international segment not only driven by the innovation that we're putting into the market it is significant. We also cycle the Ella's challenges with the broader sort of industry and category in May of 2026. So that's going to definitely, definitely help. In North America, we also expect sequential improvement as we look to from first half to second half. We saw that actually in our tea business. If you look at Q1 to Q2, we see that pick up with the rest of our businesses as we launch innovation. So when you think about our yogurt business, the doing very well. We continue to expand our single-serve Greek gods yogurt, which is driving a lot of incrementality, about percent incremental to the business and almost 100% or the category and almost 100% incremental to our business. When you look at our Earth's Best business, we are launching seven SKUs in the big kids snacks area. That's an area we have not been in the past. So we're launching bites, we're launching Waze, we're launching Sticks. All of those things have added protein, have added fiber, and so they really play into where the market is moving. So again, the sequential improvement comes from that innovation, we also see the full realization of the pricing actions we've taken. As you know, pricing actions have been rolling in across baby, across tea, across meal prep. As we executed the first half, in the second half, we see the full benefit of that, along with we'll continue to tighten up sort of our promo efficiency and effectiveness. So definitely, we are looking to drive sequential improvement first half to second half overall, and we have a lot of activities. I guess our five actions to win help drive that. Lee Boyce: Yeah. And I just building on that a little bit, you know, we expect our margins in the second half to improve. The reasons Alison mentioned. I mean, RGM, you know, we did have some impact and we talked about it in the second quarter on manufacturing on absorption. We expect to get improvements in our manufacturing footprint continue to drive productivity reducing some of our waste as well. So we expect to see that as we move through. So we expect to see an improving margin profile as well. Andrew Lazar: Okay. Great. And then just regarding stranded costs, call out the $20 to $25 million on an annual basis. Obviously, you're gonna do what you can to mitigate that as soon as you can. But, I guess, in the near term, I mean, should we think about EBITDA being impacted for a period of time when the deal closes because of the stranded costs? And does the four times pro forma leverage include or exclude the stranded costs? Lee Boyce: Thank you. Yes. So we do I mean, the pro forma leverage did include some of the stranded cost and then some of the other benefits as we've taken out. Moving forward, I mean, will be some short-term pressure with the stranded cost, but we do have a very detailed plan to get those out in a short period of time. We said the six to twelve month period. So, it is something again, there's a number of elements. It's primarily in the SG&A side, a little bit in our distribution and warehousing network. But we have action plans to get those out. So you got I'd say you would see some pressure in the first quarter, but that would dissipate as we execute those actions. Very, very quickly. Thank you. Operator: Again, if you would like to ask a question, press 1. And your next question comes from the line of Anthony Vendetti with Maxim Group. Please go ahead. Anthony Vendetti: Thank you. Yeah. So just to know you gave us the percentages of the snack business relative to overall into North America. If we had a look at the last either the last twelve months or fiscal year 2025, what was the actual revenue contribution from the Snack business? Lee Boyce: We gave it as was it 38% of the total of the total North America number. Anthony Vendetti: Okay. Did the is that was that business I know you said that there was I think the gross margin on that business was twenty-eight point six. Not that far off from what you're look No. No. No. Sorry. Lee Boyce: Sorry. Just one correction there. That gross margin was ex the Snacks business. So the Snacks business was extremely dilutive to that. So that's why we wanted to give you x the snacks business. Anthony Vendetti: Got it. Okay. Good. That's helpful. And then if you know, in terms of I know the first question was you know, what drove you to this. Was this was this sale you know, pressured by the debt by your bank group? Did the bank group sign off on it? You know? And if there if the bank group wasn't involved you think you would have spent more time trying to turn it around? Or maybe just give us a little bit color on what drove the sale right now. Lee Boyce: Yeah. It definitely pressured by the bank, it was done. I mean, we talked about I think it was made. We kicked it off. We had a strategic review process, and where we've strategically in a position with the right to win within that category and how did it fit within the rest of our portfolio. So that's really what drove the decision. You know, it felt like with the acquirer, they've got a better position to drive that moving forward. So not pressured by the bank group, no. Alison Lewis: Yeah. And I would say, Anthony, I mean, you know, look, obviously, this is public now with the team. We couldn't talk to, you know, the team in North America much about what we were doing. As the team looks at sort of the potential of the business with the three flagship categories I noted plus, you know, selective opportunities in meal prep, they're excited. They're excited because the financial profile is such that they can put a lot more focus against these. They know there's growth in these businesses. They're gonna be given an opportunity to unlock that growth. So, again, simplification is our first action to win. We have to engage in ruthless complexity reduction across our business and that was a very smart way to do that given the capabilities that are required to win in Snacks, which I would argue are not capabilities that are at the heart of The Hain Celestial Group, Inc.'s strength. Given it's an impulse category and fundamentally a demand creation category. Anthony Vendetti: Okay. Great. And then one last follow-up on the meal prep business because that is one of the fastest growing categories within grocery stores. Maybe give us a little bit more color on the plan there. Is it gonna be more frozen, refrigerated? And just an idea of how you're gonna build that out? Thank you. Alison Lewis: Yeah. You're right. Meal prep is actually an exciting area, and as we've sort of we're looking at how do we put some additional focus against that business without the snacks business in North America. We're looking at out our pipeline related to Maranatha. You heard me talk about liquid coconut oil on Spectrum. 25% of households only using coconut oil, and we're number one right now. But we don't have a liquid product. That's another great example. So we will absolutely look at ways we can unleash the opportunity within meal prep as we go forward because we know it's a growth category. And when 38% of your business is in snacks and it requires impulse category like capabilities. You find that a disproportionate amount of human resources are spent there. We now have time to spend it against some of the other great opportunities that exist in our portfolio. Anthony Vendetti: Okay. And I would just like to conclude with congratulations on the permanent appointment as CEO, Alison. Alison Lewis: Thank you very much. Continue to be energized by it. Operator: Your next question comes from the line of Jon Andersen with William Blair. Please go ahead. Jon Andersen: Morning. Thanks for the question. I was wondering if you could help us just with kind of the cadence in the baby and kids business, there are, I guess, a couple of other transitory events that are affecting organic growth in that business. You've cited the first one as being pipeline associated with the Earth Balance relaunch last year. And then just kind of the industry-wide challenges in Wet Baby in The UK, can you remind us UK. You know, the timing of those? When will those be cycled or kind of out in the base, if you will, and do you do you kind of expect post that that the baby and kid business is in a position in aggregate to grow? Thanks. Alison Lewis: Yeah. So I'll talk about The UK first and Ella's. So the BBC Panorama documentary came out in early May of last year. And so we do start to cycle that drag that has hit the category come Q4 of this year. So you will see, you know, that business return to a much better position and return to growth. We are, as you know, on that business we've been doubling down on marketing. I think I talked in our last call about sort of a new marketing campaign that's getting very good response that we are also doubling down on our innovation. So in the back half, in Ella's, we have 10 new snacks SKUs going in. We have new meal stage four, so older kids sort of meals going in. And then we have the nutty blend, which is a combination of nuts and fruits and vegetables. So, again, lots of innovation to continue to drive that category, and Ella's does remain the number one in the category overall. And is the pioneer in sets the standard for organic baby in the category. So again, once we cycle that, we have confidence that again, that business, you'll see a return to growth. As it relates to the North America business, I think we've talked quite a bit that we're in a tale of two cities where we've got good growth double-digit growth, strong double-digit growth in our Earth's Best snack, in business, and we'll continue to drive that with the innovation we have coming in, in the back half of the year. On our cereal business, the same thing. Mid single-digit growth, strong business. Again, looking at innovation to continue to drive that. When it comes to our formula business, this is the last big cycle this quarter with the last big cycle that we see, so we should get to a more normalized place. Although I will tell you that formula is an incredibly competitive category. You have a lot of new players in, and Earth's Best has been working hard to really rebuild sort of the trust credentials that it always had as well as engage in very targeted recruitment-based marketing through things like Earth's Besties, as well as some of the registry programs with our retailers. So again, we have more work to do on our formula business, but the cycles we get over. As it relates to our pouch business, sort of our other challenged area, I mean that's another example where hypercompetitive in the pouch business a lot of the pouch business moving to refrigerated. And so you're seeing sort of a sea change and a shift in that category overall. We will still be cycling some exits of that business as we look to we talked to you, I think, our last earnings call about the 30% SKU reduction in North America. We continue to drive that. A chunk of that SKU reduction does actually hit our pouch business as we look to really again build a focused power core of sort of hero SKUs in our wet baby food business. So again, we've got great strength in a couple of segments, and we'll continue to drive those hard. And we're working to stabilize the other two segments with some cycles that we get through as we move through the remainder of the year. Jon Andersen: That's thanks for the color. That's helpful. Makes sense to focus on the area where you have the strongest differentiation. One follow-up to Andrew's question just on stranded overhead. I just want to make sure, when you talk about North America gross margins, being in the thirties post on a pro forma basis and EBITDA margin double digit or double digit. Is that after the work down of the stranded overhead costs, or is it, you know, kinda right out of the gates? Lee Boyce: Oh, no. That's a good question. It is after the work down of the stranded overhead impact. So again, that's why we've emphasized and we have action plans to do take those out on the kind of a short-term basis, moving very aggressively. But it is up to that work down. That's right. So just again, for modeling purposes, it would be I guess, prudent might be the word to assume, you know, there's gonna be kind of a $5 to $6 million overhead stranded overhead headwind per quarter until those are worked down. Jon Andersen: That's the way it would work. Yes. It would be about, yeah, $5.05 $5 million, you know, a quarter, 5 to 6. But, again, we would be taking actions, you know, to quickly kind of work that down as fast as possible. Jon Andersen: Understood. Okay. Thank you so much. Operator: That concludes our question and answer session. I will now turn the call back over to Alison Lewis, CEO, for closing remarks. Alison Lewis: Great. Well, thank you, everyone, for joining today. I'll just reaffirm our confidence in the direction that we're taking. This quarter represented a really pivotal step for us as we began to execute our strategic review with the Director of Snacks. We're focusing our portfolio for growth. We're improving sort of our overall financial profile as we go forward. And strengthening our operational health while they continue to drive out costs and enhance our overall cash delivery. And I would say, you know, we're attacking the challenges head-on. Certainly, business is in transformation, and turnaround, but we see bright spots and, we'll continue to drive those bright spots as we action our five actions to win. So thanks for joining us today. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.