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Unknown Executive: [Interpreted] It's now time to begin the Sony Group Corporation Earnings Announcement. I am [ Ishii ] from the Corporate Communications Department, and I will be your moderator today. Today, Lin Tao, Corporate Executive Officer and CFO, will present the FY 2025 third quarter results and full year forecast, followed by a Q&A session. The entire session is expected to last 65 minutes. To ensure our international audience can hear the presentation in Ms. Tao's own words, the English language earnings presentation will be delivered via a prerecorded video. Lin Tao: Today, I will explain the content shown here. Sales of continuing operations in FY '25 Q3 increased 1% compared to the same quarter of the previous fiscal year to JPY 3,713.7 billion, and operating income increased 22% to JPY 515 billion. Both were record highs for the third quarter. Net income increased 11% to JPY 377.3 billion. The financial results by segment are shown here. We upwardly revised our full year sales forecast from the previous forecast 3% to JPY 12,300 billion, operating income 8% to JPY 1,540 billion and net income 8% to JPY 1,130 billion. We increased our forecast for operating cash flow 9% to JPY 1,630 billion. The forecast for each segment is shown here. Now I will turn to an overview of each business. First is the G&NS segment. FY '25 Q3 sales decreased 4% year-on-year, primarily due to lower hardware unit sales. Operating income increased 19% year-on-year, primarily due to the positive impact of foreign exchange rates and the impact of increased sales and network services and first-party software, setting a record for the third quarter in this segment. We upwardly revised our FY '25 sales forecast 4% from the previous forecast to JPY 4,630 billion and our operating income forecast 2% to JPY 510 billion. User engagement trended well during the quarter with the number of monthly active users across all of the PlayStation in December increasing 2% compared to the last December to a record high of 132 million accounts, and total play time for the quarter increased 0.4% year-on-year. Although conditions in the console hardware market during year-end selling season were more challenging than expected, we were able to steadily expand our PS5 installed base in line with our original plan and exceeded 92 million units on a cumulative selling basis. While PS5 hardware unit sales have decreased moderately in latter half of the console cycle, software revenue from the PlayStation Store reached a record high during the quarter, primarily driven by the contribution of major third-party franchise titles and new hit releases. PlayStation Plus significantly contributed to the results of the quarter as the shift to higher tiers of the service continued. As for securing a supply of memory, we are already in a position to secure the minimum quantity necessary to manage the year-end selling season of next fiscal year. Going forward, we intend to further negotiate with various suppliers to secure enough supply to meet the demand of our customers. Given the stage of our console cycle, our hardware sales strategy can be adjusted flexibly, and we intend to minimize the impact of the increased memory cost on this segment going forward by prioritizing monetization of the installed base to date and striving to further expand our software and network service revenue. In the Studio business, Ghost of Yotei, a tentpole title we released in October, exceeded the sales of the previous title in the same period of time and significantly contributed to the financial results of the quarter. Our established live service titles like Helldivers 2 and MLB The Show also contributed stable recurring revenue. We expect that Marathon, which is scheduled to be released on March 5, will be enjoyed by many users, thanks to Bungie having strengthened the gaming experience. Next fiscal year, we plan to release new titles such as Saros and Marvel's Wolverine, and we intend to enhance our effort to increase the revenue of our Studio business. Next is Music segment, primarily due to an increase in live events, sales and streaming revenue in Recorded Music, FY '25 Q3 sales increased 13% year-on-year. Operating income increased 9%, reaching a record high for the third quarter, excluding onetime items. On a U.S. dollar basis, streaming revenues for the quarter increased 5% year-on-year in Recorded Music and 13% in Music Publishing. We upwardly revised our sales forecast 4% from the previous forecast to JPY 2,050 billion and our operating income forecast 16% to JPY 445 billion. We incorporated a remeasurement gain of approximately JPY 45 billion from the acquisition of an additional equity interest in Peanuts Holdings and the forecast for operating income. SMG artists delivered hits during the quarter and the sales of SMG continued to increase by double digits year-on-year, like in the previous quarter. Rosalia new album Lux reached #1 globally in its first week on Spotify and Peso Pluma's collaborative album Dinastia as one of the most streamed on Spotify. These global successes and global hit artists are the result of SMG's strategic focus on discovering local artists and supporting their musical endeavors. Many SMG artists and songwriters received accolades and nominations at the 68th Annual Grammy Awards held in the U.S. earlier this month, with Bad Bunny winning Album of the Year for Debi Tirar Mas Fotos as Beyonce did last year. In Visual Media and Platform, the theatrical release of Demon Slayer: Kimetsu No Yaiba The Movie: Infinity Castle, which has exceeded JPY 100 billion in global box office revenue, continued to contribute and the mobile game Fate/Grand Order, which celebrated its 10th anniversary in July 2025, contributed more to our results than expected. Next is the Picture segment. FY '25 Q3 sales decreased 11% year-on-year and operating income decreased 9%, primarily because the same quarter of the previous fiscal year benefited from the contribution of the blockbuster film, Venom: The Last Dance and licensing revenue from other theatrical released films. Our forecast is unchanged from the previous forecast. In January, SPE signed a new Pay-1 licensing agreement with Netflix. Through this agreement, Netflix will stream on a global basis SPE's future theatrical films and the Pay-1 window, the initial window within long TV licensing period that follows the theatrical and home entertainment periods. This agreement is an industry-first global licensing deal that will enable SPE to secure an even more stable revenue base during the period of the deal. Furthermore, the signing of this agreement is proof of SPE's excellent production capabilities and the power of its appealing IP. As an independent production company, we will continue to pursue other licensing opportunities with a wide range of distribution partners beyond the Pay-1 window. Now I will explain our additional investment in Peanuts IP, which we announced in December as an initiative that spans our music and picture segments. Through this transaction, Sony will gain ownership of 80% of Peanuts worldwide, which owns the rights and manages the business of Peanuts IP, one of the world's leading evergreen IPs. While closely collaborating with the family of Mr. Schulz, the creator of Peanuts, which owns the remaining 20%, we aim to further grow the scale of the business and further increase the value of the brand over the long term by leveraging the strength of the Sony Group. Specifically, we aim to enhance SMEJ's music, video and event business by leveraging Peanuts IP and collaborating with SMEJ's artists and content. Furthermore, by utilizing SPE's production capabilities and distribution network, we aim to make Peanuts IP more accessible to a wider audience and share its charm with people all over the world. The transaction is expected to close during the current fiscal year, subject to certain closing conditions, including regulatory approvals by the relevant authorities. Next is the ET&S segment. FY '25 Q3 sales decreased 7% year-on-year and operating income decreased 23% year-on-year, primarily due to the impact of lower sales, partially offset by an improvement in operating expenses. Our full year forecast remains unchanged from the previous forecast. Despite a continued decline in sales in China due to reduced government subsidies and weakness in the overall market during the shopping season for Singles Day, demand in the global interchangeable lens camera market during the quarter remained strong year-on-year, mainly in Asia. The Alpha 7 Mark 5 released in December has been selling well as a new product for the volume zone of the full-frame mirrorless single-lens reflex camera market, and we expect it will continue to contribute to sales in the fourth quarter ending March 31, 2026. Regarding the impact of the situation in the market for memory, we are almost in a position to secure the quantity we need through the year-end selling season for next fiscal year. We will continue to monitor the situation while working to minimize the impact on profitability. On January 20, Sony signed an MOU with TCL aimed at forming a strategic partnership in the home entertainment field. In the MOU, both companies agreed that a joint venture between the 2 companies would operate Sony's home entertainment business, and we are negotiating the details with the intention of executing a definitive agreement by the end of March. By leveraging Sony's high definition and high fidelity technology, brand strength and operational management capability while utilizing TCL's advanced display technology, cost competitiveness and vertical supply chain strength, the joint venture aims to further strengthen the competitiveness of this business and realize sustainable growth. Last is the I&SS segment. FY '25 Q3 sales increased 21% year-on-year and operating income increased 35%, both of which were record highs for the third quarter for the segment. These are primarily due to an increase in sales volume and unit prices of mobile image sensors. We upwardly revised our sales forecast 5% to JPY 2,080 billion and operating income forecast 13% to JPY 350 billion, primarily driven by the increase in sales volume and sensors for mobile devices and the impact of foreign exchange rates. Mobile image sensor sales during the quarter increased significantly year-on-year due to a gradual recovery in the smartphone market, strong shipments for new products from our major customer and higher die-sized sensor. Because recent orders are stable, we believe that the supply chain concerns we mentioned at the previous earnings announcement have receded, and we have upwardly revised our annual shipment forecast for mobile image sensors. Going forward, we think that the impact of the situation in the memory market will become more apparent, mainly in the form of fewer smartphone made primarily for the low-end market. Since Sony's image sensors are primarily for the high-end market, at this time, we think the impact will be relatively small. We will continue to monitor the situation while keeping in close contact with our customers. In addition, we are continuing to take action to address low-margin business, as we mentioned at the previous earnings announcement. As a part of that, we have incorporated additional expenses for resource and asset optimization of the relevant business in our forecast for FY '25 Q4. We will continue to focus on improving our business portfolio and raise our profitability. To summarize, the G&NS, Music and I&SS segment achieved record high operating income and are driving the profit growth of the Sony Group overall this quarter. We believe that the structural profitability of the group is further improving. Given the continued uncertain business environment, we plan to carefully manage our business and consistently produce results as we approach the fiscal year-end. We intend to take actions this fiscal year to get off to a good start next fiscal year. As for shareholders' returns, today, we increased the maximum of our share repurchase facility established in November 2025 from JPY 100 billion to JPY 150 billion. This concludes my remarks. Unknown Executive: [Interpreted] That was Ms. Tao. Following the presentation, we will have a Q&A session for the media at 4:20 p.m. and for investors and analysts at 4:45 p.m. Each Q&A session is scheduled to last approximately 20 minutes. [Operator Instructions] Please wait. The session will resume shortly. Thank you for waiting. We'll start the Q&A session. First, we will introduce you today's speakers. Chief Financial Officer, CFO, Corporate Executive Officer, Lin Tao; Senior Vice President in charge of Accounting, Hirotoshi Korenaga; Senior Vice President in charge of Corporate Planning and Control, Naoya Horii. We'll take questions from the media. [Operator Instructions] The first question is from Toyo Keizai, Umegaki. Hayato Umegaki: [Interpreted] Yes. I'm Umegaki from Toyo Keizai. Can you hear me? Unknown Executive: [Interpreted] Yes. Hayato Umegaki: [Interpreted] All right. So I'd like to ask 2 questions. The first question is about Marathon, and it's going to be released on March 5, I understand. And it has been delayed. And what kind of considerations did you have until you decided to have this? And well, in the past, there were cases that has been stop short, but what kind of a learning do you have? And for the live service game and what is the strategic significance of having that? And this kind of a platform, I think, but to have quite a number of platforms, what is the significance for the group to have such platforms? Unknown Executive: [Interpreted] Yes. Thank you for your question. And as for the Marathon, well, it has the user tests and then from the users has feedback for Marathon, and in the game, so what was a good point and not good point and such kind of a feedback we had taken into consideration and we had modified. And this time around, so after the modification, we are very confident to release it on March 5. And live service, the games significance you asked, but here, what is most important for us is that the live service is a recurring revenue. And recurring revenue means that the hit driven. And if it comes a hit, then for a year, it can bring revenue. If not become a hit, then no revenue. So it's such not the volatility high studio, but it's going to give us a constant amount of revenue every year. So that's the merit of having a hit live service. But -- well, it's not that we want to have -- so to many of them, it's not what we want to have. So the idea is that so-called AAA and live service game would become integrated into a portfolio management style. That's it for me. Unknown Attendee: [Interpreted] And the second question is about your stock price. And you had announced your earnings results, and it was a JPY 3 plus, but it's almost flat. So that the market valuation is quite severe, I think. And the stock performance is not good because the memory had risen. But it's rather Sony Group, it seems that there has been a harsher view on the Sony Group. So what do you see as a CEO? And you have announced the share buyback, but the market capitalization, in order to raise the market capitalization, if you have any continuous way to keep that going up? Unknown Executive: [Interpreted] All right. Thank you for your question. And about the stock price, so we had several information revisions, but it's not performing well. So I think you have various thoughts about that. But one thing is that memory, there are concerns for the memory supply. And as an industry, yes, that is one concern. And the other is the entertainment stock, generally speaking, is because the capital AI-related would go to the AI related. So I think that's why. And then for us, what we can do is that as a business, we will look at the fundamentals to make it even stronger. And the profitability, we would improve so that the portfolio can be optimized. And for us, Sony, long-term strategy, we believe in that so that we would implement that, so that the business performance can be improved and such measures would be communicated, messaged to the stock market so that the stock market would value our approach, and we are going to put our efforts into it. That's all for me. Unknown Attendee: [Interpreted] The AI... Unknown Executive: [Interpreted] Excuse me, but that's the end of your 2 questions. Next question [indiscernible] from Nikkei, please. Unknown Attendee: [Interpreted] I also have 2 questions. First, about ET&S structural reform. Today, you have mentioned that the TV business, you're going to move to a joint venture with TCL. And you talked about synergies. So separating the TV business, what's the intent of that? And Home Entertainment, what's the scope? I'm sure that the details are being still discussed. So to the extent possible, can you describe the range that this covers? And also, smartphone also positioned as a structural reform business. And you have hit to explain that they will be continued. Has there not been any change to that status? Is an option to collaborate with external source? Unknown Executive: [Interpreted] Thank you. For the smartphone, we don't have such plans. So with TCL, we have a strategic partnership for Home Entertainment. So this is about the review of portfolio, and we are constantly doing that to deal with the changing business environment. So optimizing that is the management mission. So Sony has assets that we have accumulated over many years, and we're combining that with the strength of TCL. And so Home Entertainment business, including TV, can grow more through this partnership. That is the background to this partnership. And what the scope of what business to be covered, Horii will explain. Naoya Horii: [Interpreted] Thank you for the question. So this strategic partnership, the scope of that, as you point out, it's TV. and home audio, those are the areas that we assume will be included. As you point out, the details are still being discussed. So at the appropriate timing, we would like to communicate to you. At this point of time, TV and home audio will be included in the scope. Unknown Attendee: [Interpreted] Thank you. Second question about the game business. So this was mentioned in the previous question. So with the surging memory price, so you have secured the supply until the next year-end campaign. So you maybe have secured supply, but will there be impact of the rising prices? For example, PS5, any price increases or the successor, the timing that it will be introduced? And what will be the impact to the next fiscal year? Can you give us your assumptions, please? Unknown Executive: [Interpreted] So PS5 next fiscal year and onwards, what would be the impact there. So for the business results for next fiscal year, we would like to inform you at the appropriate time. But our thinking is what we'd like to share with you. That is PS5 since launch, it's in the sixth year. So 92 million unit installed base on a sell-in basis, we already have established. So we have been able to develop a very robust ecosystem. And this fiscal year as well, the majority of the sales is software content and network service. And these areas, next fiscal year onwards, are going to continue to make significant contributions, and that will be the part that will not be impacted by the memory price. Now as for the new PlayStation hardware sales due to cost increases, there will be some impact. However, it's in the latter part of the life cycle. So that means that in terms of hardware sales, it's been expected all along that it will gradually decline or slow down. So there are several or a wide range of choices or options that we can take. So that's our basic thinking there. Unknown Executive: [Interpreted] Moving on to the next question. So I'm very sorry. Please ask both of your questions at the beginning. [ Yomiuri Newspaper, Nakayama-san ], please. Unknown Attendee: [Interpreted] So this is Nakayama from Yomiuri. Do you hear me? So I have two questions. Number one, about music. The streaming revenue growth rate, this -- so do you think the music streaming service will continue to do well? We would like to hear your prospects. And about I&SS, the image sensor for mobile, do you have any background on the increase in the unit price of image sensors for mobile? Unknown Executive: [Interpreted] About -- I will answer the question on the music business first. The music market, we see will continue to grow in the mid- to long term. Of course, the extent of growth will differ due to the timing, but we believe there will be a constant growth of -- to about 5 to middle to latter single digit. And there are 2 drivers to this. First is DSP that is a platform that we offer service on. The ARPU or ARPU is going up, and also the number of users going up. So the average revenue per user and the number of users going up is driving the growth. The second point about I&SS semiconductor, Horii will answer. Naoya Horii: [Interpreted] The sensor -- so this is the background of increase in the selling price of mobile sensors. As you know, in smartphone products, there is -- the camera feature is a main reason for increase in price. So the smartphone manufacturers are working to increase the camera resolutions as well as the camera features. The image sensors that we provide to the manufacturers, we want to increase the size as well as increase the resolution and add new features. So large-scale image sensors as well as increased performance is leading to higher price, and that is really contributing to our results this year. That's all. Thank you. Unknown Executive: [Interpreted] All right. So we take another question. [indiscernible] [ Yamamoto-san ], please. Unknown Attendee: [Interpreted] Yes. My name is Yamamoto. So let me ask questions. So about the structural reform and TCL, so we have the strategic alliance, but the display to have the higher resolution. And Home Entertainment, I think though you have the high resolution, I think it is contributing to the technology and also the common kind of R&D. Do you separate the 2, the technology and the common R&D base in order to have the next phase of development? So about the strategic alliance, would you tell us your direction or your strategy? Unknown Executive: [Interpreted] Yes. Thank you for the question. So first, so we have the basic agreement. And for the technology and for what kind of assets can we have through the joint venture to have the definitive contract, so we are in discussion in order to aim for the final agreement. So if it is confirmed, then we would tell you when it is confirmed. Unknown Executive: [Interpreted] Running short on time. So the next one will be the last question. Shino-san of Asahi Shimbun, please. Shino-san, do you hear? Well, then, we'll move on to the next person from [ Mainichi Shimbun, Shino-san ], please. Unknown Attendee: [Interpreted] This is Shino from Mainichi Shimbun. Earlier, you talked about the PlayStation 5 life cycle that you're entering the latter half of the life cycle. But last November, you talked about the Japanese dedicated model for PlayStation, a relatively cheap, lower price model for the Japanese market. So what's the reason for introducing this kind of model in the latter part of the life cycle? And what will be the impact to the financial results? Has there been impact from introducing this new model? Unknown Executive: [Interpreted] So the Japan model introduction, well, that was to enhance the presence of PlayStation in the Japanese market. It's one part of that effort. Compared with the global model, it was more reasonably priced. And so publishers and users appreciated that more affordable price. And after launch, in terms of sell-through, it has created an uplift. Now this was not a special model just for that seasonal effort. But for the mid- to long term for the Japanese market, we think that this had a strategic significance. So we want many users to buy this so that publishers will make great games. So we think in that regard, this will have a mid- to long-term impact. Unknown Executive: [Interpreted] Now it's time to conclude the Q&A session for the media. So the Q&A session for investors and analysts will start from 4:45. Thank you for waiting. We will now begin the Q&A session for investors and analysts. I am [ Kondo ] from the IR Department, and I will be your moderator. The speakers will be the same 3 individuals as in the media session. We will now start the Q&A session. [Operator Instructions] JPMorgan, Ayada-san, please. Junya Ayada: [Interpreted] I'm Ayada from JPMorgan. I have 2 questions. The first question is about gaming. The play time and so what do you think about the status of play time and spending in the holiday season? Active users have gone up 2%, but play time is flat and software network revenue is going up. But thinking about the price up, I think in terms of value or volume, it's more or less flat. So it seems like it's dwindling a little bit. Is it because of the economic cycle, business cycle or console cycle? Or is this impact from the title lineup? Or are people using time for things other than game. So we would like your take on that. Your second question, so this might be an abstract question. The impact of AI to the entertainment industry, how should we see that? For music production and game development, already 90% of creators use AI, so -- based on the data. So by the creators using AI, if there's more content, that would be a very positive effect on platforms such as PlayStation and Crunchyroll or if users use more of their casual -- more time in casual content using AI, would that be negative? So I think the repercussions will be different, whether it's music, anime games or video production. So please share your view. Unknown Executive: [Interpreted] Thank you for the question. About the engagement of games in the holiday season, I think this is transitioning quite well. Of course, the play time, I think there are many factors influencing the play time. But I think the biggest factor, I think, is whether there are hit games. Up until now, the games, maybe the large-scale games, which everyone has been playing up until now, the engagement has gone down. And instead, the players are playing new games. As a platform, we see a momentum. But depending on the game title, how that is played and the play time will be different. Towards the next fiscal year, the large-scale titles will be launched. So I'm very optimistic about this. And about how we see AI, as you say, music, game and animation, how AI is used or the positioning of AI is different. There is high affinity between AI and game and animation. In the long term, I think it's a very positive thing that there will be more content. But there would be impact in many areas, especially how you develop and produce. So this process from idea to game, I think, would be changing. But it's still early in the day to say what the impact would be and what would be the impact on the cost. So at this point of time, it's difficult to really say. But what we can say right now is to use a lot of AI. So we promote using AI, especially in game production. And if that disrupts the existing process, we should be the one disrupting rather than the one being disrupted. That's all. Thank you. Unknown Executive: [Interpreted] Thank you. All right. So next question from BofA Securities, Mr. Hirakawa. Mikio Hirakawa: [Interpreted] Yes. BofA Securities. My name is Hirakawa. So first question is -- well, it's a rather abstract question, but this is the second year of the midterm business plan, but the operating profit growth is like 10% average as you go. And then this year, it has progressed very smoothly. And the concern from the market is that the next year, the profit level because of the memory or the untransparent price movements, then it might not be so smooth. Then what I want to ask you here is now in the midterm business plan, so what kind of certainty do you have? And what kind of risk factors do you have in achieving or what kind of upside do you have? So if you can allude to that is the first question. And the second question is about what you have said. So image sensor, I&SS, so what I have heard is the high end is so ASP rise and the volume expansion, you can have both. So that, I think, was the main thing that you wanted to message to us. Unknown Executive: [Interpreted] Okay. Thank you for the question. And about the midterm plan, so the second year and the year are going on quite smoothly. Yes, that is the feeling we have. About the memory price surge, and we can understand the concern from the market about this. And this earnings results for the next year, I think we can go into this more deeper. But basically speaking, we would have the momentum very strong here and the memory cost rise. So we have to manage that, and that's the kind of a direction we have and the profitability, of course, we have in mind. And for the attainment of the midterm plan, how certain we are or how confident we are? So it depends on each business segment, but this is a game and Sony Pictures. So next year's software lineup is quite good. So for those segments, I think we have quite a positive kind of outlook. And for the detail, I don't think I can go into here. So when the earnings results for the 2025 fiscal year, I can maybe tell you more about it. And the ESP and the semiconductor and the volume, okay. For this question, I would like to ask Horii-san to answer. Naoya Horii: [Interpreted] All right. Thank you for the question. So in the speech, we have said that this year, what we have seen this year, okay, and what we are seeing SP and the volume also, we have momentum. So for next year, it's like a launch pad, let's say, that it's in a good position. So I think we can say that we are in a positive position. And having said that, in the semiconductor business, there's other businesses like game or [indiscernible] and -- so memory market condition effect. And let's say, the selection or the options range is different is what I feel. So the final product manufacturers, well, so what kind of measures would they be taking because of this memory market condition? And we would like to have a close contact communication with the customers so that we can have a good understanding of each of the customers we have, and that's procedure we take. But I think we are rather in a passive mode concerning this because of this kind of a characteristic business. And for next year, I think we have a good launch pad in place. And that's exactly what you have pointed out. Unknown Executive: [Interpreted] Next, from Mizuho Securities, Nakane-san. please. Yasuo Nakane: [Interpreted] Two questions. First, so expanding the share buyback. So before you used it up, the facility is being expanded. I think this is the first time you're doing that. You have higher cash flow. Stock price is low. I think those are the backgrounds. So talk about what discussions you had in the Board meeting, and what's the message of expanding this facility in addition to what's in the release? That's the first question. Second, about the Home Entertainment separation. So from development, design, manufacture, that part, I think it's easy to separate cleanly. But for sales, you have the common platform and domestic and overseas, I think it's still quite a huge size. I understand that the details are still to be worked out. But for the next fiscal year in terms of sales, how is it going to be handled? And on the ET&S side, inclusive of structural reform, is there a possibility of some adjustments to be made? Give us some clues, please. Unknown Executive: [Interpreted] Thank you for the questions. First, about increasing the facility to repurchase shares. So as you say, the business results and the cash flow is better than anticipated. So we want to increase our returns based on that. But in terms of the window, that is up until middle of May. So JPY 50 billion increase is what we've decided on this time. So the company's momentum of earnings and the fundamentals, we are confident about that. That is the message that we would like you to take from this increase in the facility. About the ET&S, for next fiscal year, basically, ET&S will continue to operate. It will have its budget in the same way, and we will communicate in that way. For the joint venture, it's to start from April of fiscal '27. So in terms of the additional structural reform for the portfolio, it's always dynamic. So looking at the business situation, it's our job to optimize that. It's one of our main missions. As of now, nothing has been decided yet. That's all. Unknown Executive: [Interpreted] SMBC Nikko Securities, Katsura-san, please. Ryosuke Katsura: [Interpreted] So I'm Katsura from SMBC Nikko Securities. I have 2 questions on game and semiconductor. About the gaming question, this quarter, how we see the profit. The third quarter, so the -- compared to the real profitability of second and third quarter -- first and second quarters, I think the third quarter profit has gone down. This is about the domestic version of hardware and you did also promotion activity. And also the procurement side, there has been -- maybe you purchased memory in order to secure the inventory. So the landing of the third quarter and also the full year, so the postponement of first-party title might be a negative factor. So these numbers seemed a little bit low. So maybe you have included some of the countermeasures towards the next term. And the second point is I&SS. You said you will be taking measures in the fourth quarter. So if you can say, we would like you to share us the scale of this measure. So my question is about your plan towards the next year. Unknown Executive: [Interpreted] Thank you for the question. About the third quarter profitability for gaming going down compared to the first and second quarter. So there was -- the main reason was the end of the year sale promotion of the hardware. In addition to the Japan domestic model, we did global promotion. and that led to many users purchasing the console. And that -- due to that, the profit went down in the third quarter, but this will contribute to the mid- to long-term lifetime value. And towards the end of the fiscal year, as of now, the inventory, we do not have any plans to do anything extraordinary on the inventory. I&SS, we have factored in a part of that into the fourth quarter. Horii will respond. Naoya Horii: [Interpreted] So as we have explained, the business balance within I&SS segment and some of the assets depreciation amortization done in acceleration. So this type of treatment is currently being processed. And about the scale, about JPY 20 billion, so this onetime cost of JPY 20 billion will be factored into the fourth quarter. Unknown Executive: [Interpreted] All right. So we have not much remaining time. So the next question is going to be the last. [Operator Instructions] [ Munakata from Goldman Sachs ]. Unknown Analyst: [Interpreted] Yes. My name is Munakata from Goldman Sachs. I think you have been saying about the generative AI. I'd like to ask a question about that. And so last week, so Project Genie was announced. And basically speaking, so generative AI, I think there's opportunity and also a threat. So in the stock market, so the generative AI, so the creation might be done by that so that a very interesting game can be made in an instance. So that I think a threat is more strong here. But in the game creation, so there has been some comments that to have it in a positive manner. But with the generative AI becoming -- developing, so what is the strength of your game studios and game development? What is your strength in that? So I appreciate you to ask -- to answer this question. Unknown Executive: [Interpreted] Well, but the generative AI, so in very various ways, there are trials going on and now is in a test stage, I think. And there are very interesting things that's happening. But before -- I think it's before the commercialization. And as for game, it's not just game, but -- so AI, I think it can be in a toolbox that there's a very strong tool in the toolbox. That's kind of a feeling we have against AI. So tool itself, it's not going to be a business. So I think we need the sensitivity of artists and the tool to integrate in order to have another business chance or to have entertainment. So that's the kind of understanding we have. In that sense, AI, I don't think it's a threat. But -- so that the creators can use AI fast way. And then we are going to help them make it the commercial product. So I think that's a Sony's mission. Thank you. Unknown Executive: [Interpreted] With that, we would like to conclude the earnings announcement of Sony Group. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Patricia Bueno: Good morning, and thank you for joining us for BBVA's fourth quarter results presentation. As every quarter, I'm pleased to be joined by our CEO, Onur Genc; and the Group CFO, Luisa Gomez Bravo. We will begin with Onur reviewing the group's performance and key strategic developments during the year, followed by Luisa, who will walk you through business unit results. After their remarks, we will open the call to take your questions. With that, I now turn the call over to Onur. Onur Genç: Thank you. Thank you, Patricia. Good morning to everyone. Welcome, and thank you for joining BBVA's 2025 Full Year Results Audio Webcast. I will start with Page 3 right away. So I'm happy to say that in 2025, we achieved outstanding results across critical dimensions, value creation, as you see on the page, growth, profitability, strategic execution and shareholder remuneration. First, I would like to highlight the excellent value creation achieved during the year, which is rooted in our outstanding profit evolution. Despite falling interest rates in our core markets, we still managed to increase our net attributable profit, which reached a record EUR 10.5 billion, 4.5% higher than last year in current euros. Secondly, as we have emphasized in previous results presentations, BBVA offers a unique combination of profitability and growth, which was further reinforced in 2025. Our loan portfolio increased by an exceptional 16.2% at constant euros and 11.7% in current euros, an exceptional figure, while our return on tangible equity remained at industry-leading 19.3%. Third, in the page, we are advancing consistently in the execution of our strategy. First of all, we are transforming the bank with a radical customer perspective, leveraging the power of AI and innovation and also growing the bank, especially in areas where we believe we have an opportunity of superior return. And finally, all of this is enabling us to significantly increase distributions to our shareholders with a regular payout of EUR 5.2 billion from 2025 results, while at the same time, our CET1 ratio remains comfortably above our target. As you can see on the page, the regular payout against 2025 results will be paid entirely in cash through a total cash dividend of EUR 0.92 per share, being the highest cash dividend ever by BBVA. And additionally, we continue with the execution of the first EUR 1.5 billion tranche of the extraordinary share buyback program amounting to EUR 4 billion. These are the key highlights that I will expand in the following pages. But as you see, in my humble view, 2025 has been a remarkable year for BBVA, and we are on track to achieve our ambitious 2025-2028 long-term goals. Moving to Slide #4. On the left-hand side, our tangible book value per share plus dividends continued to show an excellent performance with a growth rate of 12.8% at face value. But it is worth highlighting, however, here the number, excluding the impact of share buybacks, that is 15.2%. As you all know, through the share buyback programs launched in 2025, the EUR 993 million already executed and the existing tranche of EUR 1.5 billion currently in execution, we have been buying our shares at higher value than the book value, which then leads to some negative impact on tangible book value per share creation. On the right-hand side of the page, you can see the very positive evolution of our net attributable profit, which continues its upward trend, reaching a new record, as we discussed, exceeding EUR 10.5 billion, again, despite the negative impact of falling interest rates in our core markets, especially in Spain and Mexico. At the same time, our earnings per share, it reached EUR 1.78, representing a 5.8% year-over-year increase. And if you look into a larger time frame, a compounded annual growth rate of 26% in the last 5 years. Slide #5, I want to underscore the truly unique positioning of BBVA within the European banking sectors, combining growth and profitability at the same time. You have seen this page before in other presentations of ours, but the situation has improved even further in our view in 2025. But the page -- just to explain the page, on the x-axis, we show the return on tangible equity as a profitability metric. While on the y-axis, we present loan growth in current euros for equal footing of all large European players. And as an indicator of future value creation, in our view, because growth and profitability, those are the 2 core dimensions of future value, BBVA clearly stands out, positioned in the top right quadrant, by far the highest loan growth in current euros and best profitability metrics among our peers. On return on tangible equity, as the measure of profitability, we should also underscore the fact that this number is partially negatively influenced by the excess capital that we have held throughout the year because at the denominator of this ratio, as you all know, it's the average equity throughout the year. Moving to Page #6, new customer acquisition. As we have reiterated consistently, again, we put this page also in every single analyst presentation, expanding our customer base is a key driver of healthy and profitable growth. In 2025, we reached a new record in customer acquisitions with 11.5 million gross new customers. Maintaining this space year after year is particularly remarkable in our view because we are already one of the largest banks in the markets in which we operate, and it's always a smaller pool to look for new clients. But despite that, a record number in 2025. And the value of this growth -- on the right-hand side of the page, there are 2 factoids there, but they're very important in our view. The value of this growth becomes clear when we look at the monetization of new clients over time. For example, in Spain, revenue per customer increases by 3.7x between the first and the fifth year of that relationship. And in Mexico, it's very important this number, 75% of the new credit cards sold in 2025 are to the customers acquired in the last 5 years. With such focus on cross-sell in place, we believe our future business in the coming years is already hatched with the customer acquisition activity over the past few years. Moving to Page #7. All the great results of the past few pages are due to our relentless focus on executing our strategy. You all know our new strategic plan. Our new strategic plan announced in 2025 has outlined a few critical priorities to sustain and improve our delivery. The plan foresees the continued need for the transformation of our business. That transformation, in our view, has to start with the customer, which we call radical customer perspective. Putting ourselves in the shoes of our customers, we are adopting a radical approach to understand and analyze every single customer interaction with the bank so that we act on these insights to improve customer service and eliminate frictions, eliminate frictions with agility and empathy. And this is reinforcing our NPS leading positions in most of our geographies and is leading to a significant reduction of negative experiences with our customers related to events like fraud, claims or service waiting times, improving, obviously, quality of service across geographies, as you see on the left-hand side of the page. As part of this new wave of transformation, we also have started to maximize the potential of AI and innovation within BBVA. We will pursue this across 8 initiatives listed there in the page, including our digital adviser, the Blue, the AI assistant for bankers and injecting efficiency and effectiveness in different processes across the bank in different areas like the software development. In addition, AI is increasingly being embedded across our organization. Our 127,000 employees all around the world, they have now access to OpenAI and Gemini. We are still at the early innings on this, but we are already starting to see the positive impact from all of our AI work, and we will update you on this further in the coming quarters. On Page 8, as part of our strategic plan also, you see certain businesses that we have prioritized to grow faster than average. We have achieved that superior growth in 2025 in all selected areas, enterprises, sustainability and capital-light businesses. On the left-hand side of the page, you see the levers through which we grow our enterprise business, cross-border, a natural lever for a global bank like us to serve our multinational enterprise clients beyond their home geography and sustainability also mainly on the enterprise side, a strategic priority for us to accompany our clients in their transition, all yielding excellent results in 2025, again, as you see in the growth rates. And if you can compare those growth rates with the rest of the bank, which is on the right-hand side. But in the middle and the right-hand side of the page also, you see the prioritized capital-light fee-generating businesses, again, displaying excellent growth performance in insurance, in payments, in wealth management, where again, we grew much better than the average of the bank in all of those areas. Slide #9. From this slide on, I'm going to walk you through the financials, but let me not -- and also to save time, let me not spend too much time on this page as it is a summary of the following pages. So let's jump into Page #10. In the annual P&L, a similar story as in the recent years, but I would like to highlight the very strong performance of core revenues, which drove gross income growth to 16.3% year-over-year in constant euros with 13.9% in NII growth and 14.6% in fee income. I mean this solid growth in gross income, together with positive jaws, as you see on the page, contained impairment charges, it resulted again in the record net attributable profit of EUR 10.5 billion. Slide 11, the P&L for the fourth quarter. Again, I will not stop long here, but just to remark on the strong quarterly performance with a net attributable profit above EUR 2.5 billion once again, despite some negative one-offs like a tax code change in Turkey at the final days of the year. You might have seen it on Christmas Day actually. The continued and accelerating delivery at the core revenue lines, net interest income and fee income is worth highlighting again on this page. Core revenue, especially in Spain, in Mexico, is behaving exceptionally well. Then talking about that maybe on Page #12, talking about Spain and Mexico, our 2 core geographies. First of all, before the countries at the group level, on the left-hand side of the page, one of the clear highlights of the quarter was the growth in activity. Loan growth maintained an excellent pace, increasing 16.2% year-over-year, which is translating into that strong net interest income performance. And then talking about the countries within that, in Spain, loan growth further accelerated to 8% year-over-year, while Mexico maintained a solid 7.5% year-over-year growth. In the case of Mexico, excluding the impact of the U.S. dollar affecting the value of our U.S. dollar-denominated loan book in Mexico, if you isolate for that impact, loan growth would have reached 9.9%, fully in line with our 2025 guidance. And on the right-hand side of the page also, you see how all of this is supported by strong loan growth and proactive price management in a declining rate environment, how we translated this into growth in core revenues in both Spain and Mexico year-over-year, but also look into the quarterly evolution with an acceleration in the last quarter if you annualize those quarterly figures. Moving now to Slide #13, again, talking about growth. Our strong activity growth is not only due to the overall industry growth, but also due to our clear outperformance versus competitors. As shown on the page, we have been gaining loan market share in all of our markets in the past few years. And in 2025, specifically, we continued that trend in practically all of our markets, again, with meaningful gains across the board. We have to be careful here. Market share by itself is not an isolated goal for the bank as the underlying growth has to be profitable. We are not here for the sake of growth. But as we monitor and manage the profitability of any granted loan in any country of the bank, we take pride in the consistent track record of market share gains across the board. Moving to Slide #14 on costs. I would first highlight that once again and in line with our DNA, we closed the year with positive jaws with gross income growing by 16%, clearly outpacing the growth in costs. And as a result, on the right-hand side of the page, our efficiency ratio continues to be one of the best among the European peers, and it improved to 38.8%. Again, picking up some speed. Slide #15, the evolution of our asset quality. It remains in line with our expectations, even in a context of strong activity growth in our most profitable segments. And starting on the left-hand side, at the bottom of the page, our cost of risk stands at 139 basis points year-to-date, improving versus 2024 and delivering a better performance versus guidance in most of the countries. At the same time, on the bottom right-hand side, both our nonperforming loan ratio and coverage ratio, they continue to improve year-over-year and quarter-over-quarter. Slide #16 on capital. Quarter-over-quarter evolution clearly illustrates both the underlying growth dynamics of the business that I just talked to you about and the one-off timing effects at year-end. First, results remain at the core driver of capital generation. Strong earnings contributed 64 basis points to CET1, then with the accrual of the dividends and AT1 coupons deducting 34 basis points. Then RWAs, turning to RWAs, activity-driven growth implied an impact of around 57 basis points. Overall, we saw a higher pace of RWA consumption compared with previous quarters. Again, this reflects very strong and exceptional business dynamics across all geographies with an acceleration in the loan portfolio growth, explaining the majority of the increase in RWAs. In addition, the thing that I mentioned about the fourth quarter exceptional number, the quarter includes also the year-end operational risk calculation which in the context of higher revenues and higher activity also came slightly higher than usual. Importantly, this capital consumption for the right reason, as it is driven by profitable growth, we would like to underscore this. I mean it's 57 basis points, much higher than usual because we have grown much higher than usual, and that's good as long as the growth is a profitable growth. And on that one, again, we remain highly disciplined in the use of capital as it is a scarce resource. I shared with you before, we have developed this concept of micro capital management framework, which ensures that at the most granular level, at the level of every single loan, again, I'm repeating, but it's important, granted at any part of the world, capital is deployed profitably above the respective cost of equity in that respective market. In the page, other impacts, marginally positive, adding around 4 basis points as negative market-related impacts were more than offset by the positive credit in OCI from hyperinflationary countries and higher minority interests. Regulatory impacts, we have basically advanced this a few -- I think, 2 quarters ago, but we added 56 basis points, somewhat above the original expectations that we shared with you during the -- again, July presentation, I think it was. These effects are technical in nature and mainly reflect the reversion of some portfolios to standard and to foundation in Spain and in Mexico. As a result, CET1 reached 13.75% in December 2025 before capital distributions. Then you deduct the EUR 4 billion of extraordinary share buyback program, a clear demonstration of our commitment to shareholder returns and to get back to our capital target, but this reduced the CET1 by 105 basis points, taking us to 12.70%. Slide 17 on shareholder distributions. In line with our payout policy, I'm very pleased to announce that the proposal to be submitted to the governing bodies contemplates a total regular distribution of EUR 5.2 billion for 2025, equivalent to a 50% payout, the upper end of our distribution policy. The distribution will be fully paid in cash, amounting to EUR 0.92 per share, which represents a 31% increase versus the 2024 cash dividend, and this implies a final dividend of EUR 0.60 per share to be paid in April 2026, complementing the EUR 0.32 per share that we have distributed back in November. In short, I mean, by far, the highest dividend of our history. And in addition, we continue to execute the extraordinary share buyback program, EUR 4 billion announced last December, of which the first tranche of EUR 1.5 billion is already being executed, again, as a share buyback program. Then Page #19. As you know, in the second quarter of 2025 in July, we set our ambitious financial goals for the 2025-2028 period. We are completely in track of those numbers. We are still in the first year of the program, but as compared to the numbers we had in the plan for 2025, we are performing in line with our original expectations and some better, but overall in line with our original expectations in all of the metrics that you see on the page. And with this, I pass over to Luisa for the business areas. Maria Gomez Bravo: Thank you very much, Onur, and good morning, everyone. Let's start with Spain, which has delivered outstanding results in 2025. Net profit grew at a double-digit number, reaching EUR 4.1 billion for the year, driven by strong business dynamics with loans up 8% year-on-year, more than offsetting some margin pressure in a declining rate environment. This was further supported by robust fees, contained costs and improving asset quality trends. The fourth quarter was particularly solid with net profit exceeding the EUR 1 billion mark. Looking to quarterly dynamics, net interest income remained highly resilient, supported by continued commercial momentum. Loan growth remained very solid, supported by strong new production, up 9% quarter-on-quarter. Loan balances evolved positively across the board, with particularly strength in consumer and across the enterprise segments. This translated into further market share gains in the most profitable segments. To highlight the evolution in the enterprise segment, where we have successfully closed the gap with the overall loan market share, gaining 60 basis points of market share in the year. Robust fee income driven by sustained growth in asset management and insurance fees, along with the recognition in the quarter of asset management success fees. On costs, expenses remained well contained, growing by 1.9% if we exclude the positive one-off related to VAT calculations recorded in the second quarter. The quarterly increase mainly reflects year-end adjustments of variable compensation accrual according to the strong performance in the year. Overall, efficiency remained best-in-class with cost-to-income ratio at 33.1%. Finally, we continue to see positive trends in asset quality. The NPL ratio declined, coverage increased and the cost of risk improved to 34 basis points, in line with guidance. Turning to Mexico. 2025 was a remarkable year for Mexico with a very strong performance despite a challenging macro environment. On a full year basis, earnings were supported by robust core revenue growth, up by 8% year-over-year, driven by strong activity momentum outpacing peers, leading to continued market share gains. Total market share reached 25.6%, increasing by close to 30 basis points over the year, while total deposit market share also increased by close to 70 basis points. Looking into the fourth quarter, net profit reached EUR 1.4 billion, up close to 5% quarter-on-quarter, supported by very solid activity dynamics. Loan book growth accelerated in the final quarter, increasing by 4%, excluding the FX impact, with sound performance both in the Retail and Enterprise segments. Total deposits grew by 5.4% quarter-on-quarter, outpacing loan growth, driven by strong inflows in retail deposits, particularly the band deposits. Cost of deposits declined further in the quarter, supported by lower interest rates and an improved deposit mix. All in, this translated into strong gross income growth of close to 6% quarter-on-quarter. Turning to costs. The increase in expenses during the quarter as in Spain and by the way, in the other geographies as well, mainly reflects year-end adjustments in the variable compensation accrual. Efficiency levels remain outstanding with a cost-to-income ratio stable at 30% in the year and in line with guidance. Finally, asset quality remains solid with a flattish NPL ratio in the year, higher coverage levels and broadly stable cost of risk. Moving now to Turkey. The franchise delivered a net profit of EUR 805 million in the year, representing a significant improvement compared to 2024. The improvement in earnings is mainly supported by a strong increase in net interest income, underpinned by higher activity levels and a significant recovery in the TL customer spread in Turkish lira in the context of declining interest rates. Fee income remained robust, supported by growing activity. In addition, the negative impact from hyperinflation adjustment continued to decline, reflecting the ongoing disinflation process in the country. Cost of risk stood at 194 basis points in 2025, reflecting still elevated provisioning needs in the retail portfolios following a long period of negative real interest rates. Finally, the effective tax rate increased significantly in the fourth quarter by the full year impact of the recently announced tax code change, which Onur already mentioned and weighed on guaranteed BBVA earnings at the end of the year. Let's turn now to South America. The region delivered a strong performance in 2025. Net profit reached EUR 726 million, growing by 14.3% year-on-year, mainly supported by earnings improvement in both Peru and Colombia as well as lower negative impact of hyperinflation adjustment in Argentina as this inflation process continues. Core revenues dynamics were very positive in Peru and Colombia, growing at mid-single digit year-on-year in current euros, supported by solid loan growth and wider spreads. Net interest income in the year is affected by Argentina, reflecting a lower contribution from the securities portfolio and some compression in customer spread over the year despite the recovery observed in the fourth quarter. Robust fee income across the region, supported by the rollout of new initiatives aimed at reinforcing fee generation and improving efficiency, the cost-to-income ratio improved to 43.9% in 2025. Turning to asset quality. Trends continue to improve in Peru and Colombia, while in Argentina, provisioning requirements in the retail portfolio remained high, leading to adjustments in the risk appetite for this segment. Overall, risk indicators improved across the region with the NPL ratio declining to 4%, coverage increasing to above 90% and the cost of risk improving to 250 basis points. All in all, South America continues to show increasingly positive dynamics, reinforcing our confidence in the region's outlook going forward. Going now to rest of business. In 2025, rest of business delivered strong net profit of EUR 627 million compared to EUR 485 million in 2024. The strong performance was driven by solid activity across geographies. Loan growth remained healthy with important contributions in corporate lending, transactional banking, project finance. Funding dynamics were also positive across the board. The strong momentum translated into robust revenue growth. Net interest income increased by 15.9% year-over-year, supported by higher volumes and disciplined price management. Fee income also showed remarkable growth with positive trends across countries, driven by both investment banking and global transactional banking. On cost, expense evolution reflects the rollout of our strategic growth plans, including continued investments to reinforce our capabilities and growth plans going forward. Risk metrics remain very solid. Cost of risk stood at 16 basis points in 2025, broadly stable year-on-year. Overall, rest of the business continues to show very positive momentum. Back to you, Onur. Onur Genç: Thank you. Thank you, Luisa. Let me finish with the takeaways and the outlook and the guidance, but we have a commitment to you that we always finish by the hour. So on the takeaways, let me not go through all the bullet points that we have on Page #26. In short, I do think we have had one of our best years ever in 2025. Then guidance, Page #27, completely aligned with the midterm goals of our strategic plan. We are expecting strong business momentum to continue, solid loan growth across the board, supporting net interest income and overall revenue growth. On expenses, we maintain our clear commitment to cost discipline. The expected evolution in Spain and Corporate Center is impacted by some -- as you remember, in the second quarter, there were some VAT-related topics there, some base effects. But if you exclude the base effects, completely in line with our also original plan. Cost of risk is expected to remain broadly aligned with the 2025 levels. And overall, as a result of all of this, our expectation across the different business units, it translates into a group return on tangible equity goal of around 20%, better than 2025 is our expectation and the cost-to-income ratio of below 40%. And finally, on Page 28, to deliver on our ambitious long-term objectives and the 2026 guidance that I just talked to you about, we will continue to focus and execute on our strategic priorities. We again announced them at the beginning of 2025. We will devote time in 2026 to further discussing these strategic priorities with you through a series of what we call BBVA strategic talks and obviously, with the involvement of our senior management. These sessions would include country and certain business deep dives, and we are going to start them in March 10 with Mexico and the Enterprises segment. With this, I conclude the presentation. Now I give the floor to Patricia for the Q&A. We are at 9:58 in Spain, so 2 minutes. Perfect. We are right on time. Patricia Bueno: Thank you. Thank you very much, Onur and Luisa. We are ready to start the Q&A session. So operator, please, the first question. Operator: [Operator Instructions] And the first question is from Maks Mishyn with JB Capital. Maksym Mishyn: Two questions from me, please. The first is on Spain. You target mid- to high single-digit growth in -- above mid-single-digit growth in loans, and you grew 8% in 2025, but the NII guidance is low to mid-single digit. Can you walk us through the key assumptions there on rates? And then the second is on Mexico. Looking at sector data, and please correct me if I'm wrong, but it looks like the gap in deposit costs you had historically is reducing. You also seem to be growing faster in term deposits. Can you please discuss competition in deposits? And how do you see your customer spread evolving in the coming quarters? Onur Genç: Thank you, Maks. On Spain, our Euribor expectation that we have, for example, Euribor 12 months is basically flat, but the average spreads that we would be having average 2025, average 2026 shows a slight decline. As a result, you see a different guidance between the activity growth and also the overall NII and revenue growth. That's the core reason. But the Euribor levels, we do think today, we are at 2.22%, 12-month Euribor. It's going to be around these levels. The average that we expect for the year is at 2.25%. On Mexico, the deposit pricing, we discuss this every quarter. I mean our Mexican peso funding is at 2.5% at the end of November for comparison reasons. In the backup, you also see the end of December. But comparison, the markets authority announces these numbers. When our competitors, they are at 4.11% -- 2.5% for us, 4.11% for the industry. We maintain that very positive gap with the rest in terms of cost of funding and deposits, going back to the same dynamics that we repeat every quarter here, but they are important. We are in transactional deposits. I did mention this to you before, but I would repeat it, given our very high market share in payrolls, 1/3 of our deposits, 1/3 is in this bucket of EUR 0 to EUR 30,000, the lowest bucket. And the average of that bucket, 1/3 is in that bucket, EUR 0 to EUR 30,000. And the average of that bucket is EUR 790. So we have millions of customers and their transactional relationship is with BBVA. That's the best insurance policy against any cost of funding challenges or deposit challenges. You have seen that our loan-to-deposit ratio is basically flat throughout the year also in Mexico. I did mention to you in the last call that we would be a bit more aggressive in deposits now that the prices are lower. We didn't want to be very aggressive in deposits, and we have chosen to do wholesale funding when interest rates were very high because we didn't want to trigger that market too much. But now that the interest rates are at relatively low levels, we are also gaining market share in the last quarter, and it's mainly coming from the Enterprise segment, which is then leading to those dynamics. But overall, we feel very comfortable with our deposit positioning and cost of funding positioning in Mexico. Maria Gomez Bravo: Just to add on to Onur's comment also on the rate side in Mexico. We do expect Banxico to continue to lower rates this year. So we're expecting Banxico rates to be at around 6.5% around mid of the year. So that is also implying somewhat compression of spreads in 2026 in Mexico on average versus also 2025, just as in Spain. Onur Genç: And when we announced our long-term strategic plan, we said that the core driver of the strategic plan numbers that we announced again in July was the fact that the rates would stabilize. And once rates stabilize, the activity growth will translate into bottom line, right away into profits. And that stabilization has already happened in Spain and is very close to be happening, finalizing in Mexico. Patricia Bueno: Next question please. Operator: Next question is from Francisco Riquel from Alantra. Francisco Riquel: I have two questions. First one is, Spain customer spread fell 50 basis points in '25. Local peers are reporting falls of just 20, 30 bps. You're growing faster in loans, 8%, however. So how can you reassure that market share gains are not coming at the expense of profitability? And if you can comment on customer spread dynamics that we should expect in '26 and '27. And my second question is on capital generation. Net profit, well, results in '25 and '26 guidance is in line with expectations, but you are getting there more capital intensive that I thought in view of the negative organic generation in Q4. So I wonder if you can update on the strategic -- on the goals of the '28 plans in terms of the -- do you feel that the EUR 45 billion of CET1 generation is still achievable? How much through SRTs? And the mix, how much do you plan to devote between growth and distributions that you guided at the time? Onur Genç: Thank you, Paco. Luisa, do you want to take the first one, customer spread dynamics? Maria Gomez Bravo: Yes. I think the customer spread dynamics have been quite positive in the quarter, to be honest. I think that -- first of all, I think that we need to also remember that the repricing of our mortgage loan portfolio is faster than our peers. We repriced 2/3 of our mortgage book every 6 months and 1/3 every year. So this pricing dynamics, obviously, you see it feeding into the loan yields quarter-on-quarter. And in the cost of deposits, this quarter, we had a slight uptick of 2 basis points of cost of funds, and this was driven primarily by a mix effect because in the quarter, we gained market share in transactional banking deposits in the corporate side, and that's what affected a little bit the cost of deposits. Going forward, as we mentioned, we think that we will see quarter-on-quarter pretty stable customer spreads in the first half of the year and perhaps slightly picking up at the end of the year depending on that Euribor rate performance that Onur mentioned. So all in all, I think that we are quite comfortable with the evolution of the spreads going forward. And going to profitability, I think that our profitability, as you can see by the dynamics of core revenues in BBVA this year in Spain, which have been quite positive with over 3% year-on-year in NII and over 3% year-on-year in fees compared to our peers, I think, showcase the profitability outlook of our growth. Onur Genç: Just to add on this one, Paco. On Page 38, you see the customer spreads, average customer spreads by geography in the appendix. The average spread has declined by 41 basis points, just to be very precise on the figure. And that 41 basis points, as you mentioned, is slightly higher than the competition. For a good reason, if you look into the growth of our lending book, you would see that we are growing very profitably, to be fair, but still at a different margin or a different spread level versus retail in the Enterprise segment. We are growing very nicely in the Enterprise segment. That has an implication. Obviously, the mix effect comes into that play. But that 41 basis points, again, is excellent in our view. And finally, I would say that the final spread that you see in Spain at the end of the -- in the fourth quarter, but at the end of the quarter as well, 280, we expect that number to remain -- we have touched bottom basically in short. We expect that number not to go any further down. Slight maybe changes, but not too much. From here on, if the rate policy evolves as we are expecting, it's going to be going up. Then the second question, the broader question on the growth being capital intensive and the implications of that. You were asking implications of that in terms of goals. We do have our, again, midterm strategic plan and the associated figures. There are 2 numbers there that are very important to us and that are very easy to remember. EUR 48 billion profits and EUR 36 billion capital distribution back to our shareholders, okay? Those 2 numbers. And then there are many others underneath, but I am giving you the 2 figures that is like -- I put them into a post note and I put them next to my bed so that I look into them when I wake up in the morning. They are important numbers. I mean we have a very solid competent team. If things happen that are beyond our control and if it doesn't happen, fine. But at the moment, we are completely on track to reach those figures. The thing that you mentioned, be growing in capital-intensive areas, as long as it's above your cost of equity, that growth, we love it. We want to do more of it because we are going to be creating capital more than our cost of equity. The thing that you mentioned might create a bit more different dynamics in terms of some of the buckets underneath the capital flow. But at the moment, it's completely in line with our plan. But if it continues like this, meaning we grow a lot in, as you say, capital-heavy areas, then we have an opportunity to do more SRTs, for example. I'll give you the growth dynamics here because you mentioned it's capital intensive. If you look into the quarter-over-quarter growth, you see that in Spain in the quarter, we grew 2.5% in loans when the average annual growth was 8%. So if you annualize the quarterly growth, we have grown much more in the fourth quarter versus the rest of the year. If you look into Mexico, the fourth quarter number growth is 3.7%, then the overall annual growth was 7.5%. Again, if you annualize Mexico, 3.7%, it was a much stronger quarterly growth than the previous quarters. And rest of business -- as also Luisa explained, rest of business is basically CIB business. We also delivered amazing growth in that area. All of this growth, again, is happening above cost of equity. If we grow like this, again, we will have a higher pool, for example, to do more SRTs. There will be different dimensions. But in short, coming back to your simple question, we are fully committed, and we are completely on track of our midterm goals. Patricia Bueno: Next question, please. Operator: Next question is from Benjamin Toms from RBC. Benjamin Toms: The first one is on costs. At a group level, costs grew 10.5% in 2025, above weighted average inflation of 9.6%. I roughly calculate the weighted average inflation is expected to be 7% in 2026. Is that 7% roughly in line with your expectations? And is 7% the right way to think about group cost growth for this year? I appreciate you have a cost-to-income ratio. And secondly, one of the reasons that Mexico is a great geography to operate in is because the population is young and underbanked. From a strategic point of view, I'm interested that when we're talking about new entrants coming to the market, and coming to a market like Mexico and disturbing the status quo, does that young and underbanked population actually represent a disadvantage? I imagine younger customers are less sticky. And if your parents never had a bank account, you'll have no brand aspiration or allegiance. Basically, conceptually, do you think that it's easier for a new entrant to come to a market like Mexico relative to a market like Spain? Onur Genç: Perfect. On costs, Luisa, do you want to take? Maria Gomez Bravo: Yes. Well, I think on costs, what we see is that this year, the performance on cost has been basically affected as well by the VAT one-offs in Spain and Corporate Center, in line in Mexico, and Turkey affected by inflation and rest of business in line with our expectations according to our investment plan. So all in all, I think, as I mentioned, very much with what we expected. Going forward, I think the guidance is very clear that we continue and remain investing in our footprint. Spain and -- guidance for Spain and the Corporate Center is affected by the one-offs on the base case. I think that in both cases, if you strip out the one-offs, we will be growing in Spain around circa between 3% and 4% on the average of the both years, which is in line with the growth that we see for Spain. And in Mexico, again, very consistent growth in Mexico, a market where we continue to believe that investment gives a lot of return going forward. So I think that the group costs this year are going to be, in that sense, higher than inflation because of these one-off trends and the continued investments in the growth franchises that we see in the group. As you mentioned, profitability is very relevant for us. And as long as we see cost-to-income trends performing the way that we expect below 40% for the group in 2026 and with our midterm goals going into the 35% aim, which is what we still stand by, I think we're perfectly fine investing in our footprint at these return levels. Onur Genç: And on your second question, Benjamin, which is a very good question. Our experience in banking, Benjamin, is that different segments of the society and population, young, mid-age, old or different segments, whatever metric and whatever dimension that you pick as a segmentation dimension, they really don't care whether it's the neobank or the incumbent bank and so on. What they care about is the service. They want to get the best from their bank. Very simple concept, but very important. Different segments prioritize different areas of service. As you say, the young segment, for example, the digital experience has to be really good because that's the piece that they care about. But if that digital experience is being provided by an incumbent bank versus a neobank, they don't care about that tag, about that label. They go for the service. In that context, our claim, and there are many numbers that we can take offline and feed you with, but there are many numbers that tell us that our digital experience in Mexico is amazing because as compared to those neobanks as well, we do this constant. I'm personally involved in those exercises. We look into what do they have in digital experiences, what do we have? Do we have a gap? If it's positive, perfect. We further build on that. If it's negative, we close that gap right away. If we do that, why would the young segment prefer a certain bank versus another? In that context, I mean, again, the numbers speak for themselves. Those neobanks that you are mentioning, and some of them have been there for many years now. There are newcomers, but there are also very entrenched now players in Mexico on the neobank side. They have been there for quite a long time. But despite that, we have 4.7 million new customer acquisition in Mexico in 2025, 4.7 million. A good part of them are very young customers. 81% of this acquisition are done through pure digital channels. So they don't go to a branch, they don't go anywhere, and they basically become a customer through pure end-to-end digital channels, which is one of our core competitive advantages in Mexico and beyond. That's why we are providing that service to them. That's why we are getting those numbers. On top, we have certain things that, in our view, neobanks cannot replicate that easily. We can do what they do because of the digital channel. We are really focused on that. But the things that we have, our infrastructure in the country. Mexico is still a very cash-heavy country. More than 90% of the population says they deal with cash on a daily basis. We have, by far, the largest ATM infrastructure. We have the branch network, if the customer needs it for a problem -- for the young segment, it's only for problem areas, but it does happen. They care about that infrastructure as well. And also, even if you are young, if you are working in a place, we do have a relationship with your company so that your payroll comes to BBVA, which is not very easy for, again, neobanks to replicate. In short, I think the numbers are very clear that we see that challenge, but we are matching that challenge, and we are going to compete really hard. Patricia Bueno: Next question please. Operator: Next question is from Cecilia Romero with Barclays. Cecilia Romero Reyes: The first one is on Spain. Spain volumes are strong and you're gaining market share in SME and corporates while deliberately giving up share in mortgages. Is this pushing the cost of deposits up as you compete for clients, clients that you're not gaining through mortgages? You mentioned before on risk-weighted asset growth was larger than expected in this quarter. Can you clarify whether any large SRT transactions have slipped into Q1 and how we should think about risk-weighted asset growth and further SRT benefits for next year? My final question, the final dividend was entirely in cash. Is this structural going forward? Or are you planning to keep flexibility to do a final dividend in 2026 with a share buyback component? Onur Genç: Perfect. SRTs, the architect and the leader of SRTs is Luisa, so I'll leave it to you on the second one. On the first one, the cost of deposits may be going up, if I understood you correctly, Cecilia, because we are less aggressive on mortgages, does it have an implication on deposits? Was that the question? But the deposit, you would see it in the numbers as well. Again, in the appendix, you will see it. Our loan-to-deposit ratio in Spain is now 87%, 87%. So we do have so much liquidity and so much deposits that the tension that you might be implying that would be coming from not having that mortgage relationship with customer and hence, lower deposits is not there at all because we do have, again, abundant deposit space. SRTs, Luisa? Maria Gomez Bravo: Yes. So on the SRTs, we generated 35 basis points of capital this year. In 2025, it was around EUR 11 billion of RWA release. We did front-load the deals in the year where they were more biased. We did like 23 basis points in the first half. We do see that the trend in the market is for deals to concentrate at the end of the year. And so we planned our SRTs in a different way. We expect this year to be able to deliver more or less in line with the guidance that we gave last year of around 30 to 40 basis points and pretty much in a similar fashion. We are also expecting to start doing some deals in some of our other core geographies such as Mexico and also potentially Turkey. We're working on those type of deals as well in order to try and mobilize the balance sheet further. So in that context, we do expect RWA growth to be below the loan growth as we complete our SRT planning going ahead. Onur Genç: Okay. On the first answer that I gave on deposits in Spain, Patricia here is alerting me that I didn't give a proper answer. But I do think what I said was critical, which is the 87% is the number to look into. But she's also highlighting a very good number, which is one of the clear reasons of our deposits are growing in Spain is also the retail franchise that we are building. Last year, we continued to acquire, I go back to the same topic, but it's very important, 1 million new customers in Spain, 1 million new customers. Excluding the neobanks, we are #1 among incumbent banks in terms of customer acquisition. That brings a lot of deposits as well. Patricia, I added your point as well. So I think you should be happy. Then the dividend topic, you said, I think, Cecilia, that 2026, can there be share buyback instead of cash. Of course. Of course, as we have done in the past, I mean, this year, it's 50% full in cash because we are running a share buyback program already. There is an ongoing extraordinary share buyback program running in parallel. That's why we said, okay, let's go with cash on the other side. You might remember, 2024, 2023, we did a piece of the payout -- regular payout in share buyback, EUR 40 million last year in cash and EUR 10 million in share buyback, if you remember. So we have that flexibility in our payout policy as we have announced to the market. We typically tend to pay a good part of the regular payout in cash because we do think it's important the cash dividends continue for our shareholders in a nice way. So a good part of that will always be coming in cash dividends, but there is the possibility and the flexibility, obviously, to do the 2026 regular payout, also some of it in share buyback. Patricia Bueno: Next question please. Operator: Next question is from Alvaro Serrano from Morgan Stanley. Alvaro de Tejada: Can I ask a couple of questions around the guidance in -- first of all, in Mexico and then I have got one on cost in Spain. In Mexico, the mid- to high single-digit NII growth, if I look at the momentum you had in 2025, it was very good. And sort of in the second half of the year, you had 3% sequential growth in NII in pesos and the mid-single-digit -- sort of mid- to high single-digit NII growth implies very modest sequential growth over the fourth quarter base. And you're not going to get -- Luisa, you mentioned 50 basis points rate cut that you're putting in. Can you -- are you being conservative? Is there anything to -- I don't want to go to the cliche of the deposit competition, but is there anything we're missing? Are you being conservative? Just if you could qualify that guidance a bit, that would be very helpful. And then on Spain, even -- the cost income is 33%, which is obviously very good. That goes without saying. But if I think about the 2026, you're discussing low to mid-single-digit sort of NII fees and expenses underlying around 4%, I think, Luisa, you said. Is that -- I'm just thinking that doesn't imply -- potentially implies negative jaws or stable jaws. How are you thinking about costs from here on given this good starting point in cost income? Should we expect a bit more investment, maybe some negative jaws at some point? Is this the best you can do, which is very good. I don't mean in a bad way, 33% is obviously best-in-class. Onur Genç: Okay. So maybe take the second one, Luisa. On the first one, Alvaro, congratulations because in that chart of outlook and guidance, there are many bullet points on the page. The one that we discussed extensively and we said, are we being too conservative on this number or on this line was the one that you picked. But I mean you know our style. That page, again, is very important to us. When we say a number that we want to deliver, we deliver. And maybe a bit on the conservative side, that number, we are very positive in Mexico, very positive. I mean, if we have delivered what we delivered in 2005 (sic) [ 2025 ], despite all the complexities of the year in Mexico, in 2026, based on what we also see at the beginning of the year, we are quite positive. But we put a number and we always deliver and maybe that's one of the reasons why you have that guidance in there. Luisa, on the cost? Maria Gomez Bravo: Yes. Well, on the cost side, I think that with the current guidance and in this year, we do expect some slight negative jaws in Spain if factoring for that circa 4% on average for the last 2 years. But that would still leave us with a very positive cost-to-income ratio for the year in Spain as we guided for. And again, we continue to, by the way, invest a lot in efficiency and productivity by no means are we standing still, where actually part of the investments and the growth in investments and expenses are to achieve further productivity gains throughout the year in '27 and '28 primarily. So we are very committed to ensuring that we have a very good solid cost discipline in Spain and the rest of the geographies, but Spain is, I think, a poster child of cost discipline in the past, and we will continue to do so throughout the year and going forward. So yes, slightly negative jaws this year, but again, very positive growth for Spain going forward in results, I mean... Onur Genç: And Luisa, maybe we also quantify EBIT. I mean in terms of the number that you see on the page for 2025, Alvaro, you see that the costs in Spain have decreased by 0.7%, decreased. It was because of that one-off that Luisa also mentioned in previous calls and also today, this VAT one-off. If you exclude that one-off, the growth in 2025 would have been around 3% and the guidance for next year would have been around that as well. So it's not any different. It's the base effect mainly affecting that figure. And we are going to be in the first quarter running an efficiency initiative, a voluntary efficiency initiative in Spain, and that might have a little impact on that number also, especially in the first quarter. But the guidance is there in that sense, mainly because of the base effect. Patricia Bueno: Next question, please. Operator: Next question is from Marta Sanchez Romero with JPMorgan. Marta Sánchez Romero: My first question is a follow-up on cost. We've seen some slippage in the Corporate Center. Is there space to do something more ambitious in terms of restructurings? It's been a number of years since you did anything meaningful in terms of early retirements. Could we see some capital allocated there? My second question is also on capital allocation. Some may say that your buyback, your current extraordinary buyback was somewhat stingy. And at the current execution pace, you will be done and dusted by July. Is there a chance that you reload that buyback? Or we are not going to see anything in terms of capital returns beyond the interim dividend this year in 2026? And just a quick question on the rest of business. So your loan book there is growing like a weed, EUR 16 billion this year, almost EUR 30 billion over the past 2 years. We're seeing market investors a bit jittery about underwriting generally, private markets, et cetera. Can you give us some sense of the quality of your underwriting, what you're doing? Onur Genç: Perfect. Maybe last one, you take Luisa, if you like. On the first question, Marta, thank you for the questions. On the Corporate Center, as I just mentioned to Alvaro's question, in Spain and in Corporate Center, we don't want to -- it's not a restructuring program at all. It's something that we do in an ongoing basis. But in the first quarter of this year, we will have an efficiency initiative, as we call it, which is a voluntary initiative for some of our colleagues to benefit from if they want. It's a targeted voluntary initiative that we would be doing. But I would highlight to you that if you go back to the Corporate Center expenses in the last 5 years, 5 years, you would see that those expenses are always growing less than inflation, always. And except the one-offs, and we can talk about the one-offs, but it has been a commitment that we have had -- even in these calls, we have voiced those commitments, and we are on track with those commitments. The buyback strategy, and you're saying we wouldn't -- should we expect something more or less or nothing? We have been very clear, very vocal and I do think we have built the credibility around this fully. We do have this commitment that we have a capital target of 11.5% to 12%, that we will distribute all the excess capital above 12%. Our commitment on that is full. If you look into our capital number and the evolution of the capital, you would see that we would have excess capital. So obviously, you should expect something more, when the time comes we will announce it, additional extraordinary distribution back to our shareholders. Then rest of the business, Luisa? Maria Gomez Bravo: Yes. No, I think that the growth that we are seeing is a strong growth, but this is on the back of plans that have been developed over quite a number of years already and that have gained momentum now. So these are very thought-out plans that basically are trying to gear and leverage the global footprint that we have. We put our clients in connection to our emerging markets, and we're doing business with large corporates that are growing the strategy in traditional corporate banking with that growth of 21% that we saw in the year-end cross-border business. I think that in terms of underwriting criteria, we are quite conservative as in the rest of the group. And 40% of our business is booked in the U.S., and we are, I think, overall very focused in growth in corporates. That's where we're seeing the main growth, Marta, we're not seeing growth in other types of -- I mean, we're seeing growth, but not as relevant growth as in the corporate book. Again, corporate banking, transactional banking, regional banking model across the footprint is what we are focusing on developing. Onur Genç: I would double down on this comment, and I'm glad that Luisa has picked up on that dimension. It's on Page 8 of the presentation on the left-hand side at the top, it says enterprise cross-border. Our growth in rest of the business in general, but our growth in CIB is based on a model that we want to accompany our clients wherever they are. We have this global footprint. Many of our clients do exist in our footprint with different subsidiaries and so on. It's more trade finance, multinational client, corporate banking focused growth that we are after. And in that one, you see the evolution in that page on Page 8 that the growth is coming from there, from those clients. It's basically a cross-sell to our clients that we have in Spain. For example, we have a business in Mexico, we go after that. Our big clients in Spain who have a business in the U.S., we go after that. That's the focus of our growth in CIB. Maria Gomez Bravo: And the capital allocation that we do in these clients in the rest of business and -- we see that profitability going into our subsidiaries in Mexico, in Latin America, in Spain. So that capital that gets allocated there have the profitability driven by the growth that you're seeing in our business in fees and margins across the group. Patricia Bueno: Next question, please. Operator: Next question is from Carlos Peixoto from CaixaBank. Carlos Peixoto: So the first one would be a bit on the medium-term targets. So basically, the 42% -- sorry, 22% return on tangible equity average that you had guided to for 2025-'28, considering that 2025 was slightly below 20%. This year, you're guiding towards 20%. So this basically means that over the coming years, the average ROTE would actually have to be around 22% or more, whether you stick to that or you see some downside? And the same rationale more or less would apply to net profit or areas to -- looking at what is implied in the guidance this year, it seems as though in 2027 and in 2028, you need to have post a net profit above EUR 13 million to fulfill those goals. What will be the drivers for the improvement in the net profit? Then the second question would actually be on Mexico. Just the cost of risk guidance of 340 basis points implies a small deterioration vis-a-vis 2025. Are you just being cautious on this? Or do you see here any kind of concern? Is it related with loan mix? Just trying to understand a bit there, the rationale. Onur Genç: Very good. Thank you, Carlos. Maybe on the cost of risk, Luisa, you help me out. On the first one, the long-term -- midterm goals, Carlos, what I can confirm to you or let me say it first in a very clear way. We are fully committed, and we are still on track, as we have highlighted on Page 18 of the presentation to those goals. But you are asking a very fair and a very good question, saying that you did 19.3% in 2025, how come you can get to 22%. You have to look into the plan. And in the plan, the only thing I can guarantee you or I can tell you is the year for 2025, what we had in the plan, we delivered above that. The 2026, our guidance that we are giving to you, we are going to -- if we deliver the guidance, we are going to be delivering above what we have in the plan. So in the third and fourth year, it's obviously a bit better years than the first 2. And you're asking this is related to profits as well. What is the driver of that? I do think we talked about this in the past, but it's a very important -- relatively simple, but very important dynamic as we have talked to you about. We are growing very nicely in our core geographies, especially in Spain, everywhere, but in Spain and Mexico as well. That activity growth -- in 2025 and at the beginning of 2026 also, that activity growth is being consumed by the decline in the customer spreads. Why? Because in those 2 geographies, we are very rate sensitive. When rates come down, we lose in customer spread. So we grew very nicely in 2025, and this compensated the negative coming from the customer spread decline. Starting from 2026, our expectation, again, it's based on a macro assumption that the rates will not go down any further in Europe and in Spain and Mexico, it's going to go down to 6.5%. Today, we are at 7%, but then stay at 6.5%. If those assumptions are correct, if that those macro assumptions are delivered, the driver of the better profits in the coming years is the fact that the activity growth will not be anymore consuming the decline in the customer spreads and will be flowing directly to the bottom line. With those assumptions, again, our midterm goals we are on track, and we feel very comfortable with the numbers that we have put forward some time ago. On the Mexico cost of risk, Luisa? Maria Gomez Bravo: Yes. Well, I think as you mentioned, it's more driven by a mix effect. As you know, we have been growing in the past years, our retail portfolios faster than our wholesale portfolios. This year, our retail portfolio has grown close to 12%. Our wholesale portfolio is growing at 3% at the end of the year, factored by the U.S. dollar also depreciation. But in general, that mix effect is driving that guidance in terms of cost of risk. Remember that we're growing 14% credit cards, 14% consumer loans, 14% SMEs. So it's a mix effect. The underlying quality trends are supportive, and we don't see any issues other than the mix effect feeding into that cost of risk guidance for Mexico this year. Patricia Bueno: Next question please. Operator: The next question is from Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: Sofie from Goldman Sachs. So my first question would be on AI and tech. You guided for below 40% cost-to-income ratio in '26 and around 35% in 2028. But how do you think about kind of AI and the kind of cost-to-income ratio in the longer term? How much cost reduction do you expect AI potentially could help BBVA? And then my second question would be on Turkey. Revenues are strong, but net income was a little bit lower than expected. Also guidance for 2026 is slightly lower than expected by consensus. How should we think about the kind of upside risk to Turkey, but also Argentina from potentially exiting hyperinflation in 2028 and what that could mean for BBVA? Onur Genç: Very good. Thank you, Sofie. In the AI, we are still at the early innings. So we don't know exactly how the efficiency savings that we see, and they are really promising. And we are quite positive on what we have been seeing in the areas that we are applying it at the moment. But we need time. We need time to measure and see the direct impact and so on. But in the plan, we have given you this 35% in 2028 with the idea that in 2027, 2028, there will be some efficiency savings coming from AI that will be reflected into the figures. But exactly AI or other things, we haven't disclosed it. We haven't broken it down. And I think it is too early to quantify it at the moment. But we do have that intention to have some efficiency savings in those 2 years due to the programs that we are executing at the moment. On Turkey, how should we evaluate the upside risk, as you say? First of all, on the 2025 figure also you asked about -- you said that it came a bit lower than planned than the consensus. Actually, that's the miss consensus versus the group numbers in Turkey for 2 reasons. Number one, and as I mentioned, there was a change in the tax code. I'm not sure whether you all have followed it, but there was a change in the tax code in the final days of December, which has created around EUR 50 million, EUR 42 million to be precise, impact in the tax number that has created a bit of a dent in again, final days. And then the impairments are coming a bit higher in Turkey. Because in Turkey, the minimum wage increase happens only once in a year at the beginning of the year. And towards the end of the year, basically, the minimum wage is not adjusted, but inflation is there. And you see a bit higher inflows in retail, in credit cards and the consumer lending books. That's what we have seen. I mean the vintages, when we look into the vintages, we see nothing extraordinary, nothing different than what we expect. By the way, what we have seen in 2025 is more or less in line with the guidance that we have given to you. So given the vintages are already stabilizing, are already improving actually, maybe in the first quarter or so, similar to fourth quarter numbers, you would see some provisioning. But beyond that, we are not worried about the provisioning levels. You were asking in general about the upside, both Argentina and Turkey as well. On that one, what we can tell you, as you also look into the guidance, I need to highlight that thing in the guidance page, there's a footnote to the Turkish guidance, which is based on inflation, interest rates and depreciation of the currency. Those 3 things drive the guidance. We do think we have some fair assumptions in the footnote. As a result, we are guiding accordingly. But Sofie, your question of, do we have upside in those 2 countries? In our view, yes. But it depends on whether the countries improve on inflation and interest rates come down or not. If in Turkey, for example, inflation improves and interest rates come down, we do have a very high upside. If that happens, we have -- at some point, we have raised it in these calls as well. I mean, the fair value that we should have in Turkey is more than EUR 2 billion in profits. Today, we are less than EUR 1 billion. That upside is there, but it depends on the macro evolution of the country. Finally, you asked about also hyperinflation. As you know, the rule there is relatively clear. It's not the only rule. It's not sufficient. But if the last 3-year inflation cumulative number is less than 100, you get out of hyperinflation. That's why in our strategic plan, we put in 2028 for 2 countries get out of hyperinflation. But again, it depends on the macro evolution of those geographies. Patricia Bueno: Next question please. Operator: Next question is from Andrea Filtri with Mediobanca. Andrea Filtri: And sorry for drilling down on capital and its implications, but they are just one number answers. First, how much capital generation can you absorb if you push volume growth further? How much was the op risk revision in Q4 impacting your risk-weighted assets? And you refer repeatedly to internal cost of equity reference your Northern Star for new loan generation. Can you share with us the cost of equity you're applying to your networks in Spain and Mexico for the different loan categories, please? Finally, digital euro. Given the geopolitical evolutions, do you agree that the digital euro is likely to be a reality at this point? And how are you preparing to deal with this and turn it to your advantage? Onur Genç: Thank you, Andrea. Very specific questions. I appreciate all the questions. And I'm going to be very specific to you, too. In the volume growth and capital generation, the thing I can guide you or tell you is that we still expect in the coming years that every year, this year, we created 31 basis points pure organic capital generation even after growth, after regulation, after growth, after any other extraordinary thing, we created 31 basis points. In the capital plan, we expect every year to create 30 to 40 basis points. The operational risk. In the fourth quarter, operational risk consumption was 16 basis points. Typically, it's 4 to 5 basis points in a quarter. We do this calculation, as you know, at the end of the year. So fourth quarter always has an adjustment that the number was 16 basis points for operational risk in the final quarter of the year. Cost of equity of the bank for different franchises, we never disclose it. Thank you for asking the question. Digital euro, it has pros and cons. It has to be done in a proper way in our view. I do think for the sovereignty topic that many people talk about, it can be helpful. There is a pro there. We see that angle. We see that point and appreciate it, but it has to be done in the proper way, in our view. And there are certain dimensions that we hope that we can continue to dialogue with the regulators and the politicians on this topic, given the fact that we are pushing private solutions as the banking sector in Europe, you might have seen this, the solution of [indiscernible], the Spain, Italy and Portugal, we are now in the same umbrella. We just concluded an agreement with EPI, which is basically Netherlands, Belgium, Germany and so on. So all of these countries, we will have already a private solution developed. We hope that in the digital euro discussions that politicians and supervisors and regulators understand the complexity, the costs and everything else required for the payment solution to be developed. In that context, we hope that the existing private solutions are integrated into that dialogue and discussion. Patricia Bueno: Next question, please. Operator: Next question is from Ignacio Cerezo from UBS. Ignacio Cerezo Olmos: I've got three. The first one is on distribution and capital. If you can confirm that this is the year where the CET1 goes much closer to the 12% threshold or that's going to be a multiyear process? The second one is in Mexico, we're seeing a significant slowdown of remittances in the country. Does that have any impact in terms of deposit growth and asset quality, you think? And then third, if you can give us a few numbers in terms of balance sheet and P&L for the 2 digital banks in Italy and Germany, how have they been evolving basically in 2025? Onur Genç: Very good. I'll do it very quick, if that's okay, Luisa. This Is -- I mean, I mentioned multiple times, but our commitment to go back to the upper end of our capital target is absolute. In that sense, you should expect this year also that we get close to 12% as well, exactly, which implies that extraordinary distributions in the year. In the remittances question, Ignacio. We have also reported this back to authorities also in Mexico because there are channels that are not fully captured in our view in that number. So there's a 5% decline in remittances, but you don't see that in many other geographies where there is a remittance flow between U.S. and Honduras and Guatemala and so on. You don't see that in other countries and only in Mexico because we do think it doesn't fully capture the figure. So the reliability of that number, we have some doubts. But we do think that including those informal channels that are not included in the figure, the number has not come down actually. But in any case, we are quite positive for the Mexican franchise and Mexican economy better than 2025, we do think next year, and the remittances is an important part of this. Even in the official numbers that are being published, you will see a pickup in RV in 2026. The balance sheet and P&L of digital banks. We started reporting this to you as if you can see in the rest of business line item. Rest of business is basically CIB beyond the geographies that we report a geographical account, so U.S., U.K. and so on, all in there, plus the digital banks. You do see that in that page of 24 customer funds, the digital bank deposits is EUR 12.2 billion at the moment. It's basically roughly a bit more than half coming from Italy and the other part coming from Germany. We will continue to report on the balance sheet numbers. As you would see in this page, you will keep seeing the update in the figure. The P&L numbers will be published when we see the maturity of those businesses. At the moment, we are not publishing them separately. Patricia Bueno: Next question, please. Operator: Next question is from Borja Ramirez with Citi. Borja Ramirez Segura: I have two. Firstly, on Mexico, I understand that recent macro indicators show improving GDP growth trends. So I would like to ask if you could provide some details. And then also you're gearing to the appreciation in the Mexican peso versus the euro in recent weeks. I think it's around 4% appreciation. And then my second question would be on Spain NII. If I take your Q4 NII for Spain and I analyze and I add a bit of growth, I get towards the upper end of your guidance for NII. So it seems your guidance is conservative for Spain. And also, I saw that you had a very strong deposit growth in Spain, which -- so it seems you're gaining market share there. So I think it's also thanks to your stronger digital capabilities. So if you could kindly provide some details, please? Onur Genç: Thank you, Borja, for the questions. Maybe Spain question, you take Luisa. On the Mexican side, again, I mentioned the overall positivity that we have for 2026 for Mexico, but you're asking about the depreciation effect. In the plan that we have and in the guidance that we have, we are basically expecting a depreciation of Mexican peso versus euro, depreciation. In the first days of the year, it's the other way around, which is amazing news for us, which is very good news, which is a positive upside potential. But we live with this currency topic day in and day out everywhere. We wouldn't jump into conclusions too quickly. If it turns out to be as such, perfect. But again, our plan basically foresees a depreciation of the Mexican currency versus euro. On the Spain NII number, we have to pick up some speed as well. Maria Gomez Bravo: Yes. I mean, I think on the Spain NII number, as we mentioned before, we expect activity growth to feed into NII with average customer spreads slightly lower than last year, but stable from quarter-on-quarter numbers, and with a positive contribution -- continued positive contribution from the ALCO portfolios because we did increase ALCO portfolios in the end of the quarter by EUR 3 billion, and that should be also supportive to NII dynamics, which are all embedded into our guidance. And with deposit growth, I think it's primarily a strong growth in the fourth quarter, driven by demand deposits. Obviously, seasonal effects go into play in the retail side with Christmas salary bonus and so on and so forth, public sector, but also a strong growth, again, as I mentioned before, in Global Transactional banking with specific clients that have supported that growth in the quarter. And we hope to see that going into next year as well on the back of, again, that growth of almost 1 million clients retail, that also will help support deposit dynamics going forward. Deposit dynamics in the market overall are going to be also quite supportive as well. Patricia Bueno: Next question, please. Operator: The next question is from Britta Schmidt with Autonomous Research. Britta Schmidt: I've got three fairly quick ones. Could you remind us what the cost-income ratio in 2025 would have been excluding the one-offs? And maybe comment on how much of the expected cost growth this year above inflation is, let's say, upfront investment versus ongoing cost drivers? The second one would be on macro assumptions in Turkey. The rate and inflation assumptions do look a little bit of conservative. Maybe you can expand on why that is and perhaps also give us a bit of a sensitivity of the fee income to lower rates? And then thirdly, just on capital, your SREP benefits from the fact that there's no countercyclical or systemic buffer in Mexico primarily. How do you think about the simplification suggestions that the ECB has put forward with changing potentially how they think about releasable buffers? I mean is that a potential risk to your SREP requirements in the long term? Onur Genç: Very good. The cost-to-income number, Luisa? Maria Gomez Bravo: In the group, it would have been 39.3%, excluding the VAT topic from the 38.8% published in 2025. Onur Genç: And the Spain number would be rather than 33%, 34%. Maria Gomez Bravo: 34%. Onur Genç: Yes. On Turkey, I didn't get the full question. Turkey, are we conservative? Patricia Bueno: On the macro assumptions. Onur Genç: On the macro assumptions, we have to see -- maybe we are taking it a bit with a grain of salt, Britta really, because in 2025, if you go back to our first quarter 2025 presentation, we were expecting better macro in Turkey in 2025, but the rates didn't come down as much and inflation didn't come down as much. And you have seen the number in January. The inflation came 4.84%, monthly inflation. So we want to be a bit on the safe side to be fair. But the macro assumption that we put into the guidance is in the footnote of that page. If you believe those macro assumptions would be better, perfect, you will have a better number in Turkey. If you believe it's going to be worse, it's going to be a slightly worse number. The sensitivity is also more or less clear. Every 1% inflation has a EUR 15 million to EUR 20 million impact on net attributable profit. Every 1% interest rate has a EUR 40 million impact on the P&L. And every 1% additional depreciation has, again, another EUR 20 million impact on the number. That sensitivity is relatively clear. There are some overlaps. So you have to -- it's not directly, but not that far away from what I just talked to you about. If you have other macro assumptions, then the number would change. Then the simplification topic, Britta, it will take 2 hours to discuss this really because we spent a lot of time thinking about this. At the moment, I think the proposals are still not clear or not finalized, we wouldn't want to comment on them until we see something more certain and more clear on the page. Patricia Bueno: Next question please. Operator: Next question is from Hugo Cruz with KBW. Hugo Moniz Marques Da Cruz: So two questions. One on Mexico, perhaps you already gave the detail, but if you could remind us what guidance you expect for loan spreads and deposit spreads to evolve during the year? And I think you gave a comment of ALCO should support the NII in Mexico. So what are the assumptions there? It's more like the size of ALCO? Or is it repricing? So if you could give a bit more detail. And then the second question is, you said that buybacks are starting to slow down your tangible book value per share growth. So related to that, I was curious if you think buybacks still have a return above your cost of equity. And basically, I was wondering if it makes sense at some point to stop the buybacks because organic growth or M&A could have a better return. Onur Genç: Very good, Hugo. Mexico question, Luisa. Maria Gomez Bravo: Yes. On Mexico, well, we don't give guidance on specific customer spreads. What we've mentioned is that our guidance for NII is going to be mid- to high single digits. And we mentioned that we expect a compression of average spreads in the market this year versus last year, reflecting the strong decrease in rates in 2025, which is around 300 basis points in the reference rate and also in the slide as well. So that's what we mentioned in Mexico. With regards to the ALCO book in Mexico, what we have primarily been doing is extending durations. We did some exchanges of short-term bonds for long-term bonds in the quarter. And we have extended that duration. The book is right now at EUR 16.8 billion. It's grown around EUR 1.2 billion, pretty stable in the year. And again, the most relevant effect has been that extension of durations with yields at around 8.6%. Onur Genç: Very good. On the share buyback question, Hugo, maybe it's a repetition of some of the things that I always say and I also partially said today. But in terms of principles, very clear, we are value focused. Any capital action that we do, it looks into the return of that capital deployment for our shareholders and compare that also to other alternative uses of that capital. So you mentioned, for example, the negative impact on tangible book value per share number. So because of that, maybe no, that's not how we look into it. We look into it from a value perspective. If we create value for our shareholders, then it's still a good investment of that capital. That is why we always look into the intrinsic value of the share, not the tangible book value per share. So it might have a negative impact on the tangible book value per share, but that's not a criteria for the bank to decide on these. You have to look into the intrinsic value. It is true that given the appreciation of the share price, the attractiveness of share buyback has come down. But in our view, as compared to the intrinsic value, still there's value. That's why the program continues. And then also, I would once again highlight that our commitment to returning the excess capital above 12% is full. So when the time comes, when the capital distribution decisions are due, we will look into the situation, compare that with the intrinsic value, get the feedback of investors in general and decide. Then we have to wrap up, no. We have to leave in 5 minutes, okay? Patricia Bueno: So we have to leave it here. No, we can continue. So next question, please. Operator: Next question is from [indiscernible]. Unknown Analyst: I have just three questions, please, all on Turkey. Can I just clarify one thing? The EUR 40 million you mentioned on the sensitivity to lower rates, is that excluding the hyperinflation adjustment? Or is that including the hyperinflation adjustment? I just want to make sure I understand, so is the impact 4% or 2% in general. Second question, clearly, we're running positive real rates now in the region, and we will get an uptick in NPLs. But I just want to try and understand the relative effect of both in your PBT. So I suppose the NII impact is obviously much more sensitive given the fact the country is delivered -- delevered by 50 points of GDP over the last 5 years and household loans are only 9% of GDP. So I just want to try and understand, like obviously, a lot of it is credit cards, just in terms of the relative effect of both, that real rate policy. And lastly, kind of more a strategic question. Can you chat about what you would need to see to buy out the minorities in Garanti as soon as you can? I mean, surely, it's a perfect opportunity now to buy the balance given an enormous return on invested capital that would be delivered to BBVA shareholders, assuming that the Turkish real rate policy persists, which obviously you do expect in your presentation. And so I just want to try and understand how you're thinking about the buyout of the minorities. Onur Genç: Very good, very quickly because we don't have time. The number that I gave is including the hyperinflation adjustment, meaning it's the perspective of BBVA looking into it from here, consolidated in a hyperinflationary accounting included way. The cost of risk, again, just to pick up some time. [indiscernible], it's in the guidance. We are expecting around 200 basis points of cost of risk in 2026, which is more or less in line with 2025. No more deterioration, not much deterioration in the first quarter. In the first half, what we have seen in the fourth quarter might continue a bit, but vintages have improved. That's why you have the guidance of around 200 basis points. About the minority shares, we are happy with what we have. We have no plans at the moment. We have no plans to change that shareholding structure that we have there. So we will -- again, we continue with what we have. Patricia Bueno: Next question please. Operator: Next question is from [indiscernible] from Jefferies. Unknown Analyst: I just had a follow-up regarding some of your previous comments about the fact that in 2025, you delivered better than what you had budgeted for at H1 '25 in the strategic plan. And I just wanted to make sure that I get that right, and that is a comment regarding profits rather than the return on tangible equity. I think at that point, you were guiding for '25 ROTE to be around 20%. That came in slightly lower. Is the reason behind that slight miss the excess of equity that you've been operating on versus what you were expecting back then? And then also, if '25 profits came in better, '26 is expected to come in better as well. Why shouldn't we see some upside to your previous EUR 48 billion guidance for profits cumulatively? And then if I just can ask a more thematic one as well. Just a few days ago, you joined the banking consortium to develop an euro-backed stablecoin. Could you please tell us what are your intentions and ambitions there and how you think about tokenized money more broadly in the coming years? Onur Genç: Very good. Thank you, [indiscernible]. Again, we are too late, so I'm going to go very quickly, apologies. And if you want to follow up with us, we are always open to the follow-up. But on the 2025 plan versus reality, as you exactly said, we delivered above plan in profits, but the average equity in the denominator of the return on tangible equity has been relatively high because we only started the share buyback programs because we have our commitment to go back to 12% all the time when we have excess. We started those share buybacks later in the year due to the Sabadell transaction and the fact that we weren't doing share buybacks throughout that process. But you're right, it was a beat on the profits. Then 2026, given what you see, shouldn't we update EUR 48 billion, [indiscernible], we are too early in the game. We are only in the first year. I do think EUR 48 billion is a very good number, and we are on track to deliver that figure. Then the stablecoin consortium. We do think it's a technological topic that needs to be watched very closely. There are certain use cases in our view that would benefit from those developments. And we are an innovation-focused bank. We always led the drive in digitalization now in AI and stablecoins is part of that dynamic as well. That's why we wanted to be part of a consortium to work through this and to basically stay up to date on all the developments around that. And then the final question we can take. Patricia Bueno: This is the final question. Next question, please. Operator: Next question is from Fernando Gil de Santivanes from Intesa Sanpaolo. Fernando Gil de Santivañes d´Ornellas: Very quick one. What has changed over the FX hedges in the Mexican peso? Because I'm seeing higher volatility expected in this presentation versus the previous one? Onur Genç: The RWA is -- very quickly Fernando. The RWAs has come down because, as you know, again, we have done this regulatory -- you have seen it in the capital chart. We went to standard in some portfolios, and we went to foundation in some other portfolios, which has led us into the -- and then the equity, the sensitivity. Patricia Bueno: Yes, on hedges. Sensitivity to currency as we have reduced the capital, the sensitivity to hedges. Onur Genç: Very good. So you have the answer from Patricia. And if you want to follow up with her, she is always available for all of you. Apologies for this because we have an immediate program right after this in the same room with the press. Thank you so much for the questions. For any follow-ups, the team is happy to help you out. Patricia Bueno: Absolutely. We are at your disposal for any further questions or clarifications. Thank you very much. Onur Genç: Bye-bye. Maria Gomez Bravo: Thank you.
Henrik Andersen: Good morning, and welcome to our presentation of our Full Year 2025, Q4, of course, in '25, and as always, as this full year presentation, also a short strategy update section. For us, 2025, a year of evidence in both important milestone in our strategy value through performance, but also here, it's absolutely timely to say proper thank you to our customers, to our partners, shareholders and colleagues. So today, both shareholders and colleagues will see a reward from financial year 2025 in the form of a proposed dividend, share buyback, and also for our colleagues around the world, a very well-deserved incentive bonus payout. I also just want to here take the opportunity to just point to the picture. As you can see, a nice weather day in the North Sea, where we are constructing one of our Offshore turbines for He Dreiht. So really appreciative of seeing that. With that, I would like to go to key highlights for the year. So revenue of the year of EUR 18.8 billion and an EBIT margin of 5.7%. Revenue all-time high from growth in both segments and profitability achieved in the upper and, of course, narrowed part of our outlook from Q3. The service EBIT of EUR 626 million delivered on a revised service EBIT guidance. However, the outcome fell short of our performance targets and also internal expectations, as you can see also in our remuneration report. Order intake of 16.3 gigawatts, leading to a record high order backlog. Its higher Onshore activity, especially in EMEA, was offset by lower Offshore orders in the year. The manufacturing ramp-up leading to extra costs and investments, as we were speaking to throughout the year. Progress is made and being made on the persistent challenges, and we expect further improvements here in 2026. We are returning value to our shareholders. A dividend of DKK 0.74 per share is proposed, and a share buyback of EUR 150 million will be initiated from tomorrow. The outlook for 2026, revenue expected between EUR 20 billion to EUR 22 billion, EBIT margin before special items expected between 6% to 8%. And as always, you will hear and see more details of that later in the presentation. So now I'll go to the environment we work in. Wind energy key to affordability, security and sustainability. This is the key factors of our narrative for wind. And not surprisingly, it works in more than 80 countries across the world, and it's delivering a high generation of electricity from now more than 200 gigawatt installed. When we look at the global environment, inflation, raw materials, transport costs are stable. But of course, with some degree of variability to tariff, as everyone appreciates, that will increase cost over time. It will come towards and through the value chain, and it will come to the energy and electricity price over time. The ongoing geopolitical and trade volatility leading to realization, that's not new. It's just a continuation of the trends we have been seeing over the previous years. And I think it's only been accelerated further by the ongoing discussions on the geopolitical side. On the market environment, heightening focus on energy security and affordability, it almost is the one thing that are being discussed in every leadership political as business leadership across the world. The grid investment prioritized in key markets, it's also prioritized and even now announced as part of the EU plan for grid expansion across Europe. On the permitting side, it's improving in some markets, but overall permitting auctions and market design are still challenging or still being changed or picked up. Two of the really strong examples of positive development is AR7 Offshore in the U.K., led by Ed Miliband, which is really showing the leadership required. And then on the Onshore in Germany, I will say we will have years where we are now in excess of 10 gigawatt Onshore, again, a testament to if leadership, both political and business, put their minds to it, then it will also get done. On the project level, strong project execution, some regional disruptions to supply chain always at risk, but I'll also here use the opportunity to thank our colleagues. It has been an exceptionally good execution in 2025 and the best execution we have seen in the last 5 years on our projects when it comes to our often discussed pre and post calc on the project. So a huge thank you to everyone here who has contributed to '25. With that, I'll go to the Power Solutions slide. So strong finish to 2025. The order intake of 6.5 gigawatts in the quarter, driven by strong momentum in Onshore across all regions and good activity in Offshore, such as the 390-megawatt Shinan-Ui project in Korea. The 6.5 gigawatt in the quarter also, therefore, hints and indicates an unannounced order intake of 1.1 gigawatt, which again supports the strong momentum that sits in and around the whole Onshore part. The largest order in the quarter was 828-megawatt Onshore project in Brazil with a long-standing partner and friend, Casa dos Ventos, marking the first major deal in Brazil's wind market since 2023. ASP on new orders was EUR 1.01 million per megawatt, like the prior quarter. The ASP reflects a good mix of project scope, geography and type. The overall pricing environment remains stable and positive for our continuous financial performance and progress. The order backlog in Power Solutions increased by EUR 1.6 billion compared to 1 year ago to a record high of EUR 33.2 billion. It's the highest ever. You can see the breakdown of both geography and quarter-on-quarter comparison to the right. With that, I'll go to the Service business. So heading here is that we are halfway through our Service recovery plan. When we look at the highlights for the Service business in 2025, I think the Service order backlog increased to EUR 38.7 billion from EUR 36.8 billion a year ago despite EUR 1.9 billion headwind from foreign exchange rate movements in the year. The Service business reached 161 gigawatts under service. That's an increase of 2 gigawatt compared to Q3, as healthy additions in the fourth quarter outweighed expiries and deselection as part of the ongoing commercial reset. The first year of the Service recovery plan has been completed. We have achieved better operational discipline during 2025, but we have not yet finished and the plan continues throughout 2026. It remains our strategic priority to drive operational excellence, cost out and improve cash flow and with full attention and support across all of Vestas and the full value chain of Vestas. I would also say, at year-end, there's no doubt that across Vestas, both about the plan and expectations, that is fully aligned and also fully understood. I will talk more to it when we get to the strategy overview later in the strategy section. You can see the breakdown here to the right. So the service order backlog, EUR 38.7 billion, of which EUR 33 billion is Onshore, gigawatt under active service contract, 161 gigawatt versus 152 from Onshore. And then we have an average year's contract duration of 11 years. With that, I'll go to the Vestas Development part. And I think this is, in short, it is a business we talk about, and it's also a business that we often give a quarterly update on. But year '25 was very much a year that also characterized with the heading "Revised Organizational Structure as part of the Operating Model Reset". So it was a year of simplification and also a year of refocusing the development business. So in Q4 2025, Vestas Development generated 102 megawatts of order intake from Argentina. At the end of Q4, Vestas' pipeline of Development projects amounted to 28 gigawatt with Australia, the U.S. and Brazil holding the largest opportunities. As part of the Operating Model Reset, we have implemented a leaner organizational structure with simpler governance to benefit from market trends and ensure traction with key projects. Ultimately, the goal of Vestas Development is to develop quality projects to the benefit for our customers and very close partners, thereby contributing meaningfully to the Vestas Group EBIT over time and quarter-on-quarter. Then I will go to Sustainability. And here, positively record high greenhouse gas emissions avoided. If we look at Vestas turbines produced and shipped in 2025, are expected to avoid a record of 463 million tonnes of greenhouse gas emissions over the course of their lifetime. Undoubtedly, this is Vestas' main contribution to sustainable energy system. And maybe just put that a bit in perspective. The whole emission from Spain in a year is approximately 250 million tonnes. So we are sort of beating that with a factor 2, give and take. During 2025, we also supplied 22,000 tonnes of low-emission steel, driving significant emission reductions in those projects. The number of recordable injuries per million working hours, TRIR, remains unchanged at 2.7 in 2025 compared to 2024. Safety remains a top priority for us as we tirelessly work to improve our safety performance across our value chain. I'll also say here, no fatalities in 2025, and we can also see that the frequency of serious injuries have reduced and gone down over the year, which is a really pleasing trend of what we see across our many countries, but also across now 37,000 employees. I also encourage you to read our annual report. There is a very large section on CSRD. Some will say too much and too bureaucratic. We are one of them. But it also contains a lot of the emotions and passion that goes from us. You will also see, we don't no longer comment on Corporate Knights. We don't understand the changed rules and ways of potentially evaluating sustainability retroactively back in time. So therefore, we'll come back when we have chosen a new sensible partnership later in the year. With that, I think it's time to come to the financials, and what better year could be to have your debut of a full year, Jakob. So over to you. Jakob Wegge-Larsen: Thank you, Henrik. And we start off with the full year 2025 income statement with a historic record high revenue and EBIT that landed within the narrowed outlook range. When we look at the highlights, in '25, revenue increased 9% year-on-year to a record high EUR 18.8 billion. The increase was primarily driven by a larger amount of megawatt delivered in Power Solutions. Revenue for the year were though affected by a 3% currency headwind. Gross profit landed at an all-time high of EUR 2.5 billion, and our EBIT margin before special items landed at 5.7% in the upper end of our narrowed outlook range and is an increase of 1.4 percentage points compared to last year and was driven by better profitability in both segments. Finally, on this slide, I want to highlight the ROCE that improved to 11.8% for the year, while EPS rose 60% to EUR 0.8. In terms of Q4, we see strong project execution in Onshore, offset by ramp-up cost and service. Revenue in the fourth quarter increased 2% compared to Q4 last year. The increase was driven by higher revenue in Power Solutions, offset by lower service revenue. EBIT margin before special items in the quarter was 9.3%, a decrease of 3.1 percentage points year-on-year. The development was primarily driven by ramp-up costs in Offshore, higher depreciations and lower Service revenue, offset by continued strong profitability and execution in Onshore. It's worth to note here on the slide that we incurred negative EUR 56 million of special items in the quarter. This is primarily relating to the Operating Model Reset, which, among others, led to a reduction of 900 positions. And therefore, the EUR 56 million entailed both redundancy costs, but also some noncash impairments of legacy assets, and Henrik will speak to this a little bit later in the presentation. Diving into the segment split, starting with Power Solutions, where we see double-digit profitability. In Power Solutions, the fourth quarter revenue increased by 7% year-on-year, driven by higher megawatt delivered in Offshore, while Onshore revenue was flat. The EBIT margin of 10% in Q4 is down year-on-year due to higher depreciations and ramp-up cost in Offshore, but offset by continued strong execution and profitability in Onshore. '25 was a back-end loaded year, and '26 is expected to follow a similar seasonal pattern. And of course, on the right on the slide here, you can see that was the same in '23 and '24. This is linked to what you all know, but let me just repeat it. It's the operational leverage, of course, where deliveries in the first half is mainly covering the fixed cost. And yes, '26 is expected to follow this as well. Moving to our Service segment. As Henrik mentioned, this is the first year of the Service recovery plan, and we completed that. In Service, the revenue decreased by 16% year-on-year, driven by a decrease in contract revenue and a lower level of transactional sales against an unusual strong Q4 last year. Service generated an EBIT of EUR 144 million in the quarter, equivalent to an EBIT margin of 14.4%, affected by extra costs at a few specific sites. For full year '25, we delivered on our revised EBIT guidance in service. However, as Henrik also mentioned, the overall outcome fell short of our internal performance targets. We continue to execute on the recovery plan to achieve our long-term ambitions, and Henrik will also speak to that in a little while in this presentation. Moving from the P&L into the balance sheet, starting with net working capital. Our working capital decreased in the quarter. It improved to negative EUR 3.1 billion in quarter 4, mainly related to an improvement in accounts payables and a continued focus around in the organization on improving our working capital. Compared to Q4 last year, we have seen an improvement of EUR 830 million in net working capital. This level, this development, I'm really, really positive about. While we can always improve, this is a strong and satisfactory level. And with that note, we move into the cash flow statement. We saw strong and good cash flows that resulted in further strengthening of our cash position. Our operating cash flow was EUR 1.3 billion in the quarter, a decline compared to Q4 in the prior year, mainly due to higher warranty consumptions as well as changes in the net working capital. Adjusted free cash flow was EUR 872 million in the quarter. For '25, we ended with a strong net cash position of EUR 1.2 billion, having actually, throughout the year, paid out dividends and also completed 2 share buybacks in 2025. This is a situation that I'm obviously also very positive about, and it shows the strength of our business model. And we have to thank both Henrik and me, the strong execution by all of the teams around the world in securing this strong end to the year for our cash flow. Moving to net investments in Q4. We are continuing investing for growth and competitiveness. Total net investments amounted to EUR 382 million in quarter 4, as expected, slightly down from Q4 last year. Compared to last year, investments have focused less on intangible investments such as research and development and is now primarily related to tangible investments such as transport equipment and tools as we enter '26 ready to execute a higher number of projects in Offshore. Total net investments for the year amounted to EUR 1.250 billion, in line with our outlook. And moving into the quality slide, where we also see a strong development year-on-year. The lost production factor improved now that the repairs of the sites mentioned in the recent quarters have been completed. Note that the LPF, the lost production factor, is measured over the last 12 months, and it will take some quarters before this effect is fully out. Warranty costs amounted to EUR 207 million in the quarter, corresponding to a 3.3% of revenue. Warranty consumption in Q4 was EUR 251 million, mainly due to finalization of the above-mentioned repairs. For the full year, warranty costs were 3.2% of revenue. And I want to highlight the lower right corner, where you can see that in 2022, we were at 6.4% of revenue. So we have halved that in '25, and it's now the lowest in 5 years. Then before handing back to Henrik, I want to end on my favorite slide, the capital structure slide. It is important for Henrik, for me, for team Vestas that Vestas remains resilient to economic fluctuations and respecting the volatility of the industry. And with this in mind, we have updated our capital allocation priorities. Henrik will speak to this a little bit later. But already on this slide, you can see we have changed the upper right corner, where we before talked about having a net interest-bearing debt to EBITDA before special items at maximum plus 1. We now also say we want to have it within the boundary of plus 1x to minus 1x. And the final comment on this slide will be that the net interest-bearing debt ended the year at minus 0.6x EBITDA. And we are, therefore, very pleased to propose a new buyback of EUR 150 million, so second quarter in a row, in addition to the dividend proposal of EUR 100 million. And with that, Henrik, back to you. Henrik Andersen: Thank you, Jakob. And again, here, a solid end on what you call your favorite slide, I like that. When we then go into the strategy update, I will also try to point you a little bit back to much more information out of the annual report. But I think starting with really what it's all about, the wind energy value drivers. And as mentioned before, we just chose here to choose one of the things that happened just a few days ago in Hamburg, the North Sea Summit, 26th of January 2026, where European leaders got together to confirm how we can now tangible build out the Offshore wind resource in the North Sea. And I think one of the heads of state has said, it's an untapped energy source in what else is an energy deficit Europe, because we need to be more independent on that. So the energy affordability, the energy security and the energy sustainability are the headings and also what we see as the main drivers of the growth and the build-out, not only in Europe, but across the world of wind. I think on the energy affordability, when you look at it, wind energy is cost competitive and also fast to deploy. And the fast to deploy has, in many societies today, become a much more sought after factor in this. When you need to build something, whether it's the demand for the energy or the electricity, as factories or build-out capacity for the society because the electrification is happening or it's for data centers, it's the same underlying positive trend. On the energy security, the world has become, in some ways, much more complex, but also in some ways, more simple, because people want to be sure that they are in control over the critical infrastructure, whether that's energy, defense or telecom, it's exactly the same. So therefore, wind energy strengthened security through national decentralized power generation. We see that. We see that evidenced also in areas where it is conflicted, like, for instance, ultimately in Ukraine. And when you then go to the energy sustainability, we believe sustainability in everything we do, and we work tirelessly with that across both our Scope 1, 2 and 3 at Vestas. This is a low-carbon source of power. And whatever you believe in fact shows that the wind will continue in this planet also long after we have stopped presenting -- or at least I have stopped presenting quarterly of Vestas. So therefore, this works and it works in more than 80 countries, and it's a testament to how far the industry and the technology has developed. I will point you to Page 16 to 20 in our annual report, where you can see more about what we also expect in terms of growth rates, underlying positive trends in the markets. So I encourage you to take the time following. So what do we then say in terms of our global strategic priorities? The heading here, and you saw that we have used that throughout 2025 as well externally as internally value through performance. And when we look at our 7 priorities down here, there's no doubt that we also have become, as team Vestas, much more direct and more specific in what it means to drive quality cash or, for that matter, efficiency in it. I'll speak more of the efficiency in the coming slide, where we talk about Operating Model Reset, which is something that also hit home to us throughout 2025 and was needed to do something about. We have become more dedicated. And I think in some ways, Jakob, as much as it was your favorite slide on the capital structure, that is actually a reflection of all the activities and all the commitment that goes in and also the support from customers, especially from the Onshore execution this year, ramping up in the Offshore, and still doing the recovery in Service, but Service works really well and supports not only the business, but also our customers as key. When we look to the right side of this, towards the end of this decade, no doubt that our ambition is to be a global leader in sustainable energy solutions. I think we can tick a couple of boxes when we look at Onshore and Service. I think we are a strong pursuer in the Offshore, and we will probably remain that, but we are a good pursuer in terms of discipline and how we work and build with customers and the industry, and then not least in development, where, of course, as you heard me say, development will never be something where you will see it overtakes the whole purpose of what it is with Vestas. But we are in markets where we have projects we can support our customers and partners with. So therefore, as a global provider in more than 80 countries, we will remain also there as a good partner in early development to the benefit of our customers. With that, I will take a look into something which we probably haven't talked that much about, but what we call Operating Model Reset in Vestas. It started midyear last year. We've been speaking about it for some time, because the overall 2 drivers of making an Operating Model Reset is making Vestas more simple and also more customer focused. When you look down, it's anchored in the Vestas' strategy, of course, anything that is closer to customer is basically across all 7, but the efficiency part sits under the efficiency box. So therefore, operating model is having that drive and also requires that attention from everyone among our 37,000 colleagues across the world. When we look at our 4 focus areas for steering the outcomes, I think the first and foremost, it's listen to customers. Customers told us throughout the last year or 2 that in some ways, we have become too complex, too difficult to talk to. And sometimes that was too long from when you presented a potential need or solution to you could actually get the right answer or a committed answer from Vestas. That we picked up. Not all of it we liked when we went back, because if we look at some of our processes that also sat out facing to our customers, it took far too long. Some of the things is fair saying we had examples of both processes and the way we acted, where I will sort of say, even if you make your best, you couldn't invent something that was more complex than what we had in Vestas. So therefore, part of it was, first of all, stop/avoid being in denial. Then also, let alone. This is not something which the Executive Management Board of Vestas knew all the details of. So how do we actually get this through everyone's mind and therefore, becomes an integrated part of our culture and DNA, which it is not. The overall consequence of this is, you've seen first wave of it, that 900 positions were gone by the end of 2026 (sic) [ 2025 ], and it is fairly obvious that the rightsizing of Vestas is, of course, painful. But on the other hand, it's also needed. And therefore, it's not the last time you will hear, because the continuation of this is not a project way of thinking. This has to be a part of the DNA of being in Vestas. And therefore, we are not finished simplifying. We just started and scratched the surface of it. So this you will hear more about in the coming not only quarters, but hopefully also the coming years with much better examples to share. We've also said here, there are 3 work streams. And I think, Jakob, you touched a part of the financials. We also here had a special item for the first time, which relates to this very clearly, because it actually is an immediate return when you use those special items to do that. First one is ease of everyday. And this is what I call day-to-day. Very easy. If you onboard the group of colleagues, investors and say, give us what you find that is actually hindering you making an easier impact of value creation, then we had a catalog of hundreds of good ideas to improve that. That is one of the things where I just encourage everyone to sort of, common sense, make your decision. No one is forcing you to sit in a virtual meeting, double the time of what you expect it to. So if you have contributed what you need or you're not even contributing in the meeting, please leave the meeting. That's just one example. There are plenty more. When we look at the rightsizing, you see in the first one, I mentioned the 900. I wouldn't be surprised if that is a continuation with similar numbers for the coming year. And then the third box is really where the big prices sit, because that's where we tie the value chain together and where we shorten it. This is also the most challenging and probably, for a lot of us, a bit more disturbing part, because we got to somehow get back to, in customers, how do we get to a much faster response time and not use each other as an excuse for not answering proper and direct. So that's, I will say, for me personally, very, very engaging and a very, very motivating process to embark in. I didn't know where we would be when we came out of end of July and beginning of August. Today, I know that it's festering and anchoring much better in the organization. So really encouraged by where we are and also how this step change Vestas week-in and week-out. With that, I go to an area that is feeling some of the same measures and some of the same magnitude of change. So the Service recovery plan, we are entering the second year of our Service recovery plan. The headings are exactly the same, hasn't changed. Haven't discovered other areas we need to touch. So the strategic priorities for Service is the same. We need to deliver the operational recovery, the commercial reset and also ensure delivery of OnePlan initiatives. I think we can definitely say when we jump down to see the commercial reset, we have no longer a challenge of that we are getting things in or have gotten things in from a contractual side that is not playing to the strength of this. So very importantly, we have exited trim contracts with unacceptable terms. We're not finished with it. We also drive early renewal negotiations and, of course, strengthen the backlog health. And one of the things I will comment here on that where it was possible to have very disfavorable sculpting arrangements or phasing arrangement on the cash flow side of these contracts, that has per se also been stopped effectively. On the operational excellence, I will say for me, rewarding to see that it's understood, rewarding to see that we are executing on it. Not so rewarding is also to see some of it is a bit more sticky for our leadership and for our day-to-day teams to get it out. So therefore, the drive of operational excellence is one of the key, key areas of getting and keeping and potentially even increasing momentum, because now we have some of also the better examples to work with. So this leads to more global regional cost out and also, of course, reducing cost of unscheduled maintenance, both on frequency and others. That also means that by the end of this year, the net contract assets sits at EUR 1.168 billion. It's around 3% of the Service backlog. It's in good control, and we can also know, down to contracts, where that contract asset sits and of course, is being addressed ongoing as we speak. On the challenges side, I think the challenges remain grouped in the same. It's the unit cost, which means it's wage inflation, rising material cost indexations. Some will also add in there how tariffs and others are passed to the contract -- payment of the service contracts. The operational inefficiency, for me, this was probably disappointing to see, but somehow also expected that if a part of the business has not had the attention on a day-to-day basis that we expected, then this is the one that has been picked up at really speed. And then as the quality-related effect, you've seen it. Jakob talked really positively around how we are now seeing the quality improving. We are seeing the warranties coming down. And I always said, warranties are a bit of reflection together with LPF. So the good thing in here, we don't have exceptionally warranty and other component cases, which, of course, suddenly release also a constraint and a strain on the service business to a very large extent. So the repairs turbine stops comes now from a day-to-day normal operations and to a lesser extent of an LPF-related repair. So that will support the business. We don't and we can't yet predict the size of that positive. So therefore, we are also there pretty prudent in looking ahead for now the next or the last year in our recovery plan, because we don't run ahead of ourselves in looking at that. And then here in the bottom, you can see the development in the Service backlog. I will say here, in some ways and in some markets, we probably underestimated a little bit the strength of the partnerships we have had with our customers. And in some markets, we have also this multi-brand, which I have not talked too positively around for the last 6 quarters. We might end up having some gigawatts of multi-brand still remaining, but then the contract way of looking at multi-brands will be very much a part solution and a direct cost plus solution with our partners. We are helping running turbines of sometimes OEMs that disappeared years ago. With that, I will go to also one of the areas, Jakob, you already mentioned, which is the capital structure. And I think there's a couple of observations here. First of all, we feel that we are that far in our ramp, we are that far in our investment into Offshore that we can definitely see that the model we are scaling and working after works really well, which also means we see a lot more transparency when we look towards the end of this decade. That also have led to that we look now at our revised capital structure. We come out at a year now with the highest turnover in ever. We come out with an EBITDA of Vestas that is the highest ever due to both size and scale of what's working. And that have led us, also based on the feedback and exchanges we have had with you as our owners during 2025, to revise and look at our capital structure strategy going forward. That is described, if you want to read much more about it, in Page 21 and 22 in our annual report. But here it is that we will -- as the priorities here sit, we will continue investing in the business. Jakob just showed you the EUR 1.2 billion we have invested in '25, and we will invest approximately the same. But the underlying split of what we are investing in will be different in '26 compared to '25, because we are more investing now what is needed to ramp up the volume rather than the technology, or for that matter, the manufacturing facilities. So reinvest in the business, very important, and we'll continue doing that, among other things, virtual service tech and other stuff in the service business. So anything there we can do to make the business better. Make value-creating acquisitions. It's not something that has been that much on our mindset since '21 and '22, but we will continue measuring if there are adjacent areas or even within our areas where we can add to it either directly into our business areas or if it is of another nature, also use our Vestas Ventures to do some of those investments or acquisitions. Thirdly, we will, of course, look at maintaining the solid investment grade. We have now a long-standing partnership and understanding with Moody's. So therefore, we want to keep stable rating, and we want to keep working with a stable rating, which also means that when we look at our net interest-bearing debt to EBITDA, we aim for having that between minus 1 to plus 1, also meaning to you shareholders out there that when we are building a cash position, that cash position will be distributed back towards you over time. And I think testament is always better than claiming. So therefore, the last just 5 quarters mean there we have carried out three share buybacks. We don't like to do big things in that sense. We much rather have a frequent one and then being a one that also, therefore, supports the daily sort of trade in the share with our share buyback programs. And then we have also looked at what is the best way. So therefore, we've said, return at least 40% of our net profit through a combination of dividend and share buybacks. I mean, for many of our investor exchanges, in general, we will see that people probably prefer more share buys and therefore, less dividend. We follow that guidance very much. Therefore, when we have proposed here a dividend of EUR 100 million and a share buyback of EUR 150 million just following the release of the full year for '25, that sets sort of a good tone of also saying -- that doesn't mean that you can then immediately extrapolate that to the next 5 years and saying dividend will never be more than EUR 100 million, but we are just sort of saying it's probably the least effective way of distributing cash back. And therefore, of course, we will continue also doing the share buyback. You can see here earnings per share is just now touching some of the highest earnings per share in the last 10 years. And I will leave you to do the assumed or calculated earnings per share with our 2026 guidance, but now volume and size of Vestas matters also when you look at earnings per share. With that, I'll go to our long-term ambitions. They remain mostly unchanged. The only thing that has had a change is the ESG, simply because we will restate and we have restated what we are going to do on the ESG side, reflecting of that we bought Offshore activities back into Vestas, and we can see that is going to give us a different sum of CO2 and therefore, also how we address that in both our Scope 1, 2 and Scope 3. When we look at the revenue, still the same, ambitious to be the market leader and grow faster than the market. On the EBIT side, 10% EBIT margin. I will come back to that on the following slide, because on that chart, I think I feel very comfortable when you look at that chart compared to what we have also shared with you in the previous years, but we'll come back to that, as I said, on next slide. Return on capital employed, your ROCE, Jakob, but those 2 go well hand-in-hand and are easy to compare. Free cash flow positive. You've seen it. You've also seen it when we generate free cash flow. Business is good, predictable and with an increasing earnings, then, of course, free cash flow know their way back to the shareholders in what we just discussed in the previous slide. And last but not least, ESG, 50% reduction across our own operations and 45% Scope 3 reduction by 2030. Part of the Scope 3 is very much still the steel. And I think from some years ago, where everyone were really very optimistic about hydrogen and green steel, I think today, we see much more drive for the recycled steel that still has a 60% reduced input of greenhouse gas. So therefore, how do we do that? Some of it, we have the tools, some of it, we don't. But our biggest internally is still transport. So therefore, it's the Service vehicles, it's the vessels that we are looking into how we can do better with. But I really, really encourage you to also here deep dive into our ESG part. We are not a big fan of the CSRD directive, but we are a big fan of sustainability, and that I hope you will enjoy reading our annual report. This is an important one, and this has almost become a personal thing. So drive us to the long-term financial ambition of 10%. We have 10% firm in target. We are not saying a year, but we are having here the 4 factors. I think we can narrow it down to in main what we see. The Offshore, the ramp-up, the cost out and the extent of competitiveness of what we see is increasing, of course, when we add the volume to the platform. And therefore, Offshore is by far, in this bridge between the midpoint of our outlook, 7% to 10% is by far the biggest lever we have. On the quality side, you often see the quality side. And when you say the quality here is that we drive operational performance, lower warranty cost and reduce the cost of poor quality through close collaboration throughout the full value chain. So what you see as a heading of the warranty percentage of 3.2% for 2025, that's only part of the equation here. The related quality issues, that has also both been apparent in service, but also in the manufacturing, of course, is still a major contributor also how we can build a bridge to the 10%. Service goes without saying, we haven't observed anything that prevents the Service business from doing 25% EBIT margin. It's just not in '26, and it won't be in '27, because we won't jump from a midpoint of 16.5%. We came out of '25 just around 16.5%, and we will continue having that as a work assumption. And then we will see. We need to get it into starting with a 2 first, but there's nothing in here, in neither the model, neither the way we run the Service business, and neither in the way we look at it with the number of employees across the world that prevents us from getting to 25% EBIT margin. Then on the Onshore, after '25, it can actually be a bit difficult to sit here and saying, here it is, we can do much better. I think the Onshore has one lever really here is keep doing as good as we did in execution in '25 and keep building some more volume, then Onshore has another contributor into this, because don't forget, we wouldn't be at 5.5% if Onshore wasn't working as good it is, because we have been able to do that and back some of the negative variances we have had in the Offshore ramp and also from the Service that we have backfilled from the Onshore. So thank you for that. And therefore, people that are doing really well, it's funny enough, they seem always to be able to do a bit better. So that, of course, we will use in this margin bridge. If you add those 4 together, they come to by far more than 300 basis points. So therefore, for us to sit and have that in mind, it feels, in many ways, better. It feels doable. I will also say, when we sit here in beginning of '26, now it has a gap of 300 basis points. I think we probably also gained a bit of credibility compared to when we sat in 2022 and talked about it, because that was where the gap was, 1,800 basis points. But now I can say, with the first 1,500 basis points in the back, let's get the last 300 basis points done and then everyone can do your own planning and really progressing in the calculations, because that also means at that point in time, our EPS, ROCE and other things would look a lot different. And I can promise you, at that point in time, we will have less years than we have outstanding today. With that, I'll go to the outlook of the year and the outlook for 2026. Revenue, EUR 20 billion to EUR 22 billion. So that's another progress and another uplift in revenue. EBIT margin before special items, 6% to 8%. Service is expected to generate an EBIT margin before special items of 15.5% to 17.5%. And total investments sits around EUR 1.2 billion. This outlook is also based on the current foreign exchange rates, which we know is coming slightly more volatile in these days. Then 2 more little service message here. Some of you might observe over the coming day or 2 that I'll be selling some of the shares I have now bought and had since I joined as CEO in August '19. I paid a lot of tax of those, I even borrowed to pay the tax in Denmark, which is a tax rate of more than 60%. And therefore, I just want to repay some of that lending. I will have a lot more shares back than I'm selling. So therefore, don't worry. But it is to pay the tax in a strange country. So just as you know, have a question to that over the coming days. Then I will also say thank you. Thank you for everyone here supporting the journey that now we sit with end of '25. Thanks to also listening in. And please just here on the last page, I would just say, we have our Annual General Meeting on the 8th of April. I think it's a highlight. There is an opportunity to come in person and both meet the Board and the Executive Management and also, like previous years, have a bite to eat and also a drink on the way. Rest is our financial calendar, and I will just leave it, therefore, back to the moderator and open up for the Q&A. Operator: [Operator Instructions] And the first question comes from Claus Almer from Nordea. Claus Almer: A few questions. The first is the Service division. As you said in the presentation and the report that all these recovery initiatives will end by end of 2026. So maybe give some color on what is the margin drag in '26 and maybe some comments on what should we expect beyond 2026, except for your 25% margin target? That will be the first one. Henrik Andersen: Thank you. I always love when you ask, Claus, for '27 guidance on the Service. So therefore, listen, we're going through diligently quarter-on-quarter. We're saying what we are doing. We're showing it. If you ask some of our customers, most of them will also say that they probably understand why we are doing and how we are doing it. And internally, there's no doubt. That I won't simply -- besides what we are saying here, in a recovery phase of what we are doing, we're making good progress, we can see it's working. And I'm very encouraged by seeing that what we are coming into, into the backlog is also getting addressed, whether that's renewables (sic) [ renewals ] or it's new, it's working. But giving outside what is here a range for '26, I don't want to do that. That we can talk about when we get longer into the year of how it's progressing and how it's working. I would prefer to do it like that, Claus. Claus Almer: I didn't try to get a '27 guidance because I knew that was impossible. So I was a bit puzzled why the guidance for '26 is as it is. Why shouldn't we hope or expect a better margin in '26 versus '25? That was more the things I was trying to figure out. Henrik Andersen: I don't know if you should hope or think or whatever. Claus, we hold the business in very tight ropes right now. And if you open the remuneration report, you will see that actually out of what went well in '25, EBIT and cash flow gave employees, investors an incentive payout where the 20% that relates to Service gave 0. And therefore, Service continues to be part of the incentive scheme for also 2026. And I think I can honestly say as a Chief Exec, unless we hit the numbers and the predictability of the business that also triggers an incentive payout for Service, then I'm not interested. I'm talking about more progress than that. So we are pushing, we're doing everything we can, and that's really where -- but we cannot let the recovery run ahead of what we feel we are addressing, and it does take time. Claus Almer: That is fair. I think we all appreciate that, Henrik. Then my second question goes to your pipeline, and by the way, congratulations with the strong Q4 order intake. There's a lot of talk about data center and the data center build-out and that being powered by Onshore wind turbines. What do you see in your pipeline from that area? That would be my final question. Henrik Andersen: Yes. No, I will say here. I think it's interesting because when pendulum swings in this world, everyone have now learned that you got to start thinking of what if the pendulums change next time. So I think that's what goes on right now. No one is single-handedly betting on either/or. So therefore, you see a lot of these data centers now being planned, built and also talked about that it should involve both gas and probably electricity from renewables as well. So there is a combination. Why is that? It is huge investments that has to be able to survive also changes in political arena and other stuff. And I think if we look across the world on a day-to-day basis, we see some of these offtakes being made. So that goes from the hyperscalers, the sort of the data center part, but it also comes from something as simple as in the U.S. that you have manufacturing that has been home shored to the U.S. that are also in the need for energy generation. So generally, across many societies, you have 3 drivers. Yes, you have the single-handed data centers, but you have the electrification. You now have more electric cars in the country we live in, Claus, that are electric than are diesel. So that's also a part of the electrification. And then secondly, and generally, the energy demand across all societies are increasing. So that, I think, wind is serving well. And we don't see any change to that. Operator: Then the next question comes from John Kim from Deutsche Bank. John-B Kim: Two questions, if I may. Can you just update us on operations in Offshore. I'm interested to see how Q4 compared to Q3 in terms of production throughput over time, or any issues around the blades. If you could comment on that, please? Henrik Andersen: Yes. Thanks for that. I will say, John, here, there's nothing else than it works to plan. We are progressing. We are seeing that the takt time is developing. As I said, one of the most rewarding for me between Christmas and New Year was standing on Esbjerg Harbour and seeing that there was blades and nacelles waiting for a weather window to go out on the North Sea. So in reality there, we feel really good. And as I said, highlighted with the picture we have on the introduction to this presentation. We have more than 50 turbines out there. It's working both with -- works always better with grid connection, but let me throw that a little bit as a straw here. But outside that, it also works without grid, because then it has sort of its own generating electricity for the turbine. So no, we are really pleased with it, which is also part of what I referred to when we talk about capital structure. We feel confident of the ramp. We feel confident of the technology. We have been testing it for a long time, and it seems also like our customers are appreciating that we work diligently right from technology design, and we have a lot of our partners that are now bringing the projects in execution in '26 that we are also following and having with us in the factory. So really pleased with its progress. Always, you will never meet me, John, and not here that I probably would like to have been a bit further on, and that we are acutely reminding probably also our manufacturing colleagues on, but it is as much now also to get it at sea and get it installed. John-B Kim: Okay. Helpful. A quick follow-up, if I may. Given the near-term outlook for Offshore, I believe you have more projects to execute this year than the last and the POC accounting treatment. Is it fair to say that the seasonality on Offshore is different to Onshore, perhaps a bit more balanced through the quarters? Henrik Andersen: Yes, I will sort of say yes. And then at the same time, I think here, I think never leave the big principles of that '25 was the first year where we put the turbines out there, so it's working. '26 will be, for us, a bit of a year where we are not disappointing the partners we have, and we are ramping further up. We have all the factories open that we need right now. And therefore, it's all about getting the output in. And then that also means '26, we are not at the revenue we neither need to dilute that or the depreciation. So therefore, it's still with a red number in '26, but the progress, as you can see from our outlook, and therefore, we aim for a black number in '27. That's no surprise. That's how you should think about it sort of on the big years. And then as I said, on the quarters, let's talk a bit more about that when we probably sit together. Operator: Then the next question comes from Alex Jones from Bank of America. Alexander Jones: First, maybe on the buyback. If I take the profit you made for 2025 and use your new 40% payout ratio, then I think it implies around sort of EUR 300 million of shareholder returns and you've announced EUR 250 million today. So should we expect a further EUR 50-ish million later in the year? Or could you do much more than that such as continuing EUR 50 million per quarter run rate? Jakob Wegge-Larsen: Thanks for the question. I think when you look at the buyback and return to shareholders, we should also look at what we did in Q4 and add that to your calculation. And then what we will do, as Henrik also presented, we will look at -- now with our new guidance in place, we will look at this quarter-by-quarter. When we deliver the result, we will make the decision on what we pay back also for '26. But '25, we are seeing actually that we are above the 40% if we take everything that we have done end of last year and what we are now announcing. Alexander Jones: Okay. That's clear. And then maybe if I can just follow up on the earlier questions on Service. I suppose if I take out the one-off costs you had in Q4, then the 2025 margin was probably nearly 17.5%. Could you just talk about the midpoint, whether there are any particular drivers of why margins would be down year-on-year as a further one-offs like they were in Q4? Is there cost inflation or tariff impact? Is there a change in how you're treating the accounting? Or is it very much, as you outlined earlier, just conservatism given you're still only halfway through this turnaround? Henrik Andersen: I think when you do a turnaround, the one thing you should never do is to stress the people that you are stressing a bit every day. So therefore, I don't think we need a stress on a percentage point here. And I keep coming back. We're doing the right thing, what is right for the business. If you then take 1% of, give and take, EUR 4 billion, it's EUR 40 million. When we see quarter-on-quarter, when we have either single projects and other stuff, that gives us either a challenge or an upside. Therefore, it is too easy to get out of sync with that. So therefore, there is -- with the entry to this year, we want to complete the recovery plan, and that gives us some stability just saying there's no stress for doing anything else than completing that and then continue with the results generation we see. Operator: And the next question comes from Colin from RBC. Colin Moody: Perhaps one on capital allocation. Clearly, a strong balance sheet and there's been an update. But digging down a bit deeper, could you maybe clarify what sort of areas you could potentially do M&A in? And then perhaps picking up on your comments that you have better transparency out to near the end of the decade. I think back to the 2021 CMD, and I appreciate it's a very different world, but the guidance then sort of implied that CapEx should sort of stabilize at a steady level kind of post V236 entry. Is that your view? Is that possible that it could potentially stabilize at a level not too much higher than this? Henrik Andersen: I think here, first of all, if we both go back to the memory lane of 2021, I think we both learned the lesson. I think here what we sit with today is so progressed. I don't think we were wrong in the scale and the investment into Offshore. I think what we were definitely wrong in that the world gave us a bigger challenge on the execution and the profitability from the Onshore. That, of course, we can see works really well. And at the same time, we can also see we are over the top of what was needed to do in terms of technology design and also, to a very large extent, the ramp-up of the manufacturing. Now it's more back to Jakob's point about tools and other things that sits in the CapEx. So CapEx north of EUR 1 billion seems to be slightly elevated in this part of it. But at the same time, we can also see that even with a CapEx of EUR 1 billion or more, then the business is actually contributing really well on that. On the acquisition, we don't have anything planned. We are just saying here, acquisitions could very well be seen as part of also this equally as investing in the business. So I think we are just not shying away from it. If and when there is something, then, of course, we will also consider that. And if you took note of it end of last year, we actually acquired a factory in Poland on the Onshore, which made sense for us to expand the Onshore capacity of blades in Europe. Colin Moody: Great. That's very clear. And maybe then just a question back to Service. So put that slide in the deck, Page 24, the net contract assets climbed EUR 300 million year-on-year, clearly better than last year's EUR 400 million on an underlying basis. I know you kind of commented Service is underneath, beneath, below your expectations for the year. But maybe just to clarify that specific point, was the contract asset development as expected? And just to confirm, do you still expect contract asset declines to begin in 2027? Jakob Wegge-Larsen: So firstly, on your first question on whether it developed as we expected, and I can confirm that, that was in line with our modeling when we went into first quarter. So this is in line with expectations. As Henrik is saying, this is something, of course, that we work on. We are not starting guiding on net contract asset going forward. But of course, you can look at this as a future receivable to be invoiced and collected. Of course, we are very focused on getting that invoiced and getting that collected. So it's certainly something that we work on as part of our service recovery plan. Operator: Then the next question comes from Kristian Tornoe from SEB. Kristian Tornøe Johansen: Two questions from my side. So first one is on the current sentiment among your U.S. customers. So last year, you ramped up your production capacity in the U.S., but sort of listening to your key competitor in the U.S. Onshore business, they are not necessarily very up to speed on demand. So just maybe help us on how we should think about the risk of your capacity utilization and hence margins for your U.S. Onshore? Henrik Andersen: I think, first of all, I will avoid comment on too many participants. It seems like we are pretty good in doing what we are doing globally in wind. And therefore, we believe that has a pretty bright future. And we don't need to try to sell anything else, because we don't have anything else to sell than what relates to wind Onshore or Offshore. We'll continue to do that. I think it works well. It works in more than 80 countries, and it also works in the U.S. And I think, especially in the countries we are debating here on the Onshore side, the levelized cost of energy is fairly attractive. The time to energy, very attractive compared to any other alternative energy sourcing. So therefore, Kristian, I don't hear anything else of doing that. When you then sit with it, it is also beyond any doubt that when you have a business environment where it does have some volatility and sort of variances to it, some days even within the days or some days within the weeks and some days within the month, but I think here, the clearance of some of the tariff parts and other stuff will be very helpful of part of the conditional part. And then at the same time, we sit with something that is an FOI that is more than 30 gigawatt in the backlog plus/minus. It's the historic high one, and you will see on our deliveries that also from the annual report, you can see that deliveries have actually grown to a tune also in the U.S. And don't forget, we have factories there that works really well now. So I'm pleased with it. So I'm not going to -- I don't talk it down, and I won't talk things down when you can see that when we look just into this year, we have a double-digit percentage growth from wind. And at the same time, we have a much bigger growth when it comes to EBIT in terms of absolute euro value. So it works. And of course, we keep reinvesting in the Offshore that will start paying off in '27. Kristian Tornøe Johansen: Understood. And then my second question is actually on Offshore. You said it just before that you expect that to be profitable in '27. I'm just a bit curious sort of looking towards the end of the decade and especially in the light of the outcome of the AR7. So assuming all those projects are actually built, are you comfortable that you have visibility for sort of continued growth for your Offshore business towards the end of the decade? Henrik Andersen: I'm smiling, because now I've been an ambassador for Offshore wind, and I probably at some point in time, almost felt I was the only one that believed in it. But here it is to now see that auction now start working, that raises the question critically of if we then now can deliver. I mean, come on, we have built capacity in Europe for a decade, whether it comes to Onshore or Offshore that will supersede what is actually going on. And if you take that, AR7 gave 8 gigawatt, that's spread over several years, several good customer partners, potential projects in there. But then pause for a second. We've just opened last year a nacelle in Poland. We have expanded blade facilities across Europe. So therefore, we are more than ready for that. I still sit with another one, which is hope this time is the round where we all learn from the same auction conditions. So we actually get a real tangible -- if it's scheduled to be built in this year, it gets built in this year, and it doesn't always move to the right. So the scale-up of Onshore, I should give everyone on this call a good sense of that the industry is ready to scale if it has the 1, 2 years lead, and therefore, it's not a problem with the capacity, not a problem. Operator: The next question comes from Ajay Patel from Goldman Sachs. Ajay Patel: Look, I think when I look at what you presented, the opportunity is clear, right? Even if you deliver similar revenues in the future and your margin targets, you double the EBIT that you achieved in '25. I think a number of questions I get is around the visibility. Now I think if we think about the course of this year, what elements will derisk or become more visible to you, i.e., will we have a much clearer picture of the Offshore ramp and therefore, the recovery of the profitability of that business by year-end? On Service, will you have executed on the more closer and more easier wins that we then have a better visibility of margin recovery from '27 onwards? And then I think my second question would be, from my utility perspective, we're hearing increasingly about the opportunities around repowering in the U.S. Is that something where you're seeing increasing activity in terms of just inward bound conversation? And you mentioned operational leverage on the Onshore side. Is there any sense you can give us what an incremental gigawatt adds in terms of operational leverage, so we can kind of get a sense for what maybe the margin opportunity is in that part, given that Onshore is doing so well over '25? Henrik Andersen: Thanks, Ajay. I will just sort of say, first of all, thanks for your initial reflection over where we are and how far we have come. And I sit with exactly the same 10-year EBITDA and EBIT development as well. I think you can read a lot into how we are presenting the combined debt today, because if you take and reflect over also our comments on capital structure, we would not readdress the capital structure in a time where we didn't have the visibility. So maybe conclude and take a bit away from the capital structure and that visibility. Jakob's comments on, we like doing repeatedly share buybacks is also a good hint of we are not finished with that. We are just now showing you how we want to think about it quarter-on-quarter of capital redistribution back to our shareholders. That we wouldn't have done if we didn't feel we had Offshore visibility. And if you then take the guidance '26 versus '25, as Service is plus/minus in round terms, more or less the same, then you can probably assume that a lot of the progress is happening from both top line on Offshore, but therefore, also the progress of what we are seeing in our ramping on Offshore and what is sitting still as a bit of remainder on some of the Onshore U.S. So that you can take as a progress just seeing between 5, 7 and to the new guidance range. I hope you will appreciate, I'm not going to comment specifically on Offshore individual projects or an individual market, because how the world has developed is we either sit here and comment on a competitive situation that typically only have one other player. And therefore, on these calls, I know they are listening in as eagerly as I'm speaking. So therefore, that I would rather keep to another day. On the repowering, yes, please. So U.S., yes, please. And that also means as we have that many gigawatts over there, and it was also one of the first place 20 years ago, 15, 20 years old turbines in the U.S., yes, please. You can replace 3 with and 1 have even much more electricity out of it. So it's ongoing. It's happening. It's only now a matter of how quickly can you get the permitting, because the capital is there to get it done. Ajay Patel: Just, sorry, on the operational leverage, is there any sense you can give us on that side? Henrik Andersen: No, thank you. But it's positive. Ajay Patel: You can't blame me for trying. Henrik Andersen: No, I put you immediately in the same category as Claus Almer. Operator: Then the next question comes from Martin Wilkie from Citi. Martin Wilkie: It's Martin from Citi. Just come back to the Offshore progress. If we look at your guidance for 2026. And obviously, given the Service guidance, the Power Solutions profitability is probably a bit higher than perhaps was embedded in consensus. You had talked in the past about having a triple-digit million drag from the Offshore ramp-up in '25, and that, that would largely sort of reverse going into 2026. Just any comments around that. Is that sort of developing better than expected? And you've talked in the past about improving takt time, these kind of things to effectively pick up that level of profitability. Just to understand if Offshore is actually running a little bit ahead of where you thought, say, last quarter, or if that's just sort of in line with the plan that you already had in place? Henrik Andersen: So I know some of our internal colleagues are also listening into these calls. I will say absolutely not. So they are not ahead of plan. So therefore, the Offshore ramp is probably right now on what I will say on the plan we have agreed to. But I think here, we can still improve and we can still do better. And when we look at the Offshore ramp, what we are getting out in '26 is not the full thing we need to get out. So therefore, when we imply that, it's not only a volume game for '27, it's also a cost and a ramp-out cost in '27. So Martin, this will lead -- so therefore, what you're seeing in the guidance and outlook for '26 is what I will call a first stage of what comes out of an improvement in the Offshore ramp, but we are not done with it at all. Martin Wilkie: And if I could just come back to Service. I know you don't want to give huge amounts of detail, but obviously, it's a huge question for people today. I guess under the sort of accounting that you use in Service, we've used the example in the past that the best predictor of the next period margin is the current period margin just because of this overtime accounting. And given the range that you've given for '26, there is going to be some influence of how we think about the exit rates. But I guess the thing that would stop that happening is if there were particular contracts that were falling away this year or other one-offs. I mean is there anything that you can give us to sort of help us think about what those impacts are inside '26? Henrik Andersen: I think -- we won't give you a drill down of that. You can see some of it is. And as I said, one of the things that probably still annoys me a bit in the commercial reset, which we have also seen is that when you do the commercial reset, this is not only about talking to customers, it's also about disciplining ourselves, because some of these back-end loaded or whatever loaded in 10, 20 or 30 years contract where you have let yourself to believe that it was a different payment profile or whatever, that doesn't work. And I think some of that, of course, relates to the net contract assets. So therefore, for us, as you know, when you have 11 years portfolio, really encouraged by what we are doing to restore the whole backlog of contracts. Some of them we have up, some of them gets in there either as renewed or untimely discussed with customers as part of new order intake. And that, of course, will overall improve, I call it, the wealth and the health of the backlog. But at the same time, it also still means that a number will come out every year, Martin. And that, of course, gives us a little bit right now, let's come through the quarters. I know what you're asking for everyone, and you want to know what the outcome is when the recovery is over, but we just have to go through this. And this is painful because, yes, you find still some of the examples where you said we'd rather not have them, but then we deal with them. And that, of course, influence your average profitability of a business like this. There's nothing in the business that is not looking as a sound and a good business when we look ahead outside the recovery period. But it's not going to jump from 16.5% to 25%. It will be measured, it will be controlled. And for me, it's also about seeing that people stick to the discipline of what we have experienced and initiated in the business. Operator: And the next question, today's last question, now comes from Max Yates from Morgan Stanley. Max Yates: Just quite a quick one. Just when we get the auctions and the turbine orders for the AR7 Offshore wind projects, do you expect any of the Chinese players to participate in that to win orders? And I'm asking in the context of, obviously, we've seen kind of the U.K. Prime Minister has been in China quite recently. And I was just wondering kind of when you speak to people in the industry and in the U.K., what is the willingness to kind of leverage the Chinese supply chain in some of those projects? Henrik Andersen: You're asking again a little bit outside what I -- first of all, I was not part of the delegation in China, and therefore, I don't know what the agreement was. I know what we are talking to U.K. government about. I know what we are talking to a head of State of the energy in there, Ed Miliband. I don't think that sort of leans towards that. I also think there is a lot going on if you revert to not only the annual report, but also to the slide I'm saying in here, the narrative starts working more seriously in a world that seems to be a bit more aware of what geopolitical uncertainty means. And I think energy is getting higher and higher prioritized in terms of energy independence and how you control your energy supply, not least to say also how you distribute it. And the access to grid is a difficult one, let's put it that way. So therefore, I think that is a question mark. I've learned to say these days, never be surprised. But in this case, I would actually be surprised if somebody took that measure in the current environment. Max Yates: Okay. Interesting. Henrik Andersen: I know this is -- we look forward to see you, many of you, over the coming days, both here in Copenhagen and also in London tomorrow. Again, thank you for your enormous support, especially shareholders that are on the call over the last years. This was the year of evidence. And yes, some of us really feel proud of returning some value back to you and saying proper thank you. So therefore, look forward to see you over the next coming days. Thanks and good 2026 ahead. Thank you. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.
Johan Andersson: Good morning, everyone, and welcome to the presentation of Saab's Fourth Quarter and Full Year Report for 2025. My name is Johan Andersson, responsible for Investor Relations, and I will be the moderator here today. With me here in Stockholm, I have our CEO, Micael Johansson; and our CFO, Anna Wijkander. Micael and Anna will present the report, and then thereafter, we will conclude with a Q&A session. [Operator Instructions]. So with that, a warm welcome, and I'll leave it over to you, Micael. Micael Johansson: Thank you, Johan, and also a warm welcome from my side, and thank you for joining us today. I will start by jumping right into sort of the perspective of last year, looking at how we met sort of our guidance and our growth perspective. So we ended up with almost SEK 80 billion in organic growth, SEK 79.1%, which was excellent, 25% organic growth. And then also had a very good development on our operating income, of course, growth 37%. And the cash flow was extremely good in the quarter, the last quarter last year. So we ended up all in all, at 5.3%. So we had an extremely good year last year. meeting all our expectations. And it is, of course, based on very good sort of delivery capabilities and how we actually performed in delivering to our customers over the year and showing that our capacity investments that we have comes into play. Going forward and looking at some highlights, obviously, looking at the extremely high order intake in Q4, but also over the year, we see a high customer demand in the market, and there's very many initiatives that we're working, of course. And the product contracts continue to grow, but also we have a strong interest on the sort of bigger platform side, and that's why the balance of the large orders towards the medium-sized orders and the smaller orders have changed a bit. So we still see, of course, volatility in the geopolitical tensions around the world, as you all know. And -- but I would say what's dominating the growth right now from our perspective is still that the European nations and the pillar of NATO, the European pillar of NATO has to sort of expand the capabilities, also quite clearly stated by the U.S. that we have to take responsibility for our own continent when it comes to the threat environment. So that is driving, of course, lots of spendings in Europe, but not only to look forward to future growth. And that drives mainly the growth for us, I would say. So we have a record order bookings, as I've said, and a very high backlog of SEK 275 billion. Now a big thing that happened during the quarter, of course, was the selection by Poland for the A26 submarines, and that is extremely important to us, and we really appreciate that. And it will be good for our security policy between the countries, the Baltic Sea protection, of course, and a close collaboration between Sweden and Poland, but also between industries between Sweden and Poland. Now we are diligently working that contract, of course, it's not a contract yet, but I really look forward to finalizing that contract sort of during this year. And then, of course, we have shown that we are capable in extending our capacity and expanding that. We -- all the time, we get new capacity expansions in play to support our growth. But there's still much more to do, of course, both when it comes to facilities and factories that will come into play. We have a U.S. factory that will be up and running late this year, and we also have an Indian factory as examples, coming into play next year. So those are a few highlights. Coming back to the market position and looking at what I tried to sort of describe on a very high level that the mix of the product side of Saab, the portfolio, we are very well positioned in the marketplace, I would say. And I'm really grateful that we have a portfolio consisting of both sort of products, but also platforms and also being able to integrate systems together. So of course, looking at last year, a few very important parts of contracts that happened was, of course, the Gripen to Colombia, EUR 3.1 billion that we are now executing, of course, according to plan. And then we have the GlobalEye that came in very late last year, which was really a good win, of course, the 2 GlobalEyes to France. And then the contract in Q4 also on the A26 submarines for Sweden, the extending capabilities that added to that contract. But also things like the electronic warfare capacity for the German Eurofighter is a very important contract to us. And then as I said, product contracts on the missile side and the support weapon side is adding to an excellent sort of year for us when it comes to order intake. So order bookings of SEK 169 billion in 2025 and a really good outlook, I think, going forward also because of the market interest that we have. Coming back to the quarter -- last quarter then '25, the fourth quarter. Of course, we have all noticed a fantastic order intake of SEK 100 billion in the last quarter, which is then a mix of large contracts with many good product contracts as well. So an extreme increase, of course, from the SEK 17 billion we had in the Q4 of 2024, an extremely good quarter, highest ever, of course. But also the sales growth, 35% organic growth is really good, including also the EBIT growth of 50%. And then as I said, the volatility in the operational cash flow side is over the year is quite sort of big. So of course, we had an extremely good fourth quarter to generate SEK 5.3 billion over the year, SEK 6.3 billion. And as we've said all the time, we promised good operational positive cash flow. But over the year, it will vary a lot, of course. So this is absolutely the best quarter, I think, that Saab has ever generated, not only the best Q4, but the best quarter ever. So I'm really pleased with that, of course. A few comments on the different business areas then. For Aeronautics, the Colombia contract was really the big event, of course, another contract on the Gripen E. So now we have 3 countries, and we're increasing capacity to deliver all these Gripen E fighters. And we have a number of campaigns going forward also a big interest in the market. So this is an area that is now growing for us going forward. And we are also looking into the next-gen fighter capability. But I think in the beginning, we will work to complement a Gripen E fighter with a collaborative combat aircraft, sophisticated, you can call it a loyal wingman and autonomous systems. And that, I think, is the sort of the first thing that will happen in the future fighter sort of avenue that we're running. We have also the T-7 and the first one is now with Randolph Air Base. Now they are using it to start sort of creating the training for the pilots, but there's still many to deliver. And we're still we're still sort of affected by the under absorption that we have in the facilities in West Lafayette, Indiana, and that will be continuing for a couple of years more, I would say. So that is going to be a good business for us, but we need to ramp up the deliveries. And we have only delivered a few so far of the 350 that we have on contract. And then a very important thing that happened, of course, that we're working diligently to sort of organize a contract around this, and this is a government to government and industry-to-industry initiative, I would say, was from the letter of intent that was signed between Sweden and Ukraine regarding fighter capabilities going forward. So of course, we would like to see Ukraine flying the Gripens going forward. But we're working that, and we hope that the financing side of that will be sorted and also for us then to prepare for industrial collaboration, but also capacity increases. Dynamics still has a very strong demand in the market for their entire portfolio, I would say, from training simulation to Camouflage Net, but not the least from the missile and ground combat perspective. So we have had quite a few large missile and ground combat orders in the quarter. So they have an amazing order backlog of SEK 90 billion. And this is also an area where we have invested heavily to increase capacity to deliver to our customers. There are more to come into play, as I said in the beginning, in both India and the U.S., but we have also already taken some capacity increases into operations, I would say, and we are booming our expansion also in Sweden, of course. So this looks very good, and they had a growth of 50% quarter-to-quarter over the year. So that's an amazing result. Surveillance did have a very good quarter. I mentioned the GlobalEye from France from a market and order intake perspective, but also a strong demand when it comes to our EW equipment, our sensors, the Giraffe 1X, our fire control sites for the CV90s, but also other sensors, the weapon locating radars, Arthurs. And they are picking up on the project execution, and we see a substantial growth also here quarter-to-quarter of above 50%. And we have -- we just want to mention that we have now divested completely TransponderTech, which affected the EBIT of the operational income of Surveillance by SEK 336 million. But even without that, they did a 10% result during the quarter. So that was a very good step for Surveillance. Kockums was, of course, extremely happy and so am I on the selection by Poland. So now we are expanding capacity to build more submarines. And we have other segments, of course, in the underwater business, which is autonomous systems and a number of things in that area that has a high customer interest. And then, of course, we are working on the campaign to be part of the new Swedish frigates or Corvettes, but I don't know exactly when that decision will be made. We have a partnership with Babcock. And of course, that is something that we work diligently on the surface side going forward. But we have a growth -- very good growth also in Saab Kockums of 20% and good project execution. And of course, also the Swedish A26 contract was important here. So they are developing in a very good way as well. And lastly, we have Combitech, good momentum. Of course, the total defense perspective and how many things are happening in that area in Sweden now from an industry, from an agency perspective is supporting the growth of Combitech. The new agency, MCS, the Swedish and also on the civil aviation side, generates lots of business for Combitech, and they are good in this area, both from a cybersecurity perspective, but also how you set up resiliency in an organization. So that is, of course, the growth is driven by increased number of consultants, but they are growing in a very nice way, and they are now a SEK 5 billion entity within Saab, which is absolutely fantastic. And they're really important for Saab as well since they have a number of very important participations in our contracts within the Saab business areas as well. A couple of comments on the sustainability side. We have done a number of important things during the quarter. We have adopted formally now a human rights due diligence policy, supporting our responsible sales policy. This is something that generates a due diligence every time we do a contract with someone and sell something. We actually go through in detail that we are not affecting anything related to human rights or things that we shouldn't be involved in. That's very important to us. We have a good development on the share of women managers in the organization, which has increased now to 29%. And we have a higher ambition than that, of course, but we are growing all the time, which is absolutely fantastic. And we have done well also on the emission perspective, the environmental perspective. We have reduced our emissions 7% year-over-year, and we are on a good path supporting the scientific-based target initiatives targets that we have set that we have to be down 42% 2030, and we are now at 36% after 2025. So that's very good. And we are we have the ambition to be a market leader when it comes to -- in our segment when it comes to sustainability, which is not only environmental perspectives, of course. And we -- but we have been highly ranked within the CDP when it comes to climate and water. We're in the highest ranking of 4% of the companies right now, which I really -- I'm impressed and I'm really pleased with that development. So I think with that, I will hand over to Anna to go through the numbers in a little bit more detail. Anna Wijkander: Thank you, Micael, and good morning, everyone, from my side as well. Yes, it's clear that we have closed yet another successful year, and I will soon go into the details of the financials in the quarter. But before doing that, I would like to take the opportunity to show you some trends on what we have achieved so far. So let's start looking at our graphs and what we have achieved for the sales growth. You know we are growing the company substantially. And during the last 3 years, we have grown an average 24%. And what's so good to see is that we have had double-digit growth in all our business areas during this period. And that is achieved, of course, through our strong offering and our strong portfolio that we have, but also our operation and our ability to grow our operation. And an important factor to that is that we also have increased the number of employees by around 10,000 people, now adding up to the 28,000 employees that we are today. And we have a really strong company culture where we have a good focus on both delivering on our commitment, but also building the company in the future. The EBIT has also grown in this period by 33% compounded average growth rate. And that really shows that we are leveraging and scaling on our growth, growing more the EBIT more than we grow our sales growth in average. And we should remember that during this period, we have invested substantially both in R&D and in capacity investments. So over this period, we have doubled our R&D, and we have actually tripled our CapEx. Now look into the quarter then more in detail. We have increased the EBIT by 50% this quarter. I think one should remember that, that is an exceptionally strong quarter, and that is, of course, largely driven by our sales growth. And what's also visible in this slide is that we have a volatility when it comes between quarters that is really reflected here in this slide. This quarter, I want to highlight Dynamics. Here, the EBIT grew by 19%, although the margin is a bit lower compared to what it was last year in Q4, and that is primarily related to project mix within Dynamics when comparing year-over-year. But if you look at the trend for Dynamics, it's very strong for the year. The EBIT growth was 46% and the EBIT margin for the full year was 18.1%, an increase from last year as well. Also surveillance is worth mentioning this quarter with a growth in EBIT of 83%, and that was very much driven by high project execution and several deliveries in the fourth quarter. In addition to that, we had a positive effect when we received the order for the GlobalEye France contract in the last days of December since we, in that project had started some activities already when we got the letter of intent in the summer. I can also mention that we had this divestment of TransponderTech that is visible in the numbers of surveillance, but it's excluded here in the figures that you see for the EBIT for the quarter. For the full year then, the financial summary, we grow our sales with 24.1% reported organically 25.6% impacted by currency, so SEK 79 billion in sales. Good growth also in gross income and EBIT was growing 37%, and we ended up with 9.8% EBIT compared to 8.9% last year. That was mainly driven by Dynamics and Surveillance. Another thing to point out here in this slide is the financial net that improved substantially compared to last year. And here, we have a positive impact this year from the SEK appreciation, where the revaluation of our tender portfolio from currency hedge in the tender portfolio had a positive impact this year. Last year, it was negative. So that's why we have a big swing there in the financial net. Also good, the net income and the EPS grew by 51% over the year. We have talked about the cash flow. Micael talked about the cash flow. It was very strong in the fourth quarter, where we both had several deliveries and received a lot of customer milestone payments. And as we can see on the slide, we have the cash flow from operations now amount to SEK 12 billion approximately. And we have increased our investments. So they are now SEK 7.2 billion this year. If you compare to last year, they were SEK 4.8 billion. So all in all, we achieved a cash conversion this year of 68%, which is well above our midterm targets. And also our return on capital employed increased to 16.5% this year. So driven also by this strong cash flow, the net cash position has improved this quarter, and we're ending up the year with SEK 4 billion in net liquidity. So our balance sheet continues to be strong, and we have a cash and liquid investments amounting to SEK 18.7 billion. And adding to that, we have an unutilized revolving credit of SEK 6 billion as well. So following this strong financial performance -- financial position, the Board of Directors will propose to the Annual General Meeting that we increase our dividend by 20%, amounting to SEK 2.40 per share. So let's again zoom out a bit and look at some trends on what we have achieved so far, '23 to '27. Cumulative over these first 3 years, we have delivered cash flow before operation of SEK 26.4 billion. That is a strong enabler for us that we have been able to invest more in capacity expansions and which is important for our foundation, growing our company, as we know, investing in new capabilities, new facilities, new production sites and new products. And in total, over these years, we have had investments amounting to SEK 15.5 billion. And measuring of the period, we have achieved a cash conversion of 62% so far. and generated approximately SEK 11 billion in operational cash flow for our company. Another parameter that has strengthened this quarter is our backlog. We had a strong order intake this year, SEK 169 billion on the year and SEK 100 billion this fourth quarter. So we have built a substantial order backlog to deliver from going forward. And compared to last year, we have extended both the duration of the backlog for the years to come, but also increased the backlog for the closest years '26 and '27. So it's increased 29% for '26 and 46% '27. So this really gives us a good comfort for future growth and a good foundation for growing the company within the years to come. And finally, just look at the trend of the backlog that has been strong for -- the growth has been strong over the last years, amounts now to SEK 275 billion and corresponds to 3.5x our sales that we had 2025. So this is really supporting our long-term growth. So by that, I hand over to you again, Micael, to guide us through the midterm targets. Micael Johansson: Thank you so much, Anna. And yes, coming back then to our medium-term targets, I mean, one has to reflect a bit upon that this is our way of measuring progress over time, of course, and our best assessment of how this business will evolve over time. And we have performed really well. As you know, Anna mentioned, we have had 24% in average growth over the period of '23 to '25. And as I will show shortly, we are increasing our now target to 22% in average over the period of '23 to '27. We think we have a very strategically positioned portfolio, of course, that is fitting the market demand in a very good way. And now when we see the product offering growing and the contracting order intake on that side growing, in combination with better performance on the platform side, even though I recognize the fact that many of these sort of campaigns are not only about the great offering that we have, but also political decision. I think we have a very good position having both in our company. And we have shown now during the last few years that we are able to ramp up both from a sort of increasing our company in terms of great employees supporting us, and we have a very attractive company to come and work for, but also our capacity increases when it comes to production and getting a lot of the backlog sort of delivered to our customers, which is incredibly important. We will continue to invest and never compromise sort of anything that has to do with the future when it comes to R&D and new capabilities, embracing new technologies. and continue to expand capacity, of course. So we will continue to invest to make sure that we can meet this market demand. And now also going into the target upgrade that I will show you, we -- of course, as Anna showed just shortly before, we have a record order backlog of SEK 275 billion, which has now also increased in terms of how that is spread over the years. So all in all, this is a very good position that has led us to going from a previous target perspective of 18% average growth over the period '23 to '27. We have upgraded that now to 22%, quite a step for the full period up until '27, which implies then, of course, that we will generate roughly 20% average over the next 2 coming years, including '26 and '27. We continue to reiterate our targets of growing our EBIT more than the sales growth, and we also continue to reiterate our target of having a good cash conversion of more than 60% despite all the investments that we are doing now and going forward. So that's a good sort of sign of that things look very good going forward. And from that, I am pleased to take questions. Johan Andersson: Thank you, Micael and Anna, and let's go over to the Q&A session. [Operator Instructions] So please, operator, do we have the first question from the telephone conference? Operator: [Operator Instructions] The first question comes from the line of Daniel Djurberg, Handelsbanken. Daniel Djurberg: Congrats to the stellar performance. I would like to ask a little bit, you obviously have a great order visibility on both volume and mix for '26. And I was wondering if you could give -- share any more information about how to think on operational margin development in '26 based on this visibility perhaps on group level or possibly in some of the business areas. That would be grateful. Micael Johansson: Well, thank you. First of all, I mean, I think we -- as I said, we have a good market position. And we, of course, see a good trend in terms of growth on the product side. When I say product side, I mean, Giraffe 1X, the RBS 70, the support weapons side, training and simulation, you name it. It's lots of products that is growing in a very good way. But then there are sort of a number of campaigns that are quite big, and they are, of course, more difficult to sort of assess when they -- when the decisions will be made and how political they will become and all that. So I mean, an obvious one is that we must contract now Poland on the submarine side, which is roughly, as we've mentioned before, a SEK 30 billion type of contract. But that's sort of something everyone knows. Apart from that, of course, there are an assessment of the GlobalEye within NATO that will come to a decision hopefully now in the first 6 months of this year. But I can honestly not sort of predict completely how the mix will look like in the end of the year. But broadly speaking, we have quite a few campaigns that sort of can generate good order intake, supported by the continuous growth on the product side. I won't go into talking about operational margins and what have you more than that we continue to grow this top line and we continue to grow the EBIT more in terms of growth. And obviously, I think we are we are doing well on that side. The mix will define and there will be different mixes in different quarters exactly where we will be. But sort of that's the trend that we have right now. And this is something we are careful about also looking into the investments we have to do and the R&D efforts we have to sort of continue to perform really well in to be capable going forward. So you won't get sort of a specific number or a range or anything. You have to, unfortunately live with sort of the guidance that we've given on growth of EBIT, I think. Operator: The next question comes from the line of Ian Douglas-Pennant, UBS. Ian Douglas-Pennant: So on your medium-term guidance, so there's some language in the press release saying it's implied 20% growth expected in 2026 and 2027. Could you help us understand the phasing within that? I mean, I know you don't want to give 2026 guidance, but can you just help us roughly understand, presumably, there's more growth in '26 and '27. And then related to that, again, how much of that guidance is secured by orders you've already received and where any risk around that guidance? Micael Johansson: Well, as you saw, I mean, from what Anna showed on how the backlog is spread over the years, it's high numbers already in the backlog, both for '26 and '27. And then, of course, it's up to us to generate sales new orders. And that is sort of varying every year, but it gives us quite a confidence that we can reach sort of an average, as I said, 20% growth over this year and next year. And I won't sort of go into any sort of specifics on '26 versus '27 because then we go into guiding for both years simultaneously. And that we've decided not to do that. But take a look at the backlog, how it's spread and you can have a view of sort of what can we achieve in terms of sales new orders, which can be also looked upon in a retrospective perspective, of course. But that's where we are. So I won't divide '26 with '27 in a more sort of detailed way. This is where we are. And 20% average is good. Johan Andersson: Perfect. Thank you very much for your question, Ian. Do we have a next question from the telephone conference? Operator: The next question comes from the line of Tom Guinchard, Pareto. Tom Guinchard: A question on Surveillance margins here just looking into '26, '27, '28. You mentioned on the Capital Markets Day earlier last year that you had some unprofitable business that you're managing? And how much of that has been dealt with as of today and sort of margin potential there for surveillance going above the 10% EBIT margin line. Can you comment anything on that? Micael Johansson: Well, I think, I mean, as we're showing right now, surveillance should be a profitable business. I'm not going to guide in detail on that, but they should be on or above 10%. So that's sort of the business they have in the mix. And I would say that we have taken steps to sort of either mitigate loss-making business or sort of making sure that we have a sort of a crossroad decision on whether that business should be within surveillance or not. But we're not done yet. That will continue a bit this year to improve even further. So if you're asking, have we divested the loss-making business yet or sort of stopped sort of the losses completely? No, not yet. We're working it. And we'll tell you when we have done it completely. Tom Guinchard: Perfect. And just a quick follow-up on the T7. You said a couple of years ahead with negative numbers here and increasing cost. You said throughout '25 that costs actually accelerated for the T7 program. are we looking at '28, '29 or mid-'27 that you previously indicated? Micael Johansson: I think we're looking at '28, '29 actually. But with one sort of comment on that, this is based on the numbers we have now in our contract and how quickly the U.S. Air Force wants to receive sort of the aircraft going forward. This can change a bit depending on renegotiations between Boeing and the U.S. Air Force that will sort of flow down to us, and it can change from a margin perspective overall in terms of getting additional contract into the business. This has not happened yet. But as we speak, I mean, you have to think we have probably 25 to 30 aircraft in the pipeline in the factory right now. And it's just sort of to get the flow out of the customer that we need to achieve. And it's a bit sort of -- I can't be sort of exactly sure on which year we will now pass sort of going positive perfectly, but it's not this year, I would say, if I'm going to be honest, but Aeronautics as a whole will improve. But this is where we are on that program. It will be a good program to us. There will be many, many aircraft delivered to U.S. Air Force and others. So this is numbers that we're not used to on aircraft side. This is 1,000 aircraft and beyond that in the end. And we're just in the beginning having delivered a handful of aircraft. So yes, that's where we are. So it will be a good thing, but it unfortunately takes some time. Johan Andersson: Many thanks, Tom. Let's take 2 questions that we have received over the web here. One is around Canada in Gripen, and it was a lot of discussions and media around that for a couple of months ago. Are we seeing any progress? Or have we -- is that relation progressing? Micael Johansson: Well, Canada is, of course, looking into -- looking to a crossroad decision, I would say. There are 2 parts of Canada. One is campaigning to win a global business in Canada, and we're waiting for sort of that procurement to happen. That's a campaign. Then Canada is looking into, do we want to have sovereign capacity when it comes to aeronautics having more of a -- not to be too dependent on the U.S. by having a dual fleet, maybe both F-35 and the Gripen. And there, we are providing all detailed information that they need to understand what it would mean to Canada. How quickly would we do a technology transfer? How quickly can we build up a Gripen hub in Canada for manufacturing? And how would they be involved in the full export market perspective of the fighter business. We're providing that, and they're asking questions. We are providing that, but it's sort of a very high-level political decisions that they have to make. And exactly when they will make that decision, I don't know. But of course, we have intensive discussions around this, absolutely. Johan Andersson: Perfect. Many thanks, Micael. Another question on that is that we have seen media figures that you're ramping up the Gripen production capacity to around 2030 in the coming years. Are we progressing with that? Is that going according to plan? Micael Johansson: We are. We're taking many, many initiatives and investments to make that happen. And we already now have 3 contracts to deliver to Sweden, Brazil and Colombia. So that is going according to plan, and you will see more and more aircraft leaving the factory in Link�ping, but also in Brazil. And if we are successful in the market, maybe we'll build another hub somewhere. But right now, we're focusing on the Swedish and the Brazilian hub, of course, to expand that. And that is going according to plan. Johan Andersson: Perfect. Thank you very much. Operator, do we have any further questions on the telephone conference? Operator: The next question comes from the line of Carlos Iranzo Peris, Bank of America. Carlos Peris: On the GlobalEye, how should we think about the delivery time line of the 3 GlobalEyes to Sweden? Any chance you could put forward those 3 deliveries? And if you can share any time line to go to 4 per year on the GlobalEye? Micael Johansson: Well, on the GlobalEye contract to Sweden, I'm not sure we're going to say an exact delivery date on that, but it's not far away. We are working diligently on all 3 aircraft now. So Sweden quickly needs the capabilities. In the next couple of years, they will have it. And that's sort of what I can say about the Swedish contract. And then if the question was the pipeline on GlobalEye going forward, there are quite a few. I mentioned the NATO initiatives. We have provided information, a request for information from NSPA, the acquisition authority within NATO. And because there are 9 countries now, the partner countries that want to have a common -- use a common NATO capability. And I think we have a great offer there with a great schedule, and there is a gap here, so they need it. So that's an obvious one. The Nordic perspective, I think it's interesting how can the Nordic countries combine efforts in using an airborne early warning capability. It hasn't materialized yet. Sweden has contracted 3. Let's see if we can get the other countries involved in that. Then we have an interest. France actually contracted 2, but there is an option for 2 more in France. We have an interest from a couple of countries in the Middle East for this capability. So yes, there is a great interest for GlobalEye, and we're also increasing our capacity to deliver a number of aircraft per year also on that side. Johan Andersson: Perfect. Thank you, Micael. Sounds promising. Operator, do we have next? Operator: The next question comes from the line of Bj�rn Enarson, Danske Bank. Björn Enarson: A question on Dynamics and the capacity expansion that you are doing in India, also Sweden and United States. Are there any -- how would that impact the profitability like near term, midterm? Or are there anything that will distort the picture? Or will it be a good drop-through from day1? Micael Johansson: I think the mix of things will -- we haven't taken into account that, that will have sort of a moment effect somehow at a specific moment, an effect on our profitability. I think it will be a very automated setup in the U.S. and also to some extent in India. And then it more depends on the mix of how the contract looks like in our facilities there going forward. When the individual salt munition production comes into play in Grayling in Michigan, of course, it depends on volume rather than whether the facility is efficient and also combine that with Ground-Launched Small Diameter Bomb. It will be good contributions to capacity. We haven't sort of taken any assumptions on that it will affect profitability really. We will, of course, have some sort of learning curve in these facilities, but the Dynamics will still sort of have good numbers going forward in terms of the mix that we see. I wouldn't sort of connect a specific factory that comes into play to any effect on Dynamics as such. It's not on that level anyway, that it will affect us. Anna Wijkander: I think I can just add... Björn Enarson: Normal business basically. Anna Wijkander: And the capacity increases are really happening stepwise. It's not just a big boom. It's happening in different places and different steps gradually. Micael Johansson: Good. Thank you very much, Bj�rn. Operator, do we have another question from the telephone conference? Operator: The next question is from Afonso Rosario, Barclays. Afonso Osorio: Micael, can I just follow up on this backlog situation? Given the significant number as of today, can you tell us the average duration of the contracts that go beyond 2029? I'm just looking at this Slide 21, where you showed the phasing over the coming years, and it will be super helpful to have your views on the story beyond 2029. That would be great. Micael Johansson: Yes. Anna showed a slide on that, but it stretches, of course, until 2029, right? Yes. Okay. So well, I think it's a good spread over the years. I mean, already, if you look at '29, it's like after that, we have still like SEK 35 billion to SEK 40 billion in backlog to deliver. So it's a good spread, but it's also quite high level sort of during the first few years that has increased substantially from sort of the same position we had last year. So it looks good from a long-term perspective. I mean the big platform contracts are adding to the long-term perspective, while the product side of things is very much more short term, like sort of within 2 years. So when we get contracts on the platform side, submarines, GlobalEyes, Gripens, of course, that sort of extends our backlog over many years to come. And that's good for us. So that's why the balance is important. But then you can't predict in the same way exactly when you get more product contracts. You don't get 10-year contracts on Karlskoga ammunition, for example. That's not what we have. But the platform contracts are quite sort of beyond 5 years in terms of how they spread. So I can only say we have a very good market position, as I tried to say, and we are confident that the capacity increases that we're now taking into the operations will sort of give us a possibility to meet the market demand. And we don't see that sort of diminishing in any way as we speak. And as I said, difficult to say exactly when the bigger contracts will come into play and how political they will be. So this is the world we live in every day. But it's a good spread and a good backlog. Operator: The next question comes from Mikael Las�en, DNB Carnegie. Mikael Laséen: Okay. I have a question around the order backlog and the capacity situation. I'm wondering if you can say something about where you are most capacity constrained today and where are the 2, 3 concrete bottlenecks that you could fix in '26? And also comment on the CapEx coming couple of years. Micael Johansson: Well, when it comes to where are we most constrained, I mean, I would say if there's one thing that we work diligently now, it's maybe not our factories or capacity increases as a prime that we're worried about them being set up. It's the material supply, it's the supply chain that we work diligently. So we know that the ecosystem of companies we work with supports us in this growth journey. There are pain points there. That's sort of -- but I wouldn't point to any specific, we have certain issues on the missile side. We have certain issues on the ground combat side, but we also have issues on the sort of fighter side. So everything, if it's summarized, comes down to we have to be extremely diligent on making sure that we have a balance by sort of what kind of inventory level do we have to have to support our commitments and how can we assure that we have commitments from our supply chain to support us in this growth journey. I wouldn't point to any specific area where we have more problems or possibilities than any other areas, I would say. We're doing well, but I'm just saying that this is a huge ecosystem of companies in the supply chain at different tier levels that everyone uses. So it's not only us. So we also have to make sure that we are sort of proactive in how we work with our suppliers. So we get priority. Anna Wijkander: To add on the -- regarding your question regarding investment levels, I mean, we have increased investment substantially this year, and we see continued need for high investment levels going forward as well. So... Johan Andersson: Absolutely. Good. Let's take another one here from the... Micael Johansson: It won't be less than the 7.2% that you saw this year. That much I can say. But still with good sort of -- as you've seen good targets. Johan Andersson: Good. Another question here from the web. You were selected by Poland in quite fierce competition. Why do you believe you won there? What's your edge on the submarine side? Micael Johansson: Well, first of all, this is about sort of how do we, in this region make sure that we protect the Baltic Sea and create returns through acting in the Baltic Sea. And of course, the A26 is a fantastic conventional submarines with capabilities that are adapted to that environment. And then, of course, Poland and Sweden have -- both countries have naval capabilities that can work together in an interoperable way. And we can train together, of course, if we use the same submarines. So it's both a security policy perspective, defense and deterrence perspective, adding to the capability in the Baltic Sea. But then it's about that we have a great product as well. And on top of that, we want to establish industrial collaboration so we can have redundancy in capacity at both sides of the Baltic Sea. So it's a number of parameters, of course, that are really logical to sort of make this happen between Sweden and Poland and between Saab and Polish industry. So -- but in the sort of the foundation of everything is that we have a great product. Johan Andersson: For sure. Yes. Good. Another one, you talk a lot about innovation. Can you give 1 or 2 examples, either of something you just have released or something that's really keen about that's coming out? Micael Johansson: I hope that people understand what we did sort of during '25, during the summer, and we're continuing to do that to have an AI agent supporting a pilot in a fighter aircraft like the Gripen E is something quite unique and how much that can add to the work sort of load of a pilot in different types of emission. It's a fantastic innovative example of innovation example of what we quickly can achieve with existing air forces. But then, of course, as anyone else, we have innovative sort of R&D that has led to counter-UAS systems, for example, the local system, which is involving our C2 systems, our radars and our track. We're part of what was launched this week, Sweden and Denmark spending SEK 2.6 billion on counter-UAS systems for Ukraine. And of course, our C2 and sensors are part of that as well. And then we have SOM technology on the quadcopter level, so to say, that can do missions for the Army. And we're working sort of specific autonomous systems also in all domains. So we have many, many innovation initiatives that we are spending money on to embrace new technology and work with partners on. Johan Andersson: Great. Operator, do we have a final question on the teleconference? Operator: We have a follow-up question from Renato Rios, Inderes. Renato Rios: Congratulations to your team on a great quarter. So you keep growing a lot and you have increased your medium-term target for the revenue. In absolute terms, that means that you -- from an observant point of view, it's quite challenging in terms of absolute values that have to be delivered like volume-wise. And in the industry, it just -- it takes a bit to align capacity, sometimes it takes years and you have to build factories. So obviously, you are ahead of that because you are hiking your medium-term revenue targets. So based on that, could you give, I guess, as much context as you can on the capacity requirements to deliver the growth that you're expecting through 2027? I mean, is the capacity and the supply chain already fully or mostly aligned to deliver on that? And included in that answer, you could just -- it would be nice to hear you reflect out loud about the constraints that would make it difficult for Saab to deliver on the new targets. Micael Johansson: Well, it's, of course, impossible to say that this specific capacity in terms of a facility or a factory needs to come into play for us to deliver this portion of our backlog. It is not happening sort of like a one-off thing. It's happening gradually. And specifically in Sweden, when we invest heavily in the Karlskoga area, where we have 40 sort of construction projects ongoing, one by one, they come into play to support this backlog. Now we have capacity to do lots of the backlog. Our investments are also meant to take us even further, of course. It's not that we have -- everything we've talked about in terms of investment do not have to come into play fully for us to deliver this backlog. It's not that much connected on that level. We can do lots of this with the capacity we have, but we also need to have more going forward. That's our view of things. I don't know how to elaborate more on that. Of course, the factories we've talked about with that capacity, but they also need to be filled with new orders. So we have both in this. That's all I can say. I mean, we are taking a big responsibility from the demand perspective in the market to be proactive to provide capacity, which all politicians are saying that we have to because the growth will continue. So it's not 100% clear answer. But you can look upon, we have up until now, in certain areas, four, fivefolded our capacity compared to what we had like in '22 in terms of ammunition and sensor capability, it's a lot higher already. But we think more will be needed. And some of it is needed to sort of deliver on the customer commitments that we have in our backlog, but some of it will be devoted to future contracts. I don't know how to answer the question in a more detailed way. Johan Andersson: Operator, do we have any final questions on the telephone conference? Operator: The final question is from Ian Douglas-Pennant, UBS. Ian Douglas-Pennant: You mentioned that late in the quarter, you booked some GlobalEye milestones. Could you help us size that effect, please? Just -- I'm sure you're not going to give us an exact number, but just roughly how important was it in terms of driving the outperformance versus expectations in that division, please? Micael Johansson: Yes. In Surveillance, we did have an effect of recognizing revenue and profit from the contract we got in France, obviously, but it's not super substantial. I don't want to give an exact number to it. It would have been good numbers anyway, but there is some revenue recognition and profit recognition from that contract because we have been selected and we had agreed to start sort of our work to make sure we keep the schedules and that we did. And that we could, of course, recognize then when the contract was formally signed. But it was not so substantial, so that drives this fantastic quarter in any sense. Johan Andersson: And operator, I don't think we have any further questions in the telephone conference. Do we? Operator: There are no more questions at this time. Johan Andersson: Okay. But I think with that, we will conclude the presentation of the Q4 and the full year results from us here at Saab. Importantly, we will be on the road now for both here in Stockholm, Paris, London and Helsinki as well during the coming weeks here. So looking forward very much to see you out there, and then we report the Q1 then in April. So thank you very much for listening in today, and have a nice day.
Bent Oustad: Good morning, and welcome to Fabege's Year-end Report 2025. My name is Bent Oustad, I'm the CEO of Fabege, and I'm lucky to have with me the experienced CFO, Asa Bergstrom, here today. We run through the report, quite well-known structure on the report today. And just to start with Fabege in brief, we are a modern -- we have a modern portfolio, we focus on Stockholm. We own, we develop and we manage our properties, we focus on attractive working places and good living in superb locations in Stockholm. And as you all know, Sweden is the capital of growth region in the Nordics. If you distribute the rental value of SEK 4.3 billion to different segments, office stands for 84% of the portfolio. That's office in a broader definition, including also education. Industry logistics, 4%; retail, 4%; hotel 4% and other segments, 4%. If you allocate square meters into the same segments, office is 72% and industry and logistics up to 9%, the others more or less the same. And the market value of the portfolio, SEK 78.5 billion, 37% to the inner city, and that also explains the differences from the rental value of the square meters because a lot of the properties are in central locations in Stockholm, and there the rents per square meter are quite substantially higher than rest of the city. Solna stands for 48%; Hammarby Sjöstad, 10%; and Flemingsberg, 4%. If we try to summarize the fourth quarter '25, rental income came in at SEK 899 million, up 4.4% from last year. Profit from property management ended at SEK 371 million, up 11% and the surplus ratio was 75% for the quarter. And as we have commented on the report, quite lucky with the weather at least at the end of the year. So that's why we had a quite good surplus ratio. Profit from residential development came out at SEK 35 million in the quarter, 23% margin. Shouldn't expect that high margin going forward, but close to 20% is something you can count on. Value changes -- net value changes of SEK 711 million downwards and earnings before tax then came in at SEK 293 million. Net lettings for the quarter was SEK 33 million, ending the total year at plus SEK 36 million. And we see increased activity in the leasing market. I will get a bit back to that later on. Large projects entered the management portfolio during the quarter, also coming back to that and large refurbishments are ongoing. That's how we try to secure also future value creation for the total portfolio. The quarter has proven our quality and our capability to capitalize on Birger Bostad's business model. We are then converting our residential land bank into shareholder return, and we will have more reporting on that also going forward. The last point, north on the summary slide is the Board has requested or has proposed a dividend per share of SEK 2.20 per share. So with that, hand over to you, Asa. Åsa Bergström: Thank you, Bent. Yes, I'll go through the income statement. Rental income, as you can see here, amounted to almost SEK 3.5 billion, a little uptick from last year. We had a negative impact in the identical portfolio of minus 3.2%, mainly due to the negative net lettings of the previous year. We also sold one property that impacted on the negative side. But on the other hand, we have several projects that have been finalized during the year and that are now producing income for us. Property expenses, a little bit higher than last year. We have an uptick in property tax. But as Bent also said, there were lower winter-related costs, very good, both beginning of the year and end of the year. And thus, we had a surplus ratio in property management of 74%. This year, we also had a positive impact from Birger Bostad's residential development. They have finalized just over 100 apartments during the year and produced an income of SEK 280 million and a result of plus SEK 55 million, which is included in the gross profit, as you can see here. Net interest expense was slightly lower than last year. We have borrowed roughly the same amount during the year, but the average interest rate has come down from SEK 2.98 to SEK 2.82 during the year. The share in profits in associated companies increased. The majority of this or all of it roughly is related to our share in Arenabolaget. There was a one-off included in this figure of SEK 63 million, where we have taken down the value of the shares that we have in Arenabolaget. So that's SEK 63 million of the SEK 130 million is more one item -- one-off item. So all in all, profit from property management increased by roughly 5.5% to SEK 1.4 billion. The impairment development properties relates to the Bostad future project --future potential projects. And the realized changes in value is related to the sale of Ynglingen in the first quarter. So that's the same figure as in the first quarter. Unrealized values came at SEK 1.7 billion for the full year. I will come back to that a little. And then changes in the derivatives were positive in the fourth quarter, but all in all, over the year, a little negative number. And so we have a result before tax of minus SEK 508 million and then a positive tax impact, SEK 160 million, of which SEK 128 million relates to the sale of Ynglingen in the first quarter. We have externally valued roughly 50% of the portfolio this quarter, and the property value came at SEK 78.5 billion, as you can see here. There's been a shift upwards in the average yield from 4.55% in the first quarter to 4.59% in the fourth quarter. And this next slide is -- gives a little bit more transparency to unrealized value changes over the year. We can say that during the first half year, the negative value changes were mainly related to increased yield and lower expected cash flows, longer vacancy periods expected from the external valuers and also a write-down of building rights, mainly in Flemingsberg. In the second half of the year, we saw increased yield requirements in suburb location, a little decrease actually in the most central CBD location. And we also took a write-down on the building rights in Flemingsberg since the land allocation agreement with Huddinge has expired at year-end. But what you can also see in this slide is that actually the projects have contributed on the positive side in all the 3 first quarters. Key ratios, we landed at SEK 119 per share and an EPRA NRV of SEK 145 per share. Total return of the properties after the write-downs amounted to plus 1.1%. The surplus ratio, as I mentioned before, 74%. Equity ratio and loan-to-value ratio remains on the strong side. And as you can see here, the debt ratio has actually improved as well as the interest coverage ratio. So we feel that we are still in a strong position going forward. Financing has been on the positive side all over the year, maybe getting even more positive during the second half of the year. We see continued strong access to financing, both from banks and from the capital markets. We have some ongoing refinancing with banks that will hopefully be finalized during the first quarter. We have done some refinancing for maturities in 2026 already. We did bond issues of SEK 850 million during January, short of 3 years. And as you can see here on margins of 89 and 84 basis points. Those are maturing in November 2028. And we still have the undrawn facilities of SEK 6 billion, which provides safety, security going forward. There has not been any change in fixed rates. As I said, the average interest rate cost has come down during the year. Approximately 47% of the portfolio is fixed and with an interest rate fixation of 1.5 year. And if we include the callable swap, it increases to 2.1 years. So we have some safety for increasing rents or increasing interest rates should that happen, although it seems that the opposite now is more likely at least in the near-term. This is also a new slide that we just wanted to show that how rental income and results have developed over the last 10 years. And you can see that rental income and gross profit from property management has increased while the profit from property management, including interest rate -- interest cost is more variable depending on the level of the market interest rates. The surplus ratio is fairly stable. We still have the target to reach 75%. And what this figure shows most apparently is the occupancy rate, which has come down, and we will come back to that a little later. Also finally from me, a few words on sustainability. We keep working very hard in order to reduce energy consumption. We're now very well below the target of maximum of 70 kilowatt hours per square meter with the outcome, which was in 2025, only 65 kilowatt also, of course, due to very mild winter conditions over the year. But nevertheless, a target and a result which we are very proud to present. And we also achieved the goal to reduce CO2 by 35% in comparison with 2018. And finally, the Fabege share is again confirmed green by Nasdaq Stockholm, which I believe is also a good sign for all the work that we are doing on the sustainability side. So that's it for me. And back to you, Bent. Bent Oustad: Thank you. The work done in the sustainability department is very important for us, and it reduces our costs, so keep up the surface ratio for the company very well. If you look at the occupancy rate, it has fallen down to -- or increased up to 14%, as I said, that's driven by the 2 previous projects, Ackordet 1 and Påsen 1 that has now been transformed into the management portfolio, increasing the vacancy. And as the one of you that's really following us, you know that some tenants are moving into Ackordet this spring, for instance, Atea moving from Kista to our property. So it will start to increase again. We also have improvement portfolio, not part of the occupancy rate. There, we have a total of 156,000 square meters, of which 127,000 square meters is left. That's future potential projects for us and are on short-term lease contracts without any right to possession when it expires. If we go a little bit more into the net lettings and the renegotiations for the whole year, the net lettings came in at plus SEK 36 million. It's new lettings of SEK 236 million and terminations of SEK 200 million. That's in our historical view on the lower side for us. And it also shows that we have a year without any major new lease agreement signing. So that's a goal for 2026. The renegotiations in total SEK 618 million, decline in rents of 0.3% with SEK 2 million down for the whole year as a whole. That also shows more stability in the leasing market. And bear in mind, SEK 316 million of maturities in '26 and onwards has now already been renegotiated and are part of these figures. So the tenants are forward-looking. That's great news for us. If we dive a little bit deeper into the renegotiations, I said SEK 618 million. You can divide that into SEK 341 million extended on unchanged terms and SEK 277 million with a 0.7% decline, so total SEK 618 million. As said, they are dominated by several small and medium, large tenants. We don't have any of the really large one this year. And for the total 2025, we only have 6 tenants with a yearly base rent above SEK 10 million a year. And actually, 2 of these 6 were concluded in Q4, both with an unchanged rent level and one in Arenastaden and one in the City portfolio. So that shows also for us, even though there are a small number of renegotiations that it's stabilizing in our view. If we distribute the new leases above SEK 10 million, 45% are in the office, 35% in the education and 20% in the hotel. And if you take all the renegotiations per area, 72% are in the inner city, 25% in Solna, 2 in Hammarby and 1 in Flemingsberg, just to give you a little bit more flavor on the figures. So rental development for the existing leases and existing contracts we have put in place. So it's definitely not a forecast, but that's what we have secured so far. And as we see, all numbers a little bit better than last quarter, and that's kind of more or less reflected by the positive net lease in the last quarter. I really like this heading stable customers. What we are talking about is high-quality customers with long lease contracts. And just to remind you, we have in total around 700 customers in our portfolio. It's a lot and it's an important work for us. If you look on the right side, the 10 largest tenants, they stand for 30% of the total rent. And the 10 largest tenants have a WAULT of 10 -- 9.2 years. So it's very, very good as a base for the whole company. And if we go further into it, the 25 largest customers have close to 50% of the total rent, meaning 670 customers more or less stand for 50% of the rent. So that also takes down the big risk of many of those customers. They are more or less flexible customers also when it comes to better market conditions and to adjust the portfolio to what the larger tenants also would like to rent on us. In total, the average lease contract length is 5.1 years. And we're very happy to welcome 2 new tenants on the top 10 board during 2025. The subcontract is the second largest one and Alfa Laval are in place #9 there. It's very nice to see. Also, we've seen in several quarters some questions about the parking business. We have increased our parking business. We have specialized personnel taking care of that for us in our company. We have total 12,500 parking spaces approximately, can be [ 501, ] I'm not quite sure, of which 2,700 have a separate charging station for electrical vehicles. And we see that as a key factor for some of the larger customers we have. It's important for them to have access to parking spots. We see increased demand for day-to-day permits instead of monthly agreements, and that also increased the flexibility in the portfolio for us as a company. It's easier to book spots up to 120%, maybe 130% when you have day-to-day permits instead of monthly reservations. So in total for 2025, approximately SEK 210 million in parking revenues. So if we look a little bit at the completed projects, I think they are well known for most of you. But in May, Alfa Laval took occupancy in the premises -- in their premises in Flemingsberg, very nice property. And in September and November, Saab took occupancy in Nöten 4 in Solna Strand, also a nice property, even though I'm not allowed to go into that property yet. So I haven't seen it from the inside, but it's -- as I said Ackordet 1 and Påsen 1 tenants have gradually moved in during the last quarter as well and some more tenants will move in during spring 2026, and that's also the reason why the vacancy in the management portfolio have increased slightly this last quarter. If we look at the ongoing projects, we have the Farao, Kairo. We have also talked about that earlier. For me, Arenastaden as a whole is a sweet spot. This is the sweet spot in the sweet spot, 20 meters from the metro station. We have Board approval for investments up to SEK 630 million. We have dismantled the existing buildings, and we are doing ground and foundation work and also preparation for construction works these days. And so why are we doing this right now? This was more or less decided 10 years ago when we entered Arenastaden. So now Solna municipality are doing their last work on all the roads, the infrastructure in this area. And then to be cost efficient for us, we do this work on the plots at the same time. So being ready for that. It's an interesting spot for -- and we have a lot of interest in that spot. But as of today, we haven't concluded any leases on it so far. We also have Ormträsket 10, the Wenner-Gren Center, investments approved for up to SEK 609 million. Rental value in this part will be approximately SEK 58 million, and it's pre-let 20%. That's a little bit down from last quarter and it's due to when we started the construction work there or the refurbishment, we had to move out all the tenants to other buildings we have in the neighborhood. Some of them are very satisfied in the new locations. They have signed new leases there instead of going back to this one. And some of them have even found other premises in our portfolio, other places in Stockholm. So right now, it's 20% let. We are starting the marketing towards end of second quarter 2026 on this building and it will enter the market 1 year from now or between first and second quarter 2026. Each floor plan is 400 square meters, so it's a little bit early for us to be in the market already. But we see good interest. We have also completed and have some ongoing projects in Birger Bostad of a residential company. Haga Norra, the block 5 up there is processing according to plan. It's in total 288 units. Completed in 2025, we had Brf Alma, which is a cooperative apartments. 23 out of 20 are sold as we have 2 showroom apartments there, and they are not for sale yet. And we have one that's not sold at Fabege. We also finalized 78 rental apartments in Q4. That's what's reported in the numbers in Q4 and to be completed in 2026, 50 owner-occupied apartments, of which 44 are sold when we wrote this yesterday. And today, it's 45 actually. So possession of this will be during Q1 this year. And we are coming with Brf Mathilda and Ingetora also later on in 2026, in total, 137 apartments, of which 35 are sold and on the marketing during last Sunday, and more than 17 interested parties showed up. So it's looking good for us. We also have the preparations underway for projects to start in the next phase in Haga Norra. So it's block 4 and block 3, totally 132 cooperative apartments in the block 4 and 260 rental apartments and senior housing plus a preschool actually in the block 3. When it comes to the senior housing, the preschool and also grocery store, we have signed LOIs on those units already, but they have not signed contracts and not part of the net lease at this time. Remaining investment in that one is SEK 860 million, completion in '28 and '29. And with that, we complete the residential buildings in Haga Norra. If you look at our building rights, commercial building rights of 550 million square meters, approximately 60% legal binding of those, and it has a book value of SEK 7,000 per square meter. That's a little bit down from earlier quarters. And as Asa mentioned, we have not -- or it's been a termination of the land allocation in Flemingsberg. We haven't agreed on the terms with Huddinge mun. But we have ongoing negotiations, have a positive tone. So we will report to the market when things changes. And we have 500,000 square meters of residential building rights in addition in our portfolio. So the last land allocation that we received is the Sveaplan. It was legally binding in January 2026. So preliminary possession date around mid-April 2026 and the building rights approximately 8,800 square meter gross floor area also taking into account the floor plans underground. Purchase price is SEK 208 million, should be index-linked and start to be close to SEK 230 million and a planned move in during 2029 on this property. And that more or less completes our -- one of our core areas in Sveaplan going forward. We will have 55,000 square meters of gross leasable area in that area, having ground floor activities, including food and beverage, having high-class conference centers, parking and other services to be a center for our portfolio that can have some extra services going forward. Project opportunities in the near-term, as I mentioned, Farao, Kairo with commercial units coming in addition of approximately 500 apartments. And in Phase 1, we have 185 apartments there. We see apartments in this area is more or less bought or let by the larger tenants in this area. So it's very, very popular. And that's really give us a well-functioning urban area. So that's good for us. Haga Norra, as I said, already produced 519 units, in production 187 and decided to produce another 390 units already with LOIs on a lot of them. We have the Västra Kungsholmen, Tegelterassen is 36,000 square meter office, partly demolition has started in January 2026, not -- and we don't have any lease contract in place, but the interest and the pipeline is quite good, quite promising. So there's a big ambition for 2026. And we have the Solna Business Park, the Parkhuset is a land allocation for 22,000. That's in the purple line on the screen here. And we have Yrket next to it with 320,000 residential units and 2,200 square meter premises, more or less ground floor activities there. The last one, we already own and have in our books 60% of the land plot, but 40% is a land allocation from the municipality. So if we try to summarize our main short-term priorities, we are working every day, every night, every second to decrease vacancy in our portfolio. We have to continue to be the preferred partner for our customers. It's so good for me as a new CEO to come into this company and meeting a lot of the larger tenants and everyone talking good about the Fabege employees. It's very, very nice to hear. We have always to be available, accessible and be solution orientated. And in my view, we are that, and that's what I hear. So it's very good. We have to secure value creation in ongoing projects. We have to analyze value creation in our land bank to be very exact about that going forward, that both in the commercial and the residential land bank. And we have to continue to be active in the financing markets, which started well already first day in January, that looks good. And as a company, we always have to search for opportunities, and we are searching for opportunities to build the company and not to do a single transaction. So with that, I conclude our presentation and maybe you have some questions for us. You were so shocked about the presentation. Albin Sandberg: Thank you very much for that. And also my name is Albin Sandberg, I'm representing SB 1 Markets as a sell-side analyst, and I will be moderating this Q&A and all of you will have the opportunity to ask questions as well. So I want to start with you, Bent, I mean, obviously, you provided us and the market with an update a few weeks before Christmas about your first thinking and so on. Now you've been through a Q4 results. And I just wonder if there's anything that has come across your mind that either better or worse with the company compared to that you thought initially. I mean you were always on the board before. And maybe also you're a Norwegian and now we're coming to Sweden. Any cultural differences that you have encountered so far? Bent Oustad: Definitely some cultural differences. It is on the good side. You see Stockholm as a city is much more vibrant. It's much more happening here. You see also in the papers, you see on the stock exchange. Things are happening, you are taking all the opportunities, and that's something also we have to grab in this market that we are right now. On the very, very positive side is to be around meeting all of our employees, see how they are burning for Fabege, really want Fabege to do well. That's important for us. They are the one that always meet the customers first. So that's a good sign. On the negative side, we have some vacant space, and I've been around visiting most of the vacant spaces. I can't believe that we don't have tenants for them. So they are very nice, superb locations. So that's what we have to achieve going forward. Albin Sandberg: Yes. Now obviously, the numbers that we're seeing that you're reporting today on the one hand, positive net letting. On the other hand, a little bit higher vacancy, which I understand is a bit of mix, and you're also saying that key focus is to reduce these kind of vacancies. But from a broader market perspective, in this cycle where we are now? Do you think that it's the same as previous cycles? So once we get the economy running, demand should pick up? Or is there anything else because of work-from-home habits, AI and so forth that would sort of impact this, let's say, potential recovery differently than what we've used in the past? What do you see? Bent Oustad: I'm not sure if it's that much actually. But now the vacancy in total in Stockholm, the biggest Stockholm is quite high. So that's why it will take a little bit longer time. But if you look at the pipeline, look at the leases being out there, the competition, I think the pipeline is growing only the 2 months I've been on board. So that's positive. What kind of tenants are growing, you see within the defense industry, you see within municipalities tenant or link tenant, they are growing. You see some tech investors are growing more or less -- I think you take some more opportunities in Sweden than I saw in my -- in Norway at that time. So I think more is happening here, and this is more or less the capital of Scandinavia. Someone is talking about Copenhagen, but I think more will happen here. So I'm quite positive about that. When it comes to all the other things you are mentioning, and I hear that all the time, all talent, if you need talent, you have to be in CBD. I don't think it's like that. I've been in my company now in Fabege, talented people all over, but maybe in my view, we are more or less in the center. It's very nearby. Nice locations. And I think what we are searching as a young employee today is you want to be where things happen. You want to be in the office that you can be creative, that you meet your older colleagues, you want to grow within the company, you want to be motivated. And that's up to us as landlords are, are the premises good enough? And if I hear someone, no, I have to stay home to be efficient. Okay. So then you have to really have to move because that's a landlord's responsibility to give you the right location, give you the right premises. Albin Sandberg: And the positive net letting that you managed now in Q4, can you say anything about were these negotiations that have been going on for a long time that finally made it? And also, given the high vacancy rate we're seeing in the Stockholm office market, do you need to offer extra rental rebates or something like that in order to sign these leases? Bent Oustad: It's on the both sides actually. As I said, this time, it was no major leases. So the leases we took now are not being going on for so long time. But we had ambitions of higher numbers, but someone came in early January instead of this, and -- but it can be both ways. So this time, it was not -- that was not the reason. On the other side, the lease -- the period to conclude the leases are getting longer and longer. This is much longer than I'm used to. But still, I see they are getting concluded. We listen about all possible leases in the media or 2 years before they are really concluded on the larger ones. So things happening in the market, quite positive. But as I said now during the presentation, the signs in our numbers are there for real, but it's not a lot of them. It's only SEK 36 million in total in positive net lease. So if it really recovers, should be much higher. And definitely, we don't have any new major new leases during the whole year and that we have to step up the gas. Albin Sandberg: And I know that in the past, you referred to an annual net letting target. I don't know if that's still valid or if you have one, what would that be for 2026? Bent Oustad: It's SEK 50 million in net lease. We need that. And we have some extras in new leases. But in the management portfolio... Albin Sandberg: And you were referring to your tenant list saying you were very happy with that. And still, there are some that account for a little bit more. Are there any specific one that you are already now working with and so on in order to make sure that they stay or anything that we should watch out for here in the near-term? Bent Oustad: We are always working with our tenants. So we try to keep all of them. We try to have them grow. And if they don't want to grow or they may be as we have been done in a little downturn in generally, they have to adapt their business to the reality. And if they can't increase the prices, they have to look on the cost side. And if it's possible, among other things, they also try to reduce some of the space. So we think we have high-quality tenants, and we are working with them every day. 24 hours a day, and that's our main priority as a landlord. Albin Sandberg: Yes. And out of these, let's say, 14% of vacancy that you have now, what would you say is a normal level for vacancy in the Fabege's portfolio across the cycle level? Bent Oustad: Across the cycle. It's always difficult to be 100%. So -- but we should be high in the 90s actually, mid-90s, 95% maybe. Albin Sandberg: Yes. Bent Oustad: That's a goal, and it's absolutely reachable. Albin Sandberg: Yes. Do you want to say any target year for that number? Bent Oustad: In my head, it's only 1 year ahead, but they have to be a little bit realistic. So we need some time. And as I said, to conclude a lease it takes some time. And for them to move in, it also takes time. So the larger tenants, they are planning 5 to 10 years ahead. So bear that in mind. Albin Sandberg: And are you in a situation now where some of these vacancies are close to structural, you believe that you're looking into alternative use for some of these assets that you have? Bent Oustad: Not yet. But if you think we only have pure office, then it can be some alternatives. But within the education sector, within the health sector, et cetera, things are growing. Albin Sandberg: Yes. And I also wonder a little bit about your potential to start new projects. Obviously, you are very much focused on getting the vacancy numbers down. And you have your balance sheet where I guess your LTV is well below target, but you still have a debt ratio that is a little bit high. So how do you envision the development CapEx going forward here, 2026 specifically maybe? Bent Oustad: As we went through some of the projects, larger projects we have now. And I think the CapEx for 2026 would be around SEK 2 billion, but it's a little bit on the way to go down. But some of the CapEx are also for the residentials, and that's more or less a sale. So that will be -- and in a future sale. So when you see the result from the residential, the cash flow is much better, of course, comes that. But going forward, if you are a potential tenant, we always have space. We always have potential projects. We're talking about the portfolio of 150,000 square meter that's now running on shorter leases. That's also potential projects going forward. But in the meantime, they run on shorter lease lengths, et cetera. Albin Sandberg: So a new potential commercial project starts this year, 2026, that would require a tenant in place, would you say? Or could you imagine starting anything on speculative grounds? Bent Oustad: We can start on the speculative grounds. The balance sheet, we are not worried about that, but we'd like to have tenants in place before we start any larger at least. Albin Sandberg: Yes. And then on the property valuation side was negative in Q3, was negative now again in Q4. If you just could clarify a little bit what was happening in your own assumption and maybe in the discussion with the valuers, anything that struck your mind in one way or another delta-wise? I'm just wondering what happened and that needed you to take down values again in Q4 [indiscernible] are we reaching the real trough here now? Do you think you can see the numbers in red -- sorry, in black for '26? Åsa Bergström: I hope so. But it also depends on what's happening on the market. And specifically in this quarter, the expected indexation or inflation for next year was taken down by the valuers from 2% to 1.5%. So that has a negative impact. We also saw increasing yields in the suburb locations, still coming from the deal Vasakronan did, and there has not been any other deals in this kind of suburb locations. So that has had maybe too much of an impact, I believe. And then we have -- because the land allocation -- the agreement with Huddinge regarding the land allocation in Flemingsberg was terminated by the year-end, which made us take down the values for, you can say, overvalue -- extra value that we had allocated to those building rights that we don't, we are not at least sure that we will have them anymore. But as Bent said, also, there are ongoing discussions with Huddinge. So that might change in the coming months. So I think no major changes, but small changes that had this impact. Albin Sandberg: And just to be clear, the 1.5% indexation that's for 2026. Åsa Bergström: Correct. Yes. And then onwards, it's still 2%. Albin Sandberg: And then also, I mean, obviously, the financing market continues to be strong is my feel. And as a CFO, I guess you can confirm that your interest rate duration is a little bit on the low end, in my view, at least. Do you -- are you happy with it? Or are you have any plans to extend it or what would it mean for you? Åsa Bergström: I mean, yes, we are -- as it is right now, we are quite happy with it. But of course, we are monitoring long-term interest rates and the levels of them in order to be ready to act when we find it more favorable than it is right now. We have some older swaps that will mature during this year, also next year, that will increase rents, increase interest rates costs going forward. But we also see when we are renegotiating both banks and refinancing bonds this year, margins are substantially lower today than they were when these were signed before approximately, say, 3 to 4 years ago. So there are ups and downs, and I'm quite confident about more or less sideways development of the average interest rate this year. Albin Sandberg: Compared to this outgoing rate as of Q4. Åsa Bergström: Yes. Albin Sandberg: Yes. That's clear. And I think the discussion about share buybacks is a topic for a lot of Swedish property companies trading at a discount to NAV. You have carried out buybacks in the past. And my understanding is that you have referred maybe a little bit to your underlying cash flow and the debt ratio in order not to continue buybacks. Is that correct understanding? And is that still valid? Or are you considering buybacks maybe ahead of investment starts? Bent Oustad: We are always considering everything. But when it comes to the capital structure, that's the main priority. We have also the dividend policy more or less as a base for how the Board is thinking these days. And Asa and I, we are not deciding, this is a discussion in the Board, how should the capital structure be? And it's part of that discussion actually. Albin Sandberg: Okay. So you don't rule out share buybacks for 2026. Bent Oustad: We never rule out anything actually. But as I said, the priority is the dividend policy we have in place. And after that, we look at the cash flow and the key metrics for the company. Albin Sandberg: Yes. And then I have one last question before I hand over to the telephone conference and also questions on the web. But now Bent, you obviously have a bit of connection, I must say, with the main owner in Fabege. You used to be the Head of -- CEO of Norwegian Property. Would a merger between Fabege and Norwegian Property make sense in your view? Bent Oustad: Never say never. I'm not spending too much time on that actually. But in my view, at least the 2 of us, we are synergies. We don't need 2 CFOs or 2 CEOs. On the other side, we have better financing here in Sweden. So that's also a synergy. But beyond that, I'm not sure about the synergies. Albin Sandberg: Great. Thank you very much. Okay. And with that, we open up for the telephone conference, and you can also send questions via online, and we will see if we can take them here. But operator, please go ahead. Operator: [Operator Instructions] The next question comes from John Vuong from Van Lanschot Kempen. John Vuong: You mentioned that lettings in Q4 was skewed to SMEs. Looking at your leasing discussions, are they also skewed the same way? And do you expect new lettings to gain momentum over '26? Bent Oustad: It's a little bit difficult to hear. Åsa Bergström: Yes. Bent Oustad: Can you please repeat the question? As the line wasn't that good here, actually. I'm sorry. John Vuong: Yes. Just on your leasing discussions. Do you see the same skew towards small and medium-sized companies? Bent Oustad: Going forward, I think that's more or less the bread and butter for us in Fabege. We -- as I mentioned, we have 670 customers/tenants in our portfolio. And we are always looking for smaller and larger tenants. That's part of our portfolio. We have some very large tenants. The top 10 stands for 30% and they take more time, take longer time, but they are also in the market. There are companies growing. There are different segments growing. So we have this mix. It's actually not a clear view of what's happening forward. So if you just look at Solna, Solna Business Park in that area. We had a large contract with Saab. Our neighbor had a large contract with [ Svenska Kraftnät ] and the social government has also moved to this area, large tenants. So large tenants are in the market. And unfortunately, we didn't have too much succeed in 2025, but that's top of the agenda going forward. John Vuong: Okay. Clear. And just how well is your current vacancy position to capture this demand? Do you still need to spend some CapEx to reposition these assets? Bent Oustad: It's very different. But a lot of the vacancies are very, very nice. So more or less the CapEx will be maybe to do something at the entrance just if it's a single-tenant building converting to a multi-tenant, we have to look a little bit to the entrance for the whole building to be for a multi-tenant building. But we have the examples at Stjärntorget 1 where Telia is the main tenant, approximately 8,200 to 8,300 square meters are now rented out to 2 new tenants in that building during '25. So things are moving. John Vuong: Clear. And sorry, just on the near-term project opportunities, what returns do you see and how does it stack up against your cost of capital? Bent Oustad: And cost of capital are in the -- around 10% is the cost of capital. And as you see, we haven't really succeeded in the last years. But as I tried to summarize, to really look into the value creation in the land bank and in the projects is a top priority. Operator: The next question comes from Jan Ihrfelt from Kepler Cheuvreux. Jan Ihrfelt: I have a couple of questions here. The first one regards, if you look at the central administration on a year basis, it's up 14%. Are there any extraordinary costs in that increase? Åsa Bergström: Sorry, it seems to be a very bad line here. I couldn't understand your question. Jan Ihrfelt: I'll try to repeat it, maybe taking it a little bit slower. Your central administration costs are up 14% year-on-year for the full year. And are there any costs that are there though be of extraordinary character. Åsa Bergström: Last year, we in -- sorry, in 2024, we didn't make any provision for the profit sharing foundation in Fabege. And this year, there is a provision for that, and that pretty much explains the whole difference. Jan Ihrfelt: Okay. And then the question on the NOI margin, you have a target of 75%. How comfortable are you of reaching that already in 2026? Åsa Bergström: It's definitely a goal to reach it in 2026. I think if we are a little bit more successful in the letting business, adding more rental income to the P&L, we will soon be there. So it's more related to income side than cost side actually. Jan Ihrfelt: Okay. And then maybe if you could comment or make any kind of guidance for your associated companies, i.e., the Arenabolaget for 2026. Do you have any figure there? Bent Oustad: Except for the write-down of SEK 63 million that we took in 2025, this is in line with what we have communicated before. And as it looks now, it will be the same for 2026. So roughly around SEK 70 million negative. Jan Ihrfelt: Okay. Then a question on -- maybe a clarification. Your net letting target for this year, was it SEK 50 million in the management portfolio? Åsa Bergström: For 2026, yes. Jan Ihrfelt: Yes. Okay. And then a final question from my side is, if you look at the chart where the rental income in the coming quarters. And if you zoom into to the first quarter, that figure has increased SEK 10 million from the Q3 report. Is that the indexation effect? Åsa Bergström: Indexation is very low. It's an impact from positive net letting that has that. Jan Ihrfelt: Okay. So hardly any increase from the indexation? Åsa Bergström: I think indexation is roughly in total, SEK 25 million over 2026, the full year. So of course, it has a little impact. Jan Ihrfelt: Including the [indiscernible] Åsa Bergström: Yes. Operator: The next question comes from Lars Norrby from SEB. Lars Norrby: First, a simple question on the headline, the CEO statement is the same as in the Q3 report, I note. Does this mean that your view on the market is very much the same? Or is it looking slightly better now or the opposite? Bent Oustad: I haven't concentrated about the former CEO's view there. This is my view, and it's the view as of today. And I'm quite positive actually, but it's better to try to show you some results before we are too optimistic, but it looks better and better in my view. Lars Norrby: And then my second and final question. You did not do many transactions during '25, if I remember correctly, just one centrally located property. If you would sell something in 2026, would you focus on selling something centrally located or rather in Solna, Arenastaden? And for that matter, are you looking at divesting residential building rights? Bent Oustad: We are always looking at opportunities. But in my view, with the balance sheet we have, we do transactions when the markets are favorable for us. I don't see the market is very favorable to sell assets these days, but that can change quite fast. And we also see the transaction market in the CBD being better, even though it's a low volume. So -- but we are looking into that. When it comes to residentials, we will try to develop the residentials at least in our core areas ourselves. We still own some residential land banks outside Stockholm, and that could be possible sales going forward, but nothing is concluded as of today. Åsa Bergström: Just to complement, we did some -- we sold some building rights for SEK 200 million on the Western part of Stockholm City, Western Kungsholmen. And those will be vacated probably in April or May in 2026. So the agreement was signed. They still remain in our balance, but they will be vacated in the spring. Operator: [Operator Instructions] The next question comes from [ James Cattell ] from Green Street. Unknown Analyst: When it comes to your land rights and the decision to sell or develop your land rights, what's the required rate of return that you would need to develop a piece of land rather than selling it? Bent Oustad: That's also a little bit different. If it's in the core area, then we are more -- we don't have that high development margin. But it's above other. But we'll try to achieve 15%. It's difficult these days, to be very honest. And when it comes to residential, as I mentioned, they are a little bit higher. Unknown Analyst: And that figure, is that levered or unlevered return? Bent Oustad: Leverage to return, equity return. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Albin Sandberg: Yes. So we have a few questions left. I think we can make it within the 11. From Fredrik [indiscernible] at ABG. One question is, are the 2 remaining floors in Haga Norra leased now, even though tenants have not yet moved in? If so, when are tenants moving in? Åsa Bergström: There is one tenant moving in, in April this year, and there's still some remaining space to be let. Albin Sandberg: Yes. And the other question refers to the JV, Fredrik, unless you got the question before -- answered before, please reach out to management, but I think we -- you guided for SEK 70 million for this year. And then from Mihail Tonchev from Kempen Investment Management. Would you consider rationalizing your location and perhaps tightening the portfolio segments via capital recycling? Or are you fully convinced of all your location for the longer-term? Bent Oustad: We are always looking at all kind of opportunities. But at the time being, nothing is decided with that. And I've been on board for 2 months. It's a little bit early to conclude on all those kind of questions. Albin Sandberg: And I think the final questions has been answered. So I think we'll leave there. Bent Oustad: Okay. Then we close the call and thank you for participating. We look forward to the next quarter and see you back in 3 months. Åsa Bergström: Thank you.
Operator: Welcome to Shell's Fourth Quarter and Full Year 2025 Financial Results Announcement. Shell's CEO, Wael Sawan; and CFO, Sinead Gorman, will present the results, then host a Q&A session. [Operator Instructions] We will now begin the presentation. Wael Sawan: Welcome, everyone. Today, Sinead and I will present Shell's Fourth Quarter and Full Year 2025 results. 2025 was another year of consistent delivery and real progress. We continue to execute with discipline and delivered against our targets in service of becoming the world's leading integrated energy company. As always, safety is a top priority. In 2025, four colleagues tragically lost their lives in our operated businesses. We owe it to them, and everyone who works with us, to learn from these incidents and to prevent such tragedies from happening again. On process safety, we continue to make encouraging progress with 30% fewer incidents in 2025 compared to the previous year. Improving personal and process safety is a continuous journey and will remain our top priority. Turning to our strategy of delivering more value with less emissions. Last year, we beat our ambitious CMD23 targets and set out important new financial targets at CMD25. The first of these financial targets is to deliver structural cost reductions of $5 billion to $7 billion by the end of 2028. By the end of 2025, we had already achieved $5.1 billion of reductions with more to come. Nearly 60% of the structural cost reductions came from operational efficiencies, a leaner corporate center and faster value-based decision-making. Achieving this target 3 years early demonstrates the drive of our organization to deliver. The next target is disciplined capital allocation within a cash CapEx range of $20 billion to $22 billion, and we ended 2025 in the middle of that range. This is about greater discipline and better capital allocation to enhance returns and you see that reflected in tough choices like stopping the construction of the biofuels plant in Rotterdam. The third is annual growth and normalized free cash flow per share of over 10% through 2030. We are on track to deliver through a focus on performance and discipline by turning around underperforming capital, and we continue to focus on shareholder distributions through buybacks. This brings me to the fourth financial target. Shareholder distributions of 40% to 50% of CFFO through the cycle. This remains sacrosanct. And in 2025, we delivered at the top end of that range. In short, we are on track to achieve our financial targets, showing that we deliver on what we say we will do. Now turning to our portfolio. In 2025, we executed several deliberate value-driven decisions to strengthen our businesses. In Upstream, we completed the divestment of SPDC in Nigeria, the conclusion of a major multiyear effort. We also completed the Adura joint venture in December, which as of today is the U.K. North Sea's largest independent producer and unlocks additional value. And finally, in Chemicals & Products, we divested our loss-making asset in Singapore and are working to reposition our Chemicals portfolio to unlock further value. These decisive actions demonstrate our focus on value. At our CMD25, we also set an aim of growing our LNG sales through to 2030 by 4% to 5% per annum. And last year, those sales grew by 11%, supported by the highest number of cargoes delivered in a single year. This record was supported by last year's start-up of LNG Canada, where ramp-up to full capacity is continuing. Beyond our organic growth, we also completed the acquisition of Pavilion Energy last year. We also committed to bring new oil and gas projects online that at their peak, will add more than 1 million barrels of oil equivalent per day by 2030, and we're progressing well. By the end of last year, we had already started up more than 1/4 of that new production. We have also further strengthened our deepwater position by increasing our interests in the Gulf of America, in Brazil and in Nigeria. And we took final investment decisions for the Kaikias waterflood in the Gulf of America and for Gato do Mato, now renamed to Orca in Brazil. In addition, we have expanded our footprint for exploration by acquiring acreage in Angola, South Africa, and the Gulf of America. Moving now to marketing, where we continue to high-grade our portfolio. Last year in Mobility, we closed or divested some 800 lower-performing branded sites. And by focusing on performance, discipline and simplification, both Mobility and Lubricants achieved their best-ever results in 2025. And in Power and Low Carbon options, we've continued to high-grade the portfolio through the year, divesting projects like Atlantic Shores and ScotWind, while also diluting parts of the Savion portfolio. These steps are aligning our portfolio with our increased focus on flexible generation and trading. Turning now to the less emissions part of our strategy. At CMD23, we said we would invest between $10 billion to $15 billion in low-carbon energy solutions between 2023 and 2025, which we have delivered on. We have created options in Power and Low Carbon in areas such as CCS and bioenergy. We're now focused on delivering returns on those investments, helping our customers to decarbonize and leveraging our trading capabilities. Last year, we also made significant progress against a number of our ETS24 emissions target. Starting with our target to halve Scope 1 and 2 emissions under our operational control by 2030 on a net basis compared with 2016. We have already achieved some 70% of that target. Next, our target to lower the net carbon intensity of the products we sell by 15% to 20% by 2030. We are on track, delivering 9% in 2025 compared with 2016. Linked to that, we also set an ambition to reduce customer emissions from the use of the oil products we sell by 15% to 20% by 2030, and we met that ambition, achieving a reduction of 18% in 2025. 2025 was also the year we achieved our target of eliminating 100% of routine flaring from our Upstream operations, once again showing that we deliver on what we say. With that, I will hand over to Sinead, who will tell you more about our financial results and our financial framework. Sinead Gorman: Thank you, Wael. Our financial results in the fourth quarter of 2025 were lower due to noncash tax impacts and lower oil prices, which were partly offset by another quarter of strong operational performance. Our adjusted earnings for the quarter were some $3.3 billion. Upstream delivered a strong quarter in the current price environment, and as expected, Integrated Gas results returned to more normal pre-COVID levels as we have outlined in previous quarters. Marketing results were seasonally lower and further impacted by noncash tax adjustments in joint ventures. Products delivered strong results, helped by higher refining margins, partly offset by lower trading, which is typical in the fourth quarter. And in Chemicals, we continue to face challenges due to both low chemical margins and lower operational performance. Fixing and repositioning this business is a key priority in 2026. Turning to cash. Q4 CFFO was robust as we generated $9.4 billion despite some of the typical year-end payments. Moving to the 2025 full year. From a macro perspective, Brent prices on average were over $10 a barrel lower than the year before. Despite this, we are proud that our stronger operational performance drove solid financial results in this lower price environment. Full year adjusted earnings were $18.5 billion, and we generated close to $43 billion in cash flow from operations. And we delivered just over $26 billion of free cash flow. Both Integrated Gas and Upstream had a very strong year operationally, with high controllable availability driving increased production. In particular, we saw increased contributions from higher-margin Upstream volumes, especially in the Gulf of America and Brazil. In Downstream and Renewables & Energy Solutions, Mobility and Lubricants delivered higher margins through increased sales of premium products, whilst also reducing operating costs. As a result, both businesses continue to improve their ROACE year-over-year in 2025, with Mobility increasing to over 15% and Lubricants to over 21%, and with both achieving their highest ever contributions to our results. Chemicals & Products had a mixed year with better refining performance being offset by continued low chemical margins and lower trading and supply contributions, while our Renewables & Energy Solutions business performed in line with expectations. Now moving to our financial framework. Our cash CapEx range for 2026 remains at $20 billion to $22 billion. We continue to maintain a strong balance sheet with gearing of 21% or 9% excluding leases. And our distribution range of 40% to 50% of CFFO remains sacrosanct. We continue to deliver compelling shareholder distributions. And today, we announced a 4% increase in our dividend, in line with our progressive dividend policy as well as a $3.5 billion share buyback program, which we expect to complete by our Q1 results announcement in May. This marks the 17th consecutive quarter in which we've announced $3 billion or more in buybacks. And with that, I will hand back to Wael. Wael Sawan: Thank you, Sinead. Before closing out, I want to take a moment to thank our staff for their hard work, their commitment and their delivery across the year. We're living in a rapidly changing world, but our business model is well positioned for these conditions. That confidence is underpinned by our balance sheet strength, which we've improved in recent years through stronger operational performance and disciplined spending. This has led to enhanced cash generation. We'll continue to focus on what we can control and ensure we are positioned for countercyclical opportunities where they might arise and meet our high bar for investment decisions. Ultimately, we hope it's clear that you can be sure of Shell. You can trust us to stay value focused and disciplined. We have entered 2026 as a more resilient organization. We have raised the bar on operational performance. We are showing more discipline and making great progress to deliver more value with less emissions. And there is so much more to come. Lower costs, further performance improvements supported by the transformative potential of AI and a higher returning portfolio of world-leading franchise businesses. All of this gives us confidence for the road ahead. Thank you. Operator: [Operator Instructions] Wael Sawan: Thank you very much for joining us today. We hope that after watching this presentation, you've seen how we delivered a strong set of results in 2025 and how we are firmly on track to deliver the targets that we set ourselves at Capital Markets Day 2025. And now, Sinead and I will be answering your questions. So please, could we just have one or two questions each so that everyone has the opportunity. With that, could we have the first question please, Jake? Operator: Our first caller is Alastair Syme from Citi. Alastair Syme: I feel obliged to kick us off on reserves. You've listed a huge amount of portfolio refocus in the Upstream. But I guess, to Shell, we've had 3 years of sprint and cost takeout, but at the same time, reserve life has fallen 15%. And if I take you back a couple of years ago, you used to say there was no portfolio problem. And I think now the message is morphed into one that sort of acknowledges there is a bit of a problem to address, but there's no hurry. So I guess the question is what is the plan? How do we frame the time line around hurry? And how can you counter the market concerns that the business is simply shrinking? Wael Sawan: Yes. Thank you very much, Alastair. I'll suggest I kick off and then maybe, Sinead, bring you in. Yes, first, thank you for the question. I think I'll start with what you and I have talked about in the past. Where we start and what I keep saying and I keep hearing back from my investors is that at the end of the day, it's intrinsic value creation that we are driving. And it's particularly value creation per share that we are driving towards. And so there are a few elements of how we are unlocking that. I think you touched on one of them, fundamentally driving the performance culture in the company, the takeout of the $5 billion of cost reduction, and we are now driving towards the higher end of the $5 billion to $7 billion range. There's more to be done on capital efficiency. There's more to be done on improving the returns on the actual capital employed. So there's significant value uplift on that side of it. We also showed, of course, in Capital Markets Day 2025, the trajectory to 2040 for both Integrated Gas and Marketing, where we see our cash flow growing from around $20 billion last year to close to $25-plus billion at a slightly lower capital diet. So all of that is showing the growth. But then let me come specifically to the heart of the question around resource. What we have tried to do is look at the resource as an important KPI in the overall mix, but most importantly, look at the cash flow that's coming from it. I mentioned in Capital Markets Day that we had a gap to 2030 that was close to 100,000 barrels per day to be able to, for example, keep our liquids flat. I'm pleased to say that with the $2 billion of deepwater bolt-ons that we did in 2025 and improved recovery from some of the reservoirs we have, we already have largely plugged that gap of the 100,000 barrels per day. So that actually gives us the runway to be able to derisk the 10% free cash flow per share that we talked about in Capital Markets Day. Your question, though, is a fair one when you look out to 2035. We still have a resource gap there that we plan to fill. But we want to make sure that the bar continues to be high there. And we have a few years to be able to fill that gap. So this is not ignoring the issue. But this is derisking what we can see in front of us, what we can control and making sure that we deliver on our commitment to our shareholders to do it in a highly accretive way. And that's what we want to be able to work on. We are liquidating the 1 million barrels per day of new capacity we're bringing in. Last year, we brought 1/4 of that. We have another 750,000 barrels per day to bring online. We have exciting new projects like Bonga South West, that is also coming in the post 2030 time frame. We need to be able to move those things through. But the core continues to be one of real focus on proper capital stewardship as we unlock that future cash flow. Sinead, maybe you want to add a few words? Sinead Gorman: Yes, just a little bit on that as well because I think you covered indeed how we're closing the gap. Let me just talk you through our thinking a bit. And I think as Wael positioned very well, of course, things like reserves or R/P are important metrics, but it's only one metric as we look at the depth of our portfolio. So let me go specifically on R/P. So roughly speaking, we were at about 7.8 years, as you know, now, which came down from 9. How did we -- what were the decision-making between coming down from 9? Two main elements of that. One was the SPDC sales, so the sale in Nigeria of assets and the other, of course, was the move with respect to oil sands, both of which we've talked over the last year or so with you. And of course, both were very conscious decisions. And of course, the reason they were conscious decisions, if we kept them, we would have stayed at about the same level given all of the additions that we had as well. But we consciously chose not to do that. And that $2 billion of CapEx instead that we move towards deepwater, what did that do? The fact that we put it into deepwater and that was Gulf of America, that was Brazil, that was Nigeria as well and a number of other aspects. Those ended up with very high-margin barrels, but of course, didn't have quite the same length in terms of the R/P or the impact on the R/P. We chose to go with high margin, therefore, creating value rather than just trying to manage to a metric. And of course, as you know, when we talk to the shareholders, it's very much about focus on not moving towards one metric, but actually generating value. Wael Sawan: And so let me close then, Alastair, and thank you for that, Sinead. What I will say is we are, of course, at an inflection point as a company as well. We have really been focused on the performance drive, the embedding the performance culture, and I think made great progress. What I can say and what I will be saying to our investors is both Sinead and I will bring that same focus and rigor now as we have really gotten the self-sustaining performance loop into the company. We will now look at portfolio reallocation, how we are going to be reallocating capital to the opportunities that allow us to unlock even further growth post 2030, and that's where our attention will continue to go in the coming years. Operator: Our next caller is Josh Stone from UBS. Joshua Eliot Stone: Just a question on the buybacks. I'm curious as when you set the buyback, how much of a close call that was this quarter? Because I understand you've got a strong balance sheet, prices seem to be holding up better than expected, but also for the first time in a while, we've got more people buying energy stocks and your shares are clearly rerated with that and they're more expensive. So was that considered at all in your decision to leave it flat? And how much -- how close was that call? Wael Sawan: Thanks for the question, Josh. Sinead? Sinead Gorman: Yes. No, happy to take that. Thanks, Josh. Really good question. And what I like is you're asking us about how we think about it. And it is a conscious decision in terms of capital allocation each quarter, of course. I mean with respect to the buybacks and where do we go on the buyback, I mean, one of the first things I would say is what we've looked at is the fact that we've bought back roughly, what, 25% of our shares, I think, over the last 3 years. And of course, that's at some 20% below where our share price is today. So you can see the allocation around that. So that thoughtfulness is there. The frame that we use has been sort of quite clear. We've always said to you that sort of 40% to 50% in terms of CFFO distribution is sacrosanct. And of course, that varies a little bit quarter-to-quarter because it is through the cycle. So you see that in our thinking. And of course, this quarter was 52%, but you have volatility with price and everything else coming through. So we're very comfortable and very focused on staying within that. But indeed, we still see the buybacks as particularly at this sort of price as very much value led. And of course, we have such a strong balance sheet, as you know, when we're sitting at some 20% of gearing as well. Operator: Our next caller is Irene Himona from Bernstein. Irene Himona: I had two, please. So first, can you please speak around the key financial impacts of the Adura joint venture in the U.K. in 2026 on key metrics like perhaps your cash dividend receipts or Upstream tax rates, et cetera? And then secondly, looking at group return on capital, obviously, it is below double digit. It's clearly not helped by widening Chemicals losses. The Chemicals down cycle appears to be a really prolonged one, which is clearly something that cannot be controlled. So I wanted to talk around what you are controlling in Chemicals and in particular, to ask about progress on the announcement you made at CMD25 of the restructuring intention for Chemicals? So how far has that progressed? Wael Sawan: Thank you very much, Irene. I'll take the second one. Maybe you want to start with the first one on Adura? Sinead Gorman: Certainly. Indeed, Adura really pleased, Irene, to see that actually up and running with our partner on the 1st of December. Teams are doing well there. It's really is a stand-alone venture, of course. You can see them out there looking at raising debt to be able to continue to grow that business and to be able to use capital very efficiently there as well. But you specifically asked about how would we see that play out in some of our metrics. What you see, of course, is because it is a stand-alone entity, you see a lot of the normal aspects pulling out. You see the production reduced coming through in our outlook or that production -- sorry, production being reduced in our Q1 outlook as well. So you see that in the Upstream numbers. And in contrast, what you will see, as you exactly rightly say, we'll see dividends coming in. Now we don't tend to give guidance. Of course, it's a stand-alone venture, as you know, but we expect to see considerable dividends coming through. And of course, I saw yesterday, of course, our partner, of course, made some comments in that respect as well. Venture is strong. It has the ability to grow. It's the largest stand-alone producer, independent in the North Sea now, and they're looking at many more opportunities and are driving hard to be able to return to the shareholders the dividends that they've rightly promised us. Wael Sawan: Thanks, Sinead. Irene to your second question around group ROACE and then the Chems. So a couple of points maybe. Firstly, in my response to Alastair's question, I talked about our real focus on performance, right? We want this company to be the best performing, best returning company in our sector, positioned for longevity and positioned for sustained growth. And so we've been focusing very much on the performance. And actually, that's also starting to show through on the returns. You saw that this past year at 9.4% ROACE. By the way, that was up compared to 2024, despite a $10 drop in oil price. And that shows you we're making progress. Some of that progress is coming through, for example, in Mobility, where we had put a target of getting to 15% ROACE. We're up from 12% to 15% in 2025. Lubricants is up from 19% to 21%. Res, despite the fact that it is still nowhere close to where we need it to be, is up 4% points on ROACE as well between '24 and '25. So we're making progress. And Chemicals is not where it needs to be. And there's a couple of elements around Chemicals that you touched on. Let's talk about, firstly, the strategic element of Chemicals. Nothing's changed from what we talked about in Capital Markets Day. What I also said in Capital Markets Day is we are going to be patient because while we know where we want to go with it, we do not want to be selling at bottom-of-cycle conditions. We have promised our shareholders to be good stewards of their capital. And what we are looking at, at the moment is constructs that could potentially work. I won't update you at this stage on where things are because there's nothing specific to update on. But you can rest assured that we continue to look at opportunities around that. Where I would say I have less patience is in our own self-help. I already indicated a couple of quarters ago that we are looking at what more we can do. So the team did some great work around that. Q4 was a bit more difficult as well because we had a planned downturn in Monaca. But as we come out of that, we hopefully get a bit more tailwind there. But most importantly, we have identified a few hundred million dollars' worth of cost reductions, CapEx reductions to be able to just ensure that we get closer and closer towards free cash flow neutrality. So at least it covers its face in a difficult macro like we have at the moment. Hopefully, that also sets us up for a better performance when we see Chemical margins come through. But we are assuming that if there is a prolonged period of depressed Chemicals margins that we at least need to be able to avoid the bleeding in free cash flow from Chemicals. And that's very much our intent and what we're focused on. Operator: Our next caller is Biraj Borkhataria from RBC. Biraj Borkhataria: My first one is just on operating costs. You've clearly made that a priority in recent years and there's progress being made. When I look at your divisional breakdown, the one thing that surprises me is that when I look at the Renewables business, the OpEx still looks outsized relative to the size of that business and the contribution and I guess, the outlook. So my question on that front is, why aren't you moving faster to reduce costs specifically there? Or is that building options for the future or is there something else? And then just a second question, a follow-up to the resource one. In the past, and even today, you've mentioned you want to be countercyclical. So I guess, there's a balance between knowing where you are in the cycle, but also understanding the competitive landscape. As I'm listening to your peers talk about the same issue over recent months, a number of them have started to talk up M&A. So you could argue there's increased competition on the buyer side. So just some perspectives on your patience and the competitive landscape would be helpful there. Wael Sawan: Biraj, thank you for those questions. Let me take the second one and maybe give you the first one, Sinead. Look, I think you heard me, Biraj, in the third quarter results, open up the space much more for M&A as we start to get much more comfortable that we now have the internal performance to be able to unlock value better than others can. And that to me was an important element of what we needed to do because I didn't want to simply add resource for the sake of it. Of course, we had started with a capital budget of $25 billion to $27 billion. We took it down to $22 million to $25 million in CMD23. We took it down to $20 million to $22 million in CMD25, and we haven't used the full capacity. Not because we can't buy barrels, but because we have said to ourselves that we're only going to go after accretive barrels. That's what's core for us. Now as we look at the landscape, I'd start off by saying the biggest thing we had to do was to continue to create the space for us to have the strategic patience. And to Alastair's question, we now have that line of sight to 2030, which means we built ourselves a few years to be able to really be selective about what we go for. But we are hungry for growth. Don't get me wrong. But we want to do it on the right terms. And so where do we see opportunities to play, where we can synergize, not simply buying the barrels, but where we think we can bring particular technologies where we have synergies with existing assets. You've seen us do deals in Brazil, in Nigeria, and the GOA. Those are the sorts of areas where we can play in, but there are other areas where we are looking for that. We will continue. I can tell you, I have a lot of opportunities coming on -- coming to my desk on a regular basis. And I would say I see more of them starting to screen now than we would have a year ago. But we are looking at making sure that we do not fall into the pitfalls of the past, where we start to sort of do deals for the sake of resource buildup rather than do deals that create value through the life cycle and allow our shareholders to be able to really get the most out of the decisions we're taking. Sinead? Sinead Gorman: Indeed. Thanks, Biraj. You're absolutely right in terms of cost being a focus over the last period, but it's been cost really in service of performance. So what have we done? As you know, we've taken some $5.1 billion out of structural costs over the period. So actually heading into the bandwidth, which we have talked to the band that we talked about as a target for Capital Markets Day '25. So we've done it a couple of years early. So you can really see the business motoring in terms of just as a company, how can we ensure that every dollar is allocated in the right way. And there's a lot more to come. That's clear. And there's a lot of pressure from the boss on making sure we do actually deliver on that as well. But specifically, it's very thoughtful about where we take it out. And as you say, in terms of our Renewables segment, there is more to come. But we've actually taken $1 billion out of OpEx over the last few years there. And we're changing the portfolio mix, remember. So as we change that away from some of the generation assets that we would have had before, we're moving it more towards some of the flex and assets that we can trade around. So of course, what you're seeing is as we make some of the divestments, as we change that portfolio mix, that comes down on that side, but actually goes up in terms of the actual flex side. And actually, we had quite a bit of OpEx that came from our CCGT acquisition in Rhode Island as well. So that's coming through. And remember, that Res portfolio with that Renewables portfolio is continuing to change. And actually, we've done more than 15 deals over the last 2 years in that space, more than half of them actually within the last year as well. So more to come. Operator: Our next caller is Paul Cheng from Scotiabank. Paul Cheng: Wael, can you talk about the new opportunity set. It seems like with the open up of Iraq, Libya and Venezuela and how attractive are those to you guys? And whether you are concerned, the opening up of these countries will compound the oil market oversupply? And if that is the case, how will it shape your capital allocation outlook, if any? Wael Sawan: Thanks for the question, Paul. Look, I'd start maybe first from a longer-term perspective. So we continue to see growth in energy demand for -- well, through to 2050 at the moment. So some 25% uptick between 2025 and 2050 in terms of overall energy demand. We see oil demand continue to grow roughly by that 1 million barrel per day tick, at least for the coming few years. And remember, we're losing around 5% of overall supply due to depletion. So every single year, you're having to refill 6 million barrels per day. So longer term, the fundamentals continue to be very constructive, I would say, on oil. In the shorter term, you're right to sort of hint to the fundamentals being maybe slightly long in terms of supply, but that's being balanced by a lot of geopolitical risk at the moment, whether it is Venezuela, whether it is Iran or others. You're seeing more ships at sea. And that's creating, I think, a bit more balanced and helping the oil price achieve what it has achieved. Now turning to the specific markets that you've talked about. There is, of course, potential to unlock more production, but the world will need that production. So it doesn't concern me. It actually encourages me that we will be able to find the supply to be able to meet that demand. Most importantly, I think we are very well positioned to be able to play in some of these theaters. I was in Kuwait just a couple of days ago where the KPC announced the opening of some opportunities there, which we will be looking with interest in. We are in discussions, of course, with the Libyans. We have an MOU for some fields there. In Venezuela, we are well positioned, in particular, in the gas side, given some of the work that we had been doing even before recent events, and so on and so forth. Iraq, again, we have a strong position there. So we see ourselves as particularly well placed to be able to enter some of these theaters. But again, it's going to depend on the entire sort of risk-adjusted return profile and our ability to be able to say to ourselves, "Is this where we want to deploy our capital?" It doesn't change our appetite in terms of the longer-term fundamentals around oil. We continue to be bullish and constructive on that. Operator: Our next caller is Michele Della Vigna from Goldman Sachs. Michele Della Vigna: I wanted to ask you about LNG. It looks like we're going into a period of oversupply where we may need the shutdown of some U.S. LNG plants at least for a few weeks in the summer. I was just wondering how should we think about that potential outcome into the Shell portfolio with the positive being probably on the trading side, some of the negative in terms of some of the spot gas exposure? And also, in a cheap LNG environment, we should see rising LNG demand. But one of the big areas of growth, which has been China, feels like it may be slowing down and potentially with the geopolitical risk rising, they may not want to depend so much on a commodity, which -- where the U.S. is the largest producer in the world. So just wanted to have, if possible, some of your thoughts on that. Wael Sawan: Thank you, Michele. And let me maybe touch on that. So what do we see in the LNG markets at the moment? Again, if I take the long-term perspective, if anything, we are seeing even more constructive demand on for LNG. We see it more and more playing the role of the stabilizing force in most energy systems. I mean, take Europe, for example, we do not have, of course, the coal assets of past. Nuclear will take a long, long time to be able to bring in as Europe shifts its energy system towards more intermittent renewable energy, you will need more and more of that stabilizing force, which, of course, LNG plays. And that's demonstrated just this year by the fact that we have had record imports of LNG into Europe. You consider now where we are also in the current cycle, even if you think prompt and midterm, just at the moment, we're looking at storage levels in Europe at the low 40% compared to the 5-year average that is closer to 65%. So Europe will continue to play a big role. We see both China and India, actually, also still constructive on LNG, but at a certain price point, which is closer to the $8 to $10 rather than above 10%. So I don't think the Chinese or the Indians are averse to taking more LNG, but they want it at the right price point compared to the alternatives they have, which typically is domestic coal. So where does that leave us as a portfolio? I think we are incredibly privileged to have such a diverse set of supply opportunities, one of the best, of course, being LNG Canada with AECO indexation that allows us to supply our markets in particular in the East. We, of course, also have access -- significant access to U.S. LNG. I don't know whether there will be shutdowns or not in the summer, depending on demand levels and the wave of supply and how quickly it comes. But I would say we are very well positioned given that balance of diversified supply, diversified demand. We have multiple different indexations to whether it's Brent, TTF, we can sell on Henry Hub or AECO and so on and so forth. So the cross-commodity exposure gives us opportunities to be able to create value out of the volatility that comes with that LNG market. So do I expect a length in the LNG market? Who knows? There might be some, but we look through these cycles and create value over the long term for our shareholders. Operator: Our next caller is Kim Fustier from HSBC. Kim Fustier: I wanted to go back to Chemicals. Last quarter, you talked about cutting several hundred millions of dollars from Chemicals. I think you referenced that again today. But I mean, this could be a very extended down cycle of up to another 4 to 5 years. So a few hundred million of cost reductions may not be enough. And presumably somebody has to shut capacity. So what exactly would be stopping you from outright shutting capacity? Is it the benefit of integration with your refining plants? Is it the environmental cleanup costs or labor issues in Europe? And then I wanted to go back also to the Upstream longevity point. You've talked about that and yet we're seeing Shell continuing to put assets up for sale in the market such as Vaca Muerta in Argentina. I would have thought Vaca Muerta has a lot of running room, and you do have plenty of unconventional experience. So if you could help us understand the logic of that particular asset being put up for sale, that would be great. Wael Sawan: I will let, maybe, Sinead start with that second question and correct that fake news article that came out, and then I can address the Chemicals one. Sinead Gorman: I think you just said it perfectly. Kim, I've seen the same article. I don't believe we've said anything about that specific asset at this moment in time. So indeed, lots of things I read in the paper or many other assets apparently that we're selling as well that I wasn't aware of. Wael Sawan: Thank you, Sinead. And Kim to your Chemicals point. Shame on me, I should have also mentioned that, of course, we are also looking at unit by unit shutdowns where required. At the end of the day, we're looking at cash cost of each of these units and making the choices depending on where we are in the cycle. But nothing is off the table. Let me put it that way. We are looking at all the opportunities to be able to really get to free cash flow neutrality at some of these more severe realities around margin, and we are leaving no stone unturned. Operator: Our next caller is Martijn Rats from Morgan Stanley. Martijn Rats: I've got two questions, if I may. I wanted to ask about trading. Sort of full year results is always sort of a good one. I know throughout the year, it can be a bit volatile. But looking back 2025, group return on capital was 9.4%. But often, you're willing to provide a comment about the uplift of the trading created to the group ROACE 200 basis points, 400 basis points, usually they live in that sort of ranges. In 2025, broadly speaking, were we at the upper end of that range, lower end of the range? What was roughly the contribution of trading? And then the other one I wanted to ask, maybe a small point, but it relates to Kazakhstan. There seem to be some punchy compensation claims coming from the government of Kazakhstan now. It's not that -- we've seen this before, but I was hoping you could share some perspective on that situation. Wael Sawan: Thank you, Martijn. Did you want to take the T&S one first? Sinead Gorman: Yes, happy to. Martijn, thank you for that. Indeed, as you know, our trading organization continues to be a core part of Shell's proposition. We have great individuals in there. We have a great set of assets that they get to trade around and some judgments that have to come with that as well. So indeed, we've talked before about the uplift that they provide in terms of being able to optimize across the organization or across the portfolio for us. They've continued to over 2025, as you say, had a very good year as well. Of course, Q4 is typically softer for us in terms of trading, particularly in terms of our crude and products desks. So just about there. And we've talked about that a number of times. And you see that play out in C&P as well, and that continues to be the case this year. They have done more towards the lower end of that range in terms of -- you said 2% to 4% in terms of ROACE. But really pleased with what they deliver, and they're continuing to deliver this quarter as well. So thank you. Wael Sawan: Thanks, Sinead. Martijn, on Kazakhstan, it would be inappropriate, of course, of me to sort of get into details around that given there is some legal proceedings happening at the moment. I think suffice it to say that we are disappointed that we can't see alignment between the joint venture partners and the government on some of these topics. It is -- it does impact our appetite to invest further in Kazakhstan. So we watch the situation with care. We think that there's still a lot of potential investment opportunities in Kazakhstan, but we will hold until we have better line of sight to where things end up. And I leave it to the individual joint venture sort of projects to be able to make sure that they represent the position of the joint venture partners in a unified way. But let me leave it there -- at that point for now. Operator: Our next caller is Lydia Rainforth from Barclays. Lydia Rainforth: A slightly different topic. Agentic AI, I think you signed up with SLB to deploy agentic AI across the Upstream. So I'm just wondering, what does that look like in practice? And what are you trying to get out of that? And possibly linked to that, obviously, you're already at the -- you already achieved $5 billion in structural cost savings. Target is $5 billion to $7 billion by 2028. So why not lift that? And then secondly, I mean just the idea that there's more to come, the free cash flow growth per share target or ambition of more than 10% out to 2025 -- out to 2030. 2025 was sub-5%. So was that a disappointing number to you? Or was it just as you expected? And basically, it does imply that there needs to be an acceleration of free cash flow growth. So when do you actually see that? Is that '26? Or is it more '28 to '30? Wael Sawan: Thank you for that, Lydia. Did you want to take that second question? I can touch on agentic AI and how we're deploying it? Sinead Gorman: Certainly, indeed. So as you say, we had -- so in terms of the free cash flow per share, it is a target, as you say, out to 2030. We also knew that it was going to be variable across the different years as well, Lydia. So you see that year-to-year as it comes through. And of course, in this upfront period, of course, the share buybacks are a key part of that as well as we go through. So in terms of where we disappointed in terms of where it was for 2025? No. We knew where it was expected to come. And we've, of course, got a wave of different projects that are coming through. We've still got LNG Canada, of course, that is still to ramp up to its full capacity, and we talked about it as well, the number of different projects that seem to go. It is not linear. We know that, that portfolio will change over time. And of course, as Wael has already alluded to, there's a lot more to come in terms of performance. So that drive on performance is certainly not over, and you'll see that play out as we continue throughout the rest of the decade as well. Wael Sawan: Yes. And to your question then, Lydia, on -- to the broader bucket around the cost reduction. So I think as you rightly said, we signposted the $5 billion to $7 billion, really pleased with the momentum the team continues to drive getting us to the lower end of that already. My expectation of the team is we do hit the higher end of that come 2028. So we will be driving towards it. And AI is one of those key elements. Agenetic AI is one of those elements. Now where are we on that journey? I'd start off by saying that the investment we have been making in data cleanup over the past few years, the investment we are making to be able to harmonize ERP systems. For example, in trading and supply, we are looking to modernize our ERTMs to standardize them and to make sure that they bring the data-centric architecture that allows us to scale up AI's benefit across the organization. So this is playing out not just in upstream. It's playing out all across. In Upstream, specifically, it's playing very much into the subsurface space and how we high-grade our interpretation of subsurface, both for existing reservoirs, but also as we look into exploration. And it's playing up in areas like proactive technical monitoring and the maintenance that we do. I would say agentic AI is also playing up very much in our functional journey. So as we look to continue to not just apply automation into the way we work, we are challenging the way our workflows are constructed because agenetic AI means that we can fundamentally approach those work outputs in a different way. So I find it an exciting journey for us. We are not yet banking all sorts of cost reductions coming out of agentic AI because, to be honest, we're still learning. There is a lot of hype around it at the moment, and we're trying to focus on where can we actually deliver real cash gains rather than talk about it. And so I will withhold judgment as to how much it will impact the bottom line until I can give you an honest reflection on the impact it can have. Operator: Our next call is Lucas Herrmann from BNP Paribas. Lucas Herrmann: A couple, if I might. Just going back to Alastair's opening question. When you think about resource and you think about resolving the resource issues for want of a better word, are we -- do you think -- we're really thinking about resolving for a deepwater issue in that, that's your greatest strength, should we say one of your greatest strengths certainly in terms of the Upstream. And obviously, the margins there and the return on capital there has the potential to be very attractive. So question one is really just back on Alastair's, what are we trying to resolved for? And question two, far easier. When I think about this year and LNG, it's really about volumes and about growth and opportunity. I mean, it looks as though you've got incremental volume coming from Calcasieu from -- I don't know how free things are around Pavilion, voluming in from Plaquemines, volume coming in from Canada, obviously. So it feels as though we're at a point now where LNG in volume terms at least should really start to drive improvement. And perhaps you can add to that by just commenting on where Nigeria Train 7 is and what your thoughts on timing are there. Wael Sawan: Thank you, Lucas. I'll ask Sinead to take the second question in a moment. Let me just address the first one. When we think about the resource base that we want to sort of add to the funnel, I'll tell you we're agnostic, Lucas. I mean, we start from a position of we have a differentiated strength in deepwater. And of course, we can play into that strength. But we also have some real strengths in a bunch of basins with a bunch of technologies in our conventional oil and gas portfolio. And we have continued to hone our strengths in areas like Shales. I mean, look at what we're doing in Groundbirch, look at what we're doing in the Vaca Muerta, look at what we're doing with QGC, the upstream part of our Queensland assets. And so we are looking at how we can actually complement some of these strengths and create value out of it rather than trying to be too narrow. At the end of the day, this is back to what I talked about earlier, creating value per share and finding ways to be able to actually deploy our capital in something that's going to be accretive. And so that is our -- let's call it our North Star rather than necessarily what particular resource and in what country. Sinead? Sinead Gorman: Thanks, Lucas. Indeed. You're asking about what is our expectation in terms of some of the LNG volumes coming through? I think two ways to take it. Of course, you're right, we have volumes that are coming up, whether that's indeed LNG Canada actually delivering in terms of up and -- ramped up and getting to its full potential. We've got a number of third-party volumes, as you mentioned, coming through. And then, of course, we'll have different items such as Qatar in the years to come. But it's more about what we do with those. At the moment, we have quite a balanced portfolio. We don't have a lot of additional length, and we talked about that before. We're a little bit tighter. And therefore, we haven't had as many opportunities to be able to deploy some of that trading capability that we have had in the past in different positions around the world. Some of those volumes will continue to come in the time period. But also if you look at it, we talked about actually having a growth in terms of our LNG sales of 4% to 5% coming through over the next period per annum, actually, through to 2030. Actually, what we saw in this last year was our sales grew by 11%. So you can see that sales side of things absolutely there and continuing to grow, and we need the volumes to be able to match that. So of course, yes, some of those volumes will start coming through as well. Operator: Our next caller is Doug Leggate from Wolfe Research. Douglas George Blyth Leggate: Wael, I know this reserve number, you've kind of inherited that. It's been flogged to death today. But I want to ask you a direct question. As you inherited the portfolio several years ago now, do you believe legacy Shell has underinvested? And if so, how do you fix it in short order, whether through M&A or without a step-up in CapEx? That's my first question. And my second one is probably for Sinead. And it's just going back to the recommitment to the buyback. Going back to your strategy day, you had assumed a flat real oil price. Can you maintain that 10% free cash flow growth per share without the help of a flat real oil price or without leverage? Wael Sawan: Good. Let me take the first one then, Doug. Look, I mean, I don't often look back. And if I were to look back, I would say, I wish we hadn't walked away from Guyana when we did. That's the honest truth. How do we resolve the issue going forward? Look, at the end of the day, I think we play to our strengths. I mean, today, we can underwrite a production flat line on liquids, and we have said we're growing our gas by 2% between now and 2030. And what we are finding is, as we really focus on understanding of our reservoirs, really focus on making sure that we are going after every drop, that is really unlocking value. I mean, remember, these reservoirs were barely scratching the surface of 25% to 30% recovery. You add 1% or 2% recovery from these reservoirs and you can sustain without massive capital outlays. Now having said all that, that doesn't mean we don't play with seriousness and other opportunities. And so how are we going to look at that? One, we need to keep doing what we're doing inside the fence and do the best that we can to unlock those resources. Number two, we will leverage the strength of this company to be able to be out there to partner with the likes of Venezuela, with the likes of Libya, with the likes of Iraq, with the likes of Kuwait and others as they look to be able to open up with partners that they trust and partners that have worked with them for a long, long time. We continue, by the way, to focus on our own exploration capabilities. which we have recently had a full reset of the exploration team, changed out the leadership of that team. And we're starting to see the early stages of success in terms of really securing some exciting acreage in a place like Angola. We secured acreage in -- more acreage in South Africa, acreage in the Gulf. And so that's the other, call it, value accretive way of doing it. And then selectively, we will continue to look at the right M&A opportunities with that high bar that I have referenced, but it needs to be able to justify itself to be a value accretive deal. Otherwise, we don't do it, and we have the time to be able to play that out into the coming years. Hopefully, that helps, Doug. Sinead? Sinead Gorman: Indeed. Doug, good to hear from you here. You asked a question that can be taken from two different angles, one of which is just the confidence in terms of where we're going to for 2030. So indeed, that confidence comes from two aspects. It's from performance and it's, of course, from returns. On the performance part, I think Wael has talked to that, that's about driving the company hard, ensuring that every asset delivers on what it can and actually going even further than that. So you heard about the wave of projects that are coming. So you hear on that aspect of it as well. The other is about effectively return of capital and return on capital. So in terms of that, if I take you through it in terms of return on capital, we are clearly entering into a phase of capital reallocation. You see it in what we're doing. You see on where we are moving our capital to in terms of allocating it more towards the Upstream and Integrated Gas areas versus where it would have been in the past as well. So that's about return on capital. In terms of return of capital, so let's take you through. We've talked about it before. So what's our thinking in that? How do we go about it? We've got 40% to 50% in terms of distribution, which is sacrosanct. You've heard us talk about it more and more. So I don't need to go into that in great depth. But what also we have is we have a very healthy balance sheet. Our balance sheet is sitting at some 20% in terms of gearing. Now remember, we've had a range of 10% to 30%. You always say to me, let's look back over time. So over the 10 years, we've gone between 10% and 30%. So sitting at some 20% is very healthy. I'm very comfortable with that. And of course, I'm even more comfortable with that because during that time, we've managed to buy back 25% of the shares of this company and done so at a price that averages out at some 20% lower than today's share price as well. So you can see the creation of value there. But of course, one of the things that you ask is how is that going to be in terms of net debt. If you look at the 3-year period, actually, our net debt is roughly the same level as it was before. But what has happened, of course, is that our -- what you see is the gearing has changed, and that gearing has gone up roughly 2%. Where does that 2% come from? Well, actually, interestingly, 3/4 of that 2% is down to those distributions that we just talked about that our shareholders tell us time and time again that they love and they appreciate the way forward we're doing on that. And actually, the last bit of it, so the remainder comes from interestingly, the Netherlands pension reform, if you remember, back a few quarters ago, which is a bit specific to us, but that had an impact in terms of equity as well. So I'm very comfortable with where we are in terms of a balance sheet perspective and where we are from a net debt. And actually, when I look at net debt relative to the cash flow, the CFFO of this company, it is incredibly healthy, not only from our perspective, but also relative to our peers as well. So we're comfortable with the position of where we're at. Operator: [Operator Instructions] Our next call is Henry Tarr from Berenberg. Henry Tarr: The question probably is a follow-on from that. And I guess then, you've talked about securing acreage. Are you happy with sort of recent exploration performance? And I guess then, as you think about resource beyond 2035, is more capital going to be allocated towards exploration? And do you have a plan to sort of improving some of the returns there? Wael Sawan: Henry, thank you for the question. As part of the reset, what we have done is not just put new leadership in, new targets in, but also make sure that we are really restraining the capital that we're putting into exploration to something that we feel is fit for purpose. So this is not an open bucket, let's go back to the swashbuckling days of exploration everywhere. We need to be able to prove to ourselves that we can create value out of that. And so you asked me for my report card on exploration. I'd say it's mixed. Really pleased over the last year where we had a good step-up in commercial discoveries in basins which are familiar and known to us, smaller volumes, but highly valuable barrels that allow us to tie back into existing hubs. Less pleased with the fact that we haven't found the bigger plays that allow us to potentially create big new hubs. And so that's the space we need to continue to work on to improve. That first bucket is motoring on well, and I think we have filled the funnel with good opportunities. I think we've really started to fill the funnel for the second bucket with some exciting ones. I mentioned the likes of Angola, which I'm really keen to sort of see where we can get to with that. And that's one that we need to be able to go. But I would characterize our pursuit of resources as being not one that is dogmatic around exploration or M&A or NBD, new business development. We will look at where best to deploy that capital depending on track record, on that risk-adjusted return, where we think we can create value, and we will pivot depending on where that value can be created. Otherwise, we will start to have tunnel vision down one pathway rather than keeping options open and creating value through whatever is in the money at that point in time. Operator: Our next caller is Christopher Kuplent from Bank of America. Christopher Kuplent: Wael, I wanted to ask you about the state of the M&A market. Not what you're about to buy, I get you. You're agnostic on lots of levels. But I guess it'd be interesting to hear from you, you've been in a number of data rooms, what deals that are currently being signed, what they are telling you whether this is a buyer or a seller's market, particularly when we speak about the assets that you're looking for, i.e., resources that are yet to be developed, whether it's the Namibian farm down that we've seen from Galp or others. Where do you think the bid-ask is currently sitting? And if I may squeeze in another opportunity for Sinead to deny fake news. Tell us what's happening with LNG Canada, whether it's FID of Phase 2 or whether it's a farm down there? Wael Sawan: Do you want to start with that one? Sinead Gorman: Yes. No, absolutely. Thanks, Christopher. And indeed, you know what I will always say on anything is similar to Argentina. Of course, you see a lot of news coming through. We will look at every opportunity to deploy our capital sensibly and to maximize value. So we have no -- what is it, sacred cows, holy cows. We've used both expressions or I've used both expressions throughout. But in terms of LNG Canada, what I would say is we're not divesting from assets that we have high conviction in. So very much in LNG Canada, we're looking at making sure that, that performance is delivered. I think what you're seeing is a commentary in the press about reallocation of capital and speculation as to whether we would look to get out of anything, which is , say, parts or elements of it. The way I think about it is just pure and simple, where are the returns on every part of our asset base, and therefore, is this somewhere where I should have my money tied up, and that's what Wael and I spend our time looking at or is there somewhere else it could go. And that's actually true across the whole of the portfolio. We will look to maximize the value of every dollar we have sitting there. So if it's low-returning assets or if there's a better place to put it, we will do that. And you saw it, for instance, with the Colonial pipeline. We were able to realize value from our stake in the Colonial pipeline. It wasn't a strategic control point for us. We were able to actually exit at some over 9x EBITDA as well. So it's those sorts of things that we will continue to look to do. Wael Sawan: And to Sinead's point there, Christy, that focus on capital reallocation, I would say, is an important now area of my and Sinead's focus in this part of the journey that we're on as a company because we believe there is over 15% of the capital employed that we have, the $225 billion, that we could actually redeploy into higher return opportunities, which we want to actively be looking at. To the heart of your question, and that, of course, plays into it as we redeploy some of that into, for example, M&A opportunities in Upstream and beyond, I would say the market is somewhere in the middle at the moment. It used to be at the higher end of the 60% to 70% range, and now we're closer to the lower end of that 60% to 70% range. And it's sort of in that space. So it is not out of what we have seen, call it, mid-cycle conditions in the past. I think there's different things at play. I mean, there's one interpretation of the subsurface by different players. There's desperation by some to be able to create investment cases for themselves. And what you have seen us do is to look at all of these. And where we have been able to win is where we have had a real differentiated advantage like the bolt-ons that we did in 2025. Now as we look at some of the other opportunities, I'm sure things will continue to evolve. And we'll see how we will compete for those. But the most important thing for me is to keep that broader frame of strategic patience, accretion when we do these deals, and making sure that we can add value to the barrels that we're bringing in, not simply adding resource for the sake of being able to satisfy a KPI in our books. And that's the approach that we will continue to use. It is fair to say that this will take more of our time, of course, as we get that performance muscle much more embedded into the organization. Operator: Our final caller is Ryan Todd from Piper Sandler. Ryan Todd: Maybe if I could ask one on an asset that you mentioned earlier and has also been in the news, Bonga South West. I think reports have suggested that you're targeting the 2027 FID there in Nigeria. Can you talk about what hurdles you need to clear over the next 12 to 18 months to reach FID? And then maybe more broadly, could you talk about the broader resource opportunity in Nigeria and other kind of existing basins within your portfolio like that and what may or may not have changed to make things more attractive in some of those areas? Wael Sawan: Ryan, thank you for that question. Let's start with Nigeria. I was there, I guess, a couple of weeks ago now to meet the President and was very encouraged by the real drive to be able to support investment in the resource base of Nigeria. Of course, you know what we've done on the onshore, having exited that. That's opened up our opportunities now much more in the offshore. Bonga South West is a material resource. And what were the conditions precedent? A key condition precedent was a set of fiscal support to be able to make this an investable project, which I was very pleased that the President was committed to providing in the coming days as part of a gazetting process that needs to happen, which means we already have now kicked off FEED. And indeed, as you say, looking to develop that into hopefully what is an investable project. So now it really is just follow through on all sides to be able to make this -- the project we need it to be. It's important to recognize that there is a lot behind those funnels in deepwater Nigeria for us. We have a project called Bosi. We have projects like Adura. These are all projects that now are starting to make their way through the funnel as the investment climate opens up in Nigeria. And we are talking about hundreds of thousands of barrels there. And so we are actively going after those and developing them. Of course, where we continue to have a lot of music is in Brazil and in the Gulf of America, where we have existing resources. Some of the discoveries that I've mentioned are in the Gulf that tie back into our existing asset bases as well. We're excited by areas like Oman, where we have significant access to gas resources in the blocks that we operate. We're building out in Malaysia at the moment and so on and so forth. So this is a portfolio that has -- that continues to create opportunities for us. And we are making sure that what is within our reach, we are maximizing the value from, while at the same time looking at those exploration and M&A opportunities that I referenced earlier. Let me, therefore, close off, and thank you for your questions and for joining the call on behalf of both Sinead and myself. In conclusion, we delivered a solid set of results in 2025. And looking ahead to 2026, we believe we are well positioned with an investment case that remains robust through the cycle as a result of the actions that we have taken and continue to take. Lastly, I'd like to highlight a number of upcoming publications, including our annual report release on the 12th of March. And on the 16th of March, we will publish our annual LNG outlook, the LNG strategic spotlight as well as the response to the 2025 AGM shareholder resolution. Wishing you all a pleasant end of the week. Thank you very much for joining.
Operator: Good morning, and welcome to Malibu Boats Conference Call to discuss Second Quarter 2026 Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Malibu Boats. As a reminder, today's call is being recorded. On the call today from management are Mr. Steve Menneto, Chief Executive Officer, and Mr. David Black, Chief Financial Officer. I will now turn the call over to Mr. Black to get it started. Please go ahead, sir. David Black: Thank you, and good morning, everyone. Joining me on today's call is our CEO, Steve Menneto. On the call, Steve will provide commentary on the business, and I will discuss our 2026 financials. We will then open up the call for questions. A press release covering the company's fiscal second quarter 2026 was issued today, and a copy of that press release can be found in the Investor Relations section of the company's website. I also want to remind everyone that management's remarks on this call may contain certain forward-looking statements, including predictions, expectations, estimates, and other information that might be considered forward-looking and that actual results could differ materially from those projected on today's call. You should not place undue reliance on these forward-looking statements which speak only as of today, and the company undertakes no obligation to update them for any new information or future events. Factors that might affect future results are discussed in our filings with the SEC, and we encourage you to review our SEC filings for a more detailed description of each of these risk factors. Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as adjusted EBITDA, adjusted EBITDA margin, and adjusted net loss income per share. Reconciliations of these GAAP financial measures to non-GAAP financial measures are included in our earnings release. Finally, during today's prepared remarks, comparisons are to 2025, unless otherwise noted. I will now turn the call over to Steve. Steve Menneto: Thank you, David. Good morning, everyone. Before I get into the business update, I want to take a moment to formally introduce David Black as our Chief Financial Officer on his first earnings call in that role. As many of you know, David was appointed CFO in November after serving in several key financial leadership roles with Malibu Boats. David has already played an instrumental part in our financial organization and strategic planning. And he's been deeply involved in shaping the financial priorities that support our long-term growth and disciplined capital allocation approach. I'm confident you'll appreciate his insights as he walks through the quarter and our outlook shortly. I'm pleased to have him alongside as we continue to execute our strategy and drive shareholder value. Now turning to the quarter. We are pleased to report solid second quarter results as we enter the early boat show season. Net sales of $188.6 million came in ahead of our expectations despite what remains a continued challenging retail environment. And adjusted EBITDA margin was in line with our plan. While the retail environment is tracking as expected, through the first two quarters of the year, our Malibu year-end sales event was successful and outperformed the prior year. Serving as an effective tool to drive December retail activity. The promotional environment remains competitive. But during both the sales event and the early boat shows, we were encouraged by the strong customer response for our new model year boats and the continued momentum across our brands. Looking ahead, we're excited to debut two additional model introductions at the Miami International Boat Show next week, we will unveil the new Pursuit 286 and the Pathfinder 2800. We look forward to connecting with many of you there and showcasing our differentiated state-of-the-art products. Underscoring that differentiation, the Malibu 23 LSV is once again recognized by Wake World's Riders' Choice Award as surf boat of the year. Marking the sixth consecutive year we have received this honor. This recognition reflects our long track record of delivering performance quality, and innovation and reinforces our leadership position in the towboat segment. Customer-driven innovation remains central to our strategy and deeply embedded in how we operate. Regardless of the market environment, we continue to invest in our people, our partnerships, and our capabilities to push the pace of innovation and to elevate the entire ownership experience. Guided by our build, innovate, and grow framework, we are focused on putting the boater at the center of everything we do. From performance, safety, and personalization on the water to technology, connectivity, and support throughout the ownership lifecycle. While much of this work happens behind the scenes, we are laying the foundation for future product introductions and expanded partnerships that we believe will further differentiate our brands, strengthen our dealer network, and position us to capture share and drive long-term value as the market normalizes. Turning to our dealers. We continue to work in close partnership with them as we navigate the current market environment. Guided by our established playbook of prioritizing dealer health and tightly managing channel inventories. We are encouraged by the healthy and current inventory position of our model year 26 boats which are presenting well across our dealer network. While the broader industry continues to work through a modest overhang on noncurrent inventory, this disciplined approach allows us to introduce new products with confidence. Support our dealers in meeting retail demand, and position ourselves to capture share as the market stabilizes. In addition, our dealers continue to be encouraged by the early traction we are seeing with MBI acceptance as we work closely with our financing partners to thoughtfully roll out this tool across our network. The program provides a competitive retail financing option including rates as low as 3.99% and gives dealers another effective way to engage customers and close sales. What began as a pilot within our Malibu and Axis brands is gaining momentum as we expand the program across our broader portfolio. We are also continuing to build OEM to OEM relationships through our newly announced marine components business, which represents a natural extension of our vertically integrated business model. Our initial focus has been on putting the right business systems and processes in place, and as the foundation comes together, we are beginning to see early traction with our soft grip flooring and trailer offerings including engagement with two new customers which provides an early proof point of adoption. While these initiatives remain in the early stages, we are focused on applying these learnings to further strengthen our capabilities, refine our approach, and thoughtfully expand this platform over time. We will provide updates as these efforts progress. Finally, I want to touch on our operational excellence and continuous improvement initiatives, which remain a hallmark of our organization regardless of the market environment. We continue to leverage the MBI advantage to drive quality, efficiency, and consistency across the business. During the quarter, we made further progress on our centralized sourcing initiatives, we are seeing benefits across our brands as we leverage our scale to improve supply chain management, lower direct costs, and enhance quality controls. These efforts ultimately support a better customer experience and position us well to mitigate potential tariff impacts as we look to minimize price increases passed on to the consumer. Looking ahead, our expectations for the broader marine industry remain unchanged. We will continue to monitor signals for broader market recovery and manage the business guided by our priorities. Protecting dealer health, maintaining operational discipline, and driving innovation. With that, I'll turn the call over to David for a detailed review of our financial results. David Black: Thanks, Steve. Our results in the second quarter were slightly above our expectations. Net sales decreased 5.8% to $188.6 million and unit volume decreased 9.5% to 1,106 units. The decrease in net sales was driven primarily by decreased unit volumes across all segments resulting primarily from lower wholesale shipments and driven by unfavorable segment mix and unfavorable model mix in our Malibu segment, partially offset by a favorable model mix in our cobalt, saltwater fishing segments and inflation-driven year-over-year price increases. From a mix perspective, Malibu and Axis represented approximately 46.4% of unit sales. Saltwater fishing represented 25.5%. And cobalt made up the remaining 28.1%. Consolidated net sales per unit increased 4.1% to $170,544 per unit. The increase in overall consolidated net sales per unit was driven primarily by a favorable model mix in our cobalt and saltwater fishing segments and inflation-driven year-over-year price increases. Partially offset by an unfavorable model mix in our Malibu segment and an unfavorable segment mix overall. We expect segment mix to remain unfavorable, pressuring ASPs throughout the fiscal year. This is primarily driven by a challenging year-over-year comparison influenced by timing of production cuts across segments and the ongoing seasonal segment mix shift. Turning to profitability. Gross profit decreased 32.9% to $25.1 million and gross margin as a percentage of sales was 13.3%. This represents a decrease of 540 basis points compared to the prior year period. The decrease in gross margin was driven primarily by fixed cost deleverage across all segments, due to lower sales and higher per unit labor and material costs across all segments. Selling and marketing expenses increased 1.4% year over year driven primarily by higher personnel-related expenses. As a percentage of sales, selling and marketing expenses increased 20 basis points to 3.2%. General and administrative expenses decreased 21.5% or $5.7 million. The decrease was driven primarily by a decrease in legal fees, incentive pay, and stock-based compensation expense. As a percentage of sales, G&A expenses were 11%, representing a 230 basis point decline versus the prior year. GAAP net loss for the quarter was $2.5 million compared to GAAP net income of $2.4 million in the prior year. Adjusted EBITDA for the quarter decreased 52.5% to $8 million and adjusted EBITDA margin decreased to 4.3% from 8.4% in the prior year. Non-GAAP adjusted net loss per share was $0.02 compared to adjusted net income of $0.32 per share in the prior year. This is calculated using a normalized C corp tax rate of 24.5% and a basic weighted average share count of approximately 19.1 million shares. For a reconciliation of GAAP metrics to adjusted EBITDA and adjusted net loss income per share, please see the tables in our earnings release. Turning our attention to cash flow. We generated $8.4 million of free cash flow during Q2 inclusive of $4.4 million of capital expenditures. During the quarter, we expanded our share repurchase program to $70 million, reflecting our board's confidence in our long-term strategy, strong financial position, and commitment to disciplined capital allocation. Consistent with that approach, we completed $20.8 million of share repurchase representing 751,000 shares repurchased during the quarter. Taking advantage of what we viewed as attractive market conditions. We believe this was a prudent use of capital alongside our ongoing investments in the business. Looking ahead, we will continue to be thoughtful and opportunistic in our capital deployment balancing investments for growth with actions that prioritize shareholder value. Turning to our outlook for the full fiscal year. Our markets are performing as expected, and our view has not changed. We continue to anchor our outlook with the expectation that our markets will decline in the range of mid to high single digits for our fiscal year. With that said, for the full fiscal year, we expect sales to be flat to down mid-single digits year over year. For Q3, we expect net sales to be in the range of $198 million to $202 million. We anticipate consolidated adjusted EBITDA margin for the full fiscal year to be in the range of 8% to 9%. As we mentioned last quarter, this guidance incorporates a modest direct impact to our fiscal 2026 cost structure due to tariffs, which we continue to estimate between 1.5% to 3% of cost sales, assuming the current tariff rates. For Q3, we expect adjusted EBITDA margins of approximately 8.5%. To close, we have delivered year-to-date results consistent with our expectations. Retail trends are tracking with our outlook for the year. And with dealer inventories in a healthy position, we are well-positioned to execute through the back half of the fiscal year. We are closely monitoring market conditions, and if demand improves, we have the capacity and operational flexibility to scale production in line with retail. In the meantime, our business model remains resilient, and we continue to generate positive free cash flow despite a softer market. Our focus remains on disciplined execution, operational excellence, and the prudent deployment of capital to drive long-term value for our shareholders. With that, I'd like to open the call up for questions. Operator: As a reminder, to ask a question, you will need to press 1 on your touch-tone telephone. If your question has been answered or you wish to withdraw your question, please press the 2 keys. The first question comes from Joe Altobello with Raymond James. Please go ahead. David Black: Hey. Good morning. This is Martin on for Joe. Was wondering if you can quantify how much the higher boat show expenses weighed on EBITDA margin, whether that's year over year or quarter over quarter? Yes. When we think about the year-over-year promo related to year-end sales events and kind of the normal cadence for Q2, it's about 50 bps cost pressure that we saw for the quarter. Right. I think that's helpful. And, Eva, you kinda mentioned a little bit about Martin Mitela: inventories. It sounds like the industry will have a little bit of overhang, but you're a little better off. We get an idea about the delta between your inventories and kind of what's going on in the industry? David Black: Yeah. I think the industry as a whole is in a healthy position. There are pockets as usual of kind of elevated weeks on hand. But from our perspective, we've done the, you know, the appropriate thing to address those, and we feel good about kind of where our weeks on hand are from a historical perspective. Martin Mitela: Great. Thank you, and best of luck. David Black: Thanks. Operator: The next question comes from Michael Albanese with Benchmark. Please go ahead. Michael Albanese: Yes. Thank you. Good morning, guys. David Black: Hey, Mike. Just was wondering if you could maybe elaborate I know it's early, but, you know, I believe you wanted to get the MBI acceptance program rolled out for the boat shows. Could you just talk about any incremental lift you're getting there or whether you're seeing that translate to improved conversion? Michael Albanese: Or is it just too early to tell? Steve Menneto: It's early. No question. It's early. We just got out, you know, in our other brands. But we did see a couple of boat shows a higher take rate on our 3.99 So it's encouraging. You know? So not enough to make a trend and start reporting trends and so forth, but early early you know, feedback from our dealers was very positive from a driving traffic to the booths at the at the boat shift as well as it did help close handfuls. Michael Albanese: Awesome. Thank you. And then if I could just kinda ask the same question regarding your on the centralized sourcing. You know, if you could just kind of elaborate on on maybe any cost savings David Black: you're getting out of that thus far. Michael Albanese: Yeah. No. And and if you if you look at our guide and what that implies from a margin growth on the back portion of the year, The way we're thinking about that, a big portion of that is going to come from the centralized sourcing efforts that we've undertaken as you as you indicated. We're starting to see that hit the p and l, and we expect that to to continue on the back where of the year. So so we think there's a meaningful benefit to to be seen as as we move through the remainder of of this fiscal year and then and then beyond. Awesome. Thank you, guys. Operator: The next question comes from Kevin Condon with Baird. Please go ahead. Kevin Condon: Hi, good morning and thanks for taking my question as well. I wanted to ask if you've seen any shift or since any change in dealer sentiment amongst your dealer group just as we get a few boat shows, in in 2026 and just any any shift in terms of attitude towards taking on inventory ahead of the season? Steve Menneto: The, you know, the feedback from the dealer has been, you know, as you've been seeing all along Mixed retail, there's been shows that have been positive other shows that that have been a little weaker. But overall, it's been a positive trend. It has resulted in in additional orders, of course, because we do sell some, you know, custom boats and so on. So you know, again, we're we're we're happy about where the boat shows are going. It's meeting our expectations. And, you know, we have a lot more in front of us, so more to come as we get to the early part of the season here and, you know, of course, Miami next week. So we're encouraged and, you know, that's why, you know, like we talked about in our prepared remarks is, you know, we have our guidance unchanged. Kevin Condon: And then apologies if this was a a metric you gave last quarter or not. But in terms of the guide, is there a thought about keeping inventory flat or taking boats out of the channel David Black: as you look like end of fiscal year to end of fiscal year? Kevin Condon: Yes. No, I think just given the fact that we expect the market to decline, you would expect there to be some level of destocking. That being said, you know, as the as we move through the back portion of the year, we expect that to stabilize. And to the extent that the market continues on that trend from a positivity then we have the chance to begin matching retail with wholesale. But but we do imply some level of destocking for for this fiscal year. Steve Menneto: Thanks. Operator: The next question comes from Brandon Rollé with Loop Capital. Please go ahead. Go ahead. Brandon Rollé: Just on the higher labor costs, could you talk about your outlook for labor costs moving forward? And if you see if there's any material relief as well on that side. Thank you. David Black: Yeah. I think we're always focused on operational effectiveness and and excellence. And so, you know, we expect as we move through the remainder of the year, not only from a labor per unit cost, but from the centralized sourcing efforts that we talked about, we'll start seeing those benefits flow through into into margin into those quarters. Brandon Rollé: Okay. Great. And Steve Menneto: on the competitive landscape, just in terms of the ski weight category as a whole, are you seeing any bounce back for the category versus the broader industry? And is there anything that you feel like you could do as a OEM to get people reinvigorated in in the category? Thank you. Seeing for the same. And as far as what we can yeah. You know, there is a lot of effort amongst you know, what we're at at Malibu access and also our competitive David Black: group. Steve Menneto: At other, you know, on e way in segment. You know, we're all trying to need to put you know, the segment or get back to growth in the segment. And, you know, we'll continue those efforts and and on our own end as we work together in some of our you know, some of our marine groups that we that we team up you know, and execute those efforts. Great. Thank you. Operator: The next question comes from Jaime Katz with Morningstar. Please go ahead. I guess when I Jaime Katz: look at the third quarter EBITDA margin guidance of 8.5 it looks like it implies the fourth quarter is going to have some pretty significant EBITDA margin expansion. And I understand that there are these sourcing benefits that you're getting and gains from MBI, maybe that go into that. But what gives you guys, I guess, confidence that you can extract that much operating leverage out of the business when the industry is still sort of flattish? David Black: Yes, Jaime. Hey, this is David. So I think, you know, I break it into three different buckets from a lever perspective. So the biggest portion of that, we expect sequential growth on top line. And so as we move through Q3 and Q4, we expect to get fixed cost leverage, you know, benefit. And then centralized sourcing, we've been working on that, you know, since Steve started here, and, you know, we're seeing some pretty significant benefits. But they haven't made it their way into the p and l yet. And so we're working through that higher cost inventory and we expect that to to to be a big driver in in the back portion of the year. And then obviously, as inventories stabilize, we promotional dollars to decrease as well. So I think those three things collectively together are are the main drivers from a margin growth perspective in the back portion of the year. Jaime Katz: Yeah. I think it's it's sounds like the promotions were not mentioned as problematic in the last quarter. So is there anything that you guys have seen in the cadence of promotions that's noteworthy? David Black: No. I you know, actually, as we think about it, this is more of a return to normal. We had a more successful, you know, year in event than what we were anticipating, and that kind of drove some of that promotional dollars. But as we move into the back portion of the year, you know, if you look back pre pandemic, the cadence was always margin would grow over the back portion as long with as long with top line. And so we expect that to return, as we move into kind of a more normalized environment. Jaime Katz: Okay. And if I can ask one last one. Any initial thoughts on the tie up that was announced this morning and how that impacts you guys competitively and maybe why or why David Black: not Jaime Katz: that that would be a good type of strategic effort for you guys to to look for. Steve Menneto: Yeah. Yeah. Jamie, you're you're David Black: Go ahead. Go ahead, David. No. I was say, yeah, I I think Steve Menneto: from our perspective, we don't typically comment on competitors' strategic decisions. But from from our perspective, you know, we're gonna continue to focus on our capital allocation priorities and growing the business according to our strategic vision. And so we look forward to the future under those pretenses. Operator: Thank you. The next question comes from Griffin Bryan with D. A. Davidson. Please go ahead. Griffin Bryan: Yeah. Thanks. Most of my questions have been answered already. I guess kind of piggybacking on the M and A front, can you just kind of give us an update on what your pipeline looks like and if you're seeing anything else out there in terms of potential deals that you look on, maybe some other boat segments you might be trying to get into? David Black: Thanks. Steve Menneto: Yeah. I Yeah. I mean, we'll And what are David Black: like, all of just say we Steve Menneto: we're really diligent David Black: doing it, you know, and we talked about today. We'll continue to do that. And we're looking for opportunities Steve Menneto: for our system. David Black: You know, looking for those opportune and working those opportunities and so forth. And if there's any future report, we'll definitely, we'll be there in the market. Thanks. Operator: I'm not showing any further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. Please stand by. Your meeting is about to begin. Operator: Good morning, everyone. Welcome to today's OneMain Holdings, Inc. Fourth Quarter 2025 Earnings Conference Call and Web Hosting. Hosting the call today from OneMain Holdings, Inc. is Peter Poillon, Head of Investor Relations. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode. The floor will be open for your questions following the presentation. Press star one on your telephone. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. We do ask that you please limit yourself to one question and one follow-up. Please pick up your handset to allow for optimal sound quality. Lastly, if you should require operator assistance, please press star 0 at any time. It is now my pleasure to turn the meeting over to Mr. Peter Poillon. Please go ahead, sir. Peter Poillon: Thank you, operator. Good morning, everyone, and thank you for joining us. Let me begin by directing you to Page two of the fourth quarter 2025 investor presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP measures. The presentation can be found in the Investor Relations section of the OneMain Holdings, Inc. website. Our discussion today will contain certain forward-looking statements reflecting management's current beliefs about the company's future financial performance and business prospects, and these forward-looking statements are subject to inherent risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in our earnings press release. We caution you not to place undue reliance on forward-looking statements. If you may be listening to this via replay at some point after today, we remind you that the remarks made herein are as of today, February 5, and have not been updated subsequent to this call. Our call this morning will include formal remarks from Douglas Shulman, our Chairman and Chief Executive Officer, and Jenny Osterhout, our Chief Financial Officer. After the conclusion of our formal remarks, we will conduct a question and answer section. I'd like to now turn the call over to Doug. Douglas Shulman: Thanks, Pete. Good morning, everyone. Thank you for joining us today. Let me start with a brief overview of the company's 2025 performance. It was an excellent year with very strong earnings growth and meaningful progress on our strategic initiatives. All of the momentum we have built over the past few years came through in our 2025 results. Full year C&I earnings per share were $6.66, an increase of 36% year over year. Capital generation was $913 million, an increase of 33%. This outstanding earnings growth was driven by significant revenue growth, accelerated loss improvement, and continued focus on efficiency. And once again, we exhibited our balance sheet strength, raising $5.9 billion in 2025. Our receivables grew 6% to over $26 billion despite maintaining a tight credit posture throughout the year. Receivables growth was supported by focused initiatives to drive more high-quality personal loan originations as well as important contributions from our auto finance and credit card businesses. Revenue grew 9%, supported by higher yields in a constructive competitive environment. C&I net charge-offs were 7.7%, down 46 basis points from 2024. And consumer loan net charge-offs came down 63 basis points from last year, benefiting from the proactive credit actions we've been taking the last several years. In 2025, we continued to make significant progress across all three of our businesses, positioning the company for continued earnings growth in 2026 and beyond. Growth in our personal loans was driven by a series of targeted initiatives. Our debt consolidation product continues to grow. This valuable product, which allows customers to consolidate debt into a single predictable amortizing loan, typically reduces the customer's payment by about 25% on the debt they consolidate. We've also used data to reduce friction and serve more customers, including automated income verification and prepopulated auto collateral before a team member talks to a customer about a loan application. And we continue to increase our use of bank data that enables accurate real-time credit decisioning. We added a streamlined renewal product for our best customers and also created a new product that links a paycheck directly to our payment system, further expanding credit and reducing risk. We expanded our channels, including offering our best card customers a personal loan through our mobile app, allowing us to acquire new loan customers with zero acquisition cost. And this month, we are introducing a new secured lending product just for homeowners, securing the loan with home fixtures, which comes with beneficial pricing similar to our auto secured loan. All of these products allow us to drive originations volume without loosening our underwriting standards. This year, we've also continued to optimize our branch-based operating model to improve customer engagement while driving performance and efficiency. We've expanded the use of central sales and collections to seamlessly serve customers in real-time during periods of high volume. In this month, we launched a new AI-powered tool that gives our branch and central team members faster, easier access to internal policies and guidelines. By transforming enterprise knowledge into a plain language intuitive experience, this AI capability is designed to boost productivity, accelerate decision-making, and allow our teams to spend more time serving customers. This launch is just one example of our journey to embed AI across the organization to drive both efficiency and revenue. Initiatives like these across our product, operating model, data, and analytics are impactful in the aggregate, as they drive efficiency, improve our offers, and attract more customers. Turning to auto. In 2025, we grew receivables to $2.8 billion. This was a year of significant progress in building a scalable auto finance platform. We finished the migration of OneMain's legacy auto lending operation onto our new technology infrastructure. We also grew our dealer sales force this year and expanded our business into attractive new dealerships and markets. And I'm excited to share that we recently partnered with Ally Financial to form a pass-through arrangement on their ClearPass program. We've already rolled out to about 1,700 dealers and we'll be scaling the program further this year. We look forward to a very successful partnership with Ally in 2026 and beyond. Turning to credit card. We continued to build momentum in 2025. Receivables grew to $936 million and accounts increased to nearly 1.1 million customers at year-end. We continue to refine our product offering this year. We introduced a number of new cards, adjusting reward levels, credit lines, and other features. This allows us to tailor our unique product offering of payments equal progress to more customers while also managing credit and risk. As we scale the business, improvements in digital engagement are driving efficiency. For instance, in 2025, our digital efforts led to a reduction in customer calls per account, reducing marginal operating expense per account by 25%. While credit cards remain a small percentage of our overall business, making up just 4% of receivables, we're seeing progress in its performance. And as we drive efficiencies and reduce losses, we are seeing an acceleration in capital generation in the card business. During 2025, we also continued to help our customers manage their financial lives. We had continued adoption of our financial wellness platform on our mobile app. The platform provides customers with free financial wellness tools, such as credit score monitoring, budgeting, expense tracking, and bill negotiation. In 2025, we had a 36% increase in customers using the product. Our free financial education program, CreditWorthy by OneMain, has now reached more than 600,000 high school students in nearly 5,000 high schools or 18% of all high schools in the United States. Many of our team members volunteer and engage with students throughout the year, making a difference in the communities where they live and work. We're proud of the impact CreditWorthy is having on students, delivering early practical financial education that helps them build the skills they need to responsibly manage credit and build a brighter financial future. Additionally, in 2025, we saw continued recognition of the special workplace we have built at OneMain Holdings, Inc. as we were recognized by the Best Practice Institute as one of America's most loved workplaces for the fourth year in a row. This distinction is based on team member feedback and reflects the culture we continue to build. One grounded in high performance, teamwork, respect, personal growth, and a shared commitment to serving our customers. This culture is a real competitive advantage for our franchise, supporting employee engagement, strong execution, deep customer relationships, and consistent outperformance over time. Now let me turn to the great results for the fourth quarter. C&I adjusted earnings were $1.59 per share, up 37% from last year. We grew capital generation by 23% to $225 million. Our receivables grew 6% year over year, and revenue grew 8%. Our 30-plus delinquency for consumer loans was 5.65%, in line with expectations and better than pre-pandemic seasonal trends. We also continue to see strong recoveries in the business and better roles from delinquency to charge-offs. C&I net charge-offs were 7.9% in the quarter, and consumer loan net charge-offs were 7.6%. We saw significant improvement in net charge-offs in 2025. Our overall portfolio continues to perform in line with our expectations, and we remain confident that our careful management of credit will lead to losses continuing to improve in the coming years. Moving to the auto finance business, receivables increased to $2.8 billion at year-end. Losses remain in line with expectations, and we are excited about the future prospects of this business. In our credit card business, we added $102 million in receivables and 88,000 customer accounts during the quarter. We're really pleased that the losses in the card business improved measurably in 2025. This performance underpins our confidence in the business in 2026 and beyond. Let me now turn to capital allocation. Our first use of capital is originating loans that meet our risk-adjusted returns. We also continue to invest in the business to meet customer needs, drive efficiency, and build an enduring franchise. Our regular annual dividend, which is currently $4.20 per share, represents an approximately 7% yield at today's share price. And we are committed to a programmatic share repurchase program. In October, our board approved a $1 billion share repurchase program through 2028. In the fourth quarter, we repurchased 1.2 million shares for $70 million. That is up from $32 million of repurchases in the third quarter and is double the $30 million repurchased in all of 2024. Unless we see other more attractive strategic uses of capital, we would expect incremental capital returns to be weighted more towards share repurchases in 2026 and beyond while maintaining our commitment to the dividend. As we enter 2026, the consumer continues to be supported by some positive trends, including low unemployment. With that said, we saw a slightly weaker labor market in 2025, and inflation has been persistent. So we are maintaining our conservative underwriting posture. Importantly, OneMain Holdings, Inc. customers remain resilient, and we feel good about our portfolio, which reinforces our outlook for continued capital generation growth in 2026. With that, let me turn the call over to Jenny. Jenny Osterhout: Thanks, Doug, and good morning, everyone. I share Doug's enthusiasm about the strong financial results achieved in 2025, as well as the notable progress made toward our long-term strategic priorities. I'll begin today by focusing on the quarter and then I'll get into expectations for 2026. Our fourth quarter results demonstrated continued improvement across our key financial metrics, highlighted by strong revenue growth, steady credit performance, and capital generation that grew 23% year over year. We continued our active management of the balance sheet this quarter, raising $1 billion in the unsecured market, bringing our total funds raised in 2025 to $5.9 billion. We also accelerated our pace of share repurchase volume in the fourth quarter. Combined with our dividend, total capital returned to shareholders increased to $639 million in 2025, up 20% from 2024. Fourth quarter GAAP net income of $204 million or $1.72 per diluted share was up 64% from $1.05 per diluted share in 2024. C&I adjusted net income of $1.59 per diluted share was up 37% from $1.16 per diluted share in 2024. Capital generation, the metric we use to manage and measure our business, totaled $225 million, up $42 million from $183 million in 2024, reflecting strong receivables growth across our products, higher portfolio yields, and good credit performance. Managed receivables finished the year at $20.3 billion, up $1.6 billion or 6% from a year ago. Fourth quarter originations were $3.6 billion, up 3% year over year, in line with recent seasonal trends. Consumer loan originations for the full year were up 8%. We are pleased with our growth trajectory. As we have laid out before, our underwriting approach remains conservative, designed to generate a minimum 20% return on tangible equity even with a stress overlay on losses. So while we continue to actively manage credit, we have also been growing through enhanced customer experience, personal loan product innovation, and our new products. Combined, this has helped to drive year-over-year annual originations and receivables growth, giving us solid momentum going into 2026. Turning to yield. Our fourth quarter consumer loan yield was 22.5%, up 26 basis points year over year. We continued to benefit from pricing actions taken over the past few years, with a partial offset from the increasing mix of our lower loss, lower yield auto finance receivables. As we look ahead to 2026, we expect consumer loan yield will remain around this level, assuming a steady product mix and competitive environment throughout the year. We also saw measurable improvement in our credit card revenue yield in the quarter, which was up over 100 basis points from 2024. As we look to 2026, we expect to see this continue, supporting overall revenues as the book grows. Total revenue was $1.6 billion, up 8% compared to 2024. Interest income of $1.4 billion increased 8% from the fourth quarter last year, driven by receivables growth and the yield improvements I just mentioned. Other revenue of $195 million was up 10% from last year, primarily due to higher gain on sale related to our larger whole loan sale program and higher credit card revenue as the card portfolio continues to grow. Full year revenue growth was 9% year over year. This was a function of the book growing, portfolio yields reflecting the pricing actions we started in 2023, and revenue increases as the card portfolio matures. Interest expense for the quarter was $323 million, up 4% compared to 2024, driven by an increase in average debt to support our receivables growth, partially offset by a lower average interest rate as our interest expense as a percentage of average net receivables fell to 5.2% this quarter, down from 5.3% in 2024. Full year interest expense came in at 5.3%. Strong execution across our multiple financings this year, as well as opportunistic liability management, most notably the refinancing of our 9% debt in the third quarter, enabled us to reduce our funding costs below our initial 2025 expectations. Looking to 2026, over 90% of our expected average debt is on the books already at fixed rates. And we have good line of sight to 2026 funding costs and expect interest expense as a percent of receivables to be similar to 2025 level. Fourth quarter provision expense was $542 million, comprising net charge-offs of $492 million and a $50 million increase to our reserves driven by the growth in our receivables during the quarter. Our loan loss reserve ratio of 11.5% was flat compared to both last quarter and last year. Policyholder benefits and claims expense for the quarter was $48 million, down modestly from $49 million in the fourth quarter last year. As we look forward, we expect quarterly claims expense to increase slightly to the mid- to high $50 million range due to growth in the book. Let's turn to credit, starting on Slide 10. 30-plus delinquency on December 31, excluding Foresight, was 5.65%, flat to last year's particularly strong performance. As shown on Slide 11, we continue to see delinquency performance better than pre-pandemic benchmarks and in line with expectations. As 30-plus delinquency increased 24 basis points quarter over quarter, below the pre-pandemic sequential increase of 33 basis points. You'll also note that 2024 outperformed our pre-COVID benchmarks, increasing only eight basis points sequentially. This strong delinquency performance at the end of 2024 drove accelerated net charge-off improvement in 2025. While the front book, which we define as consumer loan originations post-August 2022 credit tightening, continues to perform in line with expectations, the poor-performing back book remains a headwind. It is still 17% of our 30-plus delinquency, despite comprising just 6% of the portfolio. At this point in time, we would typically expect the back book to make up about half as much in total delinquencies. This higher contribution to delinquency is due to the weaker performance of the back book as well as the pace of originations growth due to our conservative underwriting posture over the past several years, given the macroeconomic environment. Moving to net charge-offs for the quarter. As shown on Slide 12, fourth quarter C&I net charge-offs, which include the results from our small but growing credit card portfolio, were 7.9%, flat year over year. These results were aided by strong recoveries in the quarter, in line with positive trends over the past few years. Recoveries grew 16% year over year to $89 million, representing 1.4% of receivables. For the full year, C&I net charge-offs declined by 46 basis points to 7.7%, towards the lower end of the guidance range we provided at the beginning of the year. Fourth quarter consumer loan net charge-offs, which exclude cards, came in at 7.6%, down seven basis points year over year. For the full year, consumer loan net charge-offs declined by 63 basis points year over year, a steep decline from 2024. Credit card net charge-offs improved 22 basis points year over year to 17.1% in the quarter. So we are getting close to our target range. In the fourth quarter, we saw the credit card portfolio's 30-plus delinquency performance improved by 83 basis points versus the prior year. This trend is a positive indicator of future performance that we expect will benefit card net charge-off as we look into 2026. As a reminder, while we really like our credit card performance, it will pressure C&I losses higher as it becomes a bigger part of our overall portfolio. Loan loss reserves ended the quarter at $2.9 billion. Our loan loss reserve ratio remained flat both sequentially and year over year at 11.5%. The macroeconomic assumptions in our reserve calculation remain fairly consistent with prior periods and assume what we believe is an appropriate level of reserve considering the continued uncertainty around inflation and unemployment in the quarters ahead. We will continue to assess reserve levels and expect that we would reduce our coverage level as the uncertainty around the macro subsides and we continue to see improvement in the performance of the portfolio. Given our evolving product mix, we expect our reserve coverage to remain around the current level over the near term. Now let's turn to Slide 13. Operating expenses were $443 million, up 5% compared to a year ago, as we continue to invest to drive future growth. The 6.7% OpEx ratio this quarter compares to 6.8% last year and was in line with expectations. We strategically invest in future growth through technology, data analytics, and our new products while also closely managing costs to maximize profitability. We take the dual task of cost management and investment for the future as fundamental to how we operate the business. And we continue to see meaningful opportunities to invest while improving our operating expense ratio. As we look forward, we are confident that the business will continue to provide operating leverage in the years to come. Now turning to funding and our balance sheet on Slide 14. During the quarter, we continued to optimize our balance sheet. We issued a $1 billion unsecured bond at 6.5%, maturing in September 2033. The offering was well subscribed as we continue to attract both new and returning investors to our program. A portion of the funds were used to redeem the remaining approximately $400 million of our 7.18% unsecured bonds originally scheduled to mature in March. This was redeemed last month. We now have no scheduled maturities until January 2027, giving us added flexibility on funding amounts and timing in 2026. In 2025 in total, we issued $4 billion in unsecured bonds through five separate issuances and two revolving ABS issuances totaling $1.9 billion, with all offerings seeing healthy demand, resulting in attractive pricing. We believe our strong record of issuance across both the secured and unsecured market reinforces our position as an industry-leading issuer with best-in-class execution. We were able to take advantage of market conditions to reduce our secured funding mix throughout the course of the year to 50%, down from 59% in late 2024, while simultaneously reducing our interest expense as a percentage of receivables. This balanced secured mix provides us with more flexibility as we look at our funding options in 2026. Last quarter, we mentioned the expansion and extension of our forward flow program. The $2.4 billion program runs through mid-2028, with approximately half executed in 2026. As we look forward, higher loan sales in 2026 will impact our other revenue line item, with slightly higher quarterly gains on sale and higher servicing income over time. We believe this program is indicative of the attractiveness of our differentiated business model and provides us additional diversification in funding, benefiting our overall public markets program. At the end of 2025, our bank lines totaled $7.5 billion, unchanged from last quarter, and our unencumbered receivables grew to $11.8 billion, up about $900 million from last quarter. Our net leverage at the end of the fourth quarter was 5.4x, comfortably within our targeted range of four to six times. Overall, we feel great about the strength of our balance sheet and ability to continue to opportunistically issue when markets are most attractive in the quarters ahead. I'll summarize 2025 by simply saying it was an outstanding year, as we met or exceeded our expectations across the board in a period of uncertainty. Now let me look ahead to 2026. We expect managed receivables to grow in the range of 6% to 9%, supported by continued innovation in our customer experience, personal loan offerings, and growth in our newer products. This assumes we continue to maintain our current conservative underwriting posture. We expect C&I net charge-offs in the range of 7.4% to 7.9%. As a reminder, C&I includes consumer loans and the growing credit card portfolio. Our guidance assumes the softness in the current labor market continues throughout 2026, along with persistent inflation. To the extent we see macro improvement, we could come in towards the lower end of our range. We expect losses to follow seasonal patterns above the range in the first half of the year and below the range in the second half. Finally, we expect the full year OpEx ratio to be modestly better than last year at approximately 6.6%, as we continue to manage expenses and invest in our new products and digital capabilities that aid our customer interactions and benefit our team member productivity and effectiveness. All of this leads to our expectation for continued capital generation growth in 2026. We see really good momentum looking into 2026 and beyond, and we're confident in our ability to drive shareholder value by continuing to provide value to our customers. So with that, let me turn the call back to Doug. Douglas Shulman: Thanks, Jenny. Let me end by saying we continue to feel great about the key drivers of our business. We're serving more customers through continued product innovation and the ongoing scaling of our auto finance and credit card businesses, positioning OneMain Holdings, Inc. as the lender of choice for hardworking Americans. We continue to manage credit carefully through an evolving macroeconomic environment, driving market-leading risk-adjusted returns. We are investing to support growth and core capabilities across products while maintaining tight expense discipline. And our industry-leading balance sheet that is highly diversified with a long liquidity runway continues to be a key competitive differentiator. I've spoken before about the enduring franchise value we have created at OneMain Holdings, Inc. We built a lot of momentum over the last several years and are excited about continuing to drive capital generation growth and build shareholder value in 2026 and beyond. I'll close by offering my thanks to all of the OneMain Holdings, Inc. team members for their great work that made 2025 such a success and for their ongoing commitment to our customers. With that, let me open it up for questions. Operator: Thank you, Mr. Shulman. Ladies and gentlemen, the floor is now open for your questions. If at any point your question is answered, you may remove yourself from the queue by pressing star 2. Again, we do ask that you pose your question that you pick up your handset to provide optimal sound quality. We'll go first this morning to Moshe Orenbuch of TD Cowen. Moshe, please go ahead. Moshe Orenbuch: Great. Thanks. I know that both you, Doug, and Jenny have talked a little bit about your outlook for credit. Doug, you had said kind of at a high level that, you know, credit continues to improve. Jenny, you had sort of said it will be a little worse than seasonal patterns in the first half of the year, a little better in the second half. I guess, is there a way to kind of tie this all together? I mean, you know, is it really just that 17% of delinquencies moving through or are there other things going on, you know, kind of as you think about your guide for, you know, for the full year losses kind of showing stability as opposed to improvement for 2026? Jenny Osterhout: Thanks, Moshe. Let me chime in here. So I think part of this is 2025 was really a remarkable year. I mean, you can see that we really saw major loss benefit. We talked about this, but the C&I net charge-offs coming down 46 basis points and consumer loan losses coming down 63 basis points. They're really coming off of the 2024 higher losses. And so that's allowed us to generate a lot of capital and increase our cap gen by 33%. So we're coming down from there. And we really like what we're underwriting. So if I then take that to looking forward, we see the vintages in the front book performing in line with our expectations. I talked a little bit about some of that pressure that we see from the back book. That's the pre-August 2022 back book and how that's still outsized in terms of its contribution to delinquency and losses. And then the other piece to keep in mind for C&I is there's some impact on losses from card. In 2026, it's adding about 10 basis points more than it did in 2025, which was about 35 basis points. So we are seeing some positive trajectory there. And then I just remind you that our loans target at 20% return on equity threshold. So we do see very good profitability when we look at the risk-adjusted returns. So that guide that we gave you gives you a range. It also assumes that soft unemployment and persistent inflation we spoke about earlier. And so to the extent the macro improves, we could see some benefit there. I also want to go back to I think we see it higher in the first half and lower in the second half. I wouldn't expect for it to see worse than sequential. Just to go back to the beginning of your question. Moshe Orenbuch: Okay. Alright. Thanks. On a separate topic, I think it was almost a year ago that you put in the application for the ILC. Assuming that is approved, can you talk a little bit about what you're gonna be doing, what are the first steps, and what that's gonna mean for pricing and loan growth? Douglas Shulman: Yeah. You know, we applied for an ILC license. You've seen a couple have been granted this year. People who actually, you know, auto companies who had been there quite a bit before us. And as I've said before, we think we have a very strong application. We think we're qualified to be a bank. And we're progressing through the application process. You know, I think what you know, the timeline, a, I won't predict any timeline whether we'll get it or not. And you know, if we get it, when it would happen. So, the timeline would be it would take about a year to set it up. And so you know, any positive effects are probably a 2027 event, assuming you know, something happened this year. I do think it'd be accretive to the strategy. I do think we would be able to serve more customers. I think we'd have a more standardized rate, structure, operational structure nationwide. We'd have our own bank for our card business. And we'd have access to deposits, which would even further diversify our really strong balance sheet. And so you know, we have a really strong business plan that we feel great about without an ILC. This would be additive and accretive to it, and we're, you know, very positive and hopeful it'll come to pass. Moshe Orenbuch: Thanks very much. Operator: Thank you. We go next now to John Hecht of Jefferies. John, please go ahead. John Hecht: Good morning, and thanks for taking my questions. Douglas Shulman: Good morning, John. John Hecht: Thanks very much. You talked about rolling out the new like, co-merchandise backed products. The Ally program, are those programs in, you know, on products, are there pilot periods of those or because they're different, you know, relative to, say, like, the credit card that you're gonna roll them out pretty quickly? How do we think about that? Douglas Shulman: Yeah. Look. All of our, two different things. The homeownership product is in our personal loan. Every time we roll something whether it's expanded debt consolidation, even prepopulating VINs in auto for our customers or our streamline renewals or our link to paycheck, we always pilot them and are looking to see, you know, we have certain models that say, what will it do to customer pull-through rate? How will the credit perform? How's the pricing in relationship to the credit? Because as you know, we just met we manage the risk-adjusted returns. And so for the homeowner product, we have launched we'll launch it as a pilot like we do for everything else, make sure it's performing well. And if it is performing well, we'll do a full rollout. I think the Ally partnership is just getting started. You know, that's a partnership where you know, an auto dealer sends an app you know, an auto dealer gets to choose where it sends applications. It sends one to Ally, and we're now in the pass-through, which is basically a turndown program. Ally doesn't take but we're now one of their partners in the pass-through. We started with dealers that we already had relationships with. So we already had a contract so we could book loans with. And then we're gonna be rolling it out further. So that's probably you know, I think of that as it's not a pilot, but it's at the very beginning of a partnership. And any partnership you know, you wanna roll out in a pace and responsible fashion. John Hecht: Okay. And then you we all know that a debt consolidation is one of the primary, I guess, use cases of the product. I'm wondering what are other main use, I guess, drivers of demand and what do those tell you about call it, the state of your borrower? Douglas Shulman: Yeah. I mean, look. The demand's been pretty similar. About a third is usually debt consolidation where people are taking a whole bunch of other credit they have consolidating it onto a single amortizing loan, getting control of their finances, and getting, you know, as we told you, usually, you know, our average customer has about 25% decrease in their monthly payment when they do debt consolidation with us. There's always a chunk of customers and it hasn't changed a lot, who for emergency needs, you know, whether it's hot water heater breaks, or they got car repairs, or something else like that. And then there's a whole set of customers who are using it for discretionary. You know? We have customers who know, wanna pay for their granddaughter's horseback riding, or they wanna take a vacation, or they're rolling over a loan from somewhere else. And so I don't think there's any great you know, there hasn't been a lot of changes, John. And so I don't think it's stating anything new about you know, I don't think the use of funds is stating anything new about our customer right now. John Hecht: Okay. Thanks for the color. Appreciate it. Operator: Thank you. We'll go next now to Aaron Cyganovich of Truist Securities. Aaron, please go ahead. Aaron Cyganovich: Thank you. In terms of loan growth, the originations for the quarter year over year were 3% and total loan growth 6%, but the guide for 26% is 6% to 9%. What's some of the optimism that you're laying in there while you're still layering, you know, that 30% kind of credit overlay? Jenny Osterhout: Thanks for the question. So you're right. In terms of the quarter, we saw 3%. Really, if you look at the whole year, we had 8% origination growth in 2025. All of that eight percent also had pretty tight underwriting standards. So as we look to next year, we did assume that same macro environment, and we assumed we kept those underwriting standards. It's really some of the efforts that Doug just talked about in terms of the innovation on the personal loan product. But I'd also say it's team member effectiveness. So as we look at ways to improve the productivity of our team members and help them to find things faster and be able to help customers make sure they get the right offer, look at the right offer, and how we can digitize some of that. And then there's also the efforts we've been working on in terms of our new product and their share of the book. If we look at 2025, the new products contributed about 42% of our growth. So we're expecting continued growth in the new products as well as for next year. So when you pull that all together, it's driving our expectations of that guide of six to 9% for 2026. And I just say, you know, growth is an outcome for us. We are always looking to meet those return hurdles that I mentioned before, so above the 20 return on tangible equity. And we really see opportunities next year. We work on those. We always have I like to think of it almost like R&D going. And I think really what you're seeing is the output of all those behind-the-scenes efforts that we've had going in the background this year. Aaron Cyganovich: Got it. Thanks. And then in terms of capital return, share repurchases were nicely higher in the quarter, and you have the larger program that you've authorized recently. Can you talk a little bit about share repurchase pace? Is that going to be up notably in 2026? Douglas Shulman: Yeah. Look, we, as I mentioned before, we're very committed to our healthy dividend. But we think, you know, unless we see another use of capital, the incremental capital generation and the excess capital are biased is towards share repurchase. You know, we never predict exactly what it'll be. You know, as we mentioned, you know, fourth quarter was double what all of 2024 was. I think you know, you can do the math on how much capital we're generating, which is a lot more than the last couple of years. In 2025, we did. And, you know, we said we think we're gonna generate more this year. Take out the dividend, the amount of capital we need for growth, for expense and in investing in the business. And so you know, our bias will make decisions, you know, on an ongoing basis. Is to put the majority of the rest of that into share repurchases. Aaron Cyganovich: Thank you. Operator: Thank you. We'll go next now to Mihir Bhatia of Bank of America. Mihir, please go ahead. Mihir Bhatia: Good morning. Thank you for taking my question. First question I wanted to ask. Could you start Mike, I just wanted to ask about tax refunds. You know, a lot of people are obviously calling for higher tax refunds this year. How are you thinking about tax refunds? Is that in your guide? And if I can just ask on that topic, can you just talk about the implications if you get higher refunds, if we do see higher tax refunds on your customer base, would that be, like, both on the credit and on the loan demand side if there is any, typically? Thank you. Jenny Osterhout: Yep. So tax season is obviously a huge focus area for us. I mean, it's a driver of our credit performance. And drives that normal seasonality that you see where refunds typically improve delinquencies in the first quarter and drive losses down into their seasonal low in the third quarter. We don't have an expectation yet for what's going to come this tax return season. It just began. And really for us, to the extent we see those returns come in better than expected, that would bring you into the low range. So that should give you some sense sort of of where it would take us. Mihir Bhatia: And then just on the loan demand, is there any loan demand side impact of Jenny Osterhout: Yes. That's fair. So we do typically see in the first quarter, and some of that is driven by tax returns. I think, again, we talked about our the growth that we're expecting, and a lot of that growth being driven by new either new product innovation on the personal loan side or in our newer products in auto and credit cards, advancements that we're making there. So I'm not expecting if you saw an increase in tax return season, I'm not sure that I would expect for it to really mute growth too much. Mihir Bhatia: Got it. And then if I can ask on name of really interest yield because you talked about interest expense already, Jenny. But just given the card product, some of the newer products that are coming on, anything you can give us on just how we should expect interest yields to trend this year. Jenny Osterhout: So consumer loan yield today is at 22.5%. That's up about 26 basis points from last year in the fourth quarter. So, you know, and if I look at for the year for 2025 as a whole, we were up 43 basis points. So you're gonna get some benefit from those yields going up. Dependent on product mix, it's going to determine what our yields will be going forward. Auto comes with lower yields, but obviously comes also with that better credit performance. Credit. We've seen most of the gain that we've had from that increased pricing that I mentioned earlier since mid-2023. And we really like where our yields are. So I think and the risk-adjusted returns that we're generating. So I really think that the yields for the go forward, I'd expect something similar to what we have today. Mihir Bhatia: Got it. Thank you for taking my questions. Operator: Thank you. We go next now to Mark DeVries with Deutsche Bank. Mark, please go ahead. Mark DeVries: Yes, thanks. I have a related follow-up to the last question. If you can just talk about the decision to kind of drop the revenue growth guide from your full-year guidance. It sounds like from a yield perspective, and an interest expense perspective, you expect that to be flat, so spread's kind of unchanged. Should we generally expect revenue growth to kind of track your managed receivable growth guidance? Or is there something about kind of the ramping up of the pass-through that could create a little bit more lumpiness in revenues relative to just kind of the receivables growth? Jenny Osterhout: So you're right. I think we gave you all the pieces, but we didn't sort of cook it for you. So we had really strong revenue growth in this year. So that 9.3% revenue growth. And that was driven by both the portfolio growth and those improving yields I just talked about. So then if I just talk about the pieces that we've given you, and I'll take through them, but it's very similar to what you mentioned. So it's that flat yield year on year. You're basically going to see revenues rise with the asset growth. So with the 6% to 9% managed receivables. One thing to consider is we also have that whole loan sale program that I mentioned, which gives a little bit of benefit to revenues, but it's also growing to about half of the $2.4 billion in 2026. So you need to think about that and think about the on-balance sheet growth in terms of the revenue growth, and that should give you a pretty good sense of where it's going. Mark DeVries: Okay. Got it. And then I had a separate question about the whole loan sales and how you think about that longer term. I understand that it's a nice funding diversification strategy, but to your credit, you guys have built very strong liquidity, a lot of funding flexibility. How do you think about just kind of giving up some of those returns versus just keeping them and having confidence in your ability to fund just through the unsecured markets longer term? Jenny Osterhout: We think a lot about it. You're right. I mean, we see we have great access to in the public markets, I think you can really see that. Year. I mean, it was a pretty remarkable year with that $5.9 billion that we were able to raise. But we always look at opportunities. We think of the whole loan sale program as a way to provide funding flexibility. And so really, when we look at it, we're looking at the economics and the terms to make sure it makes sense for us. So I, you know, that $2.4 billion program that we have, you know, we think it has attractive pricing, and we like that diversification that it gives us for our balance sheet. And really, it's about those considerations and how it helps us meet our strategic goals and thinking about those economic trade-offs. Obviously, it gives you a little bit of higher gain on sale, and then you get the servicing income. So there's, you know, a nice diversification in having different revenue streams. But that gives you sort of some of the components for how we think about it. Douglas Shulman: The only thing I would add also is it gives us a lot of strategic optionality. We have way more demand. A lot more people would love to buy our loans. We're pretty careful about it. And as you know, Jenny mentioned, it's diversification. You know, five years or so ago, we got the pipes working, so the whole thing worked. Allows us to think about it's not what we do now, which is are there things that are unique platform can do, which is, you know, generate now a whole range of different lending products, underwrite them, you know, attract customers, and service them. Are there things we don't want on our balance sheet in the future that others might want on their balance sheet? And so in addition to being a nice, valuable, accretive piece of our current balance sheet, it also is great for strategic optionality for the franchise. Mark DeVries: Got it. Thank you. Operator: Thank you. We'll go next now to Rick Shane with JPMorgan. Rick, please go ahead. Rick Shane: Hey, thanks so much for taking my questions this morning. When we look at the charge-off rate on the credit card book, it has improved, and you guys have talked about that. And I think there really are probably three reasons why. One is fundamental improvement. The second is seasonality. And the third is denominator effect from the growth. When we think about the card book long term, what is your target loss rate? Because at the moment, yes, the actual reported net charge-off rate has come down, but the lag loss rates flatten me out a little bit. I'm curious where you think this is gonna go. Jenny Osterhout: Happy to talk about that. You're right. We saw those net charge-offs improve by about 22 basis points from last year to 17.1% in the fourth quarter. We expect for those to continue to improve based on what we've seen in card delinquency performance, which I mentioned is down 83 basis points. So it gives you a little bit of a go-forward guide. And it's a step towards bringing our book into that expected long-term range, which I would say is in the 15% to 17% range. We've really been able to drive those. You mentioned some of it. But through some of that typical portfolio seasoning, but also a lot of actions that taken to improve our servicing and recovery capabilities. You know, this we ran this new product almost like a startup. So don't focus on some of those later pieces right at the very beginning. So we did find, you know, still there were areas that we could improve. And I'd just say and remember that our revenue yields on cards allows us room to be able to do that and cushions those higher losses. So overall, credit card portfolio, we think, remains quite strong. And we think we see that as a way to support our continued capital generation in the years ahead. Rick Shane: Got it. That's very helpful. And to follow-up on that a little bit, and capital generation is exactly what I wanted to talk about. You guys have laid out sort of the plan, and clearly, you are forming more capital than you can redeploy into the business, and you were returning it to shareholders in a very deliberate way. I am curious when you think about capital, held against your traditional consumer loans versus your growing credit card portfolio. Jenny Osterhout: Levels are higher. So, our card reserve levels are around 22%. But if I look overall at our book and how we think about growing the card, I mean, we really manage capital across the business, and we're focused on being able to manage to these rich this 20% return on tangible equity hurdle. And we apply we've been talking about how we also apply additional stress, and we do that across all our products as well. So that's sort of how I would think about it. And I think we feel I mean, especially on cards, we feel like it's gonna be a great source of profitability for the future. Rick Shane: Got it. Okay. Thank you very much. Douglas Shulman: Folks, we are up against the hour. Let me just end by saying, you know, in 2024, we told our investor base that we'd position our business for significant earnings growth going forward. This played out in 2025, and we're now generating very healthy earnings and capital generation. Our ability to drive losses down by over the last three years, carefully managing the book and finding great customers, has been a major part of it. Despite the fact that there is persistent inflation and there was a slight uptick in unemployment, the customers on our book are performing really well. And we don't anticipate that changing this year. So we feel really good for 2026 and beyond, but especially 2026 to be another year of strong earnings and capital generation. We thank everybody for spending time with us on the call, and as always, our team's available for follow-up. So thanks, everyone, and have a great day. Operator: Thank you, Mr. Shulman, and thank you, Ms. Osterhout. Again, ladies and gentlemen, this will conclude today's OneMain Holdings, Inc. Fourth Quarter 2025 Earnings Conference Call and Webcast. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.
Operator: Hello, and welcome to the Second Quarter Fiscal Year 2026 Cardinal Health, Inc. Earnings Conference Call. My name is Sergei, and I will be your coordinator for today's event. Please note that this conference is being recorded. For the duration of the call, your lines will be in listen-only mode. However, you will have the opportunity to ask questions at the end of the call. Please limit yourself to one question each to allow the maximum number of attendees to ask questions. If you require assistance at any point, please press 0 and you will be connected to an operator. I will now hand you over to your host, Matt Sims, Vice President of Investor Relations, to begin today's conference. Thank you. Matt Sims: Good morning, and welcome to Cardinal Health's Second Quarter Fiscal 2026 Earnings Conference Call. Thank you for joining us. With me today are Cardinal Health CEO, Jason Hollar, and our CFO, Aaron Alt. You can find this morning's earnings press release and investor presentation on the Investor Relations section of our website at ir.cardinalhealth.com. Since we will be making forward-looking statements today, let me remind you that the matters addressed in these statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected or implied. Please refer to our SEC filings and the forward-looking statement slide at the beginning of our presentation for a description of these risks and uncertainties. Please note that during our discussion today, the comments will be on a non-GAAP basis unless specifically called out as GAAP. GAAP to non-GAAP reconciliations for all relevant periods can be found in the supporting schedules attached to our press release. For the Q&A portion of today's call, we kindly ask that you limit questions to one per participant so that we can try and give everyone an opportunity. With that, I will now turn the call over to Jason. Jason Hollar: Thanks, Matt, and good morning, everyone. We are pleased to report that the Cardinal Health team has delivered another excellent quarter driven by broad-based performance across the enterprise. I am encouraged by our results, which are a direct reflection of our continued operating momentum and relentless commitment to serving our customers and driving our strategy forward. We have continued to prioritize strengthening our core and expanding in specialty, accelerating our other growth businesses, and executing our GMPD turnaround. What stands out to me most in this quarter's performance is the balance of results across our portfolio as we achieve strong profit growth of at least double digits from all five of our operating segments. Our performance was again led by strength in our pharmaceutical and specialty solutions segment, where we continue to see a robust demand environment coupled with strong operational execution. Our strategic focus on specialty is delivering tangible results. As we shared at a recent industry conference, we expect our specialty revenues will surpass $50 billion in fiscal 2026, a testament to our progress in this high-growth, higher-margin space. Our MSO platforms continue to be a meaningful driver of our growth, in particular, led by the specialty alliance's leading multi-specialty platform. With the acquisition of the country's leading urology MSO, Solaris Health, officially completed in early November, we are positioned to further expand as we add additional practices and capabilities to our platform. Turning to our GMPD segment, we are pleased to report continued progress against our improvement plan initiatives. The team remains focused on driving Cardinal Health brand growth, where we continue to see positive results and simplification, which is driving improved operational health. Other growth businesses, at-home solutions, Nuclear and Precision Health Solutions, and Optifreight Logistics, also again delivered a strong quarter. Performance of these businesses is driven by secular tailwinds, the strength of their value propositions, and our focused long-term investments. Second-quarter performance gives us confidence as we move forward, and as a result, I'm pleased to share that we are again raising our outlook. With that, I'll turn it over to Aaron to go through the financials. Aaron Alt: Thank you, Jason. Good morning. We provided an interim update at a recent industry conference but noted at the time that our books were still open for the second quarter. I'm now pleased to share the final details of our second-quarter results, which reflect another period of exceptional execution and broad-based demand strength across our enterprise. Our performance demonstrates the resilience of our business model and the tangible benefits of our diversified portfolio, as demonstrated by the significant earnings growth in all five of our operating segments. As a result of this momentum, and factoring in our updated forecast for the remainder of the fiscal year, I'm also pleased to note that we are raising again our fiscal year 2026 earnings per share guidance. Our new range is $10.15 to $10.35, up from the at least $10 interim guidance update. This updated outlook represents year-over-year EPS growth of 23% to 26%. Let us begin with the second-quarter consolidated results. Total revenue for the second quarter increased 19% to $66 billion. This top-line expansion was primarily driven by continued strong demand within the pharmaceutical and specialty solutions segment as well as other. Gross margin increased 24% to $2.4 billion, driven by favorable mix across our businesses. We remain disciplined with our cost structure, even as we expand our capabilities and invest for the future. While SG&A expenses increased 16% to $1.5 billion, it is important to note that excluding the impact of recent acquisitions, our organic SG&A growth was more modest in the low single digits. And that the turnaround part of our business, GNPD, actually saw lower SG&A year-over-year from optimization efforts. The combination of robust growth and disciplined expense management results in operating earnings of $877 million at the total enterprise level, an increase of 38% compared to the prior year period. Moving below the operating line, interest and other expense increased to $77 million compared to $38 million in the prior year. This increase was driven primarily by the financing costs associated with our announced acquisitions, including the Solaris Health transaction, which we were excited to close during the quarter. Our effective tax rate for the quarter was flat at 21.4%. Average diluted shares outstanding were 237 million, a decrease of 2% from the prior year. In the quarter, we repurchased $375 million in shares, reaching our full-year fiscal 2026 target for baseline share repurchase of $750 million. Our weighted average price on these repurchases has been $173 per share. The net result for the quarter was non-GAAP diluted EPS of $2.63, an increase of 36% compared to $1.93 in the second quarter of last year. Now let us turn to the segment results starting with pharmaceutical and specialty solutions. Revenue for the segment increased 19% to $61 billion. This growth was driven by both existing and new customers, and we observed a continuation of strong pharmaceutical demand across the portfolio. This included approximately six percentage points of revenue growth from GLP-1 sales. Segment profit increased 29% to $687 million. This significant profit expansion was driven by contributions from brand and specialty products, our MSO platforms, and positive results within our generics program. We experienced consistent market dynamics in our Red Oak enabled generics program, and once again, we saw healthy generic unit growth that exceeded our long-term expectations. Furthermore, these results benefited from our continuous focus on efficiency initiatives across our distribution network. Our teams are leveraging our investments in technology infrastructure, such as the Vantas HQ e-commerce platform, to drive customer efficiency and streamline our operations, which directly supports our margin profile. Moving to the GNPD segment, revenue increased 3% to $3.3 billion, driven by volume growth from our existing customer base. We were particularly pleased with the performance of our Cardinal Health brand portfolio, which saw revenue growth of 10% in the United States. It is worth noting that we estimate three to four percentage points of this growth in the quarter was driven by the timing of inventory restocking by other distributors, which we anticipate offsetting in Q3. Segment profit for GNPD increased to $37 million compared to $18 million in the prior year period. Improvement was driven by volume growth from existing customers and the realization of benefits from our cost optimization initiatives. These positive drivers were partially offset by the adverse net impact of tariffs. Despite the tariff headwind, the segment's transition from past challenges to solid profitability is evident, and we remain committed to the improvement plan initiatives that focus on growing Cardinal Health brand, enhancing our supply chain, and simplifying operations. Now let us discuss our other growth businesses: Nuclear Precision Health Solutions, At Home Solutions, and Optifreight Logistics. Revenue increased 34% to $1.7 billion, driven by strong demand across all three businesses and the contribution from the acquisition of Advanced Diabetes Supply (ADS). Segment profit increased 52% to $179 million. This impressive growth was driven by strong underlying performance across all three businesses as well as the acquisition of ADS. The integration of ADS into our At Home Solutions business continues to progress well. This combination has created a powerful platform for patients with chronic conditions, and we are seeing the benefits of our dual strategy as both a direct-to-home distributor and a direct provider. In Nuclear and Precision Health Solutions, we were pleased to see continued momentum in our Theranostics offerings, with revenue growth exceeding 30%. Our leadership in the radiopharmaceutical space and our end-to-end service capabilities continue to resonate with pharmaceutical partners and providers alike. Optifreight Logistics also delivered an exceptional quarter. Welcoming new customers to our logistics management program and helping current customers succeed in expanding utilization of our program drove significant growth in inbound and outbound shipments. As a result, the business was able to grow revenues by over 30% this quarter, further validating our position as the leader in healthcare logistics management. Turning to the balance sheet and cash flow, year-to-date, we've now generated $1.8 billion in adjusted free cash flow. Teams continue to focus on working capital efficiency to support our capital deployment priorities. We ended the quarter with a cash position of $2.8 billion. Regarding capital allocation, we deployed significant capital during the quarter to drive value for shareholders and invest in our future. To date, we've invested approximately $240 million back into the business through capital expenditures to support our organic growth initiatives. We've also returned $1 billion to shareholders so far this year, comprised of approximately $250 million in dividends and, as mentioned, $750 million through accelerated share repurchase programs. We accomplished all of this and still closed the quarter with a Moody's adjusted leverage ratio of 3.2 times, which is back within our targeted range of 2.75 times to 3.25 times. We achieved this target well ahead of schedule, and that provides us with flexibility to assess opportunities consistent with our disciplined capital allocation framework. I will now highlight our updated fiscal year 2026 guidance. With two strong quarters behind us and signs of continued momentum across our portfolio, we are raising again our outlook for the full year to a new range of $10.15 to $10.35. In the pharma segment, our revenue guidance remains unchanged. Our prior guidance had already contemplated an anticipated impact from manufacturer list price decreases associated with IRA. For pharma segment profit, we are pleased to raise our outlook to a range of 20% to 22% growth, up from the prior range of 16% to 19%. This increase reflects the strength we have seen year-to-date and the confidence we have in the continued performance of our largest operating segment. As we've previously highlighted, in 2026, we annualized the $10 billion of new customer revenue that we onboarded last year, as well as the prior acquisitions of ION and GIA, while also benefiting from Solaris contributions this year. Although we aren't assuming the same level of outsized demand to persist for the balance of the year, we have incorporated some of the recent strength and anticipate mid-teens profit growth in the second half of the year. In the GNPD segment, we are updating our revenue outlook to 1% to 3% growth. On GNPD segment profit, we are raising our guidance to approximately $150 million. This raised outlook reflects the continued progress our team is making against the GNPD improvement plan, including with Cardinal Health brand. As I mentioned when reviewing the GNPD Q2 results, some of the outperformance in Q2 was attributed to the timing of Cardinal Health brand distributor buying patterns, which we anticipate will normalize in Q3. In our other growth businesses, our revenue guidance remains unchanged at 26% to 28% growth. We are increasing our segment profit guidance for other to a range of 33% to 35% growth, up from the prior range of 29% to 31%. This revision is driven by the strong performance across all three growth businesses to date. As you model the remainder of the year, please remember that we will lap the acquisition of ADS in our fourth quarter. Additionally, we will face more difficult comparisons in our nuclear business in the third quarter as we begin to lap some of the robust Theranostics growth that we experienced a year ago. Moving below the operating line, we are lowering our outlook for our effective tax rate by one percentage point to a range of 21% to 23%, down from the prior outlook of 22% to 24%. This improvement reflects our first-half performance and the expectations of positive discrete items in the back half of fiscal 2026. We are also updating our share count assumptions, reflecting our Q2 accelerated share repurchase program. We are lowering our outlook for diluted weighted average shares to a range of 237 million to 238 million shares, approximately 238 million shares. Finally, regarding adjusted free cash flow, we continue to anticipate robust adjusted free cash flow generation between $3 billion and $3.5 billion for the year. In conclusion, our second-quarter results demonstrate that Cardinal Health is executing effectively on its strategy. We are strengthening our core distribution business while aggressively expanding in higher-margin areas such as specialty and our other growth businesses. We remain focused on operational excellence, simplification, and delivering value to our customers and partners. Our updated guidance reflects our confidence in the remainder of the fiscal year and our ability to navigate the dynamic healthcare environment. We are well-positioned to deliver sustainable growth and long-term value for our shareholders. With that, I will turn the call back over to Jason. Jason Hollar: Thanks, Aaron. Our strategy within pharmaceutical and specialty solutions remains clear, and the team's consistent execution gives us confidence in the long-term potential ahead. We continue to prioritize the core, and the investments in our footprint and technology contributed to improved service levels, including a 10% improvement over the past two years, setting a new benchmark for product availability. In specialty, we are seeing growing contributions across specialty distribution, our MSO platforms, and biopharma solutions. Our acquisition of Solaris Health is already gaining momentum in the market with the addition of our first urology practice under this new structure in Michigan. Moving upstream to a key part of our specialty growth, biopharma solutions, we are pleased to highlight that a number of key manufacturer partners have recently selected our SYNNEX access and patient support business to support their hub programs, totaling over 1 million new patients served. These wins were enabled by our significant investments to digitize the patient support journey. We're seeing similar momentum in our leading 3PL business, where we continue to partner with manufacturers in the commercialization of their specialty therapies. As an example, in calendar 2025, our business supported roughly half of all new product launches that utilize the 3PL. Turning to GMPD, our improvement plan initiatives are yielding tangible results. We remain focused on simplification while continuing to invest in our network and are encouraged by the positive trends within the Cardinal Health branded portfolio. This is particularly evident in our more clinically differentiated product categories, where innovation remains central to our product portfolio. For example, the SmartFlow intermittent pneumatic compression device designed to reduce the risk of deep vein thrombosis has had a very positive market response with volume exceeding our launch expectations. Now turning to our other growth businesses, where we remain encouraged by both the momentum in the results and strong positioning for future growth. Increasingly, we see additional points of connectivity across nuclear, at-home solutions, and Optifreight, and an ability to leverage the full strength of our enterprise portfolio. Nuclear and Precision Health Solutions continues to outpace the market, backed by our differentiated offerings and our team's deep expertise. I'm pleased to share that Nuclear recently conducted their 2025 customer survey and, again, earned a net promoter score well above the industry average, a clear reflection of the reliability, adaptability, and cutting-edge technology we deliver to customers. Our performance is driven by our unique end-to-end capabilities and strong demand for Theranostics, which again delivered over 30% revenue growth for the quarter. Expansion of these products has meaningful impacts for our customers and the patients they serve, and we will continue to invest to support the business's growth of the more than 70 products in our pipeline, which is largely dominated by novel diagnostics in the areas of oncology and urology. We continue to see opportunities for greater connectivity between our nuclear business and our MSO and specialty businesses, aided by industry shifts driving greater demand for precision medicine. We are uniquely positioned to equip community practices with the know-how to establish and manage a diagnostics program to accelerate adoption. Within at-home solutions, the demand environment continues to be strong, supported by the shift of care to the home. We are executing a smooth and efficient integration of ADS, positioning us for long-term growth. We see synergistic opportunities with our large core pharma and specialty solutions business, with the latest example seen in the announcement of our continued care pathways program. This program leverages the full Cardinal Health portfolio to simplify diabetes supply management for partner pharmacies and patients, which is already supporting over 11,000 pharmacies today, with more opportunities in the pilot testing phase. We are pleased to announce a key partnership with Publix Super Markets, a recent new customer in our pharma business, to further expand our reach. Finally, Optifreight Logistics continues to demonstrate its market-leading value proposition. With ongoing investments in our proprietary technology-driven TotalView Insights, we see long-term potential to deliver cost savings, transparency, and operational efficiency for our customers. We are also making strong progress with new customer-centric technology to expand our presence in the pharmacy space as we continue to drive core growth and tech-forward transformation. In closing, we have great confidence in the resilience of our business model and our essential position as the backbone of the US healthcare system, delivering daily to tens of thousands of locations with products sourced from several thousand manufacturers. This vital role was on full display during the recent storms that impacted much of the United States, where the Cardinal Health team demonstrated its extraordinary commitment to ensuring critical products and services reach customers and patients. The team's commitment and actions are instrumental to our success, and we're deeply grateful for their contributions. As we move into the back half of the fiscal year, momentum across our business reinforces our belief in the opportunities in front of us and gives us confidence in our ability to continue delivering sustainable value creation. With that, we will take your questions. Operator: We will now open for questions. Please limit yourself to one question each to allow the maximum number of attendees to ask questions. Now the first question is from Erin Wright from Morgan Stanley. Please go ahead. Erin Wright: Great. Thanks for taking my question. So can you unpack or break down some of the components of the profit performance in Pharma Solutions? And can you break down what's organic versus inorganic? And for the balance of the year, what's implied in terms of that underlying organic growth in the second half? And just that underlying demand trend. I think you commented on that in your prepared remarks. How do you think about that continued underlying strength and stability of the business from a utilization term perspective as well as strength in specialty? Thanks. Jason Hollar: Good morning, Erin. Thank you for the question. We saw momentum in the quarter within the pharma business, as we've seen in the last several quarters with strong demand really across all categories and parts of the business: brand, specialty, consumer, generics. You saw the significant revenue growth and profit growth as well. It's really driven in particular by, on the profit line, by specialty, right, trending above historical levels as we talked about at JPMorgan. We're going to be above the $50 billion for the year there, seeing strength in the key priority areas, urology, oncology, nice strength within the biopharma parts of the business as well. You've heard us talk about Visonixis. We saw the contributions we expected from the MSOs, and we're pleased to close the Solaris transaction in November, so we got two months of benefit in a quarter there. But I want to emphasize the contributions in the quarter from the MSOs were consistent with our expectations. We really saw strong core growth. Generics is always a positive, or we just think it's always been a positive story for us when we see growing volumes, which we saw, and consistent market dynamics, which we saw. Right? That is certainly a nice contributor to the underlying business. And, of course, you can't get past just strong execution by our operations teams in the quarter as well. As we think about where pharma goes from there and the guide for the rest of the year, I guess I'd observe that the raise to our guide is really driven by both reflecting the strong Q2 performance and improved expectations as we carry forward, particularly in the core part of the business. We do have higher growth in H1 than we have called. We called mid-teens profit growth in the back half. And that's not a deceleration of expectation on demand. It's rather the observation that as part of our guidance all along, we've referenced the fact that we'll be lapping $10 billion of new customers in the back half from last year and lapping, of course, ION and GIA, which we acquired in the second half last year. With some benefit from Solaris not being in the portfolio. We are assuming strong stronger demand, if you will, as we called that in my prepared remarks, we did raise our expectation in part based on demand we're seeing. But we are not calling outsized demand. You know, that would be an opportunity, and that's consistent with our guidance philosophy from prior quarters as well. And lastly, I would observe that we are not assuming, as is our practice, that the Solaris distribution moves over to Cardinal Health. You know, that if that were to come to us, it would be toward the end of our year. So that is not baked in. Aaron Alt: Jason, anything you want to add? Jason Hollar: Yeah. I would just I know this question will probably come up a variety of different ways. I think it is helpful to remind you all what we said in the last call. It's still pretty consistent with our current expectations that M&A for the pharma business is expected to be about 8% of our total growth for the full year. So that's the same ballpark that we're anticipating today and can help you kind of piece together all those different elements. But definitely very pleased with the core performance of the business, not just the pharma business, but throughout the other operating segments. So while M&A has been a nice accelerator of our strategy, what we've continued to demonstrate is that the core is strong and that our organic core investments and priorities continue to drive the business forward as well. Operator: Next question, please. The next question is from Elizabeth Anderson from Evercore ISI. Please go ahead. Elizabeth Anderson: Hi, guys. Good morning, congrats on the quarter. I was wondering if you could maybe parse apart the other segment a little bit. You know, is ADSJ sort of performing in at, you know, ahead of your expectations in terms of how you thought that sort of full first-year performance would be? How would you is it sort of improved competitive position? You talked about some of the underlying dynamics in nuclear. So I'm just maybe trying to parse apart on the sort of three underlying business levels, some of that outperformance there as that was obviously a very nice result in the quarter. Jason Hollar: Yeah. I'll go ahead. This is Jason. I'll go ahead and start and have Aaron add in any additional details. I'd say it's a very similar type of commentary that Aaron and I just provided for our pharma business. The core was strong for each of the three businesses within our other segment. We saw good double-digit growth irrespective of the M&A and the ADS acquisition as well. That acquisition has gone at least consistent, perhaps a little bit better than what we had anticipated. It's still early in terms of all the integration and synergy opportunities. But the core business remains strong overall for that home business, but also for our nuclear and Optifreight businesses. Each one of these three businesses is very much focused on core organic investments, making sure that that core is strong and that we're taking care of customers and patients that we have today. We are investing organically in each of these three businesses in different ways to further propel their capabilities and their growth going forward. And then as it relates to at home, of course, we are also doing the inorganic investments. But it's really important for us that we keep that organic investment and that organic growth going. Each one of those three businesses has a little bit of a different story. Within our at-home business organically, we're very much focused on the distribution network, continuing to build out the automation and the technology there. We completed three of the 11 DCs. We have another three to go for the next three years. Nuclear is very much a story around the continued growth of Theranostics and the innovation that we're seeing in that space, and we're investing in our capabilities and our cycle trial capacity to get there. And not be afraid. It's to take the leadership and the capability that we already have, a long history of in the medical side, and expand that into a greater share of wallet with those medical customers. But also expanding, over time, into the pharmacy side of that. So, each of them are operating very well. Very consistent growth right now, and we'll continue to evaluate the right type of M&A to further accelerate that as appropriate. But for the time being, we're still wanting to make certain we're taking care of the at-home customers and make sure that this integration goes flawlessly. Aaron, anything I missed there? Aaron Alt: I would just emphasize strong positioning, positive secular trends, double-digit core profit growth in each of the three businesses, setting aside the positive impact of the ADS acquisition. And Jason did reference the Theranostics point. I would point out that we will be lapping strong Q3 in diagnostics with the product launches from last year, and so that will be that is part of our guidance already as well. Operator: Next question, please. The next question is from Eric Percher from Nephron Research. Please go ahead. Eric Percher: Thank you. Question on capital allocation. I believe your prior commentary was somewhat on returning to the low threes. You're back there maybe earlier than we expected significant cash flow over the balance of the year. Can you give us a bit more on capital allocation and maybe also the capacity or opportunity for further transactions you need some time on MSOs? And you see opportunities in the other segment? Aaron Alt: Thank you for the question, Eric. I would observe two things. First, that we try very hard to tell you what we're gonna do and then go do it and report back. And we are very disciplined in following the aptly named disciplined capital allocation framework that we have. And so two quarters into the year, we are on track to make the $600 to $650 million of CapEx investments that we've talked about before. We have protected our balance sheet and gotten us back within our targeted leverage range at the '2. So that's, you know, good news as well. And we've, two quarters in, fulfilled our baseline share repurchase commitment of $750 million. And what that means for a business that is continuing to generate strong cash is that we have flexibility to assess how we will create the most shareholder value as we carry forward. We are working, as you can tell from Jason's comments, we are investing for growth in the really across the portfolio, whether it's in the pharma business with specialty, within the other three parts of the other business we just highlighted, or indeed continuing the progress against the turnaround plan for GNPD. Now part of that as well is we look we are looking at the landscape and seeing where can we drive more growth or where should we be returning additional capital to shareholders. And while we have nothing to provide today from a commitment in that respect, we are very mindful of the flexibility that the business is generating for us to ensure that we are relentlessly focused on creating that shareholder value. Jason Hollar: What I would add is, you know, we've worked real hard. The team has done a fantastic job and worked very hard to generate a lot of cash, we're gonna be very careful as to how we deploy that. And when you think about in our industry where there's been some of the greatest operational challenges, it's very much on this, core decisions on where to allocate capital. So we have learned from that and are very intentional around where we put that to work. As I already mentioned, we're really focused on the core of the business, and the strategy is not predicated on any significant M&A. With that said, I think the word opportunistic will come up whether we're talking about repurchases or whether we'll talk about additional M&A. I don't see that there's a large gap or anything that we're going to be really leaning into. We're really pleased on the MSO side with the three different platforms that we have now acquired and or built, oncology, autoimmune, and urology. And we're going to want to look at how we can create more value with each of those partnerships and those assets, and we think that there's opportunities probably to do more but smaller types of acquisitions in that type of space. The at-home space and other in general remains quite fragmented. So there will be opportunities if we so choose. But we're gonna make certain that we protect the core with any of those additional acquisitions to ensure that it truly does create synergistic value, helps build capabilities, and that, you know, we're not gonna be doing anything defensive here. We'll be, you know, looking to see if some offensive actions take place. And while we're pleased with the leverage, you know, our cash is at a little bit of the lower side where it's historically been, and that's something that we'll be having a lot of flexibility with, you know, all of our other levers that are in place to continue to have the flexibility as needed when those opportunities do arise. So we'll continue to evaluate all that and, you know, we'll certainly report back as we get better clarity on it. Aaron Alt: Yeah. Just to summarize, I guess what I would say is we're pleased that both internally and externally there is competition for our capital. Operator: Next question, please. The next question is from Michael Cherny from Leerink Capital. Please go ahead. Michael Cherny: Good morning, and maybe if I can build on that a little more, clearly, the last couple of years, the story in many eyes has been about the improvement on specialty. Both from an MSO as well as distribution capability, the scaling you've done. As you think about that prioritization of internal capital and external capital, how is the experience you've had with specialty combined with the pipeline for a variety of different new launches and biosimilars impacted your thought process of where strategic advancement should be as you continue to push for driving towards your LRP and potentially higher? Jason Hollar: Yeah, great question. Love to go deeper. Our view has changed very little. If you go back to not this last Investor Day, but the one before that, we talked about the specialty flywheel effect and benefits that we anticipate that while distribution is important to us, the MSO strategy, the biopharma solution strategy, all these capabilities both up with the manufacturers and downstream with our customers and ultimately patients, all work together. I don't think it's a surprise that what we're seeing in specialty is across the board, performance improvements. The MSOs certainly help bring it all together in different ways. Our biopharma solutions strength has improved our credibility in the distribution space. We have a fantastic relationship both upstream and downstream. So we're executing very well in both directions, and that then creates additional opportunities. And having really referenced our other businesses of, you know, nuclear at home and optifreight, all three of which plug into pharmacy capabilities in different ways. One of which we've talked about a little bit this last month with our continued care pathways program with At Home and connecting the dots with those large pharmacy customers. So we see a lot of opportunity to continue to bring that together, and that's why we're less focused on expanding into new and different areas because there's still a lot of opportunity to expand within the customers, within the products, within the platforms, within the capabilities that we already have. And I think when you look at those opportunities, there's more than enough there that we just don't need to get distracted and grow in other ways because we just don't have a gap in that portfolio that, currently we're worried about. That means we can just, again, be more offensive and take on, you know, additional, you know, growth vectors within what we already have. Operator: Next question, please. The next question is from Alan Lutz from Bank of America. Please go ahead. Alan Lutz: Good morning, and thanks for taking the questions. The Cardinal Health brands in GMPD continue to accelerate even if you net the timing issue that you mentioned. Is there anything specific to call out there around that strength? And then a second question on GMPD. Lower SG&A in the quarter around optimization efforts. Can you talk a little bit about what you're seeing there, specifically where those savings are coming from? And then what's implied in the GMPD guide for the remainder of the year. Thanks. Jason Hollar: Yeah. Great. Yeah. I'll start and then hand it over to Aaron for the SG&A question. As it relates to Cardinal brand growth, it's really not all that sophisticated. It goes back similar to my last commentary. You have to go back at least a few years, probably more like several years, to when the GMPD team really started to not only focus on but really invest into their core. So that's the five-point plan that we walked through before, really focused on the basics of the business. We had to invest in some capacity and capability at the manufacturing sites. You know, we have fantastic products and we had great demand, but we weren't always getting product to the customer at the right time and place. So getting those capabilities right, our backorders I don't think it's ever been lower. Our service levels have never been higher. I mean, we're at levels of operational excellence that we just have not seen before. And that creates lots of opportunities. It was hard for us to expand into new customers, new categories with, you know, those constraints we had before. Those constraints are largely off, and we're really executing quite well to those customer requirements. It's nice that the underlying utilization is still relatively robust. You know, it's not like what we see on the pharma side, but that, you know, low single-digit consistent type of market growth. So it allows us to have enough underlying volume that we're then able to come in and take care of more of our customers' needs. I'll now turn it over to Aaron for the SG&A. Aaron Alt: And on the SG&A topic, certainly, GNPD is a highlight there, which we'll come to in a second, but I want to emphasize that Jason and I are really pleased with the focus that the entire enterprise has been putting on how do we both invest for the future and relentlessly optimize our cost structure. To, of course, reinforce that flywheel. The GNPD business, in the face of executing the GNPD improvement plan, has been relentless in looking for opportunities on how do we both consistent with the five-point plan, raise our game and service our customers better but do it in a much more efficient way. And this quarter is to the progress they've been making and that their overall SG&A costs both direct from an enterprise perspective, really came down in ways that we were pleased to see in support of that business. Operator: Next question, please. The next question is from George Hill from Deutsche Bank. Please go ahead. George Hill: Yeah. Good morning, guys, and thanks for taking the question. I guess, Jason, I'd like to ask about the macro pricing environment as we're seeing some brand drug manufacturers take price increases as 2026 starts. It doesn't seem to have impacted your guys' guidance at all. But as you look I guess, I'm wondering, should we expect to see manufacturer branded price decreases I'm sorry, not increases, decreases impact either the revenue line or the operating income line as we think about calendar 2026. And maybe also if you could talk about the offsets that you guys have used to preserve your operating earnings on the income statement. Thanks. Jason Hollar: Sure. Yeah. As well, I mean, when you talk about prices, I just don't think your question was around the contingent inflation but that piece of it has been pretty consistent with what we've anticipated as it relates to IRA, MFN, all those types of discussions. There's really no new news as it relates to this. You know, you've heard from us quite consistently that we anticipate that, whatever changes do occur to that top line, will be adjusted within our cost structure and what the DSA fees with the manufacturers to preserve that margin. We communicated, at the recent industry conference that we indeed were successful with that for all the 26 items and there's nothing at this moment that we see with the 27 and 28 items that would make us believe it would be any different than that. You are right, George, that revenue is a different story. So, you know, as the WAC levels come down, that will adjust through revenue as well as our, you know, cost of goods sold so that our margins remain stable. But that's all been factored in for '26. We didn't see anything that came through as it relates to WAC level adjustments that was significantly different than our original guidance. And so we've not adjusted our revenue meaningfully for any changes there. We would anticipate that, like what we've seen in '26 in the future, we anticipate something similar that some manufacturers will choose to adjust WACC and some will choose to utilize more of a rebate structure. And it's our expectation in our as we think about longer term that, while that should not impact our margin in any meaningful way, it could impact, you know, revenue a little bit differently than what's anticipated. We don't see that being, again, very, very impactful, across those years at this point in time. But still need to get a little bit more information before we can solidify any of that. Operator: Next question, please. The next question is from Steven Baxter from Wells Fargo. Please go ahead. James: This is James on for Steve. Thanks for taking the question. As far as GLP-1s, we're seeing a lot of change in the market between pricing changes, channel changes, the introduction of orals. Is there any way you're any difference in how you're modeling revenue or earnings for GLP-1 this year? Or maybe how you're thinking about it in the long term? Jason Hollar: No. The oral contribution that we see so far is slow. We anticipate it growing quickly, but it's not something I would expect to be material for this fiscal year. And the underlying economics behind it, we've talked before that the cost to serve we anticipate being a little bit better on the oral versus the injectables. But it's, you know, it's just too early to determine, you know, what the volume contributions will be for the different pieces. Irrespective of all that. I've been fairly consistent on this point. You know, what you've seen is a massive increase in volume growth over the last couple of years, and you just haven't heard us call it out as a meaningful driver. And I do not anticipate that you're going to hear us call it out as a meaningful driver going forward irrespective of how strong the oral growth is or the mix between the two. While there's some differences, it's just relatively unlikely that that's gonna be a big driver for underlying profitability. Revenue certainly has been much more of a contributor. We saw similar contributions this quarter than what we've seen in the last several quarters in terms of the growth pieces. Yeah. 6% of sales in Q2. And we expect a 6% of growth rates being for GLPs. And while we would expect that to start to slow down a little bit for the injectables just by the nature of the size of the market. That's where the orals will come in and start to offset that slower growth rate. But make no mistake, we expect both to be growing fairly significantly still for at least the near term. Operator: Next question, please. The next question is from Kevin Caliendo from UBS. Please go ahead. Kevin Caliendo: Hey. Good morning, guys. I wanna change up a little bit and ask a GMPD question. Specifically, CMS put out a proposal around domestic PPE recently. I know it's just a proposal. There's comments and the like. But if it were to go through, would this be a positive or a negative for you guys? Like, how would it impact what you're doing or the profits potentially on PPE you think happens to pricing? I'm just trying to understand if this is something as investors, we should be following and care about and if it will impact you or the industry in any way. Jason Hollar: So you're gonna have to make the go way back and give a little bit of history lesson on PPE in general. I can't recall how long ago it was, but it was probably several years ago. I remember when we were dealing with the COVID impacts, making statements like, well, normally, you would never expect to talk about PPE because the revenue and margin is relatively low and fairly consistent. Obviously, with COVID, the volatility on both the volume, the price, and the cost created a bit of a perfect storm of volatility. So, I guess I start off by saying that, because it's not a huge category for our business. It's an important one certainly for customers. But it's not a key part of the growth that we just described certainly. And given its importance to our customers, that means it is important to us. And, if they see value in buying PPE domestically, or if they're incentivized to do so in some way or whether we're incentivized to do some way, absolutely, we can support that. We have a very flexible talented procurement team in our GMPD business. And, we source very diverse sources today throughout the world that, of course, was expanded as a result of COVID. We would love to source even more in The United States. Quite frankly, today, the cost is not typically something our customers choose to buy, but we are very, very open, willing, and to support that, but there's not a lot of choice today in that type of marketplace, especially at the price points that are competitive in the market. But that's where the, you know, the incentives are going to be important within this equation. And, if doing so, we are very able, very flexible in order to support that type of action. Operator: Next question, please. The next question is from Lisa Gill from JPMorgan. Please go ahead. Lisa Gill: Hi. Thanks very much, good morning. I was wondering if you could just spend a few minutes discussing your relationship with hospital and health systems on the specialty side and do you see incremental opportunities there when we think about your specialty business? Jason Hollar: Well, so we're quite present today and have a great relationship and reasonable share within that particular part of the market. So, you know, we are very much capable of supporting the broad needs of specialty irrespective of what channel, what customer. So we've seen growth, consistent across the different channels over the last several years. As a reminder, up until recently, we have talked about the 14% overall specialty revenue, and we've increased that recently in our three-year CAGR about 16%. So we've seen a little bit of acceleration. And, you know, that is part of the market that we have been winning, at least our fair share within. And, I really have to go back to, you know, three and a half years ago, when I put Debbie Weitzman into the leadership role, that business is one of the first things that she did, in terms of the pharma business is she brought together the specialty and the nonspecialty side and had created a one face, one voice to the customer. That allows us to make sure that we're taking care of all of those customers' needs and because while specialty is really interesting and important to us, it's only one component of what they need to have their support with. And so we've changed our go-to-market type of strategy, and it's really resonated quite well with our customers. And that's the type of innovation and very high-touch type of support that we'll continue to drive to ensure that their needs are met. Operator: Next question, please. The next question is from Daniel Grosslight from Citi. Please go ahead. Daniel Grosslight: Congrats on a strong quarter here. I wanted to go back into the biopharma solutions and specifically the new business wins that you've highlighted for Synexis, including a significant competitive takeaway. What specific capabilities are resonating most with manufacturers then as we look forward, for the next year or so, are there any significant investments that you anticipate making to keep you guys competitive in your hub business? Thanks. Jason Hollar: Yeah. Love the question. Thank you. I put it into two key buckets. First of all, you gotta start with the team. Not only is it a great group of people, they understand the customer and they really listen to what the customer is wanting and needing and demanding. And that's where it starts because then from there, you then implement the solutions to take care of those customers. And the solutions are the digitization that we did with our tool, our platform. While there's always technology, you know, we really leaned into it in a way that simplified their work with us. We allow them to once when they bring one of their products under our platform, it allows it to be replicated quite seamlessly to other products that they have. So once we get that foot in the door and we can prove that we have a better tool, better process, then we see a lot of follow-on opportunities that go from there. This is not a recent investment that we made. This team has been all over this for years. And your last part of your question is, you know, I think in terms of future investments, you know, we're always gonna have additional investments. What we're trying to instill is a culture and a process that is not ever starving any of our businesses and then requiring some big catch-up. It may mean that we have, you know, elevated levels of spend for longer periods of time, but we like having less volatility on spend and more of a consistent investment so that we're getting in front of those opportunities and not having to be more defensive in catching up. And so we have made widespread investments across each of our investments. There's nothing that we're calling out today that will be significant. But just keep in mind, we are spending more today on whether it's capital or these types of projects than we have in the past. And so we're already at, to some degree, elevated levels. I don't anticipate that dropping, but I also am expecting that to spike in any significant way. The SG&A comments that Aaron made, he was answering a specific question around GMPD, but I think those types of that type of answer goes for each of our businesses. What we are looking to do is take away the excess and the waste in the system that always exists in any business, and reinvest that in much more productive areas. So we're always looking for a productive efficiency using technology, AI, and just, you know, elbow grease to go after and to take costs out. But then we're always also looking for, well, where can we invest that with a great return? Not only to drive financials, but to solve more of our customers' and patients' problems. And that's what's really going well with the organization right now is that we're able to look ahead farther than we ever have in the past and that's what we're spending on. It's not today's problems, but we're spending on tomorrow's opportunities. Aaron Alt: Just as a reminder, we have committed to getting the biopharma service part of the portfolio to $1 billion of revenue by 2028. Jason's been highlighting the successes that Synexis with, you know, doubling the therapy supported, etcetera. That's all been a key part of that internal and external competition for our capital that I referenced before. So we're quite excited about Synexis, you know, being half of the growth to get to that $1 billion target. Operator: Next question, please. The next question is from Glenn Santangelo from Barclays. Please go ahead. Glenn Santangelo: Yeah. Thanks for taking my question. Hey, Jason. I just wanna come back to the pharma and specialty segment. I think in your prepared remarks, you seem to suggest that one of the big drivers was the Red Oak generics program maybe performing a little bit better than you thought. And I think you sort of highlighted maybe better generic volumes than maybe you were expecting. I'm kind of curious if you could just give us a little bit more details there and what's maybe driving that? Is it greater generic introductions or is it greater penetration within your existing customers? And any sort of comments you have around generic pricing would be helpful. Thanks. Jason Hollar: Yeah. I think Aaron had made the comments around strength in terms of the generics program. I believe it was more from the perspective as a year-over-year driver, which it certainly is. And when you look at Red Oak, the utilization has been strong. That part is clear. In terms of the spread, the margin per unit, we didn't call out anything in particular. It remains very consistent market dynamics. It also remains a year that does have good launches. Not you know, the launches aren't any greater than what we had thought in terms of new items this year. But the underlying utilization across the industry remains quite good. So I'd focus more on the volume than any other type of price cost or new item type of... Aaron Alt: Yeah. We manage the business to, you know, average margin per unit. Right? That's why we call consistent market dynamics. The business did see great service levels that are certainly supportive of the volume trends and of course, we were onboarding new customers. And so that is helpful from a generic volume perspective as well. Operator: Next question, please. The next question is from Charles Rhyee from TD Cowen. Please go ahead. Charles Rhyee: Yeah. Thanks for taking the question. Maybe just sticking with sort of the pharma segment and sort of thinking about the guide for the second half. If we look at the first half, performance, you know, I think AOI growth was up 28%, and you look at the guide for the second half, it's roughly about 16%. Should we think about this delta being sort of entirely just lapping new customers and M&A and understanding we have contribution from Solaris. And, of course, we're raising our second-half expectations. Just trying to understand sort of what the moving parts are. And I'm really trying to get a sense for, like, how you're thinking about underlying sort of core growth in the pharma segment. Thanks. Aaron Alt: Sure. A couple of thoughts. I want to point out that our second-half guide is well above our long-term growth target within that business. It is the case that our guidance philosophy all year long has been to call out the fact that we will be lapping that $10 billion of new customer in the back half as well as lapping the M&A. And so we want to make sure people are modeling that appropriately as we carry forward. I did call out that we are based on the success and the strength we saw in Q1 and Q2, from an internal forecast and guidance perspective, have factored in some stronger demand within for the back half for us than what we had originally been anticipating. We've not gone so far as to assume it's the outsized demand we've seen so far will be there. That I can say call that out as an opportunity for everyone if it continues at that higher rate. We have not assumed Solaris. The distribution coming in. That would be end of fiscal year if that happens as well. Those are the drivers we've provided. Operator: Next question, please. The next question is from Steven Valiquette from Mizuho. Please go ahead. Steven Valiquette: Great. Thanks. Good morning. So I just have a question also on the GMPD segment. We go back to the Analyst Day last year, you guys talked about as part of the five-point plan, you know, new product development and commercialization. So I'm just kind of wondering as we fast forward, you know, six months or so and, you know, still a lot of moving parts on tariffs and everything else. Just the progression of, like, the new products and with the better than average growth right now, how much of that is driven from either, you know, growth of, you know, from the existing portfolio versus new products? And also, what's your appetite for just, you know, runway to just still increase that number of cardinal private label SKUs within the overall GMPD portfolio? Thanks. Jason Hollar: Yeah. I'm happy you asked the question because Aaron and I answered the prior question, it hit me that I missed that point of our five-point plan. New product development investment is certainly a component of our prioritization and of the success we've had. Now, to be clear, what we mean by that and where we're prioritized is within the product categories that we participate in today, like the new compression device that I referenced in my commentary or our new pump in our nutrition business. These are all categories that we already have a significant presence that allows us to grow through providing broader products to those existing customers or existing markets. We have not prioritized new products into new product categories. It's a similar reason for what I described before with our other businesses. Where we have a fantastic opportunity to still grow a Cardinal brand mix within the product categories that we're already participating in today. We can get at it faster, more efficient, more effective. Solving more patients' problems, and create more value for our customers by prioritizing those product categories. So it is a key component of our growth, but it's a little bit of a broader, better products within those same exact categories. So we'll continue to invest in that. And that will remain our priorities for at least the near term with this business. Operator: Next question, please. We'll now take our last question today from Brian Tanquilut from Jefferies. Please go ahead. Brian Tanquilut: Hey, good morning and congrats on the quarter again. Maybe Aaron, as I think about the growth in the embedded tech segments or tech businesses within the core like Synexis. Anything you can share with us in terms of the growth rates for those, you know, tech operations? I know last quarter, I think you pointed to Synexus you were up more than 30%. So just curious how we should be thinking about that and how do you think about it going forward? Aaron Alt: Yeah. No. We've called out both the aspirational goal of the $1 billion here by fiscal 2028 and biopharma services growing, within the year, up 30%, half of it from Synexis. We don't separately break the parts of the portfolio out, but I do want to emphasize that when Jason talks about how our key strategic investments are in specialty, we view this as an important part of the specialty. And so we continue to invest whether it's in Synexis, the hub business, you know, Cell and Gene, you know, 3PL, the other parts of the portfolio. We are investing for the long term there to help support the broader growth objective for the specialty part of our business. Brian Tanquilut: Great. Thank you. Operator: Thank you. We do not appear to have any further questions. And I would like to turn the call back over to Jason Hollar for any additional or closing remarks with you, sir. Jason Hollar: Yeah. Thanks. Thanks for joining us today. Obviously, we're very pleased with our performance this quarter as well as the progress in advancing our strategy. As always, please reach out if you have any further questions. With that, have a great day. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0. A member of our team will be happy to help you. Please standby. Your meeting is about to begin. Morning, and welcome to Alico, Inc.'s First Quarter 2026 Earnings Call. As a reminder, today's call is being recorded. I would now like to turn the call over to your host, John Mills, managing partner at ICR. Please go ahead. John Mills: Thank you. John Kiernan: Good morning, everyone, and thank you for joining us for Alico, Inc.'s First Quarter 2026 Conference Call. On the call today are John Kiernan, President and Chief Executive Officer, and Bradley Heine, Chief Financial Officer. By now, everyone should have access to the first quarter 2026 earnings release which went out yesterday at approximately 4:15 PM, Eastern Time. If you have not had a chance to view the release, it's available on the investor relations portion of the company's website at alicoinc.com. This call is being webcast, and a replay will be available on Alico, Inc.'s website as well. Before we begin, we'd like to remind everyone that the prepared remarks contain forward-looking statements. Such statements are subject to risks, uncertainties, and other factors that may cause the actual results to differ materially from those expressed or implied in these statements. Important factors that could cause or contribute to such differences include risks detailed in the company's quarterly reports on Form 10-Q, annual reports on Form 10-K, current reports on Form 8-K, and any amendments thereto filed with the SEC and those mentioned in the earnings release. The company undertakes no obligation to subsequently update or revise the forward-looking statements made on today's call except as required by law. During this call, the company may also disclose non-GAAP financial measures, including EBITDA, adjusted EBITDA, and net debt. For more details on these measures, please refer to the company's press release issued yesterday. And with that, it is my pleasure to turn the call over to the company's President and CEO, Mr. John Kiernan. Please go ahead, John. John Kiernan: Thank you, John. Good morning, everyone, and thank you for joining us for Alico, Inc.'s first quarter 2026 earnings call. We are very pleased with our first quarter results and subsequent transactions we achieved in the first month of our second fiscal quarter. We believe this momentum and our enhanced business model in action validates our land monetization and utilization strategy. Let me highlight a few specific achievements in our first quarter subsequent events. First, in the first quarter, we generated $7.7 million in land sales, reflecting the strong demand for our strategically located Florida properties. Second, our net loss improved to $3.5 million from a loss of $9.2 million in the prior year period, and we generated positive EBITDA of $2.4 million compared to negative $6.7 million in the prior period, demonstrating the financial stability we've built through this transformation. Third, with our strengthened balance sheet holding $34.8 million in cash at first quarter end and reduced operating complexity, we believe we are financially very well positioned to execute on our near and long-term plan. Fourth, Alico, Inc. entered into a ten-year lease with Bear Crop Science to establish an agricultural research station on 100 acres on our TRB property located in Charlotte County. And subsequent to quarter end, following the signing of new lease agreements in January, Weco has achieved 97% utilization of our approximately 32,500 farmable agricultural acreage. Lastly, also after quarter end, we closed on an additional sale of a large Citrus Grove representing approximately 2,950 acres for $26.8 million, leaving us within our approximately 46,000-acre Florida portfolio. We believe these results and transactions demonstrate that Alico, Inc. has a business model that will continue to unlock substantial value from its land portfolio while maintaining our commitment to responsible land stewardship. As we look forward, our development pipeline continues to advance on schedule, with Corkscrew Grove Villages leading the way as the crown jewel of our portfolio. The establishment of the Corkscrew Grove Stewardship District represents a significant regulatory milestone, validates our development strategy, and provides the framework for sustainable community-focused growth. This Stewardship District, approved unanimously by the Florida legislator, positions us to effectively finance infrastructure, restore and manage natural areas, and oversee the administration of our master plan communities. I'm particularly excited to highlight our previously announced strategic partnership with the Florida Department of Transportation to design and construct a wildlife underpass as part of the State Road 82 expansion. This $5 million investment demonstrates our commitment to Florida wildlife and showcases the innovative conservation approach that sets Alico, Inc. apart in the development community. We remain on track for an anticipated final decision from Collier County in 2026, with potential construction for Corkscrew Grove Villages beginning as early as 2028. Collectively, our four near-term real estate development projects, Corkscrew Grove Villages, Bonnet Lake, Saddlebag Grove, and Plant World, totaling approximately 5,500 acres, maintain their estimated present value between $335 million and $380 million, which we hope to be realized within the next five years. This represents significant value creation potential from just 10% of our land holdings, demonstrating the substantial embedded value within our diversified portfolio. As you can see from the first quarter results and achievements, our approach creates the best of both worlds. With approximately 25% of our land identified for strategic development and 75% remaining for diversified agriculture, we've built a balanced platform for both near-term returns and long-term growth. We believe it is important to emphasize our commitment to returning capital to shareholders, especially as we achieve positive EBITDA for the quarter and generate approximately $34.5 million in recent land sales. Since 2015, we've returned more than $190 million to shareholders through dividends, share repurchase, and voluntary debt reduction. Going forward, we continue to evaluate the best use of capital to enhance shareholder value. Management's comprehensive NPV analysis of our approximately 46,000 acres indicates a market value of assets between $650 million and $750 million. With our current market capitalization of approximately $320 million and net debt of approximately $50.7 million at quarter end, we believe Alico, Inc. represents compelling value for investors seeking exposure to Florida's real estate and Florida's continued growth story. What differentiates Alico, Inc. is our unique combination of strategic land holdings across seven Florida counties, more than 125 years of local relationships and conservation credibility, a proven management team with deep expertise in both agriculture and real estate development, and a balanced portfolio approach with 75% of our land continuing to be used for agricultural activities. On our fourth quarter call, I listed our priorities for fiscal year 2026 to continue our transformation momentum, and today, we are reiterating those priorities. First, to optimize our agricultural operations by maximizing revenue from our diverse leasing programs while maintaining rigorous cost controls across all properties. We have made tremendous progress on this and now have approximately 97% of our farmable land leased. Second, we remain committed to advancing our residential and commercial development project by continuing to progress through the entitlement process for our four priority projects with particular focus on securing final approvals for Corkscrew Grove Villages. Third, our strategic capital allocation approach will balance required entitlement investments with shareholder returns while maintaining the financial flexibility necessary to execute on our long-term strategy. And finally, to pursue operational by leveraging our experienced management team and strong local relationships to execute efficiently across all these initiatives. As we enter our second fiscal quarter, our strengthened balance sheet holding $34.8 million in cash as of December 31, 2025, the January 2026 land sale of $26.8 million, and our reduced operational complexity highlight the fact that we continue to believe we are well positioned to advance along our high-value development roadmap. The Corkscrew Grove Villages entitlement process remains on track for an anticipated 2026 decision by Collier County. And our balance sheet and revenues from our diversified agricultural operations provide the financial resources to execute our long-term strategy. We believe that Alico, Inc. has a business model that unlocks substantial value from our approximately 46,000-acre Florida portfolio while maintaining our commitment to responsible land stewardship. The foundation is in place, and we're excited about the opportunities ahead. With that, I'll turn it over to Bradley Heine to walk through our detailed financial results. Bradley Heine: Thank you, John, and good morning, everyone. I'll walk you through our first quarter fiscal 2026 financial results, which demonstrate the solid performance of our business model and continued financial discipline. For the three months ended December 31, 2025, we reported total revenue of $1.9 million compared to $16.9 million in the prior year period. The decrease primarily reflects the substantial inclusion of our citrus business. Our Alico citrus segment generated $900,000 in revenue with a gross loss of $6.5 million compared to $16.3 million in revenue and an $8.8 million gross loss in the prior year. While we still had some residual citrus activities, the significantly reduced scale demonstrates our successful exit from the capital-intensive citrus production. Production, land management, and other operations revenue increased 77%, driven by higher rock and sand royalties, and farming lease revenue. This growth reflects diversified revenue streams we've established through our agricultural partnerships. Our net loss attributable to Alico, Inc. common stockholders improved significantly to $3.5 million or $0.45 per diluted share compared to a net loss of $9.2 million or $1.20 per diluted share in the prior year period. This improvement demonstrates the financial benefits of our business model evolution. Furthermore, we achieved positive EBITDA of $2.4 million compared to negative $6.7 million in the prior year period, a $9.1 million improvement. Our adjusted EBITDA was $2.7 million, also compared to negative $6.7 million last year. This positive EBITDA generation validates the cash-generating capability of our new operating model. Our balance sheet remains strong with $34.8 million in cash and cash equivalents at quarter end, providing excellent liquidity. The current ratio improved to 14.39 to one, demonstrating exceptional financial flexibility. Total debt remained stable at $85.5 billion, with net debt of $50.7 million at quarter end. We have $92.5 million available under our credit facility, and our minimum liquidity requirement is just $5.8 million, giving us substantial financial runway. Net cash used in operating activities improved to $5.5 million from $7.6 million in the prior year period, reflecting better operational efficiency. We generated $7.7 million from land sales in the quarter with a gain of approximately $4.9 million. Year to date through January 2026, we have achieved $34.5 million in total land sales, contributing to our strong liquidity position and validating our land monetization strategy. Looking ahead to fiscal year 2026, I'm pleased to provide updated guidance that reflects our strong operational momentum and strategic positioning. We expect to deliver adjusted EBITDA of approximately $14 million for the full fiscal year, which represents a significant improvement from our historical performance and validates the cash-generating potential of our transformed business model. From a balance sheet perspective, we anticipate ending fiscal year 2026 in a strong liquidity position with approximately $50 million in cash. This will allow us to reduce our net debt to approximately $35 million by our fiscal year end, with only the minimum required $2.5 million balance remaining on our revolving credit facility. I should note that these projections assume our current operational plan. However, our strong cash position and improving cash flow generation provide us with significant flexibility for potential capital allocation opportunities. Should we decide to return capital to shareholders during fiscal 2026 through increased dividends, special distributions, share repurchases, or tender offers, our ending cash balance would naturally be lower and net debt correspondingly higher than these base case projections. This guidance reflects the financial strength that we've built through our strategic transformation and positions us well to fund both our ongoing operations and future development initiatives while maintaining the financial flexibility that's become a hallmark of our new business model. Positive EBITDA generation in Q1, combined with our strong balance sheet, demonstrates that we've successfully built a financially stable platform for long-term value creation. The fundamentals of our business model are working as intended. We're generating cash flow from diversified land usage while maintaining the optionality to pursue higher value development opportunities. Now I'd like to turn the call back to John for his closing remarks. John Kiernan: Thank you, Brad. Our first quarter results demonstrate our commitment to continue utilizing all of our assets to enhance shareholder value. We have a balance sheet and operating structure that positions us extremely well to execute on our near and long-term projects as we continue to unlock the value in our approximately 46,000-acre Florida portfolio. Management's NPV analysis values our land portfolio between $650 million and $750 million. We traded at approximately $313 million as of last night. We believe this represents a significant valuation disconnect that we expect will close as we continue to execute on our plan. Alico, Inc. today is fundamentally transformed. We are well-capitalized, strategically focused, and spread across Southwest Florida. With more than 125 years of Florida heritage, proven conservation leadership, 97% of our farmable land leased, and a clear real estate development pipeline, we're very well positioned to deliver sustainable value creation. Jamie, we'll now open the call for questions from industry analysts. Operator: Thank you. Please press 1 on your keypad. To leave the queue, press 2. Once again, that is 1 to ask a question and 2 to remove yourself. We'll pause for just a moment to allow questions to queue. We'll hear first from Gerry Sweeney with ROTH Capital. Gerry Sweeney: Staying warm, Jerry? Trying to. It's getting a little chilly here. But a couple of quick questions on Corkscrew. Well, I think an easy one first. The approval, are we thinking sort of you said 2026. Do you have an idea if this is more of a 3Q4Q type event or just any idea on maybe a little bit not better timing, but, you know, spotted timing on when that could come through. John Kiernan: Yeah. So we haven't pinned that down, but I would say, you know, from a fiscal year perspective, three or four is, you know, by the September. That is not an unreasonable assumption. But, again, we don't really control the local calendar. Gerry Sweeney: That's fair. Yeah. Got it. And then assuming approval, what are the key steps next key steps for Corkscrew as you move forward between the approval process and shovels in the ground. Does that include potential partnerships with developers or builders and things like that? John Kiernan: Sure. I don't think those are mutually exclusive tracks. You know, conversations with National Home Builders and other developers happen as a regular course of business. So, clearly, nothing has been, you know, negotiated or solidified. But you know, we're acquainted with a lot of the national players. I think to be clear, you know, local approval, state approval, and then we need federal approval from the Army Corps of Engineers and Fish and Wildlife. We expect that the federal level will take the longest and nothing really happens until all those approvals are realized and a permit can be issued. Gerry Sweeney: Got it. That makes sense. And then just switching over to the farmland opportunity. Obviously, I think you highlighted 97% utilization of farmland. Can you discuss are you in a position to discuss you know, what type of maybe cash flow that utilization rate could bring in as we look to, you know, model results going forward? John Kiernan: No. And I appreciate that. That is a difficult task. At this point, we have not provided any additional forecasted information or given any guidance. But Brad and I'll take that request offline, and, hopefully, next quarter, we might be able to give you a little more clarity. Gerry Sweeney: That's fair. I just had to ask, but I appreciate it. So that's it for me. Thanks. Operator: And as there are no further questions in queue at this time, I'd like to turn the floor back over to Mr. Kiernan for any additional or closing comments. John Kiernan: Thank you, Jamie. I want to thank all of our employees for their dedication during this transition, particularly over the past weekend, where there was a significant freeze event over Florida. And we were doing our best to cooperate with our neighbors to maintain some of our properties. So thank you to our employees for really digging in. I want to thank our board for their continued support of our strategic vision. And to you, our shareholders, for your patience and confidence as we execute this transformation. We look forward to updating you on our further progress on our second quarter earnings call. Have a good day. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may disconnect.
Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Suburban Propane Partners, L.P. Financial Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. To withdraw your question, press 1. It is now my pleasure to turn the call over to Davin D'Ambrosio, Vice President and Treasurer. You may begin. Davin D'Ambrosio: Great. Thank you, Tina. This is Davin D'Ambrosio, Vice President and Treasurer, and good morning, everyone. Thank you for joining us this morning for our fiscal 2026 first quarter earnings conference call. I am here with Michael A. Stivala, our President and Chief Executive Officer, Michael A. Kuglin, Chief Financial Officer, and Alex Centeno, Senior Vice President of Operations. This morning, we will review our first quarter financial results along with our current outlook for the business. Once we have concluded our prepared remarks, we will open the session to questions. Our conference call contains forward-looking statements within the meaning of 21E of the Securities Exchange Act of 1934, as amended, relating to the partnership's future business expectations and predictions and financial condition and results of operations. These forward-looking statements involve certain risks and uncertainties. We have listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropane.com. All subsequent written oral forward-looking statements attributable to the partnership or persons acting on behalf of the partnership are expressly qualified in their entirety by such cautionary statements. Our annual report on Form 10-Ks for the fiscal year ended September 27, 2025, and Form 10-Q for the period ended December 27, 2025, which will be filed by the end of business today, contain additional disclosures regarding forward-looking statements and risk factors. Copies may be obtained by contacting the partnership with the SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures, as well as a discussion of why we believe this information to be useful, in our Form 8-K, which was furnished to the SEC this morning. The Form 8-Ks will be available through a link in the Investor Relations section of our website. At this point, I will turn the call over to Michael A. Stivala for some opening remarks. Mike? Michael A. Stivala: Thanks, Davin, and good morning. I apologize for the confusion from the operator. You are listening to the Suburban Propane Partners, L.P. first quarter earnings conference call. So thanks for joining us today. The fiscal 2026 heating season is off to a great start with a surge of colder weather in our Northeast, Mid-Atlantic, and Midwest operating territories during November, and more importantly, December 2025, that drove heat-related demand which more than offset warmer average temperatures in the West and incremental volumes in the prior year first quarter resulting from Hurricanes Saline and Milton. Our operating personnel have already endured some significant challenges with harsh weather conditions that have persisted into the fiscal second quarter. I am extremely proud of the hard work and dedication of our local teams for their preparation and commitment to the safety and comfort of our customers and local communities. The boost in heat-related demand along with continued positive trends from our customer base growth and retention initiatives enabled us to deliver an increase of more than 4% in volumes sold compared to the prior year first quarter and an increase of $8.1 million or nearly 11% in adjusted EBITDA for the quarter. In our renewable natural gas operations, average daily RNG injection in the first quarter increased both sequentially and year over year, driven by the operational enhancements implemented at our Stanfield, Arizona facility, which are resulting in both improved uptime at the facility and increased conversion of feedstock to RNG injection. We also started the commissioning process for our newly constructed anaerobic digester facility in Upstate New York during December 2025, and made substantial progress on the construction of the gas upgrade equipment at our existing anaerobic digester facility in Columbus, Ohio. The RNG capital projects are on track for completion toward the end of the second fiscal quarter, with RNG injections scheduled to begin in the second half of the fiscal year. With a great start to the fiscal year, we remain focused on delivering outstanding performance while also advancing our long-term strategic growth plans with the previously announced acquisition of two well-run propane businesses in California, investing $24 million, progressing our capital projects to grow RNG production, investing nearly $7 billion in growth CapEx in the quarter, and strategically refinancing our 2027 senior notes at an attractive rate and a ten-year maturity. Therefore, we continue to focus on disciplined investment in growth while maintaining balance sheet strength and flexibility. In a moment, I will come back for some closing remarks. However, at this point, I will turn the call over to Michael A. Kuglin to discuss the first quarter results in more detail. Mike? Michael A. Kuglin: Thanks, Mike, and good morning, everyone. To be consistent with previous reporting, as I discuss our first quarter results, I am excluding the impact of unrealized mark-to-market adjustments on our commodity hedges, which resulted in an unrealized gain of $930,000 in the first quarter compared to an unrealized gain of $3.6 million in the prior year first quarter. Excluding these and certain other noncash items, we have identified a reconciliation of net income to adjusted EBITDA in the press release. Net income for the first quarter was $46.6 million or $0.70 per common unit compared to net income of $38 million or $0.59 per common unit in the prior year. Adjusted EBITDA for the first quarter was $83.4 million, an increase of $8.1 million or 10.8% compared to the prior year. Retail propane gallons sold totaled 110.2 million gallons for the first quarter, an increase of 4.2% compared to the prior year. The increase was driven by colder temperatures across much of the Eastern Half of the US, which boosted heat-related demand as well as positive contributions from organic customer base growth and our recent propane acquisitions. These factors more than offset the impact of the considerably warmer temperatures in the Western half of the country and incremental volumes in the prior year first quarter in the aftermath of Hurricane Salim and Milton in the Southeast. With respect to the weather, average temperatures during the first quarter were 6% warmer than normal and 6% colder than the prior year first quarter. In the Eastern half of the US, average temperatures were in line with normal and 12% cooler than the prior year first quarter, whereas average temperatures in the West were 24% warmer than normal and 11% warmer than the prior year first quarter. From a commodity perspective, average wholesale propane prices for the first quarter were $0.66 per gallon, based on Mont Belvieu, representing a 14% decrease compared to the prior year first quarter. According to the most recent report from the Energy Information Administration, US propane inventories totaled 89 million barrels at the end of last week, which was 34% higher than a year ago and 28% above historical averages for this time of year. While domestic demand from the recent blast of cold weather in the East could impact inventories, wholesale propane prices remain in the $0.60 per gallon range compared to the $0.90 per gallon range a year ago. Excluding the impact of the mark-to-market adjustments on our commodity hedges, our gross margin for the first quarter was $238.6 million, an increase of $16.1 million or 7.2% compared to the prior year. Improvement was driven by higher propane volumes sold, coupled with an increase in propane unit margins of $0.08 per gallon or 4% and to a lesser extent, contribution from our RNG operations due to increased RNG injection. With respect to expenses, combined operating and G&A expenses increased $5 million or 3.4% compared to the prior year first quarter. The increase was primarily due to higher payroll and benefit-related costs, overtime, and other variable operating costs to support the increased activities associated with the incremental customer demand and higher variable compensation expense associated with the increase in earnings. Net interest expense of $19.8 million for the quarter was flat compared to the prior year as the impact of higher average outstanding borrowings under our revolving credit facility was offset by lower benchmark interest rates on those borrowings. Total capital spending for the quarter was $19.8 million, of which $13 million was in support of our propane operations and $6.8 million for our RNG growth projects. Full-year capital spending estimate for the RNG project remains unchanged at $30 million to $35 million, with spending concentrated in the first and second quarters. Turning to our balance sheet, given the seasonal nature of our business, we typically borrow under our revolving credit facility during the first quarter to fund a portion of our seasonal working capital needs. With that said, during the first quarter, we borrowed $115.4 million under our revolver and used net proceeds of $3.1 million from the issuance of common units under our ATM equity program to fund our seasonal working capital needs, growth capital expenditures for the RNG projects, along with the costs associated with refinancing of our senior notes and the two propane acquisitions that Mike mentioned earlier. Our consolidated leverage ratio for the trailing twelve-month period ended December 2025 improved to 4.57 times compared to 4.99 times for the trailing twelve-month period ended December 2024. Our working capital needs typically peak towards the end of the heating season, late February or early March timeframe, after which we expect to generate excess cash flows. We will continue to remain focused on utilizing excess cash flows to strengthen the balance sheet as opportunities arise to fund strategic growth. We have more than ample borrowing capacity under our revolver to fund our remaining working capital needs for the heating season, as well as to support our growth capital and ongoing strategic growth initiatives. With that, I will turn it back to Mike. Michael A. Stivala: Thanks, Mike. As announced on January 22, our Board of Supervisors declared our quarterly distribution of $0.0325 per common unit in respect of our 2026. That equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on February 10 to our unitholders of record as of February 3. Our distribution coverage continues to remain strong at 2.19 times for the trailing twelve-month period ended December 2025. So just a few final thoughts. As colder weather and extreme storms have swept across much of the eastern half of the country in recent weeks, our operations personnel are well prepared and working tirelessly to safely meet customer demand. The foundation of our ongoing success continues to be rooted in our more than 3,200 dedicated employees at Suburban Propane Partners, L.P. Their unwavering focus on the safety and comfort of our customers and the communities we serve and the commitment to delivering outstanding customer service truly sets us apart. I want to take a moment to thank them for their exceptional efforts during these sustained cold and extreme weather conditions. In closing, our business is very well positioned both operationally and financially to meet increased demand from a more normalized winter heating season while continuing to drive operational enhancements and executing on our long-term strategic growth plans. We remain committed to growing our core propane business while leveraging our core competencies as trusted local distributors of energy to grow the markets for alternative lower carbon renewable fuels well into the future. We continue to be patient and disciplined in executing our growth plans to ensure we maintain a strong balance sheet to support both sustainability and provide flexibility to be opportunistic. As always, we appreciate your support and attention this morning, and we will open it up for questions. Tina, would you mind helping us with that? Operator: At this time, I would like to remind everyone to ask a question for just a moment to compile the Q&A roster. And with no questions in queue, I will hand the call back over to Davin for closing remarks. Davin D'Ambrosio: Great. Thank you, Tina. Appreciate everybody's attention. We look forward to talking to you again in May following the end of our second quarter. As I always say to our employees here, please be safe out there. Operator: Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.
Operator: Thank you for standing by. And welcome to the AllianceBernstein Fourth Quarter 2025 Earnings Review. At this time, all participants are in a listen-only mode. There will be a question and answer session and I will give you instructions on how to ask questions at that time. As a reminder, this conference is being recorded and will be available for replay on our website shortly after the conclusion of this call. I would now like to turn the conference over to the host for this call, Head of Investor Relations for AB, Mr. Ioannis Georgali. Please go ahead. Ioannis Georgali: Good morning, everyone, and welcome to our fourth quarter 2025 earnings review. Today's conference call is being webcast and is accompanied by a slide presentation available in the Investor Relations section of our website at www.alliancebernstein.com. Joining us today to discuss the company's quarterly results are Seth Bernstein, our Chief Executive Officer, and Tom Simeone, our Chief Financial Officer. Onur Erzan, our President, will join us for the question and answer session following our prepared remarks. Some of the information we'll present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. So I would like to point out the safe harbor language on slide two of our presentation. You can also find our safe harbor language in the MDNA of our 10-K, which will be filed next week. We base our distribution to unitholders on our adjusted results, which we provide in addition to and not as a substitute for our GAAP results. Our standard GAAP reporting and reconciliation of COP to adjusted results are in our presentation appendix, press release, and our 10-K. Under Regulation FD, management may only address questions of material nature from the investment community in a public forum. So please ask all such questions during this call. Now I'll turn it over to Seth. Good morning, and thank you for joining us today. Seth Bernstein: 2025 was a year of disciplined execution and strategic progress for AllianceBernstein. I'm very proud of the strides we've made as a firm, and I'm deeply grateful to my colleagues for their dedication and impact. One individual who has played a pivotal role in our transformation is our newly appointed president, Onur Erzan. With a proven leadership track record spanning our client group, private wealth, and more recently, our private markets businesses, Onur has consistently demonstrated strategic vision, a tireless work ethic, and a deep commitment to our clients, our people, and our unit holders. As CEO, I will continue to set the firm's strategic and guide our leadership team. I look forward to partnering with Onur, who will lead the transformation of our business, execute our strategic priorities, and drive profitable growth. Working closely with Equitable to deliver innovative client-focused solutions. Now let's dive into our key business highlights from the quarter and the year. On Slide three. First, our assets under management reached a record $867 billion at year-end 2025. Reflecting market appreciation, strong sales, and organic growth across ultra-high net worth, insurance general accounts, tax-exempt SMAs, and private A notable positive is our Bernstein private wealth business, which has $156 billion in assets under management. And contributed roughly 37% of our firm-wide revenues in 2025. In addition, our private markets platform closed the year with $82 billion in AUM, up 18% year over year. Driven by approximately $9 billion of deployments across all channels in 2025. Finally, our SMA franchise reached $62 billion of AUM and grew 12% organically in 2025, led by our market-leading muni capabilities. Our active ETF suite expanded to $14 billion across 24 strategies, delivering 65% organic growth in 2025, excluding conversions. While we've seen strong inflows into targeted growth areas, firm-wide active net flows were negative for both the quarter and the full year. We had $9.4 billion of total net outflows in 2025, including $3.8 billion outflows in the fourth quarter. Firm-wide active equity redemptions persisted as performance headwinds lingered. With $7.6 billion outflows in the fourth quarter and $22.5 billion throughout the year. Roughly half of these were driven by retail redemptions. Taxable fixed income saw $2 billion in outflows in the fourth quarter and $9.1 billion for the years as overseas retail demand declined amid geopolitical uncertainty and a weaker dollar. Institutionally, we had roughly $4 billion of taxable outflows related to Equitable's reinsurance transaction with RGA. On the other hand, our tax-exempt franchise continues to deliver durable organic growth with $3.9 billion in inflows in the fourth quarter and $11.6 billion for the year. The platform has generated organic growth for thirteen consecutive years on long-term alpha for our clients. Alternatives and multi-asset strategies also remained a bright spot, posting $1.9 billion active net inflows in the fourth quarter and $10.6 billion for the full year. Supported by strong private markets deployments. Third, our scalable model and disciplined expense management continued to drive profitable growth. Our adjusted operating margin expanded to 33.7% for the year at the upper end of our 30% to 35% Investor Day target range. With a streamlined expense base and robust operating leverage, we are delivering strong flow through to earnings. Fourth, we accelerated our collaboration with Equitable as we continue to expand our private markets capabilities and amplify the flywheel effect of this partnership. I'm pleased to share that we're making investments to enhance our commercial real estate lending capabilities and expand the scale of our platform. As a result, we'll onboard more than $10 billion of new long-duration assets from by year-end 2026. This represents a meaningful expansion of our origination and service and capabilities in commercial mortgages. Beyond the financially accretive nature of this commitment, it underscores the broader strategic value of our partnership with Equitable. It's a clear example of how our alignment continues to unlock incremental growth, well beyond the $10 billion plus of additional committed assets. Leveraging our expertise in commercial real estate lending, the adjacent capabilities will build upon our existing footprint in core and core plus real estate credit and bring insurance tailored assets to over $20 billion. This enhances our scale and enables us to compete more effectively in the strategically important insurance channel. As of year-end, we managed over $59 billion on behalf of more than ninety third-party insurance clients. With general account assets growing 36% year over year. We see strong momentum in this business and expect to add $3 billion of new private asset mandates from strategic insurance partnerships in 2026. Slide four provides a summary page with our key financial Tom will follow-up with more commentary on our results. Turning to Slide five, I'll review our investment performance starting with fixed income. Fixed income markets delivered broad-based gains in 2025 despite softer labor market trends and limited macroeconomic data due to the government shutdown. Short-term rates declined following the Fed's rates cuts, while long-end yields remained elevated, steepening the yield curve. The US ten-year treasury ended the year near 4.2%, reflecting persistent long-term inflation and fiscal concerns. The Bloomberg US aggregate index returned 1.1% in the fourth quarter and 7.3% in 2025, while Bloomberg's global high yield index returned 2.4% in the fourth quarter and 10% in 2025. Overall, our one-year relative performance improved versus the prior quarter, supported by our higher quality exposure and global high yield, our longer duration positioning in American Income, continued outperformance across our municipal strategies. Where nearly all our funds are rated four or five stars by Morningstar. 86% of our AUM outperformed over the one and three-year periods, while 67% of our AUM outperformed over the five-year periods. Demand for intermediate duration has strengthened, and fixed income volatility has declined meaningfully. Reducing two key headwinds to performance and enhancing the diversification value of the asset class. As the curve steepens, investors are rotating out of cash, floating rate, and short duration instruments into intermediate duration products to capture higher yields. US retail taxable flows continue to show encouraging momentum, with two consecutive years of organic growth and increasing adoption of our active ETF suite. In 2025, we ranked among the top 15 fund managers in taxable flows in The United States, a meaningful step forward in the market where we've historically been underpenetrated. Municipals remain well positioned for continued supported by attractive tax-efficient returns and continued share gains of our market-leading SMA platform. Our systematic strategies are gaining traction in the investment-grade bond market, with strong institutional demand and consultant support in 2025. Underpinned by our consistent track record of outperformance. Turning to equities. The S&P 500 returned 2.7% in the fourth quarter, closing near record highs and delivering a roughly 18% total for 2025. This marks the index's third consecutive year of double-digit gains. For the first time in several years, International Equity outperformed The US supported by a weaker US dollar more compelling relative valuations, and a rotation away from US mega-cap technology leadership. Our equity performance softened in 2025, with relative returns declining across the one, three, and five-year periods. This was primarily driven by sustained underperformance in our largest US equity franchises, particularly growth defensive and sustainable strategies amid a market environment dominated by speculative momentum-driven names and narrow leadership. 21% of our AUM outperformed over one year, 37% over three years, and 51% over five years. With the most pronounced performance pressure in US large-cap growth-oriented services or benchmark concentrations remain acute. Outside of these areas, many value core and thematic strategies delivered strong absolute and relative results. Portfolios of exposure to cyclical sectors such as industrial and financials benefited from improving earnings breadth especially in non-US markets. Emerging markets, China, and international value and core strategies were notable standouts. Highly concentrated nature of US equity market leadership and stretch valuations created a challenging backdrop for active managers. In response, we're sharpening execution against our investment philosophies, leveraging decision analytics to identify areas for improvement, implement targeted changes, and measure outcomes with greater discipline. Our equity platform is intentionally diversified across styles and regions, avoiding overexposure to any single market regime. Thematic and cyclically oriented value strategies provide balance and upside participation in risk-on environments, complementing more defensively positioned portfolios. As market breadth began to improve entering 2026, platform performance has started to rebound. A growing share of growth, value core, and thematic strategies are now delivering stronger relative results while defensive strategies have lagged in a more risk supportive conditions. Looking ahead, we believe the continued earnings breadth and stable economic growth could favor international and value strategies. Additionally, portfolios with lower tracking error may offer clients more consistent participation in our leadership environments. Helping to diversify performance streams and reduce reliance on a concentrated set of products. Turning to slide six, I'll discuss our retail highlights. Retail flow softened in 2025, ending a two-year streak of organic gains. The channel saw $3.5 billion in net outflows in the fourth quarter, and $9.1 billion for the full year, driven by active equity redemptions and softness in taxable fixed income, partially offset by continuing strength in municipals. Active equities experienced outflows throughout the quarter and the year, primarily led by U. S. Growth-oriented services. Fixed income allocations favored tax-exempt strategies while taxable flows reversed to modest outflows driven primarily by APAC as the US dollar weakened. Our retail muni platform delivered 23% organic growth in 2025, surpassing $56 billion in third-party retail AUM across SMAs. ETFs, and mutual funds. Despite overseas headwinds, US retail momentum remained Taxable fixed income posted the second consecutive year of organic growth, supported by expanding adoption of our ETF suite alongside continued market share gains and tax-exempt, extending a thirteen-year history of organic growth. In effect, we believe the bond reallocation trend has significant runway and we're well positioned to help clients capture fixed income's enduring value. Just as we've consistently demonstrated in the early waves in 2024. Moving to slide seven, I'll cover our institutional channel. Institutional outflows moderated year over year, narrowing to $1.9 billion in the fourth quarter and $4.6 billion in 2025. Private alternatives remained a key growth engine supported by strong inflows across existing adjacent and newly launched strategies. Channel deployments into private markets totaled approximately $2 billion in the fourth quarter and nearly $8 billion for the year. Taxable fixed income outflows were modest in the fourth quarter, while outflows for the year were largely driven by equitable RGA's reinsurance transaction. Offsetting inflows into our growing systematic platform. ActiveEquity has experienced roughly $2 billion in outflows in the fourth quarter and $7 billion for the year, primarily from our concentrated growth and global core strategies. Our institutional pipeline expanded to nearly $20 billion, bolstered by the of more than the above-mentioned $10 billion in commercial mortgage loans. As previously noted, we expect to add approximately $3 billion of mandates from strategic insurance partnerships over the coming quarters. Next on slide eight, I will cover private wealth. Bernstein Private Wealth delivered its second consecutive quarter of organic growth and fifth straight year of positive net flows supported by record-level advisory productivity. Net new client assets grew 7% in the fourth quarter and 6% for the full year 2025, with annual organic growth of nearly 2% for both periods. Growth was broad-based across asset classes driven by client reallocations and fixed income, rising adoption of alternatives, and sustained demand for tax index equity solutions. As noted earlier, private wealth represents approximately 18% of firm-wide average AUM that contributes roughly 37% of total revenues, reflecting its attractive fee profile and highly engaged client base. Importantly, these revenues are sourced directly, underscoring the strength of our differentiated farm-to-table model. I'll close with slides nine and ten, which highlight the momentum of our private markets platform and the strategic value of our partnership with Equitable. Over the past decade, we've scaled our private markets platform to $82 billion in fee-paying and fee-eligible AUM. Delivering 18% year-over-year growth. Anchored in credit-oriented strategies, including direct lending, alternative credit, commercial real estate debt, and private placements, Our platform serves a broad and growing base of retail, institutional, and insurance clients across a wide range of risk-return objectives. Equitable's $20 billion permanent capital commitment now largely deployed has accelerated our expansion in private markets and strengthened our ability to seed higher fee, longer duration strategies. Our collaboration continues to evolve beyond periodic commitment cycles, with the expansion of the commercial mortgage capabilities representing the latest in a series of for successful initiatives spanning residential mortgages, structured private placements, and private credit. We view our strategic partnership with Equitable as a meaningful competitive advantage reinforcing AB's capital light, client-aligned model and enabling efficient and disciplined scaling of new offerings. With our proven track record and focused strategy, we're well-positioned to transform the business, unlock new opportunities for our clients, and our $90 billion to $100 billion target for private markets, AUM, 2027. With that, I'll hand it over to Tom to review our financial results. Tom? Tom Simeone: Thank you, Seth, and thank you to everyone joining us today. AB enters 2026 with clear momentum, underscored by our fourth quarter and full year 2025 results. And the progress we're making on our strategic priorities. Fourth quarter adjusted earnings were 96¢ per unit, down 9% from the prior year period. Reflecting lower performance fees, investment gains, and other revenues. Full year 2025 adjusted earnings of $3.33 increased 2% versus the prior year. We full year distributions were $3.38 up 4%. The difference between EPU and distributions reflect the mathematical impact of the lower average unit count and the higher income generated in the second half of 2025. On slide 11, we show our adjusted results. Which remove the effect of certain items that are not considered part of our core operating business. For a reconciliation of GAAP and adjusted financials, please refer to our presentation appendix. Fourth quarter net revenues were $957 million. Down 2% versus the prior year as higher base fees offset by lower performance fees. Full year revenues were $3.5 billion flat year over year. And up 3% on a like-for-like basis when excluding the $90 million of Bernstein Research revenue recognized in 2024. Fourth quarter and full year base fees increased 5% year over year driven by higher markets. Fourth quarter performance fees were $82 million below the prior year period's $133 million which benefited from catch-up fees at CarVal on the private side and strong contributions from several public market strategies. Including Absa and ARIA. While full year performance fees of $172 million declined 24% year over year, they came in above our $130 to $155 million guidance range. And I will provide additional details shortly. Dividend and interest revenue along with broker-dealer related expense declined in both the fourth quarter and full year, reflecting lower client cash and margin balances in private wealth. Moving to expenses. Fourth quarter total operating expenses were $627 million, up 1% versus the prior year. Driven by 2% higher compensation expenses and essentially flat noncompensation expenses. Full year operating expenses were $2.3 billion down 2% as slightly higher compensation was more than offset by lower noncompensation expense. Fourth quarter total compensation and benefits increased 2% year over year, with a compensation ratio of 47.7% of adjusted net revenues. This is above last year's 46%, but better than our 48.5% guidance. Full year revenues exceeded our earlier expectations. Allowing us to reduce the fourth quarter compensation ratio. As a result, our full year compensation ratio was 48.3%, slightly better than the 48.5% included in our prior guidance. We will begin accruing at a 48.5% compensation ratio in 2026 consistent with last year's accrual and may adjust throughout the year depending on market conditions. Our guidance includes the cost of investments in talent and capabilities such as building out the commercial mortgage loan platform that Seth referenced. Promotion and servicing costs decreased 1% in the fourth quarter and 10% for the full year, with the full year decline driven by the separation of Bernstein Research. Fourth quarter G&A expenses were flat year over year. Full year G&A declined 9% driven by the lower occupancy cost associated with our Hudson Yards relocation, which dropped to the bottom line as planned. For full year 2025, noncompensation operating expenses were $599 million, just below our prior guidance of $600 million to $610 million. This reflects strong expense discipline amidst a volatile macro backdrop. For 2026, we expect full year noncompensation expense to be in the range of $625 to $650 million. The increase reflects normalization in promo and G&A expenses recovering from last year's depressed levels, includes discretionary investments in technology, the operational build-out of new strategies. Promo and servicing are expected to represent 20 to 30% of noncompensation expenses with G&A comprising the remaining 70 to 80%. As a reminder, servicing includes transfer fees, which move directionally with markets. Our year-over-year noncomp outlook implies six to 7% growth at the midpoint. Slightly above our long-term objective of keeping increases below the level of inflation. This reflects investments to integrate our new investment management platform and complete the onboarding of the commercial mortgage assets both of which we expect to be accretive to earnings over time. After a robust selection process, we selected an investment management platform that we believe will materially enhance our foundational data model and prepare us for the future. Over the years, we have purpose-built technology that has served us well, but much of it is aligned to an individual investment team's and asset classes. This new platform will allow us to unify around a single source of data improving analysis, decision making, and reporting. We expect it to streamline operations and drive both business and cost efficiencies. The implementation is expected to result in approximately $40 million in total cash flow impact over the next four years, some of which will be capitalized. Before generating $20 to $25 million in annual net expense savings beginning in full year 2030 after all legacy systems are retired. We full year '26 noncomp guide assumes roughly $10 million of P&L impact from technology implementation expenses in the onboarding of our CML platform. As Seth mentioned, we are excited to expand our partnership with Equitable as we scale institutional and insurance tailored solutions in commercial mortgages, an area where we believe we can rapidly scale. The team and platform will be fully operational in 2026, and we expect to initially manage more than $10 billion of long-duration assets for Equitable. With asset onboarding expected by year-end. Excluding discretionary investment spend, noncompensation expense would increase in the low single digits. Consistent with our long-term target. Interest on borrowings decreased by roughly $1 million in the fourth quarter and $15 million for the full year 2025 compared to the prior year periods. Reflecting lower interest rates and lower debt balances. ABLP's effective tax rate was 5.9% in 2025, just shy of the low end of our six to 7% guidance range. Which reflects a favorable mix of earnings. We forecast ABLP's effective tax rate in 2026 to be 6% to 7%. In the fourth quarter, our firm-wide fee rate was 38.7 basis points, and our full year fee rate was 38.9 basis points. As we've said before, the fee rate will continue to be mix dependent, and several dynamics influence both the quarter and full year. First, on the equity side, markets finished the year higher, but volatility meant that average AUM significantly lagged end-of-period levels. We also saw outflows from higher fee active equity services, which put modest pressures on the fee rate. In fixed income, elevated rates and FX volatility weighed on taxable fixed income flows and AUM. We experienced outflows in higher fee strategies such as American Income, while most of our active fixed income inflows came from Uni SMAs, which typically carry lower fees. Offsetting these pressures, we continue to grow our private markets capabilities, which remain a key structural support for our fee rate. Our regional sales mix and strategic growth initiatives have helped mitigate broader industry fee rate compression, and our all-in fee rate, including performance fees, has trended higher over time as private markets AUM has expanded. Slide 12 reflects a breakdown of our performance fees by private and public market strategies. Fourth quarter performance fees were $82 million above our prior expectations. Public market strategies contributed $37 million, well ahead of our $5 to $25 million guide. Driven primarily by another strong year from our financial services opportunity strategy which benefited from both idiosyncratic and sector-specific performance. Private market strategies contributed $45 million, slightly above our $35 to $40 million guide. With the upside largely driven by our middle market lending platform. As a result, full year 2025 performance fees totaled $172 million, above our $130 to $155 million outlook. Well below last year's $227 million. The year-over-year decline reflects the unusually strong 2024 contributions from public market strategies, such as our securitized credit strategy, Absa, and our long-short strategy, ARIA, as well as one-time carve-out catch-up fees that we did not expect. To recur in 2025. As we noted on last year's call. Looking to 2026, we have good visibility for private market strategies contribute $70 to $80 million in performance fees. We also expect public market strategies to contribute at least $10 to $20 million based on current market levels. Assuming no major market drawdown, we view this outlook as a floor though we would caution that sector or asset class level dispersion can materially affect performance fees even in constructive broader markets. While public market alpha is inherently volatile, and difficult to forecast, Our public alternative franchise provides meaningful upside and favorable market environments, and enhances our overall market leverage profile. This upside potential complements the more steady and predictable performance fees generated by our private markets business. Resulting in an attractive and diversified performance fee opportunity for the firm. Finally, closing with slide 13. As previously mentioned, the adjusted operating margin increased sequentially to 34.5% in the fourth quarter. 2025 results benefited from favorable markets and improved operational efficiency resulting in a full year adjusted margin of 33.7%. Above our 33% mortgage neutral forecast. This margin is at the higher end of our Investor Day target of 30 to 35% which we expected to achieve by 2027. We are pleased with the progress we've made in strengthening our margin profile. Having successfully executed our major market neutral initiatives including the Bernstein Research separation and our North America relocation strategy, we now see market performance and scalability as the primary drivers of future margin expansion. We have demonstrated meaningful operating leverage from both markets and scale with incremental margins well above our long-term 45% to 50% target. We expect constructive markets to continue boosting the profitability of our existing services reflecting improved flow through to earnings. While we remain disciplined on expenses, we are also committed to investing in growth to create durable value for our unitholders. Expect to continue allocating resources to high conviction initiatives that support organic growth and increased long-term profitability. Our strategic priorities include disciplined investments, and targeted growth initiatives such as new investment services, product innovation, expanded marketing efforts. Designed to enhance earnings power over time. The expansion of our commercial mortgage lending capabilities is a clear example of an investment that we expect to be accretive and value-enhancing over the long run. Before opening the line for questions, I want to express my gratitude to our colleagues for their considerable efforts and unwavering commitment to our clients, unitholders, and all stakeholders. With that, we are pleased to answer your questions. Operator? Operator: At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press star 1 again. Please limit your initial questions to two, in order to provide all callers an opportunity to ask questions. You are welcome to return to the queue to ask follow-up questions. We will pause for just a moment to compile the Q and A roster. Your first question comes from the line of John Dunn with Evercore ISI. Please go ahead. John Dunn: Hi. Wanted to maybe get a little more on the outlook for high yield funds distributed in Asia. Some of the know, almost beyond interest rates, some of the puts and takes of, you know, that influence demand month to month. Onur Erzan: Sure. Hi, John. Yeah. It's Onur. Let me take that question. In terms of the broader trends in Asia, there are macro factors such as the FX risk for foreign investors relative to US dollar, the rates outlook, etcetera. I mean, obviously, we've been navigating those macro factors for decades. Some of our products in Asia have been in existence for thirty years. We have not seen a tremendous impact from a structural demand perspective in terms of the FX risk yet. Yes. There are some ebbs and flows, and on a relative basis, investors are a little bit more sensitive or concerned about the FX risk. But it has not dramatically impacted the structural fixed income demand. As you know, the Asia clients, the retail particularly likes income. And still, the US dollar denominated strategies and global strategies deliver attractive income. Hence, the structural demand remains strong. In terms of our business, in terms of a couple of positives, as you know, we started globalizing our ETF franchise, and we started with fixed income given our strong brand in Asia particularly in fixed income. And we added our second active ETF in Taiwan. If you recall, we were the first active fixed income ETF launcher in '25. This year, we added a high yield fund, and it was a successful IPO. Top in its category. So we see broadening of the vehicles that will help us. And another thing that will help us in Taiwan we were facing some regulatory constraints in terms of percentage of assets that can come from Taiwanese investors in some of our vehicles. Taiwan raised those minimums from 70% to 90% for us. Based on some of the commitments. As a result, that will help us unlock more opportunity in Taiwan. So as a result, there are a couple of unique AB specific factors that will help with the demands. In 2026. And then, obviously, in the broader markets, there will be definitely competition across strategies and depending on how our strategies perform on a relative basis we'll gain or lose market share. As you know, we hold very strong market share in cross-border vehicles that are used in markets like Hong Kong. We are typically a market leader. Sometimes we give up some market share or gain some market share depending on particularly, the positioning of the rate curve given we tend to be long duration and long credit structurally in most of our products. John Dunn: Got it. And then private wealth did well in the fourth quarter. Could you maybe talk about the seasonality you might expect over the course of the year? And then kind of frame a little more the areas where you expect to see flow demand. Onur Erzan: Sure. Yeah. As you pointed out, we are very pleased how we finished the year in private wealth. Almost 7% annualized sorry. 7% net new assets, organic growth rates. So feeling very good about that. In terms of seasonality, you always have the tax impact. In the second quarter, so that's always the biggest thing to consider. Overall. Other than that, seasonality, maybe sometimes you have a little bit of a softness in August. With holidays and all that in most parts of The US. But broadly, I think it's a more second quarter tax-related seasonality for the most part. And beyond that, we are feeling pretty good about our pre pipeline in terms of our business. As you recall, when we mentioned in the past, one of our big drivers of growth in terms of particular new client acquisition is the exits. As the M&A activity has been robust and given we have a very strong ultra-high network proposition with business owners and entrepreneurs. When we have strong exits through M&A, we tend to do quite well. In terms of onboarding new ultra network clients. So we continue to see strength in that area, as an example. John Dunn: Thanks very much. Operator: Your next question comes from the line of Benjamin Budish with Barclays. Please go ahead. Nathan: Hi. This is Nathan on for Ben. Just a quick question with AI-related volatility impact software evaluation. Can you size AB's private credit exposure to software across the portfolio by, you know, percentage of AUM, maybe top exposures, like, any areas where you tie in underwriting or adjusted risk limits? Thank you. Onur Erzan: Sure. It's Onur. Let me take that as well. It's not a very significant exposure for us given our broadly diversified global asset management platform. To recap our private alt platform is around $82 billion of assets based on fee-earning and fee-eligible AUM. Within that, roughly 25% is our corporate direct lending business, PCI. And in that business, typically, it is we are the lead underwriter in middle market, loans. Against sponsors. Typically, we work with 250 sponsors in the United States. Typical, companies we work with are in the $10 million to $75 million EBITDA range. So within that PCI portfolio, we have exposure to technology or software kind of companies. Our exposure tends to be in line with the rest of the corporate direct lending markets. So typically around a quarter of the AUM tends to be related to software. We have a long-standing history in terms of operating and technology and software, and we have not seen any material change in terms of our loss experience, and we have been very diligent in monitoring our credit watches and staying close to those borrowers. But so far, again, no major deterioration. And even, it was to deteriorate materially, it's not gonna impact our business given middle market lending is only roughly $25 billion of AUM. And within that, we only have a certain percentage exposure to software, as I mentioned. So overall, we are not that sensitive to it. Nathan: Thank you. And a follow-up would be, you know, given we know we understand that it's early to update. Of the target of getting, like, $90 to $100 billion of private markets AUM. But, like, how are you thinking about growing that private market? Piece beyond that time horizon? Seth Bernstein: Well, let me answer it. This is Seth. Let me answer it this way. We're not including the money that we will be onboarding this year from the commercial mortgage lending. Team. I mean, yes, that counts as private market assets. But we continue to focus on feeding the $90 to $100 billion that we forecasted for 2027. We will with our second quarter earnings, revise that target. For you, but we are ambitious, and we see further opportunities to expand it. Nathan: Thank you. Operator: Again, if you would like to ask a question, please press star then the number one on your telephone keypad. There are no further questions at this time. Mr. Georgali, I turn the call back over to you. Ioannis Georgali: Alright. Thank you all for joining this busy day. Please follow-up with us if you have any additional questions. Thank you very much.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to Lightspeed Commerce Inc.'s Third Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. Now I would like to turn the call over to Gus Papageorgiou, Head of Investor Relations. Please go ahead. Gus Papageorgiou: Thank you, operator, and good morning, everyone. Welcome to Lightspeed Commerce Inc.'s fiscal Q3 2026 conference call. Joining me today are Dax Dasilva, Lightspeed's Founder and CEO, and Asha Bakshani, our CFO. After prepared remarks from Dax and Asha, we will open it up for your questions. We will make forward-looking statements on our call today that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Certain material factors and assumptions were applied in respect of conclusions, forecasts, and projections contained in these statements. We undertake no obligation to update these statements except as required by law. You should carefully review these factors, assumptions, risks, and uncertainties in our earnings press release issued earlier today, our third quarter fiscal 2026 results presentation available on our website, as well as in our filings with U.S. and Canadian securities regulators. Also, our commentary today will include adjusted financial measures, which are non-IFRS measures and ratios. These should be considered as a supplement to, and not a substitute for, IFRS financial measures. Reconciliations between the two can be found in our earnings press release, which is available on our website, on SEDAR, and on the SEC's EDGAR system. Note that because we report in US dollars, all amounts discussed today are in US dollars unless otherwise indicated. With that, I will now turn the call over to Dax. Dax Dasilva: Thank you, Gus. Good morning, everyone. Our Q3 results highlight our disciplined execution against the strategy we presented at Capital Markets Day. We delivered another strong quarter, with revenue of just over $312 million and adjusted EBITDA of $20.2 million, both exceeding our outlook. Our focus on the two growth engines of retail in North America and hospitality in Europe is driving results. They account for two-thirds of our total revenue and generated 21% year-over-year revenue growth in the quarter. At our Capital Markets Day, we set three clear priorities to drive long-term value at Lightspeed Commerce Inc.: one, growing customer locations in our growth engines; two, expanding subscription ARPU; and three, improving adjusted EBITDA and free cash flow. In Q3, we made solid progress on all fronts. Location growth reached its fastest pace since our business transformation began. Software revenue and ARPU increased even as we lapped prior price increases, especially within our growth engines. And we achieved our second consecutive quarter of positive free cash flow and grew adjusted EBITDA by 22%. These results demonstrate the effectiveness of our strategy and our ongoing momentum. Let me walk you through our performance against each of these priorities in more detail. Starting with customer locations. Our focus remains on quality growth, winning sophisticated high-GDV merchants in retail in North America and hospitality in Europe, with approximately 2,600 net new locations added in the quarter. Customer locations in our growth engines grew 9% year-over-year in Q3. This acceleration is exactly what we would expect at this stage of our go-to-market ramp and sets us up well to achieve our targeted 10% to 15% three-year customer location CAGR outlined for our growth engines at Capital Markets Day. Overall, total customer locations grew, reaching approximately 148,000 in the quarter. In retail, we welcomed leading global brands like Balmain, Diane von Furstenberg, and Dickies to the Lightspeed wholesale ecosystem. As a reminder, Lightspeed wholesale connects retailers using our Lightspeed retail POS and brands using our new order by Lightspeed platform. With this integration, retailers can discover and order 5 million products from over 4,000 brands all in one place. This is a true differentiator with retailers like Everson's migrating their POS to Lightspeed just so they can benefit from our unified wholesale ordering. We also welcomed Irvine's Tac and Western Wear, one of the largest Western retailers in the world, and ValueZone's seven locations, which were attracted by Lightspeed's advanced inventory features and scanner app. In European hospitality, we continue to win high-profile multi-location operators such as Hotel Belle Reeve on the French Riviera, Qui des Artistes in Monaco, and ambitious expansion plans. Burger Vision in Germany with over 20 locations and Colichy, with more than 40 locations across the UK. These wins reinforce our conviction that as merchant complexity grows, Lightspeed's unique value stands out even more. An expanded outbound sales effort, increased investment in vertical brand marketing, and more effective inbound spending have accelerated location growth, particularly in our growth engines. We have fully hired our team of 150 outbound reps for the year and we continue to ramp them towards full productivity. Our outbound motion continues to deliver highly targeted acquisition of our ideal customers with strong unit economics. Turning to software revenue and ARPU. At the company level, software revenue grew 6% year-over-year, reflecting the lapping of prior year pricing actions and expected seasonality effects in parts of our business. Our growth engines delivered 13% software growth year-over-year, underscoring strong momentum. We continue to drive software ARPU higher through innovative products that empower complex, multi-location merchants to thrive. We launched Lightspeed AI, bringing agentic AI directly into retail and hospitality workflows. These AI capabilities go beyond reporting. They help merchants identify best sellers, optimize inventory decisions, and improve kitchen execution in real-time. At National Retail Federation's big show, we unveiled Marketplace. Available in Lightspeed wholesale, retailers can now browse, compare, and purchase inventory from multiple brands, all in one place. The next level of wholesale integration that we believe no other cloud POS provider offers. We also expanded in-store monetization by adding tap to pay for Android on Lightspeed Scanner and delivered customer-facing displays on payment terminals, improving checkout efficiency and transparency. In hospitality, we continue to extend our product leadership in Europe. We launched Lightspeed Tempo, which applies pacing intelligence to service flow, turning what has traditionally been an art into a science by guiding servers through each stage of service. We also introduced Lightspeed Reservations, offering independent restaurants an integrated alternative to costly third-party platforms, and Lightspeed Tasks, which standardizes workflows across locations to improve consistency and execution. Collectively, these releases help drive deeper engagement, higher module attachment, and improved win rates with the types of merchants we are actively targeting. These represent innovation-led growth that reinforces our confidence in the long-term ARPU and gross profit expansion we outlined at Capital Markets Day. Finally, on profitability and free cash flow. In Q3, we delivered $20.2 million in adjusted EBITDA and generated positive free cash flow for the second consecutive quarter. Positive free cash flow of $15 million in the quarter helped increase our total cash balance by over $31 million since Q1. Importantly, we achieved this profitability while continuing to invest meaningfully in growth, scaling our outbound sales organization, and increasing product innovation in our growth engines. The fact that we can do both invest for growth and expand margins is a direct result of the structural changes we have made over the past year. Adjusted EBITDA reached 15% of gross profit, moving us closer to the 20% long-term target we outlined at Capital Markets Day. This progress reinforces our confidence in the operating model and in our ability to continue expanding adjusted EBITDA and free cash flow as we scale. I will let Asha take you through the numbers before I make some closing comments. Asha Bakshani: Thanks, Dax. Welcome, everyone. Lightspeed Commerce Inc. had a strong third quarter, with many of our key financial metrics and KPIs surpassing expectations. We continue to deliver with strength in our growth engines and with disciplined commitment against the financial framework we outlined at Capital Markets Day. Our performance continues to be defined by two key trends. First, and most importantly, we are seeing a tremendous impact from our strategy to focus on our two growth engines, North America retail and European hospitality. For these two markets, we generated strong year-over-year results. Total revenue increased 21%. Software revenue grew 13%. GTV was up 16%. Payments penetration was 46%, up from 42% last year. And we added approximately 2,600 net customer locations in the quarter, driving a 9% year-over-year increase in ending location count. The highest rate since we began our business transformation. Combined, our growth engines make up two-thirds of our total consolidated revenue and they will continue to represent an increasing portion of revenue, GTV, and payments volume. Second, even with expanding investment in product and go-to-market, the company's total adjusted EBITDA and cash flow metrics continue to improve. We delivered positive free cash flow for the second quarter in a row. Free cash flow of $15 million in the quarter is up from free cash flow used of half a million a year ago. And we expect to generate positive free cash flow for the full fiscal year. A significant milestone for the company. I will walk you through a detailed look at our financials and then provide our updated outlook. Total revenue grew 11%, to $312.3 million, exceeding our outlook. Driven by an expanding location count, higher software ARPU, and increased year-over-year payments penetration. Notably, we achieved 21% revenue growth in North America retail and European hospitality. As we continue to scale our go-to-market efforts, we expect our total revenue growth to track closer to what we see in our growth engines. Software revenue was $93 million, up 6% year-over-year, with software ARPU rising 4% year-over-year. Software ARPU was helped by our outbound teams attracting larger, more sophisticated merchants, as well as the impact of new product releases. As anticipated, software revenue growth moderated sequentially due to lapping last year's pricing. This quarter, we also experienced typical seasonal softness in our golf business, and we made a strategic shift to focus on annual contracts. While annual contracts result in modest upfront discounts and higher lifetime value, they attract higher quality merchants with lower churn, strengthening our cash flow subscription base for the long term. We believe this shift is the right trade-off for the long-term durability and health of our subscription base and is already starting to yield results as evidenced in our free cash flow. Transaction-based revenue was $209.4 million, up 15% year-over-year. GPV grew 19% year-over-year and capital revenue grew 34% year-over-year. GPV as a percentage of GTV came in at 42%, up from 38% in the same quarter last year. Payments penetration dropped slightly from Q2 due to GTV mix. In Q2, we had very strong seasonal performance from certain verticals that have very high payment penetration rates, such as bike and golf. We expect payment penetration to continue its upward climb over time. Overall, GTV grew by 8% to $25.3 billion and total average GTV per location continued to increase as we sign more higher value customers. Same-store sales were up in both retail and hospitality and across all of our main geographies. Total monthly ARPU reached $660, up 11% year-over-year, driven by both higher software and payments monetization. ARPU grew across both our growth and efficiency markets. With respect to our efficiency markets, our goal is to maintain the revenue base through additional module attachment and expansion of financial services, and we have been successful in doing so. Software and payments revenue from these markets was flat to last year. There also continues to be meaningful opportunity to grow payments revenue in these markets as payments penetration is below those of our growth markets. GPV as a percentage of GTV in our efficiency markets increased to 35% in the quarter, from 32% in the same quarter last year. With respect to profitability and operating leverage, total gross profit was strong, growing 15% year-over-year, outpacing revenue growth of 11%, driven by strong top-line performance and expanding gross margin in both subscription and transaction-based revenue. This performance remains consistent with the medium-term framework we outlined at Capital Markets Day, where we targeted a three-year 15% to 18% gross profit CAGR driven by customer location growth, ARPU expansion, and operating leverage. Total gross margin was 43%, up from 41% last year, even with transaction-based revenue increasing to 67% of total revenue, from 65% last year. Hardware gross margins declined this quarter due to strategic discounts and incentives to drive new business. We delivered strong software gross margins of 82%, up from 79% a year ago. This was largely driven by increased cost efficiency. Our success over the past few quarters in consolidating our cloud vendors, renegotiating better terms, restructuring the organization to take out costs, and using AI to reduce the cost of support and service delivery have all contributed to industry-leading software margin. Gross margins for transaction-based revenue were 31%, up from 28% last year. This improvement reflects increased payments penetration in our international markets where margins exceed those in North America, and growth in our capital. As we convert customers to Lightspeed payments, we increase our overall net gross profit dollars. And in the quarter, we saw transaction-based gross profit grow by 28% year-over-year. Total adjusted research and development, sales and marketing, and general and administrative expenses grew 14% year-over-year. This is primarily driven by the meaningful investments we are making in field and outbound sales as well as product innovation within our growth engines. Adjusted EBITDA in the quarter came in at $20.2 million, increasing 22% from $16.6 million in Q3 last year, driven by continued success from our strategic shift and our focus on AI and automation to accelerate operating efficiency. As a percentage of gross profit, adjusted EBITDA was 15%, approaching the longer-term 20% target we outlined at our Capital Markets Day. This level of profitability enables us to continue focusing on our growth engines while maintaining strong capital discipline, including funding product innovation, scaling outbound sales, and supporting our capital return priority. I am very happy to report adjusted free cash flow of $15 million in the quarter. Thanks to our improving adjusted EBITDA, disciplined management, and certain favorable working capital movements, we were able to deliver positive free cash flow despite our accelerated outbound strategy and increased investment in R&D. This quarter, we saw record capital revenue while at the same time lowering outstanding cash advances from the previous quarter. Our goal is to target a shorter remittance time frame, and we are making great progress towards that end. Today, our typical remittance period for a merchant cash advance is approximately seven months. We continue to actively manage our share-based compensation and related payroll tax, which were $16.5 million for the quarter versus $13.6 million in the prior year quarter, holding constant at approximately 5% of revenue. With respect to capital allocation and our balance sheet, our balance sheet remains exceptionally healthy. We ended Q3 with approximately $479 million in cash, an increase of approximately $16 million from last quarter. Approximately $200 million remains under our broader Board authorization to repurchase up to $400 million in Lightspeed shares, and we continue to be opportunistic in evaluating further share repurchases. Total shares outstanding in the quarter were down by 10% versus the same quarter last year, due primarily to the $179 million in shares repurchased and canceled over the last twelve-month period. As a reminder, our normal course issuer bid program that we have used to buy back shares is limited to 10% of our public float for a twelve-month period. We have already exhausted our fiscal 2026 buyback program. Subject to TSX approval and market conditions, we intend to renew this buyback program in fiscal 2027. Aside from potential buybacks, our largest use of cash will be growing our merchant cash advance business. There are currently $106 million in merchant cash advances outstanding, and we intend to continue to grow this high-margin business over time. With respect to M&A, we remain opportunistic in the evaluation of small tuck-in acquisitions to help accelerate product development, but large-scale acquisitions are not a strategic priority for us. Our balance sheet remains healthy and positions us well as we continue our strategic focus. Now turning to outlook. Our fiscal Q4 outlook reaffirms our confidence in our profitable growth trajectory and is in line with the financial framework we outlined at our Capital Markets Day, balancing disciplined investment behind our growth engines along with continued profitability and cash generation. There are several factors influencing our fiscal Q4. Fiscal Q4 is typically our lowest GTV quarter, and we expect similar seasonal patterns this year. We also continue to lap pricing actions implemented last year and continue to drive a mix shift towards annual contracts. In addition, as evidenced in our results, our go-to-market and product investments are driving strong sales momentum. Given that strength, we are choosing to pull forward incremental investment into Q4 in areas where demand is outpacing our initial expectations, such as in our retail outbound sales organization. As a result of our execution to date, we are raising our guidance for revenue, gross profit, and adjusted EBITDA as follows: For the fourth quarter, we expect revenue of approximately $280 million to $284 million, gross profit of approximately $125 million to $127 million, and adjusted EBITDA of approximately $15 million. For fiscal 2026, we expect revenue of approximately $1.216 billion to $1.220 billion, gross profit of approximately $523 million to $525 million, and adjusted EBITDA of approximately $72 million. With that, I will turn the call back to Dax. Dax Dasilva: Thanks, Asha. Before we take your questions, I wanted to take this opportunity to publicly welcome Gabriel Benavides to Lightspeed Commerce Inc. In November, we appointed Gabe as our Chief Revenue Officer. Gabe brings two decades of experience scaling global sales organizations. His mission is clear: accelerate our go-to-market performance, add more high-value customers, and help expand our software ARPU. I also want to acknowledge Jean-David Saint-Martin, who will be stepping down as President this March. JD's leadership built the foundation for the transformation we are seeing today. His discipline allowed us to pivot toward profitability, and Gabe's appointment now accelerates that trajectory. We are deeply grateful for JD's partnership over the last six years. And with that, we can take your questions. Operator: Ladies and gentlemen, we will now begin the question and answer session. As we enter Q&A, we ask that you please limit your input to one question and one follow-up. As a reminder, to ask a question, please press the star button followed by the number one. If you would like to withdraw your question, please press star one again. One moment please for your first question. Your first question comes from the line of Dan Perlin of RBC Capital Markets. Please go ahead. Dan Perlin: Thanks. Good morning, everyone. Nice results here. I wanted to ask maybe a broad-based question and then maybe a little more specific one. But at a high level, how would you describe kind of the health of your end markets? I know, Asha, you said same-store sales growth across all regions was positive. But maybe if you would not mind a little more detail around the regions and maybe any pockets of surprise, both good and bad, as you think about where those opportunities are today? Thank you. Asha Bakshani: Thanks, Dan. Thanks for the question. Yeah. Same-store sales were very healthy in our fiscal Q3. When we look across retail, we saw all of our highly penetrated verticals do very well, positive growth year-over-year. Home and garden, bike, we saw a bit of a deceleration from Q2 to Q3 just because those are verticals that are very strong in the summer months, but nevertheless, we saw very strong growth in Q3 in all of the retail, given that that is such a good quarter for the holiday shopping period. In terms of surprises, I mean, I would just say the one area that helped slightly was FX in the European market. The euro has continued to remain strong into Q3, and that's helped the euro hospitality GTV. Outside of that, I would say no other surprises. We are happy with what we are seeing in the macro. Dan Perlin: Okay. That's great. I guess if you could maybe just spend a second on the gross margins around, really, software. They were pretty strong. I should say they were quite strong despite the fact that you had to lap the pricing. I heard kind of the reasons that you gave for the current quarter. I'm just wondering how do we think about the sustainability of those levels? Are there any things? I know you said some investments are going to come in, but just trying to understand how sustainable that is given the fact that it did kind of lap these pricing this quarter, and I'm not sure how much you actually have slated for kind of future quarters going forward. Thank you. Asha Bakshani: Yeah. Sure. I'll take that one as well. We feel pretty good about our gross margins. The improvement in the software line comes from a couple of factors. There's obviously the growth in subscription, but also, we've done a lot of work on OpEx optimization. We've done a lot of work on our cloud spend with Google and AWS, getting better rates and also more efficient use of those platforms. And then last but not least, we've done some good work on efficiency in our support department. We've deployed AI in a lot of areas, a very high percentage of the frontline support is chat now, given the different AI tools that we've used. And so we do feel good about that. 82%. We feel that over 80% margins on the software line is a sustainable place to be for us. Dan Perlin: Great. Thank you. Operator: Your next question comes from the line of Dominic Ball of Rothschild & Co Redburn. Please go ahead. Dominic Ball: Hi, guys. Hey, Dax, Asha, and Gus. I was on mute, as embarrassing as it is. So great job on locations. I mean, just one sort of broader question. You know, software names have derated quite materially on concerns around AI disruption. So Dax, could you tell us a little bit about which Lightspeed software capabilities are structurally differentiated because they're built on more proprietary Lightspeed payment data? Thank you. Dax Dasilva: Yeah. And I think you've pointed out something important. Right? We've got payments data that we're building our agentic AI workflows around. There's also very proprietary wholesale data. You know, we're talking a lot more about Lightspeed wholesale, which includes the new order platform. Which is a huge differentiator, growing differentiator for us on retail. It's now leading our outbound conversations. So there are things that we are building our organic workflows around that are very unique to Lightspeed and how we play. So, yeah, a lot of investment. We've rolled out Lightspeed AI this quarter. You know, we had two innovation events, one in the hospital, in Paris, one for retail in New York at the big show, National Retail Federation's big show. And just showing that AI vision. We really believe from a customer perspective, there's always going to be a role in a physical commerce setting for a software hardware solution that can enable an interaction and a transaction. But I believe I do believe that these business owners require AI and agentic enabled workflows to be able to keep up with the demands on what it takes to have a successful business in retail and hospitality today. So we're very excited about the path forward from a software innovation perspective and an AI perspective. And believe that the software is going to be what makes the difference for these particular business owners and helping them thrive. One more thing. Yeah. On our insights and analytics products, as you alluded, the payments data, and I added the wholesale data, it's really driving, of course, all of the Lightspeed AI conversational and agentic workflows, but also all those analytics and insights tools that we have that are on retail and hospitality as well as the benchmark and trends tools that we have. Those are all built on that proprietary data. Dominic Ball: That's great to hear. Thank you, everyone. Operator: Your next question comes from the line of Raimo Lenschow of Barclays. Please go ahead. Raimo Lenschow: Great progress on the focus areas. Congrats from me as well. If you think about the software side, you obviously have the pricing changes, and that's something that's kind of we need to be aware of. You know, just following on from the earlier questions, like, that growth path, like, how should we think about that for you and, you know, you want to say, like, you're not going to guide for next year, but, like, just more conceptually, like, has your thinking changed in terms of what growth you achieve there over the medium term? Thank you. Dax Dasilva: Yeah. Of course. In the quarter, we did lap price increases, which has impacted growth. We had seasonality, of course. We also shifted to annual contracts, which is a net positive for the company. For a lot of our new retail ads, you know, getting to 10%, you know, our growth engines grew 13%. That's where we're really focusing a lot of our go-to-market motion and landing new customers there. That grew at 9%. Growth engines are now two-thirds of our revenue and growing, and we have a lot more modules on these growth engines as you can see from the software innovation. The Q3 innovation release. We're shipping a lot of new modules and the cross-sell and upsell motions we expect to accelerate on those, you know, for those products. Raimo Lenschow: Yeah. Okay. Perfect. Thank you. Thank you. That's really clear. And then the other things, like, obviously, you know, as you said, two-thirds of the business is now the growth engines. One-third is the other one. How do you think about maintaining that balance on, you know, like, what do you do with the last third in terms of, like, how you know, how that kind of will evolve over time? Because, otherwise, you just kind of, you know, you grow the good part, but we need to think about the performance of the other part as well to see the overall growth. And how do you think about that going forward? Thank you. Dax Dasilva: Yeah. I think the efficiency portfolio for us has been just a very strong performer. You know, we've been very in line on our targets and beating some internal targets. Gross profit is up on that portfolio. So I think it's a mix of keeping those customers happy on those platforms, adding value, adding more financial services for those customers through our payments platform, both payments and capital. And yeah, continuing to serve those customers as we grow the growth portfolio and continue to accelerate so that we are net positive on locations overall for the company. And this quarter, we were. We were up several thousand locations as you combine growth and efficiency. Raimo Lenschow: Perfect. Thank you. Well done. Operator: Your next question comes from the line of Matthew Coad of Truist Securities. Please go ahead. Matthew Coad: Hey, good morning, guys. Thanks for taking the question here. I just wanted to go back to the SaaS ARPU again to totally hear you that maybe the front book SaaS ARPU is coming down a little bit as you shift those contracts from monthly to annual. I kind of wanted to talk about, you know, pricing on the back book. I know we're, like, lapping some pricing changes, but just wanted to kind of, like, get some high-level commentary on how you're thinking about pricing over time and how we should think about growth for the overall SaaS ARPU over time. Asha Bakshani: Yeah. Thanks for the question, Matt. You're right. The SaaS ARPU results that you're seeing now are really coming from the lapping of price increases, and it's up 4% for this quarter. But when we think about specifically your question, pricing on the back book, we've done a bunch of that starting in the back half of last year. When we look at when we think about the front book, we're actually doing a lot of work on pricing and packaging, and that one is more an evolving motion that we have. As we release more and more software modules, and Dax talked a little bit about that in the prepared remarks, we continue to evolve our pricing and packaging and working with the back book on moving them to higher tier products or higher tiered packages. So I would say on the back book, we've done a big motion there. You know, you'll still see a little bit from us just on pricing in the back book. But for the most part, we're still evolving the pricing and packaging work. And as more and more software modules come to fruition, those pricing and packaging on the front will continue to evolve. Matthew Coad: Thanks, Asha. That was super helpful. And then just one quick follow-up. I agree with the other comments so far, like location growth. Surprising to the upside. I was hoping you guys could just unpack the 2.6k wins kind of just around, you know, North American retail versus European hospitality and then are we starting to see some of the benefits from some of the distribution reinvestments? Or is that more of a fiscal year 2027 story? Thanks. Dax Dasilva: Yeah. Yeah. Location growth, we're very, very proud of this number. You know, it's an acceleration 9% location growth. That's accelerating up from seven last quarter, five the quarter before, and 3% all of the year before. So, you know, the strategy is really working in the investment in outbound, outbound remote on retail and outbound field for EMEA hospitality. Clearly successful. You know, I think that those numbers are distributed fairly evenly across retail and hospitality. What was the second part of your question? Matthew Coad: I just wanted to ask about, like, are we starting to see an uptick from the distribution investments you made, or is that still to come kind of as the Salesforce seasons to the... Dax Dasilva: Yeah. If you're referring to partnerships, I would say that we are seeing some success, some larger success in partnerships on the EMEA hospitality side. Distribution deals are accelerating that motion on the retail side. And that's a big part of Gabriel Benavides' expertise as he has started in December and is bringing his expertise to bear here. Matthew Coad: Awesome. Really helpful. Thank you. Operator: Your next question comes from the line of Joshua Phillip Baer of Morgan Stanley. Please go ahead. Joshua Phillip Baer: Great. Thanks for the question. Dax, earlier, you talked about some of the proprietary datasets that you have that help sustain your competitive moat. I think when it comes to the topic of AI, I was hoping you could expand and maybe talk a little bit about some of the network effects that you have or the complexity of your vertical sort of end-to-end workflows that you offer that not only position Lightspeed well but also make it hard for new entrants or smaller vendors or in-housing or point solutions or LLMs to kind of take share in the segments of the market that you sit in? Dax Dasilva: Yeah. I mean, first of all, the payments relationship that we have with customers and the fact that we do the transaction in the physical space is, I think, in itself a unique moat. But, of course, the wholesale ecosystem that we're building with a very powerful flywheel that we've really seen accelerate with our investment in the outbound that's led by the new order conversation. That is a very, very interesting and growing moat for us. A very big differentiator. And just to expand on that, you know, we have several thousand brands that use our enterprise new order platform, and we're bringing those brands to independent retailers, the bulk of the Lightspeed user base. And that is a unique wholesale offering that no other comparable cloud POS has. There's a supply all the way to consumer workflow there that's incomparable, and we're going to be able to do agentic workflows across that because nobody does that span from consumer to merchant to wholesale supplier. We can do something very unique there, and we're starting to deliver that in products like Marketplace, which we just rolled out, and Lightspeed AI, which offers some of the start-ups of AI tools across that whole chain. So very excited about that. It's very unique in the market, and you're going to see continued acceleration that matches the pace of innovation that you've seen from Lightspeed in the last few years. Joshua Phillip Baer: That's great. Thanks. And one follow-up on the location ad. Any sense for where that's coming from just as far as competitive share gains, new stores opening, or expansion within your existing base? Thank you. Dax Dasilva: Primarily brand new, you know, brand new. Well, new locations always represent a good third of all new brand new businesses is about one-third of new locations. The rest are coming from competing systems that are insufficient, and another is from legacy systems. That's a split of any new location that comes onto the platform. A third brand new businesses, a third existing cloud vendors, and one-third legacy. Joshua Phillip Baer: Perfect. Thanks. Operator: Your next question comes from the line of Koji Ikeda of Bank of America. Please go ahead. Koji Ikeda: Yes. Hey, guys. Thanks so much for taking the questions here. Wanted to go back to an earlier question on AI and maybe ask it a different way from a customer perspective. And so how are your customers thinking about the pace of adoption of AI products? And when do you think it will become meaningful enough where we could see it driving improving fundamentals for Lightspeed? Dax Dasilva: Yeah. So, you know, we've been rolling out AI-powered tools for a while, starting with tools that help build out e-commerce presences, online presences, and then later tools on hospitality, like benchmarking trends, which takes payments data, takes data, but not just at the store, but across other stores, anonymized data in our network. So that's another element of network effect where the more restaurants that are in a particular city or town in Germany, the more competitive data that we can give the hospitality business in terms of, like, how are neighbors pricing different menu items and, you know, what are the best hours to operate. So those were early experiments in AI-enabled tools, and that's driven upsell to larger plans that include those tools. Now, with the launch of Lightspeed AI, that's being built into the core platforms, and we'll be looking at segmenting that. You know, we have, as Asha mentioned, we've got pricing and packaging exercises ongoing that include the logic of, like, how do we offer different levels of AI insights and the agentic tooling that'll go and do work for these business owners. And that, I think, is an exciting path forward for the business that allows us to offer new software module value that's really powered by AI. Koji Ikeda: Got it. Got it. Thank you. And for my follow-up, maybe for Asha, on the gross payment volume as a percentage of GTV, you mentioned 42%. I think this is the first quarter that it's declined on a quarter-over-quarter basis. And, you know, totally heard you on the reason for this quarter, but wanted to think about this metric going into the future. Could we expect maybe some more variability in this percentage of GTV going forward because of strong penetration or the seasonal aspects of this? I just wanted to understand that a little bit more. Asha Bakshani: Yeah. Thanks for the question, Koji. You know, payments penetration, we should always look at that as the opportunity in front of us, so what's left to monetize. Looking at it quarter to quarter, you know, to your point, is difficult because of the seasonal trend. But we are super confident in this payments penetration continuing to climb over time. So to your point, you'll see seasonal trends like we saw Q2 bike and home and garden were very strong, moderated slightly in Q3. And just because they're highly penetrated verticals, you see that delta. But over time, we expect that payments penetration will continue to climb because we're continuing to attach payments on our front book. We're continuing to go back to the back book as they come up to their one, two, three-year renewals with, you know, their existing payment providers, then we move them over to Lightspeed. So definitely confident that that will continue to climb over time. Koji Ikeda: Makes sense. Operator: Thank you. Your next question comes from the line of Andrew Bauch of BTIG. Please go ahead. Andrew Bauch: Thanks for the question. Nice results. Asha, on the 4Q guidance, I know you've called out kind of some of the puts and takes not getting the pricing benefit anymore. But is there anything else you'd call out when we think about the 12% gross profit guidance compared to 15% in the third quarter? Maybe related to that last question a bit on what the assumption is for GTV and payments penetration in the fourth quarter. Thanks. Asha Bakshani: Yes. Thanks for the question, Andrew. Our Q4 guide really just reflects the seasonality that we typically see in our fiscal Q4. January to March, the January to March quarter, people just do not spend as much both in retail and in hospitality, and that's not Lightspeed specific. That's industry-wide. And so we typically see overall GTV in our business drop by anywhere from 15% to 20%. If you look at fiscal Q4 last year, you'll see the same dynamics. Outside of that, there's nothing else that's contemplated in the guide. I mean, when we think about our execution and the fundamentals of the business, our guide takes into account continued strength in our team's execution. Andrew Bauch: Thanks. And then with Gabe in the door now, I would love to kind of hear what the early conversations with him are like. It sounds like the go-to-market engines are really improving, and there's some of the investments that are getting pulled forward. How should we think about go-to-market, especially as we start thinking about our 2027 numbers? Dax Dasilva: Yeah. I think, you know, Lightspeed's always traditionally been very, very strong inbound. That continues to be a strength. We continue to be able to optimize that funnel and get more of the SMB and mid-market merchants into that funnel. But I think it's the outbound that we really need the big investments in, both outbound remote and outbound field. Now we're interested in really getting more productivity as we ramp those reps. And in addition to that, from a mid to long-term perspective, we feel like we can really grow the partnerships business, building on early successes in retail with partners like NetSuite, you know, and other ERP vendors that are excited to use Lightspeed in multi-location settings and be the ERP on the back end. And, of course, we have a lot of great partnerships that are driving the hospitality business and distribution deals there as well. So I think that his expertise is really going to accelerate all of those initiatives in areas where Lightspeed has a lot of opportunity ahead. Andrew Bauch: Thanks, Dax and Asha. Operator: Your next question comes from the line of John Chao of TD Cowen. Please go ahead. John Chao: For Lightspeed AI, my understanding is there are going to be more advanced features to be added, like catalog assistant and store generators. Could you first remind us of the timeline for those additional features, maybe also talk about any margin implication? Because I can imagine that advanced features are going to consume more tokens. Dax Dasilva: Right. So we rolled out Lightspeed AI officially during NRF and also previewed it in November for the hospitality customers. Obviously, slightly different capabilities for retail versus hospitality. On the retail side, really focusing on insights into inventory and flows within the retail stores and across their chains. In hospitality, there's kitchen execution and a lot of different kinds of insights around pacing and areas. So that is with select customers right now, and we'll be rolling it out to larger and larger sets of customers in the months to come. And it will start to add more agentic workflows to it. So beyond conversational and beyond, you know, getting insights into being able to do tasks, which is what I think these businesses are really looking for. They have to wear many hats nowadays, and the more that we can do to allow them to unlock their creativity and unlock their desire to work on curation and taste-making in their businesses and less sit behind Lightspeed admin screens, the better. And then I'll pass to Asha regarding any thoughts on margin. Asha Bakshani: Yeah. I mean, we're not seeing we've already started with Lightspeed AI, as Dax talked about, and we're not seeing any significant impact on margins. We feel good again about the software margins that we're delivering. We continue to be confident in delivering that. John Chao: Thanks for the additional color. And maybe on the payment side, you maybe explain the trajectory for payment penetration in markets outside your growth engines? Asha Bakshani: Yeah. For sure. The payment penetration in the markets outside our growth engines is actually, you know, low thirties. Whereas as a consolidated entity, we're at about 42% and higher than that in the growth portfolio. So, you know, all told, there's a lot of opportunity still in the payments penetration growing in the efficiency markets. And, you know, quite frankly, that's one of the biggest modules that we're cross-selling and upselling in those markets. And, you know, at the end of the day, software and payments revenue in the efficiency markets are flat to slightly up. And that's been our goal there, right, given that we're not really selling much new business in those markets. So we feel good about the pace of payments penetration in the efficiency markets. It's grown year-over-year as well. And we expect that to continue to climb, you know, to the forties and into the fifties over time. The last thing I'll say about that is it's actually a higher margin business. Payments is a higher margin business in, you know, the rest of the world than it is in North America. Our gross take rates are lower at about one, 1.5%. The net take rates are about 40, 45 bps. So when you look at it from a margin perspective, you're actually getting 40% margins on payments or slightly higher. And so that is impacting quite positively the overall margin of that revenue line item as well. John Chao: Great color. Thank you again. Operator: Your next question comes from the line of Tien-Tsin Huang of JPMorgan. Please go ahead. Tien-Tsin Huang: Hey, thanks. Good morning. Good location outcome here. I was just curious about your Salesforce headcount growth here. Are you satisfied with the quota attainment across the entire base here, especially the newer hires? I'm just curious how productivity is tracking because if that continues, then, obviously, we could see further improvement on the location side. So wanted to update there. Dax Dasilva: Yeah. We're very excited about the trend on locations. I think that's one of the things that we're most proud of with the company. That acceleration from, you know, as I said, from three to five to seven to nine is a big point of pride. It's our number one priority of the company. And, of course, that's all because of the investment that we made in outbound. And, of course, in addition to that, the refined pitch in retail around new order and the wholesale the legacy wholesale network. Very powerful in some of our top verticals, like fashion apparel and sport and outdoor. And then, of course, in EMEA hospitality, you know, going city by city in the key markets, you know, with bright spots and penetration in key places in Germany and France in addition to several other countries, you know, very, very excited about that. So, you know, we're continuing to accelerate. I think that full productivity, you know, we have 150 of our contemplated reps now hired. And now the focus of Gabe and team is to really ramp them to full productivity. And I think his lens on how we get real performance out of what we have will result in more performance and results. Tien-Tsin Huang: Great. No. That's great. Great detail. Maybe you touched on it, Dax, but just maybe elaborate a little bit more on the pulling forward of growth investments. Asha, I think you talked about that. Actually. But could we see more of that with him coming in? And is that incremental spend being informed by the production that you've seen so far, or you may be borrowing it from some other areas that maybe it's not as productive? Just trying to get a little bit more understanding of that. Thanks. That's all I have. Dax Dasilva: So, you know, it's a little bit of what I was speaking about before, Tien-Tsin, in retail. We're quite excited about what we're seeing in retail outbound, especially leading with the Lightspeed wholesale, new order pitch, to those key verticals of apparel and footwear and sport and outdoor where we have, you know, very good density of brands. It's a very powerful pitch to those SMB and mid-market customers. We're closing them, and therefore, we've decided to pull forward, you know, some of those reps into Q4, hiring those reps into Q4 so that we can have a very, very good start into FY '27. Tien-Tsin Huang: I see. I see. Yeah. No. It stood out at NRF, the new order side of it. Thanks, Dax. Appreciate it. Dax Dasilva: Yeah. Very happy with where we're at, how we're trending there. Operator: Your next question comes from the line of Martin Toner of ATB Capital Markets. Please go ahead. Martin Toner: Good morning. Thank you for taking my questions. Two for me. Can you talk about plans for price increases looking into next year? And also the prospect for software ARPU growth from other sources. And then, also, can you just talk about the health of GTV in the non-core businesses? Asha Bakshani: Yeah. Sure. Thanks for the question, Martin. With respect to price increases, as we mentioned, we did a pretty big back book price action in the back half of last year, and, you know, that's what we've just lapped and why SaaS growth has moderated. Going forward, most of the uplift will come less from broad price hikes but just more from evolving pricing and packaging as we add more modules and we move customers to these higher tier bundles. Dax talked about the pace of innovation. We're doing some really amazing things on our flagship products, which are the products that we're selling in North America retail and EMEA hospitality primarily. And, you know, the result of that innovation is going to be evolving pricing and packaging. We've already started doing that. And so you should definitely see SaaS ARPU uplift as a result of that into fiscal 2027. With respect to so that helps software ARPU into fiscal 2027 for sure. With respect to GTV in the efficiency markets, we're seeing that customer base remain healthy, and you can see that from the software and the payments growth in the efficiency markets. We've been able to keep that growth flat to slightly up despite really tempering new business in those markets. And that's because we have a healthy customer base that's growing. And you also see it resulting from the fact that the overall location count at Lightspeed was up a couple thousand as well. And so happy with what we're seeing there and the health of that customer base. Martin Toner: That's great. Thank you very much. Operator: Your next question comes from the line of Thanos Moschopoulos of BMO Capital Markets. Please go ahead. Thanos Moschopoulos: Hi. Good morning. Just on capital, some nice growth there, obviously, it's a very profitable revenue stream. So how should we think about the pace at which you'll lean in towards growing that over the coming months? Asha Bakshani: Thanks for the question, Thanos. Yeah. You're right. Lightspeed Capital has done really well. We've grown over 30% this quarter and year-to-date as well. We expect similar levels of growth, I would say, in the future. You'll get detailed guidance from us on fiscal 2027 in May. You know, what I'll say about capital is that we're growing this business prudently. We've been very good at deciphering the most creditworthy customers. And as a result, our default rates still remain in the low single digits, which is really remarkable for this type of business. It is a high gross margin business, close to 100%. You know, our churn is significantly lower for customers that take capital. And so all told, really excited about the future of capital. We are growing it prudently because we want to make sure that at the end of the day, that it is a service we provide customers, but we want to make sure at the end of the day that we are keeping the default rates really low, so that it continues to be a high EBITDA margin business as well. Thanos Moschopoulos: Great. And then just on churn, qualitatively, within both core markets and efficiency, any trends positive or negative? Or is it remaining stable in both those markets? Asha Bakshani: Yeah. We are focused very heavily on, you know, the rest of the world portfolio. And obviously, churn is a big driver, especially because we're not, you know, going strong on new business in those markets. And we're really happy with what we're seeing there. I mean, if you look at the total location count again, you'll see that it grew by about 2,000 locations. So, you know, we're really doing a good job at managing the churn in that portfolio. And, again, software and payments revenue in the efficiency markets have been flat to slightly up. So all told, we're excited about what we're seeing there. And we have been able to optimize that portfolio quite well. Thanos Moschopoulos: Thanks, Asha. Operator: Your next question comes from the line of Trevor Williams of Jefferies. Please go ahead. Trevor Williams: Great. I wanted to go back to the hardware gross margins. If you could unpack where you're leaning in most heavily with the discounting, Asha, that you mentioned and if we should expect to see that headwind from gross margins continue to get bigger as the outbound sales reps ramp, that'd be helpful. Thank you. Asha Bakshani: Yeah. Sure. I'll take that one. Thanks for the question, Trevor. The negative margins on hardware are due to discounts and incentives that we provide to encourage new business. You've seen a healthy clip of new business and new locations come in, and the result of that is, you know, we've given some more discounts on hardware. Again, that is pretty industry-wide. When we think about what free hardware we provide, a lot of that is payments. Payment terminals as we encourage merchants to switch over to Lightspeed payments, you know, they get free payment terminals from us. Outside of that, we discount other hardware that we provide with the POS. We expect hardware margins will, you know, range in the minus fifties, minus sixties. It really depends on the clip of new business. Overall, we look at the total net take from every customer. And, you know, at the end of the day, our focus is on growing the overall gross margin of the business, and we're happy with the growth we're seeing there. Trevor Williams: Okay. No. I appreciate that. And then just to clarify on the software growth for the quarter and the call out on shifting some customers onto annual contracts. Any way you can quantify what that impact was on software growth? And if you're going to keep pushing for that transition, does that dynamic get more pronounced over the next few quarters? Or at kind of what you think the normal quarterly run rate impact is from that transition? Thanks. Asha Bakshani: Yeah. We didn't specifically call out, you know, the impact of annual. But what I would say is that I would expect to see similar levels of annual contracts going forward. It's, like we said, very good for our business. In this fiscal quarter, we had about 50% of our retail North America contracts that were annual versus 25% a few quarters ago. This is great for our business, great for cash flow, great for churn. The lifetime value of these customers is typically much higher. These are more established high GTV for the most part, and so we should expect similar levels of annual discounting. But, again, over time, we expect that software revenue growth number to accelerate as the growth portfolio becomes a bigger and bigger part of the total Lightspeed revenue. Today, it's two-thirds. We expect that to be much higher in fiscal 2027, and so you should start to see the software revenue growth converge to the software revenue growth we're seeing on the growth portfolio. Operator: There are no further questions at this time. And with that, I will now turn the call back over to Gus Papageorgiou for closing remarks. Please go ahead. Gus Papageorgiou: Thanks. Thanks, everyone, for joining us today. We'll be around all day if anyone has any follow-up questions, and we look forward to speaking to you all when we report our Q4 results in May. Have a great day, everyone. Operator: Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.
Operator: Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Fourth Quarter 2025 BPER Consolidated Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Nicola Sponghi, Head of Investor Relations of BPER. Please go ahead. Nicola Sponghi: Thank you, and good morning, everyone. I'm pleased to welcome you to our full year 2025 earnings conference call. Before I give the floor to our CEO, Gianni Giacomo Papa, please be reminded that our slide set and press release can be found on our corporate website. That said, after the presentation, our CEO and our CFO, Simone Marcucci, will take care of the Q&A session. I will reiterate that this is reserved for financial analysts whom I will kindly request to ask a maximum of two questions each so that everyone will have the opportunity to contribute to today's call. Thank you very much. I will now leave the stage to Mr. Papa, CEO of BPER. Gianni Giacomo Pope: Thank you, Nicola. Good morning to everyone, and welcome to our end of year results presentation. Before giving you details of the financial performance of BPER, I would highlight a number of key features of this last year. 2025 has been an intense year for both BPER and BPSO. Since August, the two banks have been extremely busy with the integration. Please note that the update of B:Dynamic | Full Value 2027 will be presented in the second half of this year. The combined group has been able to register outstanding results, thanks to a strong focus on commercial activities, both at revenue level and on the cost side. As you can see on the slide, despite a complicated macroeconomic context and ongoing geopolitical headwinds, we've been able to increase customer loans and TFAs to EUR 551 billion. And as you will appreciate later in the presentation, our capital position remains strong despite the BPSO acquisition, our business growth and the total return swap we implemented in Q4 '25. Financial year 2025 has proven to be a record year in terms of the bottom line, thanks to all the group companies and to all our employees. Despite the ongoing integration of BPSO, our colleagues have been able to focus relentlessly on commercial activities. NII has been resilient in spite of an acceleration of the reduction in interest rates and the progression of net commission income has been extraordinary, thanks to the effort of all our colleagues. We have transformed ourselves as a key domestic player with an 11% market share from 8% in 2023. In addition, we have achieved a very thorough presence in rich Northern Italy, where we are present with more than 58% of our branches compared to 47% in 2023. And finally, as you can appreciate on the slide, since April 2024, when the new Board of Directors took over BPER shareholders have benefited from a total shareholder remuneration, which is close to 220% versus 127% for the FTSE Italian Banks Index. Moreover, our market capitalization stands at more than EUR 24 billion, an important leap from a market capitalization of just EUR 6 billion in April 2024. As such, BPER has been included incrementally in more than 130 market indices, which have benefited the stock in terms of liquidity and purchasing momentum. Let's now move to our Q4 financials on the next slide. I would like to draw your attention to the continued progression of our dividends generation. As a result of net profit growth between 2021 and 2024 from approximately EUR 480 million to over EUR 1.4 billion, cumulative dividend payments in the same period amounted to over EUR 1.5 billion. And the payout ratio has increased in the same period from 17.8% to 60.6%. As you can see on the right side of the slide, for financial year 2025, the Board proposed a dividend distribution of almost EUR 1.370 billion, of which EUR 196 million have been paid in terms of interim dividend in November 2025, amounting to a payout ratio of approximately 75%. This follows our target dividend payout ratio following B:Dynamic | Full Value 2027. Let's turn the slide to BPER's key financial results. I'm extremely pleased about financial year 2025. In the first part of the year, both banks have focused significantly on business growth and their respective strategic plans. In a similar way, in the second half, despite the ongoing business integration, both banks performed extremely well. These outstanding results have been possible because of the remarkable commercial performance which led to continued and robust commission growth and resilient NII despite the acceleration of decreasing interest rates. This slide highlights the financials of the new group based on the consolidation of BPSO's second half results. As such, the impact of BPSO on the consolidated financials accounts for only 6 months. Please note that balance sheet items, on the other hand, include the full 12 months consolidation of BPSO. Also please note that as we mentioned in Q3, Alba Leasing has now been excluded from the consolidation. In order to ease the reading, on the right side of this slide, we have included on the bottom part of each box BPER's like-for-like results. As you can see, total revenues now amount to EUR 6.6 billion and net profit adjusted amounts to EUR 2.1 billion. The cost-to-income ratio stands at 45.7%, underlining the continued focus on cost efficiencies. Please bear in mind that on a like-for-like basis, the cost/income ratio stands at 47.2% and has improved by 314 basis points in the last 12 months. So a tremendous effort in operational efficiency has been carried out. Furthermore, the cost of risk stands at 24 basis points, while like-for-like, the cost of risk landed at 34 basis points, basically flat in the last 12 months. The return on tangible equity stood at 20% while the CET1 ratio continues to be very solid at 14.8%. Despite the acquisition of BPSO, business growth and the implementation of the total return swap in 2025, organic capital generation by BPER amounted to EUR 2.3 billion or 340 basis points in the last 12 months. In a similar way, the liquidity profile of the new group is sound with short- and long-term ratios well above regulatory thresholds. Slide 7. As we mentioned in Q3, please note that the figures reported on the left side of the table concern BPER on a like-for-like basis. We have included two columns with the consolidated financials which embed only 2 quarters of BPSO contribution. It seems to me pretty clear that BPER is reporting a set of record results. As you can appreciate, in the last 12 months, total revenues were up by over 2.5%, driven by a resilient net interest income and a very strong result in net commissions. The growth path on net commissions have been remarkable and better than planned. Moreover, the resilient performance of NII, as I will later explain, was supported, particularly by commercial efforts of our network. Our continued focus on operational efficiency ensure costs to come down by 5.1%, both in terms of HR and non-HR costs. Loan loss provisions stood at EUR 316 million on the back of our continued conservative approach. As a result, BPER's adjusted net profit almost reached EUR 1.8 billion, up by almost 27% in the last 12 months. Let's move on to Slide #8. As you can see, these outstanding results allowed us to perform better than our guidance for 2025, both on a like-for-like and on a combined basis. In this respect, I can say that we are well ahead of B:Dynamic | Full Value 2027. As far as 2026 is concerned, we expect BPER to continue this trajectory on a like-for-like basis. Further information on guidance, including BPSO will be given at the business plan update scheduled for the second half once the full integration will be completed. Let's move to the core part of the presentation. After some 15 months since the launch of B:Dynamic | Full Value 2027, a quick glance at the progress over plan is a must. The plan, I remind you, remains to date stand-alone, and the merger with BPSO is an accelerator of B:Dynamic | Full Value 2027. Here are some highlights. On Pillar 1, the strong commercial push enabled new lending to increase by 13% in the last 12 months to almost EUR 20 billion. Net commission income growth continues to be very robust, particularly in Wealth Management and Bancassurance. And our customer base continued to grow significantly with over 50,000 net new customers acquired in 2025. On Pillar 2, the following highlights are important. Digital channels now process 93.8% of the bank transactions with approximately 28% of new customer acquisition and best-in-class completion rates. Digital sales continue to increase, thanks to higher cross-selling and product penetration. And we consolidated the digital human model and completed the end-to-end digital operating platform for business and corporate, launching Digital Corporate Banking and Smart Banking Business with fully digital SME credit solutions. As far as Pillar 3 is concerned, our conservative risk approach enables BPER to boast the most conservative asset quality ratios in Italy, while at the same time, we're increasing automated credit approvals for selected retail, small business and SMEs. And finally, on Pillar 4, on technology, security and AI, the group data center rationalization process and cloud implementation of all multichannel retail applications are fully completed. In this context, CapEx is running according to plan. Our commitment to ESG-related lending continues to be strong with some EUR 3.9 billion of new ESG lending in the last 12 months. And finally, over 4,000 colleagues have already been involved in BPER's Academy and training paths. Let's now turn to our financial performance. Despite the overall scenario characterized by an acceleration of the reduction of interest rates and continued geopolitical turmoil, BPER produced a set of remarkable results. Noteworthy, our total revenues, which increased by 2.5% on a like-for-like basis to over EUR 5.7 billion and almost to EUR 6.6 billion, including BPSO. Core revenues were stable at EUR 5.4 billion, driven by continued strength in net commissions and resilient NII. In this context, the ratio of net commission income to total revenues rose from 37% to 38% in 2025, proving the high quality of our revenues. As we will see later, I wish to highlight the commercial drive of NII, which increased between Q4 and Q3. Finally, it is important to underline how our productivity index, measured as net revenues on risk-weighted assets, has continued to improve relentlessly every quarter from 9.5% at the beginning of '24 to 10.1%. This is a remarkable result, and it is among the highest productivity ratios in the industry. Let's move on to the next slide, which focuses on net interest income. Although net interest income came down by some 3.2% in 2025, I'm extremely pleased about the outcome, given the context of lowering interest rates. As you can see on the slide, commercial spreads came down from 3.7% to 3.5% in the last 12 months, negatively impacting the NII line item. In the quarter, however, NII was slightly higher by 3.5%, driven by marginally higher commercial spreads from 3.4% to 3.5%. In an opposite direction, but to a lesser extent, lower impact of average loan volume and an important contribution of noncommercial drivers related to asset liability management exercise. Please note that loan volumes in the quarter actually increased by 2.1%, driven primarily by retail and factoring. In this particular context, commercial actions aimed at increasing the quality of loan volumes have been extremely effective. This had a positive effect on credit risk-weighted assets, which we will illustrate later. As I mentioned in the slide on progress of our business plan, new lending in the last 12 months increased by 13% to almost EUR 20 billion. Finally, I would like to highlight that our NII sensitivity on a like-for-like basis to 100 basis points movement equal to EUR 176 million in the quarter versus EUR 184 million in the previous quarter. Now let's move on to the development of net commission income. The trajectory of net commission income has been spectacular. As you can see on the slide, thanks to B:Dynamic | Full Value 2027, the performance of net commission income in each single quarter of 2025 was higher than in each quarter of 2024. As such, net commission income continued its strong progress up by 5% in 2025. To date, this performance is well above the targets of our plan. The mere fact that net commission income contribution on total revenues increased to 38% in '25 versus 37% in 2024 is a clear indication of the increasing high quality of our revenues. Our focus on capital-light, high-quality Wealth Management products is proven by an increasing proportion of this versus total commissions at almost 43% of total from 41% 12 months ago. The remarkable performance of Wealth Management fees is underlined by an increase of more than 10% in the last 12 months. Please note that Bancassurance fees in the last quarter are always positively influenced by performance fees, hence the 122% increase quarter-on-quarter. That said, the most important contributor remains Banking Services Fees, which almost reached EUR 1.1 billion. Although the contribution of this fees is coming down as a percentage of total commissions, we expect this to pick up significantly once BPER and BPSO will be fully integrated. Let's move to the next slide. As you can appreciate, since the launch of B:Dynamic | Full Value 2027, TFAs, the most important driver of commission income has been growing from approximately EUR 300 billion to almost EUR 330 billion on a like-for-like basis and to over EUR 420 billion with a new group perimeter. This is primarily as a result of BPER being increasingly perceived as a relevant player in Italian asset gathering. The integration of BPSO will allow us to further strengthen our focus on asset gathering activities and will ensure the exploitation of further commission-related potential. Key drivers in the quarter have been AuCs and AuMs. An important contributor, for example, is Arca Fondi SGR, which reported over EUR 50 billion in total AuMs at year-end versus EUR 45 billion at the end of 2024. Noteworthy to emphasize the fact that asset growth between AuMs and AuCs amounted to approximately EUR 16.7 billion, of which EUR 3.9 billion related to net inflows and EUR 12.8 billion related to market effects. In Q4, there has been an important asset rotation from deposits to AuCs mainly due to the issuance of certificates as well as bond and treasury placements. This is important as we are now increasing penetration of liquidity management for both corporate SMEs and private clients. Finally, it is important to note that at year-end, the loan-to-deposit ratio stood at 76.3%, stable quarter-on-quarter. This will enable us to continue to grow the loan book and to transform client liquidity into AuCs and AuMs. Let's move on to our performance on the cost side. Before I start commenting on costs, a topic of which I'm very proud of, let me anticipate that integration costs of approximately EUR 300 million are not included in these figures in order to show cost progress on a normalized basis. I'm extremely satisfied about the cost performance. The enormous effort of the whole bank on operational efficiency is bearing its fruit. Total costs were down by above 5% in 2025, and this has been achieved for both HR and non-HR costs. Our plan actions continue to reduce the cost/income ratio, which decreased from 50.3% to 47.2% in the last 12 months. Including BPSO, the cost/income ratio would further lower to 45.7%. On the HR side, at year-end, the total accounts came down to 19,000, 700 less than in 2024. In terms of the combined group, total accounts stood at 22,600 at year-end. In addition, as a result of previous agreements, we are expecting over 220 exits in 2026. And furthermore, we expect mainly in the same year, 800 additional exits aimed at the implementation of a generational change program in the bank. As a final note, the strong improvements of non-HR costs is the result of our relentless focus on cost efficiencies. As per our plan, we have significantly reduced outsourcing and consultancy costs. Slide 17. As you can see, the trajectory of the cost of risk is very sound. LLPs came down by 2% in the last 12 months, while the cost of risk stands at 34 basis points, slightly lower versus 2024. Including BPSO, the cost of risk would stand at 24 basis points. In the quarter, our continued conservative approach translated into an improvement -- improved NPE coverage ratio, which increased from 56.3% to 57.5%. This remains one of the highest among Italian peers and will act as a further buffer against any potential deterioration in asset quality. Moreover, our conservative approach is further confirmed as we report in Q4 2025 coverage ratio on performing loans at 60 basis points, mainly driven by an improvement of the rating classes of our credit counterparts. This ratio is among the highest in Italy. As we already mentioned in Q3, please note that when including BPSO coverage ratio are somewhat lower due to a technical factor. BPSO nonperforming loans are reported only on a net basis. As a result, the total NPE coverage ratio, which decreases from 57.5% to 52.8% in Q4 is driven by this reporting difference. Also, please note that the total NPE coverage ratio, including BPSO, improved significantly by 280 basis points from 50% to 52.8%. Moving forward, once full integration will have been accomplished, coverage ratios and NPE ratios will be calculated in a homogenous way. Let's move on to asset quality on the next slide. On asset quality, let me state that Q4 was characterized by some loan disposals of single names. As a result, the gross NPE stocks were lower versus the previous quarter at EUR 2.3 billion, and the gross NPE ratio came down to 2.4% from 2.7%. In any case, as in previous quarters, the quality of our loan book continues to show a very healthy state with net NPE ratios improving to 1.1%, one of the lowest in the Italian banking system. As far as the combined banks are concerned, attention should focus on the net NPE ratio, which stands at 1% and not on the gross NPE ratio. The reason is exactly the same as previously explained, which is that BPSO only reports on a net basis. Having finished with asset quality, let's move on to the development of the bank's risk-weighted assets. As you can see, in Q4 2025, total risk-weighted assets of BPER, including BPSO, decreased to EUR 80.1 billion. Despite higher volumes, credit risk-weighted assets were down by EUR 3.1 billion, thanks to high-quality lending and the deconsolidation of Alba Leasing. On the other hand, operational risk-weighted assets increased by EUR 900 million due to the annual update of operational risks. I will now turn to organic capital generation on the next slide. Despite the acquisition of BPSO, the total return swap of the robust -- and the robust business growth, the combined CET1 ratio at year-end stands at a very comfortable 14.8%. In the last 12 months, BPER continues to generate a very high level of organic capital. Organic capital generation amounted to EUR 2.3 billion or approximately 340 basis points. This result reaffirms BPER position as a highly resilient institution. Moving on to liquidity, let me point out that at the end of 2025, the bank's liquidity ratio remained high. As of the end of 2025, the LCR increased to 172% from 165% at the end of Q3. In the same period, the NSFR improved to 134% from 132%. And finally, the loan-to-deposit ratio stood at 76.3%, stable quarter-on-quarter, one of the lowest amongst Italian peers, which will enable us to continue to grow the loan book through increased loan generation and to transform client liquidity into AuCs and AuMs, thanks to our ability to attract customer liquidity. Turning now to the bond portfolio. Italian government bonds increased to EUR 15.6 billion and accounted for around 52% of total bonds. On a combined basis, including BPSO, Italian government bonds increased to EUR 21.7 billion and accounts to 50.4% of total. In Q4 2025, the duration increased majorly due to the position of CCTs equal to EUR 4.4 billion that were repriced in mid-October. Please note that the annualized average yield of the financial portfolio was 2.5% in Q4. And now a brief look at the latest bond issuance. Throughout 2025, as far as main wholesale issuance is concerned, BPER successfully placed the EUR 500 million senior nonpreferred bond and BPSO placed EUR 500 million of covered bonds. In addition, in November, BPER successfully placed an AT1 perpetual bond for a total amount of EUR 750 million. And finally, on top of our previous upgrades, in Q4 2025, Fitch and Moody's upgraded their long-term ratings on BPER. Let's move on to the business integration between BPER and BPSO. The integration plan, which involves 23 cross-bank work streams is fully running and will be completed at the end of April of this year. The major event since our last update is the regulatory green light on the merger by the ECB. This result was achieved in advance of our expectations. For what concern business and operations, we have finalized the product catalog analysis, and we are implementing the identified actions. And finally, the alignment of group policies is well in progress, as well as the implementation of the customer communication plan. As previously stated, we confirm that we will fully achieve EUR 290 million in synergies by the end of 2027. We also confirm that integration costs amount to EUR 400 million. Of this, 72% were already booked in Q4 '25, the remaining will be booked in 2026. Slide 26, as you can appreciate on the slide, not much has changed since our Q3 2025 result call. As of today, the next step will be the extraordinary shareholders' meeting of BPER and BPSO in order to approve the merger plan in March 2026. On Slide 28, we report the divisional financials for BPER on a like-for-like basis. I would like to draw your attention to the important results achieved on total wealth commission income across our divisions, which amounted to EUR 928 million, compared to EUR 840 million in 2024, an increase of above 10%. These results underline the important focus of the group on asset gathering activities. Let's move to the final remarks. Allow me to say that BPER results have been outstanding. Firstly, we achieved a record net profit on both on a like-for-like basis and on a combined basis. This set of results will translate in a proposed dividend payout ratio for financial year 2025 of 75%, amounting to approximately EUR 1.370 billion, of which EUR 186 million already paid in November 2025. Secondly, thanks to all our units, our colleagues and customers, we have been able to continue to focus on business growth, execution of B:Dynamic | Full Value 2027 and the regulatory, IT and business integration of business. The commercial strength of the bank has been remarkable. Reported NII was better than expected despite declining interest rates, while loan volumes have grown with respect to 2024. The trajectory of net commission income has been outstanding, fueled by growth in Wealth Management as BPER is gradually being increasingly recognized by our customer base as a leading Italian asset gatherer. Cost efficiency has been very thorough on both HR and non-HR. HR costs are very much under control. We are supported by our colleagues and trade unions to enable the bank to enhance a generational change while rendering the bank linear. On the non-HR front, we have taken decisive actions on outsourcing and consultancy costs, which led to significant savings. In this context of geopolitical headwinds and political turmoil, asset quality remains one of the best in the Italian banking sector, given that we are very selective with respect to whom we lend to. On the capital side, despite the acquisition of BPSO, business growth and implementation of the total return swap, we maintain a sound capital position with a CET1 ratio of 14.8%. In addition, we boast an outstanding organic capital generation amounting to 340 basis points in the last 12 months. And finally, we are fully on track to ensure a smooth, efficient and effective integration of the two banks before end April 2026. We are now ready to take your questions. Thanks. Operator: [Operator Instructions] The first question comes from Lorenzo Giacometti of Intermonte. Lorenzo Giacometti: Congratulations for the outstanding results. And then coming to my question, I have actually two. So the first one is if you can give us some color about your 2026 expectations in terms of top line, the main top line items and bottom line. And the second question is about remuneration. So shall we keep in mind your 75% payout ratio? Or shall we expect some surprises within the business plan also considering both your capital position and the derivative contract you entered? Yes, that is all. Gianni Giacomo Pope: Thank you, Lorenzo. So as much as your first question is concerned, let's say that the outstanding results allowed us to perform better than our guidance for 2025, both on a like-for-like and on a combined basis, as I mentioned before. And in this respect, we are, and I can say that we are well ahead of our B:Dynamic | Full Value 2027. Then in as much as 2026 is concerned, we expect BPER to continue the trajectory on a like-for-like basis and probably on the consolidated. But further information on guidance, including BPSO, will be given once the business plan update will be -- that is scheduled for the second half of the year, will be delivered. And this because we want first to go through the full integration, complete the full integration, and then we'll be in a better position to do that. But let me reconfirm that we -- I believe, BPER to continue the trajectory that -- as shown in 2025. And as I mentioned, we are well ahead of our plan. In as much as remuneration is concerned, we are -- we stick to our decision to pay a good dividend to our shareholders. You know that in our plan, in our strategic plan, we indicated 75% in terms of payout ratio. But I also mentioned in other presentations that if the bank will continue, as I believe, will continue to have such a strong organic capital generation which might also be accelerated by the full integration of BPSO, then we might revise also this payout ratio. And then here, I have to stop because we are living in difficult times. We have geopolitical situations, macroeconomic situation. So we want to make sure that we produce capital, that we have organic capital generation, and then we'll decide what to do. Operator: The next question is from Matteo Panchetti of Mediobanca. Matteo Panchetti: Yes. I have two questions. One on the derivatives and one on the clarification on PPAs... Operator: Excuse me, sir. Are you able to speak without the headset because we don't hear you very clear? Matteo Panchetti: Okay. Can you hear me better now? Operator: Much better. Matteo Panchetti: Yes. so you have previously stated that you have entered a derivative position based on your confidence in the company growth prospects and delivery. Since your announcement, the stock has been rally more than 20%. What is your current intention regarding these derivatives? Are you considering partially closing it and taking some profits to roll it and maintain exposure? Any color will be appreciated. Can you also confirm how much was the contribution of the TRS to the trading line this quarter? And if the sensitivity of plus/minus EUR 200 million for each 10% share price is still valid? And the last question is on the PPAs. I've seen this quarter you have benefit 5 basis points. I'm correct assuming that you still have EUR 400 million or roughly 40 basis points capital tailwind from this? Gianni Giacomo Pope: So I will take the first question. Thank you, Matteo, for your question. I will take the first one, and then I'll put through Simone Marcucci, our CFO. So in as much as the derivative is concerned, as you know, as we mentioned, when we informed the market about the derivative, the derivative has a 3-year life. And so we are not thinking neither to expand it, not to close it or whatever. So it will stay the way it is. And therefore, we don't see any variation in the position in terms of -- in as much as our position is concerned vis-a-vis the derivative itself. I'll put through Simone Marcucci now. Simone Marcucci: Thank you very much, Mr. Papa. The profit and loss effect of the derivatives in trading, as you mentioned, is EUR 28 million in Q4 2025. it's clearly now at the moment, higher than that amount. Regarding the PPA, the effect that you have seen, that we have shown in these lines is the total effect. There will be no other effect on the capital for the next quarters. Operator: The next question is from Noemi Peruch of Morgan Stanley. Noemi Peruch: My first question is on growth and NII. Loan growth was around 2% at BPER and in the mid-single digit for Sondrio, well ahead of the market. So could you please elaborate on both banks' strategy to gain market share? And how do you see volume growth and NII evolving in 2026? And then I have a second question on distribution. How shall we -- first of all, what's the size of the equity swap right now? And how should we read this vis-a-vis a potential share buyback? And how potentially these two will kind of interact with each other? Gianni Giacomo Pope: Noemi, sorry, can you repeat the second question? Because the line was disturbed. I didn't get it properly. Noemi Peruch: Yes, absolutely. So my second question is on the equity swap. What's the current size at the minute? And how will this behave vis-a-vis a potential share buyback? Gianni Giacomo Pope: In terms of growth, so we indicated that 2025, we grew both BPER and Sondrio grew and that the two banks are proceeding based on their business plan that was presented for us in October '24 for BPSO in March '25, then it will be the integration in April. 2026, we foresee a growth, we will keep on growing. If you look at -- if you remember our presentation for the strategic plan, we indicated a growth of 3% CAGR. That is what we are delivering so far. And we believe that we'll be able to keep on growing this in -- to keep on growing on the loan side, both on the Corporate side as well as on the Retail side. So for different products, and we see constant growth there. In as much as NII is concerned, as I mentioned at the beginning, we see that -- we believe that BPER will continue the trajectory of growth on a like-for-like basis. Just one note, but we already indicated this when we presented the third quarter results. We are, as of today, based our budget on interest rates at 1.75%. So we have a conservative approach in terms of interest rates. So let's see what ECB will do going forward. But for the time being, we prefer to stay again, conservative rather than staying -- rather than projecting figures that are too aggressive. In as much as your second question is concerned, I take the second part of the question, and then I'll ask Simone to answer the first part. So buyback, as I mentioned, was the question of Lorenzo, we remain committed to our generous policy with a 75% payout ratio. That might increase in case of confirmation of our capability of generating capital. In as much as buyback is concerned, any decision will eventually be taken by the Board of Directors. Anyway, let me state that the derivative announced in October is intended to hedge a potential decision for buyback which might be then more convenient in the future. So this is where we stand today. Simone? Simone Marcucci: Regarding the TRS, we don't disclose the percentage, we disclose the effect. We have the effect in this quarter of around EUR 510 million of deduction in order to arrive to the completion of the TRS described in October. We still miss EUR 200 million of deduction that -- this will plan clearly on the price of the share. Operator: The next question is from Giovanni Razzoli of Deutsche Bank. Giovanni Razzoli: So my first question is on the net interest income outlook for the short term. I've seen that you have a very strong growth of the volumes in this quarter but the growth of the NII was mainly related to the financial component. So my understanding is that the growth of the stock has not yet translated into higher NII. So I was wondering whether my understanding is correct so that we can anticipate for the coming quarters still confirmation or even better run rate of the NII when compared with Q4. And another question is on the CET1 ratio. In 2026, you plan to complete the merger with Popolare di Sondrio. If you can share with us what could be the CET1 ratio on a like-for-like basis. So if we were to assume the completion at year-end of the merger with Sondrio, what would be the 14.8% look like? And the last question is on the asset quality, is more a broader top-down question. I've seen yesterday Credit Agricole for the first time mentioning some prudent messages in terms of acceleration of defaults in SMEs. I was wondering what are you seeing on the ground right now. You have a very strong coverage ratios. So you have overlays, so it's not a matter of cost of risk, but was more interesting to the trend evolution for 2026 in terms of potential risk from this segment. Gianni Giacomo Pope: Thank you, Giovanni, for your questions. So in as much as CET1 ratio is concerned after the integration of BPSO, we confirm that we'll be above 14.5%. So we need to go through the full integration, but the confirmation is that we'll be above 14.5%. In terms of NII, and then I will put through also Simone. In reality, we had an increase, given -- I mean if you look at NII, we have on Commercial rates on Page 13 of the presentation, EUR 10 billion increase for rates, then we had on average volumes went down a little bit, and the noncommercial, as you mentioned, is the major component on the growth. You are right in saying that we are also repricing because we are conducting also a repricing exercise of the loans. And we believe that in the next months, we will see an improvement in the NII driven by both volume side and -- on one side and the repricing exercise that we are making on the other side. Simone Marcucci: Yes. Thank you very much, Mr. Papa. Regarding the net interest income and not commercial components, as you can see, we have described in the presentation that our Head of Finance take the opportunity to decrease the cost of funding and we have repaid an instrument Tier 2, and this was a one-off effect that we have described in the presentation. There were other effect on the liability side and also on the bond portfolio you see that we have taken the moment and in the last quarter, we have slightly increased the bond portfolio, and this is also the effect that is shown in the noncommercial side of net interest income. Gianni Giacomo Pope: And in as much as asset quality is concerned, I don't see deterioration actually, but I'll pass the stage to Valerio Rodilossi that is a colleague of the CRO area. Please, Valerio. Valerio Rodilossi: Thank you for the question. I can confirm that we don't see a structural deterioration of the credit portfolio. The default rate for 2025 is in area of 1%. So comparable with the previous year. And also for the different asset classes, there are no differences with previous year. Our lending policies are very conservative. We are concentrated on the best rating classes. So at the moment, we don't envisage any deterioration of the credit portfolio. Operator: The next question is from Andrea Lisi of Equita. Andrea Lisi: The first one is kind of a broad one related to the integration of Popolare di Sondrio, in particular. In relation if you can share with us some color on how the clientele of Sondrio is answering to the acquisition after 6 months from the completion of the acquisition as well as if you have observed some elements that are a bit more tougher than what we would have initially expected or others that are going better? Then the other question is on fee. In particular, I want to ask you as regards BPER standalone, if you can indicate us why banking and Bancassurance fees are slightly down year-on-year in the last quarter and which trend should we expect going on? Gianni Giacomo Pope: Thank you, Andrea, for your questions. So in as much as the first question is concerned, I think the integration is proceeding very well. As I mentioned, we have 23 work streams that are taking care of covering all the different aspects of the integration. I would say that in answer to your question could come also by the very good results of BPSO. You saw that BPSO posted a very good net profit. And if you consider that the operation, the acquisition of BPSO was concluded in July. So you have basically 5 months in which the customers of BPSO have reacted very positively to the acquisition, to the fact that BPSO is now part of a larger group. And we believe that this will be reflected also in 2026. We have analyzed the different aspect of the integration. We don't have much overlapping. And we do see a possible growth also on those customers that are common with BPSO. In as much as fees is concerned, so banking services, the fees, the banking services commission are down in terms -- if I understood correctly your question, are down in terms of percentage because we are growing very much on the wealth management Bancassurance fees. But we have a growth that is year-on-year of 0.6%. And this on the back of the fact that we are growing the number of customers. So we are talking about 50,000 net new customers in 2025 and the fact that we are also shifting -- we have been shifting in the last couple of years our activity on the corporate side, and we have become, in more situations, a bank of reference rather than the pure relationship bank. And therefore, we see more commercial activity coming also from corporate customers. In as much as Bancassurance is concerned, year-on-year, we have a slight decrease. But in reality, financial year on financial year, you see we grew by 7.5%, which is, I think, is a healthy growth. And because we go from EUR 128 million to EUR 138 million financial year on financial year. And therefore, I see also here if we look also the volumes of our Bancassurance products that have been sold in 2025, we are on a very good trajectory in terms of growth there. So it might depend also on the fact that in certain cases, we are selling products where we have fees that are paid not upfront but are paid on different tiers. And therefore, you might see this as a difference. But in reality, we have a growth in terms of volumes. Operator: The next question is from Adele Palama of UBS. Adele Palama: Yes. Couple of questions from me. So the first one is on the NII. Just a clarification. Can you tell us the impact in the quarter of the Ecobonus, maybe in the quarter, also in the full year. And how do we need to think about this impact going forward? Then the second question is on cost evolution. So looking only at BPER standalone, so you had like quite an impressive reduction. I want to understand how sustainable is this reduction like going forward? And then if there is any consideration around the cost synergies that you're expecting from Sondrio, if there is room for higher cost synergies than what has been announced previously? And then the last one, sorry, is on the capital. So I just want to double check that there is no other moving parts left in the capital in terms of regulatory headwinds, or I mean, probably there is only the last part of the restructuring costs, but you are basically taking everything related to the Sondrio acquisition. So from now on, we should just expect organic growth of the capital and if there is any impact from RWA optimization left? Gianni Giacomo Pope: Thank you, Adele. So I take the question on cost. So we, I think, have performed a fantastic job on the cost reduction. We started in 2024. You might remember that a couple of years ago, 2, 3 years ago, we were at around 62%. If I take BPER stand-alone, we are at 47.2%; on combined basis, around 45%. We keep on working very much on cost reduction. In terms of HR costs, as I mentioned, we do expect to have a further reduction because we have more than 200 FTEs that will -- head count that will leave the bank based on previous agreement with the unions. And as you know, we reached an agreement in December for the exit of an additional 800 accounts based on this new agreement, and most of this will be exiting the bank by year-end. Now we are collecting the request coming from the colleagues that want to leave the bank and we are talking about retirement or preretirement schemes. In as much as non-HR cost is concerned, based also on our B:Dynamic plan, we keep on reorganizing ourselves, bringing back activities that we had outsourced as we had done in 2025. And therefore, we will keep on, I believe, reducing also non-HR costs in order to further improve our position in this case. But, if I look at the combined basis, today, we are already at 45%. And considering that we are a bank only based in Italy basically and not having subsidiaries in Eastern Europe or other countries where the cost are lower than in Italy, I think that we have already reached quite a good percentage in terms of cost/income. Now I put through Simone for the other two questions. Simone Marcucci: Yes, sorry. Regarding the Ecobonus, we have the EUR 260 million in 2025. More or less EUR 270 million, EUR 224 million in the quarter was more or less constant. Clearly, in the next years, the Ecobonus will tend to decrease a little bit more in '26 and more then in '27 and clearly '28. Regarding the component of CET1 ratio for the next year, we clearly, we will have the benefit from the merger of Popolare di Sondrio. We will have the effect of the TRS that I mentioned before, EUR 200 million, then we will have the positive effect clearly of the deal of Nexi. And then we will have the usual operative risk at the end of the year for around 20 bps. This is what we see at the moment. We don't see other particular effects that you mentioned. Operator: The next question is from Luis Manuel Grillo Pratas of Autonomous. Luis Pratas: My first question is on the PPA information on Slide 33. So essentially, you mentioned that post tax fair value adjustments were slightly above EUR 700 million. I was wondering what is the expected P&L effect from the reversal of these fair value adjustments in the coming years, how much shall we expect per year and how many years this will be a negative in the P&L? And then on the tax rate, if you could please provide the guidance on the tax rate in 2026, considering the increase on the IRAP part of the budget law. And then just a small clarification. How much of Bancassurance performance fees did you book in Q4? Simone Marcucci: Yes. Thank you very much for your question. I'll start from the last one. Bancassurance one-off, the usual one-off is EUR 27 million, at the level of last year, more or less. Regarding the PPA, Page 33, we will have an effect of around 2 mid-digit, still clarifying, but it should be 2 mid-digit negative per year for the next years. And then tax rate guidance, you know that -- you see that we have now 31%, this is our correct tax rate for the year. Clearly, 25% in the fourth quarter, but is -- or let me say, a one-off, an adjustment, but 31% is correct one. For the next year, you have to take in account there is 2% IRAP, so around 33%, 34% is the guidance. Luis Pratas: Just a quick follow-up. Like when you say 2 mid effect, do you mean like EUR 200 million per year? Simone Marcucci: No. Two mid-digit. Two-digit, not EUR 200 million. Luis Pratas: Around EUR 50 million? Simone Marcucci: We are still look at something more, but two-digit, not EUR 200 million. Operator: The next question is from Ignacio Ulargui of BNP Paribas. Ignacio Ulargui: I have three questions, if I may. I mean the first one is on NII on the noncommercial part on the wholesale funding. How should we think about that in terms of your rating is improving the issuance that you need to refinance into 2026, how that should be supportive into NII, if there is any tailwind from there in 2026? Linked to that, just a clarification on the EUR 22 million of the quarter. You see it as a one-off, so it will come back down into the coming quarters? Or it's kind of a jump because of the lower funding or lower cost of the Tier 2? The second question is on deposit growth. How do you see the deposits growing into 2026? And how should we think as a trade-off between leaving that deposits in terms of liquidity financing lending versus in reinvesting in AuC or AuM, given that profitability probably is better in the former in keeping that on balance sheet? The third question is, if I just look to the cost growth and the cost targets, I think, Mr. Papa, you said that you don't see much more scope for a decline in the cost to income. But if I just see your revenues should grow ahead of cost. So intuitively, your cost to income should keep on improving as you keep on accelerating commercial activity. What do I am missing there? Gianni Giacomo Pope: Thank you, Ignacio. I take the last two questions, and then I'll ask Simone to answer the first two. Deposit growth. But in reality, if you look at our presentation on Page 15, you see that quarter after quarter, we have been growing the deposits BPER stand-alone. And obviously, with the integration, the full integration of Sondrio, we see a progression also under this point of view. There is a lot of attention. We pay a lot of attention to liquidity. All the teams, all the commercial colleagues are very much pushing on gathering liquidity from customers, both retail and corporate, because -- and this is of paramount importance for us. We have been concentrating on that in the last couple of years, and we will keep on going like that. Why? Because this will allow us to transform liquidity into Asset under Management or Asset under Custody, which is what we have been doing in the last couple of years. And at the same time also to grow on the loan side without -- always keeping a loan-to-deposit ratio that, as you see, is stable at around 76%, which give us ample room to in case accelerate even further the growth both on asset management as well as loan growth. So -- but we want to stay at this level of loan-to-deposit ratio in order to make sure that we have always a reserve or liquidity to further push for business. In terms of cost target, I didn't say that we are not going to lower the cost. In fact, on the HR cost, I believe that this will be lowering for the simple reason that we have, as I mentioned, and we know we have over 200 people that will be exiting the bank, BPER stand-alone, based on previous agreement with the unions. BPSO never had any agreement with the unions. Then in December, we signed a new agreement with the unions for the exiting of an additional 800 colleagues. Let's see what is the number we are going to reach. We are in progress now, as I said, of collecting the request from the colleagues. And most of these colleagues will be leaving the bank, the new group by year-end. You know that -- you know also that in the agreement with the unions, we will hire one new colleague for every two colleagues that are exiting the bank. So the net-net will be minus 400 because -- but this will be done across the years, not this year, not only next year. And then we keep on monitoring and pushing very much also on non-HR cost. One of the activities that allow us to reduce the non-HR cost has been the reinsourcing of activities that were outsourced in the past years. This has been done in 2025. We keep on doing this. So we see also further reduction on non-HR cost on, as I said, reinsourcing of activities as well as reduction of costs related to consultancy and so on. So hopefully, we'll be able to further lower the cost/income ratio. What I mentioned before is that I believe that the 45-ish is already quite good, considering that, as I said, the bank is based in Italy, doesn't have subsidiaries in countries with much lower cost of both HR costs and non-HR cost. But there is a relentless activity to reduce cost driven also, obviously, by the fact that we will be pushing on the revenue side, and we see a progression also on the revenue side. Simone Marcucci: Thank you so much for the question. Regarding the EUR 22.8 million on Page 13, as we have stated in the page on the top right, 11 -- EUR 13 million is a one-off. So of the remaining EUR 10 million, we cannot say that each quarter will have a EUR 10 million on the -- positive on the noncommercial. But as you mentioned, for sure, we will have a benefit on cost of funding coming mainly from the positive effect of the merger of the two banks. Operator: The next question is from Juan Pablo Lopez Cobo of Santander. Juan Lopez Cobo: I got a follow-up on OpEx regarding the 800 exits that you mentioned. Could you clarify if this is already included, let's say, in the BPSO synergies, or this will be on top of? And also the savings in euros that we could expect from this 800 that you mentioned, it's going to be 400 net? And my second question is related to capital. If I look to your presentation in Slide 19, you mentioned positive impacts coming on risk-weighted assets from the active portfolio management, around EUR 600 million, and also models around EUR 400 million. If you could provide a bit more color regarding this, it will be useful. And also, if you are planning to execute any SRTs. We have seen other banks in Europe quite active in Italy as well. We know that your capital position is very strong, so there is no need for that. But still, given the relatively cost of capital of SRTs, I was wondering if you are planning to do something. Gianni Giacomo Pope: Thank you, Pablo, for your questions. So in as much as OpEx is concerned, the 800 exit are already included in the synergies, cost synergies that we've been indicated as synergies coming from the integration of BPSO. We -- as you know, we indicated EUR 190 million, of which around 40% to 45% come from the HR costs. So we will see a reduction. Obviously, you will see this impact in 2027, because as I mentioned, most of these colleagues will be exiting by year-end. But when I say by year-end, it means year-end, so not across the year. In as much as the 400 hirings that we are going to perform, this will not happen in neither this year nor next year, will happen in the year to come. So we will have an increase coming from that. Nevertheless, you have to consider the fact that whoever exit has a much higher cost than whoever comes in. Because we are hiring younger people out of university for this generational change that you want to bring also to the bank. And therefore, there will be eventually an increasing cost, but it will happen throughout a few years. In as much as the asset -- the risk-weighted assets, I'll let the colleague to answer. Valerio Rodilossi: Yes. Thank you for the question. With regard to the RWA dynamic in the quarter, under the label of active portfolio management, we observed a reduction of corporate and financial bond securities with a positive impact on the RWA. And on regulatory models in October, we received an authorization by ECB to extend our internal model to some corporate portfolios previously not covered by internal model and treated under standardized approach, for example, the exposure inherited by Carige. And also this positive impact, and then we had the business dynamic due to the increase of the volumes. Regarding the SRT, it was one of the pillar of our plan. We have created the structure. We are ready in any moment. When we will need, we will execute it. For the time being, nothing planned. Operator: The next question is a follow-up from Giovanni Razzoli of Deutsche Bank. Giovanni Razzoli: Yes. Just a follow-up to one of Simone' answers about the moving part on the CET1 in 2026. You mentioned that you're going to have EUR 200 million from the TRS next year. And you also mentioned the agreement with Nexi. So I'm not -- it's not clear to me whether this is going to be an impact in 2026 or not because I've seen that in Slide 33 that you have already booked EUR 100 million as a merchant acquiring impact in the PPA. So I was wondering whether there is something else or what was you referring to in this answer? Simone Marcucci: Yes. Thank you very much for your question. As you correctly mentioned, on Page 33, this is the PPA accounting, not the CET1 effect. We have EUR 105 million of merchant acquiring that is Nexi. This has been taken account during the PPA, but we still don't have the effect in the CET1, and this will happen in 2026 when the deal will be finalized. Operator: [Operator Instructions] Gentlemen, at this time, there are no questions registered. Gianni Giacomo Pope: Okay. Thank you very much to all. Thank you. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Operator: Good day, and welcome to the Star Group Fiscal 2026 First Quarter Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Chris Witty, Investor Relations Adviser. Please go ahead. Chris Witty: Thank you, and good morning. With me on the call today are Jeff Woosnam, President and Chief Executive Officer; and Rich Ambury, Chief Financial Officer. I would now like to provide a brief safe harbor statement. This conference call may include forward-looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties and may cause the company's actual performance to be materially different from the performance indicated or implied by such statements. All statements other than statements of historical facts included in this conference call are forward-looking statements. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call, the company's annual report on Form 10-K for the fiscal year ended September 30, 2025, and the company's other filings with the SEC. All subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements. Unless otherwise required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this conference call. I'd now like to turn the call over to Jeff Woosnam. Jeff? Jeffrey Woosnam: Thanks, Chris, and good morning, everyone. Thank you for joining us to discuss our first quarter results. Fiscal 2026 has started off very well as our performance benefited from recent acquisitions, physical supply and per gallon margin management, the continued focus on service and installation profitability and last but not least, temperatures that were almost 19% colder than last year and 6% colder than normal. The confluences of these factors, even given the operational challenges associated with persistent cold temperatures resulted in an increase of adjusted EBITDA of $16.5 million or 32% year-over-year, net of a $5 million charge to our weather hedge program. At the same time, net customer attrition was modest during the period. Improvement efficiency and operational execution have been specific areas of focus for us, so it's quite rewarding to see our work have a meaningful impact on bottom line results. The cold weather has continued thus far into the second quarter and, in fact, January finished 2% colder than last year and 9% colder than normal. I'm very proud of the way our employees have responded to the added demand and the challenges of making deliveries in snow and ice conditions. They've worked tirelessly at times through difficult conditions to provide our customers with the level of service and responsiveness they have come to expect. While we did not close on any acquisitions in the first quarter, we did complete one purchase of a small heating oil business just a few days ago. It's not at all unusual to experience a slight lull in prospect activity, during a busy heating season, but we still have several opportunities under various stages of review. And I anticipate that we will see new ones presented as we get closer to spring. Although it's too early to say how fiscal 2026 will play out, we remain vigilant in providing excellent customer service, keeping costs down and growing our service and installation profitability. I believe we are well prepared to address whatever challenges or opportunities might present themselves over the remainder of the heating season. With that, I'll turn the call over to Rich to provide additional comments on the quarter's financial results. Rich? Richard Ambury: Thanks, Jeff, and good morning, everyone. For the quarter, our home heating oil and propane volume rose by 11.5 million gallons or 14% to approximately 94 million gallons as the additional volume provided from acquisitions and colder temperatures was reduced by net customer attrition and other factors. Temperatures in our geographic areas of operations for the 3 months ending December 31, 2025, were 19% colder than the 3 months ending December 31, 2024, and 6% colder than normal. Our product gross profit increased by $29 million or 19% to approximately 179 million gallons due to an increase in home heating oil and propane volumes sold and higher per gallon margins. We realized a combined gross profit from service and installations of $5.6 million for the 3 months ending December 31, 2025, compared to gross profit of $6.9 million for the 3 months ending December 31, 2024. While installation gross profit increased by $1.4 million, the service gross profit loss did increase by $2.7 million due to the high demand for service relating to the 19% colder temperatures and the additional costs attributable to an increase in our propane tank sets. Delivery, branch and G&A expenses rose by $11 million in the first quarter of fiscal 2026 versus the prior year period. The company's weather hedge contracts accounted for $5 million of the increase as temperatures experienced from November through December of 2025 were colder than the contract strike price. In addition, delivery expenses rose by $3.8 million or 13%, largely due to the 14% increase in home heating oil and propane volumes sold. The remaining operating costs increased by just $2.2 million or approximately 2%. During the first quarter of fiscal 2026, we recorded a $5 million noncash charge related to the change in the fair value of our derivative instruments. By comparison, in the first quarter of fiscal 2025, we recorded a $5 million credit. Net income increased by $3 million in the quarter to $36 million as an increase in adjusted EBITDA of $16.5 million was reduced by the unfavorable noncash change in the fair value of derivative instruments, as I just mentioned, was $10 million year-over-year. In addition, net income was also negatively impacted by higher depreciation and amortization expenses and net interest expense due solely to our higher acquisition program and that totaled $1.7 million in aggregate, along with higher income tax expense of $1.3 million. Adjusted EBITDA increased by $16.5 million to $68 million, primarily due to a $16.8 million increase in adjusted EBITDA in the base business and a $4.8 million increase in adjusted EBITDA from recent acquisitions which was partially offset by the $5 million increase in expense relating to the company's weather hedge contracts. And with that, I'll turn the call back over to Jeff. Jeffrey Woosnam: Thanks, Rich. At this time, we're pleased to address any questions you may have. Operator, please open the phone lines for questions. Operator: [Operator Instructions] The first question comes from Tim Mullen with Laurelton Management. Timothy Mullen: Just wondering if you had any commentary given we're now a month in -- a little over a month into the second quarter for the fiscal year, given obviously this cold weather has persisted in terms of how it's going operationally or any other kind of general commentary you can provide? Jeffrey Woosnam: Sure, Tim. Yes. I mean, obviously, January was colder than normal. February is starting off that way, and we've got a pretty strong forecast in front of us. And we've been dealing with some storms. So conditions have definitely been a challenge for us. But frankly, this is what we're built for as a full-service provider, and this is what we plan for. So I'm just always amazed at how our employees really just step up and get a lot of satisfaction out of taking care of our customers. So I feel very good about our current position right now, given some very difficult conditions. Timothy Mullen: Congrats on a good quarter. Operator: [Operator Instructions] At this point, there are nobody in the queue. So I'll turn it back to Jeff Woosnam for any closing remarks. Please go ahead. Jeffrey Woosnam: Well, thank you for taking the time to join us today and your ongoing interest in Star Group. We look forward to sharing our 2026 fiscal second quarter results in May. Thanks, everybody. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Linda Hakkila: Hello all, and welcome to follow Konecranes' Q4 2025 Results Webcast. My name is Linda Hakkila, I'm the VP, Investor Relations here at Konecranes. And with me today, as our main speakers, we have our CEO, Marko Tulokas; and our CFO, Teo Ottola. Before we proceed, I would like to remind you about the disclaimer as we might be making forward-looking statements. As per usual, we will first start with presentations, both from our CEO and CFO. And after that, we will start the Q&A session. We are happy to answer your questions through the conference call lines. But now without any further comments, I would like to hand over to our CEO. Marko Tulokas: Thank you, Linda, and good afternoon from cold, but very sunny Helsinki. I'd like to start with some general statements. It was a really very strong year for Konecranes, and I'm very, very proud of our team and very proud to be part of the Konecranes team, particularly in a year like 2025. Konecranes has a very sound business model. We've been executing our strategy. And that, of course, in this sort of environment has really improved -- shown that an improved resilience in our results. There was a very uncertain environment last year. We focused on executing our strategy and focused on the most important things. The year started on uncertain terms, but we acted fast and early, whether it's on pricing, focus on execution or tight cost control. Towards the second half of the year, the market environment stabilized and particularly in the delivery side, it was visible, and that helped us to finish the year strong. And now when we look at towards 2026, we have a good order book in place, the structure is solid and our strategy for 2026 has a very good road map in place. So I'm really confident for year 2026. So now let's look at how the year turned out and then also how the quarter 4 look like. Throughout the year, the demand environment stayed positive overall. There was a lot of positive development in many customer segments and Konecranes' broad presence in different customer sectors and geographies, of course, helped us in this sort of volatile environment. Our orders were very strong, particularly in Port Solutions and Industrial Equipment. So we grew almost 12% in 2025 in comparable terms compared to 2024. The demand on industrial service instead was quite a tough demand environment. But even in this environment, we were able to strengthen our agreement base. We took very good care of our pricing and also made sure that we adjusted our cost base to the prevailing conditions. We also took care of our margins and our cost structure, good execution in our project business, and we continue to roll out our products according to our strategy. And that, of course, meant that we were able to complete the year with almost 1 percentage point improvement in the comparable EBITA at 14%, record high level. Moving on to quarter 4. And in quarter 4, our orders were also very good. So we continue very solid order intake and also sales. But it's also noteworthy that both decreased against a very strong comparison quarter of -- quarter 4 of 2024. So orders were down 4% and net sales roughly flat in comparable terms. Quarter 4 in 2024 had a very strong order intake in Port Solutions, but also in Industrial Equipment, where both actually had the second highest quarter of all time in Konecranes. And that makes quarter 4 of '25 also very satisfactory for us. Our order book continued to strengthen, and it was 3 percentage points higher or 7 percentage points in comparable terms. Our profitability improved and increased to 14.1%. It was really very good project execution in Industrial Service, Industrial Equipment and in Port Solutions, Port Solutions with very good margins, but with slightly lower volume. And we kept our cost control intact and had a bit of pricing and tariff tailwind, but less than we had in quarter 3. And of course, the order book improved, and that means a solid start for 2026. Now if you look at the market environment in general, how is the best way to describe it? Maybe one way to say that the market and the customers have maybe used -- got used a little bit to the uncertainty. So there is a cautious positive development in the capacity utilization rates as it is visible in this Industrial Service and Equipment slide, which shows the capacity utilization rates in the 3 main market areas. And our own funnels and our customer demand, how we see it. European sales funnels are good on solid level. There are some signs of improvement. But of course, customers continue to be rather cautious around this type of volatile environment. In the United States, the previously very strong industrial equipment funnel has somewhat flattened down. But on the other hand, on the service side, we see some signs of improvement. So customers are starting to do the service that they may have put on hold temporarily during the kind of tariff-related uncertainty. It's, of course, too early to say how this actually pans out during this year, but we are optimistic in general about the market environment or continue to be so. And in Asia Pacific, the market continues and the funnel continue to be on a stable level, but the tough competition continues, particularly from the Chinese competition. And then if we take a look at the Port Solutions segment, here, the container throughput index, as we have discussed before, is, of course, the main indicator, and that continued to be on a very good level overall. Maybe there is some flattening in the growth rate, but it's still very positive. Our funnels continue to be good. There are big and small cases in the funnel. And of course, it's good to remember here that besides the obvious container throughput traffic indicator, there is the long-term prevailing trends in port solutions that are, of course, driving investments. So that comes from the automation trend, the prevailing consolidation trend in that industry, change in the traffic routes driven by the repatriation and changing manufacturing locations. So of course, we continue here to have a kind of positive general view on the market as we have had also last year. So reiterating again a bit more about the quarter 4 development against the strong comparison period and how the past 2 years have gone, as you see here, of course, the order intake in quarter 4 was slightly down from previous year quarter 4. But last year, the order intake was actually very good and better than previous year in the first 3 quarters. There was a decrease in quarter 4 in all business areas, some increase in Europe and some decrease in Americas and APAC. And actually, the same profile is true for the sales side of things. Next is time to look at the order book situation, and we have had a solid above 1 book-to-bill ratio throughout last year, and we've been strengthening our order book throughout the whole last year since quarter 4 of 2024. So we have a particularly strong order book situation in Port Solutions. It is positive in Industrial Equipment with also a positive mix, but it's also a bit down in Industrial Service. Now here, you see the profitability development over the last 2 years and again, comparing the quarters to each other. This is really a very strong progress and very strong execution to our strategy. There is increase in Industrial Service and Industrial Equipment in quarter 4, some decrease in Port Solutions. And like I stated earlier, that's mainly driven by the volume. So Port Solutions continued to have good margins and good execution. And they also had a very good quarter 4 last year. Some less tariff tailwind, but still some visible in quarter 4, really good cost management and slightly weaker mix in Port Solutions, but we are very happy with this 14.1% outcome to quarter 4 last year. And that, of course, really helped us to reach this almost a percentage point year-on-year full year improvement on profitability. Now then it's time to take a look at the -- how we track in our profit improvement progress or process. This is actually the third consecutive year in all 3 business areas where we consistently improve our profitability. All 3 business areas are well within their defined profitability -- midterm profitability ranges. And we've done this under rather challenging demand environment. But at the same time, of course, it is true to say that we have not really had a challenging downturn in terms of volumes. So as you will see here, there has been pressure on the volumes, and we've shown continuous good profitability improvement. And of course, with additional volumes, then this is -- we are confident that this continues to be a good story. And now I would like to hand over to Teo, and then I'll come back in after a few slides to talk about the demand outlook and a couple of other things. Teo Ottola: Thank you, Marko. And let's take a look at some of the business area numbers in more detail. But before going there, as usually, so let's take a brief look at the comparable EBITA bridge between Q4 '24 and Q4 '25. So we had close to 1 percentage point improvement in the EBITA margin in a year-on-year comparison, and this translates into roughly EUR 5 million improvement in EBITA in euros. And let's unpack this now next a little bit. So pricing impact year-on-year was roughly 3% -- and then when we combine with that information, the fact that the sales decline -- there was a sales decline in comparable currencies. So we are actually taking a look at the underlying volume decline of some 4% or so, which obviously is not good from the profit and profitability point of view. However, net of inflation pricing, mix and then particularly good execution, so project execution, for instance, then we're all working in a positive manner. And as a result of that, the net of those -- all of those impacts is positive by EUR 13 million, as we can see as a combination of volume, pricing, mix and variable cost on the slide. And then fixed costs continued to be very well under control. So only EUR 2 million increase in fixed costs in a year-on-year comparison, whereas then the translation impact as a result of the FX differences was a clearly negative number, minus EUR 7 million. And as a result of all of these then combined, so we end up with the improvement of roughly EUR 5 million in a year-on-year comparison. Then moving on to the business areas, starting with Industrial Service. So we had order intake of EUR 380 million. So this is actually a decline in reported currencies, but an improvement of more than 2% in comparable currencies. So like already mentioned in connection to the bridge, so actually, the FX differences continue to play a big role now in the fourth quarter as well. Taking a look at the different parts of the businesses. So Field Service declined in the order intake in a year-on-year comparison, whereas Parts business cut up. And then when we take a look at the regions, so EMEA did well. So there was an increase, whereas then Asia Pacific and Americas both saw a decline in the order intake. Agreement base actually grew by 4.4%, like Marko already also mentioned. Order book decline of 7%. That's a big number. But in reality, that is almost all, let's say, everything actually is in relation to the currency changes. Net sales, 3.5% higher year-on-year in comparable currencies. The story is very similar to what it is in the order intake. So Parts did better than the Field Service and of the regions, EMEA did better than Asia Pacific and Americas. Comparable EBITA margin, 21.9% on a very good level, 1.3 percentage point improvement year-on-year. The improvement did not obviously come from the volume as the net sales increase is roughly in line with the pricing change. It actually more came from pricing, from good execution as well as then efficient cost management in general. Then moving on to the Industrial Equipment. So there, we have an order intake increase in comparable currencies of roughly 1%. However, when we take a look at the external orders, so this is down slightly by almost 1 percentage point against fairly tough comparables, fourth quarter of '24 was very good from the Industrial Equipment order intake point of view. Of the business units, we had growth in components in a year-on-year comparison. We had a decline in process cranes and standard cranes as well, a slight decline. One could maybe also say that this was flattish in a year-on-year comparison. And of the regions, again, EMEA did fairly well, so increase there, whereas then we had a decline or decrease in the Americas and APAC. In a sequential comparison and taking a look at the business units, so components orders actually rose also in a quarterly comparison, so the component orders in the fourth quarter were very good. We had a decline in port cranes as also in a year-on-year comparison and then standard cranes were fairly flat in a sequential comparison, similar to what it was in a year-on-year comparison as well. Here, our order book rose by 2% and of course, with comparable currencies, even more. Net sales up 3% roughly, taking a look at the total volume or then the external volumes, both roughly 3% up. The sales mix was such that it was a little bit more favorable from the margin point of view now in the fourth quarter of '25 than a year ago. And then when taking a look at the comparable EBITA margin, 11.7%, excellent improvement of more than 2 percentage points in a year-on-year comparison. Again, good execution, pricing and of course, also the already mentioned mix supported the profitability in the fourth quarter. And then Port Solutions order intake, EUR 406 million. This is a decline of roughly 11% in a year-on-year comparison, of course, against very tough comparables. So also here, the fourth quarter of '24 was very good from the order intake point of view. When we take a look at different businesses within Port Solutions, so Lift Trucks actually had good activity as well as RTGs, Port Service, quite flattish in a year-on-year comparison. And then when taking a look at sequentially, particularly the business units that are more short cyclical like Lift Trucks and Port Service. So Lift Trucks had an increase also in a sequential comparison, so Q4 was higher than Q3, and Port Service was relatively on the same level in fourth quarter as in third quarter. So flat exactly like in a year-on-year comparison as well. Net sales declined by as much as 7% in a year-on-year comparison. This was, of course, as a result of the order book timing and as such, as expected already earlier. Order book, however, is clearly higher than what it was a year ago, thanks to good order intake that has been there basically throughout the whole of '25. Comparable EBITA margin, 9.2%. So this is a decline of 0.5 percentage point. So this primarily obviously comes from the lower volume. So sales was lower than a year ago. Mix did not help here. So in ports, it was rather negative than positive in a year-on-year comparison, but this was partly offset by very good execution and project execution in the fourth quarter within the Ports business. Then a couple of comments on the balance sheet side. Let's start with the net working capital. As usual, net working capital has continued to be on a very low level. So there is no meaningful change from the third quarter. Obviously, the structure is a little bit different. Inventories have turned into accounts receivable, but otherwise, very much on the same level. The improvement in comparison to a situation a year ago comes from accounts receivable as well as advanced payments. And then on the right-hand side, we can see the free cash flow, which continues to be on a very good level, record levels actually also for '25 and the cash conversion continues to be clearly above 100%. Then consequently, of course, as a result of the cash flow, our balance sheet from the net debt point of view looks very strong or actually, we have net cash in the amount of more than EUR 160 million at the end of the year. And then finally, from the balance sheet point of view, so the return on capital employed on comparable terms, 22.1% at the end of '25. And then I will invite Marko back to talk about the outlook for '26. Marko Tulokas: Thank you very much, Teo. There is the outlook for '26. But before that, some other additional things, of course, our solid progress, very nice development, strong cash flow and balance sheet has 2 outcomes. Our Board of Directors is proposing to the AGM a share split with 1:3 ratio. That is, of course, due to the high price and to enhance the liquidity of the shares. And we also have the Board proposing to the AGM that we increase our dividend from the previous year EUR 1.65 level to EUR 2.25 per share for [ 2025 ], which is very much in line with our stable to increasing dividend policy. And now to the demand outlook. Although there is a volatility, of course, in the marketplace, we expect several sectors to keep the demand up. And in the industrial customer segment, we expect the demand environment to remain on a healthy level. And for the port customers, the container throughput continues to be on a high level as we saw before. And there is, of course, these long-term prospects in that business in general, the long-term drivers and then is, of course, supporting a strong container handling demand in the future. So the outlook continues to be good. But at the same time, of course, it is good to keep in mind that this uncertainty related to geopolitical decisions, the trade politicians and the tensions, they do remain high. And of course, they may have positive and negative impact to our demand picture that may also come quite quickly. But generally speaking, we have a positive outlook on the margin. And then finally, let's look at our financial guidance. So we have a starting order book that is better as already was elaborated also by Teo and myself earlier. The demand outlook is stable. So we are confident that realistic picture on the demand environment, and we are conscious about the market uncertainty also. So we expect our net sales to remain approximately on the same level or to increase in 2026 compared to 2025. And as you saw, our margins have been developing very well in '25. And we expect these margins to remain approximately on the same level also in 2026 compared to 2025. And with that, I thank you all very much, and we can move to the questions and answers. Thank you. Linda Hakkila: Thank you, Marko and Teo, for the presentation. And now we will start the Q&A session. Operator, we are ready to take questions. Operator: [Operator Instructions] The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I have 3 questions, if possible. First, I wanted to ask you to -- if you could give some color on how you see the mix in Port Solutions going forward. I know you mentioned here it was slightly disadvantageous. I don't know if it's just one-off this quarter or given the nature of equipment, maybe more larger equipment, is that something that will continue? And then I'll ask my other questions right after. Teo Ottola: The ports mix going to next year, of course, it is approximately flat, the mixed or neutral, the impact as I see. And I guess that is also your conclusion also. Marko Tulokas: That is actually my conclusion also. And I think that what you are referring to with the larger equipment. So of course, we have been talking about that, that potential mix might be weaker going forward in case the product -- let's say, the demand moves more towards the, let's say, heavier equipment. However, that has not happened to the extent that we would be expecting a deterioration in the mix for this year. Daniela Costa: Got it. And then I guess we have seen in some regions quite a steep move on things like steel prices. Can you talk us through a little bit how we should think about that given the lag between orders and sales, the pricing that you're putting out at the moment? Do you expect that to be a headwind in the shorter term or not really you can pass it all to? Teo Ottola: So your question was particularly about steel prices, right? Daniela Costa: Yes. Teo Ottola: So the steel prices throughout 2025, they have been approximately flat, and there's actually a slight positive or from our point of view, positive. So in that way that there is actually a somewhat lower quarter 1 steel price rates than there was in quarter 4 of 2025. The outlook is -- or the forecast is that there would be a minor increase in steel prices in 2026. But of course, only time will show that how will that materialize. Our approach has been and it continues to be so, as still is for many of our products, a reasonably significant cost component that we will pass on the steel cost in our prices, and that's how all our pricing systems and our configurators have been built. Finally, there is some regulatory developments in the market and the CBAM is one of them that, of course, eventually the CBAM regulation, although it is no direct impact to our products and so forth, that may drive steel costs up in the longer term, but that's not in the immediate visibility at the moment. Daniela Costa: Got it. And then a final one, just in terms of like you have obviously very strong free cash flow. It looks like a decent size comes from the payables within working capital. Can you talk a little bit about sort of exactly what that is? And how should we think about payables going forward? Teo Ottola: I'm not quite sure that what your question was. I mean, are you talking about capital allocation of our balance sheet in general? Daniela Costa: Free cash flow. Teo Ottola: Yes, of course, I mean if you're referring to the dividend policy only or to the question of other means of distributing the cash. Daniela Costa: No. I'm just actually asking about free cash flow. Within your cash flow statement, there is a big positive of payables in the working capital. Yes. Teo Ottola: Maybe commenting on net working capital as a whole. So now at the end of '25, we are on a very beneficial level. And we are clearly, let's say, we are several percentage points better than our, let's say, midterm target is, which is that we should be below 10% of rolling 12-month sales in net working capital. Now we are clearly below that. So the situation is very beneficial from the net working capital point of view. And if the question is that, is that something exceptional? Or will it stay here or will it even improve? So one could maybe say so that this is, let's say, maybe in the midterm perspective, this is on the better side of the average. So maybe the overall in a way, level on a long-term basis could be even a little bit higher for net working capital. But definitely so that we aim to be below the 10% threshold of the rolling 12-month sales. And then, of course, we will need to allow volatility in both directions as we are now seeing a very good situation. So it may be that in some quarters, we are seeing a little bit worse situation. So the payables, accruals and advanced payments, all of the combination of all of that is very important, but I would still stress the importance of the advanced payments. So this is a lot of customer project timing related, how the net working capital develops from one quarter to another one. Operator: The next question comes from Antti Kansanen from SEB. Antti Kansanen: It's Antti from SEB. A few questions from me as well. I'll start with the guidance of flat to growing sales and especially on the Port Solutions side, how much of the backlog that you currently have do you expect to convert to revenues during '26? Or if you don't want to give the number, how does that compare to situation a year ago? Teo Ottola: We maybe not give the direct number for the first question, but if we take a look at the overall order book, now that we have at the end of '25 for '26 and compare that to how much order book we had 1 year ago for '25. So the difference is now more than EUR 100 million. Marko Tulokas: For all [ 3PAs ]. Teo Ottola: For all 3PAs. And then, of course, it is fair to say that the ports business is a clear majority of that, particularly now that the FX differences are impacting so much to the order book of the service business. So that basically it is the same number or maybe even slightly more for ports than what it is on the group level. But this is, of course, with reported currencies. So if you take a look at comparable currencies, Marko showed both numbers. So then, of course, that number is higher. So it's about twice as high, not for ports, but for the group. Antti Kansanen: Yes, sure. And I was also thinking on the guidance, if we talk about, let's say, on the lower end of it that your sales will be on the same level as in '25. Would that imply actually that volumes would be down, I don't know, clearly. But anyways, one would assume that there, you talked about the net price impact on Q4, one would assume that the positive pricing continues through '26. So how should we think about that volume pricing trend in the backlog? Marko Tulokas: Of course, like we were saying earlier, the starting point is positive with a stronger order book. And of course, we have a stable funnel that we look with positive mind. So there is all the reason to be positive about the demand environment and the volumes also. But at the same time, there are some question marks. Teo mentioned one of them is, of course, is the currency rate. And of course, then the other one is related, of course, to the general development of the market environment overall. But what we are trying to say with our guidance that, of course, we have a good starting point for the year, and we look at the volume development positively. But being appropriately, let's say, cautious about it also in this environment. Teo Ottola: But logically, of course, you are right. So I mean, if the sales were flat in a year-on-year comparison and the order book for this year is EUR 100 million more than what it was for last year, so of course, then it would mean that the in and out volume would be lower, which could be, let's say, depending on various things. But of course, now we need to remember that what we are saying regarding the overall market outlook is that the sales funnels in the various businesses. So they continue to be good. I don't know. They continue to be stable and on a good level. Antti Kansanen: Yes, that's clear. Then the second question was on profitability. And maybe a reminder on the tariff-related pricing tailwinds that were kind of notable on previous quarter and still there on Q4. How should we think about kind of impacts of those going forward, maybe fading away? Any guidance on that? Marko Tulokas: Well, they repeated also in quarter 4 after being visible in quarter 3 and quarter 2, but not to the same extent. So as we have also said before, the expectation is that they will go away or deteriorate over time. And of course, it actually continued throughout the whole year, and there was a positive sign to us. We expect that you will not see the similar kind of positive tailwind going forward. But also it should not have a significant negative impact to the margins either. Antti Kansanen: Okay. That makes sense. And then the last question, and I guess, Marko, you almost started to answer on the capital allocation side. And I mean, obviously, there's a clear increase on the ordinary dividend. But I mean, balance sheet is getting stronger and stronger and capital allocation has been a bit of a discussion point. So any updates on further distribution, buybacks, anything like that? Marko Tulokas: Yes, I was so eager to start answering that question already. So I was preempting that. But no, I mean, of course, that our approach has not changed there. Of course, we have several potential means for the use of that cash, and we are working on all of them. And one of the obvious one is the potential acquisitions. And as we've said before, that has been a big part of Konecranes' history, and it continues to be so in our future also the inorganic part of the growth. And so we have a funnel of different size of opportunities that we are actively exploring. And it's more a timing question that when we can realize those. And for that, for sure, we want to have maneuvering room and the increase in the dividend that was announced today, of course, that is, in our view, no way jeopardizing those -- that maneuvering room that we have going forward, given the available cash and then, of course, our ability to leverage the company. Would you like to add something to that? Teo Ottola: No. Operator: The next question comes from Mikael Doepel from Nordea. Mikael Doepel: So a couple of them. I'll take them one by one. So if we can start to talk a bit about the net of inflation pricing. I think you mentioned it was positive still in Q4 of last year. How do you think about 2026? I mean if we put tariffs aside, how do you think about pricing net of inflation? Marko Tulokas: Maybe since you are going through the bridge, you may want to continue on this also. Teo Ottola: Yes. The basic commentary here is the same as it has been. So we believe that we will be able to push cost inflation into the customer prices. And then, of course, the tariffs may change, the currency rates may change. But if we take a look at the overall underlying inflation, so the idea is that we will be pushing that into the customer prices. And in the past years, we have been able to do that in some cases, maybe a little bit even more than the cost inflation. So we believe that we can balance the situation from that point of view, but maybe it is not a good idea to expect a continuous net of inflation price benefit in '26 or further. Mikael Doepel: No, that makes sense. And talking about costs and just a follow-up, do you have any meaningful cost efficiency measures ongoing now that could support margins into this year? Anything tangible you could mention on that side? Marko Tulokas: Maybe 2 things I will mention. First of all, the topic that we have discussed also in the past is the ongoing industrial equipment cost efficiency program that we earlier announced that will continue until end of 2025. And on that note, we can say that we are still continuing that and we expect that to continue to bring us some benefits also -- additional benefits also during this year. The second topic is -- or the second answer to that is that when it comes to adjusting our cost structure to the prevailing market conditions, that is what we did early last year also that in all accounts, whether it's the SG&A or cost that we have on the group level or, for example, in service, the costs that are directly related to customer projects. And that is business as usual for us and that we've done in 2025, and we continue to do the same in '26 if the market environment and demand so requires. But beyond those 2 things, we don't have anything specific to discuss about right now. Mikael Doepel: Okay. That's clear. And just finally, I think you mentioned in your opening remarks, you talked about the industrial service business and saying it was a bit of a tough environment within that business. Can you talk a bit about what you see there specifically happening across the regions, across the customer segments and how you expect 2026 to develop? Marko Tulokas: When we look at Industrial Service in general, if I start from just the market activity and how it looks, one thing that we've discussed earlier and we also can measure is how our remote connections also with what we call the TRUCONNECT product, how much activity the customer is having with our cranes business and then, of course, means that how much manufacturing or production activity there is and those productivity rates are down last year, the whole year, and they also ended with a negative sign that somewhere 6% to 7% compared to the previous year in terms of the general use of the cranes. That's a fairly good proxy or explanation also to how much -- how the productivity and service develops for those particular customers, and that has a correlation to how our service business is actually developing. So that tells more that there is in this sort of environment where the customers have uncertainty of which direction the world is going that they have the tendency to hold back on not urgent or not critical measures. They want to do the things that have to be done to make sure that the equipment is productive and safe. That was a phenomenon last year and had certain impact to the service business. But it is obvious that you cannot do that for a very long time. So those equipment has to be taken care of. So that is something that usually returns. The other positive aspect is that we kept on increasing our -- or improving our agreement base, which is essentially the growth engine for service and very important, so that grew more than 4%, 4.5% last year. And that is what we consider and I consider very important as a service core. And then finally, I would say to that, and sorry for the long answer, easy to get excited on the topic. On service side, there is a lot of positive demand drivers like there is in the ports demand side in the long term. And whether it is the demographic trend of having less people doing this sort of thing or the automation trend that's also prevailing in some of the segments there, the outsourcing that similarly to ports actually is prevalent in many of the industrial segments and many others that also in the long term are drivers for demand in Industrial Service as well as in the efficiency drivers too. Teo Ottola: If I may add to a little bit additional color on... Marko Tulokas: I thought I answered the whole thing already because... Teo Ottola: That was very good, but I would maybe add one more thing. And I think when we have previously been saying that actually the differences between regions tend to be bigger than between customer segments in our demand. So now it may be that there start to be relatively big differences in demand pictures between different customer segments. And there are maybe a couple of indications of that one. And one of them is that the thing that we have been discussing also earlier that, for example, in North America or in the U.S., there has been a little bit slowness on the service and equipment business on the other hand, has been maybe even surprisingly strong, so which would, in a way, maybe indicate that some of the segments are doing well and they are buying equipment and some others have maybe a little bit more issues with the utilization and they are maybe saving on nonessential service. And also then this fact that our service spare parts are doing better than the Field Service may be an indication of the same thing. I mean, of course, the tariff thing, et cetera, can impact the spare part pricing and inflate that a little bit, but that doesn't explain the whole thing. So these kind of changes may be there happening a little bit because of defense and because of power and those kind of specifically, let's say, buoyant segments currently. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Linda Hakkila: Thank you, everyone, for following our webcast event today, and thank you for asking such a great questions. [Technical Difficulty]
Operator: Welcome to the Pandox Q4 presentation for 2025. [Operator Instructions]. Now, I will hand the conference over to the Head of IR and Communication, Anders Berg. Please go ahead. Anders Berg: Thank you very much, and good morning, everyone, and welcome to this presentation of Pandox Year-end Report 2025. I'm here together with Liia Nou, our CEO, and Anneli Lindblom, our CFO. And today, we also have the pleasure of having both Aoife Roche, Vice President at STR, and Rasmus Kjellman, CEO at Benchmarking Alliance, with us, and they will provide a hotel market update on Europe and Nordics, respectively. As you know, STR Benchmarking Alliance is both a leading independent research firm, totally dedicated to the hotel market, and the views they express are completely separate from Pandox, and we offer this presentation only as a service to Pandox stakeholders. Please note that Aoife and Rasmus' presentations will be held after we have completed our formal earnings presentation, including the Q&A. We start with Liia and Analyst business update and financial highlights for the quarter and the year, which in every sense was a very eventful one. And then we end up with a Q&A session. So yes, with that, Liia, please go ahead. Liia Nou: Thank you, Anders, and good morning, and welcome, everyone. I agree that this report summarizes a very busy fourth quarter and also a full year 2025. Starting with our existing portfolio, I am glad to report solid like-for-like growth in both business segments in the fourth quarter. This is explained by broad-based improvements in the hotel market, driven by active business demand, an overall solid event calendar, and active leisure travel. Together with profitable contributions from completed acquisitions in the business segment leases and improved profitability in own operations, this resulted in a tangible increase in group earnings. In the Leases business segment, demand improved markedly; however, still with variations between markets. The Nordics developed the best, with good rent growth in Sweden, Norway, and Denmark, while Finland was stable. Growth in Germany was also markedly stronger than earlier in the year, while growth in the U.K. was slightly positive. Like-for-like revenues increased by 5% in own operations in the fourth quarter, which, together with a positive business mix and good conversion, resulted in a like-for-like increase of 16% in net operating income. To be fair, part of this uplift is explained by one-time costs in the corresponding quarter last year. For the group, total revenues increased by 9% and net operating income increased by 22% in the quarter. Dalata is included in the numbers from the 7th of November. And from the fourth quarter, we report the acquisition as fully completed, including the expected divestment of the hotel operations to Scandic, which is expected to be closed or be done in the second half of 2026. In the quarter, we recorded rent of NOK 146 million and net operating income of NOK 138 million, i.e., for the 54 days we had Dalata. In the quarter, we also recorded transaction costs of NOK 241 million and preparatory financial costs of NOK 22 million. Adjusted for these one-time costs, cash earnings amounted to SEK 666 million in the fourth quarter. This corresponds to an increase of 23% year-on-year. We also report an acquisition result from the Dalata transaction amounting to approximately NOK 1.6 billion. This includes the estimated remaining transaction cost of NOK 340 million, which is expected to be done in 2026, and adding deferred tax of approximately NOK 1.8 billion, this contributes to an increase in the EPRA NAV of NOK 17.70 per share for a total of NOK 3.4 billion. In the fourth quarter, we also started the work to separate the properties from the hotel operations, which is expected to be finalized in the second half of 2026. Financially, our key ratios now largely reflect all aspects of the transaction. Loan-to-value, excluding debt of some SEK 504 million related to the expected sale of the hotel operating platform to Scandic and including Andlspars AB's minority holding in Bidco, was 52.7% compared to 50.2% at the end of the third quarter. On this page, we summarize some basic facts on Pandox. We are active in Europe, the world's largest hotel and tourism market, with strong structural growth drivers. We only invest in hotel properties and create value through active and engaged ownership. We have long-term revenue-based leases with a WAULT of 13.6 years and good guaranteed minimum rent levels with skilled operators. Please note that the reported WAULT is excluding the expected new revenue-based lease in Scandic for the Dalata portfolio and will thus increase. Our property portfolio has an average valuation yield of 6.37% and a strong yield spread of close to 250 basis points. We systematically invest in climate change projects in our portfolio with good returns based on our science-based targets and validated targets. We have strong cash flow and a balanced financial position, which enables us to drive continuous profitable growth through acquisitions of new properties and investments in our existing portfolio over time. We have a strong and well-diversified hotel property portfolio now consisting of 193 hotel properties with approximately 43,000 rooms in 11 countries and 90 cities, and with a property market value of approximately NOK 92 billion and a blended average yield of 6.37%. Please note that the yield increase compared with the third quarter is all explained by the Dalata properties going into our portfolio at a higher average yield. We are divided into 2 mutually supportive and reinforcing business segments: leases and owned operations. Leases where we own and lease out our hotel properties stand for 84% of the property market value. In our own operations, we transform and run hotels in properties we own. Own operations make up for 16% of our property market value. Our focus is upper mid-market hotels with mostly domestic demand, which is still the backbone of the hotel market, regardless of which phase the hotel market cycle is in. We also have one of the strongest networks of brands and partners in the hotel property industry, and this ensures efficient operations and revenue management, which maximizes cash flow and property values, and a continuous flow of business opportunities. Also, a relatively large part of the investment in leases is shared with the tenant, which lowers our risk. Later in this presentation, I will share some data on what the portfolio will look like after the acquisition of Dalata. Here, we have a breakdown of the performance for a selection of countries, regions, and cities versus 2024. We show the average daily rate on the vertical axis and occupancy on the horizontal axis. In the boxes, we indicate how much higher or lower RevPAR is compared with the corresponding period in 2024. In 2025, RevPAR growth was mixed across our markets. Occupancy was stable or growing in most markets, while the average price was more varied. In terms of RevPAR, the greatest relative improvements during the year took place in the Nordic markets, with Norway as a leader, Denmark performing consistently well, and Sweden ending the year on a positive note. Oslo and Copenhagen were strong city markets throughout the year. Many markets ended the year strongly, with Germany and especially Frankfurt and Hanover as good examples. Aoife Roche from STR and Rasmus Selman from Benchmark Alliance will talk more about this and the underlying trends in the hotel market later in this call. At every point in time, we have our projects rolling, big and small. The projects vary from high-yielding investments like adding more rooms in an existing hotel, converting non-yielding spaces into guest rooms, for instance, cabin rooms, or adding more beds to existing rooms, to more bread-and-butter investments like product uplifts and rooms/bathroom renovations. In the leases business segment, we share the investment with our tenants, and both parties enjoy the upside potential and share the risk. In our own operations business segment, we take the whole investment in our own books, but also have more control and can enjoy the full cash flow. And on this slide, you can see some examples of our bigger ongoing projects. Every year, we invest approximately SEK 1 billion into our existing portfolio. Now that the acquisition of Dalata completed, this figure is growing a bit, mainly during the next 2 years, due to especially 2 large projects from the Dalata portfolio. One conversion from an office into a hotel in City Center Edinburgh and one large extension of 115 rooms in Clayton Cardifflaine in Dublin. Both are exciting, high-yielding investments that we expect to be finalized in 2026 and 2027. Here, we have a selection of some of the upgraded products that we've done during 2025. Many of these are already giving impact in '25, but more so for the full year of '26. Add to that, our pipeline of approved investments for ongoing and future projects of around SEK 2.6 billion, out of which SEK 1.6 billion, as I said, is expected to be completed during 2026. So a good pipeline of both upgrades of products, as well as expected to add more than 550 new rooms during 2026 and 2027. Here, we have summarized key financial effects from the Dalata transaction. And yes, it is a nightmare slide, but still useful to explain the complexity of this transaction. This acquisition was closed on 7th November 2025, and we report the transaction as fully completed, including the expected divestment to Scandic. I will not go through all these lines, but except for Q4 2025 are in short. 31 plus 1 investment properties with some SEK 16.9 billion were added. The properties were externally appraised in the fourth quarter, with rent and NOI of SEK 146 million and NOK 138 million, respectively, or 54 days in business area leases. The transaction cost of NOK 241 million was expensed, prepared to financial cost of SEK 22 million, i.e., for the period before the 7th of November, and an acquisition result of SEK 1.6 billion, which includes SEK 340 million in expected sale cost for the expected sale of the hotel operating platform to Scandic. This means in principle that we do not expect any additional transaction costs on top of what has already been recorded unless we identify new areas of consideration. The deferred tax liability of NOK 1.8 billion arises from temporary differences between fair value and taxable value for investment properties. Loan-to-value, we exclude the debt of approximately NOK 500 million for the expected sale of our hotel operating platform to Scandic and include Andaz SPAR AB's minority holding in Bidco. We are currently working full speed with the separation of properties and hotel operations, which we expect to be completed in the second half of 2026. As we have said previously, there are several ways to think about this transaction from a value perspective. The main value driver is, of course, that we add 31 plus 1 investment properties of high quality in high RevPAR markets with solid profitability and cash flow generation capacity, together with a strong operating partner. We also unlock value from acquiring Dalata at an attractive price and, in turn, an implied value of the properties, which is lower than they are worth according to Pandox's business model. Our tentative estimate of this value uplift, or expressed slightly different embedded value, was some NOK 3 billion, or actually NOK 3.4 billion, as the increase in EPRA NAV of NOK 17.7 per share. Accounting-wise, this is expressed as an acquisition result of approximately SEK 1.6 billion, which together with a deferred tax of SEK 1.8 billion amount to this EPRA NAV uplift. And please note again, this also includes the estimated remaining transaction cost of some SEK 340 million. Here, we have mapped out the 31 investment properties from Dalata that we already added to the leases in the fourth quarter, and apologies in advance if some of the cities have been marked out wrongly. 21 of the properties are located in Ireland and 10 in the U.K. Dublin and London are the biggest markets with 11 and 5 hotel properties, respectively. All hotels are well-established with leading commercial positions in the markets. This is what our portfolio in the U.K. and Ireland looks like, including Dalata. In total, we now have 63 hotels, of which 12 are in Dublin and 11 are in London. In the number of rooms in our total portfolio, the U.K. now accounts for 20% and Ireland 12%. We thus increase our exposure to Ireland, in particular, but also to the U.K. market. In terms of destinations, our exposure will increase towards international destinations and decrease towards regional destinations relatively speaking. Here, we have mapped our now 12 properties in Dublin with a total of some 3,200 rooms, including some prime assets like our 608 rooms Clayton 57 rooms Clayton Hotel Leopardstown, 334 rooms Clayton Hotel Ballsbridge and not the least, 304 rooms Clayton Hotel Cardi Lane, where we also have an extension project for 115 new rooms expected to be completed in the end of 2027. Here on this page, we have 3 out of 5 new London hotels, 227-room Clayton Hotel Chiswick, the 212-room Clayton Hotel City of London, and the 191-room Malon Hotel Finsbury Park. On this page, the remaining 2 properties added the Maldron Hotel Shortage and Clayton Hotel London Wall. In total, we now have 11 properties in London for a total of some 2,400 rooms. Here, we have a quick summary of the main changes in the portfolio measured in number of rooms, primarily in relative terms. Our international exposure increases as a consequence of more rooms in international cities, notably Dublin, London, and Edinburgh. The share of revenue leases with minimum guaranteed rent also increases, which adds to the earnings quality of our portfolio. And with that, I hand over to Anneli Lindblom, our CFO. Anneli Lindblom: Thank you, Liia. Good morning. In the fourth quarter, revenue and group net operating income increased by 9% and 22%, respectively, driven by the acquisition and overall strong like-for-like growth. Like-for-like, leases reported growth of 5% in both revenue and net operating income, while own operation reported revenue and net operating income growth of 5% and 24%, respectively. Adjusted for nonrecurring items of NOK 263 million, where NOK 241 million is transaction costs and NOK 22 million is financial costs related to the acquisition of Dalata. Adjusted for those, cash earnings and profit before changes in value increased by 23% and 35%, respectively. When it comes to currency, please note that to reduce the currency exposure in foreign investments, our aim is to finance the investment in local currency. Equity is normally not hedged, as Pandox's strategy is to have a long investment perspective. Currency exposure is largely in the form of currency translation effects. In the fourth quarter, currency had a negative impact on both earnings and property values. And as you know, we have the main part of our hotel properties outside Sweden and denominated in foreign currencies, and now even a larger part due to the acquisition of Dalata. On this slide, we show the change in the main valuation parameters for the total property portfolio year-to-date. And please remember that investment properties are recognized at fair value. According to IFRS, unrealized changes in value for operating properties are only reported for information purpose, but it is included in the EPRA NRV. For the year, the total unrealized changes in value were a positive NOK 117 million, driven by lower yields. As I said earlier, changes in currency had a negative impact on the balance sheet items for the period, with decline in property value of minus NOK 4.6 billion in the period. As you know, on the 7th of November, we closed the acquisition of Dalata Hotel Group with a purchase value corresponding to NOK 15 billion, on which some NOK 16.9 billion in property value is added here. End of period, the average valuation yield for investment properties increased by 19 basis points to 6.2%, reflecting the higher yields on the Dalata portfolio. For operating properties, it increased by 1 basis point to 6.85%. So the blended yield for the group increased 13 basis points to 6.37%. So here, we have the average yield, the average interest on debt, and EPRA NAV per share quarterly, and the yield spread is intact, and in the period, growth in EPRA NAV was a positive 7.7%, measured on an annual basis and adjusted for paid dividends. Our LTV at the end of the quarter amounted to 52.7%, and the debt related to the expected divestment of Dalata's wholesale operation to Scandic is included, and that item is reported as a liability held for sale. The minority interest in Andazspar's ownership in our bidding company is included, however. As you can see, we are still well within the range. The ICR on a rolling 12-month basis was 2.6x. Adjusted for the preparatory financial cost of SEK 57 million, the ICR was 2.7x. Cash and credit facilities amounted to SEK 1.7 billion. Including credit approval of new financing of NOK 1.5 billion in the first quarter of 2026, the liquidity reserve amounted to NOK 3.2 billion. And on top of that, we still have unencumbered assets with a value of some NOK 900 million as an untapped reserve. So during the quarter, the constructive trend in our financing market continued. In the fourth quarter, we took up new and refinanced existing loans of NOK 13.8 billion, which makes it close to NOK 21 billion for the full year. Looking ahead, we have NOK 5.8 billion of debt maturing within 1 year. And our bank relations are strong and expanding across our markets. We have ongoing and positive discussions on future financing and refinancing. And there is really a strong appetite among not only the Nordic banks to finance our hotels. So we have a wider group of banks that are very interested. At the moment, 51% of the net debt is hedged. This is the lowest level since the end of 2022. And with that, I hand over back to Liia. Liia Nou: Thank you, Anneli. We have said it before, the hotel market remains resilient, supported by strong underlying structural growth drivers. We expect that gradually strengthening macroeconomic data should support the hotel market as well, and hotel demand to increase in 2026, driven by multiple segments. The supply outlook is more benign, which should support ADR, but the mix depends on the market. In Q1, which is the smallest quarter, we expect a normal seasonal pattern. Finess on the books looks promising for Q1 compared with the same quarter last year. But please remember, the first quarter is small and always difficult to draw any major conclusions from when it comes to full-year performance. We currently have a relatively strong appreciation of the Swedish krona, which has a negative translation effect on earnings and asset values, as Anneli described. Finally, we expect the properties from Dalata to contribute substantially to both NOI and cash earnings. And now we move over to Q&A. Operator, we are now ready for questions. Operator: [Operator Instructions] The next question comes from Artem Prokopets from UBS. Artem Prokopets: So first question for me. I will ask them individually, if it's okay. So, the first one, following the Dalata acquisition, when do you expect to be in a position to pursue additional large-scale acquisitions? And specifically, given that the PPHE is now in a formal sales process as part of its strategic review, is this an opportunity you would evaluate? Or is PPHE outside of your current acquisition focus? Liia Nou: Well, overall, of course, having done and in the process of finalizing our biggest ever transaction, we, of course, have a lot of focus on this. But you can still see from our strong financials that we still have some gunpowder to also pursue some investments, as well as we're also always looking at some divestments. I won't specifically comment on individual transactions, but you can expect us to put some effort and some strength into completing the ongoing acquisitions, and we are also on the hand for continued new ones, whether they are single assets, smaller portfolios, or even a bigger chunk. Artem Prokopets: Second question, how do you assess the impact of rising U.K. business rates on Pandox's own operations segment, and particularly with regard to net operating margin? Liia Nou: Yes. I mean, as you know, it affects our own operations, and this is a smaller part of our exposure in the U.K. The expected effect, which is, of course, in our numbers for next year in our budget, is around GBP 1 million for our own properties in the U.K., which are affected. And we have also taken, of course, some impact on that when it comes to the valuations. So a minor effect, but it's mostly affecting, to some extent, the City of London hotels. Artem Prokopets: And given these changes in U.K. business rates, do you expect this to affect the lease agreements you are negotiating with Scandic for the U.K. hotels, which are due to begin in the second half of the year? And specifically, does the fact that Scandic's U.K. position has worsened since the time of the Dalata acquisition, does it change how you would price these leases? Liia Nou: Not at all. The agreements and the framework are already in place. So that was all already agreed and put in place when we bid for this deal back in the summer of 2025. So that will not change. Artem Prokopets: And could you please provide an update on Revo Hospitality, specifically whether you have any new tenants in mind for those assets? Liia Nou: Well, of course, this is a process, as you know, where the former HR Group and Riga have put themselves in self-administration. It's a process that is in the hands of the external. I should not say that we have foreseen this, but of course, this has been on our radar for some time. And we are constantly sort of in both dialogue and also guarding our interests. We do think we have good possibilities to either rent it out, continue if HR continues their operations to some part, or whether we will find new operators with a large network, or, as we have our own operations, this is something we can sort out in the shorter term, take it on our own. So as we said in the press release, which we sent out, it affects 4% of the rooms in our portfolio. So it's smaller, but we are confident that there will be, if any, a very small financial impact, if any. Artem Prokopets: And maybe last question for me. Could you, if possible, provide a numerical outlook for RevPAR growth in 2026? And given Pandox's focus on the upper mid-scale segment, do you think the company is well-positioned this year? Liia Nou: I think we are very well positioned because, as I said, we have a broad portfolio of 193 hotels in 11 markets. So it's right. All in all, of course, after this pandemic, we are now at levels that are more single-digit. Europe grew by 5% in the fourth quarter, 3% overall. But we are positive, especially Nordic, it looks strong. We are looking at Germany, which has also come out strong with the new trade fair activities ongoing. There is some new supply coming in some markets, which will momentarily put some, I shouldn't say make, the RevPAR growth more stable. But all in all, I would say around anything between 2% to 4% overall on our portfolio. Operator: The next question comes from Andres Toome from Green Street. Andres Toome: I had just a couple of questions. Firstly, maybe just hitting on how you are thinking about your financial leverage after this transaction? And how do you see a path to a lower LTV? And maybe you could also speak to some of the disposals you might have in the pipeline already. And I noticed there's a bigger portfolio on the market in the Nordics, and if there's any progress on that? Liia Nou: Thank you. Yes. As you know, our policy range for LTV is between 45% and 60%. So we are typically, as a Nordic company, quite satisfied with the content, but fine with an LTV, which is close to 50% or slightly south. Being at 52%, which is actually what we did expect, and which is an area where we are quite confident. And also, as you've seen with our strong financial position, of close after we secure some further financing of close to 3.2 billion in liquidity reserve, then this makes us confident that this is a level that we can pursue. Of course, with our very strong cash earnings, automatically, our LTV will decrease. But also, we have also given out that we will pay out a dividend in the second quarter. So all in all, being in these areas, we are confident. There is no plan of reducing the LTV, even though we are always looking to rotate some assets. We are open to selling some assets if we just find a good price, but also, of course, acquire new value-creating properties. And when it comes to the ongoing process, I can't comment on it specifically, but it's a normal part of our business model. Andres Toome: And then my second question was just around your foreign currency exposure. And obviously, this year, it's been a year where there's a lot of FX headwind converting back to your home currency. So I was just wondering, how are you thinking about your hedging strategy going forward? And are you planning to make any changes on that front, maybe to mitigate some of that exposure, as you seem to be also expanding more and more internationally? Liia Nou: Well, it's as Anneli Lindblom mentioned earlier, it's a pure translation effect. We have all our properties financed in local currency. So yes, the translation effect of both earnings results and the value is, of course, when you report it, but it's a pure reporting effect. So we don't intend to make any changes, but our hedging policy is to finance the properties in local currency, continuing. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Anders Berg: Okay. With that, we move into the market presentations, and we will start with Aoife Roche from STR. Please go ahead. Aoife Roche: Good morning. So firstly, although a lot of variations at a market and market class level have been discussed already, they persist. Hotel performance has overcome many, many setbacks through 2025. The economic and geopolitical climate did little to support a positive consumer sentiment, and there was a high level of uncertainty for the consumer and for businesses, which created an environment of indecision. Despite that, Europe ended the year on a positive note with growth in 2024. And I will explore this now in some detail through this presentation on covering the how and the why behind this varied performance. So first up, a global perspective. During a turbulent year, it could be easy to lose sight that demand for hotel rooms is actually higher than it ever has been, up 8% on 2019. And the world population has doubled over the last 50 years. Tourism arrivals have increased sevenfold. The majority of growth in demand was in the Asia Pacific region, the Middle East, and Africa in 2025, as you can see on this slide. For the GCC countries, in particular, which have grown by 34% in terms of demand, this is really reflective of an open economy and is working hard to build market share in this industry. The U.S., however, contends with a deficit in tourism relative to 2019. There were 5.7 million less international travelers arriving in the country, whilst there were 9.7 million more Americans heading abroad, which, of course, we can see in our European numbers in 2025. We are seeing declines in the U.S., Mexico, and the Caribbean. Whilst at the top of the table here, we can see Africa is leading on growth in demand year-on-year. And much of this is down to the Red Sea resorts, which have grown by 11%, selling an average of 10,000 more nights a year than last year. From a European perspective, Germany, Spain and Europe on the whole is pushing ahead of the global average of 1.1% growth year-on-year. So good news and positive results for Europe so far. Now demand growth is slowing, albeit from record levels, there is a favorable component for the occupancy equation, and that is that global supply growth is slowing or has slowed over the last 24 months. We are all well aware of the challenges of financing new projects in recent years and an increasing focus has been on conversion, which has helped shape a more favorable level of supply growth. So the combination of growing yet muted demand and a relatively slow pace of new openings has allowed occupancy to grow. We highlighted the challenges in the U.S. and of course, China, where the 3 largest markets, Shanghai, Beijing and Guangdong have all seen declines in occupancy even with limited supply growth, and this has weighed on the national occupancy declining by 3% year-on-year. Whilst in the Middle East, Dubai and Abu Dhabi have an occupancy growth of 3% to 4%, and that is really driving that Middle Eastern growth, while Saudi growing by 2% in occupancy despite the elevated demand growth, they have had to contend with a substantial supply growth. So Europe is sitting here in the middle with a 1% growth in occupancy versus last year. Change now to average daily rate, the global picture is far more varied. Again, China and the U.S. have little or no growth. ADR in the U.S. has grown slower than inflation for 21 out of 24 months. And Europe also has seen limited growth, 2% up on last year. And if we ignore Africa and South America, where there are double-digit growth and much of that linked to inflation, so that is somewhat skewed. We can look to the Middle East and Asia, excluding China, of course, that are leading the way. Abu Dhabi, in particular, with stellar growth of 20% Dubai up 9%. Whilst in Southeast Asia, there's notable performance growth in Thailand and in Vietnam. So let's dive into Europe a little bit more. So even in a year facing tough event comparisons, missing the Olympics, the Euros and of course, Taylor Swift, Europe was able to deliver growth. Unsurprisingly, the summer faced very tough comparisons, primarily on the rate side. Germany, France, and the host cities for the IRA tour faced sizable comparisons. However, as you can see to the right of this chart, strong growth in the fourth quarter helped round out a solid year. Strong growth in occupancy in December also permitted a good end to the year, and that was due to an increase in Inverted Comma's week of business travel in the month of December. So overall, Europe is up 2.1% in RevPAR terms, and that is aided by ADR growth, up 1.2% for the full year 2025. Now we monitor 550-plus submarkets in Europe, and they did appear to be a slight risk in performance and certainly year-on-year performance in the first half. And it followed a similar pattern or trend to 2008, but a very strong summer and even a very strong start to the fourth quarter averted any concern that we had. Occupancy growth has been limited across the continent in 2025, as I highlighted earlier, and nations with the highest occupancies, like U.K. and Ireland, with 78% occupancy actualized, and Spain, with 75% occupancy actualized, have witnessed very limited growth year-on-year. But it is important to remember that these countries, in particular, U.K., had recovered far earlier than any other countries across Europe. So there is less opportunity to grow occupancy. However, we have seen good growth in countries in the Nordics and Central and Eastern Europe, much higher growth than the rest of Europe. Here, the data demonstrates country-level performance, proving that demand is attractive to those countries where there is more availability, potentially more affordability. But definitely, this is much of this is linked to a gap in the full hotel recovery. Supply also has a role to play here in occupancy performance. We have seen limited supply growth across the continent, and that really has enabled continued occupancy growth, even if that is quite limited. Turning to ADR. If we frame our narrative around North versus South and even urban versus resort, we acknowledge that there is a perennial appeal for the South, Spain, Portugal, and Italy highlighted here. We can really better understand the growth that we have seen in the South if we continue to use that narrative. Unsurprisingly, Germany and France have a hangover from an excellent summer in 2025. Additionally, if we look at the South and resort destinations, not only did they lead in 2025 on year-on-year growth, as we saw on the last slide, but they have also achieved the highest rates in Europe. Greece and Italy stand out here, some countries achieving up to EUR 300 in actualized ADR, whilst the Northern nations situated more to the right are on the lower end of the spectrum. So at a market level, performance variations do persist, and this is no different for Pandox market performance. There is a theme of Nordic growth, with the exception of Helsinki,, and here, Rasmus will speak more on that. Germany has shown some positive occupancy change year-on-year, yet this is not always followed by ADR growth, for example, Berlin and Dusseldorf. The U.K. in contrast does have many markets declining in occupancy. These are markets that have new supply, perhaps non-repeat events, and these show up in those quadrants. Yet a stronger half has helped compensate with ADR. So I'm going to spend a few moments on the U.K. and Ireland specifically. So in the previous slide, we acknowledged the quantity of submarkets that are declining in occupancy in the U.K., which resulted in a high number of submarkets not being in a position to deliver a positive RevPAR growth. The first half of 2025 mirrored 2008, much like the rest of Europe. Uncertainty postponed decisions and ultimately drove many markets to a negative growth. The second half, however, there was far less caution, and there was a peak in September of 73% of all submarkets showing positive RevPAR growth, and this dropped off as usual to a more 56% in December. Now we can clearly see this in monthly performance also. ADR has steered the ship through the second half of the year, which has enabled for the U.K. an overall growth in RevPAR of 1% for full year 2025. As we can see here, much of the growth comes through the luxury segment, with economy continuing to experience negative growth year-on-year with those middle classes, upscale, and upper mid-scale performing positively year-on-year. Like many markets across the U.K., negative growth occurred in the first half of 2025 in London. Much of this was occupancy driven in the regions, whilst ADR driven for London. London experienced this a little bit differently. ADR declined in the first half, pointing to consumer caution, perhaps a reduced short and long-haul inbound traveler and a direct impact from non-repeat summer events. Pricing power is a real problem in the U.K., and it was unavailable to 5 out of the 6 classes that we monitor. Overall, London's ADR declined by 0.4% and RevPAR was down 0.2%. So here is an outlook of the supply chain, which really sets the tone for how we expect occupancy to look going forward in 2026. And you can see there are some key markets here that have a very high double-digit growth in supply or active pipeline, I should say, expected to deliver in 2026 and 2027, which, of course, will impact our forecast. Now, most markets expect to see new supply. And here is a summary of market level forecast for 2026. We do expect pricing power to return in 2026. And for the most part, with the balance between supply and demand dynamics, with the exception, of course, of a few markets, namely Dublin and Belfast, here showing some negativity. Occupancy does have room to grow, affording the sector some confidence to drive rate. Moving to Dublin, looking very different from London or even the U.K. regions. The Dublin market managed a 3.7% RevPAR growth in 2025. 8 out of 12 months showed positive RevPAR growth, and there was a very strong last quarter. Dublin showed again, particularly in the last quarter, with well-attended events offsetting any new supply that came into that market. At a class level, performance looks very, very different in Dublin compared to the previous slides for the U.K. and Europe. A wider pool of economy hotel rooms has emerged in Dublin, available to the more cost-conscious traveler, and it has done very well in this segment, something that has been very much missing in this market prior to 2021, I would say. So let's look ahead. The forecast for the aggregate of European cities is muted. 2025 closed with a meager growth of 1.2% in RevPAR terms for Europe. 2026 is forecasted to grow by 0.4%, which is quite concerning when you stack this against inflation. In 2026, however, we do expect to see more markets with a positive RevPAR performance than we saw in 2025. And much of that, as you can see from the blue, is still rate-driven. Say some markets that will have to absorb some new supply in 2026, which will affect their chances of coming back into positive territory, perhaps. Munich and Cologne, for example, still have a lot of event offset challenges. And Amsterdam is a case on its own as it embarks on a year of added ADR pressure with the new VAT policy in play from this month. 2026 looks set to grow supply in line with previous year trends, with a particular focus on the luxury segment. As a percentage of existing rooms, Georgia, Ireland, and Poland will see the greatest percentage increase in rooms delivered in 2026. Consumer confidence is expected to strengthen for Europe, likely more so in the second half of the year; however, with interest rates falling, inflation slowing, and a high ratio of savings available to households, there is an expectation that consumption will persist. There is some concern around affordability for lower earners, particularly in the U.K., with the recent budget. However, it appears that higher earners will continue to consume, which, of course, is great news for the hospitality industry. From a source market perspective, there is a question mark around the U.S. traveler with the exchange rate. Will the exchange rate deter business, or will the U.S. traveler want to travel internationally as they have done in 2025? Many markets, and in particular, the high-end hotels and resorts, are dependent on this business to drive ADR. Now the U.S. traveler chooses differently in 2025 and probably will do so in 2026, and this had a great impact on the U.K. performance, where we saw a softening of demand coming from the U.S. to the U.K. when compared to the average in Europe. So there is a lot to consider when looking at the outlook. But overall, STR expects Europe to perform very well, particularly in the second half of the year. The global economy suggests a strengthening of consumer confidence. The desire to spend on experiences abates any concern about whether they are geopolitical or economic. Many thanks. And I'm going to hand this back over to Rasmus. Rasmus Kjellman: Thank you very much. I'm Rasmus. Let me get my slide here. I'm Rasmus Kjellman. I'm the CEO of Benchmarking Alliance. And for the coming 10 to 15 minutes, I will guide you through the Nordic hotel market. We are the largest supplier of benchmarking in hotel market data in the Nordics, and we strive to have the best possible coverage in the markets we work in, and we are based here in Stockholm. So, diving into the data, looking into the Nordics, these are the country-wide averages in the Nordics and the Baltics, and we see a positive trend continued through 2025. Generally, we see an increase in RevPAR in all countries. Blue boxes show the total 2025 RevPAR development compared to last year, and orange boxes show the previous quarter, the third quarter, and the RevPAR development up until the Q3. So the difference is an indication of how the year ended. In Finland, the increase is a bit slower, with a lot of new supply in some of the markets, as well as a slower recovery from the Asian markets, and the proximity to Russia is holding back the recovery. And in the Baltics, we are continuing to recover, especially since the Basketball European Championship in Riga had a clear impact. And after years of lost Russian demand and other negative effects from the war in Ukraine, travelers are finding their way back to the Baltics and to Riga in particular. Diving into the capitals. Oslo had the Nor-Shipping Large Maritime Industry Conference, the Ed Sheeran concert, and generally a very good summer, as well as several smaller congresses and other events driving demand. In Copenhagen, we had the Endo-ERN, the Wind Conference, the Copenhagen Rock Festival, and Robbie Williams all at the same weekend, which brought prices up to new record levels in ADR. Stockholm had difficulties replacing the extreme demand in 2024, generated by Taylor Swift, Spring, and the ECO Congress. In Helsinki, May and June were good Congress Mass and the Helsinki Metal Music Festival in August, possibly affecting. And Westervik is bouncing back again after long periods of volcanic eruptions last year. Interesting to see that the general Icelandic market is increasing more than Westervik, as Countryside hotels suffered more than Westervik hotels earlier. So if you go to a bit more of the details, the sold room increased basically demand and sold rooms increased basically everywhere. There are only smaller changes in the available room. The largest increase we see in Stockholm is our largest decrease in Riga, where a couple of hotels in the budget segment were closed during the year. In Stockholm, the increase is from Villa Foresta and VillaDaga now in full year capacity, as well as Scandi Sadakayjen and Scandicokunlman also in full year capacity. BW also opened 2 new properties in Stockholm, 90 rooms in the market, and Reykjavik did not manage to fill the small capacity increase. In Oslo, the Savoy closed and is undergoing total renovation by new owners, and the Hotel and Frogner Grunlukka is closed. This means occupancy increased in all markets, except Reykjavik. Riga, 1 hotel closed and renovation of rooms in Radisson and in RevPAR battle, Riga is the clear leader; however, pretty much poised down to one event, as I mentioned. And in the Nordics, both Oslo and Copenhagen show remarkable increases. If we also look at ancillary revenue, we see that we have an increased total revenue per available room in Stockholm and in Copenhagen, whereas in Oslo, Helsinki , and Westervik, it has decreased, holding back the RevPAR development. And it's interesting to look at the total revenue as well as other revenue in the hotels, such as food, beverages, meetings, events, and departments that don't necessarily follow the room development in the same way. Driving down and diving down into the Scandinavian capitals by segment. If we look into the Stockholm segments, we see new supply in the luxury segment holding back the occupancy levels, while rates continue to increase. Mid-scale segment supply is due to the capacity reopened after renovations and rebranding. And even though demand is there, the lack of events and concerts this year can also be seen in the loss of average rates in all segments, except in luxury. Moving to Oslo. Oslo shows a very steady and positive trend in all segments. The mid-scale and budget hotels previously mentioned can be seen in the loss of supply. Moving to Copenhagen. The Copenhagen luxury segment is starting to slow down in demand, but rates are still increasing. It is interesting to see that the demand is slowing down. And the upgoing trend can be seen in all segments, while it's only upscale and mid-scale hotels that can enjoy higher demand as well. Looking into the Helsinki market. Westfalenhalle, Foresta, and Hotel Collection are adding more supply to the luxury segments. However, this capacity has been utilized well, maybe at the cost of slightly lower rates; otherwise, mostly smaller changes in the Helsinki lower segments. If we look at the weekday, weekend patterns comparing the Nordic capitals, we can see that there is an even spread in Copenhagen and Oslo, and the pattern is somewhat different in Stockholm. So if we look into more details into the Stockholm market and the distribution between the days of the week, we can see that shoulder days, Monday and Thursday is holding back the development through the weekdays, Tuesday and Wednesday are still increasing. However, the demand is stronger on weekends. If we look into the details in the Swedish market, we cover around 36 markets, including all regional cities within Sweden. And in this graph, each bubble represents the market, and the size of the bubble represents the RevPAR. We have ADR on the left and occupancy on the lower axis. So we can see Westervik in the top right corner here. But if we look at the major changes over the last year, the majority of the Swedish regional market increased in RevPAR. But the highlights are maybe that the Swedish defense is investing a lot right now, and partly because of the new membership in NATO, and this has a positive effect in India. In Uppsala, we had the Swedish live music conference in January, having a positive effect. And [ Helestio ] is suffering very badly from the effect of the Northvolt bankruptcy. In the same way, look into the Norwegian market, we have Trons as a very strong market, with the highest RevPAR. They have the Nord Turisme and the Midnight Sun, while Oslo is the highest occupancy. In the same way, looking to the changes through the different markets, Trondheim was very strong last year, especially since they had the Ski World Championship in the end of February and beginning of March. Oslo, as I mentioned earlier, had a new shipping, a generally good summer with a Chan concert. Kristiansand had a very strong summer with an increase in the month of July only with 25%. Pori, a bit weaker, but the year before in 2024, they were the culture of capital and have a bit of trouble in replacing that. In the same way, looking to the Danish market, Copenhagen is not surprisingly the largest market. And looking to the changes, Vee had a large amount of out order rooms last year that are back on sale. And generally, there is a strong development within all of the Danish markets. Driving and diving into Finland. Rovaniemi, the outstanding strong market within Finland, the Arctic tourism, the Santa Clause bringing people from all over the world to Rovaniemi. There are increased direct flights to Rovaniemi, driving a very strong market. Helsinki is far behind from Rovaniemi, but of course, a much larger market. Otherwise, most of the Finnish markets range on an ADR of EUR 100 to EUR 110 and an occupancy between 55% to 70% and looking at the pattern of change through last year, Rovaniemi, together with the largest cities, Helsinki, Sponge are the ones increasing. Pori was affected by a slower corporate demand as well as Vantaa. Vantaa is the Helsinki Airport area, and they have a lot of new supply in the market. So if we then look into the pattern of future bookings, starting with Stockholm and there is a general increase of future bookings with 10.2%. Looking ahead, we see that we, in the coming year, have the EHA 2026 Hematology Congress in June. We have the Bad Bunny concert in Strawberry Arena in July, and we also have the weekend concert in Strawberry Arena in Stockholm driving demand. Looking at the Oslo market, not as strong as the development in Stockholm. Last year, there was the Nord Shipping and the what Congress. They are not really replaced yet. There was also the adherent concert, and this has an impact on the comparison to the coming year. Looking into Copenhagen, we see a very stable increase in the books for the remainder of the year. There is 3 days of the design festival in June, driving demand, but otherwise, a very stable increase in the Copenhagen market. And at last, looking at the future bookings for Helsinki, the start of the year looks positive in Helsinki. However, the Congress in July 2025 has no particular replacement yet, but in general, a positive development. With that, I thank you. And if you have any questions, reach out to the Pandox team or to me, and I'll be happy to help. And with that, I leave it back to the Pandox team. Liia Nou: Thank you, Aoife and Rasmus, for your excellent hotel market updates. And thank you all for participating in this call. We really appreciate your time and interest in Pandox. And our interim report for January to March 2026 will be published on the 29th of April. We also want to mention that on the 5th of May, later this year, we will host a Capital Market Day in London. If you can't join in person, the day will also be possible to follow via webcast. Then we wish you a nice winter and spring, and don't forget to stay at our hotels when you're on the road. Goodbye.
Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 Black Hills Corporation Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Sal Diaz, Director of Investor Relations. Salvador Diaz: Thank you, operator. Good morning, and welcome to Black Hills Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. You can find our earnings release and materials for our call this morning on our website at blackhillscorp.com. Leading our earnings call are Linn Evans, President and Chief Executive Officer; Kimberly Nooney, Senior Vice President and Chief Financial Officer; and Marne Jones, Senior Vice President and Chief Utility Officer. During our earnings discussion today, comments we make may contain forward-looking statements as defined by the Securities and Exchange Commission, and there are a number of uncertainties inherent in such comments. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially. We direct you to our earnings release, Slide 2 of the investor presentation on our website and our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission for a list of some of the factors that could cause future results to differ materially from our expectations. With that, I will now turn the call over to Linn Evans. Linn? Linden Evans: Thank you, Sal. Good morning, and thank you all for joining us today. I'll begin my comments on Slide 3 with a summary of our achievements in 2025 and our strategic outlook, including an update on our merger with NorthWestern Energy. Kimberly will provide our financial update, and Marne will discuss our operational performance and progress on a few key initiatives. I'll start with a sincere thank you to our Black Hills team. I'm incredibly proud of our team's accomplishments in 2025. We achieved the key commitments we made at the beginning of the year, setting the stage for ongoing success. We once again fulfilled our financial commitments, achieving the midpoint of our earnings guidance and long-term growth target. We successfully executed our financing strategy, maintaining our solid investment-grade credit ratings. We achieved strong earnings through the consistent execution of our long-term strategy, which drove new base rates, rider recovery and enabled customer growth. Notably, we witnessed growing demand from our large load customers such as data centers and solid economic development in our service territories. We also increased our dividend for the 55th consecutive year in 2025 and recently extended that industry-leading track record to 56 years. Our team made strong regulatory progress, completing 3 rate reviews and advancing several strategic project approvals. We also advanced our plans to serve data center demand, tripling our data center pipeline during the year to more than 3 gigawatts. In just 3 years, our team successfully designed, permitted, constructed and energized our 260-mile Ready Wyoming transmission project, delivering the project on schedule. This transformative project is a great example of our commitment to innovative and customer-centric investments. By strategically interconnecting our electric systems in South Dakota and Wyoming, we're providing value that will reliably and affordably serve our customers for generations to come. We're also constructing our Lange II 99-megawatt generation project in Rapid City. This project will replace aging resources with cutting-edge generation technology, enhancing our ability to provide resilient and reliable service to our customers and communities. Our legacy of excellent operational performance is fundamental to everything we do. We consistently achieved better-than-industry average safety performance, top quartile reliability and a positive customer experience. To ensure the safety of our customers and our communities, we established an emergency public safety power shutoff program. This program serves as an additional tool in our toolbox to help mitigate the risk of wildfires. In addition to our success as a stand-alone business, we announced a strategic merger with NorthWestern Energy in August. Slide 4 outlines our unwavering commitment to these critical areas in 2026 as we advance our customer-centric strategy and capitalize on emerging opportunities. We remain steadfast in our dedication to consistency building upon last year's achievements as we embrace the exciting prospects ahead. We're already diligently working towards fulfilling our financial commitments, including achieving earnings growth in the upper half of our long-term growth target, as reflected in our 2026 earnings guidance, which anticipates 6% year-over-year growth. We anticipate delivering exceptional results for our stakeholders through executing on our customer-focused capital plan, continuing our regulatory progress through multiple rate reviews, meeting the growing demand of our customers and maintaining our positive momentum through our upside data center pipeline and completing our merger with NorthWestern Energy. Slide 5 outlines our data center pipeline of more than 3 gigawatts. Our pipeline includes only high-quality data center companies under nondisclosure agreements, which we are actively negotiating to serve. Meta is ramping up its new data center, and Microsoft demand continues to grow. Their combined load represents approximately 600 megawatts to be served by 2030 under our minimal capital investment model. Viewed through a financial lens beginning in 2028, we expect this data center demand to contribute more than 10% of our growing consolidated EPS. We're also making progress in negotiations with our other high-quality partners to potentially serve the remainder of our data center pipeline. To fulfill the scale of demand, we rely upon a combination of energy resources that include the procurement of market energy, contracted generation and investments we would make in generation and transmission. Each of these energy resources has its own distinct risks and considerations which will individually contribute to earnings uniquely based upon negotiated contracts with each customer. Our unique tariff offers flexibility in how we serve data centers, provide speed to market and is positively impacting affordability for our Wyoming customer base. Marne will provide more detail in her business update. Slide 6 outlines our $4.7 billion capital plan. We invest in our natural gas and electric customers' core needs for safety, reliability and growth. As I outlined earlier with our data center pipeline, our current capital plan includes only minimal investments to support 600 megawatts of data center demand, which we expect to serve through market energy procurement and contracted generation. We are developing opportunities for investment that aren't currently in our plan. As I said before, this would include generation and transmission bills as a part of a mix of resources to serve additional data center demand. Moving to Slide 7 and 8 for an update on our merger with NorthWestern Energy. We are very committed to the merger because combining these two companies makes great sense for our stakeholders. The merger will create a stronger, more competitive utility company, providing long-term value for stakeholders created through increased scale and improved customer diversity with our existing 8-state footprint, an improved financial profile with a larger balance sheet that expands opportunities for strategic investments. Offering employees greater opportunities for growth, creating improved deployed attraction and retention. And through the industrial logic of efficiencies associated with procurement and adopting best practices as a couple of examples. Importantly, the merger will enhance our capabilities and capacity to grow especially as compared to our stand-alone business. In short, we are committed to this strategic merger, one we have pursued for more than 2 decades. Today, more than ever, the combination of these two companies will enable us to unlock additional value creation opportunities for our customers and our shareholders, which excites us. To date, we have submitted all joint applications to our regulators in Montana, Nebraska and South Dakota, requesting their approval of our merger, and we're involved in the discovery phase in each state. We also filed our Form S-4 with the SEC last week, with special shareholder meetings scheduled for early April and intend to secure all necessary approvals to finalize the merger within the second half of this year. With that, I'll turn the call over to Kimberly for our financial update. Kimberly? Kimberly Nooney: Thank you, Linn, and good morning, everyone. Our team did an exceptional job of delivering on our strategy and financial commitments for 2025. Together, we are pleased to deliver another year that advanced our track record as a trusted energy partner by achieving the midpoint of our earnings guidance and maintaining our strong investment-grade credit rating while efficiently funding our $900 million capital investment plan during the year. And as Linn mentioned, regarding the merger with NorthWestern Energy, we are working towards a stronger future, including a larger balance sheet that will support our ability to execute with confidence on the needs of our customers with a stable financial foundation. On Slide 10, we provide a bridge comparing results for 2025 to the prior year. We delivered GAAP EPS of $3.98, which included $0.12 of merger-related transaction costs. Adjusting for these costs, we reported $4.10 of adjusted EPS for 2025, an increase of 5% compared to $3.91 per share in 2024. We successfully executed our regulatory strategy, delivering $0.95 per share of new rates and rider recovery margin, along with ongoing customer growth, which more than offset higher operating, financing and depreciation expenses. Weather was favorable by $0.09 compared to a very mild 2024. However, when compared to normal, weather represented an $0.11 headwind we overcame in 2025. O&M was higher by $0.36 per share, which included $0.12 of merger-related transaction costs. Excluding merger costs, our O&M expenses increased $0.24 per share year-over-year, primarily driven by $0.13 of higher employee and outside service expense, $0.08 per share of higher insurance costs and $0.05 of unplanned generation outages. Financing costs increased $0.33 per share which included $0.25 of higher interest expense, $0.19 of share dilution and a benefit of $0.12 per share from AFUDC, driven by large construction projects. We also incurred higher depreciation of $0.15 per share, reflecting new assets placed in service. Further details on year-over-year changes can be found in our earnings release and our 10-K to be filed with the SEC on February 11. Slide 11 presents our solid financial position through the lens of credit quality, capital structure and liquidity. We continue to maintain a healthy balance sheet by delivering credit metrics within our targets of 55% net debt to total capitalization and 14% to 15% FFO to debt, which is 100 basis points above our downgrade threshold of 13%. We issued a total of $220 million of equity in 2025. Given stronger forecasted cash flows from our successful execution of strategic capital investments, regulatory plans and increasing data center load growth, we expect a significantly lower equity need of $50 million to $70 million for 2026. In early October, we completed our planned debt offering, issuing $450 million of 4.55% notes, a portion of which was used to pay off our $300 million 3.95% notes on their January 2026 maturity date. Our next maturity is in January of 2027 for $400 million of 3.15% notes. We maintained strong liquidity with more than $700 million of availability under our revolving credit facility at year-end. Looking forward, our financial outlook is listed on Slide 12. For 2026, we initiated adjusted earnings guidance in the range of $4.25 to $4.45 per share, which represented 6% growth at the midpoint over 2025. Our capital plan, solid financial position and organic customer growth drives strong confidence in our ability to deliver in the upper half of our current 4% to 6% plan while maintaining 2023 as our base year. Our confidence is driven by ongoing customer growth within our jurisdictions, increasing data center demand and new rates and rider recovery on strategic investments like Ready Wyoming and Lange II that will provide long-term benefits to customers. We continue to actively pursue additional data center pipeline demand that would be additive to our 5-year plan and contribute upside to earnings over time through a combination of market energy purchases, contracted generation and utility-owned capital investments in generation and transmission. Slide 13 illustrates our success in delivering on our earnings guidance. In early 2023, we set our 4% to 6% growth target with the objective of holding ourselves accountable to consistently delivering on our financial commitments. With consistency in mind, we maintained our long-term EPS growth target, including our 2023 base year while communicating greater clarity and confidence in the upper half of the range. Slide 14 illustrates our industry-leading dividend track record. In January, we increased our dividend, extending our track record of increases to 56 consecutive years in 2026. We continue to target a 55% to 65% payout ratio. A dependable and increasing dividend is an important component of our strategy to deliver long-term value for our shareholders. I will now turn the call over to Marne for a business update. Marne Jones: Thank you, Kimberly, and good morning, everyone. As Linn and Kim already outlined, we had a remarkable year, providing safe and reliable service to our customers. Operational performance was excellent, as we continue to deliver top quartile reliability and invest in a resilient and reliable energy future, advancing electric transmission and generation projects as well as safety and integrity focused projects for our gas utilities. We advanced regulatory and growth initiatives and continued to work to address wildfire risk. I'm pleased to report on our success this year, which did not come without hard work and dedication. An example of the resilience of our team and system was response to an extreme wind event in December. With winds reaching 100 miles per hour in Rapid City, South Dakota, our teams and mutual aid partners work throughout our communities to restore power safely and as efficiently as possible, replacing damaged poles and lines. Thank you to our dedicated team members and the response from our community and our restoration efforts. I'll start on Slide 16 with our 2025 accomplishments. In December, we completed construction of our 260-mile Ready Wyoming transmission project that energized the final segments on schedule. This is a milestone in our history, and I couldn't be more proud of our team and partners as this project is transformational to our ability to serve customers reliably and cost effectively. It reduces our reliance on third-party transmission, enhances resiliency and increases access to market energy. Our interconnected transmission network will support long-term price stability for our customers and enable continued growth across our service territory. And as a reminder, the bulk of this investment is being recovered through our Wyoming transmission rider. Moving to Slide 17. In 2025, we broke ground on our Lange II project, a 99-megawatt utility-owned natural gas-fired generation resource located in Rapid City, South Dakota. This new resource will replace aging generation facilities with modern Wartsila engines and address updated reserve margin requirements. Major components are already procured in on-site, including 6 reciprocating internal combustion engines, and we are on pace for the facility to be in service in Q4 of 2026. We plan to recover this investment through the South Dakota generation rider. Our Colorado Clean Energy Plan is listed on Slide 18. We obtained approval for our plan in 2024 and works towards finalizing our project contracts during 2025. In November, we received approval of our 50-megawatt utility-owned battery storage project to be placed in service in 2027, which is already included in our capital plan. We are negotiating the 200-megawatt solar PPA and expect to sign an agreement during the first quarter. Slide 19 summarizes our regulatory progress. Over decades of strategic acquisition and investment, we have grown our scale and the diversity of our large electric and gas systems, growing long-term value for the benefit of our customers and stakeholders. From a regulatory perspective, we manage this valuable diversity by executing 3 to 4 rate reviews annually as normal course of business. 2025 was another productive year as we completed 3 rate reviews representing over $52 million in new annual revenue. Within those rate reviews, we also received approval for deferred accounting insurance trackers in Kansas and Nebraska and a new weather normalization pilot program in Nebraska, both mechanisms helped to reduce volatility in future earnings. In December, we also filed a new rate review for Arkansas Gas, seeking recovery of $147 million of new investments since our last rate review in 2023. We are requesting $29.4 million in new annual revenue at a return on equity of 10.5% at approximately 50-50 capital structure, with new rates anticipated in the second half of this year. We are also planning to file an abbreviated rate review in Kansas during the first quarter, as outlined in our last rate review, and is expected to recover capital invested through 2025 at the previously agreed-upon weighted average cost of capital. Looking ahead, we are preparing for a rate review in South Dakota within the next few weeks after holding base rates unchanged for more than a decade. The request will recover our customer-focused investments and increased cost to serve customers since our last rate review in 2014. Given we have operations in both South Dakota and Wyoming for this utility, we will have separate filings in each state. Additionally, we recently received approval for a new tariff for interruptible large load service in South Dakota to serve blockchain growth opportunities. And lastly, in Wyoming, wildfire liability legislation was signed into law in early 2025. In accordance with this legislation, we filed our wildfire mitigation plan in November for commission approval anticipated in March. As a result, we expect to obtain significant liability protections as we remain in compliance with our approved plan. We are also supporting similar legislation introduced in South Dakota. Slide 20 provides an update on our progress towards serving more than 3 gigawatts of data center demand. We have successfully served growing demand for Microsoft hyperscale data centers for more than a decade through market energy procurement with benefits to other customers in the region. We are also serving Meta's new AI data center under construction in Cheyenne, which we expect to transition from construction power to permanent service this quarter. We have built into our plan and expect to serve 600 megawatts of demand from existing data center customers by 2030. Based on current market conditions, demand of approximately 600 megawatts will require investment in generation and transmission infrastructure. Given large load requests, should we reach that level sooner than expected, the need for generation and transmission could be accelerated. In addition to our 5-year plan, our pipeline offers compelling and significant upside. We are making progress negotiating with high-quality customers around a mix of resources to serve this demand under our flexible Wyoming tariffs. Serving the scale of this demand will require a mix of energy resources, including energy procurement, subject to market availability, contracted generation through PPAs, including third-party and customer co-located generation and utility-owned generation and transmission investments. We have an opportunity to earn on total customer demand from each project. However, each customer's need is unique, requiring varying resources to meet their needs, which will impact margins in different ways as we negotiate within the framework of our LPCS tariffs. Where we have investment opportunities, we expect risk-adjusted utility-like returns. And where investment outlays are not necessary, the pricing is negotiated by project and is reflective of speed to market value, operational and financial risks and is intentionally designed to incentivize the utility as a replacement for traditional utility investment. As we work to contract the new load, we are prudently analyzing and negotiating the potential mix of resources to achieve a mutually beneficial long-term solution that protects customers, communities and shareholders. Specific to the Crusoe and Tallgrass project, we are working through several agreements that would ultimately support 1.8 gigawatts of demand. As examples of our incremental progress, we recently filed the CPCN with the Wyoming Public Service Commission in support of a substation for this project and are engaging with all partners involved in solutioning for the mix of resources to serve this demand, including fuel cells. As you can imagine, a project of this magnitude is complex and has many components involving multiple parties. As such, the project contracts must be thoughtfully structured and negotiated to manage operational and financial risk. Keeping with our normal practice, additional details will be provided upon signing of binding service agreements. With that, I will now turn the call back to Linn. Linden Evans: Thank you, Marne. I'm excited about all that we've accomplished as a Black Hills team over the past year with a long list of other wins beyond what we had time to mention today. As you've heard, we continue to consistently achieve our financial commitments and make excellent progress on our regulatory plan, our growth initiatives and our strategic goals. We're already off and running with a consistent focus in 2026 with customer-centric innovation as we pursue our mission of improving life with energy and how we do business and be the energy partner of choice. As we look forward, Black Hills offers a compelling long-term value proposition when considering our customer-focused growth, competitive yield and significant upside opportunities above and beyond our 5-year plan. Additionally, our planned merger with NorthWestern Energy will provide us with the advantages of increased scale and new opportunities as a larger and premier regional electric and natural gas utility company. Thank you for your interest and your trust in the Black Hills team as we partner to grow long-term value for our customers and stakeholders. This concludes our prepared remarks, and we're happy to take your questions. Operator: [Operator Instructions] Our first question comes from Chris Ellinghaus with Siebert Williams Shank. Christopher Ellinghaus: Linn, vis-a-vis the 3 gigawatt pipeline. Can you give us any sense of what proportion that might fall within your 5-year window? Or how much of it is beyond the 5-year plan? Can you give us any color on timings or even geography? Linden Evans: Chris, thank you for the question. I appreciate that. Yes, I'm happy to provide some color as best I can here. We have two existing customers in Microsoft and Meta, they continue to be in our pipeline. We indicated in our opening comments that we would be 600 megawatts by 2030. That's our estimate based upon forecasts and conversations, things of that nature. And then beyond that, we do have the 3 gigawatt plus. And I would say the best way to describe that is, the ones that we are negotiating with the most aggressively might be the right phrase or the most right now -- want to take service in that 2027 time frame. And then realize when they start to take service, it will ramp up. It won't be all at once as they construct, as they expand their data centers, et cetera. So hopefully, that gives you some idea about how we think about it, Chris. Christopher Ellinghaus: Okay. That helps. So obviously, you have a much better sense of what's likely and what the time frames are. And the equipment queue is tight. Can you file CPCNs in advance of having exact specificity of what resources you might need to sort of get that ball rolling and maybe get some greater security for yourself in terms of trying to get in equipment queues and whatnot? Marne Jones: Chris, this is Marne. So I can talk to you a little bit about the CPCN process. So typically, you want to have as many of the facts present as possible when you look at CPCN. As we are working through this, as you mentioned, the equipment queue is tight, we are in those queues. We are starting to get some of those specific details about CPCN. But really, it's also important to recognize to how we'll recover on those -- any of those CPCNs and so all of this really ties together. We're still navigating. This is new territory. Obviously, CPCNs aren't new to us, but new territory as we're working on that speed to market, that we'll be working through how do we bring those CPCNs as quickly as we can. Linden Evans: Just emphasizing what Marne said, we're in the queue. And as importantly, our customers are also in equipment queues, so that's been helpful to us. Christopher Ellinghaus: Okay. That helps. And as far as the NorthWestern merger goes, you've made filings, but have you had any significant interface with the Montana Commission to sort of gauge what their attitude is at this point? Linden Evans: I'd say the best way to describe that, Chris, is we are in discovery stage right now. So we have to be very careful of [indiscernible] things of that nature, but we are in the discovery phase. We're getting the kind of questions that we would fully anticipate and that's going. I'd say just kind of almost according to plan, if you will, certainly according to our expectations about questions that would be asked information that they need to make a good decision. Christopher Ellinghaus: Okay. Maybe one last question about data centers since that's a topic -- Can you give us any sense of the scale or numbers of data centers in your pipeline? Or is there a bunch of -- I guess this is objective of what's large to you. But is there a bunch of large ones? Are there -- are they sort of moderate scale? Can you give us any sense of how many candidates there are in the queue? Marne Jones: Chris, as Linn mentioned upfront, we do have our two customers today, Microsoft and Meta, both are looking for potential opportunities to expand. We've talked a bit about Tallgrass, Crusoe. I would say, in general, that's a big chunk of what we consider as our pipeline. Obviously, there's some others out there, too, but that's the big chunk of it. Linden Evans: And then I would add one of the advantages of Wyoming and Cheyenne in particular, where we're seeing a lot of these data centers, bloom and blossom, is the fact that land is relatively available, and it's relatively inexpensive. So from our perspective, quite a bit of land is being acquired for these. So I think they're going to be large hyperscale data centers for the most part. Operator: Our next question comes from Andrew Weisel with Scotiabank. Andrew Weisel: Unsurprisingly, a couple more questions about the Crusoe-Tallgrass project. First, based on the regulatory filings, and Marne, you alluded to some of this in your comments, but you're proposing to build some transmission infrastructure, including this Robinson substation and some transmission lines to connect it to your grid. And you're proposing a pretty unique setup where the customer would pay for construction to help alleviate risk and cost to the Cheyenne Light customers. I think that's a great setup. My question is, given this interconnection, do you see -- do these assets essentially ensure that the entire data center project will be "grid connected?" And therefore, would all related spending qualify for the LPCS tariff, is that your expectation? Basically, I just want to understand how this would be applied. You talked about certain fees being negotiated. How should we think about what's objective versus subjective maybe? Marne Jones: Yes. Andrew, coming through, I want to make sure I got your question here, so I'll give it a shot. From a microgrid management fee perspective, we really apply that to peak demand. So -- as I think all of us had mentioned, there's 3 different types of resources we can use to serve that type of load and each type of resource that we use comes with a different type of a microgrid management fee or a typical utility or risk-adjusted return, that's really that the fees that are charged based on their peak demand. Linden Evans: And Andrew, I believe -- Andrew, sorry to interrupt you, but I think further to that is these networks to date as we -- everything is being negotiated. Not everything is cemented, obviously or we'd be making other kinds of announcements. But much of this -- these megawatts, this energy, yes, it's tied to our system, if you will, to date. Andrew Weisel: Okay. That's helpful. I guess maybe if I could get a little more specific on the generation side. You haven't talked about generation needs as so far, it's not your project and you haven't announced contracts, of course. But Tallgrass has publicly talked about investing $7 billion of energy infrastructure in your service territory. You alluded to fuel cells. And of course, a big utility had an SEC document about $3 billion of fuel cells in Cheyenne. Some investors are confused about whether these would qualify for utility fees and the LPCS tariff. So I guess maybe could you just elaborate? Is there anything about fuel cells or anything else? How should we think about all those billions of dollars and whether or not that would apply to your fee structure? Marne Jones: Yes, Andrew, so as I mentioned, the resource mix is still being evaluated and how ultimately we would serve that load. As I noted, and you're very familiar with, as we use market that's more reliant on -- in lieu of building when we're looking at contracted or co-located generation that comes with a different type of pricing. And certainly, if there's opportunity to build, we would look at that through the lens of risk-adjusted utility return very similar to what we do today from a regulated rate base perspective. So all of that goes into play in the pricing, that pricing has been what is basically applied to the peak demand. Andrew Weisel: Okay. Okay. And I guess, going back to the T&D side or transmission side, really, are there other assets that you're looking to fast track to accommodate this or other big data center customers? Should we expect more filings like that Robinson substation filing? Marne Jones: As we've talked in the past, that 500 and 600 -- 500 to 600 megawatts, we believe, is going to require some additional investment beyond that time frame. So whether it's this project, other projects, we certainly see there's opportunities for additional investment beyond our current plan based on this pipeline. Andrew Weisel: Okay. Great. Maybe one last one and answer as best you can, I guess. You obviously still have not yet signed an energy service agreement with the hyperscaler for the Crusoe project. Will be as patient as we can. My question is they're looking to move pretty quickly and the timing of your CPCN filing calls for in-service, I believe, by March of next year, which is very fast. By when would you need to sign and announce something to keep everything on track? Is there some kind of time frame we should be watching for on the calendar? Marne Jones: We do know -- I mean there's intention from the customer, I think, to begin taking service in Q1 of 2027. So obviously, we are working in alignment with them as well as all the parties. We want to meet both of our goals. Operator: [Operator Instructions] Our next question comes from Ross Fowler with Bank of America. Ross Fowler: Hopefully not beating a dead horse here, but I just wanted to go back to kind of what we factually know at this point and kind of walk through some numbers and make sure my understanding is correct. So we have 600 megawatts currently in the plan. And we know that, that is 200 megawatts from Microsoft. Is the other 400 megawatts of that, the meta site or is there something else in that gap? Linden Evans: Ross, I think I'll step back and correct you on that. We have not disclosed nor has Microsoft disclosed the number of megawatts that they take from us. But we can see on a combined basis for both Microsoft and Meta, we anticipate it'll be 600 megawatts by 2030. Hopefully, that's helpful. Ross Fowler: Okay. That is helpful. And then we know that Meta's data center is in Wyoming County. And so we know some piece of the 600 is in Wyoming County. And there's about 1,150 megawatts of generation in the interconnection queue filings in Wyoming County. So the rest of that beyond whatever I estimate Meta might be of the 600, where is that coming from? Is that the Tallgrass site? Is that some other side? Is that -- I'm just trying to scale things based on what we know from public filings? Marne Jones: So yes, Ross, we've shared, I guess, kind of what we can share. We are still under negotiations. We're still determining resource mix. As with any queue, you're going to have a lot of parties in queues. And so these are things that we'll continue to work through as we firm up our mixes. Linden Evans: And Ross, I might add to that. I'd ask you to remember that both Meta and Microsoft are taking market energy. And therefore, the megawatts of interconnection don't always connect if you will, or add up. Ross Fowler: Okay. All right. So it's not additive because they're taking market, [indiscernible] And then the 4% to 6% EPS CAGR, right, through '28, that is inside or I should say, the 4% to 6% EPS CAGR includes that 10% EPS contribution. It's not on top of the 4% to 6%, right? It's within the 4% to 6%. Marne Jones: You're correct. Operator: I would now like to turn the call back over to Linn Evans for any closing remarks. Linden Evans: Well, thank you very much for your questions. Thank you very much for your interest in Black Hills Energy and Black Hills Corporation. I want to once again say thank you to our team for a fantastic 2025 and thank you for leaning into 2026, and we appreciate all of you attending today and have Black Hills Energy Safe day. Thank you. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the February 5th, Rogers Sugar Inc. First Quarter 2026 Results Conference Call. [Operator Instructions] Before we begin, please be reminded that today's call may include forward-looking statements regarding our future operations and expectations. Such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. Please also note that we may refer to some non-IFRS measures in our call. Please refer to the forward-looking disclaimers and non-IFRS measures definitions included in our public filings with the Securities Commission for more information on these items. A replay of this call will be available later today. The replay numbers and passcodes have been provided in our press release, and an archived recording of this call will also be available on our website. I'll now turn the call over to Mike Walton, President and CEO of Rogers Sugar. Michael Walton: Thank you, operator, and good morning, everyone. Thank you all for joining us today to discuss our results for the first quarter of 2026. I'll begin by summarizing our results for the quarter with updates from both our Sugar and Maple segments. I'll also touch on the environment and how we are navigating market developments and positioning Rogers Sugar for the months ahead, including an update on Our LEAP Project. After my remarks, J.S., our Chief Financial Officer, will provide a deeper dive into our financial performance for the first quarter. I will then come back to discuss our outlook for the remainder of 2026. We will conclude with a summary and then open the line for questions from the analysts. As usual, we have an investor presentation accompanying this call. This presentation is available on the Investors section of our website for those who want to follow along. Our results in the first quarter underscore the power of disciplined execution and a clear strategic vision. Despite the evolving market dynamics around trade policy and tariffs, we delivered strong earnings, advanced our LEAP project and continue to strengthen the foundation of our business. This performance reflects on our focus on operational agility, cost management and above all, an unwavering commitment to serving our customers. At the same time, we remain mindful that the external environment is far from settled. Ongoing shifts in global trade policy and the upcoming CUSMA negotiation continue to introduce uncertainty for the Canadian economy, which ultimately could impact our industry and our markets. While we are confident in our ability to adapt and respond as we have done for close to 140 years, we know that vigilance and flexibility will be essential in the months ahead. With the momentum we have built in recent years and the dedication of our Sugar and Maple teams, I am confident that Rogers Sugar is positioned to meet the challenges ahead and continue to lead in both of our business segments. Now looking at the results of our first quarter, we are proud to report consolidated adjusted EBITDA of $47 million, reflecting an 18% increase year-over-year. Adjusted net earnings reached $25 million, up by 27% from last year. We generated $89 (sic) [ $89.3 million ] in free cash flow in the trailing 12 months, an increase of about 4% from last year. Our internal cash generation supports ongoing investment in our business and consistent returns to shareholders. Although these strong first quarter results were somewhat boosted by some favorable nonrecurring and timing items in comparison to last year, they do show the stability and resilience of our business operating model. They demonstrate the effects of our strategic focus over the last several years on delivering consistent profitable results. I am pleased with the performance from both of our business segments, which support the strong position of financial health we enjoy today. We have the people, the know-how and the resources we need to meet various challenges while moving forward with the delivery of our LEAP project. Turning to Slide 5. Throughout the first quarter, we saw a solid performance in both our Sugar and Maple segments. Demand in our core markets remained steady with our teams adapting quickly to shifting customer needs and identifying new opportunities for growth. Global food inflation and consumer health focus continue to influence purchasing patterns affecting global sugar demand. As a result, food and beverage producers in certain segments have adjusted their buying patterns in response to consumer behavior. Although we haven't seen a material direct impact on such changes in the Canadian market thus far, we view these changes as part of the normal cycle with overall domestic demand for sugar remaining stable over time. We are staying agile and focused, working closely with customers to support their evolving needs. Years of experience have taught us that disciplined execution, delivering quality products and strong customer service help us navigate any environment. Our Maple segment continued to build momentum. The incremental sales volume is a good reflection of the recent increase in global demand for maple syrup and maple-related products. Our gross margin percentage has improved from the slight dip seen in the second half of 2025. The quality and availability of the previous crop, coupled with our active syrup procurement activities supported our ability to deliver reliable results. Looking ahead, we will keep working with producers to ensure steady supply as demand is expected to continue to grow. In summary, we are beginning 2026 with a strong foundation, a clear effective strategy and confidence in our ability to create value even as market conditions continue to shift. This quarter's results show the result of our Rogers refined model. Through ongoing improvement, focused investment and disciplined cost control, we keep our operations resilient and ready for change, including challenges from global trade shifts. Rogers Refined is reflected in our team's commitment and agility. Their dedication to our shared mission enables us to meet uncertainty head on and act on new opportunities as they arise. Now let me update you on our LEAP expansion project in Eastern Canada. This quarter, we continued to progress on the construction activities related to the LEAP project, which is embedded in our strategy to support long-term growth and enhance our supply capabilities in Central Canada. The construction site in Montreal remains active with significant progress on facility upgrades, electrical connections and the integration of new refining technology. Our teams and contractors are working closely to keep the project aligned with our revised schedule. We are seeing tangible results as key infrastructure elements take shape while we are planning the commissioning process with suppliers and business partners. We continue to target a start-up date in the first half of 2027. This schedule reflects our focus on careful execution, taking into account current market conditions and our commitment to maintaining the highest standards of product quality. In addition, we are carrying out the LEAP project with an unwavering commitment to safety. Protecting our people remains our top priority, and we are dedicated to upholding rigorous standards and best practices throughout the organization. Coordinating a major capital project alongside a plant operating at capacity is complex, but our experience and planning are enabling us to advance construction without disrupting our essential core business. Our estimate of the cost to complete LEAP is unchanged, and we are confident that this expansion will boost our ability to serve customers more efficiently throughout Central Canada. By increasing our Eastern refining capacity, we can respond faster to demand shifts, reduce transportation requirements and strengthen our overall supply chain. Now I'll turn the call over to J.S. for a financial review. Jean-Sebastien Couillard: Well, thank you, Mike, and good morning, everyone. I will begin my financial remarks on Slide 10 with a high-level review of consolidated results before we get into the details of the 2 segments. Adjusted net earnings per share in the first quarter amounted to $0.19 compared to $0.15 in the first quarter last year. The increase was due to a favorable variance of over $7 million in adjusted EBITDA. This increase of 18% came mainly from the Sugar segment, where our business benefited from some timing and nonrecurring items while relying on strong sales margin. Free cash flow for the trailing 12 months totaled $89 million (sic) [ $89.3 million ] consistent with the same period last year. Overall, though, if we exclude timing differences in the payment of tax installments, free cash flow improved by over $11 million. The improvement was the result of stronger operating performance and tight control over working capital. This strong financial performance was delivered in a quarter when revenues declined year-over-year. Revenues for the quarter were just short of $300 million, down from $331 million in the same period last year. The reduction was largely due to a lower average Raw #11 sugar price and lower sales volume in the Sugar segment, partially offset by favorable sales volumes in the Maple segment. Although important in the overall performance of both of our business segments, revenues and associated sales volume are not the primary drivers of our strategy. Our focus remains on delivering what matters most, consistent profitability as measured by adjusted EBITDA and robust free cash flow. Now let's take a moment to review the individual business segments, starting with our Sugar segment, which drives about 85% of our profitability. Sales volume was 175,000 metric tonnes during the quarter, a reduction of about 21,000 tonnes from the same quarter last year with a significant portion of the reduction attributable to lower export volumes. The decrease in export sales is mainly related to the current market dynamics, which do not favor the sales of refined sugar of Brazilian origin in the U.S. Although we are disappointed with the volume reduction, we want to point out that this sales category usually has a lower contributed margin. We also experienced a reduction in industrial sales with a nonrecurring production issue at one of our key customers. This is the same issue that impacted the last few weeks of the fourth quarter of 2025 and has since been resolved. Overall, revenues in our Sugar segment declined by about 15% in the quarter to $226 million, reflecting the decline in volumes that we have just discussed and a drop in the price for Raw #11 sugar. That being said, our refining margin continued to be healthy and mitigated the decrease. Despite these headwinds, we were able to report improved profitability in the quarter. Adjusted gross margin per ton rose to $304, an increase of $79 from the same period of last year. A significant portion of the increase was attributable to favorable timing variances and nonrecurring items related to procurement activities, raw sugar freight and major maintenance programs. The positive adjusted gross margin was also supported by a higher sales margin associated with our disciplined pricing strategy. Adjusted EBITDA for the Sugar segment reached $41 million, an increase of $7 million over last year. This performance underscores our focus on protecting margin and managing through volatile market cycles. Distribution costs increased slightly, reflecting an unexpected adjustment we made through our supply chain to meet the needs of our customers. Administration expenses were also slightly higher, mainly reflecting market-based increases in compensation and employee benefit. Overall, the Sugar segment delivered strong results in the first quarter, setting up the foundation for the remainder of 2026. The Maple segment also delivered strong financial results in the first quarter, reflecting strong execution and healthy market demand. Revenues increased by 8% to $72 million, driven by higher sales volume as we continue to expand and take advantage of the growing global demand for this beloved sweetener. Interest in maple syrup remains robust, supported by positive customer trends and effective supply management. Adjusted EBITDA for Maple was $5.8 million, a slight improvement over the same period of last year as we maintain our overall profitability through disciplined operations. Sales volumes were 8% higher in the first quarter, supported by incremental demand from some of our established customers. Adjusted gross margin percentage at 10.6% was consistent with our recovery expectation and reflected the impact of consistent product mix sold during the period. If you recall, margin dipped below 10% in the second half of 2025 as we faced challenges related to mix of products. Over the last few months, we have strengthened our sourcing strategy and are expecting a more stable adjusted gross margin percentage for our Maple segment going forward. Looking ahead, we remain focused on supporting our producers' partners and maintaining reliable access to supply as global demand for maple syrup continues to grow. Our strong and stable performance in Maple reinforces the value of our diversified platform and positions us well to meet growing demand in this segment. From a capital allocation standpoint, we remain disciplined. We invested in our future by allocating $25 million to capital expenditures with the bulk of that spend supporting the ongoing progress of our LEAP project. This investment reflects our joint commitment to growth and operational excellence. We continue to support the LEAP project with a diversified funding approach. Our financing plan for the project supports the expected cost, which continues to range between $280 million and $300 million. In January, we further enhanced our financial flexibility with a successful issue of our Ninth series convertible debentures. Following the issuance of the Eighth series last year, this issue completes the refinancing of the Sixth and Seventh Series, which matured in 2024 and 2025. This move anchors our liquidity position and ensures we have the resources to continue to fund our strategic priorities. Our balance sheet remains strong, supported by ample available credit and a robust free cash flow profile. We maintain our quarterly dividend, reflecting our ongoing commitment to consistent shareholder returns. This approach positions us well to execute on our growth strategy while delivering value to our investors. With that, I will turn the call back over to Mike to provide a summary and outlook for 2026. Michael Walton: Thank you, J.S. Now looking at the remainder of the year. As 2026 progresses, we recognize that the business environment is still complex and dynamic. Within that context, I am confident in our ability to adapt, thanks to our vigilant approach and decades of experience in managing shifting market trends. Our teams are ready to respond quickly as circumstances evolve. Central to our success is a disciplined go-to-market approach. We are selective in how we allocate resources and pursue opportunities. Our main objective continues to be developing and nurturing long-term partnerships that deliver sustainable profitability. Our commercial team remains focused on meeting customer demand and understanding our target markets, ensuring every decision supports our long-term strategy. While tariffs and trade developments have had minimal direct impact so far, we are fully prepared to adjust course as conditions indicate. We will move forward by fostering strong customer partnerships, being rigorous about cost control and investing strategically to safeguard our resilience and our competitiveness. The progress we have made over the last several years has led to meaningful gains in profitability and execution. Our goal for 2026 is to continue along the same path and deliver consistent solid performance. Beginning with the Sugar segment, our current forecast for sales volume for the year is around 750,000 metric tons. This forecast is at the lower end of the range we provided at the end of the fourth quarter and represents a reduction of approximately 4% compared to 2025. The reduction in volume is mainly impacting lower-margin export sales as the current trade conditions for Brazilian origin refined sugar are not favorable. We expect demand from our domestic customers to be stable, and we continue to prioritize domestic sales while being alert to export opportunities as market evolves. Our beet harvest at Taber was completed in November, and we are now in the late stages of processing the beets with expected completion by the end of this month. We anticipate the 2025 crop to deliver approximately 100,000 metric tons of beet sugar, consistent with our earlier expectation. Across all our facilities, production and maintenance costs will edge slightly higher this year, driven by market-based cost increases, annual wage increases from employees. We are committed to managing our costs responsibly to maintain our production assets and ensure reliable operations. Distribution costs are expected to increase slightly as we continue to transfer sugar between refineries to meet customer demand, pending the completion of our LEAP project. Administration and selling expenses are expected to increase slightly in 2026 compared to 2025, reflecting general market increases and incremental costs associated with the planned review of the Canadian International Trade Tribunal scheduled for the second half of 2026. Interest costs will be somewhat higher as we access the funding we have put in place to complete our LEAP project. For Maple, we anticipate another strong year in 2026, continuing the steady growth over the past few years. We expect sales volumes to reach 56 million pounds, an increase of 5% from last year, driven by ongoing strength in global demand. Thanks to a favorable maple crop in 2025, we have been able to meet the expected demand for maple products through most of 2026. We expect to meet any excess volume requirements with [ syrup ] from the 2026 crop. Both segments reflect our best view of current market trends, but we recognize market dynamics can change rapidly, and we're ready to adjust as needed. On the CapEx front, we plan to allocate approximately $27 million across our core businesses this year, excluding LEAP-related spending. LEAP will continue to be our major initiative for 2026 as we press forward with construction and installation of new refining and logistics capacity. Balancing this project with day-to-day operations is challenging but essential to ensure uninterrupted service to our customers. In summary, we started 2026 on a strong note, continuing to build on our momentum in profitable and sustainable growth. Over the past 4 years, we have transformed Rogers Sugar, and our recent results reflect the impact of that evolution. Our focus remains unchanged, maintaining strong partnerships with our customers, prioritizing safety and continuous improvement, managing cash carefully and driving progress on the LEAP project to support our market. These efforts are anchored by our strong balance sheet and financial discipline, which give us the resilience and flexibility to meet the market demands and create long-term value for our shareholders. In closing, I want to recognize our teams at every site for their dedication and commitment to excellence. Your focus on customer service and workplace safety is vital to our continued success. I also extend my thanks to our customers and business partners for their trust and support as we move forward together. I'll now ask the operator to open the line for questions from the analysts. Operator: [Operator Instructions] Your first question comes from Michael Van Aelst with TD Securities. Michael Van Aelst: I want to start on the sugar side on the volumes. So the customer that had their own issues, did any of that flow into Q2? And is the lost volume something that you expect to be recaptured or are those lost sales by the customers, so you won't be able to recapture that? Michael Walton: Yes, Michael, the -- so first part answer to your question is, no, the problem didn't go into Q2. It lagged into Q1 only. And they are back in production now and resolve their issues. And as far as making up the volume, these kinds of plants are running at capacity. So not likely, although who knows, they could pick up something from one of their other sites that we would be able to supply in new supply and new demand. But we expect it to pick those volumes up across other pieces in the market. Market gives you lots of opportunities and puts and takes through the year, as you know, and that's why we're still staying in our range of the $750. Michael Van Aelst: Okay. And then you talked about improved average pricing. How much of that was just from mix like exports falling versus price increases that actually helped the margin? Jean-Sebastien Couillard: Mike, it's Jess here. It's a combination of both. I think the reduction in export had some impact on it, but we also have seen some continued strong pricing in the market. And so probably half and half. Michael Van Aelst: Okay. Okay. And then so if I look at the gross margin differences because there's some pretty severe nonrecurring items this quarter. So the timing of the production and recovery costs, is that -- was that just pushed into Q2, and so we should just reverse that in Q2? Jean-Sebastien Couillard: Yes. So a portion of the timing is going to be in Q2. For example, the shutdown, which is our annual shutdown happened in the first week of Q2 instead of the last week of Q1. And so that will be move into the next quarter. And so the rest of those nonrecurring, obviously, that's not going to change. Michael Van Aelst: Okay. So yes, exactly. So the $8 million should come in Q2? Jean-Sebastien Couillard: No, not all of it. So a portion of it, I would say half of it will come into Q2. The $8 million is made of nonrecurring and timing. So I'd say 50% of it is nonrecurring. The rest is onetime. Michael Van Aelst: Okay. All right. And then the supply chain issues on the sugar distribution side, was that tied to this customer? Or is there some -- was there something different? Jean-Sebastien Couillard: No, it was something different. So we had some issues, and we had customers that had to go pick up at a different location. And obviously, when this happened, we are compensating customers for. Michael Van Aelst: So can you explain what those issues were and how they were resolved? Jean-Sebastien Couillard: Yes. We had some technical issue with some of our railcars. And so what we would end up happening is we had customers supposed to pick up in Toronto that came in pick up in Montreal. That has been resolved. We fixed those railcars. Operator: Your next question comes from John Zamparo with Scotiabank. John Zamparo: I wanted to ask about the volume guide on the sugar side, the reduction to the lower end of the previous guide. Is that primarily from the decline you saw in Q1, whether that's export specific or related to that one customer you referenced? Or is there something related to Qs [ two through four ] that's influencing that guide change? Michael Walton: A bit of both, John. The export business, as we've reported in the past on a direct sugar basis is less than 10% of our total volume. And so anything that we were producing at that time that was a Brazilian origin didn't cross into the U.S. because of the new tariff. So some of it -- most of it was in the first quarter and our customer event was in the first quarter. And in Q2, there'll be less impact based on those export contracts because we've already repositioned them. John Zamparo: Okay. Understood. And export challenges aside, you said you now expect domestic sales growth to be stable against the prior guide of growing modestly. So again, is that related purely to Q1? Or is there anything incremental to that? Michael Walton: No, it's just a stable outlook long term for the rest of the year. It's consistent with what we're seeing globally across all markets, whether it be in Europe, Brazil, United States or Mexico. It's -- we've seen the cycle, the commodity cycle in sugar and it's just slightly lower coming in the forward months. John Zamparo: Okay. And there was a comment about lower confectionery demand in Q1 due to timing. Can you add some more color there? Michael Walton: Yes. We had -- we saw all of us for the last 18 months or maybe 24 months, the spike in cocoa prices globally and the impact of that inflation in unit costs in those products. And so we saw pricing -- a lag in the pricing coming through to retailers. And so that started showing up late in '25 and into Q1, and it started to reduce sales input at the retail side for those products. John Zamparo: Right. Okay. Understood. And then last one, and I'll get back in the queue afterwards. The $4.5 million in nonrecurring gains, J.S, you referenced penalties received in pricing adjustments. Can you elaborate on that? Jean-Sebastien Couillard: Yes. So we got some -- last year, we had some contamination, for example, on some of the vessels, it's been necessarily something that happened to different sugar refiners and sugar coming from Brazil. So we got compensated for that. So this thing happened in '25, obviously, increased somehow our production costs, and we got compensated in the first quarter. So that's part of the onetime. And on the freight, it's market pricing adjustment for freight. John Zamparo: Okay. So just to clarify, there was $8 million from the last question, $8 million in total cost, half of that was onetime, half of that was timing and then the $4.5 million, that's the gains, that's purely onetime. I got that right? Jean-Sebastien Couillard: Yes, that's good, that's a fair comment. Operator: Your next question comes from Stephen MacLeod with BMO Capital Markets. Stephen MacLeod: I just wanted to circle around. I was going to ask about nonrecurring, it sounds like we've already figured that out. Just with respect to like putting the kind of the moving parts together around the timing and gross margin per metric tonne potentially shifting into fiscal Q2. Would you still expect kind of on a full year basis, sort of a stable adjusted gross margin per metric tonne outlook? Jean-Sebastien Couillard: The short answer is yes. I think we are -- we've seen some slight improvement in adjusted gross margin and a lot of it is related to the mix of the products that we're going to sell. So if you're removing some of the export sales that are usually carrying lower margin, and the rest, you will -- your per metric tonne should increase. So last year, we did $224. Obviously, the $304 is a bit of an outlier in the first quarter. So -- but we're still -- overall, we're expecting to do better than last year on an adjusted gross margin per metric tonne basis, and that's mainly because of the mix of what we're going to sell. Stephen MacLeod: Right. Okay. Okay. And then just turning to the Maple segment. Would you also expect kind of that margin to be sort of stable year-over-year? Are you still kind of expecting margins to be in that kind of 8% range on adjusted EBITDA? Jean-Sebastien Couillard: Well. Yes, on adjusted EBITDA, yes, sorry. So our adjusted gross margin is at just about 10% right now. So between 10% and 11% is usually our target. And usually, it translates to around an 8% EBITDA margin. That's our forecast for the rest of the year. Stephen MacLeod: Okay. That's great. And then maybe just finally, just ahead of the CUSMA negotiations. I guess, is there a way to get a sense of sort of how you're feeling about those negotiations heading into the process? Just wondering if you can get any color there. Michael Walton: Yes. Sure, Stephen. It's a murky piece of ground for everybody in North America, I think, these days. As we've said all along, we've been around for 140 years, and we've seen these kinds of trade disputes come and go. Fact of the matter is the U.S. market is a deficit market on sugar production. It has to import sugar or sugar-containing products. And the manufactured goods that we're talking about are very complex production lines and production systems, and it would take a long time to make any meaningful shifts to move plants out of Canada as an example, as some people fear. We don't see any meaningful change there. And we're optimistic that seeing the impacts of these kinds of moves -- immediate impact on inflation and consumers and especially in U.S. or Canadian markets, that probably would temper any massive disruption. But that's an opinion of one. We'll see how it goes. We'll remain focused on it. We'll remain in the background advocating for what's right for the long term for our industry and hope that calmer has prevailed in the end. Operator: [Operator Instructions] Your next question comes from Nathan Po with National Bank. Nathan Po: Congrats on the quarter. So on the LEAP project, it's mentioned in the presentation that start-up is going to be in line with expected demand growth. Should we be inferring that there is other customer capacity aiming to be ramped up around that time as well or new customer wins are over the horizon? Or is that just a general comment? Michael Walton: Well, it's a bit of both. We've seen pretty steady growth in the refined sugar and SCP production in Canada over several years. And so that was the impetus for doing LEAP to begin with. And we expect to see that growth as return once we come out of the higher inflation cocoa market, which we've already seen happen and cocoa prices are down substantially. So we expect that growth to continue. And as you know, there's been many public announcements, several of them in Ontario-based area of new manufacturing capacity coming into Canada from foreign jurisdictions, and those plants have yet to start construction. So we're pretty optimistic based on what we know and what we've heard our major customers are doing on the long term and sugar containing product manufacturing in Canada. Nathan Po: All right. That's great color. And regarding the volumes and the onetime adjustments heading into Q2. How does this affect your working capital seasonality in 2026? Jean-Sebastien Couillard: We're not expecting any major impact on our working capital. So our -- if you look at some of the big impact on our working capital is always a level of inventory that we're carrying, especially on the raw sugar side. And we have adjusted our -- we've adjusted the delivery of our vessels to mirror the volume of sugar that we're expecting to sell. Operator: Your next question comes from Frederic Tremblay with [ Desjardins ]. Frederic Tremblay: Just maybe one clarification on the sugar volume outlook. That outlook implies a 4% year-over-year annual decline. Q1 was down 11%. I'm just -- maybe it would be helpful to get a bit of color on sort of the pace of improvement on year-over-year trends there and maybe the key drivers of that. I know, Mike, you mentioned those export volumes being repositioned maybe starting in Q2. So if you could just maybe provide a bit more color to help us understand how that's going to evolve over the year to get to that full year guidance that you've provided? Michael Walton: Yes, Fred, there's a lot of moving pieces, as you can imagine. If we all just look back, it's only been 370 days, I think, since we entered this new world of trade chaos. And we've navigated amazing through this with constant pivots and adjusting to what our plans are. We put a plan together now to finish the balance of the year that delivers this range that we've put together on the volume. Some of that includes the swapping of some cargoes so that we'll swap out a Brazilian origin for a non-Brazilian origin so that allows us to continue to produce some products and deliver our contracted volumes. So as I said, there's many things going on as we've proved over the last 4 years, this is a group that knows how to pivot and maximize the opportunities and take advantage where we can. Operator: Your next question comes from Michael Van Aelst with TD Securities. Michael Van Aelst: So just circling back on Sugar. So you talked about lower volumes for the year and slightly higher gross margins, but then also some inflationary pressures in distribution and min. So do you -- I think last quarter, you said you expected sugar EBITDA to be roughly stable this year. Is that something you still expect? Jean-Sebastien Couillard: I think we might slightly be better than what we did last year, and that's because some of the onetime that we received in the first quarter will actually stick. So if you look at the results of the first quarter, yes, there are timing issues, but there's also some nonrecurring impacts that are going to stick on our results for the year. So I think we should expect a slight improvement based on the Q1. I think for the remainder of the year, I think it would be aligned to what we were initially expecting. Michael Van Aelst: Okay. And then on the maple side, you touched on -- you commented that you've changed your maple sourcing, and that's going to help stabilize gross margins. Can you explain what you did and so -- and how that's going to keep your margins a little more stable going forward? Michael Walton: Yes. So Michael, we haven't changed our sourcing. We've doubled down on our activity and making sure we hold syrup. Like many of our competitors, we bought inventory that was available through the PPAQ reserve. And so we hold that to ensure we cover our sales. And we're in the season now where we're all meeting with producers and we're making sure that the producers know that we're a well-capitalized company, and we're available to take the syrup as the crop comes off. And so just continuing like we do on every other sector of our business, building relationships with growers, whether they beet or cane growers in Brazil and Central America. So -- we're just applying our good disciplined approach to long-term business partnerships and making sure that people know who we are. Operator: [Operator Instructions] Your next question comes from John Zamparo with Scotiabank. John Zamparo: Mike, I think in your prepared remarks, you referenced that you're seeking out new opportunities for growth. And I wonder if you can unpack that a bit. I presume you're always trying to do that, but I wonder if there was anything that led you to make that comment in this quarter. Michael Walton: Yes, sure. We -- it seems to be what everybody is talking about in Canada these days, John. And so -- but we've been doing it. The Maple business is distributed in over 50 countries. So this is not new for us. We've been in the Maple business over 7 years, and we're looking at those strong relationships and partnerships we've developed in those other countries and seeing where we can leverage it against other things. As a great example, we just had our commercial team and some others in Dubai on a trade mission and attending the Dubai Food Conference. So we're not going to sit on our laurels and wait for markets to come and correct themselves on our doorstep. We're going to theirs like we always have and we'll continue to do. John Zamparo: Okay. I appreciate that example. And I wanted to ask about pricing. You said that was contributing to some top line growth in the quarter. I wonder what level of resistance or how you'd characterize the resistance you're seeing to inflation, even if it's driven by commodities, there's a good amount of pushback from consumers. There's a good amount of talk in the media about this. I wonder how those conversations go on passing through commodity-driven pricing. Michael Walton: Yes. We're very fortunate in one major respect is that commodity # 11s are down to 4-year lows. And because, as I said earlier in the call, we've got a slowdown globally on demand and a strengthening production side. So we're going to see lower commodity levels going forward, which really helps negate the food inflation that has anything to do with sugar. And we've seen cocoa prices come down dramatically in the last 6 months and more recently in the last 2 or 3 months, more correction. So on the food inflation items that impact specifically sugar-containing products and the high sugar content goods like we like to be in, we're seeing things improving rapidly on the cost side. John Zamparo: Okay. And then last one on the major maintenance that fell into FQ2, 2 parts to this. Is that the typical amount? Is it annually about $8 million? And does that change once LEAP is completed? Do you still incur that level of maintenance expense? Or does that decline once LEAP is done? Jean-Sebastien Couillard: Yes, John, this is J.S here. So $8 million is not all related to maintenance. So there's a portion of it, I'd say, probably 50% is related to that. And our maintenance program is spent throughout the year. What we didn't spend in the first quarter was what we have -- we have one major shutdown every year, and that didn't get spent and a portion of that amount didn't get spent in the first quarter, and it got spent early in the second quarter. So we're not seeing Obviously, when need comes along, you will continue to have the same type of maintenance program on the current facility. And obviously, we'll have incremental maintenance because the new assets will have to be maintained. And so we will see some incremental maintenance that should be commensurate with the amount of volume that we are going to -- that we're going to push through the system. Operator: There are no further questions at this time. I will now turn the call over to Mike Walton for closing remarks. Michael Walton: Well, thank you all for joining us today, and thank you for your continued interest in Rogers Sugar. Of course, Rogers Sugar is the only 100% Canadian owned and operated sweetener company in Canada, and we look forward to seeing you in Q2. Have a good day. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Linda Hakkila: Hello all, and welcome to follow Konecranes' Q4 2025 Results Webcast. My name is Linda Hakkila, I'm the VP, Investor Relations here at Konecranes. And with me today, as our main speakers, we have our CEO, Marko Tulokas; and our CFO, Teo Ottola. Before we proceed, I would like to remind you about the disclaimer as we might be making forward-looking statements. As per usual, we will first start with presentations, both from our CEO and CFO. And after that, we will start the Q&A session. We are happy to answer your questions through the conference call lines. But now without any further comments, I would like to hand over to our CEO. Marko Tulokas: Thank you, Linda, and good afternoon from cold, but very sunny Helsinki. I'd like to start with some general statements. It was a really very strong year for Konecranes, and I'm very, very proud of our team and very proud to be part of the Konecranes team, particularly in a year like 2025. Konecranes has a very sound business model. We've been executing our strategy. And that, of course, in this sort of environment has really improved -- shown that an improved resilience in our results. There was a very uncertain environment last year. We focused on executing our strategy and focused on the most important things. The year started on uncertain terms, but we acted fast and early, whether it's on pricing, focus on execution or tight cost control. Towards the second half of the year, the market environment stabilized and particularly in the delivery side, it was visible, and that helped us to finish the year strong. And now when we look at towards 2026, we have a good order book in place, the structure is solid and our strategy for 2026 has a very good road map in place. So I'm really confident for year 2026. So now let's look at how the year turned out and then also how the quarter 4 look like. Throughout the year, the demand environment stayed positive overall. There was a lot of positive development in many customer segments and Konecranes' broad presence in different customer sectors and geographies, of course, helped us in this sort of volatile environment. Our orders were very strong, particularly in Port Solutions and Industrial Equipment. So we grew almost 12% in 2025 in comparable terms compared to 2024. The demand on industrial service instead was quite a tough demand environment. But even in this environment, we were able to strengthen our agreement base. We took very good care of our pricing and also made sure that we adjusted our cost base to the prevailing conditions. We also took care of our margins and our cost structure, good execution in our project business, and we continue to roll out our products according to our strategy. And that, of course, meant that we were able to complete the year with almost 1 percentage point improvement in the comparable EBITA at 14%, record high level. Moving on to quarter 4. And in quarter 4, our orders were also very good. So we continue very solid order intake and also sales. But it's also noteworthy that both decreased against a very strong comparison quarter of -- quarter 4 of 2024. So orders were down 4% and net sales roughly flat in comparable terms. Quarter 4 in 2024 had a very strong order intake in Port Solutions, but also in Industrial Equipment, where both actually had the second highest quarter of all time in Konecranes. And that makes quarter 4 of '25 also very satisfactory for us. Our order book continued to strengthen, and it was 3 percentage points higher or 7 percentage points in comparable terms. Our profitability improved and increased to 14.1%. It was really very good project execution in Industrial Service, Industrial Equipment and in Port Solutions, Port Solutions with very good margins, but with slightly lower volume. And we kept our cost control intact and had a bit of pricing and tariff tailwind, but less than we had in quarter 3. And of course, the order book improved, and that means a solid start for 2026. Now if you look at the market environment in general, how is the best way to describe it? Maybe one way to say that the market and the customers have maybe used -- got used a little bit to the uncertainty. So there is a cautious positive development in the capacity utilization rates as it is visible in this Industrial Service and Equipment slide, which shows the capacity utilization rates in the 3 main market areas. And our own funnels and our customer demand, how we see it. European sales funnels are good on solid level. There are some signs of improvement. But of course, customers continue to be rather cautious around this type of volatile environment. In the United States, the previously very strong industrial equipment funnel has somewhat flattened down. But on the other hand, on the service side, we see some signs of improvement. So customers are starting to do the service that they may have put on hold temporarily during the kind of tariff-related uncertainty. It's, of course, too early to say how this actually pans out during this year, but we are optimistic in general about the market environment or continue to be so. And in Asia Pacific, the market continues and the funnel continue to be on a stable level, but the tough competition continues, particularly from the Chinese competition. And then if we take a look at the Port Solutions segment, here, the container throughput index, as we have discussed before, is, of course, the main indicator, and that continued to be on a very good level overall. Maybe there is some flattening in the growth rate, but it's still very positive. Our funnels continue to be good. There are big and small cases in the funnel. And of course, it's good to remember here that besides the obvious container throughput traffic indicator, there is the long-term prevailing trends in port solutions that are, of course, driving investments. So that comes from the automation trend, the prevailing consolidation trend in that industry, change in the traffic routes driven by the repatriation and changing manufacturing locations. So of course, we continue here to have a kind of positive general view on the market as we have had also last year. So reiterating again a bit more about the quarter 4 development against the strong comparison period and how the past 2 years have gone, as you see here, of course, the order intake in quarter 4 was slightly down from previous year quarter 4. But last year, the order intake was actually very good and better than previous year in the first 3 quarters. There was a decrease in quarter 4 in all business areas, some increase in Europe and some decrease in Americas and APAC. And actually, the same profile is true for the sales side of things. Next is time to look at the order book situation, and we have had a solid above 1 book-to-bill ratio throughout last year, and we've been strengthening our order book throughout the whole last year since quarter 4 of 2024. So we have a particularly strong order book situation in Port Solutions. It is positive in Industrial Equipment with also a positive mix, but it's also a bit down in Industrial Service. Now here, you see the profitability development over the last 2 years and again, comparing the quarters to each other. This is really a very strong progress and very strong execution to our strategy. There is increase in Industrial Service and Industrial Equipment in quarter 4, some decrease in Port Solutions. And like I stated earlier, that's mainly driven by the volume. So Port Solutions continued to have good margins and good execution. And they also had a very good quarter 4 last year. Some less tariff tailwind, but still some visible in quarter 4, really good cost management and slightly weaker mix in Port Solutions, but we are very happy with this 14.1% outcome to quarter 4 last year. And that, of course, really helped us to reach this almost a percentage point year-on-year full year improvement on profitability. Now then it's time to take a look at the -- how we track in our profit improvement progress or process. This is actually the third consecutive year in all 3 business areas where we consistently improve our profitability. All 3 business areas are well within their defined profitability -- midterm profitability ranges. And we've done this under rather challenging demand environment. But at the same time, of course, it is true to say that we have not really had a challenging downturn in terms of volumes. So as you will see here, there has been pressure on the volumes, and we've shown continuous good profitability improvement. And of course, with additional volumes, then this is -- we are confident that this continues to be a good story. And now I would like to hand over to Teo, and then I'll come back in after a few slides to talk about the demand outlook and a couple of other things. Teo Ottola: Thank you, Marko. And let's take a look at some of the business area numbers in more detail. But before going there, as usually, so let's take a brief look at the comparable EBITA bridge between Q4 '24 and Q4 '25. So we had close to 1 percentage point improvement in the EBITA margin in a year-on-year comparison, and this translates into roughly EUR 5 million improvement in EBITA in euros. And let's unpack this now next a little bit. So pricing impact year-on-year was roughly 3% -- and then when we combine with that information, the fact that the sales decline -- there was a sales decline in comparable currencies. So we are actually taking a look at the underlying volume decline of some 4% or so, which obviously is not good from the profit and profitability point of view. However, net of inflation pricing, mix and then particularly good execution, so project execution, for instance, then we're all working in a positive manner. And as a result of that, the net of those -- all of those impacts is positive by EUR 13 million, as we can see as a combination of volume, pricing, mix and variable cost on the slide. And then fixed costs continued to be very well under control. So only EUR 2 million increase in fixed costs in a year-on-year comparison, whereas then the translation impact as a result of the FX differences was a clearly negative number, minus EUR 7 million. And as a result of all of these then combined, so we end up with the improvement of roughly EUR 5 million in a year-on-year comparison. Then moving on to the business areas, starting with Industrial Service. So we had order intake of EUR 380 million. So this is actually a decline in reported currencies, but an improvement of more than 2% in comparable currencies. So like already mentioned in connection to the bridge, so actually, the FX differences continue to play a big role now in the fourth quarter as well. Taking a look at the different parts of the businesses. So Field Service declined in the order intake in a year-on-year comparison, whereas Parts business cut up. And then when we take a look at the regions, so EMEA did well. So there was an increase, whereas then Asia Pacific and Americas both saw a decline in the order intake. Agreement base actually grew by 4.4%, like Marko already also mentioned. Order book decline of 7%. That's a big number. But in reality, that is almost all, let's say, everything actually is in relation to the currency changes. Net sales, 3.5% higher year-on-year in comparable currencies. The story is very similar to what it is in the order intake. So Parts did better than the Field Service and of the regions, EMEA did better than Asia Pacific and Americas. Comparable EBITA margin, 21.9% on a very good level, 1.3 percentage point improvement year-on-year. The improvement did not obviously come from the volume as the net sales increase is roughly in line with the pricing change. It actually more came from pricing, from good execution as well as then efficient cost management in general. Then moving on to the Industrial Equipment. So there, we have an order intake increase in comparable currencies of roughly 1%. However, when we take a look at the external orders, so this is down slightly by almost 1 percentage point against fairly tough comparables, fourth quarter of '24 was very good from the Industrial Equipment order intake point of view. Of the business units, we had growth in components in a year-on-year comparison. We had a decline in process cranes and standard cranes as well, a slight decline. One could maybe also say that this was flattish in a year-on-year comparison. And of the regions, again, EMEA did fairly well, so increase there, whereas then we had a decline or decrease in the Americas and APAC. In a sequential comparison and taking a look at the business units, so components orders actually rose also in a quarterly comparison, so the component orders in the fourth quarter were very good. We had a decline in port cranes as also in a year-on-year comparison and then standard cranes were fairly flat in a sequential comparison, similar to what it was in a year-on-year comparison as well. Here, our order book rose by 2% and of course, with comparable currencies, even more. Net sales up 3% roughly, taking a look at the total volume or then the external volumes, both roughly 3% up. The sales mix was such that it was a little bit more favorable from the margin point of view now in the fourth quarter of '25 than a year ago. And then when taking a look at the comparable EBITA margin, 11.7%, excellent improvement of more than 2 percentage points in a year-on-year comparison. Again, good execution, pricing and of course, also the already mentioned mix supported the profitability in the fourth quarter. And then Port Solutions order intake, EUR 406 million. This is a decline of roughly 11% in a year-on-year comparison, of course, against very tough comparables. So also here, the fourth quarter of '24 was very good from the order intake point of view. When we take a look at different businesses within Port Solutions, so Lift Trucks actually had good activity as well as RTGs, Port Service, quite flattish in a year-on-year comparison. And then when taking a look at sequentially, particularly the business units that are more short cyclical like Lift Trucks and Port Service. So Lift Trucks had an increase also in a sequential comparison, so Q4 was higher than Q3, and Port Service was relatively on the same level in fourth quarter as in third quarter. So flat exactly like in a year-on-year comparison as well. Net sales declined by as much as 7% in a year-on-year comparison. This was, of course, as a result of the order book timing and as such, as expected already earlier. Order book, however, is clearly higher than what it was a year ago, thanks to good order intake that has been there basically throughout the whole of '25. Comparable EBITA margin, 9.2%. So this is a decline of 0.5 percentage point. So this primarily obviously comes from the lower volume. So sales was lower than a year ago. Mix did not help here. So in ports, it was rather negative than positive in a year-on-year comparison, but this was partly offset by very good execution and project execution in the fourth quarter within the Ports business. Then a couple of comments on the balance sheet side. Let's start with the net working capital. As usual, net working capital has continued to be on a very low level. So there is no meaningful change from the third quarter. Obviously, the structure is a little bit different. Inventories have turned into accounts receivable, but otherwise, very much on the same level. The improvement in comparison to a situation a year ago comes from accounts receivable as well as advanced payments. And then on the right-hand side, we can see the free cash flow, which continues to be on a very good level, record levels actually also for '25 and the cash conversion continues to be clearly above 100%. Then consequently, of course, as a result of the cash flow, our balance sheet from the net debt point of view looks very strong or actually, we have net cash in the amount of more than EUR 160 million at the end of the year. And then finally, from the balance sheet point of view, so the return on capital employed on comparable terms, 22.1% at the end of '25. And then I will invite Marko back to talk about the outlook for '26. Marko Tulokas: Thank you very much, Teo. There is the outlook for '26. But before that, some other additional things, of course, our solid progress, very nice development, strong cash flow and balance sheet has 2 outcomes. Our Board of Directors is proposing to the AGM a share split with 1:3 ratio. That is, of course, due to the high price and to enhance the liquidity of the shares. And we also have the Board proposing to the AGM that we increase our dividend from the previous year EUR 1.65 level to EUR 2.25 per share for [ 2025 ], which is very much in line with our stable to increasing dividend policy. And now to the demand outlook. Although there is a volatility, of course, in the marketplace, we expect several sectors to keep the demand up. And in the industrial customer segment, we expect the demand environment to remain on a healthy level. And for the port customers, the container throughput continues to be on a high level as we saw before. And there is, of course, these long-term prospects in that business in general, the long-term drivers and then is, of course, supporting a strong container handling demand in the future. So the outlook continues to be good. But at the same time, of course, it is good to keep in mind that this uncertainty related to geopolitical decisions, the trade politicians and the tensions, they do remain high. And of course, they may have positive and negative impact to our demand picture that may also come quite quickly. But generally speaking, we have a positive outlook on the margin. And then finally, let's look at our financial guidance. So we have a starting order book that is better as already was elaborated also by Teo and myself earlier. The demand outlook is stable. So we are confident that realistic picture on the demand environment, and we are conscious about the market uncertainty also. So we expect our net sales to remain approximately on the same level or to increase in 2026 compared to 2025. And as you saw, our margins have been developing very well in '25. And we expect these margins to remain approximately on the same level also in 2026 compared to 2025. And with that, I thank you all very much, and we can move to the questions and answers. Thank you. Linda Hakkila: Thank you, Marko and Teo, for the presentation. And now we will start the Q&A session. Operator, we are ready to take questions. Operator: [Operator Instructions] The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I have 3 questions, if possible. First, I wanted to ask you to -- if you could give some color on how you see the mix in Port Solutions going forward. I know you mentioned here it was slightly disadvantageous. I don't know if it's just one-off this quarter or given the nature of equipment, maybe more larger equipment, is that something that will continue? And then I'll ask my other questions right after. Teo Ottola: The ports mix going to next year, of course, it is approximately flat, the mixed or neutral, the impact as I see. And I guess that is also your conclusion also. Marko Tulokas: That is actually my conclusion also. And I think that what you are referring to with the larger equipment. So of course, we have been talking about that, that potential mix might be weaker going forward in case the product -- let's say, the demand moves more towards the, let's say, heavier equipment. However, that has not happened to the extent that we would be expecting a deterioration in the mix for this year. Daniela Costa: Got it. And then I guess we have seen in some regions quite a steep move on things like steel prices. Can you talk us through a little bit how we should think about that given the lag between orders and sales, the pricing that you're putting out at the moment? Do you expect that to be a headwind in the shorter term or not really you can pass it all to? Teo Ottola: So your question was particularly about steel prices, right? Daniela Costa: Yes. Teo Ottola: So the steel prices throughout 2025, they have been approximately flat, and there's actually a slight positive or from our point of view, positive. So in that way that there is actually a somewhat lower quarter 1 steel price rates than there was in quarter 4 of 2025. The outlook is -- or the forecast is that there would be a minor increase in steel prices in 2026. But of course, only time will show that how will that materialize. Our approach has been and it continues to be so, as still is for many of our products, a reasonably significant cost component that we will pass on the steel cost in our prices, and that's how all our pricing systems and our configurators have been built. Finally, there is some regulatory developments in the market and the CBAM is one of them that, of course, eventually the CBAM regulation, although it is no direct impact to our products and so forth, that may drive steel costs up in the longer term, but that's not in the immediate visibility at the moment. Daniela Costa: Got it. And then a final one, just in terms of like you have obviously very strong free cash flow. It looks like a decent size comes from the payables within working capital. Can you talk a little bit about sort of exactly what that is? And how should we think about payables going forward? Teo Ottola: I'm not quite sure that what your question was. I mean, are you talking about capital allocation of our balance sheet in general? Daniela Costa: Free cash flow. Teo Ottola: Yes, of course, I mean if you're referring to the dividend policy only or to the question of other means of distributing the cash. Daniela Costa: No. I'm just actually asking about free cash flow. Within your cash flow statement, there is a big positive of payables in the working capital. Yes. Teo Ottola: Maybe commenting on net working capital as a whole. So now at the end of '25, we are on a very beneficial level. And we are clearly, let's say, we are several percentage points better than our, let's say, midterm target is, which is that we should be below 10% of rolling 12-month sales in net working capital. Now we are clearly below that. So the situation is very beneficial from the net working capital point of view. And if the question is that, is that something exceptional? Or will it stay here or will it even improve? So one could maybe say so that this is, let's say, maybe in the midterm perspective, this is on the better side of the average. So maybe the overall in a way, level on a long-term basis could be even a little bit higher for net working capital. But definitely so that we aim to be below the 10% threshold of the rolling 12-month sales. And then, of course, we will need to allow volatility in both directions as we are now seeing a very good situation. So it may be that in some quarters, we are seeing a little bit worse situation. So the payables, accruals and advanced payments, all of the combination of all of that is very important, but I would still stress the importance of the advanced payments. So this is a lot of customer project timing related, how the net working capital develops from one quarter to another one. Operator: The next question comes from Antti Kansanen from SEB. Antti Kansanen: It's Antti from SEB. A few questions from me as well. I'll start with the guidance of flat to growing sales and especially on the Port Solutions side, how much of the backlog that you currently have do you expect to convert to revenues during '26? Or if you don't want to give the number, how does that compare to situation a year ago? Teo Ottola: We maybe not give the direct number for the first question, but if we take a look at the overall order book, now that we have at the end of '25 for '26 and compare that to how much order book we had 1 year ago for '25. So the difference is now more than EUR 100 million. Marko Tulokas: For all [ 3PAs ]. Teo Ottola: For all 3PAs. And then, of course, it is fair to say that the ports business is a clear majority of that, particularly now that the FX differences are impacting so much to the order book of the service business. So that basically it is the same number or maybe even slightly more for ports than what it is on the group level. But this is, of course, with reported currencies. So if you take a look at comparable currencies, Marko showed both numbers. So then, of course, that number is higher. So it's about twice as high, not for ports, but for the group. Antti Kansanen: Yes, sure. And I was also thinking on the guidance, if we talk about, let's say, on the lower end of it that your sales will be on the same level as in '25. Would that imply actually that volumes would be down, I don't know, clearly. But anyways, one would assume that there, you talked about the net price impact on Q4, one would assume that the positive pricing continues through '26. So how should we think about that volume pricing trend in the backlog? Marko Tulokas: Of course, like we were saying earlier, the starting point is positive with a stronger order book. And of course, we have a stable funnel that we look with positive mind. So there is all the reason to be positive about the demand environment and the volumes also. But at the same time, there are some question marks. Teo mentioned one of them is, of course, is the currency rate. And of course, then the other one is related, of course, to the general development of the market environment overall. But what we are trying to say with our guidance that, of course, we have a good starting point for the year, and we look at the volume development positively. But being appropriately, let's say, cautious about it also in this environment. Teo Ottola: But logically, of course, you are right. So I mean, if the sales were flat in a year-on-year comparison and the order book for this year is EUR 100 million more than what it was for last year, so of course, then it would mean that the in and out volume would be lower, which could be, let's say, depending on various things. But of course, now we need to remember that what we are saying regarding the overall market outlook is that the sales funnels in the various businesses. So they continue to be good. I don't know. They continue to be stable and on a good level. Antti Kansanen: Yes, that's clear. Then the second question was on profitability. And maybe a reminder on the tariff-related pricing tailwinds that were kind of notable on previous quarter and still there on Q4. How should we think about kind of impacts of those going forward, maybe fading away? Any guidance on that? Marko Tulokas: Well, they repeated also in quarter 4 after being visible in quarter 3 and quarter 2, but not to the same extent. So as we have also said before, the expectation is that they will go away or deteriorate over time. And of course, it actually continued throughout the whole year, and there was a positive sign to us. We expect that you will not see the similar kind of positive tailwind going forward. But also it should not have a significant negative impact to the margins either. Antti Kansanen: Okay. That makes sense. And then the last question, and I guess, Marko, you almost started to answer on the capital allocation side. And I mean, obviously, there's a clear increase on the ordinary dividend. But I mean, balance sheet is getting stronger and stronger and capital allocation has been a bit of a discussion point. So any updates on further distribution, buybacks, anything like that? Marko Tulokas: Yes, I was so eager to start answering that question already. So I was preempting that. But no, I mean, of course, that our approach has not changed there. Of course, we have several potential means for the use of that cash, and we are working on all of them. And one of the obvious one is the potential acquisitions. And as we've said before, that has been a big part of Konecranes' history, and it continues to be so in our future also the inorganic part of the growth. And so we have a funnel of different size of opportunities that we are actively exploring. And it's more a timing question that when we can realize those. And for that, for sure, we want to have maneuvering room and the increase in the dividend that was announced today, of course, that is, in our view, no way jeopardizing those -- that maneuvering room that we have going forward, given the available cash and then, of course, our ability to leverage the company. Would you like to add something to that? Teo Ottola: No. Operator: The next question comes from Mikael Doepel from Nordea. Mikael Doepel: So a couple of them. I'll take them one by one. So if we can start to talk a bit about the net of inflation pricing. I think you mentioned it was positive still in Q4 of last year. How do you think about 2026? I mean if we put tariffs aside, how do you think about pricing net of inflation? Marko Tulokas: Maybe since you are going through the bridge, you may want to continue on this also. Teo Ottola: Yes. The basic commentary here is the same as it has been. So we believe that we will be able to push cost inflation into the customer prices. And then, of course, the tariffs may change, the currency rates may change. But if we take a look at the overall underlying inflation, so the idea is that we will be pushing that into the customer prices. And in the past years, we have been able to do that in some cases, maybe a little bit even more than the cost inflation. So we believe that we can balance the situation from that point of view, but maybe it is not a good idea to expect a continuous net of inflation price benefit in '26 or further. Mikael Doepel: No, that makes sense. And talking about costs and just a follow-up, do you have any meaningful cost efficiency measures ongoing now that could support margins into this year? Anything tangible you could mention on that side? Marko Tulokas: Maybe 2 things I will mention. First of all, the topic that we have discussed also in the past is the ongoing industrial equipment cost efficiency program that we earlier announced that will continue until end of 2025. And on that note, we can say that we are still continuing that and we expect that to continue to bring us some benefits also -- additional benefits also during this year. The second topic is -- or the second answer to that is that when it comes to adjusting our cost structure to the prevailing market conditions, that is what we did early last year also that in all accounts, whether it's the SG&A or cost that we have on the group level or, for example, in service, the costs that are directly related to customer projects. And that is business as usual for us and that we've done in 2025, and we continue to do the same in '26 if the market environment and demand so requires. But beyond those 2 things, we don't have anything specific to discuss about right now. Mikael Doepel: Okay. That's clear. And just finally, I think you mentioned in your opening remarks, you talked about the industrial service business and saying it was a bit of a tough environment within that business. Can you talk a bit about what you see there specifically happening across the regions, across the customer segments and how you expect 2026 to develop? Marko Tulokas: When we look at Industrial Service in general, if I start from just the market activity and how it looks, one thing that we've discussed earlier and we also can measure is how our remote connections also with what we call the TRUCONNECT product, how much activity the customer is having with our cranes business and then, of course, means that how much manufacturing or production activity there is and those productivity rates are down last year, the whole year, and they also ended with a negative sign that somewhere 6% to 7% compared to the previous year in terms of the general use of the cranes. That's a fairly good proxy or explanation also to how much -- how the productivity and service develops for those particular customers, and that has a correlation to how our service business is actually developing. So that tells more that there is in this sort of environment where the customers have uncertainty of which direction the world is going that they have the tendency to hold back on not urgent or not critical measures. They want to do the things that have to be done to make sure that the equipment is productive and safe. That was a phenomenon last year and had certain impact to the service business. But it is obvious that you cannot do that for a very long time. So those equipment has to be taken care of. So that is something that usually returns. The other positive aspect is that we kept on increasing our -- or improving our agreement base, which is essentially the growth engine for service and very important, so that grew more than 4%, 4.5% last year. And that is what we consider and I consider very important as a service core. And then finally, I would say to that, and sorry for the long answer, easy to get excited on the topic. On service side, there is a lot of positive demand drivers like there is in the ports demand side in the long term. And whether it is the demographic trend of having less people doing this sort of thing or the automation trend that's also prevailing in some of the segments there, the outsourcing that similarly to ports actually is prevalent in many of the industrial segments and many others that also in the long term are drivers for demand in Industrial Service as well as in the efficiency drivers too. Teo Ottola: If I may add to a little bit additional color on... Marko Tulokas: I thought I answered the whole thing already because... Teo Ottola: That was very good, but I would maybe add one more thing. And I think when we have previously been saying that actually the differences between regions tend to be bigger than between customer segments in our demand. So now it may be that there start to be relatively big differences in demand pictures between different customer segments. And there are maybe a couple of indications of that one. And one of them is that the thing that we have been discussing also earlier that, for example, in North America or in the U.S., there has been a little bit slowness on the service and equipment business on the other hand, has been maybe even surprisingly strong, so which would, in a way, maybe indicate that some of the segments are doing well and they are buying equipment and some others have maybe a little bit more issues with the utilization and they are maybe saving on nonessential service. And also then this fact that our service spare parts are doing better than the Field Service may be an indication of the same thing. I mean, of course, the tariff thing, et cetera, can impact the spare part pricing and inflate that a little bit, but that doesn't explain the whole thing. So these kind of changes may be there happening a little bit because of defense and because of power and those kind of specifically, let's say, buoyant segments currently. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Linda Hakkila: Thank you, everyone, for following our webcast event today, and thank you for asking such a great questions. [Technical Difficulty]