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Operator: Ladies and gentlemen, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will remain on music hold. Thank you for your patience. Good afternoon, and welcome to the Boyd Gaming Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is David Straub, Vice President of Corporate Communications for Boyd Gaming Corporation. I will be the moderator for today's call, which we are hosting on Thursday, February 5, 2026. At this time, all lines are in listen-only mode. Following our remarks, we will conduct a question and answer session. If at any time during this call, you require immediate assistance, please press star then 0 for the operator. Our speakers for today's call are Keith Smith, President and Chief Executive Officer, and Josh Hirsberg, Chief Financial Officer. Our comments today will include statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today's date, and we undertake no obligation to update or revise the forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement. There are certain risks and uncertainties, including those disclosed in our filings with the SEC, that may impact our results. During our call today, we will make reference to non-GAAP financial measures. For a complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8-Ks furnished to the SEC today, both of which are available at investors.boydgaming.com. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges and certain expenses. Today's call is being webcast live at boydgaming.com and will be available for replay in the Investor Relations section of our website shortly after the completion of this call. With that, I would now like to turn the call over to Keith Smith. Keith? Keith Smith: Thank you, David. Good afternoon, everyone. 2025 was another successful year for our company as we continue to build upon our strong foundation, position our company for further growth, and deliver long-term value for our shareholders. For the full year, our operations continued their steady performance as we achieved record company-wide revenues. EBITDAR for the year was approximately $1.4 billion, while property-level margins were 40%, both consistent with last year's. These results were supported by our diversified operations, continued growth in play from our core customers, and our focus on operational discipline and efficiencies. Beyond our operating performance, our company had several significant achievements throughout the year. In July, we unlocked considerable value from our FanDuel ownership interest, generating cash proceeds of nearly $1.8 billion for our shareholders. We utilized these proceeds to reduce leverage below 2x, further fortifying our already strong balance sheet. Throughout the year, we continued to enhance the competitiveness and growth potential of our properties across the country through our ongoing capital investments. We further diversified our nationwide presence with the debut of our transitional casino in Norfolk, Virginia. Given the strength of our financial position and robust free cash flow, we returned more than $800 million to our shareholders in 2025, reducing our total share count by 11%. Following our successful performance in 2025, we are optimistic about 2026. In our Las Vegas local segment, we will benefit from two new investments: the opening of our new Cadence Crossing facility at the end of the first quarter and the completion of our Suncoast modernization project in the third quarter. In our Midwest and South segment, we will benefit from a full year of contributions from our meeting and convention center expansion at Ameristar St. Charles, and from incremental revenues and profits from our recent hotel room renovations and food and beverage improvements throughout the region. In both Nevada and the Midwest and South, we continue to see strong play from our core customers and improving trends among retail players in 2025. Building on these positive customer trends, we expect the implementation of last year's tax legislation will benefit consumer spending across the country in the coming months, particularly in Southern Nevada, given the unique demographics of this region. Our online segment will be supported by the continued growth of Boyd Interactive, and our managed and other business will benefit from the opening of a casino floor expansion at Sky River later this month. Now turning to the fourth quarter. On a company-wide basis, revenues were $1.1 billion, while EBITDAR was $337 million. These results reflect continued growth in gaming revenues, led by strong play from our core customers. Year-over-year, EBITDAR comparisons in the quarter were impacted by approximately $40 million, primarily due to changes in our online segment as well as severe winter weather in December. Adjusting for these items, company-wide EBITDAR was even with the prior year, reflecting our operational discipline and cost controls throughout our business. Now moving to segment results, in the Las Vegas Local segment, overall revenue trends were consistent with the third quarter, with growth in gaming revenues and declines in cash hotel revenues related to ongoing softness in destination business in the fourth quarter. Higher gaming revenues during the quarter were driven by continued growth in play from our core customers, with strong demand from Southern Nevada residents. This growth in gaming revenue would have been even stronger had it not been for the softness in destination business during the quarter. This weakness in destination business resulted in a decline of nearly $6 million in cash hotel revenues versus the prior year, with the majority of the decline coming at the Orleans, consistent with what we experienced in the third quarter. Operator: Excluding the Orleans, Keith Smith: our Las Vegas locals business achieved EBITDAR growth of nearly 2.5%, an improvement over the third quarter as margins once again exceeded 50%. Looking to 2026, we expect our Las Vegas locals business will benefit from the opening of Cadence Crossing Casino late in the first quarter, the completion of the Suncoast project, and benefits to consumer spending from last year's tax legislation. In all, we remain confident in the long-term prospects for our Las Vegas locals business. Next, in our Downtown Las Vegas segment, play from our Hawaiian guests and our core customers remained stable in the fourth quarter. These trends were offset by an approximately 10% decline in pedestrian traffic on the Fremont Street Experience during the quarter, as well as lower cash hotel revenues, both of these reflecting weaker destination business throughout the Las Vegas market. Next, our Midwest and South segment benefited from continued growth in play from both our core and retail customers during the quarter. However, year-over-year revenues and EBITDAR were impacted by severe winter weather in December as well as the permanent closure of Sam's Town Tunica in November. The combined EBITDAR impact of weather and the Tunica closure was approximately $4 million during the quarter. After adjusting for these items, segment EBITDA grew by roughly 2%, in line with our third quarter results. Looking ahead, we expect to benefit from our recent investments in non-gaming amenities throughout the Midwest and South, including the completion of hotel room renovations at the IP, Valley Forge, and Diamond Jo Worth. We also expect incremental growth in Ameristar St. Charles following the opening of its expanded meeting and convention center this past September. Since the opening of this expanded facility, we have experienced significant levels of interest and strong forward bookings for this new space. And similar to our Las Vegas segments, we expect our customers in our Midwest and South markets will continue to stay and spend closer to home, with consumer spending supported by the economic benefits of last year's tax legislation. Next, our online segment achieved EBITDAR of $63 million for the full year, driven by a solid performance from Boyd Interactive and contributions from third-party market access agreements across the country. Looking ahead, we project our online segment will generate EBITDAR of $30 million to $35 million in 2026, reflecting continued growth from Boyd Interactive and changes in our revenue share agreements related to the FanDuel transaction last year. Finally, in our managed and other business, management fees from Sky River Casino continued to grow. With the first stages of Sky River's expansion project nearing completion, we are confident this growth will continue into 2026. The first phase of this expansion is expected to come online in February, adding approximately 400 slots and a 1,600-space parking garage adjacent to the property. Following the opening of this first phase, we will begin construction on phase two. Scheduled for completion in late 2027, this next phase will add a 300-room hotel, three new food and beverage outlets, a full-service spa, and an entertainment and events center. With the opening of Sky River's casino floor expansion in late February, we project our managed and other business will generate EBITDAR of $110 million to $114 million in 2026. So in all, our successful performance in 2025 was supported by continued strength in play from our core customers and strong returns from the capital investments we have been making across our portfolio. Building on the success of our recent capital investments, we will continue reinvesting in our properties in 2026 to enhance the overall customer experience and drive growth from our existing portfolio. For example, in January, we completed our hotel room renovation at IP Biloxi, the largest hotel in our Midwest and South segment. Work is now underway on hotel room renovations at the Orleans, where we expect to complete work in the fourth quarter of this year. We will also soon begin a hotel room update at Suncoast, which we expect to be complete by the end of the year. With the completion of these projects, we will have updated approximately 60% of our nationwide hotel inventory over the last several years. Separately, the modernization of our Suncoast property is well underway, with nearly half of the casino floor now complete. Properties continue to perform well throughout the construction process, further increasing our confidence in the growth potential of this investment. We expect this project to be completed toward the end of the third quarter of this year. Once our Suncoast casino model is complete, we plan to start a similar project at the Orleans during 2027. In addition to these property enhancements, we are continuing our growth capital investments nationwide. We plan to open Cadence Crossing Casino in late March, enhancing our Las Vegas locals presence with a modern gaming entertainment facility. The adjacent community of Cadence is growing rapidly, with more than 1,200 new homes sold in 2025 alone. This is the third-best sales performance of any master-planned community in the country. With strong residential growth continuing throughout the neighborhood, we believe Cadence Crossing Casino will be well-positioned to deliver a strong return on our investment. With significant land still available at Cadence Crossing for future development, we will have the opportunity to expand this property to meet the growing demand. Our next growth project will be the development of a new $160 million gaming facility at Paradise, Peoria. We are continuing to work with state regulators to finalize our plans for the development of a single-level facility with a modern new casino floor and enhanced amenities for our guests. Once we receive final approval from the Illinois Gaming Board, site preparations will begin, and we anticipate starting construction in 2027. Once complete in 2028, this investment will significantly enhance the competitiveness and appeal of Paradise, positioning us for incremental long-term growth at this property. Finally, work is well underway on our $750 million resort development in Norfolk, Virginia. We reached a key milestone in November when we opened our transitional casino adjacent to our development site. This was an important step for our Virginia project, and our focus remains on the development of our permanent resort. Foundation work is now largely complete for the permanent building, and construction is now going vertical. Once complete in late 2027, this upscale resort will feature a 65,000-square-foot casino, a 200-room hotel, eight food and beverage outlets, live entertainment, and an outdoor amenity deck. In addition to offering market-leading amenities, our resort will be the most convenient gaming destination for much of the Hampton Roads region, as well as the 15 million tourists who visit nearby Virginia Beach each year. While we continue to invest in our existing portfolio and new growth opportunities across the country, our strong balance sheet and robust free cash flow allow us to successfully balance these investments with our ongoing capital return program. We repurchased $185 million in shares during the quarter, supplemented by $14 million in dividend payments. We plan to continue repurchasing $150 million in shares per quarter, supplemented by a quarterly dividend. So in all, 2025 was a year of notable achievements for our company. Our operations delivered another year of strong and consistent results. We positioned ourselves for future growth as we continue to invest in property improvements and growth projects. We also returned more than $800 million in capital to our shareholders in 2025, and we unlocked significant value for our shareholders through the FanDuel transaction, allowing us to further strengthen our financial position. Looking ahead, we are well-positioned to build upon the strong foundation we have created as we continue to invest in our nationwide portfolio. With positive customer trends across the country and strong results from our capital investments, we are confident in our ability to build on our success and continue delivering long-term value for our shareholders. I'd like to conclude my remarks by thanking our entire team for their contributions to our company. Thanks to their hard work and dedication, we delivered yet another successful performance for our shareholders. Thank you for your time today. And now I'd like to turn the call over to Josh. Thanks, Keith. 2025 was another successful year for our company. We generated EBITDAR of approximately $1.4 billion, consistent with each of the last five years. Josh Hirsberg: Revenues achieved record levels. Property operating margins remained at 40%. On a company-wide basis, play from our core customers continues to grow, accompanied by increased play from our retail customers. Our diversified portfolio consistently generates substantial free cash flow, which we are actively deploying to create long-term value for our shareholders. Our strategy for value creation is built upon investing in our properties, growing our portfolio, and returning significant capital to our shareholders while maintaining a strong balance. In terms of investing in our properties, during the fourth quarter, we spent $148 million, bringing total capital expenditures to $588 million for the full year. Our capital investments are focused on strengthening our overall customer experience as well as targeted growth projects. For the full year 2026, we expect capital expenditures to approximate $650 million to $700 million, including $250 million in recurring maintenance capital dollars, $75 million in growth capital related to Cadence Crossing and Paradise, $250 million to $300 million related to our Virginia project, and $75 million related to additional hotel room renovations. As an aside, this should be the last year of our incremental hotel capital spend. Our recurring maintenance capital budget will continue to include our recurring hotel spend. In addition to our property and growth capital investments, we are utilizing our free cash flow and strong balance sheet to return significant capital to shareholders. During 2025, we returned $836 million to shareholders in the form of dividends and share repurchases. $58 million in dividends and $778 million in share repurchases. For the full year, we repurchased 10.1 million shares at an average price of $76.91 per share, with our actual share count finishing the year at 76.4 million shares, a reduction of 11% from year-end 2024. Since October 2021, the month we began our capital return program, we returned more than $2.7 billion to our shareholders in the form of recurring dividends and share repurchases, reducing our share count by 32% over that time period. During the fourth quarter, we paid $14 million as a regular dividend of $0.18 per share and repurchased $185 million in stock, or 2.3 million shares, at an average price of $81.18 per share. Going forward, we expect to maintain repurchases of approximately $150 million per quarter, supplemented by a regular quarterly dividend. This equates to more than $650 million per year, Keith Smith: or more than $8.5 per share. Josh Hirsberg: Moving to the balance sheet. As a result of last year's FanDuel transaction, we finished the year with total leverage of 1.7 times and lease-adjusted leverage of 2.2x. During the first quarter, we will pay approximately $340 million for tax credits. That will satisfy our tax obligations related to the FanDuel transaction. We anticipate that leverage will approach approximately two and a half times in 2026, taking into account this tax credit payment as well as our capital investments and our ongoing capital return program. In terms of our 2026 outlook, across our portfolio, we expect customers to continue to spend closer to home, which was a key driver of our business in 2025 for both our Nevada and Midwest and South businesses. We also expect to benefit from the opening of Cadence Crossing in March, the completion of the Suncoast renovation in 2026, and a full year of new meeting and convention space at Ameristar St. Charles, as well as the economic benefits to consumers from last year's tax legislation. As Keith noted, we expect continued growth from both Boyd Interactive and management fees from Sky River. Also, keep in mind as you think about 2026, the significant weather events in January impacting our results in the Midwest and South. So as we begin 2026, we remain confident in the strength of play from our core customers, the investments we are making, and our ability to create long-term value for our shareholders. David, that concludes our remarks, and we are now ready to take any questions. Operator: Thank you, Josh. We will now begin our question and answer session. You will hear a prompt that your hand has been raised. Should you wish to withdraw your request, please press star then 2. If you are using a speakerphone, please use your handset when asking your question. We will pause for a moment while we compile our list of questioners. Our first question comes from Barry Jonas of Truist Securities. Barry, please go ahead. Hey, guys. It's Patrick Gill on for Barry. Nice quarter, and thank you for taking our questions. First, we would like to dig into Locals play a little bit more. Could you possibly bifurcate between real locals play and destination locals play? How have each trended in Q4 and into the New Year? Josh Hirsberg: Thank you. Keith Smith: Yes. So when we look at our Las Vegas locals market here, what we saw during the quarter, and we saw this in the third quarter also, was very strong play from Las Vegas local residents, people who live here and participate with us. The real weakness, and we saw that in Q3, we saw it again in Q4, was in true destination play, you know, regional play, people coming in from out of town staying with us. That's what resulted in a $6 million decline in hotel revenue primarily at the Orleans because it's the biggest hotel, which is slightly elevated from Q3 where it was $5 million. So, you know, the core Las Vegas locals market is strong. The destination part of that, which really for Boyd Gaming Corporation is focused at the Orleans, is where the weakness is. But the rest of the market is strong. Josh Hirsberg: And the only thing to reiterate is in our comments, I think we pointed out, you know, the destination business, you can kind of see the most obvious impact in hotel revenues. Right? That you saw it in Q3. You saw it in Q4. In terms of a $5 million to $6 million decline in cash revenues. But it also is more broadly impacting our business. It affects the amount of gaming revenue we are reporting, the amount of food and beverage. And while it is primarily Orleans and primarily a Las Vegas phenomenon, to some degree, it's affecting, you know, larger hotel products even in the Midwest and South. Like at IP, for instance, where it is our largest hotel product outside of Las Vegas. It's also being impacted to some degree by weakness in destination or people's willingness to travel. Patrick Gill: That's very helpful. Thank you for the color. As our follow-up, your balance sheet is in a great spot. Could you share any updated thoughts on the M&A pipeline or overall environment on whole assets or opcos? Thanks again. Keith Smith: Yeah. Look, we obviously, over the years, have been very active in the M&A area, not in the last five or six years. But historically, we have been, and we remain interested. We remain open to it. We do look at things. We have the same very disciplined approach today that we have had over the years. In terms of making sure it's kind of the right asset and the right market at the right price, you know, and a lot of things go through the top of the funnel, and it's just that, at the end of the day, thus far in recent years, nothing's kind of come out of the bottom of the funnel. But we remain interested, and we continue to look at things. And I'm not sure there's a lot more I can say. Josh Hirsberg: Yeah. The only thing I would add is I think that we have probably the most capability to make an acquisition that we've ever had in terms of the strength of our balance sheet. But I think just because we can doesn't mean we necessarily will. It has to be the right opportunity. And in the meantime, we'll continue to remain focused on operating our business efficiently, reinvesting in our portfolio, not only to improve the overall customer experience but kind of enhance the growth of that portfolio, things like Virginia, things like Cadence, things like the Ameristar meeting space. And then as long as our stock continues to create value for us, we'll continue to buy and continue to return capital to shareholders. Patrick Gill: Sure. Thank you. Operator: Our next question comes from David Katz of Jefferies. David, please go ahead. David Katz: Hi. Evening. And thanks for taking my question. I wanted to follow-up on that second topic. You know, Keith, you sort of characterized the right market, right price, the right characteristics. Can you just shed a bit more light into that? And I know we've always had conversations about, you know, structure being, you know, holdco versus opco and propco, etcetera. You know, what are your current views with respect to, you know, those frameworks as you look at stuff? Keith Smith: Yes. So with respect to, once again, M&A, the discipline hasn't changed over the years with kind of being right market and the right asset and the right price and the right terms. With the industry has evolved over the years, which is a lot more opco in existence than a decade ago. We acknowledge that in order to buy certain assets, we're going to have to accept an OpCo structure. That is fine with us. We prefer to buy Holdco. Prefer to have Holdco assets, but we are not letting structure deter us from acquiring the right asset. And so once again, while we prefer Holdco, we're willing to accept Opco. But at the end of the day, it goes back to the right asset, the right price, the right market, the right time. So structure is not really an issue for us. David Katz: Understood. And if I can just follow-up one more time on that. Should we assume that, you know, operating improvements or operating execution on your part would be, you know, one of the ways that you can add value, but you would also consider sort of putting capital into a target as appropriate, you know, that that's on the table as well. Keith Smith: Look, I think if you look at our past acquisitions, well, I'd have to go through and check the box. But to a large extent, you know, every one of them has improved EBITDA as a result of better execution. And many of them received additional capital. You know, we bought Ameristar St. Charles in 2018, and we just spent money to expand their meeting convention center and do a few other things. So we would absolutely invest in these properties to, you know, help them continue to grow or improve their competitive position as part of an acquisition. Absolutely. David Katz: Okeydoke. Thank you. Operator: Thank you. Next question comes from Ben Chaiken of Mizuho. Ben, please go ahead. Hey, thanks for taking my question. This is really a two-part. So a few calls ago, you know, you mentioned that 40% of your customer base was 65 and older. I guess, number one, can you remind us, was that the overall company? Or was that just kind of the Nevada segment? And then part two is, you know, obviously, there's some other changes related to the one big beautiful bill or the tax bill. You know, depending on tax bracket, or you've got SALT, SNAP, so obviously, some good, some not particularly helpful. Where do you think your Midwest and South customer nets out? Is this a positive, negative, neutral? And then how do you think about the variables for that customer? Thanks. Keith Smith: So roughly 40% of our customer base being 65 plus was a company-wide comment. With respect to the one big beautiful bill, look, I think whether it's the Nevada consumer or the Midwest consumer, you know, they're going to receive a benefit, you know, and we expect that they will receive a significant benefit, you know, in the early part of this year. Obviously, we think Southern Nevada will get an outsized benefit simply because of the unique demographics we have here with a number of tip workers and a number of retirees in this town. But, clearly, we expect, and based on work we've done, we expect our Midwest customers will also, you know, get a good benefit from the one big beautiful bill. Now what ultimately that is, what they do with it, how much of it shows up in our business, TBD, obviously. Too early to tell. Only, you know, February 1, so we'll be watching and following it closely. But we do expect there to be, you know, very positive impacts to consumer spending both in Nevada and across the country from the tax legislation. Operator: Got it. But it doesn't sound like you're concerned around anything, any of the SNAP changes impacting your customer cohorts. Is that a fair submission? Keith Smith: That is a fair comment. Operator: Okay. And then just one quick one. I think we were expecting Suncoast to be at kind of peak margin disruption in Q3, Q4. Josh Hirsberg: Of this year. Is there any way to quantify the Q4 impact, either the margins or EBITDA? Operator: From the Suncoast disruption? Thanks. Keith Smith: So as we think about this year, '26, we'd expect that project to be complete at the end of Q3. And therefore, Q4, we should be starting to see, you know, see the benefits of not having construction disruption. The impact of construction sitting here today, I have to look at Josh to see if he has any commentary on the put, you know, significant in Q2 and Q3, potential impact. I don't have it for you. Yeah. I think what we've been surprised at is that the Josh Hirsberg: know, just the ability to discern the disruption has been minimal. So the property has actually been doing pretty well. Maintaining year-over-year performance or actually growing in some quarters. Despite the disruption that's been going on at the property. So the property management teams and the operating teams have done a really good job of managing through it. I think the real question is how much better could it have done without the construction? That's just, you know, that's a difficult number to come up with. So I'd just say, at this point, we've managed through it without the disruption that we expected. The guys have done a great job with that. And we'll continue to kind of work through it. And not really expect much in the way of change of performance than what we've seen since we started the project. So but we'll kind of live through it Keith Smith: to Josh Hirsberg: and report on it as we see it if it occurs. But I'd say today, we don't expect to see much. Patrick Gill: Appreciate it. Thank you. Sure. Operator: Thank you. Our next question comes from John DeCree of CB. John, please go ahead. Max Marsh: Hi. This is Max Marsh on for John DeCree. Thanks for taking my question. Was wondering if you could give us some updated expectations out of the temp in Virginia from an operational perspective. Previously, Operator: forecasted breakeven there, but revenue has looked pretty good so far. Josh Hirsberg: Can you guys make some money there before the permanent opens? Keith Smith: I think the guidance we've given on that and the guidance, I think, you'll continue to hear from us is we expected to breakeven kind of the level it's running at today. You know? Whether it's slightly positive or slightly negative is not big enough to move the dial for us. So you should just continue to think of it as a breakeven proposition through the opening of the permanent facility in late 2027. Max Marsh: Great. Thanks for that. And just as a follow-up here, there's been some Josh Hirsberg: some chatter about iGaming expanding to a couple new states. Now that you guys have a more defined iGaming product and strategy, how do you think about your approach to new state launches? Do you have an Max Marsh: opportunity to maybe gain a little bit more market share in a new state launch? Keith Smith: Yeah. Look, we're obviously supportive of iGaming, you know, around the country. And so, you know, as it looks to expand, they're looking at bills in a number of states, including Virginia right now, to pass iGaming legislation. So we're supportive of it as long as the bill has, you know, all the right elements and is a fair bill. We're supportive, and we look to be able to expand. So we're paying attention to all the states that are talking about iGaming and looking for a way to participate. Boyd Interactive has been, you know, a good source of growth over the last year or two. And we expect it to continue to grow. And we'll grow, frankly, quicker as other states, you know, adopt or legalize iGaming. Josh Hirsberg: Thank you very much. Keith Smith: Yep. Operator: Thank you. Our next question comes from Steve Wieczynski of Stifel. Steve, please go ahead. Steve Wieczynski: Hey, Keith. Hey, Josh. Good afternoon. So, Josh, I'm going to try to ask a guidance question without asking a guidance question. Keith gave us some help in terms of how to think about the online, how to think about managed. In the past, Josh, I think from a high-level perspective, you've kind of given some thoughts Josh Hirsberg: around the locals market downtown, Midwest and South, maybe just how you're thinking about the year, headwinds, tailwinds, you know, can you grow those markets? Is there margin opportunity? I guess, any kind of high color or, you know, high-level remarks would be, you know, would be helpful. Thanks. Josh Hirsberg: Yeah. So I'll try to help, Steve. And then Keith jump in if you think I missed anything. I think in Las Vegas, I think the real uncertainty is when does the destination business turn around. We don't really have any visibility at this point given destination softness was consistent between Q3 and Q4 in our view. So I think as we look at the Las Vegas locals, we are pleased with all of the property, you know, destinations largely affecting the Orleans. So outside of the Orleans, our properties are growing in revenue. We're maintaining our margins above 50%. We expect that to continue, you know, going forward. I think as we get into the second half of the year, there's a possibility that we can do better just relative to comping to destination business. And by that, I mean, I don't know if that means growth or if that means just less bad. I think the comparison will get a little bit easier in the second half of the year, and that's pretty obvious. I think we'll obviously be benefited by Cadence coming online, call it, at the end of March. And I think that as Keith mentioned in his remarks, we should see good consumer kind of health or fortification from the benefits here in Las Vegas in particular. Because of limited tax on tips and standard deductions and things of that nature. Look. I think in the Midwest and South for us, just moving there, and excluding weather where we've seen, you know, already seen pretty significant weather in January. And we were hopeful that we were past really bad weather that we saw in the first quarter of last year. But it seems like we're living through it again this year. I think we're encouraged by what we're seeing, and really this is true of Las Vegas as well as the Midwest and South. Core customer continues to be good. We continue to see good trends in the retail customer piece of our business. And that may sound counterintuitive because then at the same time, you know, we're having trouble in some areas because of destination business. That's a subset of those customer bases. But away from that, those customers are doing, those customer segments are actually going quite well. So I think we really need destination to turn around to really have a business that is well-positioned given our margin and discipline around operating. I think in the Midwest and South, we'll continue to benefit. As I stated in my remarks, people staying close to home, Ameristar St. Charles meeting space, and so I think there's growth potential in both of our Las Vegas segments and our downtown segment. Steve Wieczynski: But Josh Hirsberg: could be stronger if destination kind of came back to the table, and we just don't have visibility to that. Steve Wieczynski: So Josh Hirsberg: Steve, I hope that gives you some comfort or some answer to your question. I don't know if there's anything else you would want to ask about that, but happy to try to address. Steve Wieczynski: Yeah. Yeah. No. That's great. Thanks, Josh. And then real quick, second question. You know, you obviously called out weather so far in the first quarter. I don't think you quantified it yet. Or I don't think you quantified it. But just as we kind of think about, you know, modeling out the first quarter, how material was, you know, was January in terms of an impact on the Midwest and South just so we can kind of reset our models. Josh Hirsberg: Yeah. So I would say at this point, it's very similar to last year. Keith Smith: So Josh Hirsberg: you know, last year, I think we quantified about a $5 million impact. And I would say that's what we've seen approximately so far this Keith Smith: Yeah. It's very curious. We sat here a year ago on the same call and had $5 million worth of weather in January, and that's what it looks like this year. Steve Wieczynski: Yeah. Keith Smith: Okay. So Josh Hirsberg: Q1 this year right now is feeling a little bit like Q1 last year for the Midwest and South. Steve Wieczynski: Okay. Got it. That's great color. Thanks, guys. Really appreciate it. Keith Smith: Sure. Operator: Thank you. Our next question comes from Jordan Bender of Citizens Bank. Jordan, please go ahead. Jordan Bender: Hi, everyone. Good afternoon. Thanks for the question. I want to circle back on the comments around the weaker destination play some of the larger properties in the regions. It was something maybe newer that we've heard. Is this something that started when we started to see some of the weakness in Las Vegas last summer? Is this more of a newer trend that you're starting to notice? Keith Smith: Yeah. I think you probably need to narrow Josh's, you know, comment depending on how you heard it. The largest hotel we have outside of Las Vegas is the IP in Biloxi at a thousand rooms. And that's really what Josh was referring to. The other rooms are in the 200 to 400 category. And they're not being impacted by destination business. They generally run pretty good occupancies and pretty good rates. And so it really is about the IP, and the IP's been, you know, impacted for probably the last six months just like Las Vegas. So you should think about it as the IP, not a broader issue. Jordan Bender: Understood. Thanks. Josh, this might be splitting hairs a little bit, but you said 2.5x lease-adjusted leverage in '26. Is that you'll get to there at some point of the year? Is that a year-end target we should be thinking about? Josh Hirsberg: Yeah. So that was meant, I'm glad, thank you for clarifying. Not only am I thankful that Keith's here to interpret my comments for you guys, but thank you for asking this question to help me clarify. The two and a half times was traditional leverage, Jordan. So, you know, we're at, I think I said, 2.2 times lease-adjusted right now. So the lease-adjusted would be north of the two and a half times, probably just under three if I was estimating. I think that the two and a half times actually depends on people's expectations for the business and CapEx programs and spend and the timing of all that. But, like, kind of based on how we're thinking about it, that would have been a year-end type of estimate for 2026. Jordan Bender: Great. Glad I asked, and thank you very much. Keith Smith: Thanks. Thank you. Operator: Our last question today comes from Daniel Politzer of JPMorgan. Daniel, please go ahead. Hey, good afternoon, everyone. Thanks for squeezing me in. I wanted to follow-up on the comments on Virginia. It sounded like you guys were pretty supportive, which I think would be surprising just given, you know, you're building this big property there. Can you maybe help us better think through why that might be the case? And kind of how you're thinking about the chances that this actually goes through and, you know, passes legislation. Keith Smith: So, look, I'm not going to provide any commentary on its chances of passage. But I think with respect to being generally supportive of it, once again, making, you know, depending on exactly what's included in the bill. Right? We're supportive of iGaming as a concept in states around the country. But the devil's always in the detail and what's included in the bills and what's the tax rate and how many skins and a variety of other factors. Set the details aside for a second. Look. We've always been supportive of Josh Hirsberg: you know, Keith Smith: iGaming or iCasino. We think it is complementary to the business. I know some in the industry feel like it is detrimental. We think it's complementary. We've been involved and around the fringes of this for years. We see it as a new customer base. We've lived through this, whether it be in Pennsylvania, it be in New Jersey in the very early days when they launched iGaming and we were part of that. We've seen it evolve. We understand the customer. We understand who it is and who it is and how it can benefit the land-based properties. And so it just broadens the overall appeal of our product. It broadens the customer base. We don't think it is detrimental to the overall business. That's just our own philosophy. We know that many agree, and we certainly understand that some don't. Daniel Politzer: Right. That's helpful. And then just following up on the Locals business, right? There's obviously a good degree of concern out there on the demand for the strip. And, you know, if that could bleed into the locals business, given it's a much more diversified economy, how are you thinking about that risk? Is this something that you're concerned about? Have you seen any kind of signs of a little bit of fatigue or softening from that customer base? Keith Smith: No. We haven't, whether it be, you know, kind of the current situation or in years past when the business on the strip has ebbed and flowed, haven't really seen an impact to the overall locals market. As we commented a couple of times through the course of this call, in our Las Vegas locals business, the real strength is from people who live and play with us here. They're true local residents, Southern Nevada residents. And so we're not seeing anything bleed over. Those are not customers who are generally going to go and play on the strip. And once again, as we get into 2026, we expect consumers across Southern Nevada to, you know, have more discretionary income as a result of the tax legislation from last year. So nothing concerning, nothing we're seeing, nothing I'm worried about sitting here today. Josh Hirsberg: Yeah. And, Daniel, the one thing I would add is, or a couple things I would add is, you know, when you look at the performance of the portfolio and kind of narrow down the destination impact to just the Orleans, you see our business continues to perform pretty much as it has over the last several years in terms of the locals business. You know, we continue to see revenue growth. Continue to see our ability to drive margin efficiencies. And EBITDAR growth and really kind of the focus of the weakness in our business has been destination, and that's a focus on the Orleans. And so I think that, you know, if we were starting to see impacts beyond kind of Keith Smith: some Josh Hirsberg: kind of bleeding over from the challenges the strip are facing into our business, I think we see it in other parts of our business as well. We're just not seeing it in our Keith Smith: our everything we see in terms of Josh Hirsberg: kind of a near-term outlook don't suggest that either. Daniel Politzer: Got it. Thank you so much. Operator: Thank you. This concludes our question and answer session. I'd now like to turn the call back over to Josh for concluding remarks. Josh Hirsberg: Thanks, David, and thank you to each one of you for joining our call today. We know what time you can have competing demands on your time, so we appreciate you allocating some of that to us. If you have any follow-up questions, feel free to reach out to the company, and we'll be happy to assist. Thank you.
Operator: Good day, and thank you for standing by. Welcome to the first quarter 2026 ESCO Technologies earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. On the call today, we have Bryan Sayler, President and CEO, and Christopher L. Tucker, Senior Vice President and CFO. And now I'd like to turn the conference over to the first speaker today, Kate Lowrey, Vice President of Investor Relations. Kate, now you have the floor. Thank you. Kate Lowrey: It was made during this call, which are not strictly historical, are forward-looking statements within the meaning of the safe harbor provisions of the Federal Securities Law. These statements are based on current expectations and assumptions, and actual results may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the company's operations and business environment, including but not limited to, the risk factors referenced in the company's press release issued today, which will be filed as an exhibit in the company's Form 8-Ks to be filed. We undertake no duty to update or revise any forward-looking statements except as may be required by applicable laws or regulations. In addition, during this call, the company may discuss some non-GAAP financial describing the company's operating results. Reconciliation of these measures to the most comparable GAAP measures can be found in the press release issued today and found on the company website at www.escotechnologies.com under the link Investor Relations. Now I'll turn the call over to Bryan. Thanks, Kate, and thanks, everyone, for joining today's call. Bryan Sayler: We are pleased to meet with you this afternoon to discuss ESCO's strong first quarter results, which have our fiscal 2026 off to a great start. We booked over $550 million in orders in the first quarter, which is an increase of 143% over the prior year. All three of our segments saw double-digit orders growth, led by strong aerospace demand and large Navy orders at Maritime and Globe. We believe in the long-term growth drivers across our end markets, and it was great to see the positive momentum across our businesses to start the year. Top-line sales growth of 35% combined with 380 points of adjusted EBIT margin expansion drove a 73% year-over-year increase in adjusted earnings per share from continuing operations to a Q1 record of $1.64 per share. Our exceptional financial results for the quarter are a testament to our strategic positioning across our served markets combined with disciplined execution by our global team. Chris will take us through all of the financial details in the quarter, but before we get to that, I want to give you a few comments on each of the segments. Let's start with aerospace and defense. As I mentioned, we're seeing tremendous order strength on both US and UK Navy programs from the maritime business and from our organic Navy business. In addition, sales were up 76% in the quarter, driven by the addition of Maritime, and double-digit organic growth across our Navy and aerospace programs. The growth story here remains intact, driven by increasing build rates for commercial aerospace OEMs, and sizable investments from our defense customers as they refresh and expand their capabilities. Overall, we're seeing the benefits of our A&D segment's sharper focus on the aerospace and Navy markets where the long-term outlook remains quite positive. Switching over to our utility solutions group, the results here were a little bit more mixed in the quarter. Orders were up double digits with very strong order flow for services, condition monitoring, and offline test equipment at Doble. But this was partially offset by lower demand in our renewables business. Sales were up modestly over the prior year, as renewables headwinds largely offset the 6% revenue growth at Doble. Overall, we remain quite excited about the outlook for our utilities business. The majority of the activity here is driven by utility capital spending focused on grid reliability and capacity increases, and we continue to see those forecasts grow. ESCO's capabilities have a clear role to play in assisting utilities to meet growing electricity demand, and we remain bullish on the long-term prospects for growth here. As we have discussed previously, the renewables market is recalibrating right now as US developers focus on completing current projects in order to satisfy the safe harbor provisions related to tax credits which expire in July. This has slowed domestic renewables investments in the near term, but we continue to believe that longer-term, renewables will play a vital role as a cost-competitive source of generation as utilities work to meet the increasing demand for electric power. Finally, I'll touch on the test business, which had a robust start to the year. With orders up 17% over the prior year and revenue up 27%. This business had a nice year of recovery in 2025, and it's great to see that momentum continue with significant growth during the first quarter. This is a technology-driven business with broad capabilities to serve customers across the RF test and measurement and industrial shielding markets. The team here is executing very well, and we're excited the outlook for test continues to improve. Overall, our Q1 results got us off to a great start for the year. With record backlog and continuing strength across our businesses, we are raising our full-year sales and earnings guidance. With that, I'll turn it over to Chris who will run you through the financial details for the quarter. Thanks, Bryan. Everyone can follow along on the chart presentation. We will start on page three, which shows financial highlights for the first quarter. Christopher L. Tucker: Bar charts across the top of this page clearly show that ESCO had a tremendous first quarter. The key theme with ESCO's financial performance right now is that core company performance on an organic basis is quite strong, and the ESCO Maritime acquisition is adding significantly to that base company performance. It's a powerful combination. Getting the numbers, we start with orders, which increased 143%. Organic order growth was double-digit for all three business platforms, with aerospace and defense being particularly strong. Maritime added $238 million of orders as the business received large contract awards in the UK. On the sales side, reported growth was 35%, which was comprised of 11% organic growth and $51 million of sales from Maritime. On the profitability side, we saw adjusted EBIT margins improve by 380 basis points to 19.4%, and adjusted earnings per share increased by nearly 73% to $1.64 per share. Next, we'll go through the segment highlights, starting with aerospace and defense on page four. A great quarter here, starting with orders, which came in at over $380 million compared to $75 million in the prior year quarter. Order activity was quite strong from the commercial and military aircraft customers. Additionally, Navy order activity was also very strong with organic growth driven by Virginia class block six orders. Sales in the quarter were $144 million with organic growth of 14%. This robust organic growth was driven by strength in commercial and defense aerospace, as well as the Navy business. So really nice performance from all parts of the core aerospace defense platform. On the profitability side, we had tremendous increases with adjusted EBIT margins up to 26.5%, which is more than 500 basis points of improvement. Adjusted EBIT and adjusted EBITDA dollars both more than doubled from last year's first quarter. Again, this demonstrates the strength of our base company performance and the additive impact of the ESCO Maritime acquisition. Margin increases were due to positive impacts from leveraging sales growth and increased price while Q1 also had favorable mix due to aftermarket sales. Next, we will go to chart five in the Utility Solutions Group. Orders here were up 10% in the first quarter driven by strong performance at Doble, where orders grew by 15%. Backlog finished at nearly $155 million, up 8% since September 30. Sales in the quarter were up a modest 1%, with Doble sales growth of 6% mostly offset by declines at NRG. Doble continues to see good end market activity across a number of product lines serving the regulated utility customer base, while NRG continues to see near-term market weakness as the renewable activity resets. Adjusted EBIT dollars were down just over 4% with price increases and sales volume leverage at Doble unable to offset margin drops at NRG. We have the test business on page six. This business had a terrific start to fiscal 2026 with orders up over 17% and sales up nearly 27%. This business is seeing robust market activity centered around US test and measurement, industrial shielding, medical shielding, and power filters. Adjusted EBIT margins improved nicely, increasing to 13.8%, which represents an increase of 320 basis points from last year's first quarter. The business is leveraging the sales growth nicely, also increasing margins via price increases and cost containment. Going to chart seven, we have cash flow highlights for the first quarter. Operating cash flow in the first quarter was very strong, more than doubling to $68.9 million on a continuing operations basis. This was led by an increase in contract liabilities at the Navy businesses. Capital spending increased slightly in the quarter, and there was also a payment of just over $5 million during the quarter for the final working capital settlement related to the ESCO Maritime acquisition last year. Our last chart is number eight where we have the updated 2026 guidance. With a great start to the year, we are able to substantially increase the 2026 outlook. The sales guidance is increasing by $20 million at the midpoint to a range of $1.29 billion to $1.33 billion. The increase is coming primarily from the test business, where we had Q1 outperformance in sales and orders driving up the full-year forecast. The original sales guidance for Test was for growth in the range of 3% to 5%, and the updated guide is for revenue growth in the range of 9% to 11%. Additionally, we had a slight increase in the A&D sales outlook. Overall, the sales increase is driving increased adjusted EBIT performance expectations for 2026. Additionally, the first quarter tax rate was favorable, and that impact will flow to the full-year forecast. This means that full-year tax rate projections are now in a range of 23% to 23.5% compared to 23.7% to 24.1% in the original guidance. All of this drives the full-year adjusted earnings per share to a range of $7.90 to $8.15 per share. Compared to the prior guidance range, this is an increase of $0.38 per share at the midpoint and represents growth of 31% to 35% compared to 2025 adjusted earnings per share. The original outlook represented a strong growth plan for ESCO, and we are pleased to share this increased forecast representing an even stronger growth trajectory. That completes the financial summary. Now I'll turn it back over to Bryan. Thanks, Chris. Bryan Sayler: So as you've heard from our commentary, Q1 was a great start to the year. Robust orders and strong execution have put us in a position to raise our outlook for the full year. So with that, we're finished with our prepared remarks and can turn it over to the Q&A. We also ask that you wait for your name and company to be announced before proceeding with your question. Operator: The first question today will come from the line of Tommy Moll of Stephens. Your line is open. Tommy Moll: Good afternoon, and thanks for taking my question. Bryan Sayler: Hey, Tommy. Tommy Moll: Bryan, my first question is on the A&D orders. To the extent you can comment on ships that content on either side of the Atlantic, if there's any updates there, we'd appreciate it. And maybe bigger picture on orders, you know, last quarter's 0.83 book to bill was clearly not the right level. This quarter's 2.66 is probably not a sustainable level. But how would you give us some kind of enduring takeaway here on the state of affairs there? Bryan Sayler: Well, I'll take the last piece first, and that is I think the enduring takeaway is that the long-term demand in all of these markets is really, really good. I think we've signaled a number of times that Navy in particular is going to be very lumpy. I think we mentioned in November's conference call that we had a large, you know, couple $100 million order in the UK. That came through. Unfortunately, the way that the MOD thinks about those things, we're not really in a position to be able to give you specifics on platforms or our content there. So I would not be able to give you a lot of detail there. I'd say over on the US side, we also received in the quarter about $30 million in orders for Virginia class block six. And we would expect that to kind of be continuing. But again, that's going to come in big chunks, and so that's gonna be kind of lumpy. And it's not always gonna be in the same quarter every year. So the year-over-year quarter-to-quarter comparisons aren't really great. I think the other big story here is that we really did see a pretty robust return to orders from our aerospace OEMs. You know, 2025 was kind of a year that was a little soft on the order side as you know, build rates were kind of stable, and there seemed to be a lot of management of inventory going on in the supply chain. But we think that they're kind of through that. We're really encouraged to see Boeing and the other OEMs kind of getting their bill rates up. And we're starting to see that come through on our order book. I'd also say there was a pretty good amount of military aircraft activity in the quarter as well. That's something that is more stable, will be lumpy through a, you know, four-quarter cycle. But generally speaking, it will be pretty repetitive on a year-to-year basis with a little bit of growth. Tommy Moll: Bryan, if I could stay on A&D for another question. Just looking at the results in the first quarter, and the guide for the year, I'm talking revenue now. It looks conservative at first glance. I mean, you raised it from a seven to an eight at the midpoint. But you started the year in the teens on a pretty tough comp. So maybe walk me back from that assumption if there's something I'm missing here. Christopher L. Tucker: Yeah, Tommy, this is Chris. You know, I would say that we do expect that the first quarter is going to be the strongest growth, and we would expect to still see solid growth through the year, but kind of tapering down a little bit. And then when we get to Q4, we have, you know, kind of lower growth overall. Again, I think that's a function of the comps a little bit. So, you know, we still see a nice high single-digit outlook there in the core business, but you know, understanding it's a little bit front-end loaded. Tommy Moll: Thank you both. I'll turn it back. Operator: Thank you. One moment for the next question. And the next question will be coming from the line of Jonathan E. Tanwanteng of CJS. Your line is open. Jonathan E. Tanwanteng: Hi. Thank you for taking my questions and a really great quarter and outlook, guys. Bryan Sayler: Thanks, Jon. Jonathan E. Tanwanteng: If you could start, what's driving the strength in test, and how did that change so quickly in the span of ninety days? Bryan Sayler: Listen. A lot of our traditional core markets, particularly electromagnetic compatibility, you know, medical shielding, those really came back very, very strong this year. Or this quarter, I would say. We won a couple of pretty good-sized orders, and that's really, you know, because it happened earlier in the year, we're gonna see a lot of that come through as revenue within the year. I would also say that we're starting we've seen kind of a return to, you know, regular orders from our kind of our EMP filter product line that supports, you know, some of the data centers and that sort of thing. So, listen. Just a pretty broad-based I would tell you that the one area that we're still not, you know, feeling love on is the wireless business. I mean, it's we did see a little bit of growth there, but it's coming off a very low base. So that's the one area where we're probably still looking for some recovery. But I would say overall, like, a little bit A&D in there, some microwave stuff, so really good good and I would say Europe and the US were the two big leaders there. Jonathan E. Tanwanteng: Got it. Thank you. And then are you within sight of the trough of the energy business, or do you think that's gonna extend a little further out? Bryan Sayler: Yeah. Listen. I think that what we believe about that is that the focus for all of the developers in the US is really they're hyper-focused on kind of getting as much done on their existing projects by July. So that they can qualify as much of that as possible for those cash credits. And so, you know, a lot of our content's already been delivered on those projects. And so that's leading them to make lower investments right now on new projects. We expect that that's gonna kind of revert in 2026. So it might be in our fourth quarter. It might be in the first quarter of next year. That's when we think that things are gonna kind of return to what we would call normal growth. Which would be kind of high single digits, kind of like our regulated utility business operates. So please remember, Jon, that after the Inflation Reduction Act was put in place, you know, that whole market kind of got turbocharged for two or three years. And now they're kind of, you know, getting off that sugar high from all those tax incentives. And it's gonna take them, you know, a couple more months to kind of get back in the pocket. And really making good decisions. The renewables business, you know, will have a big role to play because it is very cost-effective. Relatively easy to deploy, and the assets are available. And those are all characteristics that utilities are looking for. Jonathan E. Tanwanteng: Got it. Thank you. Then last one, if I could. Just the large orders of the maritime business, can you just talk about how they'll layer in over the next couple of years and if that's an acceleration of the growth rate or if that's in line with what your expectations were? Christopher L. Tucker: Yeah. I would say it's in line, you know, kind of since we've owned the company. You know, we closed the deal in April, and so these were kind of the expectations were that this order would come in. As far as how that layers in, I would say we would get a little revenue starting in the fourth quarter. And then you'll start to see it kind of kick in more in '27 and '28. So these are, you know, these are long-term contracts and programs. That really kind of help solidify the outlook for '27 and beyond, I would say. So that's kind of how we're thinking about them. And really not much of a revenue impact this year, although there will be a little bit towards the end of the year. Jonathan E. Tanwanteng: Got it. Thank you. Operator: Thank you. One moment. We do have a follow-up question. And that question is coming from the line of Tommy Moll of Stephens. Your line is open. Tommy Moll: Thanks for a follow-up question here. I had to ask on capital allocation. You'll look not too long for now and potentially have a net cash balance sheet. So I'm just curious what comments you can make on M&A funnel or capital allocation more broadly. Thank you. Bryan Sayler: Yeah. Well, listen, I think with the sale of the tobacco business, and the completion of the maritime business, and that integration kind of going pretty well. Our cash flow really has been outstanding, and our leverage is pretty low. We are actively rebuilding a pipeline of M&A opportunities. The market looks pretty healthy. And we do see a number of different prospects on the horizon. Nothing we can announce, you know, at this point in time, but, you know, we do have a couple of good things that we could get something done this year. That's really our primary focus for deployment of capital, would be to continue to add good fit strategic acquisitions. I think that we're going to continue to be a little bit picky focused primarily on our utility segment, our aircraft components segment, and our Navy segment, where we think we understand those markets pretty well, and they are all markets that have really good long-term secular growth characteristics. So that's kind of where our focus is right now. Tommy Moll: Thank you, Bryan. That's all for me. Operator: Thank you. And we have a follow-up question from the line of Jonathan E. Tanwanteng of CJS. Your line is open. Jonathan E. Tanwanteng: Thanks for the follow-up. I was wondering if you could talk a little bit more about the military business in the A&D segment that is not Navy. You mentioned strength in military aircraft. Just wondering where that's coming from, number one. And if there's anything outside of that, maybe drones or munitions that's driving some strength there. Bryan Sayler: Yeah. I think it's pretty broad-based. But a couple of highlights there. You know, you would have seen in the 2025 reconciliation bill that they put a lot of money out there. They've provided 21 of the 15 EX fighters. That's a platform that we have a lot of content on. You know, there's a lot going on with regard to the sixth-generation fighter platform, the F-47. And, you know, that's been a positive story for us. So, yeah, there's a lot of good things going on. But I would say, yeah, the traditional kind of F-35, missile programs, all those things are all kind of coming through for us. Jonathan E. Tanwanteng: Got it. Thank you. And then just for the broader airplane business, the commercial side, how closely does your guidance, I guess, mirror the targeted production rates at the OEMs? Or are you still giving them a little cushion in your outlook? Bryan Sayler: No. We stopped cushion. I think that, you know, yeah, I've we follow, you know, our OEM partners very, very closely. But I think that we have our own opinion which is probably modestly skeptical of their ability to get to reach their targets. And so when we are communicating, you know, to you, you know, I think you should assume there's a little bit of discount on there, which, yeah, listen. If they're successful, then that's gonna be all upside for us. Jonathan E. Tanwanteng: Got it. Thank you, guys. Bryan Sayler: Thanks, Jon. Operator: Thank you. And this concludes today's Q&A session. I would like to turn the call back over to Bryan for closing remarks. Please go ahead. Bryan Sayler: Well, listen, thanks for taking a little bit of time to hear about our first quarter. We're pretty excited about the results and probably more excited about our growth prospects going forward. So we'll look forward to talking to you again next quarter. Operator: Thank you for joining today's program. You may all disconnect.
Operator: Good day, and welcome to QuinStreet's fiscal second quarter 2026 Financial Results Conference Call. Today's conference is being recorded. Following prepared remarks, there will be a Q&A session. Please press 0 for the operator. At this time, I would like to turn the conference over to Vice President of Investor Relations and Finance, Robert Amparo. Mr. Amparo, you may begin. Robert Amparo: Thank you, operator. And thank you, everyone, for joining us as we report QuinStreet's fiscal second quarter 2026 financial results. Joining me on the call today are Chief Executive Officer, Doug Valenti, and Chief Financial Officer, Greg Wong. Before we begin, I would like to remind you that the following discussion will contain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected by such statements and are not guarantees of future performance. Factors that may cause results to differ from our forward-looking statements are discussed in our recent SEC filings, including our most recent 8-K filing made today and our most recent 10-Q filing. Forward-looking statements are based on assumptions as of today, and the company undertakes no obligation to update these statements. Today, we will be discussing both GAAP and non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release, which is available on our Investor Relations website at investor.quinstreet.com. With that, I will turn the call over to Doug Valenti. Please go ahead, sir. Doug Valenti: Thank you, Rob. Welcome, everyone. Fiscal Q2 was another productive and successful quarter. We exceeded our outlook for both revenue and adjusted EBITDA. And even more importantly, we continue to make good progress on needle-moving initiatives across the business. We see the setup for continued long-term revenue growth and margin performance as better than ever. Auto insurance demand remained strong again in fiscal Q2, with sequential performance besting historical seasonality trends. We continue to expect further significant growth in auto insurance revenue and margin in coming quarters and years due to strong client and marketplace fundamentals, and to our rapidly expanding product market and media footprints. Home services continue to grow at double-digit rates and is now running at close to $300 million per year in revenue, between $400 million and $500 million per year with the addition of Homebody. Our outlook for that business, what we believe to be our largest addressable market, remains strongly positive short and long term. I just mentioned Homebody. Subsequent to quarter end, and as previously announced, we completed the acquisition of Homebody, adding unique new product media and clients to home services. Homebody has mastered the technology and execution of auction-driven exclusive leads, a product in high demand by large segments of the home services client market and one that we did not yet have. Also, their focus and success building big scale campaigns in social and native channels brings vast new sources of media helping us meet fast-growing client demand. We expect Homebody to extend our long history of successful M&A. Most recently, that history includes Modernize Home Services and Aquavita Media. Modernize is now the core business of our home services client vertical, where our revenue has grown about 150% since the acquisition in 2020. Aquavita Media is now our core social native and display media platform. Those channels have grown about 300% in revenue just since the acquisition in 2024. We were even more excited about the potential for Homebody than we were about these highly successful transactions. Our total addressable market opportunity is enormous and growing. And we continue to deliberately, contiguously, and successfully expand our footprint. We still estimate that we are less than 10% penetrated in our current addressable market footprint. We are also focused on continuing to adapt aggressively and successfully to changes in our markets and ecosystem. Most prominently, our progress applying AI across the business and thriving in a more AI-driven ecosystem has already been strong, and we are continuing to increase those efforts. We expect AI to lead to increased opportunities in our already big and fast-growing markets. And we expect to disproportionately benefit from AI due to our structured proprietary integrations and data and to our long history of successfully applying AI as a competitive advantage. Overall, we expect total company revenue growth and margin expansion in coming quarters and years. We continue to expect full fiscal year revenue, excluding Homebody, to grow at least 10% and full fiscal year adjusted EBITDA, excluding Homebody, to grow at least 20%. Both consistent with our previous outlook. We also expect to achieve our next milestone margin goal to reach 10% quarterly adjusted EBITDA margin in this fiscal year, even excluding Homebody. Said another way, our core business remains strong, and Homebody is purely additive and accretive to our previous outlook. Turning now to our new outlook, which, of course, includes Homebody. We expect total revenue in fiscal Q3 between $330 million and $340 million and total adjusted EBITDA to be between $26.5 million and $30.5 million. We expect total revenue in full fiscal year 2026, which, as a reminder, ends in June, should be between $1.25 and $1.3 billion. The total full fiscal year adjusted EBITDA to be between $110 and $115 million. With that, the call will be Greg. Gregory Wong: Thank you, Doug. Hello, and thanks to everyone for joining us today. Fiscal Q2 was another productive and successful quarter, as Doug noted. It was the second consecutive quarter of record revenue for QuinStreet and what is typically our seasonally lowest revenue quarter. The strong performance was driven by impressive execution across our verticals. For the December, total revenue was $287.8 million. Adjusted net income was $14 million or $0.24 per share, and adjusted EBITDA was $21 million. Looking at revenue by client vertical, our financial services client vertical represented 75% of Q2 revenue and declined 1% year over year to $216.8 million. Auto insurance momentum continued in the quarter, growing 6% sequentially versus the September, significantly outpacing typical seasonality. From a year-over-year standpoint, we were down 2% as we were comping against an unprecedented surge of insurance carrier spending in the year-ago period. Noninsurance financial services, which includes personal loans, credit cards, and banking, grew 10% year over year. Our home services client vertical represented 25% of Q2 revenue and grew 13% year over year to $71 million. Turning to the balance sheet, we closed the quarter with $107 million of cash and equivalents and no bank debt. Moving to the tax front, our provision this quarter includes a one-time benefit of $48 million related to the reversal of our valuation allowance against our deferred tax assets that we established in fiscal year 2023. We expect to return to a three-year cumulative position by the end of this fiscal year. So this entry was required by GAAP. To be clear, this one-time benefit is a non-cash item and is excluded from non-GAAP results. Moving on from our Q2 results, I'd like to spend some time discussing our recent acquisition of Homebody and our capital allocation priorities. Starting with Homebody, Homebody expands our product, media, and client footprints for growth at scale. And what we believe is our largest addressable market, home services. While our home services vertical has been growing at a compound annual growth rate of over 15%, even combined with Homebody, we serve less than 1% of a massive market that we estimate spends more than $70 billion on marketing. We closed the acquisition of Homebody about a month ago in early January. As a reminder, the terms of the acquisition include $115 million of closing. We funded this amount with $45 million of cash from our balance sheet and $70 million drawn from our new $150 million revolver credit facility. In terms of the acquisition, also include $75 million in post-close payments payable equally over four years. As previously communicated, when we announced the acquisition, we expect Homebody to generate $30 million or more of adjusted EBITDA in the first twelve months after closing. And although early in our integration of Homebody, we are working on capturing synergies to drive that number even higher. Overall, QuinStreet remains in a strong financial position. And we expect to generate strong cash flows in the coming quarters. We continue to have a rigorously disciplined approach to capital allocation and will continue to prioritize one, investing in new products and initiatives for future growth and margin expansion, two, accretive acquisitions, and three, share repurchases at attractive levels. We will continue to be measured in our approach and remain focused on maximizing shareholder value. Overall, our long-term outlook has never been better. We expect strong revenue growth and margin expansion to continue in coming quarters and years. With our near-term next milestone goal, still to reach 10% quarterly adjusted EBITDA margin, in this fiscal year. Even excluding the expected accretive impact of Homebody. As a reminder, we have three key levers to expand EBITDA margin. One, growing and optimizing new higher margin media capacity to meet auto insurance market demand. Two, growing higher margin products and businesses in insurance and in non-insurance client verticals to represent a higher percentage of our overall business mix, and three, capturing operating leverage from top-line growth through scale and from efficiency and productivity initiatives. In other words, growing revenue and media margin dollars significantly faster than operating expenses. Turning to our outlook, which includes Homebody, we expect total revenue in fiscal Q3 to be between $330 and $340 million and total adjusted EBITDA to be between $26.5 million and $30.5 million. We expect total full fiscal year 2026 revenue to be between $1.25 billion and $1.3 billion in total full fiscal year adjusted EBITDA to be between $110 million and $115 million. With that, I'll turn it over to the operator for Q&A. Operator: Thank you. Ladies and gentlemen, we will now open for questions. Should you wish to decline from the polling process, please press the star key followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Zach Cummins of B. Riley. Please go ahead. Zach Cummins: Yes. Congrats on a strong quarter, Doug and Greg. Doug, I just wanted to start off asking about just AI in particular. I know that's been a big worry in the market here in recent weeks. But first, can you talk about the traffic trends you've been seeing with your platform in recent months? Have you seen any meaningful changes in terms of channel or overall traffic volumes? And then second, I know you touched on this a little bit in your script, but can you just speak to how QuinStreet can position itself to navigate the changes in the landscape as AI becomes more prevalent? Doug Valenti: Yes, Zach. Thank you for the question. In terms of traffic trends, only positive. We have seen no negative trends or let me say this. We have seen only net positive trends in the traffic, and we expect that that would continue to be the case. I think we have a record amount of volume with, say, Google on that platform. On and mostly the most of the searches now, as you know, involve AI-based answers and searches. It's only created more opportunity for us to get deeper and have more places to run our campaigns. So short answer, net positive and it's strongly net positive. You can see it in our performance trends. You can see it in our forecast. And we're seeing it in the data. So fears there would be unfounded. In terms of the overall AI landscape, which is obviously and apparently, on everybody's mind right now, that, you know, there seem to be if step back, there are kinda two big concerns. One is the AI bubble. And the other is the AI disruption or disintermediation. I think we can all agree that the bubble concerns don't really apply to us given, you know, where we're now trading relative to our strong performance and scale. And so we've traded down with the sector. Broadly defined. With respect to fears of disruption and disintermediation of existing business models, that's pretty clearly overblown across and it's been pretty indiscriminate. Of course, as it's kinda pulled in software, SaaS, information services, performance marketing, and all of those things. And it's not surprising it's been overblown and indiscriminate. It's kinda what happens early in these big risk cycles, you know, interpreted as risk cycles. But pretty clearly overblown. And don't take my word for it, obviously. I mean, Jensen Wong, who knows more about AI than any of us will ever know, is quoted, as you know, in the past couple of days talking about it and saying it's just illogical. It doesn't make sense. AI is much more likely to enhance or utilize the value-add business models and tools, software, and otherwise out there than it is to replace them. And the CEO of Google just said basically the same thing yesterday, certainly, that would be our view from the trenches as we actually do this stuff day to day. And I would add, historically, most of the value of these big technology disruptions eventually accrues to the incumbents after the big platform and infrastructure companies are built, which is a phase, of course, we're going through now. So that's exactly what we're also seeing. On the ground in the trenches applying and competing and working these businesses day to day. And as I think I've indicated before, we have a lot. We've always had a lot of AI going on in our core marketplace algorithm function. Since 2008, that's been our core technology. And we've only added to that, of course, and we have activities across the business and applications of AI. So we certainly see ourselves as that's gonna be an example of that. Now the fears of people being disintermediated, disruptive aren't completely unfounded. And if they're to accept their businesses, that rely on commodity data or commerce and commodity products, or that are doing simple aggregation, simple manipulation, or simple intermediation of those areas. Commodity data, commodity products, then they are certainly at risk from AI. But that is not what most successful software companies broadly define or certainly not what QuinStreet is or does. We at QuinStreet have literally billions of dollars of proprietary data. We have spent billions of dollars generating that data through media campaigns that are extraordinarily complex with permutations into the billions. When you combine all the variables. We have proprietary integrations and access to data and that to that data that allows to continuously generate more of it, refresh it, and build on it. And we have proprietary technologies, including AI since 2008, as I mentioned. That we utilize to optimize that data for the benefits of our consumers, and of our marketing clients. And we also do that in a regulatory compliant and brand compliant way. Which are highly, highly complex. So clearly, what we do is uniquely complex. It's not commodity. It is value-add. It's proprietary. And, clearly, we've been successful. We're good at it because if you look at our age and our size and our profitability, by definition, we're quite successful at it. So we see as AI comes. We see rather than the negatives and the disruption, what we see is a field of, you know, more, better, higher capabilities that is net additive in a very, very meaningful way. To our business and to our company. We do not view it as a big threat. And in terms of disintermediation, by the way, if our business model could have been disintermediated, there are some big players that already exist with massive capabilities that have done that a long time ago. Question we always ask, we have always asked because we take our moats quite seriously. Is if someone were to try to disintermediate with tech AI or otherwise, how would they do it? Who would be able to do it? And how would they make money? And we just don't we can't and, again, we do this to our so we, as an executive team and with a product engineering team, ask this question all the time. And the answers are you know, nigh on impossible. Extraordinarily difficult. First of all, who would have the incentive because they gotta be able to make money? How would they get access to or replicate the data which again, would take enormous amounts of time and money? It's not something you could just turn AI on, expect that the data's gonna come. How would they access the data? Because, again, they can't get access to the proprietary integrations because the clients among others, don't won't give it to them. And how would they make money? The money comes from the marketers. This remediation would include not just a district meeting, say, at QuinStreet, it would really mean disintermediating the client brands. Which represent hundreds of billions of dollars of value and tens of billions of dollars of annual spend. So the money is in the marketing. Which means the money is not in the disintermediation. So we see again, we don't see the risk that others see. We take it seriously. We look for it. We test against it. We ask ourselves. We question others in the industry. No. Nobody, by way, has been able to counter any of what I just said. But we see more opportunity not less going forward. And it clearly and hopefully that's reflected in our performance you know, recently. And in the past and in our you know, in the forecast that we've given. So probably a longer you signed up for, but I think in this environment, something that is worthy of that. Zach Cummins: Absolutely. Thank you so much for the color, Doug. I'll keep it to just one more follow-up question. In terms of auto insurance trends, nice to see the sequential increase here in what is seasonally a slower quarter on the auto insurance side. As we lap into calendar year '26, I mean, can you give us a sense of just the appetite and spending trends you've been hearing from your clients? I know premiums are likely to moderate, but it seems like profitability is in a great spot for many of these carriers. So just curious to hear conversations and trends you've been seeing across your auto insurance carrier base. Doug Valenti: Sure. Very strong engagement, very strong interest, a lot of focus on the channel, a lot of focus on how to do better and eventually bigger in the channel. On the other side, you know, there's been an unprecedented surge in their spend overall and certainly in the channel over the past year or so, and they're still digesting that. And they're kind of reaching, you know, kind of on this new plateau. They're scoring incrementally, but not growing at high rates from here. While they sort out how that worked for them and what they wanna do to optimize further and what risks lie ahead, including, you know, having enough and by the way, you're right. Their economics are in great shape. Their financials are in great shape. So they have great capacity. But I you know, based on what we observe, it appears that they're weighing that against you know, are there places where they should now be reducing rates? What are gonna be the eventual full effects of tariffs? And many other factors. So I would say that strong engagement, very stable, incremental growth, I'd say that returning to a more normalized growth rate, which we would consider to be between 10-20% year over year, is probably on the not too distant horizon as long as there's not some big externality impact from something that nobody expects. But you know, these guys these the carriers are extraordinarily sophisticated. They're balancing a lot of different things. They're adapting as they go. I know there's been some concern out there about rates and what happened in New York, people fearing that there'd be impact on rates. That's just normal course for the auto insurance industry. This is the stuff that goes on all the time. You know, different states having different points of view about the rates and where they are. And these companies, our clients, these sophisticated auto insurance carriers are extraordinarily adept at adapting and adjusting and navigating and moving forward. So we don't see any of that as being a material risk to what we're likely to see from them going forward. Zach Cummins: Understood. Well, thanks again, Doug, for taking my questions, and best of luck with the rest of the quarter. Operator: Thank you, Scott. Your next question comes from Jason Kreyer of Craig Hallum. Please go ahead. Jason Kreyer: Great. Thank you. So just wanted to touch on Homebuzz and kind of the cross-sell opportunity there. Specifically on the media side of things, I think Homebody opens up a lot more reach in terms of media. Maybe if you can just talk a little bit about what that cross-sell can look like. Doug Valenti: You bet, Jason. It's a great question. And that's probably the most exciting part of the Homebody combination. We are really despite the great success of Acovidia, which kind of our toe in the water, and what is the place where there's the most tumor traffic on the Internet, which is the combination of social display and native. We are kinda nowhere. In that overall ecosystem because the traffic is quite different in terms of its intent than the search ecosystem that we have grown up in and that we are so good at. And so what Homebody does is it brings demonstrated ability to build these campaigns at scale in that biggest media footprint on the Internet. They already do a $140-ish million in revenue. They're all in that media. And they do it very successfully in terms of client results and very successfully in terms of economic. And so they figured that out. And so we could have continued to spend a lot of money figuring it out and climbing that learning curve ourselves. But, you know, we were able to acquire Homebody on very attractive terms and in a way that gives us that access and that capability immediately so we can now scale it rather than continue to work our way up that scale learning curve. And the cross-sell there is enormously important because if you look at our home services business today, our GM there just recently said to every client wants more. Every client. And so that's the demand side of the market if you will. The supply side is media. And so having now the ability to scale dramatically in a very predictable expert way that Homebody brings us. In that media ecosystem to continue to feed the growing demand for digital performance marketing from our growing footprint of home services clients is enormous. It's just I can't say enough about how exciting and what a big deal that is for us. So that and then the other side of it is I indicated in my prepared remarks, prepared remarks, is they also have a unique product that works great in their ecosystem, but also works in our ecosystem, which is this auction-based exclusively. A product that's fairly complex and in this technology and implementation and execution. It's their core it is their only product, basically. And so taking that product and selling that into our client footprint is also a big opportunity. So both are big, but if you made me pick one, I'd pick the media side like you appropriately pointed out. That's a big deal. Jason Kreyer: Wonderful. I'm gonna pivot on the follow-up here. So the last couple of quarters, Doug, you've highlighted some R&D initiatives that you think can drive accelerated growth, drive improved profitability. I think embedded in there are things like QRP, things like finance March. I know you have others in there. Curious, you know, how are these tracking, and when do you think these initiatives can get to the point of scale where they become more noticeable to fundamentals? Doug Valenti: That's a great question. You named a couple of them. Others include new media and auto insurance to meet demand at a higher margin and expanding our insurance footprint into places other than just auto insurance clicks, which would include leads, calls, and selling more into the agent-driven models. We historically were dominated in our insurance business for clicks to direct carriers. Great carriers like Progressive and Allstate, GEICO and pretty much all the major carriers. But that's only half the market in terms of marketing spend. The other half is on the agent-driven carriers. And that's a place that we're spending a lot of time and money and that comes to us because of our abilities, at very attractive margins. In a place that we're you know, we see hundreds and hundreds of millions of dollars of new revenue opportunity, and we're up to about a $100 million revenue run rate there now. So we're getting that one to pretty good scale, but there's a heck of a lot more to come. And then there's the whole commercial or small business side, which has enormous demand from our clients and represents if you look at overall demand from, you know, insurance to consumers and then insurance to or PNC, if you will, for consumers and insurance to small businesses. That kinda and half of the overall market. So, you know, we're currently concentrating about a quarter of the overall addressable market. Still a lot of opportunity in that quarter. But we're expanding our footprint into another one of the quarters, which is the agent-driven side of cons PNC, and then the other half, which is the SMB and consumer. So we're further along in the agent-driven PNC, but we are making good progress on the SMB and commercial side, and we have a lot of runway in front of us. So those are also components of that. So I would say that some already at good scale. Leads and calls into PNC consumer agent-driven is, you know, like I said, running $100 million a year or so. And very strong performance there. Others are getting to better scale three and QRP. Are both growing very rapidly. And together will represent north of $10 million. Well north of $10 million in revenue high margin high variable margin revenue. This fiscal year we're getting near the tail end of our heavy lift in R&D spending for those products. And really much more into the scale and profitability era for those products. And so and I could probably name five or six or seven other initiatives in the various businesses across the company, including owned and operated media auto insurance owned and operated media. For credit cards, which are two areas that we've spent a lot of money developing, and we're, yeah, we're much further up those learning curves both in terms of scale, but it's also in terms of profitability than we were, you know, a couple months ago, let alone six, twelve months ago. Yeah. So big initiatives across the business. I think in terms of the answer, in terms of when you're gonna see their effects, you're seeing the effects now. You know, we have forecast a pretty significant increase in our adjusted EBITDA margin this quarter and next quarter. And Greg alluded to the various components of what's driving that. You know, one being new capacity, better margin media and auto insurance, O&O media, auto insurance. And other media, higher margin media in auto insurance. Another one being growing these new niche new higher margin initiatives in businesses, some of which I just talked about. And the third leg being just leverage from greater scale on a slower growing semi-fixed cost base. So you are going you have seen it. Lately. As we've ramped adjusted EBITDA margin back up after the effects of the initial surge in auto insurance and you're going to see a discord, the existing current quarter, and you're gonna see it grow significantly and incrementally yet again in fiscal Q4. Because, again, we've said, listen. We fully expect that we're going to hit that 10% adjusted EBITDA margin number from the 7.3% we just did last quarter. In this fiscal year, on a quarterly basis, even without Homebody, and Homebody's accretive to that. So, you know, those are kinda some of the moving parts, and, hopefully, that gives you a good view of it. Jason Kreyer: Yeah. Really good color in that answer. Thank you, Doug. Appreciate it. Doug Valenti: Thank you, Jason. Operator: Your next question comes from Eric Martinuzzi of Lake Street. Please go ahead. Eric Martinuzzi: Yes. The growth rate on the home services business, kind of a legacy side here. The last couple of quarters has been about mid-teens. What is Homebody growing at a similar rate? Doug Valenti: Homebody's been growing at a little bit faster rate lately. So, you know, net net, Eric, we still as we've said before, we expect the average compound growth rate of our home services business going forward to be between 15-20%. Eric Martinuzzi: Okay. And then the as I looked at the kind of implied math for Q4 based on the Q3 guide, least in MIMO, I've got a little bit more of a hockey stick in Q4 than I had as I'm revising the model. Just wondering if there was any abnormal seasonality either in the legacy business or in the Homebody acquired business as you look out to Q3 and Q4. Doug Valenti: That's a good catch. And in fact, there is seasonality in the home service business, both our legacy business as well as in Homebody, and a pretty significant seasonality. The March, one of the weakest quarters not surprising. Right? There's snow and ice everywhere, so people aren't doing a lot of gutter replacements or things like that. But and then the activity grows pretty dramatically, and the two strongest quarters are the June and the September quarter. And so you're dominantly, what you're seeing there, Eric, is that effect. From a now combined, as I indicated earlier, home services business that represents between $400 and $500 million for total revenue. So pretty significant seasonality. Weak quarter, marked weakest quarter one of the two weakest quarters, December and March quarters. And then you're seeing the June quarter, which is our fiscal Q4 being one it's which is historically the strongest quarter in the home services industry. So that's the impact or effect you're seeing. Eric Martinuzzi: Got it. Thanks for taking my questions. Doug Valenti: You bet. Operator: Reminder, if you wish to ask a question please press 1. Your next question comes from Patrick Sholl of Barrington. Please go ahead. Patrick Sholl: On the other financial service verticals, I think you mentioned that those were up year over year. I think you had talked about kind of, like, just a difficult comp in credit cards and the last quarter. So can you maybe just sort of like just talk about environment for those services right now just in the current macro environment? Doug Valenti: Sure, Pat. I would say the environment is good, not great. We still have tons of growth opportunity even in a good or less than good environment because we're still pretty early in and relatively small in our footprint and all of those. Those businesses are what we generically call personal loans. Should probably more specifically internally, we refer to it as financial solutions. Because it includes not just personal loans, but HELOC, debt settlement, credit repair, and a lot of other services to consumers. So still early in our overall growth planning and strategy there. Those markets are in pretty good shape. Unfortunately, debt settlement and credit repair have been in pretty strong demand. Over the past number of quarters and are likely to and look like they're just getting stronger. As the consumer cohort faces more and more pressure. The personal loans business is solid. And doing better. Most of the lenders have been opening up their demand and their filters. And then we have the other newer components there, like I said, HELOC and others. That we are super early in but are showing very good signs. So I would say it's a good environment. It's not a great environment because there is some concern among clients that the consumer or at least the working consumer is under a lot of stress. Again, that's not bad for some of what we offer, like debt settlement. In terms of and just to get to a couple of the other pieces of credit cards, we serve premium consumers pretty much only. We're dominant in the high-end credit cards, the travel points credit cards. So that business is in great shape. There's a ton of competition among the banks as you probably know if you've been exposed to any media. We're trying to sign up customers for their premium travel credit cards. There's a lot of money in that. A lot of interest in that. There's been a little bit of concern lately about the notion of somebody trying to impose a 10% limit on credit card interest. What we've heard from the industry and from the clients is that that is extraordinarily unlikely. And the clients are not behaving as if that is going to happen. So they're not changing their appetite, their spending habits. We have the unique position of being one of only a couple of companies that can run third-party media networks for all the major credit card issuers. We're very good at that. That's a great competitive advantage and a great opportunity. We are aggressively building on top of that a lot of owned and operated media, which has been something we've been investing in and that we're super excited about continuing to scale in that market. And our clients only want more from us. It's another one of those verticals where the only complaint we typically get from a client is we need more from you. We want more. So we're aggressively working to build that out, into a good appetite. And then the banking side was kind of the smallest of the three of those pieces. Which is where we really deal with source of funds accounts. A CD savings, high yield savings, more and more brokerage accounts. We're just super early. The demand is strong. We're not seeing, you know, macro effect wise, we're not seeing anything that I think is notable given how early we are in our penetration a massive market opportunity. We're super early. It's a very, very good business for us. And I think we feel like we're, you know, we're gonna continue to do well. Though we've seen a little bit of there's been some clients that have kinda been in the CD market. You know, every time there's a big threat of interest rates coming down faster than anybody expected, you'll see them pull back a little bit because they don't wanna commit to CD consumers. The rates are gonna come down immediately. And so there's been a little bit of choppiness but I would say I wouldn't say enough that I would call any kind of big macro effect. I would say that it's just kind of part of the volatility we're seeing generally in the current economy some associated with what I might say is what I might call unpredictable government intervention. Patrick Sholl: Okay. And then maybe just, like, a couple questions related to AI. Just maybe with all the capital being committed to AI investments, are you seeing, like, any difficulty in attracting or retaining talent? And then you kinda talked about, like, just the sources of traffic. Are you seeing specifically you highlighted the Google search results and the incorporation of AI there. Can just maybe sort of talk about, like, if you're seeing, like, any change in if what you're seeing a little bit more detail on what you're seeing on the traffic patterns of whether coming from SEO versus your partners and your other sources there. Thank you. Doug Valenti: Yeah. Sure. We are not seeing a loss of or difficulty recruiting. I would point out, and this is an interesting fact, that the chief strategy officer at OpenAI is a former QuinStreet employee. For you know, if anybody wants to understand how QuinStreet is integrated into the overall market. But no, we're not seeing problems attracting or retaining talent. Anywhere in the company, let alone in our tech group and our AI group. There's a lot of good talent out there, and we have a lot of projects. So we're able to keep those folks and attract those folks. In terms of Google traffic, more and more traffic does come from SEM, which is paid traffic. Around GEO searches, you know, generative engine optimization searches. And we're very, very successful in the SCM component. We always have been, and we're only getting more opportunities to do that at greater scale. In the current Google format. And we are seeing pretty good progress in GEO. We don't have much by way of SEO. It's never you know, we deemphasized that years ago. And so, our SEO is actually fairly stable, not declining any of significant rates, but it's not material anyway. So it's again, it's not something that we made the decision a number of years ago not to focus on it because we needed Google did not want people to focus on it. They want to they wanna build partnerships with folks like us where we pay for media. They don't really they're not that interested in sending us free traffic. So, again, we made that strategic decision a long time ago. It's not a significant component of either our traffic nor really of our third-party media. And that transition has happened over a number of years. So yeah, the mix is yeah. The mix has shifted to more SEM around AI-based searches and that's good. You know, we again, we see that as providing us with even more opportunity to be even more targeted. And segmented in our spend, and we're very, very good. Patrick Sholl: Okay. Thank you. Doug Valenti: Thank you, Pat. Operator: There are no further questions at this time. Thank you everyone for taking the time to join QuinStreet's earnings call. Replay information is available on the earnings press release issued this afternoon. This concludes today's call. Thank you.
Operator: Welcome to News Corporation's Second Quarter Fiscal 2026 Earnings Conference Call. Today's conference is being recorded. Media will be allowed on a listen-only basis. At this time, I'd like to turn the conference over to Michael Florin, Senior Vice President and Head of Investor Relations. Please go ahead. Michael Florin: Thank you very much, operator. Hello, everyone, and welcome to News Corporation's fiscal second quarter 2026 earnings call. We issued our earnings press release about thirty minutes ago, and it's now posted on our website at newscorp.com. On the call today are Robert Thomson, Chief Executive, and Lavanya Chandrashekar, Chief Financial Officer. We will open with some prepared remarks, and I'll be happy to take questions from the investment community. This call may include certain forward-looking information with respect to News Corporation's business and strategy. Actual results could differ materially from what is said. News Corporation's Form 10-K and Form 10-Q filings identify risks and uncertainties that could cause actual results to differ and contain cautionary statements regarding forward-looking information. Additionally, this call will include certain non-GAAP financial measurements such as total segment EBITDA, adjusted segment EBITDA, and adjusted EPS. The definitions and GAAP to non-GAAP reconciliations of such measures can be found in the earnings releases for the applicable periods posted on our website. With that, I'll pass over to Robert Thomson for some opening comments. Robert Thomson: Thank you, Mike. We are delighted to report excellent second quarter results with both revenue and profitability growth accelerating from the prior quarter, and we see favorable signs for the second half of our fiscal year. Revenues increased 6% to $2.4 billion for the quarter, and total segment EBITDA of $521 million expanded 9% despite a one-time inventory-related charge at HarperCollins. Net income from continuing operations was $242 million, a 21% decrease from the prior year, but that was due to the absence of a rather favorable $87 million gain on REA Group's sale of Property Guru last year. Our adjusted EPS for the quarter was 40¢, compared to 33¢ in the prior quarter, and our profitability margin rose from 21.4% to 22.1%. These results were driven by sustained growth at Dow Jones and Digital Real Estate Services, which both reported double-digit profit growth. And both have started the calendar year strongly. Given the current trajectory of our core drivers, we believe prospects for the third quarter are auspicious. The results are indicative of our ongoing transformation, both digitally and commercially, as we continue to increase recurring revenues and reduce our dependence on advertising, which has a certain cyclicality. Our consistently strong cash position has allowed us to enhance our buyback program, which has been running at four times the prior year pace, whilst preserving our financial flexibility and allowing us to focus on maximizing shareholder value. We also note that Moody's, which only recently upgraded our rating, has put our outlook on positive, reflecting the sturdiness of our balance sheet and our strong operating performance. Speaking of the future, it is clear that expectations of AI's impact are evolving, and that the more perceptive players have come to realize that provenance is paramount, and that our proprietary content is valuable. Let us be clear: Anthropic has already agreed to pay $1.5 billion for using pirated books. We and our authors at HarperCollins naturally expect to receive our fair share of that payout starting later this calendar year. What is the point of acquiring cutting-edge semiconductors if they are being deployed to repurpose gormless, fatless, feckless content sets? What is the point of spending billions on energy generation when that energy is powering the prosaic, not the profound? We do believe an increasing number of insightful AI creators understand this content contradiction and will indeed pay a premium for our premium content. AI companies must provide meaningful services with reliable, relevant, contemporary information, not biased bilge or retrospective rubbish. Ignoring the obvious need to fund fecundity will mean that AI stands for artificial intransigence. Turning to our segments, Dow Jones delivered robust results for the quarter, with revenue rising 8% and segment EBITDA increasing 10% compared to the prior year. It was a record quarter for the business on multiple fronts, including a 29.5% profit margin, an improvement of almost 50 basis points versus the prior year. It also marked the fourth consecutive quarter of double-digit EBITDA growth for the segment. Digital advertising reached a record level of $87 million for the quarter, rising 12%, supported by the strength of demand, in particular from the financial services sector. The Dow Jones professional information business continued to provide crucial intelligence for customers this quarter, with revenues increasing 12% overall, thanks to a 20% surge at risk and compliance. All of our B2B verticals made positive contributions, with Dow Jones Energy posting double-digit growth and Factiva and Newswires both growing modestly during the period. Intelligence, insight, meaningful metrics, and astute analysis remain non-negotiables for global corporations and their executives, especially against a backdrop replete with uncertainty and volatility. On the consumer side, digital volumes increased 12% to over 6 million subscriptions, led by our continued push into enterprise partnerships embedding our content in corporate work streams, while the Dow Jones team is intensely focused on increasing yield and conscious of the responsibility to deliver reliable news at a moment when much journalism is mere activism. We recently announced a partnership with Polymarket, that will selectively bring data to users across The Wall Street Journal, Barron's, MarketWatch, and Investors Business Daily. Fresh investment in The Wall Street Journal's influential opinion pages saw the launch of Free Expression, an expansion of the vertical that introduced fresh writers to the editorial board's august audience. We are establishing new AI partnerships, which we expect to generate additional revenues, including an expanded deal with Bloomberg for AI rights for our peerless Dow Jones content. We also bolstered Factiva's Gen AI capabilities with expanded licensing rights for more than 8,000 premium news and business information sources. To highlight the vast potential of Dow Jones, we will be holding an investor briefing next month in New York. I have no doubt that you will find the Dow Jones proposition to be commercially compelling in the age of AI. In digital real estate services, we have seen signs of strong growth in our US business even though the housing market remains far from normal. Despite the lingering challenges, realtor.com's revenues grew by 10% in the quarter, building upon its performance in the first quarter led by premium products and notable improvement in lead volume, which posted double-digit gains. The quarter also benefited from gains in audience share and continued expansion across realtor.com's adjacencies. We firmly established our position as the leading publisher of residential real estate news and are striving to expand unique features that support sellers, buyers, and realtors. Realtor.com's share of visits among the real estate portals continued to grow in the second quarter based on Comscore, while unique visits per user for the same period continue to surpass the industry at 4.8 times, almost double that of homes.com and far superior to Zillow. In Australia, revenue growth at REA of 7% benefited from continued double-digit yield growth and an improvement in listing volumes in Sydney and Melbourne, coupled with strong growth in financial services. Competition is bringing out the best in REA, which posted record audience numbers in November with unique users of over 13 million, an increase of 9% versus the prior year. The team in Australia is savvily adopting AI applications that enhance the service for our customers and prove that AI is certainly more friend than foe. No one wants housing hallucinations. HarperCollins revenues grew a healthy 6%, a significant recovery after a sluggish first quarter, and we have mounting optimism for the second half of the year. We benefited from a strong front list in general books, as well as particularly strong growth in our faith segment as readers searched for meaning amidst the contemporary chaos. The core creative value of our books was highlighted by the continuing success of our Wicked collection and the stunning sales of Heated Rivalry, which inspired the steamy streaming series. Ice hockey stereotypes are melting away as players pursue each other and a puck. Other notable releases included Mitch Albom's Twice, Senator John Kennedy's How to Test Negative for Stupid, and Jasmine Masses' Bonds of Hercules. And the third quarter is off to a strong start, with Peter Schweitzer's The Invisible Coup and Pennsylvania Governor Josh Shapiro's memoir Where We Keep the Light. In the months ahead, we anticipate a Bridgerton boost with the recent premiere of season four on Netflix and are honored to publish the first book by Pope Leo the Fourteenth, Peace Be With You. As the pope has sagely observed, we cannot let the algorithms write our stories, and we remain passionately committed to protecting the IP of our authors in the age of AI. Across the news media segment, revenues for the quarter were flat despite a challenging print advertising market, and EBITDA fell 5% compared to the prior year. In the UK, The Times and The Sunday Times continued to build on Q1 performance, with digital subscribers rising 7% to total 659,000. While advertising trends were mixed overall, The Times achieved a record second quarter with digital advertising revenue up mid-teens. News Corp Australia reached nearly 1.2 million total subscribers, surpassing the prior year by 4%, and there was an improvement in ad trends compared to the first quarter and a modest increase in circulation revenue. Last week, we celebrated the launch of the California Post, which is bringing editorial enlightenment to the West Coast and is built on the renewed profitability of the New York Post. The early audience numbers are impressive, and we will update you on our progress in the next earnings call. The launch itself highlighted the potency of and comparative advantage of our network effect, as the WSJ, realtor, and Bible Gateway, our HarperCollins faith site, all contributed to generating traffic for the new website and app. In conclusion, we are pleased with the strength displayed across the business throughout the second quarter, and the signs so far are patently positive for the second half of the year. We have a robust balance sheet, particularly strong free cash flow, and have continued to execute on our expanded buyback program with a keen focus on maximizing shareholder value. As AI angst afflicts some sectors, we believe the company is well-positioned to profit over the coming quarters and years. We are poised with poise. Remain grateful for the thoughtful leadership of our chair, Lachlan Murdoch, the enduring support of our Board, and the sterling efforts of our teams around the world. And now for deeper insight, I cede to our Chief Financial Officer, Lavanya Chandrashekar. Lavanya Chandrashekar: Thank you, Robert, and good afternoon, everyone. Our second quarter results demonstrate the continued strength and resilience of our portfolio and the benefits of disciplined strategic diversification. Despite the continued uneven economic backdrop, we posted accelerated top and bottom-line growth led by our core pillars. Now that I have been in this role for over a year, I will start off by saying that I'm even more confident in News Corporation's growth opportunities and our ability to maximize shareholder value. The second quarter marks our eleventh consecutive quarter of year-over-year total segment EBITDA growth on a continuing operations basis. These consistent results are the outcome of strong operational discipline and reflect the repositioning of our portfolio. Our focus on operational efficiency has successfully driven margin expansion and increased free cash flow, and I believe there is significant opportunity for this to continue. We remain disciplined in our focus on the three core growth pillars: Dow Jones, digital real estate, and book publishing, which collectively accounted for 95% of our profitability in the second quarter. News Corporation has evolved well beyond the scope of a traditional media company. We are now a digital-first company with a strong and growing recurring revenue base, complemented by high-margin content licensing revenues. Disciplined investment and value-accretive M&A have increased our exposure to the large and fast-growing data and information services market. We believe the B2B business of Dow Jones has a significant runway for growth and it is highly profitable. And as Robert mentioned, we are very excited to be able to showcase Dow Jones on March 16 in New York at the Nasdaq market site. We continue to make strong progress in returning value to our shareholders and have accelerated our share buyback program. In the second quarter, we repurchased $172 million in shares, up $132 million from the previous year period. We believe our stock remains materially undervalued relative to its net asset value. And as a reminder, share repurchases in fiscal 2026 are expected to benefit from the approximately $380 million repayment of Foxtel shareholder loans. Turning to the results, News Corporation's reported fiscal second quarter revenue of almost $2.4 billion, up 6% from the prior year, and total segment EBITDA of $521 million, up 9% year-over-year. Margins improved from the prior year by 70 basis points to 22.1%. Second quarter adjusted revenue rose 3% while adjusted total segment EBITDA increased 7% versus the prior year. For the quarter, we reported earnings from continuing operations per share of $0.34 compared to $0.40 in the prior year as last year included a gain related to REA's sale of Property Group. Adjusted earnings from continuing operations per share were $0.40 in the quarter, compared to $0.33 in the prior year. Moving to the individual segments starting with Dow Jones. Dow Jones delivered another very strong quarter with reported revenues of $648 million, increasing 8% versus the prior year period, and the highest quarterly revenue growth in nearly three years. Digital revenues accounted for 82% of Dow Jones segment revenues this quarter, improving by one percentage point from last year. Professional Information Business revenues, which reflect our B2B products and services, rose 12% year-over-year, a rate 200 basis points faster than quarter one. Within that, risk and compliance revenues grew 20% to $96 million driven by new customers, new products, and higher yields. We saw continued momentum from risk feeds and API solutions and increased penetration of advanced screening and monitoring products. We also benefited from the integration of Dragonfly and Oxford Analytica as we extend our breadth of products to include geopolitical monitoring and surveillance. At Dow Jones Energy, revenue grew 10% to $75 million with customer retention remaining very strong at approximately 90% in addition to improving yields. Results include a modest benefit from the recent acquisition of EcoMovement. Factiva again posted revenue improvement benefiting from new customer acquisition, with a focus on GenAI. Within the Dow Jones consumer business, circulation revenues increased 3% versus the prior year with digital circulation revenues rising 7%. As I mentioned last quarter, we raised the full price rate for the Wall Street Journal digital subscription for new customers and continue to increase prices for a portion of tenured customers. We're also implementing changes to our promotional offerings including shorter duration offers and higher introductory pricing which we expect will have a positive impact on ARPU. I should reiterate that overall digital ARPU has been impacted by the expansion of enterprise and corporate partnerships. Those deals extend our B2B footprint and are margin accretive with low subscriber acquisition costs and very high retention rates. Direct subscription ARPU, which excludes the impact from enterprise, has been improving at a healthy rate. Digital circulation revenues accounted for 76% of circulation revenues for the quarter, improving from 73% in the year. Digital-only subscription improved 12% year-over-year and by 133,000 sequentially driven by enterprise customers. Advertising revenue rose 10% to $133 million, a very strong improvement from quarter one, including record digital performance of $87 million, up 12% led by financial services. Print advertising revenue rose 7% also benefiting from higher financial services spend. Digital represented 65% of advertising revenues, up one point from the prior year. Dow Jones segment EBITDA for the quarter grew a robust 10% to $191 million with margins increasing to a record high of almost 30%, an increase of nearly 50 basis points year-over-year despite a higher rate of cost growth as we had flagged on last quarter's earnings call. Moving on to digital real estate. Digital real estate had another solid quarter despite lower national listing volumes in Australia due to a tough prior year and still uncertain macro conditions. Segment revenues of $511 million rose 8% versus the prior year, an improvement to the growth rate in the prior quarter, and were up 7% on an adjusted basis. Segment EBITDA was $206 million, up 11% and up 12% on an adjusted basis. REA revenues grew 7% year-over-year to $368 million. Growth was driven by a combination of residential yield increases, favorable customer contract upgrades, and geographical mix. National new buy listings in the quarter declined 3% overall but improved in Sydney, up 7%, and Melbourne, up 4%. Results also benefited from strong growth in financial services driven by mid-teens growth in settlements. Overall, Australian revenues improved by a strong 10%. A partial offset was at REA India with revenues declining mainly due to the sale of PropTiger and the closure of the housing edge business with overall performance broadly consistent with REA's outlook as they communicated last quarter. Please refer to REA's earnings release and their conference call for more details. Realtor.com continued to make strong progress this quarter, with revenues rising 10% to $143 million and improved results contributing to segment EBITDA growth. We are also accelerating the pace of innovation including the announcement of realtor.com plus last month. The new platform, which leverages our partnership with the National Association of Realtors, and the MLSs enhances the home search experience by driving agent-client collaboration, transparency, and insights. This quarter revenue growth was driven by strength in core real estate products, with leads improving by 13%, improving yields, and higher annual contract values given the improved penetration of 21% of revenues in the quarter, improving 100 basis points versus the prior year. Average monthly unique users for the quarter also improved, rising 1% to 62 million. Comscore data for the second quarter highlighted that Realtor once again had the highest engagement among real estate portals at almost five visits per unique user. Realtor continued to gain audience share with visits to its properties reaching 29% of total visits to all real estate portals in quarter two, more than triple that of homes.com and double that of Redfin, while narrowing the gap versus Zillow. These strong outcomes are a result of the improvements in SEO as well as continued product enhancements and a successful brand campaign. At Book Publishing, business conditions improved markedly this quarter with revenues growing a robust 6% to $633 million despite lapping a tough comparator of 8% growth in the prior year. Segment EBITDA of $99 million declined 2% versus the prior year with margins of 15.6% down 140 basis points. However, the results this quarter included a $16 million one-time write-off primarily related to inventory at HarperCollins International operations, which impacted margins by 260 basis points. Results were driven by recent acquisitions, strong sales at Christian Publishing, as well as an improvement in general books due to higher front list sales. We also benefited from the timing of ordering. Digital revenues at HarperCollins grew 2% led by higher e-book sales up 7%. In total, digital sales represented 20% of consumer revenues compared to 21% in the prior year. This quarter the backlist contributed 59% of consumer revenues down from 61% in the prior year, driven by a strong frontlist. News media revenues were flat at $570 million benefiting from higher cover and subscription prices in The UK and Australia, offset by weak print advertising trends. Segment EBITDA declined 5% to $70 million driven by challenging advertising conditions and some investment related to the launch of the California Post in January. Turning to the outlook, some of the themes across each of our segments. At Dow Jones, overall trends remain healthy, and we expect continued strong revenue growth in B2B. As a reminder, last year's digital circulation revenue growth included approximately 300 basis points related to a non-recurring benefit. At Digital Real Estate, Australian residential new buy listings for January were down 8%. Please refer to REA for more detailed outlook commentary. At Realtor, we hope to see improving market conditions leading to strong lead volumes which should translate to continued healthy revenue growth supported by ongoing reinvestment. At Book Publishing, as Robert noted, trends remain encouraging and we expect to benefit from HarperCollins' backlist and more favorable year-on-year comparisons. At News Media, we expect to incur modest investments related to the launch of the California Post. While difficult advertising trends are likely to continue, we remain focused on driving cost efficiencies. With that, let me hand it over to the operator for Q&A. Thank you. We'll now start the Q&A session. Operator: Please limit your questions to one per participant. If you've joined via the Zoom application, please use the raise hand functionality to ask a question. If you've joined via the audio line, please press 9. Questions will be answered in the order they are received. We will now pause for a moment to assemble the queue. Okay. Our first question will come from David Karnovsky with JPMorgan. Please unmute your line and ask your question. David Karnovsky: Hey. Thank you. Robert, I think we've seen this week the market react to AI or the perception of AI, and what that is gonna mean for companies that operate in the business services or data spaces. And it'd be great to kinda get your expanded thoughts on this reaction and you know, what you view as reasonable to worry about versus maybe what the market is potentially overweighing or maybe missing here? Thank you. Robert Thomson: Yeah. David, a very salient question. There is a fundamental misconception about the impact of AI on News Corporation. AI is retrospective and synthesizes generic content sometimes imperfectly. But it is past tense, often past imperfect. We have contemporary creative proprietary content, which is only accessed if AI companies pay us. Our woo or soo strategy, we've been consciously building a moat, and it is a moat with saltwater crocodiles, with sharks, and an even more dangerous species, lawyers. More importantly, the moat separates commodity content from our premium prescient IP. Now let's be clear. Anthropic is already set to pay out $1.5 billion for inappropriate use of pirated books, and we and our authors will get a large chunk of that money later this year. And we have a partnership with OpenAI whose expertise will enhance our editorial business and real estate products, while our editorial will enhance OpenAI products. Now we're not complacent, we're certainly not naive or digital dilettantes. But we are absolutely confident about our ability to create compelling premium content and experiences in an age in which many AI companies will be recycling rubbish. I mean, it is worth remembering that AI models need data. Otherwise, they are just lines of inert code. They need real-time, real-world data, and that's what we produce every single minute of every single day. Without compelling content, these AI operators are not omnipotent. They are not unique, they are eunuchs. Michael Florin: Thank you, Dave. Luke, we will take our next question, please. Operator: Our next question will come from Entcho Raykovski with Evans Partners. Please unmute your line and ask your question. Entcho Raykovski: Hi, Robert. Hi, Lavanya. My question is a follow-up to David's question, actually. I mean, given this is such a topical issue in the market at the moment, I'm just curious as to whether you're comfortable around the investment into Dow Jones which is required including to deal with any AI threat? I think you mentioned last quarter that some of the CapEx is linked to continued investment in technology. I suppose are you able to quantify this? And again, just curious whether, you know, the launch of tools like Claude Legal for example, given it's worried the markets, whether you see it as having a negative impact on your operations? Thank you. Robert Thomson: Encho, to the last point, absolutely not. We are fully confident in the Dow Jones professional information business for the reasons that I outlined in the previous answer. And we're also very confident about the trajectory this quarter and next quarter. And we don't normally give forward guidance, but that's as much forward guidance you're gonna get. And it's particularly positive at this stage. And it's positive because we do have unique information, and it's a high-margin business, but it's not a retrospective content set. It's a contemporary content set. And I disconnect between the reality of the threat of AI and the reality of the needs of AI. And we are a company that fulfills the needs and face a very limited threat. We're not a collection of legal case studies. We're a collection of contemporary content, much of it journalistic. And in the book business, we are a collection of unique works written by authors that cannot in any way be used without our permission and their permission. And we certainly look forward to making the most of that. And the fact is that we already have AI deals, and negotiations are advanced for other AI deals. Lavanya Chandrashekar: Yeah. And Encho, maybe I can take your question on CapEx. Looking forward to seeing you next week in person. Yes. We do expect total CapEx to be up moderately this year. And that was the case in the first half as well. Having said that, Dow Jones CapEx specifically within that is going to be modestly down this year. Overall, we will generate very strong free cash flow growth for the year, despite the slightly higher increased investment in CapEx. Then I'd just conclude by saying we do invite you to join us for the Dow Jones Investor Day to really see the strength and opportunity of this business. Thank you, Encho. Michael Florin: Thanks, Encho. Luke, we'll take our next question, please. Operator: Our next question will come from the line of David Joyce with Seaport Research. Please unmute your line and ask your question. David Joyce: Thank you. I'm kind of following on the capital expenditures question, where else would you be allocating to drive returns? How would you prioritize? Are there things that you can do to accelerate your strategies given the one big new bill act in case that helps with overall free cash flow allocation plans? Robert Thomson: David, I think we've made very clear that we see three core drivers of the business. And that is Dow Jones, Digital Real Estate, and HarperCollins. And those businesses are traveling very well at the moment, and we will allocate cash accordingly. Thank you, Dave. Luke, we will take our next question, please. Operator: Our next question will come from David Arvest with Macquarie. Please unmute your line and ask your question. David Arvest: Yes. Thanks for taking my question. Look. I mean, kind of in the same vein as the prior question a little bit. But, you know, with the broad valuation de-ratings across your operating segments and your balance sheet, your cash generation, can you just remind us of your M&A strategy and maybe talk to areas of interest to what could be complementary to News Corporation? Or would the preference right now be kind of just to monitor AI developments and execute the buyback? Robert Thomson: David, we have the option of optionality. We are constantly looking for investments externally that make sense for the business, but not at unreasonable prices. And you can see from our recent acquisitions, that's been precisely the case. We obviously invest organically where we see growth opportunities within the company, and then there's the buyback. And I'll pass to Lavanya for a little articulation of that. Lavanya Chandrashekar: Yeah. Thank you, David, for that question. On the buybacks, we definitely evaluate this on a continuing basis. And we are focused on maximizing and driving shareholder value. As you would have seen from our announcement, we bought back $172 million worth of shares in the second quarter. At the current stock price, we expect the rate of purchases will be higher in the second half and the total dollars repurchased will be meaningfully more in the second half than in the first half. Michael Florin: Thank you, David. Luke, we'll take our next question, please. Operator: Our next question will come from Craig Huber with Huber Research. Please unmute your line and ask your question. Craig Huber: Great. Thank you. Robert, this is a two-part question for you. I always like to ask you, has anything changed in your mind about investors' thoughts and wishes that you guys would help, you know, simplify your company here? It seems like you're doing a lot better fundamentally across the businesses here, but anything changed in your mind to help simplify the company any further here? And my added question I wanted to ask you was on homes.com out there in the marketplace, you know, versus realtor.com, you're doing quite well here recently with the revenue growth at realtor.com, roughly 10% type growth in revenues there. Is homes.com in the marketplace concerning you all given all the amount of money that they're putting in place to run that operation? Or is it having any negative effect on you? Worried about it? Are you doing anything significant to change your operation to combat that? Thank you both. Robert Thomson: Craig, look, we're consciously constantly examining structure, and our focus is on generating value, long-term value for our shareholders. We have a robust balance sheet, strong free cash flow, positive growth trajectory, and as I said earlier, the option of optionality. As for homes.com, look, we're absolutely delighted with the progress at realtor, which is going from strength to strength. Look. And, obviously, homes.com is complicated. It's at least a fixer-upper. And while some people suggest that it's more of a knockdown, I think that comparison is a little unkind. For us, the focus is absolutely on realtor whose revival is real. And whose trajectory is particularly positive. Lavanya Chandrashekar: Yeah. If I could just add to that, maybe some details on that. I mean, as Robert said in his remarks, I mean, we're really pleased with the engagement that we have seen on realtor.com. We have the highest engagement across all of the portals with five visits per unique user. We have gained audience share up to 29%, and when you look at our visits, we have three times the number of visits as homes.com, two times the number of visits as Redfin. And we've had the fastest revenue growth here in this last couple of quarters that we've seen in the last four years. And that's without the property market being meaningfully better, and we do know that the property market will recover, and so there's a very long successful runway here for realtor. Michael Florin: Thank you, Craig. Thanks, Craig. Luke, we'll take our next question, please. Operator: Yes. As a reminder, if you would like to ask a question, please use the raise hand functionality to put them in the queue. Our next question will come from Elsa Lee with UBS. Please unmute your line and ask your question. Elsa Lee: Hi, Robert. Hi, Lavanya. Thank you for the question. My question is on circular revenue at Dow Jones. You've called out consumers and now rolling off promotional pricing which will be supportive of ARPU. Can you share any colors on how you're thinking about pricing growth going forward and maybe the balance between acquiring new subs versus ARPU? Robert Thomson: Oh, look. Thank you for the question. The Dow Jones team has successfully secured a significant increase in enterprise customers, where we are incorporating WSJ content into the work streams of companies. Now those tend to be large deals with lower churn and significantly lower marketing costs, but obviously, in the shorter term, they will have a modest impact on ARPU. But the innovative subscription team at Dow Jones believes that we have genuine elasticity on price given our unique editorial experience. Our ability to track potentially vulnerable subscribers is improving each passing month, as is our ability to identify high usage subscribers who can be targeted with dynamic pricing that reflects the importance of their reading relationship with the journal. Now, obviously, our focus is on recurring revenues, but it should also be noted that digital advertising revenue rose 12% during the quarter compared to a year earlier and to a record high. So not only does Dow Jones have a growing audience, it has a very desirable digital demographic. Lavanya Chandrashekar: Yeah. And maybe I'd add to that, Elsa. We did take price on digital new customers and on certain tenured customers here in the recent past. We're also working on optimizing a number of our promotions, and I do want to point out that excluding our enterprise customers, our ARPU has been improving at a healthy rate. Michael Florin: Thanks, Elsa. Luke, we will take our next question, please. Operator: At this time, we have no further questions. I will hand the call to Michael Florin for closing remarks. Michael Florin: Well, great. Thank you all for participating today. Have a wonderful day, and we'll talk to you soon. Take care.
Operator: Hello, and welcome to the Hub Group Preliminary Fourth Quarter and Full Year 2025 Results Conference Call. It is now my pleasure to turn the call over to the company. You may now begin. Hello. And welcome to the Hub Group preliminary fourth quarter and full year 2025 results conference call. Phillip D. Yeager: Joining on the call are Phillip Yeager, Hub Group's President, Chief Executive Officer, and Vice Chairman, and Kevin Beth, Chief Financial Officer and Treasurer. Statements made on this call that are not historical facts are forward-looking statements. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and other factors that might cause the actual performance of Hub Group to differ materially from those expressed or implied by those statements. Further information on these risks and uncertainties is included at the end of our press release and in our most recent Form 10 and other periodic reports filed with the SEC, which are posted on our website. The financial results that we will be discussing today are preliminary and may change, including as a result of adjustments that may arise in connection with the ongoing audit of our consolidated financial statements for the year ended 12/31/2025. There can be no assurance that the company's final results will not differ from the preliminary results and any changes could be material. Finally, the preliminary financial results should not be viewed as a substitute for full financial statements prepared in accordance with GAAP and are not necessarily indicative of results that may be achieved in future periods. I now turn the call over to CEO, Phillip Yeager. Good afternoon. Welcome to Hub Group's conference call to discuss our preliminary fourth quarter 2025 financial results. Joining me today is Kevin Beth, Hub Group's Chief Financial Officer, and Garrett Holland, our Senior Vice President of Investor Relations. Before we dive into our preliminary results, as you saw in the press release we issued this afternoon, in the course of our quarter and year-end closing process, we identified a calculation error that resulted in the understatement of purchase transportation costs and accounts payable. As a result, we are delayed in finalizing our financial results for the fourth quarter and full year 2025. We will restate results for earlier quarters in 2020 when we file our 10-K. Accuracy and transparency in reporting on our performance is of the utmost importance at Hub Group, and we have taken steps to strengthen and enhance our controls. Kevin will discuss this in greater detail. But as noted in our press release, there is no expected impact on total cash and cash equivalents or operating cash flow for any periods, and we have provided an estimated impact of purchased transportation and warehousing costs for the nine months ended 09/30/2025 based on our team's initial review. Now I'd like to turn to our preliminary financial results that we are able to review today, along with details on the execution of our strategy and trends we are seeing in the market. The last year was a continuation of a challenging market cycle, with stable demand and an oversupply of capacity. Kevin W. Beth: We performed well and focused on controlling what we can control, delivering record service levels across our platform and, in particular, our intermodal segment. While managing our costs, adding new business wins, and investing in our business, including equipment, technology, and acquisitions. We executed on our strategy while maintaining our strong balance sheet and cash flow profile. 2025 preliminary operating cash flow approximately $194 million. I will now discuss our segment performance beginning with ITS. Fourth quarter ITS revenue declined slightly year over year. We experienced a lighter peak season than last year in this segment, while continuing to focus on cost management and operational discipline, in both intermodal and dedicated. Intermodal performance remained strong, and we delivered another year of record service and market share gains. For the fourth quarter, volumes increased 1% year over year, while revenue per load was flat, but up 3% sequentially. Transcon volume was up 1%, Local East was down 4%, and Local West was down 1%, while refrigerated volumes increased 150% and Mexico volumes increased 33%. Intermodal volume finished October up 2% year over year, down 3% year over year in November, and up 3% year over year in December. In January, intermodal volume decreased 4% year over year with significant impact from the winter storm against a challenging growth comparison from a year ago, as shippers pulled forward orders ahead of tariffs. We worked extremely well with our rail partners during peak, delivering a 90 basis point improvement in year over year on-time performance, positioning us well for intermodal volume growth in the 2026 bid season. Throughout the year, our excellent service performance and the consolidation with our rail partners drove enhanced engagement with our customers who are excited about the opportunity for improved transit and costs in a single rail network. Which along with our consistent focus on cost reduction and efficiency gains, we believe will position us well in intermodal in 2026 and beyond. Given the strong value proposition across our business lines driven by quality service and savings, especially for the intermodal offering, we remain optimistic regarding the 2026 bid cycle. Incumbency and strong service on awards in recent years is expected to provide a strong foundation to grow from, and new logos have engaged with us to establish service. We remain focused on supporting growth with customers, building on the momentum from business awarded last year, and further improving network balance to reduce backhaul costs. With respect to demand, shippers are cautiously optimistic with potential benefits from stimulus measures countering lingering inflationary pressure. In Dedicated, revenue declined in the fourth quarter due to lost sites from earlier in the year, but we were able to partially offset this impact through operational and service improvements. We have significantly improved service levels, which is leading to a strong pipeline of growth opportunities, with existing clients, and we are excited about the recent trends in the business. Fourth quarter Logistics segment revenue reflects softer demand across business lines, partially offset by new business wins. In CFX, we have performed well through our warehouse consolidation leading to a 630 basis point improvement year over year in space utilization. We see additional opportunities for further efficiency improvements, and we expect to be better positioned for further growth. In Final Mile, we are in the process of completing the onboarding of significant new business wins, which has helped to offset negative mix and lost sites. In order to successfully onboard the business, we have made investments in the relationships that are continuing into the first quarter to ensure a seamless transition in start-up. The volume underperformed in the fourth quarter, due to onboarding delays and minor scope changes, we are confident that the steps we are taking now will help drive volume growth well into the future. For the fourth quarter, brokerage volumes declined 10% year over year, revenue per load down 4% as LTL volumes slowed while truckload and refrigerated volume benefited from project freight and market tightness in the latter portion of the quarter. Market conditions have remained tighter due to weather as we enter 2026, and we are seeing opportunities to support customers with spot opportunities. Our fourth quarter productivity improved 41% year over year due to our investments in technology and our restructuring, and we expect this to position us well for the current market backdrop and as conditions evolve. Finally, managed transportation performed well throughout 2025, and is expected to continue to perform well in 2026. As we brought on new business in the fourth quarter and have a strong pipeline of additional growth opportunities. Our strong value proposition of continuous improvement, savings, and technology continues to resonate with our clients. Our fourth quarter productivity improved 12% compared to the prior year, which is enabling our ability to invest in the business and position for growth. Phillip D. Yeager: We are pleased with our operational performance in 2025 in challenging market conditions. As we look ahead to 2026, we believe we are well positioned to support our customers in this evolving environment and excited about our opportunities for growth. We continue to see signs of tightening capacity due to regulatory enforcement along with challenging market conditions and cost inflation forcing out undercapitalized carriers. However, demand and inventory levels remain balanced and the consumer has stayed resilient. With the increased tax refund disbursements, we are hopeful that supply and demand will move to equilibrium, leading to opportunities for intermodal conversion and growth across all our services. It is too early to determine whether a sustained market inflection is imminent, but we believe we are well positioned regardless of market conditions due to our best-in-class service and team, efficient cost structure, financial flexibility, and ongoing strategic investments. With stabilizing market conditions, and excellent service as well as rail consolidation expected in 2027, we have the ability to convert business from over the road to rail. We believe our logistics services are well positioned due to our focus on productivity, service, and continuous improvement. Lastly, we maintain a strong balance sheet and capital flexibility to invest in our business for the long term. We expect to remain disciplined with capital deployment, continuing a balanced approach. Returning capital to shareholders through our dividend and share repurchases. While evaluating potential M&A opportunities that meet appropriate return thresholds. As of today, we have approximately $142 million remaining under our share repurchase program. To sum up, although there is some uncertainty near term in the industry, we see all these drivers creating an exciting backdrop for Hub Group in 2026 and beyond. With that, I will hand the call over to Kevin to discuss our preliminary financial results. Kevin W. Beth: Thank you, Phil. Before walking through our preliminary fourth quarter and full year 2025 financial results, and our 2026 outlook, I want to touch on the accounting item outlined in our release that Phil mentioned at the start of the call. The company identified an error that resulted in an understatement of purchase transportation cost and accounts payable in the first nine months of 2025. The total amount of the reduction to accounts payable and purchase transportation costs related to this issue that was recorded during these periods is $77 million. Based on our analysis to date, we estimate the correction of the error will increase purchase transportation and warehousing costs for the nine months ended 09/30/2025 but cannot yet estimate what the resulting increase to purchase transportation and warehousing costs and accounts payable will be. There is no expected impact on Hub Group's total cash and cash equivalents or operating cash flows for any periods. We are working to report our full and final financial results for 2025 as soon as possible. We plan to include the restated quarterly financial information for Q1, Q2, and Q3 2025 in our 2025 Form 10-K. The team is committed to transparency and resolution of the accounting matter. Now turning to our preliminary results. For the full year, we expect consolidated operating revenue of $3.7 billion, a 7% decrease over the prior year. Full year 2025 ITS segment operating revenue is expected to be approximately $2.2 billion, which includes a low single-digit year-over-year decrease during the fourth quarter. Fourth quarter intermodal volume growth of 1% and stable revenue per load despite lower surcharge revenue was offset by lower dedicated revenue during the quarter. We realized peak surcharges of approximately $900,000 in Q4, representing a year-over-year difference of $4 million. Full year Logistics segment operating revenue is expected to be approximately $1.6 billion, inclusive of a high single-digit year-over-year decrease during the fourth quarter. Fourth quarter performance reflects lower brokerage revenue, select customer attrition at CSS, and softer underlying final mile demand, partially offset by new customer onboarding. Building on Phil's earlier remarks, peak season activity was largely in line with expectations, but muted overall relative to prior years. We saw select customers reaching out with project freight activity, we saw pockets of tightness particularly off the West Coast, to start the quarter. However, many shippers pulled forward inventory over the course of the year and had less urgency to move product. Tightening capacity conditions later in the quarter reflected a combination of lower driver supply from policy actions and weather disruptions. Freight market dynamics clearly remain fluid and closer to balance than any time in recent years. Now turning to our cash flow. Preliminary cash flow from operations for the full year was $194 million. Our full year CapEx was approximately $45 million, in line with our estimate of less than $50 million. Integrations related to the acquisitions of Marin Intermodal Assets and West Coast Final Mile provider Sith LLC are complete and the businesses are performing well. Importantly, our balance sheet and financial position remain strong. Debt, at 12/31/2025 totaled approximately $229 million, which after giving effect to cash of approximately $113 million resulted in net debt of approximately $116 million, a decrease of approximately $50 million compared to 12/31/2024. In 2025, we returned $44 million to shareholders through dividends and stock repurchases. Turning to our preliminary 2026 guidance. Revenue is projected to be between $3.65 billion to $3.95 billion for the full year. For our ICS segment, we have revenue will largely be driven by intermodal volume growth through the year. We expect dedicated performance will be slightly lower compared to 2025, due to lost customer sites, which will continue to offset new awards in the near term. For logistics, excluding our brokerage business, expect recovering revenue through the year due to new business wins and improving profitability led by final mile and managed transportation. For brokerage, we expect volume pressure continues in the near term and weighs on Logistics segment profitability. For the year, we expect capital expenditures of $35 million to $45 million as we continue to focus on technology projects and opportunistic replacements for tractors, given favorable purchase terms and recent changes for bonus depreciation. We do not plan to purchase containers in 2026. As Phil noted, our capital allocation plan continues to guide us and starts with investing in the business that supports long-term growth and improves efficiency across tractors, technology, and container capacity. As you know, we consider M&A opportunistically to complement organic growth. The bar for M&A is high, given our disciplined due diligence process and return focus. And finally, we remain focused on returning capital directly to shareholders through our quarterly dividend and share repurchases. Our current dividend also returns approximately $7.5 million to shareholders quarterly. And as Phil noted, we have approximately $142 million remaining under our current share repurchase authorization. We expect to continue to balance capital deployment priorities and repurchase shares as market conditions and opportunities evolve. Our balance sheet is in great shape and has been fortified by the cash flow resiliency of our operating model through this industry downturn. We remain focused on ways to maximize shareholder value. We will share additional details on the 2026 outlook when we release our full fourth quarter and full year 2025 financial results. And now I'll turn it back over to Phil for his closing remarks. Phillip D. Yeager: Thanks, Kevin. To sum up for today, freight market conditions remained challenging through 2025. But the Hub Group team adapted and remained focused on serving our customers and controlling expenses. To start 2026, we are seeing positive trends in the marketplace, as reflected in improving ISM new orders, and spot market activity. Our balance sheet and cash generation remain strong, and should provide significant capital flexibility as we remain disciplined with capital deployment. Operating momentum and a strong focus on execution has carried us into 2026, and we will continue to lead with service as the freight market backdrop evolves. Phil and Joyce Yeager founded this company fifty-five years ago based on the principles of service, integrity, and innovation. And the success of this business has been and continues to be based on living those values every day. We are excited about the growth prospects for Hub Group, and extending that legacy of performance. Operator: Ladies and gentlemen, this concludes today's call with Hub Group. Thank you for joining. You may now disconnect.
Liana Chue: Good morning, ladies and gentlemen, and a warm welcome to those joining us here in the auditorium as well as via the webcast. It's my pleasure to welcome you to SGX First Half FY 2026 Results Briefing. We will begin in a while with a presentation of the financial results by our CFO, Mr. Daniel Koh. And following that, our CEO, Mr. Loh Boon Chye, will present the business updates. We will conclude with a Q&A session with SGX senior management. [Operator Instructions] It's now my pleasure to invite our CFO up on stage to present the financial results. Dan, please? Kok Yu Koh: Good morning, everyone. Thank you for joining us today. It is a pleasure to share with you SGX Group's strong set of results for first half FY '26. We delivered robust business growth and achieved our highest half year revenue and earnings. Net revenue, excluding treasury income, grew by 10% and adjusted earnings grew by 12%, continuing the strong momentum from the high base in FY '25. Total net revenue grew by 8%, while adjusted expenses were up 4%. We will go through the detail in later slides. Our equities-cash or SGX stock exchange revenue achieved a solid 16% growth powered by market optimism and elevated investor interest from the EMRG tailwinds. Our Currency and Commodity Derivatives segment demonstrated a strong growth trajectory led by iron ore's record half year volume. SGX FX net revenue increased by 8% with a record average daily value of USD 180 billion, driven by sustained client acquisition and increased platform adoption. Treasury income declined mainly due to the global rate environment and collateral currency mix. We remain confident in delivering the medium-term targets that we set out at the start of FY '25. SGX's multi-asset strategy with diversified revenue streams positions us well to deliver the 6% to 8% CAGR in top line organic growth, excluding treasury income. To sustain this momentum, we continue to reinvest for growth while maintaining cost discipline. There is no change to our guidance for expenses and CapEx. We are confident to maintain the sustainable and growing dividend commitment with the incremental $0.025 every quarter to the end of FY '28. The group's strong balance sheet also enables us to capitalize on business opportunities that will drive long-term growth. Now let me walk you through the headline financials. Group net revenue increased by 7.6% to $695 million. Group expenses on an adjusted basis increased by 3.8%, while adjusted group NPAT increased by 11.6% to $357 million. Our margins also grew with adjusted operating profit margin and adjusted NPAT margin improving by 1.4 and 1.8 percentage points, respectively. As mentioned, SGX Group's robust performance this half year continued the momentum from an already strong FY '25. Other than a 10% year-on-year growth for net revenue ex TI, there was also an 8% growth half-on-half. This revenue was backed by sustained volume growth across each of our diversified multi-asset businesses, namely derivatives, including commodities, SGX Stock Exchange, and SGX FX. Our overall derivatives DAV grew 8% from a high base last year when the China's stimulus announcements drove record high volume on China A50 contracts. This growth built on the strong momentum in the second half of FY '25 when global volatility surged due to uncertain trade policies like from Liberation Day. This was underpinned by strong client demand for SGX derivative products and the increase in our global client reach. The SGX Stock Exchange SDAV saw a remarkable growth of 20% to $1.51 billion, the highest in 5 years. This was driven by the holistic measures by EMRG and SGX, alongside growing investor interest. The STI posted a 23% 1-year return, outperforming most ASEAN peers. The SDAV for small and mid-cap surged by over 2x outpacing the STI 30 and contributing nearly half of the overall SDAV growth. Additionally, ETFs and Singapore Depository Receipts or SDRs, contributed more than 10% to the overall SDAV growth. The SGX FX business continued to grow consistently since inception. Average daily value increased by 32% year-on-year, outpacing other peer exchanges benefiting from an enhanced platform and a broader client base. Let me now elaborate on the group's net revenue performance across our 4 operating segments. Our FICC revenue grew $20 million or 12% accounting for 26% of total revenue. The commodities franchise achieved record volumes across iron ore, [ dairy ] products and petrochemical contracts. Total volume grew 24% with iron ore leading the revenue growth, benefiting from a broader customer base and improved market sentiment from the China stimulus. I had touched on the strong volume growth of SGX FX earlier. We saw faster growth in lower-yielding swaps, which increased in demand in our clients' portfolios. The Equities-Cash segment revenue grew by $31 million or 16% and contributed 32% to our total revenue. This was mainly driven by the higher SDAV, as mentioned earlier, which increased trading and clearing revenue by the same magnitude. With the higher trading activities, we also saw more income from securities settlement. Equity derivatives revenue decreased by $10 million or 6% and accounts for 24% of total revenue. This was mainly due to lower treasury income. Notably, though, total equity derivatives volume remained comparable at 91 million contracts, even with a high base last year. Platform and other revenue increased by $8 million or 7%, primarily due to higher colocation sales and repricing of data and connectivity services. This segment has grown at a steady average rate of 2% over the past -- over the past 5 halfs and now accounts for 18% of total revenue. Moving on to expenses. We continue exercising cost discipline. The adjusted expenses increased by 3.8%. The impact of our planned investments in sales and product capabilities and platform modernization will skew towards the second half. Full year expense and CapEx guidance for FY '26 remain the same as previously communicated. Staff costs for the first half increased by $4 million or 2.6%, primarily due to higher headcount. Technology expenses, depreciation and amortization were largely comparable. Other expenses increased by $5 million, mainly due to more professional fees and prior FSDF grants received for the SGX FX business. Adjusted earnings reflect our underlying core performance by excluding noncash adjustments. First is a net fair value gain of $6 million, mainly related to the transaction where 7RIDGE fund entered into a binding agreement to sell trading technologies in July 2025. Second, we took a $15 million impairment due to the lower-than-expected performance from Scientific Beta. Lastly, we have an adjustment of $5 million mainly for the amortization of purchased intangible assets. Our balance sheet remains robust, and continues to provide us with a solid foundation to pursue future growth opportunities while continuing to deliver shareholder returns. Moody's reaffirmed our AA2 rating on September '25, the highest among exchanges rated by Moody's. Our leverage ratio is at a healthy level of 0.8x due to improved margins. The Board of Directors has declared an interim dividend of $0.11 per quarter -- $0.11 per share, consistent with the dividend growth trajectory previously announced. This brings the total dividend in the first half FY '26 to $0.2175 per share, marking a growth of more than 20% compared to the same period last year. We are confident in our ability to deliver sustainable and growing dividends with a steady increase of $0.025 every quarter to FY '28 as previously guided. With that, let me now hand over to Boon Chye, our CEO, who will deliver the business updates. Thank you. Boon Chye Loh: Good morning, everyone, and thank you for joining us today. As Dan highlighted, we delivered strong results in first half FY '26 with broad-based growth across most business segments. This performance reflects disciplined execution of our multi-asset strategy anchored by a strong client-centric approach and driven by 3 strategic focus areas. First, scaling our FX business; second, expanding and strengthening our derivatives and commodities franchise; and third, accelerating growth in our stock market. With this multi-asset strategy firmly in place, we are confident in achieving our medium-term revenue growth of 6% to 8%, excluding treasury income. Let me now take you through each of our focus areas. Our SGX FX franchise, our OTC FX business has been expanding at pace, average daily volume has risen at a CAGR of 39% since we started 3 years ago, reaching a new high of USD 180 billion in first half FY '26. As market volatility persists, more participants are turning to our platforms to manage FX risks effectively. We expect this growth momentum to continue with increasing uplift to our bottom line. This supports our medium-term ambition for SGX FX to deliver a mid to high single-digit EBITDA contribution. To sustain this trajectory, we are sharpening our focus on product and platform innovation. We continue to strengthen our FX data and analytics offerings to meet evolving client needs, helping clients to improve transparency, execution quality, and risk management across the entire trading workflow. In parallel, we are enlarging our capabilities to support broader multi-asset trading, including new EM or emerging market products such as Latin America Non-Deliverable Forwards or NDFs. We are also enhancing workflows to better serve increasingly diverse client strategies. This growth is underpinned by the depth and diversity of our global client network with rising by site participation from global hedge funds and asset managers. Our client engagement has also received industry recognition with SGX FX name World's Best FX Exchange and World's Best Solution for FX NDFs by Euromoney. With these foundations in place, SGX FX is well positioned to remain a key growth driver for SGX Group. Turning to derivatives and commodities. Our overall franchise is gaining solid momentum even after an exceptional FY '25 driven by macro volatility, we achieved our highest half-yearly DDAV of 1.35 million contracts. International participation remained strong with T+1 volumes holding above 20% in first half FY '26. Our FX and rates derivatives delivered 18% DDAV growth year-on-year as more global participants rely on SGX for FX hedging. Beyond our flagship Indian rupee and renminbi contracts, our Korean won futures saw stronger trading activity amid heightened global volatility and a resilient Korean equity market, underscoring the value of our listed FX future shelves, which provides deep and liquid access across Asia's major currencies. Our commodity franchise recorded diversified growth across our key contracts led by iron ore. Alongside strong performance in our flagship iron ore and our freight contracts, volumes in dairy and petrochemical derivatives continue to grow as open interest reach new highs. Over the years, our rubber contracts have attracted rising participation from financial players who now account for over 60% of daily volumes supported by increasing interest from non-Asian investors. Reinforcing its role as the global pricing benchmark for natural rubber, our launch of T+1 night trading on 26th January this year has drawn promising early interest, particularly from participants seeking greater flexibility in round-the-clock risk management. In equity derivatives, our volumes remain resilient. Our China A50 futures registered a 2% year-on-year increase in volumes despite a high base from last year's record activity following China's similar announcement. This resilience affirms the A50's enduring leadership as the most liquid international futures for Chinese equities and continued investor demand for SGX Asia access platform. Building on this momentum we are advancing innovation across our derivative suite. As volumes in equities, FX and commodity derivatives grow, we are expanding our offering to meet changing investor needs and diversify our client base. In first half FY '26, we extended our multi-asset platform with more institutional grade tools such as the launch of the world's first regulated exchange crypto perpetual futures, bringing SGX trusted market infrastructure transparency, and robust modeling into one of the most actively traded digital assets instruments. In this evolving rich landscape, we expanded our offering with the launch of the new 20-year many Japanese government bond futures introduced at a pivotal moment as Japanese rate environment shifts. Together with our 10-year JGB and 3 month TONA Futures, this addition enables investors to express views and manage risk across the Japan rates curve with greater precision. Taken together, this development highlights the resilience of our multi-asset franchise and position us well to capture the opportunities ahead. Lastly, on the stock exchange business. Momentum has been robust and sustained with interest -- with increased vibrancy in the ecosystem. This reflects the longer-term strategy our equities team has been executing, one that is not just dependent on market cycles, but on building a structurally stronger market over time. Through the first half of FY '26, market participation deepened meaningfully. Average daily turnover rose 20% year-on-year to SGD 1.51 billion, the highest level since early 2021. Retail participation in cash equities rose to a 4-year high as investors increasingly pursue differentiated opportunities across STI constituents and small and mid-cap companies. Liquidity has increased in tandem with this heightened investor interest. The STI continues to serve as a key anchor supported by steady domestic and international flows. At the same time, trading activity has broadened across sectors driving higher turnover beyond the STI and contributing to a more balanced liquidity profile across the market. Notably, interest in mid-cap and growth-oriented companies rose significantly with institutional investors recording net purchases of SGD 450 million in small and mid-cap stocks over the year. This was partly boosted by last September's launch of the iEdge Singapore Next 50 Index, which tracks the next 50 largest companies beyond the STI constituents. Liquidity also benefited from higher IPO activity in first half FY '26, SGX Stock Exchange led Southeast Asia in terms of IPO funds raised with nearly SGD 3 billion raised. Looking ahead, our IPO pipeline continues to strengthen with a healthier outlook compared to 6 months ago. Beyond liquidity, we are enhancing market connectivity and building partnerships globally. Two major initiatives were announced in late 2025. First, with the U.S. Together with NASDAQ, we announced the Global Listing Board, GLB, designed to allow eligible high-growth companies to tap both Asian and U.S. investor bases through a streamlined dual listing framework. As we prepare to launch the GLB later this year, we're seeing more new economy companies engaged with us earlier, encouraged by the possibilities that GLB can unlock. This is widening the funnel and gradually reshaping the profile of companies looking to list here. Second, with China. The Monetary Authority of Singapore and the China Securities Regulatory Commission has expressed support for Chinese corporates or Asian companies to secondary list in Singapore. There is now a clear fundraising pathway for eligible Shanghai and Shenzhen listed companies to raise capital on SGX while maintaining their A share obligations. We look forward to welcoming new listings under these 2 initiatives in 2026, and are progressing on the supporting frameworks. Beyond cash equities, while widening the avenues for investors to express their views on Asia's team through a wider range of products such as ETFs and SDRs. ETF activity remained robust, supported by new launches and steady inflows with assets under management reaching SGD 18 billion at the end of 2025, drawn by rising investor interest and steady performance in the Singapore stock market, STI ETFs saw AUM rising to SGD 3.7 billion. We also extended regional and thematic exposures through SDRs, covering Hong Kong, Thailand and most recently, Indonesia, giving investors convenient and cost-efficient access to these markets. Alongside product expansion, we're also strengthening our market structure. SGX RegCo is consulting on proposals to reduce [ port lot ] sizes for higher-priced stocks and to modernize our post-trade framework through broader adoption of broker custody accounts, both aimed at enhancing accessibility, participation and market efficiency. Collectively, these developments point to a clear trajectory, a broader and more active investor base, deeper liquidity across market segments and stronger cross-border linkages enhancing Singapore's position as a leading marketplace in the international arena. First half FY '26 demonstrated the strength and resilience of our multi-asset strategy in FX, derivatives and our stock market. They underpin our confidence in delivering our medium-term revenue CAGR growth target of 6% to 8%, excluding treasury income, through disciplined execution and a clear focus on what matters. First, by deepening engagement with new and existing clients, across all our businesses; second, by delivering product innovation and next-generation market infrastructure; and third, driving a vibrant stock market ecosystem with our continued initiatives and momentum. Thank you. My colleagues and I will now take questions. Boon Chye Loh: Can we have the first question? Yes. I think I saw your hand up first Nick, and then we can have Harsh, and then we'll take a question online after that. Nicholas Lord: A couple of questions for me. The first is just on your comments on the GLB. And you spoke about new companies looking at the GLB. I presume there's also companies that are already listed on NASDAQ but may look at the GLB. So I just wonder if you could comment a little bit more about what type of companies you expect to list and sort of the source of those companies? And how big this GLB could be in terms of sort of number of listings on a sort of 12- to 18-month view? And then I have a secondary question, which is a little bit detailed on the numbers. But in your cash flow, there's about a $420 million gain on the sale of a FVPL or something like that. Could you just tell us what that is? I think it's a distribution. Could you just tell us what that is because it's quite a big cash inflow for you. Boon Chye Loh: Yes. Dan, you can take the second question. On your first question, the partnership with NASDAQ and GLB has clearly drawn companies to have earlier conversations with both SGX and NASDAQ. We hope to get the GLB up and running by the middle of this year. The companies that we're seeing now and on the pipeline are the high-growth new economy companies. And that's what the GLB is created to serve companies with the Asian high-growth being able to tap the Asian and global investor base. You asked for the 12- to 18-month outlook. This is being set up by the middle of this year. We hope to have some company's IPO on the GLB by calendar year 2026. Discussions, as I said, are earlier, companies are talking to us. Can't quite give you that 12- to 18-month forecast, but we're seeing the pipeline being built up. Kok Yu Koh: Thank you, Nick. The second part of your question, we had invested into a closed-end fund a few years ago and the fund is called 7RIDGE. The asset in that was trading technologies, that was sold. The transaction closed in November 2025. So that -- those numbers you see were the proceeds from that divestment of 7RIDGE. Nicholas Lord: And so your net cash is now quite high. Have you any plans as to what to do with that? Kok Yu Koh: Yes. So we will -- we are looking at reducing some of the debt, the bonds that we have as they come due for maturity -- that we have 2 bonds that are coming in the next 12 months that we are looking at reducing some of that. Yes. Harsh Modi: A couple of questions. One very big picture, Boon Chye. A lot of initiatives on equity market in Singapore. If I look at the equity allocation of Singapore households, it's quite limited. Is there any numerical target or any number, let's say, in a 5- or 10-year period, that as you work with different parts of Singapore to get that number higher directionally and to reach a particular level? And how do we think about that possibility? Boon Chye Loh: First, I think the broader participation across the number of companies beyond just the STI constituents is very encouraging. Secondly, the retail participation, as I mentioned, has reached a 4-year high. All segments of investors, including retail households are clearly important. And there are a couple initiatives going forward. You asked about target, but I think it's important to build the foundation. The value unlock program, working with the companies is one expect of that, being able to articulate growth, capital allocation, business strategy. And then in the investment part of the equation, there's going to be, first, a move towards or encouraging retail, or CDP direct account holders to move towards the broker custody model that can create multi-market efficiency. And along with that, CDP direct accounts remain available. And then third, we are doing a lot more in terms of investor education. Then the EQDP program, some of which has been launched has also been able to crowd in the money. So we're hopeful that everybody in the ecosystem playing a part and the momentum that the EMRG has created through the various initiatives and through a more resilient economy, stronger Sing dollar, we hope for a sustained momentum. But all segments of investors are important, including retail. And that's clearly something that we've been working on, but I think this momentum creates the possibility. Harsh Modi: Right. But it's not expressly a target or number they're trying to solve for in terms of participation. It is increasing and all of these suggest there's a lot of effort. Probably, we'll talk about in a year or two. Boon Chye Loh: We obviously have our working plan. We don't know where the pools of capital are. Harsh Modi: Yes. No, thanks for that. Other one is, on some of the initiatives, we talked about GLB, the other one is, which has talked about a lot in exchanges world, and I'm sure you guys have looked at it, it's a prediction market. There's a lot of different kind of contracts on prediction market, some are frivolous, some are serious. As you would have looked through it over last few quarters and years, what kind of role do you think prediction market can play at SGX, if any? And how do we think about that? Boon Chye Loh: Thank you for the question. This space is evolving. And I think the adoption of events markets in each jurisdiction will be different, has to have clear regulation, obviously, demand ecosystem led. As a market and looking at what SGX offers, particularly in the commodity space, freight, having some risk management tools around outcomes such as C-level, number of possible disruptions is clearly something that I think participants may not want to buy insurance for but are keen to look for some risk management tools. And also given the momentum in our stock market, if we're able to create greater visibility interest around financial metrics of a listed company, I think those are clear possible opportunities to evaluate. Like I said, this has to be with clear regulation demand led and with proper guardrails. Maybe a question from online participant. Liana Chue: Yes, Boon Chye. A couple of questions, but I'll take Jayden from Macquarie's question first. And on treasury income, the same question from Glenn from Phillip. I'll just combine it. Any more compression expected in the treasury income? And then is there a lag on compression? And are you shifting the duration of your collateral portfolio to lock-in use? So that's question number one. Question number two is on Scientific Beta. Why the decision was taken to impair the amount of $15 million on Scientific Beta? And lastly, is there more dividends to come? Boon Chye Loh: So I may forget the second and third. So I'll ask you. Okay. On the first question, the -- first, I would say, collateral balances increased. And there's a function of more open interest with SGX on our platform. Yes, the treasury income did decline, but that's, as you said, a combination of interest rates, but also a combination of the currency mix. And being an exchange that provide access across Asia, we can expect different currency mix. There's obviously, right now, a lot of focus on where the U.S. interest rates will go, but we also saw Australia hiking interest rates. We could also be in a different rate regime in Japan. So what is important is we continue to have very prudent risk management, looking at various instruments and look at duration to enhance the treasury income. And as said, I forgot the second question. Liana Chue: Second question is on Scientific Beta, the impairment charge? Boon Chye Loh: Given the ongoing dynamic and investors focus between or more on market cap weighted indices versus various specialized indices has led to underperformance of Scientific Beta, thereby, we have taken the decision to impair goodwill. However, Scientific Beta provides acquisition and continues to be, provides and enhance our index capability, allows SGX as a group, including Scientific Beta to engage the asset owners who are clients of Scientific Beta deeper. And that has also allowed us to enhance our data platform collectively. Dividend. Liana Chue: Yes. Boon Chye Loh: That was certainly Jayden. Liana Chue: Yes, correct. Boon Chye Loh: We guided the 12 quarters, 3 years out with a [ $0.25 ] increase for our dividend. We're just 2 quarters into it. As Daniel and I have said, we are committed and confident of delivering what we've guided in terms of the dividend. And obviously, as we continue to grow our business, committed to a 6% to 8% CAGR revenue growth and its cash generation increase, we'll continue to invest organically. We may put on bolt-on acquisition that provides incremental value business proposition. And if there's excess capital, the board and management is very conscious of returning value to shareholders and also creating and making a sustainable and growing dividend over time. Thilan Wickramasinghe: Thilan from Maybank. Just 2 questions. On the value unlock program, can you give us any update on how many companies that have signed up? And when can we start to see some announcements in terms of what some of those value unlock will be? That's my first question. Second question is on your clearing margin for cash equities this half. We did see an improvement of about 2% or so. Can you give us some indication of what's driving that? Is there a little bit more retail? Or has the mix changed? Yao Loong Ng: So I'll take both questions. So I think the clearing fee, yes, so that 2% increase has been led by an improved participation rate of our full fee paying clients, which is largely institutional and retail, and they come from both segments. The value up -- so the program was officially launched middle of this month. And I would say the response has been quite encouraging. People who have stepped forth to say what are these programs and how can we be involved. So I would say there should be about roughly around 100 companies as of today. That's about 1/6 of the number of listed companies that we have. So I think that's fairly encouraging for 2 weeks. And Thilan, you would have written quite a few notes on this program. Many of the things that we will work with the ecosystem to assist the companies will be quite different. Some of them clearly would be around capital management issues. Some of them will be around the narrative. It could be great in generating returns, but perhaps the story wasn't that well communicated. So those are the things we have to work through. It will not just be done by SGX alone. We are a platform, but we are able to convene the ecosystem, whether it's the IR experts or whether it's the consultants or whether it's the corporate finance advisory firms, right? So as the ecosystem we come together, and of course, MES has provided that grants to help encourage the companies to say, look, this is the time to do it. And I think best of all, we have seen examples of companies in Singapore that have done value unlock of value up, and have seen the results in share price appreciation. So I think these are the best examples. And it's not just in the STI companies, but in the next year as well. So that sets an encouraging tone, the template for the next year of companies to say, look, there is something for us to do. There is some assistance. And we do know that the EQDP managers, for example, are looking at some of these companies. And if the right strategies, the right metrics and the thinking can be communicated, then they should be able to expect that some of these managers will have institutional capital or retail capital allocated to them can look at these companies. Yong Hong Tan: This is Yong Hong from Citi. And maybe just one question on the DCI segment. So given the recent development and the Anthropic releases and based on your interaction with your clients, any recent opportunities you see for your DCI segment, maybe especially the Indices business. And relating to that, on your Scientific Beta, would that be further eased to your scientific business? And also, is the impairment done? These are my 2 questions. Boon Chye Loh: On the DCI segment, we saw revenue increase in the connectivity space with higher colocation sales and repricing in October '24 and in the data part of it, as part of our securities trading market platform modernization, we're also undergoing a data lake modernization, which will create capability and functionalities for us to create data and indices that participants will find it useful. On your question on Scientific Beta. As I mentioned earlier, there are other values that SB bring to the group. The revenue contribution of SB to the group is limited. Even if we were to take further impairment, which is not the case at this point, as the management and the team continues to execute on the plan, even if we do that, it will not be -- it'll be modest given the very strong cash and balance sheet of the SGX Group. Felicia Tan: I'm Felicia from The Edge Singapore. Earlier on you mentioned that the IPO pipeline continues to strengthen with a healthier outlook. So at the last results briefing, I think Pol gave a number. It says that you guys have 30 companies in the pipeline. So I was just wondering whether you'd be able to give a figure. And I think the last time you guys mentioned medium term. So do you all have any like more concrete timelines this time? Boon Chye Loh: Yes. So when we mentioned the IPO pipeline at our full year results briefing, roughly now also in August, 6 months ago, say, we mentioned more than 30. Very pleased to say 18 out of 30 has now come to the market. As of now, for our full year calendar outlook, the number of companies on the pipeline is more than what we said before. And we have number of IPOs at this month. I think key is obviously companies, as we've mentioned in our pipeline, companies have engaged advisers working on IPO on SGX. And we hope market continue to be conducive, and we hope to outperform last year. Pol de Win: So the number now is greater than 30, if you want the number. But what Boon Chye mentioned is important, right? We said that 6 months ago, 18 listings have happened since. By the way, it's greater than 30 and growing, right? So as all these deals are happening, we see new additions coming in at a greater pace, and that's encouraging. I think the other aspect to this is not just about numbers for us. The quality and the breadth of it is equally if not more important. We see that across main boards and catalysts nicely spread. And with the global listing board now, we have another very, very exciting tool in the toolbox to cast the net even wider. And to Nick's earlier question, I think what we are seeing based on the conversation that we're having around the GLB is that it's attracting companies that probably otherwise we might not have seen, consider Singapore as a listing destination. So that's exactly what we were hoping to achieve with it. And then equally in terms of -- Boon Chye mentioned is already around industries, right? So it's been pretty diverse. Technology is part of it. Health care is part of it. Consumer segment, digital infrastructure and of course, also real estate, which is 1 of our strengths. And I think all of this, by the way, we already saw reflected in the type of transactions that have started to come through in the last 6 to 8 months. Boon Chye Loh: That's why Pol is the Head of Global Sales and Origination. You're hearing the word greater from him. Felicia Tan: Sorry, I do have 1 follow-up question, and that will be the last one for me. I also was wondering whether you guys have any updates on the bolt-on acquisition front. I think, again, it's something that you mentioned 6 months ago and something that you mentioned just earlier. So I was just wondering whether you've identified any potential targets. Boon Chye Loh: Well, we continue to execute on our organic plans. We'll invest organically. We're also obviously continuing to evaluate areas that can extend our breadth and our debt. And as previously mentioned, the freight industry is undergoing in our view, a digitalization journey. And coupled with our existing strength in freight and commodities, that's an area that we're continuing to try and find bolt-on targets that could complement our business strategy. There is no timeline to that because I think it's important to look at the value, to look at the fit and obviously, market timing. Unknown Attendee: Just wanted to ask on the GLB. As of now in terms of the conversations that you've had with the companies who are interested, do you see more coming from U.S. trying to come into Singapore? Or is it the other way around where you're trying to bring companies onto the U.S. side? Boon Chye Loh: It will be both ways from what we see right now on our pipeline. Our companies are broadly in this part of the world. But with businesses that could extend into Europe or U.S. So meaning, companies in this part of the world having a global footprint or having more of a regional footprint and clearly looking to tap the Asian and global investors. Unknown Attendee: So just to follow on. I guess, it's more trying to understand. So do you see this more as issuers that are coming new to the market, there will be -- or are there already listed players who are looking to go over to U.S.? Boon Chye Loh: So this will be for new IPOs, and new IPOs could include companies. They have not been listed. It could also include companies that are already in the U.S. looking to tap this GLB. Questions online? Liana Chue: Yes. Boon Chye, this is from Shekhar of RHB. I'll broadly put into 2 buckets. One on equity derivatives, broadly stable volumes. What is the action plan to accelerate growth over the next 12 to 24 months? And on securities market, any pricing levels without impacting competitiveness? Hsien-Min Syn: Very bullish on the need for risk management across the Asian capital structure. Very bullish on our portfolio mix because it doesn't even yet reflect the market weight of what exists. So if you look at our A50, the number looks very large. But when you normalize the notional, so the A50 notional is 15,000, the Taiwan notional is 100,000. When you normalize this, the upside is a lot. And there are 2 metrics you can look for if you wanted to say what the bogey is. One, today, our market share of A shares on our exchange versus onshore China is about 5%. Secondly, the inclusion rate of China in MSCI equity is about 2.5%, meaning there is no asymptote here. It's all about increased activity in Asian markets, higher volatility, very idiosyncratic moves between markets. There is no Asian lump, China is China, India is India, Taiwan is Taiwan. How quickly can this grow? When I look back at Taiwan, 5 years ago when we did the migration, the notional contract of our Taiwan contract was 40,000. Today, this month, it's 100,000. That's just AI and TSMC. So it's not a static portfolio. And in fact, in this current world order in capital markets, I think we are so well placed because we have currency, we have equity, we have commodities, and we're making a start on a new -- entirely new derivatives category, which is the perpetual payout. It's not about crypto. It's about that payout. Boon Chye Loh: I will reinforce Mike's view. Given the unpredictable and very uncertain environment, this is really an environment where I think investors are more actively managing macro risk, which then translate into asset class risk management. If you look at the IMF 2026 outlook, 4 of the top 10 countries that will contribute to global growth in 2026 comes from Asia. Obviously, the top 2 being China and India, and there's collectively, the 4 countries is going to contribute about 50% of GDP growth. The second question is any pricing levers for securities market without reflecting competitiveness? Our focus is really to broaden market participation, increase the number of stocks number -- increase the liquidity or number of stocks beyond the STI, more products, better post trade with the broker custody arrangement for the investors who choose to do so. And if that continues to create the flywheel, I think that's better for the overall market in terms of our activity. Any questions here in the audience? If not, we take 1. Yes, Harsh, and then we have 1 from online. Harsh Modi: A couple of follow-ups. You touched on, Mike, on the [indiscernible] futures as a contract, and it's more a proof of concept. Where are we in that journey? And how -- by when do you think you can get enough of data or comfort to then broaden out into, let's say, gold or some other contracts? Hsien-Min Syn: The design choice of what we delivered was to go through existing rails because that's how you address your current customer network. But there are 2 specific things that need further adoption. One is clearly setting up the fact that it's not -- it's an indefinite future. It keeps rolling. And it has a daily funding, right? So these are the 2 important things. And we needed to wait for the right asset class to come along where there was an ecosystem that said, I can do this. So the evidence that we have since launch for Bitcoin and [ Ethe ] has been very promising. It's mostly luck because of the environment. So what we've seen is that the most important thing to track is the micro structure. How liquid is it? And actually, the results are very encouraging. Most of the volume is in Asian hours, hypothesis, number one. 70% of the stuff trades in Asia, the trading happens out of Asia, that's what we've seen. Number two, the funding rate is actually tracking the nontraditional crypto exchanges. It is not tracking the U.S. ETFs. It is not tracking the U.S. Bitcoin futures, meaning it is the regulated mirror of what you're seeing on the unregulated exchanges. So that is very promising. Thirdly, this funding rate is very responsive. It went up a lot when Bitcoin went to 85,000, 87,000, and guess what, in the past week or so, it is now negative. So it works. It does what it says on the tin. Our task here going forward is to get more institutions, clearing members and primes to onboard this onto their shelf, right? We already have a number of pioneer technology vendors and clearing members, and they are very crypto-native in nature, but we need to hit the mass customer network where our strength lies. Boon Chye Loh: We'll take 2 more questions. One here and then 1 online. Unknown Attendee: I am [indiscernible] The Business Times. I wanted to circle back on the IPO pipeline that you mentioned. So would you say it's better than the first half of your financial year? Pol de Win: I would say the pipeline has improved, yes. That's what we said. Notwithstanding the good momentum that we are carrying across from the first half of the financial year. But you need to understand, right, these things never happen in a straight line. There's a bit of seasonality in IPO activity as well. So it's normal for the first quarter to be a little bit more quiet as companies prepare our full year financials. But overall, as we look -- continue to look at that sort of medium-term window, we're very, very confident. Unknown Attendee: All right. I also wanted to clarify whether do you see like more mean bought applicants or more catalyst applicants? Pol de Win: Quite equally split. Unknown Attendee: And actually, last year, you said that 2025 was a transitional year for the [ board ], right? So do you think -- how do you describe 2026 then? Boon Chye Loh: Transitional year? Unknown Attendee: It's transitional year. That's what Pol said last year. Pol de Win: Yes. So I mean it was very clear. If you look at the calendar year 2025, the first half and the second half were 2 different worlds. We're now in the new world, and we'll keep building up on that momentum. I think if you just generally look at market conditions that are out there, pretty favorable and not just for us, that is globally, but I think there are certainly elements that play to the strength of us here in Singapore and of Asia as a region. We see the supply coming through, right? There is many, many companies out there in this region that fit right in our sweet spot that need to create liquidity for their shareholders that need capital for growth. So -- from a supply perspective. And then we've, of course, worked tremendously hard with many people here in the ecosystem in identifying some of the pain points and coming up with these initiatives that have been rolled out following the review group that I think are going to be very meaningful in creating an even better environment for us. And I think the deployment of EQDP funds is a very good example of that. The regulatory changes that we've started to make and indeed also the global listing board, for example. Unknown Attendee: I have another question for Boon Chye. It would be very quick. For the Equity Market Implementation Committee, do you have any more details you can disclose at this point? Boon Chye Loh: Not at this point, we hope in the weeks ahead to announce the formation of the -- to announce the committee members and then lay out our plans forward. Liana Chue: One last quick question, I think, maybe for Boon Gin. Could you kindly elaborate on the reduction of port lot size from 100 shares to 10 shares? Will it extend beyond the initial companies that have been identified so far? And that's from a private banking sector. Yao Loong Ng: Yes. So I think we have put out that console and taking into balance the various factors, we think that we start off with $10. And I think that is going to be a good start because it represents companies or blue chip companies that can be more accessible to a wider population. I would say that the unitization way of breaking down the ballot size, it's not new to us. We did that in the ETF market in 2022. And we have seen quite good activities in ETF market clearly, and we have seen how investors are able to access the higher-priced ETFs and being able to do that. I mean, GOL is an example. It is trading about SGD 600. So we have seen activities in that. And I think that has helped. Of course, I won't be able to definitely extrapolate, but I think making our stock market accessible with -- for higher price shares to a much broader population is part of our goal for higher retail participation in this market. Boon Chye Loh: Okay. With that thank you very much, everyone, for your presence and participation. Thank you.
Fredrik Ruben: Good morning, and welcome to this earnings call, where we will mainly cover the fourth quarter of 2025, summarizing our business then in October, November and December and also some comments regarding the full year of 2025. I am Fredrik Ruben, I am the CEO of the Dynavox Group. Linda Tybring: I'm Linda Tybring, and I'm the CFO of Dynavox, and I will cover the financials at the end. Fredrik Ruben: Yes. So for those of you who have participated in these calls before, you will be familiar that we'll start with a quick recap about what Dynavox Group does, and then we will summarize the main takeaways from the quarter and the full year. We will dive deeper into the financials, and thereafter, there will be a Q&A session. And you can submit questions during the Q&A session in the chat function here in or you can ask them live if you have been given prior notice to our team. And of course, we always welcome offline questions sent by e-mail to the above e-mail address, which is linda.tybring@dynavoxgroup.com. All right. So a brief overview of Dynavox Group. First and foremost, it's important to reiterate our mission and our vision, which I know is very dear not only to now our over 1,000 colleagues around the world, but also to our ecosystem of partners and investors. And our vision is a world where everyone can communicate, and we will contribute to this via focusing on our mission, which reads to empower people with disabilities to do what they once did or never thought possible. And this also summarizes 2 of our main user stories, the do what you once did, that may be a person who lived a normal life until a diagnosis such as ALS, which rendered her unable to control the body or communicate like before. The other story is the never thought possible, and that can refer to the child diagnosed at an early age with a condition such as autism or cerebral palsy, where thanks to our solution, he can do much more than the world around him ever thought possible. On the picture here, you see Lane from Lawrenceburg in Kentucky in the U.S. and she's one of our amazing users diagnosed with cerebral palsy and is using -- she's a great example of this. So the market that we serve remains hugely underserved. We estimate some 50 million people have a condition so grave, they simply cannot communicate unless they have a solution like ours. And every year, about 2 million people are being diagnosed, and yet we estimate that only some 2% of those are actually being helped and the rest remain silent. And the main reason for this spells lack of awareness also among the professionals and the prescribers task to assist these users and poor health care reimbursement systems. We operate with a global footprint. Today, some 3/4 of our business stems out of the U.S., largely because of a reasonably well functioning funding system established some 20, 30 years ago. But our products are also sold in more than 65 markets around the world, of which 11 are markets where we sell directly, while the others are served by a network of some 100 reseller partners. Our own staff is distributed in a similar way as the revenue, meaning that some 60% or so of our staff are based in North America with our U.S. headquarters in Pittsburgh in Pennsylvania. And our second largest office is our headquarter here in Stockholm, but we have branch offices in several European countries as well as in Suzhou in China, in Adelaide in Australia. As of today, we are just north of 1,000 employees in total. We provide a comprehensive portfolio of solutions ranging from, a, the content and the language system, such as the world's leading library of communication symbols and they're called PCS and the leading solutions for off-the-shelf or custom-made synthetic voices of the highest quality with a large diversity of languages, ages and ethnicities. Then we also do highly sophisticated communication software tailored to the type of user, which, of course, can vary greatly based on the need of that individual. Then we develop and design devices with cutting-edge technology and medically certified durability, including communication aids controlled via eye tracking and accessories such as the Rehadapt mounts. We have a services portfolio to help our users through the complexity of obtaining and getting funding for solutions. And then last but not least, we are there to help our users, the therapies, the caregivers through a global team of support resources. Then as mentioned, we operate this model globally, and it's important to note that each piece is critically important and also a significant differentiator for us, making us absolutely unique. Our go-to-market model is predominantly as prescribed aids, that means that some 90% of our revenue comes from public or private insurance providers. And this also means that we have solid paying customers and have always been resilient towards changes in the overall economic climate. But now we will go back at focusing on the main topic of today, namely the earnings report for the fourth quarter 2025. If I would be looking at the highlights, we had another strong quarter when it comes to revenue growth. The growth compared to the same quarter previous year sums up to 31% after adjusting for the currency effects. And this marks a further acceleration of an already strong trajectory over the past 4 years. The demand for our solutions remains high, proving the solidity of our underlying business, obviously, but we also see robust growth across all geographies and markets. We continue seeing increased growth in the touch control product portfolio, which typically then serves younger users with autism. However, in the quarter, we also continued to see good traction in the eye-gaze controlled solutions, serving users with more complex needs. Our EBIT came in at SEK 103 million, and this includes nonrecurring costs of roughly SEK 17 million in the quarter, and that implies then, of course, an even stronger underlying profitability. In November, we moved our entire North American headquarters and logistics hub to a brand-new location from where you will see pictures during this presentation, including on this one. And then last but not least, on December 23, we entered into an agreement to acquire all the shares of our Italian reselling partner, SR Labs Healthcare, and I will come back to that in a little bit. If we then instead look at the full year of 2025, we can conclude that it was a solid regarding our top line growth. In local currencies, the growth was 34%. Our profitability improved in the year. The EBIT grew by 11%. Earnings per share grew by 13%. And this really proves the case that our business is continuing to scale quite well. And the fundamental factor behind this is, again, the hugely underserved potential in the market that we address. The growth in profitability during 2025 should be seen in the light of the investments that hit our P&L with around SEK 100 million in total of nonrecurring nature related to 2 main projects. First, the new ERP system that was successfully launched in North America on July 1, which represents some 3/4 of our business. And this new system lays the foundation for a modern, highly digitalized and scalable backbone. And then in November, we finalized the consolidation of the product and development organization into a central hub in Stockholm, reducing our U.S.-based team by some 50 FTE and in parallel, building up an even larger team here in Stockholm. And as a company with a clear focus on innovation, having our products and development function concentrated in one location enables further scalability and resilience. Another important way to scale and grow our business is to expand our direct market and the presence there. More than 70% of our revenue from Europe and the rest of the world comes from markets where we have direct presence. In 2025, we completed the acquisition of former reseller partners, Cenomy in France and RehaMedia in Germany. And as mentioned, on December 23, we announced our third acquisition for the year, this time in Italy, where we agreed to acquire our reselling partner, SR Labs Healthcare. The company reported revenue of approximately EUR 3 million in 2024, and we are paying the current owner EUR 4.2 million in cash at closing. And the closing is expected during the next half year when we look forward to welcoming some 10 amazing new colleagues to our team. But now I hand over to you, Linda, to take us deeper into the financials. Linda Tybring: Thank you, Fredrik. So let's start with Q4. Revenue for the fourth quarter came in at SEK 677 million, a 31% year-on-year growth after adjusting for the currency effect. Recent acquisitions contributed with 3% and the organic growth was a solid 27%. And this marks another chapter in our 4-year strike of robust growth and consistent execution. Currency fluctuations had 15% negative impact on revenue, hence, the reported revenue growth was 16%. Sales continued to grow across all our markets. Also in previous quarters, we continue to see growth among younger users with autism using handheld touch control devices. At the same time, they continue to see good traction in our eye-gaze control solutions, serving users with more complex needs. The gross margin ended up at 69%, a decrease of 1.1 percentage points and the gross margin was at the same time, negatively affected by currency fluctuation, resulting in SEK 13 million loss, but also somewhat strengthened by sales growth and the addition of new direct markets contributed an extra layer of the gross margin. So EBIT for the quarter was SEK 103 million and the EBIT margin was 15.2%. Our OpEx increased with 17% organically, and the OpEx increase was affected by factors such as staff increases, mainly within the sales and marketing organization. In total, we added 155 FTEs, including M&A versus last year. During the quarter, as Fredrik already mentioned, we continue to invest in new systems and tools to strengthen scalability. The total nonrecurring spend related to this in the quarter was SEK 6 million, which was SEK 4 million lower than prior year. Operating expense was also affected by nonrecurring costs related to the restructuring cost in the product and development organization. The total nonrecurring spend in the quarter was SEK 8 million, which was SEK 6 million higher than prior year. Both these 2 investments are in line with the announced strategic plan. The development of the Tobii Dynavox Group share price has rendered in increased cost for employee long-term incentive programs of SEK 3 million compared to fourth quarter last year. All in all, nonrecurring costs in the quarter sums up to SEK 17 million, but this was partly offset by operating income that was positively impacted by SEK 6 million related to adjustments of earn-out liabilities. In addition, currency effects both from lower exchange rates versus prior year and together with transactional timing effects had a negative impact of SEK 36 million on EBIT for the period. Net R&D costs decreased by SEK 3 million, and this includes nonrecurring cost of SEK 8 million related to the restructuring within research and development organization. If we look at the basic earnings per share, it totaled at SEK 0.72 per share to be compared with the last year's SEK 0.51 per share. So to the full year 2025 financials, Revenue for the year came in at SEK 2.467 billion, a 25% year-on-year growth. Excluding currency effects, revenue grew by 34%. Acquisition contributed to 2% and the organic growth was a solid 32%. As with the quarter, we see growth across the board in not just regions, but also products and user group. We also see the trend where markets where we go direct grew stronger. The gross margin ended up at 68%, a decrease of 0.34 percentage points, and this was negatively impacted by the currency effect of about SEK 31 million, and this relates to that inventory purchase in U.S. dollar at a higher exchange rate, resulting in a loss up on sale due to the strengthening of SEK. At the same time, the margin was strengthened by additional of new markets, which contributed to an extra layer of gross margin. EBIT for 2024 was SEK 254 million, corresponding to a margin of 10.3% versus 11.6% last year. Our OpEx increased organically with 27% versus prior year. The OpEx increase mainly relates to staff increases in the sales and marketing organization and salary adjustment that came into force in April 1. During the period, we continue to invest in systems and tools to strengthen scalability. These nonrecurring costs contributed approximately with SEK 28 million to the cost increase with a total cost of SEK 46 million in the period. Operating expenses was also affected by the nonrecurring cost of approximately SEK 41 million related to the restructuring of product and development organization. The cost of the long-term incentive program increased by SEK 18 million, driven by the share price development during the year. The amount also includes a nonrecurring cost of SEK 5 million related to historical long-term incentive costs. To summarize, a total of nonrecurring costs amounted to SEK 106 million. We should also say that currency effect, both from the lower exchange rates versus prior year and transactional timing effects had a negative impact of SEK 78 million on EBIT for the period, an impact of 3 percentage points on EBIT. R&D expenses had a negative impact on EBIT of SEK 61 million compared with corresponding period last year. This includes nonrecurring costs of SEK 35 million related to the restructuring within the research and development organization. Of course, we are very happy with our revenue growth and how we delivered on our strategic investment. Adjusted for this, we are now seeing an EBIT in line with our financial target. For the quarter, cash flow after continuous investment was positive with SEK 46 million and cash at hand at the end of the quarter was SEK 195 million. Net debt was SEK 909 million, and the total unused credit facility at the end of the period was SEK 300 million. The net debt over last 12 months EBITDA was 1.7x. Those are numbers. Fredrik, back to you. Fredrik Ruben: Great. Thank you, Linda. A lot of numbers. But on the other hand, we're also summarizing both the quarter and the year. So before we open up for questions, I'd like to reiterate the main takeaways and bring further nuance to our performance and outlook. We continue our strong trajectory, and that's a trend that started early in the spring of 2022. As we said, the revenue grew by 31% adjusted for currency, which, of course, is highly satisfactory. And going forward, we are clearly meeting tougher comps. As noted as well, the strengthened SEK to the U.S. dollar poses headwinds, both on revenue and earnings. But we still saw that sales continue to grow across all markets. We continue to see the growing adoption among younger users, typically with autism. At the same time, we also see good traction in the eye-gaze control solutions, serving users with more complex needs. Our profitability was negatively affected by nonrecurring costs totaling some SEK 100 million in the year or over 4 percentage points. And that relates to the long-term investments that focus on building a more robust company and a more resilient company. And obviously, the strengthened SEK and the weaker dollar post significant headwinds. Our operations infrastructure got a significant upgrade with the opening of our brand-new and modern offices and operating hub in Pittsburgh, Pennsylvania, serving our entire North American market, and that represents some 3/4 of our business. We continue to expand our direct market presence by agreeing to acquire our Italian reseller partner, SR Labs Healthcare. The overall exposure to import tariffs to the U.S. is limited since our products generally are classified as medically certified assisted devices and that exempts them from tariffs under the so-called Nairobi protocol. While the recent U.S. government shutdown and general uncertainty on policies had no apparent impact on our business, we acknowledge the broader societal effects that this may cause and may cause some slowdown to the business, but the financial impacts are quite difficult to quantify at this point. It continues, obviously, to be a very fluid situation in and around the U.S., and we continue to monitor all macroeconomic and policy change developments very closely. All in all, we remain confident there is ample opportunity for growth over a long period of time given the low penetration of communication aids, and we continue our efforts in helping more users by expanding and service a market that is largely underpenetrated. As we have learned from the history, it will never ever be a straight path forward, but our past performance solidifies our long-term confidence. Our current financial targets were communicated in February of 2024 and then expressed with a time horizon of 3 to 4 years. The first target to, on average, grow revenue by 20% per year adjusted for currency effects, but includes contributions from acquisitions. And in local currency, the fourth quarter growth for 2025 was 31%, which means that we've found a revenue growth momentum to build on. The market we serve remains hugely underserved, but also quite immature. With the example of growth levers such as sales team expansion, adding direct markets and operational excellence, we continue to build our growth journey. The second target is to deliver an annual EBIT margin that reaches and exceeds 15%. And we have proven to build strong growth with incrementally improving profitability, and we need to continue to invest, obviously, in the future growth with improvements in scale. And the recipe for us is quite simple, continued revenue growth, high and stable gross margins and then a total operating expense that increased at a lower pace than the revenue growth. And as a consequence, we see good opportunity to further leverage our revenue growth translates to reaching and exceeding an EBIT margin of 15%. Last but not least, the dividend policy. So we do have an attractive cash flow profile. And given the growth opportunities, we need to maintain a capital structure that enables strategic flexibility to pursue growth investment, and that obviously includes acquisitions. But it's still expected that over time... Operator: Let's try with Jakob instead. So -- do we have Jakob on the line? Jakob Lembke: Yes, I'm on the line. Operator: Good. So please ask your question. Jakob Lembke: My first question is on the sort of growth outlook you see. Obviously, very good momentum here continuing in Q4. But given that now that from Q1, you are facing these more tougher comparables, do you still see that you can sustain a sort of 20-plus organic growth momentum? Fredrik Ruben: I think you're absolutely right, Jakob. By the way, sorry for the technical issues. This is Fredrik. You're absolutely right. We are seeing tougher comps. And without kind of talking too much into the future, we also remain confident in our long-term predictions, and that is expressed as we believe in an annual growth of 20% adjusted for currencies and contributions from acquisitions. So we're making no change to the outlook. we have never been in a situation where the current growth has been something we have commented on in more detail. Operator: Any more questions? Jakob Lembke: Yes. Another question, if you can elaborate on the development in your U.S. sales force during the last year, sort of how much it has grown from the beginning of 2025 to where you are now and also what trends you're seeing in sales force efficiency? Fredrik Ruben: Sure. Can I hand over to Linda to maybe elaborate on that? Linda Tybring: I mean we have added more feet on the street, over 20 people in the sales organization or solution consultant as we call them, are -- have been added during the year. We also see an improvement in efficiency for our sales organization on a good trajectory, which is a really good sign considering how many people we have added during the past year. So that's great. Fredrik Ruben: And that equates to roughly 20% or is it? Linda Tybring: It's about 10%. Fredrik Ruben: Sorry, the growth in terms of number of FTEs. Linda Tybring: Yes, that's about 20% increase. Fredrik Ruben: Yes. Operator: Good. Any further questions? Jakob Lembke: Yes. Then I'm also wondering a bit on your balance sheet. I mean, it's good to see the dividend here you announced today. But given the stronger profitability, I guess we will come down to quite low leverage level here towards the end of 2026. So just what are your thoughts on how you will use the balance sheet going forward? Linda Tybring: I mean we should always prioritize and make sure that we look at future investments, it could be M&A, et cetera. So we need to make sure that we have excess cash for that. But if we -- for the future, I mean, now we have a good situation, and that's why we decided on doing a dividend this year. Fredrik Ruben: I think it's also important to stress the fact that given the type of business that we're in, the type of payers that we are, as a company, we should carry a certain leverage. And we obviously feel quite confident in the ranges where we're currently operating. But that can change with market interest rates and whatnot. But obviously, we feel quite confident at the leverage rate that we're on and hence, doing the dividend. Jakob Lembke: Maybe I can just take one more and then I'll get back. Operator: A quick one. Jakob Lembke: Yes, just if you can comment on the situation with RAM memory prices and if you see any impact on gross margin or ability to deliver. Fredrik Ruben: Sure. So just for everybody to understand, the prices for high-technology memory chips has gone down dramatically, typically associated with the AI boom. We do have memory chips in our products. And yes, we have seen that the memory prices have gone up, but you should see that in the light of 2 things. First of all, we don't use the highest specs memory chips that you typically use in AI computing, et cetera. So we're not really in that market. And the other part is that the bill of material cost for the memory chip per se in our products is very, very small. So even if you would look like a doubling of memory chip price, et cetera, it only would affect some tens of percentage points on our gross margin for our products. So we are -- with a 70% or so gross margin, the bill of material cost for a specific component doesn't actually affect us all that much. Operator: Good. Thank you so much. I think we also have Daniel Djurberg from Handelsbanken. Daniel Djurberg: Congrats on a great report, I think. And also thanks for the clarification for some analysts on the COGS side. I have a question on -- you mentioned the Nairobi Protocol. Have you seen any policy impact or changes so far? I have looked myself, I haven't found anything. Fredrik Ruben: No. Linda Tybring: No. Daniel Djurberg: Good. Another question in the autumn on the close down, you were quite safe out due to prepayments. Is something changed this time and this prepayment thing that could be that it could be a larger impact directly given the close down? Fredrik Ruben: We didn't see any direct impact of the close down, and that's because the system is -- there are buffers, as you alluded to in the system. But I need to stress the fact that this type of close down, and I would also say if you go up in the helicopter and look at the general uncertainty in the U.S. society, it will and have some sort of impact on us. It's affecting schools. It's affecting the life for our own staff and societies at large. It's, however, super difficult for us to quantify exactly what that meant in terms of dollars. But I would be wrong saying that we are unaffected largely. But there's nothing that we can really point out or quantify. Daniel Djurberg: Super. And also in terms of ramping up sales force, can you comment a bit on the efficiency on the number of prescribers and so on that this sales force can help, i.e., your indirect sales force more or less? Fredrik Ruben: So 3 factors. The first one is the number of reps that we have in the field. And as we said in the previous question, that increased by roughly 20% or so or 20 people to be exact in the U.S. last year. At the same time, we did see an improvement in kind of revenue per rep or sales rep efficiency. The third element is something that I believe we have talked about before, which is the number of prescribers in the market that prescribe 4 or more devices per year. And here, too, we saw an uptick compared to last year. I actually don't have the number, but I would say that there were probably a double-digit percentage, perhaps low in number of prescribers that are for the lack of a better word, good at your job or et cetera. And that's, of course, a fantastic growth lever because they carry our water, and they typically have more successful patients. Daniel Djurberg: Perfect. And if I may, very last question on the competitive landscape. Have you seen any larger changes for example, your U.K. competitor, Smartbox was acquired there and also you say something about PRC in the U.S., given these are private companies, it's hard to judge from the outside. Fredrik Ruben: The short answer is no. I think it's largely business as usual. If you look at the acquisition of Smartbox that was announced, not yet closed, I believe. That's merely an ownership change. And that's potentially good. We have no opinion about that. And you did also see that PRC did acquire 2 small software companies typically focusing on other markets than their home market, U.S. But again, this doesn't affect our day-to-day life. Operator: Thank you, Daniel. And then we will turn to Kevin, who has posted a question in the chat asking you increase R&D every year. Will this increase indefinitely? Or will it flatten out more and get quarterly consistent over time? Fredrik Ruben: Linda? Linda Tybring: So I mean, during 2025, we have talked about the strategic move that we have done from the U.S. to Sweden, which means in 2025, our R&D spend has been very high because of a lot of nonrecurring costs. What we see over time is that we will not increase our R&D spend in relation to revenue. So that will over time go down. And also why we did this move was to -- for the same amount of money that we spend in 2024 or in Q4 2024, we will actually hire more people. So we will get an efficiency in adding more capacity for the same amount of money. So over time, this will go up. But of course, we need to add a couple of heads every year, but it's not significant from a SEK 1 million increase perspective. Operator: Good. And he continues also, Kevin, all the quarterly reports for 2025, you have expressed that the demand has been basically the same in Q1, Q2, Q3. What did it look like for Q4? Fredrik Ruben: The same. Operator: The same. Fredrik Ruben: Yes. Operator: Good. So let's see now if we have, Phillip. Unknown Analyst: All right. Most of my questions have been covered, but I was just wondering, has the U.S. reimbursement rate increased going into 2026? Linda Tybring: Yes. They have communicated a 1.9% increase in December that we will start to evaluate during the year or implement during the year. But as historically, this takes some time for us because we need to update overall appendixes to our agreements with the funding bodies across the U.S. Fredrik Ruben: But it's a good question because as many fear with the current political, it didn't go down. And it's typically associated with inflation. I think this just under 2% increase of reimbursement rates underscores that. Unknown Analyst: And then I was also wondering about Tobii, they reported the other day, and it was quite a disappointment. And does it have any effect on you about their performance and their ability to deliver products to you? Fredrik Ruben: No. Unknown Analyst: Short answer, okay. Fredrik Ruben: It's obviously a complex topic, but we are in a position where it doesn't affect us. Linda Tybring: And we have a lot of stock when it comes to Tobii components. That's part of the prepurchase we did during the summer. Operator: Thank you, Phillip. We also have another question from Jessica at Redeye. So adjusted for nonrecurring costs of SEK 17 million, the EBIT margin reached 18% in Q4, which sits well above your long-term target of 15%. Now that the restructuring of the R&D organization is complete, how do you view the ability to maintain this elevated margin level throughout 2026? Fredrik Ruben: First of all, Jessica, is that the profitability or margin target is expressed as exceeding 15%. So our target is not 15%. It's exceeding 15%. And we remain confident that that's a level where this company should be able to deliver. With that said, we're also going to make sure that we make the appropriate investments so that we don't build a card house that could implode here. We want to build something very, very solid and resilient. Linda Tybring: We should also remember that Q4 is our strongest quarter. So profitability grow -- both revenue and profitability can increase during -- quarter during the year. Operator: Good. And actually, I see that Kevin had a follow-up question on the R&D that he asked. Would your EBIT margin and therefore, your results have been better next year, all are the same since they have been a onetime cost? Fredrik Ruben: Yes. That's mathematics. Operator: Good. Good to confirm. I think by that, let's see. There was one more here also from Kevin. And another question about the demand. That the demand is so consistently high, 32% excluding currency. Can I get some history regarding this, more in regards to if you have seen this demand historically and what may or may not affect this? Fredrik Ruben: Sure. And it's actually quite a complex topic because we are operating in an industry where we are also not only providing the products and the solution, we're also there to create the awareness. So our long-term initiatives on educating prescribers, being active at universities, creating more and more successful use, et cetera, that is a very, very slow-moving ship. And it's quite difficult to kind of exactly calculate the impact from when one of our colleagues were out in the speak teaching a prescriber how to do their job until that translates into revenue growth. So I would say we are responsible for the growth because we and some of our industry peers, we largely create the market. Exactly to predict which percentage points that will end up in is genuinely hard. But we feel obviously that we've found the momentum, but I expect that it will be a bumpy road. Sometimes we will have very strong growth and sometimes we will have weaker growth. But if you zoom out a little bit and look at the overall curve over longer periods of time, we are obviously quite confident in long-term growth. And when I say long term, I'm probably more talking decades than quarters. Operator: With that, all the questions have been asked, and we concluded. Fredrik Ruben: All right. Thank you, everybody, for listening in. We apologize for the technical mess up that happened. But obviously, we were able to hear the voices of some of our dear analysts and followers. So something worked. We will now continue to work. And next time we have a session like this will be on April 24. It's a Friday, and then we will conclude the first quarter of 2026 in our earnings. Thank you very much. Linda Tybring: Thank you.
Operator: Welcome to Nordic Semiconductor's Q4 2025 Presentation. [Operator Instructions] This call is being recorded. I will now hand it over to Stale. Please begin. Stale Ytterdal: Thank you, Kjell, and good morning, everyone. Please note that this presentation is being recorded and will be accessible on the Nordic website in the Investor Relations section. Additionally, for those of you who missed the release, you can find the earnings press release, quarterly report, and presentation material also on our IR website. With me today, we have the CEO, Vegard Wollan; and our CFO, Pal Elstad. They will share details about our recent financial performance and updates on key business developments. Following the presentation, we will move on to Q&A segment. [Operator Instructions]. As a reminder, this presentation includes forward-looking statements that come with inherent risks and uncertainties. Actual outcome may differ materially from those statements expressed and implied. We highly recommend reviewing our detailed Q 4 quarterly report and the 2024 annual report for a deeper understanding of the risks and uncertainties that could impact our business operations. With that, I will now hand the microphone over to our CEO, Vegard Wollan. Vegard Wollan: Thank you, Stale, and good morning, everyone. Today, I'm going to quickly go through the main points of the quarter, then leaving the word for Pal to take you through the financials before I'm returning with my review of 2025 and how we see ourselves progressing towards our long-term goals and ambitions. So let's start with the headline figures of the fourth quarter. Revenue amounted to $170 million in the fourth quarter, an increase of 13% year-on-year. As expected, revenue declined somewhat from our third to the fourth quarter, and the revenue ended in a higher end of our guiding range. The year-over-year growth was on par with what we saw in the third quarter and reflects that our strong competitive position enable us to benefit from the market improvement throughout 2025. We see growth both in short range and in long range, and among both large key customers and in the broad market. In terms of end-user markets, we saw continued growth in the Industrial and Healthcare segment, with more modest year-on-year growth in the Consumer segment. This is roughly the same picture as we saw in the third quarter. Gross margin was 55% in the quarter, but as Pal will get back to with more details, this included some reversal of an inventory write-down we took last year. If we exclude that, we still see healthy gross margin levels of 52%, a clear improvement from Q4 2024 and on par with the previous quarter. The product and customer mix is improving and cloud services revenues after the acquisition of Memfault also contributes positively. Reported EBITDA was $15 million, and adjusted EBITDA, $13 million. This excludes the positive effect of the reversed write-down, partly offset by the quarterly noncash cost effect related to the Memfault acquisition. The top 10 customer share of our revenue has stabilized at 57%, meaning that revenue has grown equally strong among our key customers and in the broad market over the past year. Revenue in 2025 exceeds the 2022 peak level for our top 10 customers, showing our strong relationships and developments with these customers. We will see many more exciting products coming out from these collaborations in the quarters and years to come. As we have said repeatedly over the past year, it has been a key priority for us to regain momentum also in the broad market. And the revenue in this customer segment is still around 1/3 below peak levels, though we see gradually improving revenue also here. We remain the clear design win leader when we look at the Bluetooth Low Energy end product certifications, with 32% of the design certifications in both Q4 and for the full year 2025. This is about 3, 4x as many designs as our closest competitor. And please note that this is counting of certifications that does not differ between high and lower volume products. So you cannot translate this directly to revenue. The NRF 54 is now beginning to have a meaningful impact and accounted for about 15% of certifications in Q4. This will continue to increase going forward. Turning to our products. I would like to highlight some recent product news. The first is the nRF54LV10A, which we have specifically designed for next-generation healthcare wearables such as biosensors and glucose monitors. These products are typically powered by silver oxide coin cell batteries, using lower voltages, and ultra-low power is crucial. Compared to the previous 52 series generation, we achieved between a 30% to 50% lower power consumption while increasing the performance substantially, and this new product positions us perfectly for these high-volume markets. At the CES in Las Vegas in January, we also introduced another great addition to the nRF54 series. Many applications require local data processing to save bandwidth cost and energy consumption. Other requirements for local processing are applications where you need low latency and on-site response in milliseconds without a round-trip to the cloud or other devices. Our new nRF54LM20B chip goes a long way in meeting those demands. This is the first SoC integrating our Axon neural processing unit, a very fast and energy-efficient hardware AI accelerator. The Axon NPU is built on technology we acquired with the acquisition of Atlazo a couple of years back, and it offers 7x faster performance and 8x better energy efficiency compared to our -- compared to today's competing technologies. Following the acquisition of Neuton.AI last year, we offer a complete ultralow power Edge AI solution, which, in addition to the 54LM20B chip, includes pre-optimized Neuton models, which are 10x smaller, faster, and more efficient than competing solutions, and the Nordic Edge AI lab, which simplifies development of custom Neuton models based on customer data. The Neuton models and the Nordic Edge AI lab are ideal for all Nordic SoCs, also including our long-range modules and products. Altogether, this offering dramatically lowered the barrier to bringing AI to battery-powered IoT devices at the edge. We are uniquely positioned to serve the next wave of AI-powered IoT growth across wearables, healthcare devices, and smart sensors. Within the long-range area, we have seen positive development last year. And besides the stronger commercial development in the cellular operation, one of the most exciting things that has been the qualification of our technology on satellite networks, positioning us as a leading technology and solutions provider within satellite-enabled IoT connectivity. In the fourth quarter, our nRF9151 module was certified for Skylo's satellite network, and we have now established connectivity across multiple leading satellite operators such as Iridium, Myriota, Sateliot, and OQ Technology, in addition to Skylo. Many customers just want a single solution that just works everywhere, also beyond cellular network coverage, and with seamless coverage across both satellite and cellular networks. We can offer true global IoT connectivity on land, on sea, all around the globe. We're looking forward to the next chapter in our long-range business unit with the launch of the nRF92 approaching this year. With that, I'll hand over to Por to take you through the financials before I will return with a wrap-up of our developments through '25 and into 2026. Pål Elstad: Thank you, Veg. So as Vegard mentioned, revenue amounted to $170 million in the fourth quarter of 2025, a 13% increase from the same quarter in 2024. Full-year revenue was a strong 31% increase to $668 million. The revenue growth reflects Nordic has retained a strong competitive position in the recovering short-range market, built a gradually stronger position in both cellular and satellite within long-range, and added cloud services revenue with the strategic acquisition of Memfault. The short-range business remains the main revenue driver in absolute terms, growing by 13% to $158 million or 93% of revenue. Compared to last quarter, revenue is down 5%. The revenue level demonstrates the persistent competitive strength of Nordic's product portfolio in the NRF 52 and 53 series of Bluetooth Low Energy products. Revenue contribution from the new and groundbreaking nRF54 series products was limited in 2025 and will start to contribute meaningfully to revenue from 2026 onwards. Long-range revenue amounted to $8.7 million in Q4, representing an increase of 25% compared to the fourth quarter of 2024 and a decline of 11% compared to the previous quarter. The year-on-year increase reflects higher demand on the back end -- back of the 151 launch late 2024 with sales to a broader set of industrial verticals. The growth also reflects increasing cloud services revenue after the acquisition of Memfault, which has performed in line with expectations out plan in connection with the acquisition. The other category includes early-stage businesses in PMIC and Wi-Fi, ASIC components, and development tool sales. While the technology development in Wi-Fi and PMIC is progressing as planned, these business units are still in an early commercial phase and therefore, included in other. Turning to the end-user markets. We see that industrial and healthcare is driving growth in the quarter. Industrial and Healthcare is now 37% of the total and increased 20% compared to the same period last year, and more or less flat compared to last quarter. Part of this is because of strong growth we're seeing in long-range, including services, which for the most part goes to industrial customers. However, we have previously said that revenue in industrial and health care still is dependent on a relatively small number of customers, and revenue reflects high sales to individual key customers also in this quarter. Consumer revenue was flat year-on-year with tough comparable from high Q4 last year when we saw especially strong performance in PC accessories. Turning to gross profit or gross margin. Gross profit was $93 million in Q4, up from $73.8 million in Q4 2024. The reported gross margin increased to 54.9% from 49.1% last year. As Vegard mentioned, reported gross margin included a partial reversal of a write-down of cellular products made in Q2 2024, which had a positive effect of $5 million in the quarter. We have been able to sell more of the old material than originally expected. Adjusted for reversals of the write-down, the gross margin was 52%, reflecting a 2.9 percentage points improvement over the fourth quarter 2024, or marginally up compared to last quarter. This improvement was primarily driven by changes in customer and product mix, higher sales in the broad market, and a positive contribution from cloud services. We maintain our long-term ambition to keep gross margins above 50%. Yes. Looking at our operating model, the revenue increase of 13% translated into a 20% increase in adjusted gross profit. However, our R&D efforts are also increasing with the ongoing product renewal process and increased activity to deliver on our long-term growth ambitions. Overall, R&D costs increased by 24% to $50 million in the quarter, with the strongest increase in short range due to very high development activity with new nRF54 products. Long-range R&D also increased significantly ahead of the upcoming launch of new products there. We have spent close to 30% of revenue on R&D. And as we talked about last time, the SG&A has also increased in connection with the ongoing product releases and more activity. Summing up, the adjusted EBITDA increased slightly in absolute terms, but declined slightly as a percentage of revenue. For the full year 2025, the adjusted EBITDA increased from $8 million last year to $67 million this year, with adjusted EBITDA margin increasing from 2% to 10%. As earlier communicated, our operating model is set up with a long-term ambition to move towards an EBITDA margin of 25%, which will require both continued revenue growth and a decline in long-term R&D costs to 15% to 20% of revenue, and also a similar reduction in SG&A. Turning to cash costs. So total cash operating expenses were $80 million in Q4 '25 compared to $70 million in Q4 2024 and compared to $75 million last quarter. As we talked about last quarter, we are doing a lot of efforts with the new products, which drives costs up. This increase in cash operating expenses mainly reflect payroll expenses, which increased to $53.6 million from $46 million in Q4 '24. Of the increase, approximately $2 million relates to net salary adjustments, higher salary, and about around $4 million relates to the Memfault and Neuton.AI acquisition. The remaining increase is driven by higher bonus accruals and FX. Nordic is exposed to currency fluctuations, mainly USD, euro, compared to the U.S. dollars. Compared to previous year, changes in these exchange rates increased quarterly operating expenses by approximately $3.7 million. The payroll increase from last quarter is mainly explained by Q3 lower due to vacations. The total number of Nordic employees at the end of Q4 was 1,431, including 59 employees that joined the acquisitions of Neuton and Memfault in Q3. This corresponds to an organic increase of 1% and a total increase of 5% compared to the end of 2024. There is increase in other OpEx is driven by high activity in Q4, including several tape-outs for new products. There are some moving parts here, but overall, we expect a similar cash cost level in Q1. CapEx this quarter was $5 million, up from $3.5 million last year, but down from $6.6 million last quarter. CapEx on this slide is purchase of equipment and software and does not include capitalized R&D. CapEx investments are irregular, and this quarter should be viewed in the context of the broader trend over recent quarters. CapEx intensity last 12 months at 3.4% of revenue. Current CapEx is mainly supply chain capacity, supporting ongoing new product introductions. Turning to cash flow. You can see that we had a neutral cash flow during Q4. This was mainly achieved by an EBITDA adjusted for capitalization of $9.1 million, offset by higher working capital. The main increase in net working capital this quarter comes from higher receivables and inventories, offset by higher accounts payable. Inventories increased by $12 million to $155 million and was driven by our strategic build of inventories. Net working capital at the low 22%. Finally, before handing the word back to Vegard, we can have a look at our near-term outlook, where we are looking for solid revenue between $175 million to $195 million in the first quarter of 2026. We reported an adjusted gross margin of 52% in Q4 and expect the gross margin to remain above 50% also in the first quarter. With that, I'll hand the floor over to Vegard for some closing remarks. Thank you. Vegard Wollan: Thank you, Pal. Let me round off with a few concluding remarks on our development through 2025. I think 2025 was a good year for Nordic, and we demonstrated solid progress operationally, strategically, and financially. First, operationally, on our Capital Markets Day back in 2024, we highlighted that our portfolio renewal program and launches of innovative new products would be crucial to drive our future growth. On that note, I'm very happy to see that we are progressing very well with the new products and launches we are making. First, in short range, we have now announced 7 SoCs in the market-leading nRF54 Series product family since we launched the first chip about 15 months ago. These 7 unique SoCs meet a wide range of different customer requirements and applications. We have launched high-performance SoCs with multi-core MCUs, rich on memory and features, and entry-level SoCs for more cost-constrained applications. And finally, fit-for-purpose products such as the low-voltage SoC I talked about earlier today for the health care market. This is actually slightly ahead of what we committed to, and we'll continue to roll out new products this year. In long range, we have broadened our addressable market and gained traction in key verticals by introducing the nRF9151 in the second half of 2024. And as I mentioned earlier today, we see strong momentum after we launched the leading technology, enabling true global coverage with satellite networks. We are also approaching the launch of the new nRF92 SoC on the 22-nanometer technology platform with higher performance, more integration, lower power consumption, lower cost, which is another great milestone coming up. PMIC and Wi-Fi are still small revenue-wise, but are also making good progress. We added 2 new PMICs in 2025 and expect to launch more in 2026. The design win pipeline is growing very well. In Wi-Fi, our offering has centered around the nRF70 series, which is positioned as a Wi-Fi companion chip to our other SoCs. The next-generation nRF71 will build on the same integrated architecture as the nRF54 series on the 22-nanometer platform and will be the first Nordic Wi-Fi SoC built in-house, both hardware and software. nRF71 is expected to significantly expand our addressable market, and we expect to launch this towards the end of the year. Strategically, we are transitioning from a hardware company to a complete solutions provider with chips -- from chips all the way to the cloud and aftermarket services. This enables our customers to focus on what they are best at, to design end-user products, application-specific software, apps, and the end-user interface. On the left side, you see the hardware pillar where our world-leading energy-efficient hardware SoCs. In the middle pillar, you see the software layer, which is becoming increasingly important as the complexity of our customer products increases. We have market-leading connectivity software stacks, our nRF Connect SDK software platform, and the new AI functionality, which I just covered. And finally, the services pillar, building on our Memfault acquisition last year, we now provide full device life cycle management capabilities. Our customers increasingly need technology that enables them to securely monitor, maintain, and update millions of their devices in the field throughout their lifetimes. This is not longer just a nice-to-have. New regulatory frameworks such as the EU Cyber Resilience Act and the U.S. Cyber Trust Mark require secure-by-design products, continuous vulnerability management, and reliable over-the-air updates. These mandates begin to take effect from 2027 and fundamentally change what our customers must comply to. Nordic has had an early start with our NRF cloud offering, and the integration of Memfault's cloud life cycle management solution significantly strengthens this position across all our connectivity technologies. Together, we provide a complete low-power optimized path for observability, diagnostics, and secure over-the-air firmware updates at scale. This combination of hardware, software and services puts Nordic in a unique position to deliver solutions to our customers' technical requirements and their regulatory obligations. This forms a truly differentiated end-to-end solution in the market. At last, we have financially progressed. I called my intro at the CMD in 2024, driving growth and restoring profitability. I believe the numbers for 2025 overall show that we are moving in the right direction, also financially. Revenue increased by 31% to $668 million in 2025, which was stronger than we anticipated going into the year. Full year 2025 gross profit amounted to $346 million, an increase of 43% from $242 million in 2024. Reported EBITDA increased from negative $5 million in 2024 to a positive $66 million or 10% margin in 2025. While we still have a way to go, I would say we are overall on track towards the long-term financial ambitions we have outlined, which are to grow revenue by more than 20% on average from 2024 through 2030 and to move towards the 25% EBITDA margin. With that, I think it's time to open for questions. So over to you, Stale. Stale Ytterdal: Thank you, Vegard. [Operator Instructions]. With that, I will now hand it over to our operator, Kjell, to begin the Q&A session. Operator: [Operator Instructions] The first question is from the line of Christoffer Bjønsson from DNB. Christoffer Bjørnsen: Congrats on the great quarter and the strong guide. I think just one thing we wanted to understand a bit better is you're now guiding Q1 growth around 20% on midpoint versus the quarter last year, you called out particularly strong orders that seemed a bit out of the ordinary for some key customers and also compared to the typical seasonality, you're kind of up 9% on the midpoint in Q1 on the guidance versus typically it's supposed to be down around high single digits. So anything you could say to help us understand like how much of that is just getting back to normal and market recovery and stuff like that versus if there could be any pull forward of people trying to get ahead of a potential shortage of components or any other abnormal things that we should keep in mind for our estimates for the rest of the year shape for the rest of the year? Vegard Wollan: Yes. Thanks, Christoffer. Good question. Yes, I think as I said, when we saw the revenue increase by 31% in '25, that's stronger than we had expected. So the market recovery from lower levels in '24 continued throughout 2025, and the strengthening continued towards the end of last year and into this year, which is reflected in our guidance. And through lots of dialogue and engagement with many customers, I think we have seen that quite some customers are now indicating they were selling more than they had forecasted in Q4. So that's clearly a positive. I think it's also clear that some customers are now, to some degree, a bit worried about shortages in certain areas, as you commented on, Christoffer, such as memory and potentially other components, which -- and this concern is related to potentially the spreading over to other components. So I don't think we can rule out that there could be an element of restocking of inventories happening. But also it's clear that our customers have had increased sales of their products in Q4 compared to their original forecasting. Christoffer Bjørnsen: Just a quick follow-up on the numbers. On the OpEx side, can you just help us a bit understand your plans for '26? For '25, you had pretty cautious plans to try to keep it flattish on kind of a like-for-like basis. But now with this momentum, should we expect like a material step-up? Or is '25 going to be like a year where we see operating leverage and OpEx will grow double-digit? Vegard Wollan: Yes. So as I mentioned, we are investing heavily, and we are growing the product line and business. But we did a quite big step-up in the second half of the year. So I'm foreseeing that going into 2026. So as I said, Q1, pretty close to what we see in Q4. But a little bit caution on the U.S. dollar, which is weakening, which will have -- will probably be offsetting this slightly. So I would say, more or less the same levels as in Q4 going into Q1. Operator: The next question is from the line of Harry Blaiklock from UBS. Harry Blaiklock: Maybe just following up on that Christoffer's question on Q1. Wondering whether you can call out kind of any particular areas of strength, whether across kind of Tier 1 versus broad market, consumer versus industrial healthcare, or any particular regions? Anything you can give there would be super helpful. Vegard Wollan: I think overall, we see some strengthening continuing gradually in all our segments at the moment, both geographically, our market segments, as well as our technologies. So it is across the broad board as expected. And while still not contributing materially, we are also very confident and optimistic, positive on all of our new product launches, which is truly what we are focusing at, at the moment. And it's very energizing to see the products and the wins we have on new products at the moment. Harry Blaiklock: Great. And then for my follow-up, over the last few days, you would have seen the news about one of your U.S. peers being acquired. Wondering whether you could just give a quick assessment of how that impacts the IoT connectivity segment and the competitive environment, how you're thinking about that? Vegard Wollan: Yes. Thank you. I think it's generally just to comment first, it's a very interesting proof point and recognition as such a large player as TI values the wireless connectivity IoT market and recognizes that it's an important and growing market in the semiconductor space. I also want to add, we have respected Silicon Labs as a good competitor. Having said that, we are very confident in our competitive position at the moment, probably more so than ever. And with all the new and great products we are releasing nowadays, these products are competing very effectively in the growing IoT market. Clearly, we are -- and I'm especially thinking of the leadership position we are taking on our 22-nanometer SoCs, and it's a great execution happening in the Nordic engineering teams when we now launch this unique, innovative, very, very leading products at the moment. Operator: The next question is from the line of Craig McDowell from JPMorgan. Craig Mcdowell: My first question was just in the context of higher DRAM pricing. Just what you're seeing in terms of customer conversations in terms of launching nRF54 series. Is there any risk that actually customers aren't accepting a new sort of potentially higher-priced connectivity chip in the context of sort of seeing higher DRAM pricing? Any risk of destocking there? That would be my first question. Pål Elstad: It's really hard to -- what the customers see in relation to the 54, I guess, the higher price on the 54. Lower pricing. Vegard Wollan: Yes. I think we haven't shared so much on any details of that, which we will continue to do, obviously, also for competitive reasons. And our market and value pricing, clearly, we are focusing on value pricing in Nordic as we have a leading value proposition, which we offer to our customers, particularly with the combination of software, services, and everything we deliver on the technology platform. If you think specifically of the 54 series, I think it's also clear that we are expanding our addressable market and our reach by the portfolio and the broader family we are bringing to market. So from the high-end products in the 54 series, which is, of course, quite a lot higher performance than previous products in the 52, 53 family. But also we are expanding in entry-level products. And the ASPs we are seeing in that picture are varying quite a lot, I think, is generally what we see. I think good news, which we see is that lots of customers require more compute power at the edge. They require more software, more functionality, and are very often upgrading also to a more powerful Nordic SoC when they either update or develop new products. Craig Mcdowell: Just my follow-up. You referred to sort of risk of supply tightness or constraints. Can you just remind us of the sort of terms with your fab partners for your own supply? Vegard Wollan: Yes. Of course. Our major foundry partners are TSMC and GlobalFoundries, working extremely closely and well with both of them, and in close partnerships, strong partnerships, and we are getting excellent support from them. Clearly, as we are also ramping up manufacturing, as you can see, there is a bit of tightening in certain elements of the supply chain happening at the moment. We are not constrained on that, but we are working, monitoring, and assessing that situation very closely. But overall, we have very strong support and are able to increase our manufacturing at the moment, as we are currently doing. Operator: The next question is from Om Bakhda from Jefferies. Om Bakhda: You mentioned that AI bolt-on that you sort of at the end of H1 last year is sort of key to being a compute solutions provider. And through the quarter, we've seen headlines around possible Apple wearable and maybe some more traction in this AI space. And so through the quarter, have you seen renewed interest and engagement on the wearable piece or any projects that you're sort of working on that could be announced later in the year? Vegard Wollan: Yes. I think, unfortunately, we only heard the last half of your question, but I think it was related to our traction within Edge AI, which is obviously an area we are focusing a lot at. And I would say we are clearly seeing very solid positive increased traction, both on our hardware side as well as our solutions side. The LM20 family, actually both the A and the B has very solid traction at the moment, so without and with hardware acceleration as people also need to utilize these NPU capabilities to speed up their computing at the edge for the reasons I mentioned, either bandwidth reasons, energy consumptions, latency times or just a requirement for local decision-making at the edge node device. So we are clearly seeing very positive traction on the hardware side. And similarly, I would say on the Nordic AI labs with the pre. And maybe just to add to that, when we launch these things, it's also generally such that then you have the broad market applicability. So we see a multitude of customers using them. Typically, with us, that means that we have had some key customers also using them for a quarter or a couple of quarters prior to that. Om Bakhda: And then just on your revenues [Technical Difficulty]. Vegard Wollan: Okay. I think the question was on the Memfault revenue. We don't comment on the revenue. But back when we did the acquisition, we said that Memfault had an ARR of around $7 million, and we're expecting a 50% growth in 2025. And then as I said, the development has been as planned since the closing. So we're very happy with that team and that acquisition. Operator: The next question is from the line of Martin Jungfleisch from BNP Paribas. Martin Jungfleisch: 2 small follow-ups, please. The first one is really on the Q1 guidance. I mean, it implies around 9% growth at the midpoint. Can you just disclose if there's any larger positive mix or price impact already in from the nRF54, and if that increasing share in the mix could be an acceleration of revenue growth over the next couple of quarters? Vegard Wollan: Yes. It's a great question, and we understand the interest there, but we are not breaking out the revenue for the nRF54 series. What we have said is that we have now broadened out our product offering in that space. We have had a certain time of design wins of the design win activity with the earliest launched products, while momentum is growing and increasing for the more recently launched products. And we also see in the Bluetooth SIG certifications, it's starting to become slightly meaningful as a contribution, which means that we are clearly delivering to what we have said we were in '26. This is going to gradually start to become more meaningful as a revenue contributor for Nordic. Martin Jungfleisch: Okay. And as a follow-up, it's also on the foundry side of things. There's some reports that TSMC is raising prices in some mature nodes, and they may even shut down some certain older nodes. I mean just how are you affected here? Is that something that you're seeing that TSMC or raising prices? And if so, I mean, could you potentially pull more volumes towards GlobalFoundries, TSMC is raising prices or even shutting down more than not? Vegard Wollan: Yes. Thank you. I think we appreciate the interest in that area, and we see media coverage and even some speculations on some of these data points. I think the only thing we can say there is that we are working extremely closely with our supply chain and foundry partners, obviously, and within that, obviously, with TSMC as well, such that we are confident in having support in the coming time for our customers and manufacturing. And of course, there is also a bit of flexibility between the picture, as we are now having multiple sources and multiple technologies, 55 nano and 22 nano, et cetera. So that is also a picture we are working and monitoring, and planning for on a multiyear basis. Operator: The next question is from Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: Coming back to the broad market, which remains 35% or 30% below the peak. Have you made any kind of progress to reaccelerate the expansion on the broad market? Is there any specific progress there? And specifically in China, how the situation is evolving there? Do you see a bit of more market traction there? And where is competition happening in China? First question. Vegard Wollan: Yes. Thanks, Sébastien. Great question. I think to cover it quickly, and take the last one first. I think in China, we see that market growing similarly as other markets for Nordic at the moment. So it's growing, but it's growing at the pace we are growing. So same percentage of our growth is coming from China, plus or minus. That's the approximate situation. Broad market, lots of activity, lots of action we are taking in that space at the moment, and have done that now for quite some time. We are seeing the results. A lot of that is also related to new product launches, which I talked about because new products create energy, create momentum, and create activity. And fortunately, I can confirm that we are seeing that amongst our distribution partners, which is great, though things take a little time for designing in industrialization, qualification, certifications, et cetera, before customers launch their product. So it's part of what we expect to see growing also throughout this year. Sébastien Sztabowicz: And coming back to the story of the question around the inventory replenishment, where do you see the inventories at your main distributor partner today? Have you seen any kind of rebuilding at the distributor level? Or it is more at the end customer that is happening right now? Vegard Wollan: Yes. I think our distributor inventory levels at the end of last year, we are probably somewhat on the lean side. And for Nordic, we continuously aim to keep inventory at healthy, balanced levels to be supporting our customers and their needs at all times with more SKUs and more products coming up at the moment as well. But yes, that's probably. Pål Elstad: And on end customers, we see that most larger customers have been in a balanced situation for quite some time, and you can read that on reports. Some of them even have low inventories. And then we also saw in Q4 that broad market customers are at normalized levels, and then we see that in the replenishment levels, et cetera, they have. So healthy inventory levels. Operator: Time is running fast here. And in the interest of time, I will hand it back to Stale for any further announcements. Stale Ytterdal: Thank you, Kjell. We will conclude today's session. I have one announcement. Nordic will conduct 2 post Q4 2025 result Q&A group calls with analysts and investors. The first call will be for the U.S. investors and will be hosted by Bank of America and is scheduled today, Thursday, at 5:00 p.m. The second group call for European investors will take place tomorrow, Friday, and will be hosted by ODDO. This call will be attended by CEO, Vegard, and CFO, Pal, and will be moderated by the covering analysts at each brokerage. For details on how to register, please visit the IR calendar on our website. With that, I will now close today's Q&A session and hand over to Vegard for final remarks. Vegard Wollan: Thank you, everyone. Thanks for joining us, and this concludes today's call. Thank you. Pål Elstad: Thank you.
Jann-Boje Meinecke: Good morning, and welcome to our Q4 results presentation. As usual, Christian, our CEO; and PC, our CFO, will walk us through the performance and key developments in the quarter. This time, we will also spend a bit of time on AI to share our perspective, and we know it's a topic which many of you are interested in. Afterwards, we will, as usual, have a Q&A session with financial analysts, which you can join by Microsoft Teams. So please go to the website and find the link. Let me then just show the disclaimer slide to go through. And then Christian, the floor is yours. Christian Halvorsen: Thank you very much, Jann-Boje. And good morning, everyone. Very happy to be here to present our Q4 results today. But I -- just quickly, I wanted to take a moment first to reflect on our 2025 results as a whole. Because 2025 was a defining year for Vend, it was a year where we delivered on key strategic priorities and where we made good progress towards our financial targets and a year where we fundamentally reshaped this company. Vend now is a much simplified marketplace company with a leaner cost base and with a sharp focus on our 4 Nordic verticals. And I'll come back to this in just a little bit. . The results that we present for the fourth quarter today are strong. They demonstrate the resilience of our business, and they come as a result of targeted efforts in line with our strategy. Group revenues remained rather stable at NOK 1,510 million, this reflects, on one hand, anticipated headwinds, both in advertising and soft volumes in Jobs. But at the same time, disciplined focus on monetization and ARPA was very strong with the 15% to 20% growth in several of our key segments. The growth in Classifieds revenues, combined then with the disciplined cost management, delivered exceptional results in terms of profitability, and group EBITDA rose with 53% year-on-year and ended up at NOK 491 million. This represents a margin expansion of 12 percentage points to 32%. Let me also mention that the EBITDA for the full year increased 30% compared to 2024. And I think this is a good opportunity to thank my team and all our fantastic employees for their efforts to make this achievement possible. Now in the last quarter of the year, we also continued our simplification agenda. We sold our skilled marketplace portfolio, also several of our venture investments, and we removed the dual class share structure, and that means that we are now operating with this one share one vote system. We also reached a major technical milestone in November with the migration of Blocket to our common Aurora platform. I'll also mention this a little bit more in detail in a few minutes. Finally, reflecting our solid financial position and confidence in our trajectory, we launched a new NOK 2 billion share buyback program in Q4 and last evening, the Board also resolved to propose increasing the ordinary dividend for 2025 to NOK 2.5 per share compared to NOK 2.25 last year. In November 2024, we presented our strategic agenda at the Capital Markets Day in Barcelona. And today, I'd like to give a summary of our progress on this plan since then. And I already touched upon some of the simplification measures that we have done with our organization. Now first of all, our cost level is significantly reduced. If we look at our OpEx to sales ratio excluding COGS, that has improved by 8 percentage points from 65% to 57% compared to the baseline we presented at the CMD. We have now also found homes -- new homes for most of our noncore assets. And I also want to say that the sales progress for delivery is progressing well. We've simplified the company structure materially. The separation from Schibsted Media has been completed. And as mentioned, we no longer have this dual-class share structure. As mentioned at CMD, verticalization is really the essence of our growth strategy. We have successfully executed on a number of, let's say, vertical-specific product and pricing initiatives that has resulted in a strong ARPA growth. And we have rolled out our transactional Recommerce model to all our markets. And the transition to one common platform is also on track with the Blocket transition in November. On the expansion part, we continue to scale our transactional models in mobility and real estate. And we have seen strong growth in both Nettbil, AutoVex and Qasa through last year. In Finland, we reached the #1 position in real estate. And our focus now is to translate that leadership into a sustainable category leadership with stronger monetization. And last, but certainly not least, we have also forcefully executed on our capital allocation agenda, and we have returned close to NOK 8 billion to shareholders in 2025 alone, and our share buyback program is continuing into '26 as well. So now I'd like to just tell a few more comments to the platform transition. This is the slide we showed at CMD and moving all our marketplaces, except Oikotie to a common Aurora platform is something we see has several benefits. It unlocks cost efficiencies. It supports our long-term monetization agenda because it means that we can roll out pricing and product innovations and structures simultaneously and uniformly across all our markets. I would also say that it's a key to scaling our AI initiatives. It means that we can develop things once and then rapidly roll out those with few or no adaptations in all markets. And I said, this is the chart that we showed at the CMD. It shows that we still have some things to do. But all our main brands, except FINN in Norway and Bilbasen in Denmark are now on the common platform. And I also want here to remind everyone that Aurora, the common platform, is built on the FINN technology, and the FINN business logic. And that means that the upcoming FINN transition is of a different nature. It's a more tech transition which then leads to the shutdown of the old legacy FINN platform. And that means that there are no kind of planned changes to the user interface or the product experience, which means that this is an initiative that carries low business risk. Then I'd like to spend a few minutes on Blocket in Sweden. And Blocket continues to come from a position of strength. It's a well-known and highly loved brand in Sweden with lots of engagement across categories. And I think that is a very important context for what we've seen through this platform transition. Blocket -- our Blocket users really care about the Blocket brand and product. And many of the users have long-established habits, particularly in vehicles. So on November 18, we completed the platform transition for Blocket. And as in previous transitions in Finland and Denmark, we did expect that there would be some user and dealer reactions to changes in the product and in the user journeys. But it's fair to say that the reactions we have seen have been stronger. They have been more widespread than we expected. And we are also seeing some of that in the engagement on the site afterwards. Early on, we did experience some technical issues with data and ad statistics to dealers. But I also want to mention that these issues were quickly identified, quickly resolved, but they do explain in part some of the initial reactions from the dealers. If we then look at the metrics. On the professional side, the number of professional sellers, the number of professional car ads is in line with last year. Leads are slightly down, but that is also partly due to seasonality, but on the private side, new car ads are down around 27%. We've also seen that the user satisfaction has recovered more slowly than what we experienced in Tori and in DBA when we did those transitions. But it's also important to say that conversion is better in the new product compared to the old Blocket product. And that explains why, for example, dealer leads and Recommerce transactions are much less affected than the overall traffic on the site. And I also want to say that we have seen improvements on these key metrics since the beginning of this year. Of course, improving the Blocket situation is a top priority for Vend as we enter this year. And we are working continuously to roll out product improvements. We have a particular focus on the app experience, on the search and on the ad insertion for private ads. And of course, also, we are in parallel in continuous dialogue with both users and customers. We have increased our support as one example. And from a commercial perspective, we have postponed the planned price increases to later in the first half of 2026. And our goal is to be a long-term partner with the car industry. And this initiative has been very well received by our customers. So our overall objective is quite clear when it comes to Blocket, stabilize usage, stabilize customer satisfaction and then kind of restore and build on the momentum from having a shared platform. Then I'd like to turn to AI. And I'll begin here by reminding you of the incredibly strong positions that we have across the Nordics. The brands that we operate are 2 household brands. They're known and used by almost everyone in our markets. FINN, of course, is in a complete league of its own with 99% unaided awareness and close to 30 visits per capita every single month. And I really think this matters in an AI context because it means that our brands are really destinations in their own right. They're not dependent on traffic from other sources, whether that is from Google, social media or other sources, users come directly to our sites. And importantly also, traffic from AI platforms today is negligible, even when users use AI tools, they still go directly to our sites to act on that. And that direct relationship with users is really visible. When you look at our engagement metrics, for example, 70% to 80% of our users are logged in, half of them are even identified with electronic IDs. So we know exactly who they are. More than half of our traffic comes through our apps, which is really the channel that is the most engaging. And this combination of trusted brands, direct traffic, deep user relationships is something that is extremely difficult to replicate, and what we believe is an incredibly strong starting point in this new AI world. And it is really against this backdrop that we are, as we've said many times before, very excited about the opportunities that come from AI to improve the user and customer experiences. And we truly believe that we have the right assets to build winning AI products in the features. And in particular, I would say that we see 3 structural advantages that we have. First, it's about the unique data that we have. This is our most important strategic assets. And we truly believe that the most powerful AI products come from combining, let's say, general-purpose models with deep structured and domain-specific data. And this is exactly what we have in our company. Of course, we will take active measures to protect this data. And the approach we will take will vary somewhat across verticals and brands depending on the strength of those. And it's also something that we will experiment with and adapt as we see the landscape evolves over time. Now the second structural advantage is the vertical focus. Our marketplaces really support quite complex, high stakes and long-running user journeys. And -- this is really something that makes them particularly well suited for tailored AI solutions. And we will work, in particular with securing ad supply, improving discovery and matching and supporting better decisions for users and customers. And thirdly, we benefit from scale. Common Nordic platform allows us to build once and roll out to all our markets. And already 18 months ago, we built up our department of AI that ensures that we have specialist competence across the organization. And then finally, I just want to mention again that we don't foresee any AI investments beyond the financial guidance that we have given. So turning to data. And as mentioned, this is what we believe is a decisive differentiator when it comes to building the winning AI products. Of course, the actual data varies somewhat from vertical to vertical, but it broadly falls into these 4 categories. First, it's real-time ad data, and unlike e-commerce, as an example, all our objects are unique, and they are constantly changing. That means that the global AI platforms, if they're going to -- if they want this data, they either have to rely on crawled snapshots, which are quite quickly outdated or they have to rely on, let's say, on-demand lookups, which are slow. And both these approaches lead to a weaker user experience than what we can provide natively on our sites. Secondly, we have aggregated and enriched data, which should build from both the ads and also the user behavior. These can be things like price insights, demand trends, popularity signals things and models that are proprietary to us and also quite difficult for these other parties to replicate. And thirdly, we have a deep personal and behavioral data, of course, AI platforms will also know a lot about you as a person, but we truly believe that we have the most detailed insight into the intent that people have in our verticals. And then fourth, we have transactional data. This is an area that is growing quite rapidly for us. Data from Fiks Ferdig, in Recommerce from Smidig Bilhandel, in Mobility Nettbil and so on. This really reflects actual transactions between people, including what you have bought at what price and so on. And altogether, this data is quite unique, I would say. It's something that we continuously develop and evolve, because this is what we believe will allow us to build the most personalized, the most accurate products for our users and customers. As I mentioned, we established the central department of AI more than 18 months ago. And since then, we have developed, rolled out and tested a range of different AI features across the company, as you can see on this page. But I would also like to say that it is still early days. There isn't any established best practice out there yet. And our goal and priority is to experiment, to learn and then to scale what we see working. And we will, in particular, focus our efforts on a few areas. It's about securing and improving the quality of ads. It's about improving discovery and matching and it's about providing users and customers with the best decision support. And I thought it would be useful actually to show Jobs as an example because this is the vertical where we so far have launched the most AI features, and where we have also seen quite solid improvements in key metrics. And what we really see in Jobs is that the user and customer needs, they actually differ by stage of their journey, and as you can see also on this page, in the consideration phase, for example, when you're early, candidates explore more, let's say, the range of options that they have based on preferences they might have with regards to how they want to have their life or how they think about their career and so on. Then when you come into the more active search phase, the experience becomes more tailored towards more concrete job opportunities. And then finally, when the candidate has found a relevant and attractive job, we use JobMatch to analyze the fit at that individual role level, helping that candidate make a decision whether this is the right opportunity or not for them. And I really think that this -- overall, these vertically tailored products that we build on unique data will outperform more generic AI platforms in delivering the best user experience for these kind of use cases. And we are confident that we will be able to develop these tailored AI products. I think we have a history where we have shown that we are willing to innovate and we take that mindset with us also into the AI era, and we go into that shift with a quite strong position, I would say. So let's move to the more, let's say, regular part of the presentation, and let's start with Mobility. Here, ARPA growth remained strong across all markets and segments in Q4. Professional ARPA was up double digit in every market. It was particularly strong in Norway. And that was following the package launch and also in Denmark, following price adjustments that we made both in January and in August of '25. Private ARPA also showed solid momentum, most notably in Sweden. This was driven by upselling by the value-based pricing and new packages. And Denmark was softer year-on-year, and that came as a result of the reversion of to freemium for cars below NOK 50,000. If we then turn to volumes. And here, we have already shared the volumes for October and November in our presilent newsletter in December. So I think you should know the general direction. In Norway, professional volumes declined. That was mainly due to weakness in the sub verticals, both motorcycles, caravans, which is a reflection of the macro environment. Cars, however, remained stable. Private volumes in Norway was increasing quite a lot, and this was driven by the tax changes regarding electric vehicles starting in January of '26. Then in Sweden and also as we have mentioned on the previous slides, volumes were impacted by the platform transition. Professional volumes also declined, but this was due to the business model change that we have mentioned before in heavy machinery from -- where we went from a subscription to a paper ad model. Cars was broadly flat in volume. And private volumes were down broadly across our categories. Then in Denmark, the market still remains a healthy market. That means fast sell-through rates. And that in the model that we had in '25, reduces the average daily listings for professionals. And the decline in private volumes reflects the introduction of the listing fees that we have mentioned before. If we then move to the financials. Revenues in Mobility increased 11% in Q4 and supported by the strong ARPA growth, Classifieds grew 12%, and the transactional business model delivered 23% growth, and this was driven by a strong quarter in both Nettbil and in AutoVex. Finally, I would say, advertising returned to growth in Q4, where we saw 3% year-on-year growth following the declines that we have seen previously. OpEx excluding COGS increased only slightly, and this is despite the continued investments in the transactional business and in our core product and platform. And then overall, EBITDA increased 21% over Q4 last year, and this results in a 54% margin. Moving then to real estate. In Norway, ARPA increased 22% year-on-year. This was driven primarily by residential for sale, which delivered a 21% ARPA growth in Q4. And for the full year, ARPA in residential for sale was 12% growth. And in Finland, ARPA increased 12% year-on-year in Q4, and it was supported by underlying drivers that we have also discussed before, price increases, mix effects between for sale and rentals, and also continued growth in upsell. Turning to volumes. In Norway, residential for sale actually returned to growth in Q4, and that was after a decline in the quarter before. So we saw 3% year-on-year growth here. And this capped an exceptionally strong year for residential for sale, where ad volumes reached an all-time high, ending up 6% for the full year. Total volumes for Norway declined 4%, and this was driven by lower activity in the rental segment together with commercial and leisure homes. And in Finland, total volumes were down 4% year-on-year. Residential for sale actually grew, but rental volumes continued to decline further, which is a reflection of the ongoing market dynamics in Finland. So in total then, Classifieds revenues grew 15% in Q4. This was driven by the strong ARPA growth and also the high volumes in residential for sale in Norway. The transactional business led by Qasa and HomeQ in Sweden continued to develop well also. And here, transactional revenues were up 31%. And these businesses, of course, they continue still to be smaller in absolute terms, but they are actually becoming now increasingly so and a meaningful contributor to the growth in real estate. And then on costs, OpEx excluding COGS declined 4% year-on-year, and this is despite the marketing investments that we're doing in Finland, which I think reflects the solid cost control that we have in real estate. And overall then, as a result, EBITDA reached NOK 123 million in the quarter, and that is up 60% from the year before. Then we have Jobs. Here, Jobs continued to deliver exceptional ARPA growth of 21%. This was, as before, driven by our segmented price model by adjustments to volume discounts and better upsell of distribution products. Same pattern as before, also volumes continued to decline due to challenging macro, and again, I just want to say that if we compare our volumes to, let's say, the available numbers from Statistics Norway, our numbers reflect what we see in the total national market. Then in Norway, Jobs delivered 7% underlying revenue growth in Q4 and that means that the strong ARPA growth more than offset the 11% decline in volume. And OpEx, excluding COGS, decreased 22%, and this is primarily a reflection of the exits from Sweden and Finland as well as some FTE reductions in Norway. And in total, then EBITDA grew 33%, and this resulted in an EBITDA margin of 56%. And then finally, we have Recommerce. And here, we saw transacted gross merchandise value continue to grow. Finland, in particular, delivered solid GMV growth in Q4. Well, as mentioned before, Blocket's GMV declined and this was a reflection of the temporary impact of the platform transition. In Norway, we also saw transactional volume growth. That improved to 15% year-on-year, and take rates remained solid across all markets, which is a reflection of the scalability of the model that we have in Recommerce. And in total, Recommerce revenues then increased 4%. That means that the strong transactional growth and the private growth offset a 19% decline in advertising as well as the continued phaseout of low-margin and noncore revenue streams. Transactional revenues grew by 23% and we also had a continued improvement in the transactional gross margin. This was supported by both lower COGS as well as pricing initiatives. And here, it's worthwhile to remind everyone that in Q4 last year, we had a one-off of NOK 10 million in a VAT accrual that reduced the reported transactional revenues. That means that the underlying year-on-year growth in transactional revenues and in the total revenues for Recommerce then will be somewhat lower than what you see reported here. And OpEx, excluding COGS declined 6% year-on-year, driven by both FTE reductions and increased AI automation. And EBITDA then improved to minus NOK 44 million, which is an equivalent to 16 percentage points margin improvement. And with that, I will conclude my section and hand it over to PC to go through the financials in some more detail. Per Morland: Thank you, Christian. Good morning, and welcome, everyone. Let's move to the financials for Q4. In total, revenues on a constant currency basis ended 1% below Q4 last year. This is driven by decline in the Other/HQ segment, offset by solid underlying revenue growth in Mobility, Real Estate, Jobs and Recommerce. Total EBITDA ended at NOK 491 million, 53% up compared to last year, driven by positive developments in all verticals. Christian has already covered the vertical performance, but let me give you some additional insights for the Other/HQ segment. The year-on-year decrease in revenues in Other/HQ was, as earlier quarters, driven by a change in allocation model, combined with revenue decline following the termination of the TSA revenues linked to the split with Schibsted Media. At the end of 2025, TSA with Schibsted Media were fully terminated. Other/HQ had an EBITDA of minus NOK 76 million in the quarter compared to a loss of minus NOK 71 million in the same quarter last year. We have accelerated our cost reductions and delivered ahead of our original plan, but we're not fully able to offset the declining revenues in the quarter. Now let's look closer at the cost development in the quarter. As before, this slide shows OpEx, excluding COGS. During the second half of 2025, we have been able to accelerate the cost takeout ahead of our original plan. This is a combination of earlier termination of the TSA agreements with Schibsted Media, but also a somewhat higher-than-planned cost takeout across our organization. In total, OpEx, excluding COGS, in the quarter declined by 17% compared to last year. Personnel costs were down 11% year-on-year, driven by significant FTE reductions, mainly from the downsizing process that was executed in 2024, combined with closing our jobs positions in Finland and in Sweden, but also ongoing FTE management throughout the year. Total workforce continues to decline, slightly down and now stand at 1,669 FTEs. Total marketing costs were down 15% year-on-year, driven by the job exits, partly offset by higher marketing costs in Real Estate and Recommerce. Other cost has decreased 26%, driven by general cost reductions in addition to the mentioned termination of the TSAs with Schibsted Media. Overall, this resulted in more than a 10 percentage point improvement in OpEx, excluding COGS over revenue from 67% in Q4 last year to 57% in Q4 2025. Our operating profit for the quarter increased to NOK 234 million from a loss of almost NOK 1.4 billion last year that was impacted by the impairment in Finland. Adjusted for impairments recognized in 2024, the positive development in operating profit reflects the improved EBITDA, but also somewhat lower depreciation and amortization costs and lower net other expenses. The reduction in other expenses is mainly due to lower costs related to restructuring and separation. The fair value of our 14% stake in Adevinta has decreased from NOK 18.9 billion in Q3 to NOK 16.1 billion now at the end of Q4. Based on the updated valuation, a loss of NOK 2.8 billion was recognized as financial expense in the quarter. The decrease is due to multiple contractions in the industry, partly offset by improved performance in Adevinta. Our valuation methodology is kept totally unchanged. In totality, net loss for the group ended at minus NOK 2.5 billion. Now let's move to the cash flow from continuing operations in Q4. Cash flow from operating activities ended at NOK 555 million compared to NOK 245 million in the previous year. The increase is driven by the improved EBITDA, but also positively impacted by lower restructuring payments, positive development in working capital, lower taxes paid, partly offset by some increased net interest expenses. Cash flow from investing activities ended at positive NOK 68 million, mainly related to the proceeds from sales activities linked to our venture portfolio, offset by CapEx of NOK 137 million in the quarter. And finally, cash flow from financing activities ended at minus NOK 1.2 billion, which includes repayment of interest-bearing bonds of NOK 681 million in the quarter and the share buybacks of NOK 448 million. With our solid operational cash flow and significant divestments during 2025, we have, in accordance with our principles for capital allocation, returned a material amount to our shareholders throughout the year. We have paid out cash dividends of more than NOK 1 billion. Additionally, we have bought back own shares amounting to almost NOK 7 billion throughout ordinary share buyback programs, but also the reverse book bill that we executed in June. Despite these significant distributions, we ended the year with a net cash position of NOK 210 million. During 2025, we have repurchased Vend bonds for NOK 753 million, of which NOK 681 million in the quarter. As of 30th of January 2025, we have around NOK 1.1 billion remaining of our ongoing NOK 2 billion share buyback program. The Board has decided to propose an ordinary dividend for 2025 of NOK 2.50 or around NOK 537 million to be resolved at the upcoming Annual General Meeting in April. This is fully in line with our policy of paying a progressive dividend and a slight increase from the levels of NOK 2.25 in '24 and NOK 2.0 in 2023. The scope rating of BBB+ with a stable outlook confirms Vend as a solid investment-grade company. Now let's take a step back and look at our medium-term targets and how we are performing. Despite 2025 being a transition year, we have made solid progress towards the medium-term targets. At the CMD in November 2024, we highlighted ARPA improvements and transactional revenues as our key growth drivers. In 2025, ARPA has improved significantly across mobility, real estate and jobs. Transactional revenues within Recommerce, Real Estate, Rental and Mobility has increased more than 20%. In 2025, the strong underlying growth was partly offset by decisions to close down revenue streams, the separation from Schibsted Media and some volume headwinds. The announced and partly implemented product, packaging, go-to-market initiatives for 2026 across all our verticals are expected to support revenue growth in line with our medium-term targets. Despite somewhat muted revenue growth, the vertical EBITDA margin has improved significantly throughout the year. Mobility, Real Estate and Jobs already have EBITDA margins around the medium-term target levels and Recommerce shows significant progress towards becoming -- having positive margins in the medium term. Looking at our cost development, we are pleased to report strong progress against our targets. OpEx, excluding COGS over revenues, ended at 57% in '25 compared to 65% at the time of the CMD. CapEx ended at 8% compared to 9% at the same time period. The improvements in these ratios have been delivered on broadly flat revenues, showing a significant cost reduction. Going forward, revenue growth is expected to be the main driver for further ratio improvements towards the targeted levels. Wrapping up, I'd like to reiterate that our strategy, our medium-term targets and our capital allocation principles that we presented at the Capital Markets Day remain unchanged. As we enter 2026, we have a sustained ARPA momentum across our verticals, reflecting our go-to-market initiatives. And as I mentioned, we expect these actions to support revenue growth in the verticals in line with our medium-term targets. Visibility on volume remain limited. At the same time, the underlying health and resilience in our marketplaces is strong. In Other/HQ, we expect revenues to be reduced by around NOK 300 million compared to 2025, primarily reflected the termination of the TSAs, but also effects related to the ongoing divestments of our noncore assets. On cost, following the accelerated delivery of cost reduction in 2025, we expect our absolute cost base, excluding COGS, to remain broadly stable in 2026 compared to 2025. Overall, we remain committed and confident in our ability to deliver on the medium-term financial targets, supported by our growth initiatives, a simpler portfolio, continued platform consolidation and a sustained cost discipline. And with that, thank you for joining, and let me hand over to Jann-Boje to take us through the Q&A. Jann-Boje Meinecke: Thanks, PC. I can see. Many of you are reconnected here on Teams. And first up is Hakon from Kepler Cheuvreux. Hakon Nelson: Two questions from me today. With the Blocket migration now completed and stabilization phase underway, when do you expect Aurora to start contributing more clearly to revenue or cost efficiency? And also on the Adevinta valuation, it was revised down due to peer multiple compression. Should we interpret this as a purely market driven? Or have there been any changes in underlying assumption we should be aware of in the period? Christian Halvorsen: es. So I can take the Blocket question first. So yes, the migration of our sites to a common platform is a key pillar of our strategy, contributing both to cost efficiency and to revenue growth, as you say. And I would say that now that we have most of our major sites on this, it is already a driver to, let's say, increased innovation capacity and so on. So -- but we have also before said that most of the cost efficiency of it will come in '27. Per Morland: And then on your second question, as I mentioned in my section, the modeling and the valuation model is the same. It's entirely due to market factors. It's actually offset a bit by improved underlying assumptions related to Adevinta. Jann-Boje Meinecke: Thanks, Hakon. Then next in line, we have Will Packer from BNP. William Packer: Three from me, please. Firstly, could we talk about your plans on ChatGPT integration? We've seen the likes of Scout and Hemnet sort of submit apps for the forthcoming app launch in Europe. I suppose your position is potentially a little bit different because of the huge traffic from FINN generalist. So any kind of insight as to how you're thinking about that strategic question would be useful. Obviously, the context that traffic is very low currently is very clear. Secondly, in the context of all the noise around AI, I think it's fair to say that the Jobs segment is in particular focus. And could we just talk a little bit about the sustained weak inventory trends? So if I look at the Norwegian economy, we've seen 3 years of solid GDP growth, especially in '24 and '25. We've seen low unemployment, and yet we've seen a double-digit CAGR and decline in FINN Jobs inventory. Is that just because genuinely, there has been a 10% per annum reduction in available new jobs? To me, that sounds surprising. Is there some underlying market share loss or alternatives? Just some kind of commentary there would be helpful. And then on a related note, it feels like AI is not necessarily having a productivity positive impact within the job segment. You've got talk about AI slop tsunami, AI applications, AI job screening is not making the market more efficient. How do you see that as an opportunity for FINN Jobs? How can you exploit that? Just a little bit of color there would be helpful. Christian Halvorsen: Yes. First, on the ChatGPT question. I think we have extremely strong confidence in the strength of our positions. And based on that, we don't see it as the -- let's say, that it's necessary to be the first mover on having an app in ChatGPT. But we are -- so that means we don't have any current plans of launching ChatGPT app. That doesn't mean that we're not evaluating it. We are evaluating various options for, let's say, controlled data distribution through these AI platforms, and that includes apps as one option also. So let's see where we end. We are following the evolution and yes, we will come back to that later. Then on Jobs, first on the volume part, it's important to remember that there was a huge boom with COVID. And it has actually been a negative trajectory since then. And we are now back to volumes that are more, let's say, in line with the volumes that were before the COVID boom. If we follow our volumes compared to, let's say, the national statistics, they are very much in line. So there are no indications that we are losing market share as such. And in fact, if you look at many of the parameters that we have, let's say, in unaided awareness and things like that, we are actually coming out stronger in the Jobs area than we did before. Then on a more broad question around how will, let's say, the overall job market evolve with AI and so on? And what kind of opportunities does that mean for us? Well, it's hard to kind of say in general how the job market will evolve. But I actually see many opportunities for us to leverage AI to make the entire job market more effective. It provides a lot of new tools to be better and more targeted at matching consumers and recruiters in a very good way. I think the tools that we showed were indicative of that. And we actually get a lot more insight into candidate preferences as an example. Jann-Boje Meinecke: Thanks, Christian. And then next in line, we have Giles from Jefferies. Giles Thorne: So it was a question back on the AI and thank you for the comments on the content today. It'd be useful to hear -- I guess it's a different way of asking the same question around Jobs, but it would be interesting to hear you talk about how you see the risk and the opportunity, I suppose, for each of your 4 verticals, which vertical are you most worried about, which are you most excited about? And the second question then is on Tradera launching in Mobility. And if we look over to Spain, obviously, Wallapop has been very successful disrupting, using Recommerce as a platform to disrupt [ coaches ] in Mobility. So I'd like to hear why it will be different for you in Sweden, especially given the recent [ botched ] migration. And then lastly, and I think it's probably a short answer and we will instinctively know, but the shuttering of Wheelaway, it feels a little bit odd because you had the playbook from AutoVex, you got the dominant position in mobility. It was the asset-light model. It just feels odd that you would choose to shutter this one at all. So a bit more on your decision there. Christian Halvorsen: Yes. Those were quite big and broad questions. But on the first one, on the, let's say, the strength of the different verticals in the AI era. I'm not going to say that one is stronger than the other. I think they all have their different strengths. In general, I would say that they all support, as I also mentioned in my introduction, quite complex and, let's say, high-risk transactions for users that also take a long time. And as such, they are very suitable for quite specific AI solutions as we mentioned. I also want to say that, for example, in many of our verticals like in Mobility and in Recommerce, we have a strong element of consumer content, private content, which is also strengthening the position in the AI, let's say, era because that is kind of harder for these platforms to get hold of. So yes, so I think they all have their strengths. Then Tradera. Yes, we have heard that Tradera is launching a car site. We haven't seen it yet. So I think it's too early to say anything about that, but we are confident in the strength of the Blocket position. It is still a very, very strong brand and has a very strong traffic situation as well. So we are confident in that. Jann-Boje Meinecke: And then Wheelaway. Christian Halvorsen: And Wheelaway was the last question. And yes, we shut down Wheelaway after attempting to approach the Swedish market with the C2B model. We had to conclude that the competition in the Swedish market was a lot tougher than we expected. And that also many of the car dealers have a quite, let's say, mature approach themselves to how they source private cars, which made it harder to kind of enter with that kind of model in the Swedish market. Jann-Boje Meinecke: Thanks for good questions, Giles. And then we have Markus from SEB. Markus Bjerke: So 2 questions from me as well. So digging a bit more on the OpEx side here into 2026 and your comments on flat costs. If I look at the Q4 level and try to adjust for seasonality and even some inflation, considering you don't have these TSA costs, et cetera, why shouldn't cost be substantially down in 2026 given the level that you are exiting 2025? What are the offsetting factors? That's the first one. And then if you can also elaborate a bit more in Jobs would be helpful on the ARPA growth there. It's very high. You mentioned some changes to the discount model and some upselling, but is there any mix here? Or how should we think about the ARPA into 2026 in jobs? Per Morland: So I'll start on the cost side. Yes. So you are correct. We are now guiding on a broadly stable OpEx, excluding COGS base in '26 compared to 2025. And I think, as you also mentioned, you need to remember there are seasonality if you look at the sequential development on a quarterly basis, particularly from Q3 into Q4. But also remember that a lot of the, let's say, the positive development we've had in '25 is either connected to us serving the TSAs that is no longer there. So that will not repeat itself in '26. But also, we did a lot of measures in '24, both on downsizing and shutting down jobs that we haven't -- we don't have a similar initiative executed in 2025. So just keep those in mind. We will continue to work on our cost agenda. We will continue to implement structural cost initiatives. We will continue to push and leverage AI to become more productive. And we expect, as we have said before, that we will be fewer FTEs also going forward. And then a bit later, you will also start to see more effect coming from the platform transition. So I think that's the combination of those efficiencies will be likely offset by general cost inflation. And also, we are investing into our growth businesses that has been mentioned by Christian, as you also can see partly in the numbers in Q4. Christian Halvorsen: And on the jobs ARPA, I think we have to separate '25 and '26. '25 is very much driven by 3 factors. One is kind of a general price increase. The second is changes to the volume discount structure. And the third is better upsell of distribution products. There could be some mix effects also from quarter-to-quarter, but that is not driving the kind of the big numbers here. Those 3 are the main drivers. Then going into '26, there will be a slightly different drivers. It will be a more modest, let's say, price increase in line with the CPI adjustment. There will be some changes to the volume discounts also here. But let's say, the new distribution product, the Plus product that we have launched in the market will have a bigger, let's say, impact. And overall, you should expect a somewhat more modest ARPA growth in '26 than what we have seen in '25, but in line with our guidance. Jann-Boje Meinecke: Thanks, Markus. Then next, we have Silvia from Deutsche Bank. Silvia Cuneo: I would also like to ask 3 questions. The first is on the Blocket platform transition. Could you provide more specific insights into the current volume trends since the start of 2026? And what is your expected time line for accelerated growth from the announced platform? Is there any risk related to this, the price increase could be delayed further into H2? Then the second question is a follow-up on the guidance for costs that you were just discussing. So while you guided for the cost base to remain broadly stable in 2026, can you also comment on your prior message about the temporary EBITDA headwind that you expected for this year. Has anything changed on this front? And can you perhaps share more color on your expectations for HQ in 2026? And also perhaps about the COGS, just a reminder of how to think about the gross margin development as you further expand into transactions? And then finally, just on the Advertising revenue trends. The Q4 results still showed a diverse picture for advertising revenues. So I wanted to ask if you could share your updated outlook for Advertising revenue growth in 2026 in light of the current macro environment and as the TSA agreement expired. Christian Halvorsen: Yes. On Blocket first and what we see into this year, I think just a reminder first that on, let's say, the professional volumes and also professional sellers, it's kind of broadly stable, right? So it's in the private side, the private ads that we see a decline. That decline, we also see going into '26 that continues from '25. But it's also fair to say that with all the, let's say, initiatives and product improvements and so on that we have done, we also see, let's say, an improvement week-over-week since the beginning of the year. So at the current time, we don't expect any, let's say, further delays in the price increases. We have said that they will come later in the first half of this year. Then I also take the advertising thing. So we saw in Q4 that it came back to growth in Mobility for the first time, still a decline in Recommerce. Going into this year, I think the trend will continue, but it is hard to predict, as we have also said before. But for example, we could expect, let's say, going into the year that for Recommerce, it is broadly, let's say, on a stable level as what we saw in Q4. Per Morland: And then on your second question, there was multiple questions in that, but let me start. On the HQ Other segment, in Q3, we gave an update that we -- given the significant revenue reduction in '26 compared to '25, we could see a negative drag up to NOK 100 million in '26 compared to '25. Now that we have a bit more information and we have seen quite a good progress already in Q4, we have somewhat increased visibility. We still don't have perfect information because we're still exiting some of our companies. But if I'm going to give you kind of an updated assessment from my side, I gave you the revenue we expect to be around NOK 300 million lower on an annual basis. That has not materially changed. But then I think given our cost progress as of now, I think a better update now will be up to NOK 50 million drag is what you could expect for that segment in '26. Then you have a question around COGS. Remember that the main part of our COGS is related to the transactional revenues, particularly then in Recommerce. So we haven't given specific guidance and color on that, but you can see the trends in the data that we have provided for '25. And then as transactional revenues growing in Recommerce, you should also increase COGS in a similar way, right? But we have been able to improve the margins on that in '25, and we will continue to try to do that also going forward. Then you asked about second half. I'm not going to give you any more color on the phasing of the cost development throughout 2026. Jann-Boje Meinecke: Thanks, Silvia. Then back to Oslo. We have [indiscernible] from Arctic. Can you hear us? Unknown Analyst: I have 2 questions. So the first is with regards to Blocket and the delayed price increases for 2026. How should we kind of -- is this due to the pushback? And how should we look at this going for the rest of 2026? And my second is related to Adevinta. So Adevinta has quite some leverage now. And given that the value fell approximately 15% quarter-over-quarter, how should we bridge this? Because given the leverage, I would assume that the value would have dropped approximately 30%. So some more color on the performance and maybe leverage as well. Christian Halvorsen: First on Blocket. I want to say that we have worked a lot with our car dealers. Before we made the transition, we had a lot of, let's say, positive engagement and so on from the car dealers going into this and still have. Then, of course, as I also mentioned in my presentation, there have been reactions. There have been some issues that happened as we launched on the new platform. And we felt that in this situation, it is better to have a long-term view on the, let's say, the partnership that we have with the car industry and don't push ahead on this pricing agenda, but rather kind of just push it a little bit forward in time to -- and still do it, of course, but kind of make sure that we stabilize and we prioritize delivering value to our customers at this point in time. And this has been very positively received by the car dealers. So it's part of our building trust and, let's say, Net Promoter Score and so on over time with the industry. Per Morland: And then on Adevinta, I cannot give you too much details on the questions. But just to sort of be clear that our model is the same as before. As I also said in my comments that the contraction of the multiples also reflecting the leverage situation is a clear negative in the quarter compared to Q3, but that this is somewhat offset by underlying improvements in the performance of Adevinta. And that is coming from both closing on a strong 2025, but also increased visibility and confidence into the performance now as we have entered 2026. And then remember, we do evaluation now on a combination of the multiples of '25 and '26 and also looking at both EBITDA and also EBITDA minus CapEx. I cannot give you more color on the leverage situation at Adevinta other than what was communicated in Q2 last year. Jann-Boje Meinecke: Thanks, PC, and thanks for the questions. Then there's a hand from you, Giles. I don't know if it's a new or old one. It seems like it's an old hand from you, Giles. And then I don't see any further questions, and we can round up for today. So thank you very much for joining. Christian Halvorsen: Thank you.
Mirko Hurmerinta: Good morning, everyone, and welcome to Sampo Group's Conference Call on Full Year 2025 Results. My name is Mirko Hurmerinta, Investor Relations Manager at Sampo. I'm joined on the call by Group CEO, Morten Thorsrud; Group CFO, Knut-Arne Alsaker; and Lars Kufall Beck, Group CFO as of the beginning of April. The call will include a short presentation by Morten and Lars, followed by Q&A. A recording of the call will later be available at sampo.com. With that, I hand over to Morten. Please go ahead. Morten Thorsrud: Thanks, Mirko, and warmly welcome from my side as well. Sampo delivered another strong year in 2025, marked by consistent execution, robust profitability and solid momentum across our Private and SME segments. We achieved a like-for-like growth of 8%, combined with disciplined underwriting, a benign claims environment and continued efficiency gains, supported even by Topdanmark synergies. This resulted in an underwriting profit of EUR 1.5 billion. Our Investment portfolio also performed strongly, driven by both NOBA's contribution and solid returns from the regular investment portfolio. Operating EPS reached EUR 0.50, and the Board has proposed a regular dividend of EUR 0.36 per share, a 6% increase year-on-year. Sampo remains committed to delivering substantial value to its shareholders, and today, we also announced an adjustment to our distribution policy, which Lars will elaborate on shortly. Our underwriting results grew by 13%, actually for the third consecutive year, representing then more than 40% cumulative growth over this period. The main driver of this performance has been organic growth with consistent strong momentum in our Private and SME segments. I will return to the Private business shortly. In SME, customer adoption of digital services is following the same pattern as we've seen in the retail market, exactly as anticipated and planned for. As a result, top line growth has accelerated. SME premiums grew by 7% in 2025 compared to 5% in 2024 and 4% in 2023. Last year, we added more than 3,200 new commercial customers, predominantly SMEs, while maintaining high and stable retention. Part of the underwriting improvement reflects favorable weather and large claims outcomes, but the underlying trend remains strong. We continue to offset claims inflation through disciplined pricing. 2025 was also the first year of delivering synergies from integrating Topdanmark into our pan-Nordic platform. We achieved run rate synergies of EUR 37 million, ahead of the original EUR 24 million target for the year, though largely due to timing effects. We remain firmly committed to our EUR 140 million target for 2028. However, now, of course, with increased confidence. Let's turn to our Retail business, beginning then with Private Nordic. Private Nordic has delivered strong and sustained growth, and the momentum throughout 2025 reinforces the competitive strength of our modern remote distribution model. Like-for-like growth reached approximately 9%, with solid performance across all major product lines. Personal Insurance continued to stand out, growing 11%, as we added 30,000 new insured individuals in 2025. The outlook in this area remains highly positive, supported by rising demand for services that complement public healthcare. In digital sales, we reached our operational target of EUR 175 million 1 year ahead of schedule, demonstrating the increasing significance of this channel. Our digital capabilities, combined with our scale and technical expertise, also reinforce our position in partnership channels. In 2025, we renewed all major partnerships across all markets, including in the Swedish mobility sector. This underscores our position as the preferred partner to the automotive industry and provides valuable insight into motor industry trends. It's particularly encouraging to see that we also secured 4 new mobility agreements in Denmark, reflecting how our strengthened position in the market is now transforming our ability to compete for and win new partnerships. Turning then to Private UK. In 2025, we delivered 13% like-for-like premium growth, supported by a 16% increase in policy count. However, motor pricing continued to soften throughout the year. While we have captured the growth opportunities available to us, we have also scaled back activity in line with market pricing trends. This was reflected in a slower policy growth trajectory in the second half of the year. We continue to view the U.K. market as rational, but achieving our target margins has naturally become more challenging in the current pricing environment. Despite this, we remain highly confident in our long-term prospects in the U.K. In recent years, we have consistently demonstrated our ability to balance growth and profitability, and we are continuing to invest in proprietary data, pricing sophistication and enhanced digital capabilities. Underwriting discipline remains paramount, for example. We will continue to target business in the U.K. that fits within our 88% to 90% combined ratio ambition. In the softer phase of the cycle, this means operating more towards the upper end of the range. With that, moving from the insurance operations to investments and the balance sheet, and I'll hand over to Lars to comment a little bit on that. Lars Kufall Beck: Thank you so much, Morten. In 2025, Sampo delivered a strong investment income on the back of strong returns across both fixed income and equities. Our fixed income portfolio continued to provide a stable interest income, also slightly down year-on-year. The mark-to-market yield is still slightly below the running yield, which implies that a small further reduction is expected in 2026, assuming, of course, no material swings in the interest rate environment. However, the main driver for our strong investment income in 2025 and for the fourth quarter as well was our stake in NOBA. Following the successful IPO of NOBA, we saw a EUR 540 million gain, of which EUR 173 million came in Q4. Beyond NOBA, equities in our portfolio performed well in 2025, where we continue to benefit from being exposed to this asset class. If we look ahead into 2026 in terms of investment strategy, we are being quite cautious about deploying new money at this point in time, given the tight spreads, high equity valuations and the geopolitical uncertainty we see. Talking about capital generation and capital management, Sampo runs a highly cash-generative business and a very strong balance sheet. Our solvency stood at 174% at year-end, but it is cast on a very strong basis with the symmetric adjustment materially higher than a year ago and with benefits from further NOBA sell-downs and the Danish partial internal model change to come. In total, Sampo generated EUR 1.5 billion of deployable capital in 2025, bringing our cumulative capital generation in the strategic period to date to EUR 3.5 billion. This puts us well on track for the more than EUR 5.5 billion target we have set for the 2024 to 2026 period. In 2026, we see deployable capital generation being driven mainly by our operating profits. But on top of that, we do have effects from the partial internal model for Denmark and potential NOBA sell-down. The regulatory process around the Danish partial internal model has taken a little bit longer than originally anticipated. However, nothing has changed with the estimated EUR 60 million to EUR 90 million SCR benefit expected, in which we remain very confident. On NOBA, we are currently in a lock up, but we will, of course, look for opportunities to sell down our stake further, assuming we can do so at an attractive valuation. When it comes to buybacks, funded by disposals, in our last Capital Markets Day, we said that we would distribute up to EUR 500 million, which means that there is EUR 350 million to go after the latest buyback. Beyond that, we will take a closer look at the excess capital position when that times come. Remember, we want to maintain a very strong balance sheet with a solid liquidity buffer in our holdco. Shifting from capital generation to capital distribution. This morning, we announced an update to our distribution policy, enabling us to provide an attractive mix of dividends and share buybacks going forward. Firstly, it's important to note that this affects only the mix of capital returns, not the total amount of capital to be returned to shareholders. We stay committed to a very strong capital discipline, where we, in a normal year, expect to return around 90% of our operating result to shareholders through dividends and buybacks. Secondly, Sampo remains committed to distribute a reliable and progressive regular dividend. And in a normal year, the majority of our operating results will continue to be redistributed through dividends, but effectively, we are lowering the dividend payout ratio floor from 70% to 60%. We believe buybacks offer an efficient way to invest in our steadily growing business, and we know that a lot of our shareholders agree with this. At the same time, we continue to offer growing progressive dividends for more income-oriented investors. Looking ahead, we aim to grow the regular dividend broadly in line with the EUR 0.02 annual increase that you have seen since 2020. That's all from my side for now, and back to you, Morten. Morten Thorsrud: Good. So looking ahead to 2026, we expect the strong trends across our business to continue. Organic growth will remain the primary driver of underwriting profit, and we maintain a positive outlook. We guide for insurance revenue in the range of EUR 9.5 billion to EUR 9.8 billion, corresponding to 5% to 8% growth. In areas where competition is tightening, such as the U.K. and large corporate segment, you can continue to expect disciplined execution from us. On margins, the planned 40 basis points improvement in the Nordic operating cost ratio is expected to be the main driver of profitability. Our outlook on underwriting result is set to EUR 1,485 million to EUR 1,600 million. As always, our outlook is set with an element of caution. The lower end of the range reflects uncertainty related to weather conditions, including a somewhat harsh winter to date and potentially spillover impact from the storm Johannes that occurred late in 2026. Overall, I'm very pleased with Sampo's performance in 2025 and the momentum that we carry into 2026. This gives me strong confidence in our ability to continue delivering excellent results and shareholder value. Mirko Hurmerinta: Thank you, Morten and Lars. Operator, we are now ready for questions. Operator: [Operator Instructions] The next question comes from David Barma from Bank of America. David Barma: Firstly, on the U.K., please. Could you run us through the drivers of the deterioration in the margin in the quarter? And to what extent the weather impacted this, please? And then secondly, staying on the U.K., policy count growth seems to have accelerated in motor in Q4. Can you explain how you see the balance today between margin and volume? And maybe if you could give us some indication as to how pricing has developed since the end of the year when I think we were still seeing double-digit average pricing drop year-on-year? And then lastly, a more theoretical question. A big topic so far this year has been the increased threats of the faster growth in self-driving vehicles and trials appear to have been particularly focused on your market, so the U.K. and the Nordics until now. Would you be able to share your thoughts on this and how the Sampo Group might be preparing for a faster evolving auto insurance market landscape than maybe we realized? Morten Thorsrud: Good. So 3 large questions in a way at the very start here. First, to the U.K. margins. Fourth quarter is, of course, a quarter where we move a little bit into winter-type effects also in the U.K. So it's natural to see a little bit increase in frequency in the fourth quarter. We are landing firmly within our range -- operating ratio range with 89.2% for the full year. But again, fourth quarter, naturally a little bit more motor claims due to weather. Then, there is also a small impact from us strengthening reserves a little bit on the home side. There's been a bit of subsidence claims in the U.K. in 2025, and we wanted to be sure that we had as conservative reserves on the home side, as we have on the rest of the business. So we also added a little bit there in the fourth quarter. When it comes to policy count and pricing development, policy growth came down clearly in the U.K. during the year. So fairly strong in Q1, coming down then a little bit in Q2. And Q3, Q4 being clearly softer in terms of policy growth, but we still continued to see a growth in also number of policies. Obviously, the reason for growth coming down is, again, that prices have come down over the last year, more so in the first half of 2025. And then second half of '25 has been more a sideways movement. And that is, broadly speaking, also the situation that we see now in the beginning of '26. Always important to, I think, underline that this is quite a rational behavior from the market. Pricing was clearly overshooting a bit towards the end of 2024. So it's quite a rational and natural move in the market. And when it comes to autonomous vehicles, one can spend hours debating this. Perhaps some few reflections. First of all, safer cars, safer roads is, of course, nothing new. Over the last 15 years or so, we've seen a 40% to 60% decrease in fatalities in the Nordic region, which means that we have -- which, of course, is a very good development for the society as such. And also, for us, where we've seen a sharp reduction in bodily injury claims. And at the same time, this has been more than offset by an increase in frequency, and in particular, severity on the small- and medium-sized claims. And we see this in particular with newer cars. Cars with a lot of technology are far more expensive to repair than cars without, of course, this technology. If you see -- look at the market, like Norway, for instance, where you have 30% of the fleet now being fully EVs, we see that the repair cost of those are significantly higher than the repair cost of the older cars. And perhaps one should underline is nothing -- it's not really driven by the fact that these are EVs, but it's driven more by the fact that these are modern cars with a lot of technology. With autonomous vehicles, one could expect that claims frequency, when it comes to collisions, of course, could come down. Then, one should bear in mind that collision is just one of the items that we cover. Looking again at Norwegian statistics, collision claims account for about 30% of claims cost, which means about 20% of claims -- of premiums. And there are a lot of other claims types. That one, of course, need to bear in mind, and that is not affected by reduced frequency on the collision side. Then, I think also, one need to just bear in mind that with the new cars with more technology, you need to repair them to a larger degree than before. So if you had a small damage on your bumper in an old car, you didn't really need to repair it or you could just do some paint work. In the new cars, and of course, in the future autonomous vehicles, you need to repair these damages, and you need to repair them throughout the lifetime of the car. So I think there are sort of many effects here one can debate. I think we look upon this as an exciting and good opportunity for us because I think this will somehow differentiate between the excellent players. Motor insurance is becoming a more complex type of business now with all of this technology and with large variations in repair costs on different models. So perhaps a long answer, but I wanted to sort of give you a little bit also on the context around this. David Barma: Yes, that's very helpful. Operator: The next question comes from Vash Gosalia from Goldman Sachs. Vash Gosalia: I had 2 questions. One was just on the Nordic region and more specifically, in Norway. Would love to understand how much of a pricing benefit do you continue to see in Norway, one? But then in general, are you able to talk to us a little bit about how do you plan to grow in the broader Nordic region? And where is the growth in top line going to come from? That's the first one. The second one, just circling back to the U.K. a little bit, trying to understand your sort of targets versus your margin guidance. So obviously, you have the 20% to 25% CAGR underwriting result target that you have, but now with margins worsening, should we be a bit more sort of flexible on that? Or would you continue to be more flexible on that? Or how would you meet that target? It would just be great to understand that. And sorry, if I could just squeeze in a third one, just a little bit on your investment. In the past, I remember you had spoken about re-risking in Topdanmark. Is that still something you would look to do? Morten Thorsrud: Yes, I'll start with the Nordic region and pricing. We continue to have a situation where price increases are clearly higher in Norway compared to the other countries. Coming down a little bit over the last couple of quarters, but still clearly being higher in Norway compared to the other countries. Then, also pricing overall in the Nordics is still on a somewhat elevated level. So we definitely see support on the topline from price actions still throughout the Nordics. When it comes to growth in the Nordics in the future, our expectation is that it's quite broad-based. We have an excellent competitive position, and what I would say, a superior operating model in the private segment, a highly digital, modern operating model that I expect that we should be able to capitalize on going forward as, again, the market is gradually becoming more and more digital. We have an excellent position in the mobility market, where we many times have talked about the Swedish market in particular that should represent a good growth opportunity for us when that market is turning and Swedes are starting to buy cars again. We have built up also a very competitive distribution service model in SME. So that is also a good opportunity for us. And then we continue to point out sort of the personal insurance market as a market with strong underlying growth, where we continue to see double-digit growth and maybe we continue to have good outlook for the future. So it's quite broad-based when it comes to the growth expectations in the Nordics. Then, on the U.K. margin, I'm not sure if I fully got your question. Yes, perhaps, Knut-Arne, if you... Knut Alsaker: Sure, Morten. Morten alluded to the operating range that we want to have in the U.K., 88% to 90%, and indicated that where we are today with pricing, it's more likely that it's going to be in the upper end than the lower end of that range, which again then translate into the operating ambition we have for the U.K., which is a 20% to 25% average growth in the underwriting profit. And with that condition and the upper end of the combined ratio range for '26, we still confirm the 20% to 25% average underwriting profit growth, but it will be reasonable to assume that it would be more in the lower end than the upper end of that particular range. Morten Thorsrud: Good. So hopefully that was clear. And then, you had a question on derisking in Topdanmark. We're not doing any derisking, not in the Topdanmark portfolio, nor sort of in any other parts of our business. We did quite a lot of derisking in industrial and partially also in commercial throughout, yes, second half of 2024 and well into and throughout 2025. But that process is now concluded. So no further plans of doing any derisking, not in the Topdanmark portfolio or for the previous Topdanmark portfolio nor elsewhere in the business. Vash Gosalia: I'm sorry. So just on the Topdanmark bit, so my question was actually more related to the investment portfolio in Topdanmark. I remember, I think it was last quarter or the quarter prior, you were talking about actually increasing your allocation to corporate credit or higher-risk investments. So I'm just curious, do you still plan to do that with the Topdanmark investment portfolio? Or is that no longer the case given what you've already said about the spreads in the market and the geopolitical uncertainty, et cetera? Sorry, that was my question around Topdanmark. Knut Alsaker: All right. It's Knut-Arne here again. I'll take that on investments. That is still the plan. We're slowly, but gradually changing the fixed income portfolio away from Danish covered bonds to high grade, not necessarily high-risk corporate euro as well fixed income instruments. That's a process that started, but not completed. And one of the reasons for that is that we don't want to rush into that transition by buying assets at prices that we think are too high. So it's still the plan, and it started. I wouldn't necessarily say that, that is re-risking at large our fixed income portfolio, and it's not a process which will significantly change in any way the capital we deploy to market risk. Operator: The next question comes from Hans Rettedal Christiansen from Danske Bank. Hans Rettedal Christiansen: So I had a few questions. Maybe first just starting on the premium growth expectations for 2026. And sort of elaborating a little bit on the overall guidance that you're giving, specifically interested to hear what sort of Swedish new car sales that you're embedding in the overall guidance for 2026? And secondly, also if you're still confident in the sort of over 10% growth overall for the Nordic region that you said in Q3? Morten Thorsrud: Yes. Premium growth, as we indicated with the outlook, we expect insurance revenue to grow with 5% to 10%. So I think that gives an indication on our growth expectations overall. And I think, as we have alluded to, more favorable development in the Nordic region than in the U.K., at least now in the very beginning of 2026. When it comes to Swedish new car sales, we have not put any significant increase in our sort of base assumption, so, of course, again, if new car sales is picking up, that could be an upside for us, but we have expected a rather stable situation sort of when creating the plan. Yes. Mirko Hurmerinta: Just a quick one. Hans, it's Mirko here. The 10% you are referring in Q3, that is the ambition for Personal Insurance, not Private Nordic. Hans Rettedal Christiansen: Got it. And then just to follow up on it, can you maybe just elaborate a bit on the sort of what is your assumptions underlying the kind of 5% to 10% range given that it's quite wide? Morten Thorsrud: Well, of course, again, a large proportion of this will continue to come from price increases. But we do expect to see also a certain growth in number of customers. We saw a growth in number of customers both in private and commercial throughout 2025. We continue to expect that. And then, again, as Mirko alluded to, of course, more growth in certain parts of the business, like personal risk products, where we see consistently growth above 10% now for quite a long period, and we expect that to also continue into 2026. Knut Alsaker: And if I should just add to Morten's comment, Hans, I think you asked for the range in the insurance revenue outlook. It's, of course, the beginning of the year, where we think it's reasonable to have a slightly wider range in the outlook than what we usually end up with at the end of the year for natural reasons. And one of the drivers for that range and the lower end of that range is what Morten alluded to earlier also in his introduction in terms of staying disciplined, not least in the U.K. market. So pricing development in the U.K. market will also impact where we -- as one factor where we end up in that range towards the end of the year. Hans Rettedal Christiansen: Got it. That's very helpful. And just 2 final ones, quick ones on the updates that you're planning for Q1, both on capital and synergies. So on the first one on the update on distribution policy, how do you plan on sort of the timing of share buybacks throughout the year in this sort of updated policy? And is it also so that excess capital is still going to be distributed in the form of share buybacks in this policy? And then, on the synergy update that you're planning in Q1, just looking at the Slide #12 in the presentation, the wording is sort of a phasing of synergies that you want to update on. So should we take this to mean that you're sort of -- you haven't seen any more synergies or potential for synergies, but more so that it's kind of 2028 synergies coming earlier than expected? Morten Thorsrud: Yes. I'll hand the one on capital and buybacks to Lars, and then, I can comment on the synergies after that. So Lars please go ahead. Lars Kufall Beck: Yes. Thanks a lot. On your question about timing and update of the policy, as we are saying, we will revert this year in connection with our Q1 results, i.e., in May. And we expect actually also going forward to do that at that point in time. We believe that is the right time in the year. It will allow us to do potential buybacks after the ex-dividend period. I think what we are confirming here is our strict -- as I said, initially, our strict capital discipline that we will return in a normal year 90% of the operating profit to our shareholders with a split that is potentially a little bit different from the past, lowering the floor from dividends from 70% to 60%, but confirming and reconfirming the majority come as dividend, and then, an option to do share buybacks on top of that. But as I said, important to stress our commitment to delivering a progressive dividend going forward as well. Morten Thorsrud: Then, on the synergy update, as you all have seen, we are reporting EUR 37 million in run rate synergies realized already at the end of 2025, which is well ahead of the plan that was EUR 24 million at the end of 2025. So we are front-loading the synergy capture quite a bit, and we thought that it would make sense to update on sort of the timing of the synergies, again, in connection with the Q1 result. We still remain committed and believe in the EUR 140 million in total synergies. But again, obviously, we have been able to realize the synergies somewhat quicker than anticipated. Operator: The next question comes from Ulrik Zurcher from Nordea. Ulrik Zürcher: Just wondering one clarification I have. The base case, should that be an improvement in the underlying risk ratio in the Nordics in '26, just given all the pricing actions and still relatively hard market? And then question number two, I think you described the low-end risk of your underwriting result outlook quite well. But what would be some key factors needed to hit the higher end of that outlook? Morten Thorsrud: Yes. When it comes to combined ratio improvement, the main driver on the combined ratio, I remember that you asked about the risk ratio, but the combined ratio is still the 40 basis points efficiency improvement in the Nordic cost ratio. And we indicated that is expected to be also the main driver of underlying profitability going forward, alluding then to perhaps a somewhat smaller risk ratio improvements. We produced a 30 basis points risk ratio improvement this year. But expect that to come somewhat down, and we expect, again, the combined ratio more to be supported by the cost ratio improvement with the 40 basis points. When it comes to the outlook, in a way, you could say on the insurance result, we have produced a 13% growth now 3 consecutive years. However, one should bear in mind that there was a benign large claims and weather situation in 2025. And if you shave off that, then the outlook is actually consistent with 5% to 13% increase in insurance service results. The upper part of that, of course, would assume that we have, again, a favorable -- somewhat favorable development in large claims and also in weather. And, of course, then the lower end would assume the opposite. This is after all insurance, and we are after all still exposed to large claims and weather. Ulrik Zürcher: Yes. That makes sense. And just on the underlying risk ratio or underlying, as you said, because it's very hard to picture that we won't see an improvement in private lines, for example, given all the repricing that's been going on. Is that correct? Is this more of a commercial or industrial segment where it could be more difficult to improve the risk ratio? Morten Thorsrud: I think could be the situation. I think, obviously, sort of U.K. now, I mean, if you start there, a little bit softer. We indicated that we still stick to our 88% to 90% operating ratio target, but perhaps in the soft market, you operate more towards the upper end of that. Then, yes, we've seen very good development in private, also SME, where we've seen good underlying improvement. And then also on the large corporate side, it's a little bit softer market. So I think it's reasonable to expect that more positive sort of view on private SME and a bit more cautious view on large corporate and the U.K. Operator: The next question comes from Jaakko Tyrvainen from SEB. Jaakko Tyrväinen: Jaakko from SEB. I would like to follow up on the discussion on SSD or autonomous driving possible market disruption going forward. What are you seeing as a kind of a key barrier entries for possible new competition in your home markets? And how you are seeing Sampo positioning in terms of your very good digital capabilities versus the so-called pure-play digital players that you see outside your home markets? Morten Thorsrud: Yes. I think to put it very simply, the main barrier of entry when it comes to motor is that all of these cars need to be repaired. It's a very physical operation in reality. So if you want to insure cars in the Nordics or in the U.K., you need to be able to handle all of the damages, all of the repair throughout the entire region. You need to provide roadside assistance, you need to sort of provide services sort of changing in screens. You need to repair the collisions and so forth and so forth. So I think sometimes people forget about that, that although a large part of the insurance industry is digital, also a very large part of it is highly physical, and that, in particular, goes for motor. So I think regardless of how the insurances are distributed, you basically need a service on the ground that to me will very much look and smell like an insurance company to put it like that. Jaakko Tyrväinen: Excellent. All of my other questions have been already asked. Operator: The next question comes from Vinit Malhotra from Mediobanca. Vinit Malhotra: My one main question would be on this new dividend policy or new payout policy. I mean, isn't it usually that the market looks as a dividend as a signal, which you're more committed and -- not you, but our company is more committed to and buybacks being more flexible? Could you just talk a little bit about why you felt the need to bring in a little bit more flexibility within the same, say, 90% payout approach? So that's my first question. Second question is just on the Nordics and the autonomous vehicle debate. I mean, is -- we've seen obviously 2 forces. One is the new car sales falling for many years, which have changed the -- have kind of increased the fleet age, but also lots of new adoption by customers. So do you see that there is a risk here that the adoption of new autonomous vehicles could be much faster even though the price point might be higher, of course? So just curious what you think about the adoption rate of customers to new autonomous vehicles? Morten Thorsrud: Yes. I'll leave to Lars to debate a little bit about the dividend policy, and then, I can ponder a bit around the AVs again. Lars Kufall Beck: Yes, absolutely. Thanks a lot. Thanks for the question. I think, again, reiterating that what we are changing here is merely a potential floor for the dividend payout ratio. We reconfirm and confirm that we want to and aim to deliver a progressive, stable, growing dividend over time that then represents at least this 60% of operating profits. Lowering the floor simply gives us the opportunity and the flexibility to ensure that we can deliver that. And that's basically why we're doing it to ensure that 70% doesn't become a constraint and that we continue to deliver an attractive capital redistribution to shareholders in the form of dividends -- ordinary dividends and buybacks. Morten Thorsrud: Good. And when it comes to adoption of new car and new technology in the Nordic motor industry, I think it's a rather scattered picture in a way. When we talk about low new car sales, we are then pointing at Sweden. If you then look to a country like Norway, the new car sales has been very high for a number of years now with a very high adoption of new technology, and in particular, EVs. So if you look at 2025, more than 95% of all new passenger cars were fully EVs in Norway. And if you look at the stock, more than 30% of the stock of passenger cars in Norway are now EVs. So in that market, that leads us to be in a quick adoption of new technology. So it's quite a different situation from market to market. Obviously, the Norwegian situation has been fueled by incentives given by sort of -- through sort of lowering taxes on the EVs compared to other cars. So I think it's hard to say something about adoption rates of new cars, new technology. I think for us, again, it's more underlying that I think that we're well positioned to handle this. And again, that the trend that we see is making motor insurance actually a little bit more complicated, and again, favors the big players that have a lot of data, a lot of insight and that can act in a smart way in a landscape that is changing. So for us, we look upon this as a good opportunity to really utilize our skills in full. Operator: The next question comes from Michele Ballatore from KBW. Michele Ballatore: I mean, they are both on the new capital management policies -- policy. I'm sorry, but I'm quite confused. I mean, so you have a 90% payout as a target of your operating earnings. And you are referring to 70% on the dividend. I believe this is the cash portion of the dividend. And you said that you don't want this to become a constraint, but why should this be a constraint? I mean, can you maybe help me understanding the dynamics here? So this is the first. The second question is about the operating EPS growth target. I mean, obviously -- I mean, we're going to see the -- let's say, the share count dropping a little bit more than expected now. So how should we think about this 9%? I mean, is this 9% -- how much of share buyback are included in your mind on this target? Or should we assume there is probably upside to the EPS -- operating EPS from this? Lars Kufall Beck: Yes. If I take the first one, thanks, I think the whole idea for us is to deliver a dividend per share that is secure and gradually growing while we leave a little bit more headroom for doing share buybacks to be funded by our operating earnings in the future and not just the one-offs like the asset sale that we have done over the recent year. We believe that makes sure that we have a mix of capital return that's attractive to our shareholder base. And if you assume that earnings developed nicely, you can expect our dividend to grow in a very similar way to what it has done over the recent years if we have -- where we have increased the dividend per share by EUR 0.02 per year for 5 consecutive years now. And should we have a bad year, we do aim to keep the EPS stable. So that, in other words, means that we aim to have a progressive dividend of at least 60% of operating earnings and then top that up with potential buybacks. And whether it's 70% this year, it's a payout ratio of 71%, 70% plus/minus, has not been an option with the historical policy that we have had, and that's why we're doing the change. But as I said, and we are pretty clear on our guidance that our plan is to grow dividend in a very similar way to what you have seen over the last few years. Morten Thorsrud: Yes. And then, on the operating EPS growth, yes, our target for the period 2024 to 2026, so this strategic period, is above 9% for the period, annual growth. We, of course, do expect some buybacks in this year. But we also said that we will come back to more information about that after Q1. But of course, as you all understand, there is still a bit of capital to be distributed from the 2025 earnings. And then also sort of we need to look into other sources for capital redistribution and to be used that by buybacks. Again, we'll get back to that in Q1, sort of where we can give a more firm answer on it. Operator: The next question comes from Vash Gosalia from Goldman Sachs. Vash Gosalia: Just one quick question on something you mentioned. So you were saying you expect some drag from the large corporate or the industrial segment. Are you able to share with us what kind of price decreases you saw in that book at the 1/1 renewals? So just trying to get a sense of how much do you think -- how much we should think that will impact your risk ratio? Morten Thorsrud: No, I think we definitely didn't use the word drag. I think we continue to expect excellent profitability also in the large corporate segment. However, I think the comment was more about underlying improvements. We delivered a strong combined ratio for the large corporate segment in 2025 and expect to be able to do so also in 2026. Of course, always bearing in mind that this part of the business is a little bit more exposed to large claims. And then, the comment was more about price increases, that price increases in the large corporate segment. That market is definitely a little bit softer. So it's not reasonable to believe strong underlying improvement, but that's not -- that's absolutely not the same as saying that it will be a drag. We continue to expect solid profitability on the large corporate side. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Mirko Hurmerinta: All right. Thank you very much. That concludes the call for today. Thank you for listening in.
Operator: Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banco BPM Full Year 2025 Group Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Arne Riscassi, IR Manager of Banco BPM. Please go ahead, sir. Arne Riscassi: Good afternoon, and welcome to Banco BPM Full Year Results Conference Call. Our CEO, Giuseppe Castagna; and our Joint General Manager, Edoardo Ginevra, will take through the presentation. And let me remind you, please to limit yourself to 2 questions. And now I hand over the -- to Mr. Castagna. Thank you. Giuseppe Castagna: Thank you, Arne. Good evening to everybody for ones we are the only one in the evening. So we'll take our time, but I will try to be as quick as possible in order to give you the possibility to make an interesting Q&A session. So first slide, on Page 6, I will start is just a recap of the completion, we are more and more having on our new business model, which, as you know, started a couple of years ago with the intention to build a business model driven by the product factory and able to hedge the contribution of commission and fees vis-a-vis NII revenues. I would say that this model is becoming more and more attractive. We are completing basically the different product factoring steps. We will go through the each one later on. But let me say that with this business model, we were able to support a very strong profitability, which with this split 50-50 income -- interest income and commission is, of course, more sustainable for the next quarter and the years. The results of 2025 was EUR 2.8 billion, EUR 130 million higher than the guidance I gave you in the last quarter. Also with the strong increase in terms of common equity Tier 1 pro forma, 13.76% versus, as you may remember, a planned minimum threshold of 13%. These results allow us to match the dividend per share of EUR 1, which we gave last year so the balance dividend would be EUR 0.54, 17% higher than the first interim dividend, EUR 0.46. The payout ratio is still 80% considering for this year that net income, excluding the valuation of preexisting Anima stake of EUR 200 million. Let me remember that last year, we accounted for the 80% payout ratio, also the extraordinary contribution coming from the Numia transaction. Shareholder remuneration, '24-'25 reached EUR 3 billion, which is exactly of the strategic plan cumulative target, which is already achieved after a couple of years. Some further number, which give you the sense of where we stand in terms of where we wanted to reach with our presentation of business plan in February last year. As I mentioned before, we are already a non-NII revenues on total revenues 51%, cost-income ratio of 46%, gross NP ratio 2.2% and cost of risk 40 basis points. On Page 7, the pro forma net profit is higher because, of course, we are not considering in the stated accounting, the first quarter in which we did not consolidate Anima. So if we have a pro forma with consolidation of Anima, the net profit -- the net profit would have been EUR 2.120 million. If we compare, as I mentioned before, the '24 to '25 net profit, we have an increase of 20% excluding in '24 Numia transaction and solidarity one-off -- solidarity funds one-off and the EUR 1.880 billion, which we reached this year, excluding Anima one-off is a 20% increase in net income, which, of course, accounts for almost 20.5% of ROTE and 15.5% of ROE. The organic improvement was so high to offset completely in the Euribor reduction of this year. We started from a profit from continuing operations, pretax of EUR 2.5 billion in '24. We have a total reduction NII at full funding cost of EUR 200 million, a further reduction in NFR of EUR 56 million, which were completely compensated by organic improvement coming from non-NII core specifically commission and insurance and a reduction of operating costs and provision like-for-like. So we have a plus EUR 2.550 billion to which we add EUR 263 million related to the integration of Anima starting from Q2. If we include also the first quarter of Anima, our profit from continuing operation would stand at EUR 2.9 billion. So let's have a look to the composition of the profit and loss. We have growing revenues in terms of total revenues from EUR 5.7 billion to almost EUR 6 billion. As I mentioned before, non-NII revenues on total revenues is 49% for pro forma, but 51% considering NII at full funding cost. Net fees and commission raised 21% to EUR 2.5 billion, starting from EUR 2.055 million of last year. And the same strong increase of almost 60% comes from income from associates would grow from EUR 200 million to EUR 330 million. The Q4 was the first positive quarter of the last year in terms of core revenues, which grew almost 5% thanks, of course, mainly to fees, but also to a fair contribution Q4 and Q3 of NII. The same favorable trend we are experiencing cost control. Like-for-like, we have a reduction in cost of 1.7%, which, of course, pro forma takes in account also the impact of Anima. Significant decline also in provision, where we reduced the total provision 26% with LLPs going down from 46 basis points to cost of risk to 40 basis points. Just a quick deep dive on risk profile. As you may remember, this was the main difference that we had when we started the merger. We had an NPE ratio of 22.5% vis-a-vis an average of the Italian bank at 15% and average of EU bank at 5%. As you can see in the last 3 years, we have reduced massively this amount and now we are at 2.2%, which is exactly in line with Italian banks and slightly above the 1.8% of the European average. Let me also remember that we were basically one of the few banks who didn't make recourse to the market to offset the NPE. In the same period -- in the same 9-year period, we assume that there were at least more than EUR 25 billion of share issue in order to offset the NPE from other banks. Also, the stock has a low record. We have now a EUR 2.250 billion of GBV, decreased by EUR 600 million now, which is a 21% reduction and net NPE went down 0.37 points to 1.2%. And basically, we have a 0 bad loan if you exclude bad loans covered with the state guarantees. We, at the same time, have also the higher NPE coverage because we're increasing for 52.5% to almost 56% of the total coverage excluding, again, state guarantee and also the vintage of our NPE portfolio has been reduced to less than 2 years. The default rate was 0.84%, and we have managed also to reduce EUR 1.1 billion Stage 2 loans, which now stands at 8% of total performing loans. Capital generation, we were able to generate 194 basis points after absorbing more than 260 basis points related to EUR 1.5 billion of dividend distributed. We have a sort of road of the common equity Tier 1 during '25, which you may remember, has been a massively eaten by the Anima acquisition, not getting Danish compromise. This accounted for 240 basis points on our capital to which we had 60 basis points of regular headwinds totaling 300 -- more than 300 basis points. So with the starting point rebased in 2024 at 12%. To this, we had the capability to generate 176 basis points which brought the total to 13.76% to which we had to deduct the one-off levy on extra profit reserve, which accounted for 18 basis point, bringing the stated common equity Tier 1 to 13.58%. We managed in January to have some hedging on some minority stake holdings, which gave us 18 basis points of contribution to common equity. So we can say that nowadays, we have 13.76% of common equity Tier 1. After again, absorbing Anima acquisition, regular headwinds, the dividend payout and the levy on extra profit reserve. This is very important in our opinion because if in such a year, we were able to offset all these headwinds and generate such a consistent amount of capital as we did basically from 9 years, every year offsetting the losses that we had in reduction of NPE, you can understand that the capital generation for the future will not be a problem. We are very confident to return very soon at a 14% level. Let's go into some detailed figure on Page 12. We have the spreadsheet of Q4 and Q3 and full year '25 and full year '24. As I mentioned before, Q-on-Q, we have the first time of positive results of net interest income 1.3% higher than Q3, net fees and commissions 7.5% higher than Q3. Of course, it's a bit more difficult to make a comparison year-on-year because we have the contribution of Anima, 9 months this year. But anyway, we have 21% of net fees -- higher net fees and commission to EUR 2.5 billion. Another quite remarkable contribution is coming from income from insurance, where year-on-year, we passed from EUR 116 million to EUR 163 million. Core revenues went up 5% Q-on-Q and 2.5% to year-on-year considering more than EUR 300 million reduction in NII year-on-year. Net financial result was EUR 48 million positive due -- specifically, thanks to the cost of certificates, which went down to EUR 167 million compared with EUR 284 million last year. Total revenues went up to almost EUR 6 billion compared to EUR 5.7 billion last year and Q-on-Q went up 1.1%. As I mentioned before, we have a slightly increase in operating costs, but this is driven by the Anima impact, which was not present in '24. If we compare like-for-like, we have down in cost, 1.7%. Total provision down from EUR 547 million to EUR 403 million quarter-on-quarter, we have instead an increase, which is a seasonal increase of total provision to EUR 160 million from EUR 81 million. Profit from continuing operation. Pretax profit were EUR 2.8 billion year on '25 compared to EUR 2.5 billion, '24, so a 12.5% growth. Net profit from continuing operations is 17.4% growth with again a considerable growth. Also net income more than the figure that is shown on the Page 12 of EUR 2.8 billion compared to EUR 1.9 billion, maybe is more affected to compare the 2 years without the one-off I mentioned before, again, is EUR 1.880 million against EUR 1.570 million, a growth of 20% year-on-year. On the right side of this slide, you can see how we managed -- we were able to manage and we will go through afterwards the NII, of course, there was a massive reduction in NII. But if we consider the NII at full funding costs, so the contribution of the lower cost of certificates we managed to keep the reduction '25 on '23 at only 2.2% with EUR 200 million reduction from '24 to '25. And you can see how the impact of commission basically is now higher than the impact on NII in '25, growing to almost EUR 3 billion from EUR 2.3 billion of '23. So you can see the non-NII revenues growing from 43% to more than 50%. Cost/income down to 46% from 48%. Again, I mentioned already both the LLPs and net profit from continuing operation, which grew 38% which is quite massive, if you consider the reduction of NII. Again, net interest income, specifically a reduction of 9% year-on-year, which is 1.3% positive on quarter. At full funding cost, the reduction was only 6.2%. And the results of the last quarter was justified by the increase of 3 basis points in Euribor, which we were able to take in our commercial spread up to 2 basis points, so almost all the entire Euribor increase. Specifically, we grew 2 basis points in the liability spread, maintaining at [ 1.47% ], the asset spread. The managerial action sensitivity basically reached the top as it was already in Q3, we are not hedging anymore both in terms of replicating portfolio due to the consistency of Euribor during the last months as well as also the index current accounts were stable at 37% vis-a-vis 34% over last year. Also sensitivity was -- there was a reduction on sensitivity rate at EUR 150 million. Finally, on the last bottom right part of the slide, you can see how a strong help in NII came also from the reduction of the wholesale issue in last year. Basically, we reduced from the beginning of '24 to the last emission, we were able to reduce the average of the wholesale bonds spreads of 60 basis points which accounts for almost EUR 35 million per year. So that means that we have a lower cost of risk for our -- lower cost for our issuing going on towards the end of the plan. You can see how for each kind of issue, there was a reduction based from the last issuance from -- related to the previous one. A good signal finally in Q4 also from loan volumes Of course, there was all the year strong generation of new lending up to EUR 28 billion, EUR 7 million higher than last year, showing our constant presence close to the client make us take advantage also from -- also in a period in which there is not loan growth. We were able, of course, to foster a lot of new loans taking an important share of commission coming from new lending. Specifically, new lending to household grew 40% year-on-year to non-financial corporates grew 30% year-on-year. Also in terms of low-carbon new money long-term financing, we were up to EUR 7.6 billion compared to EUR 5.7 billion of last year. As well -- as far as the stock is related, the Q4 was EUR 1.2 billion up in Q3, growing basically in all the different asset class, non-financial corporates, household and financial. Meanwhile, when you compare with December '24, we were able to have a positive increase, both in household and non-financial corporates. Meanwhile, as you may remember, we have only 1 institutional big ticket transaction amounting from EUR 1.5 billion which impacted the reduction of EUR 1.3 billion related to the institutional lending. On the right side, some quality discretion 73% of our core customer loans are located in North of Italy. We still continue to take a lot of advantage from the collateral of our loans, 52% have secured, 27% with state guarantee. And if you go to SMEs, 63% are with collateral and more than 90% of the risk are concentrating in the best plus from mid- to low-risk. Net fees and commission is the game changer of this year, thanks not only to the Anima contribution but also to grow 5% and normalized for the Ecobonus reduction commission '25 or '24. As you can see, we have -- we passed from EUR 2.055 million of '24 to EUR 2.5 billion of '25. And this, again, make clear the share of investment product fees passing from 56% to 49% of the total commission. You can have some detail on the right side of the slide. In the upper part, there is the investment product fee growth to 11% year-on-year like-for-like. So without Anima contribution, which, of course, became EUR 1.2 billion, if you consider also the contribution of Anima, which brings to more than 50% of the contribution of the asset manager -- wealth management fees. Also in terms of loan of investment product placement, we grew 12%, in line with the growth of the commission. On the other commission, we were able to contain the reduction at 1.9% which if we exclude the deck of bonus impact on '24 became a growth of 1.2%, specifically from having good results and increasing results, especially from P&C insurance, consumer credit, corporate investment banking commission, structured finance commission. Meanwhile, some reduction in -- as I mentioned before, in ecobonus and instant payments and in the payment system and activity. Let's make a quick focus on the insurance business, as you know, has been one of the core field of our strategic plan. In the last 2 years, we have done a lot of work integrating 100% the Life business and creating the new joint venture with Agricole and P&C. This year, we had bought the IT migration of Life and Non-Life. One run directly by us and the other one run by our partner of Agricole. So, of course, as always, in this case, you always experience some reduction in sales. Basically, it was not so much the case because if you see the contribution of the insurance business, this grew year-on-year, 26% from EUR 255 million to EUR 320 million with a pace which is much quicker than the pace that we need to reach the target in '27. Basically, in the last year, we had the same increase that we expect for the next 2 years. If we go through the different kind of insurance, Life Insurance grew 27%. Commission were up to EUR 70 million from EUR 67 million, but what was really affecting these results was the income from the insurance business, keeping, of course, now all the income coming from this kind of business, which grew from EUR 160 million over last year to EUR 163 million of '25, which is almost in line with EUR 175 million, which we have as a target in 2027. Let me remember that in '23, this business contributed only for EUR 46 million to our profit and loss -- as well -- as far as P&C is related, we have the same growth up to 23% coming from EUR 71 million to EUR 88 million. And again, definitely, we are not yet at the final speed we assume we can take in '26 and '27. A quick focus also on Anima and all the total customer financial assets, which in terms of captive volumes grew more than EUR 13 billion, EUR 13.7 billion in '25 and more than EUR 25 billion in the last 2 years. So a really remarkable growth. As you can see, last year, we had a big impact also from net inflows. Asset under management grew EUR 2.3 billion, asset under custody EUR 3.5 billion and current account and deposits grew almost EUR 5 billion. We can see the same -- almost the same pace if we consider the total customer financial assets held by our group, which now amounts to almost EUR 400 billion is EUR 396 billion, starting from [ EUR 377 billion ] last year. on a pro forma basis, of course, because we did not consolidate Anima last year with a growth of almost EUR 20 billion year-on-year. A final page on Anima. Of course, the most important piece of news is that we appointed in end of January, the new CEO, Mr. Perissinotto. And of course, also the growth of Anima is quite considerable, considering also the difficulties of last year managing from one side, our acquisition, the CEO -- the former CEO leaving in the last quarter and managing the integration of the new business into the group. But Anima managed to grow 4%, EUR 8 billion year-on-year and growing 5% in terms of revenues and 16% in terms of net income. So we are very happy of the contribution Anima is doing for us. And we, of course, expect this figure bettering with the new management of the company. Let's go to the cost income, down 46%, thanks to a rigorous cost discipline that is now, I would say, quite a mark for our bank. Like-for-like, we have the reduction of 1.7% to EUR 46 million, which, of course, including Anima is higher up to EUR 2.7 billion. If we consider staff cost, we have a reduction of 1.5% like-for-like. With Anima, we have stated EUR 1.8 billion if we integrate also in the first quarter Anima, the figure would have been EUR 1.825 billion, but we assume that we are completely in target with the business plan, which may remember is EUR 1.780 billion because thanks to the retirement scheme we fostered last year, we have already generated more than 1,000 exit and another 600 will be during the last 2 years. This will be -- will generate EUR 60 million of reduction of cost of personnel only offset by EUR 20 million of increase of national contract and new hiring that we are doing. Also in other administrative expenses, we have a quite strong reduction, 4.7% in terms of [indiscernible] we just said we register a slight increase in depreciation and amortization due to the increasing amount of investment we are doing in IT and AI. Let me remember that the headcount that with Anima were pro forma more than 20,000 people being in '25, now are down to below 19,000 people. We have 18,970 people and further reduction of 300 people is forecasted by the end of the plan. We already mentioned cost of risk, very good news in all aspects total down EUR 600 million to EUR 2.250 billion, net bad loan down to 0.36%, which became 0.1%, excluding state-guaranteed loans. The cost of risk is down to 40 basis points, but this 40 basis points includes 5 basis points related to front-loading future derisking for other EUR 300 million, which we forecast to materialized during this year default rate at a low rate of 0.84%, increasing cure rate and of course, decreasing net default rate also the coverage is a record level for us without the state guarantee, we had almost 56% in NPEs and 77% of bad loans. I'll give the floor to Edoardo Ginevra for the financial and capital side. Edoardo Ginevra: Thank you very much, Giuseppe. I try to be very quick in the interest of time. Good evening, every one, of course. So in this Page 21, we see the evolution of the contribution of the financial component to our P&L and our capital reserves performed very well during the year. They had a negative contribution on a net basis above EUR 500 million now or below EUR 300 million, with a further improvement during the month of January. Bond portfolio is slightly below EUR 47 billion, decrease in the quarter was due to some maturities. But you may remember that we described the evolution of this portfolio is pre-investing during the rest of the year also for some maturities that we had in the final part of the year. Composition is similar to third quarter with 68% at amortized cost. Out of this, EUR 46.6 billion, EUR 38 billion are Govies, of which Italy accounts for 38%. Most of Italian bonds as usual, as in the previous quarters are in the area of -- in the category of amortized cost. Net financial result was negative last year for EUR 82 million, now is positive for EUR 48 million. Most important drivers of these results is -- this evolution are the reduction in cost of certificates from negative contribution to EUR 184 million to negative EUR 167 million. The other components accounted for EUR 215 million, out of which almost EUR 100 million are represented by Monte Paschi dividends, which, by the way, left us some room for prudent valuations of loans booked at fair value during Q4. '22, cash is almost at EUR 54 billion with a positive evolution on total direct funding that now is at above EUR 137 billion, thanks to EUR 5 billion almost of increase in direct funding in current accounting deposits, sorry. Indicators of liquidity and funding are on a very solid level with LCR in particular, that is at 147%, which is quite the level that on a 12-month basis, the average we have continuously registered. NSFR is constant at 126%. MREL buffer is at almost 7.7 percentage points. The evolution of our funding has been very successful as far as our access to the markets is concerned. Thanks also to positive influence of improvement in credit ratings from Fitch, from Moody's and DBRS, we have been upgraded whilst S&P during the year assigned to the bank a positive outlook. Moody's and DBRS for the first time, showed for the deposit category, also the A class of our rating. We were successful in issuing EUR 2.65 billion of wholesale bonds, of which [ EUR 175 billion ] using GS&S bond framework or EU GB fact sheet. We were the first Italian bank issuing a green bond using the EU labor for EUR 500 million during the year. Secondary market spreads that were described on an average basis in the first part of this presentation in NII slide, here are analyzed in terms of the evolution between -- or the difference between the average spread of the strategic plan, which is the blue bar and the issuance spread that for that category, we have reported -- we have achieved in '25. So for example, senior preferred, we have in the plan, 140 basis points of spread, we issued this year at 95 basis points of spread and secondary market, which may, of course, be is a different type of indicator, but it's interesting as a benchmark, as at the end of last year was at 63 basis points. Similarly, also for the other categories, you see that we are well ahead of where we expect it to be when we drafted the plan in February last year. Page on capital. Here, we focus on the evolution of this fourth quarter where we started at 13.52%. We have to book -- to account for the levy on extra profit reserves, which dragged the capital for 18 basis points. So the real rebate starting point is 13.34%. We are at a pro forma level of 13.76%. This is thanks to the contribution of our P&L, which after dividend contributes for 9 basis points, 72 minus 63 to the contribution of DTAs and fair value comprehensive income reserves. RWA operational risks is a one-off of 19 basis points due to the need to take account of Anima in our yearly -- full year P&L replacing the previous full year P&L, which was less rich in terms of revenues and final other components account for 4 bps. Organic capital creation in this quarter has been 24 basis points on a pro forma basis, taking into account the hedging transactions that we have executed in January. We are on top 18 basis points coming to the level I mentioned 13.76%. MDA buffer allows us room for additional business expansions, investment opportunities, capital deployment, which is as high as 408 basis points or on proforma basis 425. Let me remind that the minimum threshold in the plan 350. Finally, we continue to have material level of capital that will be created from additional sources on top of P&L, in particular, DTA and fair value comprehensive income reserves will contribute to capital creation during the remaining part of the plan horizon in the next 2 years for an expected level of 150 basis points of about 150 basis points. And I'll leave the floor again to Giuseppe. Giuseppe Castagna: Okay. Just for the conclusion, thank you. So Page 26, we are very satisfied and proud also of the new bank with a very strong and diversified business model we were able to build in the last years, starting from a very normal commercial bank driven by NII. Now as you can see, we are able to deliver almost 50% through commission. Meanwhile, growing also in terms of net profit. So it's just not a substitution of income and profitability, but it's a growing profitability coming from a sustainable remuneration of commission. Basically, we have the growth we experienced in the last year, which is already the double of the growth we will need to have in the next 2 years to reach the target '27, but more important, again, we are already at the 50% that we expect in terms of non-NII contribution. Let me say that 35% of our net profit comes from wealth management, asset management and protection, which was only 24% last year and below 20% in the previous year. So all these allow us to be very confident in the trajectory towards the EUR 2.150 billion of the net income target with a very consistent ROTE and ROE we almost already reached and the capability to continue to distribute a dividend of EUR 1 also this year, which, as you can see, the progression from EUR 0.23 to EUR 0.56 last 2 years ago, EUR 1 last year. But as you may remember, this EUR 1 was coming from out of EUR 400 million coming from the Numia transaction. This year, the EUR 1.5 billion comes all from a repeatable and sustainable profitability, capability to generate profitability. All in all, we have -- with this distribution, we will reach the EUR 3 billion, which is half of what we promised to the market, which is EUR 6 billion, but we are already ahead of expectation because the first 2 years were considered lower in terms of profitability vis-a-vis the next 2 years. If we consider the average price of the stock in 2025, the dividend yield is 9%. Let's have a look, recap on '25, profitability at record level with over delivery of EUR 130 million, more diversified and sustainable business model, producing 50% of non-NII revenues, record of asset quality, reduction of NPE to 1.2% and a good increase in the common equity Tier 1 ratio, notwithstanding a very difficult year in terms of headwind to just not remember that the year was, in a way, more difficult for many reasons. But notwithstanding that, we are already ahead of the figure we gave with our business plan in February vis-a-vis the target '26, both in terms of total revenues, in terms of operating cost, in terms of cost of risk. And this, of course, this allow us to say that the pretax targets are confirmed with some room for overperformance. Of course, we know that for next 2 years, there will be better next 3 years, there will be some external challenge. We have a budget law, which increased the tax rate in the plan horizon. We have also some incremental due to specific systemic charge. Notwithstanding that, we think that through managerial action, the advantage accrued in '25, the capital generation that we are able to produce, we will, in any case, be able to deliver EUR 1 dividend per share also in 2026 and doing so, remaining ahead of the EUR 6 billion target distribution that we have for 2027. This is my final page. So please, I would go for Q&A section. Operator: [Operator Instructions] First question is from Giovanni Razzoli, Deutsche Bank. Giovanni Razzoli: I have 2 questions. The first one is on the NII. We have seen an acceleration of the household segment in terms of loan growth in the Q4, but most of the growth was driven quarter-on-quarter by the financial institutions. So I expect that the trend of the NII in the coming quarters could be supported more by the household -- the growth in the household volumes going forward, whether this -- so I was wondering whether this -- my understanding is correct. Because on the other side, I've seen that you have reduced by around EUR 2 billion your replicating portfolio in the Q4 when compared with the Q3. And if I remember it correctly, you tend to replicate much less than the other peers. So I was wondering what shall we expect going forward in terms of NII when compared with the Q4? And the second question related to the governance and specifically to the evolution of the governance and legal framework in the coming weeks. We've seen some coverage on the press. You are planning to introduce the changes in the Articles of Association. So what are the steps that we shall expect from here in terms of governance, legal framework? So if you have the opportunity to clarify this to us. Giuseppe Castagna: Okay. Thank you. Let's start from NII. We think that the pace of new loans we were able to produce last year is -- and also the increase in Q-on-Q is a good signal for forecasting a slow increase also in terms of portfolio of stock of loans. Beginning of the year is not that bad. Of course, every year, you have to stand and replace what is expiring end of the year, but we are already at a quite good pace. We are confident that this year could be the first year of recovery also in terms of loans. But don't forget that last year, we grew EUR 5 billion in terms of deposit. This, I think, a very strong assumption. I don't know if we can repeat the same pace. But in any case, the margin coming from deposit is exactly the same, the margin coming from loans. So this is another very good way to increase NII without taking further risks. Of course, we will stand close to our clients, taking all the advantage also for increasing loans, but it's not the only way to better NII. I leave to Edoardo the replicating portfolio, but maybe I can go through your question about governance. As you have seen from the published documents, we plan to amend our bylaws to comply with Legge Capitali and provide for an increased minority representation to our shareholders in line with the spirit of the law. As you know, we have a new EGM on February 23, which will be followed by the submission of slates for the renewal of the Board. If we will go for the list of the Board, we have to submit 40 days before the Ordinary Shareholders' Meeting of 16 April. So this will be within 7 of March. And if the list will be presented by the shareholders, the presentation will be allowed up to 25 days before such extraordinary meeting, so within 22 of March. In terms, of course, of requirement, I think that there are the usual requirement, which are requested by ECB. So of course, fit and proper requirements, independence requirements, rules, equilibrium on gender. And specifically, of course, we have some bylaws, which imply that, of course, in terms of competitors, we cannot have in our Board members of competitors. Giovanni Razzoli: Thank you. On the replicating portfolio, you are right. We have reduced the level versus what we had in September. But this was, I think, completely planned in September, we basically entered into new transactions to anticipate of some swaps that was due to happen by end of the year. So we came back to the level that we plan to have in our strategic plan, which is exactly EUR 25 billion. Next year, we will start the year with this EUR 25 billion and the contribution to NII of the replicating portfolio is expected to be supportive to represent a tailwind for the overall NII given the evolution of especially the floating rate, the lag that is paying for us. So also the replicating portfolio on top of the commercial evolution of the commercial part will allow us to reap some benefits. Another point worth mentioning is that despite the observation you made on replicating portfolio, still our sensitivity, overall NII sensitivity is reduced especially compared to June, given that on the period, it was EUR 50 million higher like-for-like, of course, so considering the contribution to NII or the contribution including certificates. Operator: Next question is coming from Sofie Caroline Peterzens, Goldman Sachs. Sofie Caroline Peterzens: Here is Sofie from Goldman Sachs. So my first question would be on the investment products on Slide 15. We can see that the upfront fees were very strong at EUR 343 million. Should we expect this to remain the run rate going forward? Or do you see kind of scope for increasing both upfront fees and also the running fees on the investment products? And then my second question is on the systemic charges that you mentioned on Slide 26 -- sorry, 27 that you expect kind of incremental systemic charges. Can you just walk us through what these charges are and how we should think about these new challenges? Giuseppe Castagna: Thank you, Sofie. On investment products, yes, it's been a very strong pace, but we come from years of increasing this kind of product. And of course, having now Anima into our group, it will be even easy to have the opportunity to give -- to offer our clients the best product having the possibility to offer without any advantage for us, but only in the interest of the client, both insurance product, asset under management, funds, certificates and whatever. So we think this is something that we can continue. Asset under management, notwithstanding the growth of the last years, we are still with a share which is a bit below the average of our competitors. So we feel that we can have the opportunity to have a common policy together with Anima and grow in this respect. I have to add that next year, we will be -- this year, of course, '26 will be more attentive to the product, which will generate a run rate rather than upfront. This year, we were a bit in the middle of our bancassurance business proposition. And we had also the need to serve our clients with product which we were not -- we were more in the interest of our clients in terms of yield, reducing our commission in the run rate. Starting from this year, we are not anymore in this situation. We will have only one company, which will do together with Anima, the new product, and this will make much easier to have product, which will have more run rate embedded. I leave Edoardo for the systemic charge. Edoardo Ginevra: So on systemic charge, of course, there is this specific case, which is very well known in the Italian market of Banca Progetto, which will require Italian banks to contribute through the interbank fund. Our share is around EUR 20 million per year in the next 5 years. On top, there is a small amount that will contribute to the insurance fund, which is additional EUR 5 million, EUR 6 million. I'm talking about gross before tax. Operator: Next question is from Antonio Reale, Bank of America. Antonio Reale: It's Antonio from Bank of America. Two questions from me, please. The first one is on your outlook for revenues in 2026. Your Slide 27 shows your business plan target, which, I mean, increasingly look very conservative now in the context of the strong numbers you've managed to deliver in 2025 and also in the context of your remarks in the presentation. So as things stand, your 2026 revenue number, it basically imply no growth year-on-year. And I'd like to understand or get a more up-to-date target on what you think this number could look like and possibly understand the moving parts on the sort of key revenue line items. The second question is really a follow-up on the previous question on governance because I'm trying to square up. I think yesterday, Crédit Agricole said that they would like to have a fair representation on the Board. And I mean, it's no surprise given the shareholder register. Based on what you said earlier though, of not having members of a competitor on the Board, do you think this is going to require an additional approval from ECB or other authorities in Italy? I'm just trying to understand how this comment squares up, if I understand correctly. Giuseppe Castagna: Okay. Yes, every time we announce some plan, it looks like not to be conservative, then when we reach, of course, the final step looks conservative. Let's say that we are very happy where we stand right now. Of course, you know which were the figure for 2026. On top of that, we have some headwinds that I mentioned before. We are committed to make good results also for '26, trying to offset this EUR 100 million of lower net profit coming from the new taxation and the contribution that Edoardo was specifying. So I don't think it's something -- if you start from EUR 1.880 billion, which is the net profit of this year, not considering the contribution of Anima, I think is a quite impressive increase towards, of course, the final target, which is more related to '27. And again, we are also committing in paying the same amount of dividend for this year. In terms of governance, no, we do not need any approval is Crédit Agricole. I think that need approval from ECB. We just have -- as I mentioned before, we have done a new -- some change in our bylaws in order to accommodate not only for Crédit Agricole, but for the minorities, all the minorities, a more consistent pace, also considering the level of shareholding held by Crédit Agricole. So we are going ahead. Of course, in order to change the bylaw, we need an approval from ECB, but it's not related to the Crédit Agricole possible Board member. Operator: Next question is from Manuela Meroni, Intesa Sanpaolo. Manuela Meroni: The first one on the capital base. I'm wondering if you expected to make some optimization actions of your risk-weighted assets right now in 2026. I'm referring to potential SRT or maybe some action in order to reduce the capital impact of Anima. The second question is a follow-up on the question that you just answered. I would like to understand what should happen in order to allow you to revise upward revise your targets for 2026, '27. is this something that at some stage in 2026, we may expect? And the third question is on the hedging transaction that you executed in January. I'm wondering if you can elaborate a little bit more, providing some, let's say, indication also if there is any impact on the P&L. Edoardo Ginevra: Thank you, Manuela. Edoardo here, Ginevra. In 2026, the indication that we gave of 14% is based on, I would say, more of the same of what we have done during this year. So strong attention to capital absorption in origination, management actions to reoptimize RWA, including, as you mentioned, correctly, synthetic securitizations and capital production through [indiscernible] 20% retained earnings and DTAs and put to par of fair value comprehensive income. We have on top kind of confidence that at least with this market scenario, we may be even more effective, for example, in managing the bond portfolio and creating additional capital out of that if needed. We don't have extraordinary transactions expected in this evolution to contribute to this evolution. In this fashion, what we have done in the hedging transaction is a simple capital hedging structure that we have to avoid to deduct from capital participations that would have been -- that have exceeded the threshold of 10% for the total participations below 10% -- so it's a transaction that creates a synthetic short position, counterbalancing the long positions and net-net generating capital efficiency via avoiding the deduction. Giuseppe Castagna: As far as your second question, let me remember, Manuela, that we gave this number only in February this year were numbers that we gave under an OPS. So I think you can understand that we were not shy where we gave this number to the market. We are very happy that in the first year, we are above we are as well confident that we will be good in '26 and '27. But for '26, let at least go through the 1 or 2 quarters in order to understand better the situation for '27, just some figure. We have a target of EUR 2.15 billion. Without Anima, we are at EUR 1.880 billion is EUR 270 million. Let me say that we can add another EUR 100 million of tax that we didn't expect is EUR 370 million is 20% more than the net profit this year. So let me wait a bit in order to increase the 20% increase on net profit to which we are still very much committed, but it's difficult to say that we can right now, 2 years in advance, raise this target. Operator: Next question is from Delphine Lee, JPMorgan. Delphine Lee: Just first of all, just wanted to come back on the governance. Just trying to think about like if you could give us some color about what you think once Crédit Agricole will have some representation in the Board, like what implication that would have long term strategically? My second question is just like a very quick one on guidance on sort of net financial results, if you don't mind, given it can be sometimes a bit volatile. I mean, if you don't mind giving us a little bit of sort of a reminder of what you said in your business plan -- and then also maybe for this year, what do you expect including or excluding the dividend of Monte Paschi? Giuseppe Castagna: Okay. Delphine for the first question, frankly speaking, I think that there will be an important shareholders, which will be represented in the Board doesn't change that the bank remains a public company with a very important shareholder. I think we have been able to run the bank quite independently up to now. All the move we have done in insurance asset management are completely showing the independence of mind of our management. So I don't expect any implication in this regard. Of course, we will strengthen all the rules related to the conflict of interest. This is something that also ECB will require for anybody being in our Board it running a business, which is in some way in competition with us. But for the rest, I think also Crédit Agricole is very happy. They have invested very recently in our bank. They are getting some good reward from the investment. We have 2 joint ventures in common. So I don't expect anything different from what we do right now. Edoardo Ginevra: Okay. On net financial result, I think that it is not surprise that this is an item that shows some volatility. We gave -- we insert in our strategic plan a conservative outlook for this item on the P&L, which after some reclassifications that we have done and we explained to the analyst community in June or in the second quarter of this year can be quantified in slightly below EUR 50 million. This is the indication for 2027. Current expectation is to be able -- to be confident to do better than that. leveraging on both the reduction in cost of certificates and on the ability to produce revenues from our structuring activity that is included within the certificates and so on and so forth, which is included within trading. Last but not least, of course, this component this item will include dividends from MPS, which is factored into our plan for an amount consistent with the dividend payout, which was announced 1 year ago by the bank. Operator: Next question is from Luis Pratas, Autonomous Research. Luis Pratas: The first one is on the cost of risk guidance. So essentially, you printed 40 basis points this year. You also reduced the NPE ratio significantly. I was just wondering why do you reiterate your 43 basis points 2026 target? Are you seeing like any signs of deterioration picking up? And then my second question is on the tax rate. Can you provide the guidance for the tax rate in 2026? I think you had 29% in 2025. So not sure if there were like any one-offs here? Or can we just assume maybe like 2 percentage points higher, so 31%. Giuseppe Castagna: No, you're right. Of course, cost of risk, if we have -- now our cost of risk is basically driven by default rate. As you were mentioning, we have a very low stock, very well provisioned. So we don't have any possible increase of cost of risk coming from managing the stock. Of course, inflow, default rate, it is always a question mark. We have had a very good '25 as well as good '24. With this, assuming there will be -- could be another year at that level, of course, we will have some better in terms of cost of risk. But if you -- of course, it's very difficult, especially if we forecast a potential increase in the demand, which we don't see yet so strong, but could become strong, it's difficult to not consider at least 1% of default rate. If the default rate will be lower, considering that we don't have any stock to manage increasing provision, of course, the run rate related only to the cost -- to the default will be lower than our guidance, and we will update it during the year. Edoardo Ginevra: Tax rate, we are in the area -- in our outlook in the area of 33%, including, of course, the increase in taxes coming from the recent budget law. This year, correct, your observation has been lower. It's a technical out of the same budget originating one-off effects on DTAs that were readjusted to the new tax rates introduced by the budget law. So we basically have increased the current fair value of DTAs and this generated a one-off benefit on taxes. Operator: Next question is from Lorenzo Giacometti, Intermonte. Lorenzo Giacometti: I have actually 2. So the first one is whether there is any chance that you will be able to obtain a review on the ECBs decision on the Danish Compromise? And then the second one also on Anima is what are, in your opinion, like the most reasonable options you have in the medium term for the stake you hold in Anima, I mean, keep it listed, delisted or doing in industrial partners. Edoardo Ginevra: No. On the Danish Compromise, I think that the recent publication by EBA seems to close the various doors. So we are not taking in our plans, we're not assuming to have benefits from reviews. Also bearing in mind this recent position from EBA. On Anima, 10%. Giuseppe Castagna: On Anima, as I mentioned also before other presentation, we are really happy to be free to decide what to do with the remaining 10%. As you know, we have the possibility to take on board other partner, commercial -- new commercial partner, old commercial partner, all the definition of the banking system in Italy is ongoing. So let us wait at the right moment to decide what to do. Of course, having the Anima listed, I think, is much more flexible to operate in this respect. Also considering that basically for 1 year, we had to offer to retire the 10% stake, the same price of the OPA we did. And basically right during these hours, the price of Animas is coming back towards EUR 7. So of course, it's something that we will decide, but we are not pressed. We have many projects and many potential opportunities that we want to exploit. Operator: Next question is from Noemi Peruch, Morgan Stanley. Noemi Peruch: So I would like to ask which P&L line you see -- in which P&L line you see room for overperformance in 2026? And which actions are you planning to implement to reach targets? You mentioned wholesale spread, but if you could elaborate more, it would be very useful. And then on the capital and 18 bps common equity impact from the hedging transaction. Am I understanding correctly that you hedged the stake in Monte? And if so, what's the net stake at the minute? Giuseppe Castagna: Again, we gave on page -- I think the last page of my presentation was very clear in saying that we are above the plan, both in total revenues and operating costs and cost of risk. And for sure, this will be the aspect that are more encouraging. Specifically, I would say, commission, thanks to the consolidation of Anima for the full year, of course, the insurance that we made the focus in order to make you understand the pace of growth we are experiencing. Some -- all the commission, I think we will grow and will be better than this year. Of course, NII -- depends from the interest rate where they will stand, of course, [indiscernible], which is like the current one, and we consider it to be stable. Of course, we think that we will be in line with the 2026 forecast, but lower than this year. Cost of risk, as I mentioned before to your colleague for Q&A, we think that depends on default rate. We are assuming the 1% default rate. We think that with a better default rate, we can do better. Edoardo Ginevra: On the hedging transaction, I prefer to repeat what I said, we had inefficiencies due to the fact that in total, our participations below 10%, exceeded the 10% of own funds threshold, and we implemented the transaction allowing us to come back within that maximum level, avoiding these deductions. Operator: Next question is from Hugo Cruz, KBW. Hugo Moniz Marques Da Cruz: Yes, just one more question. So you talked about a lot of the revenue lines. I don't think you've given an indication for trading, which has been very difficult to forecast. And also related to trading, should we expect any material impact from this hedging transaction in January? So if you could just give a bit of an indication what could be the trading income in 2026? Edoardo Ginevra: Well, it's always, I mean, difficult to commit with indications on single lines of the P&L. Trading, of course, is the most difficult. So again, allow me to say that in the current market scenario, we believe we'll be able to do better than to improve the final level of contribution of trading, both in '26 and in '27, allowing us some room of maneuver in general to exploit tailwinds on the revenue side. Operator: Next question is from Adele Palama, UBS. Adele Palama: Sorry to repeat the question, but I have a question on the NII evolution. So in the target for 2026, so the quarterly run rate basically implied a little bit of decrease versus this quarter print. So now I understand that the guidance has like a degree of conservativeness. But I want you to understand like in terms of lending growth, are you still expecting -- I think the plan had a 1.7% growth assumption. And then how is the lending growth expected also for 2027? I mean is there any change or potential upside on that loan growth? And then which are the possible headwinds that might bring the quarterly run rate for 2026 NII down versus the fourth quarter? And then the second question is actually on the capital. I just want to double check the DTA recovery that you had in 2025, the impact on the capital, the total one. And then the DTA recovery that you expect for 2026 and 2027. I have like an amount of around 80 basis points between '26 and '27. I just want to check if that amount is correct. Giuseppe Castagna: Okay. I'll try to answer to your first question related to NII, I think it's very consistent with the Euribor forecast that all the banks are doing, basically flat on 2%. We are still linked to our forecast of growth in terms of loans. But as I mentioned before, we -- for instance, this year, we were very much better in terms of deposit growth. So we depend also on that. Having said that, we are reducing in our forecast, the reduction vis-a-vis '25, if you consider the new Euribor average for '26. And we feel that it's not conservative. It's quite consistent with the current situation. Maybe Edoardo, do you want to say on the DTA? Edoardo Ginevra: Yes, we gave indication that we expect from DTA in February comprehensive income in total, 150 basis points of capital creation between '26 and '27. Most of this capital creation will definitely come from DTAs. Adele Palama: Okay. Sorry, if I can make a follow-up on the NII. I mean, so is the lending growth for 1.7% has an upside risk? -- in your estimates? Giuseppe Castagna: What do you mean, sorry, an upside risk... Adele Palama: Definitely you can do better. Giuseppe Castagna: Okay. Of course, normally, if there is a growth, our bank historically due to the geographic footprint and strength in structured finance, SMEs, corporates, normally, we grow more than the banking system. But we don't see yet such a strong growth in order to say that we can change the forecast of 1.5%, 1.6% growth. Operator: Ladies and gentlemen, there are no more questions registered at this time. Sorry, we have one more question from Giuseppe Grimaldi, BNP Paribas. Giuseppe Grimaldi: I have a brief one related to the replicating, just a clarification. You said before that you expect some tailwind from the replicating this year. Can you help us in understanding the magnitude of that? Edoardo Ginevra: I mean 25 billion of average volumes magnitude may help if you compare a scenario of past year, 2.17% -- 2.2%, let's say, average Euribor. This year expected level of 2% and some delay in the translation of Euribor into cost of the swap. So the order of magnitude is slightly less than the 20 basis points multiplied by the EUR 25 billion. Also will depend, sorry, on renewal of existing swaps with new ones. So there are risks in that because we have part of this replicating that is maturing during the year, some EUR 6 billion -- and over time, we will need to see what will be the market rates from the swap curve. Giuseppe Grimaldi: And maybe just a quick follow-up. If you can -- if we can expect some growth in NII considering you have given a pretty solid outlook in terms of volume and replicating as well could be -- is expected to be a tailwind. So what kind of NII growth we can expect for '26? Edoardo Ginevra: We stick to the guidance that we gave in the plan, conservatively stay slightly above EUR 3 billion. Operator: Gentlemen, we have no more questions registered at this time. Giuseppe Castagna: Thank you very much to everybody. I expect to see you in person in the next few days, and thanks for your attendances. Bye. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone.
Simon Falk: Hi, everyone. Thank you for joining us on Jyske Bank's conference call for the financial results for 2025. This is Simon Hagbart from Investor Relations speaking. With me, I have Jyske Bank's CEO, Lars Morch; and CFO, Birger Nielsen. Lars and Birger will walk you through our prepared remarks. Afterwards, we will open up for questions. I will now hand over to Lars. Lars Stensgaard Morch: Thank you, Simon. And I would also like to thank everybody for joining this conference call today. We closed 2025 on a strong note, delivering results above our previously guided ranges and growing EPS a full 18% year-on-year in Q4. This performance supported an upgrade of our outlook as well as our preannounced results for '25 in January. This morning, we published the full set of results for '25, including full details on strong capital position and updated capital targets. We now target a CET1 ratio of approximately 15% and a total capital ratio around 20%. This is at the lower end of our previous capital targets despite a systemic buffer of 0.9 percentage points. On the back of this, we have announced our largest capital distribution so far of DKK 4.5 billion in total, an increase of 20% year-on-year. We also provided our outlook for '26. We expect earnings per share in the range of DKK 71 to DKK 85, reflecting more normal levels of loan impairment charges and value adjustments following a favorable '25. We expect to continue to see positive core operating trends in '26. We are gaining personal customers in target segments, increasing our mortgage market share and have seen a healthy development with particularly larger corporates with high levels of customer satisfaction in all segments. The Danish economy is likely to show a balanced trajectory with a stable rate outlook as we maintain a solid credit quality with significant buffers in place. Overall, we ended '26 in a healthy position, and we are well placed to further build on our momentum. With that, let me hand over to Birger for a walk-through of our financial results. Birger Krogh Nielsen: Thank you, Lars. And as you may well know, the PL numbers and some of the balance sheet numbers were released back in the mid-January. And as Lars alluded to, the macro environment is actually relatively stable. Average long-term growth around 2% is expected. Inflation is under control. We have a high and steady employment and house prices are still on the rise, expectedly 3% during '26. And on top of that, the geopolitical uncertainty, of course, has and still can have some impact on the demand for credit facilities. Looking at the chart, a few comments. For '25 in total, the return on tangible equity was 11.9% and a cost/income ratio at 48%, better than our projections for '28, and there are several reasons to that. One is that the decrease in interest rates was 0.25 percentage points lower than expected. And value adjustments were very strong in '25, now the third consecutive year with a significant spread tightening with highly rated liquid Danish bonds. And thirdly, cost of risk was 0 for the second year in a row. And finally, we upgraded our expectations after Q3 and again, when we released the numbers in January. As you also can see, the EPS was in total DKK 85 in '25 with a strong end to the year, both in Q3 and Q4 with DKK 23 in those quarters. And looking at the right-hand side of the graph or the slide, you can see that AUM is still on the rise, Q-o-Q, a 2% rise, driven both by positive markets and net inflow of customers. And on the lending side, Q-o-Q, you can see that mortgages was up 1%, driven by private individuals and bank lending was up a couple of percent, both -- primarily driven by corporates despite the transfer of loans of mortgage-like loans to the balance sheet of Jyske Realkredit. And when it comes to leasing, it was a bit more muted during the course of Q4. Deposits finally on an upward trend again, both driven by private individuals as well as time deposits from corporates. So a decent development in balances at the end of the year. The outlook for this year, DKK 71 to DKK 85, DKK 4.3 billion to DKK 5.1 billion after tax. The core income line was very steady from '24 to '25, and we expect a lower level in '26, primarily driven by value adjustments. Core income -- sorry, core expenses is also expected to be slightly lower in '26. We will see a lower level of one-offs, and we will also do some cost initiatives that will outpace both inflation and wage inflation during the course of the year. Loan impairment charges. We expect an expense in '26, although a low one. We see significant post-model adjustments of DKK 1.7 billion here by year-end. We have, in the last 10 years seen 0 basis points average-wise in impairments. We have low write-offs also in Q4 and the Stage 3 part of the total portfolio is down from 1.1% end of '24 to now 0.9% end of '25. Net profit, I have referred to that. And finally, capital targets around 15% and 20%. I'll return to that in just a minute. And finally, also to mention that we don't see any further significant impact from upcoming regulation, primarily the output floor from CRR 3 given the current risk weights. Lars?. Lars Stensgaard Morch: Yes. Thanks a lot, Birger. A bit of a busy slide, I'm afraid here, but let's see if we can follow the logic. Moving from the left-hand side here, we have the results or the outcomes, the financial targets that you know from our strategy. And in the middle, you have the priorities, the activities that we do to make sure that we deliver on the left-hand side. And on the right-hand side, you have the specific, more detailed examples of the deliveries that we have managed to -- the things that we managed to deliver in '25. So taking a look at the middle here, you see the ambition that we want to increase the quality of the service that we deliver, but also we want to increase the quantity of the meetings and the interactions that we have with the clients. In order to support that, we have the activities on the right-hand side here, and I'll just mention a couple of them. First, on the personal customer part, automated data collection for credit processing that ensures higher quality and obviously also higher speed. More digital solutions that make saving and investment easier, again, potential for more and at the same time, higher quality customer experience. New AI assistance and copilot for advisers, streamlining workflows, supporting meeting preparations and making things easier inside. On the business and corporate side, automated price setting, data collection and guarantee creation, faster customer responses should be ensured that way also. New meeting concept for larger customers, making sure that we have a tighter link between the objectives and the financial solutions. We also have an upgraded risk management tool that can enhance the quality of the service that we give to our clients and the value of the advice linking the business strategy with the interest rate risks and financing risks altogether. So this is basically just showing that we are steaming forward in order to deliver on the right-hand side here to support that we see the clients more often and that we deliver more value to the clients when we meet. And obviously, then again, is able to deliver on the left-hand side here the financial targets and the volume targets here. Birger Krogh Nielsen: Yes. And looking at the net interest income, you can see the uplift in '22 and '23 was, of course, driven by the merger with Handelsbanken Denmark and PFA Bank. And for the quarter, we saw an increase of NII of 1%. And if we include a one-off of net interest income of DKK 38 million related to tax matters, it is more or less a flattish development from Q3 to Q4. During '26, we hope to see an increase, of course, very much dependent on the volume development during the course of the year. Lars Stensgaard Morch: On the personal customer side of the business, we've been under pressure in terms of volume and in terms of customer satisfaction for some years from approximately 2020 up until late '24. Now we have a number of consecutive quarters where we are building on the higher customer satisfaction and building more volume, which is part of the aims that we had in the strategy. The change have come a little bit faster than we anticipated, but we are pleased to see that we are building momentum here. We have, as of today, announced some price changes on our mortgage products. These are changes that will ensure that we are also going forward, competitive both in short-term loans and in the 30-year mortgage loans and a couple of the loans in between. We see a limited financial impact on the results in '26 and fully phased in, this will be approximately on the low end of DKK 100 million, not taking into account the dynamic effects, which obviously, if we are not competitive, will also have an impact on the volumes that we are able to write going forward. So altogether, we think we are still very competitive. And at the same time, it will not have very significant financial implications for the group. We have seen higher activity levels during '25 and also during the fourth quarter. Net interest -- net fee income was up a full 11% in '25. And actually, if we merge the last 5 years, up 45%, of course, inclusive of the acquisitions we've made. I have mentioned several times during the course of '25 that there are several factors behind this, but just to replicate again and mention again, markets have been favorable. New customers have entered, and we have done more business with existing customers. And also very importantly, that the turnover in the housing market is more or less normalized after a period with low turnover. And of course, together with our momentum in the segment for mortgages for private individuals has lifted the total income. So the fee uplift, as you see here on the chart, is driven by higher number of transactions and higher volumes. Costs are expected to decrease in '26. The underlying costs were moderate in '25. And if we look at Q4 in isolation, the underlying increase was around 2%, where inflation and salary increases were partly offset by 2% lower FTEs in Q4 of this year versus '24. The strategy going forward, as we also mentioned back in the autumn of '24 was -- is a CI level below 50% and to the extent possible, stable costs. We saw one-off costs in '25, especially related to the expansion of Bankdata and going into '26, as we say, lower costs from the level of DKK 6.6 billion in '25. But be aware that when we announced the strategy in the autumn of '24, we talked about a level around DKK 6.5 billion. And also be aware that we, of course, together with some efficiency initiatives, we also have initiated a marketing campaign with a new corporate visual identity that will take place during the course of this year. Moving onto capital. We have finalized the latest share buyback program here by the end of January, DKK 2.25 billion with an average price of DKK 680. And now we are heading for a record-setting capital distribution in '26, where we expect to distribute 84% of the result after tax to shareholders, split between DKK 1.5 billion in dividend, which will be proposed to the AGM here in March and DKK 3 billion in buybacks. And we have engaged with Bank of America to execute the program. And the program will start as of today and end by January '27 at the latest. Then finally, looking into capital targets. We have now changed a bit the outlook and expectations for the level of CET1 and the capital ratio. Now we are talking about around 15% and around 20%, and that includes the systemic risk buffer of 0.9%. We know that the Systemic Risk Council has recommended a reduction in that risk buffer. It is yet to be decided by the government and the implications will be of a minor extent if that were to be implemented here during '26. But overall, you can see that we have a 16.1% CET1 ratio by end year, well above the target of around 15%. And if we then include the reservations for expected payouts, they actually consume 1.4% in total. So 17.5% is actually the buildup for future need of capital. And we will, of course, during the course of the year, reserve for buybacks and dividends quarter-by-quarter. Simon Falk: Thank you, Birger, and thank you, Lars. We'll now open up for questions. [Operator Instructions] And the first question in line comes from Mathias Nielsen from Nordea. Mathias Nielsen: And congratulations on the strong end to '25. If we start on a very high-level note, like it looks like you're ahead of the plans that you set out in the strategy a bit more than a year ago. Can you maybe say a bit about it, is that just things happening faster than you expected? Or is it also the potential for more that has actually been a bit bigger than what you initially expected, if I start there. Lars Stensgaard Morch: Yes. Good question, Mathias, Lars here. I think it's a combination of internal matters and the market. So if you look at the market, that has been a little bit more gentle than we anticipated when we launched the strategy by the end of '24. And we've seen interest rates at a different level than what we anticipated. So we have had some help basically. But we also see that internally, we are able to move a bit faster than we anticipated on some of the initiatives. It's still early days. There's a lot of work still in the strategy on our platform, on IT and so on. But so far, we are definitely on plan. And hopefully, we will be a little bit ahead of plan when we move further into '26. Mathias Nielsen: That was very clear. And then maybe a bit of a nerdy question, but bear with me. So this Bank Data one-off cost, like you seem to be the only bank so far that is taking a one-off cost. Can you maybe explain like a bit of the dynamics like why you're taking it? Is it something that we should expect then to be a tailwind in the coming years because you revaluation -- have revaluation gains? How should we think about it just [indiscernible] went out with taking the write-down? Lars Stensgaard Morch: Yes, I can start and then Birger, if you want to add. I think it's clear with the agreement that is between Bankdata and Jyske Bank and being finalized and the integration that is being prepared that there are 2 different alleys you could take as a bank here. We've decided to take the alley that we've normally taken in Jyske Bank, which is a bit on the conservative side. I've noticed that some of our -- some of the other banks on Bankdata or at least I've seen one bank doing it differently so far, which is fully understandable because that's also possible to handle it this way. The thing is Bankdata has a fairly strong balance sheet, and that can potentially give -- and we think that's the base case, so we think that's very possible, give Bankdata the possibility to handle the cost of this integration within that balance sheet. And then from '28 and forward, we'll get an even stronger Bankdata with more volume on this, and then it will be able to handle the cost basically that we have getting Arbejdernes Landsbank and [ Vestjysk Bank ] on board. We have taken a more cautious route on this, which is, as I said, in line with how Jyske Bank have handled these kind of things in the past and in agreement with our external auditors who acknowledge that both ways can be -- it can be done both ways, but also support this as the right one for Jyske Bank to take. Birger Krogh Nielsen: And maybe just to extend a bit, when we talk with the auditors and when we look at the regulation in Denmark, the cost -- we know there is a cost to be paid as a member of Bankdata. We know -- we don't know the timing, and we don't know the amount. It's uncertain, but it's then a normal procedure actually to be careful and to book the cost after a best estimate in the quarter where you get the knowledge. Lars Stensgaard Morch: But you're right, Mathias. There is obviously a possibility of that not showing to be needed. Mathias Nielsen: And then would it then come back in one go? Or would it be like over the years, like what is the dynamics if it shows -- it turns out that Bankdata can handle this by themselves. How would that work like from an accounting perspective in Jyske Bank? Birger Krogh Nielsen: Well, there are -- of course, there are bills to be paid over the next couple of years with the migration costs and other costs related to the agreement with Sydbank. And of course, when those bills are up for payment, things will be settled also relative also in our books, of course. Mathias Nielsen: Okay. Maybe the last question, and then I'll jump in the queue. So when I listen to the comments on hope to see the NII coming up and guide down on cost, like isn't it difficult to see the bottom of the guidance range unless loan losses spike? Is there any broad comments you can make on like what's the assumption of the top and the bottom of the guidance that could help us understand like how you would even in a quite negative scenario end at the bottom of the range? Simon Falk: Yes. well, we usually use the DKK 800 million as an interval. So that's sort of the base case, but that's not to say that it's not related somehow to the numbers. So what we do is usually we look at the volatility of value adjustment and investment portfolio earnings, and we also set in some scenarios related to loan impairment charges as those are the most volatile components of our P&L. So that is how we come up with the interval. And I agree that if we are to end up at the lower end of the interval that would mean materially higher loan impairment charges than what we've seen in recent years, but also lower value adjustments likely. And next in line is Alexander Vilstrup-J rgensen from DNB Carnegie. Alexander Vilstrup-Jørgensen: So I have 2 questions. First, on core expenses. One of your peers recently flagged lower IT costs driven by economies of scale on the Bankdata platform. So I was just wondering if you could elaborate on your own expectations for cost savings at Bankdata and maybe also include the timing and magnitude of any potential reductions. Lars Stensgaard Morch: Yes. Thanks a lot, Alexander. I saw that, too, and I could follow his calculations. I think it was Ringkj bing that was out yesterday saying that we add volume to Bankdata, meaning that the expense will come down 17% like-for-like. I also saw that he then added that, that can come as a cost saving or it can come as further investments into digitalization if it makes sense. We are trying to run a tight ship on Bankdata. So obviously, we'll see if we can get some of it as cost savings and then we'll see what is needed in potential investments. I think it's safe to say that this is now the cheapest and we also believe the best data platform in the country and gaining volume is going to take cost down, but it's also going to make it more resilient in terms of what is needed going forward to ensure a strong digital platform, both in terms of functionality for clients, but also in making sure that it's a resilient, strong platform. So he's right. John is right. 17% is what we've calculated so far that could be taken out of the cost of Bankdata for us also. Alexander Vilstrup-Jørgensen: I also have a question regarding your ordinary bank loans. So to me, volumes for ordinary bank loans seems a tad down compared to last year. Is there any reason behind this? Shouldn't your volumes for ordinary bank loans increased as a result of your improved customer satisfaction ratings? Lars Stensgaard Morch: Not necessarily because we have still some of our Handelsbanken customers that came from bank loans and are generally moving towards mortgage loans on our Realkredit setup. So that's the underlying trend here. That's what is... Simon Falk: Thank you, Alexander. So next in line is Martin Birk from SEB. Martin Birk: Yes. Just 2 small questions from my side. First of all, the -- I guess first question goes on the price initiatives you took this morning in light of, I assume, peers also moving. How far are you willing to go? Is this only going to be a front book market share? Or should we also see the back book eventually getting the benefit without having to refinance? That's my first question. Then second question, coming back to capital and perhaps also less or more resiliency in stress test and a 15% CET1 target, how does that position you for future payouts? Lars Stensgaard Morch: Well, let me take the first one, Birger, and you can take the second one. The first one, thanks a lot, Martin, on the pricing on mortgages. We don't know where the competition is going to take the price level here. I think for us, a part of the reason why we make the decision it's a front book that we adjust is that when prices were adjusted upwards last time in the cycle, we did not really increase the prices on the back book in that scenario, which would then be a totally different way we would handle it if we lower the prices. Then on our book, a lot of them are short loans, which means that they will be refinanced within a year. And we do not reduce prices on these ones. So that would be basically for free if we did it. And they can then move on to either the same product or on to one of the other new attractive products here. So I think now we have a very strong portfolio of loans, both the bank balance loans, but also the loans on the mortgage balance sheet. And we have them with the short interest rate, we have them with medium and we have them with long. So we have a strong portfolio when we meet the clients, and I think we are priced to compete on this one. Without this meaning that we will necessarily see a big drop in the income here because our clients will be moving from another competitively priced product for instance, the F1s to the longer interest rate products, which, again, will also be competitively priced. So basically, we'll be following what is going on in the market. We think the reason why we've been winning market share is not because of generally the prices, it's because of the service model that we have and the turnaround that we have seen in number of volumes or in number of loans and in volumes on personal mortgages that has been done without us changing the price. And we've seen competitors moving down on price before us, and we've been able to keep that up. We'll be -- we'll ensure that we have a good product and an attractive price, but we think we are also driving the volume with having a good service model and being fast basically. Birger Krogh Nielsen: Yes. And then to the second question regarding the capital distribution and resilience in stress test, you're quite right that given some of the shifts we made in our model landscape and model setup recently, we are more resilient now to downturn and stress than we were formerly, especially because some of the segments are now managed under the foundation IRB setup versus an advanced IRB setup. And that, of course, leads us to a potential, larger buffer. And before giving any guidance in the market, we, of course, need to have a dialogue with the FSA regarding their full and their acknowledgment of the new setup that we have, and that will happen in the coming months, quarters. But you're quite right that there is a potential for a larger buffer. When we then look at the distribution and the split between dividends and buybacks, you have now heard us say that we have launched the largest buyback program of DKK 3 billion in the market. And of course, there is a limitation when it comes to liquidity in the stock in general. So going forward and if buffer will be extended, we, of course, need to adhere to the split between these 2 elements of distribution of capital. Martin Birk: Okay. But I guess the means of distribution that can always be changed? Birger Krogh Nielsen: The split, of course, is up for a debate and especially if liquidity in the market is a limiting factor. Simon Falk: And next question in line comes from Asbj rn M rk from Danske Bank. Asbjørn Mørk: Most of them have already been answered. But I have basically more of a strategic pricing question, Lars. Maybe it goes to you, but it's more like now you're lowering the prices on mortgages. I, of course, am fully aware of how your competitors have reacted and hence, it seems like more of a reaction to that. But I'm just trying to understand the rationale here because you had the lowest prices for a decade. And you also alluded to it, and you were not -- I mean you're basically losing market shares for many years. Now that trend has changed over the last year or so, but obviously not due to prices. So just wondering, do you actually believe that the price is the sort of decisive factor for clients? Secondly, since you're cutting mainly in the interest only and in the high LTV areas, how does this price reaction sort of go hand-in-hand with your strategy of growing in the more affluent areas as well on the private side? Lars Stensgaard Morch: Yes. Thanks a lot. Good questions here. I think some of the history that you're describing here is not 100% right because Jyske was actually winning market shares back in time on the mortgages. And Jyske was winning up until 2019 and a number of things with changes to the organizational structure and service models in relation to clients, pricing of other products meant that Jyske was losing out, and that was what you saw in the graph here. So -- and with that, I'm basically saying that price is an important factor, not the only factor and probably not the most important factor, but you need to be priced fairly competitive. I think we, in all honesty, we're more competitively priced on the short end here with the loans with refinancing often than with the longer. And we want to be competitive in both end of the scale here to support the clients and also to have a portfolio development that we would like to see in the bank. So what will happen here is probably that will go from one competitively priced product to another competitively priced products in a little bit larger scale than what we've seen before. Then you could also say that these are changes, directional changes that it was our plan to do in terms of making sure that we have attractive product price on -- across the different products here. Now we are doing that as tactical changes also, but it fits within our strategy. We still have a strategy relating to our portfolio of products, which is also about making sure that we have differentiating products. And we'll be able to, I think, launch new stuff within the not too far distance that will make us even more competitive, not from a price competitiveness only but also from a product competitiveness part. So I think it's one factor. It needs to be right, but it's certainly not the only one. I have to say I'm fairly impressed with the organization being able to turn around the development without using the price basically as a differentiator during the last couple of years. If we've not changed some of the prices now, it would have been a negative differentiator. I think we are moving in with the pack here and being more competitive or being very competitive on selective products. Asbjørn Mørk: That's very clear. Then if I may, on the sort of the competitive landscape and the consolidation that we've seen in the last 5 quarters. Have you seen any reaction in the market from Nykredit Spar Nord or changed behavior for that matter or from the AL Sydbank? And what should we sort of expect to be the Jyske Bank response, not in terms of M&A, but more in terms of product launches or more aggressive behavior or something? Is there something out there we should expect from you given the -- all the turmoil in the market? Lars Stensgaard Morch: Yes. I think if you look at our situation at the moment, we have the organization in place. We have no major projects going on. Obviously, we have the eyes on the possibilities in the market, and we have the muscles to also take advantage of some of these opportunities here. What we've seen so far is predominantly a number of employees, the number of people applying for jobs is increasing quite a bit, but we will not go down the different tracks that some of our competitors are doing and taking major teams from retail. We don't believe in that strategy. We think we are scalable with what we have today. And if we are adding, it will be select employees in select geographies and not the teams of 8 or 10 spread across the country here. So you do not see that kind of -- we don't envisage that we'll have this kind of aggressive behavior on this. We've also seen that we've been gaining some customers, not very, very significant, but some and more during the last couple of months due to customers that thought, well, then that might actually be the reason why I'm looking for a new bank. And then I believe the next part will be when they migrate the banks. It's very difficult at that point in time because you'll be extremely busy internally and the focus on clients can be a little bit less. So maybe we'll also have an uptake at that point in time of new clients. Simon Falk: Next question in line comes from Namita Samtani from Barclays. Namita Samtani: The first one on the net interest income. Did I hear you say that you hope it goes up year-on-year versus 2025? And my second question, how do you see competition and pricing on the bank lending side? Simon Falk: Yes. So maybe I'll start on the net interest income year-over-year. So we haven't provided exact guidance for 2026 versus 2025. What we said was basically we expect Q1 2026 to be the low point, and that is due to Q4 having a one-off positive impact of DKK 38 million, and there will also be 2 fewer interest -- days of interest in Q1. So underlying, we believe we have seen a trough in terms of NII, but we need to go into Q1 to see the actual trough and then we'll expect to grow from there. Whether that's enough to keep NII stable year-on-year, I think consensus is for a slight decline, and I get how you could end up there. Birger Krogh Nielsen: Looking at the competitive landscape, I think for bank lending, I think it's fair to say that there is ample liquidity and capital still within the banks. So that leads us to a relatively fierce competitive situation in '25. which also actually was the case if you go back in '24. But it seems to us that there has been even more competitive -- there's more competitiveness in the market now than there was 1 year ago. And you need to couple that with what I said initially that the demand for credit facilities may be a bit subdued due to the geopolitical uncertainty around Denmark because if you look at Denmark in isolation, we are still on a good footing when it comes to the economic development. Simon Falk: So there are no further questions in line. And with that, we would like to thank you for participating in today's conference call. A recording of the call will be made available on our IR website in the coming days. Please do not hesitate to contact us if you have further questions, and we appreciate your interest in Jyske Bank and wish you a nice day.
Daniel Fairclough: Good afternoon, everyone. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you for joining this call to discuss ArcelorMittal's performance and progress in 2025. Present on today's call, we have our CEO, Aditya Mittal; and our CFO, Genuino Christino. Before we begin, I'd like to mention a few housekeeping items. As usual, we will not be going through the results presentation that we published this morning on our website However, I do want to draw your attention to the disclaimers on Slide 26 of that presentation. Following opening remarks from Aditya and Genuino, we will move directly to the Q&A session. [Operator Instructions] And with that, I will hand over the call to Aditya. Aditya Mittal: Thanks, Daniel. Welcome, everyone, and thank you for joining today's call. Before I ask Genuino to walk through our financial performance, I want to start by reflecting on the progress we have made against our 2025 priorities. When I look back at the year, the achievements are clear and everyone at ArcelorMittal should be very proud of what we have delivered. I will focus on 3 key topics. First, on safety. Across the organization, our people are galvanized and fully engaged in improving safety performance. A year ago, we outlined a 3-year safety transformation plan. And in 2025, we have seen real measurable progress. All key safety KPIs have improved, most notably fatality prevention. Custom safety road maps are at the heart of ArcelorMittal's transformation program, designed to strengthen our safety culture, enhance risk management and drive progress towards our goal of zero fatalities and serious injuries. Secondly, on trade policy. ArcelorMittal has been a vocal advocate for the need to address the market distortions created by excess capacity and unfair trade dynamics. It is encouraging to see the European Commission recognize and address this over the past 12 months. With the new carbon border adjustment mechanism in place, we are now competing on a more level playing field. And the new tariff-rate quota trade measure will significantly limit the amount of steel that can be dumped into the European market. Together, this fundamentally resets the outlook for the European steel industry and creates the conditions for a balanced market structure that will restore profitability and returns on capital to healthy levels. I want to take this opportunity to reassure our customers that ArcelorMittal is ready and able to meet all their needs for high-quality steel delivered with the best-in-class service they expect from us. And while Europe has perhaps seen the most significant changes in trade policy, we are seeing real efforts in Canada and Brazil to also protect their domestic markets. This should add incremental support to our results in those regions as we move through this year. Moving to my third topic, growth. ArcelorMittal's growth strategy is clearly differentiated and sets us apart from our peers. In 2025, we began to reap the benefits of several strategic investments made in recent years. Our projects and portfolio optimization helped support our results in 2025, and this growth momentum will continue. Our strategic projects will add an additional $1.6 billion of EBITDA in the near future. A core pillar of our growth strategy is energy transition. We are expanding our renewables portfolio. We are building electrical steel capacities to support electrification and mobility, and we are expanding our EAF footprint where the economics make sense. We remain laser-focused on competitiveness and allocating capital to where we can achieve the strongest returns. We are consistently generating solid investable cash flow, $1.9 billion in 2025 and $2 billion the year before. This enables us to continue strengthening the business through investment in these high-return opportunities while consistently returning cash to shareholders. As I conclude, my message is simple. A more supportive trade policy has reshaped the outlook of our business. This is set to amplify the transformational progress we have delivered at ArcelorMittal in recent cycles. We benefit from best-in-class operations and an industry-leading R&D program. Our reputation for quality, innovation and operational excellence sets us apart from our competition, and this is all down to our people. So I would like to sincerely thank our employees and also our key stakeholders for their continued trust, commitment and support. I will now hand it over to Genuino to talk more about our financial performance. Genuino Christino: Thank you, Aditya, and good afternoon, everyone. Let me start by saying that 2025 was another year in which the resilience of our business was clearly demonstrated. We delivered EBITDA of $6.5 billion, which is equivalent to $121 EBITDA per tonne shipped. This is almost double the margin that we achieved at previous cyclical low points and reflect how the earnings power of ArcelorMittal has structurally improved. The benefits of our optimized asset base and our diversified footprint are now being complemented by the additional EBITDA being generated by our strategic projects. In 2025, these projects contributed $0.7 billion of new EBITDA, driven by a record performance in Liberia, the continued build-out of our renewables capacity in India and the significant strengthening of our U.S. footprint following the full consolidation of Calvert. Turning to cash flows. In 2025, we generated $1.9 billion of investable cash. This brings the total investable cash flow generated since 2021 to $23.5 billion. Last year, we allocated $1.1 billion towards high-return strategic growth projects, returned $0.7 billion to shareholders and deployed $0.2 billion cash to M&A alongside $1.7 billion of net debt assumed through these transactions. Our results continue to show that ArcelorMittal can deliver value through all phases of the steel cycle. Today, we have proposed a base dividend of $0.60 per share. This marks the doubling of our dividend over the past 5 years and reflects our increasing confidence in the company's outlook. In addition to dividends, our share buyback program has been a major driver of value creation. Our share count has been reduced by 38% over the past 5 years, a pace unmatched by any of our peers, significantly enhancing value per share. Finally, regarding the positive outlook for 2026, we expect higher steel production and shipments across all our regions this year, supported by operational improvements and strengthened trade protections. We are confident in our ability to continue generating positive free cash flows in 2026 and beyond, and we will remain disciplined in allocating this through our established capital return policy. With that, Daniel, I believe we can go to our Q&As. Daniel Fairclough: Excellent. Thanks, Genuino. [Operator Instructions] We have a good queue already, and we'll take the first question from Alain at Morgan Stanley. Alain Gabriel: I've got a couple. I'll take them one at a time. First one is on Europe. So the industry structure is changing, and you have quite a flexibility across your European assets to bring in more tonnes to the market, should they be needed. How quickly can you bring these tonnes online? And what signposts would you look for before making that decision? That's the first question. Aditya Mittal: Thank you, Alain. Can you say the last bit? What -- I missed it. What would we have to look for before we bring the capacity online? What was the question? Alain Gabriel: Indeed. What signposts are you looking for before bringing the new capacity online? And how quickly can you bring this capacity as well? Aditya Mittal: Fantastic. Thank you, Alain. So yes, look, I think clearly, the biggest change since I last spoke to you guys has been Europe. I won't go through the details of the TRQ and the CBAM program. In terms of your question, we are well positioned at ArcelorMittal because we do have certain idle capacity. We can bring that online quite quickly. It is not subject to reline. It is not subject to bringing back people who have been permanently laid off. So we could meet the deadline that is projected. I think the best -- the latest estimate remains 1st of July for the TRQ to be put in place. Hopefully earlier, but today, the latest estimate is 1st of July, and we'd be able to bring the capacity online in that time frame. What is the capacity? You may ask as a follow-up. We do have the ramp-up of our Sestao mini mill, which is underway. We have a new electric furnace in Gijon and we do have some spare blast furnace capacity. So it's a combination of the above in terms of idle capacity or available capacity. In terms of signposts, I think signposts are very clear, right? The signpost has to be customer demand, i.e., requirement in the market. We don't want to bring in capacity just for the sake of bringing back capacity. And related to that and underpinning all of that is earnings a healthy and sustainable return on the capital employed in Europe. So clearly, we remain focused on meeting customer demand, but at the same time, ensuring that these tonnes are profitable and achieve our return thresholds. Alain Gabriel: And my second question is on the usual profit bridges Q4 into Q1, including the impact of the restart costs in Europe, if you decide to bring in some capacity in Q1? And then more importantly into Q2, where the lagged prices really kick in. So any color on that bridge would be very much appreciated. Aditya Mittal: I missed the first bit of your question, but perhaps Genuino caught it all. So Genuino... Genuino Christino: Yes, I got it. Aditya Mittal: Okay. Genuino Christino: Thanks. I got it, Aditya. Thank you. So let us start with the bridge then as we typically do. And I will start with North America because that's really where we're going to see a big delta quarter-on-quarter. So as you know, we were -- experienced our operational problems in Mexico that has been now largely resolved. So we will see a recovery in volumes in North America in Q1. As we know, prices have been moved up. So we will also see prices increasing in North America, right? So those are really the big 2 changes that we see in North America. We will be shipping more and prices will be higher. We're not going to have the repetition the operational costs from Mexican operations. Moving to Europe. In Europe, we will, of course, also see higher shipments, which is, as you know, also to some extent, seasonal. We will also see prices improving to some extent. But I would say that this is really more a second quarter phenomenon for us. Costs will also be moving up as we are seeing what is happening on the marketplace with the raw material basket and CO2 costs, right, following also the implementation of CBAM. Then Brazil should be relatively stable and also our mining division should also be relatively stable. We'll continue to ramp up the Liberia. So -- but we will -- in terms of shipment, it should be relatively stable quarter-on-quarter. So your -- second part of your question was on costs just to bring back this capacity. As Aditya said, it does not really involve. We're bringing more fixed costs. So the cost to restart this capacity will not be something meaningful to your bridge, Alain. Alain Gabriel: And any hints you can give us on Q2 given that there's a lag effect in both North America and in Europe? Genuino Christino: Well, I think that the key point there really is in Q2, as we know, I mean, that's always the strongest quarter from a volume point of view in Europe. So I would expect to continue to see that trend, right? And as we know, we'll see the full impact of the prices that we are seeing in the marketplace right now impacting our Q2 results in Europe and North America. We started to see prices also responding also in Brazil. So that should also improve our realized prices in quarter 2 as well. Operator: So we'll move to the next person in the queue, which is Tristan at BNP Paribas. Tristan Gresser: I have 2. The first is on Europe decarbonization. As you have now more visibility on the returns you can make in Europe, what are the next steps and the time line around all the decarbonization project you previously announced in each country? And if the structural margin level is now higher in Europe, does that mean also that your previous CapEx maximum of $5 billion could potentially be increased? Aditya Mittal: Thank you, Tristan. Yes, a really good question. As all of you know, in Europe from 1st of Jan, the carbon border adjustment mechanism was put in place, which creates a level playing field in terms of carbon costs. In terms of decarb, we call it economic decarbonization in ArcelorMittal. We call it economic decarbonization because it has to make economic sense. What is our plan? We have long talked about we need certain preconditions to economically decarbonize our footprint in Europe or in other parts of the world. So the conditions that we've talked about publicly have been energy. As you saw in France, we signed a new energy contract with EDF. And at the same time, we wanted a level playing field in terms of carbon costs. Those conditions have been premet or those preconditions have been met. There is an economic case to decarbonize our operations. And so at this point in time, we're evaluating to decarbonize our French operations, specifically our Dunkirk facility by setting up an electric arc furnace. It's also in our presentation as future projects. In terms of what will come next, our idea is to be sequential. Taking on multiple projects at the same time is onerous, both from a people perspective, but also from a capital perspective. And therefore, you should be comfortable with our CapEx guidance of $4.5 billion to $5 billion on a going-forward basis because, yes, we're starting Dunkirk. The intent is to do it sequentially, not overburden the organization, both from a people resource or a capital perspective. And at the same time, as I underlined and highlighted, these are economically attractive decarbonization projects. Tristan Gresser: That's very clear. And the second question is still on Europe and more on the ETS reform and review. What is your view on the potential extension of the phaseout period for free allowances in Europe, if you are in favor, and what it could change for your business? And how likely do you think as well that the commission will move forward and extend the deadline past 2034? Aditya Mittal: Yes. Thank you, Tristan. Look, I talked about this in my quote, in the earnings release, that the biggest change that has happened is -- in 2025 is a realization that countries around the world need the steel industry. It's about supply resilience, it's about national security. And we see increasing action to support the domestic steel industry, whether it's through trade or other actions. I see the same dynamic in Europe, right? That's the fundamental shift that has occurred in 2025. So there is support that's coming through the TRQ, there's support that's coming through the CBAM, but I also see a fundamental rethink that Europe cannot deindustrialize, but needs to retain and support its strategic industries. So I would take the ETS review in that context because that is the new dynamic and the ETS review should reflect that new dynamic. What is ArcelorMittal's focus area in that new dynamic or in the ETS review, is to highlight that today, energy costs in Europe remain very high relative to the global averages. Gas prices remain very high relative to what is available globally. And at the same time, when you look at what other steel companies around the world or other countries are doing in terms of decarbonizing their steel business, the pace is much slower, right? The steel industry is not able to adapt at the rate or slash pace that the ETS system is currently designed to do that. And so I do believe that we need to -- that the ETS system needs to adapt to reflect these realities. To the extent that it does not adapt to reflect these realities, at the end of the day, the CBAM is in place, right? We have a carbon border adjustment mechanism. So to the extent that we incur a carbon cost, the same as incurred by imported tonnes, and so there is a level playing field. And so I hope that provides a perspective on our thinking. Tristan Gresser: That is very clear. Daniel Fairclough: So we'll move to take the next question, which we'll take from Ephrem at Citigroup. Ephrem Ravi: Just 3 non-European questions, for a change. Firstly, on the Page 12 of the presentation, when you say further expansion at Hazira under study. Just to clarify, is that to the 15 million to 24 million tonnes that you've already planned and guided to by end of the decade? Or is it to beyond 24 million tonnes? Aditya Mittal: Thank you, Ephrem, for the questions. I'm not exactly sure what you're referring to, but let me talk about what's happening in Hazira. So this will provide a broader context and I hope it answers the question. So just starting with the macro, India remains a growth market, right? Demand continues to grow at 6% to 8%. We have an excellent facility with excellent products, excellent quality, excellent people, and we have a very strong platform to grow that. Today, our current capacity is about 9 million tonnes in Hazira and we are finishing our expansion, which will start up towards the end of the year, but will really be completed in 2027, where we will achieve a targeted capacity or design capacity of 15 million tonnes in the Hazira facility. We're actively working on an additional greenfield facility. We have not announced what the capacity level would be, but safe to assume it will be about 8 million tonnes on the Eastern Coast of India in Rajayyapeta. So that remains an option. And as we make progress on finalizing environmental clearance, land acquisition, virtual integration in terms of iron ore, we will be updating the market. Fundamentally, the vision is to grow the business and to achieve a design capacity in excess of 40 million tonnes in the long term. Ephrem Ravi: So very quickly, switching to Brazil. There are news reports that CSN is considering selling its steelmaking. I don't want you to comment on M&A specifically, but do you think you're capped out in Brazil from an acquisition perspective, given your high market share already? Aditya Mittal: So in Brazil, we have an excellent business. As you know, we have 2 facilities, Tubarão and Pecem. Two big picture points on Brazil. We're working with the government to further support the steel industry in terms of trade measures, so there is progress on that front. But simultaneously, we're growing our franchise, right? We just completed the Vega facility, which is automotive galvanizing capacity. In the presentation, you can see that we're evaluating further downstream capability in Tubarão. We have certain mining projects, which have come on stream in Brazil, namely Serra Azul. We have investments in the long business. So we are very comfortable with the business that we have. We have, like in other parts of the world, an excellent set of assets with excellent people and really are the market leader in terms of product quality, product capability as well as what we offer the market in terms of innovation, design, service, et cetera. Ephrem Ravi: And then finally on Calvert. You're ramping up your furnace #1, and it will be done pretty much in 6 months, I think. Given kind of the challenges of mobilizing another team for the next phase of expansion there, when do you think is a realistic time frame for approving the second EAF? Aditya Mittal: Yes. Ephrem, it's a great question. I don't expect it to be a medium-term phenomenon. I can't give you a specific time line. I expect this to be in the short term. We have put it in our presentation. We have further organic growth plans, Calvert, Dunkirk as well as what I just spoke about in terms of Brazil. We're also building up our electrical steel facility in Calvert, as you are aware. So we have completed the EAF, but we have another facility ongoing and we have plans to double our EAF capacity. So that is an update that I can provide. I don't know if Genuino can provide more of an update. Genuino Christino: No, I think that's a fair summary, Aditya, and we will have to wait and see when we announce the next steps. Daniel Fairclough: So we'll move now to take a question from Cole at Jefferies. Cole Hathorn: Just a follow-up on Europe and the impact of the import quotas and how you're thinking about ramping up your capacity. It's very difficult from the outside in to kind of put some shipment numbers to that. If we think that 10 million tonnes of imports are going to be displaced and ramped up in Europe, how do you think about how much Mittal can ramp up to meet those needs? Should we think about it as kind of 3 million to 4 million tonnes kind of keeping your market share? And when you talked about being able to ramp up initially some idle capacity, do you have an idea in mind, we can ramp up 2 million of that 3 million tonnes and then we'll need to put some more CapEx into that? Aditya Mittal: Yes, thank you for the question. I'll get Genuino to answer it. But just to maintain our market share, which is our intent, there's not that much significant CapEx that's required, right? We spoke about that earlier. So we do have idle capacity. We can bring it online to achieve the market growth. It's not a market share fight, right? It's to achieve market share growth based on customer demand. Genuino? Genuino Christino: Yes. I think you got the numbers right, right? So we are talking about 10 million tonnes of reduction of imports, about 8 million is for flat products, right? We talked about in the previous quarter, our market share against the domestic supply of about 30%. So I think you got the numbers right. And as you know, this is going to happen, we're going to see really the full impact of that in 2027 because as Aditya mentioned, our best guess today is to have the new TRQ from 1st of July. So we are already working on some of these tools, furnaces, be it France or Poland. So I think we're going to be in a good position to meet the demand. And I think that's really important for us to be able to service the customers when they need us, and that is our focus. So I would not expect to add more CapEx. You have our guidance. So we have provided the guidance of $4.5 billion to $5 billion, right? And it's all included in that. So I would not, at this point, conclude that there is more CapEx to come to be able to bring this extra capacity that we are talking about. Cole Hathorn: And then maybe just as a follow-up on that, to Alain's question. What's the trigger to start kind of ramping some of your idle capacity or improving operating rate? Do you really need to start seeing the demand and pricing as the trigger to start building some inventories? And Europe for a long time has benefited from having, I would say, quite short supply chains. Do customers need to adapt to longer order books or longer supply chains, which I imagine would be good for Mittal? Genuino Christino: Yes. Well, I think, look, this is not really a fight for market share, right? So I think we are -- we want to be ready when we see that demand, right? And so we're not going to be increasing capacity or just for the sake of doing it. I think Aditya mentioned it at the beginning of the call, our focus is on make sure that as we bring back this capacity, that it makes sense also from an economic point of view, that we earn our cost of capital. And I think that is our focus. Aditya, do you want to add to that? Aditya Mittal: Yes. I feel that you answered the question very well, Genuino, but there's also an answer in the question, the order book. I think the order book determines when we bring on this capacity. We don't have that much of long lead time in bringing on some of this capacity. Also recognize that we have a lot of slab capacity in Brazil. So we can augment our facilities with slabs from Brazil. So there is flexibility in-built in our operations, and we will examine the order book. And based on that, we will plan our production cycles. Daniel Fairclough: So we will move to take the next question from Reinhardt at Bank of America. Reinhardt van der Walt: First one, I just want to check on the dividend increase. Quite a substantial increase, I guess, this year-end and over the last 5. It does seem like the buyback pace has slowed very slightly. Should we read this as maybe a mix shift in how you're returning capital to shareholders? Or should we read this as an increase in the absolute level of payback in the dividend? Aditya Mittal: Yes. Thank you, Reinhardt. I'll get Genuino to answer it specifically or provide more details. But just at a high level, there is no change to our capital allocation framework, right? We think it has really served the company and its stakeholders really well. The framework remains 50% of free cash flow return to shareholders and 50% in terms of growth. We talked a lot about our growth portfolio in our opening remarks. You can see how well that is doing. We have not really used up much of the balance sheet, and yet we're delivering significant earnings enhancement, both in 2025, but also going forward. In terms of returns to shareholders, if you see, the share buyback program has been very successful. And because of the confidence that we have in the underlying operating business and what we're seeing from a macro perspective, we're very comfortable in increasing the dividend this quarter to $0.60. With that, Genuino, please go ahead. Genuino Christino: Yes, I think you touched on the key aspects of it. I think we did well in 2025. So we did more than the minimum according to our policy. And I think that's really the key message for everybody is the policy has been working extremely well. I think we're very pleased with the outcome of the policy based on our interaction with shareholders as well. We have a very good positive feedback. So the intention is to keep that. 2026, we believe will be a better year in terms of profitability. We are very confident that the company will continue to generate good levels of free cash. And as you know, the policy is such that 50% of that as a minimum should flow to shareholders. And we continue to see good value in our stock. So I would think that as we generate free cash, the buyback will continue to be our preferred tool to return cash to shareholders. Reinhardt van der Walt: Understood. That's very clear. And maybe if I could just ask one more question on your demand forecasts. So 2% next -- this year ex China, but Europe specifically, I mean, we're seeing sort of PMIs turning and construction indicators moving, especially since you last reported. Can you give us a more specific number for the European market by any chance? Aditya Mittal: Yes. Reinhardt, thank you for the question. We -- this quarter, we provided global guidance. The reason is because bare steel consumption is changing. I guess what am I trying to suggest to you, historically, when we published our ASC numbers, that became a proxy for the change in our shipments in terms of markets. That is no longer the case because trade has become such a big driver that the change in our shipments is much more driven by trade policy. So what we did want to do was provide you with the global outlook, a positive macro outlook. That's what we're seeing. You spoke about some other factors in Europe. The other factors in Europe that we're seeing on a more medium-term basis is the German infrastructure spend. That's quite significant, as you are aware. You also see a resurgence in defense-based spending, right? Now European countries are moving towards 5% of NATO spend, so that's a positive medium-term dynamic. Globally, in other markets, there are other positive dynamics. So we just wanted to provide with a -- with you with a global perspective and then you can model what you expect how our shipments will do based on the changes in trade policy. So I hope that answers the question. Daniel Fairclough: So we'll move now to take the next question from Bastian at Deutsche Bank. Bastian Synagowitz: Just the first one on Europe as well. And I guess, you turned more positive on the market as we all do. Just looking at the market structure, though, Europe is obviously still a much more fragmented market than many other markets you're operating in. And I guess you did your job to a very large extent, but do you still see more scope and need for consolidation in Europe? And would you aim to continue to play a role in this? Or is this something you would leave to the other players? That's my first question. Aditya Mittal: Yes. Thank you, Bastian. We are very comfortable with our footprint in Europe. As we talked about, we have latent capacity to grow it at minimal capital costs or CapEx. And as you do it, you get economies of scale, you get fixed cost dilution, i.e., fixed cost absorption. The assets that we have are well invested. They're producing high-quality products. We don't really see significant benefits from consolidating at this point in time. If anything changes, obviously, from further consolidation for us in Europe, if anything changes, obviously, we will update you guys. Bastian Synagowitz: Got you. Okay. Very clear. Then one more question actually on just the back and forth we've seen on the European stance with regards to Russian material and how it may be treated in the context of the planned TDI. And I guess that also particularly depends on how far semifinished products are in scope or not. So do you have a view on this? And how far Russian semis may or should be tackled by the new tool? Aditya Mittal: So I can just provide you with information versus a perspective. In terms of slabs, you're right. They are not part of the tariff-rate quota, the TRQ. There has been a position paper that has been published by the European Parliament, I believe, where they are demanding they are demanding that there is no Russian slabs that are brought into the European marketplace. But it is not a position that has yet been adopted by either the council or the commission. Clearly, there is a move in that direction, but time will tell whether that actually gets enacted into policy or not. Daniel Fairclough: So we'll move now to take a question from Matt at Goldman Sachs. Matthew Greene: I have a couple of questions just on CapEx and then a follow-on, on Liberia. Just on CapEx, perhaps you can just clarify a couple of things. Just the strategic CapEx spend was a bit of a -- it fell short, I guess, of what you guided for the year by about $300 million, $400 million. So you spent about, I guess, 75% of the CapEx, yet still delivered the full $400 million of strategic EBITDA uplift that you guided through last year. So I guess, can you just sort of talk about what the moving bits are? Has that CapEx been deferred into 2026? Has it been canceled? Because I see '26 as that -- is that EBITDA uplift or that target uplift has been trimmed slightly as well? So yes, if you could just help marry up what's going on there with some of the strategic CapEx spend, please? Genuino Christino: Yes, Matt, let me take that one. So you're right. So we came at the end a little bit lower than the low end of our range for CapEx. And really the biggest delta there, Matt, is you may have seen that we have just recently finalized the MDA extension for Liberia, right? And we are providing you with the number there. So this will -- we will have to pay the government $200 million in Q1, and that number will be part of our CapEx because it gets capitalized and amortized throughout the life of the new MDA, which now extends until 2050, right? So that's about $200 million. So if you add that to our CapEx of 2025, then we are there. So no change to the projects or delays. So we continue to move forward, right? And then when we think about what we're going to be doing in 2026, I think a lot of the CapEx will go into electrical steels in the U.S., in Europe, the renewables, the projects that we announced for renewables in India, right? And then, of course, we will have this $200 million for Liberia that should be paid in quarter 1. So that's how I would describe the moving parts, pieces of our strategic growth CapEx. Matthew Greene: Got it. That's clear. Okay. So just a delay in that spend and, obviously, no EBITDA uplift given it's an extension of the mining agreement. Okay. That's clear. Well, look, moving on to Liberia then, just you touched on this agreement allowing you to push the rail up to 30 million tonnes. How should we think about the criteria here that would trigger the decision for you to move beyond 20 million tonnes? And perhaps you could just touch on what are the limitations? Is rail the limitation at 20 million tonnes or is it the mine? Are you oversizing any part of the mine to, I guess, allow you to expand at a lower capital intensity in the future? Could you just touch on kind of how you're thinking about that pathway to 30 million tonnes? Aditya Mittal: Yes. Thank you, Matt. It's a great question. In terms of capacity, there's minimal infrastructure required for rail. The rail is quite well designed. They can accommodate up to 30 million tonnes. You probably have to buy some rolling stock, but you don't have to set up a whole new rail infrastructure. In terms of the mine, we want to further explore and develop the mining licenses that we have and examine how we can bring production up to 30 million tonnes at low capital costs that achieve our return on capital. That's fundamentally it, right? We want to make sure after we had made this investment, which is doing really well, and we can see the increase in production in Liberia and more expected in 2026, how we can continue to outperform and deliver these projects, which create higher returns for the company. So that study is underway and as soon as that is complete, we'll update you. It's not in our document in terms of what you can expect in the short term. So you can expect that this will take a little bit of time before it's finalized. Daniel Fairclough: So we'll move now to take a question from Timna at Wells Fargo. Timna Tanners: I wanted to follow up with Aditya's comments on the opening remarks about the additional measures in Canada and Brazil. I'm curious about your thoughts. There's also, of course, threats to India and Mexico of your coverage. And given the sharp measures to prohibit trade or restrict trade, I suppose, to the U.S. and EU, is there not even more risk on those regions? And are they doing enough to combat the excess supply that you've alluded to? Aditya Mittal: Yes, Timna, look, excellent question. The short answer is yes. There is heightened risk in these markets. So I talked about Canada already, so I won't go through it. I addressed Mexico, I believe that they're moving forward, but the pace can be accelerated. In terms of Brazil, it's a similar conversation. The government is very engaged on ensuring that the steel industry in Brazil continues to thrive. They understand that the steel industry is domestically important, both long and flat. There have been some new measures that have been put in place recently. We expect this to further develop. Let us see the impact of the European trade measure that will be put in place latest by 1st of July and what it does to some of these markets. But I would expect that governments will react. I mean if there is a direct impact, I think everyone is recognizing that, that is very important to support the domestic steel industry for supplier resilience, for national security, for various other reasons. And so I am not overly concerned by that development or by that scenario, I should say. In terms of India, in India, I think you are solving for 2 things at the same time. It's unique from other markets in the sense that there is significant growth. And when you have growth that clearly supports the development, it supports profitability, as you continue to drive scale advantage, you can do productivity improvement and the 6% to 8% growth level is quite healthy for our market. And so I think the growth vector offsets some of the trade actions in that market because the government remains very focused on inflation. Nevertheless, even with the existing trade policy in place, we can see that the steel industry in India remains profitable. Growth is profitable, and that's where we continue to expand our operations. So Timna, I hope that provided you with a quick perspective. Timna Tanners: Yes, I appreciate it. It's not a quick topic, but we'll stay tuned. The other question we had, I just wanted to get your perspective on the substitution risk and opportunity in Europe, in particular. So we have heard that maybe Audi is switching more to steel from aluminum on the margin, but then also perhaps the move up in prices could risk some demand destruction. So I just wanted your thoughts on substitution both ways, if possible, please. Aditya Mittal: Sure. So we have gone through markets in which there have been significant tariff or trade measures put in place. I mean, I believe we live in one, the United States. And we have not seen that level of demand disruption or significant demand disruption in the downstream industries, right? So I think overall, this is not a phenomena that we are concerned about. However, we do want our customer base to be competitive. I think we always want to grow with our customer base. So that really is the thing that we want to solve towards, how can our customer base continue to grow and flourish. In that, I think there is a lot of activity in the European Union, a recognition that is also very important for European industrialization. And so if you see in the TRQ, there is a conversation on what has to be done on downstream industries as well, similar to what the U.S. has done. And so I would expect that once this is in place, there will be a conversation on TRQ measures for downstream industries. The downstream industries are not as well organized as steel, so it will take some time, but I do expect that to occur. There's a similar conversation on CBAM for downstream industries. What can be done in terms of CBAM for downstream industries? So I do expect that as these measures are put in place for the steel business, they're also put in place for some of the downstream industries. And there's also support. For example, we're growing our electrical steel franchise. And we do want to see electric vehicles being manufactured in Europe, not just the assembly of the vehicles, but everything, right, the whole gamut of activities. So that is the direction of travel and that is what we remain focused on. In terms of automotive steels, look, we have a leading franchise. We continue to do very well in demonstrating that steel is a premier product. It has excellent lightweighting capability and is available at a very competitive cost. Through our R&D efforts, through our process capabilities, that journey continues in all the markets in which we operate. Daniel Fairclough: So we'll move now to take a question from Phil at KeyBanc. Philip Gibbs: Regarding Calvert, just curious where the current operating rates are on the EAF. And then in Mexico, how much incremental volume should we think is coming back after the outages? Genuino Christino: Yes, Phil. Look, we are progressing, Phil, with the ramp-up of the EAF. So our expectation is to see a meaningful improvement in quarter 1. And as we discussed, we are hoping to be up and running at capacity towards the end of the second half, right? So it's progressing well. We are in dialogue with our customers for the homologation of the product. So it's progressing well. In Mexico, really the volumes that we're going to see coming in quarter 1. So as you know, we have 2 business in Mexico, longs and flats. The long business was basically the furnace was not operating in quarter 4 and started end of Jan. So you're going to have 2 months there, and it's a furnace that produces about 1 million tonnes. So you're going to have 2 months of the production and shipments. So that's what you're going to see. On the flat side, so we were -- we had maintenance for about 1 month in Q4. So you're going to have the full quarter, quarter 1 in operation. So that should add another. So we are talking about 2.8 million tonnes for our flat business at the moment. So then it's going to be 1 month more of capacity, Phil. Philip Gibbs: And then just as a follow-up, I saw D&A pop pretty good in Q4. I think largely, it was in North America. What should we be modeling just overall for D&A for '26? Genuino Christino: For '26 overall or you're asking for overall or for North America? Philip Gibbs: Overall. I just noticed the change in North America a lot quarter-over-quarter, but... Genuino Christino: Yes, yes, yes. So if you read our MDA, you're going to see we are providing a guidance on that, Phil. It should be in the range of $2.9 billion to $3 billion. So some of the new projects, of course, coming online. So there is a depreciation for that, right? And what you see, the data that you see in North America in quarter 4, it's just as we typically do at the end of the year. So -- and as we know, this is all based on estimates and to the extent that we have assets that ended -- get to end of life, we have this correction. So that should not be the run rate for the full year. Daniel Fairclough: So we have time I think, for one more question, which we will take from Max at ODDO. Maxime Kogge: So the first one is on Ilva. There has been some developments recently, which have forced you to issue a press release. Can you perhaps give us some sense of the next milestones there? And when we will get more clarity on the financial impact? I assume you haven't provisioned any amount at this stage, right? Genuino Christino: Max, yes. So look, I mean, you have our response there, right? And you referred to the press release and that's the right place to go. And you're absolutely right. So we have no provisions for that. We don't believe that is the case it has any merit. So there are no provisions in our books. And in terms of timing, I mean, we will see, but when we speak with our lawyers, it's likely that it may last for a couple of years. So we will, of course, update you as and when there are new developments. But it should be -- it should take some time. Maxime Kogge: Okay. Second question is on CBAM. Can you perhaps give us a bit of your initial feedback on the first months of implementation? Do you still see some circumvention going through the system? It seems also there was some import front-loading ahead of CBAM at the end of last year. So does it mean that most of the impact from CBAM in terms of pricing is yet to come? Aditya Mittal: Yes. That's a great question. So I'll address parts of your question. In terms of the front-loading of the CBAM, the CBAM came into effect 1st Jan 2026. However, as per the legislation, it's for a product which is produced before 1st Jan 2026 does not have any CO2 cost, right? So the product may arrive in Jan or Feb, but as long as it was produced in December 2025, there is no CBAM effect. So you don't see it in the January numbers. However, we are seeing it now because import offers are including CBAM costs. And as you can see, in Europe, there has been a change in the spot pricing of steel and that is reflecting -- some of it is reflecting the CBAM effect. In terms of your question on circumvention that as you know, there is also an activity to further tighten the CBAM. And there are a few topics to address. I spoke about, I think Timna asked a question on downstream. I spoke about the downstream. There is a review on what to do for CBAM for downstream. There is also a fund that is being created to support exports from Europe, right? And how we can support steel companies in Europe so that they can continue to export product globally. And then the third aspect is circumvention. So there is circumvention legislation, and we need to make sure that there is no resource shuffling and circumvention that occurs. At this point in time, we have not seen that. Clearly, the default values are in place. Certain companies will work through actual values. But fundamentally, so far, we have not seen that. Maxime Kogge: Okay. Very clear. And just the last one is on the India greenfield. So as the construction is getting nearer, how should we think about this financing? Will it be self-funded or through bank lines as previous phases of the development were done? Or will it be partly funded by equity injections from the shareholders, in which case, are you going to include them in your CapEx guidance? Aditya Mittal: Yes. Look, a great question. We are focused at ArcelorMittal on minimizing funding costs both at ArcelorMittal and our joint ventures. So we will make sure the capital structure that we put in place, both in India and ArcelorMittal supports that. To the extent that we have further news on that to share with you in terms of CapEx guidance or others, we will obviously update you. At this point in time, we are focused on achieving groundbreaking, achieving the key milestones and then we will come back and report to you on how we are minimizing overall funding costs. Daniel Fairclough: So that, Aditya, was our last question, so I'll hand back to you for any closing remarks. Aditya Mittal: Okay. Great. Thank you, Daniel. Thank you, everyone, for taking the time to join us. I hope the discussions gave you a clear sense of the progress we are making and the confidence we have in the road ahead. As you all heard, the outlook is positive. Policy developments are creating the foundations for a fairer and more balanced market. Our investments, particularly those supporting the energy transition, are delivering tangible returns and positioning us for long-term value creation. As I said, right at the opening, what underpins all of this and what is the foundation of all of this is our people. Across the company, I see a deep commitment to operational excellence, to innovation, to building a safer and more competitive ArcelorMittal. This gives me great confidence that we can continue executing our differentiated strategy to safely grow ArcelorMittal and create value for all our stakeholders. Thank you once again. With that, I will close today's call, and I look forward to speaking with you again soon.
Operator: Hello, and welcome to today's presentation with Nolato, who is going to present the report for the Fourth Quarter of 2025. With us here to present today is CEO, Christer Wahlquist; and CFO, Per-Ola Holmstrom. [Operator Instructions]. After presentation, there will be a Q&A. [Operator Instructions] And with that said, I hand over the word to you guys. Christer Wahlquist: Thank you, and welcome to the presentation of Nolato's Fourth Quarter of 2025. Starting on Page 2, we had sales that totaled just shy of SEK 2.3 billion in the quarter, which gives a growth of approximately 2% adjusted for currency. We saw an increased growth rate for the Medical Solutions business area at 5%. We saw a decrease of approximately 1% for Engineered Solutions adjusted for currency. We had some headwinds on the sales in the last part of the quarter due to Christmas holidays and during that time. Our operating profit ended up at SEK 236 million in comparison to SEK 240 million. This was strongly affected by currency headwinds of 6%. The margin rose to 10.4%. So we saw improved margins in both areas, but sequentially lower due to somewhat weaker volumes during the Christmas break and also some startup costs for the new programs in United States. If we focus on the full year of 2025, we ended up at close to SEK 9.5 billion in sales. That was corresponding to a 2% increase adjusted for currency. We saw an operating profit increase 11%, even though we had a strong currency headwind. The margin improved and ended up at 11.3% in comparison to 9.9%. So we saw a 1.4 percentage points increase of margin. The earnings per share ended up at SEK 2.88 per share, and we have a very strong financial position, enabling us to execute on our increased acquisition strategy. The dividend proposal is SEK 1.7 in comparison to SEK 1.5 per share, and that is a current payout ratio of 59% in comparison to 61% last year. If we jump to Page 5, starting with Medical Solutions. Here, we are on a growth and global expansion journey, and this business area now corresponds to 58% of group sales in the fourth quarter. On Page 6, we see our focused product areas. We feel that we are very well positioned with leading global customers and positioned in very interesting product areas. If we go through them a little quickly, we see the in vitro diagnostics with a long-term growth potential, and we have a very strong position in this therapeutical area. Cardiology, of course, high-end market, a lot of lifetime implants and very high demands on the products delivered. Drug Delivery, a growth market area where we have a very strong position and well positioned for continuously growth. Endoscopy and General Surgery, it's a changing market. It's interesting with the new sort of more robotic surgery that are coming in. Continence Care, of course, high-volume market with huge volumes. If we then jump into the fourth quarter for Medical Solutions, we ended up just above SEK 1.3 billion in sales, which corresponds to a 5% adjusted currency growth. We see that the drug delivery market continued to exhibit growth within the autoinjector and pen injector systems. We saw a positive development for the in vitro diagnostic during the year with a slow start last year and then increasing volumes. If we look on the margin side, we ended up at 11.6% margin for the business area. That is an improvement of 0.4 percentage points compared to 2024. We had, during the quarter, a negative impact due to temporary higher cost for the start-ups, as mentioned before, and also some volume headwinds during the Christmas breaks. Our expansions are going according to plan, both in Hungary, Poland and Malaysia. Jumping into Engineered Solutions, which is a sales level of close to SEK 1 billion and 42% of group sales in fourth quarter. In this area, we are focusing on different product areas, of course, the consumer electronics where we see potentials, hygiene, good potentials and automotive, of course, a little bit slow right now, as we explained in previous quarters. And then that's a little bit different market, the materials, where we see strong growth, but also affected during this quarter by the increased cost of precious materials. Jumping to the next page and then summarizing Engineered Solutions for the fourth quarter. As mentioned, strong growth for materials, 10% increase if we adjust for the currency. We saw sustained performance for consumer electronics, particularly in Asia. After a positive performance during the year, volumes decreased for Hygiene in the last quarter due to an inventory adjustments ahead of year-end. The total business area ended up at a margin of 9.9% in comparison to 9.2%. We saw, of course, favorable product mix. But if we compare to the previous quarters of 2025, we had negative impact of the lower volumes and sharply increased precious metal prices, as mentioned. Per-Ola Holmström: Good afternoon, Per-Ola Holmstrom, CFO, and group financial highlights on Page 11. Net sales was SEK 2.272 billion in the quarter, a 2% growth given currency headwinds of 7%. Operating profit EBITA amounted to SEK 236 million, slightly below last year, but with currency headwinds of 6%, representing an accelerating negative effect of about SEK 14 million in the fourth quarter. The EBITA margin for the full year 2025 improved by 1.4 percentage points, driven by pricing, cost adjustments and efforts in the entire supply chain. The quarter improved 0.3 percentage points to 10.4%. The declined margin compared to previous quarters 2025 was negatively affected by: one, temporarily higher costs for start-up of the new products in the U.S. The medical margin was negatively affected by that by 0.5 percentage points; two, slightly lower volumes within mainly Engineered due to holidays at year-end; three, sharply increased prices for precious metals within materials in business area Engineered. Summarizing these 2 effects for Engineered, the total negative effect is 1.0 percentage points for the business area. Four, group cost was on the high side in Q4 and in comparison to Q3 that had one-offs of plus SEK 7 million in addition, effects from M&A activities in Q4, giving a delta of SEK 10 million compared to Q3. Summarizing these 4 items, the temporary negative effect is in the range of SEK 25 million to SEK 30 million compared to Q3. Parts of these will influence the first quarter 2026 as well. Cash flow from operating activities was SEK 310 million, a good level in the quarter, but last year was very positive from improved working capital. Net investments, we did see a shift in trends. CapEx declined compared to the comparative quarter last year to SEK 146 million. The full year 2026 is expected to be between SEK 650 million to SEK 700 million, where SEK 100 million approximately still is left for the Hungarian project. Return on capital employed for the full year improved to 14.2%. Christer Wahlquist: Turning to Page 13 -- no, sorry. Jumping, turning to Page 12 -- sorry. Sustainable development. We have had a very positive development of our -- all kinds of measurements on the sustainable side. If we focus first on our Scope 1 and 2 emission, we have reduced this by 96% in absolute terms from our base year 2025 (sic) [ 2021 ] versus our target of 70% for 2020 (sic) [ 2030 ] . So it's an impressive journey on that side. If we talk about Scope 3 Upstream's emissions, we have reduced that by 30% in absolute terms from the same base year versus our target of 25%. So we are well ahead of our near-term targets on path towards 2030. We're also delivering fast results on our science-based target initiatives. And our Net-Zero targets for 2045 is approved by science-based target initiative in January of this year. Turning to Page 13, focusing on our current situation. Overall, we see a very favorable financial position that enables intensified M&A agenda and focusing on medical solutions, we have a continuous growth strategy. We see very high market activity. We have a very strong broad customer base with long-standing close customer relationships enable us to continue our growth journey. Our establishments of operations in Malaysia and an expansion in Poland as well as in Hungary are creating excellent opportunities for us. Within the Engineered Solutions business area, we are advancing our market positions. We have established position in new product areas and successful in new products and technology areas, mainly data center is very positive for materials and also the expansion of our operations in Malaysia, creating opportunities. We are now handling over for questions. Operator: Thank you so much for the presentation. Ladies and gentlemen, we will now carry on with some questions. [Operator Instructions] And the first caller here is Carl Ragnerstam from Nordea. You have the word. Carl Ragnerstam: It's Carl from Nordea. Sorry for a slow unmuting. A couple of questions here. It is, of course, a lot of dynamics in these reports. So I hope to unpack some of them. You mentioned 100 basis points in Engineered owing to shutdowns as well as the precious material thing. So firstly, I wonder what materials are we talking about? And secondly, yes, how do you view that topic specifically for Q1 and Q2? Per-Ola Holmström: Yes. We could see that the pricing we are talking about that is affecting materials. And as you know, we are compounding a material, which is including metal particles and some of these materials within that part is based on silver particles. And as you have seen, pricing of that has skyrocketed during the fourth quarter, and it has continued in the beginning of January as well. That is a part where we have quite short actions to change the pricing to our customers. And we are, of course, in the process of doing that. It's more standard materials, which we are handling, and that will give effect. But of course, there is a timing effect. And as you have seen, pricing have continued up in the beginning of January as well, however, now declining. So we are in the middle of a very dynamic pricing because of the silver materials mainly. So that is affecting that part. Carl Ragnerstam: And what portion of the 100 basis points was the metal or material thing compared to the customer earlier shutdowns? Per-Ola Holmström: That is the larger part of the 1 percentage. Carl Ragnerstam: And what did you say about Q1? Is it same effect or less effect or ballpark? Per-Ola Holmström: Yes. We do see that, that will continue in Q1 as well, but it's slowing down a bit during the end of the quarter. That is our assumption based on pricing activities that we have done. Then, of course, we don't know the ongoing pricing dynamics for the silver pricing going forward. But as far as we can see right now, there will be an effect which is slowing down during the rest of the quarter. Carl Ragnerstam: That's very clear. Jumping into Medical, you mentioned the production ramp-up in the U.S., the 50 basis points impact. How long is that ramp? And what product are you? Is it a multiproduct facility? Or what are you ramping? Christer Wahlquist: It's a multi things. There are different programs ramping at the same time. And we are expecting that to continue a little bit into the first quarter and then, of course, be more steady state. Carl Ragnerstam: Good. And the final question, if I may, is on the Medical organic growth. Did the new autoinjector contract that you're manufacturing in Hungary contribute with a similar magnitude as in Q3? And if so, what is the main delta behind the acceleration of the organic growth in Medical? Christer Wahlquist: It's continuing -- the new program in Hungary is continuing on the same level as in the third quarter and also expected to continue on the same level in the first quarter of 2026. So that's -- and then it's a general thing. We have a growth in different areas, all kinds -- all over the place, more or less. Carl Ragnerstam: Okay. Sorry, final one. In terms of the M&A cost you touched upon, it seems a little bit -- it is a little bit on the high side given your history of doing due diligence. Is it fair to assume that it's a bigger transaction? Or is it several smaller ones you're looking into? Per-Ola Holmström: Well, I mean, the delta of the SEK 10 million is coming from SEK 7 million from the one-time positive effect in Q3 and then the rest is mainly coming from these activities. So well... Carl Ragnerstam: Okay. Fair enough. Per-Ola Holmström: Large or not large, but yes, nothing... Carl Ragnerstam: Then I understand that. Very good. That's all for me. Operator: And the next caller here is Oscar Ronnkvist from SEB. You have the word. Oscar Ronnkvist: So yes, I just had one question on the volumes. So assuming that there were earlier shutdowns in Q4, do you expect to see a catch-up effect in Q1? Or is it more of a normalized quarter? Christer Wahlquist: I think we would see the first quarter as a more normalized quarter. Oscar Ronnkvist: All right. I see. And then just on the start-up costs here in the U.S., any particular reason why you sort of highlight that as a temporary cost? I suppose that, I mean, you're looking to expand most of the time. Christer Wahlquist: Yes, it was just an explanation to that we have several things running and it was more than normal. Oscar Ronnkvist: All right. I see. And then just I think a follow-up on Carl's question before, but just a clarification on the pricing adjustments in materials in specific. So how would you handle the dynamics of price increases when we have so volatile precious metal prices? Christer Wahlquist: Yes. It's a continuous -- of course, if you have an upwards trend, it's something that then you have to adjust and do it the right timing. And it's always a dynamic process, and you can't really go back to a customer every day. So then you might lose some temporarily on the upgoing if it's a continuous upwards trend. Oscar Ronnkvist: All right. But have you done any price increases thus far based on the higher material prices that we saw especially in Q4? Christer Wahlquist: Yes. We have. Operator: Thank you. And yes, final shout out here [Operator Instructions] It seems that, that was all the questions we had. So thank you so much, Nolato, for presenting here today, and thank you all for tuning in. I wish you a pleasant day. Christer Wahlquist: Thank you. Goodbye. Per-Ola Holmström: Bye.
Operator: Good morning, and welcome to the RMR Group Fiscal First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Bryan Maher, Senior Vice President. Please go ahead. Bryan Maher: Thank you. Good morning, and thank you for joining RMR's fiscal first quarter 2026 conference call. With me on today's call are President and CEO, Adam Portnoy; Chief Operating Officer, Matt Jordan; and Chief Financial Officer, Matt Brown. In just a moment, they will provide details about our business and quarterly results, followed by a question-and-answer session. I would also like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on RMR's beliefs and expectations as of today, February 5, 2026, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, which can be found on our website at rmrgroup.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we may discuss non-GAAP numbers during this call, including adjusted net income per share, distributable earnings and adjusted EBITDA. A reconciliation of net income determined in accordance with U.S. generally accepted accounting principles to these non-GAAP figures can be found in our financial results. I'll now turn the call over to Adam. Adam Portnoy: Thanks, Bryan, and thank you all for joining us this morning. Yesterday, we reported first quarter results that exceeded or at the high end of our expectations, highlighted by distributable earnings of $0.47 per share, adjusted net income of $0.20 per share and adjusted EBITDA of $19.5 million. I'm also happy to highlight that the strategic actions we have undertaken over the past two years at DHC and ILPT helped drive continued share price improvements at each REIT, and, in turn, resulted in RMR receiving $23.6 million in incentive fees for calendar year 2025. While there is more work ahead, the strategic steps taken thus far have helped generate significant positive returns for shareholders of DHC and ILPT. In 2025, DHC and ILPT were the #1 and #3 best-performing REITs in the United States as measured by total shareholder return. Although, the economic environment continues to experience elevated uncertainty, RMR remained active this past quarter, executing on our clients' strategic initiatives. While we are limited in what we can discuss today because we are reporting results in advance of our publicly traded client companies, I'd like to highlight several noteworthy accomplishments from the quarter. DHC continued its focus on improving SHOP NOI margins and selling noncore assets to further delever its balance sheet. In the fourth quarter, DHC completed its sale of 37 properties for gross proceeds of approximately $250 million. And for the full year, DHC sold 69 properties for approximately $605 million. Partially using these asset sales proceeds, DHC also fully repaid its zero coupon senior secured notes due in 2026. Leaving DHC with no debt maturities until 2028. This repayment further strengthens DHC's balance sheet, increased financial flexibility and unencumbered 45 collateral properties, representing $850 million in gross book value. During the quarter, DHC also completed its announced transition of 116 SHOP communities from AlerisLife to new operators that have proven track records and well-established regional footprints. DHC anticipates material SHOP NOI improvements as these new operators increase revenues and rightsize operations. SVC continues to make significant progress selling noncore hotels to delever its balance sheet. During the quarter, SVC completed the sale of 66 hotels for approximately $534 million and sold a total of 112 hotels in 2025 for $859 million. SVC also announced the early redemption of $300 million of its senior unsecured notes due February 2027, using these proceeds from hotel sales. Beyond the deleveraging efforts, we remain focused on helping SVC drive EBITDA growth across its hotel portfolio despite ongoing revenue displacement from renovation activity. Sonesta, which manages the majority of SVC's owned hotels and which is 34% owned by SVC, recently announced the appointment of Keith Pierce and Jeff Leer as Co-CEOs effective April 1st. These individuals will be instrumental in growing the Sonesta platform, while also working to improve EBITDA margins at the SVC-owned hotels. ILPT had a successful year of leasing activity and indicated during its third quarter earnings call that it was expecting a strong end to the year as it finalized a large number of lease renewals. The REIT successfully refinanced over $1.2 billion of debt in 2025 and materially increased its dividend. ILPT is actively exploring the refinancing of its remaining $1.4 billion of floating rate debt, which currently has a final maturity date of March 2027. Seven Hills, our mortgage REIT, completed a rights offering in December that raised gross proceeds of $65.2 million. This new capital should allow for over $200 million in gross loan investments. RMR agreed to backstop the offering, acquiring any rights not exercised as a demonstration of our confidence in Seven Hills and our Tremont lending platform. The offering resulted in subscriptions for approximately 5.5 million shares or 73.2% of the common shares offered. The RMR purchased the remaining 2 million shares for $17.4 million. With a pipeline of approximately $1 billion in potential lending opportunities, I'm confident our organization will quickly deploy these new proceeds in an accretive manner. In the fourth quarter alone, Seven Hills deployed $101 million into three new loans, which will complement its existing fully performing loan portfolio. Lastly, as we noted on our fourth quarter earnings call on October 30, 2025, OPI filed Chapter 11 bankruptcy. The bankruptcy process remains ongoing, and we will update investors as new information becomes available. We are hopeful the process will be concluded by the summer. And in the meantime, we remain committed to supporting the assets, vendors and tenants of OPI. To conclude, we are pleased with the progress RMR has made over the past quarter, assisting our public and private company clients with their financial and strategic objectives. Importantly, our perpetual capital clients provide RMR with stable cash flows, which we have used to pursue new growth initiatives in the private capital space to drive future revenue and earnings growth. With that, I'll now turn the call over to Matt Jordan, Executive Vice President and Chief Operating Officer, to provide added insights on our platform and private capital growth initiatives. Matthew Jordan: Thanks, Adam, and good morning, everyone. Despite continued economic uncertainty for the full year, RMR arranged nearly 10 million square feet of leasing at rental rates approximately 13% higher than previous rents for the same space. These results continue to demonstrate the strong relationships our leasing and property management teams have with our tenants and the brokerage community. On the private capital side of our business, we continue to make the investments necessary to further scale our platform and reduce the use of third-party placement agents. To that end, we recently announced the hiring of Peter Welch to lead International Capital Formation. Peter is an experienced real estate and capital markets executive, there will be a strong complement to Mary Smendzuik, who leads our North American Capital Formation efforts. Peter is based in Australia and joins RMR with a mandate to expand RMR's brand globally, and help raise capital for current and future strategies. Although the fundraising environment remains challenging, our current efforts are primarily focused on residential and select development opportunities, though the depth of our platform will allow us to pivot based on investor feedback. At RMR Residential, which represents $4.5 billion in value-add residential real estate across over 18,000 owned and managed units, our portfolio ended the year on a strong note. Our managed portfolio is approximately 93% occupied with resident retention for the year coming in at over 70% and resident delinquencies at nominal levels. We are seeing similar trends within RMR's owned residential portfolio with each of the five communities remaining on track with their stated business plans. As it relates to RMR's enhanced growth venture fundraising, which launched in September, our goal remains to partner with a select group of investors to raise approximately $250 million. As we've noted before, we believe this venture is unique in the current competitive marketplace, as it provides investors with the ability to share in property level and general partner economics. We look forward to providing further updates related to this important initiative on future calls. Turning to the retail sector. We continue to underwrite investment opportunities as we work to build a portfolio of value-add retail properties on our balance sheet to generate a track record we can raise money around in future years. Our first investment, the previously disclosed $21 million shopping center outside of Chicago, is ahead of our -- of its business plan, given our retail team's successful leasing efforts. As it relates to our credit strategy, we recently closed on the sale of two loans totaling $61.7 million, which netted RMR $16.6 million in proceeds after repaying the associated secured financing facility. During our approximate 1.5 years holding period, these loans generated returns to RMR of just over 14%. While RMR continues to invest in our people, technology and brand building, we remain committed to improving our adjusted EBITDA margins. We have been steadfast in controlling costs and have made significant strides in headcount rationalization through process improvement, the implementation of AI initiatives and reducing functional redundancies across our more than 30 locations nationwide. With that, I'll now turn the call over to Matt Brown, Executive Vice President and our Chief Financial Officer. Matthew Brown: Thanks, Matt, and good morning, everyone. For our first quarter, we reported adjusted EBITDA of $19.5 million, distributable earnings of $0.47 per share and adjusted net income of $0.20 per share, all of which exceeded or are at the high end of our guidance. Recurring service revenues were approximately $43 million, a sequential quarter decrease of approximately $2.5 million, driven primarily by the wind down of AlerisLife's business and a decrease in SVC's enterprise value as proceeds from hotel sales were used to repay debt. As Adam noted earlier, we earned aggregate incentive fees of $23.6 million for the year ending December 31st, including $17.9 million from DHC and $5.7 million from ILPT, as these REITs respective total returns per share exceeded the applicable benchmark total return for the 3-year measurement period. These fees were paid in January, adding to our overall liquidity and further improving our dividend coverage. Next quarter, we expect recurring service revenues to decrease to approximately $41 million, driven by lower construction supervision fees as calendar first quarter spend is often lower for our clients as well as decreases in certain of our managed REITs enterprise values and property management fees from strategic asset sales that were used to repay debt. During the quarter, we earned approximately $400,000 of fees from AlerisLife that will impact results in the second quarter as the business was substantially sold by December 31st. Our wholly owned portfolio of residential properties and one retail property contributed $1.4 million of increased net operating income in the quarter, mainly driven by the two residential acquisitions completed last quarter. Turning to expenses. Recurring cash compensation was $37.4 million, a sequential quarter decrease of approximately $1 million, driven by our emphasis on cost containment and aligning our employees' total rewards to overall results. Looking ahead to next quarter, we expect recurring cash compensation to remain at or slightly below this level with a cash compensation reimbursement rate of approximately 45% as compared to 46% this quarter. Recurring G&A this quarter was $10.5 million, a modest sequential quarter increase, driven by normal course legal and professional fees. Excluding the impact of annual director share grants we expect to make in March, we expect recurring G&A to remain at these levels over the next couple of quarters. Interest expense this quarter increased to $2.6 million as we incurred a full quarter of interest expense on the two leveraged residential properties acquired last quarter. Interest expense is expected to remain at current levels going forward. It is also worth noting that this quarter's income tax rate of 14.8% reflects the impact of incentive fees. For modeling purposes, we expect our tax rate to increase to approximately 17% in the second quarter. During the quarter, we sold two existing RMR loan investments to Seven Hills which, prior to the sale, contributed $411,000 to earnings in the quarter. In addition, we participated in Seven Hills rights offering by exercising RMR subscription rights and backstopping the transaction, which increased our ownership to 20.3%. Beginning next quarter, we expect to see an increase of $800,000 in quarterly adjusted EBITDA from additional dividends on this increased investment. Aggregating the collective assumptions I've outlined, next quarter, we expect adjusted EBITDA to be approximately $17 million to $19 million, distributable earnings to be between $0.41 and $0.43 per share and adjusted net income to be between $0.12 and $0.14 per share. As we have stated on previous earnings calls, while our wholly owned portfolio is contributing to adjusted EBITDA and distributable earnings, it is negatively impacting adjusted net income as we incur depreciation and interest expense, which will continue to impact us until these investments are sold into private capital strategies. We ended the quarter with nearly $150 million of total liquidity, including nearly $50 million in cash and $100 million of capacity on our undrawn revolving credit facility. With the $23.6 million in incentive fees collected in January, our liquidity profile leaves us well positioned to execute on our strategic objectives. That concludes our prepared remarks. Operator, please open the line for questions. Operator: [Operator Instructions] The first question today is from Mitch Germain with Citizens Bank. Mitch Germain: Peter's addition, Adam, I think the comments from either you or Matt, I apologize where it was complementing your existing fundraising efforts. But is this really kind of globalizing what you're doing currently, or was that already part of kind of what you were trying to accomplish with your fundraising? Adam Portnoy: Sure. Good morning, Mitch. It's a good question. Let me put some context around Peter's hire. So if you go back almost 6 months ago, we had no dedicated folks focused on private capital fundraising. And now we have, including Peter and Mary, which are senior folks, and there are some people working for them. We have four dedicated people now at the RMR Group dedicated wholly to raising capital privately. If you -- if I had to very simply describe Mary and Peter and sort of, again, very senior roles, Mary's very focused sort of U.S.-focused capital raising. And Peter is very focused ex-U.S. and with a real focus on Asia and Middle East. To get to the heart of your question, is this sort of a change? No, it's not really a change. It's just sort of bolstering what we were trying to do. Again, we didn't have people dedicated 6 months ago to raise capital. But that being said, on an ad hoc basis, we were meeting with folks in Asia and the Middle East or out of those parts of the region -- those parts of the globe. I think Peter's hire really sort of supercharges that and have someone dedicated with a really, for lack of a better word, a Rolodex that -- and experience in that market raising capital from those types of sources. So we just -- we don't think it's a real change. We just think it's sort of bolstering what we've been trying to do. And look, I think as a firm, we feel really good about the team we've assembled, and we're hopeful as the year progresses, we're going to see some results. Mitch Germain: Great. Last one for me. I think the comments were multifamily and development were initial focus or maybe that's where you're seeing the most interest, but you do have a retail asset, you talked about $1 billion debt pipeline. So can you just kind of describe to us kind of what sort of products you're looking to raise capital for in the market today? Adam Portnoy: Yes. Sure, Mitch. I think being a vertically integrated sort of middle market-oriented focused nationwide player in commercial real estate that touches all sort of major sectors. We can deploy capital for clients pretty much in any sector. And I think when we're out talking to clients or potential clients, that's a really attractive attribute about RMR and sort of our positioning in the marketplace. There's not a lot of firms to sort of check the boxes that we check. And so we're a very attractive sort of place for folks that want to deploy capital, especially in the U.S. middle market and want to pick a manager that can do lots of different things for them. That all being said, based on our conversations that are going on today and where we're focused, for 2026, we're very focused on getting our multifamily fund off the ground. As Matt highlighted, we have close to $100 million on our balance sheet deployed to sort of see that effort. We feel good and optimistic that as 2026 continues to come along that we will be able to be -- have some successes there in trying to launch that fund or that separate -- large separate account that we think we're going to put together around multifamily. In terms of deploying capital at the RMR level, as we think about across all of our clients, I think you've touched on it. As I think about 2026, I think we'll continue to put more money out multifamily. I think we'll continue to put money out on the loan side making loans. I think we will continue to put money out in retail. We talked a little bit about that, and what we're doing on our balance sheet. And I think there's going to be a select number of development opportunities that we might embark on to. So those are sort of the focuses we have. I will tell you just in conversations in the marketplace over the last -- since this year began. What's sort of interesting to me, big picture, a little less interest or people talking about industrial, a little less interest, people talking about lending, a little more interest in people talking about office and a continued interest in talking about multifamily, which has been strong throughout the cycle. So I hope that gives you some context. Operator: [Operator Instructions] The next question is from John Massocca with B. Riley. John Massocca: How would you kind of view the performance of the multifamily assets on balance sheet, maybe even relative to expectations when we were talking last quarter, it seemed like that was called out as part of the driver of relative outperformance to kind of what you were expecting at the time of the 4Q '25 earnings call. Matthew Jordan: Yes. Just -- this is Matt. It's a great question and something we did intentionally highlight. So most of the five assets are still early in their life cycle. And again, those are all value-add residential communities in the Sunbelt. So you're looking at a 3- to 5-year business plan, all targeted mid- to high-teen returns by the end of that business plan. And so again, as we look at most of those being at year-end, we're seeing really strong operational results. We're seeing the capital improvements we're making, resulting in premiums on the rent as we underwrote. We highlighted some of the key measures. A 70% tenant retention or resident retention rate is incredibly important in this market right now. You read a lot of headlines about oversupply in the multifamily space. But if you're holding on to tenants and residents, you're seeing rent growth that in our portfolio is approaching 5% versus new tenancy being rolled down in rent of 4% to 5%. So all of that has played really well in our favor, and we like where things are trending right now on those business plans. John Massocca: And I guess maybe as you think about -- I mean, it's a small sample set of assets, but as you think about where your properties are performing. I mean, is that product you think of maybe a stronger performance in kind of the broader Sunbelt market than was expected when you were underwriting, or is it something property specific that's causing the outperformance? Matthew Jordan: I think that's part of the secret sauce. We're trying to fund raise around that our folks have a long history, the team we acquired back in December '23. They know those markets well. We have a long tenured management team, who knows within each submarket, where -- what intersections, what streets, where are you going to see the best demographic trends and the best resident retention and rent growth possibilities, so that -- you hit the nail on the head. We believe what we have in-house and the data we're able to maximize is something we can fund raise around and find unique opportunities even in a very challenging market like we're in right now. John Massocca: Okay. And then maybe for Matt, can you maybe walk us through how you kind of get from the $0.20 of adjusted net income in kind of 1Q '26 to the $0.12 to $0.14 you're guiding for. I mean, I imagine there's some tax impact in there. And I was kind of curious on the depreciation side that got called out just given -- if you give -- basically the same amount of assets -- real estate assets on balance sheet as you did at 4Q '25. Just kind of curious what the pushes and pulls there are. Bryan Maher: Sure. So it's a good question. A couple of things that I noted in the prepared remarks. We earned in the quarter about $400,000 on our AlerisLife contract. That business, all the assets were substantially sold by December 31st. So that's a headwind heading into the second quarter for us. The loan portfolio, we earned about $400,000 on that as well. Those loans were sold in mid-quarter, so mid-November. And then in addition to that, construction management fees are expected to be lower in the calendar first quarter. That's a normal trend we see. And then we are expecting with debt pay downs at DHC and SVC that have occurred towards the end of calendar 2025, that's going to impact management fees as well. And then lastly, in March of each year, we generally grant shares to our trustees. So that's a couple of cents impact as well in the second quarter. John Massocca: Okay. I appreciate that. And then in terms of kind of the investment outlook, you mentioned loans again. What's the appetite for loan investments and just kind of the long-term strategy there, especially given the recent sale of kind of the loans you had on balance sheet at 4Q '25 and to Seven Hills? Adam Portnoy: Sure. So from a lending perspective or credit perspective, it's -- we consider it a growth engine for the RMR Group. I mean at Seven Hills, we had a very successful rights offering that we completed in December. RMR participated in that. We now own about 20% of Seven Hills, but Seven Hills has about over $200 million of new loans that it can put the work based on that rights offering, and it has just regular course loans maturing that required to be -- required capital to be reinvested. So we expect to have a pretty active 2026 in terms of new loans being put to work or are being underwritten in 2026, most of which I think will occur at the Seven Hills mortgage REIT. As we sit here today, I don't think we're planning -- there's no plan to put additional loans on the RMR balance sheet. We originally did that because we were trying to seed a vehicle around loans. As we were out in the marketplace talking to private capital about funding a vehicle, for whatever reason, it became evident to us that we didn't really need to seed the vehicle on our balance sheet. I think we are still having conversations with groups about managing a credit strategy for them, but it's less required, I guess is the right word, that we seed a portfolio on our balance sheet. I think we will have some success in the future raising capital around credit. But that all being said, even if we don't raise any additional private capital around credit 2026, I think we're going to have an active year. And I think we're going to be putting a lot of money out to work in the year, but it's mostly, if not all going to be going through the Seven Hills mortgage REIT. John Massocca: Okay. I appreciate that clarity. And then one last one for me. I know you kind of mentioned the focus is really on the multifamily fund. Is there some kind of time line in your mind or expectations for when you would expect that capital to be fully raised and maybe even start thinking about moving some of those assets off RMR's balance sheet? Adam Portnoy: So not to sound flippant, but ASAP, meaning we want to do it as fast as possible. It's really the #1 focus in terms of our private capital raising discussions in the marketplace. Again, we have lots of discussions on different strategies, but where we are being the most proactive in talking to folks and having conversations is around the multifamily platform and creating a vehicle and offloading those assets from RMR's balance sheet into the -- to seed the vehicle. Look, it's very hard to put an exact pin into exactly what's going to happen. I would say the management team, myself, we would expect it to happen in fiscal year 2026. I don't know if that's early in fiscal year 2026 or late. And when we say fiscal year, we're talking September 30th. So sometime between now and the end of the fiscal year, we would like to have that vehicle funded and those assets move, but it's very hard to put a precise time line on it. But I can tell you, there's a lot of effort going in towards it. It's sort of the #1 thing that our private capital group we've invested a lot in, our private capital Capital Markets, Investor Relations group and bringing talent on board, and I'm hopeful that we will meet that time line. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Adam Portnoy for any closing remarks. Adam Portnoy: Thank you all for joining our call today. Institutional investors should contact RMR Investor Relations if you would like to schedule a meeting with management. Operator, that concludes our call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Simon Falk: Hi, everyone. Thank you for joining us on Jyske Bank's conference call for the financial results for 2025. This is Simon Hagbart from Investor Relations speaking. With me, I have Jyske Bank's CEO, Lars Morch; and CFO, Birger Nielsen. Lars and Birger will walk you through our prepared remarks. Afterwards, we will open up for questions. I will now hand over to Lars. Lars Stensgaard Morch: Thank you, Simon. And I would also like to thank everybody for joining this conference call today. We closed 2025 on a strong note, delivering results above our previously guided ranges and growing EPS a full 18% year-on-year in Q4. This performance supported an upgrade of our outlook as well as our preannounced results for '25 in January. This morning, we published the full set of results for '25, including full details on strong capital position and updated capital targets. We now target a CET1 ratio of approximately 15% and a total capital ratio around 20%. This is at the lower end of our previous capital targets despite a systemic buffer of 0.9 percentage points. On the back of this, we have announced our largest capital distribution so far of DKK 4.5 billion in total, an increase of 20% year-on-year. We also provided our outlook for '26. We expect earnings per share in the range of DKK 71 to DKK 85, reflecting more normal levels of loan impairment charges and value adjustments following a favorable '25. We expect to continue to see positive core operating trends in '26. We are gaining personal customers in target segments, increasing our mortgage market share and have seen a healthy development with particularly larger corporates with high levels of customer satisfaction in all segments. The Danish economy is likely to show a balanced trajectory with a stable rate outlook as we maintain a solid credit quality with significant buffers in place. Overall, we ended '26 in a healthy position, and we are well placed to further build on our momentum. With that, let me hand over to Birger for a walk-through of our financial results. Birger Krogh Nielsen: Thank you, Lars. And as you may well know, the PL numbers and some of the balance sheet numbers were released back in the mid-January. And as Lars alluded to, the macro environment is actually relatively stable. Average long-term growth around 2% is expected. Inflation is under control. We have a high and steady employment and house prices are still on the rise, expectedly 3% during '26. And on top of that, the geopolitical uncertainty, of course, has and still can have some impact on the demand for credit facilities. Looking at the chart, a few comments. For '25 in total, the return on tangible equity was 11.9% and a cost/income ratio at 48%, better than our projections for '28, and there are several reasons to that. One is that the decrease in interest rates was 0.25 percentage points lower than expected. And value adjustments were very strong in '25, now the third consecutive year with a significant spread tightening with highly rated liquid Danish bonds. And thirdly, cost of risk was 0 for the second year in a row. And finally, we upgraded our expectations after Q3 and again, when we released the numbers in January. As you also can see, the EPS was in total DKK 85 in '25 with a strong end to the year, both in Q3 and Q4 with DKK 23 in those quarters. And looking at the right-hand side of the graph or the slide, you can see that AUM is still on the rise, Q-o-Q, a 2% rise, driven both by positive markets and net inflow of customers. And on the lending side, Q-o-Q, you can see that mortgages was up 1%, driven by private individuals and bank lending was up a couple of percent, both -- primarily driven by corporates despite the transfer of loans of mortgage-like loans to the balance sheet of Jyske Realkredit. And when it comes to leasing, it was a bit more muted during the course of Q4. Deposits finally on an upward trend again, both driven by private individuals as well as time deposits from corporates. So a decent development in balances at the end of the year. The outlook for this year, DKK 71 to DKK 85, DKK 4.3 billion to DKK 5.1 billion after tax. The core income line was very steady from '24 to '25, and we expect a lower level in '26, primarily driven by value adjustments. Core income -- sorry, core expenses is also expected to be slightly lower in '26. We will see a lower level of one-offs, and we will also do some cost initiatives that will outpace both inflation and wage inflation during the course of the year. Loan impairment charges. We expect an expense in '26, although a low one. We see significant post-model adjustments of DKK 1.7 billion here by year-end. We have, in the last 10 years seen 0 basis points average-wise in impairments. We have low write-offs also in Q4 and the Stage 3 part of the total portfolio is down from 1.1% end of '24 to now 0.9% end of '25. Net profit, I have referred to that. And finally, capital targets around 15% and 20%. I'll return to that in just a minute. And finally, also to mention that we don't see any further significant impact from upcoming regulation, primarily the output floor from CRR 3 given the current risk weights. Lars?. Lars Stensgaard Morch: Yes. Thanks a lot, Birger. A bit of a busy slide, I'm afraid here, but let's see if we can follow the logic. Moving from the left-hand side here, we have the results or the outcomes, the financial targets that you know from our strategy. And in the middle, you have the priorities, the activities that we do to make sure that we deliver on the left-hand side. And on the right-hand side, you have the specific, more detailed examples of the deliveries that we have managed to -- the things that we managed to deliver in '25. So taking a look at the middle here, you see the ambition that we want to increase the quality of the service that we deliver, but also we want to increase the quantity of the meetings and the interactions that we have with the clients. In order to support that, we have the activities on the right-hand side here, and I'll just mention a couple of them. First, on the personal customer part, automated data collection for credit processing that ensures higher quality and obviously also higher speed. More digital solutions that make saving and investment easier, again, potential for more and at the same time, higher quality customer experience. New AI assistance and copilot for advisers, streamlining workflows, supporting meeting preparations and making things easier inside. On the business and corporate side, automated price setting, data collection and guarantee creation, faster customer responses should be ensured that way also. New meeting concept for larger customers, making sure that we have a tighter link between the objectives and the financial solutions. We also have an upgraded risk management tool that can enhance the quality of the service that we give to our clients and the value of the advice linking the business strategy with the interest rate risks and financing risks altogether. So this is basically just showing that we are steaming forward in order to deliver on the right-hand side here to support that we see the clients more often and that we deliver more value to the clients when we meet. And obviously, then again, is able to deliver on the left-hand side here the financial targets and the volume targets here. Birger Krogh Nielsen: Yes. And looking at the net interest income, you can see the uplift in '22 and '23 was, of course, driven by the merger with Handelsbanken Denmark and PFA Bank. And for the quarter, we saw an increase of NII of 1%. And if we include a one-off of net interest income of DKK 38 million related to tax matters, it is more or less a flattish development from Q3 to Q4. During '26, we hope to see an increase, of course, very much dependent on the volume development during the course of the year. Lars Stensgaard Morch: On the personal customer side of the business, we've been under pressure in terms of volume and in terms of customer satisfaction for some years from approximately 2020 up until late '24. Now we have a number of consecutive quarters where we are building on the higher customer satisfaction and building more volume, which is part of the aims that we had in the strategy. The change have come a little bit faster than we anticipated, but we are pleased to see that we are building momentum here. We have, as of today, announced some price changes on our mortgage products. These are changes that will ensure that we are also going forward, competitive both in short-term loans and in the 30-year mortgage loans and a couple of the loans in between. We see a limited financial impact on the results in '26 and fully phased in, this will be approximately on the low end of DKK 100 million, not taking into account the dynamic effects, which obviously, if we are not competitive, will also have an impact on the volumes that we are able to write going forward. So altogether, we think we are still very competitive. And at the same time, it will not have very significant financial implications for the group. We have seen higher activity levels during '25 and also during the fourth quarter. Net interest -- net fee income was up a full 11% in '25. And actually, if we merge the last 5 years, up 45%, of course, inclusive of the acquisitions we've made. I have mentioned several times during the course of '25 that there are several factors behind this, but just to replicate again and mention again, markets have been favorable. New customers have entered, and we have done more business with existing customers. And also very importantly, that the turnover in the housing market is more or less normalized after a period with low turnover. And of course, together with our momentum in the segment for mortgages for private individuals has lifted the total income. So the fee uplift, as you see here on the chart, is driven by higher number of transactions and higher volumes. Costs are expected to decrease in '26. The underlying costs were moderate in '25. And if we look at Q4 in isolation, the underlying increase was around 2%, where inflation and salary increases were partly offset by 2% lower FTEs in Q4 of this year versus '24. The strategy going forward, as we also mentioned back in the autumn of '24 was -- is a CI level below 50% and to the extent possible, stable costs. We saw one-off costs in '25, especially related to the expansion of Bankdata and going into '26, as we say, lower costs from the level of DKK 6.6 billion in '25. But be aware that when we announced the strategy in the autumn of '24, we talked about a level around DKK 6.5 billion. And also be aware that we, of course, together with some efficiency initiatives, we also have initiated a marketing campaign with a new corporate visual identity that will take place during the course of this year. Moving onto capital. We have finalized the latest share buyback program here by the end of January, DKK 2.25 billion with an average price of DKK 680. And now we are heading for a record-setting capital distribution in '26, where we expect to distribute 84% of the result after tax to shareholders, split between DKK 1.5 billion in dividend, which will be proposed to the AGM here in March and DKK 3 billion in buybacks. And we have engaged with Bank of America to execute the program. And the program will start as of today and end by January '27 at the latest. Then finally, looking into capital targets. We have now changed a bit the outlook and expectations for the level of CET1 and the capital ratio. Now we are talking about around 15% and around 20%, and that includes the systemic risk buffer of 0.9%. We know that the Systemic Risk Council has recommended a reduction in that risk buffer. It is yet to be decided by the government and the implications will be of a minor extent if that were to be implemented here during '26. But overall, you can see that we have a 16.1% CET1 ratio by end year, well above the target of around 15%. And if we then include the reservations for expected payouts, they actually consume 1.4% in total. So 17.5% is actually the buildup for future need of capital. And we will, of course, during the course of the year, reserve for buybacks and dividends quarter-by-quarter. Simon Falk: Thank you, Birger, and thank you, Lars. We'll now open up for questions. [Operator Instructions] And the first question in line comes from Mathias Nielsen from Nordea. Mathias Nielsen: And congratulations on the strong end to '25. If we start on a very high-level note, like it looks like you're ahead of the plans that you set out in the strategy a bit more than a year ago. Can you maybe say a bit about it, is that just things happening faster than you expected? Or is it also the potential for more that has actually been a bit bigger than what you initially expected, if I start there. Lars Stensgaard Morch: Yes. Good question, Mathias, Lars here. I think it's a combination of internal matters and the market. So if you look at the market, that has been a little bit more gentle than we anticipated when we launched the strategy by the end of '24. And we've seen interest rates at a different level than what we anticipated. So we have had some help basically. But we also see that internally, we are able to move a bit faster than we anticipated on some of the initiatives. It's still early days. There's a lot of work still in the strategy on our platform, on IT and so on. But so far, we are definitely on plan. And hopefully, we will be a little bit ahead of plan when we move further into '26. Mathias Nielsen: That was very clear. And then maybe a bit of a nerdy question, but bear with me. So this Bank Data one-off cost, like you seem to be the only bank so far that is taking a one-off cost. Can you maybe explain like a bit of the dynamics like why you're taking it? Is it something that we should expect then to be a tailwind in the coming years because you revaluation -- have revaluation gains? How should we think about it just [indiscernible] went out with taking the write-down? Lars Stensgaard Morch: Yes, I can start and then Birger, if you want to add. I think it's clear with the agreement that is between Bankdata and Jyske Bank and being finalized and the integration that is being prepared that there are 2 different alleys you could take as a bank here. We've decided to take the alley that we've normally taken in Jyske Bank, which is a bit on the conservative side. I've noticed that some of our -- some of the other banks on Bankdata or at least I've seen one bank doing it differently so far, which is fully understandable because that's also possible to handle it this way. The thing is Bankdata has a fairly strong balance sheet, and that can potentially give -- and we think that's the base case, so we think that's very possible, give Bankdata the possibility to handle the cost of this integration within that balance sheet. And then from '28 and forward, we'll get an even stronger Bankdata with more volume on this, and then it will be able to handle the cost basically that we have getting Arbejdernes Landsbank and [ Vestjysk Bank ] on board. We have taken a more cautious route on this, which is, as I said, in line with how Jyske Bank have handled these kind of things in the past and in agreement with our external auditors who acknowledge that both ways can be -- it can be done both ways, but also support this as the right one for Jyske Bank to take. Birger Krogh Nielsen: And maybe just to extend a bit, when we talk with the auditors and when we look at the regulation in Denmark, the cost -- we know there is a cost to be paid as a member of Bankdata. We know -- we don't know the timing, and we don't know the amount. It's uncertain, but it's then a normal procedure actually to be careful and to book the cost after a best estimate in the quarter where you get the knowledge. Lars Stensgaard Morch: But you're right, Mathias. There is obviously a possibility of that not showing to be needed. Mathias Nielsen: And then would it then come back in one go? Or would it be like over the years, like what is the dynamics if it shows -- it turns out that Bankdata can handle this by themselves. How would that work like from an accounting perspective in Jyske Bank? Birger Krogh Nielsen: Well, there are -- of course, there are bills to be paid over the next couple of years with the migration costs and other costs related to the agreement with Sydbank. And of course, when those bills are up for payment, things will be settled also relative also in our books, of course. Mathias Nielsen: Okay. Maybe the last question, and then I'll jump in the queue. So when I listen to the comments on hope to see the NII coming up and guide down on cost, like isn't it difficult to see the bottom of the guidance range unless loan losses spike? Is there any broad comments you can make on like what's the assumption of the top and the bottom of the guidance that could help us understand like how you would even in a quite negative scenario end at the bottom of the range? Simon Falk: Yes. well, we usually use the DKK 800 million as an interval. So that's sort of the base case, but that's not to say that it's not related somehow to the numbers. So what we do is usually we look at the volatility of value adjustment and investment portfolio earnings, and we also set in some scenarios related to loan impairment charges as those are the most volatile components of our P&L. So that is how we come up with the interval. And I agree that if we are to end up at the lower end of the interval that would mean materially higher loan impairment charges than what we've seen in recent years, but also lower value adjustments likely. And next in line is Alexander Vilstrup-J rgensen from DNB Carnegie. Alexander Vilstrup-Jørgensen: So I have 2 questions. First, on core expenses. One of your peers recently flagged lower IT costs driven by economies of scale on the Bankdata platform. So I was just wondering if you could elaborate on your own expectations for cost savings at Bankdata and maybe also include the timing and magnitude of any potential reductions. Lars Stensgaard Morch: Yes. Thanks a lot, Alexander. I saw that, too, and I could follow his calculations. I think it was Ringkj bing that was out yesterday saying that we add volume to Bankdata, meaning that the expense will come down 17% like-for-like. I also saw that he then added that, that can come as a cost saving or it can come as further investments into digitalization if it makes sense. We are trying to run a tight ship on Bankdata. So obviously, we'll see if we can get some of it as cost savings and then we'll see what is needed in potential investments. I think it's safe to say that this is now the cheapest and we also believe the best data platform in the country and gaining volume is going to take cost down, but it's also going to make it more resilient in terms of what is needed going forward to ensure a strong digital platform, both in terms of functionality for clients, but also in making sure that it's a resilient, strong platform. So he's right. John is right. 17% is what we've calculated so far that could be taken out of the cost of Bankdata for us also. Alexander Vilstrup-Jørgensen: I also have a question regarding your ordinary bank loans. So to me, volumes for ordinary bank loans seems a tad down compared to last year. Is there any reason behind this? Shouldn't your volumes for ordinary bank loans increased as a result of your improved customer satisfaction ratings? Lars Stensgaard Morch: Not necessarily because we have still some of our Handelsbanken customers that came from bank loans and are generally moving towards mortgage loans on our Realkredit setup. So that's the underlying trend here. That's what is... Simon Falk: Thank you, Alexander. So next in line is Martin Birk from SEB. Martin Birk: Yes. Just 2 small questions from my side. First of all, the -- I guess first question goes on the price initiatives you took this morning in light of, I assume, peers also moving. How far are you willing to go? Is this only going to be a front book market share? Or should we also see the back book eventually getting the benefit without having to refinance? That's my first question. Then second question, coming back to capital and perhaps also less or more resiliency in stress test and a 15% CET1 target, how does that position you for future payouts? Lars Stensgaard Morch: Well, let me take the first one, Birger, and you can take the second one. The first one, thanks a lot, Martin, on the pricing on mortgages. We don't know where the competition is going to take the price level here. I think for us, a part of the reason why we make the decision it's a front book that we adjust is that when prices were adjusted upwards last time in the cycle, we did not really increase the prices on the back book in that scenario, which would then be a totally different way we would handle it if we lower the prices. Then on our book, a lot of them are short loans, which means that they will be refinanced within a year. And we do not reduce prices on these ones. So that would be basically for free if we did it. And they can then move on to either the same product or on to one of the other new attractive products here. So I think now we have a very strong portfolio of loans, both the bank balance loans, but also the loans on the mortgage balance sheet. And we have them with the short interest rate, we have them with medium and we have them with long. So we have a strong portfolio when we meet the clients, and I think we are priced to compete on this one. Without this meaning that we will necessarily see a big drop in the income here because our clients will be moving from another competitively priced product for instance, the F1s to the longer interest rate products, which, again, will also be competitively priced. So basically, we'll be following what is going on in the market. We think the reason why we've been winning market share is not because of generally the prices, it's because of the service model that we have and the turnaround that we have seen in number of volumes or in number of loans and in volumes on personal mortgages that has been done without us changing the price. And we've seen competitors moving down on price before us, and we've been able to keep that up. We'll be -- we'll ensure that we have a good product and an attractive price, but we think we are also driving the volume with having a good service model and being fast basically. Birger Krogh Nielsen: Yes. And then to the second question regarding the capital distribution and resilience in stress test, you're quite right that given some of the shifts we made in our model landscape and model setup recently, we are more resilient now to downturn and stress than we were formerly, especially because some of the segments are now managed under the foundation IRB setup versus an advanced IRB setup. And that, of course, leads us to a potential, larger buffer. And before giving any guidance in the market, we, of course, need to have a dialogue with the FSA regarding their full and their acknowledgment of the new setup that we have, and that will happen in the coming months, quarters. But you're quite right that there is a potential for a larger buffer. When we then look at the distribution and the split between dividends and buybacks, you have now heard us say that we have launched the largest buyback program of DKK 3 billion in the market. And of course, there is a limitation when it comes to liquidity in the stock in general. So going forward and if buffer will be extended, we, of course, need to adhere to the split between these 2 elements of distribution of capital. Martin Birk: Okay. But I guess the means of distribution that can always be changed? Birger Krogh Nielsen: The split, of course, is up for a debate and especially if liquidity in the market is a limiting factor. Simon Falk: And next question in line comes from Asbj rn M rk from Danske Bank. Asbjørn Mørk: Most of them have already been answered. But I have basically more of a strategic pricing question, Lars. Maybe it goes to you, but it's more like now you're lowering the prices on mortgages. I, of course, am fully aware of how your competitors have reacted and hence, it seems like more of a reaction to that. But I'm just trying to understand the rationale here because you had the lowest prices for a decade. And you also alluded to it, and you were not -- I mean you're basically losing market shares for many years. Now that trend has changed over the last year or so, but obviously not due to prices. So just wondering, do you actually believe that the price is the sort of decisive factor for clients? Secondly, since you're cutting mainly in the interest only and in the high LTV areas, how does this price reaction sort of go hand-in-hand with your strategy of growing in the more affluent areas as well on the private side? Lars Stensgaard Morch: Yes. Thanks a lot. Good questions here. I think some of the history that you're describing here is not 100% right because Jyske was actually winning market shares back in time on the mortgages. And Jyske was winning up until 2019 and a number of things with changes to the organizational structure and service models in relation to clients, pricing of other products meant that Jyske was losing out, and that was what you saw in the graph here. So -- and with that, I'm basically saying that price is an important factor, not the only factor and probably not the most important factor, but you need to be priced fairly competitive. I think we, in all honesty, we're more competitively priced on the short end here with the loans with refinancing often than with the longer. And we want to be competitive in both end of the scale here to support the clients and also to have a portfolio development that we would like to see in the bank. So what will happen here is probably that will go from one competitively priced product to another competitively priced products in a little bit larger scale than what we've seen before. Then you could also say that these are changes, directional changes that it was our plan to do in terms of making sure that we have attractive product price on -- across the different products here. Now we are doing that as tactical changes also, but it fits within our strategy. We still have a strategy relating to our portfolio of products, which is also about making sure that we have differentiating products. And we'll be able to, I think, launch new stuff within the not too far distance that will make us even more competitive, not from a price competitiveness only but also from a product competitiveness part. So I think it's one factor. It needs to be right, but it's certainly not the only one. I have to say I'm fairly impressed with the organization being able to turn around the development without using the price basically as a differentiator during the last couple of years. If we've not changed some of the prices now, it would have been a negative differentiator. I think we are moving in with the pack here and being more competitive or being very competitive on selective products. Asbjørn Mørk: That's very clear. Then if I may, on the sort of the competitive landscape and the consolidation that we've seen in the last 5 quarters. Have you seen any reaction in the market from Nykredit Spar Nord or changed behavior for that matter or from the AL Sydbank? And what should we sort of expect to be the Jyske Bank response, not in terms of M&A, but more in terms of product launches or more aggressive behavior or something? Is there something out there we should expect from you given the -- all the turmoil in the market? Lars Stensgaard Morch: Yes. I think if you look at our situation at the moment, we have the organization in place. We have no major projects going on. Obviously, we have the eyes on the possibilities in the market, and we have the muscles to also take advantage of some of these opportunities here. What we've seen so far is predominantly a number of employees, the number of people applying for jobs is increasing quite a bit, but we will not go down the different tracks that some of our competitors are doing and taking major teams from retail. We don't believe in that strategy. We think we are scalable with what we have today. And if we are adding, it will be select employees in select geographies and not the teams of 8 or 10 spread across the country here. So you do not see that kind of -- we don't envisage that we'll have this kind of aggressive behavior on this. We've also seen that we've been gaining some customers, not very, very significant, but some and more during the last couple of months due to customers that thought, well, then that might actually be the reason why I'm looking for a new bank. And then I believe the next part will be when they migrate the banks. It's very difficult at that point in time because you'll be extremely busy internally and the focus on clients can be a little bit less. So maybe we'll also have an uptake at that point in time of new clients. Simon Falk: Next question in line comes from Namita Samtani from Barclays. Namita Samtani: The first one on the net interest income. Did I hear you say that you hope it goes up year-on-year versus 2025? And my second question, how do you see competition and pricing on the bank lending side? Simon Falk: Yes. So maybe I'll start on the net interest income year-over-year. So we haven't provided exact guidance for 2026 versus 2025. What we said was basically we expect Q1 2026 to be the low point, and that is due to Q4 having a one-off positive impact of DKK 38 million, and there will also be 2 fewer interest -- days of interest in Q1. So underlying, we believe we have seen a trough in terms of NII, but we need to go into Q1 to see the actual trough and then we'll expect to grow from there. Whether that's enough to keep NII stable year-on-year, I think consensus is for a slight decline, and I get how you could end up there. Birger Krogh Nielsen: Looking at the competitive landscape, I think for bank lending, I think it's fair to say that there is ample liquidity and capital still within the banks. So that leads us to a relatively fierce competitive situation in '25. which also actually was the case if you go back in '24. But it seems to us that there has been even more competitive -- there's more competitiveness in the market now than there was 1 year ago. And you need to couple that with what I said initially that the demand for credit facilities may be a bit subdued due to the geopolitical uncertainty around Denmark because if you look at Denmark in isolation, we are still on a good footing when it comes to the economic development. Simon Falk: So there are no further questions in line. And with that, we would like to thank you for participating in today's conference call. A recording of the call will be made available on our IR website in the coming days. Please do not hesitate to contact us if you have further questions, and we appreciate your interest in Jyske Bank and wish you a nice day.
Operator: Good morning, ladies and gentlemen, and welcome to the MAA Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, February 5, 2026. [Operator Instructions] I will now turn the call over to Andrew Schaeffer, Senior Vice President, Treasurer and Director of Capital Markets of MAA for opening comments. Andrew Schaeffer: Thank you, Julianne, and good morning, everyone. This is Andrew Schaeffer, Treasurer and Director of Capital Markets for MAA. Members of the management team participating on the call this morning are Brad Hill; Tim Argo; Clay Holder; and Rob DelPriore. Before we begin with prepared comments this morning, I want to point out that as part of this discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our 34-Act filings with the SEC, which describe risk factors that may impact future results. During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data. Our earnings release and supplement are currently available on the For Investors page of our website at www.maac.com. A copy of our prepared comments and audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. When we get to Q&A, please be respectful of everyone's time and an attempt to complete our call within 1-hour due to other earnings calls today, we will limit questions to one per analyst. We ask that you rejoin the queue if you have any follow-up questions or additional items to discuss. I will now turn the call over to Brad. Brad Hill: Thank you, Andrew, and good morning, everyone. As highlighted in our release, our fourth quarter core FFO results met expectations, despite continued elevated supply levels. With occupancy up 10 basis points and same-store blended lease-over-lease performance 40 basis points stronger year-over-year, the recovery in fundamentals is underway. As we look ahead, we are entering 2026 in a stronger position with a higher earn-in and more tight top line revenue momentum that we expect to build throughout the year, particularly in new lease rates, driving an anticipated 110 to 160 basis point improvement in blended lease rates and an 85 basis point improvement in effective rent growth compared to 2025. While uncertainty remains in the broader economy, the level of uncertainty appears lower than what we navigated in 2025, supported by expectations for sustained GDP growth. Several of last year's major headwinds are showing signs of easing. At the same time, the economy should benefit from the working families tax cut, easing inflationary pressure and improving consumer sentiment, which is showing signs of recovering from multi-decade lows. Looking at our portfolio, rent-to-income ratios have improved, making rents more affordable. New deliveries are decelerating sharply, down over 60% in 2026 from the peak. And new starts are muted and have been for nearly 3 years, down nearly 70% from peak levels. Against this improving backdrop, we anticipate demand across our markets to remain solid and broad-based, supported by stable job growth, continued in-migration, healthy wage gains and record levels of resident retention. These trends point to a financially healthy resident base, supporting our consistently strong collections, reinforcing the durability of our revenue profile and suggesting that absent a meaningful shift in the broader economy, underlying demand conditions remain well supported. Building on this foundation, our long-term earnings growth will benefit from numerous strategic investments we're making. This includes expanding our technology initiatives such as community-wide WiFi and other enhancements designed to elevate the resident experience and improve operational efficiency. Our residents value our communities and the exceptional service our teams provide, reflected in record retention levels, strong renewal rates and sector-leading resident Google scores, averaging 4.7 out of 5 for the year. Persistent single-family affordability challenges, combined with favorable demographic trends continue to support renter demand and keep move-outs to purchase a home near historical lows. These trends, along with fewer competitive units in lease-up, support strong returns from our repositioning and redevelopment projects. As a result, we're expanding our capital investments in these areas by more than 10% in 2026. Beyond these investments, we continue to grow our development pipeline by leveraging our strong balance sheet and development capabilities to invest early to take advantage of growth opportunities at a time when access to capital is more limited for others. As such, during the fourth quarter, we purchased a shovel-ready project in Scottsdale, Arizona from a developer that was unable to line up equity for their project after 3 years of due diligence, bringing our active development pipeline to $932 million. Additionally, during the first quarter of 2026, we purchased a land parcel in the Clarendon neighborhood of Arlington, Virginia and expect to start construction on a 287-unit apartment community later this year. As demand remains robust, new deliveries slow and new starts track well below historical levels across our region, our development should continue to generate strong returns and earnings growth with stabilized NOI yields between 6% and 6.5%, well above current market cap rates. Subject to market conditions, we expect to begin construction on 5 to 7 new development projects in 2026 that should deliver into a much stronger operating environment than the one experienced over this past year. Additionally, our balance sheet provides the flexibility to pursue compelling acquisition opportunities as they materialize. We remain encouraged by the progress we're seeing across our portfolio. With more than 30 years of navigating economic cycles, we believe we are well positioned to serve our residents and to deliver compounded earnings growth over the full cycle. As market conditions continue to strengthen, improving fundamentals, coupled with our strategic investments should provide meaningful opportunities to enhance performance and support a stronger revenue trajectory over the next few years. To all our associates across our properties and corporate offices, thank you for your continued commitment to customer service. With that, I'll turn the call over to Tim. Tim Argo: Thank you, Brad, and good morning, everyone. For the fourth quarter, the key operating fundamentals of pricing and occupancy combined were in line with expectations. New lease growth continues to be muted due to the moderating, but still elevated supply picture combined with the normal seasonal slowdown in the fourth quarter. We did, however, continue to have strong retention and renewal lease rates and achieved sequentially improved average physical occupancy. As compared to the fourth quarter of 2024, blended rates improved 40 basis points, supported by a 50 basis point improvement in renewal rates and flat new lease rates. Average physical occupancy was 95.7%, which was a 10 basis point improvement from both the fourth quarter of 2024 and the third quarter of 2025. Additionally, we had another quarter of strong collections with net delinquency representing just 0.3% of billed rents, in line with the collection performance for the full year. While we broadly saw normal seasonality in pricing during the fourth quarter, many of our mid-tier markets, particularly in Virginia and South Carolina, continue to be outperformers relative to the portfolio. Charleston, Greenville, Richmond and the D.C. area markets all demonstrated strong pricing power and strong occupancy in the quarter. Encouragingly, our 2 highest concentration markets, Atlanta and Dallas continue to show improvement as compared to the prior year. Of our top 20 largest markets, these 2, along with Denver had the largest year-over-year improvement in blended pricing as compared to the fourth quarter of last year. Austin continues to be our weakest market in terms of pricing as it continues to work through the 25% of inventory that has been delivered cumulatively over the last 4 years. In our lease-up portfolio, MAA Vale in the Raleigh-Durham market reached stabilization in the fourth quarter. We now have 3 properties remaining in lease-up with a combined occupancy of 65.7% as of the end of the fourth quarter and an additional 3 development properties that are actively leasing units. Elevated concessions and longer lease-up periods continue to have a greater impact on the lease-up properties and have pushed the full earnings contribution from these out about a year. However, these projects are still expected to achieve our underwritten yields as markets continue to improve and retain the long-term value creation opportunity, despite the overall leasing velocity being behind original expectations. We continue to progress on our various targeted redevelopment and repositioning initiatives in the fourth quarter. And as Brad mentioned, expect to accelerate each of these programs in 2026 with improving fundamentals. During the fourth quarter of 2025, we completed 1,227 interior unit upgrades, bringing the total for the year to 5,995 units renovated with rent increases of $95 above non-upgraded units and a cash-on-cash return of 19%. Despite this more competitive supply environment, for the full year, these units leased on average 11 days faster than non-renovated units when adjusted for the additional turn time. For our common area and amenity repositioning program, we are on average over 70% repriced at 6 recent projects with an average NOI yield above 10% and rent growth far exceeding peer MAA properties. 5 additional projects are well underway with anticipated repricing in mid-2026 during the prime leasing season. We have targeted an additional 6 properties to begin later this year that will reprice in 2027. While vendor challenges and equipment delivery delays have slowed progress on our community-wide WiFi retrofit projects, we arrived on 14 of the 23 projects started in 2025, with the remaining 9 expected to go live in the first quarter. Similar to our redevelopment plans, we expect to expand this initiative in 2026 also. Looking forward to 2026, we are well positioned. While Winter Storm Fern did impact about 70% of our portfolio and slowed traffic for several days, we ended January with physical occupancy of 95.6% and 60-day exposure of 7.1%, both in line with this time last year. As Brad referenced, new supply pressures continue to moderate and demand remains strong with market level occupancies, including lease-ups in our markets well above where they were this time last year. Strong renewal performance continues in the first quarter with high retention rates and lease-over-lease growth rates on renewals accepted for January, February and March, all above 5%. This compares to the 4.5% we achieved in the first quarter of 2025. We expect gradual seasonal improvement in new lease rates, along with consistent renewal growth will drive improved performance in 2026 and be particularly impactful to 2027, as pressure from supply subsides throughout the year. I'll follow -- I have in the way of prepared comments. Now I'll turn the call over to Clay. A. Holder: Thank you, Tim, and good morning, everyone. We reported core FFO for the quarter of $2.23 per diluted share, which was in line with the midpoint of our fourth quarter guidance and contributed to core FFO for the full year of $8.74 per share. Fourth quarter same-store NOI was in line with our guidance as same-store revenues were $0.01 unfavorable due to other revenues and pricing, offset by same-store expenses favorable by $0.01 due to office operations, repair and maintenance and real estate taxes. Favorable interest expense was offset by overhead expenses and operating performance from our non-same-store portfolio. During the quarter, we funded approximately $81 million in development costs for our current $932 million pipeline, leaving an expected $306 million to be funded on the current pipeline over the next 3 years. As Brad noted, our balance sheet remains well positioned to support these and other future growth opportunities. At the end of the quarter, we had $880 million in combined cash and borrowing capacity under our revolving credit facility, and our net debt-to-EBITDA ratio was 4.3x. At quarter end, our outstanding debt was approximately 87% fixed with an average maturity of 6.4 years at an effective rate of 3.8%. During November, we issued $400 million of 7-year public bonds at an effective rate of just over 4.75%, using proceeds to repay borrowings under our commercial paper program, which were used to repay the November 2025 bond maturity. During the quarter, we repurchased 207,000 shares at a weighted average share price of $131.61, our first repurchase since 2001. Finally, we provided initial earnings guidance for 2026 in our release, which is detailed in the supplemental information package. Core FFO for 2026 is projected to be $8.35 to $8.71 or $8.53 per share at the midpoint. As was outlined in the prior comments, with the continuing improvement in supply impacting our markets, coupled with solid demand fundamentals, we expect rental pricing to grow during the year and to drive improving earnings performance as we progress throughout the year. Projected 2026 same-store revenue growth midpoint of 0.55% results from a rental pricing earn-in of negative 0.2%, an improvement compared to 2025's earn-in, combined with a blended rental pricing expectation in the range of 1% to 1.5% for the year. New lease pricing is expected to show improvement over last year. We expect supply levels to continue to impact new lease pricing, particularly in the first half of the year, but believe the impact will increasingly improve over the course of the year as the effect from new supply continues to decline. Renewal pricing is expected to remain strong and in the 5% to 5.25% range throughout the year. For the same-store portfolio, we expect effective rent growth to be approximately 0.35% at the midpoint of our range, occupancy to average 95.6% at the midpoint and other revenue items, primarily from reimbursement and fee income to grow just over 2%. Same-store operating expenses are projected to grow at a midpoint of 2.65% for the year. Personnel costs are expected to grow by less than 2%, while we expect some continued pressure from utilities, marketing costs and office operations. These expense projections, combined with the revenue growth of 0.55%, results in a projected decline in same-store NOI of 0.75% at the midpoint. As outlined in our release, we expect our non-same-store portfolio to contribute $0.19 in NOI during 2026. With the related interest carry, along with the slower leasing velocity and higher lease-up concessions that Tim mentioned, we anticipate the recently completed developments and acquisitions will be slightly accretive to 2026 core FFO and move closer to the expected yields in 2027 and beyond. We expect continued external growth in 2026, consisting of our current development pipeline and the projected new starts that Brad noted, with funding between $350 million to $450 million coming from debt financing and internal cash flow. We also expect to match fund $250 million in acquisition opportunities with dispositions. This external growth is expected to be slightly dilutive to core FFO in 2026 and then turn accretive to core FFO after stabilization. We project total overhead expenses, a combination of property management expenses and G&A expenses to be $136 million, a 5% increase over 2025 results, bringing our 3-year average increase to 2.5%. We also expect to refinance $300 million in bonds maturing in September 2026, which had an effective rate of 1.2%. Further, we plan to redeem the outstanding preferred shares in the second half of the year. These anticipated transactions, coupled with our 2025 refinancing activities will result in incremental interest expense of over $0.05. And combined with financing to support our 2025 development deliveries and the expected deliveries in 2026, we project interest expense to increase by over 15% for the year. We are still early in the assessment of the impact of Winter Storm Fern. But based on initial assessments, we anticipate excluding the impact from our core FFO results as we expect to receive insurance proceeds to cover a portion of the cost of the damages. That is all that we have in the way of prepared comments. So Julianne, we will now turn it back to you for questions. Operator: [Operator Instructions] Our first question comes from Jamie Feldman from Wells Fargo. James Feldman: I apologize that you went really quickly through the new renewal and blend outlook. Can you just run through those numbers again? And maybe just talk us through your level of confidence in each, your cadence on each throughout the quarters and just where you think -- if you think about your markets, where you're most confident and most concerned about hitting those numbers? Tim Argo: Yes. Jamie, this is Tim. I can walk you through that, and then Clay may have some to add as well. As Clay mentioned, our blended guidance is about 1% to 1.5% for 2026. On the renewal side, I mentioned in my comments that we're seeing a little bit above 5% so far this year. So we would expect renewals to be in that 5.25% range and then start to slowly see momentum on the new lease side and you kind of do the math on the new lease side with those components. And I would say, generally, we expect a normal seasonal curve where we see strength into the summer and then start to moderate move into the late summer and fall, but see less of that moderation in late Q3 and Q4 than we typically do, again, as we get further away from the peak of the supply and expect the demand to solidify as well. So normal seasonality, but less steep declines as we get late in the year. As far as markets, I mentioned a few of those on the prepared comments. We're continuing to see strength out of the markets that have been strong, some of the Carolinas and Virginia, encouraged with what we're seeing out of Atlanta and Dallas. Those are obviously our 2 largest markets. We continue to see steady progress there, both on the pricing front and the occupancy front. The year-over-year improvement in Q4 pricing for both of those was significant and 2 of our highest. I think we'll start to see a little bit of momentum in Tampa. That's one where occupancy has stabilized, and we expect to see a decent amount of demand there. But other than that, I think the ones that have been pretty solid for us this year, I expect those to continue to be solid for us in 2026. Operator: Our next question comes from Jana Galan from Bank of America. Jana Galan: I was curious if you could comment a little more on the transaction market. We're hearing there's more variance on cap rates between core and value-add. And then maybe on your decision to add to the development pipeline rather than buying assets or buying back more stock? Brad Hill: Yes. Thanks. This is Brad. I'll kick that one off. I mean, in terms of the transaction market, it continues to be pretty aggressive on those core assets, as you mentioned. What we looked at in the fourth quarter, we continue to see cap rates in the, call it, 4.6% range. In terms of the spread between core and value-add, I would say you're probably seeing a 50 to 75 basis point spread, all depending on certainly the markets that the value-add is located in, what that upside opportunity looks like. But those can trade somewhere in the 5.25% to call it, 5.5% range, again, depending on the market that that's located in. But I don't think that spread has changed. That spread has been there for the last couple of years. So I wouldn't say there's a material change in that at the moment. In terms of our capital allocation, yes, I mean, development continues to be a big focus of ours. If we can -- as I indicated in my comments, when we're in an environment where demand continues to be solid, the supply pipeline over the next few years continues to be muted. We've got the past 3 years now of starts have been below long-term averages in our region of the country. This is a good time for us to be able to use our balance sheet capacity to invest in new assets that will deliver into a much stronger operating environment, the development yields that we're still able to achieve today selectively, not on everything that we look at, but on the deals that we move forward with, and we're in the 6% to 6.5% range. So we continue to believe that, that's a good use of our capital to drive long-term earnings growth out of our portfolio. In terms of share repurchases, again, we look at all opportunities for capital allocation, whether that's external growth, internal growth, developing -- or excuse me, investing in our existing platform. We talked about the redevelopment repositioning, the WiFi initiatives, various initiatives we have to drive margin expansion opportunities. Those continue to be very, very compelling for us. And when we look at our opportunity set there, that does leave us with limited capacity for share repurchases. One of the things that we're not really targeting is a big disposition portfolio of properties to dispose of. I mean we generally like where we're located, and we don't need to reallocate capital between markets. So you're generally not going to see us move forward with a big disposition plan to support a share repurchase. Rather, what we'll do on the disposition side is continue to cycle out of older assets, redevelop or redeploy that capital into newer assets. And if you look at what we've done over the last 5 years, we've taken capital off of dispositions. We've earned almost a 20% IRR on those and redeployed them into new assets, driving 1,000 basis points better NOI margins and a 1,500 basis points better after-CapEx NOI margin. So we think that's the best opportunity for us on dispositions moving forward. Operator: Our next question comes from Nick Yulico from Scotiabank. Nicholas Yulico: So in terms of development, I was hoping you could talk some more about why that you have a focus on development right now when -- clearly, you have a view there's value creation to be had over time. You're building at higher yield than where you think assets are trading. But from an FFO and accretion growth standpoint, it's not helping right now. I mean you've talked about slower development lease-up period. You have an issue like others where capitalized, interest benefit is lower than where you're borrowing. So can you just maybe talk about how this makes sense to be picking up development right now if you are having all these near-term FFO impacts because of that? Brad Hill: Yes. Thanks, Nick. This is Brad. I think that's a good question, fair question. I think it's important to keep in mind with our development pipeline that we are delivering currently at a time where that -- those particular properties are under more pressure than they ever have been. I mean keep in mind that if you look at the amount of supply that's delivered on our markets from '23 to '25, we delivered 5 years' worth of supply over a 3-year period. So those properties are facing much more pressure, which we are seeing right now in terms of their ability to lease up, the velocity of their lease-up and certainly the use of concessions right now. But that's temporary. If you look at the lease-over-lease return or rents we're getting on renewals on our new lease-up properties, we're getting low double-digit returns. So the concessions that we're offering are burning off. If you look at the recurring rents that are in place on those development projects right now, they're 2% above pro forma. So again, this is a temporary issue with our developments. If you look at what we've developed over the last 5 years, we have delivered developments on average that have exceeded our underwritten yields by 90 basis points. So you're right, we're under pressure right now on that development pipeline, and we do think that, that's temporary. And as the market firms and concessions burn off, we will, as Tim mentioned in his comments, capture the value proposition associated with those. And then in terms of starting new developments today, they'll be delivering in '28, '29. And as I mentioned in my comments, we've had 3 years now of below long-term average supply in our starts in our market, which will support a stronger operating environment when those new developments come online. So we very much believe in the merits of continuing to allocate capital to developments despite the pressure that we're under currently. Operator: Our next question comes from Eric Wolfe from Citi. Eric Wolfe: You mentioned that renewals are being accepted above 5% so far this year. Could you just talk about what the dollar premium is on renewals versus new leases right now and how that premium compares versus history? And just any thoughts on how sustainable you think this 5% renewal rate is. Tim Argo: Yes, Eric, this is Tim. As far as the gap, Q4, it was around $180, $185 or so new leases versus renewals. Now that's after the renewal increase and the renewal increase is about $80 or so. That's certainly higher than our long-term averages, but not too much different. Q4 is when it always tends to gap out as we see obviously more moderation in new lease rates and traffic patterns, that sort of thing. So if I look back to the last couple of Q4s, that's not too much different than what we've seen there. So -- but we've now seen that. There's been 8 or 9 quarters now where it's been a little bit wider than normal, but still been able to maintain the growth that we've achieved on renewals. And I think there's a lot of reasons for that. We've talked about this in the past. I mean I think there is a cost, there's a hassle to moving as our residents get a little bit older, the cost of that and the willingness to go through that hassle and spend that money and take that time. I think people are less willing to do that with the resident base that we have, and we're very thoughtful of how we go about our renewal increases. It's based on where our residents are relative to market and we scale that higher or lower based on that, and we're looking at it on a very strategic basis. And there's a customer service factor there as well. Brad mentioned the Google scores that we have, which are highest in the sector, the customer service component. And I think when you factor all those things in, the service you're getting, the cost, the hassle, the everything that goes into moving, it's just not worth it for a lot of our residents when they consider the value that they're getting with us. And particularly in this environment, when you think about the concessions on lease-ups and some of the 8 to 10 weeks free that they're seeing, that's a short-term thing, and you're going to get that big increase when you try to renew if you are willing to move. So we expect -- we've got visibility really out into April now and seeing consistent take rates and consistent performance on renewals. So feel confident and comfortable about where we are on the renewal side. Operator: Our next question comes from Michael Goldsmith from UBS. Ami Probandt: This is Ami on with Michael. What gives you the confidence that you can see an acceleration in new lease through and maybe a little bit past the typical lease season given the softer macro? I know you mentioned some tailwinds. But within your markets, what are you seeing in terms of job growth that really gives you confidence that the remaining supply can be absorbed, and rents can accelerate? And maybe if you could talk about the new lease growth from trough to peak and how that would compare to historical? Brad Hill: Yes, Ami, this is Brad. I'll kick off and Tim can certainly give you some details. But I think it's -- the pace of recovery and the expectation for a recovery to accelerate this year for us is really, as I mentioned in my comments, really anchored in the fact that we do think some of the headwinds that we had last year are a little bit less than what we -- or less this year than what we expected last year. And we're seeing the momentum. If you look at our fundamentals as we talked about, they're improving. The operating fundamentals are. Now it takes time for that to make its way into the revenue and earnings portion as the rent roll turns. But we've had 4 straight quarters now of blends improving year-over-year, which really indicates that we're turning the corner, certainly less uncertainty, as I talked about. And then I think as you look out into the next year and the cadence of new deliveries declining this year, where they'll be down by more than 60% from the peak and down 35% year-over-year. And then I think, as Tim mentioned earlier, with the backdrop of market level occupancies continuing to firm up and less units in lease-up, the sustained demand that we're seeing across our portfolio right now should have a more pronounced impact on fundamentals. And certainly, as we get into -- and particularly on the new lease rate side and as we get into the spring and summer leasing season, we would expect that to continue to manifest itself to a larger degree. Tim Argo: Yes. I'll just add one point. I mean I think important to keep in mind on the new lease side is typically in Q4 and Q1, we historically see negative new lease rates. Even in a good environment, even in a more historically favorable supply-demand environment, you see negative new lease rates in those 2 quarters just from normal seasonality from traffic declining. So that's not unusual to see that. But we would expect some good acceleration, as I mentioned, into the summer and then start to moderate in the fall. But all the things Brad mentioned and think about it when we get to the back half of 2026, how far we are from the peak, continuing to see those units absorbed. We think the demand picture will continue to solidify. All the various factors in our region of the country, whether it's job growth, migration, household formation, population growth, the health of our renters in terms of income, rent to income are all extremely strong, particularly compared to other areas of the country. So all of those factors are combined to give us the confidence that we think 2026 looks better than 2025. Operator: Our next question comes from Haendel St. Juste from Mizuho. Haendel St. Juste: Just wanted to come back to the point on blends one more time. Just doing a quick math by our numbers, it looks like there's about a 200 basis point ramp implied into the back half of the year versus the first half, which is similar to what you saw or what we saw at this point last year, and you subsequently had to cut a few times. So first, I guess, is my math correct? And it sounds like secondly, that it's a little bit of lower supply. You have some optimism in the demand picture here. But what about turnover? I'm curious kind of what you're factoring as well for turnover into that math. Tim Argo: No, I'll hit that last point. I might let Clay talk a little bit about the first part. As far as turnover, we're expecting pretty consistent turnover. There's nothing that suggests that we think it will pick up. So we've effectively dialed in consistent turnover of what we did last year. So certainly, the renewal performance and the impact of renewals versus new leases is helping in that blend as we expect turnover to stay low. We're not necessarily dialing it in to be lower, but not dialing it in to be any higher either. A. Holder: Just on the new lease side, I mean, so far as kind of the pace of that plays itself out to be. I mean, it's -- as Tim was mentioned earlier, it's increasing over the first half of the year and then subsiding over the back half of the year kind of following the typical seasonal curve. But we do expect there to be continued improvement versus what we've seen in 2024. And so as that ramps up over the course of the year, we see that playing itself out into the blended rates that we were describing. Operator: Our next question comes from Brad Heffern from RBC Capital Markets. Brad Heffern: Can you talk through what the path is back to positive new lease growth? Obviously, it was originally expected in mid-'25. It doesn't look like the guidance would suggest that we would see it in '26. And then if renewals are a little higher than normal, I don't think you've done anything in the [ 0.5 ] since '23. So it feels like that would put pressure on new lease in '27 as well. So I'm just wondering your best guess on when we would see positive new lease growth and then when new lease growth in general could kind of go back to normal. Tim Argo: Well, I'm not going to put a target on going to positive new lease growth. I mean we don't necessarily have that dialed into our expectations. As you noted, in 2026, we do expect it to continue to accelerate from where we are now. And then as mentioned, seeing the steady renewals. But I think as we get into 2027, I mean, I think one thing to be clear about on what we dial in 2026 because of the acceleration of new lease rates, and I mentioned in my comments, less of the normal seasonality as we get into August, September and beyond, more of that impact in new lease rates is going to impact 2027 more so on the revenue side than 2026 because of it being a little more backloaded. And so part of that leads into where we expect 2027 to be. And again, we're even further from the supply peak consistently starts are continuing to go down. We think demand will be solidified. So as we get into 2027, I think that's when you see real sustained momentum and starting to see potentially where we get into some of those positive new lease rate ranges. Operator: Our next question comes from John Kim from BMO. John Kim: I wanted to follow-up on your disposition guidance of $250 million, which is following a year in which you had sold just a couple of assets. But just given the strong demand from institutions for your products, I'm wondering what's holding you back from selling more into the strength. Brad Hill: John, this is Brad. I mean I think what's holding us back from selling more is, one, what we've always talked about, we want to protect the earnings quality and capability of our portfolio without introducing a lot of volatility into our earnings performance. And I think for us to go out and sell a large part of our portfolio, I think, could potentially introduce some earnings volatility. Second, we like where we're located. We like the diversification of our portfolio in both large and mid-tier markets, and there's really not a portion of our portfolio that we are really targeting moving out of and reallocating that capital to another region of the country. So we don't really have the need to do that. And if you look, again, as I said earlier, what we've been selling over the last couple of years, it's 30-year-old properties. And I think that really fits nicely into our overall strategy of improving the earnings quality of the portfolio versus going out and selling a big portion of our portfolio and trying to determine what to do with that capital. I think you also have to remember that the fact that we are selling assets that are 30 years old, the taxable gains associated with that are sizable. And for us to really protect that from having to pay some type of tax on that, we want to be able to 1031 exchange that. And that's harder to do at a large scale in this market without paying cap rates that we think are very aggressive at the 4.5% range or so. And we think our opportunity is better to be measured and to deploy capital into other avenues. Operator: Our next question comes from Austin Wurschmidt from KeyBanc Capital Markets. Austin Wurschmidt: Recognize it's still pretty early in the year, but just wondering if the pace of improvement in new lease rate growth from the fourth quarter into January, February and any future visibility you have into future months, how does that compare versus last year? And do you expect just that gap or improvement to just gradually widen through the year? Is that what's in that new lease rate growth assumption? Tim Argo: Yes, Austin, this is Tim. I think you characterized it well in the last part of your question. We would expect that variance, if you will, to prior year to continue to get a little bit wider as we get later in the year for all the reasons we've talked about with moderating supply. Right now, particularly on the blended side, we're seeing -- we would expect pricing in Q1 blended to be better than what it was this time last year, and then we start to see it accelerate from there. So -- so far, as expected. And as I mentioned, I think the way you characterize it is the right way to think about it. Operator: Our next question comes from Rich Hightower from Barclays. Richard Hightower: Just to maybe follow on Austin and even Jamie earlier. Just to confirm, you guys wouldn't want to put a number on what new lease growth in the first quarter is going to be. And that's not even my real question. My real question is just on share repurchases. It seems like the philosophy -- it was always there as a possibility, but maybe it changed later in the fourth quarter. And just wondering what the math around sort of sources and uses, how that changed kind of later in the fourth quarter that led to repurchases for the first time in a long time. Brad Hill: Rich, this is Brad. I'll kick that off and others can jump in if they need to. I wouldn't say it's been a material change in terms of our outlook there. I mean, honestly, we've always had the position that if we -- if our shares traded at a persistent and sizable discount to our underlying value, and we felt that investing in our existing shares provided an opportunity to drive earnings growth and value proposition for our shareholders, then we would do that. And I'd say what's unique right now versus historical times is that we're trading at a sizable discount persistently. We really have not done that if you go back and look at our history in a long, long time, hence, why we haven't repurchased shares since 2001. So it's not a position that we have found ourselves in historically and certainly think it's unique given the supply pressures that we are under right now that are dissipating. So we do think that it is a temporary item given where we continue to see private market pricing relative to the public market. So as I mentioned, we have a limited appetite to do that. And so we have an authorization that's in place, remains in place. And so if we continue to find that to be the case, and we think that's the best opportunity for our capital to drive long-term shareholder returns, we'll continue to monitor that and execute in that way. Operator: Our next question comes from Steve Sakwa from Evercore ISI. Steve Sakwa: I just was curious if you had sort of an overarching kind of macro view that you're laying on top of your expectations. I mean you're talking very positively about renewal pricing. Obviously, job growth kind of slowed in the back half of last year. And I'm just curious if there's an underpinning or kind of broad assumption that you guys have about job growth kind of in either absolute terms or percentage growth because obviously, job growth slowed pretty meaningfully from '24 into '25. Brad Hill: Steve, this is Brad. I'll kick off and Tim can add any details if he wants. I would say the broad view is that, as I mentioned in my comments, that GDP continues to be relatively strong this year. I think from a job growth number perspective, what we're looking at, the numbers we're looking at for our markets showed absolute job growth going up slightly versus last year. The other demand metrics that we're looking at continue to remain positive. As Tim mentioned earlier, household formation, population growth in migration or migration trends continue to be positive in our region of the country. And then just wage growth. We continue to see very strong wage growth in our resident base, supporting declining rent-to-income ratio. So I think all of those things really support just the broad view that we have that things on the demand side are holding up quite well in our region of the country and should continue to hold up quite well this year, with the supply-demand dynamics improving as we progress through the year. Tim Argo: Just one thing I'll add just to put some numbers on it. We're projecting somewhere in the 340,000, 350,000 jobs in our markets in 2026 and then about half of that in terms of number of completions. So you think about that job to completion ratio is certainly improving and in a lot better position than we've been in the last few years. Operator: Our next question comes from Linda Tsai from Jefferies. Linda Yu Tsai: For the markets where you're seeing higher concessions, where would you expect to see the concessions burn off the soonest? And then alternatively, markets where the concessions might persist? Tim Argo: Yes, this is Tim. I mean I would say at a broad level; concessions have been pretty consistent. There's probably about 2/3 or so of our direct comps are offering concessions and they're averaging somewhere in the 5-week range. That's kind of a broad assessment, which is pretty consistent with what it's been. Some of the lease-up properties, as we mentioned, if there's a lot of lease-ups have been a little bit higher, more in the 8 to 10 weeks. We're starting to -- we've seen a little bit of increase in downtown Nashville, a little bit in Raleigh and Charlotte. Those are ones where we've seen concessions pick up a little bit. We've seen them drop a little bit in Tampa and some in Houston. We've seen a lot of good stability in Phoenix, where occupancy has stabilized, and we're not seeing the concession pick up. But broadly, where we've seen some improvement over the last few quarters is a couple of markets I mentioned earlier, Dallas and Atlanta and really starting to see those inner loop and urban areas across the portfolio work through that level of supply. So we've seen concessions in some of the more urban areas come down, which again is encouraging. They've seen a lot of supply. So broadly, concessions is pretty consistent and then it's some increasing, some decreasing depending on certain pockets and certain markets. Operator: Our next question comes from Alexander Goldfarb from Piper Sandler. Alexander Goldfarb: Just thinking about concessions, is there a risk -- all the supply that was delivered in the past 2 years presumably had a lot of concessions in that and those existing renters got the benefit of whatever, 1, 2, 3 months free. As those leases roll and those renters face market rents, are you expecting a lot of churn where, once again, even though supply is coming down, there's suddenly a lot of competitive supply, if you will, because those units now are looking for full freight renters versus the concessionary ones that were currently in the lease-up. I'm just trying to understand how the first-year anniversary of all that supply rolls, how that's going to impact you guys in the overall market? Tim Argo: Yes, Alex, this is Tim. I mean, certainly, relative to where we've been over the last couple of years, I don't consider that to be too much of a risk. I mean, because it still comes down to just how many units are out there that are available. We think there's probably 110,000, 120,000 less units in lease-up in our markets than there were at the peak. And then you combine the lower turnover, that's helping as well, where there's just fewer units of existing assets. So I don't consider that -- I think it still just comes down to more of a supply-demand picture of how many units in lease up, and that really drives it more than anything else. I think where it has helped us more honestly, is on the retention side where people knowing those concessions are going to burn off. And I think that's helped us more on the renewal side, but we don't see that as a real risk. Operator: Our next question comes from Buck Horne from Raymond James. Buck Horne: I was wondering if you could help us stratify maybe the recent performance between your Class A units versus Class B. And however, you want to describe it, new lease rates, occupancy, any sort of metric between As and Bs. And I'm just wondering if we're starting to see any sort of incremental pressure from kind of the vacancy increases in the Class C units, if that's starting to filter upwards or not? Tim Argo: Buck, this is Tim. As far as A, B, and you can think about A, B or you think about urban, suburban, depending on how you want to define it. But the way we define A and B, I haven't seen a real differentiation of performance there. But I did -- I mentioned this a little bit earlier, where we have started to see some differentiation over the last couple of quarters is more of the urban versus suburban, more of the central business district and urban areas, particularly, and we don't have a ton of that, but we have a fair amount in Dallas and Atlanta. We've seen that performance start to differentiate both on the occupancy side and the pricing side, we're seeing pricing about 40 basis points better on blended pricing and probably 10 basis points or so higher occupancy. So I think that's encouraging given where supply was occurring in those markets, but not a big mix on the A, B side. Operator: Our next question comes from Mason Guell from Baird. Mason P. Guell: On the acquisition side, are you seeing more opportunities to acquire lease-ups with the cycle taking longer to turn? Brad Hill: Yes, this is Brad. I wouldn't say that we're seeing more opportunities. I mean, certainly, there are a lot of lease-ups that are out there right now. But honestly, I think we've seen less lease-ups actually being marketed than what we have historically. And I think that's just because -- the valuation is more impacted right now because there's just more uncertainty about the timing of the lease-up, the roll-off of concessions and things of that nature. So I think from a buyer's perspective, there's a little bit more hesitancy on lease-ups versus a stabilized. And so therefore, the valuation could be impacted. So sellers are really holding on to those assets a little bit longer right now, trying to lease those up before they really bring them to market. So we've seen -- there's lease-ups out there that you -- certainly that being marketed, but there's -- I think there's less of those today than there have been in the years past. Operator: Our next question comes from Ann Chan from Green Street. Ann Chan: Could you share how renewal and new lease rates in Atlanta have trended late last year and into early this year? Unknown Executive: Yes. As far as Atlanta, and I touched on this a little bit earlier, we've continued to see pretty good performance, continually increasing performance, both in terms of really blended pricing and occupancy. If I look at 2025 full year blended pricing for Atlanta versus where it was in 2024, it is about 260 basis points higher blended pricing for the full year in 2025 and occupancy about 70 basis points higher for the full year. So continue to see steady improvement there when I isolate to just the fourth quarter, saw that improvement as well. So that's market that I talked about that we're starting to see some stability from. We've seen delinquency go down to just about the portfolio average as well. So I don't see any concerns there. And on a relative basis, Atlanta has had less supply than some of our markets. So broadly, pretty encouraged with what we've seen from Atlanta. Operator: Our next question comes from Alexander Kim from Zelman & Associates. Alex Kim: I wanted to dive into the transaction market a bit more here. Pricing power overall has been relatively soft, particularly on the new move-in side. And at the same time, you cited market cap rates in the 4.6% range with investor demand still obvious. Can you talk about what you're seeing in the transaction market for stabilized product, I guess, and what you expect moving forward for transaction volumes with this particular dynamic in play? Brad Hill: Yes. I mean we continue to see very robust investor appetite for assets in our region of the country. I think the volume of properties that have come to market have increased steadily during '25, certainly as interest rates stabilized and were more attractive for folks. So I do think that, that is likely to continue in '26. I think the appetite for [indiscernible] in our region of the country will continue to be very, very strong. There's a lot of capital out there. Interest rates, spreads have decreased overall, the cost of capital has decreased. So I do think that the transaction market could be pretty healthy with healthy cap rates as we go forward. I don't really see those changing at this point. I think from a -- as I mentioned a moment ago, I think from an underwriting perspective, there's a little bit of more uncertainty or has been for the past year of what happens on the new lease rate side. And since these lease-ups are and generally leasing predominantly to -- for the most part, at least in the first year to new lease rates, there's more pressure there. So then it comes down to the ability to turn those concessions off. So I think the market is certainly optimistic about what that looks like going forward and hence the low cap rates. And so I see the transaction market picking up in activity as we go through '26. Operator: Our next question comes from Haendel St. Juste from Mizuho. Haendel St. Juste: I might have missed it, but can you tell us what the new lease rate was for January specifically? And then would you also comment -- or can you comment on the pending settlement for the RealPage multidistrict lawsuit? And then maybe remind us what other litigation there is on that front outstanding? Tim Argo: Yes, Haendel, it's Tim. I'll answer the first part. We're not going to get into individual months on the new lease side. I think it's just pretty granular and a small population. But I will say, I think the -- when you think about new lease pricing compared to last year, we expect the smallest delta between those 2 in Q1, and then could get larger for all the reasons we've talked about and then a blended basis to broadly, we expect that we would have better pricing in Q1 versus what we did this time last year. Robert DelPriore: Haendel, it's Rob. On the RealPage settlement, I think I mean, first and foremost, I would say the settlement is no admission of wrongdoing or liability and remain confident that we've acted lawfully and responsibly. And secondly, it does not require any material changes to how we operate the business. The prospective commitments are all ones that we believe are consistent with how we conduct operations today. So we don't really expect any significant disruptions there. And then finally, it really is just about removing distraction and uncertainty in a complex and evolving legal environment where this is really an attack on the entire industry and not just MAA. The resolution did allow us to eliminate significant cost and complexity and distraction of the continued and prolonged litigation and keep the focus of leadership where we really want it, which is on residents, operations and value creation. And then the 2 ongoing attorney general matters that are disclosed in our financial reports are still continuing, and we will continue to defend those. Operator: And our last question will come from Julien Blouin from Goldman Sachs. Julien Blouin: I just wanted to check on maybe just the trend of absorption volumes in your markets. It seemed to maybe normalize somewhat in fourth quarter, certainly lower than it was in the fourth quarter of '24. Do you worry at all that maybe absorption is starting to slow amidst the job environment that Steve alluded to and maybe in this sort of slower migration environment. You're still dealing with elevated levels of vacant units in your markets, but just wondering how you feel about absorption? Tim Argo: Yes. Julien, this is Tim. We did see absorption slow a little bit in the back part of the year and into Q4, but not really surprisingly. I mean, one, just there's a seasonal component to that, that is not unexpected. And then frankly, there's just as supply and starts have continued -- as we continue to get further from that peak, we would expect absorption to go down. There's just fewer units to be absorbed. But -- so we didn't necessarily need to stay at those extremely high levels that we've seen over the last few quarters. But as we look forward, just given the fact that there are so many fewer units in lease-up than there were 12, 15, 18 months ago, continued steady demand scenario, no sign of supply picking back up. We would expect absorption to be pretty consistent, demand to be pretty consistent and not concerned overall on that front. Brad Hill: Julien, this is Brad. I'll just add one thing to that. As Tim mentioned, as new deliveries continue to decline, the absorption numbers, the way they're calculated are going to, by nature, continue to decline. And so one of the things that we're also focused on is what our market level occupancies look like in our markets. And certainly, we look at that on a total basis as well as just the stabilized occupancy. And as Tim mentioned, I think, in his opening comments, I mean, we've seen significant improvement in those market level occupancies over the past year. And the numbers are -- continue to show that the lease-ups that are in the market continue to be filled up and therefore, the market level occupancies are firming, which is one of the components of our strengthening -- belief of the strengthening performance throughout this year. So occupancies appear to continue to improve. Operator: And we have no further questions, I will return the call to MAA for closing remarks. Brad Hill: All right. Thanks for joining the call today. If you've got any follow-ups, don't hesitate to reach out. Thanks. Operator: This concludes today's program. Thank you for your participation. You may disconnect at any time.
Operator: Hello, and welcome to today's presentation with Nolato, who is going to present the report for the Fourth Quarter of 2025. With us here to present today is CEO, Christer Wahlquist; and CFO, Per-Ola Holmstrom. [Operator Instructions]. After presentation, there will be a Q&A. [Operator Instructions] And with that said, I hand over the word to you guys. Christer Wahlquist: Thank you, and welcome to the presentation of Nolato's Fourth Quarter of 2025. Starting on Page 2, we had sales that totaled just shy of SEK 2.3 billion in the quarter, which gives a growth of approximately 2% adjusted for currency. We saw an increased growth rate for the Medical Solutions business area at 5%. We saw a decrease of approximately 1% for Engineered Solutions adjusted for currency. We had some headwinds on the sales in the last part of the quarter due to Christmas holidays and during that time. Our operating profit ended up at SEK 236 million in comparison to SEK 240 million. This was strongly affected by currency headwinds of 6%. The margin rose to 10.4%. So we saw improved margins in both areas, but sequentially lower due to somewhat weaker volumes during the Christmas break and also some startup costs for the new programs in United States. If we focus on the full year of 2025, we ended up at close to SEK 9.5 billion in sales. That was corresponding to a 2% increase adjusted for currency. We saw an operating profit increase 11%, even though we had a strong currency headwind. The margin improved and ended up at 11.3% in comparison to 9.9%. So we saw a 1.4 percentage points increase of margin. The earnings per share ended up at SEK 2.88 per share, and we have a very strong financial position, enabling us to execute on our increased acquisition strategy. The dividend proposal is SEK 1.7 in comparison to SEK 1.5 per share, and that is a current payout ratio of 59% in comparison to 61% last year. If we jump to Page 5, starting with Medical Solutions. Here, we are on a growth and global expansion journey, and this business area now corresponds to 58% of group sales in the fourth quarter. On Page 6, we see our focused product areas. We feel that we are very well positioned with leading global customers and positioned in very interesting product areas. If we go through them a little quickly, we see the in vitro diagnostics with a long-term growth potential, and we have a very strong position in this therapeutical area. Cardiology, of course, high-end market, a lot of lifetime implants and very high demands on the products delivered. Drug Delivery, a growth market area where we have a very strong position and well positioned for continuously growth. Endoscopy and General Surgery, it's a changing market. It's interesting with the new sort of more robotic surgery that are coming in. Continence Care, of course, high-volume market with huge volumes. If we then jump into the fourth quarter for Medical Solutions, we ended up just above SEK 1.3 billion in sales, which corresponds to a 5% adjusted currency growth. We see that the drug delivery market continued to exhibit growth within the autoinjector and pen injector systems. We saw a positive development for the in vitro diagnostic during the year with a slow start last year and then increasing volumes. If we look on the margin side, we ended up at 11.6% margin for the business area. That is an improvement of 0.4 percentage points compared to 2024. We had, during the quarter, a negative impact due to temporary higher cost for the start-ups, as mentioned before, and also some volume headwinds during the Christmas breaks. Our expansions are going according to plan, both in Hungary, Poland and Malaysia. Jumping into Engineered Solutions, which is a sales level of close to SEK 1 billion and 42% of group sales in fourth quarter. In this area, we are focusing on different product areas, of course, the consumer electronics where we see potentials, hygiene, good potentials and automotive, of course, a little bit slow right now, as we explained in previous quarters. And then that's a little bit different market, the materials, where we see strong growth, but also affected during this quarter by the increased cost of precious materials. Jumping to the next page and then summarizing Engineered Solutions for the fourth quarter. As mentioned, strong growth for materials, 10% increase if we adjust for the currency. We saw sustained performance for consumer electronics, particularly in Asia. After a positive performance during the year, volumes decreased for Hygiene in the last quarter due to an inventory adjustments ahead of year-end. The total business area ended up at a margin of 9.9% in comparison to 9.2%. We saw, of course, favorable product mix. But if we compare to the previous quarters of 2025, we had negative impact of the lower volumes and sharply increased precious metal prices, as mentioned. Per-Ola Holmström: Good afternoon, Per-Ola Holmstrom, CFO, and group financial highlights on Page 11. Net sales was SEK 2.272 billion in the quarter, a 2% growth given currency headwinds of 7%. Operating profit EBITA amounted to SEK 236 million, slightly below last year, but with currency headwinds of 6%, representing an accelerating negative effect of about SEK 14 million in the fourth quarter. The EBITA margin for the full year 2025 improved by 1.4 percentage points, driven by pricing, cost adjustments and efforts in the entire supply chain. The quarter improved 0.3 percentage points to 10.4%. The declined margin compared to previous quarters 2025 was negatively affected by: one, temporarily higher costs for start-up of the new products in the U.S. The medical margin was negatively affected by that by 0.5 percentage points; two, slightly lower volumes within mainly Engineered due to holidays at year-end; three, sharply increased prices for precious metals within materials in business area Engineered. Summarizing these 2 effects for Engineered, the total negative effect is 1.0 percentage points for the business area. Four, group cost was on the high side in Q4 and in comparison to Q3 that had one-offs of plus SEK 7 million in addition, effects from M&A activities in Q4, giving a delta of SEK 10 million compared to Q3. Summarizing these 4 items, the temporary negative effect is in the range of SEK 25 million to SEK 30 million compared to Q3. Parts of these will influence the first quarter 2026 as well. Cash flow from operating activities was SEK 310 million, a good level in the quarter, but last year was very positive from improved working capital. Net investments, we did see a shift in trends. CapEx declined compared to the comparative quarter last year to SEK 146 million. The full year 2026 is expected to be between SEK 650 million to SEK 700 million, where SEK 100 million approximately still is left for the Hungarian project. Return on capital employed for the full year improved to 14.2%. Christer Wahlquist: Turning to Page 13 -- no, sorry. Jumping, turning to Page 12 -- sorry. Sustainable development. We have had a very positive development of our -- all kinds of measurements on the sustainable side. If we focus first on our Scope 1 and 2 emission, we have reduced this by 96% in absolute terms from our base year 2025 (sic) [ 2021 ] versus our target of 70% for 2020 (sic) [ 2030 ] . So it's an impressive journey on that side. If we talk about Scope 3 Upstream's emissions, we have reduced that by 30% in absolute terms from the same base year versus our target of 25%. So we are well ahead of our near-term targets on path towards 2030. We're also delivering fast results on our science-based target initiatives. And our Net-Zero targets for 2045 is approved by science-based target initiative in January of this year. Turning to Page 13, focusing on our current situation. Overall, we see a very favorable financial position that enables intensified M&A agenda and focusing on medical solutions, we have a continuous growth strategy. We see very high market activity. We have a very strong broad customer base with long-standing close customer relationships enable us to continue our growth journey. Our establishments of operations in Malaysia and an expansion in Poland as well as in Hungary are creating excellent opportunities for us. Within the Engineered Solutions business area, we are advancing our market positions. We have established position in new product areas and successful in new products and technology areas, mainly data center is very positive for materials and also the expansion of our operations in Malaysia, creating opportunities. We are now handling over for questions. Operator: Thank you so much for the presentation. Ladies and gentlemen, we will now carry on with some questions. [Operator Instructions] And the first caller here is Carl Ragnerstam from Nordea. You have the word. Carl Ragnerstam: It's Carl from Nordea. Sorry for a slow unmuting. A couple of questions here. It is, of course, a lot of dynamics in these reports. So I hope to unpack some of them. You mentioned 100 basis points in Engineered owing to shutdowns as well as the precious material thing. So firstly, I wonder what materials are we talking about? And secondly, yes, how do you view that topic specifically for Q1 and Q2? Per-Ola Holmström: Yes. We could see that the pricing we are talking about that is affecting materials. And as you know, we are compounding a material, which is including metal particles and some of these materials within that part is based on silver particles. And as you have seen, pricing of that has skyrocketed during the fourth quarter, and it has continued in the beginning of January as well. That is a part where we have quite short actions to change the pricing to our customers. And we are, of course, in the process of doing that. It's more standard materials, which we are handling, and that will give effect. But of course, there is a timing effect. And as you have seen, pricing have continued up in the beginning of January as well, however, now declining. So we are in the middle of a very dynamic pricing because of the silver materials mainly. So that is affecting that part. Carl Ragnerstam: And what portion of the 100 basis points was the metal or material thing compared to the customer earlier shutdowns? Per-Ola Holmström: That is the larger part of the 1 percentage. Carl Ragnerstam: And what did you say about Q1? Is it same effect or less effect or ballpark? Per-Ola Holmström: Yes. We do see that, that will continue in Q1 as well, but it's slowing down a bit during the end of the quarter. That is our assumption based on pricing activities that we have done. Then, of course, we don't know the ongoing pricing dynamics for the silver pricing going forward. But as far as we can see right now, there will be an effect which is slowing down during the rest of the quarter. Carl Ragnerstam: That's very clear. Jumping into Medical, you mentioned the production ramp-up in the U.S., the 50 basis points impact. How long is that ramp? And what product are you? Is it a multiproduct facility? Or what are you ramping? Christer Wahlquist: It's a multi things. There are different programs ramping at the same time. And we are expecting that to continue a little bit into the first quarter and then, of course, be more steady state. Carl Ragnerstam: Good. And the final question, if I may, is on the Medical organic growth. Did the new autoinjector contract that you're manufacturing in Hungary contribute with a similar magnitude as in Q3? And if so, what is the main delta behind the acceleration of the organic growth in Medical? Christer Wahlquist: It's continuing -- the new program in Hungary is continuing on the same level as in the third quarter and also expected to continue on the same level in the first quarter of 2026. So that's -- and then it's a general thing. We have a growth in different areas, all kinds -- all over the place, more or less. Carl Ragnerstam: Okay. Sorry, final one. In terms of the M&A cost you touched upon, it seems a little bit -- it is a little bit on the high side given your history of doing due diligence. Is it fair to assume that it's a bigger transaction? Or is it several smaller ones you're looking into? Per-Ola Holmström: Well, I mean, the delta of the SEK 10 million is coming from SEK 7 million from the one-time positive effect in Q3 and then the rest is mainly coming from these activities. So well... Carl Ragnerstam: Okay. Fair enough. Per-Ola Holmström: Large or not large, but yes, nothing... Carl Ragnerstam: Then I understand that. Very good. That's all for me. Operator: And the next caller here is Oscar Ronnkvist from SEB. You have the word. Oscar Ronnkvist: So yes, I just had one question on the volumes. So assuming that there were earlier shutdowns in Q4, do you expect to see a catch-up effect in Q1? Or is it more of a normalized quarter? Christer Wahlquist: I think we would see the first quarter as a more normalized quarter. Oscar Ronnkvist: All right. I see. And then just on the start-up costs here in the U.S., any particular reason why you sort of highlight that as a temporary cost? I suppose that, I mean, you're looking to expand most of the time. Christer Wahlquist: Yes, it was just an explanation to that we have several things running and it was more than normal. Oscar Ronnkvist: All right. I see. And then just I think a follow-up on Carl's question before, but just a clarification on the pricing adjustments in materials in specific. So how would you handle the dynamics of price increases when we have so volatile precious metal prices? Christer Wahlquist: Yes. It's a continuous -- of course, if you have an upwards trend, it's something that then you have to adjust and do it the right timing. And it's always a dynamic process, and you can't really go back to a customer every day. So then you might lose some temporarily on the upgoing if it's a continuous upwards trend. Oscar Ronnkvist: All right. But have you done any price increases thus far based on the higher material prices that we saw especially in Q4? Christer Wahlquist: Yes. We have. Operator: Thank you. And yes, final shout out here [Operator Instructions] It seems that, that was all the questions we had. So thank you so much, Nolato, for presenting here today, and thank you all for tuning in. I wish you a pleasant day. Christer Wahlquist: Thank you. Goodbye. Per-Ola Holmström: Bye.
Operator: Welcome to the X-FAB Full Year and Fourth Quarter 2025 Results Conference Call. [Operator Instructions] I will hand the conference over to Rudi De Winter, CEO. The floor is yours. Please go ahead. Rudi De Winter: Thank you, and welcome, everyone. We have today in the conference call with me Alba Morganti, CFO; and Damien Macq, my successor and CEO. In the fourth quarter in 2025, we recorded revenues of $222 million, up 18% year-on-year and down 3% quarter-on-quarter. The fourth quarter revenue in our core markets was $204 million, up 13% year-on-year and down 5% quarter-on-quarter. The core business represented 94% of our total revenue. Full year revenue amounted to $870 million, up 7% year-on-year. and within the guided range. In the full year of 2025, our core business was $814 million which is 7% growth compared to the previous year, and our core business represented also 94% of the total revenue. Our order intake in the fourth quarter came in at $164 million, and it understates actual underlying demand by approximately $30 million to $40 million as first of all, we have shorter cycle times resulting in customers ordering later. Secondly, we have higher wafer yields resulting in order -- reduced order quantities. And third, because of the absence of new bookings in the 0.6um CMOS technologies that we are terminating in early 2027. Customers already placed these orders following the last time by announcement more than a year ago. The backlog at the end of the quarter was $318 million, down to -- from $347 million and at the end of the quarter. The backlog relative to our revenue is still high compared to history and pre-COVID situation. In the fourth quarter, automotive revenues came in at $133 million, up 3% year-on-year and down 10% quarter-on-quarter. The sequential decline was mainly due to inventory corrections in various channels of the supply chain and also influenced by the end of major LTAs and the underlying end market. This trend is also evident in the full year automotive revenue, which recorded only a slight increase of 1%. Although the shift to full electric mobility in 2025 advanced at a slower pace, it remains an important megatrend, underpinning our automotive business. Key automotive applications driving the growth in 2025 included battery and thermal management systems as well as on-board chargers for electric vehicles. In the industrial end market, we recorded a quarterly revenue of $50 million. This was up 40% year-on-year and 6% quarter-on-quarter. The strong growth was driven by the recovery of the SiC business, the recovery of the fragmented industrial market and the prototyping revenue for Photonics, while an elevated level of production in last-time-buy technologies, also contributed. The fourth quarter medical revenue amounted to $21 million up 28% year-on-year and flat sequentially. The demand for DNA sequencing, ultrasound applications as well as contactless temperature sensors was strong in the past quarter. In the total of 2025, our medical business achieved a record revenue of $71 million marking 26% increase over previous year. For a further update, I would like to pass the word now to Damien. Damien Macq: Thank you, Rudi. Good morning, good afternoon, everyone. Let's start with CMOS and SOI revenue. In the fourth quarter, this revenue was up 7% year-on-year and down 5% quarter-on-quarter. For the full year, revenue grew 8% compared to the previous year. Quarterly microsystem revenue was up 24% year-on-year and down 9% sequentially. In 2025, X-FAB microsystem business achieved revenue exceeding USD 100 million for the first time, representing an 11% increase compared to 2024. X-FAB silicon carbide business demonstrated a remarkable recovery, achieving robust growth in the fourth quarter, driven by solid demand for data centers, electric vehicles and renewable energy applications. Revenue increased by 77% year-on-year and 6% quarter-on-quarter. Silicon carbide wafer starts raised 60% sequentially. This was the largest ever silicon carbide wafer start in the quarter. The weaker quarter-over-quarter revenue growth reflects the much higher share of customer-supplied silicon carbide wafers, which carried lower billings due to the less pass-through of substrate costs. For the full year, silicon carbide revenue reached USD 33.8 million, which constitute a 34% decrease against 2024 when the first quarter was still exceptionally strong. Quarterly prototyping revenue was USD 20.3 million, down 14% year-on-year and up 3% quarter-on-quarter. Over the past 3 quarters, its fab recorded a notable increase in CMOS and SOI prototyping revenue reflecting renewed customer confidence after capacity constraints were resolved with last year completion of it's fab capacity expansion program, and from significant operational improvement in terms of product yield and cycle times. Let's now zoom in specific products and development highlights achieved in 2025. In Q4, we secured a major design win for 110-nanometer CMOS technology, particularly in sensing application, which should contribute to revenue growth from 2028 onward. For our 110-nanometer SOI platform, we see confirmation of the strong ramp-up for motor control and automotive LED drivers, and we booked an important design win for new ultrasonic applications. In microsystem, interest in our through-silicon via technology continues to grow, especially for photon-counting CT scanners. On top of the technology capability of its fab, another key factor in this engagement is our customers' ability to establish a fully localized supply chain for this next-generation scanner platform. In MEMS, we achieved the first design win for our next-generation inertial sensors. For power application, we launched as well an innovative snubber technology, this device is integrated inside silicon carbide inverters to review the switching losses by up to 70% and therefore, improving the electrical vehicle range. This solution has already been adopted by 1 OEM and is under evaluation by several orders. In the photonic space, we teamed up with LIGENTEC on the lowest lost silicon nitride platform for various applications, main one being quantum computing. This already contributed to 7% of our total NRE in 2025. In GaN, we secured several major NRE. A first one for the development of industrial protection devices. 2 additional protraction inverters for small and medium EVs and a fourth one for 800-volt data center applications. In silicon carbide, we continue to make excellent progress with a major Asian Tier 1 in EV traction inverter, achieving record-setting electrical performance. Our latest XSICM03 platform has also enabled multiple customers to reach leading-edge electrical performances, driving further design wins across renewable energy, automotive, data center and circuit breaker applications. Its fab technology portfolio with the emphasis on power sensing and microsystem technologies is strategically aligned with global mega trends, including the electrification of everything with worldwide decarbonization initiative and advancement in health care for aging populations. This alignment creates substantial opportunities within X-FAB key end markets, automotive, industrial and medical, driving sustainable growth in the long term. The short-term visibility remains limited, primarily due to continued inventory adjustment by automotive customers and persistent geopolitical uncertainties. Let's now go through the short operation update. By mid-2025, X-FAB concluded its major 3 years $1 billion capacity expansion program. In September, we celebrated the grand opening of our new facilities in Malaysia, following the launch of our production in this new cleanroom. All equipment related to this expansion have been installed and qualified. Production in X-FAB popular 180-nanometer technology is being ramped up gradually there. The site's target capacity of 40,000 wafer start per month will be fully operational by the end of 2026. The increased capacity and reduced cycle time enable X-FAB to become much more attractive for new business opportunities and to respond more quickly to market opportunity when they arise. In the fourth quarter, significant progress was made in securing financial support under the EU Chip Act for the growth of X-FAB's microsystem business. The funding will be used to further advance the MEMS and microsystem offering and more specifically to support the ongoing transition of the site in Erfurt Germany, to the microsystem hub of X-FAB Group. Capital expenditure in the fourth quarter reached USD 25.2 million, bringing the total CapEx for the year to USD 204.1 million. This is lower than the initially projected USD 250 million as some expenditures were postponed to the current year. New capital expenditure in 2026 are projected to come in at around USD 100 million. This CapEx will be allocated to enhance our process capabilities, to facilitate the transition of the Erfurt Germany and Lubock Texas sites to microsystem and silicon carbide, respectively, and to support necessary maintenance and further autoimmune activities across all sites. In response to the short-term challenge and limited visibility, we are also introducing further cost efficiency measures. This initiative includes a planned headcount return in the high single-digit percentage range for 2026, as well as a gradual reduction of operational costs. By the fourth quarter of 2026, cost savings are estimated to reach USD 6 million per quarter. Concurrently, we remain well positioned to respond swiftly to increasing customers' requirements and growing demand. I will now pass it over to Alba Morganti, CFO of X-FAB for the financial update. Alba Morganti: Thank you, Damien. Good evening, ladies and gentlemen. We will now go to the financial update. I would like to start this financial section by highlighting that in 2025, we totalized $870.3 million sales, meeting the yearly guidance of $840 million to $870 million. This represented an increase of 7% compared to 2024. The sales in the fourth quarter totalized $222.3 million, which is an increase of 18% year-on-year, also in the guided range of $215 million to $225 million. In the fourth quarter, our EBITDA was -- of $42.3 million with an EBITDA margin of 19%. If we exclude the impact from revenues recognized over time, our EBITDA margin would have been of 19.2%, which is still below the guided range of 22.5% to 25.5%. The main reason for that is the miss -- that we missed, our guidance is that the fourth quarter profitability was impacted by a one-off item totalizing $9.3 million, out of which $6 million resulted from the renegotiation of a long-term agreement for the SiC raw wafers while $3 million were due to the reevaluation of our silicon carbide substrates inventory in Lubock and we had renegotiated lower prices. If we exclude these exceptional items, the EBITDA margin would have been of 23.6%. I would like to add that with the productivity improvement plan Damien was referring to, we are in a trajectory to achieve a 30% of EBITDA margin with a quarterly revenue level of $240 million. Since a few years now, our business is naturally hedged and our profitability remains unaffected by exchange rate fluctuations. At a constant USD/Euro exchange rate of USD/EURO 1.07 as experienced in the previous year's quarter the EBITDA margin would have been up 19.3%. Cash and cash equivalents at the end of the fourth quarter amounted to $194.3 million, up $20.1 million compared to the previous quarter, while our net debt decreased by $4.5 million quarter-on-quarter. Our cash position improved despite the fact that in 2025, we repaid several bank loans for more than $75 million as well as leasings for more than $24 million and we also repaid some prepayment that we received from customers, including LTA contracts for about $43 million. And to conclude the financial section, I would like to share our next year's guidance -- next quarter, sorry. Our Q1 '26 revenue is expected to come in within a range of $190 million to $200 million with an EBITDA margin in the range of 18% to 21%. This guidance is based on an average exchange rate of 1.17 USD/Euro and does not take into account the impact of IFRS 15. For the time being, we are not providing a full year 2026 guidance due to the limited visibility and the current macroeconomic environment. And now I would like to give the word back to Rudi. Rudi De Winter: Thank you, Alba. While we remain cautious about the near term, we are observing encouraging developments across our business. Momentum in our CMOS and SOI prototyping revenues is building as our operational improvements make us again more attractive. We see a high level of interest in our microsystem capabilities that is opening substantial new opportunities. Our silicon carbide business is on track for recovery. And we see strong traction for our photonics on the one hand and the gallium nitride on the other hand, demonstrated by several new contracts. I firmly believe X-FAB is excellently positioned for robust growth. The fundamentals of our business remain strong, and I'm confident of X-FAB's long-term sustainable growth. X-FAB is ready for what's next. With that, I'm very pleased to hand over the leadership of X-FAB to Damien Macq, who will succeed me as CEO of the group. And with that, we close the opening, and we are opening for questions. Operator: [Operator Instructions] The first question is coming from Robert Sanders from Deutsche Bank. Robert Sanders: Can I just get a bit of better understanding of the trends by end market? It looks like industrial, medical is performing well, auto clearly soft. Is that what you expect to be the story of the year as it were, even if you can't give specific guidance. Is there any reason to think that that's not the story of the year. And then the second question would just be around your lack of 300-millimeter footprint and your largest customer's business in China, they seem to be under big pressure to use local foundries. What can you do to mitigate the risk that they have to source locally as opposed from you? Damien Macq: Yes. I think your understanding of the end market -- this is Damien speaking -- is aligned with what we see right now. We see uncertainty on the automotive. So -- but strong industrial. So I think the industrial will stay strong, medical -- was a good year in Medical and likely this will be prolonged as well with important design wins as well in the pipe. Regarding the 300-millimeter footprint. At this point in time, we still see customers coming from China to look for our product. So basically, we being a high voltage, being a automotive qualification. And right now, we do not see the absence of 300-millimeter in our site as a handicap. So we keep seeing strong business coming out of companies that are headquartered in China, and we will need to monitor the evolution over the coming quarters to see where other situation are evolving there. Does that answer your question? Rudi De Winter: Operator are we still... Operator: Yes. I think 0- Robert Sanders, I was looking for a feedback, but I guess, this replies to his question. So we have the next question coming now from [ Luke DeSoto ]. Unknown Analyst: First of all, I would like to thank Rudi De Winter for the huge investments which you have done with X-FAB, and this without any dilution for the shareholders. I think this is an incredible good job and how that has been managed financially. I see that there are now a lot of platforms and technologies available at X-FAB. What are the actions? That would be my first question. What are the actions to increase actually the sales because that is still a little bit lagging behind? Damien Macq: Yes. So that's a very good point. Maybe this was not disclosed in this presentation, but we are reorganizing ourselves also across 3 business units. So we have moved some people closer to end customers, and we want to reinforce our co-design capabilities with customers. So business development is and was along 2025, a critical topic that is going to be prolonged in 2026. And if you see some of the results for 2025, so we observed quarter-over-quarter an improvement of our design win in the CMOS technology. So this is something that we need to [ prolonged ]. You have also to realize that we are coming out of a period of allocation with a lot of stress and a lot of stretch with our customers. This period is now over, and it's really time to go hand and [ try ] to collect additional business. And I think the items that were described also in this call, also in regard with microsystem are a good demonstration of the result that this can provide. So it's a very good point, deploying now the technologies and all the good deals that we have in hands to our customer is essential. Also I want to repeat what I said earlier regarding photonics. So photonics is also a technology where we see a lot of traction from our customers. I want to repeat that 7% of the total NRE of the company was realized on photonic -- with photonic technologies. Unknown Analyst: Okay. My second question is more towards finance. I see that the current liabilities are very high, $700 million, $702 million, while the current assets are at $648 million. Are we going to have some stress on a financial basis? Alba Morganti: Look, no, we have credit lines available to support the working capital needs. We have our first revolving credit facility of EUR 200 million, which will expire end of this year, but we are in renegotiation with the banks of the syndication to use the clause of -- which is included in the contract to extend it by 1 year, and we will still have the other one running until -- well, it's of -- we have another 3 years for the other one. And so for the time being, we see rather a decrease of the net debt, thanks to the fact that our major CapEx expansion plan is now over. Therefore, we see a relaxation actually is the other way around of our indebtedness. We have been able to repay several debts which were due, so absolutely in line with expectations in 2025, and we will continue to do so in the future. Unknown Analyst: Okay. So overall, actually, we just need to focus now on getting more sales and then everything will leverage out, and we will get the benefit of the investments. Alba Morganti: That's clear... Unknown Analyst: Yes. It will be marvelous company. Alba Morganti: Thank you for this lovely compliment. But yes, you're absolutely right. Thank you. Operator: [Operator Instructions] There are no further questions at this time. So I hand the conference back to the speakers for any closing remarks. Damien Macq: Thank you. Damien speaking. Before closing the call, I wanted to take a moment to acknowledge the leadership and instrumental contribution of Rudi, as it was already mentioned in this call. I'm grateful for the strong foundation that we have built under his tenure over the past 15 years and for the support from the Board and from our global team as I step into the CEO role. My focus will be on further specialization through continuous innovation, offering unique capabilities on market and customer diversification and on disciplined execution in our operations to serve our customers with the level of performance and quality required to make them successful. For the past 3 years spent within X-FAB as COO, I had the opportunity to interact with our global teams. I trust we are already and committed to building and delivering our robust growth on the momentum already in place. Uta, Alba and myself remain available for any follow-up, and we look forward to speaking with you for our next quarterly conference call on the results of the first quarter 2026. This call is scheduled on the 30th of April. Thank you very much to everyone. Bye-bye. Rudi De Winter: Thank you. Alba Morganti: Thank you. Operator: Thanks for participating to today's call. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to U-Haul Holding Company Third Quarter Fiscal 2026 Investor Conference Call. [Operator Instructions] I would now like to turn the conference call over to Sebastien Reyes. Please go ahead. Sebastien Reyes: Good morning, and thank you for joining us today. Welcome to the U-Haul Holding Company Third Quarter 2026 Investor Call. Before we begin, I'd like to remind everyone that certain of the statements during this call, including, without limitation, statements regarding revenue, expenses, income and general growth of our business, may constitute forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Certain factors could cause actual results to differ materially from those projected. For a discussion of the risks and uncertainties that may affect the company's business and future operating results, please refer to the company's public SEC filings and Form 10-Q for the quarter ended December 31, 2025, which is on file with the U.S. Securities and Exchange Commission. I'll now turn the call over to Joe Shoen, Chairman of U-Haul Holding Company. Edward Shoen: Good morning, everybody. As you read in the press release, we continue to have earnings pulled down due to excessive acquisition costs of vans and pickups in model years '23 and '24. This has hit earnings hard, and you can see it in increased depreciation and originally declining gains on sale and now losses on sale of vans and pickups exiting the fleet. To a much lesser extent, the enormous post-COVID price increases on internal combustion engine vehicles is dogging our box trucks with elevated depreciation. We had been accumulating internal combustion engine fleet due to predicted declines in availability of ICE-powered units going ahead. Now we are too heavy in fleet and the rental market is not responding with significant transaction increases. We are working a plan to open more U-Haul dealership locations, which will put some of this excess fleet to work while earning in return. We will likely still be overfleeted so we will need to increase sales of older, higher-mileage trucks over the next 12 months. As best as I can tell, we are holding our own and then some in the self-storage industry. For nearly 24 months, we have been adding units faster than we are renting them up. This results in a surplus of available units. We're launching some initiatives intended to improve our rate of units rented over the prior year. The proof will be in the pudding, and we'll see how that develops going into summer. We now have a significant U-Box presence at over 700 locations in North America. By that, I mean a significant warehouse and depot operation. This increases our capacity and the absolute number -- well, to the extent that U-Box's self-storage, U-Box is both moving in storage. But one component of it is storage. To the extent U-Box is self-storage, this increases our capacity and absolute number of self-storage customers. We have over 200,000 U-Box containers in service and over 100,000 of them in the hands of customers. We have slowed our rate of adding U-Box warehouses as we have a workable presence in most markets. However, in D.C., L.A., Boston, New York City and the Bay Area, we are still underserved. In Canada, we are still light on U-Box capacity in Vancouver Island and Edmonton. We have projects in planning or in construction in all of these markets and I plan to carry through on these capital expenditures. We continue to heavily invest in digital tools to meet what customers expect from the industry leader. Most of this investment is expensed in the current period. With that, I'll turn it back to Jason. Jason Berg: Thanks, Joe. Yesterday, we reported third quarter losses of $37 million compared to earnings of $67 million for the same quarter last year. So that's a loss of $0.18 per nonvoting share this quarter compared to earnings of $0.35 per nonvoting share in the third quarter of last year. Earnings before interest, taxes and depreciation, what we're calling adjusted EBITDA, in our moving and storage segment decreased 11% to nearly $42 million for the quarter. On a percentage basis, that's about the same decrease that we saw in operating cash flows for the quarter as well. Included in our release and financial supplement is a reconciliation of adjusted EBITDA to GAAP earnings. Depreciation and losses from the disposal of rental units continues to be a significant earnings headwind. During the third quarter of this year, we reported a $26 million loss on the disposal of retired rental equipment compared to a $4 million gain in last year's quarter. Cargo vans that we purchased over the previous 2 model years that are now being sold came into the fleet with a higher cost and the current market resale values have not been reflecting that, thus resulting in this loss. We've also increased the pace of depreciation on the remaining units to reflect that new reality. On top of this, we have depreciation from increasing the size of the box truck fleet by nearly 11,000 units compared to December of last year. Between fleet depreciation and the loss on disposal, we experienced a $75 million cost increase for this quarter compared to the same time last year, translated into nonvoting share EPS, that's approximately $0.24 a share. Over 3/4 of this negative variance is related to our cargo van fleet. Looking towards the future, the model year 2026 cargo van purchases that will be coming on the books this year are going to be at an average cost of about 12% lower than last year's model year. And if you compare them to 2 years ago, about 20% lower. For the third quarter, our equipment rental revenues results increased $8 million or just under 1% compared to the same time the year before, the majority coming from in-town portion of our business. Comparing the end of December 2025 to the same time in 2024, we added 65 new company-operated locations, and we had a net increase of 365 independent dealers. These new locations, as Joe mentioned, are expected to help us better distribute the larger fleet and increase transactions. For January, our results were trending quite positive prior to the onset of the significant weather activity that hit much of the country has certainly slowed the improvement over the last 1.5 weeks or so. Capital expenditures for new rental equipment in the first 9 months of this year were $1.748 billion. It's a $162 million increase compared to 9 months -- same 9-month period last year. Looking at the last 12 months, so that would be the calendar year of 2025, our gross fleet spend was approximately $2.025 billion. If you net out equipment sales, we got down to $1.331 billion. I'm estimating close to $670 million of that growth -- of that gross spend was growth related. Initial estimates for next fiscal year are showing a decrease in new truck purchases somewhere north of $500 million. Storage revenues were up $18 million or 8% for the quarter. Average revenue per foot continued to improve across the entire portfolio by just under 7%. While the same-store revenue per occupied foot was up 5%, reflecting the cumulative effects of our rate increase activity. Our strategy of straightforward pricing with the customer and avoiding the large introductory discounts continues. Our same-store occupancy decreased 490 basis points to just over 87%. And mentioned in our last earnings call that in July, we took on an effort system-wide to increase the number of available units at existing facilities by focusing on delinquent units. This effort did not affect revenue because we don't record storage revenue until we collect it, but it has had an effect on our reported occupancy level. So of that almost 5% decrease in same-store occupancy, close to 4% of that was related to the removal of delinquent rooms. Net tenant move-ins year-over-year, so comparing end of December of this year versus last year, are slower than in recent years has picked up compared to where we were last year adjusted for the delinquent units. During the first 9 months of fiscal 2026, we invested $770 million in real estate acquisitions along with the development of new self-storage and U-Box warehouse space. That's a $444 million decrease over the first 9 months of fiscal 2025. During the third quarter, we added 16 new locations with storage, translates to about 1.5 million new net rentable square feet. Our development pipeline now is down to -- active development is down to 106 projects that should result in somewhere around 5.7 million new net rentable square feet. Moving to storage operating expenses were up $66 million for the third quarter. As a percent of revenue, we certainly took a step back from the progress that we made last quarter. First, personnel costs were up $16 million, and fleet maintenance and repair were up $13 million. But really, the unusual increase and the largest component that we had was related to our self-insurance liability costs, and they were up $38 million, with the majority of that being in the form of reserve strengthening. We've made progress on this front, increasing our liability by nearly $79 million since March of 2025. In December, our property and casualty insurance company paid U-Haul Holding Company's parent $100 million dividend as we're taking steps to reallocate capital amongst some of our subsidiaries. This $100 million is now available for general U-Haul corporate use. As of December 2025, cash along with availability from existing loan facilities, at our moving and storage segment totaled $1.475 billion. I'd like to remind everyone that we have a supplemental financial information exhibit that's available on our homepage investors.uhaul.com under Investor Kit. With that, I'd like to hand the call back to Jenny as we have Joe, Sam Shoen and myself here to answer questions. Operator: [Operator Instructions] Your first question is from Steven Ralston from Zacks. Steven Ralston: Taking into account that seasonally, this is the second weakest quarter in your year. There seem to be some pressures in the one-way market in the self-moving equipment area and also in the U-Box program. Could you discuss that? And also, does that indicate there is some sort of -- that the U-Box market sort of track the one-way market, one-way rental market? Edward Shoen: I'll start on that. I mentioned this last conference call, what we've seen over decades is when consumers get anxious, they shorten the distance of a transaction. So instead of moving relocating to Denver, they go to a suburb of their existing town. They still move for a variety of reasons, which is basic underlying demand, but they move shorter distances. And sometimes that turns a one-way transaction into a local transaction. So there's -- so U-Box, and I'll let Sam elaborate on this. U-Box, we've had our greatest success with long-distance transactions. So to the extent that it tracks U-Haul, it will kind of track it. U-Box will track it but maybe a little more exaggerated as a percentage of business. Samuel Shoen: Right. Yes, Steven, that's a great question. I think this is getting to kind of what you're asking. U-Box operates in almost primarily in what U-Move considers the long zones. So for rental trucks, what might be a 20% of our one-way business in the long zones, for U-Box might be 80%. And so I think the question you asked was does U-Box track the one-way moving market, certainly in that way it does. And then, of course, as we have distribution as we're using rate to control distribution, now we're pricing U-Haul trucks in a certain way and our customers are seeing that and getting to incorporate that into their choice. So I think the short answer to your question is yes. Steven Ralston: You've discussed the depreciation line, a great deal. And I think I'm missing something because I just -- could you please explain it. Depreciation is up dramatically, but sequentially, from the second fiscal quarter to the third fiscal quarter, depreciation actually went down. What's happening on an accounting basis on that? Jason Berg: So this is Jason. A couple of things going on. First, the depreciation of the box truck fleet is a dynamic depreciation where every time a truck passes its 1-year anniversary, the depreciation rate steps down on it. right? So our -- the first year that we buy a box truck, we charge off 16% of the cost. The second year is 13%. And that keeps going down. So if we don't do anything, the depreciation on the box truck fleet will gradually just continue to step down. The second part of that is on our pickup and cargo van fleet, which is a -- it's a smaller fleet... Steven Ralston: It's a shorter life asset, right? Jason Berg: Yes, exactly. We hold it a shorter period, and those depreciation rates we're adjusting from quarter-to-quarter based upon what we see in the resale market. And as we've essentially almost finished selling through the model year '23 units. Now we're onto the '24. And so we're -- that depreciation number is getting adjusted from quarter-to-quarter. Operator: Your next question is from Steven Ramsey from Thompson Research Group. Steven Ramsey: Maybe to start with, what did you think about from the high level for your business? You've continued to invest in growth in all areas of the business in the time of subdued activity. If you think about moving competitors against you in the traditional moving and U-Box space, have you seen capacity reductions from peers or another angle maybe is how you're expanding in the dealer space to position you to perform well now and perform much better on the other side of this? Edward Shoen: I'll answer that. Yes, on both moving fleet and locations. The numbers aren't hard. I can't give you a hard number of, let's say, how many outlets Penske or Budget has. But we have a bunch of other indicators we get from various industry sources that causes us to be fairly confident they're both reducing fleet and reducing outlets. So that should we see an upturn or should we get a -- another way to put it, should we do a better job of understanding and satisfying customer needs, we'll be in a position to fill that demand. And that's the way I look at it a lot more in where we failed to appreciate what our customer needs. And if we will find that failure and remedy it, the customer will reward us with more transactions, and we'll be in a better position. We'll have more outlets and convenience is kind of part of our overall strategy. So we're far and away. Just for talking points, let's say, Budget has 3,000 outlets and Penske has 3,500, but we're sitting with 24,000 and change. So as far as customer accessibility, we just -- we dominate. And that's part of our strategy. It's a judgment how far to push that. Frankly, it's not an algorithm. Maybe there is, but it isn't one that we have a math problem that solves that algorithm. So one other thing that you don't see and Jason, I don't think he really talked about is, inside our fleet isn't homogenous. It isn't one number. So when he says we have 100x box trucks, the size of those and the age matters when you're trying to manage the whole fleet. So we have been playing catch-up to massive disruptions in the supply chain caused by both COVID and the government's insistence on electrification. Curing those takes a while. You can cure it in the pickup and van fleet maybe in 24 months because you rotate that fleet. In our box truck fleet, it's at least an 8-year opportunity. So sometimes we're buying a little more trucks than we need because we need a certain size truck or that truck is now available and it wasn't available before. So there's a bunch of adjustments inside of the big number. And if you went back to, let's say, 2016, we had it at that point, the best I've ever had in my life. We had tuned that pretty good. And that falls through as profitability. So as we get this fleet rebalanced, and I wish I can tell you a date, I wish -- I'm trying to get my own self a date as to when that will be back in balance. I don't know. We've had -- you've heard me bellyache about the administration and the drive towards electrification. You see that really caused the manufacturers to do 2 things. One, they increased the price massively I'm talking 30% and 50% price increases; and two, they allocated vehicles. We couldn't get the model we want and the quantity we want. We had to take what their supply chain was able to produce. And this caused disruption in the age and size of our trucks, and we're working very hard to remedy that. And you see this year, the year we're just kind of finishing, we bought very arguably, a little more vehicles than is reasonable. But if you get into the details, you would see we're attempting to get this balance back out. So 2, 3 and 4 years from now, it's the right mix in the age of vehicles to serve the market. So we're very aware of it. But it's all judgment. It's not absolutely guarantee. I think that I've been elated because the administration has done everything I could imagine it to kibosh on the electrification. So you and I'm sure all your peers have seen what -- our good friends in the manufacturing business, Mary Barra announced, I think, $6 billion or $5 billion write-off. Jim Farley announced $19.5 billion write-off. Well, that gives you some idea of the disruption at their level, and that disruption kind of is like a ripple of a pond that carries through to people like me or to car dealers, if you have any car dealer clients, you'll see that they're not getting the exact mix of vehicles that they wish they had. But this will balance out. The carmakers are smart people. And once they shed themselves of this electrification, I don't know what it is this for you. I'm not sure the right name for it. But as they get out of that, they're going to deliver the mix of vehicles that customers want, and customers will respond. So if that kind of addresses your question, it may be too much information. I don't know. Steven Ramsey: No, that's helpful perspective. I appreciate that. I wanted to think about the expense management side of things? I know it's been a focus for you. Do you think this needs to be a more intensified effort over the next 6 to 12 months? Or would you say the structure is actually in a good place, but it's more waiting on volume to come back? Edward Shoen: I've been pounding through on -- we run on the system of budgets like a lot of people. So I've been pounding through budgets. Trying to get the correct response out of the various parts of the corporation. And I think I'll see some results in the present calendar year and a little bit more the next year. Repair hasn't been too bad. It's a lot of money somewhere is approaching $800 million on an annual basis. But is coming in somewhere in a normative -- we calculate all repair by model, by year, by cents per mile. We have a pretty good ability to forecast that. So repair, we've got half way under control. Personnel is kind of -- we're stuck in a vice on that. I think many, many people or organizations are, which is cost of living for our workforce is rising at a pretty good clip, and they're pretty hard pitched. So we're going to see that increase steadily over the next 2 or 3 years, I think, for sure. And our job is to outpace that, and when I look at that, we look at that on a location-by-location basis. Basically, we need to get a nexus of revenue enough that will support the complement of people to be open the hours we want to be open. We may likely have to adjust some hours over the coming 12 months because the -- it's not going to generate enough surplus to pay the wages for the hours the store is presently open in my judgment. Now that's not done, but that's the kind of pressure we're under. And it's on -- it gets to a totally micro analysis you can say overall blah blah blah, but every morning, we open about 2,400 stores. So I got to have a body there. It's very specific. And then some days in the week, I got to have several bodies there. So and those people have to be paid a living wage. So there's going to be tension there. I think -- I don't know what part of the country you're from, but this year, the West Coast of the United States, let's say California, Oregon or Washington have put in greatly increased minimum wages have processed, or have in place plans that will automatically do it next year. And in many jurisdictions, they've done this for both salaried and hourly. Most of us are used to a minimum wage per hourly personnel. But they're not putting in minimum wages for salaried personnel. And it's going to stress a significant number of our stores' profitability. So of course, we're going to pay the people, but we have to boost productivity. Both self-storage and U-Box have been a relief valve for that in many instances. We've been able to expand that presence in the location, but other locations are limited by the geographic footprint. There's only so much you can do on that piece of land. So let's say in Los Angeles, we have several locations that are just slightly over half an acre. There's no wiggle there. So those are under intense pressure. And I don't have a simple solution to it, but we're very cognizant of it. We're working on it. Steven Ramsey: Okay. That's helpful. And then last one for me. You've talked some about U-Box in the major markets that you are building out. Can you clarify if construction is going on in those markets for warehouse capacity? And then secondly, can you talk about U-Box usage both moving and storage in large metros that you already have established warehouse presence. Trying to think about the potential upside in the big cities once it's built out. Edward Shoen: I'll take the brunt of that question and let Sam take the back of it. In the cities I mentioned, the metropolitan areas I mentioned, at the minimum, we own property. We're somewhere between land use and putting the roof on it at these locations. These are all -- to me, each one is a big saga, okay. So I know too much information on it. We'll pick D.C. We've had the steel building on the ground for 2 years. That's how between COVID and normal city bureaucracies, how much it set us back. We thought 2 years ago, we were going to break ground. We ordered the building, they delivered it. We still haven't broke ground. So it's not because we're not trying. It's just -- it's quite elaborate. But in all those cities, we own the property or metro areas, in all those metro areas, we own the property. I'd say, I'll pick Vancouver Island. That's a readily apparent thing. If we don't have a significant warehouse capacity, there's just going to be no U-Box business at all. So we have to have real warehouse capacity there. So -- but in the rest of Canada, we've done a great job for the Maritimes, up and through Ottawa, down to Montreal, all through the Greater Ontario or the whole belt people between Toronto and Detroit, we've got a fairly adequate footprint. And so I believe the business will follow. Sam? Samuel Shoen: Sure. I'll add some more color. Metros for U-Box is something we're certainly maybe a little extra excited about because Joe had the foresight to design our product and our strategy specifically around the size of container that thrives in the metro areas with challenges of space. So for example, our container size unlike a lot of our competitors fits in an apartment parking spot, no problem. A lot of the challenging metro areas are restrictions on where they can be laid in terms of needing permits or having outright restrictions to be placed on the street. Our container option delivery method with the trailer gives it a license plate, which means it can go in anywhere that's a legal parking spot. So those are tremendous differentiators in our product versus the competition, and those were deliberate. And of course, we're hoping they drive some -- continue to drive some exciting results in the metro besides the fact that a lot of these -- the metro demand is for a smaller-sized container in the first place. So getting the right-sized product to those customers is what we do. So I think we've got a big advantage. Jason Berg: Steven, this is Jason. I just want to make sure that there isn't any misunderstanding. In these markets, our customers already have access to the U-Box product. We're just looking to improve their access to it. It's not that we aren't in those markets. Operator: Your next question is from Jeff Kauffman from Vertical Research Partners. Jeffrey Kauffman: I just had a question more for Jason. You talked about we're almost through the 2023 cargo van cohort and starting to work on the '24s. Can you give us an idea of how many vehicles we have left to kind of get caught up to the current market and maybe the differential between your average acquisition costs and where you're depreciating the '24s versus what that spread looks like for the '23s. Jason Berg: Sure. I'll give you some big picture numbers. On the '24s, we probably have somewhere around 6,000 of those left, and those were the most expensive ones, a little bit more pricey than the '23s. And then we have, say, close to 19,000 of the model year '25s that then were maybe $3,000 cheaper than the '24s. So now we're going to be in the process of rotating out the model year '24s, which we have been -- we've been hitting those with this increased depreciation. So part of -- answered the question earlier, I think it was for Steve Ralston, that's been part of the depreciation increases. We've been hitting those modeling years here before we have to sell them, hoping to minimize any loss on disposal. And we'll see how successful we are here in the next 12 months on that. Jeffrey Kauffman: Okay. But is your sense that -- because, look, it's going to come out either way, right, either through depreciation or loss on sale. But is your sense, we've got the '24 model years mark-to-market fairly at this point in time? Or is there still kind of going to be this deferred catch-up on loss on sale? Jason Berg: I think it would be fair to expect a loss on sale for those units. I don't know if we're fully there yet. Edward Shoen: Let me address it. It's you make your estimate of what you're going to get on sale when you're going in, you set up your books. We've had to come back with adjustments because the way the market has developed that estimate turned out to be wrong. And as far as I can tell, it's wrong because as the automakers get away from electrification and get their supply chains reorganized, they're now, in fact, selling new vehicles for less than last year's new vehicle and maintaining a margin. They need to make a profit. I'm all for it. But that takes the resale value and kind of gives it a little bit more of a hit. And we haven't in recent years, at least not in the last 15 years, had a market where the new prices kept being under the old price. And so I think we poorly estimated this, and of course, we figured this out, I don't know, 1 year, 1.5 years ago, when we start to act on it, and everybody was confident going into this particular year we're in that we're finally through it. And then, of course, what happened, another round of opportunistic. So we're acquiring the fleet cheaper, but that may mean that these trucks that we just put in are going to retail for less or wholesale when we get rid of them for less than we thought. So we're -- I've got people here pretty tuned up. And I think we will try to -- if we see it declining what my direction has been, try to adjust depreciation to where you're going to basically be neutral at sale because the problem with the sale is that by the time you get it, you forgot how much you paid for it and all that. So we should suffer the pain monthly, and that also puts pressure on my marketing people because they basically incur that depreciation cost as part of their charge or whatever you want to call it that, as part of what they know they have to hit, it's harder for them to -- for me to hold them accountable for recouping a loss on sale, but they really didn't have a budget or a forecast that adequately presented that. So I'm very hopeful we're going to get it right, but you've seen how just this whole thing has just kind of ricocheted through and it's given everybody some things they didn't really totally appreciate, and I'm kind of a glass half empty person, and I've kind of pushed our people. Of course, they're all marketing and now we're going to sell our way out of it. Well, I think it's pretty clear when the pickup or van prices declined 2 years in a row, you're not going to sell your way out of it. You're just going to respond to the market. So I think it's a collaborative effort to guess -- make these estimates. I won't call them guesses, but they're kind of a guess. But your estimate of what that thing is going to go out for 18 months from now is an estimate. Of course, there's other industry people making this estimate. We're not the only people trying to figure this out. So I have some belief that we may now hit the bottom of this whole declining group of factors coming together. But should next year, GMC lower prices again. Because they improve their margins and they've written off all the garbage. They have the same problem. They had some garbage on the books because they were attempting to respond to government. And I don't want to call it third-party greeny pressure. People who didn't know what the facts were but nevertheless had power positions. They tried to respond to them has really cost them greatly. It hasn't hit us as hard, but it's costing us, and we will work through it, and every effort is being made to keep the fleet. I've always prided myself over the last 40 years, of always having the fleet on the books for less than it's worth. Because when push comes to shove, if you're on the books for more than it's worth, it can be a very unpleasant time. So I've pushed real hard and we've missed it 2 years in a row on our pickup and van fleet. And we should have it right this time, but only time is going to tell. It's important. We're trying to undershoot without just being stupid. If I put too much depreciation on, of course, my rental teams will say we can't possibly make we can't make any of our goals. It's impossible that you've afflicted us with. So I have to not try to be not too low or too high. So -- but on the other hand, I'll say that the whole company has overestimated resales for 2 years running. Yes, it all comes out in the wash. But during the interim period, it can affect people's motivations and I need to do that. Operator: Your next question is from Jamie Wilen from Wilen Management. James Wilen: Joe, you've always mentioned that fleet utilization was your prime objective in managing the business. How did you arrive at only reducing the fleet expenditures in the coming year by $0.5 billion and as you look forward, are you going to spend $0.5 billion less in future years as well? Edward Shoen: Right. Now I'll start with the year, we're finishing up. So we call that fiscal '26, I believe. In fiscal '26, you're actually seeing an increased -- significantly increased fleet expense. That is aimed at trying to rebalance. If you don't buy some trucks, well, 4 years from now, you don't have those trucks at that mileage and that cost parameter. And so you create imbalances to the whole fleet. And that also impacts on what can you buy next? So in the year just finished, we put in something like 10,000 10-foot trucks. That's beyond replacement considerably. We have a whole bunch of considerations. And that truck, in our present plan for the coming year, we reduced that massively because we think we know what we're doing there. In my 20-foot truck, I have a disproportionate amount of fleet that's 8 or 10 years old. So while my total number is okay, my mix is off as 10-year-old truck can't perform quite like a 5-year-old truck or a 4-year-old truck. So I'm buying a fair amount of those a little bit more than you might say is replacement simply because I have a lump of them that are 8 or 10 years old, and I've got to try to smooth that out. The perfect life would be figure the life of the truck, divide that in the fleet, make that fleet purchase every year. That would be wonderful. But they just don't become available. And in the past 5 years, it's been aggravated because of all these supply chain disruptions. The worst being we're on allocation. They would say, you can buy x trucks that -- we haven't seen that since the Korean war. So that caught us off balance, I would say, and resulted in a couple of times, we made huge buys because they would sell them to us. We had to have something, so we made a huge buy. So we're going to -- we're going to reduce this, and then we have to see what we can do with sales because that problem, it's a buying problem. It's also a selling problem. Can you take that many trucks into the sale market and can you move them. So we'll see in case of my 20-foot trucks, I have something like 12,000 lump going through it. And we can't digest 12,000 of those at resale in one year and probably couldn't do it less than 3 years. So depending on how -- but if I don't buy for 3 years, I'm just creating another lump that I'll have to face down the road. So I'm going to do some modest buys that may accelerate sales and see where that -- where we can find the balance. And so we're probing that, I'll say, specifically on the 20-foot truck right now. How much can we -- how many of those trucks can we put into the resale market successfully, and we should buy at least that many of them this year so that we don't have another month in our supply chain. James Wilen: On the self... Edward Shoen: Go ahead, I'm sorry. James Wilen: I'd say on the self-storage side, as far as capacity utilization there, is there any thought of slowing the pace of development to a more modest level. Edward Shoen: It slowed a lot. I think Jason thinks it's down $400 million. It's not a -- these numbers are a little bit soft. But we've slowed it down. A ground-up self-storage location is probably a 3-year process. So if I slow it down, you won't totally see it until 3 years from now. Now the other problem is if we want to speed it up, you won't see it for 3 years. So you got to be a little thoughtful going both ways. So we have slowed it down. I'm still going ahead with what I consider to be strategic. So the U-Box warehouse as I mentioned, I believe they're strategic, and we would be foolish not to build them. Although -- so the -- it's going to be a significant amount of money, enough money that I'm watching it. For self-storage, we're a little more opportunistic as we're going ahead now. We either think it's a market that we know better than somebody else when we see an opportunity, or it's something that's semi-distressed. We just bought location in Olive Branch, Mississippi. It doesn't mean much to you, but we already had a store there. We bought a second store. We paid well less than 3/4 of the cost of construction for it. And I think Olive Branch, Mississippi is going to be fine over the next 10 years, although it's probably not on your horizon. But it's a good solid growing area. I determined that was opportunistic and we go ahead with it. James Wilen: Okay. You guys have done an excellent job of building value, but less than a stellar job of creating value for shareholders. If I were a Board -- pardon me? Edward Shoen: I'm with you on that. James Wilen: Okay. If I were a Board member, here's what I would suggest to you to help crystallize a bit more of that value. We all know how undervalued self-storage is relative to the rest of the world. And we'd like to help the investment community as well as analysts recognize a bit of that. What I would suggest us doing is selling a territory of well-occupied facilities that don't have U-Box storage in there because I don't want to eliminate the competitive advantage we have with the rest of the world in U-Box. But I would take an area where we have stabilized occupancies over 80% like a Tennessee or New Jersey and hopefully, no U-Box storage or not much. And I would want to sell that to one of the publicly held REITs, which could crystallize value for how much we have value if we have created there and recycle the proceeds. If we get $1 billion or $2 billion, use half of them to buy back stock, the rest to pay down debt. We'll build new facilities. But it would help crystallize what we built and hopefully not impact the growth of the core business there. What do you think of that? Edward Shoen: I kind of understand the math of it. I won't say I am hot on the proposal. Of course, part of the opportunity is every one of those I work to get. And so I'm a little bit wary of selling it. And should the market turn up, we may rue the day we sold it. But I think that's a fair position to explore. I'll explore it a little bit with Jason. He's pretty good on the numbers. So we'll explore that a little bit. The stock buyback, I kind of go both ways on also. I'm not -- we went and did the stock dividend and a bunch of other stuff, tried to bring some analysts in, changed the exchange, we were going all in an effort to, I guess, improve liquidity or make the stock more interesting to people with, I think, very minimal results, okay? I don't think anybody at my end is a stock guru. We don't -- that's just not where we all live. I was underwhelmed with the response of the market when we did that. But these are -- we have to do something to demonstrate value. Another way to demonstrate value is put these stores at 90% occupancy, then, of course, now it's a little bit easier. I'm sitting here with -- depending on how you want to count it, somewhere around 80% effective occupancy. Now it varies by every store, but that's overall not a bad estimate. And that's been dragged down by -- every time I open a new store, I lower that number. So I believe that the market is significantly larger, but it's being say, mistreated. The customers are being mistreated by the industry now, and I'm going to try to see if I can communicate that to the customer that we're not the ones mistreating it. So we'll see how that goes. But a bunch of people have come into this industry, which you probably know them, and I don't. But they're big money operators, and they kind of view storage as a cow to be milked and I look at it more as a lamb to be petted and taken care of. So they're a little rough on the customer would be the nicest way to put it. And I think we can distinguish on our customer service, and I think there's enough people in the market now who this is their second or third time running storage, and they know that storage room is not a storage. It's not a storage. We'll see if I can communicate that to the wider group of customers. Overall, I think we've been outperforming our peer group, if you wanted to find that as the big REITs, I believe we've done a better job of being able to maintain rates and expand customer base. Now, I don't get any numbers of theirs that you don't see. So I don't have any special look into their numbers, but it seems that they're having difficulty holding move in rates at or above move-out rates. We're still able to maintain a differential there. I think that's significant. I'm optimistic I can fill more rooms, but I've got it pretty close to the edge, I think, Jamie, as far as -- we're pushing somewhere as -- Jason may have a better number, 220,000, 230,000 empty units, something like that. Jason Berg: If you include the managed portfolio, so U-Haul-branded stores were about 290,000 rooms available. Edward Shoen: Okay. So all of those are depending on either a liability or an opportunity. So as a shareholder, you're probably seeing a little bit as a liability because you're paying for them and get nothing for it. I think we're going to see significant progress in filling those rooms and that's how I have my teams wound up. At the same time that we've increased successfully, we've increased total customers every year in conventional self-storage. We've done the same thing. We've introduced something like 100,000 storage customers in the U-Box. So from the point of view of operating a facility, that manager is looking at a total storage customer base. So I'm not disgusted with our performance. But I think our performance has to be better because we've invested the money. But I think we're showing we're resonating with the customer as much or better than anybody else in the business. James Wilen: I believe you have 2 customers here. One is the person who rents your storage facilities and truck rentals and the other customer are investors. And investors would love to see you harvest some of the value you've created where you've turned $1 into $4, but we can't see it. Whatever you can do in that respect would be a good thing for... Edward Shoen: I got it... James Wilen: It's a consolation, I'm 76. I'm kind of getting a little closer to wanting to see the goose lay some golden eggs too. All right. Edward Shoen: Appreciate your thoughts. Operator: [Operator Instructions] And your next question is from Steven Ralston from Zacks. Steven Ralston: I just want to circle back around and tap Joe's experience and get a historical perspective. You've pointed out that you're in a very unique period with the emphasis on EV vehicles and the demand that came through COVID. When you think about the situation in your past, does it remind you of any time in the past where you resolved the situation and how it happened and you use that as like key markers in managing the company? Edward Shoen: In a general sense, yes. But in fleet, we've always been able to buy all the fleet we had money for. Our problem up until recently was we always were capital constrained. And then this flipped COVID and post-COVID, and we can buy what someone says we can have. That's -- that -- we don't have a lot of markers in there. But of course, we're working on it regularly. I think if I had to do this all over again, coming out of COVID or I'll say post-COVID, I would not have -- when they went on allocation, I'd have told them to keep their trucks. That's what I'll tell them next time. They keep their trucks and when they jack prices, they can keep their trucks because I can sweat out 2, 3, 4 years, and I think my customer will support me. I think I was over eager to buy trucks because we had such a nice balance in '16. I wanted to get back to that balance quickly. And I didn't stand firm enough when they came through with massive price increases. I just don't know it's unsupportable. Now they had all this talk, and we all saw it and I think everybody is a little guilty of this saying that, as Mary Barra did, she had something, I don't know, after 2037 or something, GM will not make an internal combustion engine. Well, if you're on my end of the deal, that's a frightening thought because the other ones don't run, you see. So you can see how I fell into the trap and think well hell, if she's not going to build any, but then my friends at Ford didn't make quite as broad a statement, but practically speaking, they were running their investment as if they were no longer willing to make it. An example, they quit the second shift to one of their truck plants. We've been the beneficiaries of that second shift for at least 10 years. So when they put a second shift to that plant, I will -- where the hell is trucks going to come from. So I think we'd have come out better if we'd just let the fleet age by just what suited us and just at the price that suited us and we wouldn't be trying to digest all this excess cost. But that's not what happens. So now we've got to digest it and want to work it in a way that it doesn't come back and plague people who are trying to make fleet decisions 5 and 6 years from now and I want to try to smooth it out. And so that's causing us in some models to buy a few more trucks than an analyst would testify, but when you look at the age of the truck and what that's going to do to you going ahead, I think experience tells me you want to buy some trucks. So -- so no, I don't have a marker and experience on this. Self-storage, I have a lot of markers and experience on. I'm fairly confident that, that's -- those are all good money bets. But the timing is too slow, and it's not enough to command investor support, which I understand I'm an investor here, too. So -- but we have markers. We can look at market penetration by various markets and storage market -- the demand for that product has far exceeded anyone's expectations. I think you could say that of any of the major companies. No one really appreciated how much demand there was for that product or there is for that product, and it's still being served in a spotty fashion. So filling in those gaps is an opportunity for someone if they can identify them and then get them filled. Operator: There are no further questions at this time. I will now turn the call back over to Sebastien Reyes for closing remarks. Sebastien Reyes: Thanks, Jenny. I have one question that I wanted to post here that came in during the call. U-Haul's profit margins, excluding depreciation have been in constant decline for the last decade. Please explain why margins have been so persistently weak since 2016, and please explain your plan to restore the profitability of this great company. Jason Berg: Well, this is Jason. I'll take that one. Well, 2016 is picking the high point of our EBITDA margin. So that our earnings over the history of the company have been a little bit cyclical largely in relation to how much we expand the organization over a certain timeframe. So to pick 2016, which I think was maybe 35%, 36% EBITDA margin. The 10 years before that, our EBITDA margin was 25%. And the 10 years since 2016, our average EBITDA margin has been 33%. So there has been actually a structural improvement in how the organization has been run. And we've included a slide that shows this trend of improving EBITDA margins that I don't think it's happenstance that it coincides with our growth in the self storage and the U-Box market. Since fiscal '16, we've had some up years and down years. I would say that during COVID years where we got back up to the mid 30% range, there was some recognition of revenue and not the recognition of the associated expenses that went along with it. So for example, the repair and maintenance that we were incurring during the work from home phase where revenues shot up. Under current accounting rules, you can't accrue for expected maintenance based upon how much the truck is going right now. So we accrued all of these miles and recognized the revenue and then there was a couple of years after that, that we've been paying for the repair and expense associated with that. Then we also had the somewhat idiosyncratic event where our former auditors failed to see the wisdom in how we chose to reserve for our self-insurance liabilities, and they took -- I think it was $88 million out of our self-insurance reserves in order to sign the opinion. And now over time, I think we've seen that we would have been much better off to leave those reserves on the books, and that would have been a little bit more of a shock absorber, right? Because during COVID transactions increased, so the rate of incident, potential incidents increased, well now we're dealing with as those incidents that happened back then are developing, they're becoming a little bit worse than what was originally thought. It's always ifs and buts. But for this quarter, if we had a normal U-Move revenue quarter of 4% growth, and we didn't have the reserve strengthening, we would be looking at an average EBITDA margin. So I'm hesitant to agree with the premise that there's something structurally wrong with the how we're operating the business from an expense perspective, I would say that it's a revenue issue, and then it's a cycle. We've been in an unprecedented growth cycle how much we've grown the fleet and how much we've grown self-storage. And frankly, I think we've done a reasonably good job in keeping the EBITDA margins where they're at, while we're going through this process. Now all of that to say, a decent EBITDA margin for us over a 12-month period is going to be in the low 30% ranges and we are underperforming that this year. Sebastien Reyes: Well, thanks again, everyone, for your participation. We look forward to speaking with you again after we report our year-end results in May. Thanks. Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining you. You may all disconnect your lines.