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Jan Marcel Matthieu Boone: Good morning, everyone. Welcome to the investor call. Following the announcement this morning of the 2025 annual results of Lotus Bakeries. I'm Jan Boone, and joining me today is our CFO, Mike Cuvelier; and we are both here in Lembeke. We will start with the presentation providing an overview of the performance and also the milestones of '25 and later on, deep dive into the financials. And of course, following the presentation, we are open for questions from your sides. And in total, we have foreseen 50 minutes for this call in total. First slide, I'm proud to report another year of strong and double-digit top line growth. The reported sales in '25 amounted to EUR 1.35 billion, and that represents an increase of 10%. This evolution is driven by continued strong volume growth in the second semester for both Lotus Biscoff and Lotus Natural Foods. At constant currencies, growth was even stronger, given the negative currency evolutions of the dollar and the pound in the second half of the year. Profitability improved further with underlying EBITDA on sales exceeding 20%, and this is an increase of 12% compared to the prior year. Also, the net profit increased and the net profit increased with 13%. The strong reduction of net financial debt led to a historic low multiple of 0.25x underlying EBITDA. Besides a strong operational cash flow delivery, we also realized a successful exit in FF2032 with the sale of our participation and The Good Crisp Company. A dividend of EUR 90 per share is proposed, and that's an increase of EUR 14 per share compared to the 76 of last year. And similar amount to prior year, we invested EUR 120 million in capital expenditures, and that's mainly in the plant in Thailand. The successful start-up of the first lines in Chonburi is for us, as a company, a huge milestone. And the operations teams deserve full credit for delivering this greenfield ahead of schedule and well in budgets. Last but not least, the partnerships with Mondelez advanced strongly and they contribute positively to the results. Lotus Bakeries is a growth company, and has been for the last 20 years, delivering a compounded annual growth rate of 11%. Looking at the pillars, the 3 strategic pillars. We see that Lotus Biscoff achieved a growth of 13% in '25. It reflects the discontinuation of Lotus Bakeries' own Biscoff ice-cream sales following the new license agreement with Froneri, EUR 11.6 million of second semester revenue was excluded from the reported top line sales. This primary volume growth of Lotus Biscoff demonstrates continued strong demand for Biscoff cookies and spreads. The Biscoff cookie once again ranks as the fastest grower in the global cookie brands ranking further reinforcing its position within the top 5. Lotus Natural Foods is the fastest-growing strategic pillar '25 with a growth of 17%. And after a strong performance in the first semester of '25, Lotus Natural Foods continued on the same positive path. TREK is the fastest-growing brand and BEAR is the biggest contributor to growth. [ After ] sales remained flat in the first half of '25, the Local Heroes delivered again growth in the latter half of the year. Annas pepparkakor even realized more than 10% growth and had its best holiday season ever in Sweden. The gingerbread sales in the Netherlands stabilized on a full year basis. Growth in Continental Europe of 9% is outstanding, certainly given the full allocation of the Local Heroes portfolio to this region. Belgium and the Netherlands are good examples of home countries that carry a broad assortment of the 3 strategic pillars and generates good growth in '25. The reported growth in the U.K. was 2%. Currency evolution of the pound has a negative impact on the reported sales in the second half of the year. The deep focus on the own Biscoff chocolate business and the exclusion of Biscoff ice-cream sales in the second half of the year further tempered the growth. On the contrary, the Natural Foods brands performed strong in the U.K. As an example, TREK was the fastest-growing brand in the bar category in the U.K. And in the U.S., Biscoff was the fastest-growing brand in both, the cookies and spreads category. Household penetration for the Biscoff cookie has steadily expanded in recent years, and now stands at 9%. Significant growth was also realized again in the U.S. with BEAR. Our largest consumer markets continued to increase in imports. You can see this in the overview here on this slide, an overview that shows the revenue distribution by country. The U.K. remains our largest market, closely followed by the U.S. Other major consumer markets, including many European markets, China and Canada, are also gaining share. Within the remaining 19%, several smaller but high potential markets are emerging. Let's now go into more details about Biscoff. Biscoff realizes a 10-year average growth of 15%. The most important growth engine of Lotus Bakeries in absolute value of the last decennial. We have reached with Biscoff again, a lot of milestones and we will go into more detail on some of those in the following slides. The launch of spreads was almost 20 years ago, namely in 2008. You can see the interesting evolution of our pack design over the years. In '23, the brand named Biscoff became prominent on the pack. And now we take the next step, and we will move from a generic shape jar to our own design. [Presentation] Jan Marcel Matthieu Boone: The new jar makes the perfect reference to our Biscoff cookie with the embossment linking into our iconic cookie. And you can see the new Biscoff spreads lined up next to other global spread brands. And now it's our goal to make this Biscoff jar also iconic. Here you can see that our Biscoff brand. Here, you can see our Biscoff brand identity over the years. In 2018, we created the red banner on the packaging design. And in '23, we placed Biscoff front and center on the packaging as part of a shift towards a unified global brand identity. And we are ready to take the final step. In '25, we introduced the Biscoff engraving on the cookies, replacing the long-standing Lotus engraving. This change completes more than a decade of brand evolution, and ensures us 1 consistent visual identity and tone of voice. The letter fonts on the cookie is aligned to our Biscoff logo connecting the Fs to ensure readability. The new engraving will be introduced across the entire range, including the original cookie and the sandwich cookie, as you can see here. Implementation began late '25 in the U.S. and India, followed by a global rollout in '26. And now an update on the partnerships. One of the highlights '25 is, for sure the launch of Biscoff cookie in India. Towards the end of '25 an unprecedented nationwide launch campaign was rollouts, rapidly building distribution in more than 300,000 stores in less than 4 weeks. Sales conferences were organized across 15 key cities to inform and energize among the sales teams across the country. This allowed us to reach 10,000 salespeople in all parts of the country. A wide range of impactful marketing initiatives was deployed across the country. The main focus was on the unique product taste. [Presentation] Jan Marcel Matthieu Boone: Painting the towns red with Biscoff billboards across top cities. Social and influencer buzz delivering more than 150 million views. Also a nationwide and broadly covered press conference was organized. And of course, impactful in-market activation in all channels, both modern trade and traditional trade. Traditional trades includes thousands of small shops, as you can see on the slides. At '25, we successfully launched Biscoff with Cadbury, Milka and Cote d'Or. And Mondelez is working on some more exciting innovations that will come soon on the markets. The Froneri led Biscoff ice cream launches will start in '26 this year, and the U.K. and later on in European countries. Following extensive work throughout '25 to define the new assortments and develop new product innovations. This slide shows the different concepts that have been developed. You can see the sticks, the pints and the new sandwich concepts. And the sandwich concept is ice cream in between 2 original Biscoff cookies. In recent years, Lotus Bakeries has invested in a new greenfield production facility in Chonburi in Thailand to support its growth ambitions in the Asia Pacific region. We have now 4 Biscoff plants, including India, on 3 continents. By the end of '25, the first cookies produced in Chonburi have been delivered to the customers. Plant is expected to be fully completed and operational by the end of the first semester in '26 at the latest, including capability of spread production and in-house bottling of spread jars. You can see here a drone picture of the current Chonburi plants. On the left of the current building, you can see that the plot of land still allows for significant future expansion. Mid '25, a new investment in spread production and bottling was also commissioned at the plant in Mebane U.S. Local sourcing and production of Biscoff spreads in the U.S. will reduce our ecological impact, lower import duties and accelerate our logistical flow. Our ambition with Natural Foods is clear. We want to become a global leader in better-for-you snacking segments. And in '25, we have made great steps again. Lotus Natural Foods was the fastest-growing pillar of the group with 17%. It is now a EUR 300 million business. And this is not a one-off because since we entered the better-for-use snacking segment in 2015. Our 10-year average growth has been that same 17%. With Natural Foods, we reached several milestones in '25, and we will go more into detail on some of those in the following slides. An important driver of growth in recent years for those Natural Foods is the successful development and introduction of new innovations. Other brand, BEAR brands, the fruit splits are a perfect example of an innovation that was introduced in recent years. The fruit splits are performing very strongly next to the original BEAR fruit rolls. In both key markets for BEAR, the U.K. and the U.S., the splits rotates in the top quartile, at most retailers. Seasonal activation strengthened brand's visibility and consumer engagements. Alongside BEAR's strong overall performance, the brand successfully launched nationwide Halloween Edition featuring a single wrapped strawberry fruit roll and themes cards with the BEAR mascots. Also under the TREK brands, we launched 1 of the most impactful innovation of recent years, the TREK Protein Flapjack with Biscoff. And this TREK Protein Flapjack with Biscoff is a vegan protein bar layered with smooth Biscoff spreads. This innovation created a strong halo effect. While consumers were introduced to the iconic Biscoff of taste while Biscoff brands encouraged trial and visibility for TREK, strengthening relevance and appeal for both brands. In '25 Lotus Bakeries entered into partnerships with RunThrough in the U.K. and with Golazo in Belgium, the Netherlands and France. We will be a key partner at running events reaching over 900,000 runners annually and offering a strong opportunity to further build the visibility and relevance for -- of TREK and Nakd brands. So this concludes my part of the presentation. And now I will hand over to Mike, who will present the financials. Mike Cuvelier: Thank you, Jan. On the financials. In '25, we delivered another strong set of annual results, powered by an in-sync flywheel of sales profitability, cash flow and continued reductions in net debt. You see that revenue is up by 10%. Underlying EBITDA is up by 12%. Free cash flow before expansion CapEx is up by 20%. All of which make it possible to invest EUR 240 million in the past 2 years and at the same time, reduce the net financial debt further to 0.25x underlying EBITDA. The strong performance of '25 is also reflected in a proposed increase of the dividend with EUR 14 per share. This slide shows the yearly volume growth in percentage on the left and in millions of euro over the past years on the right. The reported revenue growth of 10% in '25 is primarily driven by continued robust volume growth of 9.5% or more than EUR 115 million. This is the darker bar in the graph. Before exclusion of the Biscoff ice cream sales of the second semester, normalized volume growth is actually higher at 10.4% or close to EUR 130 million. This is the bar on the right of the graph. And you can see this volume in '25 was outstanding and comes on top of a record volume growth already realized in 2024 of 14% and EUR 150 million. Over the past 5 years, underlying EBITDA has grown faster than sales. And in 2025, underlying EBITDA reached again the 20% of sales level matching the profitability level we delivered also in 2021. Our partnerships with Mondelez further enhance the group's margin profile. Underlying EBIT and underlying EBITDA grew by more than 12%, as you can see, outperforming the top line growth of 10%. This demonstrates the solid underlying quality of earnings. Strong volume growth, combined with disciplined pricing and margin management, continue to support expansion of profitability and cash flow. Our Biscoff plants in Lembeke and Mebane, together with the Bar factory in Wolseley, operated at high occupancy levels throughout the year. And towards the end of 2025, our new plant in Thailand became operational. The annualized depreciation in '26 for Thailand is expected to add around 0.5% on sales. The volume growth and operating leverage is being reinvested in strengthening our commercial organizations, expanding marketing initiatives to build brand awareness and penetration and further increasing production capacity. The nonunderlying items of EUR 4.8 million relate mainly to the start-up cash costs for the plant in Thailand before production commercially goes live. The financial results of EUR 2.4 million consists of interest expenses, net of cash deposit income, bank charges and a negative exchange rate impact from the revaluation of balance sheet positions in foreign currencies. The tax expense amounts to almost EUR 53 million and remains as a percentage profit before tax in line with prior year at 23.5%. Underlying net result amounts to EUR 177 million or 13.1% on revenue. On this slide, you can see our investment program over the last 5 years. We invested more than EUR 500 million since 2021 in total CapEx and more than EUR 430 million in expansion CapEx alone. In 2025, we invested EUR 120 million similar to the 2024 number, and the majority of this budget goes to the plant in Thailand. Maintenance expense remains well under control and also remains below 1.5% of sales in 2025. The CapEx forecast for '26 and '27 combined stands at EUR 250 million, and is slightly above the EUR 240 million over the last 2 years, '24 and '25. Cash flow delivery was once again very strong in the second half of the year, with cash conversion before expansion CapEx well above 90%, we were able to absorb more than EUR 100 million of expansion CapEx and still reduce net financial debt further. Supporting drivers of cash conversion remain control on working capital and maintenance CapEx. Net financial debt is historically low at 0.25x underlying EBITDA. The sustained strong cash flow delivery over the recent years and the successful exits by FF2032 of the participation in The Good Crisp Company are the drivers in 2025. And I have to repeat myself, this balance sheet, again, is stronger than ever. Increased long-term investments, reaching the EUR 1 billion mark alongside increased equity. Net working capital remains stable and the reported net financial debt further reduces. On this slide, the reported net financial debt of EUR 89 million includes EUR 21 million of debt to be expressed by applying the IFRS 16 standard about leases. The evolution of underlying earnings per share shows a CAGR of 17.1% over the recent 5 years. and is actually outpacing the underlying EBITDA evolution we saw in 1 of the previous slides. And then to end the presentation with another highlight of 2025 Lotus Bakeries has reached the status of dividend aristocrat with 25 consecutive years of dividend growth and proposing a dividend this year of EUR 90 per share. This concludes the presentations. We will now open the call for questions. Mike Cuvelier: And we have the first question of Alexander Craeymeersch of Kepler Cheuvreux. Alexander Craeymeersch: Thank you. Yes. So the first question, I would ask 2 questions. And congratulations on the good set of results first. So the first question would be, you mentioned at the beginning of the year that you could have only a max volume growth of 10% over full year 2025 in Biscoff and you mentioned also that there was going to be a high base in H2. Of course, at the H1, you already mentioned that there was the new plant in Thailand opening but now we show in Biscoff 15% growth half-on-half. And if you compare that, because in the first half of the year, it was only 1% growth half-on-half. I was just wondering now can we also expect that 15% growth to also be present in H1 next year because, of course, there was little room for growth supposedly, but now apparently, that was well overshoot. So that was the first question. The question -- the second question I would have would be on Capex. I was just wondering why CapEx landed a bit on the lower end in H2? And how much capacity would be coming free in 2026? That would be my second question. Jan Marcel Matthieu Boone: Thank you, Alexander, for the questions and also for the congratulations, so thank you. Regarding your first question, indeed in '25, we gave some guidance in respect of capacity related to Biscoff and in '26, there is not. The demand will be leading and we had indeed a very good, very strong second semester and the 15% growth of Biscoff is a bit exaggerated. It's more like-for-like almost 13% in the second semester that we grew with Biscoff. But the demand will be leading in '26, we have been investing in increased capacity, mainly through our plant in Thailand, and that plant will be producing for Asia and Australia and New Zealand. So the capacity is there to grow, to grow Biscoff in '26. In relation to the CapEx number, we have shown an outlook for '26-'27. So about EUR 250 million will be reserved for increasing the capacity in our different factories. That includes our Biscoff factories but also our factory in South Africa for Natural Foods products. And sometimes the risk between H1 and H2, a difference in cash out, but we can be assured in H2. We did work quite hard to get the plants up and running in Thailand. We are extremely happy with how the team performed -- our operations team performed in Thailand. They -- we did not have any significant setbacks. And that's why we made a clear statement in our press release that at the latest by end of the first semester we will be up and running with all our lines. Mike Cuvelier: The next question, Kris Kippers, Degroof Petercam. Kris Kippers: So yes, indeed, also on my side, excellent second half, so congrats on that. My question is more on the comment made in the press release on the first page also on the profile the group. Looking forward and looking at your cost base, which remain indeed well under control in the second half, given the fact that you have some scale increase as a group, you have indeed Mondelez, which is helping. On the other hand, there is, of course, the effect of Thailand which might not be as profitable as the Belgium plant or even Mebane in the short term. But what seems to be a realistic margin assumption going forward because, indeed, it could be that 21% in a couple of years is feasible? Or would it imply again what you commented in the past that you aim for, let's say, more marketing effect in order to focus on the long-term growth, it will be helpful to give some insight on that because it does see indeed that your margin uptick in second half could be structural. That's my main question, actually. Jan Marcel Matthieu Boone: Thank you, Kris. Yes, indeed, we are happy that the EBITDA margin was higher than the 20%. So we are now at 20.2%. There are a couple of elements that affected that percentage. First of all, the ice cream business we took out in the nonunderlying line. So not only the top line, but the whole P&L of the ice cream business in the second half is not included in the underlying results. So as you know, our ice cream business was not the most profitable one. So that helps to increase that profitability percentage. Looking into the future, a couple of elements will play. First of all, we will have the Thailand plant as from the 1st of January, fully consolidated into the results, which also means full overheads will be in the costs. And so it's clear that a new factory being integrated in the profit and loss has its overhead costs. And once it's fully in the P&L and you add lines, it's more profitable. So if we add lines in Lembeke and the profitability level of these additional lines is higher than implementing and your P&L, a full plant. So that's the effect we will see in '26. And also depreciation will be a bit higher, about 0.5% impact on our depreciation. On the other hand, the Mondelez partnership will play positively on the EBITDA and percentages as well, India as the corporation on ice cream and chocolate will play positive side percentage wise. So to summarize it, we think for '26 the EBIT and EBITDA percentages will be more or less in line with what we have communicated today in relation to '25. Kris Kippers: Okay. Very clear. And then just one follow-up, coming back on the CapEx program, EUR 250 million, somewhat north of what we anticipated, I presume. To what extent is this ample? And what kind of capacity expansion would this provide you? Could you share more details on what it entails? Jan Marcel Matthieu Boone: I said it's linked to our Biscoff factories and also our factory in South Africa. We -- the calculation made is, of course, based on what we expect in relation to demand to coming years. We don't like to build empty factories. We're not going to invest already for 30%, 40% additional capacity. We'd like to be quite close to the market. And the factories, the 3 Biscoff factories specifically, they are close to -- is very close to the full capacity. '26 will give us room for growth. But we're not going to be overinvesting in capacity sort of EUR 250 million, and it will not give us 30% to 40% additional capacity. I don't know if that gives you an idea. Mike Cuvelier: Next question, Maxime Stranart from ING Bank. Maxime Stranart: Can you hear me? Jan Marcel Matthieu Boone: Yes. Maxime Stranart: Correct. So first of all, looking at organic growth coming back on that. If I may, excluding the impact, would imply the organic growth is above 14% in H2 with volume growth of almost 13%. If I look at the number you just communicated, I just want to crosscheck with you that's basically the correct assumption to take? And is it a level you see sustainable in H1 that would be the first question on my slide. And secondly, digging deeper into India. Could you elaborate a bit on what's your view on what the growth could be in '26. That would be all for me. Jan Marcel Matthieu Boone: Thank you, Maxime. Indeed, in the second half of the year, we increased like-for-like. And that means the FX like-for-like, also the ice cream was indeed 14% of organic growth, which is exceptional. We are delighted with the 14% and if you see it in the history of the last 5 to 10 years and 14% of organic growth for the group is exceptional. What do we expect H1 '26. We are confident to further grow. But as I said, 40% is exceptional. And we also have the headwinds of the foreign exchange effects based on the currencies of today, pound-wise, dollar-wise, we have already, and we have to start with minus 2.5%. Things can change in a good way or in an versus way. You never know, but we start with minus 2.5%. And -- but if we purely look at the like-for-like growth, 14% is extremely high. And that's why both Mike and I are sitting here with a big smile because of the fantastic results in the second half. And then in respect of India. And then I have to quote my CEO colleague of Mondelez. He said, "Okay, I want to have at least USD 100 million sales in 5 years in India." And for us, it's clearly strategically a very good partnership. We have been in India for 20 years, even more, and we could never realize a substantial sales we would never become a real brand in India. And I think through this partnership, we will be, if we see the resources that Mondelez have used now to launch the marketing efforts and especially also the way they operate. And the fast way they can get the Biscoff products in all these stores more than 300,000 stores that's really truly impressive. And I'm sure they will create a brand. They will create Biscoff as a brand also for the Indian population. And that's our ultimate goal. And I want to become a global brand and if you cannot become a brand in India, you cannot say generally, we are a global brand. So I'm happy that we can work together with Mondelez on realizing that. Mike Cuvelier: Next question is Guy Sips from KBC Securities. Guy Sips: I have 2 questions. First question is on the ramp-up and the packaging cost evolution. We see some ease in the raw mat. Can you give us some color if that could give some tailwinds from that side going forward? And the second is coming back on the CapEx, do you intend to allocate some additional CapEx to the healthy snacking activities. Jan Marcel Matthieu Boone: Thank you, Guy. In respect of packaging raw materials and other costs. What we do is, we have the whole budget around and also calculating the cost prices and the different cost elements of our products. That's an exercise we do very meticulously. And that gives us the ability to communicate also our prices to our customers before year-end. We also try to hedge as much as possible of these costs. So we have a cash flow predictability. For '26, price increases will be moderate. So if you look at the growth of next year and hopefully, the growth of next year, it will be based on volume. So it will be very -- price effects will be very limited. In respect of capital expenditures for healthy snacking. Indeed, BEAR is doing really well. So we're going to invest in our South African plant and also for Nakd that we also produce in the same plant, we will add capacity over there. So partly is allocated for the plant in Wolseley. Mike Cuvelier: Next question, Jeremy Kincaid from Van Lanschot Kempen. Jeremy Kincaid: One more for me on Capex, are you able to split out how much of the CapEx guidance will be to the Biscoff brand and to the Natural Foods brand? And then my second question is just on your balance sheet. Obviously, you called out it's very strong. Does that mean going forward, we could expect higher cash distributions to shareholders? Or do you have a target leverage ratio that you're working towards? And then just finally on The Good Chip Company or Crisp Company, are you able to disclose how much you sold that for? I'm sorry if you said that at the beginning of the call, I was having technical issues. Jan Marcel Matthieu Boone: Thank you, Jeremy. In respect of CapEx, the majority should be allocated to Biscoff and the exact number, we will not disclose, but it's the majority to Biscoff. And we do have a strong balance sheet. We have increased the dividend pay out slightly I think if you look at the underlying profit of last year and our payout ratio, which was a bit below 40% and now it's a bit above 40% because we have indeed a very strong balance sheet with low leveraging. So happy to be dividend aristocrats. So we're official aristocrats. That does not mean that we're going to stop working. So -- but the view on our dividend has not changed. I think the dividend payout, we have no plans to really dramatically change the payout ratio. And -- but the balance sheet enables us to invest in capacity. So we will invest EUR 0.5 billion in the next 2 years. And that will be -- and that helps if you have a strong balance sheet. We do look at M&A. We do look at external growth. But it's not something that we really need today. As you can see, our organic growth is very strong, as well for Natural Foods as for Biscoff. The organization is also built and organized to really focus on Biscoff, focused on Natural Foods and also the Local Heroes. So an external growth and acquisition could be interesting. And we have the balance sheet for it, but it really has to be a perfect match. And it's not something that we really need in the short term. We love the organic growth, it's the most profitable way to grow, and -- we don't -- we are not nervous by the fact that we have almost no debt anymore. And in respect of the funds, FF2032. What we've seen is that the most targets are in the U.S. we invest in scale-up companies, not in seed. We're not investing in not seed money, but more in scale-up companies. And we like companies that we think that in the mid long term, they can reach EUR 75 million to EUR 100 million. And we've seen also out of experience that most of these targets are in the U.S. And so we have our team now in San Francisco mostly looking at U.S. targets. And a The Good Crisp Company, a very nice company in the sense that they have a very good product. They did grow significantly the last years and PearlRock private company that acquired and we agreed not to disclose any detailed information. But we did create some surplus value for the funds. Mike Cuvelier: We have time for 1 more question -- a follow-up question from Maxime Stranart of ING. Maxime Stranart: [indiscernible] that you're still looking at a growth target and also [indiscernible] looking at M&A. So any element in the portfolio; that you would add any category you feel would be a great fit as a group into. Jan Marcel Matthieu Boone: I think I more or less understood your question because the line is not perfect. But I understood that your question is, do we want to invest in other categories. I think looking at M&A, preferably, it will be either in the healthy snack and natural foods fields, I think that's what we focus on in our search. On the other hand, also in traditional biscuits and bakery, could be interesting, certainly in respect of getting more scale in certain countries. Today, we're not eagerly seeking in other categories and the categories we are in today. Mike Cuvelier: Thank you, Maxime. Just 1 last question, Antoine Prevot from Bank of America. Antoine Prevot: Can you hear me? Mike Cuvelier: Yes, yes. Antoine Prevot: Perfect. Yes. 2 quick questions. So first 1 on the U.S. So 9% household penetration, see good development there. any bit of an update on what your target a bit there in the U.S. household penetration over the midterm? And just a very quick 1 on India in terms of like -- I mean, strong launch, as you said and pointed out. I mean in terms of spending on A&P and so on. I mean how is it split between you and Mondelez? Is it them taking care of everything? Or do you also need to contribute a bit? Jan Marcel Matthieu Boone: Thank you for your question. Indeed, the U.S. has been evolving very positively. We are now at 9% of household penetration and our distribution on store level is -- it's 80% more or less. So evolving really positively. What are our ambitions there. Of course, we would like to cross the bridge of the 10% household penetration in the short term in the U.S. Today, the U.S. consumers are not that positive. We have not seen that in our figures for '25. And hopefully, we will not see that in our figures in '26. Today, there are no indications that the sales would be less good. So we still have a positive vibe coming from the U.S. And it's -- it's 1 of our, maybe our most strategic markets for Biscoff. We have been investing quite a lot in the U.S. in relation to marketing above the line. Investments have been started in '24, evaluated positively, so we are extending it in '25 and also probably in '26. So we keep on spending, supporting our brands to marketing. I think another important aspect is we have our factory in the U.S. producing for the U.S. Now also we have added to the spread line. And the good news is that we had a vision to buy enough land in North Carolina on that side. So we can still extend capacity on the same site because it takes quite some time to create know-how and factory. And now in the U.S., quality of the cookies are very good and are fully on par with the Lembeke ones. So it's good that we can extend on the same spots in Maiden, North Carolina. So we are ready in the U.S. to grow. Fantastic year '25. In general, consumers are but more hesitant, but today, we don't see that in our figures. India, indeed, a great start. And our contribution is, of course, that we look at the quality of the cookie. We decide on the marketing program together, and we do have a contribution also in the marketing support and the majority of the investments are being done by Mondelez, but we also contribute a bit to the marketing efforts. And like I said, it looks very positive but we're only there for 2 months now. But the start has been very promising and very proud to see our products and so many stores to see the positive pipe in India. Mike Cuvelier: Okay. Thank you for your good questions, interesting questions. Jan Marcel Matthieu Boone: Yes. Also from my side, thank you. We will close the call here. But of course, if you have any follow-up questions, you know where to also find me or find us in the next few days and weeks. Thank you very much.
Operator: Good afternoon, and welcome to Garanti BBVA's 2025 Financial Results and 2026 Operating Plan Guidance Webcast. Thank you for joining us today. Presenting on behalf of Garanti BBVA, we have our CEO, Mr. Mahmut Akten; our CFO, Mr. Atil Ozus; and our Head of Investor Relations, Ms. Ceyda Akinc?. [Operator Instructions] With that, I now would like to hand over to management for their presentation. Ceyda Akinc: Hello everyone, and thank you for joining us. We are excited to be with you on another earnings call. Before getting into our financial performance details, let's as usual, go over the broader macroeconomic environment. Turkish economy grew by 1% Q-on-Q in the third quarter and for the fourth quarter, we now cast a slightly positive quarterly growth. Therefore, parallel to our previous expectations, we maintain our GDP forecasts as 3.7% in '25 and 4% in '26, consistent with the still-resilient activity outlook. In terms of inflation and monetary policy, seasonally adjusted inflation improved into year-end, however, January CPI figure reinforces our view that the pace of monetary easing will become increasingly data-dependent and points to a slower pace of rate cuts compared to consensus. In this regard, we maintain our call of 25% inflation and 32% policy rate for 2026-year-end. In terms of current account deficit, it remains broadly manageable, although the trend has deteriorated, reflecting domestic demand dynamics and the gold channel. We expect the current account deficit to GDP to be around 1.5-2% range. The outlook remains sensitive to the Eurozone growth and Brent oil dynamics. In terms of budget deficit, we expect budget deficit to GDP to remain around 3.5%. led by tighter expenditures control and strong revenue generation. Now moving into our financials, I'll start with the headline figures. In '25 once again, we delivered a strong track record of achieving results in line with with our commitments. Our key P&L metrics came in fully consistent with our guidance, and cumulative net income reached TRY 111 billion, corresponding to 21% year-on-year growth and a 29% return on equity. In the fourth quarter, our bottom line was impacted by tax-regulation-related effects. Excluding this one-off impact, our ROE would have been around 30%, which was fully in line with our guidance. Despite operating with the lowest ratio, we continued to deliver an ROE above the sector average. As always, we maintained our focus on capital-generative growth, which is clearly reflected in our sector-leading CET1, Common Equity Tier 1 ratio. This earnings outperformance was once again driven by core banking revenues-and with that, let me move on to page 7. We have now delivered growth in core banking revenues for eight consecutive quarters. In the fourth quarter, core banking revenues grew by 11% Q-on-Q, driven mainly by higher net interest income, which was supported by a declining funding cost environment. Trading income declined Q-on-Q during the quarter, we repositioned our TL securities portfolio and we reduced our exposure to securities with relatively lower yields. Net fees also remained resilient, registered 5% quarterly growth with the increasing contribution from money transfer and lending-related fees. As a result, our core banking revenues reached TRY 300 billion, which suggests the highest level among peers. A big part of this success stems from our asset mix-now moving into Slide 8. Our asset growth continued to be fueled by higher-yielding customer driven sources namely loans. Performing loans share in assets further increased to 58% and lending growth was across the board. I will touch upon this on the next slide. In securities, I would like to highlight that we had a favorable securities mix with lower CPI and increase foreign currency share. During the year, we had strategic additions to foreign currency and TL fixed rate securities. Moving into Slide 9 our TL loan portfolio reached TRY 1.7 trillion, while we continued to maintain a well-balanced mix between consumer and business banking loans. In the fourth quarter, we sustained our quarterly growth pace of 10% in TL loans, bringing full-year growth to 45%, which is above our operating plan guidance. Throughout the year, we further strengthened our long-standing leadership in TL loans, with market share gains across all retail products and SME loans. As we grow, we remain highly disciplined and continue to keep a close focus on asset quality and with that, let's look at the evolution of our asset quality. In the third quarter, consumer and credit card related flow to Stage-2 restructured and SICR portfolio continued, yet the share of Stage-2 within gross loan remained flat at around 10%. Our Stage-2 coverage ratio declined due to improved repayment performance of some individual-assessed firms. While our stage-2 loans coverage is now 9%, if we look at the TL and foreign currency breakdown, our foreign currency Stage-2 loans coverage remains healthy at 16%. In terms of NPL movements, Now, let's walk through the evolution of our NPLs; our NPL ratio increased modestly to 3.1% in line with expectations, and we are witnessing the natural consequence of robust consumer and credit card growth that sector registered in the last couple years. Retail and credit card portfolio still accounted for 70% of net NPL flows. If we move on to the net cost of risk, on page 12. Net provisions increased in 4Q, reflecting the absence of the exceptional provision reversals recorded in previous quarters. On a cumulative basis, cost of risk closed the year better than the guidance with the impact of large-ticket provision reversals, which are not expected to repeat in this year, as I will explain in more detail on the guidance slide. Now moving to the other side of the balance sheet, how we are funding the balance sheet growth? Not only in assets but also in funding, we rely on customer-driven sources. Total customer deposits exceeded TRY 3 trillion and now make up 69% of total assets and remain TL heavy. This quarter, in TL deposits, we gained a notable market share and our TL deposit market share increased to 21% among private peers. On foreign currency side, deposits increased by 4%. Half of that growth was due to gold price increase related parity impact. The rest can be explained by the flow from maturing KKM deposits. Growing demand deposit base, which is one of the key pillar of our margin performance, continued to support deposit growth. Demand deposits currently make up 41% of total deposits. Our diversified and liquid funding mix is also backbone of our success. With two new transactions successfully completed in 2025, total volume of subordinated bond issuances over the past two years reached $2.45 billion, making us the bank with the largest subordinated bond issuance in the recent years. We achieved another major milestone by issuing Turkiye's first Biodiversity and Blue-Themed Bond. We also secured a syndicated loan from international markets with diversified maturities. This year, we introduced a 3-year tranche for the first time, and a 2-year tranche for the first time since 2017. Putting all of this together, our total external debt currently stands at $9.8 billion, of which $3.5 billion is short term. Against this, we maintain a comfortable and strong foreign-currency liquidity buffer of $7.1 billion. Our active funding management is also visible in net interest income, on page 15, in the fourth quarter, our net interest margin recovered by 60bps with the support of declining deposit costs. On an annual basis, net interest income including swap cost doubled which points to 1.2% annual margin expansion. Our net interest margin reached 5.4%, we continue to have by far the highest net interest margin and net interest income level among major peers and our aim is to preserve this leading position. If we look at the margin component, as shown on bottom-right side of the slide, TL core spread has started to recover as of 4Q, and we expect this recovery to continue throughout 2026. We utilized more swaps in 4Q due to its funding cost advantage relative to TL deposit costs. In terms of CPI linkers' income, CPI rate used in the valuation increased to 32.9%, based on actual inflation data. Therefore, on a quarterly basis, we had positive contribution from CPI linkers' income. However when looking at CPI interest, we should also take into account its funding cost and as of this quarter we have started to share with you the net contribution of CPI Linkers' to net interest margin. In the fourth quarter CPI Linkers' negative contribution is compared to 3Q due to increased income on an annual basis CPI increased net impact to margin was -0.4%. Let's move on the other P&L item fees. Our fee base remains robust, up 50% year-over-year. On an annual basis, payment systems fees were the main driver of the growth. In the fourth quarter, contribution from lending related fees and money transfer fees gained momentum. I would like to highlight that, we are number one in money transfer fees and in both life and non-life insurance fees. We increased our mutual fund market share by 1.3% to 11.6%, which also provided additional support to our fee base. Moving to our operating expenses, our OpExbase grew in line with our operating plan and was up by 67% in 2025. As we have been communicating, we have been investing in customer acquisition through salary promotions. And to enhance customer experience and increase customer penetration, we have been leveraging the power of artificial supports our revenue generation capability. As a result, significant portion of operating expense base is covered by fee income and we have the lowest cost/income ratio. As per our capital strength, In the fourth quarter, our solvency ratios improved with support from strong profitability and Tier-2 issuance we had in October. Our consolidated CET1 realized at 13.1%. Capital adequacy ratio reached 17.5% without BRSA forbearance. The foreign currency sensitivity on capital remains limited, 13bps negative for every 10% depreciation. With TRY 179 billion TL excess capital, we maintain a solid buffer to support our long-term growth strategy. With that, let me now summarize our performance before moving into operating plan. As I mentioned in '25, we sustained our unmatched leadership in earnings generation capability and once again demonstrated a strong track record of achieving results in line with our commitments. Net interest margin performance and cost growth were broadly in line with our operating plan, while fee growth clearly stood out, driven by strong momentum in payment systems and lending-related fees. In fact, in TL loans, our growth outpaced inflation, supported by consumer, credit cards, and SME loans. Net cost of risk performed well better than expectations, benefiting from provision reversals recorded during the year. Now, let me walk you through our operating plan guidance. I will begin with the macro assumptions on the left, as these form the foundation of our planning framework. Our baseline assumes a gradual easing cycle in the policy rate. The pace of monetary easing will become increasingly data-dependent and points to a slower pace of rate cuts in the second half of the year. Inflation will continue to decelerate, closing the year at around 25%. However, given the stickiness in services inflation, we believe CBRT will maintain a sufficiently tight stance, implying ex-post real policy rate of around 6-7 percentage points. Turning to balance sheet growth on the right-hand side, we expect TL loan growth to be in the range of 30-35% foreign currency loan growth at mid-single digit levels. Net cost of risk is expected to normalize, settling in the 2 to 2.5 percent range, reflecting the absence of large-ticket provision reversals and the natural impact of strong growth in consumer and credit cards. Regarding margins, we project net interest margin expansion of around 75 basis points, on top of its highest level. I would like to highlight that the extent of this improvement will largely depend on the pace of rate cuts and the evolution of macro-prudential measures. As I mentioned earlier, our assumption of 32% year-end policy rate represents the upper end of market expectations. We deliberately adopted a conservative approach during the budgeting process in order to prepare the balance sheet for funding costs remaining above the policy rate, particularly on the deposit side. On fees, we expect growth of 30-35%, as a result of strategic investments, we expect OpEx growth to exceed average inflation. And that said, on a bank-only basis, we expect approximately 80-85% of the OpEx base to be covered by fee income. Finally, bringing all these elements together, we are targeting mid-single digit positive real ROE. Since 2018, real ROE has remained negative; however, in '26, we expect this to turn positive, supported by declining policy rates. This concludes my presentation. Thank you for your listening. Now, we can take your questions. Operator: [Operator Instructions] Our first question comes from David Taranto, Bank of America. David Taranto: The first question is on costs. Your cost growth has been running above the sector for some time, yet your revenue margins have also been higher. So this hasn't weighed on your relative profitability. But for this year, guidance again suggests cost growth at the higher end of the sector. So could you elaborate on the key cost drivers for this year? Should we view this as front-loaded investment ahead of what will hopefully be a lower inflation environment? Or are these increases more structural? And looking ahead, should we expect Garanti's cost growth to move closer to or maybe potentially below the sector levels in the future years? The second question is on fees. Your fee growth guidance appears broadly in line with the volume growth expectations. Could you elaborate on your guidance here? I assume we'll see a meaningful deceleration in payment-related fees. And in which segments do you expect to see stronger growth this year? And is there a meaningful seasonality that we should be aware of in terms of fees? And the last question is on margins. Your year-end policy rate expectations of 32% seems slightly above the market review. How would your NIM expectations change if the policy rates were closer to 30% instead? And could you also share your expectations regarding the deposit rates under your base scenario? Do you assume deposit beta to improve at some point this year? Mahmut Akten: David, thank you for all the good questions. First of all, on the cost growth, as you noticed, yes, we have a higher than inflation cost growth for basically several reasons, but primarily one on non-HR, one on HR. In Turkey, for a while now, most banks and institutions makes 2 salary increases every year. And then therefore, second increase, which is July to December, is not fully reflected in the prior year. So when you make the increase in January, you also have further increase from the base. So there is a bit of higher than inflation increase in the cost base. But as inflation comes down, the impact of that increase in the second half of the year will be lower, as you can imagine. That's number one. But more important increase actually is related to non-HR. And within non-HR, we internally, we look at this differently, especially customer acquisition cost is a different animal. It's an investment for the future. And in Turkey, especially payroll or pension, we pay promotion as you are aware of, and that's every 3 years. So you get 3 years of inflation within those numbers as you replace 1/3 or slightly more than that of your acquisition cost suddenly with 3 years inflation. So those numbers are a bit investment for the future. We expect as we go forward as inflation comes down, and this will affect also this payroll acquisition cost as well that 3 years inflation will come down. The impact to the extent is reflected on cost-to-income ratio. But we expect that cost-to-income ratio slow down or reduce down to 40% going forward. That's our expectation. And we have been highly investing in the AI within the BBA framework, and we start to see impact in efficiency, as you will see in the coming year. That's number one. Number two, fee growth. Again, as you clearly and correctly point out, as interest rate and inflation comes down, some of the payment commissions will come down properly. But we are actually offsetting that with both loan commissions, a bit of regulation also positive effect on the FX loans. So that has happened last week. But more importantly, we have investment in especially insurance type of commission-generating products and wealth management. We are expecting that to be offsetting the decrease in payment commission. So we expect a similar pattern in terms of ratio going forward as well. That will be the positive side. And the third on deposit rates. Again, I think if you look at the third quarter and fourth quarter, even though the policy rate significantly reduced, we didn't -- we were not able to reflect all of it to the deposit cost up until very recently. That's part of it, a tight monetary policy and data-driven Central Bank policy, which came with certain regulatory measures on the banks and one of which that is very important and relevant was related to deposit rate. We had 4 weeks windows to have a certain Turkish lira total deposit ratio, and that has been recently extended to 8 weeks. That has been a big plus because every 4 weeks trying to hit the ratio, it creates this synthetic competition. And despite policy rate reduction, we are not able to reflect 100% of that reduction in deposit funding. But a few weeks ago, that time break has been extended from 4 weeks to 8 weeks. That has been clearly a positive news. And then also the -- we had some level of challenge with the gold prices, especially after, I think, starting October, right? As gold increases, the total Turkish lira deposit ratio came down. That also put certain pressure on deposit ratios or deposit rates. But we start to see with this 8 weeks interval and a bit of stability now this week on the gold prices, we see that more stability and better correction in the deposit ratios and deposit interest rate. It's getting very close to overnight repo rate, which is a good news for us. So we expect further improvement in deposit rates going forward in the next months. Operator: Our next question comes from Ashwath from Goldman Sachs. Ashwath PT: I have a few questions. The first one being on your NIM dynamics. You expect 75 basis points of expansion. Would you mind breaking that up between the impact from lower CPI and the impact on core spreads? And in relation to the topic on NIMs, when do you expect to see NIMs peak? Would that be in the second half of the year? My second question would be on the dollar exposures across your balance sheet. From what I can see, your loans are around 25% to 27% in terms of U.S. foreign currency exposure, your deposits a bit higher in terms of 37%. Would you mind also telling me how much of your equity is also held in dollars or in foreign currency terms? The third question I had was around the ROE. It's good that you're guiding for real ROEs to be in the mid-single digits. My question here would be more on your expectations on your long term. Where do you think this real ROE figure would settle in an environment where there's inflation settling below or at 20% or below. And in that scenario, where do you think currency's NIMs would be at and also its normalized level of ROE? Mahmut Akten: Okay. Let's try to answer all the questions. One of them was related to 75 bps improvement, if I took my notes right. We see a further improvement in loan-to-deposit margin, 150 bps actually, but reverse repo and swap is additional 0.7%. However, CPI income this year will be with the inflation coming down, minus 60 bps and the reserve remuneration will be another minus 70 bps as well. That's the reason we are conservatively forecasting 75 bps improvement. And regarding the improvement in NIM and spread, we expect towards the end of second quarter, we'll probably see the highest level this year as well as we start to see a slowdown in the policy rate reduction starting third quarter, and we'll see further emergence between the reduction in loans as well as spreads. There was a second question about equity. Can you? Ceyda Akinc: Yes, we will get back to you regarding the second question. Mahmut Akten: On the dollarization. Okay. And the third question was related to ROE, right? Atil, would you like to take that? Kemal Ozus: Yes. In terms of return on equity, our guidance for 2026 is a real return on equity improvement. Over the long term, when we assume that it was your question, normalized ROE over long term, when we assume that inflation will limit teens, like, I mean, 15% to 20% level. We expect a return on equity -- real return on equity above inflation around 8% to 10% could be our sustained long-term return on equity. Mahmut Akten: And I think there was a question also -- a follow-up question on the -- what's a stable NIM for long term. We expect that to be around 500 bps as well. We have been always relatively high. But conservatively, we think something around 500 bps will be a relatively good margin as we increase our customer base and loan book. Does that answer your question? Ashwath PT: But just wanted to clarify regarding the numbers in terms of expansions. You said 150 basis points in terms of core spreads, 60 negative from the CPI, 60 from the reserve requirements. What was the other 70 you mentioned? Ceyda Akinc: The rest was the -- between the repo and swap funding costs. So the other funding instruments. Mahmut Akten: That's also positive. Ceyda Akinc: Yes, because swap costs will also come down in line with the declining funding costs. So therefore, we are projecting to get a positive from swaps and repos. Mahmut Akten: And we are already seeing it actually in the swap markets... Operator: It seems like we don't have any more audio questions. So moving on to the written ones a bit. First of all, Valentina asks for some color on how loan and deposit spreads have been developing so far in first quarter and what we see as the main risk to our NIM guidance? Mahmut Akten: Valentina, we are seeing actually with this 4 weeks to 8 weeks conversion, we start to see a positive improvement in cost of deposits actually despite some volatility in the MTR market. So we might be even a bit conservative in first quarter, but we'll see an improvement to almost 50 bps in the first quarter, let alone. So it's a positive improvement, and we start to see it this week further. To be honest, there is a certain level of regulation that has been published last week related, for instance, growth in overdraft, which is highly profitable product as well as credit card. But not everything has been applied so far yet. This might be a bit more limitation on credit growth, especially on the most profitable one on the consumer side. And then there has been a bit of limitations on FX loans as well, further restriction given the higher inflation. As we point out all of this guidance, Ceyda, especially underlying is everything is data-driven a bit. That's the reason on our guidance, as usual, we are a bit conservative, at least whatever we say we want to deliver at minimum that level. But we see limited downside, but regulatory framework might be always a bit challenging. And then we forecasted even last year in our forecast, we have been a bit above the market in terms of our inflation expectation and policy rate expectation being year-end 25% and 32%. I think we have been the highest in terms of inflation and interest rate perspective. We are more emerging to those numbers. It sounds like based on the January and February data. At least for now, we don't see those are at risk because higher policy rate would definitely challenge us as well in terms of our expectation, but we are not at that point at the moment. Operator: Valentina's second question comes regarding insights on asset quality trends, particularly in the SME and corporate segments. Mahmut Akten: A perfect question. SME and? Operator: Corporate segment... Mahmut Akten: Now in reality, 60%, 70% of our NPL is related to consumer retail segment. There, we are -- we continue to see improvement. On consumer, we see substantial improvement versus a year ago, close to -- in terms of NPL roll rates, more than 40% improvement as well as we see further improvement in credit card, which is the highest NPL product normally. We also see an improvement of 20%, 25%. We see a good January start. And then when it comes to wholesale and SME, wholesale, we had an exceptional year last year. We had a lot of provision release because of the asset sales and collection efforts. This year, we have a bit of -- a bit more of those, but not at the same size. But regular NPL flow in January has been half of what we have seen in terms of NPL inflow of last year. On SME, SME, I think in one of these calls, we have discussed this in the past as well, has been only 13%, 14% of our NPL roles. It has been more like 16%, 17% lately. But when we look at the January as well, our NPL roll rate in SME has been 20% less than the last year. So there is an improvement. And then the recent development regarding to credit guaranteed fund support by the government will be helping on the SME segment specifically for those who are late in their payments will benefit from this credit guaranteed fund. So that will also further help our numbers. And in the third and fourth quarter numbers related to retail, I just want to underline that. Lately, we see a further regulation that helps us to extend the terms for the delayed consumer customers as well. In the third quarter, we restructured quite a bit of them. And then this reason our fourth quarter provision is higher than the third quarter because for those customers who were going to the NPL, we have deferred and restructured and some of them still went into the NPL. But lately, with the regulation last week and then similar to credit guaranteed fund in the retail side, -- the government also -- regulator also permitted us to restructure late credit and credit card and GPL loans for up to 48 months. So it's going to help further to reduce overall provision and NPL flow. And there might be, to an extent, a shift between first quarter and second quarter as well, but overall will help to relieve this. But overall asset quality is getting better, and we have regulator support and government support on both SME and retail customers. Operator: We have a couple of questions on the audio line. So our next question comes from David Taranto. David Taranto: Sorry I have one follow-up. Just wanted to confirm one technical point. Is your mid-single-digit positive real return on equity guidance based on your year-end CPI expectation of 25% or on your average CPI assumption, which I guess is a few percentage point higher. Mahmut Akten: Based on 25%... Operator: Our next audio question comes from Tomasz Noetzel. Can you hear us? Okay. I think he has some problem with the line. Tomasz Noetzel: Can you hear me now? Operator: Yes, we can hear you now. Tomasz Noetzel: Apologies for last time. I just have one clarification and follow-up questions that was asked before. Possibly, I may have missed that when you answered that. But what will be the potential NIM upside should interest rates go further down to, let's say, 28%, not 32% as you guided because that's some market expectation that rates could go down as slow in Turkey this year. How should we think about the NIM upside in that scenario? Thank you for confirming that... Mahmut Akten: Yes. Every 100 bps change in policy rate has -- for the full year, it affects the NIM by 15 bps. Operator: Our next audio question comes from Simon Nellis. Simon Nellis: I think I put these questions through the chat as well. But yes, my first one is on risk costs. So you're guiding for higher risk costs this year. Can you just run us through the key drivers of that? And where do you think risk cost normalizes kind of longer term? And my second question would just be on the effective tax rate. What should we pencil into our numbers this year and next year given the big jump in the fourth quarter and recent regulatory changes there? Mahmut Akten: Yes. Regarding first question, actually, we had a lot of one-off large ticket provision reversal this year. Excluding those, the bank only cost of risk could have been 2.4% this year. But we had all these one-off items that we successfully achieved this year for large ticket provision reversals, mostly related to sales and collection. And our consolidated figure was 2.1%. And regarding next year, we have different products with different rates, but we expect conservatively again between 2% to 2.5% cost of risk. Our credit card cost of risk has been historically as well around 4% for retail, 3% SME 2.5% and wholesale 0.5%. We don't expect that too much to change. But recent regulatory changes will provide further positive news for cost of risk. We have not incorporated those numbers yet. We are just starting on credit guaranteed funds potentially in 2 weeks or so on restructuring on retail, this extra relief on conditions will be starting next week. So there might be some positive news on that, which might get us to be closer to 2% rather than 2.5%. Our normalized cost of risk historically has been around 1.5% to 1.7%. But given the high interest rate environment, it's probably normal to be around 2%. That's our take. And there was a second question. Kemal Ozus: It was about the effective tax rate. Mahmut Akten: Yes. Kemal Ozus: It will be similar to 2025 because already there's a change in the tax law, and it has been reflected in the fourth quarter. So full year, you can consider is full year 2025 is reflecting the new normal, let me say. So you can use 2025 as a proxy for the next year as well. Mahmut Akten: Yes. And Simon, aside from this, I think when we show the numbers, there is always from one quarter to another, there is one-offs. So it's not very easy in banking to normalize all the numbers and make it an apple. But again, quarterly income, especially the fourth quarter doesn't reflect fully the improvement in NIM. One reason was tax rate that has been shown there are only 3 quarters of the tax around TRY 2 billion, but the full impact is TRY 2.7 billion if there wasn't any change in the tax regulation. So that will bring TRY 9 billion to TRY 9.7 billion actually, apple-to-apple, our profitability in the last quarter. And because of the restructuring in the third quarter, there has been a movement of NPL. We saved some of these customers, but the movement also understated the P&L on the fourth quarter and overstated the P&L in the third quarter because of the consumer credit and credit card provisioning. So quarter-by-quarter, if you correct those 2 items, our profitability last quarter would have been TRY 31.7 billion. And on top, we had certain security optimization, things like that. So actually, even though you don't see directly the improvement in NIM in those numbers, if you correct for one-offs, the trend has been positive, and we'll continue to see that in the coming quarters as well. From that perspective, we feel comfortable with the improvements. Simon Nellis: Okay. And -- just on the tax rate, if I calculate it right for the parent bank, you had an effective tax rate of around 22.5%, 23% for 2025. I mean that's still well below the statutory rate, right, which is 30%. Are you sure that effective tax rate will be around that level this year? Kemal Ozus: Yes, around 20%, 25%, you can use because although the tax rule change about the inflation accounting, but there's still some cause inflation accounting treatment of the revaluation of assets, which are bringing some deferred tax asset year-on-year. This is one reason why effective tax rate is below 30%. Mahmut Akten: And also because of subsidies, different tax rates and as well as subsidies income level is different. In some subsidiaries, we have lower tax rate and some subsidies, we have some tax cushion as well. So depending on the performance of all the subsidiaries and our consolidated figure will be still relatively good. Simon Nellis: And do you think that should be sustained further out? Or will the DTA effect fade and the tax rate go higher? Kemal Ozus: It could change depending on the revaluation rate or the inflation rate, let's say, which is interlinked. So when the inflation is lower in the coming years, let's say, mid-teen inflation or devaluation rate, we may see an uptick in the effective tax rate. Operator: Our next audio question comes from Mustafa Kemal Karakose. Mustafa Karakose: My first question is about loan pricing. What should we expect in terms of loan pricing for the next year? We have seen so much ups and downs in loan rates recently. And my second question about spread between policy rate and the deposit rate. How much -- how many spreads do you expect for the next year and beyond? And my third question is around about ROE guidance. Do you assume any mark-to-market gain in your ROE guidance? Because if there will be some mark-to-market gains, your equity base will be higher. Mahmut Akten: Thanks. First of all, loan pricing, as you point out, depending on the product, there has been some volatility on loan pricing. But overall, because of the positive side of the regulation in some sense, given the limits on loan growth, the expected decrease in loan pricing has not been realized, given that we don't have much room to grow in loan because of the caps. Depending on the product, as you said, there has been sometimes ups and downs that's related to 8 weeks window. Sometimes when we get close to the end of the 8 weeks, especially on very digital products, we might have sometimes need to change the pricing to be within the cap. But what is important is the trend in terms of trend the reduction or reduction in the loan prices is below our expectation, are not fully parallel with the policy rate reduction. So it's not a perfect 100% beta there. Regarding deposit pricing as well, because of, again, regulatory measures because of the Turkish lira ratio, typically, in the past, what we have seen, we are not seeing right now, which means normally our incremental deposit pricing is below the Central Bank policy rate around 50 to 100 bps below. And you see that right away in the 2 days after the Central Bank policy rate, we see a significant reduction. But given that there is ratios and there is a lot of dependency on the FX situation and interest, which has been recently realty has been around gold and silver, but regardless, because of those ratios, the incremental cost of deposit has been slightly higher than the policy rate nowadays 50 to 100 bps. So instead of actually 50 to 100 bps below the policy rate. So we are not seeing the similar reduction in deposit as well. But overall, despite all this, we are improving as we see on the fourth quarter, our margin regardless because of the duration differences. We have been always investing in the customer side on loans. As you see in this quarter as well, our security fixed book has not changed much. We actually had some optimization, which you don't see from the numbers to be more sustainable and more profitable security book, but we are still at 58% customer loan versus our peer group at 49%. So I believe this is going to be reflected relatively positively on our numbers going forward. But we see 50 bps to 100 bps above policy rate. This will diminish in the following weeks as well as volatility reduced in the market, given that we are switching from 4-week windows to right now 8 weeks, which is a big plus in terms of our major. And then there was the last question about return on equity guidance. Kemal Ozus: I can take that. I mean we did not incorporate a significant amount of mark-to-market gain in our ROE calculation. Our foreign currency -- our securities foreign currency TL, there's an increase in the foreign currency part toward 40%. And in TL, we have AFS book and the hold-to maturity book. So we don't have much exposure to interest rate changes in equity in total. So we did not incorporate a significant amount of mark-to-market. Mahmut Akten: We have significantly lower sensitivity to interest rates -- that has been our policy and strategy. Operator: Our next audio question comes from Ali Dhaloomal. Ali Dhaloomal: I had this question actually about the TL spread policy rate. My question is just actually about wholesale funding. I mean what should we expect from Garanti this year in terms of issuance? I mean, last year, you have been very active in the Tier 2 format. But also in terms of other instruments, I mean, are you looking to do more in the DPR format or others? That would be great to have some color. Mahmut Akten: Sure. Let me speak first and then Atil will add. On wholesale funding in the past as well, we have been opportunistic. We have relatively high liquidity always, but going to always grow -- further strengthen our capital as well. So we had, yes, Tier 2s. But at the time we did Tier 2s, there has been substantial spreads or cost between Tier 1 and Tier 2. Depending on the needs in the following months, we'll be, again, opportunistic on how we decide on funding, but we don't have a decision at the moment, but we see very much reduction in the overall spread between different instruments. But also from senior funding standpoint, we don't -- we are not in rush to do so. But DPR type of instruments or senior loans is always 2 depending on the cost, we might tap those markets as well. What do you think, Atil? Kemal Ozus: Yes. I mean, nothing to add. I mean, yes, DPR for many years, I mean, we were not in the market. I mean -- but with the new developments, DPR market could also increase. So we may be in the market depend on conditions and the pricing. Operator: Moving on with the written questions. The next question comes from, Valentina. She says, in first quarter, usually the banks take some one hit off it on capital due to operating risk adjustments. Can you share roughly what impact on capital we should expect? Mahmut Akten: 83 bps. Operator: Next written question comes from Orkun Godek. How do you evaluate the potential implications of the recent regulatory changes introduced over the weekend? In addition, there's an expectation for an easing of loan regulations in the final quarter of the year. What is your take on this view? Mahmut Akten: Yes. I think when do we see easing of the regulation, I don't really have an answer. Yes. I mean you would expect with the reduction in interest rates, there might be further reduction, but there are 2 main instruments on cooling down the economy. Number one, interest rates. And if you believe that interest rates are coming down, that will further strengthen growth and investment and loan book. So I'm not sure whether we will see a significant release on loan caps. However, having said that, as I said, it is not fully negative for us as one of the -- I mean, one of the largest bank in terms of balance sheet, given our customer base, we have a higher growth cap, and we are pretty much tapping that growth every quarter to meet our customer needs. And those caps also in parallel are requiring to interest rate or loan yields to settle at a higher rate, which also helps cooling down economy. So we'll see how it goes. Inflation is not an easy animal. So we'll see quarter-by-quarter, data by data. I would say that. And then that was the first part. The impact of regulation, the recent regulation, yes, there are several parts. One is significant growth in credit card limits and overdraft limits. Those have been 2 products used extensively. And there were other items, as we mentioned, one that was very helpful doing restructuring of the credit card blade loan book, which is significant. And then FX loan book growth has been reduced to 0.5%. Again, recently, we have seen on the FX loan book decreasing interest. So further limitation on the growth of FX will actually help in the NIM side, but it has a negative impact on the volume side. So it makes us more road focus in our customer day-to-day business. So I'm not concerned about that as well. On the credit card and overdraft, yes, I mean, Turkey is a consumption-driven market and credit card has been highly utilized versus the past 5 years, especially after COVID and after effective money being only TRY 200 and then rising of the e-commerce and online shopping, we have seen 40%, 45% credit card share in terms of day-to-day payment going up to almost 70%. I think still the tax -- still the regulation on credit card is being worked out. The details has not been fully published. Given that we have significant market share on credit card and overdraft, any optimization on limit or risk will adapt easily. Last year, we have captured a very high market share of the new credit card customers as well. Last year, our customer growth has been close to 3 million customers, and now we have more than 30 million customers who have account with us more than 50% of the total market. So I think any optimization that's guided by the regulator will apply it. And then we have -- we will have some effect, but will not be significant in my view. But we'll see how it turns out over the next few months. As you know, in the regulation itself, things are being worked out. What I mean is like, for instance, there has been regulation regarding the school payments, which is an important one ticket, large ticket item. There has been some exceptions on the overdraft. Potentially, there might be exceptions on credit card as well. That reason we'll see over the next few weeks and months how this play out. But as the largest player in the credit card market and overdraft, we believe that we can optimize and leverage our customer base and will not affect it negatively from this change as well. Operator: We have an audio question from Furkan Vefa Tirit. Furkan Tirit: Just to clarify, you said for every 100 basis points of rate cuts, 15 basis points of effect on ROE, right? Is that true? Mahmut Akten: On NIM, but full year -- so initially lower, yes. Operator: Moving on with the written questions. We have one from Bulent Sengonul. He asks, does your 75 bps margin expansion guidance include any easing in macro prudential measures? Mahmut Akten: No. Operator: Okay. Moving on to the next one from Bulent. Does your mid-cycle NIM and ROE targets assume that macro prudentials are fully normalized? Mahmut Akten: No, we don't expect macro prudential, which means around the ratios not fully normalized this year. So we still -- even in this environment, we expect to have a real ROE at the end of the year. So we are, again, I mean, I briefly said only no, but the prior question as well, we have been conservative in our approach. As I said, everything is data-driven. And so far, inflation and interest rate expectation of other banks has been wrong or it has been going up. So we have been conservative in our approach, and we expect no change on the regulation. Operator: We have an audio question from Tomasz Noetzel. Tomasz Noetzel: Yes. I can just ask for clarification on your fee guidance. Does this include any changes to regulation in terms of interchange fees or anything like this? Could you please clarify that as well? Mahmut Akten: Yes, we expect some changes and reduction interchange. But at the moment, the interchange is already set up a bit low. So we haven't seen a change recently, but it will, at some point, there's a breakeven policy rate. But we expect to compensate that with wealth management, insurance and other service and commissions. So we incorporate the reduction in payment. Normally, payment has not been that high as a percentage of total fee. We normally normalized rates around 55%. But nowadays REI is around 67%. So there will be a reduction to normalization, but the insurance and wealth management brokerage commissions and crypto type of commissions is increasing in our overall commissions. So that has been always within the plan, and that's the reason in our strategy, these type of commissions are important to offset the very strong payment commissions we have. I hope that answers. Operator: We have a written question from Cemal Demirtas. What's the sensitivity of your ROE assumption to 1 point lower or higher inflation? Mahmut Akten: We actually -- we have a perfect number of 1%, 15 bps. We didn't calculate, but back of the envelope, you would expect to around 0.5%, 0.6%. But Ceyda will get back to you on the exact number that Ceyda needs. These are the questions I need to answer. You need to calculate that as well. But definitely, that will be an improvement in ROE as well to get a better number. So I think we finish all the questions. There is one more. Okay. Let's go for it. Operator: It seems like we have one more question, a written one from Valentina. She asks a follow-up question on 83 bps negative impact. Do you think this can be easily offset? And expanding on this, why do you see your CET1 buffers throughout the year? Kemal Ozus: Yes. Of course, this 83 basis points is one-off impact since, I mean, in the new year, the operational risk is increased based on your prior year income calculation. With the current year profit, I think we will be compensating that. Of course, in the first quarter, there will be some reduction out of the dividend payment. And I think we will be compensating these... Mahmut Akten: There will be some baseline effect as well. Kemal Ozus: There could be baseline impact around 45 basis points in the second half, assuming that Basel IV will be enforced at that time. But with the internal revenue generation, we will be compensating those impacts. Mahmut Akten: Any further question? So I think we finished the questions. So it was really good list of questions. So thank you very much for everybody's participation. Really, we are pleased to conclude 2025 with very strong numbers. Again, reflecting our strategy, as I pointed out in the prior meetings as well. We are focused on customer-driven business. Our strategy is to expand our customer base and have sustainable profitability, not quarter-on-quarter, but on the long term. And so we continue to do some investment you see in the non-HR OpEx or trading, sometimes optimization, things like that. And -- but regardless, if you do one-off corrections, as I pointed out, our Q4 apple-to-apple is better than Q3. Q3 is better than Q2. So this continues like that. And then in the first month, January, we see also relatively good results for January above our budget, our internal targets. So we continue to make consistent progress. But our focus on digital transformation, AI transformation, efficiency, sustainability agenda, innovation continues to be our top of the agenda. And then going into new year, as you point out in your questions, our sensitivity of our security portfolio is relatively low. We are positioned ourselves in any situation. And then our focus is sustainable, delivering sustainable value for all of our stakeholders. So that's the strategy, hopefully, 3 months later, these days, we'll come together and we'll also show you even a better picture going forward. Again, thank you very much for everybody's participation and your patience late in the evening. So I hope to see you and to hear from you 3 months later in the next earnings presentation. Have a nice evening to all of you. Thank you.
Marcelo de Noronha: [Interpreted] Good morning, everyone. I am Marcelo Noronha. I'm here live from Cidade de Deus, the headquarter of Bradesco for this earnings release presentation related to the fourth quarter of 2025. And why not saying of the full year of 2025 today is February 6 and my watch shows 10:31 a.m. I'll start with presentation saying that all of this material has been released last night after the market closing and I think you had access to it. And I start with our recurring net income, BRL 6.5 billion growing 20.6% year-on-year, and BRL 24.7 billion for the full year 26.1% growth and however, with an ROAE of 15.2% exceeding our cost of capital for the first time in this quarter. And that's why we say that we will continue to grow our ROAE for the coming quarters and years to come. Here, I have all of the operating highlights. I'm not going to go over each one of them because I will show -- I will certainly change a little bit today's presentation, and I would like to bring you some elements related to our transformation plan that in fact was published February 7, 2024, so less than 2 years ago, it will the 2 years as of tomorrow. So that's when we released the plan. And I would just like to remind you of what we did back then. So we started with a diagnosis at Banco Bradesco the Brazilian market, and also, we drew up a worldwide benchmark with all of the relevant aspects like technology. Out of the diagnosis, we drew up a plan knowing all of our strengths. The plan -- the bank has several strengths, and the organization as a whole for that matter. Back then, we said that we have 70 million clients. We also said that we were leaders in SMEs. SMEs understood as a segment defined by the Central Bank because every bank has its own format. These are companies that grows up to BRL 300 million a year. We also said that there was high penetration in the high income segment. And certainly, we have the largest insurance group in Latin America, in addition to having a stake in many other companies. And we also said that we will work on our strength to create a new position with the clear goal to increase competitiveness in the short and long run. But it's important to remember that we put a deadline of up to 5 years. It wouldn't happen overnight. And it hasn't even been 2 years. When we presented the plan, we came up with this [ mandala ] with all the main topics, the 10 main items that were carefully looked at with more than 200 new initiatives. I will go over some of them, I will not talk about all of them or all of that, otherwise, we will be here for 2 hours, and you will be really tired. But our IR team and the transformation office, everybody is available to give you further clarification, especially those that want to talk to investors, to discuss some particular area of this [ mandala ] -- and if you have additional questions, we are certainly at your disposal. So I'll briefly cover some of the most important highlights and then I'll go back to the core numbers, and we wrap up the presentation. So then after the presentation we have the Q&A. Well starting with digital retail. We haven't been bringing a lot of elements for you, but after this period at year-end, we came up with 19 million clients fully digital. They are fully assisted through the digital channel with our BIA GenAI with the level of resolution, which is very high. So BIA is retaining 90% of all calls that comes through digital retail, but it's also important to look at the engagement level. Our efficiency in this client life cycle that allow us to -- I mean, I'm not going to get into the details of every topic. But I would like to draw your attention to this item here down below. The direct cost to serve to all of these clients in the digital platform that was reduced by 40x. This is an important number. And what we envision for 2026 vis-a-vis our digital retail. First, we go from 19 million to approximately 40 million clients between account holders and non-account holders. And certainly our objective, not only for 2026, but going forward is to reduce the cost of -- cost to serve and to continue growing our customer base. The second topic is affluent clients, and we are talking about principal and prime segments. We promoted an upgrade to more than 3.1 million clients with a new value proposition. And at the same time, we introduced a new position in this segment of clients. Prime ended the year of 2.3 million clients. We trained 3,500 managers, we focus on that training. But notice the level of accuracy for BIA team. It's accuracy was 93% at BIA customers, and then i go to Principal. You may recall that we launched principal in November 2024, with 3 offices, one in Faria Lima, another one in Campinas and the other one in Leblon in Rio. And then we started the expansion process. In fact, I invited sell-side and buy-side clients to look at our management model rather than just the business model. So we are just going through this phase in other segments. So we launched a new segment in November of '24. By the end of last year, we had 62 offices and 36 municipalities approximately 320,000 clients in this segment with this current level of NPS, so a new value proposition. And this created this new differential. And what do we expect to see next year out of these 2 affluent segment. I mean, new upgrade with more than 1.5 million clients reaching 4,700,000 clients. And as for principle, we will open almost 50 additional offices in Sao Paulo, reaching 70 municipalities, and we will have almost 800,000 clients by the end of the year. But you might recall our target because it's not something that we change overnight because this is gradually build. So we will expand our share of wallet, and this is what you see down below when it comes to the affluent segment. And next comes SMEs. As I said at the beginning, we were market leaders. We had approximately 14.3% market share in SMEs of almost BRL 300 million a year. But notice what happen here. We've built a much more robust segment with a new digital model with a new value proposition. So mostly digital and remote service and also companies and business segment. This is a segment where we introduced 150 new branches during 2024, and we changed the segmentation of the business segment. The configuration of the management model for managers, we delivered a new Internet Banking an new app for companies and look at what happened to our NPS. These are numbers that were not disclosed before. We went from 56 to 74 points. So I'd like to say that nothing happens by divine order, it happens because we work hard in the backdrop and we execute based on the plan. But I will draw your attention to say that we have more than 5,000 managers in this segment. And we are present in 2,100 service points, and this adds value to clients. Regardless of having this level of evaluation in metrics with a robust capacity to serve clients because they can't do self-service and at the same time, have a very good experience. But we can still serve these clients in the physical channels. But I would like to draw your attention to something that I said at the beginning. We had 14.3% share. We are leaders in this market, but what happened up to September 2025. We gained market share. We reached 16.6% market share, and we continue on the right track in terms of this segment. Our purpose, not only for 2026, but for a more distant future is to increase our penetration in these segments. And we believe in this was stated in the diagnosis that in this segment of up to 300,000 a year of SMEs, it's a segment that tends to increase its share in the financial system in the next coming years up to BRL 300 million a year. And I mean, payments and cash. I'm not going to get into many details, but Bradesco Global Solutions with global cash, and obviously, our goal is to increase the share of wallet and customer centricity through time. I mean credit we introduced a credit view. Of course, I will talk about cause and effect, because as I said, things don't happen by divine chance. We introduced the credit BU at the beginning of our plan, and we thinned this business unit. We introduced a portfolio management area. They are working on different client segments. And they are also operating in the life portfolio, be it in Wholesale and Retail bank, Customer Finance, et cetera. So within this business unit, we also introduced a new pricing area to serve all segments and businesses, all the verticals I mentioned to you before, and all of them to generate more risk-adjusted return, and this is a very important part of our strategy. But when we put this together I told Andre that we wouldn't get any lack of resources. There will be enough resources. So to that end, we hired 250 professionals and we gave them full technology support to enhance the models for all customer segments, also to manage the portfolios. And looking at the time line of credits and loans that are not only decided on prediction models, but mostly decided by human judgment, and then support all of it, and the consequence is -- that this SME growth level is still the same that we have with payroll loans. And if we hadn't put this together in the way it is, certainly, we wouldn't be growing SMEs the way we've been growing today and the way we grew in 2025. And what do we expect in terms of our objectives. This unit together with the clients segment. We want more competitiveness in some lines and segments, but growth with quality and moreover, a very strict risk adjusted returns. We have also many other initiatives. Maybe there is one that will take longer to deliver. But our clear objective is not only to have back office and front office. But moreover, having an end-to-end experience that we really boost our productivity. I mean, model culture, in addition to the area led by Silvana, which is people -- they are contributing with up-skilling, re-skilling. And despite everything we are doing including new variable compensation KPIs, et cetera, we conducted a new survey new engagement survey, 84% engagement when compared to 74% postpaid in the survey of 2024. And that's why we are focused on keeping a very engaged team and fully committed to everything we want to do with the capacity to change as well and adjust. People are crucial, competent teams and teams that can certainly deliver and change as we go so that we can deliver more competitive goals in the short and long run. So organizational structure was the first thing I showed during the plan. So we reduced layers. We reduced the span of control -- I mean we increased the span of control. And -- we brought C-levels and Directors to different areas. I talked about the credit area more recently, but we also promoted inorganic growth. I'm not going to get into the details, but in the Insurance company as well with the hospitals. And what do we expect out of this organizational structure. To gain more efficiency and agility, when it comes to decision making. Technology. This is a chapter that I've been talking about all the time for investments in AI. For us our culture is AI first. AI first and AI is not just GenAI, but it's machine learning for our mathematical models, but also multi-agents who have been working with a number of initiatives on the slide, I spoke about BIA client with that level of retention using GenAI. But we have the BIA Core, BIA Tech and BIA Client so on and so forth. So what happened in these 2-year period. We gained productivity. We reduced lead time and the consequences was this that I mentioned before. With a base of 100 of delivery of apps for clients internally for review processes, and gaining productivity of a regulatory points we ended 2025 with 300. We grew our capacity by 3x over -- less than 2 years. That's when we started this whole move. We invested and we've invested in cybersecurity. We have -- we improved our second and third lines of defense for cyber, and we expect greater productivity gain. More and more intensive GenAI use, but more competitiveness, and innovation and time to market. And I'd like to mention some other things here because I'm going to get to the numbers in a minute and we'll speak about guidance eventually. But we invested last year, invested heavily in technology. Investment in technology grew in 2025 compared to 2024 by 22%. And if you look at our guidance, which I will refer to in a minute of those about 8% of growth approximately, about 3% or slightly over 3% come from the investments that we will continue to make. We will not give up on investing. I see technology is a big driver of our productivity and our ability to deliver a lot more to tech clients with hyper personalization, which we have been doing, and during the Q&A, we can speak more about that. Synergies and Innovations. We had a number of actions with Cielo. Tap-on-phone, D+0 receivables discount all invented in our corporate app. In Bradesco Financiamentos, we also gained investment with new hiring, not just efficiency in the unit cost, but commercial efficiency of Bradesco Financiamentos. And what are the next steps, we expect -- well, with the next step to increase our share of wallet, increase growth, productivity and innovation with different verticals that we have in our organization. And now speaking again about profitability to give you more numbers. I mentioned that before, and feel free because our team is ready to talk with you and explain this in much more detail. If we look at the net income. I always tell my team, this should be the last slide and not in the first because again, we speak here about the cost and effect and this is the effect. Effect of what? Effect of a plan that is been executed and that is showing how our capacity revealing and improving, the strengths that we talked about, but strengths that were driven by actions of the plan and we have a growing number. 8 quarters delivering always a little bit more and step by step, we don't change these strategic plan overnight. You correct of course. You correct the tactics, but there is a strategic continuity, with execution discipline. And this is -- it called also discipline, we are showing this with our the team in the transformation office. Moving to total revenues. We are growing in all revenues. NII, we see here, the growth in NII and fee and commission income. When we remove the Cielo tender offer, the growth is 5.5%. Insurance investment plans of 16.1%, another robust quarter and growth expectation. But why is all the revenue growing? Again comes into the effect. It's not by divining profit. It's by increased penetration, credit trading traction in NII, a reduction of liabilities cost better liability management and so on and so forth. With all the initiatives adopted. Looking at our loan portfolio almost BRL 1.1 billion in December 2025, and the previous quarter, we were at BRL 9.6 billion and now BRL 11 billion. The highlight goes to micro-small medium-sized companies growing 21.3%, and that's why we're gaining share. And by looking at all of the portfolios, we are growing in all of them. Again, why are we growing? We are growing because we have a client base. We've grown because we have high penetration in all client segments, and in the verticals that we work with, and so when this supported, because we have an engaged team. A team that was supported by client management systems, GenAI, a better offering for clients. In a nutshell, it is a set of measure that we improved over this period. And looking at the portfolio, and the loan quality indicators they are all flat over 90-day NPLs totally easy. Over 15 days, if we look on the slide, it's absolutely flat, we structured our portfolio with the BRL 10.5 billion in 2025. BRL 20.5 billion reduction of problematic assets. Look at our stages. Stage 3 dropping quarter-after-quarter. Stage 1 increasing quarter-after-quarter with the evolution of the secured portfolio. So we are totally at ease with our loan portfolio and with our ability to continue to originate even more and particularly with some levers. Net interest income 14.9% increased and the client NII up 17.4%. Again, this is we see 17.4% to growth, in here, this hits the bottom line, BRL 4.8 billion to BRL 10.3 billion, growing 22.6%. Cost of risk, absolutely under control and quite and market NII delivering our expectation -- expectation of our treasury. Fee and commission income grew at the proportion that I mentioned before, but please note I should highlight 3 card income 14.4% increase in high income 25%. Construction management. There is a lot of traction, growing 17.3%. When we look at loan operations, we have a lot of traction as well. Why is it not growing? Because part of it has been deferred because of the Resolution 4,966. But look at what happened with capital markets. 29.2% increase full year '25 compared to full year '24. This was not divine providence again, this is investment. We changed the structure with Bruno's team and the whole team, we created the agribusiness segment. We changed our investment banking structure to broaden Bradesco's team and capture a lot more in DCM, M&A and other line items such as project finance. The result is this level of growth. We have a DCM share, that we had in 2022. So we grew, we're doing well in the rankings, and we continue to grow. But there are 2 offenders here that do not help these levers, which are checking account and collection, which normally in this market pull the results down. But overall, we are delivering and we're delivering well. Operating expenses, 8.5% increase. I told you and I will repeat it. Investments in technology. We grew 22% of technology investments in 2025 compared to 2024. And we will continue to invest in technology. But if we break our expenses down into personnel and administrative, where we grew 5% in line with the average IPCA. POR is one of defect on expenses with our profit sharing patent, this would be 2.5%. We continue to reduce our footprint -- if we look at the complete period. 2,800 points, and if we exclude EloPar and Cielo as we have been doing in past quarters, growth of operating expenses would be 7.2%. But in the Q&A, if you want you can ask and we can debate administrative expenses, but overall growth was negative. We have personal expenses with this variable that I mentioned, the profit sharing program and investments in technology, in transformation. For example the whole implementation of the 59 Principal office almost 50 more will be added next year, so we continue to invest in reviewing our footprint and focusing on the necessary investments in each one of the departments to help us grow. Our Insurance growth, another strength of our organization. ROE 24.3%, but in the full [indiscernible] 22%, spoke about this already. We are growing in all lines with a lot of balance. Client base growing. I was checking this with Ivan earlier today. The result of insurance operations exceeding the guidance of 16.1% and growth in operating results, and not necessarily in financial results, with technical provisions of 446% (sic) [ BRL 446 billion ] growing more than 10% year-on-year. Moving to the end of my presentation. When we'll look at this capital discipline. We have year-on-year growth, if we look at December 2024 compared to December 2025 in Tier 1, 12.4% to 13.2% and the quarter there is a slight reduction of 20 basis points in common equity in Tier 1, but if we look at common equity we also posted growth year-on-year up 0.7 percentage points and this is something that I mentioned with all of you with the sell-side, with the buy-side. I spoke about this that we have this under control. And lastly on guidance. Well we delivered at the top of the guidance impacting all items in expanded loan portfolio we were growing 9.6% in September and we ended up with 11% good, because of our traction and the ability to execute. We start 2026 with even more traction. Insurance operations 16.1% beyond the guidance and we have the guidance for 2026 listed here. I am here and I'm ready to discuss this with you and now I will sit down with my colleagues Andre Carvalho IR Officer and Cassiano for us to start our Q&A. But I would end my speech saying that we have heard comments since last night, when we released the results, post the results, some positive comments regarding the 2025 numbers. I didn't hear anyone saying bad things, negative things, but the expectations were much higher for our 2026 guidance. Our share between December 31, 2024, and today is Feb, 6 had increased 106%. Appreciated a 106% -- so it is only natural, its part of the game of sell-side, buy-side to have price adjustments. Not 29%, it's 27.5%, of the middle of the guidance, it's up to you, but we will not loose sight of our horizon because the shares have to be adjusted by 5%, no problems. Can you imagine today with the level of conviction that we have, with the level of the delivery that we have, I am super confident in our organization. I'm happy. I had the meeting yesterday with our leadership team with the level of engagement we have in our company. So Andre over to you. Thank you very much for joining us in this call. Andre Carvalho: [Interpreted] Good morning, everyone. Thank you, Marcelo and Cassiano. I would like to let you know that Ivan Gontijo, CEO of our Insurance company is joining us remotely. To start the Q&A session, I would like to present 3 alternative for questions. [Operator Instructions] The first question comes from Pedro Leduc from Itau BBA. Pedro Leduc: [Interpreted] Good morning, everyone. Thank you for the presentation and congratulations on this wonderful year in your trajectory. My question is related to how you see the underlying business trends? So we could look at the NII guidance, less LLP. I mean I think you're going to grow low 2-digits, slightly above the portfolio. I just want to understand what's behind it when we think about NII in isolation or LLP, I think these 2 things have to talk to one another, but to understand what is part of it, so that I will have a good idea of your views about mix, spread, credit quality as you know, the year is just beginning. Marcelo de Noronha: [Interpreted] Okay. Pedro I will start, Cassiano will start as well. It's good to see you again, Pedro. Our NII remains focused on our standard. We changed our mix for 2025. Secured products remains our main lever. Obviously, the quality of our credit BU allows us to work in any credit line secured and unsecured we're very, very comfortable with the quality of our portfolio and the way we are operating it. The average rate should be maintained until the end of the year. And our LLP should grow in line with our operational. These are the main drivers of our NII, and we will maintain it with a very high degree of engagement. Cassiano Scarpelli: [Interpreted] Okay. I have a few things to add. It's important to say and highlight what you just said. Portfolio mix, spread level, always focusing on risk adjusted return. This is the goal, and I also talked about pricing. The pricing area comes to reinstate that point. I mean we have some very important levers that go through different segments like payroll loans in all of its lines I'm talking about public and INSS and private. We have approximately slightly above 14% market share. But I would like to remind you that we have the lowest market share on the private side. So we have a lot of opportunities, and we already saw this level of growth. And I would just like to add that we are I mean, we are placing our hiring offering. It's 24/7. And this is hyper customized with microseconds, that go and come and already respond, give us a response about the risk of the borrower, the company and pricing, which is adjusted to risk, it's risk-adjusted pricing. Therefore, I'm saying that we will grow in payroll loans. We see a lot of traction coming from the clients. INSS has its own challenges, market challenges. It's not all ours, but in previous quarters, year-over-year, we were growing 5%. And now in this past quarter, we grew 6.8%. But this is payroll loan, SME, we are still growing, and we will continue to grow in lines with secure lines backed by receivables, be it direct receivables or some lien, et cetera. So we will grow with auto for companies and individuals. We are very optimistic in terms of future growth with the credit quality that it's absolutely under control. I do not see any deviations. We are not concerned with that, because certainly, you know that we did our homework, when it comes to portfolio management and our modelings team. And then you also mentioned an important aspect. You talked about NII growing slightly above the portfolio. Well, this has to do with the mix. We are a wholesale bank, we can fluctuate as it happened this quarter on the positive side, but it could also fluctuate on the negative side because we do the turnover of the portfolio. Andre Carvalho: [Interpreted] And the next question is from Mario Pierry with Bank of America. Mario Pierry: [Interpreted] Congratulations on your results. We understand that a lot has been done in the first 2 years, but you still have a lot more to do going forward. But what you have already demonstrated is that you are on the right track. Right. I have 2 questions. You had an additional expense of BRL 700 million. You spent that to restructure and the structure that is suggested for 2026. And this is almost twice as much in terms of provisions you posted last year. So could you please highlight where these restructuring will focus more, whether it has to do with the number of branches? And we understand that we are getting a lot of questions from our clients. Your guidance says that you will grow expenses by 8% at the top you said it's 3% relates to investments and technology. This also means that the rest of the bank will grow or is growing 5%, in line with inflation. And just like you said, you already reduced -- 2,800 points in the past 2 years. So how come expenses are not growing below inflation? That's why the consensus, I was hoping for a number close to BRL 20 million rather than BRL 27.5 million. We thought that the bank's core expense should be growing below inflation? Marcelo de Noronha: [Interpreted] Well, thank you for your questions. If you look at our admin expenses, and if you look at some of the lines in our full publication, you will see, okay, third-party services, maintenance, conservation, lease, all of these lines were down and transportation, transportation of currency. So what are the detractors here? I'm just summarizing, there are some that are very positive. But technology, I mean, it grew 22%. And when we look at it, it will continue to grow. We will continue to invest, to increase our competitiveness. Second, I mean, profit sharing, we increased profit, and we paid out more. And the third detractor. I'm not going to refer to small lines. We had some changes on the advertising side. But we found 3 good opportunities at the end of the year, and we decided to invest like when we launched Principal. And that's when we did the coverage at the airports. It's out of what we expect us to do at that time. And thirdly, there are other expenses that also go through some lawsuits, we have a very good provision coverage. We've been working a lot based on this root causes. And when you work in that root cause, you do not expand the incoming, but that is coming down with time. So I believe that these lines will be below 27%, 28%. And this is what you look at when you look at expenses or other expenses in addition to expenses with technology. And talking about investments in restructuring, I would tell you that, first of all, we continue to review the footprint. We were doing less than -- less than what we would do in 2025. And so we will do more than what we did last year. But we will open, as I said before, about 50 offices earmarked for Principal. But we are also refurbishing some physical stores with private, meaning that we continue to invest in this transformation, making footprint adjustments also increasing our capacity to invest more and reduce cost to serve, in Retail and Digital. So our cost is 40x lower. Cassiano Scarpelli: [Interpreted] Well, thank you for your question. There is one more thing I would like to add in addition to the 3% you mentioned in terms of technology investment. 5% is only related to human resources. Well, that's important to remember, in addition to profit shares. You will see that our expenses are very much under control. There is one more thing because you said that was twice as what it was last year. If you look at 2024, it's very close to the number that we posted in 2024. Maybe the difference is about BRL 100 million. 40% higher on average or greater than average. There is another point related to efficiency. Our efficiency ratio was down by 2.2%, from 2.2% to 50%. So our ambition is to reach 40% by 2028, meaning that the trend is downwards in 2026, and this drop will be even more accentuated in '27 '28, when the top line grows a lots, it's just natural that some OpEx to see growth with OpEx. And our top line growth will be almost 10% in 2026. Also, as you increase transactional, certainly the variable cost I mean it's different even with scale. Andre Carvalho: Next question is from Gustavo Schroden with Citi. Gustavo Schroden: [Interpreted] Congratulations on resuming ROAE starting from 10% to 12% now over 15%. I would like to think a little about the investment cycle, more specifically and linking with operating efficiency and efficiency ratio. Marcelo you're very clearly showing, and I heard an interview you gave, when you said that you won't stop in investing, but the focus is to maintain competitiveness. And is that you're thinking about the future of the bank in a sustained fashion. So I'd like to understand, what part of the cycle would you say the bank is in? Particularly in terms of technology investments or investments in new product or segments? And should we start thinking -- should we start thinking about the benefits coming from operating leverage operating efficiency, and reducing efficiency ratio, thinking that in 2026 revenue should continue to support the step-by-step ROAE improvement, so that in '27, we'll start seeing the benefits of operating efficiencies? Marcelo de Noronha: [Interpreted] Gustavo, I would say that we are in the middle of the cycle. We are not at the end of the cycle. If you look at our plan, we spoke about stretching this until 2028. And along that period, some things are quick wins. You capture the benefits in the short term. Other things we invest in and you're going to reap the fruits later. We'll continue to invest in the whole renovation of the bank. Look at some U.S banks and Asian banks and what they have been seeing in September, I was in Asia I had an opportunity to talk with CEOs of other Asian organizations and to speak with peers of that region, and everyone is investing again in AI first, we see opportunities to improve efficiency and to gain competitiveness in our relationship with our clients. I will not stop investing. We want to improve our infrastructure, our architecture constantly in terms of technology. So efficiency doesn't come only because we're going to invest less -- and I'm going to give you my opinion. In the opinion of all world banks. I don't see anyone stopping investing in technology. Technology will require growing constant investing over time. That's my opinion. But we're going to gaining in other lines. For example, loss expense and areas, where we are going to have a reduction not only in 2026. So we have to have efficiency gains, and we will have these efficiency gains -- but this will be driven to the top line. Gustavo, you can ask me, if I don't deliver the top line, but I want to deliver the top line. Increased penetration continue to grow and delivering ROAEs even better than what we currently have. My colleague yesterday said an airplane will never fly backwards. We are not going to fly backwards. It was 15.2% in this quarter, and we expect it to increase, if we can deliver more and more, which was the case of the loan book in the past quarter, we will do it. Andre Carvalho: Next question from Daniel Vaz with Safra. Daniel Vaz: [Interpreted] Congratulations on the results and the delivery, since the beginning of the strategic plan. I think it's -- we can see how dedicated the management is in readapting the bank and improving the whole quality of the portfolio while still growing. My question is focused on Cielo. Cielo is a strategic asset of yours. You're talking about integrating Cielo, particularly in SMEs, integrating Cielo even more. It's already partially integrated. But in terms of TPV, Cielo had a big difference compared to the network. So perhaps we're thinking about those big accounts, not SMEs. This is an important difference in trajectory. So I'd like to hear from you what is the strategy for the large accounts? Perhaps there's a loss of profitability and you don't want to change that? And in SMEs, you advanced a lot also in terms of governmental programs, and that's an important liquidity for the system. But the Cielo part in terms of strategy, the strategy is not so clear to me in 2026, '27. I'd like to understand what is the integration stage we're at. Cassiano Scarpelli: [Interpreted] Well, thank you, Daniel, for the questions. #1, regarding Cielo. Cielo has also been undergoing a process of transformation, which is rather significant. Over there, we created separate teams for the 2 partners. Today, we have a connection at different sites with the Wholesale and the Corporate Retail segments. And we worked with them in a plan and so that we'll be a lot more connected in a verticalized way. Talking about cash and talking about affiliation, more than having a segregated company, where I would originate something and they would work with it. No, they have to improve logistics. They did. They had to deliver tap-on-phone. They did, deliver. They had to deliver a whole new pricing system for D-0, they did. They needed to deliver a connection to our app. We delivered it together. So all of that is done. But you're correct. I think that there were 2 or 3 cases, I don't remember, 2 or 3 of large accounts. And the similar team went to the limit and took it to the limit and decided to give up the TPV, which was important rather than losing profitability. So we see an ability to grow and grow a lot because we are very accelerated and tractioned in SMEs, and we reduced the attrition with our distribution channels. And this is an army of more than 5,000 managers in addition to all of the digital offering that we have. So we are going to move forward. You can rest be assured of that. But we are not going to throw away money with margins that are effectively very reduced. Regarding SMEs, our SMEs, we are growing not only in government clients, our expectation is to continue to grow. With a very similar number that we had in 2025. Indeed, we haven't got that final number, okay, Daniel, the final number regarding government or total government programs. But we have an estimate. And the estimate is that we had 26% or 25% to 26% market share. We were the bank that operated the most government clients last year. We have an initial estimate, our own estimate, not market estimate, but let's wait for official data, but that's kind of that level. We have good traction, but we can only do all that because of the kind of structuring we have in the SME segment and also because of our technology deliveries, our ability to hire through our digital channels, the whole modeling of the Credit BU portfolio management. So we are not granting credit just because we have a government guarantee. We have a lot of criteria, and it's always about RAR, risk-adjusted return. We have a program to price each one of these government programs. So, we have a lot of traction. We ended the year with high traction, and we believe that we will continue to deliver good results and Marcelo? Marcelo de Noronha: [Interpreted] This is one of the important pillars of technology this year. We created our app for business with a totally different technology embedded to it. And this is a very important reinforcement for this. Yes, we're migrating 500,000 clients to this new experience that Cassiano just mentioned. So that's another important information. We are increasing our competitiveness with Cielo being integrated. Andre Carvalho: Next question from Yuri Fernandes with JPMorgan. Yuri Fernandes: [Interpreted] I mean, your long-term view -- your long-term view, I mean, I know sometimes it's not easy to invest in the future, but you are delivering improvements gradually. So congratulations for it. I mean my question is about capital. I mean CET1 is very close to 11%. I think this quarter was 11.2%. But for 2026, there might be some challenges. There are some prudential adjustments going forward, 49.66% operating risk. So can you please elaborate a little bit about the capital outlook, whether CET1 should remain at 11%? Or maybe possibly it will be slightly lower and you would just gradually increase it. And in addition to that prudential adjustment, my other question has to do with your portfolio growth. I mean, you posted a very positive growth message. And like you said, the bank is well tractioned. But this 9.5% growth in the portfolio with retained profit, the retained profits in the middle of the guidance also might imply some capital consumption. So going back to my question, will it remain at 11% or it will go slightly above? So if you can tell me something else about CET1, I would appreciate it. Cassiano Scarpelli: [Interpreted] Thank you. You were constantly provoking us about this topic, and I really enjoy your provocation. So thank you again for joining us today. I would like Andre to start answering your question, and then I will follow through. Andre Carvalho: [Interpreted] Thank you, Yuri. In terms of CET1 of around 11%, that's what we expect to have throughout 2026. We are here talking about loan book growing at 9.5%, and we look at full CET1 of 9.2% in the first quarter, going up vis-a-vis what it was in 2025. So interest on equity that was BRL 14.5 billion last year, it will go up this year for above BRL 15 million. Our capital absorbs that portfolio growth increase in interest on equity. And here, we also have DTA, like you said. So CET1, it's around 11%. In the first quarter of the year, we know that we have the regulatory measures, operating risk, the Resolution 4,966 issue. So everything has been computed whenever when we mentioned CET of around 11% for this year. There might be some fluctuations, but it will be around the 11% number, but our baseline is 11%. But there might be some fluctuation for the reasons already explained by Andre, but it will be around 11%, and this is important. Cassiano Scarpelli: [Interpreted] Yuri, I would just -- I'm not going to repeat what they said because this is what we expect to see. But 2 years ago, we told you that we have a lot of discipline when it comes to capital. And every year, we review our DTA or tax credit horizon for 10 years, meaning that we are constantly monitoring that. And we also evaluate all of the opportunities as you put it yourself. Therefore, we are constantly looking at that. And back then, we said that we would have enough capital. But look at our allocation in our loan portfolios. Turnover of the wholesale bank therefore, everything we are doing is very well planned and coordinated. So I can even go further. I think we can surprise you more than anything else just in terms of our CET or common equity. And of course, net income will grow and our return as well. Obviously, [ 14.67 ] is a challenge more for some banks than others. But it is for the period of 10 years, but there is an intersection here, which is '26, '27 and '28 are the heaviest years. But after that, when the horizon may change. Therefore, we are very confident about everything we are doing and in terms of the capital that we are allocating. Well, thank you for your provocations. Andre Carvalho: Next question from [indiscernible] with Santander Bank. Unknown Analyst: [Interpreted] I would just like to revisit the payroll loan. I think you said something about it, but if you could elaborate a bit more about your appetite and expectations for payroll loans and more specifically private payroll loans? And I know that on the public side, you gained some important and relevant market share. Cassiano Scarpelli: [Interpreted] Well, we are very, very well positioned to grow. Gain market, of course, that depends on the competition, but I think we are well positioned to gain market share. Well, we gain market share on the public side, INSS that involves a lot of market discussions and things related to the management of INSS, when it comes to payroll loans. But we are also very well positioned with INSS. But on the private side, we tend to increase our share. And as I said, we deploy models that are highly competitive 24/7. We are growing. We've seen that in the past quarter of 2025, the last quarter of last year, and we will see the same things happening throughout the year. Therefore, I'm very optimistic in terms of everything that we are doing to grow and to gain share. Andre Carvalho: [Interpreted] Next question from Renato Meloni with Autonomous. Renato Meloni: [Interpreted] I'd like to second my colleagues and congratulate you on the deliveries, since the plan was announced. I think that the results show the whole work that was done. Over the year, you showed a lot of ROE expansion. But when we look at the guidance at the midrange, ROE similar to that of Q4. So I'd like to understand, do you expect 2026 as to be a year of accommodation of settling or the uncertainty regarding the elections made you be more conservative in the guidance? Now moving to 2027. If we have this scenario of accommodation, I think that in 2027, we bring ROEs to more reasonable levels. What would be the levers in revenue to increase profitability? Marcelo de Noronha: [Interpreted] Renato, thank you for the question. I'd say that I don't see a year of settling for us. I think it's part of our plan. Again, we will improve step by step because we'll continue to invest to increase competitiveness. I don't want to be repetitive, but this is our mantra. We focus on this all the time. Regarding the ROE, again, it's kind of an internal joke. Yesterday, we were laughing about this. An aircraft will not fly backwards. So there's no chance that we'll do less than 15%, 20%. Actually, Andre, you might witness and Cassiano as well, I said a year ago, I'm more optimistic. I'm more pointing to the upper range of the guidance than focusing on the lower band of the guidance. Of course, this year, I'm a little more optimistic. So what we actually saw, Renato, is that the market somehow started bringing the expectation of our net income to BRL 30 billion, BRL 31 billion. And the role of IR is to correct the course. You don't have a 30%, 40% leap year-on-year because we continue to invest in our transformation. Remember that. I see a higher and growing ROE. Indeed, you mentioned the macroeconomic aspect. It is true. We should have a little more volatility in the second half because of the elections that is only natural. But I am optimistic regarding what we are doing and our ability to compete in terms of the expectation of our economists we'll have the GDP growth and unemployment rate very balanced. So we have a lot of opportunity for growth. With the interest rate cuts, they happen a little faster. This will help some companies regarding their costs, if they are a little bit more leveraged. So of course, the macroeconomic environment does have an influence for all players in the market. But I see us with a lot of opportunities to grow the ROE. And if we can deliver superior absolute results, just like the loan book that grew 11% when in September, it was growing 9.6%, we will do it. We're not wasting time. We're not wasting space or losing space. And please remember what I explained here, Renato. We are well aligned, increasing penetration. I spoke about Principal segment, SMEs, Corporates doing well, the Insurance company. I mean, they are delivering a lot. And there are several verticals. Earlier today in the press conference, Ivan spoke about the continuity of growth in pension plans, active distribution there. So I see 2026 with optimism. I think that there is some a structural issue in Brazil. In terms of the fiscal aspect and the public debt. But if we're able to look at the public debt regardless of the presidential candidate, if we improve that for 2027, '28, we'll improve the market expectations. And he asked about the levers to increase profitability. Cassiano Scarpelli: [Interpreted] Renato, I can say that it's almost everything, credit. We're growing it with the right drivers. But we are not operating in the higher risk segments for credit card, mid-income and high income. In lower income, our risk appetite is lower. Credit is a big driver. Liability management, the liability management we've been doing and the growth that we've been posting and we've posted a lot of growth. Fee and commission income, the main levers and the detractor. So that's another line. The insurance group again. And in the other areas, payments, our consortium business at full speed, the ability for auto loans in our own channels and external channels and so on and so forth. So I see a lot of opportunity because our organization is diversified. We have different revenue sources at different moments. And this year, we will review the channels, and this will increase cross-selling a lot. We spoke about Bradesco Expresso, distributing a lot more consortium, operations, insurance, payroll deductible loans, but also Bradesco Financiamentos selling more insurance. So we have a number of opportunities for cross-selling. Our business app that we'll have Cielo will soon have insurance, dental insurance. So it's all part of operating leverage for us. Andre Carvalho: [Interpreted] Next question from Thiago Batista with UBS. Thiago Bovolenta Batista: [Interpreted] My question has to do with what you just mentioned, good performance of the insurance group. In recent years, the share of the insurance group was about 20%. It got to almost 50% in 2023, and it was dropping. But in recent quarters, it became relevant again. I think that in consolidated income, a much higher percentage came from the insurance group. This is due to an ROE of 18% post to that. But in the sister banks too a bit under pressure. So 2 topics, 1 is the relevance, when I think about the midterm in 5 years' time, how much of the results should come from the insurance group? And #2, is the power of the organization hurting the consumption of DTAs of the bank. In 2026, will DTAs start dropping or not? Cassiano Scarpelli: [Interpreted] Thank you, Thiago. Well, the insurance group is not getting in the way in terms of consumption of DTAs, and that is important to mention. What we have been saying in terms of DTAs is that this is a year when we will try to neutralize the nominal portion. We'll see a reduction of DTAs in 2027, '28. And this is part of our plan stretching until 2028, as Marcelo mentioned. And that is super important. And I think that we've had the best allocation possible in managing the cost of capital, and it has to do with the tax credit. What was the second part of the question? Well, a comment to make periodically, the insurance group also pays dividends to the controlling shareholder. So we declare it and repay it. So you see the insurance group is a strength to us and not the other way around. It is diversified. It is the biggest insurance group in Latin America. We have a huge traction in the bank's channels to distribute insurance, but we also have external distribution of insurance, reaching out to other clients, which were not necessarily reached out by our internal channels. But we don't hope that the insurance group will do less. We want them to do more. We have an expectation of growing even more. This is what we are seeing. The bank is investing a lot. We're investing in technology, 22% in 2025 over 2024. The bank is investing in technology. And sometimes, we capture the value considering BF consortium and so on and so forth. So what I see is, over time, we should have 2/3 from the bank, 1/3 from the Insurance group. But if this means that the Insurance group will grow a lot more and have a bigger share, I'm happy. I want to deliver more. And this is our expectation. We are very pleased with the results there and with the other related companies. So you'll see that we will be taking off in our ROE and absolute profit. Andre Carvalho: [Interpreted] Next question from Matheus Guimaraes with XP. Matheus Guimarães: [Interpreted] Congrats on the results. I would like to revisit the SME topic. I think Andre talked about market share, and that was a relevant information. And historically, this has been the bank's strength in SMEs. But we've seen some competitors, even new bank talking about SME. Of course, the concept of SME varies in terms of the size of the company. But what would we expect for 2026 in that portfolio? Because given that this is a very relevant portfolio for you in terms of growth and even in terms of growth going forward. Cassiano Scarpelli: [Interpreted] Matheus, thank you for your question. We are very pleased with our position. In reinstating our position, I must say that I've been working directly with Jose. Jose is the VP in charge of that area, but I've been working with all of my colleagues, [ Alexandre Pinheiro ], Mario [indiscernible] Marcelo, the entire corporate team or company team and also wholesale bank with Bruno, et cetera, and the middle market team. First of all, we always look at what places the Central Bank in terms of assets, companies up to BRL 300 million a year because this allow us to draw a comparison. Competition in this area is very fierce. We always knew that. But our distribution strength is very important. We delivered a lot in digital channels. We hire government progress through digital channels. The journey is very efficient. And we continue to invest. If there is a place to put money, it is precisely in SME, micro and small and midsized companies. The levers continue to be government lines, but also, we provide funding to company vehicles and other investments that have even sounder guarantees, prepayments to suppliers, all of that, it's part of our journey. But then when you look at the digital need with the new Internet app, I mean, a new app when we are migrating over 500,000 clients. The retention rate has been enormous and great growth opportunity and the commercial team in the back office is supported by GenAI and new tools. We just deployed Salesforce back in 2024 for the company segment. And now we are expanding that with the entire business segment and the previous platform we had so we can manage this whole set of things much better with more than 5,000 managers in 21 points of sales. I am very, very pleased with the results. So look at the level of market share we have and see all that we were able to deliver in terms of our loan portfolio. And that was not by chance, but rather because we implemented in new tools, new segmentation, new tools to our clients, new experiences and certainly with business unit models and products that are much more suitable. With SMEs, Matheus, not only we reduce the risk, but we increase penetration, and this is what we have to do. AI is here to help us. There are things that are a lot of -- involve a lot of machine learning and other things involve Gen AI. So there are things that we do to manage our portfolio, some predictive default models and engagement to grow, this means the client life cycle of a client totally connected to our analytics via CRM, which has also been revisited. Therefore, we are sticking to our position. I mean, going from 16.6% to 17% or 16.4% that's not what changes the game. We have to continue to grow and at the same time, reaching our fair share of everything that is important to us. And I'm very much aware of our potential and the growth that we can post for either corporate and individuals. Andre Carvalho: [Interpreted] Next question from Carlos Gomez-Lopez. Now I'll turn into English. Carlos Gomez-Lopez: Congratulations on your second year of -- under the new management. I had 2 very brief questions. The first one is about the absence of cockroaches, as you call them, bad corporate cases. We haven't had any this quarter? In your guidance for the next year, do you expect corporate defaults to stay where they are? Or do you incorporate some deterioration? And the second is, could you comment on what tax rate you expect for next year? Cassiano Scarpelli: Carlos, the answer is no for the first question. Andre Carvalho: [Interpreted] But Andre, you can just start answering on the tax rate, and then I can add if necessary. Cassiano Scarpelli: [Interpreted] Okay. The tax rate that we are working is between 16% and 21% and 18.5% or 19% to calculate fixed net income. And why is it that the tax rate was 20% in 2025, and it dropped a little bit. First of all, because we anticipate higher payment of interest on equity, like I said, BRL 14.5 billion in 2025. So I'm saying between BRL 15 billion and BRL 16 billion in 2026. Certainly, this is a number that certainly depends on interest on equity to be announced by the government. It's not a fixed number. This is just the best estimate, but we anticipate growth in IOE, so that we can take more advantage of the embedded benefit. And secondly, is what Marcelo said, part of our investments bring about competitive gains. And like consortium. We've been highlighting that almost every quarter, we could also talk about auto financing that had posted a good performance in the past 3 months. We have several examples, even with BBI. All of the companies are posting very strong performance, and this helps reduce the rate -- tax rate. That doesn't mean that this is operating weakness. But on the contrary, this is very well distributed. And this year, in particular, the tax rate will drop a bit. I mean, depending on the company, the rate is different. The insurance business has a lower tax rate. I think this is the answer. And we have no concerns when it comes to the wholesale bank. So thank you, Carlos. Andre Carvalho: Next question comes from Tito Labarta from Goldman Sachs. Daer Labarta: You may have just answered it, but just wanted to make sure, right, because on the -- if we do ROE on a pretax basis, it's actually been a little bit more stable throughout the year, right? And I think on the guidance, our tax rate will be a little bit lower. Just because of the tax benefits you have, I think as your profitability generation improves, I would expect that tax rate to go up. And I think you mentioned the insurance tax rate is a bit lower. But just to understand, in terms of the underlying sort of earnings potential of the business, do you think that keeps improving? Or do you think this tax rate sort of remains low because of the tax benefits that you do have? Just to kind of think about excluding the tax rate, the ROE of the business and how you see that continuing to evolve? Cassiano Scarpelli: [Interpreted] Tito. Regarding the operational results of the group, the operational results of the group before taxes grew 27% in 2025, very strong. Secondly, looking at 2026, the answer is no. Yes, we will post strong operational result growth. And it's not about a weaker operational and a lower tax rate. It is all well distributed with Insurance, very strong consortium, very strong Bradesco Financiamentos, very strong. It's a very big group with several companies. When we consolidate it all, we see a small reduction of the income tax rate. Let me stress this Tito. We spoke about this in the other question. The insurance group has a smaller tax rate. If you go to other affiliates as well, for example, in payments, it's the same thing. We consolidate it all. And sometimes in one channel, for example, the complete connection of Bradesco Financiamentos with this one single channel for checking account holders or non-checking account holders. So I have -- it's a different situation sometimes. It's not the case of the tax rate, but there are other companies that have different tax rates, which is the case of Cielo. You see there is a mix of tax rate. And you should not forget that sometimes in the end of a period, there are some fiscal aspects, a certain law here and there. For example, insurance group benefited from that in the past quarter. They benefited from one law that affected the tax rate. So this is kind of what explains it, nothing different, as Andre mentioned. Andre Carvalho: [Interpreted] Next question from Eduardo Nishio with Genial. Still no sound. Let's move on and the question comes from Andrew Geraghty from Morgan Stanley. Andrew Geraghty: Congratulations on the great results. I know you have discussed at some length credit growth and some expectations for payroll loans, secured loans. I was hoping you could maybe elaborate a bit more on each of the different segments and how they fit into the loan portfolio guidance of 8.5% to 10.5%, kind of where you're expecting better growth, maybe where you're expecting some weaker growth and where there could be some upside by segment, if possible? Cassiano Scarpelli: [Interpreted] Well, actually, as Marcelo mentioned, we start 2026 stronger than we started 2025. We had a positive surprise in credit in Q4 2025. So we start the year already with a lot of traction. So we see a continuity of that movement. So what do we see in terms of trends? Very strong SMEs followed by individuals and then wholesale, wholesale competing with the capital market funding. As Marcelo mentioned, sometimes very high tickets making a difference. In Q4, positive difference for us. That doesn't happen all the time. But I think that the expectation, the prospects for the segments would be this, SMEs, individuals, wholesale, we have traction across all fronts, and we are ready to capture all opportunities. Right, but Andrew, there are some different situations, when we speak about the affluent segment. In Principal, we have relationship products such as investments, the credit card with a value proposition that is unique for these clients, totally different experiences for these clients. The same goes for Prime, which is different than the relationship for INSS retirees. For that audience, we offer deductible loans. And when we get to Prime and Principal, mortgages. So we have these mixes of products that sustain in these segments. And this is just to mention a few major. And in terms of companies, legal entities, we have a huge mix of products growing in small and medium-sized enterprises in different lines, by the way, increasing our penetration there. And with the wholesale bank, we are recycling the portfolio, and what we call OBD book origination for distribution, which is the case when the capital market spread was very crushed, we can compromise risk-adjusted return. So we don't work looking at that. So it is better to distribute than effectively keeping it in our books. And we have a set of fees, which are also important for us, in different lines of business. And there's also cash management. It is a super important platform for small and medium-sized enterprises as well as for the wholesale, we have a new technology platform, which over the year will bring us important improvements. That is another key point to improve profitability. Andre Carvalho: [Interpreted] Let's see if Nishio is back. We still cannot hear you. Not yet. Maybe if you remove your headset, maybe it will be better. We cannot hear. We're receiving a question about mass income. Okay. Tell me a little bit about the mass income portfolio? Cassiano Scarpelli: [Interpreted] So if you need any more information, I can add. Okay. Mass income is probably one of the major transformations of our banking cycle, since the beginning of our track record, our history. I think we are bringing some good news. I think Marcelo mentioned it quite well. 90 million clients are already fully digital in the mass retail with a totally different value proposition. But again, it's much easier to operate, not only they use BIA GenAI, but there is a specialist that can help with a customized sale, which changes the paradigm of having an individual physically present in a branch. The second relevant aspect is the engagement, our capacity to serve that client with Gen AI tools and integration tools that are very important to boost sales. And I think this has been a major evolution. We anticipate BRL 45 million. So throughout the year, we will be fully digital. This will be our mass retail bank. This is a very important aspect. And today, February 6, we already have 25 million digital clients because every week, the numbers are growing with zero resistance, zero friction with clients. And this has been a very pleasing experience, very good experience. And behind all that, all of that is supported by a very good technological platform for individuals, and this will encompass all the individuals. And I think we've been telling you about that in the past quarters, and this will certainly grow or help us decrease cost to serve, which has been significantly reduced, and this has an important correlation to our footprint adjustment. Andre Carvalho: [Interpreted] Well, [ Nishio ], thank you very much for joining us. I know you had a that problem with the sound. But thank you. We are always available to talk to you and also to welcome you here at the bank. And the same thing goes for our IR team. I think Cassiano gave you a good backdrop. Well, you saw more than BRL 40 million at the end of '26, starting with BRL 19 million, but engagement is increasing and improving. And certainly, we are able to reduce direct cost to serve by 40 fold. We are very committed to what we are doing. And there are still people that look at the physical space in the physical world, and we are testing different models all the time with our Bradesco Expresso, so that we can address these topics. And this is a challenge. In fact, I said that I went to Asia last September. And I heard comments from some banks, they have the same challenges we have when it comes to footprint adjustments, cost to serve and consumer. Therefore, an issue, we are sticking to our plan, and we will bring this year, and in particular, in the second half, more information about this digital retail. And thank you. Thank you, Nishio. And with that, we conclude the Q&A session. Questions that couldn't be answered right now will be answered by our IR team. And before I turn the floor to Marcelo to his final comments, I must say that this presentation and the full material of this release is available in our IR website. Marcelo de Noronha: [Interpreted] Well, thank you, Andre. Thank you, Cassiano. -- and I extend this thanks to all of our team, who helped us in this video conference. And thank you, our audience, for your interest and for the time that you spent with us. Its what I said -- I mean, this is the summary of our transformation, 8 quarters in a row, delivering good numbers with the focus that I said, without losing sight of the plan that we set up for ourselves step by step, but delivering improved ROE and improved absolute net income with a very engaged team with clients and with the Bradesco team. So thank you once again. And our team is entirely available to give you more details, not only about this earnings presentation, but also about our transformation program. Thank you all very much, and thank you for joining us.
Shirish Jajodia: Hello, everyone, and good evening. I'm Shirish Jajodia, Corporate Treasurer and Head of Investor Relations at Strategy. I will be your moderator for Strategy's 2025 Fourth Quarter Earnings Webinar. We will start the call with a 60-minute presentation starting with Andrew Kang, followed by Phong Le and then Michael Saylor. This will be followed by a 30-minute interactive Q&A session with four Wall Street equity analysts and four Bitcoin analysts. Before we proceed, I will read the safe harbor statement. Some of the information we provide in this presentation regarding our future expectations, plans and prospects may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements due to various important factors, including fluctuations in the price of Bitcoin. And the risk factors discussed in our current report on Form 8-K filed with the SEC on October 6, 2025, and under the caption Risk Factors in Strategy's quarterly report on Form 10-Q filed with the SEC on November 3, 2025. And the risks described in other filings that Strategy may make with the SEC from time to time. We assume no obligations to update these forward-looking statements, which speak only as of today. With that, I would like to turn the call over to Andrew Kang, the CFO of Strategy. Andrew Kang: Thank you, Shirish, and thank you, everyone, for joining our call today. I'll start by touching on a few of our highlights for Q4 as well as for the full year 2025. We closed the year with 713,502 Bitcoin on our balance sheet, which represented approximately 3.4% of all Bitcoin that will ever exist. This reflects continued discipline around Bitcoin accumulation through the fourth quarter and further reinforces our position as the largest corporate holder of Bitcoin in the world. Also during 2025, we successfully raised over $25 billion of total capital, funding growth across our treasury strategy and expanding our product ecosystem. We now have five listed preferred equity securities, which has broadened investor access across yield, duration and risk profiles. Our execution throughout the year puts us in a position to enter 2026 with a stronger balance sheet, more access to liquidity and upside when hopefully Bitcoin price rallies soon. Next slide. 2025 overall was a very important year with several strategic corporate events that I think strengthened our foundation as the world's leading Bitcoin treasury company. We adopted fair value accounting at the beginning of the year, which provided greater investor and market transparency of our Bitcoin holdings, which are now, as you know, marked to market each quarter. Second, Treasury and IRS guidance confirmed that unrealized Bitcoin gains would not be subject to additional corporate alternative minimum tax. We also received the first-ever credit rating for a Bitcoin treasury company, which marked an important step, I think, in institutional recognition and setting the foundation for future progress. And lastly, in Q4, we established a $2.25 billion cash reserve, which provides over 2.5 years of dividend coverage. This is an important enhancement to our overall risk management framework and supports our ability to meet our interest and dividend obligations through market cycles like the one we are seeing today. And lastly, MSCI confirmed that digital asset treasury companies will remain eligible for inclusion in its global market indices, which we believe was the appropriate outcome, and I'll touch a little bit more about that later on in my presentation. Next slide. Thank you. Turning to our Q4 financial results. We reported an operating loss of $17.4 billion and a net loss of $12.6 billion. These results were obviously driven by the quarter-end decline in Bitcoin's fair value under our mark-to-market accounting. Next slide. For the full year, we reported an operating loss of $5.4 billion and a net loss of $4.2 billion. We updated our target range for the full year 2025, precisely because our results are highly dependent on Bitcoin price and can move meaningfully based on market conditions. It's important to call out that our full year results were within our target guidance based on where Bitcoin price ended the year. And while accounting outcomes may fluctuate quarter-to-quarter, our long-term focus remains unchanged. We are committed to increasing Bitcoin per share and building durable shareholder value over the long term. Next slide. Turning to our Bitcoin KPI performance for the full year. At the start of the year, we established clear KPI targets tied to Bitcoin per share growth while recognizing a wide range of possible Bitcoin price outcomes. Under those conditions, we delivered a BTC yield of 22.8% for the year, beating the lower end of our target range, which was set at 22% to 26%. That translated into a total BTC Gain of 101,873 Bitcoin and a BTC dollar gain of $8.9 billion, also beating the lower end of our target range. I think the key takeaway is that even with significant volatility in Bitcoin price, our strategy remained disciplined, and we executed against our KPIs of increasing Bitcoin per share and compounding shareholder value for the long term. Next slide. Since adopting Bitcoin as our treasury asset in 2020, we've consistently added Bitcoin per share each year. 2025 was yet another strong year in this regard and building on the momentum of prior years and demonstrating our ability to add more Bitcoin per share in both good markets and in challenging ones as well. Our focus remains unchanged. As I mentioned before, our goal is to systematically increase Bitcoin per share over time regardless of near-term market cycles and continue to deliver durable BTC value for our long-term investors. Next slide. One more. Thank you. Now turning to the balance sheet. I'll start at the top here. Our digital assets increased from $23.9 billion at the end of 2024 to $58.9 billion at the end of 2025. This was due to a $17.9 billion increase in fair value at the beginning of the year balance as well as the fair value of the Bitcoin we added in 2025. As a result, we ended the year with also $2.3 billion in cash and cash equivalents of which, as I mentioned earlier, $2.25 billion of that represents our USD cash reserve. As of the end of 2025, we now carry also a $1.9 billion deferred tax liability, which just reflects the accounting difference between the market value and the cost basis of our Bitcoin. I'll remind everyone, this is a balance sheet item. It is not a cash tax obligation and it does change quarter-to-quarter with the price of Bitcoin. Moving on -- can you go back, please? In terms of long-term debt, we ended the year at $8.2 billion, which takes into account a new convertible bond as well as an equitization of a prior convert, which we executed both in early 2025. As we said before, we do not plan to issue any new convertible debt in the future, and we'll focus on assessing strategic liability management opportunities to the extent market conditions make sense. And over time, we intend to reduce our leverage to further enhance our credit profile. We also added $6.9 billion of preferred equity, diversifying our capital-raising channels. As a result, total equity, including both preferred and common, rose to $51.1 billion at the end of the year, up from $22.8 billion a year ago. We added $6.9 billion of preferreds through five distinct IPOs as well as subsequent ATM activity, and our common equity increased to $44.2 billion through our ATM. We deployed all of that capital in an accretive manner to acquire more Bitcoin. As I mentioned before, we delivered 22.8% BTC yield and we established the cash reserve. I'd say the year-over-year growth of our capital base strengthens our balance sheet and provides more -- a more durable base to continue raising capital efficiently and acquiring more Bitcoin over the long term. All right. Thanks, Shirish. Next slide. At the end of Q3 -- sorry, at the end of Q4 -- sorry, at the end of Q3, the market value of our Bitcoin position was approximately $73.2 billion, that was based on a Bitcoin price of about $114,000. During Q4, Bitcoin, as we all know, experienced a price decline, which drove the total unrealized fair value loss of $17.4 billion. Look, quarter-to-quarter moves like this can be sharp. It can also be unsettling, but it's important to emphasize that our strategy is built for the long term. It's built to withstand short-term price volatility, even short-term extreme conditions like we're seeing today. And importantly, even in a volatile environment, we continue to execute, we purchased an additional 32,470 Bitcoin in Q4 for approximately $3.1 billion. Next slide. For the full year 2025, the market value of our Bitcoin holdings increased by approximately $17 billion from $41.8 billion at the end of 2024 to $58.9 billion at the end of 2025. And during the year, we added approximately 225,000 Bitcoin. We also recognized an unrealized fair value loss of about $5.4 billion across the year, but we significantly expanded our Bitcoin position, right? We increased our total holdings from 447,000 to 672,500 Bitcoin for the year. Next slide. Our total interest and dividend obligations are now $888 million, which is made up of about $35 million in interest on our converts. That represents an average cost of about 42 basis points. It's also made up of $713 million in dividend obligations from our cumulative preferreds, an additional $140 million related to our noncumulative preferreds. You can see here at the bottom, our cash reserve of $2.25 billion, which was established in Q4, now provides over 2.5 years of interest and dividend coverage, and it's an important and direct benefit to our debt and credit investors. Next slide. And lastly, in October, MSCI opened a public comment period around the proposal that could have excluded companies whose digital asset holdings represented more than 50% of total assets. We felt it was important for us to be a voice on this matter, and we submitted formal written feedback to MSCI. We noted that this threshold would, in our opinion, be discriminatory towards digital assets. It's arbitrary. And in many ways, I think the proposal was unworkable, and that it rested on a mischaracterization of strategy. As a result, MSCI determined not to implement their initial proposal. And as a result, we have not been excluded from MSCI's indices. I'd note Strategy is an operating company. We have 30-plus years of history in software and tech. We have 1,500 employees. Last year, in 2025, we generated $477 million in annual revenue. And while our Bitcoin holdings has grown significantly from a balance sheet perspective, we are an operating company with a treasury balance sheet built upon a commodity. And lastly, look, on a final note, I just want to say thank you. We appreciate the strong support we received from both active and passive retail and institutional investors, regulators and policymakers all in support of our efforts on index inclusion. We thank you for that. I think there's still some more work to be done, and we look forward to working with the industry in the coming year on that as well. So with that, I will turn over to Phong, our CEO. Thank you. Phong Le: Thanks, Andrew. First, just want to acknowledge. I understand the market conditions for today's call is challenging. And the fact that we have thousands of people watching this, as a testament to your intellect, your curiosity and for many of you, your conviction. So thanks, everyone, for joining us today. I also want to share, look, some of you bought Bitcoin or MSTR in the last year. This is your first downturn. My advice is to hold on. Remember the fundamentals that cause you to buy Bitcoin. It's because Bitcoin is the digital transformation of capital or maybe it's because it's the hardest and most ethical form of money or because you believe in a non-sovereign censor-resistant store of value. None of these fundamentals have changed. They didn't change in the last year. They haven't changed in the last 18 years. For the MicroStrategy shareholders and the Strategy shareholders now, remember the fundamentals of why you bought into MSTR common, because we are levered and amplified Bitcoin, we're built to outperform Bitcoin over the long run. It could be because you see us as digital innovators. We invented the enterprise business intelligence software space in the 1990s, and we invented digital treasury companies in 2020. Or it's because you believe in the management team that's here today. None of that's changed in the last year. And for those of you who have been with us on this journey since 2020, you've seen other periods of Bitcoin and MSTR downturns, and you held on and you were rewarded for your conviction. So thank you. And perhaps I ask that you share your wisdom and your confidence with those who are newer to the community. X is a great place to do this, in person is a great place to do this, and a great opportunity to get together in person. Next slide, please. It is Bitcoin for Corporations. We will have our sixth annual Bitcoin for Corporations in Las Vegas in 3 weeks, February 23 through 26. I'd love to see you there. It's a great place to get together and learn about Bitcoin, Bitcoin treasury companies, digital credit, digital capital and digital money. It's also a great place to see our software business in action. And as Andrew mentioned, our software business constitutes 1,500 employees and over 3,000 customers, and they'll be there, showcasing the transformation of intelligence and the intersection of AI and BI. And I would like to note, we had a great year last year in our software business. We saw a big cloud transition as our revenue went from decline to increase of 3%, and our cloud revenue went up 65% year-over-year. So I invite you all to join us in Las Vegas, February 23 through 26. Next slide. Take a step back, this is our business. We have been buying and holding Bitcoin since the third quarter of 2020, every single quarter. We now have 713,502 Bitcoin with a total acquisition cost of $54 billion and a $76,000 average Bitcoin purchase price. Recognizing now that Bitcoin is below the average Bitcoin price, you might ask the question, what does that mean? it really doesn't mean anything, right? It doesn't mean that we have any issues servicing our debt or paying the dividends on our preferreds. We don't have any covenants or triggers that say when Bitcoin price goes below our average Bitcoin purchase price, that anything has to occur other than we continue with our strategy. Next slide. 2025, as Andrew mentioned, was a pretty big year for us in the capital markets. As you see here, in 2024, we raised $22.6 billion, and we actually outstripped that number in 2025. The big change last year was we moved from convertible debt, $6.2 billion in '24 and $2 billion in '25, to $7 billion of preferred. We invented digital credit, and we invented the preferred market, which now other Bitcoin treasury companies are moving into, issuing perpetual preferreds. We're pretty excited about this. You'll see here, we had five IPOs. The other thing I'll note here is that year-to-date 2026 in the face of a tougher Bitcoin market, we were able to, in 1 month, raise an additional $3.9 billion of capital. And for the most part, buy Bitcoin with that. Next slide. So what do those big numbers mean? How do you think about that? In 2024, we were the largest U.S. issuer of equity in the entire country. Last year, 2025, we were once again the largest issuer of equity. We were 8% of the entire equity capital markets, 6% to the common equity market and 33% of the preferred equity market. We are getting people to invest in our company through equity raises and preferred raises, and turn that into Bitcoin, Bitcoin per share and Bitcoin yield to our shareholders. And we're doing it with the intersection of traditional finance with some of the largest banking partners in the world. Morgan Stanley, Barclays, Moelis, TD, Benchmark, Clear Street have all been participants in these markets. And they give us distribution out to wealth management and to retail and to institutions. So we've been very successful in the last year with continuing our strategy. Next slide. You'll see here in addition to getting folks to participate in our equity raises in our equity capital markets. We continue to add more and more research analysts. Here you can see price targets, and you can see they all have buy ratings on Strategy. Next slide. So let me talk about digital credit and what are we doing in digital credit and why digital credit is important. Next slide. First, I mentioned 2025 marked the launch of digital credit, and we launched five different instruments. We started with Strike, which is convertible digital credit. And it was really a gateway from convertible debt, which we no longer are issuing, to a convertible preferred note. We then launched Strife, which was our most senior of our instruments, our first fixed perpetual digital credit instrument. And after that, we launched our most junior one, Stride. And as you can see, the size gets bigger and bigger with each one. And then we launched the most important, which was Stretch, which is $2.5 billion in our first digital credit instrument. And then in November, we went to the euro market and launched Stream, which is USD 717 million. And the importance of this is accessing a European market and those who want euro exposure. Our plan with Stream is to, over time, up-list it into a regulated retail accessible market, and we're excited to do that over the course of this year. Next slide. Here's the overview of digital credit. I think the most notable here is to look at, as an example, the liquidity that we're experiencing in Stretch, $118 million traded a day over the last 30 days. As a comparison, typical U.S.-based preferreds trade $1 million a day. So these are very liquid and very interesting instruments, the dividend at 11.25% and on a tax equivalent basis 18%. And you also see the volatility here at 7%. So it's an instrument where we've been able to start to target a very finite price close to $100 and drive that volatility down to 7%. Let's go to the next slide. So what is 2025, the third quarter and the rest of 2026 has been about? It's really been about seasoning our digital credit. And by seasoning, I mean, maturing in the market and making the instrument more creditworthy. So after we launched Stretch on July 25, there were a couple of actions we took that made the credit more creditworthy and a better investment. First, and Andrew mentioned it, the CAMT guidance was a big deal. This is a big change by Treasury and IRS, acknowledging the importance of the digital asset ecosystem and that there should be no unrealized capital gains, taxes on Bitcoin, period. The second thing is we got an S&P rating, a B- issuer credit rating, which is a starting point for us to be able to access different types of investors in the credit market. November 4, we got to what really was our target, was to get Stretch to trade at par, $100 for the first time. $100 is important because it decreases the volatility of the instrument. It shows that we're able to do something that no other preferred instrument has done in its past, which is to target a specific price, and it allows us to raise more via our ATM. And then we added our U.S. dollar reserve. At the same time, since we launched Stretch, we have added 105,732 Bitcoin to our balance sheet. That's about 16% more. These are all actions we took to make our digital credit stronger over time. Next slide. So what is Stretch, right? Why are we so enamored and excited about Stretch? Why did I say 2026 is the coming out party for Stretch. Stretch is one of the most attractive instruments and securities in the market today. It pays an 11% effective yield, 18% on a tax equivalent basis. We paid monthly dividends on time, on schedule. And we have said that we expect the return of capital treatment for the next 10 years. We'll run our business to be able to give everybody tax-deferred earnings for the next 10 years. We're targeting $100 price. The volatility is 7%, its actually decreased recently to 6%, and we have mechanisms above and below that price to keep the price stable. It's quite a bit of a feat of financial engineering. And it's extremely over-collateralized after you take out all instruments that are senior to Stretch, we still have 5.6x collateral over Stretch. And so it's an over-collateralized instrument. And then after that, we've added $2.25 billion of U.S. dollar reserves. So we have 2 to 3 years of dividend coverage. And I mentioned the liquidity of Stretch is trading extremely well. Its Nasdaq-listed and it has a 4-letter ticker, is easily accessible to folks. Its now accessible on Robinhood and Square Cash App and pretty much anywhere else that you can buy a security. Next slide. So let's talk about our balance sheet. I've seen a lot of questions. We get them from investors, we get them from shareholders, we get them from people on X. What's going on with Strategy's balance sheet? Are you worried that when Bitcoin price drops, that you are going to have issues with your convertible bonds? Are you going to have issues paying your dividends? Are you going to have to sell Bitcoin? The short answer is I'm not worried, we're not worried and no, we're not having issues. What's the reason? One, we have a BTC reserve at $60 billion. This was as of last Friday, now it's $45 billion. And our equity or enterprise value still trades above our Bitcoin reserve. Our convertible debt, that's the notes that come due or preferred equity doesn't come due, is at about 10% leverage. With the latest Bitcoin price as of today, we still have about 13% leverage. So the $8.2 billion that come due is 13% leverage. How do you think about 13% leverage? Those who do not spend a lot of time in the debt world, you might say, well, 13% sounds like a lot. Let me show you how we compare 13% to the S&P 500 universe. Next slide. First thing is when you take your leverage, you take out the cash that we have. So our net debt is $6 billion. As I mentioned, our net leverage is 10% and it's 13% with the most recent Bitcoin price. If you look on the bottom left-hand side, this is how we compare to the S&P 500 universe, right? We have 10%, currently 13%, leverage. If you're AAA-rated, right, investment-grade company, your bonds are trading as AAA rated, you have 23% leverage. If you're BBB rated, high yield, you have 32% leverage. We have half the leverage of an investment-grade company, 1/3 of the leverage of a high-yield company. How about looking at it by sector, Strategy at 13%, it looks like a tech company, which is low capital, low assets, high income, right? They're levered at about 15.7%. You compare us to asset heavy, high debt companies and industries, utilities or real estate, they're levered at 42% to 48%. We are not a highly-levered company. Next slide. What about our convertible debt, right? Not very highly levered, so that's good, but what happens when our convertible debt comes due over the next 5 or 6 years, are we worried that we're not going to be able to pay back our convertibles. No, not really. You'll see here the net debt of $6 billion compared to a Bitcoin reserve of $59 billion, now $45 billion. In the extreme downside, if we were to have a 90% decline in Bitcoin price, and the price was $8,000, right, which I still think is pretty hard to imagine, that is the point at which our Bitcoin reserve equals our net debt, and we will not be able to then pay off our convertibles using our Bitcoin reserve, and we either look at restructuring, issuing additional equity, issuing additional debt. And let me remind you, this is over the course of the next 5 years, right? So I'm not really worried at this point in time, even with Bitcoin drops that we're not going to be able to service our convertible debt. All that said, it's staggered over time. We have put dates between 2027 and 2032, and our plan is to equitize that over time. And if we're not able to equitize it, we'll find different ways to restructure the debt. Next slide. Of course, we have this Bitcoin reserve. And what does it really do for us? It creates long-term durability. That's why we've been building it up. That's why we've added about 16% over the last 9 months to our Bitcoin reserve. It gives us long-term durability to issue more credit ultimately. And as we issue more credit, the dividends will rise. Our dividends, as Andrew explained, $888 million, we have 67 years of dividend coverage with our Bitcoin reserve. If Bitcoin goes up 1.5% a year, that's our breakeven ARR, we could just sell the incremental Bitcoin that we get, not that that's what we'll do, to pay our dividends. So we don't need a large increase in Bitcoin price to be able to service our dividends, primarily through Stretch. Next slide. Our U.S. dollar reserve, which I'm very happy we put in place in Q4 and solidified in Q1, is $2.25 billion. That's 30 months of dividend coverage, 2.5 years of dividend coverage. So if we were not able to raise capital, which we've shown that we've been able to do through equity issuances, we could sit here and do nothing and pay off our dividends over the -- or satisfy our dividends over 30 months using this reserve. Next slide. And as I mentioned, since we took -- since we received a B- stable outlook credit rating from S&P, we've taken a lot of positive actions to improve this, right? Will the S&P increase it from B-? I think if they were to make an evaluation today, they likely would, but they usually make valuations every year or so. They don't want to move fast in terms of what the credit rating is. But we've added a U.S. dollar reserve, $2.25 billion. I'll remind you that the first $1.44 billion, we raised in 8 days. The second is we've been able to maintain a robust access to capital. We raised $9.5 billion in 3 months and 72,300 Bitcoin. So we've shown that we're highly liquid and able to access capital. And we paid dividends every single month, every single quarter since our credit rating. Next slide. So what are we going to do to make Stretch even better? In addition to improving the credit quality, we've been working with brokerages like Robinhood and Cash App to get Stretch and preferreds listed there. Robinhood, in fact, launched the first-ever preferreds on their platform because of the demand and the liquidity that they saw in Stretch. We've been working with wirehouses, wealth management and broker-dealers, RIAs to help explain Stretch. We've integrated Stretch now into crypto. So just like you saw MSTR turn into MSTY, MSPU et cetera, we're seeing Buck and other coins like Saturn, APYX, A-P-Y-X and TradFi platform starting to launch products on top of Stretch. And we expect, over time, Stretch will be tokenized. We'll integrate with ETFs also, right. We started, we've been involved in industry conference, leveraged finance conferences, teach-in sessions, and so we're telling everybody about Stretch. And we engaged in digital marketing, you might have seen ads on X or YouTube or Wall Street Journal. And of course, we have strategy.com Strategy app, interviews and podcasts. We want everyone to be aware of digital credit because we think it's an amazing product for an end investor, and we think it helps build the Strategy flywheel and the Bitcoin flywheel over time. Next slide. I do want to update a slight change to our Stretch guidance. In the past, we've said that we're going to base our actions on Stretch on a 5-day VWAP at the end of the month. What we found is that Stretch trades very interestingly around dates like our record day and our payment date. Our record date falls before the 5 days at the end of the month, and that's where we've seen people try to buy Stretch, so beginning before the record date. So we thought the better view of Stretch price is to look over the course of the entire month. So the VWAP range by which we'll look at the price of Stretch and make determinations on what to do with our rate will be based on the entire month. So as an example, for January, if we were to have made that change in January, it would have been January 1 through January 31. For February, it'll be February 1 through February 28. Next slide. So we talked about digital credit and the importance of digital credit is what it does for a digital equity. Digital credit amplifies our common equity. And I just looked at -- these numbers were as of last Friday. As of today, MSTR is up 48% since we started this strategy, Bitcoin is up 36% since we started this strategy, and we've outperformed the Mag 7, gold, S&P 500. We amplified Bitcoin, designed to outperform Bitcoin, and our belief is that Bitcoin will outperform every other asset class in the world over time. Next slide. How do we create amplified Bitcoin? How do we outperform Bitcoin? We produce Bitcoin per share. We increase Bitcoin per share, which is -- the change of Bitcoin per share is Bitcoin yield. And you look here over the course of the last 6 years, we've increased Bitcoin per share every single year. That's why we outperform Bitcoin. If you buy 1 Bitcoin at the beginning of the year, you'll have 1 Bitcoin at the end of the year. If you buy 1 share of Strategy at the beginning of the year, 2025, you would have had 23% more Bitcoin at the end of the year 2025. We increase Bitcoin per share, and we call that increased Bitcoin yield. Next slide. So how do we think about this over the course of the next 7 years? I showed you what we've done in the last 6 years. The way we're going to increase Bitcoin per share over the course of the next 6, 7 years is we are going to sell digital credit. And what does digital credit do? By selling digital credit, we generate amplification. By generating amplification, we increase Bitcoin per share. By increasing Bitcoin per share, MSTR common outperforms Bitcoin. It's a very simple formula. And what are the inputs? How much digital credit can we sell, which is how much Stretch can we sell? Here is an assumption that on a base of $60 billion at Bitcoin, if we can sell 10% of digital credit, which is $6 billion, this is what this might look like over time. And you say $6 billion, is that a lot? Or is that a little? Well, last year, we sold $7 billion of digital credit. And we raised over $25 billion in the equity capital markets. So we think this is a fairly conservative assumption, $6 billion. This assumes a 10% dividend rate, which is where we are right now, and that we're issuing equity to pay for the dividend on digital credit at 1.34x mNAV. And so I'll call this a low scenario. If we have this low scenario over the course of 7 years, we'll increase Bitcoin per share 1.4x. That's a 5% annual Bitcoin yield. Next slide. What if we can do a little bit better? What if we can assume 16% of digital credit sales, so not $6 billion, but $10 billion. What if the Fed lowers interest rates or we're able to lower interest rates on our digital credit down to 9%? And what if the view of this causes investors to believe we'll increase Bitcoin per share and our mNAV goes up and we have amplified Bitcoin and MSTR. And we're able to get to 1.75x mNAV. This scenario with the assumption of 30% Bitcoin ARR gets us to a 2x increase in Bitcoin per share over 7 years, which is a 10% annual BTC yield. Next slide. What does a more aggressive scenario look like? Maybe we can assume 20% digital credit sales, we were able to drive the dividend rate down to 8%, and our mNAV goes up to 2.25x, then we can increase Bitcoin per share 2.5x over 7 years and a 14% annual Bitcoin yield. That's another scenario. And I'll go to the final slide of my section. Ultimately, this is the strategy of the company. We're going to issue digital credit through Stretch. We're going to amplify the common equity because of it. It increases our Bitcoin per share, and we outperform Bitcoin. What are the levers that we can play with? How much digital credit can we sell? How attractive can we make Stretch? How well do we market it? How well do we distribute it? With higher demand, we can lower the cost of credit, and we'll increase the mNAV. That's the thesis for the company, and that's what we're excited to do and that's what we're going to focus on in 2026. So with that, I will pass it over to Michael. Michael Saylor: Thank you, Phong. I'm delighted to have you join us today. Why don't we go to the next slide? All of our strategy is based upon looking at the fundamentals and taking a 10-year view. And so when you consider the fundamentals of digital capital, you have to start with the most important regulator in the entire world. And that is the President of the United States. We have a Bitcoin President, and he's intent upon making America the Bitcoin superpower, the crypto capital of the world and the leader in digital assets. I don't think you can underestimate the importance of having support for the industry and digital capital at the very top of the political structure. Now equally important, if we look at the cabinet that's been put in place on the next slide, you see the entire government has now embraced Bitcoin. When I say embraced Bitcoin, what I mean is 18 months ago, there was one person in the government that had an awareness of it and was skeptical to neutral or grudgingly accepting of it. And everyone else in government was either negatively inclined or they were ignorant of it. And now there are 12 individuals I'd want to highlight here. J.D. Vance, the Vice President; Scott Bessent, the Treasury Secretary; Paul Atkins, the Head of the SEC; #4, Kevin Warsh, who is just -- who is the Fed Chair Nominee, who is -- who understands digital assets, understands the use case of Bitcoin. This is a tremendous move forward for us, a big fundamental shift that now you can look at the Head of the SEC, the Head of the Treasury and the Head of the Fed as all-appreciating the pivotal role of digital assets and the growth of the country. And the economy, and if you go to the second line, right, you see the Head of Intelligence, the Head of the Small Business Administration, the Head of Federal Housing, the Head of Health and Human Services. All Bitcoin believers. And then Michael Selig, the CFTC Chairman; David Sacks, who's doing a wonderful job; Howard Lutnick, Commerce Secretary and even Kash Patel. So if you consider that, we went from one neutral to a Bitcoin President and 12 positive, constructive. These are great fundamentals for us, and I don't think we can lose sight of this, because everything that follows in the marketplace is very much influenced by the political structure of the world. On the next slide. Capitol Hill has embraced Bitcoin. We've got bipartisan consensus that the United States should embrace digital assets, should embrace digital capital, should be a leader. That is not a debate. No one is saying that there's one party in favor of digital capital, another party against it. That's a big deal. So although the political process is complicated, the fact that we have moved from an asset which was a scary speculative thing and maybe a legitimate to a legitimate asset that most reasoned politicians and regulators and policymakers believe they need to move constructively forward with. Let's go to the next slide. Big banks are embracing Bitcoin. Roll the clock back 18 months, and this Harvey Ball diagram is pretty much blank, mostly blank. And so when you actually look at the top financial institutions and you ask the question, do they allow IBIT trading? Well, there's an avalanche of support there. That's flipped in 12 months. The second question is do they offer credit against IBIT? That's a big deal. 12 months ago, it was almost impossible to get a loan or a margin loan against IBIT. Now there are many banks coming in the space. Would they let you trade BTC? Now you have banks that are announcing support for that. You have banks announcing support to custody BTC and you have banks announcing intent to offer credit against BTC. Again, this is an extraordinary sea change. We cannot underestimate the value. I think that the fundamentals of the industry are driven by the banks creating credit. One bank can create as much credit as all the Bitcoin miners can create in Bitcoin in a year. So each bank that turns on Bitcoin-backed credit lines might be the equivalent of another halving for the network. Let's go to the next slide. TradFi and fintech have embraced Bitcoin. If you look at the number of accounts of BTC trading asset, there's a pretty clear bullish trend here both across crypto-native exchanges, fintechs and neobanks and the brokerages and banks in the wealth management channel. Those are large numbers. Fundamentally, we're going from an asset class that no one could buy if they wanted to, to an asset class where everyone is competing to facilitate access and exposure. The next slide. This is the ETF trend. ETFs are embracing Bitcoin. 125 ETFs -- or ETPs launched, 1.4 million Bitcoin held in them. A very consistent trend, up and to the right. Next. And this is the corporate trend. It was nothing in 2019. We were the first serious player. We were lonely for a bit and we went to 33, then we were 64 in 2024, and now we're 194. This is clearly explosive growth, and there's a signal here. Next. The public markets are embracing Bitcoin. Look at these IPOs that have taken place this year. Bullish, Circle, Gemini, BitGo, Kraken that's coming. And then Coinbase, Block and Robinhood have all been included in the S&P 500. So I see this as a very bullish indicator and a fundamental improvement in the structure of the industry. The concern du jour is quantum computers. And many people ask, do quantum computers represent a threat to Bitcoin? I would note the quantum computing concern and quantum FUD is just the latest in a long litany and a parade of horrible FUD that has been taken by since the beginning of Bitcoin. There was functionality FUD. Bitcoin is not functional enough, so it will fail, it needs smart contracts. And then people thought it was a ponzi. And then they thought it was too volatile. And then they thought , well, there is a bug in it and maybe it will be 51% attack. Maybe the Chinese control too much of it. And then there was -- the Chinese shut it down. It was the opposite of the China FUD. It was the China non-embrace. And then we had all manner of block size wars and bandwidths FUD and there was it uses electricity FUD and then there was a wealth concentration FUD and of course, then there was another crypto will be better. What I would say is whenever dealing with each of these concerns, we have to take them seriously. We have to consider them, but we have to remember two things. One, the two words on the back of the Hitchhiker's Guide to the Galaxy. Don't panic. Most important, two words, more important than everything and the encyclopedia or the Hitchhiker's Guide to the Galaxy. The second observation, the Hippocratic Oath, do no harm. And so whenever you're faced with a challenge in any system or any network, you have to make sure you don't panic, you're not railroaded into doing something foolish or destructive. And you also can't do something that causes harm. You don't want an iatrogenic intervention where the care is worse than the disease. So our position on quantum computing: one, we think it's probably 10 or more years away before there's a threat. That is the consensus. It's a promising technology, but it's still nascent. Many industries, including finance and defense are dependent upon traditional cryptography. They face the same risks. There's a significant global investment going into building quantum-resistant protocols not just in the Bitcoin community, across all communities. The Bitcoin community in specific is engaged on research and development in these efforts. There's good work that's taking place. If Bitcoin requires an upgrade, there will be global consensus. Right now, there isn't a global consensus that existing cryptographic libraries are at risk. And to stampede into a hypothetical fix before there is consensus would introduce new attack surfaces and new complexity and new failure modes that don't currently exist. It's very similar to over-vaccinating and it's like, well, there's a 0.001% chance that the kid might get a disease. So we're going to vaccinate them just in case, but of course, 3% of the people that get the vaccine have side effects, right? And so it's very important that we don't over-insure over-vaccinate, overtreat, over-worry. A famous President of the United States, he said, "if you see 10 problems driving down the road, 9 of them will probably drive themselves into a ditch before they get to you." So the one thing you can't do is you can't buy 100 expensive insurance policies that cost collectively 100% of all your operating income to insure against something which is 2% likely to happen. That's why you have to be very thoughtful about addressing these risks. And you have to address them at the right time, not too soon, not too late. But -- because too soon, you probably don't have the right technology and you're over-insuring. Too late, right, you accept the risk that you shouldn't. That's why consensus is very important. Bitcoin will be stronger if and when that quantum upgrade takes place, right? And so Bitcoin is upgradable, and Bitcoin can be upgraded to be stronger, and we, of course, are optimists. And we believe that the human race will accept challenges and will upgrade to meet those challenges and do it in a rational fashion. And Bitcoin has a history of meeting challenges in a rational fashion such that it is stronger, and you can see all those examples. Last, but probably most important on this slide, Strategy, we are going to initiate a Bitcoin security program that coordinates with the global cybersecurity community, the global crypto security community and the global Bitcoin security committee, in order to help and contribute to consensus and solutions to address the quantum computing threat as well as any other emerging security threats that evolve. We think it's reasonable and appropriate for us to do this, given our large responsibility as a Bitcoin holder but we want to do it in a very responsible fashion. And we want to make sure that we coordinate with the global cyber, crypto and Bitcoin security community because there are a lot of very, very brilliant minds here. There's a lot of good work being done. And it's likely that consensus will form and solutions will form at the right time in a responsible fashion. So that's our view on quantum. Next slide. Digital credit. Our company exists to -- we structure and we secure Bitcoin, right? We're a digital credit issuer. If you look at this chart, what you can see is that the native volatility or the natural volatility of Bitcoin is about 45%. For a 45%-vol asset to draw down 45% shouldn't shock anybody, right? I note the Bitcoin looks like it's drawn down about 45% since it's all-time high 4 months ago. So a 45% drawdown on a 45%-vol asset is probably to be expected, just like an 80% drawdown when it was an 80%-vol asset. On the other hand, what you can see pretty clearly is that Strategy has stripped that volatility off of BTC with Strike, which was 32%; Stride 27%; Strife 24%; and Stretch down to 7%. So we are stripping the volatility off of Bitcoin, and there is conservation of energy and conservation of volatility. And so the volatility that we stripped off of the credit instruments accrues to the common equity. And so that's why MSTR is 63% vol. But it's not really complicated piece of engineering. It is just -- it is very pure financial engineering. There's a group of people that want low-vol, principal-protected instruments that are credit instruments, and there are other people that want high vol, high performance. Next slide. Right, think of us as a digital credit vehicle. Our job -- we are thrusting forward. We are actually moving through space through issuing digital credit, right? It's -- digital credit is the product. Bitcoin is the backing collateral. The secret or the most important thing for us to do is to build the vehicle in the most robust, fault-tolerant way that we can, the most scalable way we can. You could think of it as a Bitcoin battery and then a U.S. dollar battery. And we have lots of options. We have options to run on the U.S. dollar reserve. We have the option to sell equity. We have the option to sell Bitcoin. We have the option to sell Bitcoin derivatives. And we keep our options open so that we can do the best thing for all of our stakeholders. Our common stock shareholders. We want to do the right thing for the MSTR common stock shareholders. We want to do the right thing for the credit holders of the digital credit instruments. And we want to do the right thing for the Bitcoin community. And we believe that if we're rational and thoughtful then we get a good outcome, which is BTC positive, MSTR positive, STRC positive. Next slide. Companies exist to convert capital into cash flows. In essence, you have capital investors and you have credit investors. The credit investor wants $10,000 a month forever. And the capital investor gets $1 million of real estate with no cash flows for the next 30 years. And maybe they'll get more than 10% a year. Maybe they'll get 20%, 30% a year performance. But it's pretty straightforward that the world's built on capital. The world runs on credit. BTC is digital capital. STRC is digital credit. We -- it takes an operating company to transform capital into credit. If we were a real estate development company, we could take $50 billion of capital, buy a bunch of land in New York City, build a bunch of buildings, market the buildings, rent the buildings and generate cash flows. That's a way to do this, but you take on all sorts of liability, all sorts of counterparty risk, operating risk, it takes a lot of time. You have property taxes, employment taxes, income taxes, usage taxes, et cetera. That's the 20th century way to actually create credit from capital. We've taken a much faster route, we would just take the money, buy Bitcoin and just issue the credit, and we skip all the intermediate steps. That makes us extremely technically efficient, it makes us extremely economically efficient, it makes us extremely tax efficient. Next slide. At the core, what are we doing, right? we're transforming that capital into credit. We're taking BTC and we're converting it into a currency, whether it's a U.S. dollar or a euro. We're stripping the risk by over-collateralizing it, right? If you have $5 of Bitcoin, right, and it falls by 80%, then you've got $1 of Bitcoin. But when you have $1 of STRC backed by $5 of Bitcoin and it falls by 80%, you still got $1 of STRC backed by $1 of Bitcoin. So we're stripping or reducing the risk by the BTC rating. And then we're also taking other actions to reduce risk, right? We're an operating company. We can raise capital. We can sell equity. We can refinance. We can strip risk by taking a 2-year obligation or a 10-year obligation and stretching it out to a 20-year obligation. So operating companies can do these things. We're also dampening the volatility. We damped the volatility by building the collateral, by building the U.S. dollar value, by adjusting the dividends, by adjusting the ATM programs, by adjusting our capital markets behavior. And we adjust these things minutely every minute, maybe even every second, right? We have programs to adjust all of our activity so as to damp volatility, and we're very engaged and we are very focused on it. Of course, and then we distill the yield from the capital asset in order to create a fixed income yield rate. And of course, we're compressing the duration. Instead of telling you to wait 10 years in order to get a 30% return, we're giving the 18-year-old cash flow this month and every month. So 10 years of duration is 120 months. We're converting 120 months into 1-month duration. And so when people say, what does the company do? The company transforms digital capital into digital credit. Are these things valuable? Of course, they're valuable. There's a $300 trillion market for credit. It's extraordinarily valuable. And the key is for us to create the best credit in the world. And to create the best credit you can using digital capital. Let's go to the next slide. How do we benchmark ourselves against the other credit alternatives? Well, the bank accounts might give you 40 basis points. The money markets are giving you 360 basis points taxable. Insurance companies don't pay tax and endowments don't pay tax, but actual real people, families do, private companies do, public companies pay tax, the world's full of people that have to pay tax. And so 360 basis points of money markets works out to -- might be only 180 basis points if you live in New York or California after tax. So clearly, what we have here is a yield-starved environment. The base rate and the risk-free rate is 360 basis points taxable, and that means that all the conventional credit instruments are pegged to that, like mortgage-backed securities, investment-grade bonds, junk bonds. They all trade at very small premiums or spreads over that risk-free rate. And STRC is paying 11.3% at par -- 11.25% at par. And so you can see here that it's 3x more on a pretax basis, but on a tax equivalent basis, it's like a bank account in Miami that pays you 18%. It would be much more. It would be like a bank account that pays you 22% or 23% in New York City or San Francisco. So we think we've been able to create a very compelling credit instrument versus other credit instruments. It's just 2 to 4x better. And let's go to the next slide. We don't just benchmark ourselves against other credit instruments. We also benchmark ourselves against all the other non-U.S. dollar currencies. And what you can see here is the U.S. dollar has got a 370 basis point risk-free rate, but the Korean won, the Canadian currency, the euro, Singapore dollars, Japanese yen, Swiss francs, they're much weaker. And so fundamentally, you can think of the Stretch rate as the risk-free rate in the Bitcoin ecosystem. It's like the Bitcoin rate, short end of the yield curve. So we are working to define the yield curve, like what -- if you're willing to accept no guarantee of yield and 10-year duration, then you get the Bitcoin rate, which is right now 35%, 40%. We expect that going to be 30% over time. But if you want to go to the short end of the yield curve to the 1 month and then 11.3%, right, is the rate. We think that this is -- creates just a very compelling opportunity. Clearly, we believe the killer app of digital capital is digital credit. And oftentimes people joke, it takes 100 hours to understand Bitcoin, maybe it takes 1,000 hours to become a Bitcoin maximalist. It only takes 10 seconds to understand Stretch. Stretch is 11.25% dividend yield paid monthly. That's it, right? It's a 10-second idea. Let's go to the next slide. Okay. Here's an actual 4-month snapshot. And this is an interesting comparison, Stretch versus Bitcoin. What's the difference between credit and capital? Well, in the last 4 months, Bitcoin has traded down 30% through the first of February, Stretch is up 1%. And so it doesn't take a rocket scientist to look at this chart. If you're a retiree, if you're a corporate treasurer, if you're a fixed income investor, if you're any kind of investor and you look at these two charts -- if your crypto curious or you think you might like Bitcoin, you look at this and you think, "well, I like it, I just can't stand the ball." And you could see why. Do you want 30% drawdown and no dividends? Or do you want a 1% price appreciation and 5.3% paid dividends with an ongoing 11.25% dividend rate. And with the company that's making a commitment to stabilize that price, to target $100 and do whatever it takes, including raise the dividend. So we believe that what we're doing is expanding the market. We're bringing new capital with new forms of investors into the digital asset space. And we're making -- we're creating sort of a gateway product or an on-ramp to digital assets and digital capital by way of STRC. And of course, we're still very early on. This is like the first 5 months of seasoning of STRC. We think that after 12 months, we'll have a better picture. And clearly, in some cases, with credit instruments, people have to see it for 2, 3, 4 years before they actually want to buy it. So we think that STRC is going to continue to season, continue to harden, continue to stabilize, continue to build AUM, build liquidity, and we will continue to make progress on volatility over the coming 2, 3, 4 years. So it's a very straightforward exercise on our part. This is the flagship product of the company, right? At this point, everything we're doing in the capital structure is to improve the liquidity, decrease the volatility, increase the AUM, increase the creditworthiness, decrease the risk and improve the standing of Stretch, right? And you can extrapolate what that might mean with everything else that we do going forward. Let's go to the next slide. There's a picture of that volatility, right? We started with a higher vol. We're working it down. We do things like create the USD reserve. We adjust the dividend rate. We do no harm. We don't sell it if it's not at our target. I mean, all of these things are active decisions every day, every minute of the day. Next. And we're pleased that we are building the AUM. It is scaling. And it's not going to be a straight line up and to the right. We're going to have good months. We're going to have great weeks. We're going to have bad weeks. We're going to have bad months. That's okay. We're in this for the long term. By the way, the long term means 4 years is the short number, 10 years is the target number, 7 years is the middle, right. So as Phong pointed out, we're looking out 7 years thinking, well, we can -- if we do what we're doing, we can double Bitcoin per share over 7 years, if we execute well. And then we're looking at this over that 7-year time frame and thinking about how we actually make this into a truly great -- the greatest credit instrument in the world. Next slide. Phong had alluded to the fact that it's much more liquid. I think Stretch traded something like nearly $300 million today, a huge number, right? And it's trading consistently above $100 million. That's unheard of. A lot of people list -- perhaps over the counter, they trade $100,000 a day. And then they -- publicly listed, they trade $1 million a day. So these things in the first 12 months are already off the charts by a factor of 100 more. And Phong noted, but we didn't dwell on it. We were 33% of the preferred stock issuance last year, right? We are transforming the preferred equity markets. We're digitally transforming them. We're -- just like we revolutionized and shook up the convertible bond market until we were the largest convertible bond issuer, we're now shaking up the preferred equity market and becoming the largest preferred equity issuer. And it's because we're putting an innovative asset together with an innovative security together with innovative business strategy and the way we manage our ATMs, the way we manage our company. Next. This is a chart we're very proud of. Even though Bitcoin has struggled, if you look at the Bitcoin price, we've been increasing the BTC rating of Stretch even as the Bitcoin price has been falling, right? So we're increasing the collateralization of this. We're decreasing the risk of this. And we're doing it through programmatic, thoughtful risk management on our balance sheet. Next slide. Bitcoin is a 43% ARR, 45% vol asset. Digital credit, Stretch is 11.25%, 7% vol. It might jump up to 10% vol sometimes. Maybe we get it down to 5% vol, 4% vol, 3% vol, 2% vol. I don't know where we'll get it, but it seems like it's going to be single digits. And then the third layer is digital money. Our view for that is less than 1% vol, 0 vol digital money. Can we actually create something that pays 6% to 8% that's got 0 vol. We can't do it ourselves. We won't do it, but we welcome partnerships with other companies. With ETFs, with TradFi projects, with banks, with crypto token projects. I mean a lot of other people can use Stretch and they can step it down. They can make it 80% Stretch, 20% cash. People are going to step Stretch down. They're going to lever it down. They're going to lever it up. They're going to mix it. They're going to manage -- they're going to actively put in management and volatility buffers and liquidity buffers, and put it in various regulatory containers. Next slide. Right, you can deliver digital money as coin, like a savings coin; you can deliver it as a fund, a private fund or a public fund, an ETF or you can deliver it as an account on a crypto exchange or a bank. We welcome all those partnerships. Our view with Stretch is, we're going to market it to the general public. We're going to market it to credit investors. We're going to market it to enterprises. We're going to market it to corporate treasurers and corporate CFOs, right? We're going to offer you 2 to 4x more than your existing treasury strategy. And we're going to also work these OEM relationships in order to build great partnerships so people can create insanely good digital money products based on our digital credit. Next slide. Quick review of illustrative models. We're looking out 7 years. And so one model is we target 5% BTC yield and we increase Bitcoin per share by 1.4x over the 7 years. The mid case is we target 10% BTC yield. Let's go to that slide. Yes, 10% BTC yield. In that case, we will double Bitcoin per share over 7 years. And the high end would be a higher yield and we -- 2.5x Bitcoin per share. What is our objective? Our objective is to double your Bitcoin per share, right, over 7 years, right? I mean, I would be disappointed if we don't double Bitcoin per share over a 7-year time frame. This chart actually shows how the amplification works in practice. By selling digital credit, we create an amplification. So if Bitcoin ARR was 10%, we could achieve a 12% to 19% ARR. If Bitcoin was a 30% ARR, we could achieve a 36% to 45% if we execute on our strategy. So clearly, the equity is for vol junkies and performance junkies, they want to outperform. This is how we believe you can best outperform Bitcoin in the most responsible fashion while doing the most good for the world. And for the other end of the spectrum, for the credit investors that can't stand the vol, they want principal protection and low vol and no currency risk and they want clear yield and they want tax-efficient treatment, well, then they have digital credit and Stretch specifically. Let's go to the next slide. So I would end with this thought, right? Bitcoin is digital capital. We believe in it. We will continue to advocate for it. And for the pure capital investor, you should buy it. Stretch is digital credit. If you don't know what you want, but you believe in digital assets and you believe in digital capital, you probably want Stretch. It's 11.25% dividend paid monthly, tax deferred. If you're a corporate treasurer, if you're a retiree, if you've got money that you need 3 months from now to pay your kid's tuition, but you want to invest it in more than 2% after tax, well, then Stretch is an option for you, right? So Stretch clearly is the flagship product. And if you believe in the future of digital credit and you want to invest in the company that is making it possible, and you would buy our equity. And if you do that, you should probably have a 7-year time horizon because we're long-term thinkers, we're not -- when -- every day is not going to be a great day, every week, every month. If our thesis is wrong for 100 years, the equity won't work, and we'll run out of money to pay the dividends at some point in 100 years. If our thesis doesn't work for 10 years straight, if that doesn't work, then the credit will get paid -- the dividends will get paid, the equity won't be a great investment for you. But if we actually execute and if over the next 7 to 10 years, things work out fine, the company is well managed, well collateralized and responsibly structured so that we can stand difficult months, difficult quarters, even difficult years or 2 or 3-year cycles at a time. We've done it before. And we're prepared to do it going forward. So with that, thank you. And I think I'll pass over the floor to open Q&A. Shirish Jajodia: Thank you, Michael. We are now going to proceed to the interactive live Q&A section of our webinar. I would like to welcome all our Q&A guests and invite them to come on video. We look forward to hearing your questions. [Operator Instructions] So for the first question, I would like to invite Lance Vitanza, our research analyst from TD. Lance Vitanza: My question is, since the beginning of the year, I can count 3 weeks over which your Bitcoin acquisitions have generated negative -- slightly negative, but negative Bitcoin yield. Now I'm all in favor of buying Bitcoin even when times are tough, but shouldn't the goal be to increase Bitcoin per share at all times rather than just increasing the total amount of Bitcoin that you own? And maybe if you could just talk about the strategy or the thinking that went into those 3 particular weeks and what that could mean going forward? Michael Saylor: Yes, we agree with you. We -- those -- we don't aim to reproduce those weeks. The times that we've actually done dilutive transactions on a Bitcoin per share basis were -- if you go back to the crypto winter when we had to recapitalize some toxic debt on our balance sheet, we took out debt either it was like asset-backed loans or senior debt that had EBITDA covenants that we felt were crippling the company's growth prospects. And so we didn't do it enthusiastically, but we did it because over the 10-year time frame, we knew we needed to remove those toxic elements to our balance sheet. If you look at these 3 weeks, when we took actions that were somewhat dilutive, they all were generally associated with building up the U.S. dollar reserve. And we did that in response to analysis and feedback from the market and some reflexive concerns that we wouldn't be able to pay the dividend if the equity capital markets closed us. So we wanted to get ahead of that and address the credit quality. So the reason we did it, the short answer is we do it to improve the creditworthiness of the company. And if we felt that there was a credit problem, we would do it. Right now, we feel that we've built the U.S. dollar reserve to the level where we don't have a credit problem. We're good for the next few years. We don't have any of those other forms of debt, the senior debt or the asset-backed lending. So the balance sheet is in much better shape today. Going forward, we wouldn't electively or programmatically issue equity to buy Bitcoin if it was going to decrease Bitcoin per share, right? We're -- we don't think that's a good idea. We would only take those actions when we feel like it's essential to defend the credit of the company because if people lose confidence in the credit, then that will ripple into losing confidence in the equity and then losing confidence in the business model in general. So it's a practical consideration. But I don't think we expect to see anything of that magnitude going forward because the first USD 2.25 billion of U.S. dollar reserve was a big move. Lance Vitanza: And just if I could just get a follow-up question regarding that $2.5 billion cash reserve, could you -- in theory, could you use that -- if you chose, could you use that to redeem the $1 billion of converts that are putable in September of '27? Michael Saylor: Yes, we could. We can use it for any corporate purpose. We can use it to pay dividends. We could use it to meet a credit obligation. We could use it to pay interest on a loan. We could use it for whatever. Shirish Jajodia: Great. Thank you. For the next question, I would like to invite Tom Lee from Fundstrat and Bitmine. Tom Lee: Really useful presentation. I took a ton of notes. But I wanted to ask you a 2-part question. I apologize, it's 2 parts. On Slide 53, you talked about quantum vulnerability of Bitcoin. And I apologize, and it's getting a little nerdy, but I know a lot of people have questions about quantum vulnerability because -- of course, Bitcoin could upgrade its network. But I know there's 3 types of wallets that remain quantum vulnerable. One is Satoshi because he used a paid to public key, a really old wallet. And then anyone who's sent Bitcoin reveals their public key. And then as you know, the taproot wallets actually are somewhat quantum vulnerable. So I think that's like 25% or 30% of all Bitcoin wallets out there. So the part one question is, you -- I know MicroStrategy is a security expert. You have so much experience in security. Could you give us some idea of how Bitcoin and the core developers might think about addressing the quantum vulnerable wallets. But the second part is, that's really a small part of the story because there's 4.4 million -- there's only 4.4 million wallets that have even $10,000 worth of Bitcoin, which means what -- whereas there's almost 1 billion accounts globally that have $10,000 of stocks, bonds or cash, meaning the world hasn't really adopted Bitcoin yet. And so as you think about the rest of this year, could you give us like what you think are some milestones or road maps that further drive Bitcoin adoption, which in turn help the price of Bitcoin. Michael Saylor: So with regard to the first, the quantum question, I don't think it's appropriate for us to advocate a particular solution or a particular approach nor a particular time frame. I think that our role is to support all of the various communities and facilitate the evolution of consensus about what should be done, how it should be done, when it should be done. And I think that if you accelerate those and pressurize those processes, you end up solving a bunch of problems that don't exist in a way that maybe are iatrogenic. So we don't have a particular set of policy points that we wish to advocate right now, nor do I think it's really responsible or appropriate for us to do that. I think that, that will be emergent exactly what should be done. By the way, it's not clear anything should be done ever. It's quite possible we'll actually pop out -- you remember, the world was going to end in climate change, death 26 years ago when 26 years went by and none of those things happened, we were going to -- Bitcoin was going to boil the ocean and use all the energy on earth as late as 2018, and that never happened. So it's possible that whatever happens in the quantum domain will actually improve the security of the Bitcoin network inadvertently before we have to even discuss a protocol change. So I don't think there's any particular policies to be advocating right now other than to support all the various communities and facilitate consensus at the right time to do the right things. The second topic is really what are the catalysts for Bitcoin price to improve. Look, I think the fundamental catalysts are regulatory support. We have a very -- we have the most constructive set of financial regulators in the history of the industry right now. The head of the Fed, the head of the Treasury, the head of the CFTC, the head of the SEC and the White House has a digital asset ZAR, right? Those 5 things are massive bold flags. They're all very positive. And generally, you would expect that something good will come probably out of the CFTC or the SEC as they are constructive about facilitating financial companies to innovate in the digital asset space, right? I would have been skeptical about that 2 years ago. But I think for you to be skeptical about their support for digital innovation today would be ignoring all the words from everybody in those positions. And I think that the second catalyst will be banking adoption. The formation of the banking credit networks as the large banks and as companies like Schwab, they start to allow you to trade Bitcoin, custody Bitcoin, borrow against Bitcoin. They're going to legitimize the asset, and they're going to decrease the volatility of the asset. They're going to improve the usefulness of the asset. You're aware of the announcement of the BlackRock, Bitcoin volatility Income Fund that came like about a week ago where they said they were going to sell volatility or generate income. And a lot of people that speculate that will decrease the volatility of Bitcoin and put a more stable floor into the asset. So I think the actions by big finance, the actions by the big banks and the actions by the financial regulators are the fundamentals. I mean those are the fundamental things. And if you were to light a candle and pray to the gods of the crypto sphere, you would say, I want prodigital assets regulators, I want prodigital assets banks, and I want prodigital assets, financial innovations like BlackRock is bringing to the market, like we're bringing to the market, right? Like STRC, fundamentally, the industry is going to move forward because of enlightened regulation, engaged, thoughtful banking and then innovative finance. And that's what we're doing, and that's what we see right now. Shirish Jajodia: For the next question, I would like to invite Pete Christiansen from Citi. Peter Christiansen: Michael, I want to talk about events of the last week. On Friday, the President presented his nominee for next Fed Chair, which exacerbated volatility across a number of asset classes, including Bitcoin. The good news is Kevin Warsh is on the tape noting that Bitcoin is the new gold. So that's good. But I guess my question is, how would strategy's capital allocation framework or possibly if it would change, if the next Fed share is perceived to be less independent, perhaps maybe more tolerant of fiscal dominance, that may raise Bitcoin prices short term. But longer term, it may introduce increased rate volatility, which may be a challenge on the funding side. I'm just curious if you have any perspectives on how that might change the capital allocation framework for strategy. Michael Saylor: We try to be very reactive to market signals. So for example, when our equity trades weak, we don't sell it. When our credit instruments are trading weak when the cost of credit is too high, we don't sell them. The most obvious is STRC, if it trades below 100, we don't sell it. So in periods where the marketplace loses confidence in our particular credit instruments, we simply wait. And in periods when the NAV of the equity explodes to 3 or 3.5, we might sell $1 billion a day, right? So when the capital markets are enthusiastic about either the equity or the credit, we react to them. And it's above our pay grade to set financial policy. It's even above our pay grade to interpret like the financial policy, like sometimes the macro economy has one set of numbers, and you would think that's good for Bitcoin, but it's bad for Bitcoin. Or another time, you would say, well, if they do this, that should be good for us and it's not good for us. And in other times, it's the opposite. I think the nice thing about our business is we have the option to do nothing. And we have a set of disciplined capital markets programs. They've moved from being discrete where it's like, well, we got to do a deal this quarter. What's the deal we're going to do in Q3? And we've moved from discrete 144A capital markets programs to continuous ATM type programs. And with the ATMs, if the market thinks that the cost of capital on an instrument like STRF should be 11%, well, we just don't want to sell it. We think it ought to go to 8%. So when the market takes STRF to $140 or whatever the price it is that we think is fair, then we will be open to issuing more. And when the market is bearish on those instruments, we don't. And the good thing about the business is if you think Bitcoin is going to grow pill in a number, 30% a year, then our option is just do nothing, and we're a company that's a $45 billion, $50 billion company growing 30% a year. So that's our default. Our default -- if you think Bitcoin is only going to grow 10% or 20% a year, our default is we just do nothing and we grow at the rate of Bitcoin, and we're okay with that. And then if we think that there's something very accretive, that's going to be good for the shareholders, then we will participate. And we can participate in size, $1 million a day, $100 million a day, $1 billion a day. And the truth is, Pete, sometimes we get up in the morning, and we basically set up our programs and we think, well, nothing is going to happen today and then 5 minutes before the market closes, a lot of stuff happens. Like it can literally change in 60 seconds. And again, that's beyond our control. We can't control how the markets will interpret all these things. What we can do is set up a rational set of credit structures so that we only issue credit when we think it's in the best interest of the company, and we only issue equity when it's in the best interest of the company. Shirish Jajodia: I would like to invite [ Lynn Alden ] from [ Lynn Alden Investment Strategy ]. Unknown Analyst: Given the popularity of STRC, my question is focused on that. The company established that USD reserve, which I think shored up the confidence of these products and make them more attractive. Right now, the USD reserve is on the website, 30 months of coverage compared to the dividends of the preferreds. The other preferreds are fixed dividends. STRC is a variable dividend, which introduces some degree of uncertainty around how many months of coverage there are for the total amount of dividends payable. Do you have any kind of views on what you think is an appropriate minimum reserve relative to months of dividend coverage? Or do you have a kind of a maximum that you'd be willing to pay on a dividend for STRC? And then a related question is, we are seeing some kind of early financial products that are out in the market that are looking to potentially leverage STRC given the goal of low volatility and high yield. Are you monitoring the space for leverage build on top of that as it could contribute to spikes of volatility should there be an issue in the market? And do you have any -- are you -- would you encourage that kind of thing? Or would you dissuade leverage from building on top of that increasingly kind of a popular product? Michael Saylor: I can start, [ Lynn ]. Thanks for the question. First, we said that we target 2 to 3 years of dividend coverage with the U.S. dollar reserve. So we wouldn't want it to go below 2 years. I think 3 years would be pretty high. And as far as whether we think there's a cap to the Stretch rate, we're pretty early on, and we're sort of trying to understand what happens every single month at the end of the month, and that's why we have our guidance that we have, right? Instead of $11.25, could we take it to 12 potentially? But it's going to be a function of how do we keep the price within a tight range right around that $100 and also a function of what happens to interest rates in general. But I don't think we have a cap right now. We're just going to have to see how this instrument plays out over time. So that's the answer on Stretch overall. And your second question, remind me? Unknown Analyst: The second question was around we're seeing kind of early products potentially looking to lever it up for other customers. Do you perceive issues in that? Are you monitoring it? Would you encourage or dissuade that type of activity? Michael Saylor: I think any time people create products on top of Stretch, right? There are some products that we've seen like buck that have been issued that are -- they're not levered products, but they're actually reducing the volatility down to about 0, and they're actually showing daily accruals as opposed to monthly accruals. So I think those are positive. I think the extent people are going to build levered products, one, we can't really -- we're not going to stop them. And I think leverage adds liquidity, adds a certain extent, interest in Stretch. And we'll see how it plays out over time. But I don't necessarily think that's a bad thing. Shirish Jajodia: Okay. So we can move on to the next question. For that, I would like to invite Mark Palmer from Benchmark. Mark Palmer: A couple of questions. First of all, we have seen over the last year, a tremendous number of new digital asset treasury companies formed. Many of them focused on accumulating Bitcoin, others on accumulating other crypto tokens. What is your take on how this industry is likely to evolve in terms of the number of players, whether there's going to be a shakeout, if there is a shakeout, will there be consolidation? And most importantly, what could this all mean for strategy as it unfolds? Are there opportunities for the company to take advantage of that dynamic? Michael Saylor: I think every business has to have an operating model that works, that adds value if it's going to grow and prosper. So one model is just to provide Bitcoin exposure if people in the country in question can't get it any other way. There are a lot of people in the U.K. that bought our stock for 4 years because they just couldn't buy Bitcoin any other way. So if there's a value proposition in Brazil or in France or wherever, then maybe just you can be a simple Bitcoin holder. I think another value proposition is issue digital credit, and you can see that Stryve and MetapPinet have both pursued digital credit. If you're good at it, by the way, you can do digital credit and not be good at it, right? If you take on debt, you can't pay back, right? And that doesn't help the company, that hurts the company. But if you're good at digital credit, that could be another case. 1/3 would be anything that uses capital, right? So if these companies -- if they want to generate Bitcoin yield, they're going to have to find some way to generate a benefit from the capital, right? You could underwrite insurance, you could support trading or derivatives trading by posting it as collateral. You can engage in derivatives trading, right? You could literally become a public company with a lot of capital that trades in a digital derivatives market, posting your Bitcoin as the collateral to take the trade and sell the volatility. It's a different business model. What do I think? I think there's thousands of companies that get launched. Many don't succeed. Some will fail. Some get launched doing one thing and then they evolve into something different. like look at our company, we evolved. In fact, you could argue that the most successful companies evolved through 2, 3, 4 stages in their life cycle. I mean, Apple didn't start out as a phone company for sure. And I think Elon maybe he ends up being a robot company and not a car company, right, at Tesla. So I think that the winners will evolve and they'll find a niche. And I think that the ones that don't evolve, if you're just a holding company holding Bitcoin, not doing anything with it, might you get bought up? Yes, you might get bought and would that be good for you? You're a lot better off if you have something people want to buy, for example, Sears had a future because they had a lot of real estate that somebody wanted to own. And if they didn't own the real estate, it would have been a much worse situation for them. So I think that you're going to see all sorts of examples. Now -- and presumably thousands and thousands of companies get launched and they all do different things, and we're very embryonic early on, like in the first year or 2 years. 50 years from now, right? I mean, the debate will be who's the best Bitcoin-backed insurance company, right? But 20, 30, 40 years from now, and that company doesn't even exist right now. But on the other hand, what about us? Are they opportunities for us? Well, they were an opportunity for Stryve. Stryve did the deal with similar and they closed it quickly, and they were able to build their capital base pretty rapidly. So that's -- we see examples of that. There probably will be some mergers and acquisitions of other companies in various spaces that they put together their various assets in a synergistic way. Our business is laser-like, monomiacally focused on one thing right now. we want to make Stretch, STRC, the premier credit instrument in the digital world, the best digital credit in the world and maybe the best credit in the world. If we can create a product that trades with less than 5 that pays you 10% dividend with a stable $100 value and we pay a rock dividend, the question is who would want that? It's like everybody would want that. I mean, why wouldn't you -- like what's the demand for that? It's infinite. Like -- so if Stretch works, it's the ideal product and the company that can create treasury credit based on digital capital has the ideal business model. And so we generally won't get distracted, right? The #1 risk for us is a dilutive distraction, right? Everything else on our capital structure that undermines the credit of Stretch is a question mark, right? So you have to be thinking about that. And then anything we might do that looks complicated or risky or different would -- anything that introduces a question in the mind of the Stretch investor, can we pay the dividend? That's going to be deemed negative. Anything that introduces a question in the equity investors' mind, can you outperform Bitcoin? So generally, generally, we're pretty skeptical on acquisitions because they take a long time and then you might acquire something that you didn't want that you have to divest and then everybody wants to talk about how and why and how long it takes. And so I don't think -- I wouldn't say it's not a good strategy for other companies and other investors. There are other companies and other investors for which it's a great opportunity for them, and they can make a lot of money and they will pursue it and God bless them. For us, we believe we've stumbled upon maybe the most promising product, STRC. After 20 capital markets transactions and all sorts of credit instruments, we think we found the best one for us and for the credit investor. And we've -- and we think we found a great business model, right, the treasury company. If you can generate return of capital dividends scalably and scale up the issuance of treasury credit, you've got maybe one of the most efficient business models in the world and one of the most compelling products in the world. So we don't want to do anything that would dilute that focus, undermine the credit of the balance sheet or distract the management team from what we see is a once-in-a-lifetime opportunity. Shirish Jajodia: For the next question, I would like to invite Larry Lepard from Equity Management Associates. Larry Lepard: Yes. Thanks for having me on, guys. First off, 2 great things in my view, came out of the call. One, the whole guidance on the STRC rate. I mean that's brilliant. I really love it, and it's going to help people like me who are buying STRC as kind of a solid retirement type of asset to understand where it's going. And I have a question related to that, but I'd like to put it to the end. The second thing that I thought was really important was the notion that we're going to upgrade -- we're going to upgrade and play a leadership role in the technical direction of Bitcoin. I think that's fabulous and a great way of addressing all the f around Quantum, which I think is probably scared off a few of the bigger institutions who are looking at it and kind of saying, hey, who controls this whole thing. Just back to first principles, I want to just kind of run through how I look at this and see if you, as a management team agree I'm a value investor. I look for asymmetry. And in my view, right now, MicroStrategy is the most asymmetric value investment in the world, and most people don't understand it. And it's kind of stunning to me. My partner, David Foley and I, we did a model. We've done several models, and we've looked at it and said, if Bitcoin stays at $50,000 for 4 or 5 years, you can't break this company. It's unbreakable. I mean the dilution -- we calculate the dilution would maybe be 15% or 20%. So the downside case here in our view is really covered as a result of the fact that the debt is unsecured and the interest rate on it is very, very low. Some of it's convertible, as we all know. And the preferred is really equity. So to me, you've got an unbelievable situation. I think a lot of people listening to this call are kind of wondering, "Hey, what's going on with the stock price, what's going on with Bitcoin." My view on that is just that what's going on with Bitcoin is liquidity is really tight. And this is what's going to drive a big print at sometime relatively soon. And it's also what's driving the stock market down, and Bitcoin has always been kind of a leading indicator of where -- how much liquidity is out there. And so things are tight right now, and you see it, gold is getting hit, silver is getting hit, all of a sudden money assets are getting hit. But we know that the basement trade is alive and well because gold and silver have just been on a tear. And this reminds me very much of 2020 when gold and silver led first and Bitcoin followed harder. Bitcoin went up 6x in October of 2020 after gold had gone up 45% when Pell pivoted and then COVID came along. So to me, what's going to happen here is this thing is going to be a 2-bagger, 5 bagger, 10 bagger and most people don't really understand it. And I think the reason that's the case is kind of said where he said, commodities are a very, very hard business to invest in because they have long cycles and the average investor who's being marked quarter-to-quarter, month-to-month, year-to-year can't show long time preference. He didn't use those words, but he was essentially saying the same thing, which is Seifadine's point. And if you have the long time preference, you realize this is a commodity that has a fixed supply, the asymmetry, it's just -- it's absolutely blowing my mind. So I just want to say congrats for all you're doing. And I think it's a no-brainer that this is going to be an outstanding upside investment. I do have one specific question related to the Stretch product, and that is this. You're going to adjust it, okay? So maybe you have to adjust it in a while to get more people to buy it, fine. At some point, this is going to be a fabulous product. Everybody is going to want it. And if you kind of set the price at $100, could it ever adjust down? I mean, I'm buying it and I'll probably gift it to my kids because the tax basis will be 0, and I'll never sell it. Would be -- could you think about setting a lower boundary on the yield? I mean, 11%, that's attractive, 9%, 8%, 7%, those are all attractive. If it got so attractive that the yield on it started to go down to 5, 4, 3, 2, 1, that would be -- I mean, if people looking at buying it, thinking long, long term might wonder, is there a boundary below which this thing can fall? And we'd be better, we'd be more comfortable buying it if we knew there was such a boundary on the yield. Michael Saylor: Go ahead, Phong. Phong Le: I can start, Larry, and we agree with all your points. I think there's a significant misunderstanding of the leverage on the balance sheet and how we're going to service our convertible debt over time and these ideas that if Bitcoin price goes below our cost basis, that becomes an issue. And as I stated, Bitcoin needs to go down to $8,000 a coin and sit there for 5 years up until 2032 before we really have a problem being able to satisfy the convertible note. So thank you for pointing that out. On the rate on Stretch, right, right now, technically, the bottom of the rate would be SOFR, but we think of the fact that we get capital from Stretch. We put it into Bitcoin and Bitcoin is going to go up on average 30% a year. So anything that we pay less than, call it, 20% is accretive to our shareholders. So I don't think it's something where you should sit there and think that we're going to drive it down to SOFR, right? If Stretch price goes to $100 and sits at $100, we might take it down a couple of percentage points. But I don't think -- and obviously, it depends on where SOFR goes, but I don't think it's something that someone should think we're going to pull the rug out from under folks and drive it down to 1. Larry Lepard: Yes. I think stating that publicly to people who are buying Stretch would be important just so people understand. And if you were to say something along the lines of we're not going to let it go below 7 or something because it's going to get to be really popular at some point in time. And those of us who are buying it are buying it with multi-decade time frames, right? Michael Saylor: Yes. Another point to make is we can't lower the rate more than 25 basis points a month. So we're always going to be very incremental. And we would only lower the rate when -- in such a way that we thought it would stay in that zone of 99 to 101. Like we want to keep it target at 100. So you might 5 years from now find out that the rational credit spreads that the market assigns us are 300 basis points instead of 600 and that people would like to buy this thing at 400 basis points over SOFR, maybe. But we would very gradually get there and we would still expect STRC to be trading around 100. And so we're not looking to do anything that is jarring to the price. We want the price to be stable. As a practical matter, the reason that we would lower the dividend rate would be we had such an avalanche of demand. We had too much demand and people want to buy infinite, and we don't want to sell infinite because we'll drive the BTC rating of STRC down. right? Like if hypothetically, someone said, I want to buy $100 billion of STRC tomorrow, you can see how we don't want to sell it, right? Because then that's reflective and that would undermine the credit quality and that would increase the volatility and that kind of works against everything. So luckily for us, and practically, that's not going to happen, right? Like they say it's good that we have time because otherwise, everything would take place at the same time, right, all at once, all at once. We don't want stuff to happen all at once. So it will happen progressively. We'll be very thoughtful about it. Our goal is always for it to be extremely compelling to attract capital. and at the point where we feel like we've got too much capital. It would be a circumstance, Larry, where there was massive success of STRC and Bitcoin was lagging and MSTR equity premium was lagging and it's that weird situation where it's hard for the company to increase its collateral base in order to back the credit. And then we would say we have too much demand for the credit, so we need to click it down. But if there's over demand for the credit, it would still be pegged at 100 when we -- and we take it down 25 basis points. And so we're going to responsibly manage this so as to minimize volatility, maximize stability, and in all likelihood, it's going to be excessively compelling in terms of dividend rate for quite a while because even though you believe in Bitcoin as collateral and I believe in Bitcoin as collateral, we've got a lot of work to do with credit rating agencies and the Basel rules and traditional finance establishment before they recognize it as being good collateral. And as long as they don't, then that means probably the spreads are going to stay pretty compelling. Shirish Jajodia: For the next question, can we have Andrew Harte from BTIG. Andrew Harte: So it'd be great to hear some examples of some of the doors that have been open since strategy got a credit rating. Back in the fall, I think it's opened -- potentially open doors to pension funds, insurance companies and other really large institutional investors. And Michael, before we got on this webcast, you said something like times today that we're seeing with Bitcoin is when people are looking for insight and leadership. So I guess who better to ask, right, what is your expectation for conversations with these new potential investors with these really large pools of capital? If you could also shed some light on how the conversations to date since you've gotten that credit rating have evolved. Phong Le: Sorry, go ahead, Andrew. Andrew Kang: I was going to start, and Phong, please jump in. Look, Andrew, thank you for the question. I think the process with the rating agencies was an excellent process I think we've noted that we've had a credit rating in the past. It was more based on the legacy business. This is the first time a Bitcoin treasury company with a framework specific to that was rated by a major credit agency. I think overall, the reaction has been what we had expected, right? Like there is now a public profile that investors can look to. It is opening up, I think, interest. I think it's still early though, right? I think a lot of us that have been in these types of markets know that the credit rating agencies take time to develop. I think we noted earlier in the presentation that we believe we've made strides since the launch of the -- relaunch of the rating that we'll continue to make progress I think there's more to do in that sense. And there -- it's sort of created a little bit of a floor, so to speak, because everything we do here will be incrementally increasing the capital base. It will increase our ability to strengthen our balance sheet. And so I think in the long run, it may be -- it may take longer than it would take a near-term action. But I think that there's possible upside. I think that will continue to drive more large institutional demand. And to answer your question, I think the reaction from the investor base has been net positive. And certainly, the cash reserve has added on to that as well. Phong Le: Mike, do you want to cover the second question around just general Bitcoin? Michael Saylor: Just restate the question again. Andrew Harte: I was wondering how the conversations you've had with these really large -- very large investors have come along. And then before we got on, you said times like this is when people are looking for insight and leadership. And so as you continue to have those conversations with people that are new to Bitcoin, what do you tell them in a day like today? Michael Saylor: I think we've got an unprecedented number of invitations to financial conferences and meetings with investors in general. And I think that the amount of interest in this topic explodes. And when the volatility explodes, the engagement explodes. What I would tell them is the same. We've kind of said for a while, Bitcoin's capital investment, your time horizon needs to be minimal 4 years. I would actually say, look at the moving -- the simple moving 200-week average, the 200-week simple moving average or the 4-year average, and I would invest like with a 4-year DCA dollar cost averaging type approach if you're going to invest in Bitcoin. And you really want to have the intent to hold the product -- hold the asset for a decade. And if you can't stomach -- if you can't wait a decade with no cash flow and if you can't stand the volatility, then I would say you ought to buy the credit. If you believe in digital assets or digital capital, you believe in Bitcoin, but you can't stand to wait for a decade and take the vol, you should buy the credit and just take the 11% tax deferred with much, much less volatility and with someone else stomaching, the pain for you. And so I think it's kind of simple, right? You either don't believe in Bitcoin at all and then you don't want the credit or the capital or you believe in Bitcoin as a maxi and you want the equity because you want 2x Bitcoin or you want Bitcoin as sovereign and censorship resistant long-term store value to give you great grandkids who may be living in a country you're going to live in right now and you want to self-custody, then you buy the Bitcoin. Or you just think all this stuff looks really good, but you need the money back in September. then you think about the credit, right? And specifically the treasury credit because the other credit instruments are too complicated. So I would say we're really, at this point, pitching the credit, treasury credit as the first step in a Bitcoin journey for a traditional or conventional investor who believes in digital assets. And we're pitching to a lot of people, like we're talking to a lot, right? So there's a lot of conversations. And if anything, right, the volatility right here is the kind of the reason why you might want to have a product like STRC. If you wonder what's the justification? Well, just look at the 2 charts next to each other and you figure out why you might want the credit instrument. Shirish Jajodia: Great. And for the last question here, I would like to invite Dan Hillery from Buck. Unknown Analyst: So my question is as follows: The de-equitization of the convertible notes has seemed to be a bit of a headwind for the cost of capital across all the preferred equities. And if MSCR continues to trade below the convertible note conversion price, how many months before the put date would you guys consider refinancing or retiring the converts at a discount in order to lower the cost of capital across all the digital credit instruments? Phong Le: Dan, we went through this in 2022 during Bitcoin winter and our converts were at some point in time trading at $35 each and... Unknown Analyst: You mean $0.35 or $0.40 on the dollar, $0.35 on the dollar. Phong Le: $0.35 on the dollar, and we had considered whether it made sense to call -- to buy some of those back, and it never really made a lot of sense, especially if you live in a world where you think Bitcoin price is going to go up. So the converts aren't really this big overhang for us. And as I mentioned, you need Bitcoin price to go down to $8,000 and sit there for 5, 6 years before it really becomes a problem. So it's not really something that we think about a lot of whether we're going to buy back any of the converts or if we're going to do something early with them right now. Michael Saylor: I would say a year before we have a put event or a year before we have a redemption event, we certainly look at it and we look at the statistical likelihood of anything. And then we evaluate whether or not it makes sense to refinance or hedge or mitigate anything. And if we were to do it, we would want to do it 6 months before the event took place. So -- but right now, we're still far out of that window, and it's not clear there's any event. The last time I looked at one of our puts. It was -- the one that was coming due earliest, the bond was already above par, and so there is no risk to it. So when we get to a -- certainly, when you're more than 1 year out, it's all hypothetical worrying about something that's unlikely to ever happen. When you get to 1 year out, you have to consider whether there's a risk. And then we're certainly not going to wait until 1 month before we deal with the risk. We wouldn't wait until the last few weeks or the last few months. We would probably do it with a few quarters buffer at the latest, which means we start thinking about a year before. Shirish Jajodia: Great. Thank you, everyone. This concludes the Q&A portion of the webinar. I would like to thank all the guests for the questions and all the attendees for tuning in live. We had over 3,000 people join us live on Zoom webinar, over 4,000 people on YouTube live stream and over 180,000 views on X live stream. So this should be one of the most viewed earnings call in our history. So I appreciate all your interest in curiosity, and thank you. I would like to now turn the call over to Phong for final closing remarks. Phong Le: Look, I want to echo everyone's thoughts. Thank you for the analysts for joining us. Thank you for everybody for dialing into the call and listening, and thanks for those who are joining us online. I invite you all to join us in Las Vegas, February 25 at Strategy World and Bitcoin Corporations. And if we don't see you there, we'll see you again in 3 months at our next earnings call. Thanks.
Operator: Good evening, everyone. Welcome to TSKB's 2025 Year-end Financial Results and 2026 Expectations Webcast. Our presentation will start soon and will be followed by a Q&A session. Today's presenters will be Ms. Meral Murathan, Executive Vice President and Sustainability Leader, responsible for Financial Institutions and Investor Relations, Development Finance Institutions, Treasury, Climate Change, Sustainability Management and Treasury and Capital Market Operations; Mr. Can Ulku, Head of Financial Institutions and Investor Relations. Meral, madam, the floor is yours. Meral Murathan: Thank you, Jos, and good evening, dear participants. Welcome. Thank you for joining our financial results webcast by the end of 2025. On this call, we are also going to disclose our 2026 expectations and guidance by the end of our presentation. The first slide, where this demonstrates our year-end performance versus our guidance figures, we are glad to see that our realizations are well aligned with our projections. We did actually commit to our growth strategy and development mission throughout the year. On the top of $1.5 billion of loan disbursements during the first 9 months of last year, we disbursed nearly an extra $500 million of cash loans to Turkish economy during the last quarter. As a result, we closed the year with 11.2% of FX-adjusted loan growth as we guided. Our core net interest margin expanded during the year, whereas the security side had a constant contribution throughout the year, driven by our strategic asset management and our relatively resilient loan spreads, which stayed solid against even the market competition, we delivered 5.6% of net interest margin, which actually over beat our guidance figure. To remind, fees and commissions are generated from mainly 3 business lines of the bank, and we could name these like corporate finance, advisory and noncash loan operations. On advisory and noncash loan operations front, we have successfully realized our targets. In terms of corporate finance activities, last year was a bit muted as communicated with yourselves during previous webcasts. As a result, we ended up 17% below the 2024 year-end net fee income, which will actually translate into a low base for this year, where we project more favorable backdrop for capital markets. Our 29.3% cumulative ROE continued to be an example of the highest ROEs in the industry, as you will recognize. And 2025's strong earnings performance was mainly driven by consistently solid NII generation, strong collections both in the Stage 2 and Stage 3 and also participation income contribution. And on top of that, pre-provisions gradually being released amounting to TRY 950 million throughout the year. Still, we would like to note that we have TRY 1.1 billion free provisions in place to support our revenues throughout this year. Had we released the rest, the subject figure during last year in 2025, our ROE would have been at around 32%. On the efficiency side, OpEx growth was in line with the sector and above the average CPI as guided. To remind, main driver of OpEx is human resources expenses. Consequently, our cost-to-income ratio was flat on a quarterly basis, standing at 17.1%, which is still the lowest in the industry. Superior solvency ratios, which are well above the market was driven by our consistent and robust profitability. We are gladly closing the year with 20.3% capital adequacy ratio and 19.2% Tier 1 ratio, excluding the BRSA's temporary measures, while also achieving a more than 11% of FX adjusted loan growth in addition to more than 20% of Turkish lira depreciation. Our asset quality front, we booked a large ticket NPL, which was transferred to Stage 2 during the previous quarters. As a result, the NPL ratio rose to 2.4%, which is particularly in line with our guidance level. In addition, the problematic loans representing Stage 2 and 3 in the total loan book stood at around -- at actually 9.6%. Given this inflow, the cumulative net cost of risk, excluding the currency impact was read at 55 basis points by the year-end, again, aligned with the expected figure. To note, we do not foresee this shift to turn into a trend market position. Next slide shall deep dive into the last quarter's developments. Our new cash loan disbursements supporting Turkish economy reached almost $2 billion, given the accelerated FX loan growth during last quarter, bringing our FX-adjusted loan growth to 11.2%, as mentioned. And the main finance areas with the sustainable development focus were renewable energy projects, energy storage investments, renewable energy resource area projects, capacity investments in manufacturing sectors, along with the restructuring of the earthquake affected regions and inclusiveness focused projects. With the climate finance funding agreement signed under Ministry of Treasury and Finance Guarantee with KfW amounting to EUR 250 million. And the partial credit guarantee facility guaranteed by IBRD with the counter guarantee of the Ministry of Treasury and Finance secured through certain FIs in the amount of EUR 300 million. The total DFI funding represented to be $1.1 billion, which has been a record year. And when we include this syndication facility, Eurobond issuances, both in benchmark size and certain private placements, total funding reached to a level of $1.8 billion. Our distinguished profitability where NIM stood at 5.6% and ROE at 29.3% continued to decouple from the sector. Given our long-term nondeposit funding base, lease sensitivity to Turkish lira interest rates as well as strategically positioned investments in securities portfolio and also loans via our asset and liability management, our profitability figures continues to stay resilient enough. As we have just noted, we have been gradually reversing our free provisions with 4.5%. Still, we have one of the highest coverage ratios at an additional TRY 1 billion pre-provision stock in Turkish lira terms of core stock as a buffer and a contributor to our profitability going forward this year. Being committed to expand fees and commissions to income to support banking revenues, we have successfully closed 165 advisory projects in diverse sectors and have performed well on noncash loan business as well. And last but not the least, our comfortable solvency buffers enable us to stick to our growth strategy and meet our targets. Capital adequacy ratios supporting our internal capital -- supported by our internal capital generation capacity shall continue to stay well above the regulatory and sector levels going forward. This slide depicts quarterly and yearly earnings performance year-on-year and quarter-on-quarter earnings performance and the superiority in return on equity of the bank. Thanks to our business model focusing on investment loans, TSKB's profitability decoupled positively from the sector for the last 3 consecutive years, which translated into above market levels of ROEs. Posting TRY 2.1 billion of quarterly income, TSKB reached a cumulative year-end figure of TRY 11.4 billion with 12% year-on-year pickup in 2025. Quarterly net income dropped by 25% versus the previous quarter, given the high provision cost incurred as explained. Having said that, please note that we have not been affected by the tax adjustments as a sector due to our banking model. To remind, approximately TRY 1 billion of free provisions were reversed during the year with TRY 200 million extra resolved during the last quarter. The remaining free provision stock amounting to TRY 1.1 billion is going to support our revenues within this year, we do plan gradually reversing them with a cautiously optimistic approach. With the sustained earnings quality, the bank delivered a cumulative ROE of 29.3%, which was going up to 32% when the remaining provisions were totally released. The performance has been in alignment with our guidance levels. On this page, I would like to go into more detail about the P&L items and explain the main developments of the last quarter, particularly. Bank's NII, including the swap cost, continued to expand marking a surge of 22% year-on-year and 7% quarter-on-quarter. Behind the strong top line generation, loan spread was solid during the year, and we have started to reap the benefits of our leverage security investments in a timely and front-loaded manner. To note, our swap book expanded by 50% quarter-on-quarter as we allocated some excess liquidity opportunistically. However, our total swap cost stayed almost unchanged compared to the previous quarter. Moreover, TRY 844 million of CPI linker income was booked during the last quarter, surpassing in total TRY 3 billion, again, on a cumulative basis. The adjustment from 30.8% of our previous assumption to realized figure of 32.9% added an approximately TRY 200 million extra interest income. Trading line showed a surge of 74% year-on-year and 365% quarter-on-quarter basis. Substantially increased valuation gains from our private equity funds, including Turkey Green Fund, also contributed this performance. To remind, we have invested into one important project during last year in TGF, and we continue investing further, which will expand its contribution to our revenues going forward. On the fees front, the cumulative year-end performance was below our projections due to the market conditions, which has been communicated as such so far. Over this low base, our aim is to generate a substantial growth during this year with the increasing activity in the capital markets on which we will touch upon on the guidance page going forward. Other income includes TRY 200 million of pre-provision reversal where the cumulative amount reached almost TRY 1 billion on the top of strong collection performance within this year. As a result of resilient top line in tandem with the contribution of provision reversals and strong collections, banking income picked up by 37% compared to the previous year, whereas the quarterly figure was up by 23% on a quarter-on-quarter basis. Cumulative OpEx were up by 53% year-on-year, where the quarterly figure was also up by 20% compared to the last year -- the previous quarter, sorry. Quarter relief was mainly driven by HR side, human resources side in addition to expenses related with the 75th year anniversary of our bank. The trend is fully aligned with our projections and in line with the banking industry. It is certainly going to be gradually normalized by time with the improvements in the inflation front. Net banking income continues to expand by 34% year-on-year. To note, it is also up by 23% on a quarterly basis. Due to the last quarter's loaded provision costs, the cumulative and quarterly provisions are up by 400% levels. As a result, the total coverage surged from 3.6% to 4.5% quarter-on-quarterly change. Our income from participations continued to contribute to the bottom line with nearly 8% yearly and 20% quarterly increase. Unlike commercial banks, we do not have any promotional expenses or fixed assets and used to have a consistently stable effective tax rate. Therefore, we haven't seen any negative impact from the withdrawal of the regulation regarding the inflation adjustment. Consequently, the bank posted a net income of TRY 2.1 billion during last quarter, which is cumulatively up by 12% on a year-on-year basis. On this slide, we will touch upon our well diversified and long-term funding structure in a bit more detail. As discussed, loan agreements with the DFIs remain to be the main source of the bank's funding pool and continues to dominate our liability base. 2025 has been a record year for TSKB in terms of FX funding activities. We signed 6 new loan agreements throughout the year through the contributions of MDBs from various and different regions. In addition to the loan agreements signed in the first 9 months of the year, we've been marking the very first collaboration between TSKB and OPEC. And also the rest of the DFI agreements were to be during the first 9 months like OPEC funds, AIB, Development Bank and EBRD. In December, we have signed a new loan agreement in the amount of EUR 250 million with KfW as discussed, which support the climate finance team investments and also strengthen the economic cooperation between Turkey and Germany. This year also marked another first for us. We secured an RBR partial credit guarantee loan with the inclusion of financial institutions totaling to EUR 300 million. It's been a very debut transaction for us given the structure type. And as a kind reminder, we have implemented an assessment tool, actually created an assessment tool and implemented this for being the first of its kind. And the tool not only identifies and measures climate-related risks, but also provides a tailor-made recommendations and suggests actionable steps to our clients. So this will basically enable firms to make informed investment decisions that foster a sustainable and climate resilient transformation. Please also note that the 100% of the DFI funding obtained during the year has been under not guarantee, Ministry of Treasury and Finance Guarantee. On top of the DFI agreements, as discussed, TSKB was quite active in Eurobonds and private placement markets and syndicated loans and bilateral loans too. Thus, total funding from DFIs and FIs reached to $1.8 billion in a record size, which enhanced, of course, our liquidity buffers even further. To note, we have also currently by the end of the year, $982 million worth of nondrawn DFI funding, which are all guaranteed with the teams basically indicating the contribution to climate and environment and inclusiveness. Our strong liquidity position is very well reflected also by the FX LCR ratio, which is around 58% as of the year-end. This strong capacity shall certainly support our growth targets for the future. And going forward, we will be very proactive in new team development as discussed within the scope of climate mitigation adaptation, new incentive mechanisms and by the Ministry of Industry and Technology and also job creation, while also scaling our multilateral and bilateral FI funding activities. This slide is talking on the bank's healthy growing asset composition. Total assets as of the fourth quarter have reached TRY 326.7 billion with an increase of 7% compared to the third quarter and nearly 41% on a yearly basis. In line with our business model, assets mainly consist of loans with a share of 72%, followed by a strategically managed securities portfolio with a share of actual limited share of 16%. Consistent with our growth targets for 2025, total loans have expanded to nearly TRY 236 billion, reflecting an FX adjusted growth rate of 11.2%. With this realization, the 3-year average growth rate of the bank has been nearly at around 10%. The currency breakdown of our loan portfolio is, as you know, primarily in FX terms, accounting for 94% with Turkish lira loans comprising just 6% of the total loan portfolio. In terms of currency composition of the loans, the preference changed in favor of euro-denominated loans during the year. As a result, the share of euro loans reached 52.9% from nearly 42% compared to the previous year. We could say that these are well adjusted and secured on the funding base as well in terms of the currency breakdown, currency denomination breakdown. When we look at the types of loans in our portfolio as a development bank, investment loans corresponded to the largest portion, representing 81% of the total book. As such, we would like to kindly remind that the bank's loan growth targets were not adversely affected by the FX loan cap and some other relevant temporary regulations to this end. Our target is to continue our focus on sustainable development investments and expand our loan book by another low-teen figures going forward, which we will be explaining on the guidance page. And we do not foresee any change in the balance sheet composition either in terms of loans and securities and subsidiaries. We will continue with the details of our loan book on this slide. In the final quarter of the year, we continue to maintain our strategic focus and our development-oriented lending activities to support the economy. During the last quarter, cash loan allocation surpassed $1.9 billion, fulfilling our $200 billion -- sorry, $2 billion of year-end target, which corresponds to low teens FX adjusted loan growth for the year, meeting the year-end guidance. Within the total disbursements made last year, energy generation projects had the largest share by nearly 20%. In the outstanding loan portfolio, electricity generation loans contribute to the largest share with nearly 30%, of which 94% is allocated to renewable projects. To note teams such as inclusive reconstruction of the earthquake affected region, hybrid renewables and distributed solar power plants are tracked under their respective sectors such as metals and machinery, chemistry, plastics as such. And in both outstanding loan portfolio and disbursement graphs, as you could see on the slide. Again, in line with our long-term targets, SDG-linked loans continue to account over 90% of the total loan portfolio with the teams in the new loan disbursements standing up such as renewable projects, including storage investments, transformation, green transformation investments, circular economy projects. We are also enabling technologies efficiency -- energy efficiency projects and capacity increasing investments in manufacturing industry have been also important. Regarding project finance loans, renewable energy resource areas and certain infrastructure projects were also with us. Throughout the year, we monitored our net zero PET and performance temperature scores very closely. In that sense, last year has been a year of first. In the first quarter, we extended our first transition loan to a cement company. In the second quarter, our first project finance deal in agriculture benefiting from geothermal energy was also dispersed to enhance access to sustainable and safe food systems while also promoting women's empowerment. During the third quarter, consistent with our important role in financing Turkiye's renewable capacity, we signed 2 major renewable energy loan agreements as well as energy resource area project amounting with project amounting with a blue chip company actually. And in the fourth quarter, we financed the capacity enhancement investment of one of the largest renewable projects in Turkey. Going forward, TSKB will continue to support Turkey's sustainable development with investment focus on required areas as transition and mitigation, valuable job creation, inclusiveness and climate adaptation as well as the contribution to the earthquake affected areas. This slide shall focus on the bank's asset quality. With 9.6%, our bank's total problematic loans ratio continues to remain below 10%, which is the lowest in the sector. Despite the 2 files were transferred to Stage 3 during the last quarter of the year, NPL ratio still remained below the year-end guidance of 2.5%. Additionally, one single file was transferred to Stage 2 during third quarter. We always find it beneficial to highlight that the number of Stage 2 and Stage 3 loans are all -- are very low actually and will continue to be low in TSKB's portfolio. And all of them are already in operation, and these are also belonging to well-known groups or companies. We would like to also note about our collection ratio. Our collection ratio has been hovering around 90%. In addition, 100% of our Stage 2 loans and 33% of our NPLs are restructured. Thanks to our qualified human capital, we have the capacity to monitor these loans very closely and to conduct periodic and ad hoc analysis. And the provisions were increased in each loan group in the last quarter of the year. There have been also a considerable lift in the Stage 3 provisioning further to a single large filing as mentioned. Moreover, with the additional increases in Stage 1 and 2 coverages, the total coverage ratio of the loan portfolio went up to 4.5% from the last figure of 3.6%. This is still well above among the peers in line with the bank's prudent approach. In the fourth quarter, we reversed TRY 200 million free provisions following our reversals in the first and the third quarters. This all adds up to a total reversal of TRY 950 million in the last year. Bank's total free provision stock to remind, is at TRY 1.1 billion by the year-end. Consequently, the bank's currency adjusted net cost of risk was recorded at 55 basis points. For this year, for 2026, we would like to underline that we are not exposed to any trend in the base case scenario. We expect to maintain our NPL ratio and net cost of risk levels as reflected within this year, but we will explain it on the last slide. On this page, you can see our security portfolio in a bit detail. In the last quarter of the year, the share of securities book has slightly decreased to 16% of the total assets, while the composition of the portfolio has changed in favor of Turkish lira and fixed assets compared to the previous year. Share of Turkish securities in total portfolio remains to be above 50%, while the size of the total securities portfolio surpassing TRY 52.5 billion. As a result of our strategic management, we have been gradually decreasing the share of CPI linkers and investing in high yield fixed income notes as well as floating rate notes with higher spreads. October and October inflation was realized at 32.9%, which was a bit slightly above our assumption of 30.8%. As such, we booked TRY 844 million CPI linker income, and this was actually up by 32% quarter-on-quarter and making the whole year total amount reading at TRY 3 billion. To note, our October and October 2026 CPI assumption is 24.1%. In this year, we will continue to closely monitor the markets and continue to strategically manage the securities book to support our income base. Next slide focuses on our successful and structurally sustainable NIM performance throughout the year. We generated strong and resilient net interest income throughout 2025, thanks to our robust loan spread and front-loaded strategic asset management despite the increased market competition. The net interest income, excluding CPI and swap costs amounted to nearly TRY 4.5 billion during the last quarter, which corresponds to a cumulative increase of 35% year-on-year and 10% quarter-on-quarter. CPI linker income for the whole year, as mentioned, reaching to TRY 3.1 billion showing a year-on-year drop of 40%, driven by the disinflationary backdrop. This has been well justified by shifting the securities portfolio from CPI linkers to Turkish lira reference notes and floating rate notes. Swap utilization also picked up in the last quarter opportunistically and total swap costs have been almost flat still during the year and year-on-year basis. As a result, our strategic balance sheet as a result of our strategic balance sheet management, bank's annualized NIM realized at 5.6%, well above our year-end guidance of 5%. The slight quarter-on-quarter decrease reflects a lower CPI impact of 0.9%, while core NIM was sustained at 4.7%. We expect FX-adjusted loan growth to continue in this year, and this shall further contribute to NII within the year 2. And we could see some tightening in the loan spreads and the effect of the CPI linkers could come, but we will explore on this on the last slide. Slide, which you see on the screen, focuses on the bank's solvency metrics, which are beyond sector average, reflecting comfortable buffers against partly market volatilities and potential regulatory changes. In line with the year-end guidance, the bank remained on track to achieve its growth targets for the year, maintaining a clear focus on capital efficiency, delivering risk-adjusted returns and upholding a strong balance sheet. Our capital adequacy ratio moderated by 150 basis points compared to the previous year, mainly reflecting loan growth and higher risk-weighted assets, while the credit risk increased in line with growth and net profit remains resilient and still remaining above the sector average. In the last quarter of the year, without the temporary measures, bank's Tier 1 and capital adequacy ratios stood at 19.2% and 12.3%, respectively, well above the sector and regulatory requirements. Entering this year, the bank maintains a solvency buffer while contributing to the growth scenario and standing out favorably still against the peers. Strong capital adequacy continues to underpin again, our long-term growth strategy while resilient asset quality, above sector loan coverage and sustainable earnings generation further reinforces our sustainable solvency profile. As a reminder, the bank holds EUR 1.1 billion in free provisions. When adjusted for this amount, both Tier 1 and total CAR will increase by an additional 40 basis points. Last but not the least, we would like to conclude our presentations 2025 part with some highlights on sustainable banking. By the end of the year, SDG-linked loan disbursements have exited $7 billion and with a 2030 target of out of $10 billion. And meanwhile, our climate and environment focused SDG loan disbursements have reached to $1.7 billion, positioning us well to achieve our $4 billion target by 2030. During last year, we continued to prioritize both environmental and social development, operationalizing 2 focus areas, as discussed, adaptation finance and huge employment. And for each team, we develop internal toolkits to analyze our clients and clients' portfolio and increase our technical capacity and knowledge base as well. Since 2013, our bank has consistently reported to CDP, carbon disclosure projects, and reflecting a long-standing commitment to climate action and transparency. This sustained approach actually has resulted in our inclusion in the global A list for climate change and water security, while 2025 also marks our second reporting year for the forest team. In parallel, our sustainability performance continues to be recognized globally and along with external benchmarks. Our bank ranks at 39th overall the Corporate Knights Global 100 Index and List and is positioned first among 4 international banks while being the only Turkish FI represented on the list. Looking ahead, we remain committed to supporting Turkey's sustainable development by delivering innovative financial solutions and advisory services and while also advancing green and social investments and transformation. On the last slide, you can see our guidance figures and key differentiating areas that will continue to stand out relative to sector in 2026. Having achieved more than 11% real loan growth in the previous 3 consecutive years, the bank is committed with its sustainable development focused growth strategy. Our aim is to continue low teens real growth rate in 2026, too. The main focus areas will be as discussed, climate fund finance, such as circular economy adaptation transition and so on as well as renewable energy, including hybrid and consumer investment, storage systems, advanced enabling technology projects, efficiency, energy efficiency infrastructure and inclusiveness. With our earlier communications, we have pointed to a normalization in our profitability in accordance with the improving macroeconomic indicators. As very well known by the analysts and investors community, ourselves, TSKB is able to generate an average ROE above its cost of equity in the long run due to its distinctive business model. Our long-term funding base dominated by DFI sources also enables us to generate robust net interest margins. And in 2026, we expect our NIM to be normalized to 4.5% levels. The estimated contraction will also be driven by declining years of CPI linkers, which is not a unique case for our bank. To remind, we have been mitigating this situation, opportunistically shifting our strategy of the bank investing in Turkish lira on fixed bond securities. 2026 outlook is foreseen more favorable compared to the previous year in terms of capital market transaction, given 2025 low base for corporate finance fees and we basically estimate realizing at least 50% of yearly growth in this front. We believe this is achievable for net total fees and commissions income going forward. On a network basis, we will also continue to fill our targets in advisory and noncash business lines, too. Our distinguished and efficient business model enables us to deliver ROEs in the good level of ROEs in the sector. As such, we are expecting 2026 ROE to be around 25% levels. The operating expenses of the bank is mainly driven by human resources costs. To note, we expect actually our yearly growth to come down gradually with the improving backdrop in a couple of years. So our 2026 guidance will probably exceed the average inflation. Despite considerable loan growth guidance in alignment with our strong internal capital generation, both CAR and Tier 1 ratio are at record levels of the last decade. While expanding our loans, we will maintain our sustainable profitability and continue to generate solid internal capital. And as such, our estimated targets of CAR is around 19% and 14% Tier 1 ratio and -- sorry, our estimated target for CAR is around 19% and for Tier 1 ratio, it's going to be 18%, still above the sector levels. On the asset quality front, we do not foresee a deterioration as discussed in the risk profile or based on any specific sector. As 2026 guidance, we maintain our 2.5% NPL ratio and further to this 50 basis points of net cost of risk target. Operator: This ends our presentation. We will now start our Q&A. [Operator Instructions] We have 2 questions from Sadrettin Bagci and [indiscernible], which are similarly the same question basically. Do your 2026 ROI guidance include any free provision reversals? Yes. We will gradually keep the free provision reversals in 2026. Therefore, yes, our guidance includes these reversals. [Operator Instructions] Meral Murathan: So Sadrettin actually has question, meaning a very brief macro framework. Actually, we have not touched upon that but no problem. We could elaborate on this one. Actually, we could say that the general growth still continues to be under some limits, but still for this year, we estimate a 4% of GDP growth. Still we anticipate a growth, meaning in comparison to 3.3% of last year, 2025. And how we are going to operate in the inflation figure, we estimate that 24% will be the year-end. But on an average terms, we anticipate 27%. And also, we do continue the CBRE, as you mentioned, the rate cuts. The year-end figure is estimated to be under 30%, but currently, we anticipated around 27%. And we still continue -- we still expect the continuation of the real appreciation of Turkish lira and also in terms of the general macro levels, in terms of the current account deficit over GDP, we do not anticipate any substantial changes given where we've landed. And also this well with the noninterest income, public stock, noninterest over GDP. And also, we do not anticipate big changes in relation to the budget deficit or budget balance, let's say, compared to the last year's figures. So overall, we do not expect substantial shifts from the policy implementation, actually no shifts from the policy implementation. And in terms of the base case scenario, we do not actually price in certain elections, et cetera. [indiscernible] has a question. I do read it. Can you give more details about the funds you invested, revaluation gains are being recorded in trading gains? What are the areas of investments regarding these funds? And how is the revaluation dynamics working out? Actually, what we are talking about is mainly the Turkey Green Funds investments. And these investments -- investment actually was executed last year for a fishery. And we've been seeing -- as you know, the fund is in dollars and FX denomination basically. And this FX denomination creates also FX valuations on the revaluation front. And also, of course, the market valuation of the investment itself happens to be the case. So overall, in accounting terms, for some portion, it's been meant to be in the trading gains. If you have further questions, we could give details around this, if you could reach us. And we have another question by Sadrettin Bagci. Any restrictions for a fixed loan growth rate on your side due to recent amendments? Actually, TSKB is immune to these changes, not that we are excluded, but through the certain vehicles like we have been -- we are investing in investment loans, the green transformation. We have incentive mechanism implementations through the public and also the DFI funds that are secured under motor guarantee, we are immune to these changes. So as observed last year has been another growth year with us. And for this year, it's the base case. And last but not least, we have another question by [indiscernible]. Is there any restriction in terms of your funding agreement not to place any loans in defense sector? I could not see the defense sector in your loan mix. Actually, this is not within our mission and vision. So we are basically operating in, as you know, sustainable development focus. It's not a priority agenda with us. Operator: No other questions. Dear speakers, back to you for the conclusion. This concludes today's webcast. Thank you for your participation, and we wish you all a nice evening.
Pierre Anjolras: Ladies and gentlemen, good morning. Thanks for joining us for the presentation of Vinci's full year results. So you'll see -- you will have noticed that our performance is once again outstanding. Today, I'm joined by the members of the executive committee, several changes of late, the appointment of Thierry Mirville, Deputy CEO, who follow-on from Christian during the course of the year. We're also with the Investor Relations team, who you know well and will be available to answer your questions. So first of all, on this first photograph, we're heading for the Bay of Biscay where VINCI Energies, Cobra and VINCI Construction are working together on the new electricity interconnection project between France and Spain, the INELFE project set to be completed by 2028. It's the largest DC interconnector line between France and Spain, the 400,000 submarine cable with 2 conversion plants. It's a fine example in Europe and elsewhere, future exponential investments in power grids. Electrical infrastructure, we, first of all, think of production infrastructure, nuclear power as well as renewable power and equally essential infrastructures, which are the power, transmission and distribution grids that require as much investment, if not. And these electrical infrastructure projects are key components of the energy transition, but to a growing extent of energy security and sovereignty; a powerful driver, possibly the most powerful driver for Vinci's business developments. Other photographs now in the Concessions business on the left, London Gatwick airport managed by VINCI Airports, a major milestone reached last autumn with the final approval by the U.K. government of the transformation plan of the Northern Runway to allow for dual use with the main runway. This will increase the airport's capacity by 20 million passengers at the turn of the decade, increasing it to 80 million. Through this decision, the British Airways pragmatic implementing the key role of air traffic in the country's economic development as well as its capital. On the right, in Brazil, Entrevias highway, 600 kilometers crossing the state of Paulo. We own 55% of Entrevias now fully consolidated in early March 2025. We resumed operations on the highway of BR-040, 600 kilometers long and the Belo Horizonte Brazil route, managing over 1,200 km of highway. It's our largest highway network outside France and Brazil to give you an order of magnitude, 1,200 kilometers, slightly longer than the Cofiroute network that we manage in France. Energy Solutions now on the left, a fine shot of the Cadiz yard from the North Sea in Germany of the offshore wind plant BorWin5, 900 megawatts for TenneT, the second such platform installed successfully by Cobra. It's a feat of engineering, not always easy to implement Cobra teaming up with Siemens Energy constitute an unparalleled tandem in the world. Cobra has 8 other contracts in its order book for a cumulative capacity of 14 gigawatts gives us visibility on the activity and profitability through to the next decade. These offshore converter platforms are strategic also for Germany's energy transition and sovereignty and more broadly, that of Europe, as was reminded recently last week in Hamburg, a joint declaration of 10 European countries that want to make the North Sea the largest hub of offshore wind, targeting 300 gigawatts by 2050 back to Germany, the second largest VINCI market internationally and will become a leading international market this year through acquisitions by VINCI Energies in that country. And growth opportunities in infrastructure. VINCI Energies isn't just expanding in Germany. On the right, EnergoBit, that's a company acquired by VINCI Energies at the end of last year in Romania. This acquisition fits fully with our plan to strengthen our leadership in electrical infrastructure. For Construction, on the left, this is Auckland, the City Rail Link, the first underground rail link of the economic capital country. Work began in 2019. This design build project will be delivered in 2026 by VINCI Construction. It's a powerful lever for social integration and also sustainable development as a rail infrastructure for Auckland. Staying in New Zealand, let me remind you that VINCI Construction announced a fortnight ago that it signed an agreement with a view to acquiring Fletcher Construction with an annual revenue of over EUR 600 million. Next ahead. Construction, this acquisition will allow VINCI Construction to strengthen its position on the very dynamic infrastructure market in New Zealand and to increase the group's annual revenue to about EUR 1.5 billion in that country. We can say that as rugby fans, we've always converted our tries in that country, both in VINCI Energies and VINCI Construction, and we hope that will continue for the current highway PPP project being looked at by the teams of VINCI Concessions and VINCI Construction. Right back to France, heading for Nantes, shown here is the construction of the new University Hospital Center by VINCI Construction and VINCI Energies. This worksite is the largest hospital construction project in Europe. VINCI Construction is deploying ultra-low carbon concrete and this worksite illustrates one of the many hospital work sites currently being executed by the group. There are some dozen such projects at VINCI Construction France, Monaco, another 10 in the U.K. and 6 in Poland. VINCI Energies, many technical work packages in hospitals and not forgetting all the contracts in the health care sector for the pharma industry. So both these projects are fine illustrations of vital infrastructure with mega trends, the environmental transition with rail or health generating countless opportunities for VINCI Construction worldwide. And I'll return to that in greater detail when I discuss the group's exposure to major mega trends. Moving to the results proper. The takeaway of 2025 for VINCI, as I said, outstanding performance in line with previous years, outstanding performance in spite of the macroeconomic and global geopolitical context that you know of the highlights. Next slide, revenue growth driven by Concessions and Energy Solutions. Revenue growth with an increase in EBITDA and operating income across all our businesses. That's what counts for us more than volume growth. What counts for us is profitable growth, net income is up and that in spite of a very significant increase in taxation in France in 2025. Free cash flow reaches another all-time high at EUR 7 billion. We'll return to that in due course. For 2026, we're banking on a further increase of activity and the group's results. And lastly, the Board proposed a dividend in respect of FY 2025 EUR 5 per share. That's an increase in excess of 5% over 2024. This outstanding performance indicates that the group's decentralized and multi-local organization of the group has demonstrated its relevance once again, it reflects the group's culture, unique culture, more about that later. On this slide, the main financial indicators. Christian will return to that in detail. At constant taxation, the net income group share would have grown 10% at EUR 5.4 billion and free cash would have reached EUR 7.4 billion. On this slide, you see that our share of revenue international outside France is close to 60% proportion increases year-over-year. It's not that revenue in France is declining on the concrete activity in the country has grown 2%. It's international that's growing faster. You see also that at 5 countries accounted for total revenue, France, U.K., Germany, of course, which tomorrow, as I said, well, our leading international market as well as Spain and the United States. You will have noted that our net income is achieved over 50% outside France. This internationalization strategy, we've been rolling it out consistently for some 15 years now, and we'll continue to do so. Some key figures by business in Concessions. Revenue growth is 5% plus 4% like-for-like EBITDA margin comes in at 66.9%, up 10 basis points (sic) [ 14 basis points ] over 2024, driven by solid tariff increases, both in airports as well as highways, both in France and international, driven by the successful integration of our recent developments; well done to our teams led by Nicolas. Concessions accounted 60% of the group's EBITDA this year. In greater detail for VINCI Airports, the momentum is sustained. VINCI Airport passenger traffic continued to grow across almost all 14 countries of the network. That's down to several factors, increased capacity of low-cost carriers, the development of long-haul routes in several airports and more generally stemming from customer demand that remains robust. Even if the post-COVID rebound is dwindling, the demand for mobility is a vital need. In total, 334 million passengers used our airports, an increase of 5% over last year, in particular remarkable progress achieved in Japan, notably a consequence of the Universal Fair in Osaka last year and recently acquired airports, Budapest, Edinburgh, the OMA airports in Mexico, Cabo Verde. All this demonstrates the discipline with which M&A is undertaken, our serious analysis as well as the momentum that we can in part to the new airport. This dynamism of passenger traffic in VINCI Airports is due to our own capacity, thanks to the network effect, our unique network of airports to offer new routes, offer new routes to airlines, 400 in 2025, and I can't resist the pleasure of just an invitation to travel to mention a few, Porto Montreal, Gatwick, Bangkok, Edinburgh, Boston, Budapest, Nantes and from Mexico, Monterey, Paris. Once again, we have collectively demonstrate that this portfolio of unique airport assets achieved many operational, technical and commercial successes throughout 2025. Autoroutes, highways in France, VINCI Autoroutes traffic posted a growth of close to 1%. VINCI Highways EBITDA continues to grow, whilst remain penalized by the tax on transportation infrastructure since 2024. We continue to challenge that before the courts. But we've renewed constructive and calmer engagement with the state as illustrated by the ESCOTA works program to ensure the good maintenance of the structure between now and the end of the Concession contract in 2032. That program was approved by the government early 2025. We just owned a new planning contract for Cofiroute with more about that later. For VINCI Highways in Denver, united States. We're doing what we said we wouldn't, faster than expected. A year ahead of time, we put in place the toll modulation system with tariffs vary depending on the time of day. That has a positive upside on revenues. In Brazil, we reviewed resumed operations of the Via Cristais and we now fully consolidate the Entrevias accounts in the group accounts. As you know, we are the leading private airport manager worldwide and handful where the leading private highway manager in the world with 8,200 kilometers of network gives us great pride and it's a fine responsibility. Energy Solutions remaining very dynamic, revenue of Energy Solutions at VINCI. Okay, let's round it off, let's say, EUR 30 billion. That's an increase of some 8% at actual structure, plus 6% like-for-like. Strong momentum in Q4. This revenue is driven by international business that represents over 60% of the revenue. This growth is accompanied by further progress in margins over 20 basis points at 7.6% positions as once again and without challenge, one of the most efficient players of the industry globally. Well done to VINCI Energies and Cobra. Energy Solutions represent almost 1/4 of our EBIT. This year confirms the excellent positioning of Energy Solutions, rate dynamic markets driven by the energy transition, the digital transformation as well as by defense and sovereignty issues. In greater detail, you can see top right that the 4 areas of activity of VINCI Energies that represent an unparalleled range of expertise. We're all posting revenue growth. You can see that VINCI Energies continues its crop in terms of external growth with about 30 a year. That's one acquisition every fortnight. Internationally, VINCI Energies revenue is up 8%, notably in Germany, the leading market, the Netherlands and also in Belgium, and in France, growth comes in at 3.4%, that's way above GDP growth. Turning to COBRA. Flow business activities remain well oriented, particularly in key markets such as Spain, Portugal and Brazil. Overall, this segment grew by nearly 5%. In large EPC projects, which happens to be Cobra's area of excellence, the strong increase in activity, plus 24% was driven by the construction in Germany of offshore electrical converter platforms for the North Sea. And also in Germany, the development of LNG regasification terminal. In Brazil, high-voltage power transmission line. And of course, we talked about that very much in July, the launch of the major PPP project in Australia. These are all strategic projects that contribute to the energy sovereignty of the regions concerned. In the Construction business revenue increased slightly. As you know, selectivity is our guiding principle in this business. And the lower revenue observed on a like-for-like basis is evidence that this selectivity policy is effectively being implemented. However, our teams successfully improved profitability by nearly 30 basis points compared with last year. So once again, excellent work the VINCI Construction and VINCI Immobilier teams. At VINCI Construction, revenue increased by 1.1% to EUR 32.1 billion despite a significantly negative ForEx impact, minus 1.5%. Market conditions vary across regions and business segments. Activity in major projects declined reflecting the phasing of progress on a number of large infrastructure projects, core flow business activities remained at a solid level, both internationally and in France, where activity increased, thanks to sustained demand for road, rail and hydraulic works as well as building refurbishment projects. Specialty activities at [ Soletanche Freyssinet ] also remained at a good level, particularly in the nuclear sector. Let me also remind you, you can see the pie chart on the screen that the vast majority in Construction revenue is generated from smaller scale projects delivered for recurring local customers, what we call our core flow business activities. And that is unusual among our top competitors. In other words, the share of major projects in our overall activity is deliberately limited representing around 10%. In the property development sector, in France, market conditions remain extremely challenging. VINCI Immobilier's teams are demonstrating our ability to stay the course despite headwinds as illustrated by the return to positive earnings in 2025. Order intake reached a high level in 2025, EUR 63 billion. Our key takeaways include flow business activities, which account for the vast majority of growth revenue in Energy Services Solutions and Construction, that remains well oriented, increasing by 3%. So order intake overall remains higher than revenue, particularly in Energy Solutions. And this means that the backlog continues to grow. I will now hand over to Christian Labeyrie, who will present the group's financial performance for the year in detail. Christian Labeyrie: [Interpreted] Thank you, Pierre as Pierre explained, our 3 businesses delivered very different growth rates; plus 8% for Energy Services or Solutions, plus 5% for concessions, plus 1% for construction, resulting in overall group revenue growth of plus 4%. And these trends reflect differing market dynamics and geographic mixes across our businesses. This is not by chance. It's the outcome of a long-standing diversification strategy designed to reduce the group's exposure to economic cycles and geopolitical risks. This strategy enables us to grow in a sustainable manner, delivering solid results and steadily increasing cash flows year after year. To achieve this, M&A growth is a key pillar of our strategy. In 2025, changes in scope contributed plus 2.5% to group revenue growth. And for international operations, the contribution was higher at 4.1% as most acquisitions were completed outside France, and this represents close to EUR 2 billion in additional revenue. Full year impact of 2024 acquisitions, EUR 700 million, including over EUR 400 million for VINCI Energies. And the consolidation of Edinburgh Airport mid-2024 to the tune of EUR 162 million. And the 2025 acquisitions contributed EUR 1.2 million -- actually EUR 1 billion, including Conway EUR 664 million, VINCI Energies, EUR 278 million; and VINCI Highways EUR 93 million, so nearly EUR 100 million. By contrast, ForEx impact had a negative effect on group revenue of minus 1% or EUR 686 million with a significant share, EUR 462 million or minus 1.5% attributable to VINCI Construction. So the euro appreciated year-on-year against several currencies, including the U.S. dollar, 4.4%; the Canadian dollar, plus 6.5%; Australian dollar, 6.9%; and New Zealand dollar, plus 8.6%; the Brazilian real, 8.3%; and sterling, plus 1.2%. On a like-for-like ForEx basis, group revenue growth would have exceeded 5%, while international revenue growth would have reached plus 7.4%. Now the geographic breakdown. France accounts for 41% of total revenue, which means a 2% increase in line with domestic growth and inflation. Europe, excluding France, 38% of total revenue, up 9% or plus 3.7% on an organic basis. The U.K., 10% of total revenue, up 10% organic growth of 1.2%. Germany, close to 9% of total revenue, so EUR 6.5 billion in revenue, up 17% or plus 11% on an organic basis. Spain, 5% of total revenue, broadly stable. The Americas, EUR 10 billion, 13% of total revenue, organic growth plus 2.2%. The U.S., EUR 3.4 million, up 4.6%, but up 7.2% on an organic basis. Canada, EUR 2 million; Latin America, EUR 4 billion, up 6%; Brazil, 1.8%, plus 18% or plus 13.6% organically. Australia and New Zealand, over EUR 2 million, but down 10% due to an unfavorable ForEx impact. And Africa is back to growth, EUR 1.8 million, up 14%. If we look at operating profit from ordinary activities, 2025, EUR 9.558 million, representing 12.8% of revenue. So plus 6.2% versus -- that's an increase of 6.2%, exceeding revenue growth of plus 4.2%. Now comments on margin trends of VINCI Concessions. There's an impact from higher depreciation charges of VINCI Autoroute, mainly reflecting the commissioning of the A57 widening project in the Toulon area. So for VINCI Airports, there is a mix effect between the different platforms with the end of the [ Pumping ] concession. Highways, you're not seeing the impact on the slide, but we're seeing a strong increase in [indiscernible] VINCI Highways due to the consolidation of Entrevias and Denver. For Energy, VINCI Energies is seeing a margin that's up 20 basis points. And you've got to understand that this margin rate is rather homogeneous between the different divisions and business lines of VINCI Energies. It's also true for Cobra. We're seeing an improvement of 20 basis points, so 8% margin and margin levels are broadly comparable between flow business activities and EPC projects. VINCI Construction, margin up 10 basis points to 4.2%. Again, the impact is quite clustered. We're seeing that the U.K. is back in the lead. The U.K.'s profit margin is close to 4%, and this has never happened before. And this is in part due to Conway being consolidated. Now in real estate, this business was making loss last year due to restructuring and impairments for commercial housing projects. Now we're seeing an increase in the IFRS 2 expense, and this reflects the impact of the PEG employee shareholding project and an increase in employee subscription. And because the share price has increased, this has led to an impact that was higher than in 2024. And this is offset by the improved contribution from the equity accounted affiliates as well as the airports in Japan. Also Cobra's stakeholding in electrical transmission lines in Brazil. Recurring operating income, 6.2%, but we're seeing differences from one segment to another, plus 5% for concessions, plus 1%. And if we look at the breakdown, we find that there are 3 equivalent blocks, VINCI Airports and other Concessions, 31% and Energy Solutions and Concessions, 35%. Now if we look at the situation the previous several years ago, we were highly dependent on French motorways. Now there's a much better balance between the different contributions of the different segments to the group's financial performance. Previous slide, please. Now if we look at nonrecurring items, there are positive impacts of disposals in 2025, particularly the pullout from our Russian auto route activities and also our participation in access and also divestments for Cobra, including a pullout from offshore wind farm development. Now there's an increase in net financial expense because we paid over EUR 7 billion for new acquisitions in 2024, but the impact is rather limited. It's much lower than expected because of the volume impact due to the growth in debt because of the acquisitions has been offset by cash flow better than expected. And we've been -- we've enjoyed a favorable ForEx impact in particular, thanks to our strategy, partially floating rate debt. So we've been able to curb the increase in financial expense. Now if we look at our P&L, this comes as no surprise, but tax is up significantly, plus EUR 560 million, including EUR 449 million related to the [ surtax ] on large corporate profits introduced in France in 2025 and extended to 2026. As a result, we're leading -- we're seeing an effective tax rate of close to 35% versus 29% in 2024. If we restate, for that, the effective tax rate would have been 29%, broadly in line with 2024. The corporate tax rate in France increased from 25.83% to 36%. So net income, EUR 4.9 billion despite the higher tax burden in France was slightly above the 2024 level, which came to EUR 4.86 billion. Earnings per share increased by 2.6%, reflecting share buybacks that reduced the number of shares outstanding. The number of shares outstanding decreased from 562.4 million to 556 million at the end of 2025, and that's a 1.1% reduction, and this continued through 2026. As you can see, we have a new share buyback program, which will cover Q1 2026. On a constant tax basis, net income would have reached EUR 5.35 billion. So that's a 10% increase and earnings per share would have reached EUR 9.44 per share, so up 12%. Now if we look at the cash flow statement and analysis of the change in debt net for -- during the year, consolidated net financial debt decreased in 2025 from EUR 20.4 billion to EUR 19.1 billion at the end of 2025. Why? Well, first of all, because our EBITDA improved by EUR 800 million, increased more than our revenue, so up 6.4%. Also a positive change in working capital requirements and current provisions causing contribution in cash of EUR 2.5 billion, which is higher than the already very strong 2024 level, EUR 2.3 billion. What we can say is that over 2 years, thanks to strong control of working capital in 2024, we're talking plus -- we're looking at plus EUR 1.8 billion, which is comparable with 2024. And also, we have a prudent provisioning policy. So plus EUR 0.7 billion versus EUR 0.5 billion in 2024. So the group generated an additional EUR 4.8 billion in cash. Contrary to what some of you expected, this remains a strength for the group. And this reflected sustained efforts across all divisions, particularly at VINCI Construction to structurally improve our collection process for customer receivables and also our billing process, which delivered results beyond our expectations. You got to understand that Vinci's business is 90% flow business. I'm talking about construction, of course, in energy. So contingencies pertaining to major projects have much less of an impact than they used to when it comes to changes in working capital requirements. Now I'm not going to back to tax. Tax is up, financial expense is up. CapEx remained broadly stable year-on-year, EUR 4.9 billion, although there are different trends across divisions. Concessions, EUR 1.3 billion versus EUR 1.4 billion last year. Energy, EUR 2.3 billion versus EUR 2.2 billion last year; and construction, EUR 1.3 billion, same as last year. Financial investments made in 2025 amounted to nearly EUR 1.8 billion. That's the difference between disposals and acquisitions, but there's a sharp decrease compared with the EUR 7 billion in 2024 when we consolidated Edinburgh, Budapest and also the Denver Highway project. This year, what are we seeing? Well, we've seen the consolidation of FM Conway, EUR 0.5 billion, VINCI Energies acquisitions, so about EUR 400 million. And this includes 3 important affiliates in Germany. We dealt with ACS to finalize the EUR 300 million project and also integration of Entrevias. We have a 55% stake in this project in Sao Paulo in Brazil, which didn't use to be fully consolidated. And following renegotiations on governance, we're now going to integrate the debt for this project. Now the divestments amounted to BRL 300 million to BRL 400 million following the disposal of a corporate stake, in particular, in this project in Brazil, offshore activities in Brazil, the sale of access and also the sale of VINCI Highways' Russian assets. So cash return to shareholders is significant, BRL 3.8 billion, including BRL 2.7 billion in dividends paid to VINCI S.A. shareholders and also the dividends paid by Gatwick, Edinburgh and OMA to minority shareholders. Now we bought Edinburgh over 1 year ago. And this is the first year that we've been able to extract cash from that entity. Share buybacks, I talked about that, EUR 2 billion. So share issuances, EUR 0.8 billion, representing 7.5 million shares -- and we need to look at the difference between gross debt and net cash. And this is increasing over a year. Seasonality of free cash flow, that's the next slide. Nothing new under the sun. VINCI's businesses are characterized by strong seasonality in contracting activities, business volumes are lower during the winter months and I am assuming the obvious year. In Concessions, activity is particularly strong during the summer period. Fixed costs, however, remain largely stable throughout the year. So most of the group's cash flows generated in H2, particularly the last quarter of the year as illustrated by the chart. This is why it's difficult to have a reliable forecast. We did go out on the limb this year, but we were dragging our feet for that very reason previously. An additional challenge in producing reliable full year free cash flow forecastings from the group's highly decentralized organization. So over 4,000 business units, over 3,000 businesses consolidated and our BUMs, Business Unit Managers who are the core of our business, usually adopt a cautious approach when communicating the forecast. And that prudence is understandable, but the cumulative effect can result in significant variances at year-end as layers of conservatism add up. Now 10-year trend in free cash flow and net income cash conversion, we're seeing that we generated close to EUR 50 billion over 10 years, including over EUR 30 billion over the last 5 years. And this illustrates the effectiveness of the group's business model and the relevance of its -- and the power of its decentralized management organization. Secondly, and this in spite the fact that we weathered as many others, a lot of extraneous crisis during that period, thanks to the diversity of our activities and our geographical footprint and a prudent financial policy, we've been able to deliver year after year solid results. We've improved them as well as free cash flow generation. It's the fruit of the work of our business units, our thousands of BUs, all efficient companies, very customer-focused, responsive, fleet footed to take account of market changes to end our financial policy. It's not revolutionary what I'm going to say. I tend to repeat myself every time. Financial policy rests on several pillars. Firstly, it's key for us to have considerable liquidity. It's the price of liquidity, EUR 15 billion cash. That's EUR 2.4 billion increase, a credit line, EUR 6.5 billion by our banks, maturity extended to January 2031. In spite of the cyclical variations in market conditions at all times, we can generate resources to continue to invest in our businesses, seize development opportunities that form part of our strategic plan and return to our shareholders. We have to manage significant debt, EUR 34.5 billion that is actively managed. It must be refinanced regularly and its cost must be optimized. 2/3 of the debt are housed in infrastructures that we managed for long-term contracts. That's about EUR 10 billion for ASF and Cofiroute and as much on our airports. So debt service with the concession -- debt service is insured by cash flow generated by projects to calibrate fully our capital injections and optimize return on investment debt housed on projects is fixed rate, whereas corporate debt has a variable rate. At the end of 2025, fixed rate debt accounted for 46% and 34% and variable debt, 54%. We've been able to reduce the average cost of our debt by 60 bps in 2025, bringing it down to around 4.3% despite of the fact that 60% of the debt is not denominated in euros, the euro where we arrive at very low rates. It's not the case when we borrow in real. So Colombian currencies, dollar or sterling. And lastly, we're preserving our excellent credit ratings. As you know, minus A3 S&P, Moody's, they're periodically reviewed, but they're confirmed year after year. And thanks to all that, we're able to issue in 2025, EUR 5.7 billion additional debt to refinance EUR 4.2 billion. Excellent conditions. Our signature is widely appreciated by bond investors as we demonstrated successfully in January with a new ASF issue, EUR 500 million over 8 years that have cost below 3.5%. Thank you. Pierre Anjolras: [Interpreted] Thank you, Christian, for those very clear explanations. In terms of outlook now, our outlook reflect our value creation strategy in both our long-term and short-term activities, long-term activities, mobility infrastructure. This year, VINCI has signed with competent authorities, major agreements that strengthened visibility and offer promising growth prospects in airports. I'd like to emphasize the expansion potential of the airports that we operate in addition to our M&A growth. In this complex world, one of the great strengths of VINCI is to forge relations based on trust throughout the world. And thanks to this constructive dialogue, several major agreements were signed these past few months. A few examples. London Gatwick, I mentioned we have the approval of the Northern Runway in Lisbon, Portugal. Our teams in January 2025 at the request of Portuguese authorities began to study the development of a new airport at Alcochete, Lisbon. A major milestone was reached after consultation of the stakeholders with the receipt of a favorable response from the grantor regarding the launch of the preliminary design phase. Let's cross the Atlantic. In Mexico, OMA subsidiary signed at the end of December, a new 5-year economic regulation contract defines investments over the period, around EUR 800 million as well as the associated tariff increase in Cape Verde, further investments in excess of EUR 140 million over and above those already launched early 2026, increase the airports of the island state to boost their traffic, but above all to maintain the economic and tourist dynamism in the country. We can mention the start of the launch by VINCI Airport in close conjunction with VINCI Construction, VINCI Energies, the new terminal of the Santo Domingo Airport in the Dominican Republic. In France, following a constructive and confident dialogue with the state, VINCI has just signed a new rider to the concession contract for Cofiroute. Through moderate tariff increase, it allows the application of the court decision on the composition of the increase on the regional development plan and an investment of some EUR 350 million on the network. These are essentially shared mobility investments, regional development and use of e-vehicles for electromobility. 100% of the VINCI service areas have charging stations as well as some 40 service areas, making it the best equipped highway network in the country for 2,400 charging points, that's 54 every 100 KM. Thanks to that, the number of charging stations could double. Through all these examples, our infrastructure is vital, but also changing, evolving, being renewed and needs development, many opportunities for value creation by VINCI for VINCI, both in our airports and the highways that we manage. In terms of energy infrastructure, long term. In 2025, the group decided to combine the energy production activities, essentially PV developed by Cobra Zero.e. That's the dedicated subsidiary to better nurture performance to optimize financing arrangements and asset rotation if need. Zero.e has a total capability for renewable power production of 5 gigawatts. 1.2 gigawatts in operation and 4.2 gigawatts under construction already to build to date. Cobra has invested EUR 2.3 billion in that portfolio. This investment policy is selective, targeted on limited number of geographies, Spain, Brazil, the United States and also Australia. We plan to strengthen the value of these assets with battery projects. And on the basis of this current portfolio, we're banking for this activity by 2030 on an EBITDA in excess of EUR 400 million. So furthermore, still long-term energy assets, Cobra benefits, as does VINCI Energies of long-standing expertise to implement construction and maintenance projects for high-voltage power lines, Cobra is currently in charge of 4 PPPs for over 200 kilometers of lines in Brazil and Australia. This is the beginning of an asset portfolio in the field of energy transmission lines where opportunities are numerous in Brazil. They're developing in Australia. And we believe that they will also expand elsewhere, notably in the United States. Short-term activities, all our businesses are driven by the world's mega trends. And on this slide, we're presenting a selection of 6 megatrends that we view as dynamic, both short and long term. For electrical infrastructure, the group generates over EUR 10 billion revenue with the backlog of close on EUR 20 billion. We're one of the world leaders, if not the world's largest utility, rail works, EUR 6 billion with a backlog of EUR 11 billion. Defense and sovereignty, EUR 2 billion in revenue and EUR 3 billion by way of backlog. Water infrastructure, EUR 3 billion revenue with similar backlog; digital infrastructure, we assess our revenue at EUR 7 billion, backlog EUR 6 billion; healthcare, EUR 2 billion in revenue and equivalent backlog. All these vital assets are already reflected in our figures, account for half of the revenue and 2/3 of our order intake in Energy Solutions, and that's set to continue to grow. Our order build continues to grow reaching an all-time high of some EUR 70 billion. That's over 14 months of activities. Offices visibility, we can view the future with confidence without departing from our selectivity policy margin over volume. On the right, the share of France, 29%; Germany, 20% share; and the rest of the world, 51%. Shown here is our guidance, 2026 by business. VINCI Airports' passenger traffic should continue to increase overall in line with global economic growth with various situations across region. VINCI Autoroutes in France, traffic growth should follow French economic output and that of its neighbors, including Spain and Italy. Energy Solutions are expected to see their revenue growth in a mid- to high single digit range, expected improvement of the operating margin already at the highest level in the sector. Total capacity of Zero.e in operation and construction ready-to-build could go from 5 gigawatts currently to about 6 gigawatts at the end of '26. Construction revenue, excluding ForEx impact, is likely to be broadly similar to the 2025 level with at least the same operating margin. Based on these expected developments, assuming no change in taxation, similar corporate tax rate as in 2025, VINCI will deliver further growth in its revenue in 2026, increase in its operating earnings. And further increase in its net income and as initial estimate of free cash flow, which could reach EUR 6 billion. The dividend on the basis of the remarkable performance in 2025, the free cash flow generated and confident in the prospects, the Board will propose at the upcoming shareholders' meeting a dividend of EUR 5 per share, EUR 1.05 has already been paid as an interim dividend. This would be an increase of 5% over 2024, and that would be a payout ratio of 58%. A word to remind you of our capital allocation strategy, consistent strategy for their shareholder on the right, the dividend with the payout ratio target, 60% of net income and share buybacks over and above the prime aim to offset dilution brought about by the issuance of shares to employees. The group will undertake opportunistic share buybacks based on our financial leeway taking into account M&A and the share price performance whilst seeking to maintain, as Christian said, a solid financial structure to maintain the excellent financial ratings. In terms of development on the left, we'll continue to invest in long-term infrastructure concessions, be it auto routes or airports through M&A or investing in our existing assets as well as in long-term assets for the production of renewable power storage and transmission lines. Short-term activities, the group strategy is to go all out on Energy Solutions for 20 years now. We've demonstrated our know-how when it comes to acquiring and integrating successfully new companies and the group remains open in the construction field to opportunistic acquisitions. Shown here is a summary of our capital allocation strategy over the past 3 years. Free cash flow totaled some EUR 32 billion, 3 broadly similar segments. EUR 11 billion, EUR 2.7 million for developing energy assets and PPP transmission lines, EUR 10 billion in M&A to prepare confidently our future. There are main deals over the 3 years. The equity IRR and EUR 12 billion in dividends and share buybacks. Shown here is a recap of the major acquisitions in 2025 already discussed, and I'd like to emphasize what Christian said, we regularly undertake disposals so as to optimize our ROE and improve clarity. The portfolio reviews are regularly undertaken leading possibly to an increase in investments in some assets or disposals in others. With Christian, we've just presented VINCI's financial performance for the year. It's remarkable. This ability to generate long-term value rests on a very strong VINCI culture that is shared by all that makes VINCI unique. This culture is shown on screen, is the long-term mind-set, the quest for all-round performance. We consider both financial and nonfinancial performance inextricably linked. That's the all-around performance. Our Group culture is decentralized, multi-local, agile organization, which is particularly relevant in this polarizing world. Our culture is its trusted management with common principles across its 1,400 BUs, unmatched execution policy, focus on cash generation and great discipline and cash allocation. This culture characterizes VINCI in all its businesses, in all its geographies and characterize its -- all its global assets. It's this synergy, the shared values that make VINCI a rare precious value. At least for us, it's the only way of continuing to create value long term, and we once again demonstrated in 2025, and as we'll continue to demonstrate. Thank you for listening. I'd also like to warmly thank Christian today with some emotion. Christian, you've been Group CFO, if I'm not mistaken. since January 1999. It means that VINCI duration and long term is also present in its executives and management. And if I'm not mistaken, you've just presented for the 28th time the group's financials since you were appointed, I haven't taken into account the share price performance today. 1,100% and over 3,000% with the dividends, that's an average 14% a year on behalf of the almost 300,000 employees of the Group, majority of whom are shareholders. Thank you. Well done. Pierre Anjolras: [Interpreted] You can do just as well. Even better. Let's go with the bank. Together with Christian and the rest of the Executive Board, we are at hand to answer any questions you may have. Eric Lemarié: [Interpreted] Eric Lemarie, CRC. I have 3 questions for starters, if I may. Question number one, future potential calls for tender as part of renewing concession contracts in France. What about the timetable following the presidential elections? The press talked about 2028. Do you have additional information on that? Question number two, the rider to the Cofiroute contract, could you please give us some color regarding how things worked out? Who approached who? We often bear in mind the political risks, but maybe those risk are lower than what we'd expect. Could we expect a similar amendments to Escota contracts or ASF contracts? Do you intend to proceed similarly? And also the EUR 300 million in CapEx, could you give us the sequencing year-on-year and also the return on capital employed for this particular plan? And 1 last question regarding free cash flow. The guidance stands at EUR 6 billion. So what are your assumptions when it comes to working capital requirement fluctuation? Pierre Anjolras: [Interpreted] Regarding the first 2 questions, I'm going to hand over to Nicolas. Nicolas Notebaert: [Interpreted] Now on a more short-term basis, the investment program contract with Cofiroute and also prospects for investments. As Pierre rightly said, what's important when it comes to concessions, particularly when there are legal contract disputes, always maintain dialogue. And that's what we did. And we now have a constructive dialogue. So what is disagreement all about? It's about transferring investments. In the life of a contract, a certain type of investments were not being made. So mechanically, we were able to transfer them to new types of investments, particularly for decarbonizing motorways, multimodal exchanges, reserved lanes, et cetera. So one important factor, compensation. The Court of Appeals issued a ruling in 2025 and so the increase in the TAT divisional development tax which was specific to motorways was supposed to be offset for Cofiroute. Since May 2025, the government orders for the past increase in tax and also for the future increase in tax, and this generated additional investments. And as a result, the court ruling in May 2025, plus our partnership-driven approach meant that we were able to find common ground. So you also referenced other companies. We have submitted a new joint project together with the government regarding Escota. So that's work in progress. The investigation is underway. And of course, we're not ruling anything out when it comes to ASF, but it will be a different approach. As Pierre rightly said, we have completed Stage 1 when it comes to the end of the concession contract because 7 years ahead of time, concession contracts require an agreement when it comes to residual investment we made, and that's what we did for Escota for future competitive bidding. You know that the government believes in dialogue, that's part of the France transport ambition. And they've recognized the merits of infrastructure concession contracts and also tolling for the future because when a country such as ours is heavily in debt, you got to understand that 20% to 25% of tolling proceeds come from international operations. Spain's economic growth outperforms the European average. As you know, VINCI Autoroutes, Highway -- highways are connected to our Spanish highways. So parliament will be discussing that. We will be discussing the framework legislation to prepare for future contracts now that the current -- once the current contract lapse around 2030. So we lay the groundwork for 2028, 2029. And of course, we will continue to be selective and disciplined. We will look at the terms and conditions of these contracts and see to what extent we can take part in those efforts. But we will look at the terms and conditions of those contracts in a couple of years. Eric Lemarié: [Interpreted] Now the CapEx sequencing between 2027 and 2030. In the meantime, still CapEx underway when it comes to networks. I'm talking about new contracts. Were you talking an additional EUR 350 million in CapEx? Nicolas Notebaert: [Interpreted] Could you please repeat the question? Eric Lemarié: [indiscernible] Nicolas Notebaert: [Interpreted] Well, you can do the math easily enough. There's a difference between the EUR 6 billion and the slight increase in revenue. Now that assumption is worth whatever it's worth. But there's a breakdown between working capital requirements on the one hand and the recurring provisions. As you know, we externalize our results, but we do it cautiously. There are 4,000 business units. Everybody provisions for risks that may or may not materialize. And -- it's a structural thing as far as we're concerned. So that's where part of the gap comes from and working capital requirement is managed as close to the field as possible by our operations teams and our administrative managers. And that's been a strong focus in a number of years. And the COVID period served to reveal the issue because we used to choose the path of least resistance, then we start rolling up our sleeves and now it's paying off. It's been 5 years now. And we're still reaping the benefits of those efforts, maybe not along the same proportions of the past few years because there was a catch-up effect. But this means that the EUR 6 billion estimated assumption is pretty reasonable considering the other parameters that we discussed in the press release. Yes, this affects Cobra, Construction and VINCI Energies. This was particularly true for the Construction business this year because the Construction was lagging behind the other businesses when it comes to improving its customer receivable collection processes and billing processes. Now from an operational point of view, because the global environment is trapped with increasing uncertainty, this means that our managers business unit managers are much more cautious when it comes to cash predictions. We usually estimate cash predictions throughout the project. But from this get-go, we try to be in a cash plus in a cash positive situation from the get-go because of the growing uncertainty of the global environment, irrespective of the contracts or the relationship with the customer by definition. The customer is always smarter when their cash is already in our pocket. So from an operational point of view, many talks and working capital requirement talks as well. And so our entire reporting structure is -- has been made aware of that. Now we went through a period of low interest rates. Remember, in Italy, there were 0 interest rates, sometimes even negative interest rates. And so good habits were taken back then to collect as quickly as possible. But when it comes to our vendors, the best thing we can do is pay them in due course. So it's a good thing. It's a good thing, those good habits have continued to prevail. And this explains in part the improvement in working capital requirement. And to our minds, that is a structural thing to a great extent. Sven Edelfelt: [Interpreted] Sven Edelfelt, ODDO. Congratulations for your excellent results. And thank you, Christian, for your contributions. I have a couple of questions. Number one, regarding ANA rate, the ANA output. Could you give us some idea of the CapEx and also the phasing of the initial investments into the Alcochete Airport if you have some idea already. Question number two, Pierre, you talked about the handover between Thierry and Christian. Sometime this year, maybe at the beginning of next year, maybe you'll be willing to share your vision, your 10-year vision of the growth, maybe during a CME, Capital Markets Day. Won't that be an opportunity to add color? Pierre Anjolras: [Interpreted] Nicolas, would you like to take this question on ANA? Nicolas Notebaert: [Interpreted] It's a little early to give you an economic guidance. Now there are contract milestones. We are crossing those milestones and is proceeding at pace. We have an order of magnitude, EUR 8.5 billion. That's been published. Now we're going through an important phase and that's the environmental assessment. As you know, in all Western European countries, the period during which we secured that environmental authorization is an important one. So that's Phase I. That's the environmental phase. And meanwhile, we're working on the final design of the airport, so we can optimize it considering renewed air traffic constraints, which are different now than they were a couple of years ago. And we are also looking at financial mechanisms. So the figure I'm giving regarding Portugal is already 1 year old, and it will shift further based on how we optimize the projects and also based on the outcome and the environment assessment. But it's not going to start right away. This is a project that will take several years to achieve. But the order of magnitude for this airport in Portugal is EUR 8.5 billion, as I said. Now in terms of financial reporting, that's something we pay close attention to because it is important. And that's why we all gathered here today. If we look at the timetable and the content of the Capital Markets Day, we don't have a clear guidance yet, but we've put our heads together, but I can't make any promises as to the outcome. Pierre Anjolras: [Interpreted] Other questions? Unknown Analyst: [Interpreted] I have a couple of questions, more anecdotal questions. You talked about BESS, Battery Energy Storage Systems. Do you -- are you thinking of signing a similar contract between Cobra and Tesla, for example, regarding the EUR 6.4 billion, you gave us some idea regarding EBITDA. You gave us a figure during the presentation, but the EUR 2.3 billion when it comes to current operations, is that generating EBITDA? And when it comes to M&A, you talked about the Fletcher acquisition in New Zealand, I think, and also FM Conway. Now in terms of mergers and acquisitions, I have in mind VINCI Energies, VINCI Construction is also making acquisitions. What should we expect? Should we expect regular acquisitions internationally from VINCI Construction? Or do you have countries that you prefer when making acquisitions? And also, you talked about the EUR 7 billion in revenue for digital infrastructure. So how much -- what's the share of data centers out of the EUR 7 billion? Pierre Anjolras: [Interpreted] Regarding the BESS, Battery Energy Storage Systems, your question is twofold. First of all, you're asking about our design and build contracting activities, VINCI Energies and Cobra are doing that. Arnaud can tell you more. Jose Maria can tell you more. And then there are investments being made in terms of long-term assets, and we are planning to invest into Battery Energy Storage Systems so as to further enhance the value of our solar PV facilities. Arnaud, anything you'd like to add? Arnaud Grison: [Interpreted] Yes, it's true. For a number of years, we've seen a roll-up in those BESS installations and facilities for various customers in Europe. So we have an EPC positioning. We don't have a framework agreement with any battery provider or even Tesla, but most of those batteries are Chinese batteries. China is a major provider of battery technology. So it's up to the developer and to the -- it's up to the investor to decide what kind of battery they want. Pierre Anjolras: Jose Maria? Jose Maria Lacabex: [Interpreted] [indiscernible] Invest only for supply our projects. We are not going to do or invest in a standalone capacity. And we expect to invest at least 5 gigawatts hour for our own projects in the next 3 years. And this allows us to increase our equity IR in around 200 basis points. Pierre Anjolras: And to add to that, we are considering, as I said in the presentation, a new investment on the renewable plants in Australia and actually an investment in a plant includes the investment in BESS. [Interpreted] Now in terms of construction, as we said before, our investment policy is an opportunistic one, usually designed to strengthen our existing strong positions where we're already feeling comfortable. Now as it happens, 2 years in a row, we had an opportunity to make the Conway acquisition in the London area. And back to back, there was another opportunity for another acquisition, Fletcher. And before that, the latest significant acquisition by VINCI Construction was back in 2018, Lane. So just because we make 2 major acquisitions back to back in 2025, 2026 means that we will do the same in 2027. It will depend on opportunities. If the opportunity arises, we'll go for it. Otherwise, we'll abstain. Now VINCI Energies, however, is more of a continuum because we have a recurring bumper crop of 30 acquisitions per annum. We're talking hundreds of millions in annual revenue, thanks to M&A. And that's part of our modus operandi. And we do it so often that it's almost akin to organic growth. But like I said, it all depends on what opportunities arise as indicated when I talked about our capital allocation policy. When it comes to digital infrastructure, I did emphasize the fact that regarding construction, flow business against 90% in major projects remaining 10%, but we could be saying the exact same thing regarding Energy Solutions. If you look at the share of EPC contracts for all Energy Solutions at Cobra, it's about 10%. For digital infrastructure, we have pretty much the same take. Now I don't have the exact figure top of mind to try and answer the question you posed, but we have major projects and there's a lot of visibility there. I'm talking data centers. And there's a lot of activity, a lot business around digital infrastructure between anything that happens between the hyperscaler and your smartphones. We're talking a lot of networks, a lot of assets. A lot of installation and maintenance contracts, a lot of cybersecurity aspects. So we have to factor it all in, into that EUR 7 billion figure. Now I said the flow business accounts for 90% of the mix. And that's much more -- that's much more recurring business than data centers. So data centers, we're talking major contracts, Cobra's EPC contracts, whenever they do want such a contract, there's a lot of visibility, and it's easy to understand. But you've got to bear in mind the recurring repeat flow business, which accounts for 86% of our contracting activities. And I know, I believe that this is a major differentiating factor when it comes to construction for VINCI. And this also explains the high quality for results. But whatever is happening around the data centers is going to fuel our business throughout the digital infrastructure segment. So yes, we do have a presence in data centers, but we mostly have a presence in the recurring multiyear flow business, what VINCI Energies calls Axians. I mean that accounts for 25% of VINCI Energies. And digital infrastructure can also be found in Energy Solutions because you can find it within a building, that's what we call [ sport ] building. You'll find that in electrical grid as well. That's what we call smart grids. Digital infrastructure is everywhere, smart grids, smart buildings, microphone please, regarding the contribution, no forecast yet. We have tentative figures only in 2023 where we have a full over 1 gigawatt on a full year basis when it comes to operations. So I can't -- I prefer not to give you a figure, first of all, because it wouldn't be significant, not even at Cobra scale, let alone at VINCI scale. But yes, this will start to generate EBITDA as early as 2026. We started generating EBITDA in 2025 a little bit because, Jose Maria, correct me if I'm wrong, operations began in June, July, started generating earnings, but I don't know how significant that is. So that is why I prefer to wait until '27 before I give you the guidance. That's how long it takes for the asset development pipeline to actually reach cruising speed. Unknown Analyst: [Interpreted] Well done for your results. Just following up on Zero.e, 1 giga for this year, we report the figures separately as of '26. A question on airports. We see slight margin erosion, traffic increase. Could you maybe just rehearse the reasons for that? And Gatwick specifically, could you give us some color and a time horizon? And final question, you mentioned a bit more portfolio rotation going forward. Could you enlighten us as to the criteria that will be applied? Pierre Anjolras: [Interpreted] On the Zero.e figures, I won't answer immediately, when it becomes significant, we'll report. But there's no point giving overly small numbers that can be misread. I think we'll be still in that situation in 2026. So it's preferable for us to give you an indication once these assets are in operation in -- reach cruising speed, it's far more significant. Question on the airports. A couple of questions on the airports, Nicolas. Nicolas Notebaert: [Interpreted] So your question on the airports. Well, firstly, we regularly make acquisitions that don't necessarily have the same EBITDA EBIT margins. The annual comparisons are not always like-for-like. Secondly, that we had some one-off high turns EBITDA and EBIT in 2024 versus 2025 and EBITDA EBIT margin, very high, that's grown significantly. And final point mentioned in the presentation, I believe it was Christian, we're going to change the motor contract on Phnom Penh Airport through September. We were in full concession. We were compensated, that was a one-off of the earnings. But today, we have an operation contract for Phnom Penh Airport, which obviously doesn't have the same EBITDA or EBIT margin. Those are the prime reasons that justify this consolidation and margin on VINCI Airports. Gatwick. Color on Gatwick -- Gatwick, as we said, we have a plan that we're now rolling out the CapEx, same to that's being development, about GBP 2.2 billion for that with the latest legal challenges are underway that approval was given. But as I said, we have to follow the latest rulings. But without delay, we're launching the design and works phase, 45 million is Gatwick capacity that will grow to 80 million passengers. So with that investment, we can up the capacity significantly. On portfolio revenues, just to reaffirm that we're doing that. And Christian drawn up an inventory. I mean there are a number of significant disposals. Those are amounts in the P&L and cash. Yes, we're active. We're developing and we're active to focus and we've done that, but we've always done and we'll continue to do. Pierre Anjolras: [Interpreted] If there are no further questions in the room, we can take questions on the call. Questions in French first. [Operator Instructions] First question, Patrick Creuset from Goldman Sachs. Patrick Creuset: [Interpreted] Christian, congratulations for the great numbers. In your release, you mentioned the strategic review of the portfolio through your businesses with the goal of optimizing the return on capital. Could you tell us what type of asset will be involved? What will be the criteria, the potential scale of this review. And also in terms of capital allocation, how you currently assess opportunities for M&A business, region and also size? Christian Labeyrie: [Interpreted] As I've just indicated, this principle of reviewing our portfolio concerns all our businesses, all our geographies, we do it. We'll continue to conduct that review. I'm incapable of saying to produce -- or depends what the ROE asset by asset, how to improve the Group's clarity. That would guide us, but we are not saying that these are times where we're going to increase the capital -- the volume did for M&A. There's a pipeline of M&A at VINCI Airports an M&A pipeline at VINCI Highways, at VINCI Energies and VINCI Construction that remains active for opportunities. We do that across our businesses, and we remain open to all geographies as long as we're comfortable there. And with stronger reason, we're more comfortable in geographies where we're already present, where we're already strong to do the various deals that we've mentioned. But if we go back further, without being present in Japan, we had the smart idea was from Nicolas to go to the Osaka and Kansa Airports. And Christian mentioned that. So we remain very open and very opportunistic. And similarly, we have no M&A investment targets per year. You've seen it's far lower this year than last year. And on average, that is pretty much the same thing, 3-year average. I presented that on the reflection over the past 3 years of M&A CapEx. But we're disciplined when we need to be disciplined, that is we don't do any old things. And if there are 3 or 4 deals to be sealed, Christian has the wherewithal, the munitions to strike a good deal or several good deals when we believe the time is right. And what we could add on that, says, Christian, that across our businesses, I mean we're not an investment fund. So we're not in the business of buying assets for the pleasure of buying. When we buy something, it's to nurture it, manage it to extract value through management that is a position of control even 100% in Energy, Cobra, VINCI Construction and in Concessions to be in control or co-control. If it's just to be a passive partner, not really in terms of the revenue that we contribute extensively through our work. The idea is to have a hope of improving receipts if it's a pure PPP with a fee paid linearly over the duration of the contract. It's a less interest. Cobra did in 2025 to seed its stake in a project acquired in Brazil, for which there was no upside on the traffic. It was clearly a financial deal. Once the development and construction risk is behind it can be -- can make sense to sell the asset to a pure financial player, an investment fund. Patrick Creuset: [Interpreted] So the minority stakes that might be sold or disposed of as your portfolio rotation? Christian Labeyrie: [Interpreted] It's possible. Look at the disposals of the year. There weren't just minority stakes or investment. Pierre Anjolras: [Interpreted] Next question. Elodie Yvonne, JPMorgan, over to you. Elodie Rall: [Interpreted] Yes. Sorry not to be with you this morning. Best wishes, Christian. Just to start, we sense that you're more ambitious regarding your return to shareholder policy. You mentioned opportunistic share buybacks to what level could you go and notably regarding the dividend 5%. I mean that's a priority. So clearly, that we're moving away from a payout policy so with things possible in terms of a dividend increase going forward, perhaps more dynamic, the net income. And maybe another question, if I may. Would you have a comment on the German contract, you're beginning to see the fruits of that and also highway traffic year-to-date? Are you seeing an inflection on the residential -- French residential market that you lost at '25. You see some green shoots of hope there. And I see on the portfolio review, you mentioned that at a great length, but how -- where does ADP feature in your thinking? Pierre Anjolras: [Interpreted] On the dividends, I've spoken about that, our goal down the road was 60%. I mean if the payout ratio is to head to 60%. On the share buybacks, in fact, we're pretty much the end of the catch-up of the dilution several years. generating new shares for the group savings scheme. So we're not ruling out the possibility of going beyond that. But once again, it will be opportunistically, as I indicated, based on the capital that we have to allocate on the expansion, be it M&A or developing existing assets and depending on the share price performance. I can't give you more guidance than that. But you can say is that the dividend policy. We don't want to change it every other day. But to give some guidance that we've always done on the share buyback, there we can be more opportunists I suppose you look at the Americans who're massively buying back shares when it suits them. depending on their CapEx plan, the GAFA is spending hundreds of billions in CapEx, maybe they'll do a bit less share buyback. That's part of the financial strategy. Highly complementary dividends and share buyback, we do both. In the CAC 40, same return to shareholders in terms of its market cap as VINCI today. Next, on highway, auto route traffic, they're significant. I mean January is never significant month of January. Not much to say what to draw from that. On residential housing construction with the exception of VINCI Real Estate, that's a fine company and the impact is limited on VINCI as a whole, notably construction is not at all very little dependent on the building of new homes. It's negligible share. And so the impact of residential property development aside from VINCI Real Estate has a little impact on the Group financials. What we can say Virginie, what the market is challenging. The housing stimulus plan announced to [indiscernible]. So that hasn't yet been placed on the statute. But so we wouldn't really see the effects of that before the coming months and that we're in a year of local municipal elections that are never times that are propitious to the dynamic launch of new projects. But whatever the housing stimulus plan is a good signal for the sector to kickstart the momentum after 3 years of crisis. There's a question about Germany. Well, in Germany, there are 2 major stimulus plans. There's one for defense and stimulus package for infrastructure. From what our German teams tell us and when we ask them, we need to question them several times to get a sense of what's happening between the EUR 500 billion at federal level and twice EUR 500 billion and how it percolates down to contracts. It's not easy to read. But the sense, yes, it's beginning to be visible in defense. I remind you that in defense, VINCI Energies made an acquisition of a company SAN last year that primarily works in German shipyards for the German Navy and has very sustained activity and growth prospects. And so that momentum is part and parcel of the defense stimulus package. So for the infrastructure stimulus German teams have great difficulty in seeing a significant shift to date on that front. Arnaud? Well, what we can say is we indicated ahead of phase on energy infrastructure stimulus package, there are major needs, but they're not fast-track projects because they need authorizations, there are appeals, et cetera, a lot of design work. So it's positive over the long term, but they're not hyper growth rates short term in defense, it's production capacity. So it's positive for one sector, but it's not hyper activity, either short or medium term. But what is, however, clear is that these announcements have generated a climate of confidence and that weighs heavily in the economy of the country. And -- the Germans are fortunate in that respect. That's why it's good to be in Germany. It's good to continue to expand in Germany. And as you saw these past few acquisitions, as you saw in the contracts, be it VINCI Energy, of course, but also Cobra with the major Cobra projects in Germany, VINCI construction there for a long time. Also VINCI Highways, which is the leading operator of German highway PPPs, and we haven't seen nothing yet in terms of project launch, but that could form part of the stimulus package. We're very well positioned to benefit from that. Questions in English. If you want, you've got the translation headsets. Okay. Let's have the first one. Operator: Our very first question from the English conference is coming from Harishankar of Deutsche Bank. Harishankar Ramamoorthy: I have a few. Maybe the first one would be around order inflows. When I look at your outlook for 1C Energies, solid mid-single digits to high single-digit growth. But in Q4 -- till Q4, we have not seen inflows improve a lot. So does the outlook imply that you are expecting inflows to turn the corner pretty soon? The second one on the German side of things. Any time line by which that could overtake U.K. And lastly, on the working capital, I do see you referencing better customer payments and so on. But when we look at the balance sheet, it looks like trade receivables are broadly flat, whereas it's the payables that have increased significantly. So is it a question of delayed payments to vendors? And if that is the case, then is that structural? Unknown Executive: [Interpreted] Quick answer to the second part of your question. The answer is no. It's been a long-standing policy for us to pay our vendors in due course. I don't know what it is like in other countries, but in France, the authorities pay close attention to that and Vinci has never been named or shamed with that kind of thing. we don't artificially prolong paying our vendors. Pierre Anjolras: As for the order inflow, it's complicated to look at quarter-by-quarter. And I think what you have to do is in the 12 months rolling. And another thing is the order inflow of SCNG was impacted also by a very large project in the past years. And when you restate that of the very large project, over EUR 50 million, the order inflow is still increasing. I think it's plus 4% this year. So yes, there's no worry. And as the guidance is supported by the -- what we see in the order inflow. Unknown Executive: We need to be very vigilant when it comes to analyzing the order inflow because VINCI has a lot of multiyear contracts, a lot of recurring business. So usually, we input the contracts at the beginning of the year. So during the year, we burn through the contracts that came in the year before, and we generate business for the year after. And this is true for VINCI Energies as well as other players. Now regarding the question on Germany, these are our estimates. Next year, revenue for VINCI in Germany will be higher than VINCI's revenue in the U.K. I'm not saying that the U.K. revenue will go down, but we will simply grow ours faster. In 1 year's time, things will have been reversed. Germany will be our second international contributor to revenue after France. That's our prediction. Next question. Operator: Our next question is from Ruairi of RBC. Ruairi Cullinane: Congrats on the results. One question on tax. So do you think the tax targeting large French corporates specifically needs to be exceptional to be constitutional? Would you challenge this tax if it became an even more regular feature of French budgets? Yes, I'll leave it there. Arnaud Grison: [Interpreted] Don't ask me, ask the government and ask parliamentarians. We can answer that question, particularly since last year, the surcharge was presented as a one-off thing that would apply just that year. And we're almost at the end of the budget approval process because it's been through parliament. So without too much surprise, that surcharge, that surtax is going to be approved and this means that a promise was made to us last year, but they're not keeping it. So I can't possibly tell you what will happen in a year's time. We do realize that for a while now, SME leaders and corporate leaders in France, major corporation CEOs are making statements to the effect that this goes on for too long. Tax-wise, France will be less competitive than the rest of the EU member states, and this could actually hurt the French economy. I think as the Head of Total Energies, who said that if corporations have a choice between 2 countries where the tax rate is 15% to 30%, what do you expect them to do? Where do you expect them to go? So -- and there's also an impact on the surrounding ecosystem, the employees, the vendors, suppliers, et cetera. So reason should prevail at some point. You can't continue to hurt the French economy's competitiveness compared with Spain, Italy, the U.K., Germany, et cetera. So we can hope that eventually reason will prevail. Who knows... Let's move on to the next question. Operator: We have a question from Nick Mora, Morgan Stanley, a question in French. Nicolas Mora: [Interpreted] Congratulations, Christian. I'm sure you're looking forward to retirement. [Indiscernible] To sell shares here. Now profit margin, let's start with that. Could you please give us an update on the upside for construction, Energies, Cobra, AS. So 2025 went pretty well overall. Profit margin was driven by M&A in construction and also profit margin for Cobra is being driven by renewables. So -- is that just a medium-term thinking? Or are you expecting that the improvement of 20 basis points to continue year after year? Now regarding airports, profit margin is under pressure -- was under pressure in 2025. If we look at '26 and '27, what should we expect? We're seeing an increase in costs. We look at the U.K. business rates. Prices are being moderated. Now the traffic situation is so so. So do you think that profit margin has already passed its peak? Arnaud Grison: [Indiscernible] Nick Mora -- regarding our contracting business, there's still potential. But we've been seeing it for a while now and yet people struggle to believe us. And this is true for construction as well. Thierry Mirville gave us a chart regarding the past 10 years, showing a regular steadfast increase in construction EBIT and also a cash conversion pattern that is as good as VINCI Energies and Cobra. So yes, those are value contributors and the value should be assessed properly. And needless to say, VINCI Energies and Cobra, you heard this several times in the course of the presentation is actually being supported by all customer requirements. There's so much to be done. So obviously, we're not going to double the profit margin, but there's still room for margin to continue to thrive. And the guidance has been set accordingly. Now how long will that last? It's hard to say. But yes, over the short term, we expect that trend to continue. When it comes to airports, that's slightly different. Nicolas can tell you more about that. We have a mixture of different platforms and each platform has its own trajectory. Nicolas, why don't you go ahead? Nicolas Notebaert: [Interpreted] And sometimes it takes a while for the effect to be fully felt. Now we have a new economic regulation contract in Mexico, as we said before. And -- so we're talking 6% to 7% above inflation over the 5-year period, which is good enough already because usually, our method is based on regular capitalization. And clearly, this platform has been outperforming the sector. Obviously, we've got London Gatwick and we've got the Lisbon Airport. So there will be regulatory discussions as well. So we haven't yet set the course in terms of tariffs, but we are aligned with inflation. So future expectations in terms of profit margins from airports have yet to reach the peak. But the situation is highly fragmented geographically, so is growth. But the recent news regarding Mexico is showing that these 5-year contracts are helping us to renegotiate so as to renew our profit margin prospects in the future. Operator: [Interpreted] Very well. If there's nothing further, if there are no other questions. Over to you, Pierre, for the conclusion. Pierre Anjolras: [Interpreted] Well, thank you so much for attending. Enjoy the rest of the day. Enjoy the rest of the year and see you very soon.
Unknown Executive: Let me start the explanation meeting. My name is Hiraoka from Public Relations Department of KDDI. I serve as MC. Today's meeting, as is disclosed on a timely basis to present preliminary results of the third quarter of the year ending in March 2026 of KDDI. Today's presentation is being distributed on YouTube and other media in addition to the on-site. And we have put up three related materials on the KDDI website. Please refer to the materials at hand. This is the message for the people in the outside audience. Today's attendees are as follows: Hiromichi Matsuda, President, Representative Director, CEO; Senior Managing Executive Officer, CFO, Executive Director, Corporate Sector, Nanae Saishoji; Managing Executive Officer, Director, CSO and CDO, Executive Director, Corporate Strategy Division, Tomohiko Katsuki; Executive Officer, Executive Director, Corporate Management Division, Corporate Sector, Kenji Aketa. These four are in attendance. President Matsuda, please. Hiromichi Matsuda: Thank you very much for gathering here today despite your busy schedules. First and foremost, we sincerely apologize for the significant inconvenience and concern caused to our customers, business partners, shareholders, investors and many other stakeholders, including our employees due to the suspected improper transactions at our subsidiary. We recognize this matter as a serious issue that could potentially undermine the trust in the entire KDDI Group. As the top management, I feel a profound sense of responsibility for the occurrence of this matter and for failing to prevent it. Today, I will carefully explain the details available at this time and sincerely answer your questions. Please be assured that this matter relates solely to transactions within the advertising agency business and has no impact whatsoever on the provision of communication services, including BIGLOBE. I will explain the purpose of today's preliminary results explanation. As the Special Investigation Committee's inquiry into inappropriate transactions is ongoing, the impact on our financial statements remains undetermined at this time. Therefore, we have decided to postpone the disclosure of our Q3 FY March '26 earnings release. Therefore, today's explanation is titled Q3 Preliminary Results Explanation. We will report on the facts currently recognized by the company, the outline of the financial impact and separate from this matter, the business progress for the third quarter and initiatives for future growth. Please note that the Q3 preliminary results, prior year results and financial impact figures related to this matter presented today are reference values based on facts currently recognized by the company. These figures may be subject to revision based on the findings of the Special Investigation Committee and the audit results of the accounting auditor. Final figures will be reported promptly upon completion of the investigation. At this time, we plan to receive and disclose the investigation report from the Special Investigation Committee by the end of March. Based on this assumption, we will plan to announce the Q3 results at the end of March, and we currently intend to proceed with FY March '26 financial results announcement without delay. I will now outline the key points of today's business performance briefing and preliminary results explanation. First, the inappropriate transactions that occurred at our subsidiary, then the growth of our core business foundations, including mobile in our key focus areas and the growth in the AI era. First, regarding the improper transactions that occurred at our subsidiary. This was disclosed on January 14. It has been discovered that improper transactions were allegedly conducted by employees of BIGLOBE, a consolidated subsidiary of the company and its subsidiary G-PLAN within their advertising agency business. Regarding the advertising agency business, the possibility that sales and other figures had been overstated came to light following delayed payments from certain agencies in December 2025. To clarify the facts and causes related to this matter, we determined it necessary to conduct a more specialized and objective investigation. Accordingly, we established a special investigation committee composed of external attorneys and certified public accountants on January 14. Next, an overview of the fictitious transactions we have identified. Both -- so this is the left side, which we have anticipated. Usually, from the advertiser, advertiser approaches us. Usually, there is a request to the advertising agency. And the web media becomes multiple. So there is another existence publishing agencies. This BIGLOBE and G-PLAN are in the upstream. Advertising agencies and publishing agencies, they are the intermediary. Around 2017, G-PLAN launched this business and BIGLOBE later entered to develop new ventures. You can see the flow here. Within this business, the money is also flowing -- subtracting the fees and the advertisement fee is paid. Within this business, we confirmed suspicions that subsidiary employees conducted fictitious transactions for advertising agency services despite the absence of actual advisers -- advertisers, resulting in the recording of fictitious sales revenue and other figures over multiple years. Now let me use the right side to explain. First of all, the discovery process. The transaction volume increased. So following an internal investigation, KDDI instructed BIGLOBE and G-PLAN to reduce orders to downstream agencies to strengthen management systems and manage business risks. This led to delayed payments from upstream agencies. Within the structure where downstream agencies deducted commissions from payments related to BIGLOBE and G-PLAN's transactions and returned them to upstream agencies, a reduction in payments from both companies decreased the funds flowing to upstream agencies. Therefore, upstream agency became unable to make payments to both companies. So this transaction volume snowballed and reaching hundreds of billions of yen per month in recent periods. Beyond the publishing agencies, there is #3 and #1, the upstream agencies. We understood that those #1 and #3 are identical. And through this fictitious transaction, BIGLOBE and G-PLAN, posting of revenue was excessive. And because it's fictitious transactions, the fee was flowing outside. And the impact is on next page. At the top, as of today, these are the impacts that we recognize. As I mentioned earlier, because of fictitious transactions, we need to cancel booked revenue, part of the booked revenue. And this is before FY '24 March, about JPY 96 billion and for FY '25 March, JPY 82 billion; and FY '26 March, JPY 68 billion, the total of JPY 246 billion. Below that, operating income, reversal of recorded income, about JPY 8 billion or JPY 17 billion and about JPY 25 billion. These profits are to be canceled. In addition, as I mentioned earlier, the commissions, which are outflow, and we have provisioning for that, JPY 5 billion, JPY 11 billion and JPY 17 billion. And as to JPY 33 billion approximate number, we are going to make efforts to recover this amount. In addition, including the prior years, there is a possibility of recognizing impairment losses. At the bottom, next steps. As I mentioned earlier, at the end of March or beyond, we are going to publicize the report of investigation as well as financial results without delay. In addition, in a parallel way, doing and strengthening the company group's governance and examining recurrence prevention measures will be taken. Now this is our commitment to future actions. First, we are fully committed to cooperating with the Special Investigation Committee, diligently uncovering the facts and thoroughly analyzing the causes. I myself will take the lead in actively addressing these issues to restore and strengthen the trust for our group. Our company opposed the KDDI philosophy, which embodies the shared values and code of conduct that every individual should uphold. We will create an environment where transparency and fairness underpin our work, ensuring that these principles are communicated throughout the entire group and practiced consistently. By doing so, we aim to foster a culture that enhances both human capabilities and ethical standards to meet expectation and to regain trust, of course, we will make efforts to do everything to avoid any reoccurrence of similar matters. At the same time, it is indispensable for us to continue to develop our business for sustainable business operation. So, from now on, I would like to communicate to you specifically what initiatives or measures we will take. Now this is as reference figures. I present consolidated results for the third quarter FY 2025. And we have revised both prior year and this year because of the impact coming from the matter. Please refer to the bottom column. And we have canceled the revenue and income associated with fictitious transactions. And on the right-hand side, we are showing the numbers as reference values after the provisioning of external outflow. So, in year-on-year comparison with the actual results, the cumulative results for the first three quarters are as follows: operating revenue plus 3.8%; operating income, plus 2% and the profit for the period, plus 5.3%, we are performing well. So that is the cumulative base consolidated results change factors. From the left-hand side, we have the Mobile personal services segment base, plus JPY 27.2 billion and the Finance Energy Lawson, plus JPY 18.2 billion; and DX business services segment, plus JPY 8.5 billion; Technological structure reform, plus JPY 12.9 billion and impact of prior year's promotional expenses, minus JPY 28.9 billion. And based on those numbers, the total of plus JPY 17.4 billion positive. And also the mobile-related revenue grew and it's expanded and the finance and the DX are is moving on smoothly. And this is the Q3 alone consolidated operating income and the factors for change. In addition to each business domain growth, negative impact from prior year's promotional expenses has also subsided. So we are seeing positive growth. And now I would like to explain about this year's topics. The mobile business is making steady progress in structural transformation. building a stable business foundation that will serve as a pillar for sustainable growth. Mobile revenues bottomed out in FY March '24 and growth accelerated on a nine-month cumulative basis in FY March '26 with an increase of JPY 29.9 billion year-on-year. Right side, we are shifting away from excessive promotional competition and focusing on LTV. Structural transformation is also progressing, and we are building a lean and mean operational base with ARPU growth driven by value creation and churn rate reduction through longer contract duration. These are the key points of structural transformation of the mobile business that we explained in our Q2 financial results. We are promoting initiatives to secure long-term contracts by creating value that motivates customers to sign up shown on the left. And refining au's communication quality and differentiated value services shown in the center. This shows creating value that motivates customers to sign up to maximize LTV. Left side, at UQ Mobile, we are focusing on promotions that suggest the optimal device to customers and device bundled contracts, which have higher ARPU and contracts retention rate are on the rise by 4 percentage points. Right side, we are also working to differentiate our plans and services and money activity plan to Ponta pass and Netflix are all performing well, which has increased ninefold. We are enhancing the value of the connected experience, which is the source of our competitiveness. We aim to expand the 5G SA area, which provides more stable communication with stand-alone 5G to over 90% population coverage by the end of the fiscal year, which will be one of the highest in the industry. Right side, au Starlink Direct was launched in April 2025 and has expanded to over 80 devices, 10 million units in less than a year with a number of connections reaching approximately 3.5 million. Recently, there was a report of a fall while ice climbing in Hokkaido and one of them used this service to send SOS, which led to a rescue. Last week, the coverage area doubled, now covering the Ogasawara Islands and all major ferry routes. And in March, the service will be available outside of Japan in the U.S. as well. This shows the result of ARPU growth driven by value creation, which is a factor towards leaner and meaner operation base. Our value creation efforts have been successful as shown on the left. And regarding brand migration, UQ mobile to au migrations finally surpassed au to UQ mobile migrations on a quarterly basis. These factors also contributed to the significant growth of mobile ARPU by JPY 190 year-on-year, as shown on the right. The second factor towards leaner and meaner operation base is churn rate reduction due to longer contract trend. Left side, au contract retention rate is improving as customers are finding the value they receive during sign-up attractive. These trends are accumulating and the momentum remains strong, as shown on the right. The smartphone churn rate in Q3 of FY March '26 fell by 0.01 percentage points year-on-year, showing steady improvement. We are making progress in addressing the financial business, which was identified as an issue in Q2 financial results. In Q3, credit card business mainly drove profit growth with operating income up by 30.5% year-on-year on a cumulative basis. As shown on the right, the bank's deposit procurement capability, which had been a challenge, has improved steadily and the personal deposit balance expanded by 1.3x year-on-year and number of gold credit card members also increased steadily by 24.5% year-on-year. Another challenge for us, namely the Business Services segment. Here, growth was seen in each business area. As shown on the left, the growth of the third quarter alone was plus 7.7%, showing a strong momentum. In particular, the BPO/SI-related services, which had been identified as an issue in the first half, turned around and increased profits in the third quarter. On the right-hand side, IoT drove growth, increasing about double digit year-on-year. And especially IoT, including the SORACOM, the connections exceeded 66 million. On the left-hand side, we have the Lawson and Ikeda City in Osaka, we are working on the development of the town where you can leave in a secured and safe manner. And on the right-hand side, we are using drone to instruct the disaster-related location and we have more 1,000 locations where we have the drone ports, and we'd like to construct very agile and safe system for the disaster. And now the management platform and how to strengthen it. In light of inappropriate transaction of our subsidiaries, we will be even more conscious of the importance of governance. And as you can see on the left-hand side, we have the KDDI philosophy, which emphasizes the human capabilities and the KDDI version of its job-based personnel system has created a mechanism to enhance expertise. And as shown here, with the shift to a new management structure, we will further strengthen our core competencies by combining these with our aspiration to be a company that inspires challenges. To take on challenges, we will introduce systems and programs that celebrate challenges and promote collaboration and advance human resource development in line with our business strategies for growth. Now I'd like to talk about our efforts towards growth in the AI era. As a social infrastructure provider, it is our responsibility to support Japan's digital society and contribute to strengthening industrial competitiveness with both our cultivated communications infrastructure and our new AI infrastructure. As AI becomes more widespread in a variety of settings, an AI infrastructure that can process data securely with low latency will be important. Left side, with an eye towards such era, we ensured sovereignty and began operations at the Osaka Sakai Data Center in January as a data hub for securely processing corporate data. We have achieved efficiency gains by utilizing the existing space. And following Sakai, we plan to launch the Miyazaki Network Center in February as a communication hub, leveraging the knowledge gained at Sakai to expand into an AI data center. So we will expand operations in the counter region and Kyushu and so on. and utilize our existing landing stations to connect AI data centers with our strong communications network, building an AI digital built, a nationwide low latency network and AI computational infrastructure. We will also utilize the landing stations and submarine cables across the country to enhance the value of the AI digital belt. And we are going to create a hub by connecting landing stations and submarine cables. KDDI possesses some of Japan's leading know-how and assets covering everything from submarine cable installation to maintenance with over 60 years of experience, 360-day availability and landing stations across the country. We also strengthened Universal Joint connection technology for optical submarine cables and possess world-class technological capabilities. By leveraging these assets, we will develop landing stations near AIDCs and expand accessibility by AI computation infrastructure to overseas locations, thereby capturing global demand. Today, at the Board of Directors meeting, we decided we resolved to launch a new AI integration business cooperation. The communication platform on top of that, we need this AI platform. We have lots of contacts with customers. So the AI is -- in order to deliver AI as part of the labor force, it is very important to have solid platform. And for that, we are going to utilize our expertise and technological prowess. And also, we will integrate consulting professionals from the headquarters. And based on that, we established KDDI iret. And going forward, we will also call upon more engineers from outside, targeting at about 3,000 personnel by fiscal year 2028. Next is today's summary. First of all, the Special Investigation Committee will continue its investigation into the inappropriate transactions while the company reviews and strengthen its group governance and examines recurrence prevention measures. As to the impact amount, it is expected to include the reversal of fictitious sales and profits as well as provisions for amounts that flowed outside the company. The company will make every effort to recover the externally flowed portion. As to the schedule, as I mentioned earlier, targeting at the end of March, Special Investigation Committee is going to issue report on the investigation. And based on the results of investigation, corrections to prior financial statements and FY '26 March Q3 results will be disclosed by end of March and FY '26 March full year results will be disclosed without a delay. In the third quarter, core businesses performed very steadily, especially mobile structural reforms progressed as planned and the business foundation, including focus areas, continued to grow solidly. AI social implementation initiatives, including the AI digital build and the AI development platform are making steady progress. Even with the impact coming from inappropriate transaction, our business is performing well. And also, there is no revision to the dividend forecast for fiscal year '26 March. Thank you very much. Unknown Executive: We will now move on to the Q&A session. [Operator Instructions]. We will take questions from front. Unknown Analyst: Koma is my name. So about this fictitious transactions, I do not have the full understanding. So let me ask you a question. So about the amount. So maximum amount is this amount that you have shown here? Hiromichi Matsuda: Thank you for the question. As of today, the amount that we have confirmed, the impact on revenue is this amount and the profit impact is minus JPY 50 billion. And there's a possibility of additional impairment, but the Special Investigation Committee and the audit firm will confirm and there may be a possibility of revision going forward. Unknown Analyst: And this external flow, JPY 33 billion, if you could explain the scheme once again. So, this external flow, so upstream advertising agency and the three subcontracted party, was this external outflow from to those parties? Or was there an investment by the employees? Hiromichi Matsuda: Yes, if you could turn to the scheme diagram. Basically, this was a fictitious transaction. The agencies received the commissions of the transaction. It subtracted the fee. So the amount is this external outflow recorded as fees? I see. So this is shown here. So, to five companies, the fee was provided in this fictitious transactions, the advertising fee that goes to the publishing agencies was also returned. G-PLAN and BIGLOBE commission was also external outflow within the group. G-PLAN and BIGLOBE fees that were deducted fees was posted, but that was fictitious. And so the sales and profit was reversed. So that's shown in orange on the upper half. Unknown Executive: Next questions? D3 on the internal side, please. Unknown Analyst: Kobayashi from Yomiuri newspaper. I want to clarify some facts. This [indiscernible] the booking, when did it start? And also, how many employees have been involved? I ask those questions. Hiromichi Matsuda: So multiple number of years, that's a recognition. As a result of internal investigation, G-PLAN, this business started in 2017 and BIGLOBE, they started this business from FY 2022. This time, there are some fictitious transactions and non-fictitious ones. But the amount shown in the materials, they are all based on it, all of them are fictitious transactions. And as to the number of employees involved, G-PLAN, two, I understand that the other two are involved from the G-PLAN. And these two are seconded to the big globe and these transactions were conducted by them. That's our current recognition. Unknown Analyst: So these two people, 2017 and onward, they booked inappropriately. And the total is JPY 246 billion. Am I right? Hiromichi Matsuda: From the very beginning, when the advertising business was started, it is included in that amount. But from when and from where the investigation committee is still investigating it. And those numbers are as far as we recognize. So the more precisely, the committee will receive the report. Unknown Analyst: Am I right to understand that the employees of the KDDI are not involved, right? Hiromichi Matsuda: As to this, the commercial flow, we have already confirmed that no employee from KDDI has been involved. Unknown Executive: [Operator Instructions] Fourth from the front to the exit, please. Unknown Analyst: Sankei Newspaper, [indiscernible] is my name. First question. So when it started, this overlaps with the previous question, but the business started in 2017. And since then, this has been conducted. So from before the business started, the scheme was anticipated and started the business on top of based on that? Or did the business start first and then this fictitious transaction started? What do you think? What does the investigation look like so far? Hiromichi Matsuda: According to our understanding, the amount started becoming big in recent years. And so we said we have to have a control -- tighter control internally. So until when the transaction was authentic and correct, this is still being investigated by the investigation committee. Unknown Analyst: One more question. With this scheme, #1 and #3 were the same entity. And these agencies had to be part of the collusion. So the recovery of JPY 33 billion, will you request for the damage compensation to the agencies? Or will they be sued for criminal lawsuit? Hiromichi Matsuda: Thank you for the question. First of all, we will wait for the result by the Special Investigation Committee. And according to that, we will take appropriate measures. Unknown Executive: Any other questions? Unknown Analyst: One please. [ Fujita ] from Asahi Newspaper. I would like to clarify some facts here. So this diagram of the fictitious transaction 1, 2, 3, the advertising agency, is this just a single agency or only #2 is a different agency. Multiple number of agencies are involved. #1 and #3 are the same. There's a note on the right-hand side. So that #1, #3 are the same entity. It's just one company, you mean. Hiromichi Matsuda: Yes, we have just confirmed one and others are yet to be investigated. G-PLAN 2017 and BIGLOBE from 2022, #1 and #3. So it's not about this #1 and #3, the same entity. The 2017, when we calculated the amount, we just assumed that from the very beginning, everything was fictitious. So, back then, this entity is the same entity. We are still investigating it. So going forward, there's a possibility that there is non-fictitious transactions might be detected. That's right. As to the amount to be canceled. So about those amounts, it's not that everything is based on fictitious transactions. Well, basically, when the amount started to bigger, we thought that they were because of fictitious transactions. But as you can see at the footnote, it is either on the total sales amount or the pure sales amount. So, recently, the profit the cancellation that is getting canceled more and the transaction itself is getting bigger. Unknown Executive: Next question, please. So A4 towards the MC. Unknown Analyst: [ Niki Subo ] is my name. In the last financial results briefing, there was challenges you mentioned, the deposit procurement capability. I have a question on that. And then about AI-related question. First, on the deposit procurement capability. You said you are enhancing the capability. Could you elaborate on that? Hiromichi Matsuda: Thank you for the question. So, Jibun Bank program, we are trying to enhance the benefit, but not only that, the channel, there are multiple channels. And so we're trying to appeal and working with securities brokerage partners, enhancing that to expand the deposit. And the other is plan benefit. So money activity too is launched. On the bank side, we are focusing on the plan. And so the individual personal deposit is increasing on that side. Unknown Analyst: Next, a new AI company. You're working on the implementation, you said, trying to establish the development infrastructure. In the financial industry, the AI is used more and more. So, in the financial industry, what kind of implementation are you working on or planning? Hiromichi Matsuda: Katsuki-san would like to respond. Tomohiko Katsuki: Thank you for the question. AI implementation. In various industries, there are common areas. First, contact center and the fraud detection, AI will start from those areas. In our financial group, we are studying, examining the possible implementation and working with other financial institutions to conduct the POC, proof-of-concept. Unknown Analyst: So, SoftBank has been on that, the contact center. So if you could say a little more about what you're trying to do in the new company, what is the significance of this new company? Hiromichi Matsuda: Well, this new company is not solely for financial industry. And as we announced the Sakai last time for pharmaceutical companies and others, data, internal data and know-how that Japanese companies have will be used, managed for AI analysis. So we are being approached by pharmaceutical and other industries. Katsuki-san just talked about the financial industry, but that is the initial step. The call center is the first step. So thank you. I hope you could understand. Unknown Executive: Next question, please. The D2, please. Unknown Analyst: [indiscernible] As to the inappropriate transaction, the two people from G-PLAN, and they was seconded to BIGLOBE from when?. And these two employees, are they managers or executives? Hiromichi Matsuda: Thank you for the questions. It's related to their privacy. So I would like to refrain from answering those questions, sorry. Unknown Executive: So, B3, please. Unknown Analyst: [indiscernible] About this matter of inappropriate transaction. These two people, they were seconded to BIGLOBE. That means that they had authorities to work both for G-PLAN and BIGLOBE. They were seconded from G-PLAN to BIGLOBE and the BIGLOBE launched this new business and these two were working on that new business. And during the secondment period, they will also be able to work for Jan as well? Hiromichi Matsuda: Yes, usually, yes. Unknown Analyst: As to KDDI, to reduce the downstream the ad publishing, the request to reduce it, when did it happen and why? Hiromichi Matsuda: It was the mid-December last year. Back then, in order to strengthen the control because the amounts were getting larger and also we need to identify the risks for business. So, as to these two companies, we issued such instruction to reduce the volume. That means back then, you knew that there had been some the fictitious transactions. The specific doubt, we reduced the orders and the other payment was delayed from upstream. When that happened, we thought that we had some doubt beginning -- well, beginning to have some doubt about those transactions. In October 2025, the auditing firm pointed out some potential the fictitious transactions. And this is the table of the research. So we involved the outside the auditor and the internal auditor together started some -- the investigation. But back then, they could not get any specific evidence. Unknown Executive: Thank you. Next question please. We'll move to the online for now. [Operator Instructions] Unknown Analyst: Thank you. So about the fictitious transactions, so the external outflow portion, this is #1 and #3 companies. It's the amount that is paid to #1 and #3. Is that what you mean by external outflow? Or were there a possibility of outflow to other parties as well other than #1 and #3? Hiromichi Matsuda: Thank you for the question. So you can see this on the screen. On the right side, it says external outflow. This is the gray area. So #1 and #2 -- well, #3 and #1 are the same. So #1 and #2 paid as fees of the transaction. But this transaction turned out to be fictitious. So this is the area that is outflowing -- outflow externally. Unknown Executive: Another question from online from [ Toizai ]. Unknown Analyst: Question about inappropriate transaction. At this moment, why did it happen? How are you looking at the reason? The investigation committee is yet to come up with the conclusion. But at this moment, what is your thought? Hiromichi Matsuda: Thank you for the question. As to the reason why, of course, we are doing investigation about it. And at the same time, the times, for example, are there any signs for such a matter to happen, we need to avoid reoccurrence of similar matters. So, in December -- I mean October 2025, there were some points made. But as to the documents, the billings and the receipts, which are the evidence of the transaction existed, and there were no problem about the impairment and outpayment, and we were told that there was no problem from the big as well. And in this advertising and the business, there are lots of people involved from downstream to upstream. And we didn't look into a very extreme of the floor. So I think that's part of the reasons this kind of matter happened, and that's some -- I think that we need to make improvements. Unknown Analyst: Another question. So there is a governance issue. You have many subsidiaries and your business is diversified. So a company, what kind of governance issues do you recognize? And what kind of actions you would like to take about them? Hiromichi Matsuda: Thank you for the question. We have been expanding our business, including outside directors. the corporate ethics that should be better actually that we received such point from the directors. And since last year, we have been working on that and still this kind of matter happened, and I feel very sorry about it. I think there are two things. We have KDDI philosophy to raise a spirit to improve our mindset. The KDDI and group companies together, we would like to make repeated efforts so that the philosophy will be well embedded in the organization. And also how to prevent such the matter, that process for that is yet to be established. We need to brush up our detection capability to see any signs. Unknown Executive: [Operator Instructions]. Line B4 towards the exit, please. Unknown Analyst: Yomiuri newspaper. [indiscernible] is my name. So my question is also on fictitious transactions. So in this scheme, #1 and #2 agencies. So it was elucidated because the payment was not done. Did you contact these companies? Is the business continuing? So that's my first question. And number two, in the scheme, how involved is this company in the fictitious transaction? In this business flow, were they used -- or did they collaborate? Did they contribute to the fictitious transaction? Hiromichi Matsuda: Thank you for the question. The transaction is, of course, stopped. It's suspended. With some agencies, there were collaborations, but we think -- but this accuracy is now being investigated by the Special Investigation Committee. So number two, so you think some of them were collaborating, but I don't know a big picture. The big picture is now being investigated by the Special Investigation Committee. Unknown Executive: Any other questions? B2, please. Unknown Analyst: I am from Nikkei Newspaper. As to detection process, JPY 250 billion, the fictitious transactions. Why was it possible? I wonder. What kind of supervision did you take in the past? Hiromichi Matsuda: You mean the supervision on the results? Unknown Analyst: Yes. Hiromichi Matsuda: The billing and other slips documents were there and G-PLAN and BIGLOBE based on those documents, they did issue results. Unknown Analyst: Understood. In this -- the commercial flow, so two companies, the parent and subsidiary were involved. Is there any particular reason for that? Hiromichi Matsuda: The BIGLOBE came into the picture not from the very beginning. So, compared to G-PLAN, because of the level of the trust and the credibility, the BIGLOBE has started its operation as a new business. Unknown Executive: Next question, please. B3, third row towards the exit, please. Unknown Analyst: Sankei newspaper, Fujia is my name. So my question is on fictitious transactions. So it's cumulative, but JPY 246 billion impact on sales. So this is quite large. Each individual transaction was large amount or just accumulated to be this big. So number of cases or the transaction volume value, I don't -- I know you cannot go into much detail, but just a rough image, if you could elaborate to -- for us to get a better image, please. Hiromichi Matsuda: Thank you. So as I mentioned earlier, recently, a few tens of billions of money had been circulated back. In the scheme based on the assumption that the amount goes up month after month. And so it gradually increased and amounted to a few tens of billions of yen. So including previous years, JPY 246 billion. So this is the size of the transaction. Unknown Analyst: How much per case? If you explain this may be too much detail, but the advertisement, how -- what's the size per case of transaction? Hiromichi Matsuda: So it's -- I understand that it was circulated back in its snowballs. I understand that, but still the amount is large though. You are right. Basically, there was the report, the -- so we validated the validity of the transaction. But this is the fee for the posting of the advertisement and paid to each advertisement agency. So it was not for each individual advertisement. Unknown Executive: Any other questions? Question from B1, please. Unknown Analyst: Two questions. Yesterday, NTT DOCOMO, Mr. Maeda, President said that there is a very intensified competition. But previously, the announcement of the results, you made a shift to the LTV from the excessive competition. As to new customers and the competition for new customers, are you slowing down your efforts? Are you slowing down your speed a little bit? Hiromichi Matsuda: As I mentioned in my presentation, the mobile revenue is increasing. And the promotional cost, I said the last time, the year-on-year basis, our promotional cost is flat. So it's not that we are using a lot more compared to the previous year. And the impact -- as to the impact, for example, the handset replacement program, there should be a good balance there. But in the third quarter, the [indiscernible] plan that is producing the good benefit for this year. Unknown Analyst: My second question, Rakuten Mobile exceeded 10 million contracts to the end of last year. And I think roaming I think there are some difficulties, but could you please talk about the direction and your thought on this area as well? Hiromichi Matsuda: I cannot talk about the other companies, but the competition and collaboration for roaming included, and we are also competing with them as well. So, in September this year, we are discussing with them for the roaming for September this year. The other day, the Rakuten was faced with some communication failures. And that pushed a lot of traffic toward us. The areas, in other words, are overlapping. And that should be sorted out. So -- and we are going to suspend the part of via the communication in the due course. Thank you. Unknown Executive: Line A row 1 towards the exit, please. Unknown Analyst: [indiscernible] is my name. I have a question on your business. On Page 17 of your presentation, you talked about the Netflix, the differentiated service subscriber is now 9x bigger. So the pricing plan, subscription, how much track record do you have as au? And regarding Netflix, LYP premium, [indiscernible] is now launching a new plan, so Netflix can be used. So what do you -- how do you see the impact there? Hiromichi Matsuda: Thank you. So the original -- it's not the original Netflix bundle, it's subscription. So 20% point back if you subscribe and maximum five months, you get free. So that's the campaign. au and UQ customers. And of course, there's the product appeal of Netflix that attracts these users, but we want this to be used. So, from March and April onward, we will continue. And as I showed, this will lead to the long-time usage. So this is a bit different. The users may be a bit different from our peers' program. Unknown Analyst: One more question is on your CapEx, your thinking on CapEx. Hiromichi Matsuda: In yesterday's NTT DOCOMO briefing, they said in their CapEx, they're increasing from last year and FY '26, they will build the base station quite aggressively. And by next year, they said they will catch up with the other competitors. So not all base stations will directly lead to the communication quality, but you will be caught up. Unknown Analyst: So based on that assumption, what is your thinking on your CapEx? Any changes there? Or will you just keep your CapEx plan unchanged? If you have any questions, please -- if you have any comments, please. Hiromichi Matsuda: So we think this area expansion is the source of competitiveness. So we will continue executing and continue being the winner by the outside rating evaluation companies. Regarding 5G, we did quite a big investment last year. And so it's well built, and it has peaked out. So instead, we are now moving -- focusing on AI infrastructure and thinking of keeping the capital expenditure flat. Unknown Executive: Any other questions? The person at C1, please. Unknown Analyst: [ Ishikawa ] freelance journalist. The net increase in smartphones compared to the DOCOMO compared to the last time, it seems that the number is rather low. Are you satisfied, Mr. President? Hiromichi Matsuda: Thank you. This is related to structural reform. There are pros and cons, we need to strike a good balance. The smartphone, the numbers, 33.3 million. That's the target toward the end of the year. And June and September, plus 30,000 plus 20,000 and this time, plus 70,000. And in the fourth quarter, we will see more growth. Rather than taking excessive increase, we would like to focus on the contribution to lifetime value. So those numbers alone are not the basis for us to increase the number. Yesterday, DOCOMO talked about the following thing, the performance aggravated because too much the competition for the handset. Unknown Analyst: As to the replacement, do you have a good control on the replacement program or the purchase support program and the [indiscernible] is also revisiting the issue. Are you changing any thoughts? Hiromichi Matsuda: As this slide shows, we think that we have a very well-balanced control. In the past, we struggled a little bit, and that is because why we are controlling it a better way. And of course, new functions and new handsets, we would like to deliver those new things to the customers and striking good balance. Unknown Analyst: When you say control, exactly what are you doing? Hiromichi Matsuda: From the customer's point of view, I want something new. And after 24 months, it gets more expensive. If that's the case, of course, the customer comes in to replace it with the new one. The first such -- we -- in the past, we did not understand what could happen correctly, but we made some adjustments. And based on the plan, we are building this the scheme of control. Unknown Executive: So, next question, please. Line B row 2 towards the exit, please. Unknown Analyst: [indiscernible] is my name. So I would like to go back to the fictitious transactions. Earlier, you talked about the two members from G-PLAN. So I have a question on those two members. So these two were originally in G-PLAN or -- so when this intermediary business was launched, they joined. So my first question is that. Hiromichi Matsuda: I am sorry. We have identified the two, but I'd like to refrain from mentioning that because it has to do with their privacy. So those two, from around 2017 until this was discovered, they were in this intermediary business throughout. We want to wait for the investigation result on that as well. Basically, as I said earlier, from 2017 onward, it's been recorded. So we are trying to understand how much of that was correct and how much is fictitious. So this needs to be elucidated through the investigation. Unknown Analyst: My last question is those two for the disciplinary action, are they G-PLAN staff? Or are they already fired? Are they former employees? Hiromichi Matsuda: We are still contacting them. So they are staff employee. Unknown Executive: Any other questions? Please raise your hand. A person at C3, please. Unknown Analyst: [indiscernible]. So number one, #3 or #2, the external flow to whom or to what kind of company like sector or business form size, is it possible to share some information? Hiromichi Matsuda: As to the other companies that the flow went to, the committee is investigating it, and I would like to refrain from talking about specific names. It is not -- but it is not large ad agencies. The anti-social organization or suspicious of the kind of status is involved. And that also is being investigated. At this moment, there's nothing we can talk about it. Unknown Executive: Next question, please. A1 towards emcee, please. Unknown Analyst: [ Nakamura ] is my name. I have a question on the fictitious transaction case. So the two that are suspected to be involved, what was the motive or reasons or trigger? Have they talked about that? Hiromichi Matsuda: We want to not impact the investigation of the Special Investigation Committee. So allow me to refrain from mentioning that today. Unknown Analyst: Yes. One more question is going forward, so in the -- where a large amount of money is involved, if there was a falsification of the document, that may be another crime. So have you submitted the damage to the police or have you taken actions? Hiromichi Matsuda: Yes, we are aware of that. We have not consulted with the police yet, but depending on the progress of the investigation, we will consider that and take appropriate actions. Unknown Executive: Any other questions? Next D1, please. Unknown Analyst: [indiscernible] As to money coming in, the advertisement and the fees move together. And recently, it's the level of dozens of billions per month, including fees. And the fees are the ones which are counted as revenue? Hiromichi Matsuda: So it's about the gross amount or net amount. So it looked like the revenue canceled decreased, but it is based on net basis. So as you said, it's correct that the fees are counted as revenue. I think there should be some fund, the initial fund for advertisement, right? The amount increased dramatically to a very big amount. BIGLOBE and G-PLAN, they had fund at hand. And also, we have group finance mechanism. For the whole group, we have surplus and KDDI kind of concentrated and at headquarters. And from the headquarters, we lend money to the other companies. So the group finance was executed for BIGLOBE. The telecommunication-related investment and last year, JPY 57.9 billion or so lending was extended to BIGLOBE last year -- last fiscal year in the group financing. And so group finance is -- might be used -- might have been used as part of this incoming money. Unknown Analyst: And as to these two employees involved, both of them were seconded BIGLOBE, but they are G-PLAN employees. And at this moment, you have not confirmed any other employees involved. Hiromichi Matsuda: Yes, your understanding is correct. At this moment, we have not confirmed any other employees involved. But that is also subject to the investigation by the committee. Unknown Executive: Next question, please. Line D towards the emcee, please. Unknown Analyst: [indiscernible] is my name. So fictitious transactions, #1 and #3. there's #2 in the middle. So number three, other -- unless the order goes to the #3, the money does not circulate. But was the scheme such that the money will always go from #2 to #3? Is there #1 company and #2? Usually, I think it's multiple. But in this fictitious scheme, was there one particular company that was in charge? Hiromichi Matsuda: From BIGLOBE and G-PLAN, the upstream companies contract and the contract with the publishing agency. There were two types of contracts. And I mentioned the business practice, commercial practice. And what's beyond this downstream publishing agency, we usually don't see that. We were not looking at what's beyond the publishing agency. Now the money stopped coming in from the top. And so we heard from the employees. And after we heard from the employees, we found out that it was subcontracted from #2 and 3 and #1 and #3 were identical. Unknown Executive: Any other questions? The person at B1, please. Unknown Analyst: [indiscernible] freelance channel. Starlink related question. This year, other carriers are going to start the satellite telecommunication service within this year. You had a lead time of about one year. What is the advantage? Do you think that there is an advantage for you? And how are you going to differentiate yourself this year? Are there any specific measures? Hiromichi Matsuda: There is something that you can look forward to. I would say, Starlink Direct or area, we would like to deliver it right away. And with that in our mind, we have been developing area and Starlink the direct as well. The sooner, the better for customers. As to the lead time advantage, without thinking about other companies, as a frontrunner, we would like to work on something new. not just at area, but Starlink Direct, we would like to make advancements with something new all the time. Unknown Executive: Line B4 towards the emcee, please. Unknown Analyst: [indiscernible] Sorry for asking you another question. Just one clarification. So fictitious transactions, the impact on your financial results. Earlier, you said from 2017, the business started and sales, you mentioned full amount. But as the investigation progresses, the fictitious portion and the actual transaction will be clearer. So this amount is the current estimated amount or this amount is subject to change as investigation progresses? Hiromichi Matsuda: For now, this is the maximum amount that we are expecting. But the fictitious transaction started increasing in recent years. So we think fictitious portion will account for a large portion. So now -- so this is the amount that will be reversed. Is this already fixed? Of course, it depends on the special investigation committee and the audit firm's audit. So this is subject to change. But we understand that this is the maximum amount. So we are showing you the approximate amount. Unknown Executive: Question from online. Unknown Analyst: [indiscernible] Jibun Bank and the deposit funding and the improvement and the impact of the money activity too. You talked about other reasons as well -- factors as well. What is the impact coming from the money activity? You talked about the reimbursement, if it is over 500,000 and so on. Any impact there you've seen? And also card business is also growing. Is also driven by the money activity or any other factors? Hiromichi Matsuda: Katsuki-san, anything? Tomohiko Katsuki: As to deposit funding, there are two factors, as I mentioned earlier, the bundled -- the deposit bundled plan, the money activity two and au Jibun Bank's own campaign during the bonus season, for example. such deposit collection campaign worked. And as you can see later, the operation data, you can look at Page 36 of operation data. Y-o-Y deposit increased significantly, especially retail deposit. As you can see -- so it's not really the growth coming from the money activity. We do not disclose it. Please bear with us. And the credit cards, especially for money activity too, the growth of gold card is paying off. As you can see on the screen, -- we are seeing good effect coming from that. are you okay with that? Unknown Executive: So another question from online. Unknown Analyst: Yes. I think this question has been raised a few times, and I'm sorry about the impact of the fictitious transactions. So, 2024 March, so JPY 96 billion before March '24. So G-PLAN started -- since they started the advertising business, this has been posted. So the fictitious transaction started from the start of the business. Is that how this was recorded? Or there was a starting line when this started. And you summarized the amount up to March '24. So what is the time line. Hiromichi Matsuda: Thank you very much for the question. As an internal investigation, we found out that before year ending March '24, each company -- so all transactions since they started the advertisement business has been summarized. So in case of G-PLAN from 2017 and BIGLOBE 2022, they started the advertisement agency business. So it's a summary of all the amounts. So it started from -- not from there onward, but from the very beginning, the fictitious transaction was likely to have happened from the beginning of the business. Well, the authentic correct transaction and fictitious transactions are now being separated, but now we're seeing an increase of the fictitious transaction portion. So -- we are looking at all the transactions with a view that there is a possibility of future transactions. Unknown Analyst: Understood. So including those cases that were correct in the past, you are checking all cases. You don't know when the starting line was, but you're including everything. Hiromichi Matsuda: Yes. Unknown Analyst: Including the ones that may be correct. So the maximum amount is a revenue of JPY 246 billion and JPY 33 billion, the external outflow, is this maximum or at least or this is the maximum amount. Hiromichi Matsuda: So this time, this is the external outflow. So we are provisioning this amount shown on the table. We think this is the maximum amount. Unknown Executive: One more question online. Horikoshi-san of Nikkei business. Unknown Analyst: Horikoshi speaking. Two questions. First, in appropriate transaction. So, within this, the scheme diagram, #2, it could be involved from the very beginning with #1 and #3 or it could be involved later. So in the supply chain as a whole, my question is why you did not detect such the transactions? Hiromichi Matsuda: I think it is because of failure of the control scheme. Unknown Analyst: So do you -- could you please share with your thought? Hiromichi Matsuda: So, the group governance, and it is related to the responsibility of supervision. So Monthly transaction itself has the vouchers and slips, accounting slips, which verify that the transactions occurred and they were continuing this business as normal transaction. And the BIGLOBE also gave us some information about the appropriateness of the transactions as well objective. But the objective evidence was not detected about the inappropriate transaction. So it took time for us to detect all that. So as I mentioned earlier, group finance is part of the picture. Ad network accounts for most of the amount. that is currently being investigated. So I do not make any comments on that. Atul Goyal: And second question is about the Miyazaki data center. Two years ago, you did some construction work. What is the size of the investment? And what is the size of data center? Hiromichi Matsuda: As you can see on the screen, AI digital belt concept or initiative, you have about -- there are about three big data centers. Unknown Analyst: Are you going to open three big data centers in Japan? Or what about Tohoku and Hokkaido area? Is there any possibility for you to go to those areas as well? Hiromichi Matsuda: Thank you. The belt diagram is showing that there is no coverage in the north. But actually, we are constructing the but in the north as well. Putting aside whether it's big size or not, what kind of AI data center should be there that is in our mind. The AI processing will be happening in the different locations. So it's not that everything will be concentrated on big data centers. So the connection like mesh and as a whole, the belt, which covers the whole -- the Japanese archipelago, that's what we are thinking about. Miyazaki, we have secured the adjacent land so that we can easily expand this location as well, watching closely the demand level, we are going to make next moves. In the next midterm strategic -- midterm strategy, we are going to give you more details. Thank you. Unknown Executive: So next question, please. D3 towards the exit, please. Unknown Analyst: Yashi is my name. Sorry to ask you. So JPY 33 billion external outflow is my question. In Q3 -- up to Q3, JPY 17 billion has been provisioned, if my understanding is correct. And maximum JPY 33 billion has flown outside. So in KDDI's P&L, how much will eventually be posted as loss? So that's my first question. Hiromichi Matsuda: Thank you for the question. So this year impact. We need to wait for the result by the Special Investigation Committee for the amount to be fixed. But for now, this amount that is shown vertically will be posted on our P&L. So JPY 33 billion, and there may be additional impairment. For this fiscal year, JPY 17 billion is provisioned. So reversal of profit is JPY 25 billion. And other than that, there is a possibility of impairment in addition. Unknown Analyst: So then JPY 33 billion can -- may not be your loss. So of the JPY 33 billion and JPY 17 billion, I'm not understanding the difference between the two. Are there prior year portion? So how can I sort this out? Hiromichi Matsuda: So this table is grouped into #3. First, March '26 is up to Q3, the provision up to Q3, this is JPY 17 billion and JPY 33 billion to the right is including the prior years, it's the total of prior years. So including that, it is JPY 33 billion. And this is assuming that we cannot recover the entire amount. So we will provision this for once for now. But if we can recover, of course, we're trying to recover. And if the amount can be recovered, the recovered portion will be added to the profit in the following years. Unknown Analyst: Then at this point, JPY 17 billion loss is provisioned or is assumed for this fiscal year. Hiromichi Matsuda: Yes, this is the expected loss. Unknown Analyst: One more question, please. So there are a few advertisement agencies. So those that were involved in the fictitious transactions, do you know how many advertising agencies were involved? Hiromichi Matsuda: We only know that multiple are involved, but we don't have the exact number or the names that is left in the hands of the Special Investigation Committee. Is it 2 or 3 or maybe 10 agencies? I'd like to refrain from mentioning that as well. Unknown Executive: Any other questions? Since there are not many questions left. The two people are raising their hands. So starting with A4, the person at A4, please? Unknown Analyst: Last week, DOCOMO using DOCOMO shop, they will give support for financial business. I think they already started it actually. What about your company, for example, the opening account for the Smart Securities or are you planning to use shops for providing similar support? Could you please talk about your thought? Hiromichi Matsuda: au Jibun Bank and we have been providing support using the au shops as the other agencies for the au Jibun Bank. In addition, we have credit card business as well. So I think your question is about the -- based on the securities and the salesperson qualification. For that online intermediary securities, SBI SECURITIES using the au Jibun Bank, that kind of alliance is our current focus. So when it comes to the securities sales rep, which requires special qualification and development of such personnel on real world, we are not thinking about it at this moment. I answered your question. Unknown Analyst: It's not only about securities account, for example, the various services of the au Jibun Bank or mortgage loans in those areas, what is your thought? And of course, always we are reviewing every potential possibility. There are various financial services and some new emerging financial services, especially au Financial Holdings, as to their operating areas, we would like to give serious thought. Have I answered your question? Unknown Executive: So the last question, C3 towards the entrance, please. Unknown Analyst: [indiscernible] again. So regarding the fictitious transaction, so the two employees were involved, you said. So if I could put this in perspective, the two are still seconded to below. They are -- yes, G-PLAN employees seconded to below. So seconded to below -- and there are multiple -- so they are belong to G-PLAN. So they're seconded to G-PLAN. But why despite the absence of the two, can this transaction continue? Hiromichi Matsuda: So they're not in G-PLAN, but why can they operate G-PLAN's transaction or can be involved in G-PLAN transaction? So they're dual headed. They're seconded, but there is a proportion between the second destination and the source company. So they are dual headed. Unknown Analyst: I see. So the two employees, so they were not checked. The transactions that the two were involved. Hiromichi Matsuda: So the transactions that only two of them were involved were fictitious. So this fictitious transactions, we have elucidated up to now this much fact is already clear. There are authentic or correct transactions as well. So we're trying to draw a line between the two. And for the ones that were involved in BIGLOBE and G-PLAN, they are fictitious transactions. That is our understanding. So we're trying to have the special investigation committee -- check the accuracy of that. #1 and #3 were identical companies. That's one company. So yes, one entity, we want to refrain from saying how many companies they were, but the hearing or the entry withdraw money and digital forensic is utilized and understood that 1 and 3 are the same. That's what we're saying today. Unknown Analyst: And last question. So in your investigation so far, have you heard any motives or reasons to this were pressured to have large sales? Or were they just trying to invest all the money or the special investigation committee is investing that it's their scope. Hiromichi Matsuda: So I want to refrain from saying anything here. But of course, BIGLOBE is a business operating company. So the development of the business plan and the target management is done. But from our company, we have a medium-term plan. We are in the final year of the medium-term plan. So communication and financial or DX and enterprise business, energy, these are our main businesses. So this advertisement agency business is not a driver for us to achieve the medium-term plan target. Now the amount that you found out this time in each year, BIGLOBE and G-PLAN, what is the proportion of this in BIGLOBE, G-PLAN's revenue? BIGLOBE and G-PLAN are consolidated. BIGLOBE revenue is around JPY 230 billion. And this is last fiscal year and of which this is JPY 82 billion. Unknown Executive: With that, we would like to conclude the Q&A session. Hiromichi Matsuda: Lastly, I'd like to say a few words. Again, we are very sorry for this matter. And of course, we are going to avoid reoccurrence and strengthen our governance. And at the same time, we are going to solidify our business platform to grow our business. And that is the path that we need to take to take our responsibility. And I will take the lead in making efforts, and we will continue to make advancements. Thank you for your continued support. Unknown Executive: We will conclude this meeting. Thank you very much for joining us today.
Kimberly Callahan: Good morning, and welcome to Camden Property Trust's Fourth Quarter 2025 Earnings Conference Call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today for our prepared remarks are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, Executive Vice Chairman; and Alex Jessett, President and Chief Financial Officer. We also have Laurie Baker, Chief Operating Officer; and Stanley Jones, Senior Vice President of Real Estate Investments, available for the Q&A portion of our call. Today's event is being webcast through the Investors section of our website at camdenliving.com, and a replay will be available shortly after the call ends. And please note, this event is being recorded. Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC, and we encourage you to review them. Any forward-looking statements made on today's call represent management's current opinions, and the company assumes no obligation to update or supplement these statements because of subsequent events. As a reminder, Camden's complete fourth quarter 2025 earnings release is available in the Investors section of our website at camdenliving.com, and it includes reconciliations to non-GAAP financial measures, which will be discussed on this call. We would like to respect everyone's time and complete our call within 1 hour. So please limit your initial question to one, and rejoin the queue if you have a follow-up question or additional items to discuss. If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or e-mail after the call concludes. At this time, I'll turn the call over to Ric Campo. Richard Campo: Good morning. The theme for today's on-hold music, uncertainty, could not be more fitting for the state of the multifamily REIT sector. It's no exaggeration to say that the words uncertain or uncertainty have echoed through the conference call transcripts during 2025. And why wouldn't they? The operating environment last year was uncertain. Every sign suggests that the first half of 2026 will be marked by the same cautious tone as last year. The song that you've heard this morning reference uncertain times. However, the song verse that best captures the current uncertain vibe for us is from The Doors classic Roadhouse Blues. Well, I woke up this morning and I got myself a beer. The future is uncertain and the end is always near. The end of uncertainty that is, here's what we are certain about. We are certain that we finished 2025 strong, exceeding our original guidance for core FFO by $0.13 a share. We are certain that people need a great place to live, and we provide that. We are certain that new supply has peaked and is falling like a knife in our markets. We are certain that 2025 had one of the highest levels of apartment absorption in the last 20 years. We are certain that our Sunbelt markets will continue to grow faster than the rest of the country, prompting us to market our California properties for sale. The sale allows us to expand our Sunbelt footprint, simplify our operating platform and buy our shares at a significant discount to net asset value. We are certain that our residents are resilient and the financial prospects are strong with rent payments at only 19% of their income. We are certain that apartments are significantly more affordable than owning a home and will be for the foreseeable future. We are certain that new lease rates and net operating income will grow in the future. We are certain that Camden has one of the strongest balance sheets in REIT land. We are certain that we have one of the best teams in the business, providing living excellence to our residents. And finally, I'm certain that Keith Oden is up next. D. Keith Oden: Thanks, Ric. As we reported last night, Camden's same-property revenue growth for 2025 came in at 76 basis points, which represents a 1 basis point beat to the midpoint of our most recent guidance. And our operations teams are celebrating like they've just won the Super Bowl. In putting together our projections for 2026, we reviewed supply forecasts and job growth estimates from several third-party data providers, and we budgeted from the individual property level up, taking into account each community's historical performance, current submarket dynamics and other relevant factors. On the supply front, it is clear that deliveries in almost all of our markets peaked during 2024 and continued to decline in 2025, setting up 2026 and 2027 to be below average years for new supply. Completions as a percentage of inventory peaked at nearly 4% for our portfolio in 2024 and are expected to be less than 2% this year and closer to 1.5% in 2027. Regarding 2026 job growth, I'll echo Ric's comments that uncertainty is still a key theme in the markets this year, but we are certain also that whatever jobs are created this year will predominantly be in Camden Sunbelt markets, which continue to attract corporate relocations and growth as a result of their affordable business-friendly environments. In 2026, we expect operating conditions will improve over the course of the year with modest acceleration in the second half of 2026. The midpoint of our 2026 same-property revenue guidance range is 75 basis points, basically the same that we achieved last year, with half of our markets falling between 1% and 2% revenue growth and most others flat to up 1%. The two outliers with slight revenue declines will likely be Austin due to continued supply pressure and Denver due to recent regulatory changes affecting income from utility rebilling. As many of you know, we have a tradition of assigning letter grades to forecast conditions in our markets at the beginning of each year and providing outlooks of improving, stable or moderating for their expected performance during 2026. We currently grade our overall portfolio as a B with a stable but improving outlook. Our first three markets are rated either A- or B+ and should achieve revenue growth in the 1% to 2% range this year. Washington, D.C. Metro ranks as an A- with a moderating outlook. Despite all of the conversations around D.C., DOGE and politics last year, D.C. Metro clearly outperformed our expectations with 3.5% revenue growth in 2025 and heads into 2026 well positioned with 96% occupancy. Houston is next with a B+ rating and a stable outlook, the same grade as last year. Supply has been quite limited in Houston for the past couple of years, allowing it to place # 4 for revenue growth in 2025, and we expect Houston to exceed our average portfolio growth again in 2026. Our Southern California markets earn a B+ grade with a moderating outlook for 2026. Like D.C. Metro, Southern California outperformed our original expectations, posting mid-3% revenue growth in 2025, in large part due to declining levels of bad debt. Supply has not really been an issue in most of our California markets, but we do expect less of a tailwind from reducing bad debt as we move through 2026. Denver was our #3 revenue growth market in 2025 and receives a grade of B+ with a moderating outlook. Market conditions in Denver are fairly stable, though slightly more challenging in a few of its urban submarkets. But as I mentioned earlier, revenue growth is expected to decline year-over-year due to lower levels of utility rebilling and other income anticipated in 2026. Our next four markets earned a B letter grade with improving outlooks. Nashville, Atlanta, Dallas and Southeast Florida are all expected to improve over the course of 2026 as existing supply is absorbed. We have begun to see the proverbial green shoots in some of these markets and have budgeted between 1% and 2% revenue growth for each market this year. Orlando, Raleigh and Charlotte received B ratings this year with stable outlooks and budgeted revenue growth of 0% to 1% compared to relatively flat growth last year. Demand has been solid in all of these markets, but it will take a few more quarters to see any meaningful improvements given the higher-than-average supply delivered, particularly in the two North Carolina markets. We grade Tampa B with a moderating outlook and Phoenix of B- with a stable outlook and expect relatively flat revenue growth in both markets this year. Tampa benefited from above-average occupancy in 2024 and much of 2025, but has since returned to more normalized levels around 95%, tending to slow the revenue growth there. Phoenix still faces elevated levels of supply, mainly on the Western side. So we expect pricing power to be limited for most of 2026. And finally, Austin earns a C+ this year with an improving outlook after being stuck for a C- for the past 2 years. New supply is finally slowing and there is light on the horizon. But given the overwhelming amount of new apartment homes delivered in 2024 and 2025, it will take a little while longer for market-wide occupancy to improve and concessions to burn off. Stay tuned as we're fully expecting Austin to receive a B or better in 2027. And now a few details of our -- on our fourth quarter '25 operating results. Rental rates for the fourth quarter had new leases down 5.3% and renewals up 2.8% for a blended rate of negative 1.6%, which is fairly in line with what we saw in the fourth quarter of '24 and what we expect for the -- expected for the fourth quarter of '25. Renewal offers for first quarter expirations were sent out with an average increase of 3% to 3.5%. And as expected, move-outs to purchase homes remain extremely low at 9.6% for the fourth quarter and 9.8% for the full year of 2025. I'll now turn the call over to Alex Jessett, Camden's President and Chief Financial Officer. Alexander Jessett: Thanks, Keith, and good morning. I'll begin today with an update on our recent real estate and financial activities, then move on to our fourth quarter results and our guidance for 2026. During the fourth quarter, we disposed of three communities located in Houston and Phoenix for a total of $201 million, acquired one community in Orlando for $85 million and stabilized Camden Long Meadow Farms, one of our two build-to-rent communities located in suburban Houston. Our transaction activity for full year 2025 included the sale of seven older, higher CapEx communities with an average age of 22 years for $375 million and the acquisition of 4 newer assets with an average age of 5 years for $423 million. We recently began marketing for sale our 11 California operating communities. Obviously, the market will dictate final pricing, but preliminary indications of value and market chatter range from $1.5 billion to $2 billion. We are assuming this transaction closes midyear. Additionally, we are assuming that approximately 60% of the sales proceeds will be reinvested through 1031 exchanges into our existing high-demand, high-growth Sunbelt markets. And the remainder of the proceeds, modeled at $650 million will be used for share repurchases. We have already completed nearly $400 million of the $650 million of share repurchases associated with the planned asset sales, and we expect to complete the remaining buybacks in early 2026. In anticipation of this additional buyback activity, our Board recently approved a new $600 million share repurchase authorization. The just over $1 billion of 2026 acquisitions from the California sales proceeds are projected to occur during the summer months. Based upon this timing of asset sales, asset purchases and share repurchases, we are assuming no accretion or dilution in 2026 from this strategic transaction. Variability in transaction timing is considered in our core FFO guidance ranges. Turning to financial results. Last night, we reported core funds from operations for the fourth quarter of $193.1 million or $1.73 per share, $0.03 ahead of the midpoint of our prior quarterly guidance, driven entirely by higher fee and asset management income from our third-party construction business as we favorably closed out several jobs, which came in well under budget. Property revenues, expenses and NOI were exactly in line with expectations. Turning to guidance. You can refer to Page 24 of our fourth quarter supplemental package for details on the key assumptions driving our 2026 financial outlook. We expect our 2026 core FFO per share to be in the range of $6.60 to $6.90 with a midpoint of $6.75, representing a $0.13 per share decrease from our 2025 results. This decrease is anticipated to result primarily from an approximate $0.04 per share decrease in fee and asset management income as the outperformance we experienced in this category, particularly in the fourth quarter of 2025, is not anticipated in 2026, an approximate $0.045 per share or 3% increase in general overhead and other corporate expenses and an approximate $0.045 per share decrease in same-store net operating income. The growth in operating income from our development, non-same-store and retail communities is entirely offset by the impact of our disposition of older, higher FFO yielding communities in 2025. At the midpoint, we are expecting same-store net operating income of negative 50 basis points with revenue growth of 75 basis points, in line with 2025 and expense growth of 3% versus 1.7% in 2025. Each 1% increase in same-store NOI is approximately $0.09 per share in core FFO. Our same-store guidance includes California for the full year, and California is accretive to our numbers by approximately 25 basis points on revenue and 40 basis points on NOI. The midpoint of our 2026 same-store revenue growth of 75 basis points assumes 55 basis points of growth attributed to rental income and 20 basis points of growth from other income. We expect market rent growth of approximately 2% for our portfolio over the course of the year, with most of that growth occurring in the second half of the year, recognizing a portion of this rental rate growth with our slightly negative earn-in, flat occupancy and a slight improvement in bad debt results in expected growth of approximately 55 basis points for rental income. Other income which is primarily comprised of utility rebilling and fee income represents 10% of our total property revenues and is expected to grow around 2% in 2026. Adding approximately 20 basis points to same-store revenue growth. Page 24 of our supplemental package also details other guidance assumptions, including the plan for up to $335 million in development starts at the end of the year and approximately $200 million of total 2026 development spend. Noncore FFO adjustments for the year are anticipated to be approximately $0.14 per share and are primarily legal expenses and expense transaction pursuit costs. We expect core FFO per share for the first quarter of 2026 to be within the range of $1.64 to $1.68. The midpoint of $1.66 represents a $0.10 per share decrease from the fourth quarter of 2025, which is primarily the result of an approximate $0.05 per share sequential decline in same-store NOI driven by an increase in sequential same-store expenses resulting from the timing of quarterly tax refunds, the reset of our annual property tax accrual on January 1 of each year, and other expense increases, primarily attributable to typical seasonal trends, including the timing of on-site salary increases. An approximate $0.04 per share decrease in fee and asset management income from the large outperformance we recorded in the fourth quarter, an approximate $0.04 per share increase in interest expense from higher debt balances resulting in part from our actual anticipated share repurchases and an approximate $0.02 per share decrease in non-same-store NOI due to our late 2025 and anticipated first quarter 2026 disposition activity. This $0.15 per share cumulative decrease in quarterly sequential core FFO is partially offset by an approximate $0.05 per share increase in core FFO related to our share repurchase activity. And finally, we plan on launching a new $400 million to $500 million bond transaction later this quarter. At this time, we will open the call up to questions. Operator: [Operator Instructions] Our first question comes from Eric Wolfe with Citi. Nicholas Joseph: It's Nick Joseph here with Eric. Just on the Southern California portfolio sale. Can you talk about why now is the right time to do that, just given obviously the considerations of California right now? I think over the past few years, you've thought about kind of that portfolio exposure relative to the rest. And so essentially why now? Richard Campo: I would say why now is because we think there's going to be a pivot point in the Sunbelt growth story, we want to be in front of that rather than behind that. That's number one. So we think Sunbelt is going to grow. And when it turns, it's going to turn, it's going to turn pretty strong and pretty hard, I believe. So that's number one. Number two is if you look at the transaction volume across America, the coasts have been the most vibrant transaction environment. When you think about -- if you're a developer, you want to -- you need to sell your development deal you did, you'd rather not sell it in Austin today, but in fact, California has had a really decent revenue growth. So you don't have to -- buyers are not having to kind of pick the point when they think the market is going to turn and go up. It continues to be a pretty vibrant market. So those are the two main reasons. And I guess the last would be when we think about the ability to execute the transaction in a very buoyant buyer market. We also look at the opportunity to redeploy the capital not only in the Sunbelt, but also to buy the shares. And so when we can sell the California portfolio at a cap rate that's substantially less than our implied cap rate in our -- that's implied in our stock. That's what kind of drove the decision of those three things. Nicholas Joseph: And then you're marketing that portfolio, but how are you thinking about either splitting up into smaller portfolios or individual assets? Or is the goal really to sell it all at once? Richard Campo: Well, the good news is that there's lots of buyers and there are lots of different permutations of the portfolio and how it can be either done in a portfolio deal or individually. And what we're going to do is maximize the purchase price, whether it's individually or separate or combinations of thereof. Operator: And the next question comes from Jamie Feldman with Wells Fargo. James Feldman: Great. Thank you. I guess just going back to some of your guidance and the thoughts on the pickup in the second half. Can you just walk us through your thoughts on new and renewal rents and blends as you go throughout the year? And are there any markets that are more or less concerning as you think about hitting your numbers? Unknown Executive: Yes, absolutely. So what we're expecting in the first quarter is slight improvements versus the fourth quarter of '25 in both in terms of new leases and renewals, which obviously will translate to slight improvement on a blended rates for the first quarter of '26. As we go through the second quarter and beyond, we're going to have a lot more visibility because we'll start to get into our peak leasing season. And at that point in time, we'll give you some more color on exactly what we assume for new lease renewals and blends for the rest of the year. But I will tell you, obviously, included in our numbers is an improvement and is an improvement at the back half of the year, which is what I said in the prepared remarks. When I look at individual markets, as Keith walked through when he gave his letter grades, certainly we've got quite a few markets that are improving. And really, we don't have any markets that are declining. So based upon that, there's nothing that really sort of jumps out to us as a big concern. We're absolutely seeing green shoots in some of our markets that have been a little more challenged throughout last year and the year prior. So we feel like we're in good shape. But obviously, we need to get into the peak leasing season and see how the rest of this year unfolds. Operator: And the next question comes from Yana Galan with Bank of America. Jana Galan: A question on the guidance, and thank you for covering some of this in your prepared remarks, but can you clarify how to think about the timing of the 1031 exchange acquisitions? And I think some of the miss relative to the Street, maybe that you're net seller this year, but it does also sound like some of the share buyback activity is front-end loaded. So if you could kind of help me kind of walk through that. Unknown Executive: Yes, absolutely. So for the full year, when we look at California, and when I say California, I'm picking up the California sale, the redeployment of about $1.1 billion of capital into the Sunbelt, the redeployment of about $650 million of capital into share repurchases. When we look at all of that combined, effectively, we're saying it has no net impact whatsoever to 2026 guidance. When you think about timing, the anticipation is, is that California closes midyear, the anticipation also is, is that the $1.1 billion of redeployment happens in the summer months, so call that midyear as well. So there may be some slight little delays where we may sell before we buy. But we're trying to get as efficient as we possibly can on that entire process. And then when you look at share repurchases. At our stock price today, we think we're a screaming buy. And so we're certainly going to be doing the share prices earlier as soon as we can get them done. So that's how it lays out for the full year. As it comes to differential between our numbers and the Street, I really don't think a part of it is California because as I said, it's just -- it's a net neutral. Operator: The next question comes from Steve Sakwa with Evercore ISI. Steve Sakwa: You guys are obviously penciling in some development starts this year. Could you maybe just talk about your expectations for stabilized returns. What are you seeing on costs? And how are you underwriting rents today in those development projects? Unknown Executive: Yes, with the cost. Go ahead Alex. Alexander Jessett: Yes. So on a cost basis, here's the good news, is costs are coming down. We're seeing anywhere between 5% to 8% reduction in costs. But clearly, developments are still hard to pencil. And if you can -- you look at our activity in '25 and it was more muted and you look at the guidance that we have for '26, and we're saying that any starts are going to be in the latter half of the year. We do have a couple of land sites that we own, and we have a couple of other land sites that we control that we clearly could close on and could start this year. But developments continue to be a challenge. When we look at rental rates, obviously, the way we sort of think about things is we try not to look at trended too much. We try to look at what everything looks like on an untrended basis, and we're seeing really sort of in line with, call it, 5%, 5.5% on an untrended basis, which can get you up to sort of a 6% on a trended basis. Operator: And the next question comes from Alexander Goldfarb with Piper Sandler. Alexander Goldfarb: Can we just get a bit more color on the $14 million of legal expenses. And I know that you guys switched to core from a NAREIT, but still across the industry, these legal expenses, settlement political advocacy, whatever, in aggregate, is all becoming more a regular part of the business. So if you could just talk; one on the $14 million and two, how you guys are thinking about legal, political advocacy and stuff on a go-forward basis? Alexander Jessett: Yes. So I'll hit the first part. So the first part is, is that $14 million is the combined number of noncore adjustments, which includes legal and costs associated with development and acquisition activity, et cetera. But legal costs, I mean, it's well known, the legal battles that we're in the middle of and legal cost is becoming a significant number. And the good news is that it will go away at some point, right? This is some very specific actions that you guys know about. Those things will resolve itself, and we'll return to a more normal cadence when it comes to that category. In terms of how we're thinking about activation, Ric? Richard Campo: Sure. So when you think about the -- let me just talk about the political action issues, and this is a pretty simple math. So in the last 5 years, our political action activity was primarily dominated in California, 92% of our spend on political efficacy was in California. And so once we close that portfolio, the political efficacy in the Sunbelt is pretty much 0. . Operator: The next question comes from Michael Goldsmith with UBS. Ami Probandt: This is Ami on with Michael. What gives you confidence that you can redeploy the capital received from the asset sales within the 1031 window given some of the increased competition that we've been seeing and pretty low cap rates across the Sunbelt. And then if you can't redeploy it, what's the potential impact to earnings? Is there a tax implication here that you would have to pay? Thanks. Alexander Jessett: Yes. So we just came back from NMHC. And I will tell you, we talked to quite a few sellers that absolutely have portfolios, have individual assets, et cetera, that they would love for us to buy. Camden is a fantastic buyer, and sellers recognize that, because we don't have financing contingencies, because they know we're real, because we have been doing this for 33 years. So we are the type of buyer that sellers want. So I don't think we're going to have an issue of redeploying this capital and not to mention that we've got one of the best acquisition teams in the business spread across the country, tasked with doing this on a full-time basis. So I'm not very concerned about that. But I will tell you that if you look at the way we're doing our math is that we are -- there are tax consequences. And if we cannot redeploy this capital, then we would likely have to do some type of a special dividend. Operator: The next question comes from Austin Wurschmidt with KeyBanc Capital Markets. Austin Wurschmidt: Just going back to the acquisition opportunities. Just wondering the types of deals that you're looking at? Are these development deals that are in lease-up, are they mostly stabilized transactions? And then could you just also talk about some of the specific markets you're evaluating and whether there's any new markets included in that? Stanley Jones: This is Stanley. So on the acquisition front, we are evaluating -- we're already evaluating a number of opportunities across all of our markets, and those are stabilized opportunities, both on and off market. So look, we're going to continue to leverage all of our relationships to find opportunities to redeploy the proceeds from the California sales. So, like Alex said, our investment team is up to the task. We did $423 million in acquisitions in 2025, and we certainly could have upsized that if we had wanted to. So we're very sanguine about the opportunity in front of us and are already making some headway with that. Unknown Executive: And at this point, we're not anticipating any new markets. Operator: And the next question comes from Haendel St. Juste with Mizuho. Haendel St. Juste: Another one on the SoCal portfolio trade. I guess, a bit of a 2-parter. First, it looks like those assets are still in the same-store pool, and that taking them out would be about a 15 basis point drag to annualized same-store revenue forecast. So first of all, is that fair? And then secondly, if you're able to actually achieve closer to the upper end of the range that you outlined, closer to the $2 billion. I'm curious how you think about the incremental capital deployment of that if they would also be earmarked for acquisitions or any tax limitations there? Unknown Executive: Yes. So as I mentioned in the prepared remarks, the impact of California coming out of same store will be about 25 basis points on revenue. So that's how you need to think about it. Unknown Executive: And I think on the issue of if we -- if the portfolio sells for $2 billion, which we would really enjoy, we would increase the 1031 exchange pie and then probably increase the buyback. . Operator: And the next question comes from Brad Heffern with RBC. Brad Heffern: Yes, [ everybody ], demand question. There've obviously been a lot of issues with the job market for college graduates. I'm wondering if you've seen a noticeable impact on your business from that. And is that something that's a potential upside lever if that proves to be just a 2025 phenomenon? Richard Campo: The job prospects for college graduates has been -- in 2025 was kind of the worst in a decade. And if you look at the unemployment rate, for people in their -- in 18 to 24, it's at 10% right now. The other part of the equation, too, is if you look at those same -- that same cohort living at home. It's back to pre-COVID levels, meaning like in 2019 -- we're back to 2019 levels, and it was down big time over the last couple of years. So on the one hand, it is definitely a tough market for those folks coming out of school, which could be a tailwind if in fact, you have some sort of reasonable job growth in the second half of the year. And there's a fair number of folks that are pretty constructive about better job growth in '26 versus '25. When you think about the tailwinds of the Big Beautiful Bill, the tax refunds people are going to get as a result of that and kind of the wind down of tariffs and some of those other things that have been a drag on the uncertainty aspect of the economy in 2025. Because I think what happened then is right after Liberation Day, companies like us and many, many others just didn't know how to react, right? What's going to happen? And how is it going to be? And so you had this sort of hiring freeze that happened. And the question will be whether that freeze [indiscernible] in 2026 when you have a pretty stimulative construct with the economy. So I think it remains to be seen. I look at it as a potential tailwind when those -- when that demand is released because most of those people want to be on their own and run an apartment from Camden. Operator: And the next question comes from John Kim with BMO Capital Markets. John Kim: Alex, you gave the impact on same-store revenue from California in '26. I'm wondering if you could provide that same figure for '25, just to get an apples-to-apples where same-store revenue is going for your remaining portfolio? And then going forward, how do you think that impacts same-store expenses? Just to get in California really helps mitigate property taxes? What's the going-forward impact on same-store expense growth? Alexander Jessett: Yes. So if you look at 2025, the impact on revenue would have been the same 25 basis points. So it's consistent in '25 as it is in '26. If you look at expenses for 2026, it doesn't really have any impact whatsoever to our expense numbers. On a go-forward basis, you are right that Prop 13 does limit taxes, which is helpful to -- which is helpful to the growth rate in California. That being said, one of the things that we've absolutely experienced in our other markets when it comes to property taxes as they go up, but they also come down. If you look at our 2025 results, our property tax total growth was 0. And so California was up, but most of our other markets were, in fact, down. So I don't really think it's going to have that much of an impact on expenses on a go-forward basis. Richard Campo: Let me add to that. That if you take the sort of portfolio cost, and I mentioned our political advocacy group expenses in California, if you take the last 5 years -- or 6 years, say, and these costs, by the way, are not in same-store numbers. So they wouldn't be in your same-store occupancy numbers. But if you average the cost over that period of time, it's 80 basis points off of your net operating income. So said another way, if California is growing at a 4% NOI and the rest of our portfolio is growing at a 4% NOI and we said we have to subtract that 80 basis points off of California, because that's included in our corporate G&A. California really delivered a 3.2% NOI opposed to our -- compared to our rest of our country that didn't have those same kind of operating costs embedded in our G&A. So we were -- we actually -- when you look at the overall Sunbelt portfolio outperformed California by 80 basis points because of that excess cost. But it's not embedded in the NOI growth. Operator: And the next question comes from Rich Hightower with Barclays. Richard Hightower: I think since Keith brought up 2027 as it relates to Austin specifically in the prepared comments. I'm going to assume '27 is in play for this call. So maybe as we think about a lot of your core markets going forward, just give us a sense of kind of what that deepness of the recovery curve, that exit velocity, whichever metaphor you want to use, where do the market stack up in your current forecasting as we think about the end of '26 and then into 27? D. Keith Oden: So now we have to say we're not going to give the guidance for 2027, but we will talk about it, Rich. So our guidance... Richard Hightower: It's a rank order, right? D. Keith Oden: Yes, exactly. So one of the things that's kind of interesting about where we are, and it gives us some additional degree of optimism about what the Sunbelt markets may look like, not only in 20 -- at the end of '26, but into '27 and beyond is the fact that if you look at Camden's rents for properties in our portfolio that have been built in the last 5 years. We are -- as we sit here today, we are back to the rent levels that we were achieving at the end of 2021. So we are about to start year 5 of basically no rental growth. And this is unprecedented. I mean in our 35 years of doing this -- almost 40 years of doing this, we have never had a 3-year period where rents were flat to down. And not even in the GFC, not even in COVID. So we are already 4 years in. We're beginning 2026, and you see our guidance for 2026. If all this works out the way we expect it to, we will be 4.5 years down wind of basically 0 rental growth. And that's just not sustainable long term. And we've seen it coming out of the GFC, coming out of COVID. When you get a turn and a pivot that Ric was talking bout, it's not -- it doesn't go from 1% to 2.5%, because it's -- if you think about our average renter over that same period of time, our average renters wages, their actual household income has gone up an average of 4% a year over that 5-year period. So the income is up 20%. Their rent is basically flat. We've got -- so our residents are incredibly financially healthy. And when it turns, it usually turns pretty hard. So it's hard to -- it's always hard to pick that point, but it just feels like we are way, way down the trail of flat rent growth and do for something different. Richard Campo: The only thing I would add to that is that when you think about markets, we talk -- Keith gave Austin a C plus, right? And the issue there is you've got really good drop growth, but you just had a whole lot of supply. They added more than 15% of the supply in 3 years. And so Austin and Nashville are probably the ones that are a little slower to come out of the system. But all the rest of the markets are pretty much positioned for when that supply gets taken up over the next 12 months that they're going to be -- you're going to have a situation where simple supply and demand economics work. Which means that we'll have more demand and supply and rental go up. The other thing to think about is -- is that if you think about the way concessions work, right? So when people are leasing up, they get a month free, they get 2 months free if it's really tough, maximum is 3 months free, but I don't think there's not very many places where it's 3 months free. And so what developers do then or operators is once they get to the point where they don't need to give that month, they stop giving the month or the 2, right? And so what happens then -- and that's -- if you stop giving a month, that's an 8.3% increase immediately in the rent roll by eliminating one month. So that's where -- that's the Keith's point that it doesn't just all of a sudden, you go from flat to 1%, 2% growth. When you stop the concessions, it's immediately if it's a one month free, it's immediately an 8.3% increase in the rent roll on the next lease. So -- and then it just takes time to roll the leases over and get that revenue growth. So -- and that's going to happen. It's because of simple supply and demand. And if you think about -- when rents went up big time in 2021 and '22, it was a function of not enough supply and huge demand, and you had increases that were unprecedented. If you go to [ St. Pete ] for example, we had a 50% increase in rents in a 3-month period there. And the reason was we were at 98% occupied. We had a tiny number of units that were available and the market price just skyrocketed as a result of that. And that's simple supply and demand economics. And I think we have the recency effect that's going on in the market today, meaning that three years of flat rent growth, it's probably going to be another 5 years or 6 years of flat rent growth. And that just doesn't happen long term. The market will work and supply and demand economics will move in our favor over the next few years. Operator: And the next question comes from Rich Anderson with Cantor Fitzgerald. Richard Anderson: And just file this one away for 2027 on hold music Austin Powers theme song, just throwing it out there. So my question is on new lease rate growth. Alex, you mentioned you'll give an update as you get closer to the spring leasing season. But what I see from fourth quarter '24, it was negative 4.7%, fourth quarter '25 is negative 5.3%. I get it. It takes some time for these things to happen even though that was post-peak deliveries as you described it, Keith. So I'm wondering if you were to -- I think it's an important metric to get that above the kind of the 0% threshold eventually for multifamily to work again, particularly in the Sunbelt. Do you think how probable possible or maybe even unlikely is it to see new lease rate growth this year somehow get above that 0% threshold. I know you perhaps want to be careful about setting expectations at this point, but probable, possible, unlikely, what do you think? Unknown Executive: Yes. So clearly, that inflection point is very important. You're exactly right. And my belief is, is that as soon as we all hit that inflection point, I think a whole lot of generalists that have been out of our stocks are going to come flooding into our stocks, and we're all going to see massive pops. So it's just a matter of when, definitely not if, because it will occur. I think it's probable. I think it's probable that it could happen this year. Now obviously, we're going to continue to update you guys as we get each quarter's worth of activities as we see what's happening on site. But I certainly think it's probable. Operator: And the next question comes from John Pawlowski with Green Street. John Pawlowski: Forgive me if I missed, I joined the call late, but I wanted to talk a little bit about the change in the Denver regulation around utility rebilling and reimbursements and then any other income. So maybe if you could talk about for a minute, the specific legislation. And is there any other concerning draft legislation in other states or markets you're in that might drive downward pressure on your ancillary income, just given how proactive you've been over the years and with bundling services and there's a lot of -- there's a lot of non-rental income for each unit. So I'm concerned about longer-term risk to your other income streams. Unknown Executive: Yes. So we didn't talk about it in the prepared remarks, but what you're referring to is House Bill 25-1090 and yes, this is a new legislation that was put in place in Colorado effective January 1 of this year, which no longer enables us to bill for common area utilities. It is a significant item for us. The total value of this is about $1.8 million. If you extrapolate that out, that's close to 19 basis points of same-store NOI. So it certainly is an issue. It's something that we're having to account for. And obviously, we certainly do make sure that we monitor regulations that are out there. The good news is, is that most of our markets, the reason why they grow so fast is because they're pro business pro growth and obviously, putting the legislation like that in place is not pro business or pro growth. So not really worried about it in other places, but we're certainly paying attention to Denver. I don't know, Laurie, do you have anything to add? Laurie Baker: I mean I would just add, you asked about some of the specifics of Colorado. And I mean the key impacts are no hidden rental fees. So it's full transparency. We're seeing this across the country. We're all kind of mobilizing as an industry to ensure that there is transparency and that our residents know exactly what they're paying for. But in this particular Bill, the landlords have to show the tenants the full cost of renting before they sign anything, and that includes this common area maintenance and giving some estimates of what their utilities would be. And so that's some of the impact here trying to average out what you assume each renter's utilities bills will be. So that's the impact we're seeing. There are some things you are not allowed to charge back to our residents. So sub-metering is important. Because of this restriction, we have submeter all of our properties. And we did it fast and furious at the end of the year to make sure that we were able to capture as much of the information we needed. But it did eliminate any unclear utility pass-through charges and just really requires more disclosures. And so that's [indiscernible] the impact overall. And as Alex said, I don't think we're expecting in any of our other markets something similar to this, but we are closely monitoring that within Camden as well as at the industry level. And I play a big role with the National Multi-Housing Council and this is something we're paying attention to across the country. Operator: And the next question comes from Alex Kim with Zelman & Associates. Alex Kim: Do you talk about if you're seeing any difference in performance or rent growth between your urban and suburban assets and kind of your expectations through the balance of the year as well? Unknown Executive: Yes, absolutely. So it's interesting our urban assets are absolutely doing better and really starting to gap out just a little bit in terms of what we saw in the fourth quarter '25 revenue. And my gut is -- and the way we've modeled it is that's probably going to continue as we go throughout 2026. This is a sort of a turnaround from what we saw, obviously, for about 3 or 4 years. So today, what we're seeing is Class A urban is doing a lot better. But of course, it's and they got impacted worse at that point in time. So they had a little bit of gas in the tank to get back to where they were and go from there. Operator: The next question comes from Julien Blouin with Goldman Sachs. Julien Blouin: I think you mentioned you're expecting market rent growth of around 2% in markets this year. I think on the third quarter call, that was in the sort of 3% to 3.5% range, maybe 2 quarters ago, I think third parties were maybe talking more over 4%. I guess what has changed the most in that outlook to sort of drive that revision downwards? And then as we think about that 2% expectation for this year, what does that assume in terms of job growth? And sort of how do you think of maybe sort of the down case scenarios to that? Unknown Executive: Yes. So if you think about the way Ric started this call as he talked about uncertainty. And this is clearly a time of uncertainty and what all the economists and obviously, what we're doing is we're talking about what economists are telling us, what the economists we're looking at in mid-2025 is they were looking at the simple math that supply is falling off the cliff. And everybody recognizes that the last time you got to the level of the supply that we're expecting, everybody had some really, really large outsized growth. It's just a matter of when does that actually happen? And how quickly is all of the excess supply being absorbed. And so obviously, it's taken a little bit longer to absorb some of that excess supply. I think we've hit on some of the reasons earlier in the call, if you look at the hiring of May grads, that was obviously very weak. There's -- obviously, the job growth hasn't been as great as everybody had expected. And I think that's been putting some pressure on it. But back to one of my earlier comments, it's not a matter of if, it's a matter of when, it's absolutely going to occur that we're going to see this momentum come back to us, but it's just pushed back a little bit. D. Keith Oden: Yes. And just specifically on the employment growth outlook, 2025 Wheaton originally had job growth across Camden's markets closer to 350,000. That -- this is -- everybody knows that got revised dramatically down. I think he ended up the year at 170. His forecast for 2026 is 257,000 jobs across Camden's markets. So part of the head fake for forecasters and everybody that looks at this data was that 1 million jobs sort of evaporated that were reported as created in 2025 that as it turns out after all the revisions, it was not anything close to that. So some of it was probably just in the data set, people like that look at this and use the BLS statistics or we're using numbers that got revised away. So hopefully, we're on track with better data for 2026. And 257,000 jobs across Camden's platform would be a really good year for us, particularly in light of what Alex described as we got -- we're about to keep getting close to the end of this outsized development pipeline that we've had to work our way through for the last 3 years. Operator: And the next question comes from Alexander Goldfarb with Piper Sandler. Alexander Goldfarb: Just want to go back to the comments on lack of rent growth. Certainly, in the past number of years, everything else has gone up, Uber rides, groceries, everyone has streaming services, et cetera. So Ric, do you think the traditional sort of 20% rent to income still holds? Or do you think because of inflationary pressure on people's lives, plus all their other activities and subscriptions that maybe that number is no longer 20%, maybe it's something lower than that? Richard Campo: No, I don't think so. I think that, that number is still a really good number. At 20, people are very -- it's a very affordable thing. If you look at the real job growth or real wage growth over the last 3.5 years, 4 years, it's 4% to 5%. And that's real. That's after inflation, right? So the thing that's interesting when you think about -- when I think about our customers, we spend a lot of time getting -- trying to get inside their financial heads and also and what their preferences are for apartments and things like that. And you look at the -- like the forward consumer confidence numbers and stuff like that. And affordability is like the big question today. But when you look at our demographic, average income of $121,000 for our resident base. Their earnings are going up 4% to 5% on a real basis for the last 3 to 5 years. Then you go, well, what's really happening to them? Why are they unhappy? Why are they -- why is the consumer confidence at low levels. Part of it is just the psychology that you have high inflation and price everything kind of went up. And then I think the bigger psychological issue, and this gets to the overall housing market, which includes single-family for sale market. And the inflation numbers really haven't caught the -- haven't -- didn't include this kind of concept on housing. So COVID with low interest rates, and increased demand drove housing prices up dramatically. Interest rates doubled on the 30-year mortgage. So the attainability of a single-family home today is so expensive relative to what it was pre-COVID. But that's hanging on the -- I think, on the consumer's mind a lot. And so even though their financial picture is pretty good they still feel really bad about the economy and about because of this single-family house price issue and just the narrative that's going on. Because if you think about other big-ticket items like the price of gasoline. And I filled up my suburban the other day, and it was $2.17 a gallon. So even though you have food prices that are continuing to be elevated and some other costs that went up because of inflation. Gas prices are down, rents are flat. So I think it's a psychological issue that we have with American consumers today that isn't as real from a pure dollars and cents perspective, from an apartment perspective, it's more of an overarching issue. And unfortunately, that overarching issue makes people think everything is more expensive, even though their finances are pretty good. Operator: And the next question comes from Mason Guell with Baird. Mason P. Guell: Looks like your revenue enhancing and repositioning CapEx guide is down from last year. Can you talk about why this has guided lower and what initiatives you are working on in this category? Unknown Executive: Yes. So on the reposition side, it is down slightly, but you have to keep in mind, we're now -- this is something that we do every year. And we are reaching the point in time where we've done probably 70% to 80% of our portfolio, and there's a little less opportunities to be there this year. But I will tell you, I still believe this is one of our absolute best uses of capital, absolutely plan to continue to do it. And I will tell you that I have no doubt that our repositioning team is listening to this call, and they're probably very excited that somebody else is noticing all their good work that they're doing. So yes, we will continue to do this. It's a good use of capital for us. Operator: And the final question comes from John Pawlowski with Green Street. John Pawlowski: I want to go back to the development economics question. So the four properties that you have in the pipeline today on current market rents, could you give me an estimate on like where these would be yielding today? Or is it in that low -- that 5% to 5.5% range? Alex, you quoted on the shadow development pipeline. I'm just wondering how these four assets are kind of trending given the malaise in market rent growth in the last few years. Alexander Jessett: Yes. If you look at our development pipeline that we've actually put out there, it's two deals, which is Baker in Denver and Gulch in Nashville. And then what I told you is that we've got a couple of other sites that we control and those sites that we control that we could close on this year. And in fact, start this year, when I look at those sites, those returns are a little bit better. Those returns are penciling on those couple of sites to sort of call it the mid-5 on an untrended basis. Baker and Gulch are more challenging. This is why if you look at our math, originally, we had them as 2025 starts. And now I've got them as potentially late 2026 starts. So the math is -- I think everybody pretty well aware of what's going on in Denver, at least downtown Denver. It's a tough place to develop today. I do think the economics are going to get better, but we're certainly waiting to see if those economics get better before we get started. We talked about buyouts. Buyouts are absolutely coming down 5% to 8%, but maybe they'll come down a little bit more, which makes that economics better. And then I would say the same thing about our deal in downtown Nashville. Nashville is a fantastic market, but everybody knows that downtown Nashville is very oversupplied. And so we're waiting to see a little bit more clarity. And when we see some more clarity in that market and we can take a look at the economics and make sure it makes sense to start. But if we can't do it in a way that's accretive to our shareholders, we're not going to. But right now, we're patient, and we're going to find the right time to start, which is penciled to be towards the end of this year. Operator: This concludes our question and answer session. I would like to turn the conference back over to Ric Campo for any closing remarks. Richard Campo: Thank you. We appreciate you being on the call today, and we'll see you soon -- or talk to you soon, I'm sure. Operator: Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, everyone, and thank you for participating in Magnolia Oil & Gas Corporation's Fourth Quarter 2025 Earnings Conference Call. My name is Chloe and I will be your moderator for today's call. [Operator Instructions] Our call is being recorded. I will now turn the call over to Magnolia's management for their prepared remarks, which will be followed by a brief question-and-answer session. Tom Fitter: Thank you, Chloe, and good morning, everyone. Welcome to Magnolia Oil & Gas' Fourth Quarter Earnings Conference Call. Participating on the call today are Chris Stavros, Magnolia's Chairman, President and Chief Executive Officer; and Brian Corales, Senior Vice President and Chief Financial Officer. As a reminder, today's conference call contains certain projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. Additional information on risk factors that could cause results to differ is available in the company's annual report on Form 10-K filed with the SEC. A full safe harbor can be found on Slide 2 of the conference call slide presentation with the supplemental data on our website. You can download Magnolia's fourth quarter 2025 earnings press release as well as the conference call slides from the Investors section of the company's website at www.magnoliaoilgas.com. I will now turn the call over to Mr. Chris Stavros. Christopher Stavros: Thank you, Tom, and good morning, everyone. We appreciate you joining us today for a discussion of our fourth quarter and full year 2025 financial and operating results. I plan to briefly speak to last year's results, which closed out another year of strong, consistent performance and execution showing the beneficial characteristics and merits of our differentiated business model and during a year of elevated product price volatility. Our model has allowed us to deliver strong free cash flow and cash returns to our shareholders resulting from superior asset performance and our continued focus on capital discipline, cost containment and visible efficiency improvements. I'll conclude by providing an outlook of Magnolia's 2026 capital and operating plan which is expected to deliver moderate growth with a similar level of capital spending that provides us with further opportunities to capture low-cost resource across our acreage position. Brian will then review our financial results in greater detail and provide some additional guidance before we take your questions. Beginning on Slide 3 of our quarterly investor presentation and looking at the highlights, Magnolia delivered another solid quarter and year of performance marked by steady execution of our capital-efficient business model and our high-quality assets. I'm particularly proud of our ongoing dedication and focus shown by both our operating teams in the field and our Houston staff. Their continued hard work and diligence is a significant factor behind Magnolia's success. Our business performed exceptionally well throughout the year, driven by stronger-than-expected well results, improved efficiencies, lower unit costs and our committed -- commitment to capital discipline, as I mentioned. For the full year 2025, total company production grew by 11% to approximately 100,000 barrels of oil equivalent per day with oil production growing by 4% and averaging nearly 40,000 barrels per day. Operationally, we continue to make strides in reducing our field level cash operating expenses, which declined by 7% to $5.12 per BOE during 2025. The better-than-expected well productivity we experienced during the first half of last year not only provided us with higher production growth in 2025, but also allowed us to save capital by deferring some well completions into this year. Our teams were also able to drive a more efficient drilling and completions program last year in Giddings with our average drilled feet per day increasing by 8% and with completed feet per day improving by 6%. Turning specifically to the fourth quarter, we achieved a new company record for our production, averaging nearly 104,000 barrels of oil equivalent per day and 40,700 barrels of oil per day. These both marked a sequential increase of 3% and reflected the continued strong performance from our wells. Financially, the quarter and year were equally strong and aligned with our goal of generating consistent and sustainable free cash flow through disciplined capital allocation. Our fourth quarter adjusted net income was approximately $71 million or $0.38 per diluted share with adjusted EBITDAX coming in at $216 million. Our drilling and completion capital for the period was roughly $117 million, representing 54% of our adjusted EBITDAX. Pretax operating margins averaged 33% for the year despite a more than 15% annual decline in our oil price realizations. Our low reinvestment rate enabled us to generate free cash flow of more than $425 million for the full year. We stood by our commitment to return a significant portion of that free cash flow to our shareholders, distributing approximately 75% through a combination of our base dividend and share repurchases. In total, we repurchased approximately 8.9 million shares throughout the course of 2025, reducing our diluted share count by roughly 4.5%. This not only accretes value on a per share basis, but also reinforces our business model that leads to a serial compounding of value. Our balance sheet ended the year in a position of strength, allowing us to navigate product price uncertainty and provides us with ample liquidity and a cash balance giving us flexibility to selectively pursue opportunistic bolt-on additions to our portfolio. As shown on Slide 4, our strategy is designed to produce steady mid-single-digit total production growth, high pretax margins and reliable free cash flow while maintaining a low reinvestment rate and a strong balance sheet. The strength of this model and the strategy is clear when looking at Magnolia's longer-term performance across these key financial metrics. Looking at Slide 5. Magnolia has maintained one of the lowest capital reinvestment rates among the U.S. oil and gas producers over the past 5 years, while delivering one of the highest rates of production growth per share. As shown on Slide 6, Magnolia continues to achieve strong pretax operating margins, driven primarily by our low-cost, high-quality asset base, which is also in close proximity to large consuming markets on the U.S. Gulf Coast. Slide 7 highlights the continued strength of our balance sheet, which remains best-in-class in the industry. Maintaining low leverage is a critical part of our strategy as it reduces financial risk while preserving substantial flexibility and strategic optionality. While many oil and gas operators often excel in 1 or 2 of these areas, we believe that our combination of our low capital reinvestment rate, above-average per share growth, high operating margins and minimal debt is unique, especially for a small to midsized operator. This powerful recipe allows us to generate high corporate returns, maximize our free cash flow generation and sustain our strong and consistent capital return program for shareholders. Slide 8 illustrates our corporate level returns showing 2025 as another strong year with return on capital employed ROCE of 18% and well above our cost of capital despite year-over-year lower oil prices. Over the last 5 years, Magnolia has generated an average ROCE of 34% and more than 3x our weighted average cost of capital. These exceptional returns stem from our prudent capital allocation, consistent low debt levels, ongoing share repurchase program and perhaps most importantly, our low-cost, high-quality assets. Case in point, Magnolia added approximately 50 million BOE of proved developed reserves during the year. When accounting for all expenditures to add these reserves, this resulted in organic proved developed finding and development costs or F&D of $9.25 per BOE. During the 3-year period from 2023 to 2025, Magnolia's organic proved developed F&D cost averaged $9.85 per BOE. This demonstrates our high quality and low cost of supply asset base. Looking ahead into 2026, we're committed to the principles that have guided us from the start and have proven to be successful thus far. We plan to remain fiscally prudent and disciplined with our capital spending expected to be approximately flat year-over-year while delivering total production growth of approximately 5%. As I've often said, Magnolia's primary goals and objectives are to be the most prudent and efficient to be the most efficient of our -- and our best-in-class oil and gas assets to generate the highest return on those assets, while spending the least amount of capital on drilling and completing wells no matter what the product price. Last year was another example of our successful delivery on these goals. We achieved double-digit production growth with less capital than originally planned, repurchased more than 4% of our outstanding shares recently announced a 10% increase in our dividend, our fifth consecutive annual increase and completed approximately $67 million of bolt-on acquisitions, furthering our resource opportunity set. To summarize, Magnolia is well positioned and consistently guided by the principles of our business model. Our high-quality assets and strategy of continued capital spending discipline, proactive cost management and pursuit of further operational efficiencies should serve us well during periods of product price volatility. Our consistent policy of low leverage and the lack of commodity hedges is central to our strategy, providing us with downside protection while also allowing for upside to product prices and the ability to generate value through commodity cycles. I'll now turn the call over to Brian for a review of our financials and provide some additional guidance. Brian Corales: Thanks, Chris, and good morning, everyone. I will review some items from our fourth quarter and full year results and refer to the presentation slides found on our website. I'll also provide some additional guidance for the quarter -- for the first quarter of 2026 and the remainder of the year before turning it over for questions. Magnolia ended 2025 with a strong performance across our operations. Starting on Slide 10. During the fourth quarter, we generated total adjusted net income of $71 million or $0.38 per diluted share. Our adjusted EBITDAX for the quarter was $216 million with total capital associated with drilling completions and associated facilities of $117 million, representing 54% of our adjusted EBITDAX. For the full year, adjusted EBITDAX was $906 million with D&C capital representing 51% of EBITDAX. Fourth quarter production volumes grew 11% year-over-year to 103,800 barrels of oil equivalent per day. For the full year, production volumes grew 11% to 99,800 barrels of oil equivalent per day with oil growth of 4%. During the year, we repurchased a total of 8.9 million shares and our diluted share count fell by 4% year-over-year. Looking at the quarterly cash flow waterfall chart on Slide 11. We started the year with $260 million of cash. Cash flow from operations before changes in working capital was $906 million with working capital changes and other small items impacting cash by $41 million. Throughout the year, we added $67 million of bolt-on acquisitions. We paid dividends of $117 million and allocated $205 million towards share repurchases. We incurred $469 million on drilling completions and associated facilities and leasehold and ended the year with $267 million of cash. Looking at Slide 12. This chart illustrates the progress in reducing our total outstanding shares since we began our repurchase program in the second half of 2019. Since that time, we have repurchased 81.8 million shares leading to a change in weighted average diluted shares outstanding of approximately 27% net of issuances. Magnolia's weighted average diluted share count declined by more than 2 million shares sequentially, averaging 188 million shares during the fourth quarter. As Chris discussed, the Board recently approved a 10 million share increase to our share repurchase authorization leaving 12.9 million shares remaining under our current repurchase authorization, which are specifically directed towards repurchasing Class A shares in the open market. Turning to Slide 13. Our dividend has grown substantially over the past few years, including a 10% increase we recently announced to $0.165 per share on a quarterly basis. Our next quarterly dividend is payable on March 2 and provides an annualized dividend payout rate of $0.66 per share. Our plan for annualized dividend growth is an important part of Magnolia's investment proposition and supported by our overall strategy of achieving moderate annual production growth, reducing our outstanding shares and increasing the dividend payout capacity of the company. Magnolia continues to have a very strong balance sheet, and we ended the quarter with $267 million of cash. Our $400 million of senior note does not mature until 2032. Including our fourth quarter ending cash balance of $267 million and our undrawn $450 million revolving credit facility, our total liquidity is approximately $717 million. Our condensed balance sheet as of December 31 is shown on Slide 14. Turning to Slide 15 and looking at our per unit cash costs and operating income margins. Total revenue per BOE declined 13% quarter-over-quarter due to the decline in oil prices. Our total adjusted cash operating costs, including G&A, were $10.64 per BOE in the fourth quarter of 2025. Our operating income margin for the fourth quarter was $9.85 per BOE or 30% of our total revenue. The decrease in our quarter-over-quarter pretax operating margin was entirely driven by the decrease in commodity prices and were further benefited from lower DD&A expense. On Slide 16, Magnolia continues to have a very successful organic drilling program. The total proved developed reserves at year-end 2025 were 167 million barrels of oil equivalent. Excluding acquisitions and price-related revisions, the company added 50 million barrels of oil equivalent of proved developed reserves during the year. Total drilling and completions capital was $461 million in 2025, resulting in organic proved developed F&D cost of $9.25 per BOE and reflective of our current drilling program. The 3-year average organic proved developed F&D cost was $9.85 per BOE. Turning to guidance. We expect our 2026 drilling completions and facility capital to be in the range of $440 million to $480 million, which includes an estimate of nonoperated capital that is similar to that of 2025. At the midpoint, this is similar to prior year's capital cost despite planning more wells in 2026. We expect first quarter D&C capital expenditures to be approximately $125 million and anticipate this to be the highest quarterly rate of spending for the year. Total production for the first quarter is estimated to be approximately 102,000 barrels of oil equivalent per day, which includes approximately 1,500 barrels of oil equivalent per day of winter weather impacts experienced in January. Total full year 2026 production growth is expected to be approximately 5%. Oil price differentials are anticipated to be approximately $3 per barrel discount to Magellan East Houston and Magnolia remains completely unhedged for all of its oil and natural gas production. The fully diluted share count for the first quarter of 2026 is expected to be approximately 187 million shares, which is 4% lower than first quarter 2025 levels. We expect our effective tax rate to be approximately 21%, with all of this being deferred. We are now ready to take your questions. Operator: [Operator Instructions] The first question comes from Neal Dingmann with William Blair. Neal Dingmann: Nice to see another strong quarter, Chris and team. Chris, my first question is to jump right to the Giddings play. Specifically, looking at our well data, it suggests that a number of your recent wells not only continue to outperform the type curves, but they certainly appear to be some of the best drilled to date. I'm just wondering, with that said, has there been notable operational changes? Is it more because you're in pure development for a lot of that now? What do you attribute most of this continued upside to? Christopher Stavros: Neal, thanks for the question and also for pointing it out, we did notice it as well. They're producing -- the wells are very strong. They're producing a lot of everything. And I'm not sure exactly which specific wells that you're referring to, but many of them have performed very well. I can't point to anything specific or very different in terms of the completion design if that's a little bit of what you're asking. I think what you're seeing is simply the outcome of drilling into some very good rock. And I think when we take a lot of and make a lot of effort in terms of locating the wells and placing the wells. I think there's a better than decent chance that you'll see more of this. So I -- there's nothing specific that I can say that we've changed we've just gotten better at it with time. Neal Dingmann: No, that's obvious to see. And then second question, moving over to M&A. Simply, could you discuss -- I know you look at sort of all of the above, I think, as any -- or steward would. But what we've noticed out there, I mean we've seen record prices paid for Delaware. We've seen big prices paid for PDP heavy things. I guess, sort of twofold here, what are you looking sort of at all the above? And when it comes to the Giddings around your area in particular, are we seeing prices increase there like we've seen in a lot of these other areas? Christopher Stavros: Yes. Brian put some numbers around the bolt-on transactions, acquisitions, some of the ground game that has led to some of the bolt-ons that we've done over the last couple of years. And what I'd say is that it's not predictable. But we've done a good job, I think, with that ground game in Giddings, western Eagle Ford, Karnes area, I really do expect it to continue. Like I said, it's just tough to predict in terms of the timing. The competition, I would tell you it has risen over the last year, the larger the opportunity or maybe deal size or item that you might be looking for the tougher it is and maybe the more expensive it is. But we've done a good job of better understanding the things that we're looking for in terms of the subsurface and in and around where we currently operate. I'm not and never really have been a big proponent of very large PDP-heavy deals as you're more likely to pay full value for these or even higher. I think part of that is within your question in terms of what you might be seeing in the Permian and the Delaware. I really much prefer to focus on opportunities where we have more undeveloped upside but you're generally right, the prices for acreage has climbed. I mean, we're not out there looking to build a data center anytime soon. In terms of what you're seeing for what's happening in real estate or land prices. But for all I know, we could be competing with those -- with some of those who are looking to build a data center. I just don't know but it's certainly reflected in some of the elevated levels of pricing. Operator: The next question comes from Phillip Jungwirth with BMO. Phillip Jungwirth: You called out the faster cycle times last year in the release. I was also hoping you could talk to well cost reductions and how those might have contributed to the better capital efficiency and lower F&D. And any expectations here as we go into 2026 or what you're seeing on the service cost front? Christopher Stavros: Yes, sure. We had been -- if I go back a year plus, we were looking at a standard cost of -- or the cost of the standard Giddings well as sort of maybe $1,100 a foot. And it was trending through that period up to now, maybe down towards $1,000 a foot. So I think that's sort of what we're looking at right now for a standard Giddings well, which is between 8,000 to 8,500 feet. So something between that probably gives you a reasonable estimate and maybe closer to $1,000 a foot, if that helps you. On the service cost, things are flat to slightly down into this year, but we'll see where this goes as far as commodity prices. We have regular conversations with our service partners, and we want to keep them working because they've been good partners. Most recently, this has been a tough way to make a living. I think the OFS market continue to experience some pricing pressure going through this year. And certainly, if prices for oil are $60 or below. We've locked in some of our service costs with our key providers through most of the first half of this year, and we'll be going back probably later in the spring to start looking at negotiating for things in the back half of the year and sort of close it out. But I feel as if we're in a good position and we're not looking to take advantage, but it's like I said, it's tough. And I get it but we're also in the business to make a margin as well. So things are favorable for us, less favorable for the OFS guys. Phillip Jungwirth: Right. Makes sense. And then we've seen really strong equity performance year-to-date for the sector and Magnolia. I mean, helped by geopolitical risk. So how tactical do you plan to be on the buyback? Do you view this as more programmatic as far as deploying it or maintaining dry powder to take advantage of any pull back given that we're likely to continue to see volatility? Christopher Stavros: Yes. The programmatic portion of it is the sort of 1% that we're minimally committed to as far as the way I think about it, I mean and there's -- it really does have teeth as it starts to chew into the shares outstanding and works with that sort of serial compounding that I mentioned, some of the tactical portion of it is what you saw probably for us in the fourth quarter where we underperformed, whether that was mean reversion or whatever, nothing really changed in the business, but we have the opportunity to sort of -- since we don't provide broker discretion, we sort of run it ourselves. We have the opportunity to sort of lean in or not. As things move along on the stock, it's going to be volatile. And if we see pockets of disconnect or I can't necessarily determine why that's occurring, we can lean in or not. And so should that occur again, we will. Operator: The next question comes from Peyton Dorne with UBS. Peyton Dorne: Understanding the weather impacts for the first quarter I wonder if you could just touch on your expectations for the shape of the 2026 production outlook. Is it fair to think that beyond the step back here in 1Q that we should kind of see maybe a steady growth rate through the year? Or is there any other factors that we should keep in mind kind of as we go through 2026? Christopher Stavros: Yes, more or less. I mean, you can do the arithmetic. I mean, I think we've provided you with enough information where with the winter storm impact in the quarter and sort of adding it back, what it might have looked like perhaps without the occurrence of the event. So '26 is off to a good start, and I sort of see things gradually progressing through the year, but it's a little bit heavier capital outlay in the first half of the year, certainly the first quarter. So typically, that's sort of the way the curve works for us just in terms of timing of the spend, 4Q, 1Q is a little heavier, and then it sort of tapers off in the mid part of the year. And then again, rises on the capital as we ended out or finish out the full year. But the goal would be to spend as least as possible and generate better results on growth if we can. And I'm optimistic around the outcome of the wells. But generally, I think you'll see a gradual steady progress through the year on the volumes. Operator: The next question comes from Tim Rezvan with KeyBanc Capital Markets. Timothy Rezvan: I wanted to ask about the development approach for the year. You talked about 75% of activity on multi-well pads and Giddings almost identically to your comments a year ago. Can you sort of refresh our memories on sort of leading edge, the pad template. I know there's unique pads for different regions. But are you still sort of in that 3- to 4-well package size? Why not kind of push out laterals more to 10,000 feet or above? Just trying to kind of understand what development looks like as we think about incremental efficiency opportunities? Christopher Stavros: Yes. The 3 to 4 per pad is about -- is still about right. There's no real change there. We do have some 5-well pads. We do have some 2-well pads. But generally, I would tell you, it's probably around 3 to 4 on average. And the lateral lengths will vary. I mean we'll drill, if possible. I mean, we're not trying to drill shorter laterals. We'll drill longer laterals if and when we can. And that's part of the assist that we get with a little bit of the ground game, if we can acquire some adjacent or open acreage that could assist or help us out in that way. There's opportunities to do that. We drilled wells that are 12,000, 13,000 feet. And if we can do it, we will. But on average, it's sort of 8 to 8.5. That's sort of the typical program. that I would expect to see this year not very different. Timothy Rezvan: Okay. That's helpful context. And if I could just circle back to the M&A question. You talked about some more competition on the larger side. I know there's at least 2 large packages right now in the market from public, not really in your Giddings backyard. But do you still feel the better opportunities on those sort of smaller side? Would there be interested in doing something big, potentially on that transformative side if the pricing was correct in your favor? Brian Corales: Yes. These are what I alluded to or mentioned before, probably -- not probably, they are more on the PDP heavy side, have been well developed, has sort of been through the machination of time and heavily drilled up. So you really -- you don't want to buy somebody else's decline curve. You never want to get involved with that if you can avoid it. So I'm looking for things that have untested upside or just upside undrilled acreage. And those are tougher things to be had. I'm just not looking to -- you're going to pay full value or better on this PDP heavy stuff. And so I think generally, that's what those larger things would look like. We probably also like to lean a little bit more on the liquids side on the oil side, if we can do it or find it. So I'm not averse to gas necessarily, but if we can -- if there's going to be some production that comes along with it, I'd probably prefer to have a little bit more on the oil side. The other thing, too, large deals come with obviously greater risk. And so you just want to be sure that you can manage this and if you have a good understanding of it. So whatever we're going to do or whatever going to look like, has to sort of start off with the understanding that we have a good firm view of what we're getting ourselves into subsurface-wise and whether or not we can continue to manage it going forward. So there's a lot of -- looking at old things that are being hived off by publics. It's interesting, but you just got to make sure you understand it well, and it's actually contributing to the business in a positive way fits into our model and can be accretive to the equity. Timothy Rezvan: Okay. I appreciate the responses. And if I could just sneak a quick one in. Oil SKUs has been about 39% in the back half of 2025. As we look forward, should we still expect that 39% to 40% range to hold? Christopher Stavros: Yes. The percentage is a tough one, not tough from -- in terms of what it's going to be. It's just -- I'd rather speak in terms of absolute oil, and absolute oil I expect to grow 2% to 3% this year, and it will be a mix of Giddings and the Karnes area asset, so I'm confident around that. And if we can do a little bit better, we'll see. But the percentage considering the proportion of the program in Giddings, where you -- getting on average is running very much mid-30s, 35%, 36% thereabouts. And we're, call it, like you said, 40%, 39%, 40%. It's going to be in that range. And if you were able to add an asset or a little activity that could make you a little bit oilier, we'll just sort of see. But I'm very confident that on the low end, you're not going to sort of be 20% or something odd, you're going to be in that mid-30s or 40-ish or maybe even a touch better depending on things that are available to drill and that we fit into the program. Operator: The next question comes from Leo P. Mariani with ROTH. Leo Mariani: Just obviously, strong well performance in Q4, which you guys spoke of. Trying to get a sense of whether or not that's been primarily driven by the 240,000 acre development area? Or are you seeing some contributions from some other areas? You did reference some new development areas in your release. So I was just trying to get a sense of those new areas are on top of the 240,000 acres or kind of included in the 240? Christopher Stavros: I would tell you it's included in the 240 but that's not to say that we're not looking elsewhere and have plans to go outside the 240,000 with additional appraisal this year, which we will. So I'm looking forward to that. I'm looking forward to what the results may bring, and it's been very useful helpful to us up to now, and I expect it to be additive in terms of our resource going forward. So I'm optimistic around that. But to your question around where did it come from, it's sort of historical and it's really within the 240,000. Leo Mariani: Okay. I appreciate that color. And then obviously, LOE was once again pretty strong this quarter in terms of being a low number. Just wanted to get a sense of kind of what's really been driving that? You guys have done a really good job at getting costs down. And I think from your prepared comments, I think you're still continuing to work on that. So how should we expect that to trend as we roll through '26 here? Christopher Stavros: So good question. The first quarter, obviously, we had the weather events with the freeze and there's just some extra things that need to be done to sort of compensate for that in terms of repairs and maintenance. I'm not going to dwell on it. It's not a huge deal, but you'll see a little bit of that, I believe, in the first quarter on LOE. And LOE seasonally is generally higher in the first quarter for field bonus payments, we have to pay our guys and hopefully, we pay them well. So there's some of that. So that's just seasonality. I will tell you, though, that they have done a very good job, an impressive job, frankly, in terms of bringing down costs in the field. I think we have additional things. They have some things up their sleeve that will work out in a positive way over time. And I'm confident that sort of the numbers that we're seeing in terms of continuing to trend down, I feel pretty good about it. So I think there's some additional room for improvement with some things we're working on. Operator: The next question comes from Noah Hungness with Bank of America. Noah Hungness: You guys gave a decently wide range for your '26 capital guide. Could you maybe put some color around what would push you either to the upper or lower end of that range? Brian Corales: There's not much that I can come up with that would push us to the upper -- in the current environment. So I'm confident that you're sort of in the middle part of that range or lower. We're not looking to do more and frankly, should we do better in terms of the well performance has occurred last year. We could find ourselves in a similar position where you just put off some of the spending or defer some completions or whatever, just because the performance is better. So if we can spend lower, less and have more free cash flow, that would be terrific. That is really the objective. So I'm simply giving a range really because just some of the product price volatility and uncertainty, should prices move higher and directionally higher and we see some reflation or pickup in service costs that could lead to it. But right where we are now, that's not something I'm anticipating. Noah Hungness: That's really helpful. And for my second question is just on first quarter GP&T. During the winter freeze, we also saw really strong gas prices. Is that higher gas pricing going to potentially translate into higher GP&T for the quarter? Brian Corales: Maybe slightly. We expect GP&T to be relatively similar from what we've seen over the past couple of quarters. So I don't expect too much volatility there. Could it be slightly higher? Yes, but we're not talking quarters and it could be a couple of pennies or nickels. Operator: The next question comes from Carlos Escalante with Wolfe. Carlos Andres E. Escalante: I would like to pivot real quick to your D&C cost savings year-on-year. I learned yesterday from your own Tom Fitter that you've been running the same Patterson rig since Magnolia's inception, and I thought that's just the epitome of your industrial approach. So I wonder if you can, in a very succinct manner unpack how much of the D&C cost gains year-on-year have been on as a consequence of that industrial approach to the business versus any kind of service deflation? And perhaps with your additional commentary on how much more you can squeeze via that continued repetition on the drilling side specifically? Christopher Stavros: Well, it's a very good point in observation. I mean it's running these rigs, not just one, but both consistently over a multiyear period has led to a wonderful understanding of the field, the drilling challenges and capabilities that the assets bring to us. And so not just the rig, but the crews that we have and equipment really does provide us with that further understanding and capability and consistency that I think drive some of the efficiencies that we've been seeing. So if you want to call that the industrial approach, that's fine. But it does translate into benefits with time. The crews, the people, the equipment, all of it, we like what we have. We're always looking to continue to utilize those things. But at the same time, be competitive and look elsewhere, but there's advantages to having that consistency for sure. Carlos Andres E. Escalante: That's very helpful. And as my second question and building on Noah's question. On capital, so if we exclude the 6 deferred sales that you had from '25 and then you include back the downtime from the production storm. In my mind, it stands the reason that your development capital, your maintenance capital is substantially down. I wonder if you can put maybe perhaps a number on where you see that, where you can hold your production flat? And I think that I'll add that as a backdrop, the industry hasn't been paid to grow for the past few years. So a lot of interesting things going on in the Permian Basin and the South in general with growing dynamics. So we could be trending the tide here. So wondering how you see that and if you can provide again that number on your maintenance capital as it stands today? Christopher Stavros: No. The capital is an interesting observation or point, setting aside the winter event. We're going to complete -- drill and complete a few more wells this year that is sort of embedded within the growth expectations that we have and some of that is largely fits into the program because of some of the efficiencies that we've generated over the years. But in terms of maintenance, probably -- I'm not sure -- we haven't tested it yet. So it's always hard to exactly come up with a very, very narrow range. But I would tell you, $400 million-ish feels about right, maybe a little less. Brian Corales: Carlos, maybe I'll just add, too. If you go look back in time, the last 5 years, we've spent about the same amount of money every year. Our production is up roughly 50%. We're drilling more wells each year generally, and that's driven by efficiencies. There's other things that can contribute to the decrease in total capital costs. But when you look at it as a whole, since the last 5 years has been relatively stable in terms of how much we spend on an absolute basis. And we're doing that with more production and more wells. Christopher Stavros: And factoring in the first part of your question around the industrial capabilities of the equipment and the drilling rig, I mean, all of that sort of comes together to allow that flatness, if you will, in terms of what you've seen or consistency on the capital over the last 5 years that Brian mentioned. Operator: The next question comes from Phillips Johnston with Capital One Securities. Phillips Johnston: Just a few housekeeping questions on the modeling front. I know your average working interest on some of your acreage in Giddings has moved up with some of the recent bolt-ons. So what should we assume for your average working interest for this year's drilling program in both Giddings and Karnes? And just in terms of cycle times company-wide, are we still kind of running somewhere around 28 gross wells per rig -- per year per rig line? Brian Corales: I'll start with the second, '28. I mean that may be slightly aggressive, but it's not far off depending on where we are and exactly what we drill. And in terms of working interest in Giddings, I believe we've been able to move that up from the, call it, mid, maybe slightly higher 70% range. And I would assume something in the low 80s today. Phillips Johnston: Okay. Perfect. And you guys noted some deferred well completions from '25 into '26. I think the number was around 6. So just to clarify, would you expect your tail count this year to be about 6 wells higher than the number of wells that you drill? Or should we think about the company just operating with a higher working inventory of DUCs? Christopher Stavros: No, I wouldn't necessarily -- I mean, we don't purposefully look to add DUCs necessarily. But I think you're in the range, plus or minus ballpark of the half dozen that we sort of had coming in from last year. Operator: The next question comes from Charles Meade with Johnson Rice. Charles Meade: Chris, I want to go back to the acquisition market. And I know you spoke a lot about this earlier in the Q&A, but I want to try to put the pieces together and see if I understand your thinking. When I think about the traditional oily parts of the Eagle Ford, that's going to all be PDP-heavy or almost anything would be PDP heavy. And then you think about something that has more undeveloped, which I think you said that's more interesting to you, those are mostly going to be down dip in gassier. And so am I -- and I think you said you weren't interested in gas. And so if I'm putting those pieces together, right, does that mean that you're not likely to be a really charge hard at those traditional Eagle Ford packages? Christopher Stavros: I wouldn't disagree with what you said as far as they're tough to find, but they're out there. So you just have to be -- remember, we're small. And so little things here and there can make a difference. And you just have to make the effort and poke around and we know a lot of folks. And so there are opportunities out there. You just have to set to try. The PDP heavy Eagle Ford and things like that, that you're referring to up dip, I'm not -- I'm less interested in those. It's difficult, it tends to be more scattered. There's less obvious synergies that are available because it's just sort of county to county, it's not homogenous. It's very different scattered like I said. So it's tougher to make it work as a public company. If you're private, you could do some of these things get away with it. It's not a big deal. But as a public company in terms of the way we think about things, it's a tougher way to make a living. Charles Meade: And then on -- I wonder if you could just give us a refresh on I think that there's a lot of bearishness in the ore market, but we recently saw $65. And so when you guys look at internal scenarios where you run $70 or $75 oil rig, what is the -- where does the extra cash go in your -- in the scenarios that you run? Brian Corales: On your oil comment, you're right. I mean the sentiment as we sort of got out of '25 was extremely negative. And maybe some of that is still lingering in there in terms of just available supply in the market is certainly ample oil. Personally, I've been more constructive. I think I've said this many times in investor meetings that we've had. Been more constructive on oil as you go into 2026, and then you have all these sort of geopolitical whack-a-mole events that sort of tend to pop up, and you don't know what's lurking around the corner. So those have sort of underpinned and helped, I guess, on oil just to remind everybody that 2/3 to 3/4 of the world's oil supplies and some pretty nasty places. And so it's -- that's not going to end anytime soon. The other thing, you've got other dynamics too. Global demand is pretty healthy. You've got sort of the economy that's pretty good. I'm sorry, but what your question is getting at, what exactly? Charles Meade: When you guys run scenarios at $70 or $75, where does the extra cash go? I mean does it go to more is the first thing, another dividend bump? Or is the first thing that ramp up share repurchases? Or is -- and part of that could even be, when does another rig come into the picture? Christopher Stavros: Another rig doesn't come into the picture. That's not the plan. So again, I say this again and again and maybe people don't believe me, but I mean the plan is to spend as little as we can or be the most efficient with the money in terms of drilling the fewest wells to continue to take advantage of the productivity gains that we see in the field and have some moderate growth. We're not chasing growth for growth's sake. So in a better-than-expected commodity product price scenario, we just sort of sit there, take the winnings. It's the advantage of having an unhedged outcome, if you will, structure and so we don't have any real financial risk in terms of the leverage. So we capture all the upside to commodity prices that will ultimately feed back to the shareholder and the way shape or form of like you said, and we could toggle this, whether it's dividends, share repurchase and/or just being opportunistic around redeploying some of the excess cash towards opportunistic acquisitions. So that's pretty much where the extra money would go. Operator: The next question comes from Tim Moore with Clear Street. Timothy Michael Moore: And great execution and reliable capital allocation. And I'd just like Chris comments that another rig cost won't creep into the picture. But Chris, I just wanted to follow up on just another Giddings thread. How much more confident are you in future outcomes of new wells there, bringing more net acreage into the portfolio with some higher predictability than you were maybe 18 months ago? If you kind of could add any color on your look back of EUR predrill and post-drill results for new wells in Giddings. I mean they came out a couple of percent better. Or just any thoughts on that would be helpful. Christopher Stavros: I'm very confident because of the ongoing appraisal and even where you say maybe adding to that a touch of sprinkle of exploration, if you will, in and around some of our areas. So whether it's that or some of previous bolt-ons or things that we may be working on, there is a very good chance in there will be more opportunity set to work on that will deliver the types of results that we've been accustomed to seeing. So I'm very confident around that. Timothy Michael Moore: Great. And my only other question is mean without adding another rig, like you mentioned you own, how quickly can you really lean in and slightly ramp up drilling for a few extra wells in Giddings, if later this year, oil price is somewhere around 70%, I mean, I know you were able to quickly delay, I don't know, 6 completions last year. Could you flex that much on new wells? Or do you need a lot more lead time? Christopher Stavros: I mean, we could, but we won't. It's not -- it's just generally not the direction we would take it. Like I said, we set our plan at something that is -- we view as practical and prudent in terms of what we envision with the product price scenario that is conservative. And we'd like to grow within that outcome and the moderate growth that we talked about is what the assets are capable of delivering. We're not stretching for more than that. If the outcome turns out to be better than expected, that's great, but we won't chase more growth or necessarily just respond to the product price in that way. We'll just take the money and view it as winnings and we'll deploy it to -- or we'll provide it back to the shareholder and some fashion either share repurchases, most likely. Operator: The next question comes from Zach Parham with JPMorgan. Zachary Parham: Just one question for me. And you commented on this a little bit, but you have delivered some pretty significant gains in productivity this year that's allowed you to grow production more than originally planned at lower CapEx. Do you think that higher level of productivity is sustainable going forward? And maybe comment on how much of that productivity uplift is factored into your 2026 guidance. Christopher Stavros: There's -- we pretty much take a backward look on this and look at our drilling plan. The drilling plan, I would tell you and the anticipated outcome is not very different in terms of the sets of wells that we're expecting planning to drill as far as what this year's program. So there's a reasonable chance that things could turn out better than what we're predicting. Certainly, it turned out that way last year. But you can't -- there's no guarantee I mean so -- but there is a reasonable chance that some of that will occur in certain areas. So it's a balanced program. It's designed to sort of deliver moderate expectations for volume growth and factoring in some sorts of levels of risk. But I think as I look at the risk this year, frankly, it doesn't even feel as great as it was last year and last year turned out okay. So I think the outcome will be pretty good. Operator: The next question comes from Paul Diamond with Citi. Paul Diamond: Just a quick one for me. Just talked a bit about the improvement in drilling feet per day, completion feet per day and kind of just general overall cycle improvement. I guess just trying to understand, as we look forward, how much is up in that bone is there? Take the recent trend is indicative of what we should expect over the next 12 to 18 months or say it the thought there? Christopher Stavros: Yes. I can't speak to precise estimates or a factor of improvement that's coming in the next 12 to 18 months? Is it likely to improve? Yes. gradually, yes. And some of that is some of the -- what I mentioned in an earlier response, just the consistency and understanding of not just where we're drilling, how we're completing and the experience of not just the equipment but the personnel that are driving the effort. So as you understand more, you unlock more efficiencies with time, so I do expect that to gradually improve. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Christian Kullmann: Thanks a lot, and thanks, everybody, for joining our call today on such short notice. We have quite some news for you this afternoon and expect quite a few questions from you. So having said this, let's get right into it. To start, I would like to highlight 3 points. First, we've achieved our revised outlook for 2025. It was a tough finish in the last quarter, but we made it. Our EBITDA in the fourth quarter was solid enough to reach around EUR 1.9 billion for the full year, and our cash generation was more than just solid. We delivered almost EUR 700 million of free cash flow, resulting in a 37% cash conversion rate, making the upper half of our guidance corridor. This demonstrates once more no matter what the environment, we deliver on cash. Last year was not a great year for sure. But given the environment, I would say we came away with a black eye. So having said so, let's look ahead from there. And second, for 2026, we aim for broadly stable earnings at the midpoint of our guidance range in an environment which remains tough. And with normalizing methionine prices, delivering stable earnings, I guess, is a good thing. Claus will elaborate further on this in a second. And third, the consistent execution of our strategy is in this environment where challenges are everywhere as crucial as never before. To be able to do this, we need more financial flexibility. This is why we present a new dividend policy today, which combines a still attractive dividend for investors with more financial flexibility for us. The support from RAG Foundation on this change demonstrates their commitment to our success. More on this at the end of our prepared remarks. Before, ladies and gentlemen, I let Claus dive into the more operational topics, I would like to make a case for Evonik. Some of you would ask why invest in us? Why invest given all the headwinds for chemicals? It is true that right now, we face structural challenges and weak demand at the same time. This is, of course, not a good combination. But already in these challenging times, we are strong industry-leading cash generator. That is why despite investing and despite paying an attractive dividend, our leverage is moderate. This enables us to act from a position of strength. We, ladies and gentlemen, we do control our own destiny. From this relatively better starting point, we have significant potential to improve in the years to come, and we will realize this potential. We will reduce costs further. Our headcount will be another 1,000 lower at the end of this year or better at the end of last year. We have exciting applications and attractive growth niches such as for our batteries or drones. We still have significant portfolio optimization potential that lies within Oxeno, that lies within SYNEQT and more. And last but not least, as just mentioned, we'll adopt a more balanced capital allocation strategy. This means, in other words, in any kind of environment, we will improve in the years to come, and then we will generate a ROCE of around 11%. I have no doubts about this. By the way, ROCE will become part of our Board compensation with the approval at the upcoming AGM in June. This will help us to stay more disciplined and to align our interest and the interest of our investors. With that, I do hand over to Claus. Claus Rettig: Yes. Thank you, Christian, and to all the people listening to us online, a very warm welcome from my side as well. Before I go into the financial outlook, let's run through the puts and takes that are behind the numbers. On the side of the headwinds, we expect the demand environment to remain weak. We don't think -- we don't bet on a recovery. I think that's the best thing to do at the current moment in time. So in absence of a major demand recovery, competition, especially from Asia will stay tough. Of course, these are not Evonik-specific headwinds. Evonik specific is, in fact, that after 2 strong years, we now see a normalization in the methionine prices. I think this is well anticipated by the capital market. However, we will be partly offsetting these lower margins by our volumes and after a series of intense maintenance shutdowns last year, we have more capacity and a lower cost base in the U.S. once our backward integration is up and running, and this is the case from the mid of this year. Increasing support will come for us from our self-help measures with Evonik tailor-made and business optimization programs in full swing. On top, we will introduce short-term contingencies again, which we already had in the year 2023 and 2024. Also, we are expecting lower energy costs, mainly from regulation changes in Germany. That brings me to our guidance for the adjusted EBITDA in 2026, which we expect to be between EUR 1.7 billion and EUR 2 billion. The base assumption for our outlook is the aforementioned positives and negatives should largely balance out and leaving us at the midpoint of our guidance range with, you can say, broadly stable earnings versus last year. In Custom Solutions, we expect a year of slight growth, both in terms of volumes and earnings. In Advanced Technologies, we anticipate slightly lower earnings, mainly driven by the normalization of the methionine prices and less support from onetime effects, which we had last year. So interesting question certainly is what are we seeing for quarter 1, 2026. It's very early in the year, of course. And nevertheless, of course, we looked into this very, very intensively before we gave you this guidance range. So far, we see little change in Q1. So Q1 is more or less currently seen by us on the level of Q3 2025, in which we recorded an adjusted EBITDA of around EUR 450 million. So I guess this will be a good proxy for the start into the year, suggesting that our business in total is currently relatively stable. However, if all quarters continue on this level and even accounting for Q4 seasonality, we will be able to meet our outlook. But to reach the midpoint of our guidance, we need a small earnings improvement in the quarters to come. And we believe this is realistic, not because we are betting on any kind of support from the general environment, but because of specific elements in our business. So I'll give you some examples. Second half of Healthcare is always stronger than the first half. And we have seen this last year in a very, very strong Q4 of Healthcare that this is the case. Then we expect a stronger catalyst business in the second half partly because it's, say, normal seasonality, but also mainly because of change in, let's call it, regulations because there's regulation out for the use of biodiesel in Europe as well as in the United States, which has not been put into reality yet, and we expect that this is going to happen certainly in the second half of this year. We have Oxeno business where we believe there will be an improvement compared to Q1. And we have the second half in the year supported, let's say, margin improvement in our methionine business because our backward integration in methyl mercaptan in the U.S. is going online. Last but not least, also, we have a new hydrogen peroxide plant, which we are starting by the mid of this year in China. So just to give you a few examples, I could also even mention some more. So this gives us the confidence for the guidance level we gave to you. This brings me back to Christian. Christian Kullmann: Thanks a lot, Claus. Ladies and gentlemen, in this tough environment and facing clearly weaker results than we would like to see, the execution of our long-term strategy is more important than ever. We need both growth and cost optimization to be successful in the long run. Realizing growth is obviously more difficult than we thought 1 year ago. We are ramping up new capacities, as Claus has already mentioned, and attractive products and end markets. These are making a contribution, albeit a smaller one for now. We are complementing these with more focus on growth opportunities in attractive end markets. So we have interesting solutions, for example, for drones, for data centers and for consumer electronics. I can hear you. I can hear your skeptical question. These businesses are too small, Kullmann, to make a difference. Yes. They are small today. But this is how innovation or new application always starts in chemicals. For example, think about our Veramaris businesses. So it takes time to build sales and earnings, but that does not mean we should not be doing it because the opportunities we could have and we could benefit from are really attractive. The second pillar for future success, obviously, are our self-helping measures. Renting from Evonik tailor-made to various business optimizations and our procurement optimization, here, we have a lot of things in hand. All of these are pretty well on track, visible in a clear headcount reduction of more than 850 in the last year. And another 1,000 as part of these programs are to be reduced in this year. Unfortunately, the benefits of our cost reduction programs are partly eaten up by fixed cost increases. On average, these are around 4% a year or in other words, around EUR 200 million. In 2025, especially due to strong wage inflation in Germany, the increase was higher than normal. We were able to offset this higher inflation and expect that in 2026, the increase will be definitely lower. We will also bring back short-term contingency measures such as travel restrictions or training and communication spending reductions. Here are really saying we are used to it because we have proved to be successful in the years 2023 and 2024, and it is now urgent need again. In total, this means that more savings will come to the bottom line in 2026 compared to 2025. Before we jump into your questions, let me please close the presentation with the details of our new proposed dividend policy. First of all, in principle, our priorities of cash allocation remain unchanged. We focus on CapEx, we focus on dividend and deleveraging in that order. Note that we will still rule out M&A until 2027. In the past, we had a stable, very high dividend payout. This was favorable for and rewarded by mostly the REG Foundation. However, a rigid dividend is not adequate in this tough market environment and for a company in transformation. So we are switching to a dividend, which is tied to the financial performance of the company. This enables first, the long-term sustainability of our dividend; second, more financial flexibility for us to reach our strategic targets and goals. And third, investors to participate in future growth. And we will roll out the new policy in 2 steps. At the upcoming AGM in early June, we will propose to pay EUR 1 per share for last year. We offer this as a smooth transition from the previously fixed dividend to the performance-oriented dividend. This is still an outstanding dividend yield of around 7% today. From the AGM 2027 onwards, we will propose to pay out 40% to 60% of the adjusted net income. For this year, this would have resulted -- sorry, for last year -- excuse me, for last year, this would have resulted in a dividend between EUR 0.54 and EUR 0.82 per share. The range we provide for the payout ratio allows us to provide a good degree of dividend continuity and reliability in euro terms. That means we aim at a higher payout ratio in years of weaker financial performance and vice versa. So obviously, right now, payout would be rather 60%. At current share price levels, this would imply a yield of still around 6%. And let me stress again, the support from the RAG Foundation on this change demonstrates the commitment to our success. Thanks a lot for your attention, and now we are happy to take your questions. Operator: The first question comes from the line of Tom Wrigglesworth from Morgan Stanley. Thomas Wrigglesworth: Two, if I may. Firstly, just on the change in dividend policy. Clearly, your shares were not being rewarded for the high yield. But at the same time, I think investors would look at the challenging conditions and say this is not a market that needs more CapEx. You've talked in the past about share buybacks, probably more so in the last couple of years than you've ever spoken about potentially returning capital through other measures. Is the buyback -- does the cut of the dividend mean that a buyback becomes more attractive given how undervalued your shares are? I'm just trying to square where we sit on that. Then with regards to the strategic review of SYNEQT, can you give us an update there? Have you got a deadline as to when you think you'll come to the conclusion of a strategic review? What are the moving parts in terms of the process? I think we saw an announcement of an appointment of some bankers at the end of last year. So just keen to know what you think the time line is there? Unknown Executive: Thank you, Tom, for your questions. The first one on the capital allocation and buyback, I give to Claus. And the second one on SYNEQT, 2 questions, please. Claus Rettig: Yes. Okay. Yes. Thank you for the question. Dividend policy, I think Christian explained what are we looking for? We need more financial flexibility for, let's say, for our future. And of course, here, and Christian said it, we have to look for CapEx. Of course, we have projects, fast return projects, which are attractive. So these remain on the list. And as much as you are right, with the current utilization of plants, there is not much need for a huge investment at the moment, but there are smaller ones that really promise fast returns. So this is number one. The dividend, of course, is and will remain an important factor. We want to offer an attractive dividend yield. We are very high right now, but I think our share price is also too low and has to rise. And lastly -- or not lastly, then we will actually look for deleveraging. We are very stably financed. We have a very good financial -- solid financial foundation. And -- but here, we still want to reduce our debt. And of course, we also don't rule out buyback of shares. So that will depend very much on how strong the cash flow is going to be. But of course, it remains an option. Christian Kullmann: Tom, I'll take the second question. First of all, I really take pride in saying that we have successfully with high speed, carved out this business over the course of the last year. And now it is an independent company. What is next? Next is that -- that means we will tackle different options. Option one is joint venture or maybe specific cooperations. And of course, that goes without saying straight sales, straight divestment. That is what we will discuss over the course of the next weeks internally in the Executive Board, and then we will come along. That is where we are as of today. Operator: The next question comes from the line of David Symonds from BNP Paribas. David Symonds: I think I'm going to go to 2 as well, please. The first one is you mentioned an Oxeno improvement from Q1 onwards. And I've been noticing C4 prices rising recently. Is this the reason for the improvement that you expect there? Or is that just passing through higher energy costs that we've seen in the first part of this year? And then just maybe coming back on capital allocation. Am I right in thinking that buybacks are the lowest priority use of capital for you? Because it sort of comes bottom of the list, but at the current share price and given weekend market volumes, I would have thought deleveraging and new CapEx would be lower on the list than buybacks at this point. Unknown Executive: Yes. Thanks, David. Christian starts with Oxeno and what we see there. And then capital allocation, I give Claus again and comment on the priority list that we. Christian Kullmann: David, I guess it is fair to assume that the last year, our Oxeno business, let me say, has met the trough point. And for this year, having said so, we -- let me say, we see the chances for a slight recovery. How comes? First, there are first positive signs in respect of permissions given for -- in the area of construction. That is really helpful. It may be over the course of the year that the stimulus program of the government in Berlin could pay off in this direction. As you know, construction is one of the key areas where they want to see and where they want to, let me say, increase additional growth. So here might be a good chance. Second, and that is what we should not underestimate is the announcement of the commission in Brussels that they will overhaul the CO2 trading system because that means in future terms that we would, in respect of our Oxeno business benefit from this and that would even lift up the chances for the sales process to get a better price, referring to the announced changes of the commission in Brussels. So for 2026, however, there is a chance for a bettering for an uplift because of the construction and maybe for the construction impulse given by the government, which could pay off over the course of the second half of this year. And we do see and hope for some ups in the automotive businesses. So this altogether gives us some, let me say, -- it is a mixture of, let me say, underpinned confidence and good hope that it would turn into the better for Oxeno in this year than it has been last year. And please keep in mind that if -- and we do welcome and appreciate the announced changes of the CO2 emission trading system very much, this would additionally better the chances for our Oxano business getting a more attractive price than maybe before. With this, I hand over to Claus. Claus Rettig: Okay. Thank you, Christian. Maybe a few additions to this. Oxano, when you look into -- we don't expect -- we are not calculating a huge improvement, just to make it clear in terms of quantitative level, but a significant one. And Christian pointed it out very much. And there's also -- when you look into -- we had a major shutdown in 2025, which cost us quite a lot of money. This is not going to happen in 2026. So these maintenance costs are not there in 2026. We see currently also a little shortage in butadiene in Asia. So we will certainly benefit from this. If the freight route through the Suez Channel goes up again, we will save freight cost as well. All of this together, we put into this kind of assumption. And so I think it's not a hope. I think it's a clear fact-driven expectation. And coming back to your question with the priorities, I can only repeat what I said before. I think CapEx is number one. Like I said, we have topics which we get fast returns. And I mean fast means 1 to 2 years. We want to remain an attractive dividend company. And so this is, of course, also very important to us. And deleveraging is also clearly right now, when we look to our net financial leverage, it's only at 1.6, yes. If I take our pension obligations into account as well, then it's 2.4, still very much, let's say, maybe a little bit below average of the market. But I think we believe in the times ahead of us, it's very important to have a very, very sound balance sheet. And so this remains number three. And then again, I can only repeat if we really have a lot of free cash available, then, of course, share buyback remains an option. And so this is maybe just to clarify again, this would be the list priority list for what we do with our earnings. Operator: The next question comes from the line of Chetan Udeshi from JPMorgan. Chetan Udeshi: I had 2. First, can you remind us -- you mentioned this maintenance shutdown in C4 having an impact in 2025, but you then also had a lot of bonus accrual release through the year. So just remind us what were the key headwinds and tailwinds outside of the business conditions in your businesses that we should have in mind as we think about the bridge for 2026? And the second question, maybe for you, Christian. I mean, from your perspective, what do we need to actually see for this sector to really come out of this malaise because we've seen the industrial production globally improve last year PMIs in most regions, at least outside Europe, have been at 50 or above 50. But when we look at the numbers of Evonik, but also most of your competitors, they still look very, very tough. And I guess the question for a lot of us is what can change that? I mean from your assessment, what do you think we need for this sector to become, let's say, more interesting again for investors? Unknown Executive: Chetan, thank you very much for these. The first one on the special effects, bonds provisions and so on, goes to Claus. And then on the broader sector outlook and what we need for the improvement that's Christian done. Claus Rettig: Okay. Good. Then yes, going -- when you look back to 2025, of course, the major impact on bad results, don't get me wrong, that's why I said the improvement will be not a super huge one was, of course, volume and price. Price is down. But we also had -- we had only, I think, every 5 years or so a shutdown to do where we take all the entire chain out and have the maintenance. I think here, it was then, let's say, a lower double-digit million cost for us, which contributed to the result level of Evonik Oxeno. And of course, the bonus provisions, last year, we had good performance bonus. So we had high payouts. We -- and this is not the case this year. Of course, you are right. And from that point of view, this will also have a release. But of course, we also have -- also in Oxeno, we have our cost-cutting programs. This will contribute as well. We reduce still spendings in the unit. So that's all this together. But when you look to the biggest single portion, you are absolutely right, is the maintenance shutdown, middle double-digit million area plus less bonus payments in 2026. Christian Kullmann: Okay. Chetan, I try to answer your second question. And let's be -- maybe let's start in being very concrete on this. As of today, of course, the chemicals industry looks a little bit lackluster for the markets. But if you look behind the curtain, we could occur sexy. And why is it that I come to this kind of conclusion. Yesterday, the German newspaper has penciled and published that there is a good chance for the energy-intensive industries all over Europe to get a relief from the -- from an easing of the emission trading system. And out of a sudden, our share prices have remarkably risen up, which means, in other words, for me, that the investors do have realized that if we would -- that the pain from regulation, that the pain from the Evonik trading -- emission trading system would be eased. Hence to this, we could create a level playing field with our competitors abroad, it could really become a game changer and help us to become for capital markets more attractive. So first issue that we have to tackle is less regulation and create for Brussels and create a level playing field that we could be able to bring our performance straight -- straight on the street. Let's keep it like this. Second, I guess we have to differentiate between the company. As of today, there are companies maybe having reserves, in other words, having additional potentials, maybe by cost cutting, maybe by divestments, maybe by being in attractive growth niches, maybe by the geopolitical footprint and those who do not have. I'm convinced that Evonik belongs to the first group. So that is on top, a chance. In Germany, we should maybe give the acceleration of growth, the stimulus program of our government in Berlin, we should give it a chance. And it could start to pay off from the second half of this year onwards. And of course, maybe last comment about the politics of our days. If we could see an easing of geopolitical tensions, if we could see less tariffs between United States and China, then, of course, that would be helpful in an additional way. So that are my ideas about what is need. And I do really bank on the announcement of Brussels in respect of the emission trading system that could really become a game changer for us. And as I know the governments in France, in Belgium, in the Netherlands, in Poland, in Slovakia and in Germany, too, are elaborating here, let me say, new ideas of how to support the supply and value chains all over Europe that our economy could, in future, prosper in a better way. Operator: The next question comes from the line of Martin Roediger from Kepler Cheuvreux. Martin Roediger: Questions. Question number one is I have to come back to this CO2 topic with the EU Commission eventually softening this CO2 scheme, including the postponing of the deadline for the free CO2 allowances and also the auction time. Based on your talks with these guys, do you have the impression that the shift in the time line will be 1 to 2 years or 5 to 6 years or up to 10 years? Secondly, on cost savings, you expected incremental cost savings in the magnitude of a high double-digit euro million figure in 2025. Did you achieve that? And going forward, what are the incremental cost savings you expect for 2026? My guess would be EUR 100 million. Is that correct? And then thirdly, on energy costs. I recall that you intended to reduce energy costs from EUR 950 million in 2024 to EUR 900 million in 2025. Did that work out? And what is your best guess for energy costs in 2026, including your hedges? Unknown Executive: Yes. Thank you, Martin. The CO2 certificate question will go to Christian. And then on to Claus for the savings and the energy costs. Christian Kullmann: Martin, let's keep it like this. I'll give me a chance to split my answer up referring to your question. First, maybe as a sprinter, which would help us, where we would benefit from here, in particular, in Germany is about the new industrial electricity price system and the compensation of it. That is what would work for the next 3 years. Decisions in Berlin are already taken. And now they wait for the approval from the commission in Brussels. And here, I'm confident that it will come soon. So not in due course instead of soon. That would -- let me support our energy cost calculation over the run for the next up to 3 years. And then it is about the emission trading system. The emission trading system, there's desperate need to overhaul it in a radical way. As mentioned before, talks are ongoing, and that is what would pay off in the long run, which means if we take investment decisions for new technologies, ETC here in Europe, and we would be eased or the relief would be there in respect of the level of the CO2 fees we have to pay that would be somewhat like a game changer could come. Is it now possible for me to judge upon it about the, let me say, duration when it is going to happen. No. Here, we have to wait until July when the commission will provide us with a precise, let me say, proposal what they have in mind. And in the meanwhile, there will be a lot of negotiation and talks about how we could become -- or let me say, how we could bring this beef that it would be digestible in the future for each and everybody to the table. Claus Rettig: The next part of the question. Yes. So first, the cost question. So when we look into 2025, we can say our programs went very well. So we achieved more than a reduction of 850 headcount in 2025. That means these costs are really gone. Of course, they went over the course of the year. So it's not a full year impact. And we also heard Christian saying that we have the plan to have 1,000 more in 2026. Here, the same will apply over the course of the year. When I look into the numbers of 2025, I can tell you we reached almost the level we wanted to reach in terms of cost savings. However, and now it comes to, however, we also had a lot of cost increases that are more or less compensated the cost savings. So of course, we had huge increases in wages in last year. Germany alone, just to give you a benchmark here, was 7% wage increase in 2025. And we had also across the world, significant increases in wage because of inflation compensation. I don't have to explain it to you. You know it yourself very well. So this actually resulted that we kept our fixed costs more or less stable. This was 2025. 2026 will be totally different. We will have -- again, with our cost-saving measures, we have the program. We know that we will deliver. And I'm certainly not expecting that kind of increase in factor cost increase, fixed cost inflation in 2026. So that means at the year-end, certainly, alone from this portion, we will see quite a significant reduction in fixed cost. And so that is certainly happening in 2025. I don't think that we will see much more than 1% increase in fixed cost. That is at least the target of the CFO or interim CFO, if you want to say. But in 2026, you can take my words, you will see a significant increase in fixed costs, which we unfortunately for the reasons I have given could not achieve in 2025. 2026, I think -- yes, over and above, you heard Christian, we have also contingency measures. However, they will, like the word says, is not a permanent one. The headcount reduction, of course, is a permanent. And over and above, we have the temporary ones, which will support the results in 2026. Coming to your question about energy costs, Yes. In 2025, you are right, we saw quite a decline in energy costs, double-digit million decline in our energy costs, and we reached a level now below EUR 900 million in our total energy bill. Unfortunately, we will not see much more decrease in 2026. Here, it's a different story to what I just said on the fixed cost side. So we saw also pricing in the spot markets for energy, gas going up, strong winter in the U.S. contributed to this. Of course, it will not stay on forever. Nevertheless, in a nutshell, I have to say we believe in 2026, we will see a low double-digit million decrease in energy cost, but not more. Operator: The last question for today is from Christian Bell from UBS. Christian Bell: I've got 3. The first one is, if you are expecting significantly lower fixed costs, as you just explained in the previous questions, in 2026 alongside flat to slightly higher sales. Could you just help us understand why that does not translate into earnings growth for 2026? Unknown Executive: That's it? Christian Bell: Sorry, I was waiting for the answer. I can ask my second and third question as well. The second one would be the preannouncement today, together with the level of detail provided a month before the result is not something we typically see from Evonik. So I was just curious as to why you decided to preannounce today. And then finally, as a result of the new dividend policy and the current outlook, on our rough calculations, that suggests dividends to RAG could be around EUR 100 million lower. To the extent you can comment, do you know how RAG plans to address that potential shortfall? Or are they comfortable with a lower level of income? Sorry, that's the end of m questions. Christian Kullmann: Never mind, never mind. Maybe I take the one about the ad hoc communication style. I'm close to fall in love with my Chief Counselor, and he has given me strong advice to give this ad hoc communication. And that is what -- for me, it was a must to obey. So that is the reason why we have decided to have this ad hoc communication. In respect of RAG Foundation, first, it is to underpin that they do support the strategy of the company and that they do have totally agreed upon the suggestion saying, here we need a new Evonik strategy, dividend strategy because that is helping us in respect of future growth. And so here, they are totally supportive. That is what I could say. So comfortable and convenient for them, yes. And the first question about lower fixed costs, I have to now to hand over to Claus. Claus Rettig: Yes. Thank you, Christian. Maybe one addition. If you calculate the numbers, EUR 1 is actually resulting in EUR 466 million of dividend payment compared to the [ EUR 117 ] million we paid so far is EUR 545 million. So it's roughly, let's say, EUR 120 million below. And then you can see what the share of RAG and you get a feeling for what it means. Coming down to the other question, let's say, fixed costs not translating into earnings growth. Yes, this is a good question. And the major or the biggest point towards this one is the development in our methionine business. So here, we have I think that is also capital markets know well about it. You make your own assumptions. But we see the new capacities coming in. We have the new NHU capacity coming in, in Q4. We will have another new capacity from [ Leben ] coming in most likely Q2. And so we anticipate and we see it already from the decrease in price level. U.S., super stable, protected territory by tariffs. Europe, slight decrease so far, strong decrease in China and also moderate, let's say, in Asia. All of this together, unfortunately, has an impact, and it will consume, let's say, quite a bit of the fixed cost savings. That's why we put our guidance into see more or less stable kind of results in 2026 compared to 2025. That's the biggest single reason. Christian Bell: Sorry, I'm just still not fully able to understand. The impression I got from your previous answer -- on the previous questions was that we would see a net decline in fixed costs. But are you actually saying that we're going to see a net increase? Claus Rettig: No, no, sorry. I was talking about our methionine business, amino acid, as you -- and here, we have the situation that we are more capacity buildup in -- at the end of last year, and this is reducing the market price. And this is quite a significant counter effect to -- not on the fixed cost side, it's actually more or less on the contribution margin side. So -- and therefore, you don't see the full impact of the earnings -- on the fixed cost reduction, sorry. Fixed cost reduction on Evonik is compensated to some degree by decline in methionine business. Christian Bell: So I still don't fully understand at the group level, you're guiding to higher sales, but then you're also saying your fixed costs are going down, but you're still expecting flat to slightly lower earnings growth. So I still don't quite understand. Unknown Executive: Maybe we take this after the call, and we will call you later and clarify this. Christian Kullmann: Christoph, what a beautiful bridge you've built for me because that is now bringing us to the end of the first call of this young earnings session for our sector. All the best to you, and I hope we're meeting soon in person on the road. And that is the end for our call today. Thanks for your attention. Take care, and goodbye.
Operator: Thank you for standing by. This is the conference operator. Welcome to the TMX Group Limited Fourth Quarter 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Amin Mousavian, Vice President of Investor Relations and Treasury and Interim Chief Risk Officer. Please go ahead, Mr. Mousavian. Amin Mousavian: Thank you, Drew, and good morning, everyone. We join you today to discuss the 2025 fourth quarter results for TMX Group. We announced our results for another outstanding quarter and our sixth consecutive double-digit revenue growth, highlighting strong performance across all of our business units last night. Copies of our press release and MD&A are available on tmx.com under Investor Relations. This morning, we have with us John McKenzie, our Chief Executive Officer; and David Arnold, our Chief Financial Officer. Following the opening remarks, we will have a question-and-answer session. Before we begin, let's cover our forward-looking legal disclosure. Certain statements made during this call may relate to future events and expectations and constitute forward-looking information within the meaning of Canadian securities law. Actual results may differ materially from these expectations and additional information is contained in our press release and periodic reports that we have filed with the regulatory authorities. Now I will turn the call over to John. John McKenzie: Well, thanks, Amin, and good morning, everyone. Thank you for joining us on the call this morning. And as Amin mentioned, last night, we released our Q4 financial results, and I am very, very proud to report that we finished 2025 on a high note by every measure, delivering excellent results for each quarter of 2025 with strong increases in revenue, including 15% higher organic revenue compared to 2024, as well as record adjusted earnings per share and operating income. And we'll turn it over to David in just a few minutes to talk you through the quarter in details. Now looking back and although it only ended 6 weeks ago, 2025 already seems like a distant memory as it's been a very eventful 6 weeks. And importantly, as we discuss what went right in 2025, the key contributing factors to our best year ever, we're not talking about stand-alone achievements. The success of 2025 reflect an adaptive high-performance business model and the benefits of adhering to a consistent growth strategy. And market activity in 2025 surged, fueled by macroeconomic forces, ongoing volatility and as we continue to build TMX ever stronger for the future, more innovative, more global, more essential to our clients and stakeholders all across the vital capital markets ecosystem. Now turning to these 2025 results. Overall revenue increased 18% compared to 2024, reflecting strong performances across the enterprise, including double-digit revenue growth from derivatives trading and clearing, equity trading, TMX Trayport and TMX VettaFi. And we are also encouraged by a 9% increase in capital formation revenue due to strength in additional financings in the second half of the year as listed companies of all sizes on TSX and TSX Venture increasingly turn to the proven public market ecosystem to fund their growth plans. Organic revenue, excluding those recent acquisitions, increased 15% and adjusted diluting earnings per share increased 25% compared to last year. Overall, operating expenses increased 16% year-over-year, largely as a result of acquisition-related expenses and continued investment in organic growth as well as some BOX costs related to the SEC's mandated consolidated audit trail and some increased litigation costs. David will discuss these expenses in more detail following my comments this morning. Now moving to highlights from our business areas. Activity remained strong across our core domestic markets through the fourth quarter, capping off a tremendous year. Derivatives trading and clearing revenue, excluding BOX, increased 31% compared to 2024, driven by pronounced activity growth and the success of recent product initiatives to address client demand. MX 2025 year-over-year activity highlights include 80% growth in ETF option volume, double-digit growth on volumes across our expanded bond futures offering and record-breaking performances in our fixed income suite, specifically the 3-month CORRA futures contract, or CRA, which replaced the BAX in mid-2024. The CRA surpassed all-time BAX's daily volume records and open interest levels in December. Similarly, in equity markets, sustained volatility drove higher activity. On a combined basis, TSX, TSX Venture and Alpha volumes increased 27% when compared to 2024, highlighted by a 45% gain in volume traded on TSX Venture Exchange. And our markets stood tall amongst our peers. The benchmark S&P/TSX Composite Index broke through the 30,000 mark for the first time in September, and the S&P/TSX Venture Composite Index increased 60% compared to 2024, outperforming major global indices. Overall revenue from equities and fixed income trading and clearing increased 12% year-over-year, due to higher volumes and higher yields on premium products. And the successes of 2025 extend beyond our more traditional marketplaces and candidly beyond our borders. Alpha ex U.S., our U.S. equity trading venue, just celebrated its first anniversary last month. It has been a fantastic inaugural year in terms of volume traded and participant sign-ons and engagement. And following TMX's strong tradition of leadership in exchange technology, the AlphaX U.S. team was recognized with 2 prestigious industry awards for innovation and alternative trading systems by the trade and for most innovative third-party technology vendor, trading, risk and compliance by WatersTechnology. Now I'd like to turn over to Global Insights. Revenue here increased 16% compared to 2024, led by double-digit increases from TMX Trayport and TMX VettaFi. TMX Trayport's powerful and dynamic network plays an essential role at the heart of European energy trading ecosystem. Revenue grew 18% year-over-year or 12% in pound sterling, driven by a number of factors, primarily an increase in the number of licensees and increased adoption of analytics and other trade products. TMX's Trayport strategy is rooted in client-centric approach to serving the needs of new and existing clients, investing in continuous innovation in our core market offering to deliver performance, reliability and security, while supporting advanced capabilities, products and services and expanding into new asset classes and geographies, targeting opportunities to apply proven expertise in markets around the world, and that includes introducing digitized solutions to voice brokered markets and capitalizing on shifting dynamics and increased demand for modern trading products in transition markets. Now with TMX VettaFi, revenue increased 24% year-over-year or 21% in U.S. dollars due to higher indexing revenue driven by organic growth in assets under management and recent acquisitions. A relative upstart among our deep and diverse set of business areas, the team continued to execute against an opportunistic strategy in 2025, with 3 new acquisitions, the Credit Suisse Bond Indices in February, ETF Stream in June and a set of nuclear energy indices in October. These latest additions enhance TMX VettaFi's diverse product suite, while growing our presence in targeted regions. Next month, TMX VettaFi hosts Exchange, our marquee event and the premier gathering of ETF and wealth management community in Las Vegas. Now on to capital formation. As I mentioned earlier, revenue increased 9% year-over-year, primarily due to higher volume -- sorry, higher revenue from additional listing fee and the inclusion of a full year of Newsfile revenue. Now in a year clouded by economic uncertainty and headline disruption, the signature strength of public markets shown brightly, providing stakeholders with critical resiliency and an opportunity for growth. And our pledge to serve the evolving needs of this powerful interconnected ecosystem of companies, participants and investors remains firm. We saw a surge in financing dollars raised by issuers listed on both TSX and TSX Venture, particularly in the second half of the year, including a 44% increase in the number of transactions that we bill with the maximum fee threshold at TSX. Now big financing deals don't capture the same headlines as IPOs, but they are the clear indicators of the health and vitality of the market, and these transactions highlight the key role the exchange network plays in helping companies fund their growth throughout their life cycle. And 2025 featured some game-changing deals. In September, RFA and Artis REIT announced a business combination through a share exchange transaction to form RFA Financial, a more diversified financial services platform. On October 1, Maple Leaf Foods completed the spin-off of Canada Packers, Inc. as an independent public company. In November, TSX Venture-listed Carcetti Capital completed the acquisition of Hemlo Gold Mine and via reverse takeover emerged as Hemlo Mining Corp., a new mid-tier gold producer trading on the Venture Exchange. And there were many more. Now as many of you listening this morning are aware, Toronto Stock Exchange and TSX Venture Exchange are home to almost 50% of the world's public mining companies. The industry is vital to our markets, vital to Canada's economy and vital to the country's global competitive prospects, and the mining sector is thriving. Financing dollars have increased 53% when compared to 2024. Mining sector surpassed $1 trillion in overall market capitalization in 2025. And of the 11 companies to graduate from TSX Venture Exchange to the senior market in 2025, 10 of these were mining companies. So looking more broadly across the marketplace ecosystem, it was also a stellar year for the Canada's ETF industry with over $125.8 billion in net inflows. We welcomed 239 new ETFs to Toronto Stock Exchange during 2025, surpassing the all-time record of 127 set just last year. TSX is now also the market of choice for Canadian Depository Receipts with 116 new CDRs coming to our market last year. Our pipeline of new issuer prospects is also strong, and our business development team is as busy as ever with all signs pointing to a very active 2026 in terms of potential IPOs. Now as I said in the opening of my remarks, a lot went right in 2025. It's our best year ever. But always, our focus is always on what comes next. And at no time in my 25 years here, including 6 years leading TMX, have we had so many immediate and potentially impactful trends pushing the pace of change in our global environment, including AI adoption, tokenization, 24-hour trading and the rise of private markets. There is no denying that there are areas across the finance sector that are due for modernization. But the truth is that the traditional finance industry, as it has been called, has been continuously evolving over the past 100-plus years, reshaping and transforming many times over paced by advances in technology. And Canada's markets have long stood at the forefront of industry progress. TSX was actually the first fully electronic exchange in North America. It was the birthplace of the exchange-traded fund, and it should come as no surprise that TMX is actively pursuing client-driven solutions to build on this proud history of innovation. Today, public markets trading is a hyper-efficient connected digital ecosystem. And our approach is to seek out purpose-driven innovation, measures that make markets better rather than innovation for innovation's sake. And necessarily, our next steps are rooted in a commitment to preserving the core capital markets principles of market integrity, fairness and transparency. Now tokenization of public assets is a headline topic right now in the exchange industry. And while it may prove to be transformative in the long run, there are hurdles to clear yet in moving toward a broad market adoption, including defining an appropriate regulatory framework and operating standardization. It is the next evolution of blockchain, and we've exploring potential use cases for blockchain technology for more than 15 years, including in the early stages of developing our game-changing post-trade modernization program, which we delivered in 2025. And we see promise in near-term opportunities emerging on the clearing side, including the tokenization of collateral management, which could allow collateral to move between accounts and even different clearing houses fluidly and more efficiently. And we continue to assess the client demand for things like 24-hour trading. Round-the-clock trading is not a new concept for us. Montreal Exchange introduced extended hours trading for derivatives to sync with the Asia Pacific markets in 2021 to support growing investor demand. And the current push for 24-hour equity trading is driven by a global appetite, but primarily for major U.S. stocks. So our forward strategy includes gauging client needs as well as a full consideration of the ecosystem impacts. And an important stakeholder, not often mentioned in this discussion of either 24-hour trading or tokenization is the listed issuer. 2/3 of the public companies on TSX and TSX Venture are small or medium enterprises. And our public venture market is the bedrock of our 2-tiered ecosystem. Small issuers and their investors would not necessarily see a benefit of further diluting their liquidity over an extended trading venue. And so our commitment remains to making markets better, and that extends beyond public markets. So over the past 2 years, we have also continued to build out new capabilities and solutions for serving private companies. TMX Corporate Solutions provides end-to-end services to private as well as public companies through all of their capital raising activities and all stages of evolution. Markette Ventures, a joint venture with Canaccord Genuity to digitize and streamline the private placement process and improve investor access was just launched this last year. So in closing today, as always, I want to thank our team of employees around the world. This is the engine of TMX success last year, this year and every year. And in considering each of our milestones and recent accomplishments, I am most encouraged by the progress we have made and continue to make in preparing for the future, with a focus on accelerating growth and fulfilling our purpose to make markets better and empower bold ideas. I have tremendous confidence in our organization that it is well equipped to tackle near- and long-term challenges and capitalize on the exciting opportunities and transformation in front of us. And with that, I'll pass the call over to you, David. David Arnold: Thank you very much, John. Good morning, everyone, and thank you for joining us today. I'm pleased to report that the TMX Group delivered outstanding financial results in the fourth quarter of 2025, capping off an exceptional year. This quarter, we achieved double-digit revenue growth across the enterprise and coupled with our disciplined approach to cost management, delivered record income from operations. The strong financial performance reflects the successful execution of our diversification strategy and our team's commitment to operational excellence. We achieved record quarterly revenue of $457.8 million in Q4, representing a robust 16% year-over-year growth. This outstanding performance was driven by strength across all of our business segments with particularly strong contributions from our derivatives trading and clearing, TMX VettaFi, TMX Datalinx and Capital Formation businesses. The 2025 fourth quarter diluted EPS of $0.41 was 29% lower than Q4 of last year. This decrease in reported diluted earnings per share included $0.19 per share decrease related to the net noncash foreign exchange accounting losses on our U.S. dollar-denominated intercompany loans in Q4 of 2025 compared with noncash accounting gains in Q4 of last year. Notwithstanding, our adjusted diluted earnings per share increased 22% from Q4 of last year, reflecting a 14% growth in income from operations. Turning now to our businesses, beginning with the segments that saw the largest year-over-year increases. Global Insights revenue grew by 16% this quarter, reflecting double-digit increases across all 3 businesses in the segment. Revenue from TMX Datalinx grew 18% from Q4 last year, which includes $7.9 million from the inclusion of Verity, which was acquired on October 1, as well as an increase in subscribers and usage, data feeds and also higher revenue in colocation. Excluding Verity, TMX Datalinx grew 5% organically. Revenue from TMX VettaFi grew 23% in Canadian dollars and 25% in U.S. dollars this quarter. This growth included $3.7 million of revenue from recent acquisitions, namely bond indices, ETF stream and the addition of nuclear sector indices. Revenue, excluding these 3 acquisitions, increased 13% in the fourth quarter, reflecting strong organic growth in assets under management and higher revenue from digital distribution. TMX VettaFi's assets under management grew 49% from December 31, 2024, to over USD 77 billion at December 31, 2025. Revenue from Trayport grew 11% in Canadian dollars or 8% in pound sterling this quarter, primarily driven by a 6% increase in total licensees, annual price adjustments and incremental revenue from data analytics and other trader products compared with last year. TMX Trayport's average recurring revenue for the quarter on an annualized basis was approximately CAD 276 million or GBP 150 million, up 17% and 14%, respectively, compared with the same period last year. Trayport continues to grow in line with our expectation of high growth over the long-term. As our core European market matures, we are actively developing Trayport's product offerings, expanding into new geographies and asset classes to unlock further growth opportunities. Revenue in our derivatives trading and clearing businesses, excluding BOX, was up 27% from Q4 of last year. This strong performance was driven by a 32% growth in Montreal Exchange and a 17% growth in CDCC revenue, reflecting both higher rate per contract and a 10% increase in derivatives volumes. The increase in average rate per contract this quarter reflects the sunset of the CORRA market making program at the end of Q2 of 2025 and the sunset of the 2-year Government of Canada Bond Futures market making program at the end of November of 2025. Our derivatives business maintained its strong trajectory through 2025 and open interest at the end of December was up a staggering 33%. Revenue from BOX increased 16% this quarter, driven by a 17% growth in volumes compared with Q4 of last year. In our Capital Formation business, we saw an increase in capital-raising activities this quarter, which translated into a 13% year-over-year revenue growth. Additional listing fees grew 53% from Q4 of last year, reflecting an increase in the number of transactions billed at the maximum fee on both TSX and TSX Venture Exchange or TSXV for short. Sustaining listing fees and initial listing fees also grew compared to last year, driven by continued growth in ETFs. The increased revenue in listings was partially offset by a 5% decrease in TMX Corporate Solutions revenue in Q4, mainly reflecting lower net interest income revenue due to lower yields and lower balances compared with Q4 of last year. Turning now to our Equities and Fixed Income Trading and Clearing segment. Revenue was up 13% in the quarter, driven by growth in equities trading. The increase in equities and fixed income trading reflected a 38% volume growth in our equities marketplaces, including 24% on TSX, 74% on TSX Venture and 35% on Alpha Exchange, X and DRK combined. Our combined equities trading market share for TSX and TSXV listed issues was approximately 61% this quarter, down a minor 2% from the same period last year. We saw a modest 2% growth from our clearing business this quarter. In our fixed income trading business, revenue in the quarter decreased from last year, primarily reflecting lower credit and swap activity. Now taking a closer look at our expenses. Operating costs in the fourth quarter increased by 19% and included the following notable items. First, we accounted for a $15.3 million regulatory charge passed through to BOX by its self-regulatory organization in Q4, resulting from the impairment of an asset related to the Consolidated Audit Trail or CAT for short, a system the SEC requires marketplaces to track U.S. equity and options trading. Second, we incurred $8.9 million of additional operating expenses related to new acquisitions; and third, a $3.3 million increase in dispute and litigation costs compared with Q4 of last year. Now excluding these items, our operating expenses increased by approximately 6% on a comparable basis, largely due to 3 key drivers: first, roughly 2/3 of this increase or $8.4 million is driven by higher headcount, year-over-year merit increases and severance costs; second, approximately 1/4 of this increase or $3 million relates to IT operating costs, reflecting higher licensing and subscription fees and cloud services compared to last year. The remaining increase relates to higher amortization related to the launch of our post-trade system earlier this year, partially offset by savings from the strategic realignment updates completed earlier in 2025. On a reported basis, we had slightly negative operating leverage of 2% in the fourth quarter. However, excluding the 3 items I discussed a few minutes ago, namely; first, the CAT-related fees; second, recent acquisitions; and finally, dispute and litigation costs. I am pleased to report we produced positive operating leverage of 7% in the fourth quarter, which is a direct result of our focused strategy with our robust 13% organic revenue growth outpacing a well-managed 6% increase in operating expenses on a comparable basis. Now looking at our results sequentially, our revenue increased by $39.2 million or 9% from the third quarter, reflecting increases from, first, higher revenue from our Global Insights segment, driven by TMX Datalinx, which included revenue from Verity in Q4 and VettaFi AUM growth I spoke to earlier; higher revenue from capital formation driven by higher additional listings; and finally, higher revenue from both our equities and fixed income trading and clearing and our derivatives trading and clearing businesses, reflecting higher trading volumes. Turning to our sequential expense analysis. Operating expenses in Q4 increased $25.3 million or 11% from the third quarter, primarily reflecting $15.3 million of CAT-related regulatory fees passed through to BOX, $5.5 million of operating expenses related to Verity and higher employee incentive plan costs and higher software license and subscription costs. On the balance sheet front, our debt to adjusted EBITDA ratio at December 31 was 2.2x, which is within our target leverage range of 1.5 to 2.5x. We continue to maintain a disciplined approach to capital deployment and prioritize driving shareholder value. Turning now to our cash and marketable securities financial position. As of December 31, we held approximately $513 million in cash and marketable securities, which is approximately $273 million in excess of the approximate $240 million we target to retain for regulatory purposes. Net of excess cash, our leverage ratio was 1.9x at December 31, 2025. I'm pleased to announce that last night, our Board of Directors approved a 9% increase to our quarterly dividend to $0.24 per common share, payable on March 6 to shareholders on record as of February 20, and this positions our last 12-month dividend payout ratio at 42%, consistent with our target payout range of 40% to 50%. Now as we look to 2026 and beyond, we remain focused on building on this momentum and continued execution of our TM2X strategy to accelerate our growth. Our robust cash generation capabilities, our strong balance sheet and our diverse portfolio of interconnected global businesses positions us well for continued success. So with that, I'll turn the call back to you, Amin, for our Q&A period. Amin Mousavian: Thank you, David. Drew, would you please outline the process for the Q&A session? Operator: [Operator Instructions] The first question comes from Benjamin Budish with Barclays. Benjamin Budish: Maybe just to start out on Trayport. I know your ARR was up a little bit. It looks like the revenue trend has been a little bit more flattish over the last couple of quarters. Just curious, maybe a 2-parter, if you could remind us, how do you think about like energy price volatility translating into revenue growth, subscription growth? I imagine there's a little bit of a lag. And how are you thinking about the recent volatility and how that could translate into growth going into next year? That would be the first question. David Arnold: Thank you very much, Ben. So it's David here. I'll deal with the last part of your question first and then hand it over to John, and we can talk a little bit about our overarching Trayport strategy. I mean, yes, I mean, if there is more volatility and activity in the energy markets in Europe and various trading houses decide to either expand their operating desks, then obviously, that would have a potential uplift for us as they subscribe to additional licenses or seek to renew, let's say, an enterprise site license if they have that with us. But it goes without saying, as we've said many times before, we don't directly benefit from energy market trading. Our billing process and site license agreement is really based on subscribers. And then maybe I'll just hand it back to John, and he'll talk a little bit about our overarching long-term strategy with Trayport and our long-term growth objectives. John McKenzie: Thanks, David, and thanks for the question, Ben. Yes. And one of the pieces I just do that, I do want to iterate, we've had this conversation in previous calls as well. As we bring clients in over time, that can be lumpy. So clients will come in, they will take a number of seats, they renew at different times. So it's very difficult to look at that quarter-by-quarter to create the trend. And that's why we always guide towards the long-term guidance on this business in terms of that high single, low double-digit growth, which we continue to be just as bullish on as we have been in the past. So there is no change in outlook for us in terms of what we can do with this business. So as David said, you continue to have upside in the European market as volatility does come back, as you start to see other people coming into the market, as the market demand expands because it is still a growth market from an energy usage standpoint, you've got long-term tailwinds there. But what we're really looking to, to create that long-term growth curve is what I talked about in my earlier comments as well is the continued build-out of new asset classes and new geographies. So while the European market is well developed, we are not the same degree of development in the U.S. and Asia, and we're continuing to build that out. We are looking at how do we bring other commodities on, and we are in discussions in terms of particularly the refined oil market. That is a long-term program to bring those additional commodities on. So we see this as a business that has got a lot of white space for growth, and that's why we're able to continue to iterate that long-term guidance. Benjamin Budish: I appreciate that. Maybe just a follow-up. The Montreal Exchange has seen very robust growth over the last several years. Some of that is market-driven, but some of it is driven by TMX's various initiatives. As you look into '26, '27, what other levers or initiatives do you have kind of in the works that might either continue or accelerate or sustain that growth sort of ex whatever market volatility does? John McKenzie: Yes, happy to. So I mean, as you're right, we are really happy with how that business is performing. And I always equate it to a bit of a large sailing ship, which is -- you don't have the ability to catch all that wind unless you put up all the right sales, which our team has been continuing to do in terms of product innovation, operating our innovation, et cetera, et cetera. And even in the things that we've launched, we have room to grow and mature in them. We have the market making agreements that are rolling off for potential upside on the revenue side. But to your question around go forward, I really put it into 2 categories. So one, we are continuing to look at a product road map of new and enhanced products. You'll continue to see us bring out new things that will give new on-exchange things for people to trade. We are also looking at new product expansion on the clearing side. So the unique vertical we have with MX and CDCC means we can do more on the cleared product side like we do with repo when there's opportunity to do more there. And then the other piece of this is continued market reforms. So as the market has grown, we've identified areas where there are some limitations on market making that have made it difficult for people to do more on the market, and we are making changes there that will allow more expansion in things like ETF options and otherwise, so that our participants can do more within the ecosystem. So it's product introductions, it's clearing capabilities and new clearing over-the-counter product and marketplace reforms that allow for more activity. Operator: The next question comes from Etienne Ricard with BMO Capital Markets. Etienne Ricard: Just to circle back on Trayport. Can you remind us what the long-term growth algorithm for this business is between volume and price? And specific to volume, should we expect the new connection growth going forward to be largely driven by non-European clients? David Arnold: Thanks so much, Etienne. It's David. So let me talk a little bit about the algorithm for growth in Trayport, and it's a bit of a refresher. So as you know, I mean, in Trayport, it's a Software-as-a-Service business, which is really subscriber-driven. We really have 2 types of subscribers. We have enterprise site license subscribers and then effectively shorter-term pay-as-you-go, if you will, site licenses. And really, the growth algorithm there is pricing, which effectively automatically resets every year in December. All of our agreements have a Consumer Price Index, which is pegged to Bank of England's published Consumer Price Index. And in and around early December each year, we do reach out to all of our clients, notify them as to what pricing changes are going to occur in the next year. And as you can see in our disclosure, we've indicated what that is for 2026 for Trayport. And then the second piece is really as our clients grow, right? And what that really means is in the European market is do they -- as I mentioned when I was answering Ben's question, do they expand their usage, i.e., do they have a trading desk of 4 that now becomes a trading desk of 8? And if it is, a trading desk of 8 and they need a Trayport screen. Then if they're on a pay-as-you-go approach, they'll approach us and they'll purchase additional licenses. And if they're on a site license, they won't have an immediate revenue impact because we'll wait until we renew the agreement with them to actually upsell. But the second part is really what we would refer to as our premium products, right, whether it would be algorithmic trading, chatting charting and analytics. Our team in Trayport are constantly working with our clients on how to enhance the platform. And so in doing that, they're adding features that upon renewal, enable upsell with our clients. And really, it's meeting a client-driven need as opposed to something that we thought of and have offered. It's really listening to our clients and building the capabilities that they would like. And for example, one we spoke about at our Investor Day, is the chat capability, which is something that we're working on actively. And then as John said, and that's the most important one is how do we expand into other asset classes and other geographies. And that really, when put all together is the long-term algorithm. John, do you want to add anything? John McKenzie: Yes. The only thing I'll add is -- this is the interesting, continued transformation of the business that even the marketplaces themselves, in some cases, are becoming less geographic. So while this business was largely built in the European marketplace, areas like natural gas are very much becoming a global market, a globally priced market, especially if you have the more advent of LNG. So things like Japan, the trade reporting facility, things like that are getting much more global pricing. So you've got the ability not just to continue to grow in Europe, but to grow beyond it because these asset classes are becoming more global. Etienne Ricard: Very helpful. And then switching on VettaFi. So I know you've talked about more M&A opportunities to continue scaling the business. And VettaFi has had a lot of success with some thematic and factor-based products. So as you look at some new acquisitions here, would you prefer to continue acquiring more thematic indices or maybe look at more diversified products? John McKenzie: We're actually not limited to either one. So what the team has built out and the scalability of the VettaFi platform and now a proven track record that our team has had on being able to bring in new product and build it onto the platform and distribute it to the audience is not limited. So when we are looking at new opportunities, we are more looking at, okay, what is the unique opportunity of those assets and indices and our ability to scale them. And so they could be thematic, but we want thematic that has potential like the investment in the nuclear indices because we saw the long-term potential for increased investor demand in those interest areas. So it really can be across the spectrum. We are also continuing to look for more geographic distribution. That's why we've done some more work in the European sphere. That's why we brought the index research team on, if you remember, just over a year ago. So expect that to be the continued approach. And candidly, though, we look at far more than we will execute on because we are continuing to be very disciplined about what are the products, the ability to scale up, the interest level to the investor audience and the ability for us to integrate it in. And that's really a critical touch point in terms of how we do these things is we want to be able to scale it up on the platform in a way that's really efficient. Operator: The next question comes from Aravinda Galappatthige with Canaccord Genuity. Aravinda Galappatthige: Congrats on another excellent quarter. I wanted to maybe just picking up on the M&A question, talk about -- or ask you about your thoughts with respect to sort of the M&A market in general. Obviously, in the last couple of days, we've seen sort of an extension of the sell-off in software with -- obviously, the analytics and data businesses getting hit in multiple industries, including financial. I guess on one hand, as your balance sheet gets better, I mean, these potentially opens up interesting opportunities for you as this sort of extends into the private markets. And then on the other hand, though, perhaps you can talk about sort of the moats that you have with respect to your existing businesses in terms of sort of addressing the potential threats from some of the emerging technologies? John McKenzie: Yes. I'm so glad you asked that question because it's so timely and thoughtful for where we are in terms of this point in history. Our strategy is unchanged. And I'll get to that in terms of the defensive moats in a little bit. But our strategy is unchanged. The areas we are looking to invest are unchanged. If anything happened this week, things got -- things went on sale and maybe that will create different opportunities for us to bring things in it at valuations that make sense because it's always been a sector where valuation has been challenging in terms of ensuring that you can get good return for the investors to bringing things in. And candidly, to your point, our strategy has been to bring in things that we can integrate and scale as part of our ecosystem. And that really gets to the heart of the defensive moat pieces we bring it in. So as you saw recently, the pieces that we brought in around data, the Verity team, which actually does have AI-enhanced data capabilities in it is designed to integrate with our Datalinx business, which uses a lot of proprietary data and creates unique opportunities that you can't create necessarily just as an AI agentic outside. And so that's the real reminder that we want to make sure that people understand about our business and particularly about our Global Insights businesses that are very much proprietary based. So Datalinx, very much proprietary data, Trayport, proprietary networks that you need to be connected to be able to get the visibility and the activity on the VettaFi applications, those benchmarks, proprietary benchmarks that are integrated in products that are in investors' hands. These are very difficult to disrupt with the types of technology advancements [ we've ] been talked about in the AI market these days. So candidly, I think this reaction was an overreaction, and I don't think it's particularly appropriate for a company like us. Aravinda Galappatthige: And just a quick follow-up, perhaps for David. Great analysis of the OpEx piece as usual. Looking forward, obviously, a lot depends on sort of the growth trajectory we see in '26. How should we think about sort of the organic OpEx inflation from here on? Any kind of -- any components we should be aware of as we sort of model through? David Arnold: Yes, it's a great question, Aravinda, and pleased to actually take it. I mean, we continue, and this echoes what John said about our strategy, right, which is unchanged, is we continue to invest in growth in 2026. And the thing that is the biggest guidepost for both the management team and when we review with our Board of Directors is being focused on the positive operating leverage, right? And as I've said before, it's less about the quarter. It's really about the full year and the multiyear. This quarter, obviously, it was an outstanding performance at 7% operating leverage generated obviously, through '25. Now as you know, I don't traditionally provide expense guidance and there -- but there are 2 things that I can share with you, right? So first, looking at our most current quarter's expenses, really using Q4 as kind of a jumping off point. I would use the comparable basis as kind of the best jumping off point. And then from there, as you look to the next quarter, I would adjust for what you would typically expect are pluses and minuses, right? And the best way to look at that is to say, okay, as we head into Q1, we typically have higher payroll expenses as things reset at the end of the year as well as we typically have the VettaFi Exchange conference, right? So those would be the 2 things that you would look at. And then secondly, as I've said in the past, right, like we try and maintain expense growth to inflation. And really, inflation is on an annual basis. But as we've noted in the past, like we have various expense categories that are subject to different types of inflation. So for example, compensation and benefits really tracks more as wage inflation in the various countries in which we operate. And dare I say inflation is not quite similar in some of these jurisdictions. So that's number one. And then number two, we factor in obviously movements in total shareholder return relative to the S&P Composite Index because that changes the valuation of our performance share units and the multiplier, which we don't hedge, as I've spoken in the past. So that's really kind of on the salaries and benefits, which is about half of our expense base. And then on the technology front, the rate of inflation, Aravinda, as you know best, differs from general wage rate inflation. And then we move to SG&A, right? And that really is moving more on some part of the Consumer Price Index, but other parts like travel and entertainment seem to be somewhat disconnected from the typical Consumer Price Index. So we factored that all in, but we go back to the most important guide point, which is positive operating leverage and investing for growth. Go ahead, John. John McKenzie: I want to add in one piece because it actually then circles back to your first question. I don't want to lose sight in the discussion about the AI opportunity here for us and the work we are doing there. That is actually integral to how we see the future state of how we manage the investment, the talent base in the organization. We are already seeing some early wins. So we have AI adoption within some of our development teams. That's actually allowed us for the first time in the time that we've actually owned Trayport to essentially hold our development team flat year-over-year because of the additional productivity we're getting out of that tool deployment, so we can get more with the team that we have in terms of developing more product, more software. So we're looking into this year in terms of actually how do we scale that up, move it across more of the divisions. We're actually deploying tools across the entire population base to improve productivity throughout the firm. So that's part of then what the tool base is for help us to maintain that cost discipline going forward by using these things smartly in terms of how we would work every day. Operator: The next question comes from Jaeme Gloyn with National Bank Financial. Jaeme Gloyn: Just want to go back to the AI risks and opportunities as well. And as we look at some of the companies in your peer group or adjacent peer group like an LSEG or FactSet, getting hit a little bit harder than yourselves. It seems to be maybe perhaps focused on some of these data and analytic screens or tools that would maybe be comparable to like a Trayport. So I appreciate your commentary around the proprietary network and difficulty to disrupt that network. I would agree with that. I'm just wondering, are there other strategies or other projects underway to reaffirm that moat you have in the Trayport business as it relates to potential threats? John McKenzie: Yes. And Jaeme, thank you for that. And I think we've actually talked about this in the past that we've actually been on a continuous investment program within Trayport. We're actually just reaching the end of an investment period, which we call JUUL 2.0, which is an entire replatforming of the Trayport system, which actually then makes it even easier and quicker for us to bring new features and capabilities to the user base to keep them connected. And so that's -- like the value of a really strong network is you can only get that value by being connected to it. The data that goes through a Trayport screen is not publicly available data. You can build any AI agent you want, but the data is not available for it to do anything with. And that's what I mean by it being a proprietary network. And the users on it don't want that data exposed in a public way because it's their value-added data as well in terms of how they act with other participants. And so that's the nature of the business. Our job is to compete is to continue to innovate around it. There have been folks building competitive alternatives, the entirety of the time we've been in this business and before we owned it. And the strength in it continues to be building that value-add network that has the best price discovery in that closed market. So that's what we're going to continue to do. So it really isn't comparable to those other organizations you talk to, and those are really about screens that are actually aggregating public data that's otherwise readily available. And that really is the differentiating point. Now the second piece on that, in all of our data businesses, we are looking at where do we actually incorporate AI capabilities to both make them more efficient, but also potentially create more data and insight sets on top of them. That is what we're doing in terms of Verity team that's using public information with an AI component on top it to create investor signals on that, that you wouldn't otherwise have. We're similarly doing that with what we can potentially do in the data sets, and our analytics sets around Trayport, around Datalinx as well. So you are going to see more of that coming forward in terms of the areas where we invest. But we're focused on areas where it makes the data sets more efficient and helps to create more information and useful investor site signals to the investor audience. But I always want to remind people, the underlying proprietary data comes from us, and that is a really strong asset as this industry evolves. Jaeme Gloyn: Okay. And then still in Trayport, it looks like there were some lower nonrecurring consulting fees this quarter. Not something I think I've seen called out in the past that perhaps is what's driving maybe organic revenue growth a little bit slower this quarter than what we're used to seeing. Is that the driver? Is there something else that we should be thinking about here in terms of that organic revenue growth number? I mean, you spoke very convincingly of the high single, low double-digit target in the near term as well. But maybe talk through some of those consulting fees and what kind of movement it can have from a quarter-to-quarter or year-to-year basis? David Arnold: Yes. I appreciate that, Jaeme. Yes. I mean, effectively, what it was is it's less than GBP 0.5 million year-over-year delta. But it was meaningful for us just to call out because it was a variance year-over-year. That's kind of why we did it because it was notable. But typically, as you know, in many of our quarters, we don't call that out because the year-over-year variance is kind of not material. And this time, it was just slightly on the material side on that not material, material kind of judgment. So we thought it would be good to provide that color. But yes, that is something that is also a really good harbinger of new client kind of growth because typically, the nonrecurring projects are us helping onboard either a broker or a trading desk and so on and so forth. But it's not the big driver of our results. But in this particular quarter, it just was notable to call it out. Operator: The next question comes from Graham Ryding with TD Securities. Graham Ryding: Maybe we could jump to equity tokenization. The SEC in the U.S. seems to be encouraging the development of platforms to trade and settle tokenized equities. We're also seeing some initiatives here from some of your peers like NASDAQ, NYSE and I guess, the Clearing Corp in the U.S., DTCC, they've all sort of rolled out some new initiatives or announced new initiatives. So maybe you could just comment on what do you expect from the Canadian regulators here? Should they be following the lead of the U.S. to some extent? And then should we be expecting some announcement or initiatives from you on this front in 2026? John McKenzie: Yes. It's a great question, and it's so timely. So thank you. So let me start with in terms of where the transformation is coming from. And this transformation, again, we had talked about in some of the comments, is a technology capability that has the potential to make markets more efficient in some ways, but in some ways, less efficient than they are today. The marketplaces, particularly around equity trading throughout North America, are some of the most liquid, deep and effective markets in the world. So when we think about how we tokenize and we think about what is the value add and what is the way to do that constructively. And so actually, I really applaud the work that NASDAQ and NYSE are doing in terms of the leadership position in the U.S. where the activity on this is the highest to try to chart out what is the way to do it appropriately, so that you continue to have the benefit of price discovery, deep liquid markets, fungibility, standardization. And that's what they're looking to do in conjunction with DTCC in terms of their applications. So from a Canadian standpoint, we do have a bit of a benefit of the ability to be observing and participating in this to see how we can standardize and be part of that discussion. We've got our team engaged on that as well. And one of the unique advantages we bring to the equation is that we actually have the entirety of the ecosystem to work with. So like -- unlike in other markets, we've got exchanges and clearing houses that are separate. The fact that we have both the primary exchanges, CDS in terms of the depository and clearing, the trust and transfer agent capability, we have that full value chain so we can actually explore where we can see the abilities to innovate through this and actually create value. And what we're really encouraging in our discussions with the industry and with regulators is that we do this in a way that thinks about the industry itself, how do you standardize and ensure that the efficiency we've collectively created isn't lost as part of the innovation. And so that -- again, that IDBB how do you standardize, how do you make sure things are fungible. Now in that, I'll be candid, we've had actually discussions with companies for years that have considered bringing their issue to market in a tokenized form as opposed to a security form. It's actually not materially different in terms of the security itself because any security that's listed today is a fully digitized product, digitized from the front end all the way through, through trading and clearing. It's the question of whether or not you want it centralized or decentralized. And so the model that the U.S. is pursuing is a way to potentially still have it as the same vehicle, but decentralized so you can remove the token from the depository and take it in the old wallet, which is a question in terms of the benefit, in terms of -- for some large users, they may see a benefit in that because they can use it for those things. But for some small users, there actually may security concerns around it. So these are all the things that we're considering. And we think it's our role as the leading marketplace to take a lead role in helping to identify the best way to adopt innovation for the marketplace. So it benefits all the various parties as opposed to just adopting for adopting. So you will see announcements from us as we see practical applications that can be utilized. But we won't be doing this kind of what I'll call announcement for the sake of announcing. We're doing the work, and we want to see how we can get it right. I mentioned in my comments; we've actually been working on blockchain solutions and tokenization use cases for about 15 years. I do believe that the real biggest potential in the near term is going to be around large capital moves, collateralization. The Bank of Canada stablecoin legislation is an enabler of that because it will allow the development of stablecoins in a way that candidly to begin are stable. But that also means you have to have liquid assets behind them. You have to have them property custody, and we can be part of that solution set. So those are the things that we're working on exploring, and we'll be active in the conversation going forward. Graham Ryding: Great. Thanks for the thorough answer. Is it fair to say that there may be some areas of your business at risk, but there also could be some areas of sort of new market opportunities if the market structure does move in some extent towards blockchain and tokenized securities? John McKenzie: Yes. What I think is that there would be some areas of the business that would change. If -- I don't see where we're going to move to what I would call a 100% on-chain market because these markets are going to have to integrate. Even in the existing market today for equities, as I mentioned, everything that's been listed in the last 20-plus years is fully digital. But everything that was listed before that is a hybrid of digital and quite candidly, papers and gram of safes. And so what we do is we actually make all that work and integrate together. And so as we move down the world of potentially tokenizing things along the side, we want to make sure that it all integrates together so that it can be fungible, not just through a marketplace standpoint, seamless from a user experience standpoint, seamless from a bank or dealer to be able to connect to all of these things at the same time. And so I think it's more about how does that ecosystem transform over time in terms of how you support it. So for example, a transfer agent today maintains a register of both the centralized security that's on the centralized book and the decentralized security that's sitting on certificates. This would be another leg of that, that needs to be integrated together for it to be effective. I will be candid; the one place I do not think is an effective solution is the solutions that are more about creating a token on top of an existing equity. That's a big question mark for me because it actually doesn't confer the rights back to the user. It's not fungible. It impacts price discovery and capital formation in a way that's not necessarily positive. And I'm not sure the actual investor at the end of the day understands what they're buying or has the same liquidity when they choose to sell it. So those are the things we want to make sure we're very thoughtful about in terms of how we do market structure. Operator: The next question comes from Bart Dziarski with RBC Capital Markets. Bart Dziarski: Lots of good discussion around AI and tokenization. So maybe I'll ask about the capital formation business, seeing really good growth there momentum. Just can you give us an update on what you're seeing early days to start 2026 and how you expect kind of the rest of the year to play out on that front? John McKenzie: Yes. Thank you for the question. And I mean early '26 really flows from the end of 2025. I mentioned in my comments that the financing activity in the back half of '25 was outstanding. If you actually look at the financing activity for all of the totality of 2025 now was up 60% year-over-year, 44% in the senior market, over 100% in the junior market, multi-sector behind it in terms of resources, financials, technology. So that is a very strong leading indicator. We're seeing that strength continue into 2026. And then in terms of the new issue pipeline, this is -- it's always conversation-based because we can never give actual visibility to when a company will choose to go public. But we have one of the deepest IPO pipelines that we are engaged with. If you talk to the investment banking community, they would tell you the same thing, one of the deepest pipelines we've seen in a number of years. And again, multi-sector in terms of companies that could be coming to market. So you're seeing a return of technology companies interested in raising public money, which we haven't seen over the last number of years since basically 2021. So we're pretty excited about the potential. I always use the word potential because global events can be disruptive as we have seen in the past. But the potential is there. Market values are strong. Liquidity is very deep. The liquidity in the marketplace is the strongest it's been in decades. So the conditions are good for companies that want to go forward. And now it's a question of which ones go when. Bart Dziarski: Great. And then just wanted to ask around the Corporate Solutions business you're building out. You're tapping into private markets. It's a new asset class. Like how should we think about that in terms of the opportunity for you over, call it, the next 3 to 5 years as you address that asset class for new growth? John McKenzie: Yes. I mean one of the simple ways we've thought about it in terms of how we've kind of set up our objectives internally is when we think about the whole Capital Formation space in terms of Capital Formation and Corporate Solutions, Capital Formation being very much the capital raising activities of the exchanges and Corporate Solutions being all the solution sets of public and private issuers. Right now, the Corporate Solutions is about 44%, I think, of the total revenue of that division. We're looking for that to be actually the larger piece. So more than 50% of the Capital Formation overall business, which actually means we have to grow even faster when the capital raising activity is strong in that piece. And the reason we believe that, that has potential is because those solutions, they are not limited to public companies. The ecosystem, the client base is capital raisers, whether you're raising from a private source or a public source that transfer agency, that trustee capability, that employee plan, the disclosure tools are useful for all of them. And we've really seen this through our expansion of the Trust business, the Newsfile business when we came in, had hundreds of clients that were in the private space as well. And so all those ones have a lot of growth space to get deeper relationships. And the unique piece around as we build this out is it allows us to have multi-solution conversations with clients that we didn't have the ability to do in the past. So when we can talk to a client about not just the transfer agency capability, but the disclosure as well or vice versa. And that applies not just to private companies, but candidly, it applies to some of our largest blue-chip companies as well that use other providers that now we can have discussions with. So that's why we get really excited about that solution space because it's not bound by public. It's capital raisers in general. And as we sell into private companies, either through solutions or through the Marquette initiative I mentioned earlier, it allows us to build that relationship deeper with a company that has a go-public potential in the future. So again, when you build your pipeline for who can go public, we're starting that relationship earlier in the life cycle by being able to serve them in their capital raising activities while they're still private. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Mousavian for closing remarks. Amin Mousavian: Thank you, Drew. If you have any further questions, contact information for Investor Relations as well as media is in our press release, and we'll be more than happy to get back to you. I know your valuable time is finite, and we thank you for spending with us this morning. Until next time, goodbye. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good morning, ladies and gentlemen. Welcome to today's Encompass Health Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Just a reminder, today's call is being recorded. And if you have any objections, you may disconnect at this time. I will now turn the call over to Mr. Mark Miller, Encompass Health's Chief Investor Relations Officer. Mark, please go ahead. Mark Miller: Thank you, operator, and good morning, everyone. Thank you for joining Encompass Health's Fourth Quarter 2025 Earnings Call. Before we begin, if you do not already have a copy, the fourth quarter earnings release, supplemental information and related Form 8-K filed with the SEC are available on our website at encompasshealth.com. On Page 2 of the supplemental information, you will find the safe harbor statements, which are also set forth in greater detail on the last page of the earnings release. During the call, we will make forward-looking statements, such as guidance and growth projections, which are subject to risks and uncertainties, many of which are beyond our control. Certain risks and uncertainties, like those relating to regulatory developments as well as volume, bad debt and cost trends that could cause actual results to differ materially from our projections, estimates and expectations are discussed in the company's SEC filings, including the earnings release and related Form 8-K and the Form 10-K for the year ended December 31, 2025, when filed. We encourage you to read them. You are cautioned not to place undue reliance on the estimates, projections, guidance and other forward-looking information presented, which are based on current estimates of future events and speak only as of today. We do not undertake a duty to update these forward-looking statements. Our supplemental information and discussion on this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measure is available at the end of the supplemental information, at the end of the earnings release and as part of the Form 8-K filed yesterday with the SEC, all of which are available on our website. I would like to remind everyone that we will adhere to the 1 question and 1 follow-up question rule to allow everyone to submit a question. If you have additional questions, please feel free to put yourself back in the queue. With that, I'll turn the call over to our President and Chief Executive Officer, Mark Tarr. Mark Tarr: Thank you, Mark, and good morning, everyone. Our Q4 performance was again very strong, capping a stellar 2025. Our 2025 revenue increased 10.5%, driven by 6% discharge growth and pricing growth benefiting from patient mix and patient outcome quality. 2025 EBITDA grew 14.9% as we gained operating leverage and exercised disciplined expense management. Most notably, premium labor spend in 2025 declined by more than $21 million from 2024, even as we added capacity and significantly increase the number of patients we treated. Our quality and patient outcome scores for 2025 were outstanding. Our full year discharge to community rate was 84.6%, discharge to acute care was 8.6% and discharge to SNF rate was 6.1%. Each of these quality metrics is favorable compared to the industry average. I'd like to recognize our clinicians and support staff who bring their expertise and compassion to our hospitals every day and deliver outstanding patient care. We continue to generate attractive returns from the investments we are making and capacity additions. In 2025, we added 517 beds, 390 via 8 new hospitals and 127 through the addition of beds to existing hospitals. We will continue investing in capacity additions as the underlying growth in the target demographic remains at approximately 4% and the demand/supply gap of licensed IRF beds continues to widen. We'll be augmenting our historical two-pronged approach to capacity expansion, de novo and bed additions with a third modality, small-format hospitals beginning in 2027. This will facilitate a hub and spoke strategy to larger and growing markets. In October, we converted our enterprise resource planning, or ERP system, to Oracle Fusion without significant disruptions to our business. Fusion provides us a flexible and sustainable cloud-based IT infrastructure to support our growing business. We are keenly aware of market anxiety regarding IRF industry regulatory changes, specifically the extension of RCD and the initiation of the team model. Beginning with RCD, during 2025, we undertook significant engagement with Palmetto and CMS to ensure correct and consistent application of reimbursement criteria. Our 7 hospitals in Alabama currently have an aggregate average affirmation rate of approximately 93% for cycle 4, which we believe validates our admissions and documentation practices. Leveraging our experience in Alabama, we believe we are prepared for the expansion of RCD into Texas and California this year. The max is responsible for our hospitals in these states are Novitas and Noridian. Novitas, the MAC responsible for most of our hospitals in Texas, has gained substantial expertise with RCD in Pennsylvania, where providers have achieved very favorable affirmation rates. As RCD extends to other states, and we elect 100% prepayment review, affirmation of our claims should reduce our exposure to other Medicare claims audits. The TEAM model implementation began on January 1. Encompass has 89 hospitals in the initial team markets, 41 of which are joint ventures with acute care partners. As a reminder, there is no downside risk to the subject acute care hospitals in 2026 under the default track. As we have consistently done with all regulatory changes, we have prepared extensively for team. It is another episodic payment pilot similar to previous models such as CJR and B-P-C-I, or BPCI, versions of which have been continuously in place since 2014. In those prior cases, concerns regarding the impact to our patient flows were greatly overstated. The presence of these models notwithstanding with the exception of 2020 for obvious reasons, we have recorded positive total and same-store discharge growth every year. Regulatory change is a constant in our business, and we have a long track record of successfully adapting and continuing to grow as the underlying demand for IRF services continues to grow. Our strategic relationship with Palantir continues to bear fruit. In 2025, we focused on initiatives that streamlined admission documentation and enhanced our responses to claims denials. We have recently extended and expanded our agreement with Palantir and look forward to additional successes in 2026 and beyond. In 2025, in addition to substantial investments we made in our operations, we allocated $158 million to share repurchases and returned in excess of $70 million in cash dividends. We maintain a strong balance sheet with year-end net financial leverage of 1.9x. The need for the services we provide has never been greater and is growing. We are uniquely positioned to fill the void. We are incredibly proud of our recent historical performance, but we do not rest on our laurels. Our focus is on the future, which for Encompass Health is very bright. Our company has never before been presented with greater opportunity and we have never been better positioned to capitalize. Our expectation for continued growth is reflected in our initial 2026 guidance. I'll now turn it over to Doug to provide some additional details on Q4 and the specifics of our 2026 guidance. Douglas Coltharp: Thank you, Mark, and good morning, everyone. Q4 revenue increased 9.9% to $1.5 billion, and adjusted EBITDA increased 15.9% to $335.6 million. The revenue increase was comprised of 5.3% discharge growth and a 4.1% increase in net revenue per discharge. Net revenue per discharge benefited from a $2.7 million settlement with a managed care payer related to prior year claims. Bad debt expense for the quarter was 2.1%, flat on a year-over-year basis. Q4 SWB per FTE increased 2.1%. Premium labor costs comprised of contract labor and sign-on and shift bonuses declined $5.8 million from Q4 '24 to $23.8 million. This was the lowest since the first quarter of 2021. Contract labor FTEs as a percent of total FTEs was 1.1%, also the lowest since the first quarter of 2021. Benefit expense per FTE increased 2.9% as we anniversaried the large increase in group medical expense experienced in Q4 of last year. Net reopening and ramp-up costs were $2.9 million in Q4 '25, bringing our full year total to $13.9 million. Q4 net costs were lower than expected as 4 of our 8 hospitals opened during 2025, contributed positive adjusted EBITDA during the quarter, and the losses for our hospitals opened during Q4 were less than budgeted in part due to faster Medicare certifications. We continue to generate significant free cash flow. Q4 adjusted free cash flow increased 23.6% to $235.4 million, bringing our 2025 full year total to $818 million, an increase of 18.5% from 2024. The strength of our cash flow allowed us to fund $736 million of capital expenditures, $158 million in share repurchases and $71 million in cash dividends, while holding long-term debt essentially flat on a year-over-year basis. Our year-end net leverage ratio of 1.9x connotes substantial flexibility for continuing investments in our business augmented with shareholder distributions. Moving on to guidance. Our 2026 guidance includes net operating revenue of $6.365 billion to $6.465 billion, adjusted EBITDA of $1.34 billion to $1.38 billion and adjusted earnings per share of $5.81 to $6.10. The key considerations underlying our guidance can be found on Page 11 of the supplemental slides. And with that, we'll now open the lines for Q&A. Operator: [Operator Instructions] We'll go first this morning to Matthew Gillmor of KeyBanc. Matthew Gillmor: I thought I might ask a couple of questions on the volume front. The way volumes evolve this year was stronger in the first half and then moderate a little bit in the back half. I think there were some comp issues you talked about last call. I was curious if you could sort of flesh those out and then help us think through any comp issues we should be thinking about during 2026, especially the dynamic of the de novos rolling into the same-store base and that timing issue? Douglas Coltharp: Yes. So certainly, in the back half of the year, we were up against some pretty challenging comps. Q3 '24 total discharges were up 8.8% and 6.8% of that was in same-store. And then in a similar fashion, when you moved into Q4 of last year, we were up 8.3% in terms of total discharges and 5.8% of that was in same-store. It was also the case that with regard to contributions from new stores, we were more skewed towards the back end of this year with new hospitals coming on board. You may recall that we had 1 hospital that opened in the last week of the third quarter and then 3 hospitals that opened in the fourth quarter, 1 in each month. And then there was the issue of the unit consolidations and closures that we talked about last quarter. And so as a reminder, we had 2 units, 1 in Sewickley, Pennsylvania, and 1 in Cincinnati, Ohio. Those were spaces that were leased from a host acute care hospital. For various reasons, we terminated the lease, and we anticipate that we'll consolidate that volume into another hospital in the market, but there's a period of time in which that's not happening. We estimated that, that was a headwind of about 30 basis points to total and same-store discharge in Q3. Cincinnati actually closed relatively late in Q3, so we had a full quarter impact in Q4. And so the impact in Q4 was probably closer to 45 basis points. Mark Tarr: I think it's worth noting in terms of our track record of bringing on our de novos. Last year was a good example of how if we can get the Medicare survey quicker than having a long drug out awaiting period for them to come into the survey. It certainly benefits us. Our teams have done a great job getting these hospital staffed, getting the word out in the marketplaces, our design and construction has done the same thing. There are a lot of factors outside of our control as you go through the start-up processes. But our team has just done a really nice job in delivering these hospitals pretty much when the due dates are there. So that has benefited from us in our continued planning and execution. Matthew Gillmor: Got it. Understood. And then as a follow-up, I thought I might get a comment or 2 on the mix. It seemed like the Medicare fee-for-service mix was a little bit higher in the fourth quarter. Is there something you'd attribute that to? And if you had any comments on just sort of the growth across different payer classes that would be great? Douglas Coltharp: Yes. Fee-for-service growth was strong in the fourth quarter. That's good because that's our best payer. We did experience some challenges with regard to Medicare Advantage in the fourth quarter, and it was specifically with 1 national payer where we saw the conversion rate drop, not insignificantly in the fourth quarter. I'm not going to name names right now. I will tell you that if this persists into next year, we may be inclined to name names. The referrals within that specific Medicare Advantage plan were actually up nicely, high single digits for the converter -- for the quarter, but conversion rate, which is the ratio of admits to referrals was down significantly. And there's no reason for that. Again, as we look at the underlying nature of those referrals, they were consistent with the referrals we were getting across the system and across payers. And so what that translates into is, for whatever reason, that planned elected to start the care to a segment of the Medicare beneficiary population, which we believe is in direct contravention of Medicare coverage requirements. We're going to be undertaking some specific actions to address that as we move into Q1. That includes maintaining active communication with the subject plan and also with CMS regarding what we've view as noncompliance with the Medicare coverage requirements. As we did in the fourth quarter, we think that there's going to be an opportunity to backfill with IRF-appropriate patients covered by fee-for-service, other MA plans and the continued growth in our veterans community care network. We will ensure in terms of doing our own part that our clinical liaisons are responding timely to all referrals and doing so with high-quality medical necessity documentation. It's probably an opportunity to enhance that process with some AI tools. And we're going to be implementing an admit and appeal strategy on those MA denials that we believe are clearly in contravention of the Medicare coverage requirements. And then finally, we'll make sure that we continue to reinforce the value proposition for IRFs with the Medicare beneficiaries, making sure they understand the right of choice that they have, with referral sources, with respective patients and also with families and caregivers. Patrick Tuer: Matt, this is Pat. Just to add a couple of points to what Doug said. So one of the callouts he made was on the VA program. We've talked about that before. We continue to drive that initiative and have scaled up some best practices and education across our company and really pleased with the results. So that has now grown to represent 19% of our managed care volume. Our third consecutive quarter of discharge growth in that segment over 20% on the quarter, finishing around 25% to bring the year to 22% growth. We continue to see a lot of upside in that segment, and it's a great opportunity for us to provide IRF access to veterans. The other point that I'll make is on the MA admit and appeal strategy, we've never really taken -- undertaken such an effort before. And 2 of the major payers have Medicare -- excuse me, have conversion rates below 20%. And what we're going to do in a couple of these markets is, if the patient meets Medicare coverage criteria, we're going to admit those patients. And we're going to go through the different levels of appeal process. There's 5 levels of administrative appeal all the way to the ALJ and Federal District Court, where we're going to advocate for access to care. Douglas Coltharp: And these issues with this particular MA plan notwithstanding, and they're really not new, we've seen this pop up from time to time. There is a significant population of IRF-appropriate patients who are still not being treated in IRF. And so there's -- the pond for us to fish out of is plenty big. Operator: We'll go next now to Ann Hynes with Mizuho Securities. Ann Hynes: Thank you for all the detail on some of the regulatory unknowns. That was very helpful. Can you tell us just like how these pilots usually play out? Like I know the team pilots 5 years, 2032, what typically happens after that pilot program? Like do most of these pilots just kind of die out or are they implemented nationally? If you can give us some examples, that would be great. Mark Tarr: No. Ann, if you go back and even back to 2016, 2015, with the plans I mentioned, the CJR, there was a little bit of both in terms of people required to do it or voluntarily got into it. You saw some people really go into it strong, kind of what I would refer to on the bleeding edge. Then you saw a lot of systems kind of wait and see what happens and didn't want to get after it too far. I think it's the nice thing about our ability to work with our joint venture partners in these markets where team will come out. We have a very collaborative approach. Pat and his team have been out talking to all the major systems in our markets impacted to see what their plans are and also to bring forth our value proposition because there's a big quality factor in teams that where the acute care hospitals will be penalized for readmissions. So that's a big part of the value that we bring in to that. So I think that, in large part, as I noted, there is typically an overreaction in terms of what people think will be the impact on our facilities. And with time, as noted, we just continue to grow through them because there are enough patients that would fall outside these plans that can benefit from the care that we provide. So I'll ask Pat just talk a little bit about what he and his team have done, I think specifically in the Boston marketplace, where we have some team introduction. Patrick Tuer: This is Pat. Thanks, Mark. So just to reinforce what Mark said around team and to get a part of your question, so if you look back to BPCI and BPCI Advanced, both of them were 5-year programs that were not expanded after the 5 years. And if you look between those 2 models and then CJR, we added or acquired approximately 4,500 beds during that time. So significant growth in spite of those models. So there's really 3 things that I'll point out to you, aside from the VA strategy, which is a nice opportunity for us to continue to backfill any potential impact. But -- and aside from patient choice remaining. First is, we've had a lot of conversations in our marketplace. As Mark mentioned, Boston, 2 of our largest potential impacted hospitals are in the Boston marketplace. And frankly, we're not hearing a whole lot of chatter from them or our JV partners on that they're going to handle patients differently. In fact, they remain very focused on quality, length of stay, capacity constraints and readmissions. And those are all elements of our value proposition that we have executed on for decades to their benefit. Second, and Doug touched on this, there's substantial opportunity for us to backfill potential volume with other diagnostic categories. So if you think about stroke, brain injury, neuro, cardiac and pulmonary, those are patient categories where people are still twice as likely to end up in a nursing home than in an inpatient rehab hospital. So we put a lot of effort into working to increase our market capture there. And then third, from a team perspective, patients on dialysis with end-stage renal disease are exempt from team. About 4% of our volume currently falls into this bucket. But through our investments in Tableau, where we have almost 70% of our hospitals covered with Tableau and then the remainder with external dialysis, we have the capacity to slightly more than double that volume across our portfolio based on current utilization. So there's a lot of opportunity for us to backfill volume with IRF-appropriate patients across other diagnosis categories or within the team impacted groups as well. Mark Tarr: And at the risk of piling on, I'll just add a couple of things. First, our anecdotal evidence, and this has been consistent for multiple months right now as we canvass the acute care hospitals in the impacted markets is that there is very little focus on team from those hospitals. And it's perhaps not surprising as they face a substantially larger issues with regard to what's going to happen on Medicaid supplemental payments and what's going to happen with regard to the extension or the lack thereof of any ACA subsidies. Further, as we drill down and looked at the target prices that have been set for these conditions in the impacted markets, in almost all cases, regardless of the patient's condition, those target prices cannot be achieved unless the patient bypasses a post-acute inpatient stay, IRF or SNF altogether and go directly to the home. The only way that, that could be safely accomplished is if you increase the length of stay in the acute care hospital. And doing so by even a couple of days would completely erase any of the participation in the risk corridor. Patrick Tuer: And one last comment on this. We've done an analysis early. It's 1 month, but there's been no impact of team associated diagnoses categories within our team impacted markets. So it's really been no impact to volume. Operator: We'll go next now to Andrew Mok of Barclays. Andrew Mok: There was a pretty meaningful beat on labor costs in the quarter with improvements in both wage growth and EPOB. Can you help us understand the drivers of that in the context of moderating volume growth? Mark Tarr: Andrew, just real quick. I think it's kind of twofold. I'll ask Pat to talk specific about premium pay. But I think we're seeing some softening in the labor markets as a whole, which has been a positive thing for us for the last year or so. And then I think, secondly, while we've always been very disciplined around the use of premium pay and managing our staffing ratios, Pat has really dug in with his team to look at some of the outliers we had with our portfolio, and it's been meaningful. So Pat, do you want to give some detail? Patrick Tuer: Yes. And I'll give credit to a few different groups here. So first, our operators have done a tremendous job both bringing in -- excuse me, bringing down turnover. Our in turnover continues to drop. It's at pre-pandemic levels. And at the same time, our centralized talent acquisition team continues to do a tremendous job on the hiring front. So we added, from a same-store perspective, 300 net RNs in 2025, and that brings our 4-year total up to around 1,700. So just a tremendous job to both of those groups there. We feel like there is -- while the rate of improvement will slow that we have an opportunity to potentially narrow the gap in variation in some of our higher utilizing markets on premium pay, in particular. Our 10 most challenged markets, which represent a significant portion of our spend, we are substantially increasing our efforts from our recruiting team as well as recruitment marketing to try to get at those markets where hiring has been a little slower. In particular, I'll point out that we've -- all the growth that we've had in the de novo markets, we have opened those without contract labor. So we are taking some of the resources that we would use to open a hospital and staff a hospital, and we're going to apply that approach to these more challenged markets as well. And then on the EPOB front, while there is some small timing impact of de novos ramping, we are relentless in our pursuit of operational discipline across our regions and in our local markets. And we do that in a way that does not sacrifice quality outcomes or clinical excellence. Mark talked about our discharge outcomes. We had records in 2025 of our discharge outcomes as well as patient satisfaction. We were able to get at these additional efficiencies, and we'll continue to work towards those without sacrificing anything on the clinical front. Douglas Coltharp: And then just to go through the specifics on the Q4 labors, as we mentioned, total SWB per FTE in Q4 was up 2.1%. The composition of that core SW, which does not include contract labor per FTE was up 2.8%, benefits, again, anniversarying the substantial increase in Q4 of last year was up 2.9%, and premium labor was down year-over-year $5.8 million. The EPOB came in at 3.38. That was better than our expectation, and that was largely attributable to the past ramp-up of the de novos that opened in 2025. And as we cited during our comments previously, that was boosted in Q4 by the fact that we got our Medicare certifications on those openings faster than we had anticipated. We don't control that, so we can't guarantee it's going to happen on future openings, but it was a lift in Q4. Importantly, we were able to achieve all of these things with regard to our labor cost while holding nursing turnover at 20.2% for the year and therapy turnover at 7.8%. Patrick Tuer: One last comment here that I failed to mention is, we have talked about this before, but we have made a substantial investment in the development of clinical ladders and tweaking those to increase participation. Because if we can get a clinician on the ladder, their turnover is about 1/3 of what a non-laddered clinician is. And I'm really, again, proud of our operators. We have our nursing participation up to 32%. 36% of our therapists and 47% of our nurse techs are participating on our clinical ladders. Again, we still see upside here, but we're really pleased with our progress. Andrew Mok: Great. And just to clarify, the better labor and preopening -- the Medicare certifications coming in earlier, that's what's driving the better-than-expected preopening cost, correct? Is there anything else? Douglas Coltharp: No. Again, you had not only that impact from Q4, which was predominantly where it was, but the performance of the de novos that opened in 2025 prior to Q4, in Q4 was favorable, and we cited a number of those, 4 of those actually had positive 4-wall EBITDA in Q4. Operator: We'll go next now to Pito Chickering of Deutsche Bank. Pito Chickering: So I apologize in advance for this one, but I want to go in the weeds and talk about the Alabama RCB experience. From a process perspective, can you explain with the 93% affirmation rate, what happens with a 77% of claims that weren't affirmed? When you appeal at 7%, so what percent of those are you winning? And when you appeal to the administrative law judge level, what percentage of those are you winning? So at the end of the day, after you peel and go to the ALJ, what percent of these claims do you guys need to reserve for? Douglas Coltharp: Well, you were in line. You were down in the weeds. Let me first kind of pull us up a little bit, and then I'll see if I can get down to that level. So first of all, there's a perception out there that both team and RCD represent new risk to IRFs. And Mark referred to some of this. In our opinion, they do not. They are ordinary course of business. We have lived continuously with episodic payment models since 2014. And CMS has always had the right audit 100% of IRF Medicare claims on both a prepayment and post-payment basis. And they have done so under a series of programs such as TPE, ADR, RACK, SMRK, et cetera. RCD is just a new acronym for the same old thing. The Medicare coverage requirements under RCD have not changed. The documentation requirements under RCD have not changed. And the third parties performing the RCD audits have not changed. The potential upside to RCD is that if we choose to remain on a 100% review, and Mark alluded to this in his comments, it potentially obviates the other audit programs. Moving specifically to Alabama. 93% is the current affirmation rate for the 7 hospitals in Alabama, where we're dealing with a difficult MAC who continues to non-affirm claims for reasons that are in contravention of Medicare coverage requirements and guidelines. As a result, we appeal the overwhelming majority of non-affirm claims through the multiple levels available to us. And although it's still early to call the ultimate resolution rate because those claims are still pending and because the sample size is relatively small, we're having a good success reversing the denials. We continue to educate Palmetto, and we continue to involve CMS, and we believe that it is more likely than not that, that 93% affirmation rate moves up. When we look at the Pennsylvania experience, it covers more hospitals, and we believe that, that rate, 98% to 99% is more representative of where a broadly adjudicated RCD program will land. And so all of that suggests to us that the go-forward bad debt expense rate that we experience is going to be consistent with our recent historical experience, thus the 2% to 2.5% number that is included in our 2026 guidance. Patrick Tuer: Just 1 quick addition on RCD in Alabama, not necessarily on the bad debt front, but just on the volume and occupancy front. So virtually, again, no impact here. We have expansions that will be underway at 3 of our Alabama hospitals. We're going to be filing for the CON for 3 additional expansions. So that covers 6 of the 7 hospitals in the state. So on the volume side, unimpacted. Douglas Coltharp: Look, Palmetto is a pain in the butt in Alabama. They were a pain in the butt before RCD. Pito Chickering: Okay. Fair enough. That's a pretty honest response. A follow-up question -- that you talked about earlier. I think you said that the referrals were up high single digit, but admissions were way down. Can you talk about generally what you see from MA on conversion ratio from where that went this quarter? And then from a legal perspective, how much leeway does MA have to deny post-acute care? Douglas Coltharp: Yes. So I'll start and then maybe pass it over to Pat. So historically, our total MA conversion rates have run between 25% and 30%, and that's going to compare to Medicare fee-for-service, which is the same patient population, subject to the same Medicare coverage requirements, which is run in the mid-60%. And so that's been a problem all along. Particular payer who shall name named us for at least this quarter, has always been our lowest conversion rate, but they dropped by about 500 basis points in the quarter. This is, again, in contravention of Medicare requirements. So we do have the ability to take this directly to CMS. Because the change was so material in Q4, our first order of business is going to be to try to work directly with the plant itself and say, is there something different, is there something that we can do better to try to do that in partnership? But we're not going to wait and to see the effect of that before we get more aggressive with this admit and appeal strategy that Pat outlined just a bit earlier. Patrick Tuer: What I would add to that is, MA is required to operate with the same coverage criteria as traditional fee-for-service Medicare. They're allowed to have a prior auth requirement, which they do, but they are supposed to adhere to that same coverage criteria. And what we see on a daily basis, and this is not new, is the failure to adhere to that Medicare coverage criteria. So we have typically taken that in stride, and it's been a frustration for our referral sources. It's been a frustration for us. And most importantly, it's been a frustration for the seniors in this country that deserve our level of care. So we have decided that we're -- there's no teeth to the Medicare requirement right now that they have to do that. So we're in a position we're going to pilot this, and we're going to take these claims that are in alignment with the Medicare coverage criteria through the administrative appeal process, through the ALJ and potentially beyond. And we're optimistic. We feel like the facture is on our side here, and more importantly, we're really interested in making sure that seniors have access to our level of care in this country. Douglas Coltharp: I think it's important to note as well, perhaps another silver lining out of RCD is that the affirmation rates that we're seeing in Alabama and that the others are seeing in Pennsylvania suggest that under fee-for-service, which has that much higher conversion rate, the overwhelming majority of patients are appropriate for IRF care, which means that those that are being denied that access by Medicare Advantage are being done so again in contravention of Medicare coverage requirements. Operator: We'll go next now to Whit Mayo of Leerink Partners. Benjamin Mayo: Doug, just wanted to take your temperature on leverage and how you're thinking about the appropriate target. You're going to probably drift below 1.5x soon. Just any thoughts on upping the dividend more, stepping up buybacks on a permanent basis, maybe buying up leases? Just any updated views would be helpful. Douglas Coltharp: Yes. So maybe what we can do is kind of use our guidance to 2026 as a proxy for what things might look like. And so if you look at our free cash flow assumptions, the midpoint of those assumptions is right at about $828 million. Again, using the midpoint of other ranges within our growth CapEx, that's up $725 million. The dividend at its current level is $77 million. So that would suggest, again, if we are achieving our midpoint of EBITDA guidance and our midpoint of the free cash flow that we would fund those uses internally and still have about $25 million of cash. And that would leave us, all other things equal, at the end of 2026 with a leverage ratio of 1.83x. And that implies even if you wanted to be conservative and leave leverage at, say, 2x that there would be capacity for another $230 million to $250 million of buybacks or other distributions. There really aren't other opportunities to buyback leases. So I think to the extent that we generate excess cash and have capacity within the leverage ratio, the most likely utilization of that is going to be additional share repurchases and increases in the dividend. Benjamin Mayo: Okay. And then we haven't heard much about malpractice from you guys. Some of the other providers have been talking about it more. Just how did that develop in 2025, thoughts on 2026? You've got this new reasonable care standard change, I think, with malpractice. Does this change your views at all how you're thinking about it? Douglas Coltharp: Yes. We've seen no significant change in our GPL activity from 2024 to 2025. Operator: We'll go next now to A.J. Rice of UBS. Unknown Analyst: This is James on for A.J. I just wondering if you can give us some color on the rationale behind the changing development as you look to add these small format hospitals and what advantage is this type of hospital provides versus the traditional de novos? Douglas Coltharp: Yes. So it's the confluence of design and opportunity maybe with the dose of necessity cost in. And so from a design perspective, historically, we had trouble coming up with an economically feasible model that would be in the size range that we're talking about. But as we have ascended the learning curve with regard to our de novos, really, over the past 5 or so years, and been able to incorporate more in the way of prefabricated construction, whether in a hybrid model or fully, it's helped us kind of crack the code on this 24-bed prototype. It solves an issue for us where we've got 1 or 2 situations. One is, we've got an existing hospital in a market that doesn't have any more physical ability to expand and yet the demand of the market suggests that more beds are needed. And so this is an economically feasible way of adding more capacity into that market even on a chassis that can't be expanded. It's also the case that as we find in a lot of larger metropolitan markets in Dallas and Houston and Tampa or 3 that come immediately to mind that the overall market is growing, but based on traffic patterns and based on the growth in specific neighborhoods and geographies, the additional beds might best be positioned elsewhere in the market as opposed to in the existing hospital. So again, the standard format that we have come up with and the first will open in 2027 is what we acquire 2 to 2.5 acres based on specific topography. It is a single-story 24-bed chassis. It has got a smaller kitchen because there's no food preparation on site. Obviously, the gym is smaller because we've got a fewer number of patients. And we're able to leverage the management team and the marketing resources associated with the host hospital. So the returns are very favorable. Mark Tarr: It's a market density is a big part of the strategy. Not only you get scale from staff, but you get a brand recognition in the marketplace, which helps us with staffing as you have the employees and the workforce there starts to become more and more familiar with Encompass Health. We've seen that in markets. It gives us an opportunity to provide growth opportunities for our existing staff and management teams. So that helps with retention and also decreases the risk as we add another location in the marketplace. So we think there are a lot of benefits from the small format hospital. And as I noted, it's just yet another modality that we have to add capacity in a marketplace where the need is pointing out the required capacity. So we've got some strong plans going out in the future on this, and we think it's going to be really helpful as we expand that capacity. Douglas Coltharp: And it's important to note that because all of these small-format hospitals will be remote locations, meaning that they are tied to a host hospital, they operate under the same Medicare provider number, which in almost all cases means that managed care contracts and so forth can be extended and don't have to be renegotiated. It also means that you're not subject to another Medicare certification. And so you don't have to do the 33 patients and the ramp-up there. Patrick Tuer: This is Pat. I would also add that we do have 3 locations right now. They're not technically what we would consider a small format hospital, but they operate like it, and they are satellites of a main location. And they drive impressive results and returns. So we do have some experience with this operating model. This is a great way for us to scale this across the country. We have dozens of potential locations that we're going to be looking at for consideration. And we talked about growing or underserved -- excuse me, larger growing markets, but underserved or fringe markets have where we have a hospital are also candidates for this because you may have someone within -- location within 30 miles that it does not have the density of a new requirement for a new hospital, but they could benefit from a smaller location. And we'd still be able to get the leverage that both Mark and Doug have talked about. So we're really excited about this. I think it's going to be a big part of our strategy moving forward and a nice way for us to not only help patients but increase our returns as well. Operator: We'll go next now to Joanna Gajuk of Bank of America. Joanna Gajuk: So I guess I have 2 questions. So one, I want to start a follow-up on the team discussion. And then I have a question on volumes. So first on the team, so thanks for sizing up the exposure here. So 2% of volumes seems very manageable and you expect to be able to replace any lost volumes. So that's good. But just a couple of questions as we try to like do sum up maybe in the future, too. So are these procedures that is included, right, in the team model in the 5 categories, are those coming at an average revenue per district, that's much different than average? Any kind of direction would be helpful here. And it sounds like I just want to clarify, you don't assume much of an impact, I guess, to bottom line this year. But I just want to make sure like is there some sort of a number in terms of EBITDA headwind that you included in your '26 guidance? And with that comment around the acute hospitals are not taking risk in year 1, but would you expect things to change dramatically over time as these hospitals take more risk in the future years? Douglas Coltharp: So Joanna, this is Doug. I'm going to start with the margin and then I'm going to turn it over to Pat for the balance. So there is no real stratification of margin or real diversion of margin across our patient categories. And so it is true that reimbursement is tied to RIC into patient acuity into patient acuity. But when you drill down the specific patient level, you also have to factor in things like comorbidity. And whereas you may be getting a higher reimbursement for a more acute patient, that is in part due to the fact or large part due to the fact that, that patient requires more intense care and typically comes with a lower -- with a longer length of stay. So no real distinction between the margin profile of the patients that will be subject potentially to this demonstration into our other patients. Patrick Tuer: Thanks, Doug. So Joanna, this is Pat. I would say from a margin perspective, Doug is absolutely correct. No, we're not foreseeing any impact on margin. From a net revenue per discharge perspective, it's almost each of these are in line with our average net revenue per discharge. The only 2 that have slightly higher and I mean slightly higher are the ones associated with fractures, so lower extremity with fracture and then hip fracture. But again, we're not anticipating for this to be material. It's all reflected in our 2026 guidance, and we feel really good about our opportunities to backfill. The only other point that I'll make on team is the majority of our team impacted markets have less than -- well, 39 of the 89 have less than 10 discharges tied to team's diagnosis. Almost all of our team impact is tied to 50 markets and half of those are joint ventures. So again, we've reflected this in our guidance. We're really -- we think we're prepared to mitigate this if issues come up, but we're really just not hearing of any changes in referrals or admissions in our markets. Douglas Coltharp: I will note also just further on the margin issue. Part of the reason that you get to that parity with our average revenue per discharge on those particular categories that are subject to team is because those specific patients have more comorbidities that would make them less likely to actually be a participant within the team model in terms of diverting their care away from the IRF because they really need to be in that intense setting. Joanna Gajuk: Okay. That makes sense. And if I may, one question on volumes. I don't think you talked about some breakdown in terms of just the categories. In the past, you would talk about sort of the cardiology, neurology, orthopedic cases in the quarter. So if you can give us that color, that would be helpful. Douglas Coltharp: Well, we provide patient mix every quarter. And we provided the 2%. It's not a direct equation. It's convenient to try to look at this in isolation and just say I'm going to pick those RICs and assume that, that's an estimate for the volume that's in those categories. But that's missing 2 other things. One is the presence of comorbidities that is going to be an element that clinicians make in deciding the appropriate course of care. And the second is, let's say that you even had an acute care hospital that was extremely committed to all elements of team. Again, the only way that they would be able to achieve the target price in many instances is by increasing the length of stay so that they would have a patient who could safely bypass any inpatient -- post-acute inpatient setting. If they do that, the likelihood is that they would be looking for non-team patients where they could reduce the length of stay and that has been 1 of the key elements of our value proposition all along, which is the ability to take a more acute patient with a shorter length of stay in the acute care hospital so that would be offsetting volume there. So the team is not something that will happen in isolation. Patrick Tuer: Joanna, if you're talking about overall volume and just on a RIC basis, we did see nice growth in brain injury up 8.7%, cardiac up 5.1%, neuro 4.5%. Major trauma was up 5% and stroke was up 3.8%. So again, broad-based growth across diagnosis categories. From a mix perspective, with brain injury being our third largest discharge RIC category, that was up 40 basis points to be our largest mover. So again, that's something we're pretty excited about, especially given that it's not a team impacted diagnosis. Operator: We'll go next now to Brian Tanquilut of Jefferies. Brian Tanquilut: Maybe, Mark, as I think about concerns that are emerging on Medicare Advantage rates and how that could potentially translate to payer pressure on providers. I mean how are you thinking about that dynamic? And what are those discussions like with payers as you think about your scale and local market power? Mark Tarr: We always lead with our outcomes, Brian, and it's part of our value proposition. And I don't see that changing going forward. I think the concerns, particularly if you think about just team and some of the -- and certainly with the payers, the quality aspects and concerns around readmission rates back to acute care hospitals, it really puts the premium on a post-acute provider that can take care of these higher acuity patients like we do and have a low readmission percentage. So we're very diligent about leading with our data and our outcomes. When we go and meet with the payer or the medical director for that payer, it's very helpful that we can show them the differences that we can have with an Encompass Health Hospital versus nursing homes or even other IRF providers. So I don't think our strategy on that changes. If anything, we have more data and data sources now than what we did 5 or 10 years ago just to help create that competitive advantage for us. Douglas Coltharp: What is happening out there is the rate of growth in terms of new MA beneficiaries has declined very substantially. And if you listen to some of the dialogue in response to some of the rate updates and so forth coming out of the major plans, they are stating that they're intending to exit more geographies with regard to their MA plans, which is going to shift those patients over to fee-for-service, and that's not a bad outcome for us. Operator: We'll go next to now to Jared Haase of William Blair. Jared Haase: Maybe I'll just stick to one as well. You mentioned the expanded relationship with Palantir. So I'll ask on the technology front. It sounds like you've had some wins around administrative work and revenue cycle management. I guess 2 questions. Number one, just be curious if there's any kind of quick ways to quantify sort of cost savings or other metrics that you track in terms of that deployment? And then as you think about expanding that initiative, is that still broadly around areas that I would bucket under, let's say, revenue cycle management? Or are you seeing other areas of the business to optimize maybe around clinical care patient experience? Douglas Coltharp: Yes. So on the first, it is difficult to assign a specific ROI to the work that they're doing. But hopefully, what it's going to mean is that our success on claims denials is going to continue to improve. The manpower that we need to process those denials is going to decrease and can be shifted elsewhere. So there are going to be some real tangible benefits. In terms of new projects that we're working on, we are going to be focusing on CRM market analysis specifically to help us identify the optimal strategy for positioning in a market in terms of de novos. De novos with expansion capabilities and the use of small format hospitals. Revenue cycle management is something that we'll be looking at later this year and clinical staffing is another one that's on the table. Patrick Tuer: Just to add to that, we're looking for opportunities on the upside to enhance and elevate our clinicians. You talked about clinical care and patient experience in your question. I think that is certainly a goals of ours people don't go to medical school or nursing school or therapy school to become great at documenting and document for half of their shift. So we'll continue to evaluate opportunities to allow our clinicians to do what they do best and have to take care of patients. Operator: We'll go next now to Raj Kumar of Stephens. Raj Kumar: Just one quick one. As we kind of think about in the first quarter and maybe any potential impacts from the winter storm. I see that in your disclosures that one of the facilities that may have been slated for the first quarter was pushed back to the second quarter. So just curious maybe if there's anything embedded in guidance related to any potential winter storm impacts and how we should be thinking about that? Douglas Coltharp: No significant impact from the storm. I do want to call out, we've got 2 other closures that are going to impact Q1 as well. So the first is that we have operated since we acquired this facility in Lexington, Kentucky, Cardinal Hill, we've operated a 75-bed SNF unit. It's the only one -- only SNF unit that we have had, it ran at a low ADC, 25 ADC. Both the beds and the ADC were included in our IRF bed count and discharge number. And that unit basically had 0 profitability. We closed that at the end of December. So you're going to have some carryover impact from that. You'll have the continued impact, although lessening a bit from Cincinnati and Sewickley. And then we've got one more unit consolidation that is taking place, and that is we have a unit in Bridgeport, West Virginia, which is in the Morgantown market that is housed within an acute care hospital. It's at the end of its lease. So we are closing that effective February 28. Unmitigated, meaning not picking up volume elsewhere in the market as we go into 2026, that creates about a 70-basis-point headwind for 2026 discharge growth, all of which is in same-store. We think that we will mitigate somewhere between 35 and 40 basis points of that. Operator: We will go next now to Parker Snure at Raymond James. Parker Snure: I was just wondering if you could give some detail just on your outlook on provider taxes or supplemental payments. Maybe just remind us your total exposure there and then just your outlook for '26 and then maybe some potential upside from the a few pending programs, particularly in Florida that you may get some benefit from. Maybe just talk broadly about supplemental payments and kind of your thoughts there. Douglas Coltharp: Yes. So the EBITDA impact from net provider taxes for this year was about $21 million and a little over $3 million of that was out of period. I think a core assumption is that, that would stay relatively flat as we move into 2026. Parker Snure: Okay. Great. Douglas Coltharp: And by the way, that $21 million compared to an EBITDA contribution of $15.5 million last year, with a comparable amount being out of period. Operator: And gentlemen, it appears we've answered all the questions today. Mr. Miller, I'd like to turn things back to you, sir, for any closing comments. Mark Miller: Thank you, operator. If anyone has additional questions, please call me at (205) 970-5860. Thank you again for joining today's call. Operator: Thank you, everyone. Again, that does conclude Encompass Health's fourth quarter earnings conference call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.
Unknown Executive: Let me start the explanation meeting. My name is Hiraoka from Public Relations Department of KDDI. I serve as MC. Today's meeting, as is disclosed on a timely basis to present preliminary results of the third quarter of the year ending in March 2026 of KDDI. Today's presentation is being distributed on YouTube and other media in addition to the on-site. And we have put up three related materials on the KDDI website. Please refer to the materials at hand. This is the message for the people in the outside audience. Today's attendees are as follows: Hiromichi Matsuda, President, Representative Director, CEO; Senior Managing Executive Officer, CFO, Executive Director, Corporate Sector, Nanae Saishoji; Managing Executive Officer, Director, CSO and CDO, Executive Director, Corporate Strategy Division, Tomohiko Katsuki; Executive Officer, Executive Director, Corporate Management Division, Corporate Sector, Kenji Aketa. These four are in attendance. President Matsuda, please. Hiromichi Matsuda: Thank you very much for gathering here today despite your busy schedules. First and foremost, we sincerely apologize for the significant inconvenience and concern caused to our customers, business partners, shareholders, investors and many other stakeholders, including our employees due to the suspected improper transactions at our subsidiary. We recognize this matter as a serious issue that could potentially undermine the trust in the entire KDDI Group. As the top management, I feel a profound sense of responsibility for the occurrence of this matter and for failing to prevent it. Today, I will carefully explain the details available at this time and sincerely answer your questions. Please be assured that this matter relates solely to transactions within the advertising agency business and has no impact whatsoever on the provision of communication services, including BIGLOBE. I will explain the purpose of today's preliminary results explanation. As the Special Investigation Committee's inquiry into inappropriate transactions is ongoing, the impact on our financial statements remains undetermined at this time. Therefore, we have decided to postpone the disclosure of our Q3 FY March '26 earnings release. Therefore, today's explanation is titled Q3 Preliminary Results Explanation. We will report on the facts currently recognized by the company, the outline of the financial impact and separate from this matter, the business progress for the third quarter and initiatives for future growth. Please note that the Q3 preliminary results, prior year results and financial impact figures related to this matter presented today are reference values based on facts currently recognized by the company. These figures may be subject to revision based on the findings of the Special Investigation Committee and the audit results of the accounting auditor. Final figures will be reported promptly upon completion of the investigation. At this time, we plan to receive and disclose the investigation report from the Special Investigation Committee by the end of March. Based on this assumption, we will plan to announce the Q3 results at the end of March, and we currently intend to proceed with FY March '26 financial results announcement without delay. I will now outline the key points of today's business performance briefing and preliminary results explanation. First, the inappropriate transactions that occurred at our subsidiary, then the growth of our core business foundations, including mobile in our key focus areas and the growth in the AI era. First, regarding the improper transactions that occurred at our subsidiary. This was disclosed on January 14. It has been discovered that improper transactions were allegedly conducted by employees of BIGLOBE, a consolidated subsidiary of the company and its subsidiary G-PLAN within their advertising agency business. Regarding the advertising agency business, the possibility that sales and other figures had been overstated came to light following delayed payments from certain agencies in December 2025. To clarify the facts and causes related to this matter, we determined it necessary to conduct a more specialized and objective investigation. Accordingly, we established a special investigation committee composed of external attorneys and certified public accountants on January 14. Next, an overview of the fictitious transactions we have identified. Both -- so this is the left side, which we have anticipated. Usually, from the advertiser, advertiser approaches us. Usually, there is a request to the advertising agency. And the web media becomes multiple. So there is another existence publishing agencies. This BIGLOBE and G-PLAN are in the upstream. Advertising agencies and publishing agencies, they are the intermediary. Around 2017, G-PLAN launched this business and BIGLOBE later entered to develop new ventures. You can see the flow here. Within this business, the money is also flowing -- subtracting the fees and the advertisement fee is paid. Within this business, we confirmed suspicions that subsidiary employees conducted fictitious transactions for advertising agency services despite the absence of actual advisers -- advertisers, resulting in the recording of fictitious sales revenue and other figures over multiple years. Now let me use the right side to explain. First of all, the discovery process. The transaction volume increased. So following an internal investigation, KDDI instructed BIGLOBE and G-PLAN to reduce orders to downstream agencies to strengthen management systems and manage business risks. This led to delayed payments from upstream agencies. Within the structure where downstream agencies deducted commissions from payments related to BIGLOBE and G-PLAN's transactions and returned them to upstream agencies, a reduction in payments from both companies decreased the funds flowing to upstream agencies. Therefore, upstream agency became unable to make payments to both companies. So this transaction volume snowballed and reaching hundreds of billions of yen per month in recent periods. Beyond the publishing agencies, there is #3 and #1, the upstream agencies. We understood that those #1 and #3 are identical. And through this fictitious transaction, BIGLOBE and G-PLAN, posting of revenue was excessive. And because it's fictitious transactions, the fee was flowing outside. And the impact is on next page. At the top, as of today, these are the impacts that we recognize. As I mentioned earlier, because of fictitious transactions, we need to cancel booked revenue, part of the booked revenue. And this is before FY '24 March, about JPY 96 billion and for FY '25 March, JPY 82 billion; and FY '26 March, JPY 68 billion, the total of JPY 246 billion. Below that, operating income, reversal of recorded income, about JPY 8 billion or JPY 17 billion and about JPY 25 billion. These profits are to be canceled. In addition, as I mentioned earlier, the commissions, which are outflow, and we have provisioning for that, JPY 5 billion, JPY 11 billion and JPY 17 billion. And as to JPY 33 billion approximate number, we are going to make efforts to recover this amount. In addition, including the prior years, there is a possibility of recognizing impairment losses. At the bottom, next steps. As I mentioned earlier, at the end of March or beyond, we are going to publicize the report of investigation as well as financial results without delay. In addition, in a parallel way, doing and strengthening the company group's governance and examining recurrence prevention measures will be taken. Now this is our commitment to future actions. First, we are fully committed to cooperating with the Special Investigation Committee, diligently uncovering the facts and thoroughly analyzing the causes. I myself will take the lead in actively addressing these issues to restore and strengthen the trust for our group. Our company opposed the KDDI philosophy, which embodies the shared values and code of conduct that every individual should uphold. We will create an environment where transparency and fairness underpin our work, ensuring that these principles are communicated throughout the entire group and practiced consistently. By doing so, we aim to foster a culture that enhances both human capabilities and ethical standards to meet expectation and to regain trust, of course, we will make efforts to do everything to avoid any reoccurrence of similar matters. At the same time, it is indispensable for us to continue to develop our business for sustainable business operation. So, from now on, I would like to communicate to you specifically what initiatives or measures we will take. Now this is as reference figures. I present consolidated results for the third quarter FY 2025. And we have revised both prior year and this year because of the impact coming from the matter. Please refer to the bottom column. And we have canceled the revenue and income associated with fictitious transactions. And on the right-hand side, we are showing the numbers as reference values after the provisioning of external outflow. So, in year-on-year comparison with the actual results, the cumulative results for the first three quarters are as follows: operating revenue plus 3.8%; operating income, plus 2% and the profit for the period, plus 5.3%, we are performing well. So that is the cumulative base consolidated results change factors. From the left-hand side, we have the Mobile personal services segment base, plus JPY 27.2 billion and the Finance Energy Lawson, plus JPY 18.2 billion; and DX business services segment, plus JPY 8.5 billion; Technological structure reform, plus JPY 12.9 billion and impact of prior year's promotional expenses, minus JPY 28.9 billion. And based on those numbers, the total of plus JPY 17.4 billion positive. And also the mobile-related revenue grew and it's expanded and the finance and the DX are is moving on smoothly. And this is the Q3 alone consolidated operating income and the factors for change. In addition to each business domain growth, negative impact from prior year's promotional expenses has also subsided. So we are seeing positive growth. And now I would like to explain about this year's topics. The mobile business is making steady progress in structural transformation. building a stable business foundation that will serve as a pillar for sustainable growth. Mobile revenues bottomed out in FY March '24 and growth accelerated on a nine-month cumulative basis in FY March '26 with an increase of JPY 29.9 billion year-on-year. Right side, we are shifting away from excessive promotional competition and focusing on LTV. Structural transformation is also progressing, and we are building a lean and mean operational base with ARPU growth driven by value creation and churn rate reduction through longer contract duration. These are the key points of structural transformation of the mobile business that we explained in our Q2 financial results. We are promoting initiatives to secure long-term contracts by creating value that motivates customers to sign up shown on the left. And refining au's communication quality and differentiated value services shown in the center. This shows creating value that motivates customers to sign up to maximize LTV. Left side, at UQ Mobile, we are focusing on promotions that suggest the optimal device to customers and device bundled contracts, which have higher ARPU and contracts retention rate are on the rise by 4 percentage points. Right side, we are also working to differentiate our plans and services and money activity plan to Ponta pass and Netflix are all performing well, which has increased ninefold. We are enhancing the value of the connected experience, which is the source of our competitiveness. We aim to expand the 5G SA area, which provides more stable communication with stand-alone 5G to over 90% population coverage by the end of the fiscal year, which will be one of the highest in the industry. Right side, au Starlink Direct was launched in April 2025 and has expanded to over 80 devices, 10 million units in less than a year with a number of connections reaching approximately 3.5 million. Recently, there was a report of a fall while ice climbing in Hokkaido and one of them used this service to send SOS, which led to a rescue. Last week, the coverage area doubled, now covering the Ogasawara Islands and all major ferry routes. And in March, the service will be available outside of Japan in the U.S. as well. This shows the result of ARPU growth driven by value creation, which is a factor towards leaner and meaner operation base. Our value creation efforts have been successful as shown on the left. And regarding brand migration, UQ mobile to au migrations finally surpassed au to UQ mobile migrations on a quarterly basis. These factors also contributed to the significant growth of mobile ARPU by JPY 190 year-on-year, as shown on the right. The second factor towards leaner and meaner operation base is churn rate reduction due to longer contract trend. Left side, au contract retention rate is improving as customers are finding the value they receive during sign-up attractive. These trends are accumulating and the momentum remains strong, as shown on the right. The smartphone churn rate in Q3 of FY March '26 fell by 0.01 percentage points year-on-year, showing steady improvement. We are making progress in addressing the financial business, which was identified as an issue in Q2 financial results. In Q3, credit card business mainly drove profit growth with operating income up by 30.5% year-on-year on a cumulative basis. As shown on the right, the bank's deposit procurement capability, which had been a challenge, has improved steadily and the personal deposit balance expanded by 1.3x year-on-year and number of gold credit card members also increased steadily by 24.5% year-on-year. Another challenge for us, namely the Business Services segment. Here, growth was seen in each business area. As shown on the left, the growth of the third quarter alone was plus 7.7%, showing a strong momentum. In particular, the BPO/SI-related services, which had been identified as an issue in the first half, turned around and increased profits in the third quarter. On the right-hand side, IoT drove growth, increasing about double digit year-on-year. And especially IoT, including the SORACOM, the connections exceeded 66 million. On the left-hand side, we have the Lawson and Ikeda City in Osaka, we are working on the development of the town where you can leave in a secured and safe manner. And on the right-hand side, we are using drone to instruct the disaster-related location and we have more 1,000 locations where we have the drone ports, and we'd like to construct very agile and safe system for the disaster. And now the management platform and how to strengthen it. In light of inappropriate transaction of our subsidiaries, we will be even more conscious of the importance of governance. And as you can see on the left-hand side, we have the KDDI philosophy, which emphasizes the human capabilities and the KDDI version of its job-based personnel system has created a mechanism to enhance expertise. And as shown here, with the shift to a new management structure, we will further strengthen our core competencies by combining these with our aspiration to be a company that inspires challenges. To take on challenges, we will introduce systems and programs that celebrate challenges and promote collaboration and advance human resource development in line with our business strategies for growth. Now I'd like to talk about our efforts towards growth in the AI era. As a social infrastructure provider, it is our responsibility to support Japan's digital society and contribute to strengthening industrial competitiveness with both our cultivated communications infrastructure and our new AI infrastructure. As AI becomes more widespread in a variety of settings, an AI infrastructure that can process data securely with low latency will be important. Left side, with an eye towards such era, we ensured sovereignty and began operations at the Osaka Sakai Data Center in January as a data hub for securely processing corporate data. We have achieved efficiency gains by utilizing the existing space. And following Sakai, we plan to launch the Miyazaki Network Center in February as a communication hub, leveraging the knowledge gained at Sakai to expand into an AI data center. So we will expand operations in the counter region and Kyushu and so on. and utilize our existing landing stations to connect AI data centers with our strong communications network, building an AI digital built, a nationwide low latency network and AI computational infrastructure. We will also utilize the landing stations and submarine cables across the country to enhance the value of the AI digital belt. And we are going to create a hub by connecting landing stations and submarine cables. KDDI possesses some of Japan's leading know-how and assets covering everything from submarine cable installation to maintenance with over 60 years of experience, 360-day availability and landing stations across the country. We also strengthened Universal Joint connection technology for optical submarine cables and possess world-class technological capabilities. By leveraging these assets, we will develop landing stations near AIDCs and expand accessibility by AI computation infrastructure to overseas locations, thereby capturing global demand. Today, at the Board of Directors meeting, we decided we resolved to launch a new AI integration business cooperation. The communication platform on top of that, we need this AI platform. We have lots of contacts with customers. So the AI is -- in order to deliver AI as part of the labor force, it is very important to have solid platform. And for that, we are going to utilize our expertise and technological prowess. And also, we will integrate consulting professionals from the headquarters. And based on that, we established KDDI iret. And going forward, we will also call upon more engineers from outside, targeting at about 3,000 personnel by fiscal year 2028. Next is today's summary. First of all, the Special Investigation Committee will continue its investigation into the inappropriate transactions while the company reviews and strengthen its group governance and examines recurrence prevention measures. As to the impact amount, it is expected to include the reversal of fictitious sales and profits as well as provisions for amounts that flowed outside the company. The company will make every effort to recover the externally flowed portion. As to the schedule, as I mentioned earlier, targeting at the end of March, Special Investigation Committee is going to issue report on the investigation. And based on the results of investigation, corrections to prior financial statements and FY '26 March Q3 results will be disclosed by end of March and FY '26 March full year results will be disclosed without a delay. In the third quarter, core businesses performed very steadily, especially mobile structural reforms progressed as planned and the business foundation, including focus areas, continued to grow solidly. AI social implementation initiatives, including the AI digital build and the AI development platform are making steady progress. Even with the impact coming from inappropriate transaction, our business is performing well. And also, there is no revision to the dividend forecast for fiscal year '26 March. Thank you very much. Unknown Executive: We will now move on to the Q&A session. [Operator Instructions]. We will take questions from front. Unknown Analyst: Koma is my name. So about this fictitious transactions, I do not have the full understanding. So let me ask you a question. So about the amount. So maximum amount is this amount that you have shown here? Hiromichi Matsuda: Thank you for the question. As of today, the amount that we have confirmed, the impact on revenue is this amount and the profit impact is minus JPY 50 billion. And there's a possibility of additional impairment, but the Special Investigation Committee and the audit firm will confirm and there may be a possibility of revision going forward. Unknown Analyst: And this external flow, JPY 33 billion, if you could explain the scheme once again. So, this external flow, so upstream advertising agency and the three subcontracted party, was this external outflow from to those parties? Or was there an investment by the employees? Hiromichi Matsuda: Yes, if you could turn to the scheme diagram. Basically, this was a fictitious transaction. The agencies received the commissions of the transaction. It subtracted the fee. So the amount is this external outflow recorded as fees? I see. So this is shown here. So, to five companies, the fee was provided in this fictitious transactions, the advertising fee that goes to the publishing agencies was also returned. G-PLAN and BIGLOBE commission was also external outflow within the group. G-PLAN and BIGLOBE fees that were deducted fees was posted, but that was fictitious. And so the sales and profit was reversed. So that's shown in orange on the upper half. Unknown Executive: Next questions? D3 on the internal side, please. Unknown Analyst: Kobayashi from Yomiuri newspaper. I want to clarify some facts. This [indiscernible] the booking, when did it start? And also, how many employees have been involved? I ask those questions. Hiromichi Matsuda: So multiple number of years, that's a recognition. As a result of internal investigation, G-PLAN, this business started in 2017 and BIGLOBE, they started this business from FY 2022. This time, there are some fictitious transactions and non-fictitious ones. But the amount shown in the materials, they are all based on it, all of them are fictitious transactions. And as to the number of employees involved, G-PLAN, two, I understand that the other two are involved from the G-PLAN. And these two are seconded to the big globe and these transactions were conducted by them. That's our current recognition. Unknown Analyst: So these two people, 2017 and onward, they booked inappropriately. And the total is JPY 246 billion. Am I right? Hiromichi Matsuda: From the very beginning, when the advertising business was started, it is included in that amount. But from when and from where the investigation committee is still investigating it. And those numbers are as far as we recognize. So the more precisely, the committee will receive the report. Unknown Analyst: Am I right to understand that the employees of the KDDI are not involved, right? Hiromichi Matsuda: As to this, the commercial flow, we have already confirmed that no employee from KDDI has been involved. Unknown Executive: [Operator Instructions] Fourth from the front to the exit, please. Unknown Analyst: Sankei Newspaper, [indiscernible] is my name. First question. So when it started, this overlaps with the previous question, but the business started in 2017. And since then, this has been conducted. So from before the business started, the scheme was anticipated and started the business on top of based on that? Or did the business start first and then this fictitious transaction started? What do you think? What does the investigation look like so far? Hiromichi Matsuda: According to our understanding, the amount started becoming big in recent years. And so we said we have to have a control -- tighter control internally. So until when the transaction was authentic and correct, this is still being investigated by the investigation committee. Unknown Analyst: One more question. With this scheme, #1 and #3 were the same entity. And these agencies had to be part of the collusion. So the recovery of JPY 33 billion, will you request for the damage compensation to the agencies? Or will they be sued for criminal lawsuit? Hiromichi Matsuda: Thank you for the question. First of all, we will wait for the result by the Special Investigation Committee. And according to that, we will take appropriate measures. Unknown Executive: Any other questions? Unknown Analyst: One please. [ Fujita ] from Asahi Newspaper. I would like to clarify some facts here. So this diagram of the fictitious transaction 1, 2, 3, the advertising agency, is this just a single agency or only #2 is a different agency. Multiple number of agencies are involved. #1 and #3 are the same. There's a note on the right-hand side. So that #1, #3 are the same entity. It's just one company, you mean. Hiromichi Matsuda: Yes, we have just confirmed one and others are yet to be investigated. G-PLAN 2017 and BIGLOBE from 2022, #1 and #3. So it's not about this #1 and #3, the same entity. The 2017, when we calculated the amount, we just assumed that from the very beginning, everything was fictitious. So, back then, this entity is the same entity. We are still investigating it. So going forward, there's a possibility that there is non-fictitious transactions might be detected. That's right. As to the amount to be canceled. So about those amounts, it's not that everything is based on fictitious transactions. Well, basically, when the amount started to bigger, we thought that they were because of fictitious transactions. But as you can see at the footnote, it is either on the total sales amount or the pure sales amount. So, recently, the profit the cancellation that is getting canceled more and the transaction itself is getting bigger. Unknown Executive: Next question, please. So A4 towards the MC. Unknown Analyst: [ Niki Subo ] is my name. In the last financial results briefing, there was challenges you mentioned, the deposit procurement capability. I have a question on that. And then about AI-related question. First, on the deposit procurement capability. You said you are enhancing the capability. Could you elaborate on that? Hiromichi Matsuda: Thank you for the question. So, Jibun Bank program, we are trying to enhance the benefit, but not only that, the channel, there are multiple channels. And so we're trying to appeal and working with securities brokerage partners, enhancing that to expand the deposit. And the other is plan benefit. So money activity too is launched. On the bank side, we are focusing on the plan. And so the individual personal deposit is increasing on that side. Unknown Analyst: Next, a new AI company. You're working on the implementation, you said, trying to establish the development infrastructure. In the financial industry, the AI is used more and more. So, in the financial industry, what kind of implementation are you working on or planning? Hiromichi Matsuda: Katsuki-san would like to respond. Tomohiko Katsuki: Thank you for the question. AI implementation. In various industries, there are common areas. First, contact center and the fraud detection, AI will start from those areas. In our financial group, we are studying, examining the possible implementation and working with other financial institutions to conduct the POC, proof-of-concept. Unknown Analyst: So, SoftBank has been on that, the contact center. So if you could say a little more about what you're trying to do in the new company, what is the significance of this new company? Hiromichi Matsuda: Well, this new company is not solely for financial industry. And as we announced the Sakai last time for pharmaceutical companies and others, data, internal data and know-how that Japanese companies have will be used, managed for AI analysis. So we are being approached by pharmaceutical and other industries. Katsuki-san just talked about the financial industry, but that is the initial step. The call center is the first step. So thank you. I hope you could understand. Unknown Executive: Next question, please. The D2, please. Unknown Analyst: [indiscernible] As to the inappropriate transaction, the two people from G-PLAN, and they was seconded to BIGLOBE from when?. And these two employees, are they managers or executives? Hiromichi Matsuda: Thank you for the questions. It's related to their privacy. So I would like to refrain from answering those questions, sorry. Unknown Executive: So, B3, please. Unknown Analyst: [indiscernible] About this matter of inappropriate transaction. These two people, they were seconded to BIGLOBE. That means that they had authorities to work both for G-PLAN and BIGLOBE. They were seconded from G-PLAN to BIGLOBE and the BIGLOBE launched this new business and these two were working on that new business. And during the secondment period, they will also be able to work for Jan as well? Hiromichi Matsuda: Yes, usually, yes. Unknown Analyst: As to KDDI, to reduce the downstream the ad publishing, the request to reduce it, when did it happen and why? Hiromichi Matsuda: It was the mid-December last year. Back then, in order to strengthen the control because the amounts were getting larger and also we need to identify the risks for business. So, as to these two companies, we issued such instruction to reduce the volume. That means back then, you knew that there had been some the fictitious transactions. The specific doubt, we reduced the orders and the other payment was delayed from upstream. When that happened, we thought that we had some doubt beginning -- well, beginning to have some doubt about those transactions. In October 2025, the auditing firm pointed out some potential the fictitious transactions. And this is the table of the research. So we involved the outside the auditor and the internal auditor together started some -- the investigation. But back then, they could not get any specific evidence. Unknown Executive: Thank you. Next question please. We'll move to the online for now. [Operator Instructions] Unknown Analyst: Thank you. So about the fictitious transactions, so the external outflow portion, this is #1 and #3 companies. It's the amount that is paid to #1 and #3. Is that what you mean by external outflow? Or were there a possibility of outflow to other parties as well other than #1 and #3? Hiromichi Matsuda: Thank you for the question. So you can see this on the screen. On the right side, it says external outflow. This is the gray area. So #1 and #2 -- well, #3 and #1 are the same. So #1 and #2 paid as fees of the transaction. But this transaction turned out to be fictitious. So this is the area that is outflowing -- outflow externally. Unknown Executive: Another question from online from [ Toizai ]. Unknown Analyst: Question about inappropriate transaction. At this moment, why did it happen? How are you looking at the reason? The investigation committee is yet to come up with the conclusion. But at this moment, what is your thought? Hiromichi Matsuda: Thank you for the question. As to the reason why, of course, we are doing investigation about it. And at the same time, the times, for example, are there any signs for such a matter to happen, we need to avoid reoccurrence of similar matters. So, in December -- I mean October 2025, there were some points made. But as to the documents, the billings and the receipts, which are the evidence of the transaction existed, and there were no problem about the impairment and outpayment, and we were told that there was no problem from the big as well. And in this advertising and the business, there are lots of people involved from downstream to upstream. And we didn't look into a very extreme of the floor. So I think that's part of the reasons this kind of matter happened, and that's some -- I think that we need to make improvements. Unknown Analyst: Another question. So there is a governance issue. You have many subsidiaries and your business is diversified. So a company, what kind of governance issues do you recognize? And what kind of actions you would like to take about them? Hiromichi Matsuda: Thank you for the question. We have been expanding our business, including outside directors. the corporate ethics that should be better actually that we received such point from the directors. And since last year, we have been working on that and still this kind of matter happened, and I feel very sorry about it. I think there are two things. We have KDDI philosophy to raise a spirit to improve our mindset. The KDDI and group companies together, we would like to make repeated efforts so that the philosophy will be well embedded in the organization. And also how to prevent such the matter, that process for that is yet to be established. We need to brush up our detection capability to see any signs. Unknown Executive: [Operator Instructions]. Line B4 towards the exit, please. Unknown Analyst: Yomiuri newspaper. [indiscernible] is my name. So my question is also on fictitious transactions. So in this scheme, #1 and #2 agencies. So it was elucidated because the payment was not done. Did you contact these companies? Is the business continuing? So that's my first question. And number two, in the scheme, how involved is this company in the fictitious transaction? In this business flow, were they used -- or did they collaborate? Did they contribute to the fictitious transaction? Hiromichi Matsuda: Thank you for the question. The transaction is, of course, stopped. It's suspended. With some agencies, there were collaborations, but we think -- but this accuracy is now being investigated by the Special Investigation Committee. So number two, so you think some of them were collaborating, but I don't know a big picture. The big picture is now being investigated by the Special Investigation Committee. Unknown Executive: Any other questions? B2, please. Unknown Analyst: I am from Nikkei Newspaper. As to detection process, JPY 250 billion, the fictitious transactions. Why was it possible? I wonder. What kind of supervision did you take in the past? Hiromichi Matsuda: You mean the supervision on the results? Unknown Analyst: Yes. Hiromichi Matsuda: The billing and other slips documents were there and G-PLAN and BIGLOBE based on those documents, they did issue results. Unknown Analyst: Understood. In this -- the commercial flow, so two companies, the parent and subsidiary were involved. Is there any particular reason for that? Hiromichi Matsuda: The BIGLOBE came into the picture not from the very beginning. So, compared to G-PLAN, because of the level of the trust and the credibility, the BIGLOBE has started its operation as a new business. Unknown Executive: Next question, please. B3, third row towards the exit, please. Unknown Analyst: Sankei newspaper, Fujia is my name. So my question is on fictitious transactions. So it's cumulative, but JPY 246 billion impact on sales. So this is quite large. Each individual transaction was large amount or just accumulated to be this big. So number of cases or the transaction volume value, I don't -- I know you cannot go into much detail, but just a rough image, if you could elaborate to -- for us to get a better image, please. Hiromichi Matsuda: Thank you. So as I mentioned earlier, recently, a few tens of billions of money had been circulated back. In the scheme based on the assumption that the amount goes up month after month. And so it gradually increased and amounted to a few tens of billions of yen. So including previous years, JPY 246 billion. So this is the size of the transaction. Unknown Analyst: How much per case? If you explain this may be too much detail, but the advertisement, how -- what's the size per case of transaction? Hiromichi Matsuda: So it's -- I understand that it was circulated back in its snowballs. I understand that, but still the amount is large though. You are right. Basically, there was the report, the -- so we validated the validity of the transaction. But this is the fee for the posting of the advertisement and paid to each advertisement agency. So it was not for each individual advertisement. Unknown Executive: Any other questions? Question from B1, please. Unknown Analyst: Two questions. Yesterday, NTT DOCOMO, Mr. Maeda, President said that there is a very intensified competition. But previously, the announcement of the results, you made a shift to the LTV from the excessive competition. As to new customers and the competition for new customers, are you slowing down your efforts? Are you slowing down your speed a little bit? Hiromichi Matsuda: As I mentioned in my presentation, the mobile revenue is increasing. And the promotional cost, I said the last time, the year-on-year basis, our promotional cost is flat. So it's not that we are using a lot more compared to the previous year. And the impact -- as to the impact, for example, the handset replacement program, there should be a good balance there. But in the third quarter, the [indiscernible] plan that is producing the good benefit for this year. Unknown Analyst: My second question, Rakuten Mobile exceeded 10 million contracts to the end of last year. And I think roaming I think there are some difficulties, but could you please talk about the direction and your thought on this area as well? Hiromichi Matsuda: I cannot talk about the other companies, but the competition and collaboration for roaming included, and we are also competing with them as well. So, in September this year, we are discussing with them for the roaming for September this year. The other day, the Rakuten was faced with some communication failures. And that pushed a lot of traffic toward us. The areas, in other words, are overlapping. And that should be sorted out. So -- and we are going to suspend the part of via the communication in the due course. Thank you. Unknown Executive: Line A row 1 towards the exit, please. Unknown Analyst: [indiscernible] is my name. I have a question on your business. On Page 17 of your presentation, you talked about the Netflix, the differentiated service subscriber is now 9x bigger. So the pricing plan, subscription, how much track record do you have as au? And regarding Netflix, LYP premium, [indiscernible] is now launching a new plan, so Netflix can be used. So what do you -- how do you see the impact there? Hiromichi Matsuda: Thank you. So the original -- it's not the original Netflix bundle, it's subscription. So 20% point back if you subscribe and maximum five months, you get free. So that's the campaign. au and UQ customers. And of course, there's the product appeal of Netflix that attracts these users, but we want this to be used. So, from March and April onward, we will continue. And as I showed, this will lead to the long-time usage. So this is a bit different. The users may be a bit different from our peers' program. Unknown Analyst: One more question is on your CapEx, your thinking on CapEx. Hiromichi Matsuda: In yesterday's NTT DOCOMO briefing, they said in their CapEx, they're increasing from last year and FY '26, they will build the base station quite aggressively. And by next year, they said they will catch up with the other competitors. So not all base stations will directly lead to the communication quality, but you will be caught up. Unknown Analyst: So based on that assumption, what is your thinking on your CapEx? Any changes there? Or will you just keep your CapEx plan unchanged? If you have any questions, please -- if you have any comments, please. Hiromichi Matsuda: So we think this area expansion is the source of competitiveness. So we will continue executing and continue being the winner by the outside rating evaluation companies. Regarding 5G, we did quite a big investment last year. And so it's well built, and it has peaked out. So instead, we are now moving -- focusing on AI infrastructure and thinking of keeping the capital expenditure flat. Unknown Executive: Any other questions? The person at C1, please. Unknown Analyst: [ Ishikawa ] freelance journalist. The net increase in smartphones compared to the DOCOMO compared to the last time, it seems that the number is rather low. Are you satisfied, Mr. President? Hiromichi Matsuda: Thank you. This is related to structural reform. There are pros and cons, we need to strike a good balance. The smartphone, the numbers, 33.3 million. That's the target toward the end of the year. And June and September, plus 30,000 plus 20,000 and this time, plus 70,000. And in the fourth quarter, we will see more growth. Rather than taking excessive increase, we would like to focus on the contribution to lifetime value. So those numbers alone are not the basis for us to increase the number. Yesterday, DOCOMO talked about the following thing, the performance aggravated because too much the competition for the handset. Unknown Analyst: As to the replacement, do you have a good control on the replacement program or the purchase support program and the [indiscernible] is also revisiting the issue. Are you changing any thoughts? Hiromichi Matsuda: As this slide shows, we think that we have a very well-balanced control. In the past, we struggled a little bit, and that is because why we are controlling it a better way. And of course, new functions and new handsets, we would like to deliver those new things to the customers and striking good balance. Unknown Analyst: When you say control, exactly what are you doing? Hiromichi Matsuda: From the customer's point of view, I want something new. And after 24 months, it gets more expensive. If that's the case, of course, the customer comes in to replace it with the new one. The first such -- we -- in the past, we did not understand what could happen correctly, but we made some adjustments. And based on the plan, we are building this the scheme of control. Unknown Executive: So, next question, please. Line B row 2 towards the exit, please. Unknown Analyst: [indiscernible] is my name. So I would like to go back to the fictitious transactions. Earlier, you talked about the two members from G-PLAN. So I have a question on those two members. So these two were originally in G-PLAN or -- so when this intermediary business was launched, they joined. So my first question is that. Hiromichi Matsuda: I am sorry. We have identified the two, but I'd like to refrain from mentioning that because it has to do with their privacy. So those two, from around 2017 until this was discovered, they were in this intermediary business throughout. We want to wait for the investigation result on that as well. Basically, as I said earlier, from 2017 onward, it's been recorded. So we are trying to understand how much of that was correct and how much is fictitious. So this needs to be elucidated through the investigation. Unknown Analyst: My last question is those two for the disciplinary action, are they G-PLAN staff? Or are they already fired? Are they former employees? Hiromichi Matsuda: We are still contacting them. So they are staff employee. Unknown Executive: Any other questions? Please raise your hand. A person at C3, please. Unknown Analyst: [indiscernible]. So number one, #3 or #2, the external flow to whom or to what kind of company like sector or business form size, is it possible to share some information? Hiromichi Matsuda: As to the other companies that the flow went to, the committee is investigating it, and I would like to refrain from talking about specific names. It is not -- but it is not large ad agencies. The anti-social organization or suspicious of the kind of status is involved. And that also is being investigated. At this moment, there's nothing we can talk about it. Unknown Executive: Next question, please. A1 towards emcee, please. Unknown Analyst: [ Nakamura ] is my name. I have a question on the fictitious transaction case. So the two that are suspected to be involved, what was the motive or reasons or trigger? Have they talked about that? Hiromichi Matsuda: We want to not impact the investigation of the Special Investigation Committee. So allow me to refrain from mentioning that today. Unknown Analyst: Yes. One more question is going forward, so in the -- where a large amount of money is involved, if there was a falsification of the document, that may be another crime. So have you submitted the damage to the police or have you taken actions? Hiromichi Matsuda: Yes, we are aware of that. We have not consulted with the police yet, but depending on the progress of the investigation, we will consider that and take appropriate actions. Unknown Executive: Any other questions? Next D1, please. Unknown Analyst: [indiscernible] As to money coming in, the advertisement and the fees move together. And recently, it's the level of dozens of billions per month, including fees. And the fees are the ones which are counted as revenue? Hiromichi Matsuda: So it's about the gross amount or net amount. So it looked like the revenue canceled decreased, but it is based on net basis. So as you said, it's correct that the fees are counted as revenue. I think there should be some fund, the initial fund for advertisement, right? The amount increased dramatically to a very big amount. BIGLOBE and G-PLAN, they had fund at hand. And also, we have group finance mechanism. For the whole group, we have surplus and KDDI kind of concentrated and at headquarters. And from the headquarters, we lend money to the other companies. So the group finance was executed for BIGLOBE. The telecommunication-related investment and last year, JPY 57.9 billion or so lending was extended to BIGLOBE last year -- last fiscal year in the group financing. And so group finance is -- might be used -- might have been used as part of this incoming money. Unknown Analyst: And as to these two employees involved, both of them were seconded BIGLOBE, but they are G-PLAN employees. And at this moment, you have not confirmed any other employees involved. Hiromichi Matsuda: Yes, your understanding is correct. At this moment, we have not confirmed any other employees involved. But that is also subject to the investigation by the committee. Unknown Executive: Next question, please. Line D towards the emcee, please. Unknown Analyst: [indiscernible] is my name. So fictitious transactions, #1 and #3. there's #2 in the middle. So number three, other -- unless the order goes to the #3, the money does not circulate. But was the scheme such that the money will always go from #2 to #3? Is there #1 company and #2? Usually, I think it's multiple. But in this fictitious scheme, was there one particular company that was in charge? Hiromichi Matsuda: From BIGLOBE and G-PLAN, the upstream companies contract and the contract with the publishing agency. There were two types of contracts. And I mentioned the business practice, commercial practice. And what's beyond this downstream publishing agency, we usually don't see that. We were not looking at what's beyond the publishing agency. Now the money stopped coming in from the top. And so we heard from the employees. And after we heard from the employees, we found out that it was subcontracted from #2 and 3 and #1 and #3 were identical. Unknown Executive: Any other questions? The person at B1, please. Unknown Analyst: [indiscernible] freelance channel. Starlink related question. This year, other carriers are going to start the satellite telecommunication service within this year. You had a lead time of about one year. What is the advantage? Do you think that there is an advantage for you? And how are you going to differentiate yourself this year? Are there any specific measures? Hiromichi Matsuda: There is something that you can look forward to. I would say, Starlink Direct or area, we would like to deliver it right away. And with that in our mind, we have been developing area and Starlink the direct as well. The sooner, the better for customers. As to the lead time advantage, without thinking about other companies, as a frontrunner, we would like to work on something new. not just at area, but Starlink Direct, we would like to make advancements with something new all the time. Unknown Executive: Line B4 towards the emcee, please. Unknown Analyst: [indiscernible] Sorry for asking you another question. Just one clarification. So fictitious transactions, the impact on your financial results. Earlier, you said from 2017, the business started and sales, you mentioned full amount. But as the investigation progresses, the fictitious portion and the actual transaction will be clearer. So this amount is the current estimated amount or this amount is subject to change as investigation progresses? Hiromichi Matsuda: For now, this is the maximum amount that we are expecting. But the fictitious transaction started increasing in recent years. So we think fictitious portion will account for a large portion. So now -- so this is the amount that will be reversed. Is this already fixed? Of course, it depends on the special investigation committee and the audit firm's audit. So this is subject to change. But we understand that this is the maximum amount. So we are showing you the approximate amount. Unknown Executive: Question from online. Unknown Analyst: [indiscernible] Jibun Bank and the deposit funding and the improvement and the impact of the money activity too. You talked about other reasons as well -- factors as well. What is the impact coming from the money activity? You talked about the reimbursement, if it is over 500,000 and so on. Any impact there you've seen? And also card business is also growing. Is also driven by the money activity or any other factors? Hiromichi Matsuda: Katsuki-san, anything? Tomohiko Katsuki: As to deposit funding, there are two factors, as I mentioned earlier, the bundled -- the deposit bundled plan, the money activity two and au Jibun Bank's own campaign during the bonus season, for example. such deposit collection campaign worked. And as you can see later, the operation data, you can look at Page 36 of operation data. Y-o-Y deposit increased significantly, especially retail deposit. As you can see -- so it's not really the growth coming from the money activity. We do not disclose it. Please bear with us. And the credit cards, especially for money activity too, the growth of gold card is paying off. As you can see on the screen, -- we are seeing good effect coming from that. are you okay with that? Unknown Executive: So another question from online. Unknown Analyst: Yes. I think this question has been raised a few times, and I'm sorry about the impact of the fictitious transactions. So, 2024 March, so JPY 96 billion before March '24. So G-PLAN started -- since they started the advertising business, this has been posted. So the fictitious transaction started from the start of the business. Is that how this was recorded? Or there was a starting line when this started. And you summarized the amount up to March '24. So what is the time line. Hiromichi Matsuda: Thank you very much for the question. As an internal investigation, we found out that before year ending March '24, each company -- so all transactions since they started the advertisement business has been summarized. So in case of G-PLAN from 2017 and BIGLOBE 2022, they started the advertisement agency business. So it's a summary of all the amounts. So it started from -- not from there onward, but from the very beginning, the fictitious transaction was likely to have happened from the beginning of the business. Well, the authentic correct transaction and fictitious transactions are now being separated, but now we're seeing an increase of the fictitious transaction portion. So -- we are looking at all the transactions with a view that there is a possibility of future transactions. Unknown Analyst: Understood. So including those cases that were correct in the past, you are checking all cases. You don't know when the starting line was, but you're including everything. Hiromichi Matsuda: Yes. Unknown Analyst: Including the ones that may be correct. So the maximum amount is a revenue of JPY 246 billion and JPY 33 billion, the external outflow, is this maximum or at least or this is the maximum amount. Hiromichi Matsuda: So this time, this is the external outflow. So we are provisioning this amount shown on the table. We think this is the maximum amount. Unknown Executive: One more question online. Horikoshi-san of Nikkei business. Unknown Analyst: Horikoshi speaking. Two questions. First, in appropriate transaction. So, within this, the scheme diagram, #2, it could be involved from the very beginning with #1 and #3 or it could be involved later. So in the supply chain as a whole, my question is why you did not detect such the transactions? Hiromichi Matsuda: I think it is because of failure of the control scheme. Unknown Analyst: So do you -- could you please share with your thought? Hiromichi Matsuda: So, the group governance, and it is related to the responsibility of supervision. So Monthly transaction itself has the vouchers and slips, accounting slips, which verify that the transactions occurred and they were continuing this business as normal transaction. And the BIGLOBE also gave us some information about the appropriateness of the transactions as well objective. But the objective evidence was not detected about the inappropriate transaction. So it took time for us to detect all that. So as I mentioned earlier, group finance is part of the picture. Ad network accounts for most of the amount. that is currently being investigated. So I do not make any comments on that. Atul Goyal: And second question is about the Miyazaki data center. Two years ago, you did some construction work. What is the size of the investment? And what is the size of data center? Hiromichi Matsuda: As you can see on the screen, AI digital belt concept or initiative, you have about -- there are about three big data centers. Unknown Analyst: Are you going to open three big data centers in Japan? Or what about Tohoku and Hokkaido area? Is there any possibility for you to go to those areas as well? Hiromichi Matsuda: Thank you. The belt diagram is showing that there is no coverage in the north. But actually, we are constructing the but in the north as well. Putting aside whether it's big size or not, what kind of AI data center should be there that is in our mind. The AI processing will be happening in the different locations. So it's not that everything will be concentrated on big data centers. So the connection like mesh and as a whole, the belt, which covers the whole -- the Japanese archipelago, that's what we are thinking about. Miyazaki, we have secured the adjacent land so that we can easily expand this location as well, watching closely the demand level, we are going to make next moves. In the next midterm strategic -- midterm strategy, we are going to give you more details. Thank you. Unknown Executive: So next question, please. D3 towards the exit, please. Unknown Analyst: Yashi is my name. Sorry to ask you. So JPY 33 billion external outflow is my question. In Q3 -- up to Q3, JPY 17 billion has been provisioned, if my understanding is correct. And maximum JPY 33 billion has flown outside. So in KDDI's P&L, how much will eventually be posted as loss? So that's my first question. Hiromichi Matsuda: Thank you for the question. So this year impact. We need to wait for the result by the Special Investigation Committee for the amount to be fixed. But for now, this amount that is shown vertically will be posted on our P&L. So JPY 33 billion, and there may be additional impairment. For this fiscal year, JPY 17 billion is provisioned. So reversal of profit is JPY 25 billion. And other than that, there is a possibility of impairment in addition. Unknown Analyst: So then JPY 33 billion can -- may not be your loss. So of the JPY 33 billion and JPY 17 billion, I'm not understanding the difference between the two. Are there prior year portion? So how can I sort this out? Hiromichi Matsuda: So this table is grouped into #3. First, March '26 is up to Q3, the provision up to Q3, this is JPY 17 billion and JPY 33 billion to the right is including the prior years, it's the total of prior years. So including that, it is JPY 33 billion. And this is assuming that we cannot recover the entire amount. So we will provision this for once for now. But if we can recover, of course, we're trying to recover. And if the amount can be recovered, the recovered portion will be added to the profit in the following years. Unknown Analyst: Then at this point, JPY 17 billion loss is provisioned or is assumed for this fiscal year. Hiromichi Matsuda: Yes, this is the expected loss. Unknown Analyst: One more question, please. So there are a few advertisement agencies. So those that were involved in the fictitious transactions, do you know how many advertising agencies were involved? Hiromichi Matsuda: We only know that multiple are involved, but we don't have the exact number or the names that is left in the hands of the Special Investigation Committee. Is it 2 or 3 or maybe 10 agencies? I'd like to refrain from mentioning that as well. Unknown Executive: Any other questions? Since there are not many questions left. The two people are raising their hands. So starting with A4, the person at A4, please? Unknown Analyst: Last week, DOCOMO using DOCOMO shop, they will give support for financial business. I think they already started it actually. What about your company, for example, the opening account for the Smart Securities or are you planning to use shops for providing similar support? Could you please talk about your thought? Hiromichi Matsuda: au Jibun Bank and we have been providing support using the au shops as the other agencies for the au Jibun Bank. In addition, we have credit card business as well. So I think your question is about the -- based on the securities and the salesperson qualification. For that online intermediary securities, SBI SECURITIES using the au Jibun Bank, that kind of alliance is our current focus. So when it comes to the securities sales rep, which requires special qualification and development of such personnel on real world, we are not thinking about it at this moment. I answered your question. Unknown Analyst: It's not only about securities account, for example, the various services of the au Jibun Bank or mortgage loans in those areas, what is your thought? And of course, always we are reviewing every potential possibility. There are various financial services and some new emerging financial services, especially au Financial Holdings, as to their operating areas, we would like to give serious thought. Have I answered your question? Unknown Executive: So the last question, C3 towards the entrance, please. Unknown Analyst: [indiscernible] again. So regarding the fictitious transaction, so the two employees were involved, you said. So if I could put this in perspective, the two are still seconded to below. They are -- yes, G-PLAN employees seconded to below. So seconded to below -- and there are multiple -- so they are belong to G-PLAN. So they're seconded to G-PLAN. But why despite the absence of the two, can this transaction continue? Hiromichi Matsuda: So they're not in G-PLAN, but why can they operate G-PLAN's transaction or can be involved in G-PLAN transaction? So they're dual headed. They're seconded, but there is a proportion between the second destination and the source company. So they are dual headed. Unknown Analyst: I see. So the two employees, so they were not checked. The transactions that the two were involved. Hiromichi Matsuda: So the transactions that only two of them were involved were fictitious. So this fictitious transactions, we have elucidated up to now this much fact is already clear. There are authentic or correct transactions as well. So we're trying to draw a line between the two. And for the ones that were involved in BIGLOBE and G-PLAN, they are fictitious transactions. That is our understanding. So we're trying to have the special investigation committee -- check the accuracy of that. #1 and #3 were identical companies. That's one company. So yes, one entity, we want to refrain from saying how many companies they were, but the hearing or the entry withdraw money and digital forensic is utilized and understood that 1 and 3 are the same. That's what we're saying today. Unknown Analyst: And last question. So in your investigation so far, have you heard any motives or reasons to this were pressured to have large sales? Or were they just trying to invest all the money or the special investigation committee is investing that it's their scope. Hiromichi Matsuda: So I want to refrain from saying anything here. But of course, BIGLOBE is a business operating company. So the development of the business plan and the target management is done. But from our company, we have a medium-term plan. We are in the final year of the medium-term plan. So communication and financial or DX and enterprise business, energy, these are our main businesses. So this advertisement agency business is not a driver for us to achieve the medium-term plan target. Now the amount that you found out this time in each year, BIGLOBE and G-PLAN, what is the proportion of this in BIGLOBE, G-PLAN's revenue? BIGLOBE and G-PLAN are consolidated. BIGLOBE revenue is around JPY 230 billion. And this is last fiscal year and of which this is JPY 82 billion. Unknown Executive: With that, we would like to conclude the Q&A session. Hiromichi Matsuda: Lastly, I'd like to say a few words. Again, we are very sorry for this matter. And of course, we are going to avoid reoccurrence and strengthen our governance. And at the same time, we are going to solidify our business platform to grow our business. And that is the path that we need to take to take our responsibility. And I will take the lead in making efforts, and we will continue to make advancements. Thank you for your continued support. Unknown Executive: We will conclude this meeting. Thank you very much for joining us today.
Pierre Anjolras: Ladies and gentlemen, good morning. Thanks for joining us for the presentation of Vinci's full year results. So you'll see -- you will have noticed that our performance is once again outstanding. Today, I'm joined by the members of the executive committee, several changes of late, the appointment of Thierry Mirville, Deputy CEO, who follow-on from Christian during the course of the year. We're also with the Investor Relations team, who you know well and will be available to answer your questions. So first of all, on this first photograph, we're heading for the Bay of Biscay where VINCI Energies, Cobra and VINCI Construction are working together on the new electricity interconnection project between France and Spain, the INELFE project set to be completed by 2028. It's the largest DC interconnector line between France and Spain, the 400,000 submarine cable with 2 conversion plants. It's a fine example in Europe and elsewhere, future exponential investments in power grids. Electrical infrastructure, we, first of all, think of production infrastructure, nuclear power as well as renewable power and equally essential infrastructures, which are the power, transmission and distribution grids that require as much investment, if not. And these electrical infrastructure projects are key components of the energy transition, but to a growing extent of energy security and sovereignty; a powerful driver, possibly the most powerful driver for Vinci's business developments. Other photographs now in the Concessions business on the left, London Gatwick airport managed by VINCI Airports, a major milestone reached last autumn with the final approval by the U.K. government of the transformation plan of the Northern Runway to allow for dual use with the main runway. This will increase the airport's capacity by 20 million passengers at the turn of the decade, increasing it to 80 million. Through this decision, the British Airways pragmatic implementing the key role of air traffic in the country's economic development as well as its capital. On the right, in Brazil, Entrevias highway, 600 kilometers crossing the state of Paulo. We own 55% of Entrevias now fully consolidated in early March 2025. We resumed operations on the highway of BR-040, 600 kilometers long and the Belo Horizonte Brazil route, managing over 1,200 km of highway. It's our largest highway network outside France and Brazil to give you an order of magnitude, 1,200 kilometers, slightly longer than the Cofiroute network that we manage in France. Energy Solutions now on the left, a fine shot of the Cadiz yard from the North Sea in Germany of the offshore wind plant BorWin5, 900 megawatts for TenneT, the second such platform installed successfully by Cobra. It's a feat of engineering, not always easy to implement Cobra teaming up with Siemens Energy constitute an unparalleled tandem in the world. Cobra has 8 other contracts in its order book for a cumulative capacity of 14 gigawatts gives us visibility on the activity and profitability through to the next decade. These offshore converter platforms are strategic also for Germany's energy transition and sovereignty and more broadly, that of Europe, as was reminded recently last week in Hamburg, a joint declaration of 10 European countries that want to make the North Sea the largest hub of offshore wind, targeting 300 gigawatts by 2050 back to Germany, the second largest VINCI market internationally and will become a leading international market this year through acquisitions by VINCI Energies in that country. And growth opportunities in infrastructure. VINCI Energies isn't just expanding in Germany. On the right, EnergoBit, that's a company acquired by VINCI Energies at the end of last year in Romania. This acquisition fits fully with our plan to strengthen our leadership in electrical infrastructure. For Construction, on the left, this is Auckland, the City Rail Link, the first underground rail link of the economic capital country. Work began in 2019. This design build project will be delivered in 2026 by VINCI Construction. It's a powerful lever for social integration and also sustainable development as a rail infrastructure for Auckland. Staying in New Zealand, let me remind you that VINCI Construction announced a fortnight ago that it signed an agreement with a view to acquiring Fletcher Construction with an annual revenue of over EUR 600 million. Next ahead. Construction, this acquisition will allow VINCI Construction to strengthen its position on the very dynamic infrastructure market in New Zealand and to increase the group's annual revenue to about EUR 1.5 billion in that country. We can say that as rugby fans, we've always converted our tries in that country, both in VINCI Energies and VINCI Construction, and we hope that will continue for the current highway PPP project being looked at by the teams of VINCI Concessions and VINCI Construction. Right back to France, heading for Nantes, shown here is the construction of the new University Hospital Center by VINCI Construction and VINCI Energies. This worksite is the largest hospital construction project in Europe. VINCI Construction is deploying ultra-low carbon concrete and this worksite illustrates one of the many hospital work sites currently being executed by the group. There are some dozen such projects at VINCI Construction France, Monaco, another 10 in the U.K. and 6 in Poland. VINCI Energies, many technical work packages in hospitals and not forgetting all the contracts in the health care sector for the pharma industry. So both these projects are fine illustrations of vital infrastructure with mega trends, the environmental transition with rail or health generating countless opportunities for VINCI Construction worldwide. And I'll return to that in greater detail when I discuss the group's exposure to major mega trends. Moving to the results proper. The takeaway of 2025 for VINCI, as I said, outstanding performance in line with previous years, outstanding performance in spite of the macroeconomic and global geopolitical context that you know of the highlights. Next slide, revenue growth driven by Concessions and Energy Solutions. Revenue growth with an increase in EBITDA and operating income across all our businesses. That's what counts for us more than volume growth. What counts for us is profitable growth, net income is up and that in spite of a very significant increase in taxation in France in 2025. Free cash flow reaches another all-time high at EUR 7 billion. We'll return to that in due course. For 2026, we're banking on a further increase of activity and the group's results. And lastly, the Board proposed a dividend in respect of FY 2025 EUR 5 per share. That's an increase in excess of 5% over 2024. This outstanding performance indicates that the group's decentralized and multi-local organization of the group has demonstrated its relevance once again, it reflects the group's culture, unique culture, more about that later. On this slide, the main financial indicators. Christian will return to that in detail. At constant taxation, the net income group share would have grown 10% at EUR 5.4 billion and free cash would have reached EUR 7.4 billion. On this slide, you see that our share of revenue international outside France is close to 60% proportion increases year-over-year. It's not that revenue in France is declining on the concrete activity in the country has grown 2%. It's international that's growing faster. You see also that at 5 countries accounted for total revenue, France, U.K., Germany, of course, which tomorrow, as I said, well, our leading international market as well as Spain and the United States. You will have noted that our net income is achieved over 50% outside France. This internationalization strategy, we've been rolling it out consistently for some 15 years now, and we'll continue to do so. Some key figures by business in Concessions. Revenue growth is 5% plus 4% like-for-like EBITDA margin comes in at 66.9%, up 10 basis points (sic) [ 14 basis points ] over 2024, driven by solid tariff increases, both in airports as well as highways, both in France and international, driven by the successful integration of our recent developments; well done to our teams led by Nicolas. Concessions accounted 60% of the group's EBITDA this year. In greater detail for VINCI Airports, the momentum is sustained. VINCI Airport passenger traffic continued to grow across almost all 14 countries of the network. That's down to several factors, increased capacity of low-cost carriers, the development of long-haul routes in several airports and more generally stemming from customer demand that remains robust. Even if the post-COVID rebound is dwindling, the demand for mobility is a vital need. In total, 334 million passengers used our airports, an increase of 5% over last year, in particular remarkable progress achieved in Japan, notably a consequence of the Universal Fair in Osaka last year and recently acquired airports, Budapest, Edinburgh, the OMA airports in Mexico, Cabo Verde. All this demonstrates the discipline with which M&A is undertaken, our serious analysis as well as the momentum that we can in part to the new airport. This dynamism of passenger traffic in VINCI Airports is due to our own capacity, thanks to the network effect, our unique network of airports to offer new routes, offer new routes to airlines, 400 in 2025, and I can't resist the pleasure of just an invitation to travel to mention a few, Porto Montreal, Gatwick, Bangkok, Edinburgh, Boston, Budapest, Nantes and from Mexico, Monterey, Paris. Once again, we have collectively demonstrate that this portfolio of unique airport assets achieved many operational, technical and commercial successes throughout 2025. Autoroutes, highways in France, VINCI Autoroutes traffic posted a growth of close to 1%. VINCI Highways EBITDA continues to grow, whilst remain penalized by the tax on transportation infrastructure since 2024. We continue to challenge that before the courts. But we've renewed constructive and calmer engagement with the state as illustrated by the ESCOTA works program to ensure the good maintenance of the structure between now and the end of the Concession contract in 2032. That program was approved by the government early 2025. We just owned a new planning contract for Cofiroute with more about that later. For VINCI Highways in Denver, united States. We're doing what we said we wouldn't, faster than expected. A year ahead of time, we put in place the toll modulation system with tariffs vary depending on the time of day. That has a positive upside on revenues. In Brazil, we reviewed resumed operations of the Via Cristais and we now fully consolidate the Entrevias accounts in the group accounts. As you know, we are the leading private airport manager worldwide and handful where the leading private highway manager in the world with 8,200 kilometers of network gives us great pride and it's a fine responsibility. Energy Solutions remaining very dynamic, revenue of Energy Solutions at VINCI. Okay, let's round it off, let's say, EUR 30 billion. That's an increase of some 8% at actual structure, plus 6% like-for-like. Strong momentum in Q4. This revenue is driven by international business that represents over 60% of the revenue. This growth is accompanied by further progress in margins over 20 basis points at 7.6% positions as once again and without challenge, one of the most efficient players of the industry globally. Well done to VINCI Energies and Cobra. Energy Solutions represent almost 1/4 of our EBIT. This year confirms the excellent positioning of Energy Solutions, rate dynamic markets driven by the energy transition, the digital transformation as well as by defense and sovereignty issues. In greater detail, you can see top right that the 4 areas of activity of VINCI Energies that represent an unparalleled range of expertise. We're all posting revenue growth. You can see that VINCI Energies continues its crop in terms of external growth with about 30 a year. That's one acquisition every fortnight. Internationally, VINCI Energies revenue is up 8%, notably in Germany, the leading market, the Netherlands and also in Belgium, and in France, growth comes in at 3.4%, that's way above GDP growth. Turning to COBRA. Flow business activities remain well oriented, particularly in key markets such as Spain, Portugal and Brazil. Overall, this segment grew by nearly 5%. In large EPC projects, which happens to be Cobra's area of excellence, the strong increase in activity, plus 24% was driven by the construction in Germany of offshore electrical converter platforms for the North Sea. And also in Germany, the development of LNG regasification terminal. In Brazil, high-voltage power transmission line. And of course, we talked about that very much in July, the launch of the major PPP project in Australia. These are all strategic projects that contribute to the energy sovereignty of the regions concerned. In the Construction business revenue increased slightly. As you know, selectivity is our guiding principle in this business. And the lower revenue observed on a like-for-like basis is evidence that this selectivity policy is effectively being implemented. However, our teams successfully improved profitability by nearly 30 basis points compared with last year. So once again, excellent work the VINCI Construction and VINCI Immobilier teams. At VINCI Construction, revenue increased by 1.1% to EUR 32.1 billion despite a significantly negative ForEx impact, minus 1.5%. Market conditions vary across regions and business segments. Activity in major projects declined reflecting the phasing of progress on a number of large infrastructure projects, core flow business activities remained at a solid level, both internationally and in France, where activity increased, thanks to sustained demand for road, rail and hydraulic works as well as building refurbishment projects. Specialty activities at [ Soletanche Freyssinet ] also remained at a good level, particularly in the nuclear sector. Let me also remind you, you can see the pie chart on the screen that the vast majority in Construction revenue is generated from smaller scale projects delivered for recurring local customers, what we call our core flow business activities. And that is unusual among our top competitors. In other words, the share of major projects in our overall activity is deliberately limited representing around 10%. In the property development sector, in France, market conditions remain extremely challenging. VINCI Immobilier's teams are demonstrating our ability to stay the course despite headwinds as illustrated by the return to positive earnings in 2025. Order intake reached a high level in 2025, EUR 63 billion. Our key takeaways include flow business activities, which account for the vast majority of growth revenue in Energy Services Solutions and Construction, that remains well oriented, increasing by 3%. So order intake overall remains higher than revenue, particularly in Energy Solutions. And this means that the backlog continues to grow. I will now hand over to Christian Labeyrie, who will present the group's financial performance for the year in detail. Christian Labeyrie: [Interpreted] Thank you, Pierre as Pierre explained, our 3 businesses delivered very different growth rates; plus 8% for Energy Services or Solutions, plus 5% for concessions, plus 1% for construction, resulting in overall group revenue growth of plus 4%. And these trends reflect differing market dynamics and geographic mixes across our businesses. This is not by chance. It's the outcome of a long-standing diversification strategy designed to reduce the group's exposure to economic cycles and geopolitical risks. This strategy enables us to grow in a sustainable manner, delivering solid results and steadily increasing cash flows year after year. To achieve this, M&A growth is a key pillar of our strategy. In 2025, changes in scope contributed plus 2.5% to group revenue growth. And for international operations, the contribution was higher at 4.1% as most acquisitions were completed outside France, and this represents close to EUR 2 billion in additional revenue. Full year impact of 2024 acquisitions, EUR 700 million, including over EUR 400 million for VINCI Energies. And the consolidation of Edinburgh Airport mid-2024 to the tune of EUR 162 million. And the 2025 acquisitions contributed EUR 1.2 million -- actually EUR 1 billion, including Conway EUR 664 million, VINCI Energies, EUR 278 million; and VINCI Highways EUR 93 million, so nearly EUR 100 million. By contrast, ForEx impact had a negative effect on group revenue of minus 1% or EUR 686 million with a significant share, EUR 462 million or minus 1.5% attributable to VINCI Construction. So the euro appreciated year-on-year against several currencies, including the U.S. dollar, 4.4%; the Canadian dollar, plus 6.5%; Australian dollar, 6.9%; and New Zealand dollar, plus 8.6%; the Brazilian real, 8.3%; and sterling, plus 1.2%. On a like-for-like ForEx basis, group revenue growth would have exceeded 5%, while international revenue growth would have reached plus 7.4%. Now the geographic breakdown. France accounts for 41% of total revenue, which means a 2% increase in line with domestic growth and inflation. Europe, excluding France, 38% of total revenue, up 9% or plus 3.7% on an organic basis. The U.K., 10% of total revenue, up 10% organic growth of 1.2%. Germany, close to 9% of total revenue, so EUR 6.5 billion in revenue, up 17% or plus 11% on an organic basis. Spain, 5% of total revenue, broadly stable. The Americas, EUR 10 billion, 13% of total revenue, organic growth plus 2.2%. The U.S., EUR 3.4 million, up 4.6%, but up 7.2% on an organic basis. Canada, EUR 2 million; Latin America, EUR 4 billion, up 6%; Brazil, 1.8%, plus 18% or plus 13.6% organically. Australia and New Zealand, over EUR 2 million, but down 10% due to an unfavorable ForEx impact. And Africa is back to growth, EUR 1.8 million, up 14%. If we look at operating profit from ordinary activities, 2025, EUR 9.558 million, representing 12.8% of revenue. So plus 6.2% versus -- that's an increase of 6.2%, exceeding revenue growth of plus 4.2%. Now comments on margin trends of VINCI Concessions. There's an impact from higher depreciation charges of VINCI Autoroute, mainly reflecting the commissioning of the A57 widening project in the Toulon area. So for VINCI Airports, there is a mix effect between the different platforms with the end of the [ Pumping ] concession. Highways, you're not seeing the impact on the slide, but we're seeing a strong increase in [indiscernible] VINCI Highways due to the consolidation of Entrevias and Denver. For Energy, VINCI Energies is seeing a margin that's up 20 basis points. And you've got to understand that this margin rate is rather homogeneous between the different divisions and business lines of VINCI Energies. It's also true for Cobra. We're seeing an improvement of 20 basis points, so 8% margin and margin levels are broadly comparable between flow business activities and EPC projects. VINCI Construction, margin up 10 basis points to 4.2%. Again, the impact is quite clustered. We're seeing that the U.K. is back in the lead. The U.K.'s profit margin is close to 4%, and this has never happened before. And this is in part due to Conway being consolidated. Now in real estate, this business was making loss last year due to restructuring and impairments for commercial housing projects. Now we're seeing an increase in the IFRS 2 expense, and this reflects the impact of the PEG employee shareholding project and an increase in employee subscription. And because the share price has increased, this has led to an impact that was higher than in 2024. And this is offset by the improved contribution from the equity accounted affiliates as well as the airports in Japan. Also Cobra's stakeholding in electrical transmission lines in Brazil. Recurring operating income, 6.2%, but we're seeing differences from one segment to another, plus 5% for concessions, plus 1%. And if we look at the breakdown, we find that there are 3 equivalent blocks, VINCI Airports and other Concessions, 31% and Energy Solutions and Concessions, 35%. Now if we look at the situation the previous several years ago, we were highly dependent on French motorways. Now there's a much better balance between the different contributions of the different segments to the group's financial performance. Previous slide, please. Now if we look at nonrecurring items, there are positive impacts of disposals in 2025, particularly the pullout from our Russian auto route activities and also our participation in access and also divestments for Cobra, including a pullout from offshore wind farm development. Now there's an increase in net financial expense because we paid over EUR 7 billion for new acquisitions in 2024, but the impact is rather limited. It's much lower than expected because of the volume impact due to the growth in debt because of the acquisitions has been offset by cash flow better than expected. And we've been -- we've enjoyed a favorable ForEx impact in particular, thanks to our strategy, partially floating rate debt. So we've been able to curb the increase in financial expense. Now if we look at our P&L, this comes as no surprise, but tax is up significantly, plus EUR 560 million, including EUR 449 million related to the [ surtax ] on large corporate profits introduced in France in 2025 and extended to 2026. As a result, we're leading -- we're seeing an effective tax rate of close to 35% versus 29% in 2024. If we restate, for that, the effective tax rate would have been 29%, broadly in line with 2024. The corporate tax rate in France increased from 25.83% to 36%. So net income, EUR 4.9 billion despite the higher tax burden in France was slightly above the 2024 level, which came to EUR 4.86 billion. Earnings per share increased by 2.6%, reflecting share buybacks that reduced the number of shares outstanding. The number of shares outstanding decreased from 562.4 million to 556 million at the end of 2025, and that's a 1.1% reduction, and this continued through 2026. As you can see, we have a new share buyback program, which will cover Q1 2026. On a constant tax basis, net income would have reached EUR 5.35 billion. So that's a 10% increase and earnings per share would have reached EUR 9.44 per share, so up 12%. Now if we look at the cash flow statement and analysis of the change in debt net for -- during the year, consolidated net financial debt decreased in 2025 from EUR 20.4 billion to EUR 19.1 billion at the end of 2025. Why? Well, first of all, because our EBITDA improved by EUR 800 million, increased more than our revenue, so up 6.4%. Also a positive change in working capital requirements and current provisions causing contribution in cash of EUR 2.5 billion, which is higher than the already very strong 2024 level, EUR 2.3 billion. What we can say is that over 2 years, thanks to strong control of working capital in 2024, we're talking plus -- we're looking at plus EUR 1.8 billion, which is comparable with 2024. And also, we have a prudent provisioning policy. So plus EUR 0.7 billion versus EUR 0.5 billion in 2024. So the group generated an additional EUR 4.8 billion in cash. Contrary to what some of you expected, this remains a strength for the group. And this reflected sustained efforts across all divisions, particularly at VINCI Construction to structurally improve our collection process for customer receivables and also our billing process, which delivered results beyond our expectations. You got to understand that Vinci's business is 90% flow business. I'm talking about construction, of course, in energy. So contingencies pertaining to major projects have much less of an impact than they used to when it comes to changes in working capital requirements. Now I'm not going to back to tax. Tax is up, financial expense is up. CapEx remained broadly stable year-on-year, EUR 4.9 billion, although there are different trends across divisions. Concessions, EUR 1.3 billion versus EUR 1.4 billion last year. Energy, EUR 2.3 billion versus EUR 2.2 billion last year; and construction, EUR 1.3 billion, same as last year. Financial investments made in 2025 amounted to nearly EUR 1.8 billion. That's the difference between disposals and acquisitions, but there's a sharp decrease compared with the EUR 7 billion in 2024 when we consolidated Edinburgh, Budapest and also the Denver Highway project. This year, what are we seeing? Well, we've seen the consolidation of FM Conway, EUR 0.5 billion, VINCI Energies acquisitions, so about EUR 400 million. And this includes 3 important affiliates in Germany. We dealt with ACS to finalize the EUR 300 million project and also integration of Entrevias. We have a 55% stake in this project in Sao Paulo in Brazil, which didn't use to be fully consolidated. And following renegotiations on governance, we're now going to integrate the debt for this project. Now the divestments amounted to BRL 300 million to BRL 400 million following the disposal of a corporate stake, in particular, in this project in Brazil, offshore activities in Brazil, the sale of access and also the sale of VINCI Highways' Russian assets. So cash return to shareholders is significant, BRL 3.8 billion, including BRL 2.7 billion in dividends paid to VINCI S.A. shareholders and also the dividends paid by Gatwick, Edinburgh and OMA to minority shareholders. Now we bought Edinburgh over 1 year ago. And this is the first year that we've been able to extract cash from that entity. Share buybacks, I talked about that, EUR 2 billion. So share issuances, EUR 0.8 billion, representing 7.5 million shares -- and we need to look at the difference between gross debt and net cash. And this is increasing over a year. Seasonality of free cash flow, that's the next slide. Nothing new under the sun. VINCI's businesses are characterized by strong seasonality in contracting activities, business volumes are lower during the winter months and I am assuming the obvious year. In Concessions, activity is particularly strong during the summer period. Fixed costs, however, remain largely stable throughout the year. So most of the group's cash flows generated in H2, particularly the last quarter of the year as illustrated by the chart. This is why it's difficult to have a reliable forecast. We did go out on the limb this year, but we were dragging our feet for that very reason previously. An additional challenge in producing reliable full year free cash flow forecastings from the group's highly decentralized organization. So over 4,000 business units, over 3,000 businesses consolidated and our BUMs, Business Unit Managers who are the core of our business, usually adopt a cautious approach when communicating the forecast. And that prudence is understandable, but the cumulative effect can result in significant variances at year-end as layers of conservatism add up. Now 10-year trend in free cash flow and net income cash conversion, we're seeing that we generated close to EUR 50 billion over 10 years, including over EUR 30 billion over the last 5 years. And this illustrates the effectiveness of the group's business model and the relevance of its -- and the power of its decentralized management organization. Secondly, and this in spite the fact that we weathered as many others, a lot of extraneous crisis during that period, thanks to the diversity of our activities and our geographical footprint and a prudent financial policy, we've been able to deliver year after year solid results. We've improved them as well as free cash flow generation. It's the fruit of the work of our business units, our thousands of BUs, all efficient companies, very customer-focused, responsive, fleet footed to take account of market changes to end our financial policy. It's not revolutionary what I'm going to say. I tend to repeat myself every time. Financial policy rests on several pillars. Firstly, it's key for us to have considerable liquidity. It's the price of liquidity, EUR 15 billion cash. That's EUR 2.4 billion increase, a credit line, EUR 6.5 billion by our banks, maturity extended to January 2031. In spite of the cyclical variations in market conditions at all times, we can generate resources to continue to invest in our businesses, seize development opportunities that form part of our strategic plan and return to our shareholders. We have to manage significant debt, EUR 34.5 billion that is actively managed. It must be refinanced regularly and its cost must be optimized. 2/3 of the debt are housed in infrastructures that we managed for long-term contracts. That's about EUR 10 billion for ASF and Cofiroute and as much on our airports. So debt service with the concession -- debt service is insured by cash flow generated by projects to calibrate fully our capital injections and optimize return on investment debt housed on projects is fixed rate, whereas corporate debt has a variable rate. At the end of 2025, fixed rate debt accounted for 46% and 34% and variable debt, 54%. We've been able to reduce the average cost of our debt by 60 bps in 2025, bringing it down to around 4.3% despite of the fact that 60% of the debt is not denominated in euros, the euro where we arrive at very low rates. It's not the case when we borrow in real. So Colombian currencies, dollar or sterling. And lastly, we're preserving our excellent credit ratings. As you know, minus A3 S&P, Moody's, they're periodically reviewed, but they're confirmed year after year. And thanks to all that, we're able to issue in 2025, EUR 5.7 billion additional debt to refinance EUR 4.2 billion. Excellent conditions. Our signature is widely appreciated by bond investors as we demonstrated successfully in January with a new ASF issue, EUR 500 million over 8 years that have cost below 3.5%. Thank you. Pierre Anjolras: [Interpreted] Thank you, Christian, for those very clear explanations. In terms of outlook now, our outlook reflect our value creation strategy in both our long-term and short-term activities, long-term activities, mobility infrastructure. This year, VINCI has signed with competent authorities, major agreements that strengthened visibility and offer promising growth prospects in airports. I'd like to emphasize the expansion potential of the airports that we operate in addition to our M&A growth. In this complex world, one of the great strengths of VINCI is to forge relations based on trust throughout the world. And thanks to this constructive dialogue, several major agreements were signed these past few months. A few examples. London Gatwick, I mentioned we have the approval of the Northern Runway in Lisbon, Portugal. Our teams in January 2025 at the request of Portuguese authorities began to study the development of a new airport at Alcochete, Lisbon. A major milestone was reached after consultation of the stakeholders with the receipt of a favorable response from the grantor regarding the launch of the preliminary design phase. Let's cross the Atlantic. In Mexico, OMA subsidiary signed at the end of December, a new 5-year economic regulation contract defines investments over the period, around EUR 800 million as well as the associated tariff increase in Cape Verde, further investments in excess of EUR 140 million over and above those already launched early 2026, increase the airports of the island state to boost their traffic, but above all to maintain the economic and tourist dynamism in the country. We can mention the start of the launch by VINCI Airport in close conjunction with VINCI Construction, VINCI Energies, the new terminal of the Santo Domingo Airport in the Dominican Republic. In France, following a constructive and confident dialogue with the state, VINCI has just signed a new rider to the concession contract for Cofiroute. Through moderate tariff increase, it allows the application of the court decision on the composition of the increase on the regional development plan and an investment of some EUR 350 million on the network. These are essentially shared mobility investments, regional development and use of e-vehicles for electromobility. 100% of the VINCI service areas have charging stations as well as some 40 service areas, making it the best equipped highway network in the country for 2,400 charging points, that's 54 every 100 KM. Thanks to that, the number of charging stations could double. Through all these examples, our infrastructure is vital, but also changing, evolving, being renewed and needs development, many opportunities for value creation by VINCI for VINCI, both in our airports and the highways that we manage. In terms of energy infrastructure, long term. In 2025, the group decided to combine the energy production activities, essentially PV developed by Cobra Zero.e. That's the dedicated subsidiary to better nurture performance to optimize financing arrangements and asset rotation if need. Zero.e has a total capability for renewable power production of 5 gigawatts. 1.2 gigawatts in operation and 4.2 gigawatts under construction already to build to date. Cobra has invested EUR 2.3 billion in that portfolio. This investment policy is selective, targeted on limited number of geographies, Spain, Brazil, the United States and also Australia. We plan to strengthen the value of these assets with battery projects. And on the basis of this current portfolio, we're banking for this activity by 2030 on an EBITDA in excess of EUR 400 million. So furthermore, still long-term energy assets, Cobra benefits, as does VINCI Energies of long-standing expertise to implement construction and maintenance projects for high-voltage power lines, Cobra is currently in charge of 4 PPPs for over 200 kilometers of lines in Brazil and Australia. This is the beginning of an asset portfolio in the field of energy transmission lines where opportunities are numerous in Brazil. They're developing in Australia. And we believe that they will also expand elsewhere, notably in the United States. Short-term activities, all our businesses are driven by the world's mega trends. And on this slide, we're presenting a selection of 6 megatrends that we view as dynamic, both short and long term. For electrical infrastructure, the group generates over EUR 10 billion revenue with the backlog of close on EUR 20 billion. We're one of the world leaders, if not the world's largest utility, rail works, EUR 6 billion with a backlog of EUR 11 billion. Defense and sovereignty, EUR 2 billion in revenue and EUR 3 billion by way of backlog. Water infrastructure, EUR 3 billion revenue with similar backlog; digital infrastructure, we assess our revenue at EUR 7 billion, backlog EUR 6 billion; healthcare, EUR 2 billion in revenue and equivalent backlog. All these vital assets are already reflected in our figures, account for half of the revenue and 2/3 of our order intake in Energy Solutions, and that's set to continue to grow. Our order build continues to grow reaching an all-time high of some EUR 70 billion. That's over 14 months of activities. Offices visibility, we can view the future with confidence without departing from our selectivity policy margin over volume. On the right, the share of France, 29%; Germany, 20% share; and the rest of the world, 51%. Shown here is our guidance, 2026 by business. VINCI Airports' passenger traffic should continue to increase overall in line with global economic growth with various situations across region. VINCI Autoroutes in France, traffic growth should follow French economic output and that of its neighbors, including Spain and Italy. Energy Solutions are expected to see their revenue growth in a mid- to high single digit range, expected improvement of the operating margin already at the highest level in the sector. Total capacity of Zero.e in operation and construction ready-to-build could go from 5 gigawatts currently to about 6 gigawatts at the end of '26. Construction revenue, excluding ForEx impact, is likely to be broadly similar to the 2025 level with at least the same operating margin. Based on these expected developments, assuming no change in taxation, similar corporate tax rate as in 2025, VINCI will deliver further growth in its revenue in 2026, increase in its operating earnings. And further increase in its net income and as initial estimate of free cash flow, which could reach EUR 6 billion. The dividend on the basis of the remarkable performance in 2025, the free cash flow generated and confident in the prospects, the Board will propose at the upcoming shareholders' meeting a dividend of EUR 5 per share, EUR 1.05 has already been paid as an interim dividend. This would be an increase of 5% over 2024, and that would be a payout ratio of 58%. A word to remind you of our capital allocation strategy, consistent strategy for their shareholder on the right, the dividend with the payout ratio target, 60% of net income and share buybacks over and above the prime aim to offset dilution brought about by the issuance of shares to employees. The group will undertake opportunistic share buybacks based on our financial leeway taking into account M&A and the share price performance whilst seeking to maintain, as Christian said, a solid financial structure to maintain the excellent financial ratings. In terms of development on the left, we'll continue to invest in long-term infrastructure concessions, be it auto routes or airports through M&A or investing in our existing assets as well as in long-term assets for the production of renewable power storage and transmission lines. Short-term activities, the group strategy is to go all out on Energy Solutions for 20 years now. We've demonstrated our know-how when it comes to acquiring and integrating successfully new companies and the group remains open in the construction field to opportunistic acquisitions. Shown here is a summary of our capital allocation strategy over the past 3 years. Free cash flow totaled some EUR 32 billion, 3 broadly similar segments. EUR 11 billion, EUR 2.7 million for developing energy assets and PPP transmission lines, EUR 10 billion in M&A to prepare confidently our future. There are main deals over the 3 years. The equity IRR and EUR 12 billion in dividends and share buybacks. Shown here is a recap of the major acquisitions in 2025 already discussed, and I'd like to emphasize what Christian said, we regularly undertake disposals so as to optimize our ROE and improve clarity. The portfolio reviews are regularly undertaken leading possibly to an increase in investments in some assets or disposals in others. With Christian, we've just presented VINCI's financial performance for the year. It's remarkable. This ability to generate long-term value rests on a very strong VINCI culture that is shared by all that makes VINCI unique. This culture is shown on screen, is the long-term mind-set, the quest for all-round performance. We consider both financial and nonfinancial performance inextricably linked. That's the all-around performance. Our Group culture is decentralized, multi-local, agile organization, which is particularly relevant in this polarizing world. Our culture is its trusted management with common principles across its 1,400 BUs, unmatched execution policy, focus on cash generation and great discipline and cash allocation. This culture characterizes VINCI in all its businesses, in all its geographies and characterize its -- all its global assets. It's this synergy, the shared values that make VINCI a rare precious value. At least for us, it's the only way of continuing to create value long term, and we once again demonstrated in 2025, and as we'll continue to demonstrate. Thank you for listening. I'd also like to warmly thank Christian today with some emotion. Christian, you've been Group CFO, if I'm not mistaken. since January 1999. It means that VINCI duration and long term is also present in its executives and management. And if I'm not mistaken, you've just presented for the 28th time the group's financials since you were appointed, I haven't taken into account the share price performance today. 1,100% and over 3,000% with the dividends, that's an average 14% a year on behalf of the almost 300,000 employees of the Group, majority of whom are shareholders. Thank you. Well done. Pierre Anjolras: [Interpreted] You can do just as well. Even better. Let's go with the bank. Together with Christian and the rest of the Executive Board, we are at hand to answer any questions you may have. Eric Lemarié: [Interpreted] Eric Lemarie, CRC. I have 3 questions for starters, if I may. Question number one, future potential calls for tender as part of renewing concession contracts in France. What about the timetable following the presidential elections? The press talked about 2028. Do you have additional information on that? Question number two, the rider to the Cofiroute contract, could you please give us some color regarding how things worked out? Who approached who? We often bear in mind the political risks, but maybe those risk are lower than what we'd expect. Could we expect a similar amendments to Escota contracts or ASF contracts? Do you intend to proceed similarly? And also the EUR 300 million in CapEx, could you give us the sequencing year-on-year and also the return on capital employed for this particular plan? And 1 last question regarding free cash flow. The guidance stands at EUR 6 billion. So what are your assumptions when it comes to working capital requirement fluctuation? Pierre Anjolras: [Interpreted] Regarding the first 2 questions, I'm going to hand over to Nicolas. Nicolas Notebaert: [Interpreted] Now on a more short-term basis, the investment program contract with Cofiroute and also prospects for investments. As Pierre rightly said, what's important when it comes to concessions, particularly when there are legal contract disputes, always maintain dialogue. And that's what we did. And we now have a constructive dialogue. So what is disagreement all about? It's about transferring investments. In the life of a contract, a certain type of investments were not being made. So mechanically, we were able to transfer them to new types of investments, particularly for decarbonizing motorways, multimodal exchanges, reserved lanes, et cetera. So one important factor, compensation. The Court of Appeals issued a ruling in 2025 and so the increase in the TAT divisional development tax which was specific to motorways was supposed to be offset for Cofiroute. Since May 2025, the government orders for the past increase in tax and also for the future increase in tax, and this generated additional investments. And as a result, the court ruling in May 2025, plus our partnership-driven approach meant that we were able to find common ground. So you also referenced other companies. We have submitted a new joint project together with the government regarding Escota. So that's work in progress. The investigation is underway. And of course, we're not ruling anything out when it comes to ASF, but it will be a different approach. As Pierre rightly said, we have completed Stage 1 when it comes to the end of the concession contract because 7 years ahead of time, concession contracts require an agreement when it comes to residual investment we made, and that's what we did for Escota for future competitive bidding. You know that the government believes in dialogue, that's part of the France transport ambition. And they've recognized the merits of infrastructure concession contracts and also tolling for the future because when a country such as ours is heavily in debt, you got to understand that 20% to 25% of tolling proceeds come from international operations. Spain's economic growth outperforms the European average. As you know, VINCI Autoroutes, Highway -- highways are connected to our Spanish highways. So parliament will be discussing that. We will be discussing the framework legislation to prepare for future contracts now that the current -- once the current contract lapse around 2030. So we lay the groundwork for 2028, 2029. And of course, we will continue to be selective and disciplined. We will look at the terms and conditions of these contracts and see to what extent we can take part in those efforts. But we will look at the terms and conditions of those contracts in a couple of years. Eric Lemarié: [Interpreted] Now the CapEx sequencing between 2027 and 2030. In the meantime, still CapEx underway when it comes to networks. I'm talking about new contracts. Were you talking an additional EUR 350 million in CapEx? Nicolas Notebaert: [Interpreted] Could you please repeat the question? Eric Lemarié: [indiscernible] Nicolas Notebaert: [Interpreted] Well, you can do the math easily enough. There's a difference between the EUR 6 billion and the slight increase in revenue. Now that assumption is worth whatever it's worth. But there's a breakdown between working capital requirements on the one hand and the recurring provisions. As you know, we externalize our results, but we do it cautiously. There are 4,000 business units. Everybody provisions for risks that may or may not materialize. And -- it's a structural thing as far as we're concerned. So that's where part of the gap comes from and working capital requirement is managed as close to the field as possible by our operations teams and our administrative managers. And that's been a strong focus in a number of years. And the COVID period served to reveal the issue because we used to choose the path of least resistance, then we start rolling up our sleeves and now it's paying off. It's been 5 years now. And we're still reaping the benefits of those efforts, maybe not along the same proportions of the past few years because there was a catch-up effect. But this means that the EUR 6 billion estimated assumption is pretty reasonable considering the other parameters that we discussed in the press release. Yes, this affects Cobra, Construction and VINCI Energies. This was particularly true for the Construction business this year because the Construction was lagging behind the other businesses when it comes to improving its customer receivable collection processes and billing processes. Now from an operational point of view, because the global environment is trapped with increasing uncertainty, this means that our managers business unit managers are much more cautious when it comes to cash predictions. We usually estimate cash predictions throughout the project. But from this get-go, we try to be in a cash plus in a cash positive situation from the get-go because of the growing uncertainty of the global environment, irrespective of the contracts or the relationship with the customer by definition. The customer is always smarter when their cash is already in our pocket. So from an operational point of view, many talks and working capital requirement talks as well. And so our entire reporting structure is -- has been made aware of that. Now we went through a period of low interest rates. Remember, in Italy, there were 0 interest rates, sometimes even negative interest rates. And so good habits were taken back then to collect as quickly as possible. But when it comes to our vendors, the best thing we can do is pay them in due course. So it's a good thing. It's a good thing, those good habits have continued to prevail. And this explains in part the improvement in working capital requirement. And to our minds, that is a structural thing to a great extent. Sven Edelfelt: [Interpreted] Sven Edelfelt, ODDO. Congratulations for your excellent results. And thank you, Christian, for your contributions. I have a couple of questions. Number one, regarding ANA rate, the ANA output. Could you give us some idea of the CapEx and also the phasing of the initial investments into the Alcochete Airport if you have some idea already. Question number two, Pierre, you talked about the handover between Thierry and Christian. Sometime this year, maybe at the beginning of next year, maybe you'll be willing to share your vision, your 10-year vision of the growth, maybe during a CME, Capital Markets Day. Won't that be an opportunity to add color? Pierre Anjolras: [Interpreted] Nicolas, would you like to take this question on ANA? Nicolas Notebaert: [Interpreted] It's a little early to give you an economic guidance. Now there are contract milestones. We are crossing those milestones and is proceeding at pace. We have an order of magnitude, EUR 8.5 billion. That's been published. Now we're going through an important phase and that's the environmental assessment. As you know, in all Western European countries, the period during which we secured that environmental authorization is an important one. So that's Phase I. That's the environmental phase. And meanwhile, we're working on the final design of the airport, so we can optimize it considering renewed air traffic constraints, which are different now than they were a couple of years ago. And we are also looking at financial mechanisms. So the figure I'm giving regarding Portugal is already 1 year old, and it will shift further based on how we optimize the projects and also based on the outcome and the environment assessment. But it's not going to start right away. This is a project that will take several years to achieve. But the order of magnitude for this airport in Portugal is EUR 8.5 billion, as I said. Now in terms of financial reporting, that's something we pay close attention to because it is important. And that's why we all gathered here today. If we look at the timetable and the content of the Capital Markets Day, we don't have a clear guidance yet, but we've put our heads together, but I can't make any promises as to the outcome. Pierre Anjolras: [Interpreted] Other questions? Unknown Analyst: [Interpreted] I have a couple of questions, more anecdotal questions. You talked about BESS, Battery Energy Storage Systems. Do you -- are you thinking of signing a similar contract between Cobra and Tesla, for example, regarding the EUR 6.4 billion, you gave us some idea regarding EBITDA. You gave us a figure during the presentation, but the EUR 2.3 billion when it comes to current operations, is that generating EBITDA? And when it comes to M&A, you talked about the Fletcher acquisition in New Zealand, I think, and also FM Conway. Now in terms of mergers and acquisitions, I have in mind VINCI Energies, VINCI Construction is also making acquisitions. What should we expect? Should we expect regular acquisitions internationally from VINCI Construction? Or do you have countries that you prefer when making acquisitions? And also, you talked about the EUR 7 billion in revenue for digital infrastructure. So how much -- what's the share of data centers out of the EUR 7 billion? Pierre Anjolras: [Interpreted] Regarding the BESS, Battery Energy Storage Systems, your question is twofold. First of all, you're asking about our design and build contracting activities, VINCI Energies and Cobra are doing that. Arnaud can tell you more. Jose Maria can tell you more. And then there are investments being made in terms of long-term assets, and we are planning to invest into Battery Energy Storage Systems so as to further enhance the value of our solar PV facilities. Arnaud, anything you'd like to add? Arnaud Grison: [Interpreted] Yes, it's true. For a number of years, we've seen a roll-up in those BESS installations and facilities for various customers in Europe. So we have an EPC positioning. We don't have a framework agreement with any battery provider or even Tesla, but most of those batteries are Chinese batteries. China is a major provider of battery technology. So it's up to the developer and to the -- it's up to the investor to decide what kind of battery they want. Pierre Anjolras: Jose Maria? Jose Maria Lacabex: [Interpreted] [indiscernible] Invest only for supply our projects. We are not going to do or invest in a standalone capacity. And we expect to invest at least 5 gigawatts hour for our own projects in the next 3 years. And this allows us to increase our equity IR in around 200 basis points. Pierre Anjolras: And to add to that, we are considering, as I said in the presentation, a new investment on the renewable plants in Australia and actually an investment in a plant includes the investment in BESS. [Interpreted] Now in terms of construction, as we said before, our investment policy is an opportunistic one, usually designed to strengthen our existing strong positions where we're already feeling comfortable. Now as it happens, 2 years in a row, we had an opportunity to make the Conway acquisition in the London area. And back to back, there was another opportunity for another acquisition, Fletcher. And before that, the latest significant acquisition by VINCI Construction was back in 2018, Lane. So just because we make 2 major acquisitions back to back in 2025, 2026 means that we will do the same in 2027. It will depend on opportunities. If the opportunity arises, we'll go for it. Otherwise, we'll abstain. Now VINCI Energies, however, is more of a continuum because we have a recurring bumper crop of 30 acquisitions per annum. We're talking hundreds of millions in annual revenue, thanks to M&A. And that's part of our modus operandi. And we do it so often that it's almost akin to organic growth. But like I said, it all depends on what opportunities arise as indicated when I talked about our capital allocation policy. When it comes to digital infrastructure, I did emphasize the fact that regarding construction, flow business against 90% in major projects remaining 10%, but we could be saying the exact same thing regarding Energy Solutions. If you look at the share of EPC contracts for all Energy Solutions at Cobra, it's about 10%. For digital infrastructure, we have pretty much the same take. Now I don't have the exact figure top of mind to try and answer the question you posed, but we have major projects and there's a lot of visibility there. I'm talking data centers. And there's a lot of activity, a lot business around digital infrastructure between anything that happens between the hyperscaler and your smartphones. We're talking a lot of networks, a lot of assets. A lot of installation and maintenance contracts, a lot of cybersecurity aspects. So we have to factor it all in, into that EUR 7 billion figure. Now I said the flow business accounts for 90% of the mix. And that's much more -- that's much more recurring business than data centers. So data centers, we're talking major contracts, Cobra's EPC contracts, whenever they do want such a contract, there's a lot of visibility, and it's easy to understand. But you've got to bear in mind the recurring repeat flow business, which accounts for 86% of our contracting activities. And I know, I believe that this is a major differentiating factor when it comes to construction for VINCI. And this also explains the high quality for results. But whatever is happening around the data centers is going to fuel our business throughout the digital infrastructure segment. So yes, we do have a presence in data centers, but we mostly have a presence in the recurring multiyear flow business, what VINCI Energies calls Axians. I mean that accounts for 25% of VINCI Energies. And digital infrastructure can also be found in Energy Solutions because you can find it within a building, that's what we call [ sport ] building. You'll find that in electrical grid as well. That's what we call smart grids. Digital infrastructure is everywhere, smart grids, smart buildings, microphone please, regarding the contribution, no forecast yet. We have tentative figures only in 2023 where we have a full over 1 gigawatt on a full year basis when it comes to operations. So I can't -- I prefer not to give you a figure, first of all, because it wouldn't be significant, not even at Cobra scale, let alone at VINCI scale. But yes, this will start to generate EBITDA as early as 2026. We started generating EBITDA in 2025 a little bit because, Jose Maria, correct me if I'm wrong, operations began in June, July, started generating earnings, but I don't know how significant that is. So that is why I prefer to wait until '27 before I give you the guidance. That's how long it takes for the asset development pipeline to actually reach cruising speed. Unknown Analyst: [Interpreted] Well done for your results. Just following up on Zero.e, 1 giga for this year, we report the figures separately as of '26. A question on airports. We see slight margin erosion, traffic increase. Could you maybe just rehearse the reasons for that? And Gatwick specifically, could you give us some color and a time horizon? And final question, you mentioned a bit more portfolio rotation going forward. Could you enlighten us as to the criteria that will be applied? Pierre Anjolras: [Interpreted] On the Zero.e figures, I won't answer immediately, when it becomes significant, we'll report. But there's no point giving overly small numbers that can be misread. I think we'll be still in that situation in 2026. So it's preferable for us to give you an indication once these assets are in operation in -- reach cruising speed, it's far more significant. Question on the airports. A couple of questions on the airports, Nicolas. Nicolas Notebaert: [Interpreted] So your question on the airports. Well, firstly, we regularly make acquisitions that don't necessarily have the same EBITDA EBIT margins. The annual comparisons are not always like-for-like. Secondly, that we had some one-off high turns EBITDA and EBIT in 2024 versus 2025 and EBITDA EBIT margin, very high, that's grown significantly. And final point mentioned in the presentation, I believe it was Christian, we're going to change the motor contract on Phnom Penh Airport through September. We were in full concession. We were compensated, that was a one-off of the earnings. But today, we have an operation contract for Phnom Penh Airport, which obviously doesn't have the same EBITDA or EBIT margin. Those are the prime reasons that justify this consolidation and margin on VINCI Airports. Gatwick. Color on Gatwick -- Gatwick, as we said, we have a plan that we're now rolling out the CapEx, same to that's being development, about GBP 2.2 billion for that with the latest legal challenges are underway that approval was given. But as I said, we have to follow the latest rulings. But without delay, we're launching the design and works phase, 45 million is Gatwick capacity that will grow to 80 million passengers. So with that investment, we can up the capacity significantly. On portfolio revenues, just to reaffirm that we're doing that. And Christian drawn up an inventory. I mean there are a number of significant disposals. Those are amounts in the P&L and cash. Yes, we're active. We're developing and we're active to focus and we've done that, but we've always done and we'll continue to do. Pierre Anjolras: [Interpreted] If there are no further questions in the room, we can take questions on the call. Questions in French first. [Operator Instructions] First question, Patrick Creuset from Goldman Sachs. Patrick Creuset: [Interpreted] Christian, congratulations for the great numbers. In your release, you mentioned the strategic review of the portfolio through your businesses with the goal of optimizing the return on capital. Could you tell us what type of asset will be involved? What will be the criteria, the potential scale of this review. And also in terms of capital allocation, how you currently assess opportunities for M&A business, region and also size? Christian Labeyrie: [Interpreted] As I've just indicated, this principle of reviewing our portfolio concerns all our businesses, all our geographies, we do it. We'll continue to conduct that review. I'm incapable of saying to produce -- or depends what the ROE asset by asset, how to improve the Group's clarity. That would guide us, but we are not saying that these are times where we're going to increase the capital -- the volume did for M&A. There's a pipeline of M&A at VINCI Airports an M&A pipeline at VINCI Highways, at VINCI Energies and VINCI Construction that remains active for opportunities. We do that across our businesses, and we remain open to all geographies as long as we're comfortable there. And with stronger reason, we're more comfortable in geographies where we're already present, where we're already strong to do the various deals that we've mentioned. But if we go back further, without being present in Japan, we had the smart idea was from Nicolas to go to the Osaka and Kansa Airports. And Christian mentioned that. So we remain very open and very opportunistic. And similarly, we have no M&A investment targets per year. You've seen it's far lower this year than last year. And on average, that is pretty much the same thing, 3-year average. I presented that on the reflection over the past 3 years of M&A CapEx. But we're disciplined when we need to be disciplined, that is we don't do any old things. And if there are 3 or 4 deals to be sealed, Christian has the wherewithal, the munitions to strike a good deal or several good deals when we believe the time is right. And what we could add on that, says, Christian, that across our businesses, I mean we're not an investment fund. So we're not in the business of buying assets for the pleasure of buying. When we buy something, it's to nurture it, manage it to extract value through management that is a position of control even 100% in Energy, Cobra, VINCI Construction and in Concessions to be in control or co-control. If it's just to be a passive partner, not really in terms of the revenue that we contribute extensively through our work. The idea is to have a hope of improving receipts if it's a pure PPP with a fee paid linearly over the duration of the contract. It's a less interest. Cobra did in 2025 to seed its stake in a project acquired in Brazil, for which there was no upside on the traffic. It was clearly a financial deal. Once the development and construction risk is behind it can be -- can make sense to sell the asset to a pure financial player, an investment fund. Patrick Creuset: [Interpreted] So the minority stakes that might be sold or disposed of as your portfolio rotation? Christian Labeyrie: [Interpreted] It's possible. Look at the disposals of the year. There weren't just minority stakes or investment. Pierre Anjolras: [Interpreted] Next question. Elodie Yvonne, JPMorgan, over to you. Elodie Rall: [Interpreted] Yes. Sorry not to be with you this morning. Best wishes, Christian. Just to start, we sense that you're more ambitious regarding your return to shareholder policy. You mentioned opportunistic share buybacks to what level could you go and notably regarding the dividend 5%. I mean that's a priority. So clearly, that we're moving away from a payout policy so with things possible in terms of a dividend increase going forward, perhaps more dynamic, the net income. And maybe another question, if I may. Would you have a comment on the German contract, you're beginning to see the fruits of that and also highway traffic year-to-date? Are you seeing an inflection on the residential -- French residential market that you lost at '25. You see some green shoots of hope there. And I see on the portfolio review, you mentioned that at a great length, but how -- where does ADP feature in your thinking? Pierre Anjolras: [Interpreted] On the dividends, I've spoken about that, our goal down the road was 60%. I mean if the payout ratio is to head to 60%. On the share buybacks, in fact, we're pretty much the end of the catch-up of the dilution several years. generating new shares for the group savings scheme. So we're not ruling out the possibility of going beyond that. But once again, it will be opportunistically, as I indicated, based on the capital that we have to allocate on the expansion, be it M&A or developing existing assets and depending on the share price performance. I can't give you more guidance than that. But you can say is that the dividend policy. We don't want to change it every other day. But to give some guidance that we've always done on the share buyback, there we can be more opportunists I suppose you look at the Americans who're massively buying back shares when it suits them. depending on their CapEx plan, the GAFA is spending hundreds of billions in CapEx, maybe they'll do a bit less share buyback. That's part of the financial strategy. Highly complementary dividends and share buyback, we do both. In the CAC 40, same return to shareholders in terms of its market cap as VINCI today. Next, on highway, auto route traffic, they're significant. I mean January is never significant month of January. Not much to say what to draw from that. On residential housing construction with the exception of VINCI Real Estate, that's a fine company and the impact is limited on VINCI as a whole, notably construction is not at all very little dependent on the building of new homes. It's negligible share. And so the impact of residential property development aside from VINCI Real Estate has a little impact on the Group financials. What we can say Virginie, what the market is challenging. The housing stimulus plan announced to [indiscernible]. So that hasn't yet been placed on the statute. But so we wouldn't really see the effects of that before the coming months and that we're in a year of local municipal elections that are never times that are propitious to the dynamic launch of new projects. But whatever the housing stimulus plan is a good signal for the sector to kickstart the momentum after 3 years of crisis. There's a question about Germany. Well, in Germany, there are 2 major stimulus plans. There's one for defense and stimulus package for infrastructure. From what our German teams tell us and when we ask them, we need to question them several times to get a sense of what's happening between the EUR 500 billion at federal level and twice EUR 500 billion and how it percolates down to contracts. It's not easy to read. But the sense, yes, it's beginning to be visible in defense. I remind you that in defense, VINCI Energies made an acquisition of a company SAN last year that primarily works in German shipyards for the German Navy and has very sustained activity and growth prospects. And so that momentum is part and parcel of the defense stimulus package. So for the infrastructure stimulus German teams have great difficulty in seeing a significant shift to date on that front. Arnaud? Well, what we can say is we indicated ahead of phase on energy infrastructure stimulus package, there are major needs, but they're not fast-track projects because they need authorizations, there are appeals, et cetera, a lot of design work. So it's positive over the long term, but they're not hyper growth rates short term in defense, it's production capacity. So it's positive for one sector, but it's not hyper activity, either short or medium term. But what is, however, clear is that these announcements have generated a climate of confidence and that weighs heavily in the economy of the country. And -- the Germans are fortunate in that respect. That's why it's good to be in Germany. It's good to continue to expand in Germany. And as you saw these past few acquisitions, as you saw in the contracts, be it VINCI Energy, of course, but also Cobra with the major Cobra projects in Germany, VINCI construction there for a long time. Also VINCI Highways, which is the leading operator of German highway PPPs, and we haven't seen nothing yet in terms of project launch, but that could form part of the stimulus package. We're very well positioned to benefit from that. Questions in English. If you want, you've got the translation headsets. Okay. Let's have the first one. Operator: Our very first question from the English conference is coming from Harishankar of Deutsche Bank. Harishankar Ramamoorthy: I have a few. Maybe the first one would be around order inflows. When I look at your outlook for 1C Energies, solid mid-single digits to high single-digit growth. But in Q4 -- till Q4, we have not seen inflows improve a lot. So does the outlook imply that you are expecting inflows to turn the corner pretty soon? The second one on the German side of things. Any time line by which that could overtake U.K. And lastly, on the working capital, I do see you referencing better customer payments and so on. But when we look at the balance sheet, it looks like trade receivables are broadly flat, whereas it's the payables that have increased significantly. So is it a question of delayed payments to vendors? And if that is the case, then is that structural? Unknown Executive: [Interpreted] Quick answer to the second part of your question. The answer is no. It's been a long-standing policy for us to pay our vendors in due course. I don't know what it is like in other countries, but in France, the authorities pay close attention to that and Vinci has never been named or shamed with that kind of thing. we don't artificially prolong paying our vendors. Pierre Anjolras: As for the order inflow, it's complicated to look at quarter-by-quarter. And I think what you have to do is in the 12 months rolling. And another thing is the order inflow of SCNG was impacted also by a very large project in the past years. And when you restate that of the very large project, over EUR 50 million, the order inflow is still increasing. I think it's plus 4% this year. So yes, there's no worry. And as the guidance is supported by the -- what we see in the order inflow. Unknown Executive: We need to be very vigilant when it comes to analyzing the order inflow because VINCI has a lot of multiyear contracts, a lot of recurring business. So usually, we input the contracts at the beginning of the year. So during the year, we burn through the contracts that came in the year before, and we generate business for the year after. And this is true for VINCI Energies as well as other players. Now regarding the question on Germany, these are our estimates. Next year, revenue for VINCI in Germany will be higher than VINCI's revenue in the U.K. I'm not saying that the U.K. revenue will go down, but we will simply grow ours faster. In 1 year's time, things will have been reversed. Germany will be our second international contributor to revenue after France. That's our prediction. Next question. Operator: Our next question is from Ruairi of RBC. Ruairi Cullinane: Congrats on the results. One question on tax. So do you think the tax targeting large French corporates specifically needs to be exceptional to be constitutional? Would you challenge this tax if it became an even more regular feature of French budgets? Yes, I'll leave it there. Arnaud Grison: [Interpreted] Don't ask me, ask the government and ask parliamentarians. We can answer that question, particularly since last year, the surcharge was presented as a one-off thing that would apply just that year. And we're almost at the end of the budget approval process because it's been through parliament. So without too much surprise, that surcharge, that surtax is going to be approved and this means that a promise was made to us last year, but they're not keeping it. So I can't possibly tell you what will happen in a year's time. We do realize that for a while now, SME leaders and corporate leaders in France, major corporation CEOs are making statements to the effect that this goes on for too long. Tax-wise, France will be less competitive than the rest of the EU member states, and this could actually hurt the French economy. I think as the Head of Total Energies, who said that if corporations have a choice between 2 countries where the tax rate is 15% to 30%, what do you expect them to do? Where do you expect them to go? So -- and there's also an impact on the surrounding ecosystem, the employees, the vendors, suppliers, et cetera. So reason should prevail at some point. You can't continue to hurt the French economy's competitiveness compared with Spain, Italy, the U.K., Germany, et cetera. So we can hope that eventually reason will prevail. Who knows... Let's move on to the next question. Operator: We have a question from Nick Mora, Morgan Stanley, a question in French. Nicolas Mora: [Interpreted] Congratulations, Christian. I'm sure you're looking forward to retirement. [Indiscernible] To sell shares here. Now profit margin, let's start with that. Could you please give us an update on the upside for construction, Energies, Cobra, AS. So 2025 went pretty well overall. Profit margin was driven by M&A in construction and also profit margin for Cobra is being driven by renewables. So -- is that just a medium-term thinking? Or are you expecting that the improvement of 20 basis points to continue year after year? Now regarding airports, profit margin is under pressure -- was under pressure in 2025. If we look at '26 and '27, what should we expect? We're seeing an increase in costs. We look at the U.K. business rates. Prices are being moderated. Now the traffic situation is so so. So do you think that profit margin has already passed its peak? Arnaud Grison: [Indiscernible] Nick Mora -- regarding our contracting business, there's still potential. But we've been seeing it for a while now and yet people struggle to believe us. And this is true for construction as well. Thierry Mirville gave us a chart regarding the past 10 years, showing a regular steadfast increase in construction EBIT and also a cash conversion pattern that is as good as VINCI Energies and Cobra. So yes, those are value contributors and the value should be assessed properly. And needless to say, VINCI Energies and Cobra, you heard this several times in the course of the presentation is actually being supported by all customer requirements. There's so much to be done. So obviously, we're not going to double the profit margin, but there's still room for margin to continue to thrive. And the guidance has been set accordingly. Now how long will that last? It's hard to say. But yes, over the short term, we expect that trend to continue. When it comes to airports, that's slightly different. Nicolas can tell you more about that. We have a mixture of different platforms and each platform has its own trajectory. Nicolas, why don't you go ahead? Nicolas Notebaert: [Interpreted] And sometimes it takes a while for the effect to be fully felt. Now we have a new economic regulation contract in Mexico, as we said before. And -- so we're talking 6% to 7% above inflation over the 5-year period, which is good enough already because usually, our method is based on regular capitalization. And clearly, this platform has been outperforming the sector. Obviously, we've got London Gatwick and we've got the Lisbon Airport. So there will be regulatory discussions as well. So we haven't yet set the course in terms of tariffs, but we are aligned with inflation. So future expectations in terms of profit margins from airports have yet to reach the peak. But the situation is highly fragmented geographically, so is growth. But the recent news regarding Mexico is showing that these 5-year contracts are helping us to renegotiate so as to renew our profit margin prospects in the future. Operator: [Interpreted] Very well. If there's nothing further, if there are no other questions. Over to you, Pierre, for the conclusion. Pierre Anjolras: [Interpreted] Well, thank you so much for attending. Enjoy the rest of the day. Enjoy the rest of the year and see you very soon.
Operator: Ladies and gentlemen, welcome to the presentation of Vontobel's Full Year 2025 Results Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] and the conference is being recorded. [Operator Instructions] At this time, it is my pleasure to hand over to Christel Rendu de Lint. Please go ahead. Christel De Lint: Good morning, and a very warm welcome from Georg, Jan and myself. Thank you for joining us today. Georg and I look forward to sharing the progress we have made on our strategic priorities as well as the highlights of our financial results. Jan Marxfeld, our CFO at Interim, will then take you through the detailed numbers, after which we will open the line and take your questions. 2025 was a successful year for Vontobel. We achieved strong financial results and made decisive progress on our strategic priorities. We reached a net profit of CHF 280 million. We delivered significant growth while at the same time, absorbing lower interest rates and a much weaker U.S. dollar. Assets under management increased to CHF 241 billion, supported by strong inflows in private clients and strong inflows for institutional clients in four of our six investment boutiques, notably in fixed income. Our capital position remains very strong. We closed with a CET1 ratio of 19.7%, thanks to record capital generation and effective resource management. We will propose a continued attractive dividend of CHF 3 per share. We made decisive strategic progress. First, we integrated our quantitative investment boutique into the broader investments organization. The tighter integration will accelerate ID generation insights and innovation. We also divested customer funding, a digital lending platform. We want to concentrate on our growth areas. Second, we captured organic and inorganic growth. In private clients, we hired new relationship managers in key markets and will open an office in Los Angeles to see strong client demand. We welcome the new employees and clients from IHAG Private Bank. This integration was a resounding success. It was completed ahead of schedule on the budget and with very positive client feedback. Meanwhile, our institutional client teams operate sharper, faster and higher on the value chain. They achieved standout flows in several flagship funds, secured a number of prestigious mandates. Third, our CHF 100 million efficiency program is running ahead of plan. We have structurally improved our cost income ratio and redeployed resources to growth areas. The program will be completed by the end of 2026. Let me now briefly recap the environment in which we delivered these results. Global bonds and equities gained though volatility remained high. Bond yields drifted down as both the SMB and the Fed cut interest rates. The Swiss franc appreciated sharply, driven primarily by safe haven demand. This environment created dual financial headwind for us. The lower interest rates weighed on our net interest income and the much weaker U.S. dollar reduced our foreign currency income. Yet, these conditions clearly played into the strength of our credit light investment-led model. We helped our clients diversify and invest with confidence. The proof lies in our strong net inflows and continued high client engagements. Our unique integrated investment model underpins our success and remains the foundation for our future growth. We are an active investment firm serving two complementary client segments, private clients and institutional clients. These are mutually reinforcing in skills and business and complementary in the diversification benefits. Both segments grow and rely on the expertise of our single factory, investment solutions and our dedicated experts. Our strategy is clear. We are doubling down on this model to realize its full potential. This will drive long-term value for our clients, employees and shareholders. I am now turning to private clients which delivered another year of strong growth. Operating income grew by 5%, supported by continued client demand for structured investment solutions. While we saw a brief slowdown in April, activity bounced back and stayed above historical levels for the rest of the year. We attracted net new money of CHF 5.8 billion with continued strong growth in developed and Western markets. This ranks us in the top quartile amongst peers. We win clients with our investment expertise not through leverage. We stick to our defining and successful approach using our investment know-how to grow in Western and developed markets, thereby generating steady recurring revenues. We are committed to building on this track record of steady growth. We will recruit and develop top caliber relationship managers and are excited about opening our Los Angeles office later in H1. We will further invest in our market-leading platform for structured investment solutions, thereby, expanding its capabilities. Finally, we will complement our organic growth with highly selective acquisitions. We have successfully acquired integrated many banks and most recently, the client book of IHAG Private Bank. This strong track record positions us to pursue further opportunities in key markets such as Switzerland, Germany and Italy. And now over to Georg. Georg Franz Schubiger: Good morning, everybody and also from my side, a very warm welcome from Zurich. Last year, institutional clients net new money was minus CHF 1.6 billion. 3 years ago, outflows exceeded CHF 10 billion in 1 single year. So we made strong progress, but we are not yet where we want to be. Our ambition remains to grow institutional client flows by 4% to 6% through the cycle. In absolute terms, we want to generate annual net inflows of at least CHF 4 billion. First, I'll update you on where we stand in institutional clients. Then I will share the strategic actions that we are taking across our investments unit to drive our next cycle of growth. Over the past 18 months, institutional clients have executed the strategic measures we outlined at our Investors Day in 2024. These measures have sharpened and accelerated our distribution capabilities. We have introduced a new coverage model for integrated solutions. We replaced regionally different processes and systems with a fast and globally consistent client journey. We have reinforced our teams with senior hires in priority markets, particularly Asia. These changes are already yielding results. Our response times have improved, conversion rates have increased and our client relationships have deepened. The operational and financial results are clear. Several of our flagship funds have been exceptionally strong, have seen exceptionally strong inflows. This includes CHF 1.8 billion into credit opportunities and CHF 1.4 billion into emerging markets debt. We have won prestigious mandates. For example, one, is their CHF 600 million multi-asset mandate from the Auckland Future Fund Board. Vontobel emerged as the winner in a highly competitive selection process, including 21 participants. Our distribution strength is also evident when compared to peers. In 2025, Vontobel ranked in the top quartile for European institutional fund flows underlying our distribution effectiveness. These are tangible proof points that our strategy is working. Our disciplined execution is also driving tangible results across our investments unit, our factory that serves both private and institutional clients. After the so-called industry winter that started in 2022 for active and especially for emerging markets focused firms, the industry is now back in growth mode. And so is Vontobel 4 out of our 6 boutiques achieved strong investment performance, grew assets under management and attracted significant net inflows. These 4 boutiques delivered a combined net new money growth rate of 6.7% in 2025, well ahead of most active managers in our industry. By delivering strong performance and innovation across our boutiques, we attracted net inflows in every asset class. To accelerate the next phase of growth, we will continue to realign and expand our offering towards areas with attractive economics, strong anticipated client demand and demonstrated performance. First, we will launch new ancillary fixed income offerings that are already under development. This will build on the outstanding success of our flagship funds, including emerging markets that credit opportunities and strategic income. Second, we will expand our solutions offering. Third, we will scale our strong private clients and Swiss institutional clients multi-asset track record to a wider set of institutional clients. And fourth, we will raise the next fund in Ancala. For the remaining 2 boutiques, quantitative investment and quality growth, which have seen significant outflows, we have an equally clear strategy. This year, we completed a leadership transition at quality growth, ensuring continuity for a boutique founded in 1984. Quality growth continues to deliver stable double-digit returns, making it an attractive diversifier. The boutique has seen significant retail outflows. These were driven by the current focus on AI-driven mega cap stocks. Quality growth, however, continues to resonate with a set of institutional clients, they value the distinct and defensive style of quality growth. Style preference cycles can span years. Flows could therefore remain volatile. The boutique financials of quality growth are attractive. Our development resources will, however, be concentrated in fast-growing areas, mainly in fixed income solutions and private markets. Systematic investing has been challenged by stop and go macro conditions, and we no longer see pure systematic strategies as a growth area. Nevertheless, we will continue to serve existing clients and keep our capabilities in place. Going forward, we will focus our quantitative expertise on 2 priorities. Driving tailored solutions and supporting our fundamental investment teams. To make this shift, we are integrating the quantitative investment boutique into a central hub. This hub will eliminate overlaps and drive idea generation, insights and innovation across all our investment teams. We have already seen the benefits of this integrated approach. One example is this sustainable equity income plus. It blends our quantitative expertise and fundamental research to deliver outstanding results for our clients. This integration also positions us for the previously communicated insourcing of the Raiffeisen Futura funds in July 2027. Most of those assets are booked with this boutique today. This change will not impact any other areas of our long-standing and successful cooperation with Raiffeisen. And we continue to expect a minimal impact on the group profit. Now let's turn to our structured solutions business. It gives clients access to tailored investment solutions at scale. We combine customization, automation and scalability on a leading technology platform. Importantly, Structured Solutions has operated profitably in every single year for more than 20 years. That unbroken track record comes from our franchise being uniquely diversified. First, in terms of client types and channels, we work with external asset managers and banks, support our internal private clients and provide white label issuance services. We serve individual investors via exchange-traded products. Second, we maintain a balanced mix across 2 lines. Investment solutions and exchange solutions. Investment Solutions include yield-enhancing certificates and managed certificates. Exchange Solutions offer products such as warrants. This combination stabilizes overall revenues. Third, in terms of geography, We are the market leader in both businesses in Switzerland. We hold the second spot in Germany for leverage certificates. And we have profitable operations in select key European, Middle Eastern and Asian markets. We will continue investing in our leading technology to stay at the forefront of innovation for our clients. This will defend and expand our market share. And finally, we have substantially improved our efficiency over the past 3 years. Our cost/income ratio is structurally lower decreasing from 78.2% in 2023 to 72.9% in 2025. This underscores the progress of our efficiency program which is ahead of schedule with over 80% of the targeted savings already achieved. The efficiency gains have been driven by firm-wide initiatives including the consolidation of our IT infrastructure and applications, reductions in vendor spending and process automation. The program has allowed us to lower absolute costs while continuing to invest into our business and technology. We are currently implementing additional measures to build on this momentum. We remain fully committed to achieving the CHF 100 million in savings by the end of 2026 and embedding a lasting culture of cost discipline across the organization. Our objective remains clear. To deliver sustainable growth and create attractive returns for our shareholders through disciplined execution of our priorities. We are confident that Vontobel has the right strategy, the right business model and the right team to achieve our through-the-cycle targets. With this, let me hand over to Jan, our Interim CFO, to cover the financials. Jan Marxfeld: Thank you, Georg. Good morning, and a warm welcome. 2025 was a successful year for Vontobel. We delivered strong financial results. We generated a profit of CHF 280 million, up 5% year-on-year. Profit before tax increased to CHF 364 million. As Christel mentioned earlier, we managed to navigate dual headwinds, CHF 34 million from lower interest rates that compressed our net interest income and CHF 27 million from currency translations into our reporting currency, the Swiss franc. The Franc significantly strengthened against the U.S. dollar and almost all other currencies. This matters because 37% of our operating income is in Franc's compared to 78% of our costs. Currency swings, therefore, have an impact on our reported profitability. But I'm pleased to report that our underlying profit grew by CHF 74 million, more than overcompensating these headwinds. The efficiency program achieved CHF 41 million run rate savings, while business growth contributed another CHF 33 million. Our reported results include one-offs of CHF 19 million, slightly lower than 2024. These are what we call cost to achieve related to the efficiency program and the IHAG client book integration expenses. We expect a cost to achieve of around CHF 18 million in 2026 to complete the program. On the tax line, we realized a lower effective rate than in 2024 due to the regional mix of taxable profits and the fading of last year's one-off impacts. We are maintaining our effective tax rate guidance of 22% to 23%. We closed the year with assets under management of CHF 241 billion, up 5% year-on-year. This increase was driven by positive net inflows and market performance, again, partly offset by currency headwinds. Net new money rose to CHF 4.2 billion, up from CHF 2.6 billion last year. Private clients delivered CHF 5.8 billion of inflows which is 5.2% annualized growth. This is certainly in the upper half of our through-the-cycle target range. 4 out of our 6 investment boutiques attracted solid net inflows. But the net outflows from our quantitative investment and quality growth boutiques more than offset these. The stronger Swiss franc also reduced assets under management by CHF 10.1 billion. This reflects the fact that 3/4 of our asset base is foreign currency denominated. Performance and other effects added CHF 17.6 billion. These predominantly include market gains. Furthermore, we have effects from the integration of the IHAG client book, the divestment of cosmofunding and our decision to stop developing certain service offerings. These are connected to the strategy and the next steps for the quantitative investment boutique, which Georg explained earlier. Turning to operating income. It increased 1% to CHF 1.4 billion. Setting aside the FX headwinds mentioned earlier, on a constant FX basis, our operating income grew 3%. Net interest income declined 30%, mainly due to the SMB's successive rate cuts throughout 2024 and in early 2025. Net fee and commission income grew 2% preliminary, reflecting higher average assets under management. Trading and other income increased 6%, mainly due to the strong client demand for structured solutions throughout the second half of the year. By segment operating income in private clients yet again grew strongly by 5%. This as lower interest income was more than offset by positive effects of higher asset levels and high client activity. Within institutional clients, operating income fell 7%. This is because of slightly lower assets under management and the tail end of shift away from emerging market products. Turning to Slide 20 and the Private Clients margin. Our recurring margin remained stable at 40 basis points throughout the year. Growth in the ultra-high network segment has put some pressure on the recurring margin. That is because larger clients typically deliver a somewhat lower margin, but this has been offset by revenue management and the launch of our new modular product offering. We saw continued strong margins in structured solutions. The 2 basis point of net interest compression is a direct consequence of the lower market interest rates. The transactional margin reflects a normalization and activity levels. As a reminder, this item includes client transactional revenues not related to structured products. In institutional clients, the overall margin declined 3 basis points to 34 basis points. This is a direct result of the prior period shift away from emerging market funds and mandates. In the years 2022 and 2024, industry-wide demand for emerging market products weakened. This compressed overall margins as EM-related products typically come with a higher margin. But in 2025, the share of emerging market assets flattened out at around 10%, marking the end of this headwind. Our gross flows have now turned clearly margin accretive. This reversal is supported by our continued pricing discipline and more importantly, the success we are enjoying with our higher-margin fixed income solutions and emerging market debt offerings. Moving to costs. Our CHF 100 million efficiency program is running ahead of plan and is delivering tangible results. By the end of 2025, we have already realized CHF 84 million exit rate savings. So with 66% of this 3-year program done, we realized 84% of the savings on an exit rate basis. Now if you look carefully at this slide, you will see that despite of what I just said, the costs are flat year-on-year. It is our efficiency program that enabled us to do so even as we reinvested for growth and our cost base includes CHF 90 million of one-off costs to achieve and the IHAG client book integration costs. We will see further benefits next year. Because all the efficiency measures we identified throughout this year will be fully reflected in our P&L of 2026. Coming to the all-important cost/income ratio. Year-on-year, this improved further to 74.2%. Another consideration is the one-off effects. Adjusted for the cost to achieve of the efficiency program and the IHAG implementation, our cost/income ratio was even lower at 72.9% this year. In summary, this means we are well on track for our below 72% targets. Now to another core strength of Vontobel, our balance sheet. It is fully market-to-market, and we hold around CHF 25 billion of liquid assets which is more than 70% of our total balance sheet. Our Structural Solution business is subject to conservative and highly effective risk management. This has again been proven during the market turmoil surrounding the so-called liberation Day in April. Our lending book remains deliberately small and conservative. It comprises CHF 2.1 billion of Swiss mortgages and CHF 5.9 billion of Lombard loans backed by liquid collateral. We apply strict underwriting standards and a robust risk management, keeping credit losses minimal. Earlier in the year, we issued our first CHF 200 million senior unsecured bond, which was met with high investor demand. This further diversified our funding base and demonstrates our strong market access. Overall, our liquidity is strong with a liquidity coverage ratio of 150%. Since listing in 1986, we have reported a profit every single year. This unbroken record underscores the strength of our conservative risk culture and the prudence of our balance sheet management. Vontobel has a very strong capital position. Our CET1 ratio stands at 19.7%, up 3.6 percentage points from a year ago and up 1 percentage point from 2023. Since then, our capital-efficient business model has allowed us to first, fund 2 strategically important acquisitions. Second, support business growth; and third, absorb the Basel III Final regulation impacts all while funding an attractive dividend every year. This development reflects exceptionally high capital generation and disciplined management of our risk positions. For example, under Basel III Final operational risk-weighted assets are now largely based on past operational losses because our operational losses are minimal or corresponding RWAs are low. Additionally, the previously communicated optimization measures played a role. These are now largely complete. Our CET1 ratio comfortably exceeds both the 8% regulatory minimum and our 12% internal targets. This capital position gives us the flexibility to support further organic and inorganic growth while sustaining attractive returns for shareholders. One of the special things about Vontobel is that we take a long-term approach to shareholder value generation. And we are creating shareholder value this year, but also every year since 2014. Our return on equity reached 12.2%, constantly above our estimated cost of equity of around 9%. This year, our tangible book value per share rose by 15% to 33.86, our strongest annual increase in more than a decade. Including dividends, tangible equity per share has grown over 200% since 2014, underscoring the compounding power of our capital-efficient investment-led model. In recognition of this robust capital generation and healthy profitability, the Board will propose a continued attractive dividend of CHF 3 per share for 2025. This is equivalent to a payout ratio of 60%, in line with our target of more than 50%. To summarize, we achieved significantly higher net profit offsetting both lower interest rates and FX headwinds. Asset under management grew by 5%, and we recorded improved net inflows. We are making good progress narrowing the cost/income ratio down towards our 72% target. And our balance sheet and capital positions remain very strong. We ended with a CET1 ratio of just below 20%. Taken together, these results demonstrate the strength of our business model, especially in the prevailing macro environment and the strategic progress we are making. With that, I hand back to Georg. Georg Franz Schubiger: Thank you, Jan. 2025 was a successful year for Vontobel. We delivered strong financial results, enabling us to propose a continued attractive dividend of CHF 3 per share. We decisively advanced our strategic priorities. And we captured both organic and inorganic growth and our CHF 100 million efficiency program is ahead of plan. At Vontobel, we are determined to carry this execution momentum into 2026. Thank you for your attention. We are now happy to take your questions. Operator: [Operator Instructions] Our first question comes from Daniel Regli from ZKB. Daniel Regli: I have 4 questions, if I may. Ask all of them, please interrupt me if you want to limit the number of questions by analysts. The first question I have is on the margin and in institutional clients. And as you say, you have kind of flows have turned margin accretive by about 5 basis points difference inflows versus outflows. But can you give us kind of a rough impact of this kind of exit margin as of end of '25 versus the full year gross margin in institutional clients? Then the second question I have is regarding the net interest income in private clients H2 versus H1. And it seems like the net interest income shown in private clients is up in H2 compared to H1. However, the interest income on a group level was down H2 versus H1. So can you maybe explain to me when -- or what kind of interest income is allocated to the segment and what interest income remains in the corporate center. And then on the efficiency program, you said CHF 84 million was realized as an exit run rate. Can you give us a rough number what we already see in the cost line of CHF 25 million. And then the last question on the capital policy. Obviously, the capital looks very strong at 19.7%. So my question is a bit why didn't you choose a higher dividend? Or what do you plan to do with your capital, given the high capital ratio? Christel De Lint: Thank you very much, Daniel, for your 4 questions. I'll take the first one, and Jan will go through to the next 3 questions. So as we've shown, indeed, the growth flows have turned margin accretive. It's very hard to give you an exact numbers on the exit rate, but you can see the evolution from '24 H1 '25 and H2 '25. I would also points to the outflows coming at a lower margin. Now the end results in a given year very much depends on the outcome in the market as well. So what have we seen last year, in particular, is returning demand on emerging markets, we've seen strong inflows into credit opportunities. These are all nicely merged segments the way it's starting off, you can expect the same type of flows. But of course, it honestly really depends on the way that the year pans out. I think the key message is to see that where we're growing, where we are strong. And in particular, in the fixed income space, this is not a low-margin plain vanilla treasury type of fixed income. It's the high value-added type of fixed income. So that's important to remember. I think the other part that is important to remember is the flattening out on the EM assets. One aspect was the industry winter in a sense for EM demand. That was not under control, and that seems to be now behind us. And there was, of course, an element of under performance, in particular, for quality growth EM. And that effect is behind us because the assets have literally gone to 0. On the other side, EM was very strong for us in fixed income over the past few years until 2022 and has shown that it will again be strong in the sense that this is a top well in the upper half of the top quartile across horizon. So that's kind of the full picture on margins. And now over to Jan. Jan Marxfeld: Yes. So regarding your question of the allocation of the net interest income between PC and the Corporate Center. What I can tell you the way we do this, and we look at this is that we have an internal funding curve and PC they basically earn interest on the deposit side versus this funding cost. And they also an interest on the loan side compared to this funding curve. What remains in Corporate Center is basically a residual treasury income, which we don't allocate out. Regarding the CHF 84 million, exit rate reduction. I think you will capture this very correctly. So this is basically what we have identified over the program today. So in the years '24 and '25. And what is in our P&L is roughly 3/4 of this. This is basically the effects which materialized in 2024 and over 2025. And for the remaining, we obviously then we'll see this coming in, in 2026. Last question I think you had was on our capital and what we will do is this. So on the CET1 capital, 19.7%, at the moment, we feel that this is a very good spot to be in. And there are a couple of reasons for this. So one is definitely, we need capital to sustain our future growth. And this is organic and inorganic. So for example, the Ancala transaction in the mid- to long term, we will, as you know, acquire further shares or further part of Ancala. So that will certainly absorbed some of the CET1 capital. And lastly, there is upcoming regulation. This is on the background of the UBS, CS discussion, but might also have impact on smaller banks like us. And for this, we also would need capital if that materializes. The dividend, I think you also asked about the dividend. So the dividend it's obviously decided or proposed by the Board and decided by the AGM. It's important to remember that we have a through-the-cycle target of 50% payout ratio. We are there at 60%. So depending on growth and capital needs from the things we just explained, they will constantly evaluate this. . Daniel Regli: Follow-up on the first question on the IC. Can you maybe give me kind of the gross outflow number versus the gross inflow number. So I can kind of calculate the impact from the numbers you've given me? Christel De Lint: We'll take that offline with Peter afterwards, also in the interest of the other participants, if you don't mind. I think you already have the ballpark. But yes, yes, let's pick it up offline. Operator: The next question comes from [indiscernible] from Octavian. Unknown Analyst: I have actually 2 questions. Firstly, on the capital. So your 19.7 CET1 ratio. What I saw it was due to drop in the RWAs. You mentioned operational risk, but there was also a drop in credit risk RWA. So could you maybe give a bit more color on that and maybe more how it came to that precisely? And the second one, if you could elaborate on this CHF 1.1 billion of inflows to the Center of Excellence that you treat us institutional clients inflow so what kind of inflows are this exactly? Jan Marxfeld: All right. So on your last question, on CHF 1.1 billion from the Centers of Excellence. So this is something these are institutional clients or clients of institutional in nature, which have besides transaction banking needs, they have also investment advice needs and therefore, they are booked in the corporate center. But for the presentation here, we thought it was appropriate to show them by their origin or the client segment. And we also did this in the half year, by the way, consistently. On the capital question, the 19.7%. So I think on the credit risk, RWA can say too much here. It's in line with the measurement approach that we used the standard approach and depends a bit on the composition of our loan book. Lombard loans have carried very low credit risk RWAs, I think operational risk you saw and then on the market risk we had the measures which I explained before. Operator: Next question comes from Mate Nemes from UBS. Mate Nemes: I have 2 of them please. The first one would be going back to institutional clients. It's really good to see good performance and inflows into 4 of the 6 boutiques. Yet you are still seeing some outflows for equities or namely the quality of growth boutique. Could you offer any color on what is your expectations with regards to those flows? Could we see a stabilization already in the first half of '26? Or this is just entirely dependent on yield curves appetite for quality growth, and so on? That's the first question. The second question would be going back to the jump in the CET1 ratio. And appreciate the color on operational risk also over that some of that has to do with market risk and tail risk hedges. My question is, should we expect a somewhat more volatile market risk RWAs going forward? Or this is a single onetime jump and this is a baseline from which on you'll develop simply along the lines of normal business volumes. Christel De Lint: Thank you, Mate, for the question. To clarify, really, for all intents and purposes, quality growth is now a developed market boutique if you wish, the quality growth EM exposure is, as said, reduced literally to nothing. So that is not something that's featuring into any expectation or weighing into our results. Closing the topic of emerging markets. On the other side, it's very clear that appetite has returned from clients. As said, we saw the first green shoot on EM debt as we were standing here a year ago and that materialized the whole year. And we're also now seeing, I would say, green shoots and slightly more in EM equities. And there, our franchise in conviction equities mtx is benefiting. You've seen from the slide that one of the key prestigious mandate win from a U.S. Pension Fund was for this team in EM equities. So quality growth, the core franchises are U.S. equities and global equities. You're not, obviously, without knowing that the Magnificent 7, AI tech, et cetera, has had a predominant impact on market behavior and have therefore penalized any retail wholesale flows that was chasing performance. So it is dependent on client appetite and market because what we're seeing is the interest on the other side of institutional clients, those who really look to diversify to construct a book of business that is diversified across investment approaches, et cetera, they actually are seeing as we speak, if you want, because that is obviously a distinctive approach. Hard to forecast strong investment process, value profitable for us. So that's where we're standing right now as we look at it. But EM is not the factor for quality growth. In capital for -- Jan? Jan Marxfeld: So on the market risk RWAs and whether or not this is volatile. So I think probably it helps just to reflect 1 second on the structured solutions business itself. So this is margin-driven business, which is clearly depending on client activity, which again then is fueled by healthy volatility of the markets and sentiment around that. So it's deliberately not position taking. So therefore, I would expect the RWAs, they are being more or less flat. And we have done the optimizations. So certainly not going down from here. We have, obviously, a hedging arsenal already and a prudent risk management, which just was exemplified in the turmoil after the Liberation Day. So I would steer you towards a flattish -- somewhat flattish RWS there. Operator: [Operator Instructions] The next question comes from Nicholas Herman from Citi. Nicholas Herman: I've got a few, but I'll start with 3, and I might circle back if that's okay, later. Just can I just continue the line of questioning on institutional clients, please? Encouraging, but not a surprise to see, I guess, your EM assets stabilize given strong markets. I'm interested, could you just talk about the pipeline there? And more broadly, do you see this as being investors just addressing under allocations? Or -- and I guess even more broadly than that, do you see this as well as the start of a structural reverse of a shift away from global back towards local. I would love to hear your thoughts on what your clients are telling you. Sticking with IC, I was a little surprised to see equities AuM shrink by 10% half-on-half despite clearly very strong equity markets. Just why was that AuM build so weak in Q4? And could you please segregate that between investment performance and flows? And then finally, private client margins. How do you see the outlook for recurring margin? And I guess I ask that in the context that you mentioned some revenue management actions and the launch of a new modular product offering. Could you give some more details on these, please, and the impact on the benefit that those have driven to your P&L? Jan Marxfeld: Yes. Thank you for the questions. We had great difficulties to understand your first 2 questions. So maybe you can repeat them, but we got the third one. So I will respond to that. This was about the recurring PC margins and revenue management in case we understood that right? Yes, listen, there is always pressure on those margins, right? There's overcapacity in the industry. So we constantly need to ask ourselves and take action in terms to defend those margins. Secondly, with the strategy we announced a few years ago to do more in the ultra space that also has put certain pressure on the margin. So therefore, we mentioned last time that we have done 2 things. We have introduced a new modular product offering combined with rollout that was focusing on revenue management or pricing as you can also call it. And I think the combination of these things has been allowing us to keep the margins very stable at 40 basis points, while the overall industry is struggling. This is a very big focus point of ours because we -- as I said, we don't just need to compensate for a certain book transformation towards some of the larger clients and it's a little bit away from the small and very small clients. Secondly, we also need to compensate the general industry development. Now if I may ask you to repeat your question number 1 and 2. So we can... Nicholas Herman: Can you hear me okay? Christel De Lint: Yes. Nicholas Herman: So the first two questions that I had were on institutional clients. So the first part was on EM. And could you talk about the pipeline there in the context of very strong EM markets? And more broadly, is this investors just starting to kind of address some underweight allocations? And are they -- is it -- and do you see this as well as the beginning of a structural reverse of the shift away from local towards global, are we going back towards local away from global because that's been a long-term structural shift for a long time. And I would just love to think your clients are telling you there. And then the other part on IC was, I think equities AuM shrank by 10% in the half despite very -- clearly very strong equity markets. Could you please disaggregate the moving parts there between investment performance and markets and net new money, please? Christel De Lint: Sure. So on EM on the pipeline, it's very clear that the client engagement is strong on that. And so it's followed the packing order that we'd expect, right, in terms of moving up the risk ladder. So starting with EM debt and now moving into EM equities. So for us, we've seen the flows materialize tangibly in EM debt, and you've seen them on the presentation through the funds. We've seen the interest also starting to materialize, and you've seen that mandate for mtx, and we're seeing the interest. So I think it's a bit of both, to answer your question. They go together, right? So the valuations were extremely stretched if you look about 6 months ago. And going back to 2021, 2022, there was really a sense among the investors community that suddenly, EM, it started with China, but then EM was on investable. And that was kind of, I guess, always questionable, right, is 50% of the GDP of the world is investable -- uninvestable. So we're seeing both, it's just -- looking at the stretch valuation, looking at the underweight allocation and the discussions around diversification around the dollar also play a role. So it's -- that probably -- that part is bigger than it historically was. In terms of the equities, it's been -- indeed, there are moving parts. And there, Peter can walk you through what you've seen has worked very well for us is the Swiss equity part has grown through the sustainable equity income product. The other franchise have stabilized to slightly up. So that's impact for us. It's empty emerging market equities and quality growth is the part that has suffered in terms of outflows, as we've mentioned, the EM having come to an end, if you want now by the end of last year pretty much. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Christel Rendu De Lint for any closing remarks. Christel De Lint: Thank you all for joining us today and for your questions. We appreciate your continued interest in Vontobel. Should you have any additional questions, please do not hesitate to reach out to our Investor Relations team. We look forward to seeing you latest at our AGM in April. Until then, we wish you a successful day and a great finish to your week. Thank you very much. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Sota Endo: We would now like to start the presentation of the third quarter -- FY 2025 third quarter financial results of NTT DATA. My name is Endo from the IR office. I will be serving as the moderator today. Regarding today's materials, please refer to the financial results briefing session materials posted on our company's IR website. I would like to introduce the attendees today. Nakayama, Representative Director and Senior Executive Vice President; Nishimura, Director and Senior Vice President, Head of Corporate Planning, General Headquarters; Kusakabe, Senior VP, Head of Finance Headquarters. Total of 3 will be attending. Sota Endo: Today, we will start from the Q&A session. Without further ado, we would like to take question. [Operator Instructions] First question, SMBC Nikko Securities, Kikuchi-san. Tatsuma Kikuchi: Kikuchi speaking. I have 2 questions. First is this fiscal year, in Q2, July, data center shifted to REIT, it was a bit off from the initial assumption, and so you revised. But since then, there has not been any revision. Are you trending as planned? In Q4, how much profit are you expecting and for the full year? Kazuhiko Nakayama: Thank you. I will go one by one. Nakayama speaking. Thank you very much for the question. So at this time, the performance forecast was revised. So about the gain on sale of data center was revised downward. Others are in line, no change from the initial forecast. Q3 financial results, if I could explain a little. In data center, the fee income was a bit large. There were some one-off positive factors. So including that, Q4 -- for other areas, it's not that we have much headroom, but especially on the overseas side, we had a stretched target year-on-year. So there is a downside risk. But we want to somehow achieve the target for this year. So that is the key focus. In Japan, in public sector, in Q3 and year-to-date, we are negative year-on-year. We are trying to come close to the target as possible. And in other financial and enterprise, we will try to cover the shortfall. I think this is a question by others, too. Second question, I asked this question to the holdings, too. Tatsuma Kikuchi: In the new year, I'm sure you will discuss further. But in Q4, you may not be planning a capital recycling, but other than REIT, you may have some capital recycling in Q4. So what is your forecast? If not, and even not in Q4, what is your thinking on REIT and non-REIT capital recycling in the next fiscal year? What is your policy? Capital recycling disposal. So gain on sales, so how much gain you can get and whether you will do it or not is also my question. Kazuhiko Nakayama: First, data center gain on sale, we have nothing planned for Q4. And next year, FY '26 data center gain on sale, we have nothing fixed yet. As we've mentioned from the past, FY '25 data center gain on sale was Singapore REIT IPO. So to form the REIT price, we had to have the liquidity. So we had quite a big sale for that. So the second and third offering are usually smaller than the IPO amount, a fraction of IPO amount in normal cases. When we launched this REIT, we considered the portion for IPO and for the follow-on, we've thought of the -- so the ones that are mature and can have certain level of yield, and we also think of the regional balance. Our plan for next year is not fixed. And we understood by doing this IPO in FY '25, depending on the market trend, we get impacted. So the initial plan, it may be good or bad to mention the amount that we plan upfront. But our general thinking is not do IPO and put an end to it. We want to do some more deals to realize the cash flow early on and prepare for the next investment. So if I mention the amount, the number will help the analysts, I know, but that's not the nature of what we're trying to do. So once we have a clearer number, we will share it with you. And one clarification. Next fiscal year, data center investment, I will ask you again 3 months from now, but JPY 300 billion or JPY 400 billion. And then you recycle and also finance debt. So asset and debt will increase more next year, so you cannot help but increase? Yes. Data center investment from FY '23 to '27, we say over JPY 1.5 trillion. So that's the general trend. And the data center demand, given the strong demand, we now do business with hyperscalers, but we get orders and try to address those orders. So data center sales and profit will become sizable in the medium term. Of course, the key is the balance with the leverage. But -- and cannot mention the numbers how much next year, but the general direction is no change from the past. So most likely, we will move forward like we've done in the past. Sota Endo: We'd like to take the next question from Goldman Sachs Securities, Mr. Tanaka. Chikai Tanaka: This is Tanaka from Goldman Sachs Securities. I wanted to ask the 3 questions, including confirmation of the numbers. The first is regarding the fee income of the data centers. The one-off factor, how much of a plus or negative impact did it have on the -- sorry, the first -- the third quarter on a quantitative manner? Can you quote on that on a quantitative manner? Keisuke Kusakabe: This is Kusakabe speaking. I would like to answer your question. The data centers, it's sold as an asset and from where it's into a joint venture. If it sells, we are going to receive the revenue. That's a one-off situation. But the third quarter is about JPY 5 billion. And I believe that in the first half, I believe, was about JPY 5 billion. So 9-month total is about JPY 10 billion. Chikai Tanaka: Okay. So the one-off factor is about JPY 5 billion. Is that the correct understanding? Limited only to the data center, yes, because there are other factors. So may I mention that? Keisuke Kusakabe: At this time, the overseas -- well, North America, we were able to receive a subsidy from the government. That was about JPY 3 billion. So that's about it for the large number factors. Chikai Tanaka: My second question, Japan domestic situation. Overall, I think it is steadily performing. However, for the public and social infrastructure, what is the background on the strength of new orders? And I think there is a reactionary decline this year. So when is that going to turn around is what I would like to confirm with you. Tadaoki Nishimura: This is Nishimura speaking. I'd like to answer your question. The reason why the new orders performance is strong, the digital agency is showing their policy, the facilities advancement to improve the convenience of the people and increase investment in this area. So CAGR, it's about 8% growth market is what we expect. That is the factor behind this. And the other point is that, what was the other question? Chikai Tanaka: The reactionary decline whether it's only this time only for the public and social infrastructure. There's quite a large-scale system development, and this continues for multiple years. So in several -- once in several years, there's such a timing that occurs. So whether it's just only this time? Tadaoki Nishimura: Well, such a timing arises every several years. That's all. So this decline, reactionary decline, it's not regular. It happens on an ad hoc basis. Chikai Tanaka: But what the impact of that for this fiscal year, is that going to continue on to next fiscal year is what I wanted to ask. Tadaoki Nishimura: From next fiscal year onwards, whether it is -- we will have a reactionary decline. Last year, we had a very high margin project. And due to that, this year, as a reaction to that, it's declining, but this is not going to carry over to next fiscal year. Chikai Tanaka: Lastly, the overseas business, the orders received environment overall, what is the trend? It seems that there's quite of a drop in North America. Is that just a difference depending on the quarter, but I wanted to confirm that situation. And recently, which is the hot topic, this is the disruption type of topic in the AI, especially in the overseas market, it is considered to be an issue. And because you have a quite a weight in the overseas business, so what is your take on this part is what I would like to confirm as the third point. Tadaoki Nishimura: Regarding the overseas new orders received, do you want to know by region? Chikai Tanaka: Yes, roughly speaking. Tadaoki Nishimura: North America, first of all, regarding this fiscal year, well, last fiscal year, we had a large-scale project. And even though such project existed, this third quarter, regardless of that, we were able to receive orders regarding quite a large-scale project as well. So the growth we use this dedicated team for growth projects, and they are going out there to receive the orders. Therefore, we are seeing that effect of that at an early stage. So North America, this quarter has turned around to an increase in revenue. And so those efforts, actually, were the factors for the turnaround for North America region. And Europe, depending on the specific region in Europe, it differs or the country differs. The U.K. we brought in a growth office that we've done in North America. And so U.K. and the new orders received, we're seeing a positive impact from this establishment of this office. Germany, in terms of orders received, there are areas that they're struggling still. Starting from last October, the top management has been replaced. And in Germany as well, they are utilizing the Indian resources, which is -- well, it's like a North American model that they have applied. So the multinational corporations in Germany, they are proactively conducting the activities towards those companies. This fiscal year, the orders have not been fixed yet. However, from this fourth quarter onwards, we can expect orders coming in or it is becoming firmer. So in that sense, moving forward, we will start to see improvements in the new orders received side. And EMEAL, so up to now, they were steadily performing. And so they are progressing as usual. And lastly, APAC, Australia is not doing well quite a bit. So regarding Australia, regarding the orders received side, we have not seen a turnaround in the actual terms. However, Australia as well, reinforcement of the sales force is what we are doing. By industry, we are thoroughly responding to this situation. So the outcome of these efforts for Australia, we are having expectations towards that and waiting for it. And India within the APAC region are quite steadily performing and the Indian economy itself within the APAC region, they have a high growth rate as well. Therefore, in India, we're able to acquire quite a level of orders. And the other remaining areas of APAC, the cloud and security, there are strong performing due to the high demand of tech areas. The advanced team of U.S. is taking the lead and the know-how is utilized in APAC. And we are seeing the positive factor. And so those are the positive materials for this area. Chikai Tanaka: So regarding AI disruption, what kind of perspective do you have? Sota Endo: So Nishimura would like to answer that question. Tadaoki Nishimura: Using AI and improving the efficiency, the cost reduction pressure probably is going to becoming stronger is the outlook we have. And globally, when conducting the BPO business, the improvement of efficiency in incorporated type of contract is starting to show up. So on the customer side, the AI efficiency improvement that they do internally, they're outsourcing it. That is the situation. So specifically speaking, by the rise of AI disruption, we have expectations for the new business being deployed. So that part, we are positively receiving this. The negative part is that looking at the other companies' financial results, with this rise, it's not that they are experiencing a decline in their revenue or sales. That is our understanding. That is all. Sota Endo: So next question, JPMorgan Securities, Henderson-san. Matthew Henderson: Henderson from JPMorgan. Thank You about the financial results, Q3 segment by segment. So there's a reactionary fall from last year in the public sector, but good impression on your business. Overseas profit margin may flip next year. You will continue your structural reform expenses, although lower than this year. So Q3, Y-o-Y profit margin, EBITDA margin may improve by 2 or 3 percentage points. It's improving by 2 to 3 percentage points. But in Q3, will you continue improving at that rate and next year and enter the 10 percentage territory? Are there any changes internally? Kazuhiko Nakayama: Nakayama speaking. Thank you for the question. First of all, for Q3, as Kusakabe-san said earlier, overseas, there were some one-off positive factors. But the underlying basis by region, we're seeing an improvement. So you are right. Now profit margin, will we have the same level of profit margin in Q4? Q4 volume is quite large, and there are some unique treatments we need in the end of the year. So our forecast is we don't know if the Q3 profit margin will remain unchanged in Q4. I cannot give you a clear-cut answer there. On Page 12, profit margin trend is shown. This line graph is shown. But because we're showing this, we want to work hard to give you some positive results and numbers, but that is our view on Q4. Matthew Henderson: My second question is on data center. There was a big order in Q3. And looking at the external environment, data center demand remains strong. Are there risks that you cannot execute your current orders like the utility or power shortage or construction capacity or the raw material cost increase? Any risks that may hinder the order execution? Or can we be optimistic? So according to what you hear from the on-site is that there are no risks really, no such risks. As I mentioned earlier, large hyperscalers deals account for more than 80% of the new orders, and these are made to order. We do after we receive orders and the term is 10 to 15 years, very long. And the customers have financial strengths. So there is small risk that this gets canceled or deviate due to customers' situation. Now the former NTT Communication, North America, Germany and India. So that was the start, purchasing those companies in the region. And initially, the operation was independent by region. But now we work with hyperscalers. So the raw material procurement and design are now unified and centralized globally. So raw material delivery is now optimized and try to exchange and interchange when necessary. So we don't have the risks that you just mentioned. We have high expectations in Q4 and next year. Sota Endo: [Operator Instructions] The next question will be the last one of Nomura Securities, Mr. Masuno. Daisaku Masuno: This is Masuno from Nomura. I have simply 3 questions. The first is on Page 13, the structural reform of the overseas business. From next fiscal year onwards, so if you have about 2 years, this JPY 151 million will disappear in 2 years, and the synergy is going to be JPY 30 billion. And in total, about JPY 50 billion is going to contribute to the profit. So if you have 1 or 2 years, there's about JPY 50 billion of contribution to the profit. Is that the correct understanding? Sota Endo: Nishimura would like to answer that question. Tadaoki Nishimura: First of all, regarding integration of the overseas businesses, we have been working on it up to now as well. As you can see here on the chart, the upgrade of the business processes and optimization of business operation and moving forward, we have the ERP integration. And from next fiscal year onwards, what is the budget for it? We're still considering it. And there's nothing that I can share with you that is clear. But to a certain extent, we will spend a certain extent of expense to business transformation by integration. And the synergy, was it non-synergy? The categorization of that because the integration is progressing, it's difficult to say that. But if you look at the Inc. overall growth, we will grow more than the expense that is required. Whether it's around JPY 50 billion at this point, I cannot give you a clear answer. Daisaku Masuno: And then my second question is regarding the sales of the data center. Truly, I think it is a way of actually selling a very crown jewel asset. So last -- end of the last fiscal year, the noncurrent asset, the others is JPY 2.2 trillion and the equity depreciation or amortization itself is JPY 1.2 trillion. So I think you should sell about JPY 50 billion and have the cash going to your company, and then you don't have to sell data centers. And that part to the holding company, sell the -- ask them to sell their treasury shares and create that cash. Kazuhiko Nakayama: This is Nakayama speaking. At the second quarter, I think Mr. Masuno, you did give us a similar comment. So we are taking note on that -- we have been taking note on that. So I do understand your opinion very well. Having said that, at the end, the EBITDA number, how much are we going to increase that? And how much investment are we going to make towards the data center? Well, the data center is quite a long period project or business. So there's an immediate profit. But how it's going to be 5 years from now, 10 years from now? When we think about that, how are we going to think about the balance with the cash side are the factors that we need to consider and make the final decision. I do understand your opinion very well. Daisaku Masuno: Lastly, AIVista. You're going to have your Top Gun team do this. But every day, there's a new announcement made from the U.S. So you can't spend that much of a long time. What I'd like to ask is that if you have about 12 months, will the first platform be completed? Is that the sense of speed that you are taking in? Because if you take too much time, what you created at the initial stage is going to become obsolete. So at what timing will the first phase of the first platform be completed? Tadaoki Nishimura: This is Nishimura speaking. Thank you very much for your question. You are correct. Because the changes occur so fast, and how we can come about with something quickly? Is that going to become the key? So next fiscal year, we would like to come out with a certain deliverable. And this company itself is not a large-scale company. It's about between 30 to 50 headcount size company. And there is sales specialists that are very well versed in the industry, exists in each country. So utilizing this talent, we would like to create a new business case. So by next fiscal year, we are working on so we can come out with a certain deliverables. So please look forward to that. Sota Endo: So we answered all the questions that were raised. So we would like to close NTT DATA's Q3 financial results briefing. Thank you very much for your attendance.
Operator: Welcome to the COPT Defense Properties Fourth Quarter and Full Year 2025 Results Conference Call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Venkat Kommineni, COPT Defense's Vice President, Investor Relations. Mr. Kommineni, please go ahead. Venkat Kommineni: Thank you, Jonathan. Good afternoon, and welcome to COPT Defense's conference call to discuss fourth quarter and full year results. With me today are Steve Budorick, President and CEO; Britt Snider, Executive Vice President and COO; and Anthony Mifsud, Executive Vice President and CFO. Reconciliations of GAAP and non-GAAP financial measures that management discusses are available on our website in the results press release and presentation and in our supplemental information package. As a reminder, forward-looking statements made during today's call are subject to risks and uncertainties, which are discussed in our SEC filings. Actual events and results could differ materially from these forward-looking statements, and the company does not undertake a duty to update them. Steve? Stephen E. Budorick: Good afternoon, and thank you for joining us. 2025 was another great year for the company as we outperformed on virtually all of our operating and financial metrics. FFO per share was $2.72, which is $0.06 above the midpoint of our initial guidance and represents an increase of 5.8% over 2024's results and marks our seventh consecutive year of FFO per share growth. Same-property cash NOI increased 4.1% year-over-year, driven by a 40 basis point increase in our average occupancy. We executed 557,000 square feet of vacancy leasing, which represented 47% of the space we had vacant at the beginning of the year. We also executed 477,000 square feet of investment leasing at a weighted average lease term of 13 years. We committed $278 million of capital to new investments which consisted of 5 projects in 4 different markets and these projects are 81% pre-leased. Importantly, 4 of 5 projects represent expansions with existing tenants. In late December, we committed roughly $155 million to 2 build-to-suit projects in our Fort Meade BW Corridor and San Antonio markets. First, we committed $66 million to a fully pre-leased development with ARLIS, which is the University of Maryland's Applied Research Laboratory for Intelligence and Security to expand their footprint in our park. This 110,000 square foot project will expand our Discovery District campus which currently totals 415,000 square feet and is 98.4% leased. This new ARLIS facility will serve as the Capital Quantum Benchmarking Hub to test and evaluate quantum computing prototypes for national security in a partnership between the State of Maryland and DARPA, the Defense Advanced Research Projects Agency. In 2024, the University of Maryland received a $500 million contract from the DoD to support ARLIS and their mission of addressing complex national security problems. Second, we committed $88 million to 132,000 square foot fully pre-leased development project in San Antonio with an existing Defense/IT tenant. Our team did a tremendous job of adding incremental density to our already fully leased high security 1.1 million square foot campus to create this additional development opportunity. In aggregate, our active developments, along with those projects placed in service or acquired in 2025 will generate an incremental $52 million of cash NOI on a stabilized annual basis, which will be realized as projects are completed and placed into service. The incremental NOI will phase in between 2026 and 2029, which will be the first full year benefiting from the total amount. $48 million of this is contractual and the balance is from leasing up the remaining availability at 8500 Advanced Gateway. Britt will discuss the very strong pipeline of activity we have for RG 8500. For 2026, we're establishing the midpoint of FFO per share guidance at $2.75, which implies $0.03 or 1.1% growth over 2025's outstanding results. Our guidance absorbs a $0.09 increase in financing costs. Excluding this impact, 2026 FFO per share would have totaled $2.84 and 4.4% year-over-year growth. Anthony will provide details on the specific assumptions included in our guidance but we're already off to a great start to the year with capital commitments and investment leasing. In January, we committed $146 million to yet another fully pre-leased development project at the National Business Park, once again with an existing Defense/IT tenant. This is another high security specialized facility that will total 236,000 square feet. An earlier this week, we executed a full building lease for NBP 400 with an existing tenant that is a top 10 U.S. defense contractor for 148,000 square feet and a lease term of nearly 11 years. Turning to the Defense budget. 3 days ago, President Trump signed the FY 2026 Defense Appropriations Act. This base budget is $841 billion, which is an $8 billion increase over the President's initial request. Adding the $113 billion in allocated DOD funding that was in the Big Beautiful Bill. This amounts to a Defense Budget of over $950 billion, which is the largest defense-based budget in our nation's history and is a 15% year-over-year increase. The President's fiscal year 2027 budget request is expected to be submitted in the coming weeks, but he publicly announced the need for a $1.5 trillion Defense Budget. Regardless of where the final number ends up, his comments send a strong policy signal of the President's commitment to increase investment in Defense, and we expect the overall size of the defense budget to continue to increase throughout the next 3 years. Importantly, the initial FY 2026 Defense Appropriations Act enjoyed very strong bipartisan support, recognizing the increasingly complex global threat environment. A recent editorial published in the Wall Street Journal was titled a serious Defense Budget at last, and it highlighted the new technologies that are proliferating in ways that threaten the U.S. homeland, which include hypersonic missiles, space and cyber weapons, drones and the weaponization of AI. The editorials conclusions are perfectly aligned with the administration's peace through strength philosophy and recognizes that investment in Defense is infinitely less costly than a war. Given this backdrop, we continue to expect that the priority missions our portfolio supports will be well funded in the near and medium term to safeguard national security. And these missions include intelligence, surveillance and reconnaissance, cybersecurity, missile defense, space activities, among others. Space is the newest war-fighting domain and achieving uncontested dominance in this theater is of paramount importance to the country's defense. In support of this objective, we expect the $175 billion multiyear Golden Dome initiative and the relocation of Space Command's headquarters to Huntsville to drive growth in demand from both government and contractors at the Redstone Gateway for the foreseeable future. Before I turn the call over to Britt, let me reflect on our performance over the past few years. In 2019, we entered our era of growth as we had largely completed our strategic reallocation plan and our FFO per share for that year was $2.03. 7 years later, the midpoint of our 2026 guidance is $2.75, a 35% increase and represents a compound annual growth rate of 4.4%. Between the initial midpoint of 2023 and 2026 guidance ranges, FFO per share is expected to grow at a compounded rate of 4.9%, which is over 20% higher than what we had projected back in 2022. And with that, I'll turn the call over to Britt for some details. Britt Snider: Thank you, Steve. We finished the quarter with strong occupancy at 94% in the total portfolio and 95.5% in the Defense/IT portfolio. Year-over-year, occupancy increased 40 basis points in the total portfolio and 10 basis points in the Defense/IT portfolio. Our buildings remain highly leased with our total portfolio at 95.3% and our Defense/IT portfolio at 96.5%. The lease percentage for the total portfolio increased 20 basis points from the end of last year, driven by our incredibly strong vacancy leasing performance. And I want to give special recognition to our entire team who contributed to these outstanding results in terms of both vacancy and investment leasing. In fact, we executed 557,000 square feet of vacancy leasing during the year, which exceeded our initial target by 40% or over 150,000 square feet. In our Defense/IT portfolio, we executed 424,000 square feet, which alone exceeded our 400,000 square foot initial goal for our entire portfolio. The vacancy leasing achieved represented 47% of our available inventory at the beginning of the year for the total portfolio and 58% within our Defense/IT portfolio. Half of this leasing was tied to either secure space, cyber activity or a combination of both. In our Defense/IT portfolio, over half of our vacancy leasing and 90% of our investment leasing was executed with existing tenants. We enjoyed broad-based leasing activity across our markets. And notably, we executed roughly 110,000 square feet in our Navy support market, which represented 73% of our available inventory in that group at the beginning of the year. Many of you have asked about this market over the past few quarters, and we delivered. The lease rate in this portfolio increased nearly 200 basis points over the year and the occupancy rate increased over 400 basis points. We also executed over 130,000 square feet in our other segment, which is the highest level in over a decade and represented 29% of our available inventory at the beginning of the year. This is important as this segment holds the largest amount of vacancy in the portfolio. Leasing achievement in the other segment included over 40,000 square feet at our property in Tysons Corner and nearly 90,000 square feet in Baltimore. Year-over-year, the leased rate in our other segment increased nearly 300 basis points and the occupancy rate increased nearly 400 basis points. For 2026, we have again set a vacancy leasing target of 400,000 square feet, which represents 1/3 of total available inventory at the beginning of the year. Our leasing activity ratio is 74%, which equates to 870,000 square feet of prospects on 1.2 million square feet of availability and 10% of this activity is in advanced negotiations. Turning to renewal leasing. We executed 2 million square feet for the year with tenant retention of 78% and cash rent spreads of 1.1%. In our Defense/IT portfolio, we executed 1.9 million square feet for the year with tenant retention of 79% and cash rent spreads up 2.7%. The government had an administrative delay in processing lease renewals that were expected in the fourth quarter, which included 700,000 square feet of secure full building leases in San Antonio. This delay negatively impacted our tenant retention and cash rent spreads relative to our guidance. And to quantify the impact of these delayed renewals, tenant retention would have been 84% or over 600 basis points higher and cash rent spreads on renewals would have been 2.4% or over 130 basis points higher. Our 2026 guidance assumes a midpoint for tenant retention of 80% and cash rent spreads up 2% at the midpoint. In 2026, we have 2.2 million square feet of government leases expiring, virtually all of which we expect to renew. Nearly 1 million square feet of this total is at our campus in San Antonio, which consists entirely of secure full building leases with the government that expire in the first quarter of 2026. This group of leases accounts for 1/3 of the expiring square feet in our Defense/IT portfolio this year and over 40% of the expiring annualized rental revenue. We expect 100% retention on this nearly 1 million square feet as lease economics have already been finalized. And again, we're just waiting for the government to finish processing the paperwork. We believe this process will be completed, and this batch of leases will be renewed in the first quarter. Turning to our large lease retention on Slide 20 of our flip book, we provide an update on leases in excess of 50,000 square feet that expire between mid-2024 and year-end 2026. Overall, we now expect tenant retention of over 95% on the entire 4 million square feet of these large lease renewals as we expect 100% retention on the remaining 12 leases totaling 1.9 million square feet, all of which are with the U.S. government and half of which are at our campus in San Antonio. Additionally, since we started providing this disclosure 3.5 years ago, we have renewed over 4 million square feet of large leases with a retention rate of over 97%. Moving on to development. We commenced 3 developments over the past few months, and our active development pipeline totals nearly $450 million of capital commitment. The active pipeline totals 880,000 square feet and is 86% pre-leased. 5 of our 6 development projects are 100% pre-leased now that we've executed the full building lease at NBP 400. The only development with space available is our 8500 Advanced Gateway project in Huntsville, which was just constructed as an inventory building in one of our highest occupied parks. We commenced construction on 8500 Advanced Gateway a year ago and the roughly 400,000 square feet of prospects on the remaining 125,000 square feet of availability speaks to the strength of tenant demand at Redstone Gateway. The project is currently 20% pre-leased as we signed a 32,000 square foot lease in the fourth quarter with a Defense/IT tenant whose technology is central to the Golden Dome initiative. We are in advanced negotiations on a 32,000 square foot lease with another defense contractor, which is also supporting Golden Dome and has been a tenant of ours for over 20 years. This lease will increase the pre-lease rate at 8500 Advanced Gateway to 40%. We are already progressing planning and design for our next inventory building at Redstone Gateway. And once 8500 Advanced Gateway approaches 60% pre-leased, we expect to commence the next inventory development. And finally, at 8100 Rideout Road in Huntsville, which is an inventory development we delivered last year, we are in advanced negotiations with one of our top Defense/IT tenants to expand into the remaining 27,000 square feet of availability. Once executed, the only space available in our 2.4 million square foot Redstone Gateway operating portfolio will be a single 10,000 square foot suite, and we are in advanced negotiations with a defense contractor on that space. Our development leasing pipeline, which we define as opportunities we consider 50% likely to win or better within 2 years or less, currently stands at nearly 1 million square feet. Recall, the pipeline stood at 1.3 million square feet at the end of last quarter. Since then, we achieved over 650,000 square feet of investment leasing, and we added another 300,000 square feet of high probability prospects. Beyond that, we are tracking an additional 1 million square feet of potential development opportunities. This activity should allow us to maintain a solid development pipeline in the near and medium term. And with that, I'll hand it over to Anthony. Anthony Mifsud: Thank you, Britt. We reported 2025 FFO per share of $2.72, which was $0.02 above the midpoint of our revised guidance and $0.06 above our initial guidance. The year benefited from earlier-than-expected leases commencements and success in flipping expected nonrenewals to renewals, lower-than-anticipated net operating expenses, including nonrecurring real estate tax refunds. The Stonegate acquisition in late October, additional interest and other income on investments and lower net interest expense from the timing of development funding, which was partially offset by higher interest expense from our October bond offering. During 2025, same-property cash NOI increased 4.1%, which was well above the midpoint of our original guidance of 2.75% and was driven by a 40 basis point increase in same-property average occupancy and operating expense savings, which also positively impacted FFO per share. Same-property occupancy ended the year at 94.2%, which is right in line with the midpoint of updated guidance and 20 basis points higher than initial guidance. The 10 basis point decline over the quarter was driven by a few previously discussed nonrenewals in the Fort Meade BW corridor, each of which were under 30,000 square feet. In October, we issued $400 million of 5-year unsecured notes at a yield to maturity of 4.6%. The bonds priced at a credit spread of 95 basis points and are currently trading at spreads that are tighter than our higher-rated office peers. The proceeds from the offering will be used to repay our $400 million 2.25% bond, which impacts 2026 FFO per share based on the higher interest rate between the new bond and the maturing bond. Our decision in September to prefund this bond maturity was driven by our conservative and risk-averse nature and the tight execution window that exists for any issuer early in the first quarter. Our decision not only eliminated any execution risk, but also removed any underlying treasury rate risk. The 5-year treasury at the time of our offering was 3.67%. And since our deal priced, the 5-year has traded at or above that rate in 90% of the trading days open for issuance. With respect to guidance, we expect another solid year of performance in 2026. We are establishing FFO per share at a range of $2.71 to $2.79, implying 1.1% growth at the midpoint. The $2.75 per share midpoint takes into account a $0.17 increase in NOI from rent increases and lease commencements in the operating portfolio, partially offset by nonrecurring real estate tax refunds, along with increases in NOI from developments and one acquisition placed into service during 2025 and 2026. This is partially offset by $0.09 from higher financing costs, $0.015 from the delivery of NBP 400 into the operational portfolio and $0.03 from the net effect of lower interest and other income on investments and higher G&A. Same-property cash NOI is projected to increase 2.5% at the midpoint. This guidance is impacted by the nonrecurring real estate tax benefits in 2025, which reduced the 2026 growth rate by 100 basis points. We expect same-property occupancy to end the year between 93.5% and 94.5% and be relatively flat throughout the year. Regarding uses of capital in 2026, we expect to spend $200 million to $250 million on active and future projects and to commit $225 million to $275 million of capital to new investments. We take a conservative approach to our AFFO payout ratio, which has averaged roughly 60% over the past 2 years and is forecasted to be under 65% in 2026. At this level, the portfolio continues to generate sufficient cash to fund the equity component of our anticipated investments on a leverage-neutral basis. Finally, I'd like to take a moment to discuss the impact of placing our development NBP 400 into service this year and our overall approach to capitalize costs as it relates to development. We will place NBP 400 into service on April 1, which marks 1 year from the completion of the core and shell of the building. At that point, as our long-standing policy compels us, we will stop capitalizing interest and operating costs associated with the project. This results in a $0.015 impact to 2026 FFO per share, which is absorbed in our guidance. Our policy is to capitalize interest and operating expenses, the largest component of which is real estate taxes associated with properties undergoing development or redevelopment. We continue to capitalize these costs until a property becomes operational, which we define as the earlier of 90% occupancy or 1 year from substantial completion of the core and shell. Historically, we capitalize only a small fraction of our overall interest expense with capitalized interest averaging roughly 5% of our gross interest over the past 3 years. And in 2026, we forecast we will capitalize less than 8% of our gross interest expense. While delivery of NBP 400 will temporarily reduce total portfolio occupancy by 60 basis points beginning in the second quarter and FFO per share in the second and third quarters, our guidance assumes the lease we just executed with a defense contractor will commence in the fourth quarter. We believe our policy regarding capitalized costs related to development and redevelopment projects is illustrative of our conservative approach to adhering to GAAP standards and avoids accumulating excess basis in our projects, which would deteriorate our expected yields. With that, I'll turn the call back to Steve. Stephen E. Budorick: Thanks. I'll close by summarizing our key accomplishments and messages. 2025 was a year of outstanding achievements, delivering strong performance across all segments of the portfolio and all departments of the business, resulting in FFO per share growth of 5.8% year-over-year and representing our third consecutive dividend increase, resulting in a 10.9% increase over the last 3 years. For 2026, we expect this will be our eighth consecutive year of FFO per share growth. We again set a target for vacancy leasing at 400,000 square feet, which is an aggressive goal given the limited amount of unleased space in our portfolio. We expect tenant retention will remain strong at 80%, and we expect to commit $250 million of capital to new investments, of which we've already committed $146 million. Our liquidity remains very strong, and we expect to continue self-funding the equity component of our capital investments. We now anticipate compound annual FFO per share growth of nearly 5% between 2023 and 2026, and we're already off to a great start. We expect to deliver another strong year of results. Before I wrap up, I want to make a comment about the passing of my good friend and former colleague, Roger Waesche. Sadly, Roger passed away suddenly on January 8. Much of the foundation that we have built on over the past decade is a result of the leadership and foresight of Roger Waesche. Roger worked for the company for over 3 decades, serving in a wide range of leadership roles, culminating with being the company's third Chief Executive Officer from 2011 and 2016. We have no need to idealize him beyond what he was because that was more than enough. A loving husband and father, a man of great faith and integrity, a fierce and loyal friend, a man of great intelligence and kindness and a colleague and leader who cared deeply for all those he encountered. Those of us who had the privilege to work with and alongside Roger are better off because of it. He is greatly missed. Operator, with that, please open up the call for questions. Operator: [Operator Instructions] Our first question comes from the line of Seth Bergey from Citi. Seth Bergey: I guess just starting off with the development pipeline. Are you starting to see opportunities from Golden Dome and the new kind of defense appropriations kind of trickle into that pipeline visibility? Or are projects kind of related to that still on the come? Stephen E. Budorick: I think the answer is both, Seth. Britt talked about the big backlog of prospects we have for RG 8500 in the 400,000 square foot range. Many, if not most, of those pertain to Golden Dome. And I believe they represent kind of initial footprints, early moves to get into the action. And I think subsequent down the road, you'll see larger requirements as awards are made and the contractors ramp up to perform the actual creation of the Golden Dome. Britt Snider: I'll just add a couple of things to that, too. I mean they're really trying to move that process forward from a contracting standpoint. And I mean, the Missile Defense Agency's Shield contract could afford DOD with quite a bit more flexibility to process orders more quickly. And then also, they're looking to fast track, especially some of the space-based interceptor contractors through OTAs or other transactional authority. So we actually -- we're seeing it not just through the tours, but also how they're setting up for these contracts to be awarded. So expect some velocity this year. Seth Bergey: Great. And then just a second one on kind of the leasing assumptions around tenant retention, 80% at the midpoint. I guess, kind for the 20% that would not be retained, given kind of the type of tenant that you have, where are those tenants going? Is there like a cited reason for move out? Or could that be conservative just kind of given where your retention has been in the past couple of years? Stephen E. Budorick: Well, when you look at our nonrenewals from year-to-year, it's typically smaller tenants that are vulnerable to a relocation because they need a little less space or a little more space. Probably 70% of nonrenewals are just getting smaller tenants into the rightsized space. Some of those are nondefense tenants. And often, it's our asset managers managing their inventory to accommodate the growth of larger defense tenants. So there's always a little friction in there. But I have to remind you, for a decade, we've delivered 80% retention. It's a pretty astounding number. Operator: And our next question comes from the line of Blaine Heck from Wells Fargo. Blaine Heck: Just following up on potential additional investments, specifically the roughly $100 million of additional investments earmarked for guidance in 2026. I guess what do you think the mix between acquisitions and developments will be in that total? And can you talk about the profile and yields that you're targeting on acquisitions? And outside the activity in Huntsville you described, are there any additional near-term development projects that you're eyeing at the moment? Stephen E. Budorick: Well, we talked about our development pipeline having roughly 1 million square feet. A big chunk of that are smaller contractors for 8,500, but there are some build-to-suit opportunities. Our yield targets haven't really changed for developments. We target 8.5% cash-on-cash yield at the commencement of the lease. Regarding acquisitions, when they occur, we consider them opportunistic. We don't have any built into our guidance, if you will. And typically, the yield on that acquisition has to exceed that, which we can do on our development opportunities for us to make the move. Blaine Heck: Got it. That's helpful color. And then just switching gears, you guys have been pretty steadfast in your messaging around not needing equity as a source of funds to support your investment initiatives. But given that the stock performance has been very strong thus far this year, I'm wondering whether you'd be more open to issuance at these levels. I guess, how equity would rank in your options for funding sources? And maybe alternatively, are there any assets that you would consider for dispositions if you were to add significant developments or acquisitions this year? Stephen E. Budorick: Well, many layers to that question. It's nice to be in a position where we could consider issuing equity, but it's kind of a last alternative. We have -- as we have made very clear, the ability to handle our expected development investments with the cash we generate internally. We actually have the ability to flex up in a given year or 2 with a modest increase in our debt ratio, which on a pre-lease basis will only be temporary. Regarding dispositions, there are a few assets that we've clearly indicated we'd like to sell. They're all in the other segment, not defense. Timing of those sales is not so much dependent on our development -- our pace of development opportunities, but more market conditions in the markets where they exist, where we can get an efficient sale and preserve shareholder value. Blaine Heck: So I guess just asked another way, I guess, you don't feel like your hesitation to issue equity has held you back at all from taking on more projects. Is that correct? Stephen E. Budorick: Not at all. Blaine Heck: Okay. Stephen E. Budorick: If God forbid, we get so much that we have to issue equity, well, that will be a happy day for our investors, and we'll let everyone know well in advance, but we don't expect that to happen. Operator: And our next question comes from the line of Anthony Paolone from JPMorgan. Anthony Paolone: So first one, just on the starts that you anticipate for 2026. It sounds like maybe the follow-up for 8,500 in Huntsville. And then are there any others in the plan? Stephen E. Budorick: Well, we have our eye on a few, but you know we're not going to tell you where they are at. We're working several other opportunities. And yes, you're right. We expect to start an inventory pretty quickly after 8,500 gets committed. Anthony Paolone: Okay. And so I guess if we're kind of looking out even beyond '26, like your investment spending has been pretty consistent the last couple of years in your guidance for '26. But if we look at like what's left to spend on the developments in place right now, it sounds like you'll still have a couple of hundred million to spend after 2026. And then if you start some things this year, that will kind of add to that. So I guess, should we expect development spending or investment spending to maybe ramp a bit in the next couple of years? Britt Snider: From a spending standpoint, yes, because if you look at the development chart in our supplement, you'll notice that the two buildings that we committed to, one in late December and one in early January have placed in service dates that are in 2027 and late 2028. So you're correct, the spending for the significant spending for those isn't going to occur in 2026, it will occur in '27 and 2028. So there will be incremental funding for the commitments that we've made this year as well as the commitments we expect to make in 2026 and beyond. Anthony Paolone: Okay. And then I guess my follow-up then on all of that because it seems like the business is going well. And a few years ago, you had laid out your 4% kind of earnings CAGR as an intermediate or maybe even longer-term growth rate. Do you think that still stands? Is there a chance that could bump a bit higher given all the conditions surrounding the business? Or maybe how to think about that? Stephen E. Budorick: Well, this year is a transition year because of the impact of the refinancing costs. I think later in the year, we'll probably try to give you a little more of a view of what our future looks like but we're very confident we're going to continue to produce solid growth as we have and that's my message. Operator: And our next question comes from the line of Manus Ebbecke from Evercore ISI. Manus Ebbecke: Out of demand that you're seeing in your markets, how much is driven by existing tenants versus new tenants? And have you witnessed any like meaningful uptake and in-migration from maybe like tech defense tenants into your markets from other regions in the U.S. Britt Snider: Yes, I would say it's about 50-50 existing and new biz. And then we are seeing some groups come in from other locations, including Colorado and California. So it's we're encouraged by seeing some influx from people into our markets that have not had footprints there previously. Manus Ebbecke: Got you. I appreciate the commentary about maybe getting another outlook later this year. So we're definitely looking forward to that one. But just maybe in your view, obviously, with now the demand picture looking really good and you're certainly like being able to capitalize on that, like how do you expect your like tenant mix maybe to change if we compare today's portfolio maybe to one potentially in like 5 years from now? Like where do you think like maybe the mix is shifting in your portfolio? Stephen E. Budorick: The mix of tenants, or are you talking about concentration? Manus Ebbecke: Specifically tenants, like government versus tech defense versus traditional contractors, like where do you think there's maybe outside growth? Who do you think is going to take bigger shares going forward? Stephen E. Budorick: Well, that's a hard one to answer. I think it will be roughly comparable to what it is, 2 parts defense contractor for every one part government, and we'll see that growth in a variety of markets. Operator: And our next question comes from the line of Rich Anderson from Cantor Fitzgerald. Richard Anderson: Yes. Rich Anderson here. I got caught off there. Steve, first, well said on Roger, one of the best that I can recall ever working with, soft spoken, unassuming, but probably a big part, as you mentioned, the architect of where you guys are today. So his legacy lives. Just now getting under the questions. In terms of Huntsville and kind of where it is in terms of the size of the portfolio, 2.5 million square feet or thereabouts, NBP is 4.3 million square feet and growing from there. When I think about all the forces at work moving to Huntsville, whether it's Missile Command, Space Command, Golden Dome, do you feel like you could get to a point where you just kind of run out of opportunity to meet some of these demand forces coming at the area? Or do you see opportunities to expand to be able to build more in the area? I'm curious what your sort of 5-year outlook is on Huntsville in terms of how big it can become within the portfolio. Stephen E. Budorick: Well, I can't wait to be on a call to tell you how we're going to manage that growth. And it's going to happen. It's just going to take a year or 2, Rich. But do recall, we're built to 2.4 million square feet right now. We've got a little bit under development. Our overall capacity on the land we control without structured parking is 5.5 million square feet. So we got 3 million square feet of development runway on the enhanced use land that we do currently control. We believe there is a significant opportunity at the point where we have consumed that development that we can continue to expand our enhanced use lease presence on the base because there's ample land available. The existence of our contractor and government campus is a well-appreciated catalyst to the missions on the base. And in essence, we work in partnership with the U.S. Army overall Commands to support their missions. So I don't think we're ever going to run out of runway there. There might be some processes we have to go through. But we've got a long runway in Huntsville. Richard Anderson: Okay. In terms of the organic growth of the company, you guys have been successful at improving upon whatever your guidance was to start the year. I think in the last 2 years, you've seen it steadily sort of improve from one quarter to the next. Maybe the calculus is a little bit different this year. I'm not sure. But would you say that you've left some opportunity on the table from a pure organic point of view? And what has to happen for same-store to sort of get a little boost up as the year progresses and maybe you've left some conservatism on the table as well? Stephen E. Budorick: Well, same-store is a battle of inches. It's square feet renewed weeks of earlier or later commencements, pennies of rents. It's hard to say we're leaving anything on the table. Last year, our team executed extraordinarily well at getting the best outcome of probably 150 different transactions. And meanwhile, our operating teams have to keep the expenses in line and contest taxes. It's a hand-to-hand combat in same-store growth. And I think we've put out a good solid forecast, and we'd like to beat it, but I don't think we've sugar coated it. Richard Anderson: Okay. Last for me, the $950 billion defense budget with the OBBB. I'm curious if you could sort of frame when that will start to matter from -- to the bottom line in terms of leasing and actual opportunities for the company? I mean it's great, obviously, as a setup for the long term. But is that like a 2- or 3-year type of process before you actually see it, make its way to your FFO line? Stephen E. Budorick: Yes. We've traditionally conveyed that from an appropriation, our demand impact is 12 and sometimes 18 months down the road. And particularly with some of the big funding things that are occurring right now because the funding is going to new programs. New programs have to be conceptualized, then put into contract competitions, defense contractors have to compete for the contract, get an award, survive a protest, finally get an adjudicated result and then they can lease space. So 12 to 18 months, it's really a very strong signal that our demand is going to remain very healthy, if not improve, over the next 2 years. Britt Snider: Rich, I would just add that there's a couple -- like if you look at what I was referring to earlier, Golden Dome and even Golden Fleet, which is less applicable to us. But those 2 initiatives, they're working on ways to fast track those dollars in the program. So Golden Dome for us is certainly has the potential to see benefit from that sooner than that. Richard Anderson: That was the genesis of my question, like it's somewhat political that all this is happening, although it is bipartisan, I get it in terms of the spending bills. But I just wondered if there was -- given the geopolitical climate of today, maybe you would see the benefits of this appropriations bill and so on sooner than 12 months, but I guess you're holding the line on that for now. Stephen E. Budorick: Well, I think what Britt conveyed is you're going to see a mix of both. But one thing that's crystal clear is this administration is very high sense of urgency. So it could be quicker than we have traditionally seen, but it's hard to tell you it will be. Operator: [Operator Instructions] Our next question comes from the line of Dylan Burzinski from Green Street. Dylan Burzinski: I know the Iowa data center development plans has sort of been pushed back a little bit, but just sort of wondering if there are any other sort of markets that you're looking to sort of go out and gobble up some land parcels for future development opportunities on the data center side? Stephen E. Budorick: Not currently. We're constantly evaluating opportunities, but there's nothing that we're seriously considering. Dylan Burzinski: And then I guess just one last one on sort of the office disposition plans. I think the theme that we've heard over the last several months is that debt capital markets are improving, bidding tents are getting more full. Just sort of curious on your thoughts on sort of bringing 2100 L to market because I know that's sort of largely stabilized now. Stephen E. Budorick: Well, the D.C. market has not yet indicated pricing for assets that excites us. And so I don't expect that to happen for 12 months, but we have that building extremely well positioned. It's a fantastic development with great tenants. And when we see capitalization rates approach the level that makes sense for our shareholders, we can move on it. Operator: Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Mr. Budorick for any further remarks. Stephen E. Budorick: Thank you all for joining our call today. We are in our offices, so please feel free to coordinate through Venkat if you'd like to talk to us further. Have a great day. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Jan Marcel Matthieu Boone: Good morning, everyone. Welcome to the investor call. Following the announcement this morning of the 2025 annual results of Lotus Bakeries. I'm Jan Boone, and joining me today is our CFO, Mike Cuvelier; and we are both here in Lembeke. We will start with the presentation providing an overview of the performance and also the milestones of '25 and later on, deep dive into the financials. And of course, following the presentation, we are open for questions from your sides. And in total, we have foreseen 50 minutes for this call in total. First slide, I'm proud to report another year of strong and double-digit top line growth. The reported sales in '25 amounted to EUR 1.35 billion, and that represents an increase of 10%. This evolution is driven by continued strong volume growth in the second semester for both Lotus Biscoff and Lotus Natural Foods. At constant currencies, growth was even stronger, given the negative currency evolutions of the dollar and the pound in the second half of the year. Profitability improved further with underlying EBITDA on sales exceeding 20%, and this is an increase of 12% compared to the prior year. Also, the net profit increased and the net profit increased with 13%. The strong reduction of net financial debt led to a historic low multiple of 0.25x underlying EBITDA. Besides a strong operational cash flow delivery, we also realized a successful exit in FF2032 with the sale of our participation and The Good Crisp Company. A dividend of EUR 90 per share is proposed, and that's an increase of EUR 14 per share compared to the 76 of last year. And similar amount to prior year, we invested EUR 120 million in capital expenditures, and that's mainly in the plant in Thailand. The successful start-up of the first lines in Chonburi is for us, as a company, a huge milestone. And the operations teams deserve full credit for delivering this greenfield ahead of schedule and well in budgets. Last but not least, the partnerships with Mondelez advanced strongly and they contribute positively to the results. Lotus Bakeries is a growth company, and has been for the last 20 years, delivering a compounded annual growth rate of 11%. Looking at the pillars, the 3 strategic pillars. We see that Lotus Biscoff achieved a growth of 13% in '25. It reflects the discontinuation of Lotus Bakeries' own Biscoff ice-cream sales following the new license agreement with Froneri, EUR 11.6 million of second semester revenue was excluded from the reported top line sales. This primary volume growth of Lotus Biscoff demonstrates continued strong demand for Biscoff cookies and spreads. The Biscoff cookie once again ranks as the fastest grower in the global cookie brands ranking further reinforcing its position within the top 5. Lotus Natural Foods is the fastest-growing strategic pillar '25 with a growth of 17%. And after a strong performance in the first semester of '25, Lotus Natural Foods continued on the same positive path. TREK is the fastest-growing brand and BEAR is the biggest contributor to growth. [ After ] sales remained flat in the first half of '25, the Local Heroes delivered again growth in the latter half of the year. Annas pepparkakor even realized more than 10% growth and had its best holiday season ever in Sweden. The gingerbread sales in the Netherlands stabilized on a full year basis. Growth in Continental Europe of 9% is outstanding, certainly given the full allocation of the Local Heroes portfolio to this region. Belgium and the Netherlands are good examples of home countries that carry a broad assortment of the 3 strategic pillars and generates good growth in '25. The reported growth in the U.K. was 2%. Currency evolution of the pound has a negative impact on the reported sales in the second half of the year. The deep focus on the own Biscoff chocolate business and the exclusion of Biscoff ice-cream sales in the second half of the year further tempered the growth. On the contrary, the Natural Foods brands performed strong in the U.K. As an example, TREK was the fastest-growing brand in the bar category in the U.K. And in the U.S., Biscoff was the fastest-growing brand in both, the cookies and spreads category. Household penetration for the Biscoff cookie has steadily expanded in recent years, and now stands at 9%. Significant growth was also realized again in the U.S. with BEAR. Our largest consumer markets continued to increase in imports. You can see this in the overview here on this slide, an overview that shows the revenue distribution by country. The U.K. remains our largest market, closely followed by the U.S. Other major consumer markets, including many European markets, China and Canada, are also gaining share. Within the remaining 19%, several smaller but high potential markets are emerging. Let's now go into more details about Biscoff. Biscoff realizes a 10-year average growth of 15%. The most important growth engine of Lotus Bakeries in absolute value of the last decennial. We have reached with Biscoff again, a lot of milestones and we will go into more detail on some of those in the following slides. The launch of spreads was almost 20 years ago, namely in 2008. You can see the interesting evolution of our pack design over the years. In '23, the brand named Biscoff became prominent on the pack. And now we take the next step, and we will move from a generic shape jar to our own design. [Presentation] Jan Marcel Matthieu Boone: The new jar makes the perfect reference to our Biscoff cookie with the embossment linking into our iconic cookie. And you can see the new Biscoff spreads lined up next to other global spread brands. And now it's our goal to make this Biscoff jar also iconic. Here you can see that our Biscoff brand. Here, you can see our Biscoff brand identity over the years. In 2018, we created the red banner on the packaging design. And in '23, we placed Biscoff front and center on the packaging as part of a shift towards a unified global brand identity. And we are ready to take the final step. In '25, we introduced the Biscoff engraving on the cookies, replacing the long-standing Lotus engraving. This change completes more than a decade of brand evolution, and ensures us 1 consistent visual identity and tone of voice. The letter fonts on the cookie is aligned to our Biscoff logo connecting the Fs to ensure readability. The new engraving will be introduced across the entire range, including the original cookie and the sandwich cookie, as you can see here. Implementation began late '25 in the U.S. and India, followed by a global rollout in '26. And now an update on the partnerships. One of the highlights '25 is, for sure the launch of Biscoff cookie in India. Towards the end of '25 an unprecedented nationwide launch campaign was rollouts, rapidly building distribution in more than 300,000 stores in less than 4 weeks. Sales conferences were organized across 15 key cities to inform and energize among the sales teams across the country. This allowed us to reach 10,000 salespeople in all parts of the country. A wide range of impactful marketing initiatives was deployed across the country. The main focus was on the unique product taste. [Presentation] Jan Marcel Matthieu Boone: Painting the towns red with Biscoff billboards across top cities. Social and influencer buzz delivering more than 150 million views. Also a nationwide and broadly covered press conference was organized. And of course, impactful in-market activation in all channels, both modern trade and traditional trade. Traditional trades includes thousands of small shops, as you can see on the slides. At '25, we successfully launched Biscoff with Cadbury, Milka and Cote d'Or. And Mondelez is working on some more exciting innovations that will come soon on the markets. The Froneri led Biscoff ice cream launches will start in '26 this year, and the U.K. and later on in European countries. Following extensive work throughout '25 to define the new assortments and develop new product innovations. This slide shows the different concepts that have been developed. You can see the sticks, the pints and the new sandwich concepts. And the sandwich concept is ice cream in between 2 original Biscoff cookies. In recent years, Lotus Bakeries has invested in a new greenfield production facility in Chonburi in Thailand to support its growth ambitions in the Asia Pacific region. We have now 4 Biscoff plants, including India, on 3 continents. By the end of '25, the first cookies produced in Chonburi have been delivered to the customers. Plant is expected to be fully completed and operational by the end of the first semester in '26 at the latest, including capability of spread production and in-house bottling of spread jars. You can see here a drone picture of the current Chonburi plants. On the left of the current building, you can see that the plot of land still allows for significant future expansion. Mid '25, a new investment in spread production and bottling was also commissioned at the plant in Mebane U.S. Local sourcing and production of Biscoff spreads in the U.S. will reduce our ecological impact, lower import duties and accelerate our logistical flow. Our ambition with Natural Foods is clear. We want to become a global leader in better-for-you snacking segments. And in '25, we have made great steps again. Lotus Natural Foods was the fastest-growing pillar of the group with 17%. It is now a EUR 300 million business. And this is not a one-off because since we entered the better-for-use snacking segment in 2015. Our 10-year average growth has been that same 17%. With Natural Foods, we reached several milestones in '25, and we will go more into detail on some of those in the following slides. An important driver of growth in recent years for those Natural Foods is the successful development and introduction of new innovations. Other brand, BEAR brands, the fruit splits are a perfect example of an innovation that was introduced in recent years. The fruit splits are performing very strongly next to the original BEAR fruit rolls. In both key markets for BEAR, the U.K. and the U.S., the splits rotates in the top quartile, at most retailers. Seasonal activation strengthened brand's visibility and consumer engagements. Alongside BEAR's strong overall performance, the brand successfully launched nationwide Halloween Edition featuring a single wrapped strawberry fruit roll and themes cards with the BEAR mascots. Also under the TREK brands, we launched 1 of the most impactful innovation of recent years, the TREK Protein Flapjack with Biscoff. And this TREK Protein Flapjack with Biscoff is a vegan protein bar layered with smooth Biscoff spreads. This innovation created a strong halo effect. While consumers were introduced to the iconic Biscoff of taste while Biscoff brands encouraged trial and visibility for TREK, strengthening relevance and appeal for both brands. In '25 Lotus Bakeries entered into partnerships with RunThrough in the U.K. and with Golazo in Belgium, the Netherlands and France. We will be a key partner at running events reaching over 900,000 runners annually and offering a strong opportunity to further build the visibility and relevance for -- of TREK and Nakd brands. So this concludes my part of the presentation. And now I will hand over to Mike, who will present the financials. Mike Cuvelier: Thank you, Jan. On the financials. In '25, we delivered another strong set of annual results, powered by an in-sync flywheel of sales profitability, cash flow and continued reductions in net debt. You see that revenue is up by 10%. Underlying EBITDA is up by 12%. Free cash flow before expansion CapEx is up by 20%. All of which make it possible to invest EUR 240 million in the past 2 years and at the same time, reduce the net financial debt further to 0.25x underlying EBITDA. The strong performance of '25 is also reflected in a proposed increase of the dividend with EUR 14 per share. This slide shows the yearly volume growth in percentage on the left and in millions of euro over the past years on the right. The reported revenue growth of 10% in '25 is primarily driven by continued robust volume growth of 9.5% or more than EUR 115 million. This is the darker bar in the graph. Before exclusion of the Biscoff ice cream sales of the second semester, normalized volume growth is actually higher at 10.4% or close to EUR 130 million. This is the bar on the right of the graph. And you can see this volume in '25 was outstanding and comes on top of a record volume growth already realized in 2024 of 14% and EUR 150 million. Over the past 5 years, underlying EBITDA has grown faster than sales. And in 2025, underlying EBITDA reached again the 20% of sales level matching the profitability level we delivered also in 2021. Our partnerships with Mondelez further enhance the group's margin profile. Underlying EBIT and underlying EBITDA grew by more than 12%, as you can see, outperforming the top line growth of 10%. This demonstrates the solid underlying quality of earnings. Strong volume growth, combined with disciplined pricing and margin management, continue to support expansion of profitability and cash flow. Our Biscoff plants in Lembeke and Mebane, together with the Bar factory in Wolseley, operated at high occupancy levels throughout the year. And towards the end of 2025, our new plant in Thailand became operational. The annualized depreciation in '26 for Thailand is expected to add around 0.5% on sales. The volume growth and operating leverage is being reinvested in strengthening our commercial organizations, expanding marketing initiatives to build brand awareness and penetration and further increasing production capacity. The nonunderlying items of EUR 4.8 million relate mainly to the start-up cash costs for the plant in Thailand before production commercially goes live. The financial results of EUR 2.4 million consists of interest expenses, net of cash deposit income, bank charges and a negative exchange rate impact from the revaluation of balance sheet positions in foreign currencies. The tax expense amounts to almost EUR 53 million and remains as a percentage profit before tax in line with prior year at 23.5%. Underlying net result amounts to EUR 177 million or 13.1% on revenue. On this slide, you can see our investment program over the last 5 years. We invested more than EUR 500 million since 2021 in total CapEx and more than EUR 430 million in expansion CapEx alone. In 2025, we invested EUR 120 million similar to the 2024 number, and the majority of this budget goes to the plant in Thailand. Maintenance expense remains well under control and also remains below 1.5% of sales in 2025. The CapEx forecast for '26 and '27 combined stands at EUR 250 million, and is slightly above the EUR 240 million over the last 2 years, '24 and '25. Cash flow delivery was once again very strong in the second half of the year, with cash conversion before expansion CapEx well above 90%, we were able to absorb more than EUR 100 million of expansion CapEx and still reduce net financial debt further. Supporting drivers of cash conversion remain control on working capital and maintenance CapEx. Net financial debt is historically low at 0.25x underlying EBITDA. The sustained strong cash flow delivery over the recent years and the successful exits by FF2032 of the participation in The Good Crisp Company are the drivers in 2025. And I have to repeat myself, this balance sheet, again, is stronger than ever. Increased long-term investments, reaching the EUR 1 billion mark alongside increased equity. Net working capital remains stable and the reported net financial debt further reduces. On this slide, the reported net financial debt of EUR 89 million includes EUR 21 million of debt to be expressed by applying the IFRS 16 standard about leases. The evolution of underlying earnings per share shows a CAGR of 17.1% over the recent 5 years. and is actually outpacing the underlying EBITDA evolution we saw in 1 of the previous slides. And then to end the presentation with another highlight of 2025 Lotus Bakeries has reached the status of dividend aristocrat with 25 consecutive years of dividend growth and proposing a dividend this year of EUR 90 per share. This concludes the presentations. We will now open the call for questions. Mike Cuvelier: And we have the first question of Alexander Craeymeersch of Kepler Cheuvreux. Alexander Craeymeersch: Thank you. Yes. So the first question, I would ask 2 questions. And congratulations on the good set of results first. So the first question would be, you mentioned at the beginning of the year that you could have only a max volume growth of 10% over full year 2025 in Biscoff and you mentioned also that there was going to be a high base in H2. Of course, at the H1, you already mentioned that there was the new plant in Thailand opening but now we show in Biscoff 15% growth half-on-half. And if you compare that, because in the first half of the year, it was only 1% growth half-on-half. I was just wondering now can we also expect that 15% growth to also be present in H1 next year because, of course, there was little room for growth supposedly, but now apparently, that was well overshoot. So that was the first question. The question -- the second question I would have would be on Capex. I was just wondering why CapEx landed a bit on the lower end in H2? And how much capacity would be coming free in 2026? That would be my second question. Jan Marcel Matthieu Boone: Thank you, Alexander, for the questions and also for the congratulations, so thank you. Regarding your first question, indeed in '25, we gave some guidance in respect of capacity related to Biscoff and in '26, there is not. The demand will be leading and we had indeed a very good, very strong second semester and the 15% growth of Biscoff is a bit exaggerated. It's more like-for-like almost 13% in the second semester that we grew with Biscoff. But the demand will be leading in '26, we have been investing in increased capacity, mainly through our plant in Thailand, and that plant will be producing for Asia and Australia and New Zealand. So the capacity is there to grow, to grow Biscoff in '26. In relation to the CapEx number, we have shown an outlook for '26-'27. So about EUR 250 million will be reserved for increasing the capacity in our different factories. That includes our Biscoff factories but also our factory in South Africa for Natural Foods products. And sometimes the risk between H1 and H2, a difference in cash out, but we can be assured in H2. We did work quite hard to get the plants up and running in Thailand. We are extremely happy with how the team performed -- our operations team performed in Thailand. They -- we did not have any significant setbacks. And that's why we made a clear statement in our press release that at the latest by end of the first semester we will be up and running with all our lines. Mike Cuvelier: The next question, Kris Kippers, Degroof Petercam. Kris Kippers: So yes, indeed, also on my side, excellent second half, so congrats on that. My question is more on the comment made in the press release on the first page also on the profile the group. Looking forward and looking at your cost base, which remain indeed well under control in the second half, given the fact that you have some scale increase as a group, you have indeed Mondelez, which is helping. On the other hand, there is, of course, the effect of Thailand which might not be as profitable as the Belgium plant or even Mebane in the short term. But what seems to be a realistic margin assumption going forward because, indeed, it could be that 21% in a couple of years is feasible? Or would it imply again what you commented in the past that you aim for, let's say, more marketing effect in order to focus on the long-term growth, it will be helpful to give some insight on that because it does see indeed that your margin uptick in second half could be structural. That's my main question, actually. Jan Marcel Matthieu Boone: Thank you, Kris. Yes, indeed, we are happy that the EBITDA margin was higher than the 20%. So we are now at 20.2%. There are a couple of elements that affected that percentage. First of all, the ice cream business we took out in the nonunderlying line. So not only the top line, but the whole P&L of the ice cream business in the second half is not included in the underlying results. So as you know, our ice cream business was not the most profitable one. So that helps to increase that profitability percentage. Looking into the future, a couple of elements will play. First of all, we will have the Thailand plant as from the 1st of January, fully consolidated into the results, which also means full overheads will be in the costs. And so it's clear that a new factory being integrated in the profit and loss has its overhead costs. And once it's fully in the P&L and you add lines, it's more profitable. So if we add lines in Lembeke and the profitability level of these additional lines is higher than implementing and your P&L, a full plant. So that's the effect we will see in '26. And also depreciation will be a bit higher, about 0.5% impact on our depreciation. On the other hand, the Mondelez partnership will play positively on the EBITDA and percentages as well, India as the corporation on ice cream and chocolate will play positive side percentage wise. So to summarize it, we think for '26 the EBIT and EBITDA percentages will be more or less in line with what we have communicated today in relation to '25. Kris Kippers: Okay. Very clear. And then just one follow-up, coming back on the CapEx program, EUR 250 million, somewhat north of what we anticipated, I presume. To what extent is this ample? And what kind of capacity expansion would this provide you? Could you share more details on what it entails? Jan Marcel Matthieu Boone: I said it's linked to our Biscoff factories and also our factory in South Africa. We -- the calculation made is, of course, based on what we expect in relation to demand to coming years. We don't like to build empty factories. We're not going to invest already for 30%, 40% additional capacity. We'd like to be quite close to the market. And the factories, the 3 Biscoff factories specifically, they are close to -- is very close to the full capacity. '26 will give us room for growth. But we're not going to be overinvesting in capacity sort of EUR 250 million, and it will not give us 30% to 40% additional capacity. I don't know if that gives you an idea. Mike Cuvelier: Next question, Maxime Stranart from ING Bank. Maxime Stranart: Can you hear me? Jan Marcel Matthieu Boone: Yes. Maxime Stranart: Correct. So first of all, looking at organic growth coming back on that. If I may, excluding the impact, would imply the organic growth is above 14% in H2 with volume growth of almost 13%. If I look at the number you just communicated, I just want to crosscheck with you that's basically the correct assumption to take? And is it a level you see sustainable in H1 that would be the first question on my slide. And secondly, digging deeper into India. Could you elaborate a bit on what's your view on what the growth could be in '26. That would be all for me. Jan Marcel Matthieu Boone: Thank you, Maxime. Indeed, in the second half of the year, we increased like-for-like. And that means the FX like-for-like, also the ice cream was indeed 14% of organic growth, which is exceptional. We are delighted with the 14% and if you see it in the history of the last 5 to 10 years and 14% of organic growth for the group is exceptional. What do we expect H1 '26. We are confident to further grow. But as I said, 40% is exceptional. And we also have the headwinds of the foreign exchange effects based on the currencies of today, pound-wise, dollar-wise, we have already, and we have to start with minus 2.5%. Things can change in a good way or in an versus way. You never know, but we start with minus 2.5%. And -- but if we purely look at the like-for-like growth, 14% is extremely high. And that's why both Mike and I are sitting here with a big smile because of the fantastic results in the second half. And then in respect of India. And then I have to quote my CEO colleague of Mondelez. He said, "Okay, I want to have at least USD 100 million sales in 5 years in India." And for us, it's clearly strategically a very good partnership. We have been in India for 20 years, even more, and we could never realize a substantial sales we would never become a real brand in India. And I think through this partnership, we will be, if we see the resources that Mondelez have used now to launch the marketing efforts and especially also the way they operate. And the fast way they can get the Biscoff products in all these stores more than 300,000 stores that's really truly impressive. And I'm sure they will create a brand. They will create Biscoff as a brand also for the Indian population. And that's our ultimate goal. And I want to become a global brand and if you cannot become a brand in India, you cannot say generally, we are a global brand. So I'm happy that we can work together with Mondelez on realizing that. Mike Cuvelier: Next question is Guy Sips from KBC Securities. Guy Sips: I have 2 questions. First question is on the ramp-up and the packaging cost evolution. We see some ease in the raw mat. Can you give us some color if that could give some tailwinds from that side going forward? And the second is coming back on the CapEx, do you intend to allocate some additional CapEx to the healthy snacking activities. Jan Marcel Matthieu Boone: Thank you, Guy. In respect of packaging raw materials and other costs. What we do is, we have the whole budget around and also calculating the cost prices and the different cost elements of our products. That's an exercise we do very meticulously. And that gives us the ability to communicate also our prices to our customers before year-end. We also try to hedge as much as possible of these costs. So we have a cash flow predictability. For '26, price increases will be moderate. So if you look at the growth of next year and hopefully, the growth of next year, it will be based on volume. So it will be very -- price effects will be very limited. In respect of capital expenditures for healthy snacking. Indeed, BEAR is doing really well. So we're going to invest in our South African plant and also for Nakd that we also produce in the same plant, we will add capacity over there. So partly is allocated for the plant in Wolseley. Mike Cuvelier: Next question, Jeremy Kincaid from Van Lanschot Kempen. Jeremy Kincaid: One more for me on Capex, are you able to split out how much of the CapEx guidance will be to the Biscoff brand and to the Natural Foods brand? And then my second question is just on your balance sheet. Obviously, you called out it's very strong. Does that mean going forward, we could expect higher cash distributions to shareholders? Or do you have a target leverage ratio that you're working towards? And then just finally on The Good Chip Company or Crisp Company, are you able to disclose how much you sold that for? I'm sorry if you said that at the beginning of the call, I was having technical issues. Jan Marcel Matthieu Boone: Thank you, Jeremy. In respect of CapEx, the majority should be allocated to Biscoff and the exact number, we will not disclose, but it's the majority to Biscoff. And we do have a strong balance sheet. We have increased the dividend pay out slightly I think if you look at the underlying profit of last year and our payout ratio, which was a bit below 40% and now it's a bit above 40% because we have indeed a very strong balance sheet with low leveraging. So happy to be dividend aristocrats. So we're official aristocrats. That does not mean that we're going to stop working. So -- but the view on our dividend has not changed. I think the dividend payout, we have no plans to really dramatically change the payout ratio. And -- but the balance sheet enables us to invest in capacity. So we will invest EUR 0.5 billion in the next 2 years. And that will be -- and that helps if you have a strong balance sheet. We do look at M&A. We do look at external growth. But it's not something that we really need today. As you can see, our organic growth is very strong, as well for Natural Foods as for Biscoff. The organization is also built and organized to really focus on Biscoff, focused on Natural Foods and also the Local Heroes. So an external growth and acquisition could be interesting. And we have the balance sheet for it, but it really has to be a perfect match. And it's not something that we really need in the short term. We love the organic growth, it's the most profitable way to grow, and -- we don't -- we are not nervous by the fact that we have almost no debt anymore. And in respect of the funds, FF2032. What we've seen is that the most targets are in the U.S. we invest in scale-up companies, not in seed. We're not investing in not seed money, but more in scale-up companies. And we like companies that we think that in the mid long term, they can reach EUR 75 million to EUR 100 million. And we've seen also out of experience that most of these targets are in the U.S. And so we have our team now in San Francisco mostly looking at U.S. targets. And a The Good Crisp Company, a very nice company in the sense that they have a very good product. They did grow significantly the last years and PearlRock private company that acquired and we agreed not to disclose any detailed information. But we did create some surplus value for the funds. Mike Cuvelier: We have time for 1 more question -- a follow-up question from Maxime Stranart of ING. Maxime Stranart: [indiscernible] that you're still looking at a growth target and also [indiscernible] looking at M&A. So any element in the portfolio; that you would add any category you feel would be a great fit as a group into. Jan Marcel Matthieu Boone: I think I more or less understood your question because the line is not perfect. But I understood that your question is, do we want to invest in other categories. I think looking at M&A, preferably, it will be either in the healthy snack and natural foods fields, I think that's what we focus on in our search. On the other hand, also in traditional biscuits and bakery, could be interesting, certainly in respect of getting more scale in certain countries. Today, we're not eagerly seeking in other categories and the categories we are in today. Mike Cuvelier: Thank you, Maxime. Just 1 last question, Antoine Prevot from Bank of America. Antoine Prevot: Can you hear me? Mike Cuvelier: Yes, yes. Antoine Prevot: Perfect. Yes. 2 quick questions. So first 1 on the U.S. So 9% household penetration, see good development there. any bit of an update on what your target a bit there in the U.S. household penetration over the midterm? And just a very quick 1 on India in terms of like -- I mean, strong launch, as you said and pointed out. I mean in terms of spending on A&P and so on. I mean how is it split between you and Mondelez? Is it them taking care of everything? Or do you also need to contribute a bit? Jan Marcel Matthieu Boone: Thank you for your question. Indeed, the U.S. has been evolving very positively. We are now at 9% of household penetration and our distribution on store level is -- it's 80% more or less. So evolving really positively. What are our ambitions there. Of course, we would like to cross the bridge of the 10% household penetration in the short term in the U.S. Today, the U.S. consumers are not that positive. We have not seen that in our figures for '25. And hopefully, we will not see that in our figures in '26. Today, there are no indications that the sales would be less good. So we still have a positive vibe coming from the U.S. And it's -- it's 1 of our, maybe our most strategic markets for Biscoff. We have been investing quite a lot in the U.S. in relation to marketing above the line. Investments have been started in '24, evaluated positively, so we are extending it in '25 and also probably in '26. So we keep on spending, supporting our brands to marketing. I think another important aspect is we have our factory in the U.S. producing for the U.S. Now also we have added to the spread line. And the good news is that we had a vision to buy enough land in North Carolina on that side. So we can still extend capacity on the same site because it takes quite some time to create know-how and factory. And now in the U.S., quality of the cookies are very good and are fully on par with the Lembeke ones. So it's good that we can extend on the same spots in Maiden, North Carolina. So we are ready in the U.S. to grow. Fantastic year '25. In general, consumers are but more hesitant, but today, we don't see that in our figures. India, indeed, a great start. And our contribution is, of course, that we look at the quality of the cookie. We decide on the marketing program together, and we do have a contribution also in the marketing support and the majority of the investments are being done by Mondelez, but we also contribute a bit to the marketing efforts. And like I said, it looks very positive but we're only there for 2 months now. But the start has been very promising and very proud to see our products and so many stores to see the positive pipe in India. Mike Cuvelier: Okay. Thank you for your good questions, interesting questions. Jan Marcel Matthieu Boone: Yes. Also from my side, thank you. We will close the call here. But of course, if you have any follow-up questions, you know where to also find me or find us in the next few days and weeks. Thank you very much.
Sota Endo: We would now like to start the presentation of the third quarter -- FY 2025 third quarter financial results of NTT DATA. My name is Endo from the IR office. I will be serving as the moderator today. Regarding today's materials, please refer to the financial results briefing session materials posted on our company's IR website. I would like to introduce the attendees today. Nakayama, Representative Director and Senior Executive Vice President; Nishimura, Director and Senior Vice President, Head of Corporate Planning, General Headquarters; Kusakabe, Senior VP, Head of Finance Headquarters. Total of 3 will be attending. Sota Endo: Today, we will start from the Q&A session. Without further ado, we would like to take question. [Operator Instructions] First question, SMBC Nikko Securities, Kikuchi-san. Tatsuma Kikuchi: Kikuchi speaking. I have 2 questions. First is this fiscal year, in Q2, July, data center shifted to REIT, it was a bit off from the initial assumption, and so you revised. But since then, there has not been any revision. Are you trending as planned? In Q4, how much profit are you expecting and for the full year? Kazuhiko Nakayama: Thank you. I will go one by one. Nakayama speaking. Thank you very much for the question. So at this time, the performance forecast was revised. So about the gain on sale of data center was revised downward. Others are in line, no change from the initial forecast. Q3 financial results, if I could explain a little. In data center, the fee income was a bit large. There were some one-off positive factors. So including that, Q4 -- for other areas, it's not that we have much headroom, but especially on the overseas side, we had a stretched target year-on-year. So there is a downside risk. But we want to somehow achieve the target for this year. So that is the key focus. In Japan, in public sector, in Q3 and year-to-date, we are negative year-on-year. We are trying to come close to the target as possible. And in other financial and enterprise, we will try to cover the shortfall. I think this is a question by others, too. Second question, I asked this question to the holdings, too. Tatsuma Kikuchi: In the new year, I'm sure you will discuss further. But in Q4, you may not be planning a capital recycling, but other than REIT, you may have some capital recycling in Q4. So what is your forecast? If not, and even not in Q4, what is your thinking on REIT and non-REIT capital recycling in the next fiscal year? What is your policy? Capital recycling disposal. So gain on sales, so how much gain you can get and whether you will do it or not is also my question. Kazuhiko Nakayama: First, data center gain on sale, we have nothing planned for Q4. And next year, FY '26 data center gain on sale, we have nothing fixed yet. As we've mentioned from the past, FY '25 data center gain on sale was Singapore REIT IPO. So to form the REIT price, we had to have the liquidity. So we had quite a big sale for that. So the second and third offering are usually smaller than the IPO amount, a fraction of IPO amount in normal cases. When we launched this REIT, we considered the portion for IPO and for the follow-on, we've thought of the -- so the ones that are mature and can have certain level of yield, and we also think of the regional balance. Our plan for next year is not fixed. And we understood by doing this IPO in FY '25, depending on the market trend, we get impacted. So the initial plan, it may be good or bad to mention the amount that we plan upfront. But our general thinking is not do IPO and put an end to it. We want to do some more deals to realize the cash flow early on and prepare for the next investment. So if I mention the amount, the number will help the analysts, I know, but that's not the nature of what we're trying to do. So once we have a clearer number, we will share it with you. And one clarification. Next fiscal year, data center investment, I will ask you again 3 months from now, but JPY 300 billion or JPY 400 billion. And then you recycle and also finance debt. So asset and debt will increase more next year, so you cannot help but increase? Yes. Data center investment from FY '23 to '27, we say over JPY 1.5 trillion. So that's the general trend. And the data center demand, given the strong demand, we now do business with hyperscalers, but we get orders and try to address those orders. So data center sales and profit will become sizable in the medium term. Of course, the key is the balance with the leverage. But -- and cannot mention the numbers how much next year, but the general direction is no change from the past. So most likely, we will move forward like we've done in the past. Sota Endo: We'd like to take the next question from Goldman Sachs Securities, Mr. Tanaka. Chikai Tanaka: This is Tanaka from Goldman Sachs Securities. I wanted to ask the 3 questions, including confirmation of the numbers. The first is regarding the fee income of the data centers. The one-off factor, how much of a plus or negative impact did it have on the -- sorry, the first -- the third quarter on a quantitative manner? Can you quote on that on a quantitative manner? Keisuke Kusakabe: This is Kusakabe speaking. I would like to answer your question. The data centers, it's sold as an asset and from where it's into a joint venture. If it sells, we are going to receive the revenue. That's a one-off situation. But the third quarter is about JPY 5 billion. And I believe that in the first half, I believe, was about JPY 5 billion. So 9-month total is about JPY 10 billion. Chikai Tanaka: Okay. So the one-off factor is about JPY 5 billion. Is that the correct understanding? Limited only to the data center, yes, because there are other factors. So may I mention that? Keisuke Kusakabe: At this time, the overseas -- well, North America, we were able to receive a subsidy from the government. That was about JPY 3 billion. So that's about it for the large number factors. Chikai Tanaka: My second question, Japan domestic situation. Overall, I think it is steadily performing. However, for the public and social infrastructure, what is the background on the strength of new orders? And I think there is a reactionary decline this year. So when is that going to turn around is what I would like to confirm with you. Tadaoki Nishimura: This is Nishimura speaking. I'd like to answer your question. The reason why the new orders performance is strong, the digital agency is showing their policy, the facilities advancement to improve the convenience of the people and increase investment in this area. So CAGR, it's about 8% growth market is what we expect. That is the factor behind this. And the other point is that, what was the other question? Chikai Tanaka: The reactionary decline whether it's only this time only for the public and social infrastructure. There's quite a large-scale system development, and this continues for multiple years. So in several -- once in several years, there's such a timing that occurs. So whether it's just only this time? Tadaoki Nishimura: Well, such a timing arises every several years. That's all. So this decline, reactionary decline, it's not regular. It happens on an ad hoc basis. Chikai Tanaka: But what the impact of that for this fiscal year, is that going to continue on to next fiscal year is what I wanted to ask. Tadaoki Nishimura: From next fiscal year onwards, whether it is -- we will have a reactionary decline. Last year, we had a very high margin project. And due to that, this year, as a reaction to that, it's declining, but this is not going to carry over to next fiscal year. Chikai Tanaka: Lastly, the overseas business, the orders received environment overall, what is the trend? It seems that there's quite of a drop in North America. Is that just a difference depending on the quarter, but I wanted to confirm that situation. And recently, which is the hot topic, this is the disruption type of topic in the AI, especially in the overseas market, it is considered to be an issue. And because you have a quite a weight in the overseas business, so what is your take on this part is what I would like to confirm as the third point. Tadaoki Nishimura: Regarding the overseas new orders received, do you want to know by region? Chikai Tanaka: Yes, roughly speaking. Tadaoki Nishimura: North America, first of all, regarding this fiscal year, well, last fiscal year, we had a large-scale project. And even though such project existed, this third quarter, regardless of that, we were able to receive orders regarding quite a large-scale project as well. So the growth we use this dedicated team for growth projects, and they are going out there to receive the orders. Therefore, we are seeing that effect of that at an early stage. So North America, this quarter has turned around to an increase in revenue. And so those efforts, actually, were the factors for the turnaround for North America region. And Europe, depending on the specific region in Europe, it differs or the country differs. The U.K. we brought in a growth office that we've done in North America. And so U.K. and the new orders received, we're seeing a positive impact from this establishment of this office. Germany, in terms of orders received, there are areas that they're struggling still. Starting from last October, the top management has been replaced. And in Germany as well, they are utilizing the Indian resources, which is -- well, it's like a North American model that they have applied. So the multinational corporations in Germany, they are proactively conducting the activities towards those companies. This fiscal year, the orders have not been fixed yet. However, from this fourth quarter onwards, we can expect orders coming in or it is becoming firmer. So in that sense, moving forward, we will start to see improvements in the new orders received side. And EMEAL, so up to now, they were steadily performing. And so they are progressing as usual. And lastly, APAC, Australia is not doing well quite a bit. So regarding Australia, regarding the orders received side, we have not seen a turnaround in the actual terms. However, Australia as well, reinforcement of the sales force is what we are doing. By industry, we are thoroughly responding to this situation. So the outcome of these efforts for Australia, we are having expectations towards that and waiting for it. And India within the APAC region are quite steadily performing and the Indian economy itself within the APAC region, they have a high growth rate as well. Therefore, in India, we're able to acquire quite a level of orders. And the other remaining areas of APAC, the cloud and security, there are strong performing due to the high demand of tech areas. The advanced team of U.S. is taking the lead and the know-how is utilized in APAC. And we are seeing the positive factor. And so those are the positive materials for this area. Chikai Tanaka: So regarding AI disruption, what kind of perspective do you have? Sota Endo: So Nishimura would like to answer that question. Tadaoki Nishimura: Using AI and improving the efficiency, the cost reduction pressure probably is going to becoming stronger is the outlook we have. And globally, when conducting the BPO business, the improvement of efficiency in incorporated type of contract is starting to show up. So on the customer side, the AI efficiency improvement that they do internally, they're outsourcing it. That is the situation. So specifically speaking, by the rise of AI disruption, we have expectations for the new business being deployed. So that part, we are positively receiving this. The negative part is that looking at the other companies' financial results, with this rise, it's not that they are experiencing a decline in their revenue or sales. That is our understanding. That is all. Sota Endo: So next question, JPMorgan Securities, Henderson-san. Matthew Henderson: Henderson from JPMorgan. Thank You about the financial results, Q3 segment by segment. So there's a reactionary fall from last year in the public sector, but good impression on your business. Overseas profit margin may flip next year. You will continue your structural reform expenses, although lower than this year. So Q3, Y-o-Y profit margin, EBITDA margin may improve by 2 or 3 percentage points. It's improving by 2 to 3 percentage points. But in Q3, will you continue improving at that rate and next year and enter the 10 percentage territory? Are there any changes internally? Kazuhiko Nakayama: Nakayama speaking. Thank you for the question. First of all, for Q3, as Kusakabe-san said earlier, overseas, there were some one-off positive factors. But the underlying basis by region, we're seeing an improvement. So you are right. Now profit margin, will we have the same level of profit margin in Q4? Q4 volume is quite large, and there are some unique treatments we need in the end of the year. So our forecast is we don't know if the Q3 profit margin will remain unchanged in Q4. I cannot give you a clear-cut answer there. On Page 12, profit margin trend is shown. This line graph is shown. But because we're showing this, we want to work hard to give you some positive results and numbers, but that is our view on Q4. Matthew Henderson: My second question is on data center. There was a big order in Q3. And looking at the external environment, data center demand remains strong. Are there risks that you cannot execute your current orders like the utility or power shortage or construction capacity or the raw material cost increase? Any risks that may hinder the order execution? Or can we be optimistic? So according to what you hear from the on-site is that there are no risks really, no such risks. As I mentioned earlier, large hyperscalers deals account for more than 80% of the new orders, and these are made to order. We do after we receive orders and the term is 10 to 15 years, very long. And the customers have financial strengths. So there is small risk that this gets canceled or deviate due to customers' situation. Now the former NTT Communication, North America, Germany and India. So that was the start, purchasing those companies in the region. And initially, the operation was independent by region. But now we work with hyperscalers. So the raw material procurement and design are now unified and centralized globally. So raw material delivery is now optimized and try to exchange and interchange when necessary. So we don't have the risks that you just mentioned. We have high expectations in Q4 and next year. Sota Endo: [Operator Instructions] The next question will be the last one of Nomura Securities, Mr. Masuno. Daisaku Masuno: This is Masuno from Nomura. I have simply 3 questions. The first is on Page 13, the structural reform of the overseas business. From next fiscal year onwards, so if you have about 2 years, this JPY 151 million will disappear in 2 years, and the synergy is going to be JPY 30 billion. And in total, about JPY 50 billion is going to contribute to the profit. So if you have 1 or 2 years, there's about JPY 50 billion of contribution to the profit. Is that the correct understanding? Sota Endo: Nishimura would like to answer that question. Tadaoki Nishimura: First of all, regarding integration of the overseas businesses, we have been working on it up to now as well. As you can see here on the chart, the upgrade of the business processes and optimization of business operation and moving forward, we have the ERP integration. And from next fiscal year onwards, what is the budget for it? We're still considering it. And there's nothing that I can share with you that is clear. But to a certain extent, we will spend a certain extent of expense to business transformation by integration. And the synergy, was it non-synergy? The categorization of that because the integration is progressing, it's difficult to say that. But if you look at the Inc. overall growth, we will grow more than the expense that is required. Whether it's around JPY 50 billion at this point, I cannot give you a clear answer. Daisaku Masuno: And then my second question is regarding the sales of the data center. Truly, I think it is a way of actually selling a very crown jewel asset. So last -- end of the last fiscal year, the noncurrent asset, the others is JPY 2.2 trillion and the equity depreciation or amortization itself is JPY 1.2 trillion. So I think you should sell about JPY 50 billion and have the cash going to your company, and then you don't have to sell data centers. And that part to the holding company, sell the -- ask them to sell their treasury shares and create that cash. Kazuhiko Nakayama: This is Nakayama speaking. At the second quarter, I think Mr. Masuno, you did give us a similar comment. So we are taking note on that -- we have been taking note on that. So I do understand your opinion very well. Having said that, at the end, the EBITDA number, how much are we going to increase that? And how much investment are we going to make towards the data center? Well, the data center is quite a long period project or business. So there's an immediate profit. But how it's going to be 5 years from now, 10 years from now? When we think about that, how are we going to think about the balance with the cash side are the factors that we need to consider and make the final decision. I do understand your opinion very well. Daisaku Masuno: Lastly, AIVista. You're going to have your Top Gun team do this. But every day, there's a new announcement made from the U.S. So you can't spend that much of a long time. What I'd like to ask is that if you have about 12 months, will the first platform be completed? Is that the sense of speed that you are taking in? Because if you take too much time, what you created at the initial stage is going to become obsolete. So at what timing will the first phase of the first platform be completed? Tadaoki Nishimura: This is Nishimura speaking. Thank you very much for your question. You are correct. Because the changes occur so fast, and how we can come about with something quickly? Is that going to become the key? So next fiscal year, we would like to come out with a certain deliverable. And this company itself is not a large-scale company. It's about between 30 to 50 headcount size company. And there is sales specialists that are very well versed in the industry, exists in each country. So utilizing this talent, we would like to create a new business case. So by next fiscal year, we are working on so we can come out with a certain deliverables. So please look forward to that. Sota Endo: So we answered all the questions that were raised. So we would like to close NTT DATA's Q3 financial results briefing. Thank you very much for your attendance.
Jan Marcel Matthieu Boone: Good morning, everyone. Welcome to the investor call. Following the announcement this morning of the 2025 annual results of Lotus Bakeries. I'm Jan Boone, and joining me today is our CFO, Mike Cuvelier; and we are both here in Lembeke. We will start with the presentation providing an overview of the performance and also the milestones of '25 and later on, deep dive into the financials. And of course, following the presentation, we are open for questions from your sides. And in total, we have foreseen 50 minutes for this call in total. First slide, I'm proud to report another year of strong and double-digit top line growth. The reported sales in '25 amounted to EUR 1.35 billion, and that represents an increase of 10%. This evolution is driven by continued strong volume growth in the second semester for both Lotus Biscoff and Lotus Natural Foods. At constant currencies, growth was even stronger, given the negative currency evolutions of the dollar and the pound in the second half of the year. Profitability improved further with underlying EBITDA on sales exceeding 20%, and this is an increase of 12% compared to the prior year. Also, the net profit increased and the net profit increased with 13%. The strong reduction of net financial debt led to a historic low multiple of 0.25x underlying EBITDA. Besides a strong operational cash flow delivery, we also realized a successful exit in FF2032 with the sale of our participation and The Good Crisp Company. A dividend of EUR 90 per share is proposed, and that's an increase of EUR 14 per share compared to the 76 of last year. And similar amount to prior year, we invested EUR 120 million in capital expenditures, and that's mainly in the plant in Thailand. The successful start-up of the first lines in Chonburi is for us, as a company, a huge milestone. And the operations teams deserve full credit for delivering this greenfield ahead of schedule and well in budgets. Last but not least, the partnerships with Mondelez advanced strongly and they contribute positively to the results. Lotus Bakeries is a growth company, and has been for the last 20 years, delivering a compounded annual growth rate of 11%. Looking at the pillars, the 3 strategic pillars. We see that Lotus Biscoff achieved a growth of 13% in '25. It reflects the discontinuation of Lotus Bakeries' own Biscoff ice-cream sales following the new license agreement with Froneri, EUR 11.6 million of second semester revenue was excluded from the reported top line sales. This primary volume growth of Lotus Biscoff demonstrates continued strong demand for Biscoff cookies and spreads. The Biscoff cookie once again ranks as the fastest grower in the global cookie brands ranking further reinforcing its position within the top 5. Lotus Natural Foods is the fastest-growing strategic pillar '25 with a growth of 17%. And after a strong performance in the first semester of '25, Lotus Natural Foods continued on the same positive path. TREK is the fastest-growing brand and BEAR is the biggest contributor to growth. [ After ] sales remained flat in the first half of '25, the Local Heroes delivered again growth in the latter half of the year. Annas pepparkakor even realized more than 10% growth and had its best holiday season ever in Sweden. The gingerbread sales in the Netherlands stabilized on a full year basis. Growth in Continental Europe of 9% is outstanding, certainly given the full allocation of the Local Heroes portfolio to this region. Belgium and the Netherlands are good examples of home countries that carry a broad assortment of the 3 strategic pillars and generates good growth in '25. The reported growth in the U.K. was 2%. Currency evolution of the pound has a negative impact on the reported sales in the second half of the year. The deep focus on the own Biscoff chocolate business and the exclusion of Biscoff ice-cream sales in the second half of the year further tempered the growth. On the contrary, the Natural Foods brands performed strong in the U.K. As an example, TREK was the fastest-growing brand in the bar category in the U.K. And in the U.S., Biscoff was the fastest-growing brand in both, the cookies and spreads category. Household penetration for the Biscoff cookie has steadily expanded in recent years, and now stands at 9%. Significant growth was also realized again in the U.S. with BEAR. Our largest consumer markets continued to increase in imports. You can see this in the overview here on this slide, an overview that shows the revenue distribution by country. The U.K. remains our largest market, closely followed by the U.S. Other major consumer markets, including many European markets, China and Canada, are also gaining share. Within the remaining 19%, several smaller but high potential markets are emerging. Let's now go into more details about Biscoff. Biscoff realizes a 10-year average growth of 15%. The most important growth engine of Lotus Bakeries in absolute value of the last decennial. We have reached with Biscoff again, a lot of milestones and we will go into more detail on some of those in the following slides. The launch of spreads was almost 20 years ago, namely in 2008. You can see the interesting evolution of our pack design over the years. In '23, the brand named Biscoff became prominent on the pack. And now we take the next step, and we will move from a generic shape jar to our own design. [Presentation] Jan Marcel Matthieu Boone: The new jar makes the perfect reference to our Biscoff cookie with the embossment linking into our iconic cookie. And you can see the new Biscoff spreads lined up next to other global spread brands. And now it's our goal to make this Biscoff jar also iconic. Here you can see that our Biscoff brand. Here, you can see our Biscoff brand identity over the years. In 2018, we created the red banner on the packaging design. And in '23, we placed Biscoff front and center on the packaging as part of a shift towards a unified global brand identity. And we are ready to take the final step. In '25, we introduced the Biscoff engraving on the cookies, replacing the long-standing Lotus engraving. This change completes more than a decade of brand evolution, and ensures us 1 consistent visual identity and tone of voice. The letter fonts on the cookie is aligned to our Biscoff logo connecting the Fs to ensure readability. The new engraving will be introduced across the entire range, including the original cookie and the sandwich cookie, as you can see here. Implementation began late '25 in the U.S. and India, followed by a global rollout in '26. And now an update on the partnerships. One of the highlights '25 is, for sure the launch of Biscoff cookie in India. Towards the end of '25 an unprecedented nationwide launch campaign was rollouts, rapidly building distribution in more than 300,000 stores in less than 4 weeks. Sales conferences were organized across 15 key cities to inform and energize among the sales teams across the country. This allowed us to reach 10,000 salespeople in all parts of the country. A wide range of impactful marketing initiatives was deployed across the country. The main focus was on the unique product taste. [Presentation] Jan Marcel Matthieu Boone: Painting the towns red with Biscoff billboards across top cities. Social and influencer buzz delivering more than 150 million views. Also a nationwide and broadly covered press conference was organized. And of course, impactful in-market activation in all channels, both modern trade and traditional trade. Traditional trades includes thousands of small shops, as you can see on the slides. At '25, we successfully launched Biscoff with Cadbury, Milka and Cote d'Or. And Mondelez is working on some more exciting innovations that will come soon on the markets. The Froneri led Biscoff ice cream launches will start in '26 this year, and the U.K. and later on in European countries. Following extensive work throughout '25 to define the new assortments and develop new product innovations. This slide shows the different concepts that have been developed. You can see the sticks, the pints and the new sandwich concepts. And the sandwich concept is ice cream in between 2 original Biscoff cookies. In recent years, Lotus Bakeries has invested in a new greenfield production facility in Chonburi in Thailand to support its growth ambitions in the Asia Pacific region. We have now 4 Biscoff plants, including India, on 3 continents. By the end of '25, the first cookies produced in Chonburi have been delivered to the customers. Plant is expected to be fully completed and operational by the end of the first semester in '26 at the latest, including capability of spread production and in-house bottling of spread jars. You can see here a drone picture of the current Chonburi plants. On the left of the current building, you can see that the plot of land still allows for significant future expansion. Mid '25, a new investment in spread production and bottling was also commissioned at the plant in Mebane U.S. Local sourcing and production of Biscoff spreads in the U.S. will reduce our ecological impact, lower import duties and accelerate our logistical flow. Our ambition with Natural Foods is clear. We want to become a global leader in better-for-you snacking segments. And in '25, we have made great steps again. Lotus Natural Foods was the fastest-growing pillar of the group with 17%. It is now a EUR 300 million business. And this is not a one-off because since we entered the better-for-use snacking segment in 2015. Our 10-year average growth has been that same 17%. With Natural Foods, we reached several milestones in '25, and we will go more into detail on some of those in the following slides. An important driver of growth in recent years for those Natural Foods is the successful development and introduction of new innovations. Other brand, BEAR brands, the fruit splits are a perfect example of an innovation that was introduced in recent years. The fruit splits are performing very strongly next to the original BEAR fruit rolls. In both key markets for BEAR, the U.K. and the U.S., the splits rotates in the top quartile, at most retailers. Seasonal activation strengthened brand's visibility and consumer engagements. Alongside BEAR's strong overall performance, the brand successfully launched nationwide Halloween Edition featuring a single wrapped strawberry fruit roll and themes cards with the BEAR mascots. Also under the TREK brands, we launched 1 of the most impactful innovation of recent years, the TREK Protein Flapjack with Biscoff. And this TREK Protein Flapjack with Biscoff is a vegan protein bar layered with smooth Biscoff spreads. This innovation created a strong halo effect. While consumers were introduced to the iconic Biscoff of taste while Biscoff brands encouraged trial and visibility for TREK, strengthening relevance and appeal for both brands. In '25 Lotus Bakeries entered into partnerships with RunThrough in the U.K. and with Golazo in Belgium, the Netherlands and France. We will be a key partner at running events reaching over 900,000 runners annually and offering a strong opportunity to further build the visibility and relevance for -- of TREK and Nakd brands. So this concludes my part of the presentation. And now I will hand over to Mike, who will present the financials. Mike Cuvelier: Thank you, Jan. On the financials. In '25, we delivered another strong set of annual results, powered by an in-sync flywheel of sales profitability, cash flow and continued reductions in net debt. You see that revenue is up by 10%. Underlying EBITDA is up by 12%. Free cash flow before expansion CapEx is up by 20%. All of which make it possible to invest EUR 240 million in the past 2 years and at the same time, reduce the net financial debt further to 0.25x underlying EBITDA. The strong performance of '25 is also reflected in a proposed increase of the dividend with EUR 14 per share. This slide shows the yearly volume growth in percentage on the left and in millions of euro over the past years on the right. The reported revenue growth of 10% in '25 is primarily driven by continued robust volume growth of 9.5% or more than EUR 115 million. This is the darker bar in the graph. Before exclusion of the Biscoff ice cream sales of the second semester, normalized volume growth is actually higher at 10.4% or close to EUR 130 million. This is the bar on the right of the graph. And you can see this volume in '25 was outstanding and comes on top of a record volume growth already realized in 2024 of 14% and EUR 150 million. Over the past 5 years, underlying EBITDA has grown faster than sales. And in 2025, underlying EBITDA reached again the 20% of sales level matching the profitability level we delivered also in 2021. Our partnerships with Mondelez further enhance the group's margin profile. Underlying EBIT and underlying EBITDA grew by more than 12%, as you can see, outperforming the top line growth of 10%. This demonstrates the solid underlying quality of earnings. Strong volume growth, combined with disciplined pricing and margin management, continue to support expansion of profitability and cash flow. Our Biscoff plants in Lembeke and Mebane, together with the Bar factory in Wolseley, operated at high occupancy levels throughout the year. And towards the end of 2025, our new plant in Thailand became operational. The annualized depreciation in '26 for Thailand is expected to add around 0.5% on sales. The volume growth and operating leverage is being reinvested in strengthening our commercial organizations, expanding marketing initiatives to build brand awareness and penetration and further increasing production capacity. The nonunderlying items of EUR 4.8 million relate mainly to the start-up cash costs for the plant in Thailand before production commercially goes live. The financial results of EUR 2.4 million consists of interest expenses, net of cash deposit income, bank charges and a negative exchange rate impact from the revaluation of balance sheet positions in foreign currencies. The tax expense amounts to almost EUR 53 million and remains as a percentage profit before tax in line with prior year at 23.5%. Underlying net result amounts to EUR 177 million or 13.1% on revenue. On this slide, you can see our investment program over the last 5 years. We invested more than EUR 500 million since 2021 in total CapEx and more than EUR 430 million in expansion CapEx alone. In 2025, we invested EUR 120 million similar to the 2024 number, and the majority of this budget goes to the plant in Thailand. Maintenance expense remains well under control and also remains below 1.5% of sales in 2025. The CapEx forecast for '26 and '27 combined stands at EUR 250 million, and is slightly above the EUR 240 million over the last 2 years, '24 and '25. Cash flow delivery was once again very strong in the second half of the year, with cash conversion before expansion CapEx well above 90%, we were able to absorb more than EUR 100 million of expansion CapEx and still reduce net financial debt further. Supporting drivers of cash conversion remain control on working capital and maintenance CapEx. Net financial debt is historically low at 0.25x underlying EBITDA. The sustained strong cash flow delivery over the recent years and the successful exits by FF2032 of the participation in The Good Crisp Company are the drivers in 2025. And I have to repeat myself, this balance sheet, again, is stronger than ever. Increased long-term investments, reaching the EUR 1 billion mark alongside increased equity. Net working capital remains stable and the reported net financial debt further reduces. On this slide, the reported net financial debt of EUR 89 million includes EUR 21 million of debt to be expressed by applying the IFRS 16 standard about leases. The evolution of underlying earnings per share shows a CAGR of 17.1% over the recent 5 years. and is actually outpacing the underlying EBITDA evolution we saw in 1 of the previous slides. And then to end the presentation with another highlight of 2025 Lotus Bakeries has reached the status of dividend aristocrat with 25 consecutive years of dividend growth and proposing a dividend this year of EUR 90 per share. This concludes the presentations. We will now open the call for questions. Mike Cuvelier: And we have the first question of Alexander Craeymeersch of Kepler Cheuvreux. Alexander Craeymeersch: Thank you. Yes. So the first question, I would ask 2 questions. And congratulations on the good set of results first. So the first question would be, you mentioned at the beginning of the year that you could have only a max volume growth of 10% over full year 2025 in Biscoff and you mentioned also that there was going to be a high base in H2. Of course, at the H1, you already mentioned that there was the new plant in Thailand opening but now we show in Biscoff 15% growth half-on-half. And if you compare that, because in the first half of the year, it was only 1% growth half-on-half. I was just wondering now can we also expect that 15% growth to also be present in H1 next year because, of course, there was little room for growth supposedly, but now apparently, that was well overshoot. So that was the first question. The question -- the second question I would have would be on Capex. I was just wondering why CapEx landed a bit on the lower end in H2? And how much capacity would be coming free in 2026? That would be my second question. Jan Marcel Matthieu Boone: Thank you, Alexander, for the questions and also for the congratulations, so thank you. Regarding your first question, indeed in '25, we gave some guidance in respect of capacity related to Biscoff and in '26, there is not. The demand will be leading and we had indeed a very good, very strong second semester and the 15% growth of Biscoff is a bit exaggerated. It's more like-for-like almost 13% in the second semester that we grew with Biscoff. But the demand will be leading in '26, we have been investing in increased capacity, mainly through our plant in Thailand, and that plant will be producing for Asia and Australia and New Zealand. So the capacity is there to grow, to grow Biscoff in '26. In relation to the CapEx number, we have shown an outlook for '26-'27. So about EUR 250 million will be reserved for increasing the capacity in our different factories. That includes our Biscoff factories but also our factory in South Africa for Natural Foods products. And sometimes the risk between H1 and H2, a difference in cash out, but we can be assured in H2. We did work quite hard to get the plants up and running in Thailand. We are extremely happy with how the team performed -- our operations team performed in Thailand. They -- we did not have any significant setbacks. And that's why we made a clear statement in our press release that at the latest by end of the first semester we will be up and running with all our lines. Mike Cuvelier: The next question, Kris Kippers, Degroof Petercam. Kris Kippers: So yes, indeed, also on my side, excellent second half, so congrats on that. My question is more on the comment made in the press release on the first page also on the profile the group. Looking forward and looking at your cost base, which remain indeed well under control in the second half, given the fact that you have some scale increase as a group, you have indeed Mondelez, which is helping. On the other hand, there is, of course, the effect of Thailand which might not be as profitable as the Belgium plant or even Mebane in the short term. But what seems to be a realistic margin assumption going forward because, indeed, it could be that 21% in a couple of years is feasible? Or would it imply again what you commented in the past that you aim for, let's say, more marketing effect in order to focus on the long-term growth, it will be helpful to give some insight on that because it does see indeed that your margin uptick in second half could be structural. That's my main question, actually. Jan Marcel Matthieu Boone: Thank you, Kris. Yes, indeed, we are happy that the EBITDA margin was higher than the 20%. So we are now at 20.2%. There are a couple of elements that affected that percentage. First of all, the ice cream business we took out in the nonunderlying line. So not only the top line, but the whole P&L of the ice cream business in the second half is not included in the underlying results. So as you know, our ice cream business was not the most profitable one. So that helps to increase that profitability percentage. Looking into the future, a couple of elements will play. First of all, we will have the Thailand plant as from the 1st of January, fully consolidated into the results, which also means full overheads will be in the costs. And so it's clear that a new factory being integrated in the profit and loss has its overhead costs. And once it's fully in the P&L and you add lines, it's more profitable. So if we add lines in Lembeke and the profitability level of these additional lines is higher than implementing and your P&L, a full plant. So that's the effect we will see in '26. And also depreciation will be a bit higher, about 0.5% impact on our depreciation. On the other hand, the Mondelez partnership will play positively on the EBITDA and percentages as well, India as the corporation on ice cream and chocolate will play positive side percentage wise. So to summarize it, we think for '26 the EBIT and EBITDA percentages will be more or less in line with what we have communicated today in relation to '25. Kris Kippers: Okay. Very clear. And then just one follow-up, coming back on the CapEx program, EUR 250 million, somewhat north of what we anticipated, I presume. To what extent is this ample? And what kind of capacity expansion would this provide you? Could you share more details on what it entails? Jan Marcel Matthieu Boone: I said it's linked to our Biscoff factories and also our factory in South Africa. We -- the calculation made is, of course, based on what we expect in relation to demand to coming years. We don't like to build empty factories. We're not going to invest already for 30%, 40% additional capacity. We'd like to be quite close to the market. And the factories, the 3 Biscoff factories specifically, they are close to -- is very close to the full capacity. '26 will give us room for growth. But we're not going to be overinvesting in capacity sort of EUR 250 million, and it will not give us 30% to 40% additional capacity. I don't know if that gives you an idea. Mike Cuvelier: Next question, Maxime Stranart from ING Bank. Maxime Stranart: Can you hear me? Jan Marcel Matthieu Boone: Yes. Maxime Stranart: Correct. So first of all, looking at organic growth coming back on that. If I may, excluding the impact, would imply the organic growth is above 14% in H2 with volume growth of almost 13%. If I look at the number you just communicated, I just want to crosscheck with you that's basically the correct assumption to take? And is it a level you see sustainable in H1 that would be the first question on my slide. And secondly, digging deeper into India. Could you elaborate a bit on what's your view on what the growth could be in '26. That would be all for me. Jan Marcel Matthieu Boone: Thank you, Maxime. Indeed, in the second half of the year, we increased like-for-like. And that means the FX like-for-like, also the ice cream was indeed 14% of organic growth, which is exceptional. We are delighted with the 14% and if you see it in the history of the last 5 to 10 years and 14% of organic growth for the group is exceptional. What do we expect H1 '26. We are confident to further grow. But as I said, 40% is exceptional. And we also have the headwinds of the foreign exchange effects based on the currencies of today, pound-wise, dollar-wise, we have already, and we have to start with minus 2.5%. Things can change in a good way or in an versus way. You never know, but we start with minus 2.5%. And -- but if we purely look at the like-for-like growth, 14% is extremely high. And that's why both Mike and I are sitting here with a big smile because of the fantastic results in the second half. And then in respect of India. And then I have to quote my CEO colleague of Mondelez. He said, "Okay, I want to have at least USD 100 million sales in 5 years in India." And for us, it's clearly strategically a very good partnership. We have been in India for 20 years, even more, and we could never realize a substantial sales we would never become a real brand in India. And I think through this partnership, we will be, if we see the resources that Mondelez have used now to launch the marketing efforts and especially also the way they operate. And the fast way they can get the Biscoff products in all these stores more than 300,000 stores that's really truly impressive. And I'm sure they will create a brand. They will create Biscoff as a brand also for the Indian population. And that's our ultimate goal. And I want to become a global brand and if you cannot become a brand in India, you cannot say generally, we are a global brand. So I'm happy that we can work together with Mondelez on realizing that. Mike Cuvelier: Next question is Guy Sips from KBC Securities. Guy Sips: I have 2 questions. First question is on the ramp-up and the packaging cost evolution. We see some ease in the raw mat. Can you give us some color if that could give some tailwinds from that side going forward? And the second is coming back on the CapEx, do you intend to allocate some additional CapEx to the healthy snacking activities. Jan Marcel Matthieu Boone: Thank you, Guy. In respect of packaging raw materials and other costs. What we do is, we have the whole budget around and also calculating the cost prices and the different cost elements of our products. That's an exercise we do very meticulously. And that gives us the ability to communicate also our prices to our customers before year-end. We also try to hedge as much as possible of these costs. So we have a cash flow predictability. For '26, price increases will be moderate. So if you look at the growth of next year and hopefully, the growth of next year, it will be based on volume. So it will be very -- price effects will be very limited. In respect of capital expenditures for healthy snacking. Indeed, BEAR is doing really well. So we're going to invest in our South African plant and also for Nakd that we also produce in the same plant, we will add capacity over there. So partly is allocated for the plant in Wolseley. Mike Cuvelier: Next question, Jeremy Kincaid from Van Lanschot Kempen. Jeremy Kincaid: One more for me on Capex, are you able to split out how much of the CapEx guidance will be to the Biscoff brand and to the Natural Foods brand? And then my second question is just on your balance sheet. Obviously, you called out it's very strong. Does that mean going forward, we could expect higher cash distributions to shareholders? Or do you have a target leverage ratio that you're working towards? And then just finally on The Good Chip Company or Crisp Company, are you able to disclose how much you sold that for? I'm sorry if you said that at the beginning of the call, I was having technical issues. Jan Marcel Matthieu Boone: Thank you, Jeremy. In respect of CapEx, the majority should be allocated to Biscoff and the exact number, we will not disclose, but it's the majority to Biscoff. And we do have a strong balance sheet. We have increased the dividend pay out slightly I think if you look at the underlying profit of last year and our payout ratio, which was a bit below 40% and now it's a bit above 40% because we have indeed a very strong balance sheet with low leveraging. So happy to be dividend aristocrats. So we're official aristocrats. That does not mean that we're going to stop working. So -- but the view on our dividend has not changed. I think the dividend payout, we have no plans to really dramatically change the payout ratio. And -- but the balance sheet enables us to invest in capacity. So we will invest EUR 0.5 billion in the next 2 years. And that will be -- and that helps if you have a strong balance sheet. We do look at M&A. We do look at external growth. But it's not something that we really need today. As you can see, our organic growth is very strong, as well for Natural Foods as for Biscoff. The organization is also built and organized to really focus on Biscoff, focused on Natural Foods and also the Local Heroes. So an external growth and acquisition could be interesting. And we have the balance sheet for it, but it really has to be a perfect match. And it's not something that we really need in the short term. We love the organic growth, it's the most profitable way to grow, and -- we don't -- we are not nervous by the fact that we have almost no debt anymore. And in respect of the funds, FF2032. What we've seen is that the most targets are in the U.S. we invest in scale-up companies, not in seed. We're not investing in not seed money, but more in scale-up companies. And we like companies that we think that in the mid long term, they can reach EUR 75 million to EUR 100 million. And we've seen also out of experience that most of these targets are in the U.S. And so we have our team now in San Francisco mostly looking at U.S. targets. And a The Good Crisp Company, a very nice company in the sense that they have a very good product. They did grow significantly the last years and PearlRock private company that acquired and we agreed not to disclose any detailed information. But we did create some surplus value for the funds. Mike Cuvelier: We have time for 1 more question -- a follow-up question from Maxime Stranart of ING. Maxime Stranart: [indiscernible] that you're still looking at a growth target and also [indiscernible] looking at M&A. So any element in the portfolio; that you would add any category you feel would be a great fit as a group into. Jan Marcel Matthieu Boone: I think I more or less understood your question because the line is not perfect. But I understood that your question is, do we want to invest in other categories. I think looking at M&A, preferably, it will be either in the healthy snack and natural foods fields, I think that's what we focus on in our search. On the other hand, also in traditional biscuits and bakery, could be interesting, certainly in respect of getting more scale in certain countries. Today, we're not eagerly seeking in other categories and the categories we are in today. Mike Cuvelier: Thank you, Maxime. Just 1 last question, Antoine Prevot from Bank of America. Antoine Prevot: Can you hear me? Mike Cuvelier: Yes, yes. Antoine Prevot: Perfect. Yes. 2 quick questions. So first 1 on the U.S. So 9% household penetration, see good development there. any bit of an update on what your target a bit there in the U.S. household penetration over the midterm? And just a very quick 1 on India in terms of like -- I mean, strong launch, as you said and pointed out. I mean in terms of spending on A&P and so on. I mean how is it split between you and Mondelez? Is it them taking care of everything? Or do you also need to contribute a bit? Jan Marcel Matthieu Boone: Thank you for your question. Indeed, the U.S. has been evolving very positively. We are now at 9% of household penetration and our distribution on store level is -- it's 80% more or less. So evolving really positively. What are our ambitions there. Of course, we would like to cross the bridge of the 10% household penetration in the short term in the U.S. Today, the U.S. consumers are not that positive. We have not seen that in our figures for '25. And hopefully, we will not see that in our figures in '26. Today, there are no indications that the sales would be less good. So we still have a positive vibe coming from the U.S. And it's -- it's 1 of our, maybe our most strategic markets for Biscoff. We have been investing quite a lot in the U.S. in relation to marketing above the line. Investments have been started in '24, evaluated positively, so we are extending it in '25 and also probably in '26. So we keep on spending, supporting our brands to marketing. I think another important aspect is we have our factory in the U.S. producing for the U.S. Now also we have added to the spread line. And the good news is that we had a vision to buy enough land in North Carolina on that side. So we can still extend capacity on the same site because it takes quite some time to create know-how and factory. And now in the U.S., quality of the cookies are very good and are fully on par with the Lembeke ones. So it's good that we can extend on the same spots in Maiden, North Carolina. So we are ready in the U.S. to grow. Fantastic year '25. In general, consumers are but more hesitant, but today, we don't see that in our figures. India, indeed, a great start. And our contribution is, of course, that we look at the quality of the cookie. We decide on the marketing program together, and we do have a contribution also in the marketing support and the majority of the investments are being done by Mondelez, but we also contribute a bit to the marketing efforts. And like I said, it looks very positive but we're only there for 2 months now. But the start has been very promising and very proud to see our products and so many stores to see the positive pipe in India. Mike Cuvelier: Okay. Thank you for your good questions, interesting questions. Jan Marcel Matthieu Boone: Yes. Also from my side, thank you. We will close the call here. But of course, if you have any follow-up questions, you know where to also find me or find us in the next few days and weeks. Thank you very much.