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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.
Rune Sandager: Hello, everyone, and welcome to GN's conference call in relation to our annual report announced this morning. Participating in today's call is Group CEO, Peter Karlstromer; Group CFO, Soren Jelert; and myself, Rune Sandager, Head of Investor Relations. The presentation is expected to last about 25 minutes, after which we'll turn to the Q&A session. The presentation is already uploaded on gn.com. And with that, I'm happy to hand over to Peter for some opening remarks. Peter Karlstromer: Thank you, Rune, and thank you all for joining us today. '25 were a year where we continue to execute on our strategic and operational agenda in a difficult market environment influenced by uncertain trade and macroeconomic weakness. In Hearing, we continue to deliver very strong performance, and we are now at record high market shares driven by ReSound Vivia that was launched in the beginning of the year. Our premium products sell very well, and our margin is under control in spite of an adverse country and business growth mix in '25. Our product and software platforms are in strong shape, and we plan to launch further innovation in '26 that will support our growth. In Enterprise, the U.S. and APAC market continued to grow modestly throughout the year, while the European market still experiences some weakness. We are pleased with our own execution in this environment and well prepared to benefit from a continued gradual strengthening of the market. In '25, we successfully accelerated several supply chain and pricing initiatives to manage the uncertain trade environment. We have managed this well and have mitigated most of this change. We have a strong pipeline of products in video and headsets that we will launch in '26, the most important one for our financial results is the Evolve3 headset platform, which we announced a few weeks ago and will start to ship later in this quarter. Additional launches under this new platform will follow later in the year. In gaming, we continue to gain market shares in a challenging gaming equipment market. While gaming also faced some of the same margin headwinds as enterprise, we have executed sustainable margin initiatives and operational resilience initiatives supporting our long-term margin aspirations for the division. In addition, we have also launched exciting products in gaming, including our new gaming headset, the Nova Elite, which is very much a premium offering. Also here, our product pipeline is strong, and we look forward to exciting launches in '26. The markets that our 3 divisions operate in have been challenged in '25. While we aspire to deliver stronger absolute numbers in the year, we feel very good about our relative performance across our divisions and focus on the things that are within our own control. We have taken several supply chain and operational improvement initiatives that we will benefit from in the years to come. In addition, our product pipeline across our 3 divisions is stronger than it's been for a very long time. We remain firm in our belief that our markets remain attractive and look forward to further developing our business in '26 and the years to come. With this introduction, I'm happy to hand it to Soren for further details on our performance in the group. Soren Jelert: Thank you, Peter, and thank you all for joining us today. Essentially, as Peter mentioned, we are satisfied with what we achieved during '25 under these challenging circumstances. The group delivered a negative 1% organic growth for the year, supported by a 5% organic growth from our Hearing divisions, a negative 6% organic growth from our Enterprise division, and a negative 2% organic growth from our Gaming division. Our profitability, we are pleased with where we landed for the year with an EBITA margin of 11.4% as this essentially demonstrates strong mitigation of what is within our own control. We have successfully increased prices and kept a strong focus on costs while harvesting group-wide benefits from the scale of GN. The profitability also positively influenced the free cash flow generation where we ended the year with DKK 1.1 billion in free cash flow. Moving to the financial details on Slide 6. Starting with the results of the fourth quarter of '25, the group delivered organic revenue growth of a negative 2%, reflecting solid execution across our divisions in some difficult market conditions. The EBITA margin ended at 13.4%, reflecting a group-wide cost focus offset by an extraordinary R&D write-down due to the new partnership with Huddly in our video collaboration business. Lastly, the group generated free cash flow, excluding M&A of DKK 744 million, reflecting the strong profitability and positive development from our working capital. For the full year, the group landed at an organic revenue growth of negative 1%, in line with our financial guidance. The group delivered an EBITA margin of 11.4%, which reflects prudent cost management while strengthening business fundamentals and preparing for future growth. The free cash flow, excluding M&A generated for the year was DKK 1.1 billion, driven by solid earnings and positive impact from working capital. In 2025, we have decreased our net interest-bearing debt by more than DKK 800 million, which also allow us to refinance our main loan facilities during the year with attractive terms. In summary, at a group level, we delivered solid profitability and good cash generation while continuing to improve the balance sheet. We also accelerated our efforts to ensure a flexible and diversified operational setup while making important progress on our product road maps, paving the way for growth opportunities in '26 and beyond. And with those group highlights, I'm happy to hand you over to Peter for some additional color on the 3 divisions. Peter Karlstromer: Thank you, Soren. Let me start with our Hearing division. In Q4, we finished the year well with 7% organic revenue growth, reflecting a market that continued to grow slightly below its normal trends. Divisional profit margin for the quarter was 35.2%, reflecting a focused cost control. When looking back at '25 as a whole, we can conclude that Hearing grew faster than the market and continue to gain market share. The full year organic growth was 5% in the market growing slightly slower than normal. The gross margin ended at 61.1%, which was below 24% due to an adverse development in the country and business mix as well as the divestment of Dansk HoreCenter. Divisional profit margin ended at 33.6% due to prudent management on sales and distribution costs, offset by the gross margin development and ongoing investments to support the strong momentum of our ReSound Vivia platform. The divisional profit margin was slightly below 24%, which is explained by margin underperformance in the difficult and unusual Q1 that we and the market experienced. In the last 3 quarters of '25, we delivered a slightly better divisional profit margin compared to the same period in '24. We are confident in the underlying margin structure and plan for margin improvement in '26 and beyond. Let's move to the next slide for some highlights on the performance on Enterprise. The Enterprise division ended the year with a fourth quarter organic growth of negative 3%. This includes a larger FalCom order that continued its good progress. Our Enterprise business grew in North America and APAC, while the weakness in EMEA continued. Sell-out in the quarter was a few percentage points stronger than the sell-in, reflecting some channel inventory reductions in EMEA. Channel inventories were stable in North America and APAC. The divisional profit ended at 33.3% for the quarter, reflecting positive contribution from price increases and cost control and offset by direct tariff costs. For the year of '25, Enterprise managed to maintain its market-leading position in a challenged European market while executing positive sell-out growth in North America and APAC, resulting in organic revenue growth of negative 6%. As part of these numbers, it's worth highlighting that our sell-out growth numbers were around 3% better than this. So global channel inventories have decreased compared to last year. The gross margin increased 0.3 percentage points compared to '24 in spite of the extra tariff cost. We are pleased about how we mitigated uncertain trade environment through accelerated diversification of our supply chain and targeted price increases. The development in divisional profit margin reflects focused cost control, negative operating leverage and costs related to the upcoming launch of the Evolve3 platform. Moving to the next slide and Gaming. In our Gaming division, we delivered organic revenue growth of negative 12% in the fourth quarter, reflecting a difficult gaming equipment market influenced by low consumer sentiment as well as a very demanding comparison base as we delivered 16% organic growth in the same quarter '24. In the quarter, we demonstrated good cost control, delivering a divisional profit margin of 16.4% despite the direct tariff cost. For the year, we have increased our market share in a difficult market, resulting in organic revenue growth of negative 2%. We increased the gross margin for the division due to strong pricing discipline and benefits from the supply chain integration with Enterprise, partly offset by direct tariff cost. The divisional profit margin for the year reflects investments in product launches and extra costs related to managing the difficult trade environment. Let me move to the next item on the agenda, where we'll provide some more flavor on the divisional growth ambitions for '26 and beyond. Starting with Hearing. In '25 the market grew slightly less than normal. We still very much believe in the underlying growth drivers of the market with increased adoption and a growing elderly middle class around the world. This will continue to support healthy market growth over time. We are pleased that we have managed to outgrow these attractive markets for the last years, driven by strong commercial execution and product innovation. With the help of our latest platform, ReSound Vivia, we have further strengthened our position and our momentum remains strong around the world. As announced earlier this week, we will now also expand the Savi portfolio, which will support growth, especially in countries and channels looking for more affordable product solution. On top of these exciting portfolio additions, we have even more innovative product launches planned for the second half of '26. Altogether, this gives us high confidence that we can continue to grow above the market and strengthen our competitive position in the coming years and further. Let's turn to the development of the Enterprise business. I think it's worthwhile taking a step back and looking on our headset business has been shaped over the last decade. We have been one of the frontrunners establishing the market and driving the professional headset penetration. And the enabler for this has been technology shifts, where we have been successful in developing products that caters for customers' needs over time. Back in 2014, we launched our award-winning Evolve portfolio that supported the rapid adoption of different UC platforms driven by large technology infrastructure companies. What was unique and industry-leading at that time was the easy integration of our headset portfolio in the different user platforms, where we also launched ANC and a strong microphone pickup. The result was clear, professional headset quickly became popular and a standard for the knowledge workers wanting a high-quality experience. Moving into 2020 and the hybrid work age, as we would call it, this was accelerated by COVID-19. This period in time required new technology for headset performance and integration. In early 2020, we launched the Evolve2 portfolio that significantly increased headset performance across multiple dimensions. As a result, global headset penetration increased further to around 20% where it is today. And now with a fast-developing AI solution, we're entering what we believe is the next era. We call this the modern work shift. And with the increased adoption of AI solution, we believe that the next headset penetration will be driven by new technology demands. For it to succeed, you need to have a headset that fits the evolving trends of tomorrow. Let me give you a few examples. Ninety-nine percent of knowledge workers acknowledge that poor sound is impacting online meetings. Seventy-eight percent of knowledge workers from multiple locations, which means that the design of headsets is important and that headset needs to handle ever-changing noise situation in different environments. Currently, we're also seeing a return to office trend among many companies as well as a trend that the majority of new offices being built are having more open landscapes and less square meter per worker. This means that all of us need great solutions for working in these open spaces that are comfortable and where we can have online meetings where all background noise is filtering out. And that would help you to come across very clearly even in these challenging environments. AI workflows will also be a driving force. Voice is 3x faster than typing, making AI voice interaction much more efficient than if we type. Simply, we will likely speak more to our computers and devices and type less. This puts new requirements on the headsets in terms of how they can handle this with great accuracy. It would also like to increase the sound level in open spaces further and further increasing the need for great headsets that can handle that. Lastly, cybersecurity is important today and will likely increase even more into the future and grow in importance while an enterprise-grade framework for security is becoming an essential to be in this market. We have talked to numerous customers, partners, and analysts over the years to form a strong view on what's needed. And we believe that we have announced the -- what we have announced last week is really the headset that can take us into the new modern work area. Our latest enterprise-grade headset launch, the Evolve3 is designed to take the user experience to a new level while playing up against future technology trends. And it's not just another hardware update that is slightly better all around. The Evolve3 is also based to close to 10 years of research and development in its underlying technology. First and foremost, the AI-driven deep learning technology had been trained on more than 60 million real-world synthesis, taking microphone technology to a completely new level with outstanding ability to separate speech from noise, and this is quite impressive considering that it's also been possible even without the traditional boom arm. These headsets captures 99% of words accurately in an open office environment, making it built for voice-led AI and screen productivity in any environment. In addition, it is the first of its kind to feature adaptive noise cancellation while we're on a call and it comes with improved connectivity and a significant step-up in battery life with the possibility of a full day use from only 10 minutes of charging. In addition to impressive technical development, Evolve3 is also designed to be compelling. It is released in black and warm gray with a modern design. It's also designed for comfort. It is light and comfortable to wear all day. From March, the Evolve3 will be globally available in our high-end form factors, the 85, which has an over-the-ear fit and is designed for immersed focus and the 75, which has an over-the-ear fit if you prefer a lighter wear and greater environmental awareness. We call this the best headset for modern work and it's really built to match the pace and flexibility of what we all require. So let me move to the next page. As the working habits change, we need technology that adapts well. Whether you are in an airport, working at home, in the office or somewhere else, Evolve3 is a perfect companion. Even in very noisy environments, voice clarity is state-of-the-art due to our DNN-based voice processing, taking the benefits from the wider GN Group. As an example, you can literally stand in the room with loud music playing in the background and a person that you're speaking to will only be able to hear you and what you are saying and not the music at all. The same applies when you're taking a call outside a windy day, in a noisy coffee shop, or basically anywhere in any situation you can imagine. It's only you that is being heard. And perhaps most important, the strong sound process to make the headset the perfect companion for working also in the normal open landscape where you likely will be shielded from the noise around you. And when you make a call, you need to be heard without any background noise and the shatter to enter your meeting. The sound performance is so strong that you do not even need to mute when you're not talking any longer. The participants in the meeting will essentially only hear your voice and nothing more. We cannot be more excited about this launch and have more confidence in that this is really taking the headset to the next level and help us with the growth for the Enterprise division in '26 and beyond. It is developed to be the next penetration wave, while it also will assist the ongoing replacement of existing legacy products. And stay tuned because more will also come. We will, as normal, launch across mid and entry-level price points later and a more affordable price point will come over time in the next 15 months. Let's move to the next slide, where we'll also talk more about our aspirations for the gaming business. SteelSeries have been on a journey with increasing market shares for quite some time now. Since 2019, we have increased our market shares significantly in our core categories of headset and keyboards due to our best-in-class innovation. In [ mikes ], we have been defending our position during the last 5 years. This will be one of the focus areas for the coming periods as we obviously want to improve our position in this market as well. The core gaming equipment market remains structurally attractive, supported by continued growth in the number of gamers, time spent on gaming, and a growing appetite for premium features. These dynamics underpin a healthy long-term growth profile for the market, even though the near-term environment is held back by a muted consumer sentiment, in particular in the U.S. Against that backdrop, SteelSeries continues to win, and we expect our current momentum to continue in '26 and beyond, and we continue to deliver new product innovation in the market that will support this growth. SteelSeries is not just another gaming equipment option. In SteelSeries, we continue to challenge status quo and expand our categories into new and better options. For '26 and beyond, we expect to harvest broad-based market share gains by strong brand momentum and significant launches across categories and into new form factors on top of the growing core portfolio. While it is, of course, important that Gaming returns to deliver strong growth, the division has also been a journey to increase margins to becoming part of GN. We have come a long way by fully integrating Gaming into the same systems and product flows as Enterprise business and there are even more margin benefits to come over time by fully utilizing the GN at scale. In addition, we will continue our strong pricing discipline to mitigate impact from direct tariff cost and other unforeseen future external headwinds that could be a threat to our margins. Moving to next slide. Let me go through the assumptions for '26. In '26, we are planning for growth across our 3 divisions. We are convinced about our strong product portfolio that will help us to further gain market share in a flat to slightly growing markets. For the hearing aid market, we expect the market growth for '26 to be at the low end of the structural value growth of 3% to 5% due to the current low level of consumer sentiment around the world. In this market, we assume that we can continue to gain market share driven by our current momentum and further product innovation. And this is why assuming an organic revenue growth for the years between 3% and 7%. For the Enterprise market, we believe that the growth patterns that we have observed outside EMEA in '25 will continue. We also believe in some level of stabilization of the macroeconomic environment in the EMEA region to materialize during the year. All in all, we believe the global enterprise market will likely grow between flat and 2% in '26. In this market, we assume we can gain market shares driven by the launch of our Evolve3 headset platform and a gradual strengthening of our video portfolio. As a result, we're assuming an organic revenue growth for Enterprise between 0% and 6%. For Gaming, we expect the market growth for '26 to be modest, influenced by the current low consumer sentiment in the near term. In this market, we're assuming continued market share gains, driven by current momentum and the strong product innovation. And we believe that for Gaming, we can grow between 7% and 13% in the year. And with that, I'm happy to hand it back to Soren to speak more about our guidance for '26. Soren Jelert: Thank you, Peter. All in all, when we apply these divisional assumptions, it leads to our guidance for the group where we guide for an organic revenue growth of 3% to 7%, driven by continued strong execution and market share gains across our 3 divisions, as mentioned by Peter. Moreover, we are guiding for a reported EBITA margin of between 11.5% to 13.5%, driven by continued cost focus and operational leverage, offset by some short-term headwinds. All in all, the financial guidance supports our ambition to grow in a sustainable and profitable way that eventually will lead to realization of our long-term targets. On the next slide, I'll provide you with some more details on the elements that drives our '26 EBITA margin guidance. First and foremost, we are pleased with our ability to mitigate the impact on tariff in '25 by effective price increases and a successful acceleration of our diversification of our supply chain. Specifically, in '26, we will experience a margin tailwind from the temporary cost taken in '25 to relocate our production lines. That tailwind is then more or less offset by the full year effect of tariffs as these were only really impacting our COGS from the third quarter of '25. Then we will have a net negative effect from a step-up in absolute amortizations following the product finalizations of a number of projects, including the recent Evolve3 portfolio. This is, by definition, a noncash effect, but is following our accounting principles. Taking these factors into account, we do believe that we can drive a very healthy underlying growth in '26, which will materialize across gross margins and operating leverage. Depending on the growth development in the year, we will be able to expand our underlying EBITA margin by 1 to 3 percentage points. This once again underpins our strong group-wide margin platform potential. We remain firm on our long-term structural margin target of 16% to 17%. With the underlying margin target we are guiding for this year, we are convinced that we can continue to drive yearly margin expansions beyond '26 as a result of healthy top line growth and prudent OpEx management. On top of this, we will naturally look for gross margin opportunities as well. So to conclude, following a difficult '25 due to a wide range of external headwinds, we are excited about the prospects of the coming year. With growth coming back to our 3 divisions, we will be able to deliver a strong profitable growth while continuing our focus on strong cash flow generation and thereby continuing deleveraging. And with that, happy to hand you back to Rune. Rune Sandager: Thank you, Peter and Soren, for the updates. This was the end of the presentation. I will hand you over to the operator for the Q&A. Please limit your questions to 2 at a time, please. Operator: [Operator instructions] The first question comes from the line of Andjela Bozinovic with BNP. Andjela Bozinovic: Maybe one on Enterprise and one on Hearing. So on Enterprise, having in mind the Q4 performance, can you give us more details on underlying assumptions supporting the guidance and phasing of the growth throughout 2026? And just more broadly, what is your take on the expected decline in the PC volumes following the memory price hikes? How do you see this affecting IT budgets and the end markets in particular? And on Hearing, can you maybe discuss the moving parts going into 2026 and the phasing of growth? And any indication of what is baked in your guidance in terms of market share gains, competitor launches and market growth assumptions for both at the top end and bottom end? Peter Karlstromer: Great questions and quite a lot of unpack there. Let me start with Enterprise. We recognize that '25 was, of course, not the year where we delivered the growth, which we aspired for. But with that, there were still some positive things happening in the year. We saw the U.S. market and the APAC market actually growing throughout the whole year. So the difficulties were in EMEA, and we did see some underlying improvements throughout the year. Q4 ended a bit weaker than what we anticipated. Still, if we look back over the years, it has improved. And then, of course, also with our launches here, I talked a lot in the opening about Evolve3. We also have video products, which we are launching this year. We do believe that will support and growth also on top of the market improvement. In terms of the sequencing, I think it's fair to expect that it will be a gradual return to growth. So we will build up the growth over the year. So in some ways, the second half will be stronger than the first half. We also expect more product launches throughout the years and the launches we have made now, while the products, I think, are truly fantastic, it is a premium product that's still a smaller part of the total Enterprise volume. So all in all, I think we will build up the growth in Enterprise throughout the year. Then you asked about the relationship to PC shipments. I think we need to admit that we have seen a correlation before over time. We saw a little bit less of that last year, and it's probably also linked to quite an accelerated forced upgrades of a lot of PCs. So with a significant amount of budget for many companies spent on this. So it's probably crowded out spending in other categories. So while perhaps PCs decline a bit, we do not necessarily see this as something negative for us. And so we believe in the underlying growth here and the gradual improvement of our market. Then if I move to Hearing, I think it's fair to say that there is, of course, a lot of many moving pieces when we're building up our growth aspiration here for the year. I mean as we talked to, we believe that the market underlyingly is growing slightly below its normal trends. And we're talking about the lower end of the 3% to 5% value growth, which we consider to be normal. And you asked about what we have factored in. We have tried to factor in everything that we know, of course. We do assume some competitive launches. We do assume, of course, some larger customers making different type of decisions with opening up for more entrants. So we have tried to factor in everything we can. But we're, of course, also factoring in our own new innovation and our own launches. And we are entering the year with a good momentum. We had a 7% growth in Q4. We're entering with that momentum into this year and feel good about the momentum of Vivia. And with more innovation throughout the year, we think we can support a healthy growth over the year. So in Hearing, in terms of sequencing, I think you should probably expect a fairly even momentum throughout the year. Every quarter, we see a good opportunity to grow in essentially. Operator: Next question comes from the line of Martin Brenoe with Nordea. Martin Brenoe: I have a quite long question here. So I think I'll just limit myself to this one question, and then I'll jump back in the queue. In your Q3 report, you wrote that GN has minority investments in noncore assets that may contain significant value and could be divested. I've done some channel checks, which are indicating that NationsBenefits is a $1 billion valuation company, which is looking for external funding here in 2026. And this should translate into a potential divestment opportunities with potentially billions in DKK, based on my analysis at least. I know it's a bit out of your hands, whether this happens or not. But could you maybe just confirm whether you expect a funding round in 2026 and whether you expect to monetize that opportunity when it arises. And then just as part of that, I guess it would also explain why you're not having a cash flow guidance for this year, which indicating that you are a bit more comfortable with your leverage ratio. And if possible, I know I'm asking for a lot here, but could you maybe just provide some details on what you think such an opportunity would affect your deleveraging path from here and how you -- if you monetize it? Otherwise, potentially just give some basic information about the revenue and the growth of these minority investments? Peter Karlstromer: So Martin, thanks a lot, and thanks for laying this out and your work around this. We started to talk about Nations because we realized it started to build up to a valuable asset that we wanted to be very open about. And -- but we've also been clear on that there are some unknowns also for us. This is a company that is privately held. It is, of course, we have an ownership share of about 19%. We have a founder in that, that's been there since the beginning and another large investor also. So we're one of the larger investors. I think we are very happy, of course, with the underlying performance of the company. We do not want to comment on the details here since it's not a public company. I think that all of you can approach Nations for request directly from them. But I can just confirm that our view is that the underlying performance of Nations is strong and is strengthening over time, and it's been a very successful business buildup. So that's probably all we can say. And then in terms of how we think about our ownership, this is not strategic to us in terms of that is interlinked a lot with our existing business. At the beginning, Nations were very hearing aid focused, but they've grown to be much more than that today. And as such, there is not a very strong link to our existing business. So at the right point in time to the right valuation, we would be open to consider if we're the right owner. But it's not anything we are unilaterally seeking. We probably will do that in great harmony with other key owners and the founder, which we respect a lot. And we will update you over time as opportunities will present themselves. There is nothing very imminent around this, but could very well be over time. I hand it back to Soren for more commenting on the cash flow guidance and how to think about it. Soren Jelert: Yes. I think in many ways, you're absolutely correct that we do not guide for cash flow this year. And just to echo what Peter said, in the event something would happen, it would be M&A. And as such, we would always guide excluding M&A. So in that sense alone, it is not interlinked. But that's fundamentally not why we are not guiding for free cash flow this year. It's more the fact that we now, the last 3 years have generated more than plus DKK 1 billion in free cash flow. We have demonstrated that when we have the margins that we've had that we can generate the cash flow. In addition to that, we have also now made a new loan agreement that in many ways, is also a testimony to that our endeavor to go towards 2.0 leverage by '28 is definitely on the right track. And it was our opinion that where we need to focus now is to generate growth and the earnings. And when we do that, it will yield cash flow. And rest assured, we'll stay focused on getting to the deleveraging of 2.0 as fast as we can. Operator: Next question comes from the line of Hassan Al-Wakeel with Barclays. Hassan Al-Wakeel: Firstly, can you talk us through the drivers of hearing aid market outperformance and any regional performance that you can highlight? Your market outlook is for another softer year in 2026. It'd be great if you can walk us through how you see Europe within this and whether you're seeing any signs of improvement? And then secondly, on margins, given this should be a strong year of launches across your businesses. Can you talk us through some of the building blocks for expansion in the margin over the course of 2026? And I appreciate this is a wide range for the year, but the gap to the midterm ambition remains pretty large. So any updated thoughts on the bridge to 2028 would be very helpful? Peter Karlstromer: And let me start in the order you're asking this essentially. So if you take Hearing, if we look on '25, as you have heard us talk about before, in the first 3 quarters, this was very much Europe and international markets providing the growth for our business. We have been doing very well there. I think what's positive is that in Q4, we saw a bit of a stronger performance and growth contribution also from the U.S. side of our business. And if we look into the next year, I would say market-wise, we do expect the U.S. to be a little bit stronger than it was in '25. As we remember, Q1, in particular, was a very difficult quarter in the U.S. But generally, still the global market outlook, as we're saying, we do believe it's adding up to slightly below the structural growth of the market. That's our planning assumptions. Then in terms of our own plan for how to outgrow that market, I would say it's broad-based. We like to see outperformance versus the market growth in each of the region and also very focused to drive success in each of the channel types, everything from larger key accounts to more smaller independents. So this has been the approach we have taken in the last few years. It's very important for us to have that kind of balanced exposure and balanced ambition for our growth across. And the same is how we think about '26. And then you asked about Europe specifically. I think it's clear that Europe has been, I think, lately a little bit better. I would say that the markets where we have been doing very well has been, in particular, in Germany, that has been a growth driver for us, and we continue to have a very good momentum there. I think it's probably what I would highlight. But generally, I mean, the European markets for us has provided quite healthy support for our growth. I think it's also fair to say that in some European markets, we have a bit of a lower market share, also presenting an opportunity for us to catch up a little bit to what we think are natural market shares for us. Soren Jelert: And then when it comes to the margins, I think a couple of questions here, one linked to this year's margin. And for us, I think it's important to also recognize that we all the time have said that Gaming is an area where we will, through the good synergies with Enterprise, improve, amongst others, our gross margin. And as such, we also do believe that the group as a whole will be able to improve its gross margin in '26. Then in addition to that, actually, we also do see an opportunity on leverage of the OpEx base essentially. But to your point, we have factored in that we are launching. And then bear also in mind that within Hearing, we did launch Vivia in '25. So those costs were actually sitting in '25 as well. So in many ways, we are at a level of the cost base, which we believe is adequate to actually support the growth that we are striving for within the 3 divisions. Then when you look at the long-term margin aspiration of 16% to 17%, I think fundamentally, it's also important the decomposition we did of the aspirations for '26, where we have some cost items, amortizations as one, we do believe when you come out to the outer years we will be able to leverage the top line growth and as such be able to generate these margin increments as you see. So fundamentally, the underlying performance of our business should be able to get us to the 16% to 17%, which we believe is right for GN as a group. Operator: Next question comes from the line of Carsten Lonborg Madsen, Danske Bank. Carsten Madsen: Yes, a quick follow-up on Nations and the value here. Could maybe -- I know you cannot really talk about the value of it, but what will happen tax-wise if you realize a gain on this? Should we extract some tax from that, at least then we know that? And then I have a question on Huddly. You talked a lot about Huddly and you also mentioned video as a growth driver for you in 2026, something we have on the outside been waiting for a very long time. How meaningful is this collaboration? And do you expect -- and have you factored in sort of the meaningful growth of the video segment into your Enterprise outlook for this year. That's it? Peter Karlstromer: Let me start with the video and then hand it back to Soren for Nations and tax. I think that the Huddly partnership is meaningful in the way that it's addressing a gap which we've been having for a while, which is to work with companies in large video rooms. And Huddly is a company -- it's a smaller company, but with great technology for how you can add cameras into video rooms. So we essentially have integrated this into our existing video platforms together with their R&D. So it helps us a lot to now be able to address the full needs of companies, and it's been very well received when we're talking to customers and have presented this. We are launching this now in Barcelona this week at the big conference here, ISC. And we also have own other video launches, some which we have made and some that's coming. I think it's meaningful for the video business, what we're launching. It should definitely support the growth of the video business. If you look on the total growth support for both Enterprise and for the group, we need to remember that video is still a relatively small part in absolute numbers, so to say. But it certainly are important steps to see some acceleration of growth on the video side. But if you look into the growth ambition of our -- of Enterprise of 0% to 6%, we are counting on some contribution from video, but the majority will come from the core of the business, which still is headset. Soren Jelert: And then, Carsten, when it comes to your further deep dive on Nations question, I mean, I'll refer back to the question or the answer that Peter gave before. And as such, neither are we speculating in a potential tax implication of this and as such, are planning on group level still with around this 22% as we have also reported out on this year. Carsten Madsen: I was more thinking about whether we should -- when we calculate the value, whether we should just assume that the value is the value or whether we should subtract 20% tax? Soren Jelert: Again, I wouldn't speculate in the value is the value. I mean, honestly, we do not have a comment on the value as such and when it will materialize on Nations. So that's the way we look at it. Operator: Next question comes from the line of Veronika Dubajova with Citi. Veronika Dubajova: I will keep it on to 2, please. One, I just was hoping you could quantify the contribution from FalCom to the fourth quarter revenues and then what your expectations are for 2026 and whether those have changed in any way? And kind of maybe just gate some sort of risks to the upside and the downside around that just so that we can think about that since it was a driver. And then I apologize, but I have to go back to sort of the expectations around the Enterprise business growth. I guess there is a lot of concern and uncertainty in the sort of broader IT spending market. I guess it'd be helpful to understand the conversations that you're having with your distributors with some of the larger customers. What are you picking up in terms of corporate willingness to spend, especially as they face a lot of other competing priorities for investments, whether that's PC units or it's things like AI. I'd be kind of good to understand what you're hearing there. Just to give us a bit more confidence in your kind of -- what seems to be a very clear message that Enterprise should grow this year after many years of decline. Peter Karlstromer: Starting with FalCom, as you remember, we had a very good quarter in Q2 where we talked about more than DKK 100 million of business. In Q4, we had a similar quarter. So also a very good quarter. And we did preannounce that already earlier in the year because we had more or less agreements for that order in a firm way already then. But it was delivered and revenue in Q4. So if you look on the year in total, we made a bit more than DKK 200 million on FalCom for the full year of '25. And if we look into '26 that at the minimum, we see that we should be able to do the same level of revenue, but our base case scenario is probably to grow that a bit further. So I would say it could have some small growth contribution to the overall group growth. But I think we also need to remember FalCom still is relatively small in absolute terms. So it's not a real needle mover. But we continue to see a very positive development of FalCom, and we are pleased about that and very focused on continuing to growing it, of course. And then if I move to Enterprise, I appreciate a lot your questions around this and also how to think about this? I do think that we can approach this both top down, what we hear from leading analysts in terms of IT budgets and how much they spend on software versus hardware and so on. And if you do that, I think you're coming to a conclusion that IT hardware is probably modestly growing in most of the forecast, but relatively low growth numbers. And then if we observe it more from our own trends and the markets where we operate, which is predominantly headsets and video, as I talked about before, the market has been growing in the U.S. and APAC, which is great to see actually a stability of that growth. It's been going on every quarter for more than a year. And then EMEA has been the traveling area for us and the whole industry. And it's still not in growth in EMEA. So I would say that, that's perhaps a major uncertainty here and what the market growth will end up with. But our best assumption, if we take the growing North America and APAC and an improving Europe is market growth then for around 0% to 2%. And that is also consistent with what we are picking up with our largest distributors and resellers and when we speak to large customers and I mean trying to both plan our own business, but also talk about how they see and observe the future. So that's a market. And then we are guiding slightly above that because we feel very good about the products we are launching. I hope you all have a chance to test them at some point in time soon because we really think that this is not just like another product, so to say, another headset, but it really is taking the performance to next levels. And the initial reception has been very positive. It will take some time to build up the volume on this new line of products in Evolve3. We will see some limited contribution already in Q1, but more throughout the year essentially. So that's the combined thinking in resulting into the guidance of 0% to 6% growth for Enterprise. Veronika Dubajova: Got it. And can I just maybe ask a very quick kind of financial modeling question. Would you expect Enterprise to grow already in the first quarter? And I guess maybe, I don't know, Soren, if you want to comment on the phasing of growth for you specifically given some of the destocking dynamics you saw in the fourth quarter? Soren Jelert: No, we don't know and we're not guiding per quarter per se, but we do believe you will see gradual strengthening of it. And at this point in time we have some level of negative growth momentum, and we need to turn that into a flat to growing momentum. If that is happening in Q1 specifically or a little bit later in the year, we are not really guiding [indiscernible] it will be gradual. I do think though, and I could have talked about that also in the overall dynamics, it's worthwhile to highlight that we did see some channel destocking for the full year of '25. So that affected our growth in Enterprise with a few percentage points. And what we have assumed for next year are fairly stable channel inventories, and that is also what is a little bit helping to create the range of the guidance, what is happening to the channel inventories. Operator: Next question comes from the line of Jack Reynolds-Clark, RBC Capital Markets. Jack Reynolds-Clark: I had a couple also on Enterprise, please, and then across the U.S. and Europe. So within the U.S., can you kind of quantify the positive growth coming out of the quarter? And has that sell-out growth translated into a recovery in sell-in so far in Q1? And how much -- and if not, kind of how much destocking is there left in the U.S.? Then within Europe, again, in Enterprise, you mentioned some sell-out growth recovering there. Could you point to which markets are seeing sell-out growth and kind of quantify that recovery? And again, are you seeing any kind of translation into sell-in growth recovery and/or kind of how much destocking or how much inventory are your distributors holding there? Peter Karlstromer: So on the U.S. market, in the quarter, we did see sell-out growth, and we also had the sell-in growth, and they were actually fairly aligned those 2 numbers. So the channel inventories in the quarter in the U.S. were stable. We saw some more significant channel reductions in the beginning of the year '25 in the U.S. But towards the end of the year, they have actually stabilized. So the delta of sell-out and sell-in in the last quarter were predominantly in EMEA, and there, we saw it with several percentage point differences. And then to the markets have been going best. I mean, the last few quarters, a highlight of EMEA has been Germany, which is very encouraging for us because it is the largest market in EMEA. It is also a market where we have a very strong position. So that market has been both in sell-out and sell-in growth in the last few periods. U.K. has also improved a lot lately. And then I would say the Nordics and a few others of the more Central European countries have been -- I mean, also improving. And then we've been having a bit of a further challenges in Southern Europe. But I think that overall, if you look in EMEA, it is ending stronger than it started '25, so to say, and that's why we're talking about some level of improvement in trends. But the channel destocking have impacted also the numbers in EMEA. Operator: Next question comes from the line of Martin Parkhoi with SEB. Martin Parkhoi: First, a question again to Soren on the margin. I'm still a little bit curious to understand the bridge towards '28, in the short-term, which is '26, you have a range of 2 percentage points on the margin. And you believe 3 years later, you have a better transparency, only have 1% range in your margins? So how can that be? How can you -- if you land in the low end like 11.5%, how can you reach up in the 16%? What tools do we have to make such cost control? Then second question on the hearing aid market. We saw your gross margin going down this year, as you also rightfully say that you use some channel and country mix. And how should we see that mix in '26? Also if we get a soft hearing aid market, slightly soft hearing market again in '26 as we saw in '25, then there's a tendency to manufacturers starting to compete a little bit more on prices to reach their budget. So what kind of pricing environment have you baked in and margin have you baked in on hearing? Soren Jelert: Soren speaking, and that's on the longer-term aspiration. I think it's the way we have also decomposed the '26 guidance. We are of the opinion that in the event that we come in lower, it will, in our minds, also be a question of timing as we will strive for the growth as the key vehicle for us to get to the long-term 16% to 17%. Fundamentally, some of the investments we are taking in 2026 in, for instance, operations will yield gross margin improvements when we come out in the outer years closer to the '28. So in reality, we believe we will be able to catch up in the event that we land in the lower end. And we believe that if it's timing, it will definitely be possible. So we are investing in an underlying improvement structure that will yield results towards the '28 target. Peter Karlstromer: Martin, for more the hearing aid margins in '26, as we commented and you also highlighted in '25, the gross margins reduced due to the growth mix essentially we had in areas where we have low gross margins, channel types and geographies basically. As we're looking into the '26, we do expect a little bit of reversion of that into the more higher margin areas growing more normally and as such, supporting the gross margins. What I'd also like to highlight here and had that in the opening readout the divisional margins because they were actually -- if we look on -- after the difficult Q1, which was challenging in many ways, we were actually stable vis-a-vis the year before. And the explanation of that is that some channels where we have low gross margins also have a very, what should we say, compelling cost to serve. And as such, you might get a lower gross margin, but you still can protect a very good divisional margins. And we remain very focused on both type of margins. They're helping us to manage the business in a good way. But the planning assumption is some type of improvement on the gross margins for the year. Operator: Next question comes from the line of Richard Felton with Goldman Sachs. Richard Felton: Two, please. The first one is on Gaming. I'd like to understand the confidence in the 2026 guide. I suppose that that business was down slightly in 2025, momentum sort of decelerated into the end of the year. So just trying to understand sort of the gap from 2025 to the 7% to 13% guide for '26 between how much of that is the market getting better? How much is market share gains and product launches? That's the first one, please. And then the second one, thanks very much for sharing the detail on the Evolve3 launch. My question is, how impactful the launch has been historically on the Enterprise business? I know for hearing aids you get quite excited about new platform launches. But thinking about the business model and the type of customer base in Enterprise, how important is that launch cycle to drive growth? Peter Karlstromer: If we take the Gaming first, I think it's a combination of an improving market and then market share gains. If we look on the '25, the market was, I mean, relatively weak, around the world and in particular in the U.S. and Europe, where we have the majority of our business. So we do expect a bit of a stronger market environment. And then also have several great launches in the pipeline for the year across key core categories where we have meaningful business. Then I appreciate also when you're looking at, we all get a bit scared, of course, about Q4, which looks like a loss of momentum. I think it's important to bear in mind the outstandingly strong quarter Q4 the year before. So the comp was also part of seeing that decline in growth. So if you look more on sequential growth, quarter-on-quarter growth, it looks a little bit less daunting, so to say, to go from where we ended the year to growing into '26. So it is what we believe in as the base assumptions. And then the Evolve3 launch for Enterprise, we think it's a very meaningful launch and that this really will support our business. And given that we are the market leader in headsets also, hopefully, it can help the whole market to grow. So maybe get a double help here in some way. We have had this headset in early trial programs with both channels and lead customers for a while, and the feedback is overwhelmingly very positive. At the same time, we need to recognize it several years since we launched a line like this. So it's hard for us to analytically come back and say exactly what it would mean. But definitely, we are of the firm belief it will be a strong contributor to finding our way back in growth for Enterprise essentially. Operator: Next question comes from the line of Niels Granholm-Leth with DNB Carnegie. Niels Granholm-Leth: You are calling out a headwind in your margin for this year because of less positive effect from R&D capitalization. I mean, the effect for '25 was actually a little bit more than 2 percentage points. So would you expect to neutralize the effect completely this year? Or is it just going to be a less positive effect in '26? So that's my first question. And then getting back to the phasing in the Enterprise division. So how should we think about the growth trend throughout the year? I mean, are you continuing to expect kind of flattish to negative growth in quarter 1 to improve in the second half? How should we think about that? Peter Karlstromer: The way we have planned it out and can see it, of course, operating in the asset bases we have under R&D, we believe that the headwind or the less headwind is -- of the headwind in this case is to the tune of 1%. So it's not a full erosion of the 2% that you rightfully quote, but think of it at least as 1%. That's for the planning purposes. Soren Jelert: And then when it comes to Enterprise facing, I think the best way to do it is to expect a gradual buildup of the growth. So second half stronger than the first half. And I think it's both about generally getting the growth momentum going and also linked to the Evolve3 launch. We will see some impact in Q1, but we will see more impact of the Evolve3 launch later in the year. We will also launch more headsets later in the year, also further contributing to that growth. Then, of course, if we look on the Enterprise overall number, I think it's helpful, of course, to keeping a track on the large 2 FalCom orders in the comparison base from last year. And if we look on FalCom for '26, I said we aspire to have at least the same level of revenue, but also FalCom will likely be bigger in the second half than in the first half for '26. So that's probably as much as we can help you here, but do expect a gradual buildup of the growth momentum. I think that's the conclusion here. Niels Granholm-Leth: But shouldn't we expect any channel filling from the Evolve3 launch already here in quarter 1. Soren Jelert: Some level, definitely. But again, as I said, the Evolve3 85 and 75, these are the premium products, which is meaningful, but a smaller part of the total Enterprise sales. The mid-tier is where we have most of our Evolve3 sales and these type of products will launch at a later point in time. So that's what I meant with the sell-in will contribute in Q1 to some extent, but I think you will have even stronger Evolve3 contributions later in the year. Operator: Next question comes from the line of Julien Ouaddour with Bank of America. Julien Ouaddour: And sorry, guys, I come last, it won't be too different from my peers. I want to focus on the Enterprise guide again. I just think you need to give us a little bit more confidence for that. Just if I summarize, you're talking about gradual market improvement, 1Q and likely to grow back-end loaded year for Enterprise and Gaming. I think 4Q was softer than expected and not yet significant improvement in EMEA with declining PC shipments for next year. That's basically what I take from the call. I'm just wondering why putting such guide with ambitious market and share gain expectations instead of trying maybe to rebate expectations for beat and raise if the market recovers and the share gains materialize later. So that's just a question about just your thoughts behind how the guide was set and the visibility you -- I mean, you have today given, let's say, it was a little bit challenged to call the market in recent years? That's the first question. The second one, so switching to Hearing, you're the largest OTC player out there probably. Could you maybe address on what you're seeing on this channel in the U.S. and globally? And I'm asking the question because we're seeing some slowdown in the hearing aids market. AI seems to have unlocked possibility for smaller OTC players to get out with pretty good products from a performance standpoint. So my question is just, do you see some traction from small competitors? And could it be one of the reasons the U.S. market was soft for prescription hearing aids recently? Peter Karlstromer: Now back to Enterprise, and I run the risk of repeating some of the things I said before, but we have really tried to take all facts into accounts. I mean, both what we are picking up top down from all the sources we have available to us and then discussions with partners, distributors, and customers. And finally, what we observe ourselves in the underlying momentum of the business. And as I highlighted before, we do see the U.S. and APAC market in growth. It's been a lot about EMEA. And I mean, what we do believe and have into the guidance is some gradual improvement in EMEA. It doesn't say that the market will enter a high growth. We are saying a global growth of flat to 0%. It can even cater for some level of decline in EMEA for the year for the flat scenario there. And then we very much believe in the launches we are doing across the portfolio. And we do believe that the guidance we are giving with the midpoint as the most likely is our best effort here to give a meaningful guidance. We could, of course, have given an even broader range, but we do think the best way we can help you and the market is to guide like this in what we believe will be the most likely outcome. Then if I move to the OTC side. We -- I can speak about our own business first. I mean we have shared with you that we saw a little bit of a disappointing growth momentum in the first 3 quarters of '25. We actually had a fairly good quarter in Q4, so reentered double-digit growth in our Jabra Enhance our OTC offering. But I think I will say that still, if we look on the whole for both the market and our business, I think we've seen actually relatively similar dynamics to what we've seen in the overall hearing aid market. In the beginning of the year, and particularly in Q1, also the OTC business was really negatively impacted then the Q2 and Q3, I mean, our business, but I would also believe that's true for the overall business didn't really perform in the normal ways. And now we're seeing a little bit of stronger momentum in OTC. But to be fair, we actually see that in the U.S. business overall for ourselves. I personally do not believe it is, what should we say, cannibalizing significantly the traditional market. I think it continues to be a complement. It's interesting for us when we analyze our customer data. And so we do see that the customers buying from OTC are a bit different from the traditional hearing aids. In particular, it seems to be people that are younger. On average, it's about 10-year younger profile. And so there probably are some differences in the user base also. I appreciate there might be some limited overlap, but this is our best read on the market. So we don't think it will be the key explanation of the performance of the traditional hearing aid market, so to say. Julien Ouaddour: Perfect. I mean if I may just squeeze a very last one. Do you have any view on the Section 232, maybe any potential impact like on the protocol for the hearing aids? I mean, could it change your -- the original tariff for '26? Peter Karlstromer: No, we don't have any privileged insights in this. We're, of course, observing this also. So I have no further insights or comments. Operator: Next question comes from the line of Martinien Rula with Jefferies. Martinien Rula: I think you can hear me okay. Most of my questions have already been addressed. So I'll probably keep it to 2 quick ones and just to be as well conscious of time. So the first one is on your formerly called Lively business, which, if I remember correctly, was supposed to be breakeven by late '25, early '26. Could you elaborate a bit on how much of a drag it was for 2025? And if you have considered any potential scenarios for divestment or something like that into 2026 and beyond for this business? And the second question would be on the Gaming. I appreciate that you've been gaining consistently some share in the headset and keyboard categories. But I was a bit surprised to see that your share in the mike category, sorry, have remained stable. As such, I would appreciate if you could remind us of the revenue contribution of each of these categories and elaborate on why you haven't been able to grow your share in mike. Peter Karlstromer: Now, starting on the Lively business, which is what we call Jabra Enhance today. And as I mentioned, this year, we have not been able to have the same growth profile as in the previous years. The positive, I mean, fact is that Q4, we are back to the double digit growth, which we like to see. But given that the slow growth profile this year, our breakeven has been a bit delayed. We talked about that it will happen late '25, early '26. I will say with the growth momentum we have now, it's probably a bit later in '26 or early '27. But what is positive is that, I mean, the P&L works, so to say. I mean it will help the breakeven with the growth of volume. So we've been very focused on getting the business back to growth, and it's encouraging to see that now in Q4. Then on the Gaming side, I mean, you're absolutely correct. I mean the key category for us in Gaming are headsets. And here, we're really the leader for premium headsets in Gaming. And we are also large in headsets overall. So that is the largest category for Gaming. And then keyboards has been another category where we've really been building up a good business over time and very meaningful. You highlight mike as an area where there should be a growth opportunity, and I would say I agree with that. I don't want to forgo future launches, but it was a while ago since we launched new products into the mikes area. So I think you should expect us to have something going there that can help us to capture that opportunity essentially. I very much agree with your observation that that is a growth opportunity for us. Operator: This concludes our question-and-answer session. I would now like to turn the conference back over to the management for closing comments. Rune Sandager: Thank you very much, operator, and thanks, everybody, on the call.
Operator: Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Murphy USA Fourth Quarter 2025 Earnings Q&A Call. [Operator Instructions] I would now like to turn the call over to Christian Pikul. Please go ahead. Christian Pikul: Thanks, Carly. Good morning, everybody. Thanks for participating in our first Q&A only session covering fourth quarter and full year 2025 results, I would remind everybody to refer to the forward-looking statements commentary we included in our prepared remarks yesterday, which I hope you all took the opportunity to listen to or read. With me this morning are Mindy West, President and Chief Executive Officer; Donnie Smith, Chief Accounting Officer and Interim Chief Financial Officer; and Ash Aulds, Director of Investor Relations and FP&A. [Operator Instructions] Carly, you can go ahead and open us up for questions. Operator: [Operator Instructions] Your first question comes from Bobby Griffin with Raymond James. Robert Griffin: Yes. I like the new format getting that out there after the press release. I guess my first question is more on the competitive comments that you put in the prepared remarks. Just curious if you can kind of conceptualize where the competitive kind of pressure is versus 6, 8 months ago? Is it getting worse or getting better? And then, I guess, more importantly, after you see that initial competitive response of new entrants how long does it take the store that's impacted to kind of come back to what you'd say are company-wide trends or company-wide averages. Mindy West: Right. That's a great question, Bobby. Our same-store gallons in particular, are impacted by those factors of competitive intrusion. And really the pressures vary market by market. So for instance, in 2025, some of our stores had average per store month volumes that were actually higher. We saw that in 9 states that we operate in. Margins were higher in 10 states. . But those markets are in different stages of competitive intrusion and pricing behaviors. When we look at Texas, has both higher margins, higher volumes. Colorado and Florida, though had lower volumes and lower margins but those states over time are going to look more like Texas as they mature and stabilize and those new competitor entrants their share and then ultimately raise prices because they have to make a return on their sites, too. So our new stores also take share from others and they're outperforming the network. But same-store remains under pressure. So we have to invest an extra penny or so in order to maintain volumes. So typically, when a new entrant enters the market, they do exactly what we do. They price very low at the outset while they try to gain their share from the other competitors that are already entrenched in the market and that could take 3 months. It could take 6 months. It could take a year. And then it depends on how many stores that particular market entrant wants to build and that -- and what density do they want to build in that market as to how long it's going to last. But ultimately, everything goes back to normal and margins rise and we are able to increase our margins as well. So in a way, we actually like competition because while it creates a disruption when it's happening, as that market matures and stabilizes and the winners have acquired their share of customers, then the higher margins ultimately follow. And we're disciplined where we build and continuously upgrade. So we're going to be there for the long term and we're going to be a winner also. Robert Griffin: Okay. That's helpful. And I guess, secondly for me, and I'll turn it back over. The comment there about the step-up or the acceleration in the maintenance capital spending, I found interesting. And more so and just like the fact about it limiting disruption, is there any -- can you put any more details around how big of a drag those, call it, disruptions have been? Or is more this step-up just kind of getting ahead of what could have been a drag. And just kind of trying to see if we've been -- there's been an EBITDA impact that actually will start to go away after you do this maintenance capital step up. Mindy West: Sure. What I would say is it's more of the latter. It's more of a getting ahead of things before it happens. We have been entirely within a break fix mode for our history. That means that maintenance comes in lumps, but it's difficult to predict. And as our market -- as our fleet ages, we found the need to go ahead and proactively invest in equipment that is end of life or near end of life because that does 2 things. It results in maintenance expense that we can predict. It also enhances uptime with that equipment, so enhances the customer experience and therefore, their loyalty to us. So the kinds of things that we're talking about doing is a step-up in proactively replacing some dispensers HVAC units, space, things like that, which are going to cost us a little bit in capital from the beginning. But we'll improve it in uptime and store performance over time. And we think the projected savings from just doing that is roughly $6 million to $8 million, somewhere in that range of maintenance cost -- maintenance expense that we would avoid by doing that. And then, of course, the impact on our customer goes even beyond that by being able to serve them in a more consistent fashion. Operator: Your next question comes from Bonnie Herzog with Goldman Sachs. Bonnie Herzog: I actually had a question on your long-term guidance, I guess, through '28 and I guess I'm just thinking about it, this for modeling purpose guidance this year of $1 billion, it does imply stronger EBITDA growth in, I guess, '27 and '28 to ultimately reach that long-term guidance of EBITDA target of the $1.2 billion. So I was just hoping maybe you could talk about the drivers of maybe faster expected growth in the out years? And where you see maybe the most upside or maybe most downside. Just trying to think through the potential for you to kind of meet that long-term EBITDA guidance? Mindy West: Great question, Bonnie. And what you're seeing in our EBITDA guidance is really a function of several factors for 2026 so the guidance is capturing the timing and scale impacts of our new store program. So as we get to a level where we can sustain 50-plus NTIs a year and those classes mature, then that EBITDA contribution becomes more visible because we would expect that 50 stores can contribute $35 million to $40 million of EBITDA once they complete their 3-year ramp. However, for this year, when an entire class of 50 from last year opens at once, it does create a temporary drag that outweighs the strong 2- and 3-year contributions that we are getting from our earlier smaller classes. So it isn't that the stores aren't performing, it's about scaling up our program to deliver the 50-plus stores going forward. So that's one of the factors is us just being able to build 50-plus stores a year and then ramping as expected. The other factor is in a more normalized, more volatile fuel environment, our EBITDA growth will become even more sustainable. Because, as you know and we've talked about at length, the current fuel environment does impact our same-store performance that the new stores right now are not able to offset this early into their ramp, and that's going to be a headwind this year. Now when you look at the path to the $1.2 billion, it really depends on 3 levers only 2 of which we can control. We talked about one, the normalized fuel environment. That's one unfortunately, we cannot control sustaining the 50-plus NTIs annually, we can, and we are in a great position to do that and accelerate our growth there, also executing on our initiatives. So making our business better is also a material driver of that future growth. So when the environment changes, I think investors are going to be very surprised about the earnings power of this business. But if I was going to handicap how can we achieve $1.2 billion. What am I, what are the pluses and minuses I believe in the pipeline that we have, I believe, it's a quality pipeline that will deliver the $35 million to $40 million at ramp and a 50-plus store ramp per year. I believe in our ability to achieve our initiatives. But again, the $1.2 million does depend on a little bit more volatility and I think as we saw in the fourth quarter, when we can just get brief spurts of that, our business is functioning well and we are attributing the value to the company that we would expect in periods like that. But we do need a little more help from the macro environment in order to get to the $1.2 billion. Bonnie Herzog: Yes. That's super helpful. And honestly, it makes a lot of sense. And yes, volatility is your friend as you kind of suggest. And maybe a quick follow-up then on that because also just in the context of that, the fuel margin, I know, again, it's for modeling purposes, but it did suggest a 30.5% CPG. And so if I'm right, I think that's maybe 4 years of flat to down fuel margins. So just trying to think through that for how you're kind of thinking about fuel margins. And again, and then also just the breakeven costs? Like how have they been trending recently? Mindy West: So for fuel margins, our outlook for the year really reflects what we believe is the highest probability and most likely environment. So it's -- we think it's going to still be characterized by relatively low volatility as we go through the year. We think we're going to see relatively stable and still low fuel prices, which impacts our business model because it makes our customers on margin a bit less price sensitive. So we believe it is a base case similar to last year. And of course, we're comping several years ago when we experienced the other extreme of things, which we benefited from tremendously where we saw really high volatility, higher prices, which made our offer even more compelling so we are going to focus on the things we can control and improve our business and the earnings power, including levers that in the future could be more fuel immune. But for right now, for the fuel margin, we think that $0.30-ish all in is right where we need to be. And it's still reflective of that structural component because to be able to earn margins at this level despite the fact that we're putting a $0.01 or $0.02 on the Street. And despite the fact that we have low volatility is really speaking to that structural element that, that is still there and supporting the stock, the margin. So when you talk about the breakeven, what I can say is the cost to serve is really not going down and that breakeven component is still alive and well and playing out industry-wide. So the fact that margins were flat this prior year given the low volatility and really nothing that was there to macroly support margins being that high shows you that those marginal retailers are still requiring those higher margins to break even, much less continue to invest in their business, which they're not able to do, and we are able to do that. Operator: Your next question comes from Irene Nattel with RBC Capital Markets. Irene Nattel: Before I get to my question, I just wanted to clarify something you just said, Mindy, which is, you're still planning on putting $0.01 to $0.02 a gallon on the Street this year and that -- and even with that, you're still looking at sort of 1% to 3% same-store volume pressure. Is that correct? Mindy West: We still think that we will continue to see volume pressure in this lower price environment, and we will still need to protect our position, especially against competitive entrants in certain markets by putting some sense on the Street in order to do that and maintain our competitive position. So yes. Irene Nattel: And then just moving on to the back hard. Can you talk about how you see the nicotine environment unfolding this year? We had some bright spots last year. How do you think it plays out that in 2026 and moving ahead? Mindy West: I think that we are still the ideal retailer for manufacturers as they help our customers progress down the risk spectrum from cigarettes to other products. We will continue to be very promotion-driven throughout the year. And I think that we have delivered strongly on promotions. I think you saw that earlier in the year when we have a promotion, our sales force can get behind that and really sell it. We are having our national leadership conference over these several weeks. I just got home from St. Louis, where we toured the Midwest. We had all our store managers from the Midwest in one location a couple of weeks ago, we were in Houston for the Southwest. And I can tell you, all of those store managers are so excited and they are very promotion-driven. They are very contest-driven. And I think that, that culture really underpins our ability to be the most effective use of our manufacturers promotional dollars and meanwhile, we still continue to take share in cigarettes and we will continue to do that. But the other categories, the other nicotine categories are growing strongly, and we don't expect that to slow down any. Now we do realize that we're going to be comping a very special one-off promotions. So we are not anticipating in our guidance being able to duplicate that but we have put in our numbers accelerated promotional funding from what we had last year. Operator: Your next question is from Ed Kelly with Wells Fargo. Edward Kelly: Good morning I wanted to ask you about per store expense growth. You had a very strong year in '25 below the initial guidance that you had mentioned. The '26 outlook assumes that you'll still be running below that 5% level that I think at one point, you maybe thought was more normal in terms of run rate. I'm just hoping that you could talk about the drivers of that for '26 and then just taking a step back, what's the right -- the correct run rate over time for per store expense growth over the next few years? Mindy West: Great questions. Let me take that. And you're right. We have -- the team has done a great job of managing their expenses, so hats off to them delivering OpEx at only up 3.3% last year. It was really good. And obviously, our guidance is still forecasting that we're going to be below that 5% number. I'll talk about some of the drivers this year that we expect to maintain going into this year. We've done a lot of work with our store excellence campaign and our self-maintenance in particular, and just changing -- being able to change our card reader batteries, ourselves versus calling in a technician allowed us to save almost $2 million on maintenance expense last year. Our team has also done a great job of cutting overhead almost in half and that's attributed to our store managers just doing a great job with staffing and with scheduling and motivating their teams and running their stores more efficiently and then done a great job on loss prevention as well. We've moved some of the higher shrink items closer to the register. We also really dialed in on our cash loss and our merchandise inventory management. That alone allowed us to cut shrink by over $4 million, and that's inclusive of price increases, growth. We were still managed to save over $4 million. So we expect the impacts of those things to continue and even amplify. And then things like I talked about with proactively going ahead and replacing some of our equipment those will earn some savings in our maintenance line over time. And then I think your last question was, what should you expect going forward? I would expect something around 4% going forward. And bear in mind, we are building a lot of new-to-industry stores. Those stores are bigger than some of our existing networks. So those are going to come with higher costs from the -- and especially in the beginning as we are going to make sure that those stores are fully staffed to make a really good first impression to our customer. And then, of course, the fuel on the merch will ramp over time. So a lot of the driver of our OpEx is actually the new-to-industry growth building the bigger stores. But we are going to hold the line on making sure that we are operating as efficiently as possible. Operator: Your next question comes from Jacob Aiken-Phillips with Melius Research. Jacob Aiken-Phillips: I just wanted to double quick on the larger format stores and some of the cost pressures. I think last year, there was a dynamic where a lot of stores opened towards the end of the year, beginning of the year. And the winter storm in February like exacerbated some of those cost pressures. We had this January storm and I guess, February is still pending. But how should we think about like the 1Q dynamics there? And then the evolution of that or cadence throughout the year? Mindy West: What I would tell you is we will experience some higher maintenance costs from this first quarter winter storms, but we also got -- we're the beneficiary of some higher margins to heading into those storms. So we think that on balance, all that is going to offset and was fully baked into kind of the $1 billion-ish that we already talked about. So you are correct that when we build a bunch of stores, these larger stores, all at one time, those come with full OpEx really from day 1, while our fuel takes a bit of time to ramp and merchandise takes a full 3 years to ramp. And then, of course, the fuel does ramp faster, but we are also probably aggressively in order to take that share as well. So that definitely has an impact on our overall OpEx. And I would say that half of it or so is it just attributable to those larger stores. Jacob Aiken-Phillips: Got it. And then just on the small tuck-in acquisitions like you just did 4 and then could potentially do some this year. It's a newer dynamic. And I'm just curious what exactly do you look for? And I know it's early, but like what do you envision like economic improvement of the stores when like you get the Murphy's merchandising into the stores? Mindy West: We really like that Colorado acquisition in particular because we got to pick and choose which ones we wanted versus taking a whole portfolio where you get the good and the bad and you just have to make the best of the bad. In this case, we got the kind of cherrypick. And it was a market in which, one, we wanted to add density. This was a very quick and easy way to do it. It was also an economic way to do it. And we were able to get those stores open in what, 30 days or so, less than 30 days, we were able to put our signage up get our assortment, how we wanted to get those stores back open. So we were able to hopefully retain most of the customer base that was already going there and then leverage our Murphy Drive Rewards loyalty app and our density of stores in that market to drive more traffic into that store. So we like it from the standpoint we got to cherry pick it. It was a market in which we wanted to add density. It also allowed us to do that very quickly without having to go through -- we like organic growth, but it takes a long time to go through that, let's pick the site, let's permit the site, let's construct the store, let's get all our opening permits. That just takes a long time. So having the ability to bolster that with some of these maybe smaller onesie twosie [ fivesie ] type acquisitions. We are certainly in the market looking at some of those right now. Jacob Aiken-Phillips: Thanks, Mindy. Congrats on the new role. Mindy West: Thank you very much. Operator: Your next question comes from Pooran Sharma with Stephens Inc. Pooran Sharma: Just wanted to maybe start off with understanding the contribution from the NTIs in year 3. I think you mentioned $35 million to $40 million in yesterday's prepared comments and today as well. And I think you mentioned in the prepared comments, you maybe expected? Was it 2 years worth of these 50 class builds contributing $35 million to $40 million. So higher level, should we be thinking that you're going to get about $70 million to $80 million in contribution dollars from these stores and then that would rise to around $100 million to $120 million by 2028 or just wanted to get the right way to frame up that contribution? Mindy West: It's more of a stair step. And greater, we're always going to be -- for the foreseeable future, we're going to be building a new class of 50, which are going to be a drag on that as they didn't incur full cost, but have to go to ramp. So what we said was we expect each new build cost of 50 stores to generate between $35 million and $40 million of EBITDA at maturity after their 3-year ramp. So as we enter 2027, we will have the 32 new stores from our 2024 bill class, the 51 stores from our 2025 bill class and the 45 to 55 from this year, helping to grow EBITDA in 2027. So cumulatively, this will begin to move the needle even if the fuel environment does not normalize and we expect and continue to potentially increase our ability to add more than 50 stores in the network as we look even beyond 2027. So that's why we say looking back, 2026 will be viewed as an inflection point in our ability to deliver sustained EBITDA. But the $120 million is a bit extreme because you're going to still have that 50 new stores coming on, which in that first year, especially or a decrement to EBITDA. Pooran Sharma: And I wanted to maybe understand kind of the higher-than-expected PS&W and RINs contribution for the quarter. I wanted to understand more specifically what the dynamics at play were during 4Q? And as we look and think about PS&W margins in 1Q I know you're expecting $0.05 for the year. But just with the run-up in RIN prices, should we expect PS&W margins to stay a little bit above that $0.02 to $0.025 per gallon range you'd previously mentioned? Mindy West: Sure. When you compare the fourth quarter versus prior year on PS&W, this years were really supported by stronger arbitrage, stronger line space values. But less than prior year because we did have some downward movements in the price. So that's what's explaining that, but just there was a little more volatility in the fourth quarter than in the third quarter, for example. And so you saw the benefit of that in the PS&W line. As we look forward into the first quarter, obviously, these winter storms are having an impact on the network. It's also having an impact on price. Too early to say where we're going to end up on PS&W for the quarter at this point because the swings can be pretty dramatic. But safe to say for the full year, we think that we're still going to be within that band unless we can see some more prolonged volatility sustain itself but that's where we would expect PS&W to land for the full year, too early to say really for the first quarter. And then with regard to the RINs, as we always say, the price of the RIN is baked into the price of the gas we pay. So while there may be some temporary dislocations if RINs run up very quickly or run down very quickly, over the sweep of time, it all balances out. Operator: Your next question comes from Corey Tarlowe with Jefferies. Corey Tarlowe: Can you talk a little bit about what happened on the tobacco side from a margin perspective in the quarter? And then also maybe what to expect ahead there? Mindy West: Sure. And that's a great question. What you were seeing there, something we talked about frequently last year. So for the fourth quarter, it's really the timing of promotional dollars impacting that cigarette category, in particular, and the volumes. So importantly, though, although volumes were down, we did grow share of market in the cigarette category for both the 4-week and 13-week periods ending January 4. So our volumes did remain strong compared to the market. But keep in mind, these categories are highly promotional, so you won't necessarily ever see straight-line growth even on a year-to-year basis. But as we've demonstrated over longer periods of time, we do have -- we have significantly grown those contribution dollars in the overall nicotine category and we are definitely seeing strength in pouches and other products. And I will tell you, too, the business has already normalized in January, and we expect to continue to show consistent margin performance when viewed over time, but it can be lumpy quarter-to-quarter. Corey Tarlowe: Okay. Great. And then I have 2 quick follow-ups. I know we're lapping severe weather from last year. Can you provide any context around the storm impacts this year? And then also any impacts from changes in SNAP as well? Mindy West: Well, I would just reiterate what we said for January, it's shaping up to be a good month. We are lapping winter storms from last year, but we're not finished with the winter storms from this year because now we have one impact in the Carolinas and other parts of our network. So while we were pleased with January's results, that was one of the reasons, quite frankly, that we were not willing to increase the EBITDA guidance materially because we don't know what's going to happen for the rest of the year, and we know that we're going to have some impacts on the back end of these winter storms as well. So turning to SNAP though that is a great question. And we do have some exposure there, but it is relatively small. It's actually less than 2% of our sales but we did have those SNAP changes take effect January 1 in 5 of the states in which we operate, as you I'm sure know, they primarily affect candy, packed bev and specifically energy drinks. I'll share with you some data points, but I want to caveat these are very preliminary, but our early read suggest kind of a modest headwind in candy and energy drinks. We're going to continue to monitor the data, obviously, as the space is in, and we do expect some impact in the very discretionary categories, which is included in our guidance, by the way, we put in our guidance a headwind and I think it's roughly less than $5 million overall for SNAP. Our top EBT item, you might not guess it. It's actually Red Bull. So while some customers may pull back, we believe that most are going to continue to buy those products even if they are not eligible for the SNAP benefit. So there is some category noise there, but the overall impact to the business is modest. As I said, it's $5 million or less. Operator: Your final question comes from Brad Thomas with KeyBanc Capital Markets. Bradley Thomas: Mindy, I'll just add my congratulations as well on your first call as CEO. And I know that last quarter, the main message was around much of the leadership transition, keeping the core strategies of Murphy in place. But just wondering if I could ask directly, if there are specific areas that you think the priorities will change a little bit now that you've taken over? Mindy West: That is a great question. Thank you, actually for asking that. What I said in those certain terms, some things are going to stay the same. Our everyday low price strategy, our continuous improvement mindset capital allocation will remain unchanged. So when I think about it, it's really more of our culture that is evolving. So we're pushing for things like quicker collaboration, more nimble decision-making reorganized the company to create more clear roles in accountability. We've already made some leadership changes to help us work better together, remove some inefficient reporting structures and increase accountability. I can tell you people are excited because their work and ideas can have more impact and then that excitement ends up being infectious. And we have an incredibly strong platform to improve this business and are 100% dedicated to growing shareholder value. So our 5 strategic pillars in which we have grown the company since spin, are still intact. It's really just a culture shift, which I think is necessary to make sure that we are agile and adaptable and really unafraid to challenge ourselves and stretch further and try new things. So you may see us be and I hope you will see us be a bit more innovative going forward than we are in the past. And as we have these macro conditions pressuring our stores, we have accelerated competition. I think that's a smart thing to do. We need to be able to fight back in our business model, reducing our reliance on fuel and tobacco where we can, but still preserving the strength in both of those. We need to figure out how to attract and retain new customers, how to grow trips and spend and how to make our store's teams life easier and our stores more productive. And then what are those niches of opportunities of value that we can exploit. So we're going to be looking to innovation to support our core business and also drive for more business. And we're really already looking at it around 3 main pillars, which are our portfolio, our customer and advanced technology, and we're going to attack all of those types of opportunities and absolutely believe that we have untapped potential in this business to improve, not just our existing stores and serving our existing customers, but the ability to stretch for more with different stores and different customers. So I'm excited about the future. I know the team is too and stay tuned to see what we will deliver on this topic. Bradley Thomas: If I could squeeze in one last follow-up just on the QuickChek brand. I don't think I heard any commentary about how it performed in the quarter. Could you just address that? I mean, how you're thinking about its impact on EBITDA in 2026? Mindy West: Yes. Great question. It is continuing to exhibit stronger sales. Margins continued to be pressured. Traffic continues to be pressured. What we're doing really there is really simple. We are refocusing on the fundamentals of the business. We are focusing on the core, which are mainly coffee, breakfast and sandwich as our traffic drivers. We are simplifying the menu, rationalizing the assortment based on performance, not legacy, not what we've always done. So we're choosing where we win and really not trying to be everything for everybody. We're also focused on improving margin. We need to balance the innovation with cost and margin control because while growth is important, we have to earn money. I can't take growth to the bank. We have to take margin to the bank. So being disciplined around that. And then building a better operating model that simplifies operation, reduces complexity, enhances that customer experience because we're -- our speed to service is better. So overall, it took really just a recognition that execution and ability to scale are as important as idea generation because ideas which can't be implemented well or executed consistently are actually a bad idea. So I would add to that we have new leadership at QuickChec in that new structure and that will help speed up execution and also, I think, spark some innovation. So I really like where the team is headed and I believe they're focused on the right thing. So really appreciate you asking about that part of our business. Operator: There are no further questions at this time. I'll turn the call back over to Murphy's Presenter Panel for any closing remarks. Mindy West: Thank you for your time and participation on the call. All great questions. As we look to upcoming calls, I want you to know that we are committed to strengthening our core business while pursuing incremental sources of value that endure across the fuel cycle. And we are building from a very solid foundation, and I have solid conviction in this leadership team's capacity to unlock Murphy USA's next level of potential. So thank you again and I look forward to the next quarter's call. Operator: This concludes today's call. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the AMSC Third Quarter Fiscal 2025 Financial Results Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Nicol Golez, Director of Communications. Please go ahead. Nicol Golez: Thank you, Bailey. Good morning, everyone, and welcome to American Superconductor Corporation's Third Quarter of Fiscal Year 2025 Conference Call. I am Nicol Golez, AMSC's Director of Communications. Joining me today are Daniel McGahn, Chairman, President and Chief Executive Officer; and John Kosiba, Senior Vice President, Chief Financial Officer and Treasurer. Yesterday, after market closed, American Superconductor issued its earnings release for the third quarter of fiscal year 2025. A copy of this release is available on the Investors page of the company's website at www.amsc.com. Remarks that management may make during today's call about American Superconductor's future expectations, including expectations regarding the company's financial results, plans, and prospects constitute forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those set forth in the Risk Factors section of American Superconductor's annual report on Form 10-K for the year ended March 31, 2025, which the company filed with the Securities and Exchange Commission on May 21, 2025, and the company's other reports filed with the SEC, all of which are available on our website. The company disclaims any obligation to update these forward-looking statements. On today's call, management will refer to non-GAAP net income or non-GAAP financial measures. Tables of reconciliation of GAAP to adjusted financial measures can be found in the company's earnings release. With that, I will now turn the call over to Chairman, President and Chief Executive Officer, Daniel McGahn. Daniel? Daniel McGahn: Thanks, Nicol, and good morning, everyone. I will begin today by providing an update and sharing a few remarks on our business. John Kosiba will then provide a detailed review of our financial results for the third fiscal quarter, which ended December 31, 2025, and we'll provide guidance for the fourth fiscal quarter, which will end March 31, 2026. Following our comments, we'll open up the line to questions from our analysts. We are excited to share a quarter of outstanding financial results. Total revenue for the third quarter of fiscal year 2025 exceeded our guidance range and came in at over $74 million. Revenue grew over 20% versus the year ago period, driven by organic growth as well as a few weeks of contributions from the acquisition of Comtrafo, which we closed on December 5, 2025. The business outperformed this quarter. We delivered our sixth consecutive quarter of profitability and our 10th consecutive quarter of non-GAAP profitability. Strong market demand drove bookings, resulting in a robust 12-month backlog of over $250 million. Gross margins again topped 30% and we closed the quarter with a strong balance sheet of over $145 million in cash after acquiring Comtrafo. Total revenue for the past 9 months is nearly total revenue for the entire previous fiscal year. This means that most of what we do in the fourth quarter will contribute to year-over-year growth. Our grid revenue accounted for 85% of AMSC's total revenue and grew over 20% versus the year ago period. Nearly 15% of the revenue came from our Wind business, which grew by 25% versus the year ago period. During our third quarter, we generated revenue across a diverse set of sectors. Traditional energy accounted for nearly 1/3 of shipments. Renewables represented about 1/4. Military and utility markets each contributed over 15% and materials, including semiconductors, made up more than 10% of revenue. Additionally, we delivered into a data center project this quarter. We've talked about this for the past couple of quarters. We believe this delivery marks an important milestone for additional potential opportunities in this market. We said we were going to deliver on a data center order, and we did. But please remember, these projects make up about 5% of total revenue. Our revenue mix is well diversified, and we expect our recent acquisition to strengthen our reach to utilities while expanding our overall end market exposure. This quarter, we did record a significant tax benefit due in large part to our recent history of sustained profitability and our forecasted future earnings outlook. This is an important moment in the history of our company's financial progress, and John will get into more details later in the call. Now I'll turn the call over to John Kosiba to review our financial results for the third quarter of fiscal year 2025 and provide guidance for the fourth quarter of fiscal year 2025, which will end March 31, 2026. John? John Kosiba: Thanks, Daniel, and good morning, everyone. AMSC generated revenues of $74.5 million for the third quarter of fiscal 2025 compared to $61.4 million in the year ago quarter. Our Grid business unit accounted for 85% of total revenues, while our Wind business unit accounted for 15%. Grid business unit revenues of $63.2 million, increased by 21% in the third quarter versus the year ago quarter. The increase in revenue was primarily driven by organic growth within our new energy product lines as well as the addition of Comtrafo revenues, which totaled $4.6 million in the quarter. Please note that Comtrafo revenue and associated financial activity in the quarter was for a partial period from the date we closed on December 5, 2025, through the end of the quarter. There were approximately 19 days of Comtrafo financial activity included in our Q3 results. Our Wind business unit revenues of $11.3 million increased by 25% over the same time period. The increase in revenue was primarily driven by additional shipments of electrical control systems. Looking at the P&L in more detail, gross margin for the third quarter of fiscal 2025 was 31% compared to 27% in the year ago quarter. This marks the third sequential quarter with gross margins exceeding 30%. Included in cost of goods sold in the third quarter of fiscal 2025 is approximately $400,000 in noncash adjustments related to the purchase and accounting for the acquisition of Comtrafo. The year-over-year increase in gross margin was primarily driven by higher revenues, a favorable product mix, both within our Grid and Wind business units. Moving on to operating expenses. R&D and SG&A expenses for the third quarter of fiscal 2025 were $19 million compared to $14.6 million in the year ago quarter. The year-over-year increase includes the acquired operating expenses of our recent acquisition of Comtrafo. Additionally, there was approximately $1.2 million of acquisition-related expenses to complete the Comtrafo acquisition. Approximately 20% of R&D and SG&A expenses in the third quarter of fiscal 2025 were noncash compared to 19% in the year ago quarter. Our net income for the third quarter of fiscal 2025 was $117.8 million or $2.68 per share. Our non-GAAP net income for the third quarter of fiscal 2025 was $123.5 million or $2.81 per share. Included in our third quarter net income and non-GAAP net income was a tax benefit of $113.1 million due to the release of a valuation allowance on deferred tax assets. Excluding this tax benefit, net income in the third quarter of fiscal 2025 was $4.7 million or $0.11 per share. This compares to net income of $2.5 million or $0.07 per share in the year ago quarter. Excluding the tax benefit, non-GAAP net income was $10.5 million or $0.24 per share. This compares to a non-GAAP net income of $6 million or $0.16 per share in the year ago quarter. Please see our press release issued last night for a reconciliation of GAAP to non-GAAP results. We ended the third quarter of fiscal 2025 with $147.1 million in cash, cash equivalents and restricted cash, which compares with $218.8 million on September 30, 2025. Included in the quarter was the acquisition of Comtrafo, which included cash consideration of $88.3 million. We generated $3.2 million of operating cash flow in the third quarter of fiscal 2025. Our CapEx for the quarter was $900,000. I would like to note, it would not be unusual for CapEx to exceed $1 million a quarter, and at times, it may even exceed a couple of million dollars in a quarter as we scale up production, particularly within our power transformer lines, which are seeing high levels of demand. Now turning to our financial guidance for the fourth quarter of fiscal 2025. We expect that our revenues will exceed $80 million. Our net income is expected to exceed $3 million or $0.07 per share, and our non-GAAP net income is expected to exceed $8 million or $0.17 per share. With that, I'll turn the call back over to Daniel. Daniel McGahn: Thanks, John. We're very pleased with this quarter's result and super excited about the rest of the fiscal year. We believe going forward, the company has the capability to deliver consistent profit. We achieved 2 quarters of what I consider record-breaking revenue levels, one of over $72 million, that was our first quarter earlier this year and now over $74 million in the quarter that just ended. And we're guiding to another possible quarter that could become another record-breaking quarter for our fourth quarter. As we approach the final quarter of fiscal year 2025, total revenue for the past 3 quarters reached an impressive $212 million. With 3 quarters completed, our revenue nearly matches our total revenue for the entire prior fiscal year. The business has demonstrated growth, both organically as well as through our recent acquisition. Let's discuss some additional benefits that we expect of the acquisition when combined. The team has done an excellent job of integrating and making the last several acquisitions work and work together. The acquisition of Comtrafo strengthens our utility position and positions us to capture opportunities in Brazil and the broader Latin American markets. Comtrafo brings 30 years of operating history, a manufacturing presence in Brazil and deep relationships with utility customers across one of the world's fastest-growing electricity markets. Comtrafo expands our transformer offering to include distribution and large power transformers up to 250 MVA. With their strong local demand driven by government-led grid investment, we can now serve critical transmission and grid expansion needs that we could not previously address. In closing, this was an exceptional quarter for our company. The results reflect the strength of our core business and the discipline of our operations. We delivered strong financial results and remain focused on execution. The business grew organically and the addition of Comtrafo opens new possibilities. Overall, we are truly excited about this business. We are developing business opportunities in new areas with utilities for data centers and for pipelines for traditional energy. We are very well positioned as a company that has diversified and has been growing. I am personally very excited about the future of the company. We believe we are in a tremendous position to take advantage of our end markets. We are prepared to capitalize on the growing demand for energy and the need for a stable grid to support it. We have delivered another outstanding quarter, and we can see the fundamentals of our business are well grounded. This is an exciting and positive moment for us here at AMSC. Our future-facing technologies help harmonize the world's desire for decarbonization and clean energy with the need for more reliable, effective and efficient power delivery. We're now focused not only on the American market, but on the entire Americas. I look forward to reporting back to you at the completion of our fourth fiscal quarter and fiscal year-end. Bailey, we'll now take questions from our analysts. Operator: [Operator Instructions]. Our first question comes from Justin Clare with ROTH Capital Partners. Justin Clare: So I wanted to start out just on the data center opportunity. So you mentioned that you have delivered a solution to a data center project here. And so just wondering if you could speak to the scope of the engagement, which products were involved? And then just within your portfolio, which solutions do you see as kind of the strongest fit for the data center application at this point in time? And then I guess just lastly, is the opportunity largely at the utility substation that you see at this point? Or is this inside the data center facility? Daniel McGahn: Yes. Let me talk a little bit about what we're doing. So it represented about 5% of revenue in the quarter, so on the 74%, 75% that we did. So a significant project. It's something that we were telegraphing that we thought would happen. And really, the only reason we're talking about it is because I get asked the question wherever I go about data centers and what are you going to do. What we're finding is as these data centers get bigger, particularly when there are areas where they have a weaker grid, what we can do is modulate the instantaneous change in voltage. And we do that through a very contact footprint. So the more that they're loading equipment in for managing thermal load, HVAC, the more that they have higher computing power and they're worried about very small disruptions similar to what we do in a semiconductor fab, the more we think we fit. And we think that the footprint may be a unique competitive advantage that makes it easy for either the utility or the data center construction project to buy the equipment from us. So in this case, this is really our first win in the construction of a data center. Alongside this in this current quarter, we also helped a utility that has a lot of data centers and has some challenges coming from them. So I think the answer to part of your question, Justin, is yes to both. I think that there are opportunities for us going forward. in data center construction projects, but also to help support challenges with the utility. That's no different than what we've seen in semiconductor. It's no different than what we see in mining. The market and the investment drives the need. And then the question is, where does the solution physically fit? Where does it fit within the grid? Is it on the pad that sits as part of the data center? Or is it somewhere in the grid that's supporting that effort. So it's really no different application than what we do for semi, what we've done for a lot of other industrials. What we're finding is that there are changes in induction at the site that we can modulate what we think in a very unique way. It's one data point, however, right? So it's hard for us to say this is the white paper and here's how we're going to analyze the return on investment for the customers. Those are all things that we're going to figure out. But what we found is there are a number of data center operators and a number of data center builders that have approached us looking for exactly the type of solution that we uniquely offer. So I'm very opportunistic that -- and optimistic that this could become a part of the business. But again, we like diversity in what we do. Did I get to all the different pieces, Justin, if I didn't, I apologize and you can ask it again. Justin Clare: Yes. No, I think you got to everything there. So yes, I definitely appreciate that explanation. And I guess just thinking through it a little bit, just how significant do you think the growth opportunity might be here? And I'm just wondering, has your solution been installed and is now operating effectively with this project? Or is that coming in the next few months? Just wondering if this kind of proves out that your solution is effective and then others can see the effectiveness and this could potentially lead to upside in your orders here. Daniel McGahn: Yes. I think the hardest part for people that follow us is to realize so much of what we do is industrial construction. So there's a pacing that things go through a year to be able to build. So I'm pleased to announce we got the order. I'm pleased to announce that we delivered on the order, but that's as far as we can take it. We're not at the point where it's going to operate and we'll get all the learning out of it. That's all going to come. It's a customer that knows us well, that we know well, and we'll try to use that as best as we can to try to market having a bonafide solution in the wild that works. But again, simplistically, this is no different than what we do in all the other markets. I think that there's an interesting need. I think the form factor and the speed that we can go to market really becomes a critical advantage here. If I speak more broadly, we have a huge pipeline of larger orders. I keep talking about order expansion and -- we used to talk about cross-selling. Now we just talk about selling. We have hundreds of millions of dollars of opportunity across all the different areas that we have tailwinds. We have probably in a dozen or 2 projects that are very large, we have several hundred million of potential business, not just for data centers, but for mines, for semiconductor, for traditional energy that the business is really working. The business is expanding because we're relied on to deliver more content into larger projects. That's what we've been talking about for the past few years. That trend seems positioned to continue to grow. And data centers will be a part of it. I hope to not have to talk about it every conference call because it's a piece of the business, and it's something that people get excited about. But we're not a data center stock, and we're not we shouldn't be thinking of ourselves as a play just in one area. This is really a diversified company that's focused on the problem with energy, which is the grid designed today to be able to meet those needs and those demands that many uses and many sources of generation require to have a very effective and reliable and resilient grid. Operator: Our next question comes from Eric Stine with Craig-Hallum. Eric Stine: Maybe we could just talk about traditional energy. I believe that was 1/3 of the quarter. And obviously, that's been a pretty increased focus here over the last year plus. I mean as we think about that, can you just talk to us about kind of where you're selling, where you play in there? I mean, should we view that as cyclical that it's more -- that swings in oil prices have an impact? Or is it insulated because it's more tied to traditional infrastructure? That would be helpful for me to clarify my thinking. Daniel McGahn: Yes. I think it's more insulated in that it's persistent demand. In general, I think what's changed in the American economy is that traditional energy is no longer considered something that people don't want to invest in. But creating cleaner energy in a traditional way is something we can help powering pipelines that move natural gas and things are an area that we fit in and as well as kind of general oil processing, being able to take from extraction [ of extra ] sources and move them downstream, midstream and end stream, the types of processes that move and refine that create other byproducts, all are becoming more and more energy dependent. So you need energy to be able to move and process the traditional energy sources. And that's really where we come in. So we see it as a long-term kind of persistent trend for us. The climate is really more apropo there. We think there's a fit definitely in North America. We think there's a potential in Latin America as well as we look at not necessarily quarters and years. The other part I'll say, Eric, realize and take everything I say with a little bit of a grain of salt. Our lead times are 9, 12 months for many products, right? So anything that we're going to do today that we think is exciting is really going to affect the financials a year plus out. Eric Stine: Okay. Yes. No, that's very helpful. That makes sense. Maybe just as you think about growth in the business, now you're guiding to $80 million plus, a new level on a quarterly perspective. I know capacity is less of an issue than I think in the past, you've talked about labor. I mean any updates you can share there? It clearly is an area which maybe is a bit of a push point, but just that would be great, an update. Daniel McGahn: Yes. I think the team has done very well at hiring. I feel like all the factories are being utilized very well. We have a lot of demand. We have a lot of bigger demand. So we feel really good. I think the new wrinkle in our portfolio is Brazil and the very strong demand there and the need potentially for some more expansion. And John kind of almost directly said that given the CapEx guidance that we believe the business is positioned to ramp, and we may have to expand capability, particularly in Brazil to be able to go meet all of that demand 2, 3, 4, 5 years out. So there's a longer-term plan that we want to be able to implement. We're at a point where the business really is driving us. We have a multiple set of very strong tailwinds that are pushing us, and we just need to be able to react to the market. If we do a good job for our existing customers, they're going to come back again and again as they have, and they come back with harder and bigger problems for us to solve. Eric Stine: Got it. And maybe last one for me. I know -- well, data center, just -- I mean, is that something as we think about that similar to semiconductor where potentially if it's a large data center operator or EPC that you potentially are spec-ed in? Or do you view it as it's a little more lumpy and then it would be kind of not one-off projects, but it would be more based on different projects moving forward rather than a few key partners. Daniel McGahn: Yes. I don't think I have clear visibility on that. Our EPC customers tend to try to design us in and we see a print that has our rectangle on it, and that's what we try to do. Obviously, doing one of these, we're not at that level yet. Do I think this has the potential for that? Yes. If this market grows faster than other markets, we'll have to invest in them to make sure that they grow to be able to maintain the diversity. part of the portfolio. That's tremendously valuable. It's a stabilizing effect on the business and allows us to grow on multiple fronts in parallel. Operator: Our next question comes from Tim Moore with Clear Street. Timothy Michael Moore: Congratulations on your revenue growth and operating leverage. That was very nice to see. My first question for you is about the potential to cross-sell and bundle to customers. You've done that extremely well on oil and gas to target upstream, midstream and downstream power systems. Maybe curious if you can shed some light on maybe what end markets make the most sense to cross-sell near term besides oil and gas? Is there potential in mining or chemicals or just your overall thoughts on end markets to really get that through. Daniel McGahn: Yes, it's pretty much everything, Tim. The way the business is now aligned is we no longer cross-sell, we just sell. So we have combined solutions that come from the family of acquisitions that we have that we're now presenting in some cases, they're $10 million projects. In some cases, they're $25 million projects, where we're presenting a combined offering to be able to manage voltage, to be able to transform voltage, to be able to modulate AC/DC power flows and to be able to do all of those features and functions for customers. So we no longer have to sell them as separate. We do because many of our customers think of them that way. But as for the larger projects, I'll say, more established customers, they like where we've headed with what we've added. And it's for mining, it's for traditional energy, it's for semiconductor. To some extent, it's even for renewable projects as we see them. Wherever we can, we want to be valuable to our customer. And if we can keep demonstrating that value, both from what the product does and what our engineers can help solve or derisk for the end customer, that's where we win, and that's why we win. Timothy Michael Moore: That's terrific color. Switching gears to my second question. I mean, you're clearly busy integrating Comtrafo in Brazil. And I know some comments were made on CapEx there, and they've got a great factory that you can expand. The organic growth is awesome there and the backlog is quite big. So can you maybe just give us a little bit more color on the near-term plan on increasing output there? And then just on the topic of acquisitions, how comfortable do you need to be with integration there, maybe how many quarters in until you maybe consider doing your next acquisition given you're sitting on a lot of cash right now? Daniel McGahn: Yes, it's hard, Tim, at this point to speculate. We're 19 days in plus the days we have in January. So it's early days for us. It will take us some time to be able to digest and leverage. We have a huge opportunity just in Brazil alone that we want to go after with everything that the company has to offer there. So I think we'll take our time and we'll be as we have been with each of them. We want them to run as they've run because we like the culture. We like the financials. That's true of all the acquisitions we've done. And then over time, how do we do more together? And that becomes the question that helps affect things 2, 3 years out from now. So I don't anticipate we're going to turn around and do another acquisition right away. But we do have a lot of inbound. We do have a list. We are working -- it's becoming -- the business is evolving to we have an operation business and then an opportunistic part led by John here to say, okay, what can we add to the portfolio and how do we do that? We're also looking, and you can hear it in my tone at combining product to basically come up with whole new sets of opportunities for us. And that's taken some R&D investment to be able to do all those things. So the company is evolving and maturing in all the right ways. Timothy Michael Moore: That's great color, and comforting that you won't rush into the next acquisition, until you're ready for them. Operator: Our next question comes from Colin Rusch with Oppenheimer. Colin Rusch: I have a few. I would love to just get a quick read on working capital and how that transitions over time. Obviously, with the acquisition, you've got a substantial amount of inventory and some receivables that grew in the quarter. Would love to understand kind of how that trends over the next few quarters. John Kosiba: Yes. Good question, Colin. We have had -- I don't want to call it a drain on working capital, but we have invested into the growth of the company over the last couple of quarters. To the extent we continue that growth and if we can maintain elevated levels of growth, then we'll continue to invest in working capital. If growth tapers to, call it, single-digit growth, then we would see working capital probably turn favorable. So it's difficult to tell depending on our growth strategy, but I can -- if working capital is an investment, I can assure you it's to support growth. Colin Rusch: Okay. And then we haven't talked about some of the military opportunities. Certainly, there's an awful lot of activity in Washington right now around enhanced military capabilities. Can you just talk a little bit outside of the ships, you talked about ports and infrastructure being a meaningful growth opportunity. In your sales pipeline, what are you seeing these days? And how do you see that starting to flow through into the P&L over the next couple of years? Daniel McGahn: Yes. I think just topically for the quarter, Colin, we had a good percentage in military more than 15%. I think typically, it's closer to 10% quarter-to-quarter, and that was because we're doing a bunch of things at once within the quarter, which is good. And that helps strengthen quarters. I think longer term, we're kind of front and center in some of the critical problems that have and ports have and those opportunities are going to be persistent kind of long term. But I'd say there's nothing I'll say specifically that's going to change the trajectory of that business in the next 2 to 4 quarters. Colin Rusch: Awesome. And then just a final one on the R&D road map. As your customer intimacy has improved, you're getting a look at what the real needs are for a bunch of these applications in a different way. And obviously, you guys have capabilities around customization for different applications. But I would love to understand how you're thinking about the cadence of evolving the product suite and just the leverage that you have out of the existing designs to meet all of the opportunities that you're seeing with your customers these days? Daniel McGahn: Yes. I'll take by example. So we're working towards a project for a very large mine, and there's opportunities at the site, but there's also opportunities with the utility that the grid is going to need to be improved. So I think our capability has matured now to the point where we really understand the problems that capital investment will cause in capacity from an electricity standpoint. So we try to just start with that as the premise and then work backwards and say, okay, what are going to be all the electrical challenges that this CapEx investment for this end customer is going to create, not just locally, but more broadly in the utility. So being able to combine our capabilities into products that are more proprietary, more defensible, more valuable to customers, that's where we're trying to push things as much as we can. Operator: This concludes our question-and-answer session. I'd like to turn the conference back over to Daniel McGahn for closing remarks. Daniel McGahn: Thanks, [ Bailey]. As we look forward to the future, it's clear that the opportunities ahead are vast. We stand ready to capitalize on the rising demand for energy and the critical need for a dependable grid to support it. We reached another recent record quarter with revenue levels of over $70 million, and we guided for our next quarter to potentially exceed $80 million. The business has already demonstrated a strong year through the first 9 months into the fiscal year. We see more traditional energy and utility projects, including those driven by data center demand on the horizon. In the longer term, we have a very strong pipeline of materials and semiconductor projects as well. I look forward to talking to you again when we report our full year results. Thank you, everybody, for your support and attention, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Kerri Joseph, Senior Vice President, Investor Relations and Treasury. Mr. Joseph, please begin your conference. Kerri Joseph: Thank you, operator. Good morning, everyone. Thank you for joining our fourth quarter and full year 2025 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer, Ron Bruehlman, Executive Vice President and Chief Financial Officer; Eric Server, Executive Vice President and General Counsel; Mike Pita, Senior Vice President, Financial Planning and Analysis; and [indiscernible] , Senior Investor Relations. Today, we'll be referencing a presentation that will be visible during this call for those of you on the webcast. This presentation will also be available filings following the Events and Presentations section of our tibia Investor Release website at ir.iqvia.com. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Accident results could differ materially from those stated or implied by forward-looking statements of the risks and uncertainties associated on these phases, which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent SEC filings. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with guidance. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would now like to turn the call over to our Chairman and CEO, Ari Bousbib. Ari Bousbib: Thank you, Kerri, and good morning, everyone. Thank you for joining us today to discuss our fourth quarter and full year 2025 results. We closed 2025 with a strong fourth quarter resulting in full year revenue growth of 6%, adjusted diluted earnings per share growth of 7% and free cash flow of $2.1 billion, representing about 100% of adjusted net income. As I reflect on our accomplishments in 2025, I'm proud of the results delivered by the IQVIA team given that our industry faced significant challenges with heightened uncertainty around macroeconomic and government policy as well as continued pressure from interest rates. This macro environment led to slower customer decision-making and tempered biotech funding. This impacted R&D bookings and revenue earlier in the year. But as the year progressed, the environment stabilized somewhat and demand indicators became more favorable and funding increase. Despite the environment, we at IQVIA continue to invest in developing innovative offerings and more integrated solutions to advance development programs and drive commercial success. Examples of the depth and breadth of our clinical and commercial offerings and significant investments in 2025 include increasing our Phase I trial capabilities to test new drugs in healthy volunteers with the acquisition of a facility in the U.K., expanding our science management organization with the acquisition of -- next Oncology, a network of specialized sites serving patients enrolled in early-stage oncology trials. Helping clients advance critical programs, ranging from global Phase III oncology and obesity trials we're launching innovative treatments in rare and underserved patient committees, seeing great demand among the large and midsized pharma clients for our DAS solution does data as a service, which provides AI-ready data as a single harmonized source simplifying customers' data management and building a strong foundation for AI analytics. This offering integrates global to local data, highlighting IQVIA's unique ability to more proprietary assets, data assets with third-party data assets we are compliance scalable framework. Advancing the digitization of patient support programs to streamline workflows for treatment access and adherence with the research launch of the IQVIA Patient Experience platform, which already has 6 new customers on. Working with the same vaccine Institute to provide more than 640 more vaccine doses to top for a Phase II trial during the nation's first more virus disease outbreak partnering with local health authorities to evaluate safety and efficacy. Winning our first full service commercial outsourcing deal in Asia with the large pharma client. A last example, enhancing our capabilities in patient solutions and payer analytics with the acquisition of Federate Technologies in the fourth form. Let us now turn to the results for the quarter. Revenue for the quarter came in above the high end of our guidance range, representing year-over-year growth of 10.3% on a reported basis and 8.1% at constant turns. Acquisitions represented about 2 points of this growth. Fourth quarter adjusted EBITDA increased 5% versus prior year. Fourth quarter adjusted diluted EPS of $3.42 increased 9.6% year-over-year. On the clinical side, net bookings totaled over $2.7 billion growing 7% year-over-year, 5% sequentially. This resulted in a net book-to-bill ratio of 1.18, reflecting the continued improvement in customer trends as well as solid execution from our sales teams. I should point out that in the fourth quarter, our cancelations, while in the normal range were really slightly above the normal range due to specific esosycratic aspects of certain trials that had to be canceled. T-demand metrics for the quarter continued to be positive. Our qualified pipeline is about 10% higher year-over-year, with growth across all customer sends. RFP flow grew double digits year-over-year with growth across all segments, largest gains in large barge and in EP. Our win rates improved year-over-year, several percentage points. Backlog reached a new record of $32.7 billion at the end of the quarter growing 5.3% compared to the prior year. And encouragingly, EVP funding was strong in Q4, reaching this $33 billion of quality to buy world. On the commercial side, Tara continued to perform very well in the fourth quarter, achieving better-than-expected results despite the anticipated tougher year-over-year comparisons. We delivered growth in terms of 9.8% reported 7.1% at constant currency, highlighting the resilience of our broader commercial portfolio. And now a few highlights of business activity in the fourth quarter. We announced the strategic collaboration with Amazon Web Services namely AWS as our preferred agentic car provider to accelerate the industry's digital transformation. With the world's largest pharmaceutical companies already relying on IQVIA and AWS. We believe this partnership remains AI more revenue available across life sciences, medical affairs and health care analytics and enable faster delivery of life-saving treatments to patients worldwide. IQVIA was recognized by Everest Group for our AI leadership, the only clinical research organization to receive the #1 ranking for generative AI leadership in life sciences. You will recall that we started on this AI journey quite a while ago, and specifically, a little more than a year ago, we announced a partnership with NVIDIA, which with whom we have been working for over a year to build agents into our workflows, both in clinical and commercial, and we have made significant progress to date. In commercial, demand for our AI-driven innovations is gaining momentum with our clients, especially in large pharma. A few examples, a top 20 pharma client selected IQVIA to provide comprehensive AI-enabled information and analytic solutions for a major U.S. gastroenterology franchise. The top 15 pharma clients shows IQVIA as the strategic partner for a multiyear program to deliver analytics and agentic AI solutions across the -- another pharma selected IQVIA deploy our AI-enabled patient relationship manager solution for rare disease hub services, improving patient engagement and therapy adherence. On the clinical side, in RMBS, I'll share some key wins in the quarter, focusing on large pharma and biotech companies and focusing on AI capabilities. The top 50 pharma clients selected IQVIA for a major respiratory development program, where our IQVIA ability to integrate AI-driven planning tools to accelerate time lines and improve efficiency was key to secure the win. A large pharma client chose IQVIA to manage a large full service program of MASH studies, utilizing AI-enhanced planning toes and advanced recruiting strategy. IQVIA was selected to manage a pivotal oncology study with end-to-end services and leveraging Pages AI-enabled technology solutions, including patient randomization and drug supply optimization. Now I would like to take your means to share how we are simplifying our organization in 2026 to strengthen collaboration, enhance efficiency and support continued growth. Our goal is to better align our teams with how our operating model has evolved to adapt to the new ways our clients are purchasing our capabilities. In the clinical space, clients are incorporating real-world evidence earlier in clinical development programs. And in the commercial space, as I mentioned in prior calls, we are seeing clients increasingly looking to outsource integrated commercialization programs that use IQVIA suite of capabilities from analytics to field-based sales and medical forces. Against this backlog, we implemented a simplified organization that consists of 2 reporting segments: Commercial Solutions and R&D. Under this new reporting set model, the CSMS segment, which has become more grossly integrated into commercial offerings in the talk segment, and represents $788 million in 2025 revenue is incorporated into the top segment, which has remained commercial solutions. Additionally, certain offerings currently reported in the tough segments consisting of real-world late phase, as well as certain other real-world offerings that have become more closely related to the critical trial business are linked to the RNDS segment. The business dynamics and growth patterns of real-world late sales and these other offerings mirror those in the clinical trial business -- they represent $674 million in revenue in 2025. So simply put, commercial solutions is tag across the CSMS segment minus the clinically-oriented real-world offerings that were moved to RNDS. These new segments reported aligns with industry evolution and the company's operating model. It has a negligible impact on segment growth rates, as you can see on the chart. We believe our growth and differentiated capabilities position us well to pursue enterprise-wide partnerships across these 2 segments as clients continue to consolidate vendors. I want to take another moment to acknowledge and congratulate our employees around the world for the ninth year in a row. IQVIA was named one of the world's most admired companies in Fortune's annual serve. And importantly, for the fifth year in a row, IQVIA was named the #1 most admired company in our category. Finally, this is the last earnings call for our long-time CFO, Ron Bruehlman. I want to take a moment to acknowledge Ron I've been working with Ron for the last 3 decades. He's a proven extraordinary world-class leader who plays an instrumental role in shaping and executing our company's financial strategy and transformation. Ron, steady leadership and long-term strategic vision have been essential in building a high-performing global finance organization and how IQVIA remain resilient through unprecedented times. On behalf of the entire IQVIA team, I want to thank Ron for his exceptional service. And the good news is not going anywhere and only transitioning into a senior advisory role, assuming he returns from his upcoming track in Nepal. And now to Ron for more details on our financial performance. Ronald Bruehlman: Thanks for your kind words, already I promise I will make it back -- good morning, everyone. We'd start by digging into the numbers a little bit more. Starting with the fourth quarter. Fourth quarter revenue was $4.34 billion. That was up 10.3% on a reported basis and 8.1% at constant currency excluding all COVID related work revenue grew over 8% at constant currencies. This included approximately 2 points of contributions from acquisitions. Technology & Analytics Solutions revenue for the fourth quarter was $1.821 billion. That's up 9.8% reported and 7.1% constant currency. R&D Solutions fourth quarter revenue of $2.33 billion was up 9.1% reported and 8.2% at constant currency, and excluding the step-down in COVID-related work R&DS revenue grew over 8.5% at constant currency. Finally, our contract sales in Medical Solutions or CSM Fourth quarter revenue of $210 million increased 18.6% reported 15.3% at constant currency and about 5 points of that growth was due to the acquisition we mentioned in the third quarter call. For the full year, revenue was $16.31 billion, up 5.9% reported and 4.8% constant currency. That included tech and analytics solutions revenue of $626 million, which grew 7.6% reported and 6.2% constant currency. R&D Solutions full year revenue was $8.896 billion, up 4.3% reported and 3.5% at constant currency. And finally, full year CSMS revenue was $788 million, up 9.7% reported and 8.2% at constant currency. Now moving down to P&L. Fourth quarter adjusted EBITDA was $1.046 billion, representing growth of an even 5%, while full year adjusted EBITDA was $3.788 billion up 2.8% year-over-year. Fourth quarter GAAP net income was $514 million in GAAP diluted earnings per share was $2.99. Full year GAAP net income was $1.360 billion or $7.84 of earnings per diluted share. Adjusted net income was $580 million for the fourth quarter and adjusted diluted earnings per share was $3.42, that was up 9.6% that brought the full year adjusted net income to $2.68 billion or $11.92 per share, up 7.1%. As already noted, we had a strong net new bookings growth this quarter, which confirmed the improved demand environment that we started to see in the second quarter. R&DS backlog at December 31 was $32.7 billion. That's up 5.3% year-over-year and next 12 months revenue from backlog was $8.3 billion at year-end. Okay, now turning to the balance sheet. As of December 31, cash and cash equivalents totaled $1.980 billion and gross debt was $15.724 billion, which results in net debt of $13,745, billion. Our net leverage ratio ended the year at 3.63x trailing 12-month adjusted EBITDA. Cash flow from operations in the fourth quarter was $735 million and capital expenditures were $174 million which translated into free cash flow of $561 million. For the full year, free cash flow was $2.51 billion, representing 99% of our full year adjusted net income. In the quarter, we repurchased $212 million of shares, bringing our full year share repurchase activity to $1.244 billion at an average price of $159 per share. Now I'll turn it over to Mike Fedock, who will show details on our 2026 guidance. Mike? Michael Fedock: Thank you, Ron. For full year 2026, we expect revenue to be between $17.159 billion and $17.359 billion. This includes about 150 basis points of contribution from M&A and approximately 100 basis points of tailwind from foreign exchange versus prior year. Our adjusted EBITDA guidance is $3.975 billion to $4.25 billion, and our adjusted diluted EPS guidance is $12.55 and to $12.85. Now let me provide some color on the below of the line costs. This guidance includes approximately $610 million of operational D&A, net interest expense of approximately $760 million, which is about $80 million higher than 2025. This increase reflects the full year impact of the senior notes issued in June 2025, swap maturities and refinancing activity we expect to complete in 2026 partially offset by the lower interest rate on our variable debt. And finally, our guidance assumes an effective income tax rate of just over 17%. And average diluted share count of just over $171 million and assumes that foreign currency rates as of February 4, continue for the balance of the year. Now let's look at revenue at the new segment level. As Ari mentioned, we will start reporting 2026 under 2 segments: Commercial Solutions and RBS. This change to better align and simplify our operating to the evolving market landscape. We will provide full recast of relevant historical financials for the 2 segments, starting with the first quarter 10-Q and the 2026 10-K. And in the meantime, we have included a recast of 2025 and 2024 revenue in the press release that accompanies this earnings presentation. On a recast basis, 2025 full year revenue for the 2 new segments has Commercial Solutions at $6.730 billion and RDS at $9.570 billion, with this new reporting, TAS transfers $674 million of real-world late phase and real-world clinical-related offerings in RBS and Commercial Solutions received the full $788 million of CSMS revenues. For full year 2026, we expect Commercial Solutions revenue to be between $7.2 billion and $7.3 billion, which represents growth of approximately 7% to 9%. RDS revenue is expected to be between $9.9 billion and $10 billion, which is a little over 4% growth year-over-year at the midpoint. Now let's review our first quarter guidance. For the first quarter, we expect revenue to be between $4.50 billion and $4.150 billion. Adjusted EBITDA is expected to be between $920 million and $940 million. And adjusted diluted EPS is expected to be between $2.77 and $2.80. Now before we move to Q&A, I just want to take a moment to thank Ron for his support and guidance and nutrition. I've enjoyed working with Ron over the last 9 years. First as CFO of the lab business, then as CFO of R&DS and most recently leading the corporation on DNA function. I'm grateful for everything he shared with me along the way. Now with that said, let me hand it back to the operator for Q&A. Operator? Operator: [Operator Instructions] Your first question comes from Shlomo Rosenbaum with Stifel. Shlomo Rosenbaum: Ari, maybe you could just talk about the concerns everyone is having in the market about the potential for AI to disrupt various established businesses. And if you could just talk about why you think your business is insulated or why it would be hard to disrupt it? And then why you think AI is really more of an enabling technology for the business versus anything that investors should be concerned about? Ari Bousbib: Well, I don't where to start I wish we will be spending the next few moments talking about our great results for the year and our great guidance for 2016. We're very excited about how business is going. But an article was published a couple of days ago and all of a sudden, it's the end of the world. I don't know why it was news to people. It certainly is not news to us. We started on this AI journey a long time ago. Specifically, I mentioned again, we've been working with NVIDIA for over a year to build agents into our workflow, and we made a lot of progress. We've seen this opportunity for our business very early. And again, I stress, it's an opportunity, not a challenge. There really is nothing new here for us other than, obviously, I want to take the opportunity because it's obviously not clear to people to clarify what I believe is fundamental misunderstandings of both what our business is and why we're not offer. There are 3 requirements for AI agents. Number one, significant ready-to-consume data ingredients at scale. Number two, domain expertise. And number three, technology, meaning the AI tools everybody talks about with French names, and the processing capability to enable this AI agents to work. Now the first 2 are absolutely necessary, meaning the data ingredients and the domain expertise. The third one can be bought, and it's typically a combination of tools that constitute a tech stack from a variety of ecosystem players. I want to focus on this first 2. Let's start with the data. First, our data is proprietary. You need to understand that our data is not readily available on the web. It's proprietary. It's not like KR, Jes prudence, company financials, consumer information it's just not available. This is a lot more than simply aggregating data vacuum cleaning everything that's on the web and organizing uniquely for somebody to use with an AI tool. It's just not there. Second, it's sourced de-identified, cleansed, curated and integrated into data lakes that enable fit-for-purpose extraction algorithms to do their work. We do this at a huge cost and on a massive scale, and we have been doing this for decades. By the way, many have tried to replicate it. No one has duplicated it. Third, health care data is dynamic data. That is -- it changes every moment, and it needs to be updated constantly. It's not like a legal case. It remains the same legal case forever. It's status for health care data is subject to significant regulatory compliance, privacy frameworks that vary across countries and geographies. Do you really think that Germany is going to allow, let's call him Jean-Paul to access and play around with individual health care data of their citizens. Fifth, health care data needs to meet interoperability, relevance, completeness, traceability, reliability and linkerbility standards under countless ontologies at a scale and level of complexity that has a 0 comparison to any other industry. Sixth, the data that we sell to our clients is for specific defined uses. We do not sell all the data that we source, we sell the final products, not the ingredients and the ingredients, which have much higher latency and higher levels of granularity are what you need to train differentiated and specialized AI agents. Now obviously, as we go on and on about why healthcare IQVIA bears no resemblance whatsoever to data in any other industry. But let me switch to the second important requirements to do AI identification, and that is domain expertise. In some industries, a couple of lawyers will do to interpret a case. Not so in health care. To build the algorithms required to develop AI agents, you need to have the ability to read, understand and interpret these highly complex data sets in that profit context, so the agents can perform these workflows at the level of precision, accuracy, trust and compliance required by the regulators in health care. That is it in what we've been calling with our clients, health care-grade AI. And this is why our clients trust us to work with them on their own AI journey. On the one hand, it helps us differentiate in clinical research and win more business. On the commercial side, we've seen an uptick in demand for AI-enabled analytical offerings. A lot of work we do with our pharma is being discussed. It's a partnership with IQVIA. Bear in mind, our agents have been training on our data assets for over a year now. And to date, we've deployed over 150 agents covering over 30 use cases across the business, clinical and commercial. The portal to understand about how this AI densification is done. And for this me if I'm being simplistic can explain obvious things, workflow includes many tasks. Each of these tasks can be performed by an AI agent so we did a workflow that could be 10, 15 or 20 agents that are involved, and they work together under the oversight usually of an orchestration agent that sits on the top. Now for each of these tasks, we choose the model that's best suited to the task -- so for a particular task within a workflow, it could be open AI. For another past, it could be claude. It could be one of our own tools or a number of models and tools. So within 1 identification process of 1 workflow, you may have many different tools working together. And the goal is to pick for each task the best suited tool. And of course, optimize the overall cost as some of these tools are actually quite expensive. Here is where deep domain expertise is critical to be able to choose the best model and fine-tuning that model on proprietary domain-specific data to optimize performance. Now finally, the investment required to put this all together is quite significant. It's only justified if you have the scale across both clinical and commercial across a broad array of therapies and across the globe to make the economics worthwhile. Now we sell to over 10,000 clients and therefore, we have that scale. That's why we exist in the first place long before AI came to the fore. Everything we do our clients will do. But they have is a lot more economically rational to us source it to us and to partner with us. Same here, -- so I would say overall, in answer to your question, forgive me, and I beg your patience for the time I took to answer your question that it's important to clarify Overall, I would say AI identification is a positive for our business across both clinical and commercial, and I understand it's hard to distinguish between us and other CROs, us and other information services provider. And so I could give you some detail, and we could go up in more detail in for calls. -- you saw a desire, I hope we can go to the main subject of the call, which is the results and our guidance. But again, our proprietary data assets, which are not stopable by horizontal AI models are more valuable than ever actually. Our services are differentiated because they leverage deep domain expertise that very few, if any, healthy organizations possess in-house. So yes, some lower-level consulting and analytics work may be displaced. But at the same time, we see increasing demand for new offerings including the next generation information management task solution that I spoke about in my introductory remarks. And by the way, these introductory remarks were written long before the AI drama erupted a couple of days ago. So I hope that addresses your questions, Rob. Operator: Your next question comes from Eric Coldwell with Baird. Eric Coldwell: Thanks very much, and I was hoping to dig into the latest acquisition, Cedar Gate. Perhaps help us better understand holistically what the value and driver of that acquisition is for the organization and how it fits into the total IQVIA ecosystem -- and then technically, could you provide any color on the specific revenue and profit contribution of that business? Is it accretive, dilutive, maybe give us a sense of the margin profile. If you could, that would be very helpful. Ari Bousbib: Yes. Thank you very much. So look, we've been doubling around the payer provider analytics business for some time, we never at scale. I think overall, before the Cedar Gate acquisition, our overall payer provider business for the company is like it's a couple of percentage points of our total revenues, and it's mostly in the EMEA region, in Europe and in the Middle East with specific technology platforms. So in the U.S., we've looked at several assets before, but nothing that would be that was a sufficient scale. And obviously, the valuations were not rational at the time. Cedar Gate itself was a great opportunity. It's basically, it transforms happier data into insights for improved patient outcomes and provide analytics to payers. It does have a great technology platform as well. It was -- it has the right scale. You asked for the numbers. It's about in '24 it was about $125 million in revenue, and it has somewhere $33 million of adjusted EBITDA. That's what I have in from 32.7% to be precise. So -- and 25, we have a little bit higher than that 140, maybe that and about Yes, single market Yes. Okay. So that's for the numbers. So yes, it helps improve patient outcomes, higher quality of care, reduce cost across the system. It utilizes data from the customers, I think it has for pain Bayer and about 60 million lives. So obviously, they don't utilize, they are purchased on IQVIA or other third party. It has to expand our solutions -- and that has some synergies with our data analytics and technologies. Operator: Your next question comes from Justin Bowers with Deutsche Bank. Unknown Analyst: All right. everyone. Ari, I may add one, if I may, but I do recall in your 2019 Investor Day where IQVIA is highlighting its investments in the cloud and AI and ML. And -- and I think a lot of those investments may not have been accretive to cash flow at the time or over the course of those few years. And maybe now is the time where IQVIA really starts to monetize those investments whereas the rest of the gold was caught up. But I think the 1 question at the risk of oversimplifying is just to understand whether this is an opportunity or risk for your business? And is it sort of accretive, mutual or decremental to growth, whether it's RTS -- and I think your response at the end, to Shlomo's question, is that it's potentially accretive to the long-term growth rate of IQVIA. So I just want to confirm that that's what you're messaging? Or maybe you can restate the thoughts on what the impact is or opportunity is for the segment growth rates. And then just secondly, it does sound like what you're seeing in RDS is an improving business environment based on your prepared remarks. And is that are we on course to really sort of get back to the 1.2 book-to-bill throughout 2026? Does the pipeline support that? Or is it sort of too early to tell? Ari Bousbib: Yes. Well, thank you. I mean I don't really know where to start. It's really frustrating that everything we've been saying on you refer to -- you went back to 2019, it's true. But again, we've been accelerating all of this over the past year, and we've communicated this over and over again. It's really hard to disclose a generic assertion like AI is going to displace your business. It's exactly the opposite. I said before, and I'm going to repeat it again. AI justification is a positive, has been a positive, will continue to be a positive for us. IQVIA has the largest proprietary health care information assets in the world and is the foundation of our value to clients. That access is not available. We have that access to nonpublic granular high-frequency data that nobody can license at that level of debt, which is the level of debt as required to build the agents I don't know how much to say it. Number two, industry expertise and global presence cannot be replicated by general purpose AI like it can be in any other services. Our value counts of 7 decades of big knowledge across 100-plus countries, deep understanding of local health systems. It cannot be systemized or replaced by generic LLM just can't outside Healthcare. -- believe if we could be ready know. So we are our company is integral to our clients' ecosystem. AI is more likely to augment the clients' team, but not to replace us -- our client AI initiatives are enabled by our data services and workflows and people. The scale and the centralization that makes IQVIA the natural health care AI partner are should be evident. A little bit in remind me, just to item, a little bit over a year ago or about a year ago, I was here in people telling me that R&D investments in drug development is over. No one is going to invest in drug development anymore. I had people stating that as a fact. Okay. So I've said what I have to say, you can remit the streetscape. I just want to remind you, again, AI delivers the most value when it's embedded in existing workflows. Why should you build the new wheel if the existing one works and you can simply optimize it. Most of what AI does by the way, it covers 80% of what needs to be done. But you still not need to have someone with the subject matter expertise to complete the remaining 20%. Otherwise, you keep compounding errors and you end up with an incomplete product, which is health care is now not to begin with. You're also forgetting regulations. AI is all about productivity. It's all about enabling people to do more. It will not replace. It will help enhance and improve. RMBS and bookings. So the metrics -- the demand metrics are very strong. They continue to be double digits, whether it's post pipelines, RFP flow. The book-to-bill -- again, I'm always pushing back on -- you've seen that it has improved during the year. We had ferrata, -- we -- this quarter had cancellations of -- for futility reasons. But we had very strong bookings. Look, despite the naysayers who were telling as to Urbat we were done in any business, we booked again $10 billion of business this year. like a few other years, circa cancellations. So what the book-to-bill will be next quarter, the quarter after next year, we don't project that. So I don't know. But again, demand indicators are strong. And for strong EMP demand has come back largely because funding has come back. Our large pharma is a very rich pipeline of opportunities we're working on. So I don't see anything here that's unusual. Operator: You next question comes from Elizabeth Anderson with Evercore ISI. Elizabeth Anderson: I don't want to beat a dead horse, but -- have you actually seen -- I think 1 of the fears that came out this week, and I'd just be curious your thoughts on it that -- I think Pfizer and maybe some others have talked about using AI in terms of trial efficient, improving trial efficiency. And when I heard that it seems sort of in line with sort of what you and others have maybe previously said about sort of an increase just generalized increase in that over time. Have you seen any difference in sort of behaviors from that large pharma segment in terms of what they're asking for you? Because I think the fear comes down to like are they going to need fewer FSP seats or something like that, and that would be a drag on revenue -- or is this -- so one, I guess, have you heard over that? And then two, maybe on the financial side, anything you can point out in terms of the cadence of profitability this year that would be sort of different than what in prior years. Ari Bousbib: No, nothing different with respect to large pharma AI efforts and the idea that clinical trials can be made more efficient with AI. We've been talking about this for a long time. The very creation of IQVIA was predicated on this idea and the innovation of new tools that allow AI justification, we find on that right away -- and we've been working on it. And in fact, I would say, with respect to client clinical trial efficiency improvements through AI agents large pharma with us. With respect to large pharma work on AI early in process, which you alluded to that is on discovery, which, by the way, this is the board. When you hear large pharma mentioned, AI 99% of what they mean is using actuation tools way, way upstream to try to source through the molecules to try and decide and anticipate in advance which trial will be more successful. So that doesn't affect what our business is, you can conclude theoretically that as a result, they will start less trials. But that at all. In fact, if you talk to an large pharma we'll do more trials and will be more successful. -- it. There are policy obviate they did that, most of the innovations, if you go back actually came for 2 weeks, not because they prove the initial hypothesis. So it's a different discussion, but innovation in some cortical has often come per change, so to speak in the course of a trial that was trying to somebody else. Either way, we do not see any change in demand dynamics. We only see opportunities for productivity improvements. We are on it. We help our clients with those proponents. It helps us as well. We work in partnership with our clients and our business is stable and growing and nothing has changed. And we believe that we will continue to grow, gain market share, as we've been doing and execute on the strategy. There is nothing new here because an article was published, nothing. Operator: Your next question comes from David Windley with Jefferies. David Windley: Super -- thanks for squeezing me in here. Ari, I wanted to ask a question about margin. Your margin year-over-year was down a little bit in the fourth quarter, but it looks like to us, your pass-through growth was quite high. So that more than accounted for that margin pressure and maybe you did actually gain some productivity apart from that. So my question if my question is twofold, sorry. So one is this more simple version of what is the trajectory of pass-throughs and how should we think about how that's affecting margin the bigger question though is dovetailing on your productivity points and thinking about how those productivity gains are shared with the client historically, my best understanding was kind of the expectation of some sharing. I guess what I'm interested in is, you've also talked about having been through a period of pretty significant reprocurement has the price taking the price pressure by pharma in those reprocurements been their way of extracting that productivity value and then you go get it? Or is it more of a program-by-program, contract-by-contract discussion with them, where the strategy on the trial drives shared efficiency. I'm just trying to understand how you monetize the efficiency that you're chasing? Ari Bousbib: Yes. I think, again, the procurement report, I'm just going to answer the second part of your question procurement is term in rates and so on and so. So you would conclude normally that that's the -- it's the form, not the like. Having said that, obviously, in a given trial, still they need a little bit of negotiation given if. But look, on long-term, you share productivity gains with the clients. That's no question. No secret. But you're asking about the short-term, not that it is in that sense. What was the first... David Windley: Trajectory pass-throughs and how we should think about that? Ari Bousbib: Yes, yes, yes. You answered your question yourself at... Ronald Bruehlman: The biggest driver that gross margin is finally saw was very strong pass-through growth in the quarter. And there's some mix -- product mix impact that gets into that as well. Now as we go into next year, you saw we're guiding towards flat. Overall, EBITDA margins and the pass-through growth will moderate going into next year into 2026. Ari Bousbib: And it's basically, yes, to answer to your question, you said -- talked about productivity, yes. I mean we -- we offset some of this with the productivity gains when you have or with a lot of passes, then there's just that much you can do. Ronald Bruehlman: Yes. You'll see that the SG&A margin continues to improve and a lot of that is productivity related. Ari Bousbib: Yes. Operator: That was our last question. Kerri Joseph: Last question -- thank you, operator. Thank you for taking the time today to join us, and we look forward to speaking with you again on our first quarter 2026 earnings call. The team and I will be available the rest of the day to take any follow-up questions you might have. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good morning, and welcome to the Markel Group Fourth Quarter and Year-End 2025 Conference Call. [Operator Instructions] During the call today, we may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They are based on current assumptions and opinions concerning a variety of known and unknown risks. Actual results may differ materially from those contained in are suggested by such forward-looking statements. Additional information about factors that could cause actual results to differ materially from those projected in the forward-looking statements is included in the press release from our 2025 results as well as our most recent annual report on Form 10-K and quarterly report on Form 10-Q, including under the captions Safe Harbor and Cautionary Statement and Risk Factors. We may also discuss certain non-GAAP financial measures during the call today. You may find the most directly comparable GAAP measures and reconciliation to GAAP for these measures in the press release for our 2025 results, the press release for our 2025 results as well as our Form 10-K and Form 10-Q can be found on our website at www.mklgroup.com in the Investor Relations section. Please note, this event is being recorded. I would now like to turn the conference over to Tom Gayner, Chief Executive Officer. Please go ahead. Thomas Gayner: Thank you, Rebecca, and good morning, and welcome. Thank you for joining this call on today's call. I'm delighted to be here with my colleagues, Brian Costanzo, our CFO; Simon Wilson, CFO of Markel Insurance as well as Mike Heaton, our COO, who will be available for the Q&A session. At Markel Group, our purpose is to be a long-term home for exceptional leaders and businesses, and to relentlessly compound your capital at attractive rates of return over decades, all while staying true to our culture as we describe it in the Markel style. 2025 was a year that reinforced the power of that model. Every reportable segment made a positive contribution, and the company advanced both quantitatively and qualitatively. Let me begin with Markel Insurance, where we took a series of decisive long-term actions this year. These were not easy, but they were necessary. And I want to thank the entire team for a year marked by tough decisions and genuine progress. In 2025, we exited underperforming businesses, most notably reinsurance, made key leadership changes, including appointing Simon Wilson as the new CEO of Markel Insurance, and we made structural improvements to simplify the business and reinforce accountability. The full impact of these changes will play out over years as is the case with all long-term compounding. Last quarter, I described the results as a green shoot. This quarter, all adjusted to the plural. We are now seeing green shoots. In the fourth quarter, Markel Insurance generated a 92.9% combined ratio and contributed $399 million of adjusted operating income. For the full year, the segment delivered $1.4 billion in adjusted operating income, up from $1.2 billion in the prior year. And 2025 marked the 21st consecutive year of favorable reserve development, a testament to our conservative posture and financial integrity. Within Markel Insurance, the headline is simple. We're doing more of what works and less of what doesn't with a focus on simplification, better execution and improved returns on equity. As Simon will discuss later, we believe the foundation is now set, but it's early days. Importantly, Markel Insurance is only one part of a broader, more diverse ecosystem of high-quality cash flows, which are central to the Markel Group story. Our Financial, Industrial and Consumer and Other segments also delivered positive results in 2025, each benefiting from the autonomy and accountability we give leaders to make the best long-term decisions for their businesses. The Financial segment, which includes State National and Nephila had a tremendous year, generating $327 million in adjusted operating income, up 25% from 2024. The Industrial segment earned $343 million, slightly below last year's level. This was a strong result given the softening in certain end markets, and it reflects the skills of the amazing leaders of those businesses and the room and space we give them to serve their customers with a long-term mindset. Consumer and Other delivered $175 million of adjusted operating income, up from $145 million last year with our acquisition of EPI driving most of the increase. Our public equity portfolio returned 10.5%, generating $156 million in dividend income and ending the year with a market value of $13 billion with an unrealized gain of $8.9 billion. These equity holdings, diversified, high quality and held with a long-term mindset remain an important driver of compounding. All of our streams of adjusted operating income convert well into cash, producing durable, resilient and diverse inflows that give us the flexibility to allocate capital to its highest and best use wherever that may be across the group. To that end, cash flow from our operations grew to $2.8 billion in 2025, and we put that cash to work with discipline. To give you a sense of that, we deployed some of that cash to $1.4 billion in fixed maturity net purchases, $207 million in new property and equipment. We bought $143 million of net public equity securities and invested $170 million in bolt-on acquisitions and increases in our ownership stakes in our existing majority-owned businesses. We also redeemed $600 million in preferred shares and repurchased $430 million of our own common shares, all while weighing every dollar invested against its next best alternative. Even with all that investment and return of cash to shareholders, our cash balance increased by $411 million, and we paid down a little bit of our long-term debt. That combination, high-quality cash inflows with a 360-degree set of opportunities to deploy it continues to fuel what we often describe as a perpetual motion machine of shareholder value creation. In any given year, results can and will be volatile. But over 5-year periods and beyond, the trend has been up and to the right. That's the power of long-term compounding. It is a joy to serve you alongside such a great team. We are energized for the year to come, and we thank you for your ongoing engagement and support. With that, I'll turn it over to Brian. Brian Costanzo: Thank you, Tom. Good morning, everyone. As a reminder, last quarter, we released significant enhancements to our financial disclosures, along with the reporting changes guide available on our IR site. We made these changes to help investors better understand the company and its performance. To review the major changes we made were changing the presentation of investment gains and losses to be included outside of revenues, establishing new reportable segments of Markel Insurance, Industrial, Financial, and Consumer and Other, while collapsing our former investment segment results into these new segments and reporting of new metrics, including adjusted operating income for all segments that excludes investment gains and amortization expense and segment level KPIs such as organic growth and return on equity for insurance. With that, let's cover the results for the period, starting with our consolidated results. Markel Group's consolidated operating revenues, which exclude net investment gains, were up 8% for the quarter and 5% for the year. Operating income for the quarter was $795 million, up from $595 million in the comparable period last year and $3.2 billion for the year versus $3.7 billion in 2024. As a reminder, operating income includes net investment gains, which can be volatile from period to period. Net investment gains were $212 million in the quarter compared with $117 million in the fourth quarter last year and $1.1 billion for the year versus $1.8 billion in 2024. Adjusted operating income, which excludes net investment gains and amortization expense, totaled $626 million for the quarter, up 19% versus the same period last year. Adjusted operating income was $2.3 billion in 2025 compared to $2.1 billion in 2024 or up 10%. The increase in adjusted operating income was primarily driven by improvements in our insurance business and strong performance within our Financial segment. Operating cash flow was $2.8 billion in 2025 versus $2.6 billion in 2024 and comprehensive income to shareholders totaled $606 million in the quarter and $2.6 billion for the year. Turning now to our operating segments, starting with Markel Insurance. The return on equity for Markel Insurance for 2025 was 14% and the trailing 5-year period return on equity was 13%. We view the 5-year average return on equity as our primary KPI within insurance, measuring our commitment to generating consistent profitability within both our underwriting and investment operations and remaining efficient with our use of capital. Markel Insurance underwriting gross written premiums increased 3% for the quarter and 4% for the full year, driven by personal lines in the U.S. and growth across several product classes in our International division. At a divisional level within Markel Insurance, within our International division, gross written premium grew by 14% for the year with the division growing in every market. Our International division continued its recent track record of fantastic results, posting an 83% combined ratio for the year. Programs and Solutions gross written premium grew by 8% for the year, driven by our personal lines and delegated programs units. For our Wholesale and Specialty division, gross written premium declined 4% for the year. Excluding the impact from exiting our U.S. risk managed professional liability book earlier this year, premium growth was flat across the division. In Global Reinsurance, which we exited in 2025, gross written premium declined 10% for the year. Overall, underwriting gross written premium volume, excluding the impact of exiting our Global Reinsurance and U.S. risk managed professional lines grew by 7% for the year. One additional note on premium volume relative to our 2026 reporting. Our underwriting premium volume next year will be impacted by 2 significant items. First, the exit of our $1 billion gross written premium Global Reinsurance business; and second, the transition effective January 1, 2026, of our partnership with Hagerty to a pure fronting model. Hagerty premium will be included in our results going forward as fronted gross written premium versus underwriting gross written premium. This change was a natural next step in our long-term evolution of our partnership with Hagerty, continuing to retain greater amounts of underwriting risk. In 2025, Markel only retained 20% of the Hagerty gross written premium volume, so the impact on our net earned premium volume will be significantly less. Together, these 2 changes will decrease underwriting gross written premiums for 2026 by approximately $2 billion, but we expect these changes over the long term to benefit our combined ratio, adjusted operating income and return on equity. Turning back to insurance profitability. Adjusted operating income for Markel Insurance was $399 million for the quarter, up 31% from last year. The combined ratio for the quarter was 92.9% compared to 95.9% in the same quarter last year. This 3-point improvement was driven by lower losses from our CPI product and within our U.S. casualty lines, partially offset by higher attritional losses in our U.S. personal umbrella product and large losses incurred in the fourth quarter within our U.S. surety line. Our surety portfolio has been highly profitable for us since our acquisition of SureTec in 2017. For the year, Markel Insurance finished with $1.4 billion in adjusted operating income and a combined ratio of 94.6%, a 1 point improvement from last year. We had 6 points of favorable prior year loss development for both the quarter and year-to-date periods, and our balance sheet position for reserves remains strong. Turning next to our investment portfolio. Our net investment income was $258 million in the quarter and $970 million for the year, up 6% for the quarter and 5% year-to-date due to higher interest rates and increased holdings in fixed income securities. Our fixed income portfolio yield was 3.6% for the fourth quarter. We reinvested new money into securities at an average yield of 4% in the quarter versus 3.1% on average across our net maturities. Within our public equity portfolio, during 2025, we made $143 million of net purchases of securities. Our public equity portfolio returned 10.5% for the year, bringing the value of our public equity portfolio at the end of the year to $13 billion with a total unrealized gain of $8.9 billion. Over the trailing 5-year period, the equity portfolio's annual return was 12% compared with 15% for the S&P 500. Our net equity purchases declined year-over-year, reflecting rising and less attractive valuations and better opportunities elsewhere for incremental investments. Moving to our Industrial segment. Revenues were $1 billion for the quarter and $3.9 billion for the full year, up 4% for both the quarter and for the year. Organic revenue growth was 2% for the year. Revenue growth for the year was impacted by our acquisition of Valor and organic growth was driven by our equipment leasing business and our businesses that serve commercial and residential construction markets, partially offset by lower revenues in our transportation products businesses. Adjusted operating income was $80 million for the quarter, down 26% from $108 million in the same period last year. Adjusted operating income was $343 million for the year or down 6% versus 2024. The decline in adjusted operating income was driven by lower revenues in our transportation products businesses and tightening margins due to higher materials and labor costs within our other products businesses. For our Consumer and Other segment, revenues were $274 million in the quarter and $1.4 billion for the full year or up 4% for both the quarter and year-to-date periods. Organic revenue growth was 1% for the year. Adjusted operating income was $23 million in the quarter, up 35% versus $17 million in the same quarter 1 year ago. Adjusted operating income was $175 million for 2025 or up 20% versus 2024, driven primarily by our acquisition of EPI and higher sales volume of ornamental plants. Next, within our Financial segment, revenues were $224 million or up 41% for the quarter versus the same period 1 year ago and $737 million for 2025, up 24% versus 2024. Organic revenue growth was 17% for the year. The increase in revenues for the year was due primarily to increased performance fees and a higher management fee rate within ILS, along with higher premium volumes within our program services product. Year-to-date revenues were impacted by a $41 million gain on the sale of our remaining minority interest in Velocity earlier this year. The increases in revenue drove adjusted operating income up 58% to $107 million for the quarter versus the comparable period 1 year ago and up 25% for 2025 to $327 million. The year-to-date adjusted operating income change was also impacted by $58 million of favorable loss development related to Markel CATCo recognized in 2024. Finally, regarding capital allocation. For the year, we repurchased shares totaling $430 million, reducing our share count to 12.6 million shares from 12.8 million shares at the end of last year. We also redeemed our $600 million preferred stock issue earlier this year, making total capital returned to shareholders over $1 billion. With that, I will pass it over to Simon to discuss Markel Insurance. Simon Wilson: Thank you, Brian, and good morning, everyone. I'm pleased to be with you and share some further insight on the progress at Markel Insurance. First off, some numbers. The quarter produced a combined ratio of 92.9%, 3 percentage points better than the same quarter in 2024. The prior year reserve release of 6 points in the quarter was broad-based and reflective of the stable position of our reserves. We achieved 3% growth in GWP and 7% growth in net earned premium despite our withdrawal from the Global Reinsurance business. Improving underwriting results were an important factor in achieving a 14% return on equity for Markel Insurance in 2025. Our underwriting and reorganization actions over recent years are beginning to pay dividends. We are now far better able to focus on the key areas where we have a right to win. The combined ratio of our 3 ongoing business divisions for Q4 2025, which excludes the impact from Global Reinsurance and CPI was 91%. This figure would have been even stronger, but was impacted by heavier-than-expected losses in a large personal umbrella program and our surety business, where we were hit by 3 discrete losses in the period. Every decision that we made during 2025 was designed to simplify our business and create clarity around P&L ownership. Ultimately, these decisions will drive more consistency and better execution around the key financial metrics of combined ratio and return on equity over the long term. The 2026 business planning process completed in the quarter was a key test of a new structure and gives me confidence that the overall organization will benefit from the changes we made in 2025. Five key indicators that underpin this confidence are: number one, a revamped portfolio mix with a refreshed focus on bottom line results and a wide range of profitable growth opportunities; number two, ambitious and measured investment plans for our high-performing businesses with clear growth opportunities such as environmental, energy, healthcare, financial institutions, personal lines and workers' comp in the U.S. and our key regional businesses in the London market, European Union, Asia Pacific, Canada and the U.K.; number three, P&L owners are challenging expenses harder than I've seen in a long time. It's been interesting to watch the way behavior changes when costs are clearly attributable to a business unit. I fully expect and encourage this behavior to continue. The planned doubling of investment of our technology stack this year versus last is the fourth area. These decisions are now driven by the business rather than the corporate center. For example, we have a complete system overhaul in the high-performing personal lines business, the continued transformation of our data and core operating systems across the International division and a commitment to increasing decision-making speed and response times in our core U.S. wholesale and specialty division. AI will be a central component of all these investments. We are fully aware that speed is a critical success factor in our business, and we are focused on improving it. And finally, number five, a renewed sense of ownership across our leadership group. A founder's mentality is returning to the fray. Our business model is designed to be driven by many, not few. We have set clear expectations for every area of our business for 2026. Our job is now to execute. Further, the overall improvement in operations is built upon the continued strength of our balance sheet. The overall reserve release for 2025 was 6 points or $484 million. We're able to make these releases while increasing our margin of safety and overall strength of the balance sheet. We have a continued commitment to setting reserves that are more likely redundant than deficient. A strong margin of safety will be important in the coming years. There is no doubt that market conditions in many areas of the specialty insurance industry have softened. Profitability has been high. Competition has increased and prices are under pressure in several key lines of business. However, competition drives progress and our customers and brokers continue to value clear appetite, market-leading expertise, high-quality service and speed of decision-making. Our job is to continue building a business that meets these needs, all while staying true to the Markel style. Businesses and teams that focus on their customers remain well organized and have a strong sense of purpose for those best positioned to succeed in any market conditions. As the comedian Billy Connolly once quipped, there is no such thing as bad weather, only the wrong clothes. I'm pleased with our new wardrobe and look forward to sharing the results with you on the 2026 catwalk. With that, I pass it back to Tom. Thomas Gayner: Thank you, Simon. Rebecca, we'd love to open the floor for questions. Thank you. Operator: [Operator Instructions] The first question comes from Andrew Kligerman with TD Cowen. Andrew Kligerman: I'd like to start off in the property casualty segment. I think back in early January when you hosted an investor meeting, Simon, you touched on wanting to kind of level out at a 93% combined ratio. And I guess the fortunate part is that you're more focused on casualty. So I want to get a sense, do you feel like the way pricing is in casualty, coupled with some intense loss cost trends, can you -- and you did come in at 92.9%, so right on the number in the quarter. Do you feel like you can sustain the trends, the 93%? And then underlying that, looking at Program and Solutions, you came in at 101.9%. I'd like to know what drove that and what you might do to kind of get that lower? And then on the flip side, International was fabulous at 80.5%, and I'm wondering what's driving such a terrific combined ratio and whether trends are going to push that up, long question. Simon Wilson: Well, that's pretty much everything there. Andrew Kligerman: Yes, [indiscernible] question, sorry. Simon Wilson: No, that's fine. And thank you for the interest in those numbers as well. I have said -- and we said for a long time now that to hit our return on equity kind of like aspirations, a low 90s combined ratio is important to us. So that's absolutely my ambition and the focus of our organization to get down to that kind of a number consistently. That's the plan. Part of your question is saying, look, you guys pretty casualty-centric organization. How do you get to a 93% with that backdrop? I'd probably challenge that actually. I don't think we are that heavily casualty oriented. We've got a very diverse book of specialty products. Yes, we've got U.S. casualty, but our London market business, for example, lots of marine, energy, a lot of professional lines all around the world. So I don't know the exact percentages of our casualty -- the casualty contribution to our book, but it will be less than 50% for sure. And so again, very well balanced across the portfolio. Therefore, I think it's the power of that diversification and us kicking the tires in lots of these specialty business areas that gives us the confidence that we can get towards achieving that ambitious combined ratio target over time. So if you're asking me, do I think we can approach those targets? Well, everything that we're doing and putting in place is designed to achieve those, but we'll see how that pans out. But the diversification of the portfolio and those different drivers, a couple of those that you just called out that will end up with the result overall. So I'm focused on it, I feel good about it at the moment. Specifically on Programs and Solutions, you raised that in the quarter, it took a pop. And I did mention in my comments, and I think Brian did in his, there were 2 factors that influence that. And a quarter is a pretty short period of time. So you get the occasional blip. The 2 areas were in our -- what we call our programs business, that's delegated underwriting, where we do a personal umbrella account. And we saw the claims trends beginning to spike in that area. And what we tend to do at Markel and certainly my philosophy is to get ahead of those loss trends and put our reserves up early. So the combined ratio and the loss ratio within that for the personal umbrella program is really driven by us putting up a big solid reserve against that program so that we've got the money in the bank effectively to pay the claims that may or may not come through, but that's our best guess at the moment and very much focused on that redundant rather than deficient position on our balance sheet. So that's the first area in Programs and Solutions that created that result that came overall. The second area was actually in our surety business, which I'll be honest, I think we were a little bit surprised, not least because the surety business has been an absolute mainstay of profitability for a decade now since we bought a company called SureTec back in the mid-2000 teens. This -- often in business like the ones that we do, we get the occasional large loss, and in surety, we actually suffered 3 large losses in the quarter, and we've obviously reserved and paid claims against those. That happens. I will take the trade on surety every day of the week, though. We were -- we had 3 large losses this year, but it's on the back of 10 years of very significant profitability. And as we look forward into 2026, having reviewed that entire book of business, we feel really good about that, the standard result that comes out of that business, absolutely meeting our combined ratio and return on equity targets. So I would consider, and I genuinely think that the Programs and Solutions business suffer from 2 very specific areas. The rest of that area, personal lines business, our Bermuda business and our workers' comp business all performed really well. So on average, I think they did really nicely. International, I do have fairly good insight into that. They've been producing extremely good results for a number of years now. And what happened there was in the late of probably 2017, '18, we took a big hard look at the portfolio and took out areas of business which we didn't think we were going to be profitable over the long term, areas where we didn't feel we had the right to win. So when we cut back and -- this is 5, 6 years ago, those areas, we then started to grow in areas where we did have the right to win and our regional businesses as well. So what we're seeing now is the result of decisions that were made 5 and 6 years ago and then investment on that new business model over quite a long period of time. So key growth areas last year were in Asia Pacific, which was up over 30%, our European Union business, which is up 20%; London market business, which is up 13%. They are all areas that we've been strategically investing in for a long period of time. And the result is one of quite good market conditions over the past few years, but absolute focused investment in areas where we think we can win. And that's what we're trying to do in all the other areas of the business now that we've got this really focused business model across the whole of Markel Insurance. So I can't say that we're going to achieve low 80s combined across the whole thing for the next decade. That's not what I'm going to say here, but we'll take the International results now. And I think what we've seen there and the techniques that were driven to achieve those results is exactly what we're deploying across the rest of the business. And that's what gives me confidence in the thing as a whole. And I look forward genuinely to what we can do in 2026. Thomas Gayner: If I may, Andrew, just to finish up, to translate Simon's English accent to the American idiom, we will do the best we can, and that's not so bad. Andrew Kligerman: No, it's not. super helpful response. Maybe shifting over to Industrial and Consumer. And by the way, thank you for the new reporting structure. It's very helpful. The Industrial organic revenue was up 2.5%. I think you just mentioned equipment leasing was good, and it was offset by transportation. Wondering if you could share a little color on how that's likely to trend going forward. And then in the Consumer, you had organic growth of about 1%. I think you mentioned ornamental plants was a positive. But how do you think that's going to trend going forward as well? Thomas Gayner: Yes, Andrew, it's Tom. We are delighted with the collection of businesses that we own. We've got first-class people running them. They're producing good returns on capital. We run those with a focus on good returns on capital over long periods of time. Each and any one of those businesses in any quarter has volatility and normal cyclicality and seasonality. So frankly, the answer to your question is we don't think about it that much. As long as those businesses are being well run and doing what they should do, well, then the outside forces are what they are. But when we totted up the numbers of them for a long period of time. As you can more clearly see in the way we're presenting the financial disclosures and data these days, we are happy. We were happy 6 months ago. We're happy right now. We would anticipate continuing to be happy with the way those businesses are performing. Operator: [Operator Instructions] Your next question comes from the line of Andrew Andersen with Jefferies. Andrew Andersen: Maybe just on the Insurance segment. How are you kind of viewing the insurance pricing environment into '26? Are you still seeing rate increases in certain areas? And maybe how does that differ between U.S. Wholesale and the International segment? Simon Wilson: Thanks, Andrew. Thanks for the question. In -- there's a general trend, I think I mentioned that sort of -- so there's a number of lines that you are seeing softening rating conditions at the moment. In particular, I would say U.S. property would be top of the list on that. We've seen very significant profitability definitely in our book, but that's across the industry. And with that profitability often in the insurance market cycle, you see heavy competition. So we are seeing very significant competition in that U.S. property market. And it depends what the account is, but you're looking at probably at least 10% reductions in many of that -- in that property book and probably up nearer towards 20%, I think, in general terms. And we've seen that reported by several other players as well. It is a bit more nuanced than that. It's not just to say like every property risk is down double-digit percentages. What we're really seeing in property is the structured and layered risks that come in. There's a change in the structure that's going about. So the primary layer is actually writing larger lines with sort of the initial insurer and some of the -- the layers on top of that, the excess layers are being challenged either by being removed completely or you're seeing an awful lot of competition going around them. So if you're playing in the second or third excess layer, you're probably seeing more intense price reductions there than maybe you are on the primary side. So property is generally soft, but you're also seeing that nuance a bit where depending on where you play in the program. A lot of people though in property are talking maybe not just about rate reductions, but rate adequacy. And I think that's really important because there were a lot of sharp rises in the property market when we saw catastrophes kind of 3 and 4 years ago, impacting the cat market and then the non-cat market in property as well. So I think the general sentiment in the industry is that prices are just about remaining adequate at the moment, but you really have to be thoughtful about what your risk appetite is and where your sort of your walkaway price might be. So we're keeping a close eye on that area. Conversely, the casualty market continues to get rate increases, specifically in auto risks, habitational risks, construction risk. We're seeing that significant rate increases ongoing. And that's important because the claims trends that we're seeing in those areas continue to be fairly strong as well. So the skill in casualty is not just writing everything just because rates are going up, but really being thoughtful about the areas of the casualty market in which we're going to play because the litigation environment in the United States is all very significant as well. Moving to International briefly. I would suggest that there is softness there. So as a wholesale market in London, you see quite a lot of business that going to London becoming sort of structured and certain brokers are bringing that in and looking for price reductions when they go into London. So certainly, in marine lines, energy lines, property areas, we're seeing that price competition in London as well. I think the professional lines area actually has begun to stabilize after a couple of years of softening. I think that's stabilizing. And again, being really focused on rate adequacy in that area is what we're focused on. And sticking to the bits of the professional lines where we really think we add value to the broker and to the ultimate customer and where we've got expertise, that serves us well, and that's one of the reasons why our combined ratios have been so good in London is because we've chosen our risk pretty well. Outside of London, in our regional offices, and this is a really important point for people to note, we tend to focus on the small end of the risk market. And the very small end of the risk market, and this is maybe $2,000, $3,000 policies quite often, certainly in the European Union, the U.K. regions and some of our Asia book. In that area, the price competition is less aggressive. So yes, you might see a bit of softening, but it's very much single digit in there. And often, we're charging minimum premium. So the rate adequacy can be really positive in that area. So less affected outside of our London lines than in London just because the intensity of competition for that small risk segment is just lower. It's harder to get at, and it's stickier. So our strategy within International is to grow our non-London portion relative to London so that we've got more of this kind of smaller, stickier business, which is less exposed to intense price competition going forward. And I think that balance will help us with that overall diversified portfolio over time. So it's a mixed bag in terms of what's happening in the rating environment. And to very quickly summarize, property is competitive. Casualty actually, we're seeing firming and hardening, but it's not an easy market to underwrite your way through. London is competitive. Non-London International actually is stacking up, continues to stack up pretty well. So hopefully, that gives you a bit of a flavor for what's going on in our world. It's an interesting time, and I like our odds with the underwriters that we've got on the ground to navigate it. Andrew Andersen: Very comprehensive. And maybe we could just kind of shift to AI and the expense ratio. What kind of -- where is it being deployed within insurance? Maybe what are some returns or examples you've seen so far, and some focus areas into '26 and '27 for deployment? Thomas Gayner: I'll ask Brian to take the first stab at that and... Brian Costanzo: Sure. Yes. I mean, I think with the new model that we have and the operating model and the org structure, I mean, now it's really in the hands of the individual business leaders. We're trying to put tools in their toolbox, make them aware of what's out there. We've had some really nice wins in lines where you have large documents and need to digest big amounts of data. So think of things like transaction liability, financial institutions where you can get data rooms filled with all kinds of things that humans have to pour through, the AI can synthesize that down very quickly, pull together the data and allow you to lower the investment of the human side, and that allows you to look at accounts that from a size and premium standpoint, you wouldn't have been able to access just because of the human element and the expense ratio of going after those. Now you've broadened what you can go after from an appetite standpoint. So that's certainly one example. I think the other place we've seen a lot of AI use is in data ingestion. So when we have delegated underwriting arrangements, when we have [ border ] business coming in, when we need to get data into our systems and use that to make decisions using the AI to transport, bring it in, and that avoids a lot of the human element of what I call data wrangling and data compiling that's expensive, it's non-value add. It shifts those resources now to where the data is there, you can now spend the time doing the analysis, finding the trends, finding where you win and enhancing the book overall. Simon Wilson: And I'll just add to Brian, and you picked up some really important spots. I will say this, I am -- Andrew, I'm utterly obsessed with operations. I'm sort of -- I'm pretty geeky around this stuff. I'll admit that much. And efficient and high-quality operations that lead to speed of response are absolutely at the center of my mind now. I'm really excited about where we are on this AI position, right? We have some really exciting projects ongoing at the moment. Brian alluded to a couple of them there. But what 2025 did to clear the organizational structure so we can really focus on specific areas of the business, allows us to deploy AI in a much, much more effective way than a simple broad brush effect that we did previously. So I don't think we -- we're doing some really exciting things. I think will begin to impact our productivity and efficiency at the moment. But I'm going to start turning the handle on AI and just operations in particular, during this quarter and next to get our focus in and around that. And I think that will begin to have a much more material impact as we go through the next sort of 6 to 12 months. So we've made a nice start, but the strategic level of what we need to do here is just beginning. Brian Costanzo: And maybe I'll add, [ Markel ] will talk more generally on expense ratio. If you look at the portfolio, the areas in which we're growing and have been very profitable in some of the segments in International, our European business, our Asian business in the U.S., our personal lines business, those are all great businesses, low combined ratios. They have higher expense ratios to operate. They have opted inverted expense ratio loss ratio profile to other areas of the business. Areas where we've been very challenged, our Global Reinsurance business, our risk managed professional liability product that we've exited, those are some of the lowest expense ratio businesses that we had in our portfolio. So we are ultra-focused on combined ratio, return on equity. We certainly want to take advantage of efficiencies, AI or whatever they might be from an operations standpoint. But number one is that combined ratio focus that we have. Operator: Your next question comes from the line of Mark Hughes with Truist. Mark Hughes: In the Financial segment, earnings very strong this quarter. You talked about better fees, I think assets under management. How much of that was product of just the light cat season this year? And how much of that should we think ought to carry forward into 2026? Thomas Gayner: Yes, I'll start, and I'll turn it to Brian. Yes, clearly, the light cat environment helps. Brian Costanzo: Yes. I mean -- so what I'll say is the like cat environment at Nephila, they did earn some performance fees in the fourth quarter based on that. But kind of -- we've talked about this before. Those kind of all matriculate in the fourth quarter. So you wait the full year, you see how the ultimate kind of cat season plays out. And then in the fourth quarter, those crystallize. And with a very low cat season, we saw the benefit coming from that. The other thing going on there is the State National business has just been on a consistent track record year-over-year growth, growth in the premium base, growth in the fee income that they're generating. That's high-margin business when it comes in. So a lot of that growth drops right to the bottom line. Mark Hughes: On State National, have you seen any push in your book for more risk retention on your part? Or -- yes, I'll leave it at that. Thomas Gayner: Yes, it's Tom again. Yes, that's a feature of the market. State National has been a leader, they do well and leaders attract competition. Mark Hughes: Very good. And then Tom, the AI trade, when you allude to your equity portfolio, a lot of discussion of software companies or tech companies that may be at risk from AI and obviously, opportunity, but then it's quite a volatile area. So how are you looking at that from your equity portfolio standpoint? Thomas Gayner: Well, I appreciate the question. One of my great friends and mentors and teachers and long-time Markel shareholder who passed recently, a guy named Chhadrow down in Texas, and I learned so much from him over the years. And one of the things he used to say was that in the investment business at any given point in time, you look either smarter or dummer than you really are. And 2025 was a year, I would say we looked dummer and we probably really are. If you look at our long-term record, very proud of it, very pleased with the discipline and the way we do things. But clearly, the AI headlines that you read had a lot to do with investment returns and probably a bit less with what happened at Markel. As we turn the quarter into 2026, the swirl that's out there, let's hold our fire and see how that works out. But clearly, the disciplines and the tools and the principles we've used to manage and select equity investments over the years on any given day will look better or worse than they truly are and I stand by what we do. Mark Hughes: Very good. And if I could squeeze in one more on the personal umbrella. You put up strong reserves. What underwriting actions have you taken? Price increases, stricter terms and conditions, just curious. Simon Wilson: Yes, good question. So we've done 2 major things I would suggest just for this call. The first is to increase rate quite significantly. Now it's an admitted product, so you have to do that state by state, you have to apply for it. So I think we're up to, I mean, a dozen states now that have signed off on that. So we have a material increase in the pricing that we're able to charge in those states now. But we've also taken another key underwriting action, which is to stop underwriting people's second homes in Florida. That was a cause of a lot of these losses. And increase the attachment point from -- it used to be $250,000 where we attached in these states where we've been able to get the rate increase, we've also increased the attachment point to $0.5 million. And we think that will take away a significant chunk of the losses that we've been being hit with mainly from auto losses actually in those various states. So we've acted decisively, quickly, and we are keeping a very, very close eye on how those claims trends go from here on in. But we do have -- we put the reserve up this quarter to give ourselves breathing space and cushion to watch that play out. And ultimately, if these underwriting actions don't work, then we'll have to think about maybe withdrawing from that particular area of business. We're not there yet, but we'll see. But a very, very big focus in the last couple of months from Alex Martin, Jeff Lamb and their teams. Operator: This concludes our question-and-answer session. I would like to turn the call back over to Tom Gayner for any closing remarks. Thomas Gayner: Thank you very much for joining us. We appreciate your support and your interest, and we're delighted to be able to report the results of the rational focus and the rational actions that we are indeed committed to and starting to see the green shoots from those activities. We look forward to connecting back with you next quarter. Be well. Operator: The conference call has now concluded. Thank you all for attending today's presentation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Kimball Electronics Second Quarter Fiscal 2026 Earnings Conference Call. My name is Alicia, and I'll be your facilitator for today's call. [Operator Instructions]. Today's call, February 5, 2026, is being recorded. A replay of the call will be available on the Investor Relations page of the Kimball Electronics website. At this time, I'd like to turn the call over to Andy Regrut. Vice President, Investor Relations, Strategic Development and Treasurer. Mr. Regrut, you may begin. Andrew Regrut: Thank you, and good morning, everyone. Welcome to our second quarter conference call. With me here today is Ric Phillips, our Chief Executive Officer; and Jana Croom, Chief Financial Officer. We issued a press release yesterday afternoon with our results for the second quarter of fiscal 2026 ended December 31, 2025. To accompany today's call presentation has been posted to the Investor Relations page on our company website. Before we get started, I'd like to remind you that we will be making forward-looking statements that involve risks and uncertainties and are subject to our safe harbor provisions as stated in our press release and SEC filings. And that actual results can differ materially from the forward-looking statements. Our commentary today will be focused on adjusted non-GAAP results. Reconciliations of GAAP to non-GAAP amounts are available in our press release. This morning, Ric will start the call with a few opening comments. Jana will review the financial results for the quarter and guidance for fiscal 2026 and Ric will complete our prepared remarks before taking your questions. I will now turn the call over to Ric. Richard Phillips: Thank you, Andy, and good morning, everyone. I'm pleased with the results for the second quarter and our updated guidance for fiscal 2026. Sales in Q2 were in line with expectations, highlighted by another quarter of strong double-digit year-over-year growth in the Medical vertical. Margins improved compared to the same period last year and cash from operations was positive for the eighth consecutive quarter. Our focus as a Medical CMO continues to gain momentum as we leverage our unique capabilities in the industry. We expect top line growth in Medical to outpace our other two verticals as we balance our portfolio across the markets we serve. Our recent announcement to rebrand as Kimball Solutions and the grand opening of the new medical manufacturing facility in Indianapolis reflects this strategy and our expanded offering of capabilities and services. Turning to the second quarter. Net sales for the company were $341 million, a 5% decline compared to Q2 last year. From an end market perspective, the strong results in Medical were offset by declines in North American automotive and industrial and continued softness in China. Starting with Medical. Sales in the second quarter were $96 million, up 15% compared to the same period last year and 28% of total company sales. This represents our fourth consecutive quarter of year-over-year revenue growth in this vertical. Approximately half of our medical business is in North America, the other half is roughly split between Asia and Europe. The increase in Q2 was driven by growth in Poland and Thailand. North America was flattish in the quarter. We continue to view the Medical vertical as a compelling opportunity to diversify our top line and leverage our core strengths as a trusted partner in a complex and highly regulated industry. Megatrends such as an aging population, increasing access and affordability to health care, and smaller medical devices requiring higher levels of precision and accuracy are expected to fuel future growth. Our strategy is to align with new and existing blue-chip customers in need of manufacturing capacity for products with long life cycles and high degrees of visibility. A great example of this strategy coming to life is our new facility in Indianapolis. Tomorrow, we will be celebrating the grand opening with a ribbon-cutting ceremony and plant tour showcasing our state-of-the-art facility that adds capacity to our U.S. footprint for manufacturing medical products, single-use surgical instruments and drug delivery devices such as auto-injectors. Indy, however, is not the only example. Thailand, Poland, Mexico and Jasper also serves the medical market with HLAs and finished medical products. To complement our organic growth, we're actively pursuing our discipline in acquisitions that could bring new customers, increase exposure to faster-growing end markets, expand our geographic reach and add manufacturing capabilities, including opportunities for vertical integration. Together, these strategies strengthen our global platform and position the company for a sustainable return to profitable growth. Next is Automotive, with sales of $162 million, down 13% compared to the second quarter of last year and 48% of the total company. The decline in Q2 was driven by lower sales in North America. The result of the electronic braking program transferred out of Reynosa in mid fiscal '25 and recent pressure in the U.S. related to tariffs. The combined impact represented the majority of the decrease in the quarter, although Automotive sales were also down in China. This was partially offset by strong growth in both Poland and Romania with programs in steering and braking, respectively. Our company has supported the automotive market since the mid-80s and has become a very good business for us, generating strong cash flow when production volumes are at or above planned levels. Electronic steering and braking applications continue to be our sweet spot with advances such as steer by wire and brake by wire, or electronic mechanical braking, increasing the electronic content on vehicles. We are also seeing early stages of growth from the full assembly of an EPP or Electronic Power Pack, a steering system HLA that integrates the motor and the ECU. In addition, OEMs are starting to design-in a second steering system in vehicles, this one in the rear of certain higher-end cars and trucks. Finally, sales in Industrial totaled $83 million, a 5% decrease compared to Q2 last year and 24% of total company sales. Our Industrial business is heavily concentrated in North America, where the majority of the decline occurred with lower demand for HVAC systems. This was partially offset by higher sales in Europe, a result of a rebound of the smart meter business for us in that region. I'll now turn the call over to Jana for more detail on Q2 and our updated outlook with raised guidance for fiscal 2026. Jana? Jana Croom: Thank you, and good morning, everyone. As Ric highlighted, net sales in the second quarter were $341.3 million, a 5% decrease year-over-year. Foreign exchange had a 2% favorable impact on consolidated sales in the quarter. On a sequential basis, sales were down just over 6% compared to Q1, with the decline primarily occurring in the Industrial vertical market driven by reduced sales in the North American climate control submarket. The gross margin rate in the second quarter was 8.2%, a 160 basis point improvement compared to 6.6% in the same period of fiscal 2025, with the increase resulting from favorable mix, the closure of our Tampa facility, favorable FX rates and our global restructuring efforts. Adjusted selling and administrative expenses in the second quarter were $12.6 million, a $2.5 million increase year-over-year. When measured as a percentage of sales, the rate was 3.7% this year compared to 2.9% last year. As we previously indicated, expense will be higher in FY '26 as we make strategic investments in business transformation, IT solutions and business development for the future. Adjusted operating income in Q2 was $15.3 million or 4.5% of net sales, which compares to last year's adjusted results of $13.3 million or 3.7% of net sales. Our improved guidance for adjusted income reflects the impact of higher sales as well as the S&A investments I just spoke about and the grand opening of our new CMO facility in Indianapolis, where we will incur higher depreciation and other expenses related to the plant opening. We have worked hard to balance the needs of the business against the backdrop of declining sales. We will continue our restructuring efforts in FY '26 and beyond as we align our cost structure to end market demand. Other income and expense was expense of $3.8 million compared to $4.8 million of expense last year. Once again this quarter, interest expense drove the decrease, down 50% year-over-year. The effective tax rate in Q2 was 47.9% compared to 1.2% last year with a higher rate driven by the impact of a provision to tax return adjustment and the valuation allowance adjustment associated with the expected sale of the Tampa facility. For the full year of fiscal '26, we continue to expect an effective tax rate in the high 20s to low 30s. Adjusted net income in the first quarter was $6.9 million or $0.28 per diluted share compared to last year's adjusted results of $7.4 million or $0.29 per diluted share. Turning now to the balance sheet. Cash and cash equivalents at December 31, 2025, were $77.9 million. Cash generated by operating activities in the quarter was $6.9 million, our eighth consecutive quarter of positive cash flow. Cash conversion days were 91 days, an 8-day increase compared to last quarter, but a 16-day improvement compared to Q2 of fiscal '25. We are continuing to focus on improving cash conversion days by actively managing the components and are pleased by our progress thus far. Inventory ended the quarter at $281.7 million, marginally higher than Q1, but down $24.5 million or 8% from a year ago. Capital expenditures in Q2 were $18.2 million, with much of the spend once again this quarter on leasehold improvements in the new facility in Indianapolis. Borrowings at December 31, 2025, were $154 million, up $16 million from the first quarter, but down $51 million or roughly 25% from a year ago. Short-term liquidity available represented as cash and cash equivalents plus the unused portion of our credit facilities totaled $363 million at the end of the second quarter. We invested $4.3 million in Q2 to repurchase 149,000 shares. Since October 2015, under our Board authorized share repurchase program, a total of $109.5 million has been returned to our shareowners by purchasing 6.8 million shares of common stock. We have $10.5 million remaining on the repurchase program. As Ric mentioned, we are raising our guidance for fiscal '26 with net sales expected to be in the range of $1.4 billion to $1.46 billion, which compares to our previous guidance of $1.35 billion to $1.45 billion. The improvement is driven by strength in the Medical vertical as well as the ramp of Automotive programs at both European facilities. Adjusted operating income now estimated to be 4.2% to 4.5% of net sales versus our prior estimate of 4.0% to 4.25% with the improvement driven by higher sales balanced against investments in our Indianapolis CMO facility, business development needs and business transformation and IT solutions to further innovations and enhance our capabilities. The guidance for capital expenditures did not change with a range of $50 million to $60 million for the fiscal year. I'll now turn the call back over to Ric. Richard Phillips: Thanks, Jana. Before we open the lines for questions, I'd like to share a few thoughts in closing. As Jana detailed, we are pleased to raise the outlook for the fiscal year, driven by strength in the Medical vertical. We continue to monitor the outlook for FY '27, particularly in the North America automotive and industrial verticals as the consumer continues to respond to tariff impacts, changes in U.S. tax subsidies and economic concerns. We'll provide more color on our outlook as the year progresses. 2026 is a year of milestones for our company, with our facility in Romania celebrating 10 years of operations; China, 20 years; and it's the 65th anniversary for the enterprise. As we previously announced, we are celebrating this anniversary and embracing our future with a new company name, Kimball Solutions. This rebrand is a strategic move that reflects our evolution beyond traditional electronics manufacturing services with an expanded portfolio of capabilities that includes design and engineering support, supply chain management, precision plastics for medical applications and high-level and final product assemblies for the verticals we serve. It also embodies our customer-centric approach to long-lasting partnerships, providing end-to-end solutions from design and prototyping to new product introduction, to manufacturing and aftermarket support. The rebrand will occur in a phased rollout at locations across the global footprint beginning in July of 2026 and will be completed when the company officially changes its name a year later, pending shareowners' approval. This change, along with the recent investments in Indianapolis, demonstrates our commitment to innovation and the vision to deliver comprehensive solutions worldwide. While the name of the company is changing, our core values of integrity, quality and continuous improvement remain steadfast. These steps are a celebration of our heritage and a move toward the future, building tomorrow together. I've never been more excited about the company, and thank you for your support. Operator, we would now like to open the lines for questions. Operator: [Operator Instructions] Our first question comes from the line of Mike Crawford with B. Riley Securities. Michael Crawford: Jana, starting with Automotive, and I believe it's primarily Nexteer driving your steer-by-wire growth. Is that -- they remain your largest customer. It was a 19% customer in the September quarter. What percent was Nexteer in December? Jana Croom: 20%. Michael Crawford: 20%? Jana Croom: Yes. Michael Crawford: And then are your other customers also expanding that? Or is it more braking that's driving some of the recovery there? Jana Croom: So we are seeing steering and braking with our largest automotive customers now being Nexteer, ZF and] HL Mondo ]. So it's not exclusive to Nexteer, but obviously, globally, Nexteer is our largest customer. Michael Crawford: Okay. Yes. Well, it's great to see that flattening out. And then on the growth side, can you remind us what the capacity is and ramp expectations are for this new facility in Indianapolis? Jana Croom: Yes. So the new facility in Indianapolis is 300,000 square feet under roof. And so considerably larger than our current footprint. We're not yet -- it depends on the makeup of the volume of work we got to be able to tell you exactly what that's going to equate to in terms of revenue dollars, but significant opportunity for growth there. And we needed to demonstrate that for the types of business that we are quoting for that facility. Michael Crawford: And then I mean, I think Philips remains your largest Medical customer to date, but I imagine much of the work that you're doing in Indianapolis would be with some of your emerging growing Medical customers? Or do I have that wrong? Jana Croom: No, you have that correct. And as an example, if you look at the growth in Q2 and the year-to-date growth, it was split fairly evenly amongst North America, Europe and Asia and fairly evenly in the subverticals within Medical, meaning it was not driven by respiratory care. And so Medical for Kimball is growing. And you're right, that CMO space would likely not have Philips content just because that's not the makeup of the business that we perform for them. It would be new customers and expanded opportunities there. Michael Crawford: Okay. And just a final question. Would -- is it more plastic injection molding? Or what are some of the value-added CMO applications that drive your fastest-growing parts of the business? Richard Phillips: Yes, Mike, it's Ric. Great question. Yes. So we expect that facility. And again, as Jana said, we'll be working with customers. We're excited about our funnel and some of the discussions that we're having. But we could imagine, think of single-use surgical instruments, drug delivery devices such as an auto-injector. Certainly, as you said, plastic injection molding, we expect to be very significant, and we'll have significant capacity there. So all of those are expected to be housed at least partially in that CMO facility in Indy. Operator: Our next question comes from the line of Derek Soderberg with Cantor Fitzgerald. Derek Soderberg: So I wanted to start with automotive. So a little bit of softness in China and North America. Just given that you guys won't be comping against quarters in the past with the braking program in North America. Just going forward, how should we think about sort of growth in the Automotive piece for Q3 and Q4, sort of flattish declines year-on-year, sort of down single-digit percentages. What's sort of the right way to think about Automotive for the rest of the year? Jana Croom: Yes. So great question. We will finally anniversary the end of the EV100 program in Q3. And so what we would expect is Q3 Automotive to be flat to potentially up just a little bit because we finally work that through the system. And we've got the 2 new programs in Europe and Europe has been rebounding nicely for us. And so in terms of Automotive and the sluggishness, the worst of it is past us in Q1 and Q2. Derek Soderberg: Got it. That's helpful. And then, Ric, just if you could comment on some of the win rates you're seeing across the business. Any sort of change in the size of the wins? What sort of gets you excited for what you're seeing in the portfolio as we sort of kind of look forward here? Richard Phillips: Yes. We're really excited, Derek, looking forward and appreciate the question. We're seeing pretty consistent win rates. I mean, not that it's not very competitive out there. And there are certainly situations where we have -- program bidding situations where we decide we're not willing to accept a level of margin that's not for us. So it's certainly -- I wouldn't characterize it as anything but very competitive. However, we feel the strengths that we have in those long-term customer relationships, our capabilities, our flexibility and quality and operations record, all of those things that we've talked about in the past continue to serve us very well. In terms of programs going forward, particularly in Medical, but also in Industrial, there's maybe a couple of things that are worth to note. One is that we've always been open to and seeking what we call lift and shift opportunities. So where we're working with a customer who's currently doing their own manufacturing and has a desire to exit that for whatever reason to focus on R&D or marketing or sales or whatever is appropriate for them and have us take that over in our existing facility network. So we're seeing that activity in terms of those conversations increase, and those tend to be large programs because this would be an example of a customer potentially shutting down an entire plant and moving that all into our footprint. So those are larger to the extent that we close those, and we're excited about those discussions. And then the CMO discussions that we're having also, those programs tend to be significantly larger than our typical average medical program just because of the nature of that business, the growth in that business and the scope and scale of what those customers are doing. But great question. Operator: Our next question comes from the line of Anja Soderstrom with Sidoti. [Operator Instructions] Anja Soderstrom: So I'm just curious, first, with this new facility that you're opening, as you ramp up, how should we think about that having an impact on the margin? Richard Phillips: We certainly think over time that the CMO space has an opportunity for margins accretive to what you've seen from us historically. That's going to depend program by program and customer by customer and again, all competitive situations. But we think that, that space and our capabilities lends itself for that to be accretive in the long term. Jana Croom: But Anja, I will tell you, in the near term, it's going to drag, right, because we have all the depreciation expense, all the additional expense associated with the opening of that facility. We're currently running both facilities, right, because we've got to move everything over and then we'll have to close the facility. So for the next 6 to 9 months or 2 to 3 quarters, it's going to be a drag. And the reason that I want to point that out is the operating income margin that we produced in Q2, considering the fact that we had $16 million less sales and the impact of the grand opening of the Indy facility and other investments that we made, I think, is a testament to our commitment as a leadership team to deliver value to the organization and to our shareholders. It was a lot of work and while we feel very confident in the strategy for the future, we're working hard to offset that drag in other areas of the business. Anja Soderstrom: Okay. And then how do you see the cash cycle days play out in the coming quarters? It was quite elevated for the quarter. Jana Croom: Yes. So for the last 2 years, we've really been after cash conversion, cash cycling. We've got a pretty aggressive PDSOH goal. We saw it tick up from 85 days to 90 days, primarily driven by North America and the impact of autos and industrial. We saw inventory tick up a little bit. That remains a key focus of the organization. We worked really, really hard to get working capital solid and inventory reductions and corresponding impact in debt on the balance sheet. You can expect that to continue to be a laser focus of us as a leadership team. So said more plainly, I would expect Q3 to come back down from where it was in Q2. I would like to -- and I know no one asked, but I think it would just be helpful to give a little bit more color specifically on the remainder of the year. So if you take the midpoint of our revenue guide at $1,430 million and you strip out the full year or what we've done so far at $707 million, that leaves you with $723 million roughly to go. What that would insinuate is that Q3 and Q4 are going to be roughly in line with Q1 in terms of revenue growth. And we already talked about autos and the fact that we've anniversaried EV100. From a Medical perspective, I would like to remind everyone that we had the consigned inventory sale in Q3 of FY '25 of $24 million. So when we report Q3, we're going to give you the results. We will tell you what growth was in Medical, including the inventory sales and excluding the inventory sales. So we won't make you do that math, but I just wanted to remind everybody of that. And then it's Industrial, North America, and that's where our focus is going to continue to be in terms of seeing how that's going to shake out. So just as everybody is fine-tuning their models, some additional color, I thought might be helpful for you. Operator: Our next question comes from the line of Max Michaelis with Lake Street Capital Markets. Maxwell Michaelis: Thanks for the color on the model, too. So if we look at Automotive, I was just hoping if you could provide some more color on maybe the opportunity with the EPP, the Electronic Power Pack program, and then kind of some of the opportunities around the OEMs with the second steering design. I mean, can these become similar in size to the old braking program that ended up going away? Or kind of just help me out with where the potential is with these 2 programs? Jana Croom: So we were really excited about the EPP program because it's our first higher-level assembly in Automotive where you're combining the motor and the printed circuit board assembly, and so that's really exciting. In terms of size of the program, the EPP is not as big as the braking program was. It's probably about 2/3 of that size. But from a future strategic focus in Automotive, it's really excited. The other thing that I'll say is as you think about the continuum of opportunity in Automotive, particularly as it relates to ADAS, right? So you've got steering programs now, you've got braking programs now, steer-by-wire, brake-by-wire, that's all really excited. But you also have ADAS where it's, "Hey, there's going to be a central brain functioning in the car that's going to be controlling all of the electronics in there," and that's something that Kimball is also interested in pursuing in the future. We would expect as EPP becomes more common in vehicles, as second steering column becomes more common in vehicles and ADAS, those are strategic areas that we would want to participate in, right? So I remember when autonomous driving lane departure features were only available in very, very high-end cars. Now they're everywhere, right? You're -- a Nissan-centric has got it. So everybody everywhere is offering that feature, and it's exciting in terms of the strategic opportunities for Automotive. Maxwell Michaelis: Awesome. Next one, if we look at the Medical space, you talked about inorganic opportunities last quarter, I don't think you have in the prepared remarks in this call. But we look at some of the things you guys provide with the auto-injectors, sleep therapy, drug delivery. I mean when you're looking at acquisitions, I mean, what are some of the other spaces or let's call them sub verticals that you guys are looking at where you're seeing some great opportunities? Andrew Regrut: Max, it's Andy. We have done a fairly deep dive on end market exposures. And in vitro diagnostics is really interesting to us. Cardiology is really interesting to us. So we would certainly consider opportunities or adjacencies to expand into those areas, especially if it provided a chance to either expand our relationship with an existing customer or add a new customer and the same for manufacturing capabilities. Operator: There are no further questions at this time. A replay of this call will be available beginning later today and will remain available through February 19, 2026. To access the replay, please dial (877) 660-6853 and enter the access ID 13757544. And with that, this concludes today's conference call. Thank you, everyone, for your participation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Beach Energy Limited FY '26 Half Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Brett Woods, Managing Director and Chief Executive Officer. Please go ahead. Brett Woods: Thank you. Good morning, everyone, and welcome to Beach Energy's FY '26 Half Year Results Presentation. Joining me today is Anne-Marie Barbaro our Chief Financial Officer. Together, we'll take you through our half year results and outlook for the remainder of FY '26 before I open up the lines for Q&A. This morning, I'm pleased to report a solid set of underlying results and what has been a very active first half across our core basins with great progress made on delivery of some key milestones. This half, Beach has continued to demonstrate great progress across our base business through our strong operating discipline and outstanding safety and environmental performance. We end the half year in a strengthened financial position and are well placed to pursue growth. Slide 2 sets out the compliance statements, which I'll leave to read at your leisure. Slide 3, we will begin, which highlights the key milestones achieved in the first half. Starting over in the West, first gas was achieved from the Waitsia gas plant in early December with the plant now in production ramp-up. Two gas compressors have now been commissioned, and the plant has reached peak rates of 165 terajoules a day so far. The third compressor is expected to commence commissioning in the coming weeks. And once ramped up, we will deliver the plant's nameplate capacity of 250 terajoules a day. Also on the Waitsia front, we listed 4 cargoes in the half, generating $233 million in revenue. Onshore in the Cooper Basin, the team were hard at work to restore operations from the severe flooding experienced in late FY '25. I'm pleased to report that 97% of flood impacted production has been brought back online at the end of the December quarter. This is a great outcome, which will support our second half performance. We also welcomed the Ventia 101 rig into the Western Flank to commence our 12-well oil appraisal and development program. It's fantastic to have the active group back in the Western Flank, which we'll talk through more in coming slides. Offshore, Phase 1 of the Equinox 3 campaign was delivered, the drilling of the Hercules exploration prospect as well as safe completion of 3 offshore well abandonments across Otway and Bass basins. Moomba CCS peaked over 12 months in operation, having safely stored over 1.5 million tonnes of CO2 since startup. It was pleasing to see Moomba CCS meet the Clean Energy Regulator's strict compliance standards and Beach received over 300,000 ACCUs for FY '25. This puts Beach well on track to achieve its target of 35% equity emissions intensity reduction by 2030. During the half, we also completed the refinancing of our 2025 and 2026 facility maturities and secured a new $300 million in Asian term loan, lifting total available liquidity to $925 million. This positions Beach well to pursue growth and continue our crucial role of supporting national energy security. On the marketing front, Beach delivered more than 15 petajoules of gas into spot and short-term markets, driving a 13% increase in our realized gas prices for the half year compared to the prior corresponding period. Turning now to Slide 4 and our headline financial results. Our financial results for the half were solid in a period of major project delivery and flood recovery. This is the outcome of our team's discipline across operations and focused execution against our strategic objectives. Production of 9.5 million barrels of oil equivalent was largely impacted by the 2025 Cooper Basin flood event. It is also worth calling out the positive performance of a production uplift at Bass Basin, up 29% on the prior corresponding period, providing a meaningful contribution to total production through continued success from our descaling initiatives, a great example of our owners mindset in action. Sales volumes have increased 3% to 12.7 million barrels of oil equivalent, supported by our delivery of 4 LNG cargoes during the period. Successful delivery of gas marketing strategy saw over 15 petajoules gas sold in spot and short-term markets and to a diversified customer base, resulting in that 13% uplift in our realized gas prices to $11.80, which is a 30% -- which is over a 30% increase in realized gas prices over the past 2 years. This resulted in delivery of $1 billion in total revenue for the half year. These factors, combined with ongoing structural cost reductions achieved across our operated assets helped to deliver solid first half earnings with underlying EBITDA of $558 million and free cash flow generation of $225 million. With a focus on prudent capital management and noting our dividend policy is a full year policy, today, the Board has declared an interim dividend of $0.01 per share, with a step-up in capital activity expected in the second half of FY '26. Turning to Slide 5, which demonstrates our strong safety performance achievements for the half year. Notably, we recorded no Tier 1 or 2 process safety events during this period. We've also achieved over 12 months recordable injury-free at all our operated sites, which is an outstanding result and a credit to all our staff in maintaining their dedication to safety through a period of heightened activity, including the commencement of the Equinox campaign over the winter period in offshore Victoria as well as the recent commencement of oil appraisal and development drilling in the Western Flank. To put this safety result into context, Beach activity has significantly increased half-on-half with a 43% increase in man hours and field work complexity. With such a ramp-up to be achieved with no recordable injuries is a fantastic accomplishment, achieved through focused execution, leadership and operating discipline. Our team is dedicated to maintaining this disciplined approach to safe execution across all our operations as we recommence the Equinox campaign in offshore Victoria and deliver the Western Flank drilling campaigns in the second half of FY '26. Turning now to Slide 6, I was pleased to report the Waitsia joint venture achieved the first gas milestone at the Waitsia gas plant during December. Having now completed what is the most significant project in Beach's history and a critical piece of infrastructure for the Western Australian gas [indiscernible] with nameplate capacity of 250 terajoules a day, it equates to approximately 20% of West Australia's domestic gas demand. The Waitsia joint venture experienced some minor operational issues in the early stages of ramp-up. However, with 2 compressors currently in operation, the plant has achieved its peak production rate to date of 165 terajoules a day. As the remaining compressors are identical, we will continue to work with the operator to ensure minimal disruption, as we commission in the third quarter and ramp up towards our nameplate capacity. I also wanted to take a moment to highlight the excellent work delivered through our commercial team with the operator, which saw us deliver another 4 LNG cargoes during the period, resulting in a total of 11 cargoes today and $740 million in revenue ahead of the Waitsia first gas. These cargoes were facilitated through a combination of gas from Xyris plant production, gas time swaps and purchase and listing arrangements with the North West Shelf. West Australian government remains supportive of the Waitsia joint venture achieving its agreed export volumes and the facility now affords a compelling pathway for Perth Basin gas to market, cementing Beach in a strong position. Now turning to Slide 7 and the East Coast gas market. As we know, East Coast gas supply is in steep decline with demand remaining strong over the longer term. It's important to highlight the current demand outlooks provided don't yet contemplate the material increase in demand expected from emerging industries, including data centers and AI. Over the last 5 years, Beach has invested over $2 billion in capital to develop new supply to the East Coast market. And for the first half of FY '26, we supplied more than 18% of East Coast gas demand, delivering 100% of our production to domestic customers. Our gas marketing strategy and recontracting efforts have diversified our East Coast customer base across the industrial sector, retailers, gas-fired power generators and delivered an uplift in realized gas prices of 30%. In late December, the government released its gas market review report centered around a recommendation to develop a reservation policy model. We expect further consultation to commence shortly and culminate in legislative process in the first half of FY '27. Beach is supportive of prospective domestic gas reservation policy. To be successful, however, it must be paired with streamlined approvals and other incentives to drive exploration and development. Domestic-only producers need to be prioritized, incentivized and not constrained in delivering new projects nor should we be impacted by pricing or regulatory constraints as it is the domestic focused companies like Beach, who are delivering the much needed gas to the Australian manufacturers, supporting and in power generation, which in turn bolsters Australian jobs. While there is a lot of focus on supply from the north, there is also significant infrastructure transport capacity constraints, which make the gas less attractive and high cost. Opening up new plays, faster approval times and a fit-for-purpose fiscal setting in the Southern Basin must be a key outcome for the review. Best gas for the market is always going to be that which is produced closest to where it's used. Pleasingly, all relevant governments recognize the need for further exploration and development. Governments must stay focus on supporting upstream investment by domestic focused companies such as Beach to ensure a balanced long-term solution for Australia's energy security. On the East Coast, we continue to invest in our core onshore and offshore assets, targeting new gas -- while 8 new East Coast gas supply. Our operated facilities have been operating at over 99% reliability this half and provide us with the ability to leverage our existing infrastructure to support future market requirements. We have been busy offshore having safely completed Phase 1 of the Equinox campaign with a successful plug and abandonment of 3 legacy wells and the drilling of Hercules exploration prospects. As we announced through quarter 1 results, the Hercules well was moderate to high-risk target and failed to intercept hydrocarbons. We're now awaiting the return of Equinox rig at the end of the third quarter when we kick off Phase 2 of the offshore campaign with a well intervention at Thylacine West, followed by the drill and completion of La Bella 2 development well and undertake the completion of Artisan 1. This will be followed by the final abandonment in the Bass Basin to complete the campaign towards the end of FY '26. Looking forward, we are targeting FID on the Artisan and La Bella connections in the second half of FY '26. Both discoveries currently sit within our contingent resources, subject to final investment decision, gas production will be targeted for FY '29. We're also progressing the assessment of nearshore drilling and exploration opportunities. This will likely be a multi-well campaign drilled from the enterprise pad and in a success case, tied into existing infrastructure. Onshore in the Cooper Basin, we're working closely with operator Santos to complete our active drilling campaign with 4 rigs drilling in the basin, roughly equating to 100 wells per year. Beach's ongoing investment in new supply will be a key contributor to the East Coast market in the medium to long term. Now turning to the Western Flank on Slide 9. In December, we commenced our 12-well appraisal and development program targeting undeveloped reserves in the McKinlay and Birkhead reservoirs with the aim to add new production following the drilling hiatus I imposed over 2 years ago to enable Beach to refresh and deliver new drilling inventory. We've had early success in the Callawonga field with the results of our first 3 development wells. And as of last Friday, Callawonga 26 was brought online just 33 days from rig release, which is a real credit to the focused planning efficiencies achieved by the team. We have facilitated these rapid online times by pre-laying flow lines, utilizing a faster rig and driving end-to-end synergies throughout the process. This significant improvement will see the next 2 wells, Callawonga 24 and 25 be brought online within the next week. A very pleasing 100% success rate from our first 6 wells, which we look forward to continuing through the remainder of our appraisal and development program. The program remains on budget and most importantly, safely executed and continues to support possible future work programs. For our fit-for-purpose onshore rig is operating with 20% less man hours than its comparable rig in FY '24 and a 60% reduction in Beach personnel, a remarkable outcome for our Beach team in conjunction with our contract partners, delivering on our strict operating principles. On completion of development and appraisal campaign, we will continue -- we will commence a 10-well oil exploration program planned for late FY '26 and carrying into FY '27. The campaign forms part of our focus to rebuild 2P and 2C resources across the Western Flank and secondly to refresh with a view to build high-quality inventory for future exploration campaigns. Turning now to Slide 10 for a look at our second half priorities. On the West Coast, production ramp-up for the Waitsia gas plant is our key priority as the operator commissioned third and fourth sales gas compressors in Q3 FY '26 to bring the plant up towards nameplate capacity. Offshore, we look forward to commencing Phase 2 of the Equinox campaign with the Thylacine well intervention, drilling and completion of La Bella 2 development well and the undertaking of the completion at Artisan. In the Cooper Basin, we look forward to successfully drilling the remaining well in the oil development and appraisal campaign and kicking off our 10 oil well exploration campaign in the Western Flank, along with continued exploration appraisal and development drilling in our non-operated Cooper Basin joint venture. On the marketing front, we'll continue to expand commercial marketing with industrial sector and gas power generators. And on that note, I'll hand over to Anne-Marie to discuss our financial performance. Anne-Marie Barbaro: Thank you, Brett. Good morning all, and thank you again for joining us today. Our headline financial metrics are set out on Slide 12. Our first half results reflect solid performance as we made significant progress on flood recovery, delivered first gas at Waitsia and completed the first phase of the Equinox campaign in offshore Victoria during the period. Results for the half were underpinned by 4 Waitsia LNG cargoes, continued progress on structural cost reductions through our operated assets and delivery on our gas marketing strategy, which resulted in an increase in realized gas prices during the period. Earnings were impacted by lower production in the flood-impacted Cooper Basin and a softer Brent price. Our average realized oil price was 12% lower compared to the prior corresponding period at AUD 110 per barrel, whilst average realized gas prices rose 13% to $11.80. Underlying EBITDA of $558 million and underlying NPAT of $219 million were down 5% and 8%, respectively. Statutory earnings were impacted by the expensing of the unsuccessful [indiscernible] exploration well drilled during the half year as well as costs associated with unutilized Northwest Shelf processing capacity. Slide 13 steps out movements in underlying NPAT, which, as mentioned, was 8% below the prior corresponding period. Sales revenue was largely in line at $982 million with lower production and softer Brent prices offset by 2 additional Waitsia LNG cargoes and strengthened gas prices. Higher cost of sales, including third-party purchases, tolling and inventory movements facilitated the 4 Waitsia LNG cargoes listed during the half. Field operating costs were 8% lower than the prior corresponding period, reflecting ongoing cost discipline across our operated assets. Notably, our operated assets delivered a unit operating cost of $10 per barrel of oil equivalent for the half year, reflecting that the operations within our control and over which we apply our strict operating principles continues to strengthen Beach's base business. Higher other income reflects the revaluation of the condensate overlift liability recognized at the time we lifted our one-off cargo at Waitsia in the first half of FY '24. With a higher proportion now expected to be returned in volume in the future, this reduces the cash settlement component in addition to the foreign exchange gains made in the half. Slide 14 shows movements in cash during the year, which resulted in closing cash reserves of $235 million. Operating cash flow of $442 million includes around $1 billion in receipts from customers for the half and also includes $107 million in restoration payments, reflecting the delivery of 3 offshore abandonment wells during the period. Total payments for capital expenditure for the half was $377 million, reflecting Waitsia Stage 2 completion, drilling of the Hercules well in offshore Victoria, ongoing drilling throughout the period of the Cooper Basin joint venture and the commencement of our Western Flank oil development and appraisal campaign. Slide 15 reiterates Beach's strong financial position. We ended the half year with $925 million of available liquidity and have maintained our low leverage position reflected through 12% net gearing reported at the end of the period. As Brett spoke to earlier, we have announced an interim dividend of $0.01 per share, reflecting capital management discipline and to acknowledge the heightened capital activity and spend across offshore Victoria and the Cooper Basin in the second half. As our dividend policy is an annual policy, we will revisit this at the full year. On that note, I'll hand back to Brett. Brett Woods: Thank you, Anne-Marie. Now look at what's coming up in the second half of FY '26. Slide 17 sets out the FY '26 guidance update. For production, we maintain our guidance of between 19.7 million and 22.5 million barrels of oil equivalent. Our first half production performance is on track to deliver in line with our guidance. As mentioned throughout quarterly, 97% of flood impacted production has been restored across the Cooper Basin, with remaining impacted wells to come online over the next quarter. Our Otway acreage continued performing strongly with the Otway gas plant producing at close to 205 terajoules a day nameplate capacity for extended periods during winter. The second half expectations back to traditional nomination levels. For capital expenditure, we maintain our guidance between $675 million to $775 million with no significant changes to the capital program discussed and guided at the full year results. Key activities in the second half include Phase 2 of the Equinox 3 campaign, continuing the Western Flank oil appraisal and development campaign, which will be followed by the 10-well exploration campaign and the commencement of Moomba Central optimization in the Cooper Basin joint venture, which is forecast to deliver significant operating and capital cost efficiency once completed. Regarding sustaining capital expenditure, we maintain our guidance of below our $450 million operating principle, which is a material reduction from recent years. I will now close out the presentation before we turn to Q&A. Our FY '26 half year results demonstrate continued progress and solid performance against our strategic objectives. We have strength in our balance sheet enabled us to invest in growth across our core hubs. We've delivered strong safety, operational and cost discipline across our operating assets. We made significant progress on growth across our core hubs, including the successful commissioning of the Waitsia gas plant, which is now well progressed through ramp-up, successful completion of Phase 1 of the Equinox campaign, ongoing drilling in the Cooper Basin joint venture and commencement of our oil appraisal drilling in the Western Flank. And we've now delivered an uplift in gas pricing through effective commercial strategies during the period. We are carrying this momentum into the second half to execute and deliver on what will be an active period across our core East and West Coast hubs. And on that note, I'll open up the lines for Q&A. Operator: Your first question today comes from Tom Allen from UBS. Tom Allen: So the interim dividend reflects a much lower payout of your pre-growth free cash flow policy, implying that the Board is prioritizing building capacity to fund growth over dividends. So can you please clarify further how investors should interpret your current dividend policy? I think Anne-Marie just called out higher CapEx over the second half with some drilling spend. So are you saying that investors should not expect a strong payout of second half cash flows in the final dividend that would meet your policy over the full year? Brett Woods: I'll let Anne-Marie go with that one, if you like. Anne-Marie Barbaro: Thanks, Tom. So very similar to last year, obviously, our dividend policy is over a full year basis. And whilst we sort of have a good understanding of what activities we've got in the second half, we've been quite prudent for the first half of the payout to ensure that we can true this up at the full year. There has been currently no change to the dividend policy. We are still maintaining that policy. Obviously, that does get revisited on a regular basis. But at this time, the payout sort of reflects more of a sort of balanced approach of prudent capital management for the second half activities levels. Tom Allen: Thank you, Anne-Marie. Beach has previously mentioned that management and the Board are scouring the market for domestic growth opportunities in new long-cycle projects that can help add some length to Beach's remaining reserve life. Can you please clarify how investors should interpret the geographic breadth and the asset classes that Beach are looking for? And is the preference for greenfield developments or projects already generating cash flow? Brett Woods: Yes. Cheers. Thanks, Tom. I'll go to that. I think we don't really have a preference on whether it's greenfield or existing cash flow generating assets. I think that helps us manage our own cash flow. But if my guidance would be if it was a greenfield type opportunity, we would look to be able to manage that within our 25% gearing objectives. And if it had some production element to it, we probably think about maybe expanding that to upwards to, say, 35% gearing as long as the cash flow helps support degearing in a relatively quick basis. I think if you reflect on the Lattice transaction, it was a very similar model to that model. We have built a very strong balance sheet, and we have capacity within the balance sheet. So we are very confident that we can utilize our balance sheet to deliver growth opportunities. And in terms of preference, as indicated before and previously, certainly, our main focus is across the East Coast of Australia. We're not looking anywhere offshore. So whether it be opportunities that are emerging in Queensland, opportunities that are emerging in the southern markets, we're looking at opportunities such as that. But critically, it goes to your point, reserve growth, portfolio longevity are the objectives I'm looking at solving for. And we're going to be very prudent with our capital, very prudent with the opportunities we're looking at and continue to chase opportunities or look at opportunities that we see as TSR accretive for shareholders. Operator: Your next question comes from Adam Martin from E&P. Adam Martin: Just a question on Waitsia. It looks January came in a bit lower than probably what people would have thought a few months back. You sort of touched on that. But how confident are you on the Feb, March uplift that you've got there in the pack Slide 6, that looks encouraging just confidence there. Maybe you can talk through that, please. Brett Woods: Yes. So what's inside the pack on Slide 6 is the operator forecast that goes to the AEMO website on a weekly basis. So what you can see through the -- from bringing the plant online to where we are today, we've got the 2 compressors online. we had that peak rate of 165, and we've had some minor operational issues, and I can be more specific about them. It's mostly been cleanliness. So we've had to do a lot of strainer swap outs and clean the front end of the plant. And that's typical when you're commissioning to get dirt and debris at the front end through the plant. So as the system cleans up, we'll see that production sustain. Over the next short period, our third and fourth compressors will be commissioned. So we're looking forward to seeing the outcomes of that over the next period, and that will drive us to full rate. So we still guide to 3 to 4 months' worth of our ramp-up schedule. And the forecast that you see there is the operator forecast is slightly more aggressive than that to achieve the first gas. And in terms of my sense of it, every day gets better and better through the ongoing cleanup work that we're doing through the plant. We've had a few minor vibration issues, but they have been rectified as well. So we continue to see better and better performance every day through the operator. Adam Martin: Good to see. And then the second question, just on the Otway, I suppose the asset continues to sort of underperform versus the sort of upstream capacity, partly due to the contracts you've got. Where you're at in terms of other opportunities there, whether it's partnering with companies in the basin or further exploration. Can you just talk us through that because that's a real opportunity if you can get it right. Brett Woods: Yes, we've got production capacity headroom at the plant at the moment. And when the market calls for the gas, we can deliver up to the 205 capacity a day. So we're obviously constrained through nominations through the plant on a daily basis, particularly when the weather is mild or the sun is shining. In terms of our opportunities, what I'm particularly excited about is our nearshore campaign that will extend from our enterprise well pad. That looks like a great opportunity to make sure that we've got additional well capacity later this decade as the pad-- plant looks -- as the existing well capacity starts to decline. And then also, we have the finalizing of the Otway offshore Equinox campaign, which will have a completion at Artisan and an intervention at Thylacine West will add some more production as well as the drilling of the La Bella 2 well, which gives us good optionality for connecting those again later this decade. In terms of opportunities outside and abroad, it was fantastic to see ConocoPhillips have a great discovery with their Essington opportunity. And obviously, our plan is well placed in support of that. And similarly, our friends next door Amplitude looks like there a very exciting drilling campaign coming up. So we look forward to hopefully seeing some discoveries there, gives the whole region a bit of optionality about where things can be developed and opportunities to move forward. So there's plenty of opportunities organically as well as inorganically in the region that we'll continue to observe and potentially pursue. Operator: Your next question comes from Henry Meyer from Goldman Sachs. Henry Meyer: Just a follow-up on Waitsia. The accounting treatment for all of the cargoes is getting quite complicated. So hoping you can step through, I guess, first of all, when the volumes that have been overlifted swaps or purchased will be returned and then how revenue costs and cash flow will be recognized for those cargoes, please? Brett Woods: I'll let Anne-Marie start with this one. Anne-Marie Barbaro: Thanks, Henry. I'll try to summarize it for you. So I think previously, we've talked to sort of that rough -- so for the cargoes today, roughly sort of 30% of those have been delivered through Xyris gas production with 70% of those cargoes being delivered through swaps and purchases. So effectively at the moment that the profile is sort of phased relatively evenly over the period till FY '29 in terms of return of those volumes. And I guess what I would note is we have tried to, through the quarterly reports, articulate how much is sort of purchased volumes. So for those that we have paid a third-party purchase, when we return those, we'll actually get sales revenue for that at the domestic gas price in the future. So that's sort of quite a simple high-level overview of how that is being returned. So when we go and produce that gas for return either for the purchases or the swaps, obviously, from a P&L perspective, you'll need to recognize the cost to produce those molecules for that. And obviously, for a portion, there will be no revenue. And then for a portion that we've articulated through the quarterly, there will be a revenue component on that return. Henry Meyer: Sticking on Waitsia, I guess, the Perth Basin has seen various reserve downgrades over the past few years and the geology has been proven to be quite complex. Could you just share how production and pressure depletion has compared against original expectations now that we're producing a bit more? And do you have enough data gathered yet to infer reserve estimates? Or will we need to wait for the full year process to come out in August? Brett Woods: Yes. Unfortunately, it's still too early to comment on depletion across the field. What we're seeing is great capacity across wells. We've only got a few wells operating at the moment because we only need a few wells. So the delivery of those wells has been very strong. So as we bring on the other compressors, we'll bring on additional wells. And then as we trend towards full year results, we'll start to see the pressure response across those wells to understand where we are. We feel pretty confident where we are at the moment. We're not seeing any red flags through that production. So it's all looking good at this point in time. Operator: Your next question comes from Gordon Ramsay from RBC Capital Markets. Gordon Ramsay: My question relates to strategy, Brett, and it's more in line with the treatment of the Hercules exploration well in that you've expensed it and treated it as an abnormal item and the [indiscernible] company, the project scale and infrequent nature of exploration activities in the rationale, that kind of implies to me that you're not looking at the drill bit in terms of adding reserves, resources and reserves to grow the company and you're leaning to M&A. The upsize of the debt facility by $300 million, can you explain if that's been solely done for your war chest for M&A and to grow the company and to buy actual projects and production assets instead of using the drill bit? Brett Woods: I think our offshore Victoria, there's quite a few resources that are available, and we are infrequently drilling exploration wells in that region. There's plenty of discovered resource, and I expect there'll be more discovered resource coming up from the upcoming drilling to give us that optionality. So new discoveries, new additional discoveries for us past the Artisan, La Bella opportunities really only come live for us mid-next decade. So we don't see that we need to invest significantly moving forward across exploration in the offshore, particularly given there has been great opportunities being discovered nearby. So I think we've got good optionality to align with other joint ventures there to deliver long stated value across the Otway. And we're obviously reflecting on the outcomes at Hercules to understand what our organic portfolio looks like as well. What I'm particularly excited with is our nearshore assets. They have a relatively low risk in terms of their Amplitude response, can be connected through the enterprise well pad. So in terms of rates of return, they're very strong projects, which will add additional volumes or additional organic volumes to our portfolio. So they make a lot of sense for me. And I just want to be cautious about investing in offshore expensive exploration given any overhang around the East Coast gas market pressures. So we're making sure that whatever we chase can deliver sufficient margin to make sure that we get strong outcomes for all shareholders. And in terms of our facilities, we had some maturities. We need to just make sure that we recycle that and wanted to have the capital available for our ongoing work. We have our opportunities across the Western Flank. We have opportunities, obviously, in offshore Victoria. And we're looking at how we can deploy that capital best in a disciplined manner. Obviously, I've been honest the whole time I've been at this organization. I do see it's important for Beach to grow. We're certainly working very hard on our organic portfolio and how we grow within that. But ultimately, I think you can all be assured that some component of M&A is required for us to give that longevity in the portfolio. But we'll only do that in a very disciplined approach. And I think the fact that I've been maintaining that [ and ] so far is a demonstration of that. We've only just got Waitsia online, and that was always a key metric for me to make sure that we deliver that to give us that line of sight of long-term cash flows in support of our strategy. So hopefully, I've answered your question there, Gordon. Gordon Ramsay: Just one more for me. Activity is picking up at the Western Flank. You've got your 12-well appraisal development program followed by 10 exploration wells. What's your target in that program? Do you expect to actually grow production? Or are you just hopeful to limit the decline -- pretty aggressive decline rate that we've seen from that area more recently? Brett Woods: I think the appraisal and development will do both should stop the decline and having 100% outcome of our wells drilled there so far is good. We're seeing some positivity in those results. And I'd hope to see some growth as well. So we still got 6 to go and looking forward to getting those connected quickly and seeing the response of those wells. If you look at Slide 9, there is a color, I think it's yellow, which represents some of the exploration targets we're chasing. And what you would observe from that, there are a little bit of step outs from some of the core areas that we've chased in the past. Again, some really good technical work has gone on to unlock what we think is some pretty exciting opportunities there and that's supporting the scale. So that's really about growing reserves and growing our future development portfolio of optionality. So with this -- this phase is really about being liquids focused. We've also done a great piece of work about looking at our gas portfolio and how we can lean into the area around Milton in future campaigns. So I'm really pleased where we've got to technically in understanding the Western Flank from a period a few years ago, where our success rate fell circa that 10%. Now we're looking at an opportunity to unlock some volume. And my objective here in the Western Flank is to build an asset base that is self-sustaining that we can continue to keep maturing inventory as we drill and continue to get that good liquids yield because the Western Flank does deliver a high-yielding piece of business if we operate it effectively. And that's really our objective to get that balance right. And super pleased with what the team has done in terms of doing it with less resources, getting a faster rig. Our operational execution has been fantastic. I'm so proud of what the team is delivering out in the Western Flank. Operator: Your next question comes from Saul Lawrence Kavonic from MST Marquee. Saul Kavonic: First question is just on Waitsia, assuming this is ramping up on target, are there any plans or need to do infill well drilling or another well campaign or some compression over the next 18 months? And is that likely -- if it's true, is that likely to put any pressure on the $450 million sustaining CapEx for FY '27 and FY '28? Brett Woods: Yes. So always -- we'll start with the wells. So we always plan to drill another 3 development wells in the future. So they're planning to come in around '27, '28 time line. So they effectively should deliver the 2P resources that are currently booked in the campaign. So we haven't had to look through infill drilling at this point in time. We are looking at an exploration campaign with -- Bill and the team have done a really good job on highlighting some other opportunities at scale within our existing portfolio that we may look to do again later this decade, probably on the back of that development well campaign. But in addition, you're correct, our inlet compression has always been a part of the plan across the Perth Basin Waitsia assets. So we would look to bring inlet compression online late this decade. So the commencement of the inlet compression project is probably in the order of 12 to 18 months away, which will be ordering a large turbine in support of lowering the production rate -- production pressure through the field. That assumes that these -- the compartments across the field effectively a depletion drive mostly, and that enables us to recover additional resources. So inlet compression was always a plan, and that is certainly -- we're not moving away from that. It's not -- we're not starting that at the moment. That's still some time away from commencement. Saul Kavonic: And is the cost of these things included within your $450 million sustaining annual CapEx guidance? Or would that be something in addition to that? Brett Woods: The wells are included within our sustaining guidance. We're just waiting to get the cost of the inlet compression, and I'll be able to update you with that in the future. Saul Kavonic: And just coming back to Western Flank. When do you think you'll be in a position to actually provide color to market on what that sustaining rate might be? Because I think this is an asset which the market has risked quite severely and there could be some upside here once the market has some confidence on what a sustained rate and capital spend for it might be? Brett Woods: Yes. Super good question. I think what we have -- what we'll have by the full year is effectively the rates and delivery of the development appraisal campaign. But on the exploration campaign, we'll probably be somewhere about 1/4 of the way through the exploration campaign. So the rigs that we've got drilled in the development campaign leases for several months. and then it's coming back to do the exploration campaign. And I think on the back of the exploration campaign, looking at some of those larger scale opportunities that we're chasing along there as well as some of those opportunities [ just along board ] from fields such as Snatcher and Martlet and Growler, we can -- we'll see what this new part of exploration campaign can do. And ultimately, each of those discoveries have a lot of follow-up. And that will give us a real good sense of where we are. So I don't expect to see a reserve write-up of any significance at full year. But following the exploration campaign, I think we'll get a really good sense on what a standard sustaining business looks like in the Western Flank. Western Flank delivers great returns for us in terms of the money spent, really, really high double-digit rates of return across those opportunities. So it's -- for me, it's about operational skill and execution. And the time that we've given the subsurface team to kind of rebuild their inventory has been very important. And now we're going to test it. So testing it will come through this exploration campaign. We've acquired new seismic. We've done a lot of reprocessing. We've done a lot of very good technical work in support of the upcoming campaign. And I think probably over this calendar year, we'll be in a really good position to have a better understanding of what long-term longevity looks like across the oil part of the business. And then in the following year, we'll probably be drilling some exploration wells around the gas infrastructure and see what longevity looks like for our own gas infrastructure through that area. Operator: Your next question comes from Nik Burns from Jarden Australia. Nik Burns: Just look back on Waitsia. Is there any update on Waitsia being allowed to export LNG beyond the current date of end CY '28? And when will we know whether this is locked in? Brett Woods: Yes. So Premier WA has given us its support. So we're still in negotiations with -- across the Northwest Shelf to secure processing at the right cost and that we'll work on that over the upcoming periods. So very confident in terms of the government support for us to continue to do that as being a good domestic player in Western Australia, and we've got a lot of engagement with them on that. And I think it's the final commercial part of the arrangement in terms of supply throughput and what the tolls look like is probably the final part of the equation before we can clearly pick that one off. Nik Burns: Got it. Just stepping back on Perth Basin in terms of reserves at the end of FY '25, your developed undeveloped reserve split on 2P is around 60% of the reserve that was classified as developed. So that 40%, I'd imagine most of that is within Waitsia. You mentioned before about 3 more development wells and inlet compression. Will that investment get all the undeveloped 2P reserves at Waitsia into the developed category? Brett Woods: Yes, that's certainly the intent. The inlet compression is a large piece of that. And then the 3 additional wells into parts that haven't been drilled at the moment should get that -- some of those wells will look at their responses of the current production wells to see if there's parts of compartmentalization or not, whether those wells are needed. But at the moment, it's in the base case assessment for the reserves. Nik Burns: Got it. Do we have any sense about the scale of that compression investment? Brett Woods: Yes. Well, it's in the circa $100 million level. I'm pretty sure that's what I told you last time. That's the number that we're working towards. Nik Burns: Just -- maybe just one more quick one, if I can. Just on Otway Basin, I was a little surprised that JV has yet to sanction the drilling of La Bella and the completion of Artisan, given you get the rig very shortly. Assuming that you do move ahead and drill and complete those wells, can you give us an indication about how much the connection cost for those wells will be? You talked about bringing them online in FY '29. And then just beyond that, further offshore exploration drilling, it sounds like you're less enamored with that now, Brett, and focusing more on nearshore. But I'm conscious you did have a commitment well offshore. I'm just wondering what's happened to that commitment well as well. Brett Woods: Yes. Just -- I'm sorry if I was confusing before. The joint venture is fully committed to drilling the Artisan, La Bella wells, that's all lined up. So we will be drilling La Bella 2 and completing. We'll be completing Artisan, which was already drilled. So that is already in track. What hasn't been sanctioned at this point in time is the final connections. So we're working with the operators adjacent to get the lowest price connection solution that we can. With Hercules not being added to the program, I previously guided some numbers for the connections. And effectively, without the Hercules piece, we're probably talking more about the 300 to 400 level to get the connections done for Artisan, La Bella. We haven't made that final investment decision on whether we will connect, but that should come towards the end of this half year. And in terms of -- subsequent part to your question, my challenge has always been in the offshore is unlocking scale. It's not cheap operating offshore in the Otway, even with all the synergies we've delivered so far. So one of the great things about our position in the nearshore is we can deliver those with an onshore rig with all effectively all available onshore kind of technology, which unlocks a lot of value. So I look at a lot of those opportunities. They're very encouraging. We can manage our balance sheet very easily. There's not any balance sheet stress that we put -- need to put ourselves in under to unlock those. And I look at opportunities that have been discovered in the region as probably offering a better solution or a simpler solution for bringing additional gas over the facility. In terms of the exploration well we had in a different prospect, so we've effectively deferred that and looking for other things to do with that option in the rig. We'll effectively deliver all our rig days through our ongoing current program. So we don't believe there's an obligation to drill that subsequent well. Operator: Your next question comes from Dale Koenders from Barrenjoey. Dale Koenders: A couple of quick ones. Just Waitsia spot cargoes, is that a thing of the past now that you've got an inventory position to unwind and you're getting close to nameplate capacity? Brett Woods: Yes. So I believe so, Dale. We effectively have got ourselves to a point, where we just get the next 2 compressors online and the project will be hopefully hitting peak rate tests in the not-too-distant future. And then we'll be effectively fully commissioned and under -- properly under the arrangements that we have across the joint venture. So there are requirement to do further swaps or anything is massively diminished. And so we'll unwind our small overlift position that we have at the end of the half and deliver our cargoes moving forward. And the quicker I can get those 2 compressors online, the happier I'll be. Dale Koenders: And then on Page 6 of the slide deck, where you're showing the Waitsia gas ramp-up, there's a gap between your nameplate and production. Does that mean we don't quite get to nameplate capacity? Is that an availability assumption? Or can you explain that to me, please? Brett Woods: Yes. So that's just running aligned to guidance. So we've been effectively saying 90% of nameplate capacity is our number. So we've just been again -- so and you will also see there's a shutdown in March. So we're currently working on that. That's probably going to be moved to align with the Northwest shutdown in the April period. So there's a few moving pictures. This is -- the operator's forecast ramp-up profile gets changed every week. It's not a static view. It's just the -- I know that you all look at the AEMO reports, you message me about it a lot. So I thought I'd share that to see where we are versus what the operator had as their ramp-up profile. But no, obviously, my objective is to try and deliver better than that. And certainly, we'll get -- I expect that the shutdown in March will shift into April coincident with the Northwest Shelf shutdown. Dale Koenders: Just for clarity, is that 90% availability, the operator's long-term assumption as well? Brett Woods: No, no. This is just for the first FY. Our gas plants are currently across the Otway and across running -- and New Zealand are running at 99%. So expectation would be we trend towards that high 90s level in the not-too-distant future. It's just being a bit conservative in the first year of production. Operator: Your next question comes from Sarah Kerr from Argonaut. Sarah Kerr: Good morning from Perth, but I have a question about the Otway Basin. Our friends at 3D Energy had quite unexpected cost overruns with the Equinox on their 2-well campaign. Is that of particular concern for you now that you've got the rig? Brett Woods: Not particularly. I think they had reservoir and pressure issues, which we're not expecting to have at our drilling. We've used the Equinox rig for the Hercules well and the 3 abandonments, and we had fantastic performance across that rig. And even though we had to face material weather issues, we've been able to deliver those pieces of work effectively on budget. So I've actually been really pleased with the performance of the Equinox rig and pleased with our technical work to understand what we're drilling into and what that looks like. So I don't -- I expect us to continue to deliver as per our promise. Sarah Kerr: That's good to hear. Just one quick question. Just staying in Victoria, are you talking to any data centers? I think you mentioned that in one of the slides for direct gas sales? Or is it mostly the utilities that you're talking to? Brett Woods: Well, the heavy part of our -- what we've done, we've moved from effectively having nearly 2 customers across the East Coast to have 15. So we've really diversified our gas buyers. And we're starting to see quite a lot of interest from people who are trying to get support for things like data centers. I'm not sure if there's been a lot of government support for that at this present time, but I can see a strong growing demand coming in that area. We're certainly supporting a lot of power producers in terms of their gas requirements, and that seems to be a growing demand center for us, which has been great. very much aligned with our objective is to be out of play and to open up a lot of our gas into being uncontracted, and that's given us a great opportunity to deliver improvements in our realized gas prices. And that I'm super proud of is we've delivered in the last 2 years, a 30% increase in our realized gas prices and it's fundamentally being through the East Coast of Australia. And that's on the back of our gas strategy, where we're not taking long-term commitments. We're kind of supporting the producers as and when they need it, and we've been able to continue to chase value for our molecules. And I think that's super important as a domestic-only producer across the East Coast of Australia. Operator: Your next question comes from Rob Koh from Morgan Stanley. Robert Koh: Congratulations on the results. So first question is in relation to the gas market review, which you've called out some of the points on it and obviously, a little bit to go before legislation. Can you talk about how that interacts with your growth aspiration and investment? Are there things that you want to see out of this review before you make decisions? Or are the opportunities before you kind of enable you to make no regret type calls? Brett Woods: It's a really good question. I'll be transparent with you. I have some concerns about what the outcome could be to the East Coast gas market review. So I'm engaging heavily on -- in support of the domestic producers to get the right outcome for us. We would like to see that domestic producers are protected through particularly the winters in the southern markets that we don't get some of the higher-margin periods in our sector taken away through LNG producers playing the arbitrage between the North Asian and southern markets at higher gas prices. That would be disappointing if that's -- if they effectively open up the opportunity for LNG producers to deliver higher value through the winters in the southern market. We've been sitting there offering gas to the market, representing only 18% in the last half of the domestic supply, which has been critical. So we would expect to see strong support from the government for the domestic-only producers. What I would also like to see is that we get our legislative change through so that we can make the approvals process and all the overhead that we have in trying to get opportunities up moving forward. So for me, the uncertainty about what the East Coast gas market could look like is very much at heart of our strategy, delivering low-cost and high-margin businesses. So in terms of the opportunities I'm trying to chase, I'm trying to deliver those molecules that have full in development and production costs in that $8 to $9 a gigajoule maximum level. If there is downward pressure on pricing that's come through an oversupply from Northern gas, I want to make sure that Beach is in a good position to continue to deliver value for shareholders and TSR accretion by maintaining margin. And that's why I like the onshore part of the Otway because it gives us that ability to manage costs, deliver low cost, but have molecules coming in at the right place. It's always going to be cheaper to have molecules developed close to where the demand centers are. So the Otway onshore certainly offers that. And our offshore portfolio because much of it has already been developed outside of the flow lines, we can deliver that at fairly good rates of return or strong rates of return, I should say. And moving forward in terms of our future development, we're looking at things probably slightly more lean to onshore than offshore that we can guarantee ourselves that we can maintain margin, i.e., deliver that all-in cost at a competitive rate that we can, irrespective of what happens to East Coast gas review, we can deliver rates of return. Robert Koh: My second question relates to the abandonment expenditure and activities there. That kind of feels like that's going according to plan so far this year, and I hope that, that remains the case. Can you maybe comment on any learnings you've had from the process and implications that has for the future non-current provisions? And then maybe if you could -- if there's any big ticket items we should be bearing in mind over, say, FY '27, FY '28, please? Brett Woods: Yes. So we set out to abandon 5 wells offshore. Normally, on an annual basis, we kind of participate in about circa $20 million to $30 million worth of standard abandonment, particularly across our onshore portfolios, and that seems to be a fairly regular and static number. So the offshore abandonments being effectively very episodic. We don't have any more offshore abandonments until next decade after we complete the next 2 wells. So I'm very pleased that we've been able to deliver the 3 wells so far as per our guided numbers in our accounts. And it really depends our position in terms of the cost of which we need to execute these offshore abandonments. So very pleasing. I would have loved to have done some of them outside of the winter. And if there was a magic learning that I could have had would have been that the rig arrived about 6 months earlier than it did. So it could have got all that done without losing some winter days. Outside of that, I think the quality of the rig and the crew was exceptional. I've got to give hats off to Transocean. Also, I think the other part that's worked very well has been the consortium. We've been working very well with groups like Amplitude, Energy, Woodside and ConocoPhillips about sharing helicopters, sharing boats, sharing all the infrastructure, and that's helped us deliver a fairly strong outcome in terms of cost. But for me, offshore execution is expensive. And moving forward, we need to work in this consortium model and get the support to get these approvals quickly. So we don't burn capital on 5 years' worth of approval delays, things like that, just erode value from all parties. Robert Koh: Can I ask specifically for the future offshore activities that you've highlighted maybe next decade in the '30s, which projects are those? Is there -- are you able to help us with that? Brett Woods: No, no, sorry, that -- what I was talking to is Bass abandonment. So the Yolla field is probably online to commence decommissioning early next decade. So that would require a re-coming back around that time line. We'll coincide that with the abandonment for the other major operators in the region to make sure we get the synergies through that. But a great outcome for us was the work we've done on increasing production out of the Yolla field through our interventions there with asset washing. And that's given us an uplift in production and turn that asset to something that's going to strongly that will be delivering for us until the end of this decade. Robert Koh: Yes. I guess, there's not much risk that you'll get a direction to decommission that earlier while it's still going. So that's good. Brett Woods: [ I think we have ] no directions. So really pleased with that. Operator: Your next question comes from Baden Moore from CITIC CLSA. Baden Moore: Just in mind with your Western Flank reinvestment, do you have an idea or a target in terms of your overall mix of oil and gas leverage going forward? Is there a medium-term target you could talk to and how quickly you would like to get there? And just a follow-on question from one of the capital management questions you answered before. Is it right you're still doing a broader capital management review of your business, which includes the dividend policy? Brett Woods: I'll start with the one first. Yes, absolutely. I think working closely with the Board on the dividend policy. We're looking at opportunities to grow the business. And as a consequence, there may be some great opportunities ahead of us. So we're just looking at being very prudent with that. And at this point in time, there was no requirement for us to make a change. So we thought it would be wise to offer a dividend to shareholders at this point in time. But we'll certainly be looking at as we do all the time moving into the full year results to give a more fulsome update on where we are with our capital management. And what -- sorry, what was the other part of the question? Baden Moore: Just in terms of your mix around oil versus gas leverage, just with the East Coast market moving around a little bit, I guess, and you're reinvesting pretty heavily into the Western Flank. Do you have an idea in terms of weighting into oil production in your portfolio and how quickly you'd like to get there? And a small follow-on as well, we've got a review on the safeguard mechanism coming up as well. Do you have any hopes out of the expansion, what you might be looking for? Brett Woods: Yes. I think for us, across the Western Flank, we love to see that liquids yield. That liquids yield helps lower our overall costs across the basin and that protects margins. So the more liquids you can get in the Western Flank, the better. I'd be happy with liquids in other basins as well. But our predominant focus really is gas on the East Coast. and gas on the West Coast. That is -- so we haven't really got an internal solver equation for what proportion of that portfolio is liquids. We recently entered an AMI with Omega and Tri-Star for an opportunity in Queensland called the Taroom Basin. And hopefully, there's a decision of that over the next few weeks. But opportunities like that, that have liquids associated with them can help you lower your cost of your combined product and as a consequence, can deliver you essentially a lower cost gas delivered. So a bit like Henry -- why is Henry Hub so cheap, all the associated liquids in the United States Hub deliver low cost of gas. Australia doesn't have that benefit from many basins, but opportunities such as the Western Flank, the Taroom's and potentially opportunities in Western Australia do have liquids. So we look at those and look at those quite carefully to see which ones can add value. But to answer your question properly, our real focus is gas, gas in the East Coast and gas through our plant in Western Australia across the West Coast. Baden Moore: And any expectations out of the safeguard review? Brett Woods: Well, I would like the safeguard to be considerate of where we are as a country in terms of our manufacturing. I would hope that the government would be a bit -- given where we are in inflation and given where we are as an economy, that we could kind of effectively lead the safeguard mechanism where it is. But I know that's not where the government is trending. So fortunately, we've done more than we need to with our Moomba CCS project to give us plenty of headroom. So at the moment, our priority is investment in traditional oil and gas to deliver gas to the market because gas is one of the best things to decarbonize. So getting recognition for that, I think, will be important. That would be a great outcome for the safeguard review. Operator: Your next question comes from Declan Bonnick from Euroz Hartleys. Declan Bonnick: So you mentioned no current cut to the dividend policy is planned. If you don't execute M&A in the next 6 months, do you see that second half dividend lifting to hit that 40%, 50% payout ratio? Brett Woods: We'll address that at the full year. Certainly, I'm not going to do a deal for deal's sake. So we're going to be very prudent with our capital management. And if opportunities don't eventuate, well, then the Board will obviously look at opportunities to return value to shareholders. I think that's something that I've always said that, that is part of our agenda. We'll only do things that are truly TSR accretive. If not, we'll look at returning capital. That would be certainly top of mind for myself and for the Board. Operator: There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Hanna Jaakkola: Dear all, warmly welcome virtually to Helsinki, and thank you for tuning in for Kesko's Full Year 2025 Release Call. Today's headline is Kesko's results improved. Net sales grew in all divisions, and it outlines 2025 well. In this presentation, we are also presenting 2026 guidance as well as dividend proposal for the Annual General Meeting. Today's agenda is the following: President and CEO, Jorma Rauhala, will give the full year and Q4 presentation. We have here with us our business division Presidents, Ari Akseli for Grocery Trade; Sami Kiiski for Building and Technical Trade; and Johanna Ali for Car Trade as well as CFO, Anu Hamalainen. After Jorma's presentation, we have time for questions, both by phone and via chat function. All the materials related to full year and Q4 can be found at our website, kesko.fi under Investors. My name is Hanna Jaakkola, I'm responsible for IR at Kesko. I will be at your service after the presentation for your questions and discussions. But now Jorma, the stage is yours, please. Jorma Rauhala: Thank you, Hanna. Ladies and gentlemen, welcome also on my behalf to this release call. I'm Jorma Rauhala, and I have now the pleasure to present Kesko's full year and Q4 results. Yes, Kesko's result improved, net sales grew in all divisions, is our headline, and it describes our 2025 well. Towards the end of the year, we saw a turnaround in performance as the third quarter result improved and growth continued in the fourth quarter. Now I will give an overview of our business performance and open up elements behind the result. I'll also present the guidance and outlook for 2026 and the dividend proposal to the Annual General Meeting. Kesko's comparable operating profit improved and net sales grew in all divisions. This is a great achievement, especially taking into account last year's market situation and low consumer confidence. In Grocery Trade, we saw an upturn in market share. Profitability was strong despite investments in price, quality and network. In Building and Technical Trade, comparable operating profit grew despite a challenging market. In Denmark, we achieved strong market position through acquisitions. In Car Trade, market position grew stronger and comparable operating profit increased significantly. Kesko estimates that its 2026 comparable operating profit will amount to EUR 650 million to EUR 750 million. In 2026, operating environment and profit are estimated to improve in all divisions and all operating countries. We execute our growth strategy and strong growth investments will continue. Dividend proposal to the Annual General Meeting is in line with dividend policy, EUR 0.90 per share, payout ratio 84%. Net sales for 2025 totaled over EUR 12.5 billion, and it increased by 2.3% in comparable terms. Net sales increased in all divisions in both comparable terms and in reported figures. Comparable operating profit for last year was EUR 654.9 million. It increased by EUR 4.8 million. Operating margin was 5.3%. Operating profit increased in Building and Technical Trade and Car Trade and decreased in Grocery Trade. Operating margin for Grocery Trade was 6.5%, which is clearly above 6%. For Car Trade, it was 6.1%. For Building and Technical Trade, operating margin was 3.8%, which is a good result in low cycle. Return on capital employed was 10.4%. Return on capital employed increased in Car Trade, was down in Building and Technical Trade and in Grocery Trade compared to 2024. Financial position. The amount of net debt was impacted by investments in store sites and acquisitions. Cash flow from operating activities was EUR 880 million, and it was affected by the change in the Food Market Act in 1st of July, which shortened the payment terms. The estimated negative impact of the payment term change to cash flow was approximately EUR 100 million. Capital expenditure totaled EUR 735.7 million. I'll open up the investments on the next page. Interest-bearing net debt increased year-on-year as a result of investments in acquisition and store site network. Net debt to EBITDA was 1.6, which is clearly below our financial target of 2.5. Capital expenditure totaled EUR 735.7 million. We continued the investments in growth and the main CapEx in 2025 were 3 acquisitions in Denmark, store site investments in Grocery Trade and the construction of Onnela, Onninen and K-Auto logistics center in Hyvinkaa, Finland. Expenses. Expenses have increased mainly due to acquisitions. It is good to bear in mind that we gained some 760 new employees in Denmark last year through acquisitions. Expenses, excluding the acquisition, were up by only 1.6%. This is a good achievement, taking into consideration the salary increases in all our operating countries in 2025. Also, cost ratio improved slightly. And now to Q4 results. We saw good net sales development in all divisions. The performance in all divisions was in line with the expectation we had at the beginning of the quarter. Net sales in Q4 totaled over EUR 3.2 billion. It was up by 3.1% in comparable terms. The net sales grew in Grocery Trade by 3%, in Building and Technical Trade by 2.9% and Car Trade by 4.4%. Net sales grew by 2.9% on a comparable terms in Finland and by 3.9% in the other operating countries. In Q4, comparable operating profit was at EUR 174.8 (sic) [174.6] million and operating margin was 5.4%. Comparable operating profit increased in Car Trade and Building and Technical Trade and decreased in Grocery Trade. And now to Grocery Trade in Q4: upturn in market share, profit at a good level. In Q4, like I said earlier, division's net sales increased and comparable operating profit was slightly down. The total grocery market in Finland grew by 2.7%. K Group grocery sales were up by 4.2%. K Group grocery store chains gained market share clearly in Q4, but also in H2 2025. In Q4, all our grocery chains won over market share in their segments. In '25, K-Citymarket won market share in the hypermarket segment. Customer flows continue to grow, thanks to the price program and campaigns. Customer satisfaction was clearly up for all our grocery chains. Kespro's net sales, up by 0.4%. And again, Kespro gained market share as it did for the whole '25. K-Citymarket nonfood sales were down by 0.4%. Online grocery sales were up by 6.6%. General grocery price inflation in Finland was approximately 1.8%, but the price development in K Group stores was only 1.1%, especially thanks to our price program. Demand for quality products and services increased in our grocery stores, which may indicate a positive change in consumer behavior. I'm very pleased that we saw the turn in market share development last year. The change can be clearly seen in the graph on this page. Also in January, good sales development continued. Our strategy is focusing on quality, price, and network is working. When it comes to quality, we have done significant efforts to raise quality level together with key retailers. Store-specific business ideas are at the core. Special focus is on fruits and vegetables, bread and nonfood. Our digital reach has risen to a new level. We reached digitally nearly 2 million customers, and the number has increased by over 20% in 2025. This is very crucial to us as media and data business has grown significantly and offers us earnings streams. Our price program launched in January last year. It's a long-term program, and we will continue executing it. This is also a joint effort with retailers. Also, active campaign is continuous as well as personalized offers, and we can see increased customer flows. Our net investments will continue. In 2025, we opened or renewed 60 stores, including 2 new K-Citymarket stores. Network net impact on our market share was still clearly negative in 2025 despite new store openings. In 2026, the network impact is expected to be neutral. The network will start supporting market share development gradually in upcoming years. Annual investments in the store network will be around EUR 200 million to EUR 250 million going forward. Building and Technical Trade in Q4: cycle is gradually recovering, sales and profit grew stronger. In Building and Technical Trade, net sales increased and profit improved in Q4. Market demand continued to be weak, especially in new housing construction. It is good to note that the market has been very difficult and many of our competitors are struggling. In that light, our 3.8% EBIT margin is strong. Net sales grew and profit improved clearly in both technical trade and building and home improvement trade. In Q4, we could see signs of sales margin returning to normal level throughout the division. In Finland, K-Rauta's result was strong compared to the markets. In Onninen, Finland, the Q3 growth trend in sales continued and profit close to comparison period level. In Norway, sales for Byggmakker and Onninen were close to comparison period level and profit improved for both. In Denmark, the sales development for Davidsen was good. Integration of acquired companies were completed technically and then work to increase sales and improve profitability continues. In Sweden, K-Bygg store conversions were completed. Credit risk is well under control. Write-downs of overdue trade receivables totaled EUR 0.1 million. Share of result from Kesko Senukai was EUR 12.1 million. In '25, share of result from Kesko was EUR 19.5 million, EUR 1.4 million below the 2024 figure. For Building and Technical Trade, profit improvements in 2025 came from countries outside Finland. This is important since nearly 60% of Building and Technical Trade division sales come outside Finland. In Finland, both K-Rauta and Onninen are strong market leaders. In Sweden, the operations made losses, closure of B2C-focused K-Rauta chain and the conversion of 8 stores to K-Bygg did impact profits negatively. In Norway, in 2025, there was a significant profit improvement for both Byggmakker and Onninen. Onninen's market share increased in Norway. In Denmark, Davidsen has now a strong market position. Integration-related costs impacted results. In 2025, the PPA costs related to the acquisitions were EUR 5.7 million in Denmark. In Poland and the Baltic countries, Onninen has a good market position and stable profitability. In this picture, we can see K-Rauta's and Onninen's sales development in Finland since 2019, quarter-by-quarter. Both have strong market shares. K-Rauta is the market leader in building and home improvement business in Finland, and Onninen in technical trade. This picture describes the whole market pretty well. K-Rauta's sales development turned black to black figures in Q4. Onninen sales continued to grow in Q4. And then to the Car Trade in Q4: strong performance continued in a challenging market. Net sales and comparable operating profit increased even though the market remained challenging. Market demand for new cars was still muted. Q4, first registration of passenger cars and vans were down by 2%. First registration of brands represented by Kesko increased by 3.5% in Q4. Our good development is a result of the extensive product and service portfolio and constant improvement of operational excellence. Market trend in sales of used cars from dealerships were up by 1.8%, and our used car sales were up by 13.3%. Also, service sales increased. We are targeting to grow, especially in damage repairs and the servicing of cars 5 years or older. In sports trade, net sales and comparable operating profit decreased, but market share grew. And then to profit guidance and outlook. Profit guidance for 2026. Kesko Group's profit guidance is given for the year 2026 in comparison with the year 2025. Kesko's operating environment is estimated to improve in 2026 but still remain somewhat challenging. Kesko's comparable operating profit is estimated to improve in 2026. Kesko estimates that its 2026 comparable operating profit will amount to EUR 650 million to EUR 750 million. Key uncertainties impacting Kesko's outlook are developments in consumer confidence and investment appetites as well as geopolitical crises and tensions. Outlook for 2026. The operating environment for Kesko is estimated to improve in 2026 in all divisions and all operating countries. Kesko's comparable operating profit is also estimated to improve in 2026 in all divisions and all operating countries. In Grocery Trade, B2C trade is estimated to pick up and the foodservice business to remain stable. In 2026, the comparable operating margin for the Grocery Trade division is estimated to stay clearly above 6% despite the investments in price and the store site network. The comparable operating profit for the Grocery Trade division is estimated to improve in 2026 compared to 2025. In Building and Technical Trade, the cycle is expected to improve moderately in 2026 from an exceptionally low level. The comparable operating result for the Building and Technical Trade division is estimated to improve in 2026 compared to 2025 in all Kesko operating countries. In the car trade market, new car sales are expected to remain muted compared to long-term levels, but to nonetheless grow compared to 2025. The net sales and comparable operating profit for Kesko's Car Trade division are estimated to improve in 2026 compared to 2025. Finally, the dividend proposal for AGM. Board of Directors is proposing a dividend of EUR 0.90 per share to the Annual General Meeting. It is proposed to be paid again in 4 installments. This proposed dividend represents 84% of the comparable EPS. Strong investments in growth will continue. Proposal is in line with our dividend policy to pay 60% to 100% of comparable earnings per share as dividend. Some words to summarize my presentation and Kesko's year 2025. Nearly all businesses gained market share in 2025. In Grocery Trade, market share turned around in H2. Customer visits have increased and customer satisfaction has improved clearly. Strategy execution continues: quality, price and the store site network. In Building and Technical Trade, sales increased clearly. Onella Logistics Center is now in use. Construction cycle is strengthening moderately. In Car Trade, sales development in new and used cars as well as services were good. Also, sports trade outperformed the market. All divisions are well positioned for further market strengthening. Thank you for your attention. This was my presentation. I guess it's time for questions now. Hanna Jaakkola: Thank you, Jorma, for your presentation. And now it's time for questions. So we will take first the questions from the conference call line and then from the -- via chat function. And please note that if you are posing questions through the chat function, there is a slight delay. So be sure to post your questions so that we have time to take the questions. Operator: [Operator Instructions] The next question comes from Maria Wikstrom from SEB. Maria Wikstrom: This is Maria Wikstrom from SEB. I had 3 questions. I'll take them one by one. And I'll start with the guidance and the assumptions behind your guidance as you guide for adjusted EBIT in the range of EUR 650 million to EUR 750 million, and the low end of the guidance range is slightly below 2025 EBIT. So what would need to happen for you actually to hit the low end of the guidance range, so the results would not grow in '26 compared to '25? Jorma Rauhala: Thank you, Maria. Good question. And I think that, of course, the main topic or issue is the consumer confidence. We believe that the market situation will improve in all countries, all divisions, but very moderately. And of course, if that would happen, let's say, that the market wouldn't improve at all, that would be the case. But like I said, we believe -- and of course, we believe that the market will improve this year, and that's -- we have this EUR 100 million range, EUR 650 million to EUR 750 million. And the biggest question is consumer confidence. Maria Wikstrom: And then my outlook -- my next question is on the outlook of the Building and Technical Trade, and if you can be more specific market by market. So which of the markets you see the biggest recovery happening in 2026? And if you could a little bit discuss the outlook on the different geographies in Building and Technical Trade. Jorma Rauhala: Yes. Maybe I can start with a few words, but Sami, you can continue then. But of course, all in all, market outlook is quite similar in all countries. But of course, we have also some differences, like in Norway, interest rate is still high. And if you look at Sweden, the market is quite okay, but we have our own issues, let's say, so with K-Rauta, but now it's kind of implemented this change. But please, Sami, continue. Sami Kiiski: So thank you, Maria. Like Jorma said, I think biggest worry overall is, of course, consumer confidence and that we see in all our operating countries that, that is weak. But to answer your question, where we see the positive signs, of course, Denmark, we still believe will be the strong. Of course, consumer confidence there also is low. Sweden, we believe that it's going to be better also for Sweden, I mean overall market for 2026. And of course, still, if we look at the forecast, what we have, for example, from Forecon, still we see that Finland should be also getting better gradually, of course. And of course, I think overall, all the markets are going for better now, but of course, this new construction and particularly new residential construction is something that we need to follow carefully, and then we will see whether the bigger improvement will come or not. But overall, I would say that we are well positioned when the growth starts. And of course, this Q4 was already positive for us. So I'm very happy about our performance in Q4 overall. And of course, we saw already that the market is getting gradually better, but I think we were also in many markets doing better than the competition. Maria Wikstrom: May I just have a follow-up here, given that the December sales figure for Building and Technical Trade in Finland was surprisingly strong, up 7%. So is there something like extraordinary, so thinking that, I mean people bought more before the new price list or something like that? Or is this really like showing the early signs of a recovery in the Finnish B&T? Sami Kiiski: Maybe a little bit too early to say the big picture, but of course, it's getting better. And like I said, we show that we are doing much better than the market, both in technical trade, but also with K-Rauta here in Finland. And also, I think this is now particularly important that you have good availability and that we have been also building up all the time or keeping that in the good level. So yes, I think nothing so special there. Our performance was good and also market getting gradually better also. Jorma Rauhala: And of course, we can say that there is a consolidation happening in Finnish technical trade business. And I think that we managed to gain market share quite nicely, latter part of the year, especially quarter 4 and maybe December. Of course, December, you have Christmas time and not so many selling days, but it was a strong one. Sami Kiiski: That's true. We gained market share with Onninen through Q3, Q4. But I would say it's also the market condition and also the -- our sales push, I would say, then availability and then, of course, this consolidation. Maria Wikstrom: And then my final question is on capital allocation. So if you could talk about the investment needs for '26 and then your view on M&A, if we should expect more M&A during this year? Jorma Rauhala: Yes. So all in all, our CapEx, something around EUR 400 million this year. And like I said, it's clear that we will implement this grocery store site network strategy, and it means EUR 200 million, EUR 250 million also this year. And of course, our strategy is that we are seeking growth in Building and Technical Trade, especially through acquisitions, but not any comments on that one. But of course, we are working daily also with that topic. Operator: The next question comes from Miika Ihamaki from DNB Carnegie. Miika Ihamaki: It's Miika here. Can you elaborate a little bit more on the drivers behind profitability decline in Grocery Trade. So we know that some of your competitors began aggressively cutting also prices again late last year. So my first question is that would you consider this is typical behavior in the market? Or does it reflect intensified competition potentially in response to the fact that you started gaining market share? And in this context, do you see that you needed to respond more aggressively on pricing? And then finally, what is your assumption of the impact of price investments on Grocery Trade profitability into 2026? Jorma Rauhala: Thank you. And all in all, I have to say that I'm very, very pleased what comes to our grocery division. We have to remember that what was our issue has been, let's say, some years now is that we have lost market share. In 2024 spring, we decided that we have to stop lose market share and start to gain market share. And now we have done that. At the same time, we say that the EBIT level should be clearly above 6%. And of course, we have done that also. But Ari, you can continue with how competitors have reacted. And of course, they have. Ari Akseli: Yes. Thank you, Miika. Excellent question. And of course, there is very hard competition all the time in the retail market, especially in the grocery side. But based on the current development of our market share, we have prices good enough now in the market, and we are gaining market share. So we're, all the time, checking around what is the price level and do the necessary actions. But at the same time, we are able to keep the profitability level clearly above 6%. Jorma Rauhala: And about -- he asked also this year how we will continue, but we will continue our strategy and to have the store site network, quality and pricing. And it's so good that we kind of share this topic with our retailers that we really understand that we have to continue with this path because we saw now the results. But Ari, do you have anything to add about this year or pricing program? Ari Akseli: Yes. We just can say that we will continue at the same level. But we also put more actions to the target offers for the customers, especially not just the basket prices, but we will add on target prices. And good part for that is that also the supplier side will support that. And the store owners are very happy with the current strategy. So we will continue this. And this will be the first year when we have like a neutral effect of the store network. Last year, we had very negative effect and still we were able to gain market share. And January has continued strong about sales side. Jorma Rauhala: And last year -- a year ago, we stated that we will invest together with retailers maximum EUR 50 million when it comes to our price program. Now we have announced -- we haven't announced any certain amount on that one. But definitely, we can continue our price program, and we are also ready to react if needed. Miika Ihamaki: Thank you. Just on the assumption that you continue the campaigns or targeted marketing investments, price investments, now we saw that the profitability declined, you still had a strong growth in grocery. But can you still elaborate on the key assumptions underpinning that the Grocery Trade profit will actually grow this year? Jorma Rauhala: Let's see. Of course, we are -- we believe that the whole market will grow and also our business will grow and our target is to gain market share. And when it comes to EBIT level, it's still very valid that clearly above 6% is our target and the 6.5% last year was that, very nicely. Unknown Executive: Maybe to add that, last year, also due to the low consumer confidence we had, Kespro's EBIT did decline. So if the consumer confidence picks up, there is a possibility that, that will support the margins in Grocery Trade as well. Ari Akseli: Yes. Another part of that nonfoods business in the Citymarkets, because there was not winter in December, it has very strong [ EBIT ] for the profitability of the clothing side and sports goods. So that's one of the reasons behind the results in Q4, especially in December. Hanna Jaakkola: Thank you. No further questions from the conference call line. Neither I don't have any questions from the chat function. So short and sweet. Thank you, everybody, for the good discussions, especially Miika and Maria. And I wish you all very good, and unfortunately very cold, February day. Thank you. Jorma Rauhala: Thank you.
Tae Hee Kim: Good afternoon. I am Tae-hee Kim, IRO of SK Telecom. Let us begin the earnings conference call for fiscal year 2025. Today, we will first deliver a presentation on the financial and business highlights, followed by a Q&A session. Please note that all forward-looking statements are subject to change depending on various factors, such as market and management situations. Let me now present our CFO. Jong-Seok Park: Good afternoon. This is Jong-seok Park, CFO of SK Telecom. It is my first time to greet to investors and shareholders as CFO. I wish you a happy new year, and I also wish all of you good health and happiness in the new year. In 2025, SK Telecom put priority on expanding operational improvements across the company and monetizing AI business and made strenuous efforts to strengthen fundamental business competitiveness and secure a foundation for new growth drivers. However, the cybersecurity incident and its subsequent developments also led us to a period of careful reflection, realizing that understanding and innovating on customer value, which is the essence of our business, is a prerequisite for a sustainable future. We will do our utmost to build SK Telecom with strong fundamentals grounded in the trust of our customers. Let me now report on the financial results for fiscal year 2025. Consolidated revenue posted KRW 17.099.2 trillion, down 4.7% year-on-year due to sales of subsidiaries, net decline in subscribers following the cybersecurity incident and implementation of the Accountability and Commitment Program, including tariff discounts. Operating income reported KRW 1.073.2 trillion, down 41.1% year-over-year, on the back of the decline in revenue, costs related to the cybersecurity incident, including USIM replacements, and costs incurred during business restructuring at the end of 2025. Net income came in at KRW 375.1 billion, down 73% year-over-year, mainly due to penalty payments arising from the cybersecurity incident. Let me report on shareholder return. The financial impact of the cybersecurity incident persisted into the fourth quarter and substantial costs were incurred in the process of business portfolio restructuring. As a result, the company decided not to pay out quarterly dividend for the fourth quarter. Accordingly, the Board of Directors resolved to set the DPS for fiscal year 2025 at KRW 1,660 including the quarterly dividends already paid, which will be finalized after being approved at the Annual General Shareholders Meeting in March. We will strive to restore our financial performance to return to previous dividend payout levels. Next, let me report on the current status and future directions of our telecom business and AI business. In 2025, our MNO business focused on addressing changes to the business environment caused by the cybersecurity incident. In 2026, with our priority on customer value innovation, we will strive to adhere to fundamental principles and standards in all areas, including quality, safety and security and to fully regain our customers' trust. We aim to improve our products and channels and achieve operational optimization centered on customer lifetime value to regain fundamental business competitiveness and become the #1 service provider from the customer's perspective. Through this, we will also ensure that our financial performance recovers to previous levels. For AI business, we focused on solidifying a foundation for new growth in 2025. Starting this year, we plan to concentrate on areas where we excel to achieve tangible results. In 2025, AIDC revenue continued a 2-digit growth trend, thanks to the increase in utilization rates of Gasan and Yangju data centers and the acquisition of Pangyo data center. Also, construction of Ulsan AIDC has been underway since September last year. This year, we aim to accelerate growth by actively developing business expansion opportunities through business scale up with an additional data center in the Seoul metropolitan region. We plan to create new possibilities through in-house development and external partnerships for the AIDC solution business, which was launched to create synergies with AIDC business. Also, we will scale up the undersea cable business initiated in 2025. Furthermore, we aim to enhance efficiency and productivity of AI agent business and B2B AI business to produce meaningful outcomes. We plan to secure preferential opportunities to participate in various projects through our own AI Foundation Model Project, which is in its second phase. SK Telecom is determined to improve MNO's business fundamentals by strengthening core competitiveness in all business areas centered on customer value and to restore profitability by producing AI business results driven by AI data centers. We ask for the continued support and interest of our investors and analysts as we work to turn this crisis into an opportunity to restore our customers' trust. Thank you. Tae Hee Kim: Now we would like to begin the Q&A session. Operator: [Operator Instructions] The first question will be provided by Jae-min Ahn from NH Investment & Securities. Jae-min Ahn: I'm Ahn Jae-min from NH Investment & Securities. I can see that we now have new CFO, COO as well as IRO. So there are new members to the management. And I believe that the market has high expectations upon this change. And so congratulations to all of you, and I hope that there will be good results coming from this management this year. I'd like to ask you two questions. The first question is that we would like to get some color on our dividend policy for 2026. Last year, due to some sluggish business performance, the size of the dividend payout to shareholders was reduced. So what can we expect in terms of dividend payout for 2026 as well as the possibility of earnings normalization? And my second question has to do with the overall strategic directions and priorities for the new management this coming year. Jong-Seok Park: Thank you for your questions. First, I'd like to answer your question on this year's earnings outlook as well as dividend payout direction. First of all, to comment on 2025 earnings performance, I understand that many people would like to know whether we can return to the pre-cybersecurity incident earnings levels. Due to sales of certain noncore subsidiaries and decline in MNO subscribers, revenue did not recover to the 2024 levels. However, in terms of operating income, we aim to return to the 2024 level as much as possible by improving profitability of the telecom business and improving self-sustainability of the AI business. We will utilize AI across the telecom business, including marketing and network, to boost productivity and improve profitability. Also, we plan to focus on striking a balance between cost and benefit when it comes to subscriber acquisition. For AI business, we plan to continue to focus on areas where we can make meaningful earnings contribution. In particular, we will pursue meaningful expansion of data center business to create new revenue streams and improve profitability through economies of scale. Now let me comment on the dividend payout outlook in connection to earnings expectation. First of all, we sincerely apologize to our shareholders for not being able to pay the yearly and year-end dividend in the fourth quarter following the third quarter. The cybersecurity incident has had direct financial impact and one-off costs were incurred in the process of restructuring our business portfolio and organization in 2025. Please understand that we had to reduce the size of the annual dividend payout for these reasons. Our number one priority in 2026 is to restore earnings through the measures that I mentioned earlier, and we will do our best to return the previous dividend payout levels. We will also consider other measures to increase shareholder value such as tax-free dividend to restore the trust of our shareholders and investors and to ensure that SK Telecom is a company that people want to invest in. More details will be discussed at the Board in consideration of business performance, financial positions and funds for growth investments to achieve a balance in overall capital allocation. Now I'd like to comment on the key strategic priorities for the new management. So our priority for this year is to strengthen practical and substantial competitiveness in both telecom and AI business. And for this, we plan to pursue three main strategic directions: first of all, restore market leadership through customer value innovation. We will place priority on customer value, which is the essence of our business, based on which we are currently redesigning all elements of our telecom business including products, memberships and channels to offer real value that customers want. We will share more details in the future. Second, we will innovate business productivity through A.X acceleration. We will apply AI in all areas including marketing, network and customer touch points to improve customer experience and boost productivity. We will advance AI-based lifetime value modeling to provide personalized offerings and to use AI to automate network operations including design, construction and operation. Third, we will enhance sustainability of our AI business by focusing on our core strengths. We will pivot according to changing business environment to focus on areas where we excel and improve profitability through cost structure improvement. AI data centers are already a strong growth driver for SK Telecom. We will quickly build the Ulsan AIDC and plan to add another data center in the Seoul region to scale up the AIDC business and create new business models to offer diverse solutions related to AIDCs. So to sum up, we will focus on strengthening core business competitiveness in all business areas centered on customer value and demonstrate how SK Telecom will make another leap forward. Operator: The following question will be presented by Tae-hyun Kim from IBK Investment & Securities. Tae Hyun Kim: I am Kim Tae-hyun from IBK Investment & Securities. I would like to ask two questions. First of all, there's a lot of interest in the market about the value of the equity stake that you have in Anthropic. And I would also like to understand whether you're planning to liquidate your equity stake going forward. The second question has to do with your proprietary foundational model project. What is the strength that SK Telecom has in this regard? And what are some of the potential business opportunities we can expect going forward? Jong-Seok Park: Thank you for your questions. I'd like to answer the first question on our equity stake in Anthropic. And then the Head of AI Strategy Planning will address your second question on our own foundation model project. First, let me comment on the current status and future plans regarding our equity stake in Anthropic. First of all, please understand that we cannot disclose accurate details on shareholding ratio and value at the time of change due to confidentiality clauses in the contract. However, our invested assets are regularly revalued and reflected in the business report. So the 2025 business report to be disclosed very soon will have updates on our equity stake. We understand that the market is quite interested in a possible equity disposal or equity valuation, but please understand that no decisions have been made in this regard, and there's nothing that we can share at this point in time about the possibility of using it as part of funds for dividend. Now I'd like to hand over to the Head of AI Strategy Planning to comment on the second question. Dong-hee Choi: I'm Choi Dong-hee, Head of AI Strategy Planning. Let me answer your question on our competitiveness in the foundation model and business opportunities. The A.X K1 that SK Telecom is developing together with the consortium members is Korea's first hyperscale AI model with more than 500 billion parameters. This model is recognized as possessing differentiated competitiveness as it can provide high-quality responses in consideration of cultural context because it is developed using the largest Korean data set. We expect that A.X K1 will create a lot of business opportunities for both B2C and B2B business. For B2C, we plan to add the model to A., which has more than 10 million users, to ensure that a large number of customers can access the model. We also plan to add references through Liner, a member of the consortium. For B2B, we plan to add this model to A. Biz for work productivity enhancement and provide a model to our manufacturing affiliates, such as SK hynix and SK Innovation, to strengthen their competitiveness. Within the consortium, we plan to expand the use of the model to vertical services such as KRAFTON. We will continue to develop this hyperscale model in a cost-effective manner with government support. If we are selected as 1 of the top 2 at the end of 2026, we expect that we can secure preferential opportunities to participate in various projects, such as national B2C projects to maximize benefits of AI, AX projects to enhance industrial competitiveness and productivity and projects to upgrade systems and services in the public sector. Operator: The following question will be presented by Hoi-jae Kim from Daishin Securities. H.J. Kim: I'm Kim Hoi-jae from Daishin Securities. I'd like to ask you two questions regarding your MNO business. Due to the waivering of cancellation fee recently by your competitor, I can see that there was some impact on your business results. For instance, LG U+ has demonstrated that they have seen an increase in their MNO subscriber base as well as MNO revenue in 2025, thanks to this development. So I'd like to understand to what extent you benefited from this trend for SK Telecom as well. And I'd also like to understand your subscriber target for 2026 as well as MNO revenue outlook. My second question is that you have now new members in the MNO management as well as the company management. So what will be the key areas that you will focus on in your MNO business in 2026? Jong-Seok Park: Thank you for your questions. Regarding your two questions on the MNO business, I'd like to turn over to our Head of MNO Support. Byeong Chan Bai: I am Bai Byeong-chan, Head of MNO Support. Let me address your questions on the impact of KT's cancellation fee waivers as well as our win-back target for 2026. With the cancellation fee waivers by our competitor, the carrier switching market expanded temporarily in the beginning of the year. However, since then, we are seeing an overall market stabilization trend. A large share of customers who joined SK Telecom during that period were voluntary win-back customers who returned after having switched to another carrier last year following the cybersecurity incident. We believe that the customer appreciation package that includes substantial benefits such as subscription tenure, restoration and membership benefits as well as diverse measures to strengthen our security has been effective in restoring the trust of our customers. Going forward, we will not rely on disruptive marketing competition for short-term gains, but rather focus on strengthening core business competitiveness through customer value innovation to continue to expand our customer base. So to this end, we are currently working on restructuring our product offerings and market operations. And as soon as they are ready and become available, we will share more concrete directions and results with the market and our subscribers. Now let me comment on our MNO revenue outlook for 2026 and strategies to recover our subscriber base. We have started the new year under rather challenging circumstances due to the year-over-year decline in handset subscribers. And throughout 2026, we will strive to minimize revenue impact by winning back subscribers and implement various measures to create growth by developing new customer segments. However, despite these measures that we have in plan, with the prolonged impact of customer attrition, it is challenging to bring revenue back to the pre-cybersecurity incident level. So for MNO business this year, we plan to focus on boosting profitability. We will reorganize our products and channels to cater to customer preferences and improve cost efficiency through optimized operations based on customer lifetime value. In addition, we will use AI to further improve our operations including products, marketing and network operation and create a productivity-based business structure to enhance customer value and maximize performance relative to input. So through these efforts in 2026, we aim to restore the profitability of the MNO business and build a structural foundation for medium and long-term growth. Operator: There are no questions in the queue right now. Tae Hee Kim: With no further questions, we would like to conclude the earnings conference call for 2025 for SK Telecom. If there are additional inquiries or questions, please feel free to contact IR. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Sven Chetkovich: Hello, and welcome to the presentation of Mycronic's Q4 report. My name is Sven Chetkovich. I'm the Director, Investor Relations at Mycronic. And with me today, I have Mycronic's CEO, Anders Lindqvist; and CFO, Pierre Brorsson, who will be presenting today. And with that, I hand over to Anders. Please go ahead and present Mycronic's Q4 report. Anders Lindqvist: Thank you very much, Sven. And this is what we'll talk about today. No change from before. So about the quarter, of course, go deeper within the different divisions. Pierre will talk more about the financials, a few words on sustainability, and then we have a question-and-answer session at the end of the presentation. And as usual, there is a market update in the material that will be posted on our website, which we will not present, but it could be interesting reading. So starting with a short summary of the last quarter of last year. So we had a decline of order intake with 19% to a level just below SEK 2 billion, which is a good level. It's on our annual average, but compared to a very strong quarter in 2024, it was nevertheless a decline of 19%, very much explained by the less -- lower order intake in Pattern Generators. Also worth to note is that currency makes a lot of impact on all the numbers here, and Pierre will talk a little bit more about that in the financial part. Also, sales were more or less flat compared to last year, around SEK 2 billion. And we had a decline in 3 divisions, so Pattern Generators, PCB Assembly Solutions, and also in the High Volume division. And then we had a quite good growth in the Global Technologies division that almost fully compensated for that difference, so being flat in total compared to the year before. EBIT also declined SEK 342 million, which is a margin of 17%. Backlog more or less flat at SEK 4.7 billion, which is a good and healthy backlog, I would say. And also the Board of Directors will propose to make a dividend of SEK 3.25 per share, which is a little bit of an increase from before, and no extra dividend as we did in last year. We made a small acquisition after the end of the period, a company called ETZ. That's a supplier of critical components for our PCB test business line. So it will not have a large impact on the numbers, but it will really reinforce our quality of the supply chain. So quite an important acquisition for us. So going into the different divisions, starting with Pattern Generators. We could see that the markets were stable, I mean, and even positive. The semiconductor photomask market has shown positive development. I think you can read it by also in the reports from peers that it's mainly driven from applications related to AI. On the display photomask side market, we see that stable as usual, a little bit irregular, but stable nevertheless. And we saw a decrease then of order intake down to SEK 545 million, and this has to be compared to a super strong quarter in 2024. We had 5 machines on order, or we got orders for 5 machines, 1 display mask writer, Prexision 8 Evo, FPS 6100 Evo, and also 3 SLX mask writers for the semicon industry. Sales down to SEK 577 million. We delivered 6 equipment, and this is 18% down. One display mask writer, Prexision 8 Evo, 1 FPS 6100, and 4 SLX. So quite similar to the order intake, actually, but it's not the same equipment. Gross margin, 58%, which is good, stable around that level, and EBIT SEK 173 million. Backlog is a bit down to SEK 2.6 billion. So as we said, the total company backlog was flat, and you can understand that the backlog has increased in the other divisions. So we have 18 systems in the backlog as per end of the year. And after the period this year, we also received orders for Prexision 8 Evo and MMX. You can also see that in the headline, we talk about continued R&D investments, and we do increase R&D investments. We develop new products to offer more equipment to our current customer base, and that kind of equipment is in the inspection technology area. So we will launch at the end of this year, a range of inspection machines for the semiconductor photomask market, which are ramping up right now, both in R&D investments, but also we are preparing space for the production for that. So quite a big -- quite a large project for us. On PCB Assembly Solutions, we have talked before about the difficult market, and this continues to be difficult, especially the European market. We have seen positive trend in Asia. and also U.S., but Asia is not so large for us for the PCB assembly solutions. So -- and the U.S. market has been stable, but European market has continued to be very, very weak. Every second year, there's a large show in Munich called Productronica, where we and our peers in the business normally introduce new products, and we had 2 large introductions there, GenAI, which is an AI-enabled inspection machine, and MYPro A41, which is a continuation of our pick and place series. Order intake down SEK 362 million, which is 7%, also sales down 10% to SEK 438 million, gross margin at 40%, okay, and EBIT down to SEK 60 million. Backlog, SEK 147 million, which is quite okay, but still a difficult market in this division. On the high-volume side, also participated on the Productronica Show, the large part of our strategy in the high volume is to expand sales outside of China. So very important to be present at those shows outside of China. We have also decided to put the listing. Some years ago, we announced that we are contemplating investigating the possibility to list Axon on the China Stock Exchange, and this is put on hold right now. That listing would have contained also an investment program for employees. So as that is not happening, we have launched what is called an ESOP program, which is employee share ownership participation program. So that is just launched. We also opened a new facility for production in Thailand to be able to supply machines not made in China, which is to be more flexible in this restricted world that we live in today from place of origin of manufacturing. Order intake was down 30% to SEK 271 million. Sales was very strong at SEK 448 million, still a little bit less than the year before. Gross margin, 41%, a good margin, and EBIT SEK 55 million. And in this SEK 55 million, there is a bit of plus and minuses. We have a cost of this share ownership program of minus SEK 23 million, and then we had a positive impact of provisions for personnel that was made, that contributed to SEK 30 million. Backlog, SEK 683 million, which is quite good or normal, I would say. So all good there. Global Technologies. Here, we see a very strong development as many companies now in these days report that it's driven by AI-related applications, and we have the same. This is in particular notable for our PCB test and also the die bonding business line. And also, we have some acquisitions, of course, supporting all that. So order intake up almost 70% to SEK 773 million and sales up 41% to SEK 570 million. And you can see the sales contribution from acquired businesses, which is Hprobe, RoBAT, and Surfx, SEK 131 million, but still a very strong development there. Very solid gross margin at 45%, EBIT, SEK 118 million, and some negative impact from the recently acquired businesses of minus SEK 6 million, and a very strong backlog of almost SEK 1.3 billion. So very good development in this division and an EBIT margin of 21% in the quarter. And as I said before, we also had acquired this very small company, ETZ, which will not really be -- have a lot of impact on the numbers, but really will solidify our supply chain for the PCB test business line. So all that, we believe that we will continue to grow the business. And this year, we see that an outlook now, which still almost 12 months to go of -- or at least 11 to reach SEK 8.25 billion in sales. All right. Now I hand over to Pierre to talk more about finances. Pierre Brorsson: Yes. Good morning from my side as well, and we will do a little bit deeper review of the numbers. Starting with this graph displaying the quarterly numbers, and we reached just above SEK 2 billion in sales. And this is compared to last year, a small decline of 2%, but it's really a volume increase. It's both organic and inorganic growth, and 11% negative currency impact. And this currency impact is even bigger on the order side because there you also revalue the orders on hand. So very significant impact of the currencies in the quarter and also throughout the year. The aftermarket revenue, we exceeded SEK 500 million. So we are approaching SEK 2 billion on an annual basis. This is a good number. However, for the first time since 2021, we were not sequentially growing on the -- towards the same quarter last year. So we were slightly below the good quarter of 2024, mainly related to that we, at that time, had some upgrades in the Pattern Generators division, which we could not fully compensate for this year. EBIT margin, 17%, a solid number, a bit high on the OpEx side, but really, according to the plans that we have made and how we want to develop the company going forward. If we look at it on an annual basis, we ended the year just below the SEK 8 billion with an EBIT margin on 24%, good level. Aftermarket revenue, as I mentioned, we are approaching the SEK 2 billion, which is then constituting 25% of the net sales, and continuously growing this part. So we will see fluctuations on the equipment side, but the aftermarket revenue is important to continuously gradually build and grow, which we are doing at this point in time. We go a little bit deeper into the costing details and the different parts of the income statement, comparing quarter-on-quarter. And this may look as a less positive staircase, but it's really largely according to plan. We had a little bit lower sales in the Pattern Generators division as a share of the total in the quarter. And thereby, we have a small negative gross margin effect. On the R&D side, Anders alluded to that we are continuing to spend at high pace and in very relevant projects, particularly in the Pattern Generators, but we also have an organic increase of the R&D spend in the high-volume division. In that division, in the High Volume division, we are also expanding the footprint in particularly outside China, and this drives a bit the marketing and sales cost. Here, we also have -- when we compare the numbers versus the prior year, we also have the newly acquired entities adding to all the cost categories here and also the acquisition-related costs and in particular, the retention mechanism for the Surfx acquisition that is running over 6 months, which will end now in the fourth quarter, which is affecting the numbers a bit. About SEK 10 million net impact of the China ESOP versus the provision release as well. If we look at the 2025 full-year bridge, we can see that we have been growing throughout the year despite the currency headwind that we have had. And in several of the divisions, we have also improved the gross margin, in particular, in the Global Technologies division, which we are very happy about. We have decided to do investments on the R&D side and on the marketing and sales side in order to set the company for the future and to create the organic growth that we want to have sustainably going forward. We have also a bit higher acquisition-related costs and transaction costs this year compared to the prior year. And in this other column that you see there, we have the net -- mainly the net effect of the FX realized and unrealized exchange differences. Ending the year at a solid SEK 1,940 million, which is 24% in relation to sales. Division by division, if we cut it that way, we have said that we had a little bit lower sales and also lower margin and higher R&D in Pattern Generators, and this is really the main explanation for the relatively lower EBIT in the fourth quarter. We had last year record quarter in PCB Assembly Solutions and in High Volume. We could not fully match that this year, but particularly for PCB Assembly Solutions, we had the best quarter of the year in the fourth quarter. It's normally that way, but I think it's also fair to say that it's not a bad level, it's a good level. In High Volume, we had a little bit slower ending of a solid year, and it looks quite good going into 2026 as well there. Global Technologies, really good despite not getting contribution yet from the acquired entities, delivering 20% or about 20% EBIT margin in the quarter, taking us to a total of 17% or SEK 342 million in the quarter. Looking at the full year, we were slightly lower than last year in Pattern Generators, mainly related to the R&D investments. The number for PCB Assembly Solutions is, of course, a bit bigger in relation to the baseline. So we did not reach what we wanted to reach in a tough market where we had our largest markets, Europe, having a negative economy, and U.S. having a bit of a difficult investment climate with tariffs, as well as the headwind from currencies. High Volume and Global Technologies on track and for Global Technologies, even exceeding the plans we've made. And here, you see on the group functions that we have, and this is largely transaction-related costs that has increased over this period of time. Ending the year on, as we said, 24% or SEK 1940. Cash flow-wise, it's all natural in relation to the activities we have conducted and the situation on the P&L, plus the acquisitions and the dividends that has been paid out. Maybe noteworthy is that we have about SEK 200 million less good change in working capital, and this is largely that we have a lower order stock in the Pattern Generators, where we have a significant portion of advanced payments from customers. We have almost spent SEK 1 billion in the acquisitions we have done during the year. Still at a position where we can be active in the M&A market and with SEK 2.3 billion net -- sorry, with SEK 2.3 billion cash and additionally facilities in place of SEK 2 billion. And with that, I hand the word back to Anders. Anders Lindqvist: Thank you, Pierre. And let's continue. So as usual, a few words on sustainability. And first, I want to talk about diversity, where we make some nice progress. We -- and especially on the share of women in the workforce as both in the workforce as also in the different managerial roles. And we could see that very notable, the Pattern Generators division had a good rise in the female representation from 19% to 22%. And also that in our annual employee engagement survey, we could see that diversity and inclusion is having now the highest rate topic of them all. So positive development on that. On other parts of sustainability, we had training for sales representatives in this and also purchasing managers that participated in different seminars to strengthening the due diligence that we do in our supply chain. So with that, Sven, over to question and answers. Sven Chetkovich: Thank you, Anders, and thank you, Pierre. And today, we will start with Handelsbanken and Fredrik Lithell. Fredrik Lithell: I'm going to keep it to 2 questions now. Maybe we could get a little bit elaboration on the outlook, the SEK 8.25 billion Pariff, what U.S. dollars are based on? And if this includes or do not include Cowin in Korea. And at the same time, maybe an update on the Cowin acquisition. The second question is you talk about the investments that you expand organization, increasing your TAM. You now also elaborate on that you will launch machines towards the end of this year. It would be very interesting to hear you talk more about that to the extent you can, of course, Anders. Always interested to hear about machines. Anders Lindqvist: Okay. If I start then with the bit the outlook. The outlook is based on all we know now, which means the current exchange rates as they stand today. We also believe that we will have a small contribution from Cowin, which we believe will be closed towards the end of the first quarter. This will not have a dramatic impact on the sales for this year, but we do believe a limited contribution from Cowin. Pierre Brorsson: And yes, regarding the new products, so this is super exciting. And as you understand, this is something we have been working on for a while. So you have seen that we have increased R&D spend over the time. We have also increased manufacturing availability by moving out the division in our main production facility to make space for this new equipment. So this is inspection equipment for photomask for semiconductor, and it can inspect the quality of a full mask, not only the pattern, but also the defects from particles and contamination and so on. We will come into an environment with competitions from very capable partners here. It will be mainly companies like Laser Tech and KLA. The size of the market we see is quite -- everything is quite equal to SLX actually. So the size of the market is the same, we believe, the available market for us, like SEK 1 billion. We believe also that the price of the machine will be in a similar range, something between from $4 million up to $10 per equipment. We have, of course, an ambition to take a part of that share, but we do have very capable competitors here, as we have in the laser-based mas writers as well. So this is super exciting. Launch will be to the end of this year. And we believe that the first revenues will be visible first 2027, really, where you can start to count on that. But we will have this year a further increase of R&D spend a little bit more than what we currently do, and most likely peak out during this year. So it's a lot of cost and no revenue so far, but we believe very much in this. Fredrik Lithell: I mean I'm intrigued by that you sort of explained it so explicitly already, now 11 months before you will launch it, giving your competitors some time to think about it. Do you bring any new type of technology angle into this? Is it something you could talk about? Pierre Brorsson: All of the players here have a little bit of differentiation between how they do and how they compare patents, either you compare it to other masks, or you compare it to the drawings and so on. So we believe that we will have a unique position. We will also have the benefit of also being able to sell the mask writers. And the combination of this is given an additional value actually, which the others don't have where we can use data from both equipments to kind of optimize the whole solution there. So no, of course, we believe that we have something better, but exactly how and what I think we will need to come back a little bit later in the year, really on the features and benefits and all the nice stuff. Sven Chetkovich: Thank you, Fredrik. And now we move over to SEB and Ina Djupsund. Ina Djupsund: I have a question on pricing and kind of assuming FX is where it is now, how important of a growth driver will price be? And is it any particular division where price hikes play a bigger role? Pierre Brorsson: Price is, of course, very important in all divisions. And I think everywhere where we can offer quite a large degree of differentiation, we are able to keep the prices quite high. But we don't really see any change in price pressure or so. We see, of course, a little bit an effect in the PCB Assembly Solutions divisions where we have the tariffs adding cost for customers, which we not always can transfer fully to the customer for different reasons. And so there can be a small decline. But otherwise, we keep pricing on everywhere and even increase where we can. And we have seen that the demand for some products in Global Technologies are extremely high, and that's, of course, an opportunity to be a little bit more stiff on the pricing. Ina Djupsund: And how is capacity utilization, if we look at next year, I think there's a little bit fewer deliveries for PG in H2. How do you kind of approach that? Pierre Brorsson: Yes. And we can still fill a bit of that, I think. So -- and we have been maybe producing more than we could in the past time. So I think that it's good for the production facility. But we're also expanding production for the PG division also to be able to -- not only actually for this inspection machine, but also for the other product lines to make that more efficient. So I think we have sufficient capacity there. We face a little bit on the PCB test in the Global Technologies, where we have an extremely high demand. And last year, we built a new factory inaugurated that in January last year, and we are already making the first extension of that to meet this increased demand. So to be able to supply. We deliver double as much as equipment as we did 2 years ago. So high pressure on production there. And also then in high volume, we expand by adding additional production site, as mentioned in Thailand now. So yes. Ina Djupsund: And within PG, do you think you can still take orders that can be delivered in 2026 as well? Pierre Brorsson: It depends on configuration and model, but theoretically or practically as well. Anders Lindqvist: On the semicon side, we could definitely get something towards the back end of the year, yes. Sven Chetkovich: Thank you, Ina. And now we move over to ABG [ Sundal Collier and Henrik ]. Unknown Analyst: So about the employee stock option program in Axon, I was just wondering if you could give us a bit more detail on the reasoning behind that and if it's a one-off thing here or if you will keep offering programs like this over time after this one is done. Anders Lindqvist: I can start and then you can add. Yes. So this is the first. And the IPO that we were investigating should have had an investment program built into it. So now the IPO is on hold. We still want to offer an investment program. And the reason for that is that China is extremely competitive when it comes to talent, both to retain and to attract, but also to engage and to drive performance. So we believe that this is a very good way to fulfill that to really keep the engagement, the performance of people, attract the best talent, and retain our good people. So that is the motivation behind that, this program is the first one, and it's larger. We will, like a normal company, launch this every 2, every 3 years, something like that in a sequence with a duration of a similar time between 3 and 5 years. And -- but the first one now is larger than the coming because of that we didn't have a program during this investigation period of the IPO. But it will have a bit of cost last year, this year, and next year as well. Pierre can explain a little bit more on that side, but it will -- but first of all, it should have a large benefit also, of course, of driving value and driving engagement and performance in the business. And it is a co-ownership program. So the -- and it's quite broad. We have invited 120 people. So it's a broad program, and we have 100% almost participation. So there's a big willingness to do this. And most China companies either have this kind of program or ownership through real shares on the stock market. So we believe that it's very good to stay competitive in the talent market. Unknown Analyst: Okay. Secondly, on Global Technologies, the margin here in the quarter was quite a bit stronger than at least I had expected. So I was just wondering if you could give us any more details regarding how we should think about that and the margin going into 2026. Pierre Brorsson: I think we have 2 larger portions that we've been owning for some time within Global Technologies. Both are benefiting from AI-driven demand in the background, and this trickles down to us who do equipment for various parts of this chain. With this demand, we have seen good increases in sales, and we have also been able to improve the margins in this existing business. And then we have added acquired businesses, which are profitably sound as a stand-alone entities. We have been suffering a little bit this year because we have had extraordinary acquisition-related costs. But we see good growth prospects and solid profitability in line with the group targets of the 20% that we see for Global Technologies specifically. I think it's perfectly realistic to believe. Sven Chetkovich: Thank you, Henrik. And now over to Nordea and Anders Akerblom. Anders Akerblom: So firstly, I was wondering a bit on display. We saw recently in Samsung's Q4 report that they were discussing the recent memory price surge is impacting display shipments. What's your view on this? Anders Lindqvist: Our view is -- I mean, we -- the link between photomask and price and so on display is quite far, I would say. So we don't -- we haven't seen any change in the willingness to invest in photomask. We still have the growth drivers on the display side, being the area driven by new applications, mainly. We have also the layer and the complexity of the displays driven by new applications as well as new technology such as OLED and so on. So I think those -- the price changes and the supply and demand of memory and other components is more short -- has a more short-term impact on the end customer business, I would say. So from our side, we don't see any change, and we haven't seen any change in demand either. Anders Akerblom: I guess I was hinting a bit towards in your customer discussions, do you think that, that might drive a mix accretion towards a higher proportion of OLED compared to LCD so that OEMs can maybe absorb that cost inflation to a greater extent? Anders Lindqvist: I think it's typical in the display industry that when demand is lower, they need to invest in technology to create demand and create and launch new features and so on. And I think that is still valid. But we also see quite a lot of new -- this mix of technologies where you have OLED, you have microLED, you have other types, you have the transparent displays curve, foldable phones, all that requiring more advanced production methods of displays and in most cases, more layers that are -- that need photomasks to be produced. Anders Akerblom: And just a final question. I sense your wording in terms of the semi market outlook in PG is incrementally more positive compared to Q3. I mean we've seen some developments during the quarter with TSMC and others raising targets, but kind of what underpins this more specifically? Anders Lindqvist: I think you can see in different reports also that the semicon industry is forecast to start growing on a quite high level and very much driven to various types of AI. But also what we have seen in the past was China kind of standing out being driving a lot of demand, and now we see a lot of demand created in other places, more kind of a more balanced approach. We can see that all those projects in the U.S. are moving forward. We also see the European projects moving forward, but also in Singapore, other places, India is gearing up and want to have their own capability domestic for semiconductor and so on. So I think, yes, all that together, I think, shows that the semicon market will be good. And at some point in time, that should be good for us as well. Sven Chetkovich: Thank you, Anders. And now we go from Stockholm to London and Oliver Wong at Bank of America. Oliver Wong: First question is on the semi mask writers. Just curious about what you guys are seeing in terms of demand from China, in terms of demand from the non-Chinese companies that may or may not be replacing -- either replacing their old machines or not doing anything or kind of upgrading with their existing machines from the incumbent supplier. Yes, just kind of curious what you're seeing there relative to maybe this time last year. Anders Lindqvist: Yes. So China is a difference. So we saw at this time last year, we had a very strong and also had before that quite big demand from China from domestic mask manufacturers, which is less. We still have demand from China. So I think it has more maybe normalized. It was maybe more than normal in the past time. But we do see, at the same time, a pickup from the other people where everyone wants to position themselves very good. China -- and China still should be -- have a huge potential for mask writers because the domestic mask production in China compared to what is used, it's still quite low. So there's -- if China would go for 100% in China for China production on mask that would require a lot more machines than what you already have. And that's maybe a theoretical thinking. But anyway, you can see that the potential is still there. Otherwise, we see potential everyone wants to make more capable masks and so on also in more places. So we have we could see all the new factories building up, and the mass production facilities is most likely to happen in the neighborhood of those. So that compensates for the peak in China that we had, hopefully. Oliver Wong: So it sounds like it's kind of more new fabs where they're kind of buying new equipment and they're going with you, versus kind of existing fabs where they're replacing old machines. Anders Lindqvist: Yes, I think that will be a mix because I think existing fabs will also be upgraded, both capacity and capability. So that's going on, and we've seen that. So that's absolutely. Oliver Wong: And then in terms of margins for next year, I was wondering if you could just talk through kind of the big moving parts, just to give us a sense of how to expect margins to trend next year? Anders Lindqvist: We typically don't really guide on margins. We have -- what we have issued is that we expect everything we own to be double-digit EBIT margin. This is a base expectation on all divisions we have and all the business lines that we have. And then as a group, we should be consistently above 20%, which we have been now for some time. And then on the Pattern Generators, I think is -- you can make the estimates by looking at the backlog and the aftermarket. And then here, we will continue to invest in R&D slightly above the level we have done this year. So I think that gives you a little bit of guidance on where we will end. Sven Chetkovich: Thank you, Oliver. And now we go back to Fredrik Lithell at Handelsbanken to see if you have any further questions. Fredrik Lithell: Thank you very much. Pierre, in your prepared remarks, you talked about the aftermarket revenue and elaborated a little bit on that. You said you had a few more upgrades in 2024, for example, than you did have towards the end of this year. Can you put some more color on this? Can you sort of give us a range of what value we talk about and how much it came down? Is it software? Or is it -- what's in that would be interesting. Pierre Brorsson: It's software upgrades and it can be laser upgrades as well in that. And as you see, we were a notch below the same quarter last year. So I still had to explain why we, for the first time in 5 years, could not continue to grow really. It's not a game-changing amount that differs on this. Fredrik Lithell: Okay. That's perfect. Another question is the -- I mean, you have quite distinct FX headwinds right now and your position on the Prexision side being the only vendor, do you update your price plans every year? Or do you intend to update your prices and compensate for FX? Pierre Brorsson: Basically, the pricing for the Prexision, it's a dollar market. It's a dollar baseline. Of course, when we deliver a new machine, new features that comes in at a different level. It's very hard to say, okay, now the dollar went down 20%, we need to increase the price in dollars with 20% that would distort the competitive landscape among our customers, given our strong position. Sven Chetkovich: Thank you, Fredrik. And now we go to SEB and Ina Djupsund to see if you have any further questions. Ina Djupsund: I have one kind of high-level question. So which division do you expect to contribute most to growth in 2026? And where do you see kind of tough comparison going into next year? Anders Lindqvist: I think in general, I think we are -- you have seen the development in Global Technologies, and I think you can see also the backlog and the order intake in relation to the sales. So it's quite natural to believe that this will continue to contribute. And as Pierre said, the margins are also good in this division now. So that will be a good contribution. I think we'll still have a headwind on the market for PCB assembly systems for a while that even though the show in Munich last year had generated a lot of leads, but there's also a lot of hope in the market. So I think this will still be a struggle a little bit for us. Do you want to comment more on that? Pierre Brorsson: I think we see -- we do expect also High Volume to perform very well going into -- we see very high interest from various markets in the products, and we start to get some maturity also outside China in what we do. So I think those 2 divisions are probably the main growth engines for this year. Anders Lindqvist: And on the Pattern Generators, you can see they have the backlog described, and that's going normally according to plan. We have had changes in deliveries, but they have all been driven by customer demand, a little bit, but no significant difference, and nothing that is moving out of the year. And as Pierre said, this will be a year of investing really in the final part of this new product program that we are launching. And there, you see we will start the year strong. You see the deliveries in the first half of the year. So it will be a strong start. And should there be some semicon equipment coming in towards the back end, that will also be supportive to pattern generators. Sven Chetkovich: Thank you, Ina. And now we move over to ABG Sundal Collier. And Henrik, do you have any further questions, Henrik? I think all my questions have been answered. Thank you. Great. So then we move over to Anders Akerblom at Nordea to see if you have any further questions. Anders Akerblom: I always do. Just a final one on Global Technologies. I mean we've adjusted for acquisition-related costs, you've performed in the 2 most recent quarters at 30% margin level. And I know you don't like to guide on margins. I don't mean to put you on the spot, but you're saying that all divisions you want to have above 20% margin. I don't think one should interpret that as you expecting margins to trend down in GT from the current level into next year, particularly with the accretive contribution from Surfx. Is that a correct assessment? Anders Lindqvist: Yes. I think you can look at the past quarters and take out the acquisition-related costs, and look into the future. Pierre Brorsson: There was nothing in the last 2 quarters that contributed more positively than expected. So it kind of was normal, I would say. Sven Chetkovich: Thank you, Anders. And now back to London again, and Oliver Wong, Bank of America. Do you have any further questions? Oliver Wong: Yes. Maybe just a question on the new inspection tools. You shared a TAM projection. That's helpful. Maybe like roughly, if you could give a sense of what kind of market share do you think would be a good sort of achievable target for next year and kind of the years to come? Anders Lindqvist: I think it's maybe a little bit early to talk. We will come with a much more detailed information closer to the launch. So I think we have that planned to the second half of this year. But we believe that this market looks very much similar to the SLX market for us, size, price, and so on market share. We do have very capable competitors here. So -- and we do have some benefits. So it's -- we don't really have a point of view that we can share right now on how much. But of course, we spend a lot of money in doing this, so we expect a good return, of course. Sven Chetkovich: Thank you, Oliver. Well, with that, we have reached the end of today's presentation of Mycronic's Q4 report. Thank you very much for watching.
Operator: Welcome to Evolution Q4 Report 2025 presentation. [Operator Instructions] Now I will hand the conference over to the speakers CEO, Martin Carlesund; and CFO, Joakim Andersson. Please go ahead. Martin Carlesund: Good morning, everyone. Welcome to the presentation of Evolution's year-end report for 2025. My name is Martin Carlesund, and I'm the CEO of Evolution. With me, I have our CFO, Joakim Andersson. As always, I will start with some comments on our performance and then hand over to Joakim for a closer look at our financials. After that, I will conclude with an outlook and then we will open up for your questions. Next slide, please. So let's start with the financial and operational highlights in the quarter. Overall, we saw somewhat better performance in Q4 compared to Q3. The net revenues came in at EUR 540 million, corresponding to quarter-on-quarter growth of 1.4%, but a year-on-year decline of 3.7%. Adjusted EBITDA amounted to EUR 341.5 million, giving a margin of 66.4%. Asia turned back to modest growth quarter-on-quarter, signaling some progress in our hard work to battle the cyber criminality in the region. As pointed out several times before, there is no quick fix to these issues. We constantly adapt and develop our technical solutions to win in the long run. We believe that it's harder to steal our content today than it was a year ago. Latin America, North America and Africa also showed growth, whereas Europe declined both on a year-on-year and quarter-on-quarter basis. Our Live revenue declined by 4.5% to EUR 438.6 million while R&D increased by 1.7% to EUR 75.7 million. I believe our slot brands have great potential ahead. Live is currently affected by both Europe and Asia, while North America and Latin America continued to do well. In the U.S., we believe Live will continue to grow its share of the total online market. And in the quarter, we launched Ezugi as the second brand in New Jersey. Talking more about games. Our headline title for 2025, Ice Fishing, is gaining in popularity following its launch this summer. More and more players enjoy the fast pace and highly entertaining format. We have actually seen a doubling over the last 3 months. It's trending on social media and at times, it has been close to player numbers that we've seen in crazy time; amazing. And speaking about speed, the quarter also saw the launch of Red Baron, our third crash game that is simple and fun both for veterans and beginners. Operators and players love it and the numbers are steadily increasing. Since this year, this is an end-year format report, let us also quickly zoom out and look at financials for the full year. Net revenues were almost flat with an increase of 0.2% to EUR 2,067 million. Adjusted EBITDA decreased by 3.2% to EUR 1,366 million, giving a margin of 66.1%, which is just within the communicated range of 66% to 68% for the year. To conclude the slide, looking at both the quarter and full year, operationally, I believe we did great. The financial outcome could have been better, but given the many challenges that we have faced, we still managed to defend our revenue and deliver solid margin together with a very strong cash flow. We always want to do better, and we look forward to continuing our hard work in 2026. Despite what happens around us, it's vital that we stay ahead of the game and increase the gap to competition through expansion and innovation. I'm fully convinced that we have succeeded in that 2025 and even more convinced that we will do it also in 2026. Two weeks ago, we added Ice in Barcelona and our road map for the year is breathtaking. I will get back to that later. Next slide, please. If we then move on to our operational KPIs. First, consisting of headcount and Game Round Index. On headcount, we are growing by 5.8% on a year-on-year basis and 3.8% on quarter-on-quarter. And we now see a better, more cost-effective distribution of all delivery. The Game Round Index can be seen as a general indicator of activity throughout our network over time. For an individual quarter, it can vary a lot and does not always correlate with the revenue development. In the second half of the year, activity went down somewhat connected to our measures in both Europe and Asia. But if you look at 2025 versus 2024, we actually saw a slight uptick of 1.8% for the full year. Next slide, please. As this year -- as this is end year report, we also have yearly KPIs on the customer dependency and a number of tables within Live. Currently, we have about 870 customers, a number that has gone up during the year, mostly linked to the new relationships and operators in Brazil. We have decreased dependency on the 5 largest customers from 46% revenues in 2024 to 39% in 2025. The largest customer represents about 12% of revenues. The number of tables have increased by 300 during the year, linked to new studio openings in Brazil, the Philippines, Romania and the U.S. The resource mix have been improving during 2025, and we look forward to further improvements in 2026 and also better supply to market. We will continue to expand in 2026 among else with a new studio in Michigan. Next slide, please. In this report, we're introducing a real breakdown of our revenues based on our customers' location. The absolute majority of our customers is based in Europe, followed by North America and Latin America. All of our revenue is regulated as a basic requirement to become a customer with Evolution is to hold a license from an approved regulator. You also see revenue split based on our customers and their players, our customers' customer, which is an estimation based on the IP number of players received from our customers. This is the breakdown of revenue we have included in historic reports connected to our customers' players IP addresses, about 47% of the revenue estimate is regulated. Next slide, please. I will now give a few comments on each of the major regions based on the estimation of revenue based on our customers' customers IP number. As highlighted in the beginning, Europe declined quarter-on-quarter. We believe that we currently have the stringiest -- most strict ring-fencing measures among all providers in Europe; and in some markets, we see that players turn to unlicensed operators instead of the official channel -- and instead of the regulated and the channelization declined significantly. The current challenge is not the actual ring-fencing, but instead the channelization decline in some major countries as a result of regulatory measures. Simply put, the players are by the regulation pushed out of the regulated limit and are to a larger extent playing on unregulated operators that we don't accept. This is bad for the industry and pushing out the most vulnerable players, but long-term, we believe that the regulatory scale will find its balance again. If looking beyond short-term performance, we see that players shift more and more towards game shows. And with the best road map ever in 2026, aiming at exactly these type of entertaining games rocket [ fueled by asper ] brands, I really look forward to the development in 2026. Speaking about Europe, we can note that we haven't heard anything from U.K. Gaming Commission since last summer in relation to their investigation. We don't know when they will come back, but have been very cooperative, and as already stated, have very strict ring-fencing measures in place since very early last year. For Asia, I've already said that we have made some progress in the cyber crime mitigation. The overall regulatory dynamics continue to be somewhat challenging, but at the same time, we see good development in the Philippines where the regulatory framework is getting more stable. Next slide, please. North America and Latin America both reported all-time high in terms of revenues. Growth-wise, North America has been somewhat modest during the year, and the regulation pace is very slow if looking at the U.S. as a whole. But after year-end, we saw some positive development with an iGaming legislation that was passed in May. The potential in existing market also remains strong as Live Casino share has a lot of potential. I already mentioned that the launch of Ezugi as our second Live brand in Italy and New Jersey. Speaking about U.S., we are still working to get the necessary regulatory approvals to complete acquisition of Galaxy, only 2 states remain where Nevada is one. Nevada recently announced a guideline for licenses that operate in online gaming in other jurisdictions, and I have seen some speculation that this may cause an issue for us to get the approval. The process is moving forward, and we are still within the time line of closing before 17th of July, and I have no further comments at the time being. Moving on to Latin America, where growth continued to accelerate both year-on-year and quarter-on-quarter. Brazil is driving growth as the new regulation is settling in. During the quarter, we also noted that the main competitor in Live decided to close down operations in Argentina. We have seen this in several parts of the world in the past that despite large resources in -- it's highly complex and expensive to build a Live at scale. Next slide, please. Okay, let's take a step back and look at our global footprint of studios. 2026 marked the 20th anniversary of Evolution. And up until 2013, we operated with only one studio out of Latvia. Fast-forward to today, we have 24 studios with the 4 latest being located in Brazil, the Philippines, Romania and New Jersey. In the very beginning of Evolution's history, it was possible to target several markets from that 1 studio in Latvia, but as regulation has evolved more markets are putting demands on local presence. Even though it requires a larger investment, this is great for Evolution as we have an unrivaled experience in building studios with very short lead times. It's a know-how that provides us with a competitive advantage, raises the barriers to success for others and also speaks to regulators that we can quickly set up operation and offer job opportunities in their local markets. Another aspect of the scale of evolution is that our students are connected in STAR network, and we can use a direct usage independently, creating scalability over all time zones. Next slide, please. I already mentioned the breathtaking road map 2026. As you remember, last year, we entered an exclusive partnership with Hasbro for online live casino and slot games for MONOPOLY and other Hasbro game titles. It's an exclusive worldwide deal that covers online content for all our brands in Live and RNG, a true milestone that will enable us to bring fantastic games to our players. Two weeks ago, we showcased some of the titles that we will launch during this year at ICE, which is the industry's largest yearly exhibition. Normally, we state that we have one big showcase title, like Ice Fishing last year. But this year, it is impossible to pick one. That's how strong the lineup is. Let me just mention a few highlights from 2026, and let's start with Game Night, which will be the largest game show to date and a feast of bonus games based on Hasbro favorites such as Connect 4 and Hungry Hungry Hippos. It will use the largest money really in the whole world, but instead of a flatbed will have a roulette-style bouncing ball and a wheel that is set at 45-degrees angle. The wheel itself is enormous but so are the Hippos. [ Fun enough, ] it will only be the biggest game show for a few months because later in the year, we will launch MONOPOLY Filthy Rich. This will be a gigantic Hollywood-style game show in a studio that would make any moviemakers jealous. With 5 exciting bonus game rounds on MONOPOLY features plus a super bonus MONOPOLY World. Also based on MONOPOLY is MONOPOLY Roulette, which will be the only roulette with 2 bonus of games and the MONOPOLY rolling a 2-dice game with a MONOPOLY-style board. We will also launch several new MONOPOLY titles within RNG universe. The first one being MONOPOLY Deluxe from BTG that is already live. In addition to the Hasbro titles, we will launch many other games that will appeal to both traditional players and others, DRAGON DRAGON which might be the coolest name ever on the game, is a simple, fast-paced guessing game will play that on -- where the 2 coins would be yellow, red or both. In Always 6 BLACKJACK, the dealer card is always 6, which provides more predictable game. From Ezugi, we have [indiscernible] which is a unique alternative to the classic roulette using a classic claw machine as a very nice piece of engineering, by the way. In total, we have more than 110 new games and RNG releases plan for the year, and I could not be more excited. Our CPO, Todd Haushalter, described this year's roadmap as all about fun, fun, fun and that is exactly what it is. 2026 will increase to get to any competitor more than ever, but more importantly, we are creating great entertainment for every single player. And with that, I will hand over to Joakim for a closer look at our financials. Next slide, please. Joakim Andersson: Excellent, Martin. Thank you. So let's now spend a few minutes on the financial details. I'm now on Slide 10, and we'll repeat a few messages that Martin opened up with. Well, on this slide, see our revenue and adjusted EBITDA development over time. The full year 2025 has seen a flat revenue development whilst the quarter-by-quarter trajectory shows a somewhat uneven trend. In the fourth quarter, we are reporting EUR 514 million of revenues, EUR 341.5 million in adjusted EBITDA and consequently, a 66.4% margin. As Martin said, with this quarter, we are ending up at 66.1% in EBITDA margin for the full year of 2025, which is within our margin guidance. Let's go to the next slide. On this side, we will have a more detailed look at our profit and loss statement. I have highlighted a few key takeaways on this slide, and I will comment on them one by one. So first, and again, net revenues of EUR 514 million. In this quarter, we have EUR 51.7 million of other operating revenues, which is due to a reduction of an earn-out liability. This is the only amount we are adjusting for when we talk about our adjusted EBITDA and adjusted EBITDA margin. As you can see and as I have highlighted on the slide, we had similar adjustments also in Q3 and Q4 2024. Moving on to the second highlight. Total operating expenses amounted to EUR 215 million, which is 6.3% higher than Q4 last year and up 2.1% quarter-on-quarter. Despite costs being slightly higher quarter-on-quarter, we are beginning to see the benefits of our initiatives to drive operational efficiency. Several initiatives are ongoing when it comes to optimization of our tables and studios as well as the way we work with our supporting functions. What is important to note is that this is not a one-off cost-cutting project, but something that we will work with continuously. If we then move to the third highlight. It's our profit for the period that amounted to EUR 306.8 million in the quarter. And for the full year, we had a profit of EUR 1.06 billion. Finally, our earnings per share EPS after dilution amounted to EUR 1.54. Let's move on to the next slide, where I'm going to show you the development of our cash flow. First, on our left-hand side, we have our operating cash flow after investments, which amounted to EUR 262 million in the quarter. One factor behind the relatively low cash flow this quarter was the seasonally weak working capital. While elevated year-end accounts receivable is a recurring pattern, we are actively addressing it, and we have seen good progress in January. The graph shows that in-year fluctuations are not unusual. However, the overall more uneven performance on top line in 2025 has driven greater volatility in our cash flow this year. Cash conversion remained solid and was at 82% for the fourth quarter. Then turning over to the other graph and our capital expenditures, we can see that we are slightly up quarter-on-quarter with a total CapEx relating to tangible and intangible assets of EUR 38.5 million. That also means that total CapEx for the year was EUR 134.8 million. Next slide, please. On this page, you will find a summary of the balance sheet for 2025 compared to what it looked like at the end of 2024. The main items that I usually highlight, which are all signs of our financial strength or the value of the bond portfolio of EUR 104 million. Our total cash balance that amounted to EUR 818 million and equity position that at the end of the year amounted to almost EUR 4.1 billion. Although a minor point, as mentioned earlier during the P&L review, we have made an adjustment to our earn-out liabilities. Consequently, the other liabilities category on the balance sheet shows a slight quarter-on-quarter adjustment. We continued with the buybacks in the fourth quarter. And in total, we invested EUR 93.7 million and bought back 1.6 million shares. In total, we invested EUR 500.2 million in 2025 and got 7.3 million Evolution shares, which today corresponds to 3.6% of the company. And when talking about buybacks, we wanted to highlight what the total shareholder remuneration has looked like over the last years. On this slide, you will see dividend payments in blue boxes and buybacks in green boxes. There are a few takeaways from this slide, but I would like to point you to 2 of them. Firstly, as illustrated by the gray bar to the right, we have returned more than EUR 3.5 billion to our shareholders since 2020. Secondly, during 2025 alone, total shareholder remuneration amounted to almost EUR 1.1 billion, which equates to a yield of 9.3% based on the market cap at year-end. With that remark, I will hand it back to Martin. Martin Carlesund: Thank you, Joakim. So let's summarize and then move on to the Q&A. Operationally, it was a good quarter and year, maybe the best ever. We increased efficiency, maintained margin, delivered fantastic games, we continued to expand our footprint just as we should. We have also handled many challenges always standing up for what we believe in, always trying to do the right thing. The situation we have been up -- put up against and are still handling are not something any company could do, especially not while also being able to maintain revenues, deliver both a solid margin and an excellent cash flow. It shows what a fantastic management team we have with the right values as well as the thousands of experts and young talents across the global build Evolution to the strong company that we are. I would like to send my sincere thank you to each and every one of those. And speaking about the excellent cash flow, I would also mention that the Board will decide and announce its recommendation regarding capital allocation for 2025 earnings later this quarter. All in all, we are in spite of the financial development, proud of 2025. But with that said, we want to do more 2026. We will deliver absolutely fabulous product road map 2026. Expansion will be at full speed in the U.S. and LatAm, while we continue to invest in Europe and at the same time, deliver margin in line with 2025, meaning 66%. I really look forward to the rest of 2026. Now thank you for listening, and we will open up for questions. On the Q&A slide, you will also find a link that takes you to a video, almost like an early Easter egg with a sneak peak of the amazing road map that you can watch after the call. Please click it and have fun. Next slide, please, and then we'll open for questions. Operator: [Operator Instructions] The next question comes from Ed Young from Morgan Stanley. Edward Young: I've 3 questions, please. First of all, on the new games, I think for anyone who went to ICE or seen the road map, the opportunity going to see as seems almost obvious with the Hasbro releases. But for 2025, you discussed being really happy with the operational performance that obviously wasn't matched financially. What would it take in '26 for the progress on the content and operational side to be more matched in the financial performance? The second question is, if I'm okay to ask them together... Martin Carlesund: My memory is very, very good, but short. So now to deliver on in 2026, just a stable environment. If we just could have a stable environment, solve a little bit continuously meticulously get a little bit better in Asia that's it. No more, no less. Edward Young: Okay. There was a sequential decline quarter-on-quarter in Europe. Could you perhaps give us a bit more color? Obviously, as you mentioned, ring-fencing measures went in early last year. Was there any particular extra regulatory development or change? Or are you seeing any underlying change at a customer level or in the markets that can help explain that? How should we think about sequential European growth as we head into 2026? Martin Carlesund: We're not happy with the quarter in Europe. There are a lot of effects on the regulatory measures and the instability of the market. And some countries are not developing according to what we want. So it was not a good quarter. The overall situation in Europe, where the channelization now drops to 50% level in certain countries or some countries which are good, that affects us. We only target 50% of the market. And the regulation is not balanced right now. So players are pushed out of the regulatory limits. So that affects us. So the total situation in Europe wasn't good in the quarter. Edward Young: Okay. Finally, could you give us an insight of why you've given this new geographic disclosure? What's the message you're giving us? Martin Carlesund: It's not too much smoke signals. It's -- there's a lot of focus on regulatory aspects where players are coming from and so on. And we feel that it's important now to disclose and show this is our revenue, this is our customers, this is where our customers are, then the geographical split of revenues that our customers provided IP adders of their players. And it felt like it was time to disclose that and show that to you -- to put a little bit of emphasis on that. Operator: The next question comes from Georg Attling from Pareto Securities. Georg Attling: I'll just start with what you alluded to in Nevada. So the direct question is really if you think there is a need for further ring-fencing to complete this Galaxy acquisition? Martin Carlesund: We are progressing with the Galaxy acquisition. The Galaxy acquisition is not large enough to affect our business model in general. So we are moving forward according to the business model that we have. Georg Attling: Okay. Second question on the CapEx here in 2026, how should we think about this given, you gave no guidance? Is it in line with 25% or a ramp-up from that base? Martin Carlesund: We will get back on it. It's just a couple of weeks. It would be well in time for the AGM. So we look forward to disclose a good capital allocation policy and action for 2025 figures quite soon. Georg Attling: Okay. And then just a final question on Asia. I mean it's been very choppy here in the last 3 quarters. What's your view on the underlying development in trying to combat the cybersecurity problems? Has it been stable since the last 3, 4 quarters? Or is it really an underlying improvement here in Q4? Martin Carlesund: The market development issue has been also shocking a little bit some countries and it's not been super stable, but still good. I mean we had a not-so-good quarter 3, and now we're slowly taking back a little bit. We're happy with that movement, and we're doing a little bit of action; slowly, slowly getting to turn for the cyber criminality and hoping to see better development, of course, forward. But we don't know exactly when that will happen. Georg Attling: Yes. And when you look into '26 in Asia, do you see that this will largely be resolved or will it take longer than that? Martin Carlesund: I can't guide you on that. We are working day and night to find ways to do it. It's a very complex environment and someone is really stealing our product and we do what we can. And I know that there are others that experience the same thing. So we will see how and how fast we can resolve this. Operator: The next question comes from Martin Arnell from DNB Carnegie. Martin Arnell: My first question is on the situation in Europe. You said it wasn't good in the quarter, and we saw that. But is it anything that suggests that it will or could improve in the coming quarters here? Martin Carlesund: I think we can do better than what we did now. That's a little bit the same as I answered to add like what do you need to do better? A little bit stable environment, then it will look really good. Martin Arnell: So it's also in your hands and not only sort of in how the regulatory markets are working or... Martin Carlesund: You can always do better. I mean even if we would have a growth of 50% in the quarter for -- and you would ask me, we can always do a little bit more. Now adding the games that we have on the road map will, of course, make a difference and I look forward to do that. So there's more to do always. But the baseline is that a little bit stable environment would be -- that would be very nice. Martin Arnell: And on that topic, what's been the reception so far when you conclude from ICE in Barcelona, for example, on the new MONOPOLY games among your big customer network? Martin Carlesund: They are flat, I guess. I don't know to find -- they are everyone -- there's no -- everyone looks at the games and like, "Wow, when are we going to get them?" Everyone looks at the games like there is nothing in comparison, there is no one else doing anything else that is even remotely doing what we do. So when they look at our road map, they are like, "Oh, when can we have it?" Martin Arnell: Sounds interesting. And when is the first game launch? Is that April on the MONOPOLY, 1 of the 33? Martin Carlesund: We will release a couple of games now with RNG. As you saw, MONOPOLY Deluxe is already out. It will come. And we are eager to do it as soon as possible. But Q1, Q2, a couple of games and then throughout the year. Martin Arnell: Final question for me. There was a lot of discussions on AI at Barcelona and ICE, and how could that impact live casino? Can you clarify your view on that? Martin Carlesund: I think AI is a great opportunity. I think that we will use AI. We will probably have a product with a virtual dealer just like we have first persons, which are games that are top of the line best in the world. Then I think that, as I stated before, AI is -- 2026, maybe up until 2030, the best support tool there are, you will give a person meeting another person, all the information that they need to have on how to handle it and all the customer information or whatever it is. I don't think that you or me would like to have an AI bot answering the questions or doing that all the time. Many times, we still want the human interaction. And the development with TikTok and that type of videos is going in the other direction. So we have to do it. It will happen. It will be there. There will be an AI dealer doing it, and it will be absolutely smashingly beautiful, but real life, real physical events will still be there for the years to come. Operator: The next question comes from Monique Pollard from Citi. Monique Pollard: The first question was just on the EBITDA margin. So that's come in at 66.1, obviously, for the year. So the low end of the guided range of 66 to 68. And then obviously, 2026, you said similar to the 66.1, you achieved in the 2025. I'm just trying to understand, if over time, there's been a bit of a shift, obviously, in where the studio capacity and studio locations are and whether that is putting upward pressure -- sorry, downward pressure on the margins or whether it's just a lack of being able to scale the top line because the top line has been coming in slightly weaker than expected? Martin Carlesund: It's a good question. I would answer it like there's always ifs and buts. But if we wouldn't have ring-fenced, you would have seen a much higher margin. Of course, we simply would have had higher volume on the same capacity. If we wouldn't have had a situation where we actually took down the delivery out of some studios due to the strike recently and then moved it around, we would have had a higher margin. So it's a combination that now the resource mix is much better, and we're slowly getting back to the right capacity. And of course, if we would have had a little bit more revenue, it would have fell through and the incremental margin would have been good on that revenue. So it's a little bit of both. Joakim Andersson: Yes, I can maybe add. And it's also, I mean, a little bit in the future because when new countries or regions open up with new regulation, then it's very much up to that regulation and the kind of rules for the regulation and the rules to operate and with local studios, et cetera, which always will have then -- of course, will have an impact on the margin going forward. But that's difficult to speculate on. Monique Pollard: Understood. And then the second question was, you mentioned, obviously, the working capital, it's seasonally weaker, but also there was this sort of issue with the accounts receivable, but that you're having some good progress with that in January. Could you talk us through sort of what you're doing there to try and sort of combat that rising accounts receivable? Joakim Andersson: Yes, Monique, what I meant, I mean, the seasonally weak AR is due to year-end Christmas holidays and breaks. I think it's a very common theme. I think that we also -- I mean, as a big company, strong financials, maybe we -- customers are a little bit taking advantage of that and then using us as a little bit of a bank over year-end to polish their working capital. So I think that's the main reason for why we saw the buildup in December. Then I mean, naturally, in January, we follow up on everything where it's outstanding. Customers have -- we've seen a lot of customers paying because of the fact that we have past year-end. So nothing, no drama, although the numbers were a little bit higher maybe than expected and no drama and then we see the swing back on working capital now. Monique Pollard: Okay. That's clear. And then I had a question just on Europe. Obviously, you've mentioned, do you think you now have the strongest ring-fencing measures in place amongst the suppliers. I just wanted to understand whether you had progressively ring-fenced any more market during 4Q in Europe or whether the markets that you ring-fenced back in February with the same that have been ring-fenced out. I didn't know if there had been any progression on your part in terms of what you were doing? Martin Carlesund: No, it's about the same. There is no big difference. I think that the channelization is one challenge and a little bit instability in general and the market is one challenge during the quarter. And we look forward to get a more stable environment in 2026. Monique Pollard: Excellent. And my final question was just on the RNG growth rate. Obviously, that slowed slightly in the fourth quarter after a stronger 3Q. I just wondered whether you think either the road map of product that you've got coming in for RNG in 1Q or other things could sort of help reaccelerate that growth rate as we go through 2026? Martin Carlesund: I think we can do even -- we can do more in RNG, yes. And I think that, for sure, MONOPOLY, but also our own brands will help a lot. Operator: The next question comes from Ben Shelley from UBS. Benjamin Shelley: So firstly, in the release, you spoke about a primary focus on the U.S. and Latin America. Can you expand a bit on this, please? And is there a shift in the strategic focus here that we should be aware of? Martin Carlesund: No, there is no shift in the strategic focus. All markets are equally important and we continue doing exactly. So there's no shift. It's just that in the coming period, we have quite a lot of things happening in the U.S. We're launching Ezugi, and we're expanding in Latin America. So they come out as first where we are doing it. And then as I stated several times, we offer a little bit more stable environment. And then, of course, we continue to invest in Europe, but not as much because we don't need that in the same way. Benjamin Shelley: Very clear. And then just on the U.K. Gambling Commission. I know you still haven't heard anything, but it looks like you have changed your wording slightly in your release regarding the review. Does that reflect the change in your expected outcome? Martin Carlesund: I don't know anything about outcome more than what I knew before. No, actually no. No, no intentional change in wording. It's just that months passes, and I don't know what to make after that. We're patiently waiting, and we're doing what we are doing. And we have some ring-fencing since the beginning of last year. We'll see. No intentional change. Benjamin Shelley: And then in your release -- in your last release at Q3, you spoke about volatility in the Philippines and India. Obviously, Asia has grown quarter-on-quarter. Is it right to think that these markets have stabilized now? Martin Carlesund: Philippines, more stable, yes. India more stable, yes. Operator: The next question comes from Andrew Tam from Rothschild & Co Redburn. Andrew Tam: Just 2 for me. First one, just a segue for Ben's question on India. Given the Nevada industry guidance and India being on that list as one of the 10 countries, are you planning to stop operations there given your commitment to the Galaxy acquisition? Martin Carlesund: We are not planning to change the business model as of now due to the Galaxy acquisition, as I said before. We will look into the policy and see what comes out of that and no decisions in that direction. Andrew Tam: Understood. My second question, just trying to assess. It looks like Russia is considering regulating online casino. Will you be applying for a suppliers' license there or are you planning on stopping supply into the Russian market until that legalizes given the Nevada guidance? Martin Carlesund: We are not. There is a lot of rumors and Putin says one thing or other, I would just spontaneously see it's very difficult to apply for license there, but let's see whatever happens in the world. Operator: The next question comes from Rasmus Engberg from Kepler Cheuvreux. Rasmus Engberg: Just a little bit confused with Europe. Throughout your reported history, Q4 has never been weaker than Q3. And now it is, and it's quite materially weaker. I'm just trying to understand, is there anything you can do to help us understand why that happened? Is it a new level going into 2026? Or are there some sort of one-offs in Q4 that we should adjust for? Martin Carlesund: I can't say that there is any material one-offs that I can give and state that it's a bad quarter, and there is a number of different aspects in the markets. There is no difference in our performance or the way that we act or relation to our customers, everything is fine. But the market was not in favor during Q4. That's a fact. Rasmus Engberg: And considering this, could you update us on the group level, how do you think -- how we should think about activity in Q1 in constant currencies relative to Q4? Is it roughly similar or how does it look seasonally? Martin Carlesund: If we take online gaming as a global phenomenon, I would say that Q4 is stronger, Q1 is a little bit weaker than Q4, but still a good quarter. But then, of course, you have February with 8% lesser days. I don't know if it's [indiscernible] this year or not. But -- so it's a little bit -- Q1 is okay, but a little bit weaker than Q4 on a global scale. Rasmus Engberg: And just a final question. You still report much more tax than you pay, so you sort of accumulate that. Is that something you're going to continue to do going forward? How do you look at that from -- it's kind of a global question in a way, but... Martin Carlesund: It's the pillar 2, and it's really -- if you ask me as CEO, it's a little bit up in the air. So we will see where that falls down eventually. But we, of course, according to pillar 2, deduct for the 15% tax. So that's why it's on the balance sheet. And then there are rules of how and when and whatever that's going to be paid. Rasmus Engberg: So no change there? Martin Carlesund: No change. Operator: The next question comes from Richard Stuber from Deutsche Bank. Richard Stuber: I mean apologies if you said it right at the very top, but could you give a bit more of an update in terms of the litigation with Playtech and whether you've actually sort of named them as a defendant and when we next here on the next phase of litigation? And similarly, has this impacted any of your sort of commercial discussions with any new or existing clients? And the second question is just you talk about this year, you'll be growing, you think, in line with the sort of general markets in the different regions. Could you just give us an indication what you think the market growth rates are in casino? Martin Carlesund: There is no real update when it comes to the main litigation, meaning Playtech. It has its due course, it's continuous and it's always slow and it will be with us for a while. There's no material update. So we look forward to move forward with the lawsuit. Customer reactions to the way that our competitors have been acting and the type of companies that they have engaged and the way that they did interviews and whatever else they did with former employees and so on is, of course, shocking for many; exactly what comes out of that, I don't know. But it's shocking. It's not good for the industry. It's not good for anyone, and it's shocking for our customers. When it comes to -- we have, of course -- we want to take market share. We have the best products we're moving forward, and we really want to grow faster than the market. Now the market growth is -- it's very hard. I mean, our figures are public, but many others are not. It's very hard to judge that. And often when we get the market growth, we get it afterwards. So we are a little bit in the dark as you are. Then there are 3i and different various institutes trying to measure it. And they are more often wrong than right. So I don't have that. But once we look at the market growth, we want to be ahead of it. So that's the target. Operator: The next question comes from Jack Cummings from Berenberg. Jack Cummings: My first question is just on North America. I think the North America growth you reported is still a bit slower than what we see in terms of the market rate in the relaunch of Ezugi is going to help kind of close that gap? That's the first one. And then the second one, you mentioned in the prepared remarks in the release that you're still going to invest in Europe, but slightly less aggressively. Just wanted to clarify kind of what exactly you mean that less capacity going in, less studio investment, what does less investment in Europe look like? Martin Carlesund: Okay. Let's start with the end. So less investment, it's like in comparison to other investments. I mean we're going to build a lot of products, new studios. All the Hasbro games that you will see will be built in Europe. So there is a strong investment in the European set, and that will be distributed out there. And we will see to that we cater for all the growth in different markets and adding whatever. But in comparison to, for example, the build up that you see in Brazil, that is stronger. We need to invest more in relative terms in Brazil to build up that market, and we see that ahead, and that goes for U.S. as well. When it comes to Ezugi launch in U.S., we believe that, that is the second option for the players and for the operator, and we believe that we will accelerate the growth with that, of course. We also think that the share of Live now when the market a little bit more mature, will increase. So there's potential in that when it comes to, for example, U.S. and North America. What was the first question? I think that I answered that. Operator: Thank you for all the questions. It is now time to hand the conference back to the speakers for any closing comments. Martin Carlesund: Thank you very much for listening and taking your time. It was a pleasure to answer your questions. Now don't forget to click the link. It's a beautiful little film that you can watch and you will be blown away by the fantastic road map 2026. Thank you very much.
Jerry Kang: Greetings, everyone. I am Jerry Kang, Head of KBFG IR team. We will now begin the 2025 full year business results presentation. Thank you very much for participating in today's earnings release. We have here with us executives from the group, including CFO, Sang Rok Na; and first, our Group CFO, will cover 2025 full year business results. After that, we will have a Q&A session. I will now invite our group CFO to walk us through 2025 full year business results. Sang-Rok Na: Greetings, everyone. I am KBFG CFO, Sang-Rok Na. Thank you very much for joining our 2025 full year business results presentation. Before proceeding with the business results, I'll briefly share some of our key performance highlights. 2025 was a year of unprecedented volatility in the financial market. As volatility in the exchange rate and market interest rates widened, the influence of external factors intensified, economic recovery was somewhat delayed and a challenging operating environment continued with asset quality pressures. On the other hand, as government policies materialize and discount factors where the domestic market became resolved partially, the capital market is gaining unprecedented momentum toward the KOSPI 5,000 era. In a situation where diverse variables and new trends are intertwined, KBFG with our stable portfolio and consistent risk management policies is absorbing external uncertainties and we are working hard to expand nonbanking earnings contribution and to shift to a business structure focused on the capital market. Added to these strategic efforts as a result of the fading away of sizable one-off effects, including 2024 ELS customer compensation cost, 2025 net profit posted KRW 5.8 trillion, a 15.1% increase Y-o-Y and proved our robust profit-generating capacity. On the other hand, today, the BOD resolved to approve a year-end cash dividend of KRW 1,605 per share, amounting to a total of KRW 575.5 billion. Accordingly, the 2025 total cash dividend amount stands at KRW 1,580 billion, an increase of approximately 32% compared to the previous year. The 2025 dividend per share, including previously paid quarterly dividends recorded a total of KRW 4,367, marking a significant increase of approximately 37.6% Y-o-Y. The total year-end cash dividend amount includes an additional KRW 240.5 billion on top of the existing 2025 quarterly uniform dividend amount. This reflects our efforts not only to meet the corporate eligibility criteria for separate taxation on dividend income, but also our efforts to reevaluate our shareholder return mix in line with the normalization of our PBR, which has recently surpassed 0.8 multiple while striving to achieve an industry-leading dividend payout ratio. According to our shareholder return framework linked to our CET1 ratio, 2025 total shareholder return ratio posted 52.4%, a 12.6 percentage point increase Y-o-Y and also achieved an industry-leading level in both shareholder return ratio and scale. In addition, we efficiently managed accumulated capital and maintained the industry's highest level of capital adequacy level in 2025 and anticipated CET1 ratio is expected to be 13.79% and demonstrated significantly enhanced capital management capabilities. Taking into account the downward impact of approximately 6 bp arising from the KRW 240.5 billion of additional cash dividend amount, the effective 2025 end CET1 ratio can be considered to have remained at a high level of approximately 13.85%. A portion of this additional cash dividend amount utilize KRW 190 billion of deferred shareholder return for 2025. Next, I will cover details of our 2026 first phase of shareholder returns. The funding for total shareholder returns in the first half of the year amounts to a total of KRW 2,820 billion in capital, corresponding to 79 bp above last year end CET1 ratio of 13%. It has already reached more than 92% of the total annual shareholder return of the previous year and has been expanded on a proactive basis. Of this amount, KRW 1,620 billion will be returned as total cash dividends for 2026, while the remaining KRW 1,200 billion will be returned through first half share buyback and cancellations. Accordingly, the BOD today resolved to conduct KRW 600 billion of share buyback and cancellation which is the first round of share buyback and will commence immediately after this earnings release. The remaining KRW 600 billion is scheduled to be repurchased during the second quarter following an additional BOD resolution upon the completion of the first round. Also separate from this, regarding the tax-exempt dividends that have garnered significant market interest, we're actively reviewing the procedures for implementation, including the submission of agenda items to the GSM and plan to proceed accordingly. This year, under the government's economic stimulus policy stance, including productive finance, the role of financial institutions in enhancing the dynamism of the real economy is expected to expand. Based on our group's diversified portfolio by proactively allocating resources to high value-added areas such as AI semiconductors and innovative SMEs, fundamentally transforming the group's business model and to secure future growth engines, we will continue to expand our customer base and business scope and seek to preemptively seize new opportunities amid a rapidly changing financial environment. Centering on subsidiaries with competitiveness in corporate banking and capital market business, we will identify and preempt additional growth areas and thereby build the foundation for future growth engines and at the same time, evolve into a reliable partner that directly contributes to the real economy of the nation. Through these management strategies of transformation and expansion, we plan to further enhance shareholder and corporate value by solidifying our profitability and earnings base while improving capital efficiency. Next, I will cover KBFG business results. First, our key words of 2025 group business results are as follows: First, the full normalization of bank earnings, which has been somewhat subdued due to 2024 one-off factors. Second, a business portfolio well prepared for the money move trend toward capital markets as demonstrated by a significant improvement in noninterest income. Third, enhancing cost efficiency through group-wide cost management efforts and optimal resource allocation. Fourth, while maintaining the broad framework of KBFG's proprietary shareholder return formula, this can be summarized as a flexible response aimed at maximizing shareholder and investor value, including a proactive expansion of the scale of shareholder returns and the achievement of a total shareholder return ratio at the highest level in the industry. As aforementioned, our group's 2025 annual net profit posted KRW 5,843 billion. And despite unfavorable conditions such as increased volatility in exchange rates and interest rates, earnings of core subsidiaries, including bank and securities expanded. In particular, the group's earnings power expanded as noninterest income grew significantly driven by capital market-related gains. In addition, 2025 ROE posted 10.86%, a 1.1 percentage point increase Y-o-Y, and the basic EPS earnings per share was KRW 15,437, representing an approximate 20% increase Y-o-Y. On the other hand, for Q4 net profit with the reflection of sizable one-off items, including Group's ERP costs and provisioning for penalties, including ELS as well as seasonal contraction in insurance performance, it declined significantly Q-o-Q. Now I will cover business results in more detail. In 2025, the group's net interest income amounted to KRW 13,073.1 billion, increasing slightly by 1.9% Y-o-Y. This is attributed to improved profitability despite concerns over margin pressure from the base rate cut cycle that continues through the first half, driven by growth in the average balance of the bank's loan assets and reduced funding costs through the policy to expand our core deposits. Next, I will discuss the growth of the bank's Korean won loans. As of the year-end 2025, the bank's Korean won loan balance stood at KRW 377 trillion, representing growth of 3.8% versus year-end of last year and 0.5% versus end of September. Within this, household loans increased by 3.7% versus year-end of last year and by 0.8% Q-o-Q as we pursued growth at an appropriate level under the government's household debt management stance. While corporate loans grew by 3.9% versus year-end of last year and by 0.4% Q-o-Q, supported by the steady expansion of loans to high-quality SMEs and increased lending to large corporates. Considering government regulations and the slowdown in housing transaction volumes, household lending is expected to show limited growth this year as well. Accordingly, taking into account factors such as our loan portfolio mix centered on productive finance, we'll continue to pursue household lending policies focused on improving profitability, and we plan to strengthen the corporate finance bank based growth framework by shifting our growth axis toward corporate lending. Next, let me move to the net interest margin shown at the bottom right. In 2025, the annual NIM of the group and the bank recorded 1.97% and 1.74%, respectively, representing a slight decline from the prior year. In the fourth quarter, the bank's NIM was 1.75%, up by 1 bps Q-o-Q as we flexibly adjusted the pace of the household loan growth despite pressure on the loan-to-deposit spread from the higher deposit rates and reduced funding costs through the establishment of an optimal funding mix, resulting in a slight improvement in NIM versus the previous quarter. And this year as well, based on our strong channel competitiveness, we plan to rigorously manage NIM by increasing low-cost deposits and through more sophisticated ALM management. Next, I'll discuss noninterest income. In 2025, the group's noninterest income amounted to KRW 4,872.1 billion, expanding sharply by 16% Y-o-Y. In 2025, the group's net fee income was KRW 4,098.3 billion, increasing by 6.5% or approximately KRW 248.7 billion compared to previous year. This was driven by a significant increase in brokerage commissions at the securities business due to the expansion of equity market trading value despite a decline in card fees amid the economic slowdown and also by meaningful improvements in the bank's fee income such as bancassurance and fund sales as well as trust-related income. In addition, capital market affiliates other than securities such as asset management and investment also posted fee income growth of 28.9% and 73.2%, respectively, compared to previous year, further supporting the expansion of the group's fee income. Meanwhile, fourth quarter net fee income is KRW 1,145.9 billion with securities leading to improvement through a substantial expansion in brokerage fees and IB fees and as fee-generating capabilities across affiliates improved overall, including trust income at the bank and asset management. Given the nonbank subsidiaries are driving approximately 70% of the group's fee income, KB will further strengthen the competitiveness of its capital market center nonbank portfolio in line with the government's policy direction to activate the capital markets, thereby further solidifying the fee income base. Meanwhile, other operating income in 2025 recorded KRW 773.8 billion despite the base effect from the reversal of non-life insurance IBNR reserves in 2024. It increased by approximately 120% Y-o-Y as a result of the efficient management of the securities portfolio, including expanded performance from the management of equity securities. However, in the fourth quarter, other operating income was somewhat weak quarter-on-quarter due to a decline in the bank income and securities amid rising bond yields, a decline in the securities business derivatives income as well. In 2025, the SG&A expenses totaled KRW 7,051 billion and due to ongoing cost efficiency efforts combined with cumulative effects of the ERP program implemented over the past several years, they increased by only 1.6% Y-o-Y. In addition, the group's CIR recorded 39.3% in 2025, reaching an all-time low supported by solid top line growth, ongoing improvements to our workforce structure and cost control efforts. And for the first time in the group's history, coming in below 40% on an annual basis, thereby demonstrating clearly improved cost efficiency versus the past. Meanwhile, fourth quarter SG&A expenses amounted to KRW 2,043.3 billion, increasing sharply Q-o-Q as seasonal factors were reflected, including approximately KRW 248.0 billion in group-wide ERP costs and higher advertising and promotion expenses. Going forward, KB Financial Group will expand investments in essential areas such as future growth fields, including AI and strengthening information security while continuing efforts to reduce recurring expenses in parallel to efforts to further enhance the efficiency of our cost structure. Next is Page 8, the group's provision for credit loss. In 2025, the credit loss provision amounted to KRW 2,318.7 billion, increasing by 15.6% or KRW 318.7 billion compared to previous year, and the group's credit cost recorded 48 bps in 2025. This was despite improvements in asset quality indicators and reduced provisioning burdens resulting from portfolio enhancement efforts and was due to the maintenance of a conservative provisioning stance across all subsidiaries to prepare for potential economic volatility, including delayed rate cuts. As such, we built additional provisions at an appropriate level from the beginning of the year. Based on the loss absorbing capacity, we have proactively secured and our conservative risk management stance. We expect to manage credit costs stably this year at a level in the low to mid-40 bps range. Next, I will discuss the group's capital ratios. On a preliminary basis, as of the year-end 2025, the group's BIS ratio recorded 16.16% and the CET1 ratio recorded 13.79%, maintaining industry-leading capital adequacy despite the downward impact from the increased year-end dividend. Meanwhile, in the fourth quarter of 2025, the group's risk-weighted assets stood at KRW 358 trillion, remaining at levels similar to the prior quarter and increasing by only 3.3% versus year-end of the prior year, thereby growing at an appropriate level within our target range. This year as well, while various factors such as interest rate and FX volatility may affect the RWA as demonstrated by our 2025 RWA growth rate, we'll continue sophisticate thorough group level RWA management strategy, including rigorous limit monitoring and portfolio adjustments in order to manage the growth rate at an appropriate level for the RWA. From the next page onward, you'll find detailed data on the results explained thus far. So please refer to those materials at your leisure. With that, we conclude the presentation of KB Financial Group's 2025 business results. Thank you very much for your attention. Jerry Kang: Thank you very much for the presentation. We will now proceed to the Q&A session. [Operator Instructions]. We will take the first question. From HSBC, we have Jaewoong Won. Jaewoong Won: Thank you very much for such good results in this challenging environment and also for your concern about the shareholder returns. So looking at your results, it's like I feel I received your New Year present. So I have 2 questions. First is that in the fourth quarter, the year-end cash dividend was actually larger than what we expected. So the cash dividend payout ratio should have been at least 25%, but I think you gave much more than that for a high dividend company. So is there any special reason for that? And my second question is the size was really larger than I expected, and that was really surprising. So 2 rounds of KRW 600 billion, I think that's been paid down. So looking at your disclosure, it seems that you're doing it in 2 rounds. What is the reason you're doing it in 2 rounds instead of 1 consolidated round? Jerry Kang: So while we are preparing the answer, please hold for a few seconds. Sang-Rok Na: So thank you very much for your congratulations as well as for your questions. You asked for the reason why there was a significant expansion of the year-end dividends, as you have said, one of the first reasons was that at the end of the first half of 2025, when we announced the second round of shareholder return amount, it was a total of KRW 850 billion at the time. The size of the shareholder return was actually larger than what we had expected initially. And so we lagged earnings for distribution. And so unavoidably, about KRW 100 billion was deferred to early 2026. That was announced previously through our disclosures. And so we have used that KRW 190 billion. And afterwards, we have continuously gave a lot of thought into how to use that KRW 100 billion, whether to do a cash dividend or whether to do share buyback. And so starting from last half, various policies from the government came out related to revitalizing the capital market, and there was introduction of the separation tax on dividend income. And so we have been looking at various options in about the right dividend yield. And so also, given the quickly improving PBR improvement trends, we thought that there should be some changes to the mix of the means that we use for shareholder returns. And thirdly, recently, the performance of our share prices have been really strong. And so in consideration of this rise in the share prices, we believe that there was a need for adjustment of the dividend yield. And that is the reason why these 3 reasons were the reason why we have decided on this decision. And so added to the KRW 900 billion, KRW 50 billion has been added in the addition. So KRW 575.5 billion has been decided as year-end cash dividend. So the total in 2025 for cash dividend was KRW 1,580 billion. So compared to last year, it's up by 32%. On annual DPS, it's KRW 436.7 billion. So compared to last year, there is about 3% increase. And this dividend payout ratio is 27%. So we have qualified as a high dividend paying company. But what's also important is that starting from last year, as we have said, we needed to establish ourselves as the people's most preferred dividend share. And in accordance with the corporate value program that we have announced, we will maintain that basic framework and the formula for shareholder returns. But we'll continue to look into different means and options in order to further enhance the shareholder value as well as the investors' value. So we'll maintain a flexible stance going forward, and we'll continue to ensure that our shareholders and investors benefit from the enhanced corporate value. I would like to answer your question about why 2 rounds. Well, regarding our first half share buyback was KRW 520 billion. And compared to that, it is true that we have the amount of share buyback that was much bigger. So we took that into consideration, and we took into consideration the timing or duration. It's because when we need to think about the funding for share buyback, we bought -- we believe that direct acquisition was better than a trust acquisition method. And when we have the direct acquisition, we need to buy the shares within 3 months. So that is why we believe that 2 rounds would be better. And an advantage to this is that within the year, we will continue with a share buyback. So there is that advantage. So that is why we decided to have 2 separate rounds of share buyback. So we have the KRW 600 billion of share buyback that was determined through today's BOD that will be done immediately. And we will have the rest of KRW 600 billion of share buyback that will be done additionally in Q2 after the BOD resolution. Thank you very much. Jerry Kang: We'll now receive the next question from Goldman Sachs Securities, Park Sinyoung, Center Director. Sinyoung Park: I'm Park Sinyoung from Goldman Sachs Securities. I have a question about the ROE target. So in your Value-up program, it says more than 10%. But previously, other peers have actually referred to their ROE target of 12%. And also in our case, already the nonbanking sector portfolio has become diversified. And this year's ROE is already reaching 11%. So going forward, what is your stance on a sustainable level of ROE? In addition, with your overseas business, the improvement in profitability, do you think this can actually help in terms of the ROE aspect? And what are the trends? Jerry Kang: So please hold for a few seconds while we prepare the answer. Thank you. Sang-Rok Na: So let me answer your question. Our mid- to long-term ROE target, we do believe that we have to upwardly adjust the target. In the case of last year, a lot of the discount factors for our share prices have been diffused and addressed. And so the valuation is going up. And so we need to also raise the value fundamentals at this point. So we are targeting ROE for more than 11% in the mid- to long term. And we do believe that the expansion of the leverage cannot be more than 10% as it has been done in the past. And so we do believe we have this task of raising the ROE target. But as we have noted, increased fee income, the increase in the noninterest income is very important for this. And also -- so we do believe that for the improvement of ROE, the improvement of the noninterest income is very important. And also recently, the profit generation by the nonbanking affiliates have actually coupled with the money move been very helpful. As you have mentioned, of course, in the case of the overseas business, any improvement in profitability will be very helpful as well. our KBI or [indiscernible] Bank, these overseas entities improvement in profit is actually becoming more visible, and this is very helpful. Jerry Kang: It seems that we do not have any questions in the queue, so we will wait. We will take the next question. From Mirae Asset Securities, we have Tae Joon Jeong. Tae Joon Jeong: I am Jeong Tae Joon from Mirae Asset Securities. Thank you very much for the good performance. Regarding shareholder return, I think it is quite positive. And I think you gave us a range of 40% to 50%, and it seems 60%. So maybe it will surpass that after a couple of years. So I just wanted to check that scope. Jerry Kang: We will answer that question as soon as possible. Please hold. Sang-Rok Na: I will answer that question. Regarding our corporate value enhancement program in the beginning, when we made our announcement compared to our peer groups, we were different because actually, we did not give a shareholder return ratio at a certain percentage. I think what we committed ourselves to was when we have an excess of a CET1 ratio that we had promised that we will use all of that as resources for shareholder return. So as was mentioned in that commitment, it is very open for shareholder return. So we have a very flexible and open shareholder return policy. Thank you. Jerry Kang: We have no further questions coming in. We'll wait for further questions. We'll receive the next question from Goldman Sachs Securities, Park Sinyoung. Sinyoung Park: I have one further follow-up question. With regards to your dividend policy, the separate taxation and also the capital reduction dividend, what kind of details can you share about these 2 topics? Jerry Kang: Please hold while we prepare the answers. Sang-Rok Na: So for these 2 issues, as I've already said, in order to establish ourselves as the most preferred dividend paying share stock, these are very important issues. And we have qualified for the separate taxation for the dividend income. And so starting from this year, the dividend that is being paid out, will be applied with this policy. And in the case of the capital reduction dividend, we have already made the preparations and we're nearing the completion of this preparation stage. But because it has not been fully finalized as of yet in the near future, we do believe that we'll be able to deliver good news in this regard. And so any changes in the mix of the dividend and the shareholder return policies, we will be making decisions that are beneficial for our shareholders and investors. Thank you. Jerry Kang: Thank you very much. We have Cho Jihyun from JPMorgan. Jihyun Cho: I have a question about guidance for 2026 for different indicators, if possible, because regarding asset quality, I think you gave us a provisioning goal. And can you tell us about what is the NIM interest rate, credit cost, last year's impact that will lead to this year's loan growth. So can you tell us about productive finance effect and SG&A pressure, I think it will be heightened. So can you tell us about any factors for SG&A boost? Can you tell us about the quarterly performance trend? And regarding the financing needed for shareholder return, what is the trajectory of CET1 do you expect for different quarters? Jerry Kang: Please hold and we will soon answer your questions. Unknown Executive: Let me cover the bank NIM. For 2026, well, for 2025, our CFO already mentioned that. So for 2026, household loan is expected to be restricted, and we will need to shift quickly to corporate finance. So we need to expand productive finance. So companies will have portfolio diversification, new growth, high profits and having a sustainable future platform. So in this situation, we will have corporate loan centered growth, but we will refrain from excessive price competition. So for asset profitability, we are going to actually safeguard some of that. And for 2026, for low-cost deposit expansion or having rebalancing of high interest rate loans, we will do our best to have the best portfolio so that we can have strategic financing cost expansion so that funding cost expansion, so we can manage the NIM. So I think we had KRW 10 trillion of net deposit -- core deposit that grew, and we will have similar growth this year as well. And we cannot really give you an accurate target, but for the NIM, low to mid-single-digit level of NIM, I think we expect a gradual decline of NIM for 2026. And for our asset growth, well, for the household loans, we think there will be some limitations. There will be some government policies regarding debt management. So that is why on a yearly basis, I think for the bank loan growth, it will be around 5% more or less. And for household loans, we think it will be around 2% to 3%. And for corporate loans, it seems that like last year, about 6% to 7% level is what we are anticipating. In the case of corporate loans, well, we think that there will be more competition intensification for that. So I think that we are thinking of special ways to quickly move to more profitable areas. So we are going to have those as our growth access and have portfolio diversification and have SME productive finance expansion and have a focus on blue asset -- and so -- and SOHO as well. So I think that is the asset growth that we are planning. Sang-Rok Na: I would like to add to the SG&A. And for this year, we have the education tax that will be increased. So there is a little bit of a more burden. So compared to 2025, we think it's inevitable that we will have SG&A growth. But we think it will be plus/minus 4% or 4% growth more or less. And I think on a recurring level, excluding the education tax increase, it will be around 2% that we will manage plus/minus. And then for CET1 ratio regarding the annual trajectory that we expect for 2025 from Q3 to end of the year, it actually went up. for last year at year-end, when we were managing the capital adequacy ratio, we believe that it should be at an appropriate level. It's because for this year, there will be active participation in productive finance. So we need asset growth based on that, and there is equity investment that will also go up as well. So taking all of these factors into consideration for the year-end CET1 ratio, we think it will be best for us to have it as high as possible for us to have asset growth and to have profitability. So we believe that there will be many variables such as FX and interest rate at the end of last year, but we were able to have a CET1 ratio that was hiked up with our efforts. And we think for this year, it will be a little bit different because there will be some similar movement, maybe a slight decline. And we think that it will not really move much. But with Q3, we believe that it will actually go up on an upward trajectory. Jerry Kang: We don't have anybody waiting in the queue for questions. So we'll wait for a little while for further questions. So we'll receive the next question. The next question is from Daishin Securities, Park Hye-jin. Hye-jin Park: I'm Park Hye-jin from Daishin Securities. I also have 2 questions. First, this time around, ELS and LTV related, what was the amount of provisioning provision that you have set aside? And secondly, you said you're reviewing the taxation for dividend income. If you look at in 2026, the total increase rate of the cash dividend, it's about 25%. So the dividend payout ratio should be 25%. And so the increase rate should be about 10%, but I think you're meeting that requirement. So in 2026, do you also plan on another surprise dividend payout in the fourth quarter as well? Jerry Kang: While we are preparing the answer, please hold for a little while. Sang-Rok Na: So with regards to the LTV, the provisioning is KRW 69.7 billion. In the case of the ELS penalty, it's KRW 263.3 billion that has been reflected already. Let me add to it a little bit. With regards to the provisioning that has been set aside, we are receiving the views of the external legal counsel as well as the experts. And as has been reported by the media reports, our exposure to the penalty is the largest. However, given our earnings fundamentals and also the stance of the regulatory authorities, we are able to manage this issue without damaging our capacity. So there might be some adjustment of the amount itself. What I'd like to, however, note is that this penalty issue is something that will be completely diffused within the year 2026. And so when that issue disappears, there will be a significant rebound. That is for sure. And also with regard to separate taxation and the dividend income, so you also talked about the increased rate of the dividend payout ratio for 2026. So we have 27% dividend payout ratio, and that's based on the 2025 levels. We are actually, however, step-by-step making upward adjustments. And as we have already noted, we're going to maintain a flexible stance when it comes to the shareholder returns. And so the year-end 2026 dividend may also go up as well. There is a possibility of that. And so we also have considered the capital reduction dividends. All of this has been considered together to reach this conclusion. Jerry Kang: We will hold in case we have more questions coming in. We have had a 40-minute earnings call till now, and we will hold. And if we do not have any additional questions, we will conclude today's business results presentation. If you have any further questions, please do not hesitate and contact our IR team, and we'll be more than happy to answer any questions you may have. It seems we do not have any further questions in the queue. With this, we will conclude our 2025 full year business results presentation. Thank you for your attention.
Unknown Executive: [Interpreted] Good afternoon, everyone. Thank you for joining the IR briefing for the third quarter of FY 2025 ending March 31, 2026, of Ajinomoto. I'm [ Gotou ] of IR Office. We have Mr. Kaji, the General Manager of IR Office, participating as the speaker. This session will be a 60-minute session. Mr. Kaji will present on the disclosure material, followed by Q&A. Please refer to the materials through the homepage of Ajinomoto IR site. Mr. Kaji's presentation will follow the presentation material. Please also refer to the financial summary and also forecast. This session will be recorded and to be posted on our IR site. We would like to start. Mr. Kaji, please. Masataka Kaji: [Interpreted] Hello, everyone. First, please turn to Page 2. This is the summary. For the first 3 quarters of FY 2025, sales, business profit and profit attributable to owners of the parent company all reached new record highs. In the Seasonings and Foods business, despite negative factors in Solutions & Ingredients, higher sales and profits were achieved overall, driven mainly by Japan and overseas seasonings as well as the Japan coffee business. In the Bio & Fine Chemicals business, Functional Materials recorded significant increases in both sales and profits. Bio-Pharma Services & Ingredients achieved higher sales and substantially higher profits, excluding the impact of the divestment of Ajinomoto Althea, Inc. For the full year FY '25 forecast, both business profit and profit attributable to owners of the parent company have been revised upward. Looking ahead to FY '26, in addition to achieving sustainable growth of Seasonings and Foods, we aim to realize significant growth in the Bio & Fine Chemicals business and challenge ourselves to achieve the 2030 road map ahead of schedule. Before going into the detailed explanation of the cumulative results through the third quarter, I would like to start by highlighting the key points of the third quarter. Please turn to Page 15. Page 15. This page shows the results for the 3 months from October to December. In the 3 months of the previous fiscal year, we achieved record highs in sales, business profit and profit attributable to owners of the parent company. In this fiscal year, during the October to December period, all businesses, including Seasonings and Foods, Frozen Foods and Healthcare posted sales and profit growth, enabling us to further accelerate our growth momentum. As a result, we significantly exceeded the hurdle set in the previous year and achieved new record highs. Business profit increased significantly to 115% year-on-year. Please return to Page 3. As a result, while both sales and profits were flat year-on-year through the first half, the acceleration in growth during the third quarter led to higher sales and profits on a cumulative basis through the third quarter, reaching new record levels. The sales amounted to JPY 1,164.1 billion, representing 101% of FY 2024 and 101% excluding currency translation. Business profit was JPY 145.9 billion, 105% of FY '24 and 105% excluding currency translation. Please turn to Page 4. This slide shows the GAAP analysis in business profit between FY '24 third quarter cumulative results and the FY '25 third quarter cumulative results. The left-hand side, the JPY 4.8 billion increase in profit due to change in gross profit due to change in sales was driven by higher sales in overseas seasonings, the domestic coffee business, functional materials and others. Regarding the JPY 18.6 billion increase in profit next to that due to change in gross profit margin, improvements in gross profit margins in overseas seasonings, domestic coffee business as well as the functional materials, pharmaceutical and food use amino acid and Bio-Pharma Services CDMO contributed. As for SG&A expenses, we are expanding investments in intangible assets and other areas to support sustainable growth in line with the 2030 road map. Please turn to Page 5. This slide shows an analysis of business profit by segment for the FY '25 third quarter cumulative results compared with the same period of the previous year. For reference, the lower part of the slide presents an analysis of the differences between the initial full year FY '25 forecast and the actual results of FY '24. In the Seasonings and Foods segment, sales increased overall, driven mainly by Japan and overseas seasonings and Japan coffee business, more than offsetting the decline in Solutions & Ingredients. Business profit, which had declined through the first half, rose significantly in the third quarter, resulting in higher profit on a cumulative basis. In Frozen Foods, while sales were roughly flat year-on-year, excluding foreign exchange impact, business profit declined, unfortunately. However, in the Frozen Foods business for the 3 months from October to December, effective measures taken in Japan proved successful, resulting in a return to sales and profit growth. As planned, the Frozen Foods business shifted into a profit recovery phase in the third quarter and performance is steadily improving. In Healthcare and Others, sales were flat overall. However, excluding the impact of the divestment of Ajinomoto Althea, underlying sales increased steadily. Business profit rose significantly overall, supported by a substantial increase in profits from Functional Materials as well as steady profit growth in pharmaceutical and food use amino acids and CDMO operations. Please turn to Page 6. I would like to provide some additional details regarding seasonings and processed foods. First, please see the left-hand side on Japan. In coffee products, the effects of aggressive price increases have become evident, resulting in a significant increase in sales. In addition, within Seasonings and Foods, the core menu-specific seasonings achieved close to double-digit percentage sales growth, making a major contribution to overall sales growth and the growth has accelerated across Japan as a whole. For the cumulative results through the third quarter, sales were 110% year-on-year with volume at 95% and unit prices at 115%. Excluding coffee products, sales were 104% year-on-year. with both volume and prices at 102%. For the 3 months from October to December, this is for domestic Japan. Sales reached 113% year-on-year with volumes 97% and prices at 116%. Similarly, excluding coffee products, sales were 108% year-on-year with volume at 106% and prices at 102%. Excluding coffee, for example, in December to -- October to December period, each subsegments product performance continued to be strong. Moving on to the overseas business to the right, the third quarter cumulative results are shown here, 104% year-on-year and 102% for volume and unit price, especially in 3 months from October to December, the growth is accelerating overseas, 106% growth in sales, out of which 104% for volume and 102% for unit price. The status of the 5 major countries, the separate document that outlines the performance results on Page 3 in the middle of this page, we have shown the 3 months local currency-based performance. Let me add some more comments. In Thailand, the overall 2% growth was recorded. Although exports of instant noodles to Cambodia were weak, sales of seasonings achieved mid-single-digit growth in local currency terms. Vietnam remained flat year-on-year for the 3-month period. While Tet New Year-related demand was recorded in the third quarter in the previous fiscal year, it will be recorded in the fourth quarter this fiscal year due to the timing difference. And we, therefore, expect an increase in demand in the fourth quarter. In the Philippines, during October to December, temporary factors such as typhoons and earthquakes affected. Despite these negative factors in some countries, overseas operations as a whole achieved 106% sales growth during this period. Please turn to Page 7. Based on the performance up to the third quarter, we have thoroughly reviewed our full year outlook and revised our fiscal year '25 forecast. Please also refer to the revised full year forecast by segment for the fiscal year ending March 2026 also provided to you beforehand. While sales have been revised slightly downward on an overall basis, we expect business profit for the food business as a whole, including Seasonings and Foods as well as Frozen Foods to steadily meet our initial plan, which we made public at the beginning of this year. The Healthcare and Others businesses have been revised upward, mainly driven by the strong performance of Functional Materials. Profit attributable to owners of the parent company has been revised upward. And as the gain on the partial sale of fixed assets disclosed separately today is expected to exceed the initially assumed amount, that is the reason why we decided to do an upward revision. Please turn to Page 8. So the upper section shows an analysis of the differences between the revised fiscal year '25 full year forecast by segment and the prior year results. So you do have the revised figures in brackets. And at the bottom, you can see the differences between the initial fiscal year '25 forecast and the prior year results. Please turn to Page 9. From here on, I would like to provide additional details on the Healthcare and Others businesses. Starting with Functional Materials. Sales of ABF for high-performance boards used in AI servers and networks have been performing strongly, leading us to revise our initial growth plan upward and expect a 28% increase in sales for the full year. Next, Page 10. As the first step to respond to growing demand towards 2030, we have constructed a new furnish production facility at the Gunma plant of Ajinomoto Fine-Techno. The new facility began full-scale operations in October 2025 and has started producing ABF furnish for cutting-edge applications. We will continue to build a supply structure that reliably meets robust demand while maintaining our high market share and solidifying our position as the industry's de facto standard. Next, Page 11. I would like to provide additional information on our biopharma business or CDMO business. Cumulative sales through the third quarter of fiscal year '25 has been in line with the company-wide plan. As for business profit, this is something that we have disclosed in the first half, but excluding consultant costs incurred at Forge for commercialization support that were not included in the initial plan, performance has been progressing as planned. In Europe, small molecule products are performing steadily, and we expect continued solid growth in the fourth quarter. In Japan, although profit declined through the third quarter, a large-scale shipment of AJIPHASE is planned for the fourth quarter, and we expect full year sales and profit to be in line with our plan. Forge in North America has been performing well, achieving both higher sales and higher profits. Its customer base continues to expand steadily, and the number of approvals for customers to initiate new drug clinical trials is increasing, driving strong revenue growth. Business profit was impacted by temporary costs associated with the accelerated commercialization efforts that were not initially anticipated. These are recognized in the first half. Including these costs, we initially aim to achieve profitability on an EBITDA basis in fiscal year '25. However, management has chosen to prioritize accelerating medium- to long-term growth over short-term targets, resulting in a slight downward revision to the full year plan. So this explains the slight downward revision for CDMO business. By leveraging our proprietary technological advances and responding steadily to customer needs, we will continue to build a track record and accelerate the growth of our CDMO business. Please turn to Page 12. Next, I will explain the progress of ASV indicators for each segment. For this fiscal year, ROE at the top is expected to be approximately 18% on a substantive basis, excluding the impact of the Forge acquisition and the sale of the head office. Organic growth is expected to be approximately 5%. The EBITDA margin is expected to reach 17%, in line with our road map. Page 13, the progress of ASV indicators by segment is summarized in this table. That concludes my brief explanation of our third quarter results and earnings forecast. Thank you very much for your kind attention. Unknown Executive: [Interpreted] We would like to move on to Q&A session. [Operator Instructions] First, Mr. Saji from Mizuho Securities. Hiroshi Saji: [Interpreted] This question, I must ask, Functional Materials third quarter, 42% sales increase, JPY 8.6 billion and JPY 5.3 billion increase and 57%. Any background or special reason or element? My interest is whether this is sustainable or not. Masataka Kaji: [Interpreted] May I reply one by one? This question was on Functional Materials. The third quarter sales and profit accelerated its growth, but are there onetime factors? That was the nature of the question. As of the end of September in Taiwan, there was a large-scale hurricane, and it was around the end of the month. So the shipment was partially postponed to October. However, there is a certain impact from that. But overall, this business in the third quarter was extremely strong. Hiroshi Saji: [Interpreted] How about the sustainability? Masataka Kaji: [Interpreted] After this, towards next fiscal year, Mr. Nakamura referred to this point when we conducted briefing for the first half, the high-end demand is extremely strong. And currently, any individual negative factors, whether we hear them right now, well, actually, no. So that is the present status. 2 percentage point improvement, 57% of business profit margin, that is thanks to the growth of the high-end area. Yes, the product mix shifted favorably. So that is the major factor. Hiroshi Saji: [Interpreted] Will this be sustainable? Masataka Kaji: [Interpreted] Yes. On a quarterly basis, fourth quarter usually have some seasonality. So quarter-by-quarter, there may be some variances. But overall, we are seeing strong growth in the demand at the high-end area, and we are able to supply to that demand. That generates positive impact, and we intend to continue to work on this area. Hiroshi Saji: [Interpreted] And briefly, just one comment. The Umami seasoning JPY 2.8 billion decline of the profit. It seems that the decline is expanding from JPY 1.8 billion. What are the updates there were? And how should we understand this number, JPY 2.8 billion? Masataka Kaji: [Interpreted] We are implementing various measures, for example, to improve the efficiency using new fermentation bacteria. In addition to first half measures in the future as well in various sites, we are going to implement various measures. That remains the same. Currently, the market price of the raw materials have settled down. Considering the current situation, the market shift of direction is rather difficult to foresee. Based on such assumption of the market trend and as the overall food market in order to achieve sustainable growth, we are to implement various measures. Hiroshi Saji: [Interpreted] 11% for full year, for total Solutions & Ingredients, you have made downward revision, but the revised number is achievable? Masataka Kaji: [Interpreted] Yes, as the business, the market trend will recover. The raw material cost decline, one cycle will be completed. And after that, the market will settle down, and we will react to that and take measures. On the other hand, the effect of the low raw material cost is seen in the B2C business. It includes Umami seasonings for processing as well. And we are able to increase the profit margin steadily. Unknown Executive: [Interpreted] Next question from SMBC Nikko Securities, Furuta-san. Tsukasa Furuta: [Interpreted] This is Furuta from SMBC Nikko Securities. I have one question regarding CDMO. As you mentioned, there is a large shipment expected in Japan in the fourth quarter. So we are expected to grow sales there in the fourth quarter. However, when it comes to the progress that has been made, are we having a clear picture of the actual progress that is being made? Are we sure about this? Masataka Kaji: [Interpreted] So this is something that is being scheduled with our customer. So the fourth quarter is just 1 month, 2 months down the road. So we are, yes, expecting this large shipment, especially AJIPHASE in Japan will lead to higher revenue and higher profit, and this is for sure. Tsukasa Furuta: [Interpreted] So as you mentioned, that is expected, but maybe there is going to be some kind of postponement and there is going to be an unmet target for the full year. Are there any such risks? Masataka Kaji: [Interpreted] Well, in the third quarter, this time around, each business performance has been scrutinized, and we came up with this revised plan. Therefore, we believe that we are having an accurate outlook on the situation and the revised numbers reflect our perspective on that matter. Unknown Executive: [Interpreted] Moving on to the next question, Morgan Stanley MUFG Securities. Tomonobu Tsunoyama: [Interpreted] I'm Tsunoyama of Morgan Stanley. I have 2 questions. First is on food business. The Umami seasonings for processing, you have reduced the plan. But in other areas, you have made upward revisions by about JPY 8.6 billion. What are the gap with the assumptions? Can you explain in more detail? And also the Umami seasonings, the competition is becoming fiercer. Is it going to impact your B2C business? Or you don't have to be concerned about that? What is your view on that? Masataka Kaji: [Interpreted] In the food business, this time, the -- looking at the third quarter results in each country, in various countries, there are impacts of fruits from the initiatives, and we are able to grow volume and necessary price increase were implemented and mix improvement impacts are generated. We expect this to be sustainable. That is the major factor. In addition to that, we covered this topic in the first half, the Umami seasonings for processing, the global B2C market is staying soft. On the other hand, for our Seasonings and Foods segment, there are cost benefit including those factors as the overall food business, strong full year forecast upward revision was possible. Tomonobu Tsunoyama: [Interpreted] For Umami seasonings for processing, any impact to B2C? Masataka Kaji: [Interpreted] As you have seen from our results, there is no particular impact that we expect to see. Tomonobu Tsunoyama: [Interpreted] I see. In Thailand, the situation is the same. There were flood, but the third quarter started to improve. So we don't have to be concerned about that. Am I right? Masataka Kaji: [Interpreted] Regarding Thailand, it wasn't actually flood. It was the instant noodle risk exported to Cambodia. That risk remains. And that is the factor pushing down the overall volume. When we just look at the seasonings, it is the growth of mid-single digit. So the trend right now does not require a lot of concerns. Tomonobu Tsunoyama: [Interpreted] The second question, Bio-Pharma, CDMO. In the fourth quarter, the profit is higher than JPY 4 billion. The level will be rather high. AJIPHASE, is that the major impact? Is it a onetime factor? Or is it due to the capability? Any context of this level for CDMO? Masataka Kaji: [Interpreted] Firstly, on slide, please turn to Page 11. Low molecule, this area, the trend is very positive. And Forge, top line is very strongly growing, and the improvement of the revenue is steadily progressing. And for AJIPHASE, on quarterly basis due to the timing of the shipment, there were ups and downs, creating concerns to investors. But on a full year basis, it is in a trend with very high top line and bottom line growth that we expected, and that is sustainable. Please understand that there will be concentration in the fourth quarter. Tomonobu Tsunoyama: [Interpreted] JPY 1.5 billion downward revision this time is the upfront cost mostly? Masataka Kaji: [Interpreted] Yes. Consulting fee is the major factor. Unknown Executive: [Interpreted] Next, this is from the English channel. McLeish-san from Bernstein. Euan Mcleish: So obviously, the ABF results were very, very strong in the third quarter. But each quarter, you seem to be getting less margin uplift relative to the revenue growth than you were in prior years. Is this a factor of the increased depreciation from the Gunma expansion? Or have there been some other changes to the cost structure in the ABF business? Masataka Kaji: [Interpreted] Yes. Thank you very much for your question, McLeish-san. Yes, new facility has been built. Therefore, depreciation has gone up. However, the cost structure or revenue structure remains unchanged. This business, as I mentioned in the first half, ABF and also other related areas with new product development, these are ongoing. So R&D goes up and down quarter-by-quarter. So that is one of the factors that is leading to the margin trend that you referred to. However, in conclusion, there is no change in the revenue structure. Euan Mcleish: Okay. That's very helpful. And maybe turning to the Americas Seasonings and Foods business. It's good to see the revenues back in growth, but there's still a lot of margin contraction in that business. Can you help us understand what's impacting the margin contraction in the Americas Seasonings and Foods, please? Masataka Kaji: [Interpreted] Thank you very much. So in the Americas, Seasonings and Foods. So if you refer to the document, Page 3, regarding the performance by region, you have a matrix. And please look at Seasonings and Foods and a big portion would be Latin American business. And within it, we have Umami seasoning for food processing. We have a large facility in Brazil for production, and there was a negative impact that significantly affected the final number. Euan Mcleish: So you talked about the Brazilian factory having some problems in the second quarter, but then I thought that had been all resolved. So is this something different to the downtime of the Brazilian factory? Masataka Kaji: [Interpreted] No, it's not that the downtime continued. But in the third quarter, we are still seeing a challenge because the market has not improved yet. So the market condition has not improved. That is the reason. Unknown Executive: [Interpreted] Moving on to the next question, BofA Securities, Sumoge-san. Manabu Sumoge: [Interpreted] I'm Sumoge of BofA Securities. My first question I would also like to ask about Seasonings and Foods. When we look at regional breakdown, if the calculation is correct, in Japan, JPY 3.9 billion increase of profit is achieved. The pricing and the volume you have explained and JPY 3.9 billion increase in profit in the third quarter. Can you break them down into factors? Masataka Kaji: [Interpreted] Thank you for the question. In Japan, although I cannot talk about the details, roughly speaking, domestically, coffee business, AGF profit grew significantly and so-called Japan domestic seasonings business, I briefly touched upon this. Cook Do and Koa-mi series, these are very popular, and that generated a significant profit increase. And also soups, we introduced new products. Sakusaku de Copan is the product name, that is very popular. And those are the factors contributing to increase of the profit. The major core categories are contributing to profit growth. So that led to major profit increase overall. Manabu Sumoge: [Interpreted] In the second quarter, the profit of the Seasonings and Foods in Japan slightly declined. And towards the third quarter, what changed mostly? What are the main factors? The changes from the second quarter, what are the points? When you look at the prices and volume, the third quarter is slightly strong. But given the magnitude of the profit increase, I am not really digesting the reason. Masataka Kaji: [Interpreted] First of all, coffee products, the improvement is continuing, and this is further improvement in trend from the second quarter. The very good initiatives are underway, and those are bearing fruits. On the other hand, seasonings-related area on quarterly basis, there are ups and downs. But from 1 or 2 years ago, we have been making challenges and changing the corporate culture so that we will make more challenges, and that is continuing. New products and services are being proposed to the retailers. And various transactions are activated, and these are generating good impact to existing products as well. And the many specific seasonings, the general prices are rising and consumers are being -- trying to be creative in managing their finances. So with reasonable food raw materials, they are able to cook balanced meals, and we are making very proactive proposals and the fruits of such efforts have materialized in a concentrated way in the third quarter. Manabu Sumoge: [Interpreted] Next question. The profit contribution, you disclosed a half year basis for Japan and overseas. The gross profit increase through volume increase or SG&A or cost increase. In terms of the broad breakdown, this time, what was the Seasonings and Foods segment? Masataka Kaji: [Interpreted] On Page 4, the business profit analysis is shown. It's hard to carve out just Japan business because we look at the seasonings business on a global basis. But generally speaking, 2 items in the left, they are growing in good balance. So there were price increases and new products were launched through making challenges, and that is leading to better product mix. And from second to third quarter, major profit increase was achieved. Good impact is felt among the existing products as well. So overall, we are able to proceed with good initiatives. Manabu Sumoge: [Interpreted] And my second question, in the fourth quarter, the plan has been revised and calculating backwards, this Seasonings and Foods, the increase of profit will further accelerate. Third quarter, JPY 3.3 billion and fourth quarter, nearly JPY 6 billion. So Seasonings and Foods further accelerate and Solutions & Ingredients will turn to profitability in the fourth quarter. Are these numbers already visible? Masataka Kaji: [Interpreted] As I have said before, there's only a few days remaining for the current fiscal year. So our forecast is quite accurate in our forecast. As you correctly pointed out, in the fourth quarter, the seasonings, the strong profit growth will continue. Partially last year, fourth quarter, overall, there were some excess capacity. So we have introduced various measures proactively. In other words, expenses rose in the fourth quarter last year, but this year, it has evened out. So that is another factor in expecting strong performance. And Solutions & Ingredients in the third quarter, we -- our plan assumes some upside. As was commented previously, we have introduced new fermentation bacteria in some of the plants, and that is generating fruits. And we are seeing some end of the cycle. So in fourth quarter alone, we have expectations of a flat or slight positive. Unknown Executive: [Interpreted] Moving on to the next one. From Citigroup Securities, Watanabe-san, please. Hiroki Watanabe: [Interpreted] This is Watanabe from Citigroup Securities. So in the third quarter, profit increased in Japan. I have one question related to that. And the second one is related to the building and land sales of your headquarters. So for the first point, you mentioned that coffee increase in sales has contributed greatly. That said, however, the raw material cost has increased, and that is having a strong impact on the situation. So in the overview on Page 1 at the bottom, it talks about negative JPY 3 billion relating to material cost increase and mostly coffee, I believe. But however, you are being able to achieve increased profit. So I'm not sure what is a contributing factor in the business. But if the coffee bean price will stabilize, then probably we could see more profit increase in the next year or maybe not. So what kind of measures are you putting in place for the coffee business overall? That is my first question. Masataka Kaji: [Interpreted] Yes. Thank you very much. As you rightfully pointed out, year-on-year, Japan's coffee business is still seeing an increase in material cost. However, this is a trend that happened in the first half and is accelerating. However, customers are very understanding of the matter, so we are able to make price adjustments. That has led to the performance that you are seeing. That is one. In addition, and I have explained this several times that one of our strengths is stick-type coffee. So the current situation is seeing an increase in our market share. So in the domestic market in Japan, we have the #1 share in stick-type coffee. So the product mix has improved, and that has had an effect on the increase in profit. And -- in the first half, Masai, the General Manager of Food BU mentioned that AGF and our group as a whole are very determined to talk with our customers, have points of contact and make meaningful proposals. This has been an ongoing effort, and our customers are stuck with us because of such activities despite the challenges that we are currently seeing. So talking about next year, maybe this is not the right timing to talk about what would be expected, but these good activities that we have been conducting will continue on into the next year so that we can have a sustainable growth going forward based on a solid foundation. Hiroki Watanabe: [Interpreted] Okay. Understood. Second point. So JPY 45.1 billion was the selling price for your land and building of your headquarters, and you are going to deliver it on 27th of February. So I do acknowledge that this will be the case, but the cash generated, which would be coming in, of course, you had a target of meeting JPY 90 billion cash level by the end of 2026, but maybe you have even more. So what are your plans for the cash that will be generated? Masataka Kaji: [Interpreted] Thank you for your question. Our way of thinking remains unchanged. Thankfully, as you can see in our third quarter results, our business is going on very well. Therefore, regarding the one-off cash in generated by the sales of our head office, yes, we will have abundant cash. And in the first half, we mentioned share repurchasing in addition to what we had already announced. So all these are ongoing. But there are only limited measures that we can take within this fiscal year. So we initially targeted for JPY 90 billion, but the cash position may slightly go up beyond the initial target at the end of this fiscal year. That is as much as I can say on this matter. But our way of thinking remains unchanged. We will not keep the excess cash. We will make sure we utilize them. You have our expectation here. So please keep that in mind. Unknown Executive: [Interpreted] We would like to take questions from 2 more people, Ihara-san from UBS Securities. Rei Ihara: [Interpreted] I'm Ihara of UBS Securities. I have 2 questions. First is the Frozen Foods business in the U.S. In the first half, the sales promotion was not possible. But from the second half, you said that you're going to focus more on the sales promotion, but the sales of the frozen foods in the third quarter is not really growing. So please explain the present status of this business. Masataka Kaji: [Interpreted] Let me answer one by one. First, in the U.S., as you can see, the third quarter, both top and bottom lines are not actually growing. But in the fourth quarter, we expect strong increase in the profit. There was a major promotion in the previous period, and that is scheduled in the fourth quarter, and we expect impact from that. On the other hand, the current period, October to December period, the business initiatives are being operated in a good way. However, unfortunately, in November, there was a government shutdown in the U.S. and low-income households food subsidy program was temporarily stopped, and there was a confusion. So November was a difficult month. December performance was very good, but there was an impact of November in the third quarter results. Rei Ihara: [Interpreted] I understood. My second question is in the medium- to long-term ASV management 2030 road map, the March '26 is the interim period was 2030 road map. And what were successful beyond expectation? And what are the challenges? And in the full year financial results of March '26, do you plan to update the indicators for ASV 2030 road map? Masataka Kaji: [Interpreted] First, on the review of the road map, I'm not in the position to make a comment because this is a third quarter result briefing. And once again, in the full year result briefing, Ihara-san, please raise your question again. When you look at the current financial results, the Forge acquisition, which was not included in the road map and also there were other special factors and 18% ROE was the initial target as the interim year, and we are close to achieving this target. Organic growth, although there are ups and downs, currently, we are likely to achieve 5% growth. So we are steadily implementing initiatives. And on Page 12, there are indicators listed. And as the interim results, FY '25, we are in a good place in terms of achieving numerical targets. The background and future outlook, please ask this question to Nakamura-san later. How are we going to do with the road map? The first half briefing slide was rather difficult to understand, and I'm sorry for that, but we plan to apply on a rolling basis. There is one slide that explains that. Rei Ihara: [Interpreted] If you have time, please review. Masataka Kaji: [Interpreted] The timing is not being communicated accurately. But 1 year later or 2 years later, we will do the rolling adjustments towards 2030. Rei Ihara: [Interpreted] ROE target 20% at 2030. On this target, 18% to 20% gives the impression that the improvement is rather small, but are you going to achieve earlier than the schedule? Are you going to be aggressive? Masataka Kaji: [Interpreted] We have not been communicating on individual items. But overall, the vision towards 2030, we strive to achieve earlier than 2030. And that is the determination of all of the employees to accelerate all of the initiatives. Rei Ihara: [Interpreted] There were personnel changes, and you have made bold changes this time towards 2030, shall we expect new news will be announced? Masataka Kaji: [Interpreted] Please expect -- keep expectations high from various perspectives. Unknown Executive: [Interpreted] So from JPMorgan, Fujiwara-san, please ask your question. Satoshi Fujiwara: [Interpreted] This is Fujiwara for JPMorgan. I have a question regarding Healthcare, Bio & Fine Chemicals business. In the fourth quarter, AJIPHASE is going to make a contribution and Forge is growing steadily. So that is expected. But when it comes to the gene therapy, this market is going to grow going forward, we believe. Of course, there's going to be some ups and downs quarter-by-quarter. But if you level it throughout the year, maybe the contribution to profit growth would be higher going forward. Would you agree? Masataka Kaji: [Interpreted] So this is not something that we have already disclosed. So it is hard for us to make a comment at this point. But the CDMO business will see a contribution from Forge going forward. And AJIPHASE,, this is based on proprietary technology that we have pride in. So we believe that the profit will grow going forward. And when it comes to small molecule in Europe, we have, again, unique technology and production process. And therefore, we have unique technologies focusing on specific areas. We would want to be asset-light in this business. So going forward, in terms of profit contribution starting from next year, I think you would see a steady contribution. Satoshi Fujiwara: [Interpreted] So in the fourth quarter, AJIPHASE, with regards -- this is going to be factored in, in the fourth quarter just because of the timing. And therefore, you have a very strong fourth quarter. But if you see it throughout the year, you are growing steadily. And in Healthcare, ABF, so in the third quarter, margin improved. So it was a product mix improvement and the new generation products increased shipment, thereby improving the margin, I believe. But for your company, when it comes to price increase, has this happened before? Or are you planning to do so? I want to ask you about the price revision. Masataka Kaji: [Interpreted] As -- Fujiwara-san mentioned, you are talking about simple price increase, correct? Satoshi Fujiwara: [Interpreted] Yes. Masataka Kaji: [Interpreted] So this is same as the policy company-wide. When material cost increases rapidly, and we cannot absorb this cost increase internally, then we will start negotiations with the customers regarding price increase. However, the current situation is not requiring us to do so. Therefore, a simple price increase is not something that we are currently considering. Satoshi Fujiwara: [Interpreted] Okay. Understood. And one more thing, just quickly. So Umami seasoning for food processing, S&I is the subsegment. And in the fourth quarter, if we compare year-on-year, this might not contribute so significantly. But looking back in history, it was a loss-making business at some point, maybe a decade ago or so. So when comparing the situation now to then, what -- do you have any concerns or risks regarding this business again going into the red? Masataka Kaji: [Interpreted] Well, I cannot say anything for sure. But looking at the trend of profit for over a 5- to 10-year period, I think we have shown a steady track record in terms of margin. So this is a business that is profitable, and we have a business structure that supports such profitability. So we don't have such concerns at this point in time. Satoshi Fujiwara: [Interpreted] So year-on-year, you have bottomed out. And so fourth quarter will be the bottom maybe. And you don't know when the recovery would happen. And in the short term, maybe there's going to be volatility. But when it comes to the overall company performance contribution, it's not going to pull the performance down, right? Masataka Kaji: [Interpreted] Yes. If you just look at the third quarter figures, you see that the profit has gone down. However, if you see the forecast, the seasoning and the processed food is going to rise. And therefore, the overall Seasonings and Foods business has a very solid business foundation. I hope you understand. Satoshi Fujiwara: [Interpreted] Yes, if we look at the segment overall, that is true. But when it comes to external sales, I want you to decrease that ratio and make sure that you accelerate your improvements. Unknown Executive: [Interpreted] So it's time for us to close, but there is one more question. So we will take that question. Morita-san from Nomura Securities. Makoto Morita: [Interpreted] I'm Morita from Nomura. I'm sorry to join belatedly. I have just 1 question, especially related to Asia seasonings business, can you talk about the pricing strategy and cost? Yesterday or day before yesterday, I was looking at PepsiCo's financial results, and they are saying that they need to reduce the prices of potato chips. Is it because of the reaction of consumers to price increases? Considering your business, have you started such discussion yet? Or have discussions been started? Masataka Kaji: [Interpreted] Morita-san, thank you for the question. Overseas consumers, the seasonings for them, we have extremely strong trust from customers. So we have such a strong platform in the past on a sustainable basis, regardless of the economic growth status. Well, I believe I showed the graph on Thailand for more than decades. Regardless of the economic fluctuations in Thailand, our seasonings continue to grow both sales and profit-wise. The characteristics of our product and the positioning of our products in the market and the assessment by customers looking at those factors comprehensively. The situation that you have just talked about is not being experienced by the company. Looking at the numbers up to the third quarter, overseas seasonings business, it has accelerated to first, second and third quarter, and the sales is growing. The situation that Morita-san referred to is not being experienced by the company. Makoto Morita: [Interpreted] Towards next fiscal year, you are able to further pursue margin improvement? Masataka Kaji: [Interpreted] On the next fiscal year, it is difficult to share concrete information. But basically, we present the road map, which is the basic thinking. The value-add type of products are highly valued by the customers. And through mix improvement, we aim at improvement of profitability and using rolling forecast and other elements, and we have internal meeting structure, and we are evolving and making various changes and creating strong platform. Unknown Executive: [Interpreted] Thank you very much, Morita-san. So we will hear from Kaji-san, who will give a final word. Masataka Kaji: [Interpreted] So thank you very much for staying with us for a long period of time. The third quarter saw a lot of progress. And going forward, we would like to make sure we take steady steps in achieving the road map, and this is going to be a company-wide effort towards that goal. I ask for your full support. Thank you very much. Unknown Executive: [Interpreted] With that, we would like to finish today's call. Thank you very much for your participation. Good night. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Linda Palsson: Good morning, everyone. Earlier today, we released AFRY's Q4 and Full Year 2025 Results. And I'll start by taking you through the main highlights from the report, and then I will hand over to our CFO, Bo Sandstrom, who will share more details on the financials. So let's begin with a brief overview of the full year of 2025. To summarize the year, it has truly been a year of laying the foundation for sustainable and profitable growth for AFRY. Since I took on the role as CEO a year ago, we have moved quickly, implementing a new simplified group structure and launching an ambitious restructuring agenda. This has enabled us to initiate harmonized ways of working across the business and measures to improve operational efficiency. In November, we introduced our new focused strategy, unlocking AFRY, which aims to realize the full potential of our company. Alongside this, we also introduced new financial targets for 2028. So as we enter 2026, we are already well underway in executing on our strategy. And while we have driven change across the organization, it has been absolutely essential for us to maintain the business momentum and continue delivering to our clients, which remains our top priority. This has meant a strong focus on capturing opportunities in sectors with significant growth potential. At the same time, we have navigated challenging market conditions in several of our segments this year. Global uncertainty has remained high, impacting the overall investment sentiment across many sectors. We have also adjusted capacity throughout the year in line with our strategic priorities, which includes market-related capacity adjustments. This has, together with the significant currency effect had an impact on our sales development for the full year. We also experienced a weak calendar during 2025, which impacted EBITA by minus SEK 128 million, while the calendar adjusted EBITA margin was in line with last year. Based on AFRY's financial position and results for the year, the Board proposes a dividend of SEK 6 per share for 2025. So taking a closer look at the fourth quarter, we are now seeing clear steps in the right direction. We strengthened our order backlog, which increased 5.4% adjusted for currency. And while sales growth levels remain pressured, the EBITA margin, excluding items affecting comparability, improved to 8.7%. And I was also glad to see that the utilization rate increased year-over-year for the first time in 14 quarters. This reflects our strong focus on operational efficiency and our commitment to improving this metric. In the quarter, we also made significant progress in our restructuring agenda to optimize our portfolio and adjust capacity. And finally, we ended the year with a strong cash flow and strengthened our financial position, which gives us a solid foundation as we enter the new year. So let's go into the market environment and the performance of our global divisions, starting with Energy. As we have seen for quite a while, the overall demand in the global energy market is strong, and we have a stable order backlog development in the quarter. The demand is particularly strong in areas such as transmission and distribution, hydro and nuclear power. At the same time, we are seeing some regional variations in some of the segments. And this, together with significant currency effects impacts the sales in the quarter. Profitability remains at high levels, supported by strong project execution in several of our segments. Turning to Industry. The market remains mixed. This is the division where we see the most impact from global macroeconomic and geopolitical uncertainty, which continues to weigh on market conditions. At the same time, defense-related investments are driving strong demand in several areas, and the mining and metals market remains solid, pulp and Paper, however, continues to be soft. We have negative sales growth in the quarter. But despite this, we managed to improve profitability, which is a result of the restructuring efforts that we have implemented in the division. And then finally, turning to our third global division, Transportation & Places. Here, we see that the transport infrastructure market remains globally strong with public investments remaining stable across the division's markets. Demand in the real estate sector remains low with activity shifting more towards refurbishment, public sector projects and investments related also here to defense. The decline in the net sales for the quarter is driven by capacity adjustments to mitigate the weak market in parts of the division. And this also impacts the EBITA margin. But looking forward, this division has an important and exciting strategic journey ahead. And that's why I'm very pleased to introduce our new Head of Division, Richard Beard. Richard joined AFRY just a couple of weeks ago as the new Head of our Global Division Transportation & Places. And Richard, he brings extensive experience from leading global businesses and his deep understanding of our industry makes him an excellent fit to lead this division going forward. He also has a strong background in leading transformational change, and I am convinced that he will be a great addition to AFRY's executive team. So welcome, Richard. Now I would like to talk a bit about some new client contracts that we won during the quarter. To start with, AFRY was awarded a contract by MEPCO for project management services related to their new paper machine line. We have been involved in the project from the development stages, and now we are continuing with assignments to secure successful completion of the project. And as you know, Pulp and Paper is an area where we have globally leading expertise, and this is a great example of how we support clients throughout the full life cycle of large-scale projects. We also have a very strong and long-standing collaboration with Vattenfall. So it's great to see that we now have signed a new framework agreement with them. The agreement covers technical consulting services for nuclear, hydro, and wind power across several areas and regions of Vattenfall's operations. So this will be a very important agreement for us going forward. And in Switzerland, we continue to strengthen our position in the transport infrastructure market as we were selected for the expansion of the Lotschberg railway tunnel. This project is a part of a large national initiative to strengthen sustainable transport through the Alps, and we were very happy to support with our railway engineering expertise. And speaking of our ability to win new contracts and stay competitive on the global market, I would like to mention another highlight from the quarter. The new 2025 ENR ranking of top engineering and design companies confirms AFRY's global leading position in the key segments. We maintained our strong positions in the overall industry and energy sectors, placing us #6 in both categories. It was also encouraging to see that we continue to hold a market-leading position in pulp and paper. We advanced significantly in the hydro category, moving up to #3. And for the first time, we made top 10 position in the solar category. This ranking helps us strengthen our long-term relationships with our key clients as a trusted partner. And they serve as an important proof point in connection to new clients to prove our global capacity and provide full life cycle offering. Another central element of our strategy that I want to touch upon this quarter is our attractiveness as an employer. As we are going through a period of significant change as a company, it's especially important that we closely monitor employee satisfaction and engagement. And our focus on leadership and culture is a part of our DNA and a key priority for us. And we continue to see that our employee reputation is strong. In Universum's most recent ranking, AFRY was recognized as one of Sweden's most attractive employers. We also track our attrition rate closely, and it's encouraging to see a steady decline in group attrition since 2022 and that we've been able to keep it stable throughout this transformation journey. We are confident that our strategic direction creates clearer benefits for our employees, providing exciting projects with leading clients and global development opportunities. Our healthy attrition rates reinforces our confidence in this direction as we continue to focus on attracting and retaining the best-in-class engineers and advisers. And with that, I would like to hand over to you, Bo to talk a little bit more in detail about the financials. Bo Sandstrom: Thank you, Linda. So I will cover the financials for Q4 and full year 2025. Quarter 4 showed net sales of SEK 6.6 billion and EBITA, excluding IAC of SEK 577 million. On rolling 12 months, we closed the year at SEK 25.8 billion on net sales and remain right below SEK 1.9 billion on EBITA. For the full year, development compared to last year, we carry significant negative currency and calendar effects, explaining approximately SEK 700 million on net sales and SEK 190 million on EBITA. In Q4, with a net sales of SEK 6.6 billion, we report adjusted organic growth of negative 4.3%, where volume is pressured by capacity adjustments related to our high-paced restructuring agenda. We maintain a positive underlying pricing, but the market price pressure in some segments seen in Q3 continue in Q4, and the average price development is somewhat lower than seen in the beginning of the year. Total growth is reported at minus 6.2%, affected materially in the third consecutive quarter by FX movements from a strengthened SEK earlier in 2025. The negative adjusted organic growth in Q4 was sequentially somewhat lower, but materially in line with what we saw in Q3. Global divisions, Energy and Industry both saw small sequential improvements from low levels, where in particularly Industry continued to experience a challenging market but is starting to move out of extensive restructuring. Transportation & Places showed sequential decline, mainly related to capacity adjustments in Q4. The order backlog continued to develop favorably and is reported at SEK 20.4 billion, improving to last year and in line with last quarter. Currency adjusted, the backlog has improved 5.4% to last year despite strong comparables in Global Division Industry in Q4 '24. Given current currency headwinds and our restructuring efforts that are ongoing, we're particularly happy to see a solid backlog development in all our 3 divisions. EBITA, excluding IAC, is reported at SEK 577 million with no calendar effects. The EBITA margin was at 8.7%, an improvement from 8.3% last year. Currency movements have limited impact on the EBITA margin, but in absolute terms, we estimate a negative currency impact of SEK 20 million on EBITA compared to last year. Global divisions, Energy and Industry support the margin development of the group. And particularly for Industry, we see positive trends that the division is coming out of the restructuring agenda with improvements in utilization, supporting the EBITA margin development. The year-over-year margin improvement in Energy and the decline in Transportation & Places reflect normal quarterly fluctuations in our project business. On utilization, we report a utilization of 72.8% for Q4, the highest in 2025 and an improvement of 0.5 percentage points to last year. This is then the first quarter in 14 quarters where we report an improvement to last year, and it marks an important step for our strategic efforts to improve operational efficiency in AFRY. We will continue our focus on improving this metric throughout 2026. We report SEK 161 million restructuring costs as item affecting comparability in Q4, bringing our total to SEK 192 million in the ongoing restructuring program. The restructuring costs, again, primarily relate to redundancies across the group. We make significant progress in our efforts to reshape the portfolio. And as we move into 2026, we will intensify our efforts on addressing the cost base. With 2 quarters to go in the restructuring program, we estimate that total restructuring costs will be at the upper end of our guidance of SEK 200 million to SEK 300 million. With Q4, we report our estimated calendar for 2026. We estimate that calendar will have a small but positive effect to EBITA, particularly in the last quarter of Q4 of 2026, that is. As anticipated, we carried a very strong operational cash flow in the fourth quarter. Cash flow from operating activities in Q4 was in line with the record high Q4 2024 and was particularly strong given the heavy restructuring agenda that we currently carry. Available liquidity increased to SEK 4.4 billion. Net debt fell below SEK 4 billion. Deleveraging to close the year was at 2.5x. And that was then straight on our financial target. We go into 2026 with a solid financial position, and the Board proposed an unchanged dividend of SEK 6 per share for 2025. With that, I leave back to you, Linda. Linda Palsson: Thank you, Bo. Now I would like to wrap up the presentation by summarizing our main messages from the quarter and share our key priorities going forward. We are now starting to see results from our efforts to focus, simplify and harmonize the business. We are ending the year with a fourth quarter in which we have improved the margin and utilization rate, strengthen our order backlog and with a strong cash flow, all of which are key priorities for us. Meanwhile, global uncertainty continues to shape the broader market landscape. As we now move into 2026, it's essential that we maintain our business momentum and that we navigate the current market conditions effectively. We will continue to executing our strategy at a high pace, including efforts to further strengthen our order backlog and improve utilization. We will also finalize the remaining parts of our restructuring agenda and portfolio optimization. And this action will be critical for delivering on our strategic ambition and targets as we set for 2028. And we have entered 2026 well into the strategy execution phase, and we are fully focused on the direction ahead. So with that, I think we open up for Q&A. Operator: Yes. So we will now open up for the Q&A session. And let's start with Dan Heimer from SEB. Dan Heimer: Maybe I'll start a little bit on how much of the run rate savings did you benefit from this quarter from the restructuring measures? And now when you're aiming for the higher end, is it still mainly personnel-related savings you see? Or what's the swing factor sort of versus previously? And do you still see 12-month paybacks on those savings? Bo Sandstrom: Yes. Thank you, Dan. I'll take that. Yes, I mean, as you can see, we stepped up the restructuring efforts in the quarter. And I would say to generalize it, is particularly towards the end of the quarter that we executed on those measures that you then see reflected in the restructuring costs. So some, but limited effects on the margin in a sense in Q4. Most of it will then carry into 2026. And looking at what we are executing on, the entire restructuring program will be redundancy related. So it's practically personnel related, but it's personnel with a focus on different parts of the organization. So the original guidance in a sense that we said on a payback of 12 months, it still holds. It can theoretically be a bit different kind of quarter-by-quarter as we go through. But from a general perspective, it still holds on where we are right now. Dan Heimer: Understood. And maybe a question on Transportation & Places as well. You saw a bit of a margin drop here versus last year. Why is the capacity adjustment not help you here like industry since you are fewer employees? Is it because the market has continued to deteriorate or what explains? And also you say it's a little bit of low attendance. So if you can elaborate a little bit on that. Bo Sandstrom: Yes. So I mean, as we said just recently, I mean, most of the restructuring efforts, then particularly in Transportation & Places were towards the end of the quarter. So we didn't get any support in the quarter from a margin perspective in that division. Then we see some movement on the attrition, which we also then report in the report. But I would say from a general perspective, what we see in Transportation & Places for Q4, we practically see that it's normal fluctuations that we see in the project business. And there is no specific effect that is particularly strong and affecting the results for the quarter. Dan Heimer: And the final one from my side. You're saying that the effects are coming in late in the quarter. So I know you had a very slow start to Q1 last year. How do you feel about January, I mean, in terms of billing rates, et cetera? Does it look a little bit better this year compared to last year? Linda Palsson: I can say that it has been a clear priority and focus for us to keep the business momentum and keep the development on these important metrics that we have. So we are working very focused with these KPIs also going into 2026. Operator: Then we will go ahead with Adela Dashian from Jefferies. Adela Dashian: Just one from me on the backlog specifically. It continues to develop in the right direction, if you say so. Could you comment a bit on the quality and maybe also pricing of this backlog? And also, I guess, how much is driven by larger long-cycle projects versus shorter cycle? I know that has been maybe an area or maybe a priority for you to create better visibility by taking on potentially larger projects. Linda Palsson: Thank you. Very good questions. Yes, we are happy about the development of our order backlog. It has been also one of our areas where we've focused quite substantially. And what's good to see is that we have good order backlog development in basically all our divisions and strengthening this going forward. So we have a healthy balance in the backlog between our divisions, between different project sizes and also in terms of geographies. But it's very important that we keep monitoring this and have a clear understanding of what enters our backlog going forward, and also to what margins projects enter our backlog. But we are quite happy with the mix as it looks today. Adela Dashian: Could you comment anything more specifically on pricing in 2026? Are you already seeing any sort of like cost headwinds, or do you feel comfortable there as well? Bo Sandstrom: I mean what we can say on the pricing on the order backlog specifically is that, I mean, we're very clearly committed to the kind of profitability uplift that we have. And of course, being diligent in securing that we have the right mix in the order backlog is a key component for that in the upcoming years. So even though we have price pressure in some of the segments that we have, we're quite diligent on just securing that we're not practically letting in a poor mix into the order backlog for the years to come. So to give at least one flavor. Adela Dashian: Yes, that's really good. If I may, just one more. Obviously, defense is a strong sector right now. I believe it has been roughly low single-digit exposure as a percentage of total top line. Could you say what it represents today and what do you envision it to end up at if this very strong momentum continues? Linda Palsson: Absolutely. And as you said, we have a lot of services related both to total defense related topics, but also to defense related. So this is a growing business for us, and we have a lot of the needed capabilities to expand our position within defense going forward. So it's a strong and promising market for us. Adela Dashian: And what's the exposure today on a group level? Bo Sandstrom: It remains at the lower single digits, but it's kind of -- it's between 4% and 5%. Then it's a difficult area to be kind of really specific about. But 4% to 5% is still where we are, slightly up from where we were a few years ago, but still on the lower side on the single digits. But clearly, it is a growth area for us, but we haven't guided on a kind of specific target set for how big share of the group that it will be in years to come. Operator: Then we have the next question from Johan Dahl from Danske Bank. Johan Dahl: A few questions. Firstly, on the order book sort of timing on that. I mean, fairly encouraging backlog growth. Can you say anything when you sort of expect that to sort of be translated to also invoicing growth? Are you able to have that visibility today? Linda Palsson: Yes. As we said before, it's quite a big mix of project sizes and project length in our backlog. So it's -- we have different time lines on the conversion. But of course, as we grow the backlog, we come closer and closer also to the conversion. So we hope to see signs of that in the end of this year. Johan Dahl: Right. Got you. On the billing ratio improvement, in your view, is that merely an effect of the restructuring carried out previously in '26? Or do you see any sort of organic changes in that from your perspective? Linda Palsson: Yes, I would say it's both. Of course, the restructuring helps us here. But I would say our structural approach to this and how we now address this internally increases the transparency. So that is also part of the improvement that we see and that we will carry into the next year as well. So we're working focused on several elements in terms of our utilization rate. It's the planning, the resource management part of it. It's, of course, the rightsizing of our organization, but it's also the back end of our organization. So we work with 3 different parts, I would say, that will help us continue to improve our utilization rate going forward. Johan Dahl: All right. Just a final one on attrition. I mean you addressed that here in the presentation. But I'm just wondering, especially in Transportation & Places, have you come across here, we're assuming mid-February, sort of any projects where you have apparent problems in sort of delivering on your commitments to customers? Linda Palsson: No, we haven't had any delivering problems. As you said, we have had pockets of higher attrition here and there. The overall attrition for AFRY is intact or even declining, but pockets here and there, but they haven't impacted our ability to deliver to the clients. Operator: Then we have a question from Julia Sundvall from ABG Sundal Collier. Julia Sundvall: I would like to come back to the utilization rate. I just have a question on this improvement. Do you see this as a new trend? Or is it just something like a one-off effect or something like that? And if it is a trend, what is a reasonable turnaround pace? Bo Sandstrom: Yes, I can start at least. I mean we don't see it as a new trend in that sense. If you follow the year-over-year development over a longer period of time, you see consecutive steps in a sense of a bit of change of direction in the year-over-year development, starting practically kind of mid-2025. So the utilization that we see and the development from a year-over-year perspective, the Q4 practically follows what we saw as an indication in Q3, where we were somewhat lower than last year, but marginally so in that sense, and it's following that. To give you an idea of where we're heading, we included utilization as a supporting KPI into our 2028 targets. And there, we said that we're going for a full year utilization level of 74%, which will mean an improvement of 2 percentage points from mid-2025 in that sense. Then at the end of the day, it's a big organization. It's a big metric. So we might see up until 2028, we might see quarters with bigger progress, and we might see quarters with smaller progress. But in general, we estimate the trend in a sense to be reasonably intact over time up until 2027, '28. Julia Sundvall: Perfect. And I just want to come back to the Energy and the regional differences. Could you please remind me what is the problem here and what needs to happen to improve? Linda Palsson: It's much related to the thermal and then also to some extent, the wind and solar side, where we see a very low number of wind power projects, for instance, in the Nordics. On the other hand, we see that we have a lot of orders coming in, in Southeast Asia in wind, but also in solar, as you have seen, we made #10 now on the ENR ranking. So that's a proof of that. So it's very low demand on especially wind and solar in the Nordics and Europe. Thermal projects, a little bit slow, but slowly taking off as well in Europe and Nordics. And then full speed ahead on transmission distribution, hydro and nuclear. Julia Sundvall: Perfect. And then a little bit of a bigger picture question. But yes, at the start of the year, there has been some AI scare in the market and the sector. What is your position here? And is there any interruption in your development here regarding the restructuring? And are you missing or getting behind in some kind of sense or yes. Linda Palsson: I can start. No, I wouldn't say that we do. We monitor this closely, of course. And there's many dimensions to AI. It's, of course, dimensions in our internal operation and how we utilize the AI to its full extent there. But more importantly, maybe in our clients' projects and their development journey. So we are monitoring both of these parts quite closely. So I wouldn't say that we lag behind. And the restructuring agenda... Bo Sandstrom: I mean from our perspective, kind of the AI in a sense, both kind of impact and opportunity on our industry, it's not a short-term topic. It's a mid- or even long-term topic in that sense. So even though we are a part of the -- we're taking great kind of efforts into that area and nothing has changed kind of in the beginning of the year on that approach. Julia Sundvall: Yes. And is there some sector or clients that can be more affected than others according to you? Linda Palsson: No, not that we can comment on now. Bo Sandstrom: I mean I think you would switch it around and then you would think of it as if it affects different disciplines or different kind of focus areas rather than affecting specific segments or sectors. Operator: Thank you, Julia. And that was all the questions we had for today. So I'm going to hand back to you, Linda. Linda Palsson: Thank you so much, and thank you for following us, and see you again after Q1. Thank you. Bo Sandstrom: Thank you.
Operator: Good morning, ladies and gentlemen. Welcome to the conference for Keppel Limited's Second Half and Full Year Financial Results for 2025. We have on the panel this morning from your left, Mr. Manjot Singh Mann, CEO Connectivity and CEO M1; Mr. Louis Lim, CEO of Real Estate; Ms. Christina Tan, CEO of Fund Management and Chief Investment Officer; Mr. Loh Chin Hua, CEO; Mr. Kevin Chng, CFO; and Ms. Cindy Lim, CEO Infrastructure. We will begin the session with presentations by CEO, Mr. Loh Chin Hua and CFO, Mr. Kevin Chng followed by the question-and-answer session. Mr. Loh, please. Chin Hua Loh: Thank you. Good morning. 2025 marked a year of strong progress for Keppel. Against a turbulent and uncertain global backdrop, we stayed focused on growing the New Keppel's and are seeing the results of our transformation as a global asset manager and operator, delivering strong returns to our limited partners and shareholders while creating real assets and solutions that meet the world's pressing needs. The New Keppel delivered a very strong set of results. Net profit soared 39% year-on-year to $1.1 billion with improvements across all business segments and record earnings from the Infrastructure division. Our funds under management grew from $88 billion a year ago to $95 billion at the end of 2025, well on track towards achieving our target FUM of $100 billion by end 2026, if not earlier, while asset management profit increased 15% to $189 million during this time. We also made good progress in asset monetization with $2.9 billion of divestments announced for 2025, bringing the total monetization announced since October 2020 to about $14.5 billion to date. At the same time, we continued to position Keppel to benefit from powerful global macro trends -- megatrends, such as the growing energy needs amidst increasing digitalization and the AI wave with new power generation capacity and an expanding data center power bank of over 1 gigawatt in Asia Pacific. We delivered broad-based earnings growth across all 3 segments: Infrastructure, Real Estate and Connectivity, with the Infrastructure segment accounting for the largest share of the New Keppel's net profit in financial year 2025. Just as importantly, the quality of our earnings continued to strengthen with recurring income from asset management and operations $41 million in financial year 2025. Including the noncore portfolio for divestment and discontinued operations, overall net profit for financial year 2025 was $789 million compared with $940 million for financial year 2024. This was mainly due to the $222 million accounting loss arising from the proposed sale of M1's telco business. As Keppel transforms and the market increasingly values the company based on the New Keppel's earnings, net profit of the New Keppel rather than overall net profit will become the more relevant measure of Keppel's performance. During the year, our expanding base of recurring income, coupled with continued progress in asset monetization contributed to a healthy free cash inflow of $611 million. This is an improvement from financial year '24 when our free cash inflow of $901 million had benefited from the one-off net cash of over $1 billion received from the consolidation of Asset Co. Reflecting our growth as an asset-light global asset manager and operator, the New Keppel achieved a return on equity of 18.7% for financial year '25 compared to 14.9% a year earlier. As at the end of December '25, the net debt-to-EBITDA of the New Keppel was a healthy 2x lower than the 2.3x at the end of 2024. We will continue to be prudent and nimble in capital management, keeping our operations and cost efficient amidst the volatile landscape. As at the end of 2025, we achieved about $98 million in annual run rate cost savings since we started streamlining the company and sharpening our focus at the start of 2023. This puts us on track to achieve our stretch target of $120 million per annum by end 2026. Part of these savings are being reinvested into growth areas aligned with the New Keppel, including developing enterprise-wide digital and AI capabilities that will help entrench our strong competitive advantage while doing more with less. With a clear focus on optimizing both the pace and exit value of our divestments, our Accelerating Monetization Task Force continued to focus on unlocking capital with the announced monetization of about $2.9 billion in assets in 2025, including the proposed sale of M1's telco business, which is pending regulatory approval. Meanwhile, we also completed transactions with a gross monetization value of about $1.6 billion in 2025. As at end 2025, our total asset monetization announced since October 2020 had reached approximately $14.5 billion, while our noncore portfolio for divestment stood at $13.5 billion. Looking ahead, we'll continue to work towards substantially monetizing our noncore portfolio by the end of 2030. Proceeds from monetization will allow us to further reduce debt, fund the New Keppel's growth as well as return capital to shareholders. In 2025, Keppel delivered a total shareholder return of 58.5%, supported by strong performance, distributions and a rerating of the company that reflects the market's increasing recognition of our transformation and growth strategy. Since the launch of our $500 million share buyback program in July 2025, we have repurchased over 13 million Keppel shares for a total consideration of $116 million. Reflecting Keppel's commitment to a steady and sustainable dividend strategy, we have said that the company will pay ordinary dividends based on the New Keppel's performance. In addition, we aim to pay out special dividends based on 10% to 15% of the gross value of asset monetization transactions completed in the financial year until our monetization program is completed. The actual percentage will depend on the company's growth plans as well as cash generated. In appreciation of the support and confidence of shareholders, the Board has approved -- or has proposed a final ordinary dividend of $0.19 per share in cash bringing the full year ordinary cash dividend to $0.34 per share. This represents a payout ratio of about 56% and of the New Keppel's net profit for financial year 2025. Considering the strong progress in monetization achieved, the Board has further proposed a special dividend amounting to approximately $0.13 per share, comprising $0.02 per share in cash and 1 Keppel REIT unit for every 9 Keppel shares held, which is equivalent to approximately $0.11 per share based on Keppel REIT's closing market price of $0.98 on the 3rd of February 2026. This special dividend proposed is approximately 15% of the completed monetization of $1.6 billion for financial year 2025. In all, we will be distributing total dividends of approximately $0.47 per share for financial year 2025, up 38% from financial year 2024, which represents a yield of approximately 4.3% based on Keppel's closing share price of $10.95 last evening. I will now run through some of the highlights of the New Keppel's developments during the year. Our asset management business continued to gain momentum in 2025. We generated $453 million in asset management fees while FUM reached $95 billion by year-end -- but growing at a compound annual growth rate of about -- both growing at a compound annual growth rate of about 20% over the past 5 years. As our platform scaled, we have seen a clear strengthening of Keppel's standing with global institutional LPs. Today, we are working with a growing group of established pension and sovereign wealth funds, financial institutions and endowments across the world from Asia Pacific to the Middle East, Europe and North America. We are seeing more LPs initiate conversations with us, reflecting growing recognition of Keppel's track record and differentiated capabilities. During the year, active fundraising by our private funds, together with portfolio expansion across our listed REITs and infrastructure trust, added $10.1 billion of new FUM. In Europe, Aermont Capital continued to perform well and has begun marketing Fund VI, with first close targeted in the first half of this year. Across our private and listed vehicles, we completed $11.4 billion of acquisitions and $2.9 billion of divestments during the year. With a deal flow pipeline of $33 billion, we see a strong run rate to deploy capital and expand our asset management income. Looking ahead, a more inflationary environment accentuated by tariffs and trade restrictions is expected to sustain investor demand for real assets with steady cash flow that can also serve as a hedge against inflation. This continues to favor alternative real assets aligned with long-term macro trends, such as the energy transition, digitalization and the AI wave, which Keppel has deep expertise in. Against this backdrop, LPs are placing greater value on asset managers who can originate differentiated opportunities and with proven expertise in operating such critical assets. As energy and digital infrastructure solutions become larger, more complex and more capital intensive, Keppel's integrated ecosystem positions us well to originate, develop and scale such projects alongside institutional investors beyond what our balance sheet could otherwise have been able to support. Within our operating platform, Infrastructure continues to be a sturdy pillar of quality earnings. Underpinned by recurring income, which grew at 51% CAGR over the past 4 years, the Infrastructure division delivered record recurring earnings of $703 million in financial year 2025. Its integrated power business delivered resilient EBITDA of $661 million backed by long-term contracted capacity, disciplined contracting and strong operational performance, even amidst softening spark spreads. Meanwhile, the decarbonization and sustainability solutions business has performed extremely well, achieving an EBITDA of $130 million, up 32% year-on-year, surpassing our earlier projection of $100 million in 2025. Our Infrastructure division has successfully built an asset-light and fast-scaling new engine underpinned by long-term contracts, which will bolster recurring income in addition to earnings from the integrated power business. As at end 2025, around 67% of our Infrastructure division's power generation capacity is contracted for 3 years or longer. The 600-megawatt hydrogen-compatible Keppel Sakra Cogen plant, a key proprietary asset within our infrastructure private fund is on track to commence operations in first half 2026. And this capacity has been already fully contracted for 2026 and 2027 after factoring in the required market reserves. The Sakra plant will strengthen recurring earnings, demonstrating our ability to scale advanced infrastructure with an asset-light model. We also continued to build scale in our nonpower infrastructure businesses. Long-term supply contracts grew by over $1 billion year-on-year to reach $7.1 billion by end 2025, with revenues to be earned over 10 to 15 years. A case in point is the Hong Kong Integrated Waste Management Facility, which is now at an advanced stage of testing and commissioning. With a 15-year operations and maintenance contract, it reflects the kind of strategic and complex infrastructure that Keppel is able to deliver and operate. Our deep operational capabilities also underpin our progress in digital connectivity. We believe that AI remains in the early innings of adoption and value creation. Scaling AI requires real infrastructure, such as power, data centers and subsea connectivity, and this is where Keppel can contribute and seize opportunities. A key enabler of our digital infrastructure strategy is data center power banking, which allows us to deliver shovel-ready capacity, significantly shortening time to development and service readiness. We are positioning ahead of the digitalization and AI megatrend by investing upstream to secure early and exclusive access to power, water and fiber connectivity at strategic sites in key data hubs. In January this year, we expanded our data center powerbank in Asia Pacific from around 300 megawatts to over 1 gigawatt, with the addition of a prime site in Melbourne earmarked for the planting of a future 720-megawatt AI campus. We're in active discussions with hyperscalers and neoclouds, and interest in the Melbourne site has been encouraging. At scale, our more than 1 gigawatt of power bank capacity, when fully activated, has the potential to translate into about $10 billion of data center FUM, supporting the continued growth of Keppel's asset management platform. Beyond data centers, we achieved an important milestone with the Bifrost cable system, which commenced carrying commercial traffic in December 2025. Our first 2 fiber pairs, already committed to customers, contributed to earnings towards the end of last year. Last month, we signed a binding term sheet term sheet with a customer for another fiber pair. Over its 25 years operating life, Bifrost is expected to generate, on average, about $200 million in operations and maintenance fees per fiber pair for Keppel, adding a new stream of long-term recurring income. At the same time, we'll continue to grow our technology solutions and services business, which, together with our digital infrastructure expertise, enables Keppel to participate in the full value chain, serving both hyperscalers and enterprises. Alongside infrastructure and connectivity, our real estate division contributes to sustainable development through providing solutions and services for future-ready energy-efficient assets. In 2025, the division recorded total Real Estate-as-a-Service revenue of $98 million, deepening its pivot to an asset-light model. Looking ahead, both the energy transition and the scaling of digital and AI adoption will require substantial capital and deep execution know-how. By leveraging our strong fund management and operating expertise, we can mobilize institutional capital effectively and undertake such projects at scale while offering attractive investment opportunities to our LPs. To conclude, the New Keppel performed strongly in 2025. Earnings grew and asset monetization continued to gain momentum. In addition, we are returning capital to shareholders through ordinary cash dividends as well as special dividends. As we execute our strategy, the market increasingly recognizes Keppel as a global asset manager and operator, which is reflected in the continued re-rating of the company. Looking ahead, while volatility and geopolitical uncertainty are likely to persist, Keppel has built strong foundations and is well positioned to deliver digital and low-carbon solutions that the world needs as well as strong returns to our LPs and shareholders. This bodes well for our future. Our CFO, Kevin, will now take you through details of the company's financial performance. Kevin? Chee Keong Chng: Thank you, CEO, and a very good morning to all. I shall now take you through Keppel's financial performance. Overall net profit for financial year 2025 was $789 million, 16% lower than the $940 million for financial year 2024, due to discontinued operations, which I will elaborate later. Consequently, ROE was low at 7.4%. Net debt to EBITDA was lower than last year-end, mainly due to lower net debt. Free cash flow (sic) [ inflow ] was $611 million as compared to $ 901 million in the prior period, as financial year 2024 benefited from the consolidation of Asset Co's cash balances of about $1.07 billion. Excluding cash balances from Asset Co, our free cash flows have improved by $780 million. In financial year 2025, Keppel recorded stronger cash inflows from operating activities as a result of lower working capital requirements as well as higher divestment proceeds and dividends received. These were partly offset by higher investments and CapEx during the year. Excluding noncore portfolio for divestment and discontinued operations, net profit of New Keppel was $1.1 billion, significantly higher as compared to $793 million in financial year 2024. Discontinued operations net loss of $227 million in financial year 2025, mainly arose from a loss on remeasurement of M1's telco business, net of cessation of depreciation and amortization following the classification of M1 telco as a disposal group. To provide greater clarity on the performance of New Keppel, in the next few slides, I will present our financials, excluding the effects of noncore portfolio for divestment and discontinued operations. Net profit of New Keppel increased 39% year-on-year to $1.1 billion. All 3 segments achieved higher profits. Infrastructure continues to be the largest contributor to New Keppel's earnings, followed by Real Estate and Connectivity. With the stronger earnings, ROE improved to 18.7% from 14.9% a year ago. Supported by increase in EBITDA and a lower net debt, net debt to EBITDA of New Keppel improved to 2x as at end December 2025 from 2.3x as at end December 2024. Free cash inflow for financial year 2025 was $177 million. In line with our focus on growing recurring income, New Keppel generated healthy cash inflows from operating activities. Cash inflows from operating activities, divestment proceeds and dividends received were reinvested to fund investments in sponsor stakes as well as acquisitions and capital expenditure. As a result of better performance from asset management and operations, recurring income rose 21% to $941 million from $739 million a year ago. New Keppel also recorded higher valuation and capital recycling gains during the year from higher fair values on investment properties and investments as well as monetization from real estate and connectivity. Moving on to our segmental performance. Infrastructure segment recorded a net profit of $803 million, 18% or $125 million higher than the $678 million in the previous financial year. Asset management net profit was lower at $46 million compared to the previous year mainly due to the absence of performance fees and transaction advisory fees recognized in financial year 2024, as well as lower acquisition fees from Keppel Infrastructure Trust. These were partly offset by lower costs, divestment fees from KIT and higher management fees from KIT and from private funds. Stronger operating income was supported by higher contributions from decarbonization and sustainability solutions as well as sponsor stakes and co-investments. These were partly offset by lower earnings from integrated power business as a result of lower contracted spreads. The segment also recorded net valuation gains from sponsor stakes and co-investments in 2025. Real Estate segment achieved a net profit of $273 million, a significant improvement compared to the net profit of $107 million a year ago. Asset management net profit of $93 million was $31 million higher year-on-year, driven by acquisition fees in relation to Keppel REIT's acquisition of an additional 1/3 interest in MBFC Tower 3 in Singapore and an interest in the retail mall in Sydney. There were also higher management fees following the first close of Education Asset Fund II and high contribution from Aermont as well as lower cost and interest expense. Operating income improved $45 million year-on-year, mainly due to higher contributions from sponsor stakes and lower financing costs, partly offset by higher losses from senior living business. In 2025, real estate recorded higher valuation gains from sponsors stakes and co-investments and also recognized net gains from the partial disposal of Saigon Centre Phase 3 in Vietnam and the disposal of One Paramount in India. Net profit from Connectivity segment of $175 million was 17% or $26 million higher than $149 million in the prior year. Asset management net profit was 47% higher year-on-year at $50 million, driven by higher management fees following the acquisition of 2 assets by Keppel DC REIT and the first close of DC Fund III, both in December 2024 as well as carried interest earned from Alpha Data Centre Fund. Operating income of $35 million was $9 million higher than prior year, mainly due to higher contributions from Keppel DC REIT following contract renewals and acquisitions of assets at the end. The segment recorded lower net fair value gains, mainly due to fair value losses on sponsor stakes in private funds, partly offset by higher fair value gains from a data center investment in Keppel DC REIT. Gains of $84 million were recognized in 2025 from lease extension of Keppel Data Center Campus, Singapore and from the sale of 2 fiber pairs of the Bifrost cable system upon receiving Ready for Service status. Net loss from noncore portfolio was $84 million as compared to net loss of $6 million a year ago. Net loss of legacy O&M assets of $156 million in financial year 2025 was mainly due to interest costs attributable to legacy rigs and impairment of fixed assets, partly offset by fair value gain from Seatrium shares and foreign exchange gains, interest income and tax provision buybacks. For financial year 2025, the property-related noncore assets registered a net profit of $119 million mainly driven by gains from divestments in China and Vietnam, which were partly offset by operating and fair value losses on investment properties and losses from development projects. Investment and others recorded net loss of $47 million, mainly from fair value losses on investments, partly offset by gain on disposal of Computer Generated Solutions, Inc. in the United States. With that, we have come to the end of the presentation, and I shall hand the time back to CEO for the Q&A session. Thank you. Chin Hua Loh: Thanks, Kevin. Before we take questions -- wait a minute. I recognize you. Before we take questions, I would also like to mention that we have just announced this morning that Mr. Danny Teoh will retire as Chairman of Keppel's Board immediately after the company's upcoming AGM on the 17th April 2026. Mr. Piyush Gupta will be appointed Non-Executive Chairman and Independent Director of the company on the same day. I'd like to express my deep appreciation to Danny for his strong support and counsel since he joined the Board in 2010 and over the years, when he served as Chairman of the Audit Committee and subsequently as Chairman of the Board. Danny's leadership and support were pivotal as Keppel undertook significant transformation to pave the way for its future growth. Since joining the Board last July, Piyush has provided valuable advice in the sharpening and execution of Keppel's strategy. I don't think it's any one's surprise. The Board and management look forward to Piyush's leadership and guidance as we accelerate Keppel's transformation to create value for our limited partners, shareholders and other stakeholders. We'll now open the floor to questions. And Mervin, you have the floor. Mervin Song: Mervin from JPMorgan. Congrats on the super strong results. I think the special divi, I think everybody is quite pleased with that. It looks like you're taking the mantle the Superstar CEO in Singapore from your new Chairman. So congrats on that. In terms of -- thank you for the clarity in terms of how much you pay out in special divis going forward, 10%, 15% divestments. But in terms of helping us model the special divi for this year, any clarity in terms of quantum of divestments? Or should we do $13.5 billion by 5%. And in terms of buybacks, should we be assuming 50,000 shares to be purchased every day as we saw last second or fourth quarter last year? Or you think you can buy a bit more? I presume you'll tell me that the share price is still undervalued again. Second series of question I have is in regards to Infrastructure segment, another question where you can share with us the quantum of decline of spark spreads. Do you still expect spark spreads would normalize in FY '26? And in terms of decarbonization, it seems to be doing very well, but do you have a quantum in terms of exit run rate for end 31st December? I do note that EBITDA was $130 million last year. Chin Hua Loh: Well, thanks. I will address the first 2 questions, and then I'll ask my colleague, Cindy, to address the questions on Infrastructure. First and foremost, I think the -- for the monetization, just to be very clear, the special dividends that is tied to monetization is not based on what is announced. It's actually based on what was actually realized in financial year 2025. So what that means is that of the $1.6 billion that was realized in 2025, of course, there were some that were announced in 2025 itself and got completed last year. But there were also some that were announced earlier, say, in 2024, that only completed in 2025. So just to be very clear, it is based on what is announced -- sorry, what is completed in the financial year. So I think we have already also made a statement consistently that the noncore portfolio for divestment is to be substantially monetized by 2030. So that's -- and I don't think that we can give any projections whether it's a straight line because some of these assets can be quite lumpy. So I think that's kind of how we would look at it. What was your second question? Joo Ling Lim: On share buyback. Chin Hua Loh: Share buyback. Okay. So on share buybacks, I can't really comment. I think we have been -- we've only so far expanded about $110 million or so. So we still got a fair bit to go. These share buybacks do serve a purpose to fund our share plans as well as to be a source for us to use as currency if we do any M&A. So as to the amount that we will buy back, I think I'll leave you to watch the market over the next period. But clearly, on share buybacks, we're also quite careful. So if there are any blackout periods or we're in possession of PSI, the share buyback will cease. Cindy? Joo Ling Lim: Happy New Year, Mervin. Right. The integrated power business has indeed performed well. We have delivered resilient performance amidst softening spread. To your question about the spread, we expect the spread to stabilize. However, to avoid the volatility of our integrated power earnings, we have diligently focused on long-term contracting strategy. As you have seen in our presentation by CEO, more than -- about 67% of our capacity has been contracted for more than 3 years. On top of that, we are also diligently expanding our generation capacity. Our Sakra Cogen is on track to complete commissioning by first half this year. Sakra Cogen is fully contracted for 2026 and 2027. So you will be able to see that our entire power generation fleet in Singapore is by far the most efficient with H-Class and the 2 F-class having been upgraded. This will continue to provide resilient EBITDA earnings from our integrated power business. We are not resting on our laurels. We are also focusing on how to expand integrated power business beyond what you see in Singapore. Your question on the carb and sustainability solutions business. Indeed, we have clocked in very strong book-to-bill ratio. And the long-term contracted backlog is about $7.1 billion to be delivered over a period of 10 to 15 years. In fact, the weighted tenor is about 10.2 years. This will translate into strong resilient EBITDA over time. And we have embedded AI in our origination proposal generation as well as subsequent operation efficiency. So I expect with this flywheel of a strong book-to-bill, growing top line, this will deliver not just EBITDA growth but also EBITDA margin growth. Thank you. Mervin Song: Let's say you annualize the 31st December day revenues, what would it be? I presume it's more than $130 million. Joo Ling Lim: Our book-to-bill ratio is about 3.6x. Chin Hua Loh: Okay. Now there are a couple of questions online, but let's deal with some of the questions. Goola Warden: I'm Goola from the Edge. So I've got a couple of... Chin Hua Loh: Sorry, can you repeat again? Goola Warden: I'm Goola Warden from the Edge, and I have a couple of capital management questions of which you've answered the pipeline for monetization this year to Mervin. And I just wanted to ask whether the special dividends will include units in Keppel DC REIT, KIT and core given that, well, core has the 6% overhang of core units from the liquidation of Pacific Oak special opportunities REIT to that bond default. So that's the first question on -- and secondly, with the Sakra plant since it's been fully contracted for this year and next year, would it be offered to KIT? Or at what point -- I mean, is it a pipeline for KIT? And at what point could it be? Chin Hua Loh: Well, to your first question, the -- there are no current plans to include any other units that we hold of the REITs and trusts for future special dividend payout. To your second question, on Sakra, we -- currently, Sakra is held by a private fund together with our balance sheet. We obviously will look as the unit gets commissioned and is ready for service in the first half, sometime for this year. We will look at opportunities to monetize it for the fund. Where it's going, we have not -- there are no current plans to put into KIT or any of the other -- we could also potentially put it into another fund. Goola Warden: Just one last question. You've not completed the divestment of M1, but you booked the loss in this year's FY. Was there a reason for that? Chin Hua Loh: I'll ask my CFO to explain. Chee Keong Chng: Yes, that's purely just an accounting sort of treatment given the announcement that we have for the intended sale and we qualified the parameters for us to classify that as a disposal group, which is why it's under discontinued operations. Chin Hua Loh: Yes. Brandon. Brandon Lee: Brandon here from Citi. Just a couple of questions. Just going back to Goola's point, right? So if you look at for this year, the special div of about $0.13, right, $0.11 did come from K-REIT, right? But if you were to look backwards, taking this away, it seems that the K-REIT shares were used to sort of back up that 10% to 15% of GAV that you intend to pay out. So going forward, let's say, if there's not enough cash on the divestments to achieve the 10% to 15%, will K-REIT or any other stakes in your listed entities be used to sort of mitigate that loss? Chin Hua Loh: I don't think we look at it this way. I think it's part of our capital management. And we will then decide, first and foremost, what percentage of the monetization. And we've given a range of 10% to 15%. So it depends on what are the needs for our growth because as we mentioned, when we monetize the noncore portfolio, it goes into 3 things. One is, of course, reduce debt. And secondly, of course, is to fund growth in the New Keppel. And last but not least, is to return capital to shareholders. So we will have to look at all that before we decide. And after we decided what percentage, then we will look at whether it's part cash, part in species distribution. So that will be decided at that point in time. But there are no current plans to -- as I mentioned to the lady from Edge, there are no current plans to do anything additional in species, whether it's K-REIT or any of our REIT holdings. Brandon Lee: Okay. So essentially, what shareholders need to know is that you will stick to your 10% to 15% of GAV as special dividend. That's all we need to know, right? Chin Hua Loh: Yes. And this is based on what -- as I just -- to be very clear, it's not based on what's announced, but what's completed. Brandon Lee: Yes, yes, of course. So hopefully, you complete double the amount this year. Chin Hua Loh: I hope so, too. That's the plan. Brandon Lee: Just following on to next question on property. So I realize for FY '25, you did book in some fair value losses on both your IP and your DP. Could you share a bit more color on that? Also, if you look at the real estate New Keppel side, the operating income started turning into black. So does this mark a turnaround in terms of the earnings? Chin Hua Loh: Kevin? Chee Keong Chng: Yes. Thanks, Brandon. We don't go into the specifics of detailing what we took impairments on. But fair to say that as we do every year, I mean, we will go through all our investment properties and make an assessment based on the valuations that we get. There is some softness, particularly in some of our China assets that we did take. The second part to your question around the real estate operating profits. If you look at our real estate business today, a large part of it is in sponsor stakes. So it really depends on the performance of the investments that we make. And a large part of that for the results this year is driven by some of those contributions. And obviously, we will continue to focus on that. I mean if you look at our results, the real estate segment as a whole has done very well this year. Chin Hua Loh: Louis, anything you want to add? Lu-yi Lim: Yes. No, I think I was going to second that the sponsor stakes become very important for us. But I think across the kind of New Keppel Real Estate-as-a-Service business, that's something that we've been focusing on growing as well. So our urban solutions business, our sustainable urban renewal business, our retail business as well as the senior living business that we bought in the U.S., as you know, we just completed that in March 2025. So we're seeing that really turning around, and we're looking forward to enjoying the tailwinds of that segment in the U.S. Chin Hua Loh: Okay. It's between Siew Khee and Tan Xuan, I know you can go -- one can go first. Xuan Tan: Xuan from Goldman here. First question is on 2026 net profit. SGX has clarified that actually forward guidance is allowed. It's also encouraged. Can I ask whether you could kind of guide us on net profit? If not, maybe what are the broad key drivers and also risks to look out for? Second question is on Keppel South Central. Can you share what is the carrying value? And when do you think that will be ready for divestment? Last is on legacy REITs. Can you elaborate a bit more on the interest cost? And also what is the time line on monetization? And if not, then what is the run rate of loss that we should expect from this? Chin Hua Loh: Well, I read the same article as you did. We're not quite ready to give forward guidance on earnings. What I will say is that the New Keppel is still growing. Of course, there are a lot of challenges out there. But I think the main -- if you look at how our business is now positioned, one of the main drivers is really on funds under management. So if we continue to see the growth and we can turn those funds under management into fee income, that would obviously help our 2026 earnings. And we are seeing quite good traction on the fundraising side and also on the deployment side, as I've shown in the slide. At the same time, I think the operating division will also have some task ahead of them to continue to perform well. So I think once you have the FUM growing and you have -- and we continue to operate strongly in the various segments that we're in, Infrastructure, Connectivity and Real Estate, then that will power our growth for 2026. But I'm not, at this point, able to give you any guidance on what to put into your model. On -- let me see on KSE yes. I think the carrying value, we don't disclose. The leasing is doing well. I think the truth is that KSE is an investment property or would be an investment property when sold. So in order to achieve a good outcome, we will need to raise the occupancy rate. Louis and the team has done a great job pushing for that. I think we have gotten quite good traction, particularly in the last few months. Maybe I just invite him, you want to share a bit on KSE leasing. Lu-yi Lim: On the leasing front, we're about 50% committed or at very active levels of negotiation already. So we do look forward to being in a position in the near to medium future to be able to figure out monetization path for this asset as well. Chin Hua Loh: And I think our -- the rents that we are seeing is also improving. As we've seen from various reports, the central CBD office core office rents are actually tightening. So we're in the right market, so to speak. So I think getting the occupancy up is crucial. Then after that, we'll then look at potential monetization. On legacy rigs, this is something that we are obviously very focused on. We do want to find a way to monetize this. But I think the market now, I would say, the jack-up rigs in the last few months in terms of day rates have started to improve. Of our 6 rigs that are now working, 4 or 5 of them are being recontracted and the rates are about 8% to 10% higher than what it was. These are bareboat charter rigs. So we are quite encouraged by that. On the floaters, the market is still a bit soft, but we expect that to improve towards the end second half of this year. So we are watching this space very closely. There are some inquiries, whether to buy or to lease. So something that we are working on. Siew Khee? Lim Siew Khee: Just following up on the Asset Co. So previously, we mentioned that we might actually look at pairing down stake of ownership of Asset Co into funds. But now we're talking about inquiries to buy and lease assets. So which is more likely in the near term? Chin Hua Loh: We -- the truth is that we are exploring all options. I think the focus now, not unlike what we just mentioned about KFC. I think if you look at the offshore rig market, we believe that with no new supply coming on, and older rigs becoming obsolete over time, the supply of rigs will tighten. So until day rates improve significantly, you will not justify new rigs being built. So I think we are sanguine about the long -- medium- to longer-term outlook for rig prices. At the same time, I think the key now is whilst we are waiting for this market to -- the capital markets or the prices to improve on the rigs, we will put the rigs to work. And the jack-up rigs that we put to work has been very successful. So now the goal will be to try and see whether we can bareboat charter the other rigs. And then once that happens, potentially, it could actually be attractive to an investor because you've got cash flow, right? Now in the meantime, if someone turns up and said, look, I'm interested in buying a rig and if the price is right, we will obviously be opportunistically looking at that as well. Lim Siew Khee: Okay. Just going to connectivity and M1. Why is there a delay? And maybe you can just share -- I know you are waiting for IMDA approval, but is there any issue in terms of infrastructure, customers? When do you expect it to be completed? Chin Hua Loh: You and I are waiting. I think the truth is that this is quite -- I think you have to let the regulators do their work. So the process has to take place. We still remain very confident that the deal will get done. It's a bit delayed. I'm just as impatiently waiting as you are. But as I said, we have to wait. We have to let the regulators do their work. Lim Siew Khee: So on connectivity, so the gains that you have actually recognized for the 2 pairs of Bifrost is already in second half. So -- and then, of course, in your comments, you said that the capital recycling is split of gains from lease extension of KDC campus as well as the Bifrost pairs. Would you be able to actually give us a bit of insight? Is it towards the latter or the former? The overall $84 million, how do you split between the KBC campus and the Bifrost? Chee Keong Chng: It's inclusive of both, Siew Khee. We can't give you the split between the 2. Chin Hua Loh: But I think given that Bifrost is still quite new in terms of even the cables that are operating, the O&M fees and et cetera, will be more towards the end of the year. Then I would say that most of it will be from -- the bulk of it will be from the lease extension. Lim Siew Khee: Okay. Sorry, I just have 2 more questions. One would be, I know that you said that monetization pace is lumpy. But last year, you were very helpful. You actually did guide us that there would be $500 million of assets to be monetized in the second half. And I think you did that, I guess, the property trading is what you meant back in the first half. So maybe you can actually just guide us on whether you would be able to do equally $1.6 billion to $2 billion of amortization this year, excluding B 1. Chin Hua Loh: Well, the truth is that we want to do more, but a lot of these are quite lumpy. So it's very difficult for us to guide because sometimes you guide if you are not -- there are so many pans, frying pans in the fire. So we do not know when we will be ready. So I would say that best to kind of look at it that we've got about now roughly $13.5 billion of noncore assets to monetize. We roughly got about 5 years to do it. So we are working really, really hard. My colleague behind his head of the Asset Monetization Task Force. I better don't tell you who it is case you go and corner him. But we'll work very hard to monetize because I think that's really the key. I think if you look at the results, New Keppel is performing well, continues to perform well. But the noncore -- and we are also doing the monetization. But the key is really we need to get the noncore out of the way so that we can then all focus on the New Keppel. I don't know who's next. Okay. You got a mic. Zhiwei, go ahead. Zhiwei Foo: Zhiwei from Macquarie. Congratulations on this wonderful set of results. I have 3 questions, one on Infrastructure, one on Real Estate and the last one is more strategy, right? So on Infrastructure, I think on Slide 12, you have this -- you presented your EBITDA numbers for both the integrated power and decarb solutions business. I think it adds up to about $790 million. It's -- first is, do I understand this as the total EBITDA of infrastructure? Because when I compare it against the $405 million EBITDA for infrastructure in first half of '25, it implies a half-on-half decline in your infrastructure EBITDA. So I'm trying to understand what's driving that decline down there, right? And should we expect one of the businesses to increase in FY '26 to kind of offset that underlying decline? That's the first question. Second question is on Keppel South Central. We've been at 50% leasing for quite a while. So could you help us understand what's -- why isn't it moving along faster, right? And the third question is, now that Piyush is the Chairman of Keppel, what great things can we expect from Keppel going forward? Chin Hua Loh: Okay. Maybe on EBITDA, I'll let Kevin or Cindy, you want to address. Joo Ling Lim: There are other contribution of EBITDA from the Infrastructure division. Maybe you can take question 2 first, and I'll come back to you shortly. Lu-yi Lim: I'll take it. Well, frankly, it's a way if I -- every time we give you a number, you latch on to it and then the next time it becomes an issue, right? So 50% was a broad number we gave. But if you listen to what I actually said, the 50% is actually almost done. So it's committed to very active negotiations. And very frankly, as -- we actually -- people who come to the building love it. There's still a lot of tension in the market where people think they can negotiate better rentals from you. We are confident of the product. So we have actually held our prices. If not, we would be actually pretty much fully leased out, right? So I think there is that kind of balance that we need to strike because if you want 10% to 15% of monetization gains, then we also have to uphold the rents to give you that valuation. Chin Hua Loh: I think Louis's point, I think we have to kind of make sure that it's clear. I recall when we talked about 50%, it wasn't done. The -- I think there was a certain percentage that were done and then the balance were active negotiations. At that time, when we mentioned about 50%. Now you are basically saying 50% is more or less committed. And then, of course, what he doesn't say is that there's more inquiries above the 50% that we're trying to convert. The other point, I think at the end is that when you are trying to monetize an asset, the rents that you obtain is quite important because that will determine what someone will pay in terms of on a per square foot basis using a cap rate approach. So I think that's why the team is -- we don't try to sacrifice rent for occupancy. If it was an asset that you're going to hold longer term in your balance sheet and you don't have any time frame for divestment, then it would be something where you can say, oh, I'll rent it out, whatever, get occupancy up. And then at the next rent renewal, then I will get the rents up. But in this case, we're trying to optimize the exit price. And this is something that I think you have to understand also, even though we are quite committed to -- we are committed to monetize the $13.5 billion, we are not doing a fire sale. We are -- as someone recently told me, he says, even though I know you're selling, I can never get anything cheap from you. So I mean, the point is that we are trying to get a fair value. It's not -- we are not in a distressed situation to sell, but we do want to sell. So we're a motivated seller, but it must be at the right price. So I think these are things that we have to work on to make sure that we get the right outcome for the shareholders. Are you... Chee Keong Chng: Maybe, Zhiwei, I'll try. Sorry, you just caught us on a question that we typically don't do a lot of analysis on. But first and second half, we just confirmed with the team on an EBITDA basis, it's quite stable. We are quoting $405 million in the first half. And then I think in the second half is $386 million. So marginally quite stable between the 2 halves. Joo Ling Lim: There's some timings also because some of it is linked to the O&M income from our waste and water business. So you can't really compare half-on-half. But I think it's stable. This is the point. Chin Hua Loh: So on your third question on Piyush, I think he joined the Board in July. And as I mentioned, and I'm sure it's no surprise to anyone here, he has very quickly gotten to understand the business and has been very actively engaged with the rest of the Board with management. And he has sharpened our look at our strategy and how we can execute better. And I think that's really one of the key -- we are very excited that he's -- he will be taking over -- I must say he will only be taking over as Chairman in April. So currently, I don't know what the news headline says, but it's only after the AGM that Danny will step down and he will take over. As I said, Danny has done a fantastic job guiding us, particularly through these last 5 years as Chair when we went through this transformation. I'm very, very sure that Piyush would add to this in the coming years. So myself, my team, Keppelites, we are all very energized and excited about Piyush coming on as the Chair. Okay. Next, I can't see. Okay. Sure. Sorry. Rachael Tan: This is Rachel from UBS. Just 2 questions. One is that your 67% contracted capacity for your integrated power business, is it just for Keppel Merlimau Cogen? And does it include Sakra Cogen? And the second question is that you mentioned that you will pay out based on what was transacted in the year. So I note that M1 hasn't been transacted yet. Will M1 be included in your consideration of your special dividend given that it's not actually included in your noncore? Chin Hua Loh: Cindy? Joo Ling Lim: Thank you. Yes, it includes the entire Keppel Merlimau Cogen and Keppel Sakra Cogen. Chin Hua Loh: So you are very sharp, Rachel. You picked up that M1 is not included in the -- well, it was still not classified -- when we started the split in the first half -- at the end of the first half last year, we did -- we still classified M1 under core or under the New Keppel. But shortly after, I think, in August, we announced the sale of the M1 telco side. So short 2 quick answers. I think first it's not included in the $1.6 billion that was monetized and completed last year. Obviously, it's not because it still hasn't been completed subject to regulatory approval. I believe it will be included when it's completed. So assuming it's completed this year, then it'll be completed in the -- it will be included in the monetization for 2026. Yes, Joy. Qianqiao Wang: Joy from HSBC. Two questions from me. First of all, on data center. Can we talk a little bit about the recent power bank in Australia? What's your plan down south? Also in terms of update of CFA in Singapore, the IMDA calling for another 300 megawatts. Just following on that, if you win more sort of DC capacity, would you want to also increase your generation capacity on the power side on the back of that? If I may just ask. Second question is on Bifrost. You talked about looking at a new system. Can we get an update on that as well? Chin Hua Loh: Mann, do you want to... Manjot Singh Mann: So we did announce -- thanks, Joy, for the question first. We did announce the power banking of about 123 hectares in Melbourne. Power banking is a very interesting way of reducing our time to market in terms of deployment of data centers. And what this allows us to do is to power bank close to about 720 megawatts gross power, which is in an area which is quite energy rich as well. So it gives us the opportunity of it being shovel-ready, as Chin Hua mentioned in his opening speech, so that whenever we have active interest from any of the customers, hyperscalers and so on and so forth, we are able to reduce our time to market significantly for them for deployment of the data center. So this is something that we started a year back, this power banking. We had about 300 megawatts in our bank. This adds to another about 700. So it's about 1 gigawatt of power bank that we have. And going forward, we will continue to deploy this strategy across in Asia Pacific so that we are able to, like I said, act very quickly because most of the customers want quick time to market from the time they decide on a location for data centers. So that's our strategy for Melbourne, and going -- that's our strategy going forward as well. Chin Hua Loh: Okay. On your question about CFA 2 and whether we will -- if we are successful, whether we will use or we will take on additional power projects to power them. CFA 2 is -- I think, it's going to be very competitive. We have a game plan. So unfortunately, I can't disclose it. Okay, Joy? Thank you. Maybe before... Manjot Singh Mann: Sorry, one last point on Bifrost. Chin Hua Loh: Bifrost. Okay. Manjot Singh Mann: So the 2 other cable systems that we are looking at are still under evaluation. These cable systems are quite complex and requires a huge amount of prework in terms of regulatory requirements, landing station partners and so on and so forth. So we are evaluating both the cable systems at this point in time. And we haven't yet come to a conclusion of which one will go first and which one will go second. But at this point in time, the evaluation is quite robust, I must say, and continuing in a very active manner. Qianqiao Wang: Can I just follow up on the power banking side? How quickly or what sort of conversion ratio should we look at? Manjot Singh Mann: We haven't yet decided on the conversion ratio. But suffice to say that the moment we power bank a location, we don't power bank blindly because we do understand that this has to be converted into active data centers and capacity utilization. So our work on power banking happens typically in conjunction with the customers that we work with so that we get some kind of an idea of how and when are we going to develop that power bank into an active data center. But we haven't yet defined our ratio at this point in time. Chin Hua Loh: Maybe an interesting departure here. Some of the -- some of you here would have attended our Keppel NEXT last year. You might recall that we have developed an AI agent that looks at potential sites for data centers. And so this is actually very actively being used by us where we kind of map out all the publicly available information on power, water connectivity and then plus our understanding of what hyperscalers are looking at. And so this is then being used by the group as part of our AI-enabled power banking strategy. Now before I go to Pei Hwa, before I go to that, I think there are a couple of questions online. So if you allow me, I'll take them first, then I'll come back to you. So thank you for waiting patiently. Mr. Tom Taylor of PEI in Australia. Tom has 3 questions, but maybe I'll take each question one at a time. First question, as global managers get bigger through consolidation, example, BlackRock, GIP, where does Keppel win deals where they don't? Chris? Hua Mui Tan: Okay, sure. Yes. Tom, thanks for the question. I think we are very fortunate that if you can remember that Keppel is a global asset manager and an operator. So unlike the financial GPs in this world where they have to actually go out to buy assets or look for assets, we have our operating divisions that can actually create, develop these assets. So for example, like working with connectivity on data centers, we actually are able to just create the data centers right from greenfield. Similarly, we worked closely with Louis in terms of real estate, providing sustainable urban solutions, greening older buildings and actually increasing the net operating income for such buildings and creating values for our investors. Similarly, for infrastructure as well, we work closely with Cindy's team in terms of whether it's power banking, creating more power plants and also looking at environmental, water, waste and all this. So we are very fortunate that we do not need to just go out competitively to look for assets and deals. We are able to actually source deals internal within Keppel, but also at the right price, I think we will always consider external deals flows when they come through. Chin Hua Loh: Thank you, Chris. Tom's second question, which parts of the remaining noncore portfolio are proving hardest to exit? I think I kind of touched on it earlier. We -- whether it's hard or not hard, we will find ways to monetize over the next 5 years. I think if you look -- it might be instructive to look at some of the things that especially the real estate group have been able to monetize over the past few years. I think we've monetized assets ranging from Philippines to Myanmar over the last few years. They are tough assets to divest. And I think Louis and the team has done a great job doing that. And at the same time, we have also sold, I think, a piece of land in China in Tianjin last year, and we were able to book quite a significant value gain from that as well. So it's never easy, but we don't do easy stuff, but we'll still get it done. Okay. For projects, third question, for projects like Sakra and the Melbourne -- Sakra Cogen plant and the Melbourne data center power bank, what percentage of development risk is Keppel retaining on balance sheet versus syndicating to LPs? So typically, how this is done is that during the very early stages, Keppel will actually come in with our balance sheet because initially, the amount of capital required is not significant. When we are doing our pre-FEED, we're doing our FEED. In the case of the power bank in Melbourne, this is through options for a lease. with an option to be able to buy later on the freehold. So I think the team has structured quite a clever deal where we are able to minimize our upfront whilst we work through with potential customers. So typically, what happens is that once the project is more or less derisked and frequently, when we have a customer in toll and where we start -- when we complete our FID, that's when the funds come in. And that's also when the capital requirement is much greater. So this is kind of our IP, and that gets LPs very interested to work with us because we can actually provide some of the early risk capital. But the development risk when we start is usually taken together with pari passu with the LPs. Okay. Next question is from Alvin Chua of SG5 Private Limited, Singapore. Over the next 12 to 24 months, which business segment does management have the highest earnings growth conviction in? How do you expect progress in monetizing legacy rigs to support returns and capital recycling during this period? We don't -- I mentioned earlier about the rigs. We're working actively on it, but we don't give projections when that will be done. As far as business segments, I think all my colleagues are equally charged up to do better, correct? Okay. Okay. One more question then before we go to the floor here again. This is from Joel Siew of DBS Singapore. Congratulations on the strong set of results and dividend uplift. He has -- he or she has 3 questions. On Sakra Cogen plant, how does the potential margin compare versus Merlimau? Cindy, you want to answer that or not? Joo Ling Lim: I think what Joel means is actually we run it as an integrated power business. So instead of looking at it one unit by one unit of power generation, the entire integrated power business includes how diligent we are in contracting gas and the cost of gas, how efficient are we in terms of the power generation units and more importantly, also our portfolio in terms of contracting the type of customer, high-value, high-volume customer vis-a-vis strategic long-term relationship customer and how do we help customer transit to low-carbon solution. This is also reinforcing Joy's earlier question about supporting, for example, hyperscaler or CFA applicants. The bringing green pathway to such high-value, high-volume customer is one of our unique value proposition, including that of the low-carbon ammonia to power Pathfinder project, which we are supporting the regulators and the industry players with. Thank you. Chin Hua Loh: Okay. Thank you, Cindy. The second question from Joel is, monetization has been outstanding in 2025. Does 2026 look like a better year with falling interest rates? How could you see monetization of your China Tianjin land bank panning out? I think that one is already done. Lu-yi Lim: We have done the Tianjin. I think they mean the land bank, which we hold at historical cost, right? So at the right opportunity, we'll continue to monetize that as well. Chin Hua Loh: I think that one is quite interesting. I mean it's -- obviously, the news and I mean, still not just the news, the market is quite challenged at the moment. But SS TEC actually has no debt. I mean, no net debt, has a significant cash balance. So we are not kind of -- in fact, we are very healthy and looking and the land cost as what Louis says, is below market. So we are -- the market may not lend itself, may not be constructive in the near term, but we remain quite positive in the medium to long term. Monetization for '26, we -- the falling interest rates, will it help? Maybe it will help the real estate market to a certain extent. But it won't hurt, I would say. But each of the assets that we have in the noncore that we are trying to monetize will not just happen because the interest rates are lower, but it certainly won't harm us. Third question, are there any new business trust and REITs that could be launched in future? Chris, do you want to take? Hua Mui Tan: Yes, sure. We will always be open to like new business trust REITs in the future. But actually, for now, our planned strategy is really to scale up our existing REITs and trust. We are ready in the right sectors in the real estate sector, in infrastructure and in the connectivity sector. So I think we're quite happy with what we have right now. The main thing is to -- our strategy is to scale up and to actually improve efficiency and margins so that as FUM grow, our margins will grow and there will be more profits actually for Keppel. Chin Hua Loh: Thank you. Pei Hwa, over to you. Pei Hwa Ho: I still have to congratulate you for the good results. Chin Hua Loh: Thank you. Pei Hwa Ho: I just had 2 follow-up questions on the infrastructure side. I think, firstly, to confirm what Rachel asked just now, the slides, the contracting profile, taking into consideration the new capacity because that means that the new capacity we have also contracted out for more than 3 years, that's correct. Okay. Then I just try my luck. I just hope that you could give us a bit more color on the power spread, how the new capacity, how is it compared to our average power spread in our existing portfolio? And where -- do we see the bottoming because this year has been under a bit of pressure because of new capacity coming online. So I just wanted to get your sense in terms of outlook and how do we expect your average power spread trending forward? Yes. Joo Ling Lim: I like other ought to be greener. So this is how we see it. From the Singapore market perspective, it's always a function of supply and demand. And we all know that the existing power generation unit in Singapore is aging, right? And the last -- in fact, we are the first planting for high-efficiency power generation back in 2022. We will be the first to come on stream middle of this year. You would have also heard the announcement from Singapore government about unlocking Jurong Island for 700 megawatts of data center planting. Then you have also heard the push behind electrification as well as attracting more advanced manufacturing investment in Singapore. All these are auguring well for power demand. And besides just power demand, there is more and more requirement for efficiency and reliability. So I think it will be more instructive to look at it from a longer-term perspective rather than the instantaneous you said volatility. So our team -- our retail team and our portfolio and commercial team is very diligent in constructing our contracted base such that it provides that resilience. And remember, I emphasize on high-value, high-volume customer. And for such customer, we work very closely with them in terms of their long-term need -- their long-term growth and also their glide path towards decarbonization. We'll augment it at the right time with our renewable importation. For that, we are also the front runner. And like I said, later on, whether it's ammonia and the like, will also supplement our value proposition to the customer. So that will help from the market perspective. If all GenCos play to the forfeitures which Sing gov has announced, I think we will be able to see quite stabilized spread in the years to come. Chin Hua Loh: Mervin, you have another question? Mervin Song: Yes, I've got 3 questions. Maybe we can go to Slide 11. You have 6 funds that you're targeting to raise. Are you able to share the potential FUM for that? And in terms of existing funds in terms of upsizing, is there any particular FUM size that you can share with us? Second part relates to the power bank in Melbourne. What is the source of the power? Is it brown coal? And if it is so, does this provide a challenge in terms of securing tenants or hyperscalers who are a bit more ESG sensitive? And how does the special relationship we have with AWS fit in this power bank? And final question, Chin Hua you still look very youthful for energy and vigor. But in terms of Piyush's mandate, is it -- is he also looking at succession planning? Or do you plan to stay on for another 5 years? Chin Hua Loh: Can I -- Chris, do you want to deal with the first question on fundraising? Hua Mui Tan: Yes, sure. On the fundraising, I think we actually have a very fortunate position that we're in the right place at the right time because Keppel is a real assets portfolio. So we have alternative real assets with actually strong cash flows that investors like. And actually, right now, with all the uncertainty in the world volatility that you see, actually, most investors are actually reallocating from the U.S. into Europe and Asia. So I think Keppel is very well placed and positioned in terms of taking advantage of what's happening globally. I think we are still working through very strong tractions, a lot of discussions and negotiations with our investors as well. Even when we want to bring them in, we also want to make sure that we get good fees for that. We don't provide forward guidance on numbers. But I think we are more than confident to go above the $100 billion that we promised by 2026. Chin Hua Loh: Thank you. Mann? Manjot Singh Mann: Yes, sure. So for the power bank in Melbourne, Mervin, it has both powers available, brown as well as green. So depending on the customer and the cost and the future plans of the customer, we could find a pathway from brown to green as well if need be. So both power are available in that particular site. And that is why that site is so interesting because if the customer does prefer green, then we are able to provide green power as well. Your question on SFA with AWS, I think, yes, of course, we have an agreement with AWS, but it's not exclusive to either. So we have the ability to understand and work with other hyperscalers, whether from the U.S. or from other parts of the world. So we are looking at their demand and how they would be looking at Australia in their future plans. So for us, while there's an AWS SFA, which is important to us, we also are working with the others. So we'll be looking at how hyperscalers look at Australia and working with any one of them whoever prefers to be in that place. Chin Hua Loh: Okay. Well, thank you for saying that I still look youthful. Some days, I don't feel that way. I think the truth is that I think Keppel is always run by a team, right? And as any good CEO will tell you, we are constantly looking at succession planning and not just for myself, but for my colleagues as well. I think there is still -- I'm still having fun and there's still, I believe, unfinished business that we need to get done. But at the same time, the time that I serve or how long I serve is really at the -- I serve at the pleasure of the Board. So I wouldn't want to predict anything. But I think so long as I'm here, I'll do my best. And I'm looking forward to working with Piyush. I think he's got a lot of things I can learn from and my colleagues can learn from. So -- let's leave it at that. Yes, one more. Low De Wei: Can I ask on -- Dexter from Bloomberg here. Can I ask quickly on the noncore portfolio in terms of divestments, do you actually break down how much the divestments or the monetization comes from the noncore portfolio? Because I noted that the real estate supply reduced by $0.7 billion. So is most of that going out through divestments? Or is that through revaluation? That's one of my first questions. On the organic growth, on the $100 billion target, are you expecting more in terms of kind of organic growth in like the fund side? Or is it more in terms of acquisitions? And you guys did a Paramount deal in India. I remember you had plans for India office fund. Is that still in the pipeline? Chin Hua Loh: Maybe first question, Kevin. Chee Keong Chng: Sure. The noncore portfolio for divestment of $13.5 billion comprises of many different variables. So we don't split up the details between the different asset classes. I mean, fair enough to say that we have said that the plan is for us to pursue monetization for this bucket, and we will leave it as that. Chin Hua Loh: Okay. Chris, do you want to deal with the... Hua Mui Tan: Okay. On the Paramount and India office funds, I think we have a Sustainable Urban Renewal Solutions fund. And in that mothership fund, we can actually create sleeves if we want. So a possible sleeve could be India office. But actually, what we do is we encapsulate everything into like a sales strategy because actually, instead of just doing value adding, I think now we are always looking to turn buildings from brown to green. Chin Hua Loh: Okay. Your other question on whether it's -- the FUM is -- I think the question was whether the FUM is generated from organic or inorganic. The truth is that last year, I think we already completed the deal with Aermont. We have not done any other deals. So in that sense, we will treat it as all organic. Low De Wei: Okay. Just 2 big questions -- big picture questions from me. First one on the AI. I know you do a lot of data centers. What's your sense of -- there's been a lot of talk about AI bubbles. Are you -- is that adjusting your strategy in any kind of way in terms of data center investments, et cetera? And secondly, I remember one CapitaLand has said that they are also interested in looking at infrastructure. Have you talked to them at all? Are you concerned that there might be overlap? Chin Hua Loh: Well, second question, I think we are 2 separate companies. So I think you got to talk to them. So we've been doing infrastructure for quite a long time. I think if you look at since the days when we started, at least 30 years. So it's not something that just happened by and buy. We've been also involved in real estate for many, I think, 50 years. Connectivity, even for data centers, we have been involved since 20-over years and asset management over 20 years. So it's not something that we just suddenly wake up one morning and said, I want to be an asset manager or I want to be an operator. It comes with a lot of track record and history. What was your first question? On AI. So I think I've mentioned in my speech that putting aside any -- I'm not commenting on the valuation of AI-related stocks, but looking at AI as a kind of a macro trend, we still feel that it is at a very early innings. -- because even for ourselves as a consumer of AI, trying to -- looking to embed AI into our organization and into our businesses. Like most companies, we started with a lot of sandboxes maybe 4, 5 years ago. And then in the last 2 years, starting from early 2024, we have started to take it very seriously. And this is starting to adopt what we call an AI-first mindset, not just for FM&I, but across the whole organization, including for our operating division. And what I would say is that for ourselves as a potential user of AI, we see tremendous opportunities. And every time we kind of look at it again, we said, "Oh, wow, this is what it can do. This is -- and it's not just about efficiency gains, but it's really about building core competency or giving us the superpower to do better, become more competitive, whether we are a fund manager or an operator or building infrastructure assets, et cetera. So based on our own experience, I would say that we think the AI journey is still at a very early stage. Okay. Maybe next question from someone else. Mayank Maheshwari: Mayank from Morgan Stanley. First question was related to GasCo. Now with GasCo coming into play this year, I suppose, how do you think about the impact in terms of your business, both from a spreads perspective as well as competition perspective? So that was one. The second question was more related to the $13.5 billion of assets you have under the noncore side now. What is the related liabilities around it and the debt around it, if you can give us that. And this is more a bit of a question around the total investments that you are doing in the core side of the portfolio, it's around $1 billion this year in 2025. Do you think that trend of slowdown in terms of investments and CapEx around the core side starts to slow further in '26 and '27? Chin Hua Loh: Cindy? Joo Ling Lim: Sure. Thank you. With regards to GasCo, we are -- we as an industry is collaborating and working very closely with the regulator in the setting up of GasCo and the implication to us as a GenCo. But bear in mind, the establishment of GasCo is not overnight. This notice that GasCo will be established was given to GenCos nearly 2 years ago. So along the process, we have done the necessary to do what we can to defend our strong gas strategies. Assisting gas supply agreement will be grandfathered. So I think that's the key. Then like I said, ongoing implementation, we will be supporting and working with the GasCo to make sure it is beneficial for GenCos and the sector. Net-net, I think it augurs well because this will put discipline in gas procurement and also avoid the volatility due to small volume buy from some of the gas offtaker. So I think this will be pretty good for us as a market player in total. Chin Hua Loh: Thank you, Cindy. Kevin? Chee Keong Chng: Just on the -- I think your second question is about $13.5 billion. That's asset value that we have disclosed. I mean if you recall in the past, when we first disclosed it in the first half, it was $14.4 billion, $13.5 billion. And you will naturally see this number coming down as we monetize. Your specific question is whether -- how much of this is debt liabilities associated with the noncore portion. We don't provide that split publicly. I mean, internally, that's a measure for us. But I think fair to say that, as we have said before, the focus on monetization, it is so important for us because it allows us to do the 3 things that CEO has covered. A large part of it is paying down debt. So naturally, you would sort of assume that a large part of our debt is captured under the noncore sort of portion, but we don't provide that split to the market. Chin Hua Loh: Okay. We have one last question online, which I propose we take. This is from Derek Chang of Morgan Stanley Singapore. Derek has 3 questions. Okay. First question is -- first 2 questions are on data centers. First question on data centers, are the plans to involve Keppel DC REIT in development opportunities as some other sponsors have done. I think right now, the answer is no, right? Hua Mui Tan: Yes. I think because our unitholders actually like stable cash use. And I think to make sure that our unitholders are rewarded, I think we prefer to have a stabilized pool of assets to make sure that we give sustainable dividends back to our unitholders. Chin Hua Loh: Okay. The second question is, can you also share when SGP IX will turn operational and likely right for divestment? Maybe operational, Mann? Manjot Singh Mann: So the plan is to start construction in 2026, end of 2026. Should be operational about 18 months from there. Chin Hua Loh: Okay. So this is currently held by a fund. So the fund has -- it's a close-ended fund. So at some point, it will come up for divestment. So at this point in time, it's too early to say when we'll do that. Okay. Third question, does Keppel have a comfort level when it comes to ownership stake in Keppel REIT? Is there further scope to reduce towards 20%, perhaps, especially as you head towards your 60th anniversary in 2 years? Well, very far. Well, the truth is that I think we're very comfortable with the current ownership of stake that we have in K-REIT. So there are no plans to -- current plans to further reduce that, okay? And the 60th anniversary is 2 years. So we'll think about it. Okay. That's all the questions we have. Okay. Great. Thank you all very much for your attention, and thank you all those for attending. Thank you for joining us today. Thank you. Goodbye. Operator: Thank you, ladies and gentlemen. We have now come to the end of our conference. Thank you again for joining us today.
Liana Chue: Good morning, ladies and gentlemen, and a warm welcome to those joining us here in the auditorium as well as via the webcast. It's my pleasure to welcome you to SGX First Half FY 2026 Results Briefing. We will begin in a while with a presentation of the financial results by our CFO, Mr. Daniel Koh. And following that, our CEO, Mr. Loh Boon Chye, will present the business updates. We will conclude with a Q&A session with SGX senior management. [Operator Instructions] It's now my pleasure to invite our CFO up on stage to present the financial results. Dan, please? Kok Yu Koh: Good morning, everyone. Thank you for joining us today. It is a pleasure to share with you SGX Group's strong set of results for first half FY '26. We delivered robust business growth and achieved our highest half year revenue and earnings. Net revenue, excluding treasury income, grew by 10% and adjusted earnings grew by 12%, continuing the strong momentum from the high base in FY '25. Total net revenue grew by 8%, while adjusted expenses were up 4%. We will go through the detail in later slides. Our equities-cash or SGX stock exchange revenue achieved a solid 16% growth powered by market optimism and elevated investor interest from the EMRG tailwinds. Our Currency and Commodity Derivatives segment demonstrated a strong growth trajectory led by iron ore's record half year volume. SGX FX net revenue increased by 8% with a record average daily value of USD 180 billion, driven by sustained client acquisition and increased platform adoption. Treasury income declined mainly due to the global rate environment and collateral currency mix. We remain confident in delivering the medium-term targets that we set out at the start of FY '25. SGX's multi-asset strategy with diversified revenue streams positions us well to deliver the 6% to 8% CAGR in top line organic growth, excluding treasury income. To sustain this momentum, we continue to reinvest for growth while maintaining cost discipline. There is no change to our guidance for expenses and CapEx. We are confident to maintain the sustainable and growing dividend commitment with the incremental $0.025 every quarter to the end of FY '28. The group's strong balance sheet also enables us to capitalize on business opportunities that will drive long-term growth. Now let me walk you through the headline financials. Group net revenue increased by 7.6% to $695 million. Group expenses on an adjusted basis increased by 3.8%, while adjusted group NPAT increased by 11.6% to $357 million. Our margins also grew with adjusted operating profit margin and adjusted NPAT margin improving by 1.4 and 1.8 percentage points, respectively. As mentioned, SGX Group's robust performance this half year continued the momentum from an already strong FY '25. Other than a 10% year-on-year growth for net revenue ex TI, there was also an 8% growth half-on-half. This revenue was backed by sustained volume growth across each of our diversified multi-asset businesses, namely derivatives, including commodities, SGX Stock Exchange, and SGX FX. Our overall derivatives DAV grew 8% from a high base last year when the China's stimulus announcements drove record high volume on China A50 contracts. This growth built on the strong momentum in the second half of FY '25 when global volatility surged due to uncertain trade policies like from Liberation Day. This was underpinned by strong client demand for SGX derivative products and the increase in our global client reach. The SGX Stock Exchange SDAV saw a remarkable growth of 20% to $1.51 billion, the highest in 5 years. This was driven by the holistic measures by EMRG and SGX, alongside growing investor interest. The STI posted a 23% 1-year return, outperforming most ASEAN peers. The SDAV for small and mid-cap surged by over 2x outpacing the STI 30 and contributing nearly half of the overall SDAV growth. Additionally, ETFs and Singapore Depository Receipts or SDRs, contributed more than 10% to the overall SDAV growth. The SGX FX business continued to grow consistently since inception. Average daily value increased by 32% year-on-year, outpacing other peer exchanges benefiting from an enhanced platform and a broader client base. Let me now elaborate on the group's net revenue performance across our 4 operating segments. Our FICC revenue grew $20 million or 12% accounting for 26% of total revenue. The commodities franchise achieved record volumes across iron ore, [ dairy ] products and petrochemical contracts. Total volume grew 24% with iron ore leading the revenue growth, benefiting from a broader customer base and improved market sentiment from the China stimulus. I had touched on the strong volume growth of SGX FX earlier. We saw faster growth in lower-yielding swaps, which increased in demand in our clients' portfolios. The Equities-Cash segment revenue grew by $31 million or 16% and contributed 32% to our total revenue. This was mainly driven by the higher SDAV, as mentioned earlier, which increased trading and clearing revenue by the same magnitude. With the higher trading activities, we also saw more income from securities settlement. Equity derivatives revenue decreased by $10 million or 6% and accounts for 24% of total revenue. This was mainly due to lower treasury income. Notably, though, total equity derivatives volume remained comparable at 91 million contracts, even with a high base last year. Platform and other revenue increased by $8 million or 7%, primarily due to higher colocation sales and repricing of data and connectivity services. This segment has grown at a steady average rate of 2% over the past -- over the past 5 halfs and now accounts for 18% of total revenue. Moving on to expenses. We continue exercising cost discipline. The adjusted expenses increased by 3.8%. The impact of our planned investments in sales and product capabilities and platform modernization will skew towards the second half. Full year expense and CapEx guidance for FY '26 remain the same as previously communicated. Staff costs for the first half increased by $4 million or 2.6%, primarily due to higher headcount. Technology expenses, depreciation and amortization were largely comparable. Other expenses increased by $5 million, mainly due to more professional fees and prior FSDF grants received for the SGX FX business. Adjusted earnings reflect our underlying core performance by excluding noncash adjustments. First is a net fair value gain of $6 million, mainly related to the transaction where 7RIDGE fund entered into a binding agreement to sell trading technologies in July 2025. Second, we took a $15 million impairment due to the lower-than-expected performance from Scientific Beta. Lastly, we have an adjustment of $5 million mainly for the amortization of purchased intangible assets. Our balance sheet remains robust, and continues to provide us with a solid foundation to pursue future growth opportunities while continuing to deliver shareholder returns. Moody's reaffirmed our AA2 rating on September '25, the highest among exchanges rated by Moody's. Our leverage ratio is at a healthy level of 0.8x due to improved margins. The Board of Directors has declared an interim dividend of $0.11 per quarter -- $0.11 per share, consistent with the dividend growth trajectory previously announced. This brings the total dividend in the first half FY '26 to $0.2175 per share, marking a growth of more than 20% compared to the same period last year. We are confident in our ability to deliver sustainable and growing dividends with a steady increase of $0.025 every quarter to FY '28 as previously guided. With that, let me now hand over to Boon Chye, our CEO, who will deliver the business updates. Thank you. Boon Chye Loh: Good morning, everyone, and thank you for joining us today. As Dan highlighted, we delivered strong results in first half FY '26 with broad-based growth across most business segments. This performance reflects disciplined execution of our multi-asset strategy anchored by a strong client-centric approach and driven by 3 strategic focus areas. First, scaling our FX business; second, expanding and strengthening our derivatives and commodities franchise; and third, accelerating growth in our stock market. With this multi-asset strategy firmly in place, we are confident in achieving our medium-term revenue growth of 6% to 8%, excluding treasury income. Let me now take you through each of our focus areas. Our SGX FX franchise, our OTC FX business has been expanding at pace, average daily volume has risen at a CAGR of 39% since we started 3 years ago, reaching a new high of USD 180 billion in first half FY '26. As market volatility persists, more participants are turning to our platforms to manage FX risks effectively. We expect this growth momentum to continue with increasing uplift to our bottom line. This supports our medium-term ambition for SGX FX to deliver a mid to high single-digit EBITDA contribution. To sustain this trajectory, we are sharpening our focus on product and platform innovation. We continue to strengthen our FX data and analytics offerings to meet evolving client needs, helping clients to improve transparency, execution quality, and risk management across the entire trading workflow. In parallel, we are enlarging our capabilities to support broader multi-asset trading, including new EM or emerging market products such as Latin America Non-Deliverable Forwards or NDFs. We are also enhancing workflows to better serve increasingly diverse client strategies. This growth is underpinned by the depth and diversity of our global client network with rising by site participation from global hedge funds and asset managers. Our client engagement has also received industry recognition with SGX FX name World's Best FX Exchange and World's Best Solution for FX NDFs by Euromoney. With these foundations in place, SGX FX is well positioned to remain a key growth driver for SGX Group. Turning to derivatives and commodities. Our overall franchise is gaining solid momentum even after an exceptional FY '25 driven by macro volatility, we achieved our highest half-yearly DDAV of 1.35 million contracts. International participation remained strong with T+1 volumes holding above 20% in first half FY '26. Our FX and rates derivatives delivered 18% DDAV growth year-on-year as more global participants rely on SGX for FX hedging. Beyond our flagship Indian rupee and renminbi contracts, our Korean won futures saw stronger trading activity amid heightened global volatility and a resilient Korean equity market, underscoring the value of our listed FX future shelves, which provides deep and liquid access across Asia's major currencies. Our commodity franchise recorded diversified growth across our key contracts led by iron ore. Alongside strong performance in our flagship iron ore and our freight contracts, volumes in dairy and petrochemical derivatives continue to grow as open interest reach new highs. Over the years, our rubber contracts have attracted rising participation from financial players who now account for over 60% of daily volumes supported by increasing interest from non-Asian investors. Reinforcing its role as the global pricing benchmark for natural rubber, our launch of T+1 night trading on 26th January this year has drawn promising early interest, particularly from participants seeking greater flexibility in round-the-clock risk management. In equity derivatives, our volumes remain resilient. Our China A50 futures registered a 2% year-on-year increase in volumes despite a high base from last year's record activity following China's similar announcement. This resilience affirms the A50's enduring leadership as the most liquid international futures for Chinese equities and continued investor demand for SGX Asia access platform. Building on this momentum we are advancing innovation across our derivative suite. As volumes in equities, FX and commodity derivatives grow, we are expanding our offering to meet changing investor needs and diversify our client base. In first half FY '26, we extended our multi-asset platform with more institutional grade tools such as the launch of the world's first regulated exchange crypto perpetual futures, bringing SGX trusted market infrastructure transparency, and robust modeling into one of the most actively traded digital assets instruments. In this evolving rich landscape, we expanded our offering with the launch of the new 20-year many Japanese government bond futures introduced at a pivotal moment as Japanese rate environment shifts. Together with our 10-year JGB and 3 month TONA Futures, this addition enables investors to express views and manage risk across the Japan rates curve with greater precision. Taken together, this development highlights the resilience of our multi-asset franchise and position us well to capture the opportunities ahead. Lastly, on the stock exchange business. Momentum has been robust and sustained with interest -- with increased vibrancy in the ecosystem. This reflects the longer-term strategy our equities team has been executing, one that is not just dependent on market cycles, but on building a structurally stronger market over time. Through the first half of FY '26, market participation deepened meaningfully. Average daily turnover rose 20% year-on-year to SGD 1.51 billion, the highest level since early 2021. Retail participation in cash equities rose to a 4-year high as investors increasingly pursue differentiated opportunities across STI constituents and small and mid-cap companies. Liquidity has increased in tandem with this heightened investor interest. The STI continues to serve as a key anchor supported by steady domestic and international flows. At the same time, trading activity has broadened across sectors driving higher turnover beyond the STI and contributing to a more balanced liquidity profile across the market. Notably, interest in mid-cap and growth-oriented companies rose significantly with institutional investors recording net purchases of SGD 450 million in small and mid-cap stocks over the year. This was partly boosted by last September's launch of the iEdge Singapore Next 50 Index, which tracks the next 50 largest companies beyond the STI constituents. Liquidity also benefited from higher IPO activity in first half FY '26, SGX Stock Exchange led Southeast Asia in terms of IPO funds raised with nearly SGD 3 billion raised. Looking ahead, our IPO pipeline continues to strengthen with a healthier outlook compared to 6 months ago. Beyond liquidity, we are enhancing market connectivity and building partnerships globally. Two major initiatives were announced in late 2025. First, with the U.S. Together with NASDAQ, we announced the Global Listing Board, GLB, designed to allow eligible high-growth companies to tap both Asian and U.S. investor bases through a streamlined dual listing framework. As we prepare to launch the GLB later this year, we're seeing more new economy companies engaged with us earlier, encouraged by the possibilities that GLB can unlock. This is widening the funnel and gradually reshaping the profile of companies looking to list here. Second, with China. The Monetary Authority of Singapore and the China Securities Regulatory Commission has expressed support for Chinese corporates or Asian companies to secondary list in Singapore. There is now a clear fundraising pathway for eligible Shanghai and Shenzhen listed companies to raise capital on SGX while maintaining their A share obligations. We look forward to welcoming new listings under these 2 initiatives in 2026, and are progressing on the supporting frameworks. Beyond cash equities, while widening the avenues for investors to express their views on Asia's team through a wider range of products such as ETFs and SDRs. ETF activity remained robust, supported by new launches and steady inflows with assets under management reaching SGD 18 billion at the end of 2025, drawn by rising investor interest and steady performance in the Singapore stock market, STI ETFs saw AUM rising to SGD 3.7 billion. We also extended regional and thematic exposures through SDRs, covering Hong Kong, Thailand and most recently, Indonesia, giving investors convenient and cost-efficient access to these markets. Alongside product expansion, we're also strengthening our market structure. SGX RegCo is consulting on proposals to reduce [ port lot ] sizes for higher-priced stocks and to modernize our post-trade framework through broader adoption of broker custody accounts, both aimed at enhancing accessibility, participation and market efficiency. Collectively, these developments point to a clear trajectory, a broader and more active investor base, deeper liquidity across market segments and stronger cross-border linkages enhancing Singapore's position as a leading marketplace in the international arena. First half FY '26 demonstrated the strength and resilience of our multi-asset strategy in FX, derivatives and our stock market. They underpin our confidence in delivering our medium-term revenue CAGR growth target of 6% to 8%, excluding treasury income, through disciplined execution and a clear focus on what matters. First, by deepening engagement with new and existing clients, across all our businesses; second, by delivering product innovation and next-generation market infrastructure; and third, driving a vibrant stock market ecosystem with our continued initiatives and momentum. Thank you. My colleagues and I will now take questions. Boon Chye Loh: Can we have the first question? Yes. I think I saw your hand up first Nick, and then we can have Harsh, and then we'll take a question online after that. Nicholas Lord: A couple of questions for me. The first is just on your comments on the GLB. And you spoke about new companies looking at the GLB. I presume there's also companies that are already listed on NASDAQ but may look at the GLB. So I just wonder if you could comment a little bit more about what type of companies you expect to list and sort of the source of those companies? And how big this GLB could be in terms of sort of number of listings on a sort of 12- to 18-month view? And then I have a secondary question, which is a little bit detailed on the numbers. But in your cash flow, there's about a $420 million gain on the sale of a FVPL or something like that. Could you just tell us what that is? I think it's a distribution. Could you just tell us what that is because it's quite a big cash inflow for you. Boon Chye Loh: Yes. Dan, you can take the second question. On your first question, the partnership with NASDAQ and GLB has clearly drawn companies to have earlier conversations with both SGX and NASDAQ. We hope to get the GLB up and running by the middle of this year. The companies that we're seeing now and on the pipeline are the high-growth new economy companies. And that's what the GLB is created to serve companies with the Asian high-growth being able to tap the Asian and global investor base. You asked for the 12- to 18-month outlook. This is being set up by the middle of this year. We hope to have some company's IPO on the GLB by calendar year 2026. Discussions, as I said, are earlier, companies are talking to us. Can't quite give you that 12- to 18-month forecast, but we're seeing the pipeline being built up. Kok Yu Koh: Thank you, Nick. The second part of your question, we had invested into a closed-end fund a few years ago and the fund is called 7RIDGE. The asset in that was trading technologies, that was sold. The transaction closed in November 2025. So that -- those numbers you see were the proceeds from that divestment of 7RIDGE. Nicholas Lord: And so your net cash is now quite high. Have you any plans as to what to do with that? Kok Yu Koh: Yes. So we will -- we are looking at reducing some of the debt, the bonds that we have as they come due for maturity -- that we have 2 bonds that are coming in the next 12 months that we are looking at reducing some of that. Yes. Harsh Modi: A couple of questions. One very big picture, Boon Chye. A lot of initiatives on equity market in Singapore. If I look at the equity allocation of Singapore households, it's quite limited. Is there any numerical target or any number, let's say, in a 5- or 10-year period, that as you work with different parts of Singapore to get that number higher directionally and to reach a particular level? And how do we think about that possibility? Boon Chye Loh: First, I think the broader participation across the number of companies beyond just the STI constituents is very encouraging. Secondly, the retail participation, as I mentioned, has reached a 4-year high. All segments of investors, including retail households are clearly important. And there are a couple initiatives going forward. You asked about target, but I think it's important to build the foundation. The value unlock program, working with the companies is one expect of that, being able to articulate growth, capital allocation, business strategy. And then in the investment part of the equation, there's going to be, first, a move towards or encouraging retail, or CDP direct account holders to move towards the broker custody model that can create multi-market efficiency. And along with that, CDP direct accounts remain available. And then third, we are doing a lot more in terms of investor education. Then the EQDP program, some of which has been launched has also been able to crowd in the money. So we're hopeful that everybody in the ecosystem playing a part and the momentum that the EMRG has created through the various initiatives and through a more resilient economy, stronger Sing dollar, we hope for a sustained momentum. But all segments of investors are important, including retail. And that's clearly something that we've been working on, but I think this momentum creates the possibility. Harsh Modi: Right. But it's not expressly a target or number they're trying to solve for in terms of participation. It is increasing and all of these suggest there's a lot of effort. Probably, we'll talk about in a year or two. Boon Chye Loh: We obviously have our working plan. We don't know where the pools of capital are. Harsh Modi: Yes. No, thanks for that. Other one is, on some of the initiatives, we talked about GLB, the other one is, which has talked about a lot in exchanges world, and I'm sure you guys have looked at it, it's a prediction market. There's a lot of different kind of contracts on prediction market, some are frivolous, some are serious. As you would have looked through it over last few quarters and years, what kind of role do you think prediction market can play at SGX, if any? And how do we think about that? Boon Chye Loh: Thank you for the question. This space is evolving. And I think the adoption of events markets in each jurisdiction will be different, has to have clear regulation, obviously, demand ecosystem led. As a market and looking at what SGX offers, particularly in the commodity space, freight, having some risk management tools around outcomes such as C-level, number of possible disruptions is clearly something that I think participants may not want to buy insurance for but are keen to look for some risk management tools. And also given the momentum in our stock market, if we're able to create greater visibility interest around financial metrics of a listed company, I think those are clear possible opportunities to evaluate. Like I said, this has to be with clear regulation demand led and with proper guardrails. Maybe a question from online participant. Liana Chue: Yes, Boon Chye. A couple of questions, but I'll take Jayden from Macquarie's question first. And on treasury income, the same question from Glenn from Phillip. I'll just combine it. Any more compression expected in the treasury income? And then is there a lag on compression? And are you shifting the duration of your collateral portfolio to lock-in use? So that's question number one. Question number two is on Scientific Beta. Why the decision was taken to impair the amount of $15 million on Scientific Beta? And lastly, is there more dividends to come? Boon Chye Loh: So I may forget the second and third. So I'll ask you. Okay. On the first question, the -- first, I would say, collateral balances increased. And there's a function of more open interest with SGX on our platform. Yes, the treasury income did decline, but that's, as you said, a combination of interest rates, but also a combination of the currency mix. And being an exchange that provide access across Asia, we can expect different currency mix. There's obviously, right now, a lot of focus on where the U.S. interest rates will go, but we also saw Australia hiking interest rates. We could also be in a different rate regime in Japan. So what is important is we continue to have very prudent risk management, looking at various instruments and look at duration to enhance the treasury income. And as said, I forgot the second question. Liana Chue: Second question is on Scientific Beta, the impairment charge? Boon Chye Loh: Given the ongoing dynamic and investors focus between or more on market cap weighted indices versus various specialized indices has led to underperformance of Scientific Beta, thereby, we have taken the decision to impair goodwill. However, Scientific Beta provides acquisition and continues to be, provides and enhance our index capability, allows SGX as a group, including Scientific Beta to engage the asset owners who are clients of Scientific Beta deeper. And that has also allowed us to enhance our data platform collectively. Dividend. Liana Chue: Yes. Boon Chye Loh: That was certainly Jayden. Liana Chue: Yes, correct. Boon Chye Loh: We guided the 12 quarters, 3 years out with a [ $0.25 ] increase for our dividend. We're just 2 quarters into it. As Daniel and I have said, we are committed and confident of delivering what we've guided in terms of the dividend. And obviously, as we continue to grow our business, committed to a 6% to 8% CAGR revenue growth and its cash generation increase, we'll continue to invest organically. We may put on bolt-on acquisition that provides incremental value business proposition. And if there's excess capital, the board and management is very conscious of returning value to shareholders and also creating and making a sustainable and growing dividend over time. Thilan Wickramasinghe: Thilan from Maybank. Just 2 questions. On the value unlock program, can you give us any update on how many companies that have signed up? And when can we start to see some announcements in terms of what some of those value unlock will be? That's my first question. Second question is on your clearing margin for cash equities this half. We did see an improvement of about 2% or so. Can you give us some indication of what's driving that? Is there a little bit more retail? Or has the mix changed? Yao Loong Ng: So I'll take both questions. So I think the clearing fee, yes, so that 2% increase has been led by an improved participation rate of our full fee paying clients, which is largely institutional and retail, and they come from both segments. The value up -- so the program was officially launched middle of this month. And I would say the response has been quite encouraging. People who have stepped forth to say what are these programs and how can we be involved. So I would say there should be about roughly around 100 companies as of today. That's about 1/6 of the number of listed companies that we have. So I think that's fairly encouraging for 2 weeks. And Thilan, you would have written quite a few notes on this program. Many of the things that we will work with the ecosystem to assist the companies will be quite different. Some of them clearly would be around capital management issues. Some of them will be around the narrative. It could be great in generating returns, but perhaps the story wasn't that well communicated. So those are the things we have to work through. It will not just be done by SGX alone. We are a platform, but we are able to convene the ecosystem, whether it's the IR experts or whether it's the consultants or whether it's the corporate finance advisory firms, right? So as the ecosystem we come together, and of course, MES has provided that grants to help encourage the companies to say, look, this is the time to do it. And I think best of all, we have seen examples of companies in Singapore that have done value unlock of value up, and have seen the results in share price appreciation. So I think these are the best examples. And it's not just in the STI companies, but in the next year as well. So that sets an encouraging tone, the template for the next year of companies to say, look, there is something for us to do. There is some assistance. And we do know that the EQDP managers, for example, are looking at some of these companies. And if the right strategies, the right metrics and the thinking can be communicated, then they should be able to expect that some of these managers will have institutional capital or retail capital allocated to them can look at these companies. Yong Hong Tan: This is Yong Hong from Citi. And maybe just one question on the DCI segment. So given the recent development and the Anthropic releases and based on your interaction with your clients, any recent opportunities you see for your DCI segment, maybe especially the Indices business. And relating to that, on your Scientific Beta, would that be further eased to your scientific business? And also, is the impairment done? These are my 2 questions. Boon Chye Loh: On the DCI segment, we saw revenue increase in the connectivity space with higher colocation sales and repricing in October '24 and in the data part of it, as part of our securities trading market platform modernization, we're also undergoing a data lake modernization, which will create capability and functionalities for us to create data and indices that participants will find it useful. On your question on Scientific Beta. As I mentioned earlier, there are other values that SB bring to the group. The revenue contribution of SB to the group is limited. Even if we were to take further impairment, which is not the case at this point, as the management and the team continues to execute on the plan, even if we do that, it will not be -- it'll be modest given the very strong cash and balance sheet of the SGX Group. Felicia Tan: I'm Felicia from The Edge Singapore. Earlier on you mentioned that the IPO pipeline continues to strengthen with a healthier outlook. So at the last results briefing, I think Pol gave a number. It says that you guys have 30 companies in the pipeline. So I was just wondering whether you'd be able to give a figure. And I think the last time you guys mentioned medium term. So do you all have any like more concrete timelines this time? Boon Chye Loh: Yes. So when we mentioned the IPO pipeline at our full year results briefing, roughly now also in August, 6 months ago, say, we mentioned more than 30. Very pleased to say 18 out of 30 has now come to the market. As of now, for our full year calendar outlook, the number of companies on the pipeline is more than what we said before. And we have number of IPOs at this month. I think key is obviously companies, as we've mentioned in our pipeline, companies have engaged advisers working on IPO on SGX. And we hope market continue to be conducive, and we hope to outperform last year. Pol de Win: So the number now is greater than 30, if you want the number. But what Boon Chye mentioned is important, right? We said that 6 months ago, 18 listings have happened since. By the way, it's greater than 30 and growing, right? So as all these deals are happening, we see new additions coming in at a greater pace, and that's encouraging. I think the other aspect to this is not just about numbers for us. The quality and the breadth of it is equally if not more important. We see that across main boards and catalysts nicely spread. And with the global listing board now, we have another very, very exciting tool in the toolbox to cast the net even wider. And to Nick's earlier question, I think what we are seeing based on the conversation that we're having around the GLB is that it's attracting companies that probably otherwise we might not have seen, consider Singapore as a listing destination. So that's exactly what we were hoping to achieve with it. And then equally in terms of -- Boon Chye mentioned is already around industries, right? So it's been pretty diverse. Technology is part of it. Health care is part of it. Consumer segment, digital infrastructure and of course, also real estate, which is 1 of our strengths. And I think all of this, by the way, we already saw reflected in the type of transactions that have started to come through in the last 6 to 8 months. Boon Chye Loh: That's why Pol is the Head of Global Sales and Origination. You're hearing the word greater from him. Felicia Tan: Sorry, I do have 1 follow-up question, and that will be the last one for me. I also was wondering whether you guys have any updates on the bolt-on acquisition front. I think, again, it's something that you mentioned 6 months ago and something that you mentioned just earlier. So I was just wondering whether you've identified any potential targets. Boon Chye Loh: Well, we continue to execute on our organic plans. We'll invest organically. We're also obviously continuing to evaluate areas that can extend our breadth and our debt. And as previously mentioned, the freight industry is undergoing in our view, a digitalization journey. And coupled with our existing strength in freight and commodities, that's an area that we're continuing to try and find bolt-on targets that could complement our business strategy. There is no timeline to that because I think it's important to look at the value, to look at the fit and obviously, market timing. Unknown Attendee: Just wanted to ask on the GLB. As of now in terms of the conversations that you've had with the companies who are interested, do you see more coming from U.S. trying to come into Singapore? Or is it the other way around where you're trying to bring companies onto the U.S. side? Boon Chye Loh: It will be both ways from what we see right now on our pipeline. Our companies are broadly in this part of the world. But with businesses that could extend into Europe or U.S. So meaning, companies in this part of the world having a global footprint or having more of a regional footprint and clearly looking to tap the Asian and global investors. Unknown Attendee: So just to follow on. I guess, it's more trying to understand. So do you see this more as issuers that are coming new to the market, there will be -- or are there already listed players who are looking to go over to U.S.? Boon Chye Loh: So this will be for new IPOs, and new IPOs could include companies. They have not been listed. It could also include companies that are already in the U.S. looking to tap this GLB. Questions online? Liana Chue: Yes. Boon Chye, this is from Shekhar of RHB. I'll broadly put into 2 buckets. One on equity derivatives, broadly stable volumes. What is the action plan to accelerate growth over the next 12 to 24 months? And on securities market, any pricing levels without impacting competitiveness? Hsien-Min Syn: Very bullish on the need for risk management across the Asian capital structure. Very bullish on our portfolio mix because it doesn't even yet reflect the market weight of what exists. So if you look at our A50, the number looks very large. But when you normalize the notional, so the A50 notional is 15,000, the Taiwan notional is 100,000. When you normalize this, the upside is a lot. And there are 2 metrics you can look for if you wanted to say what the bogey is. One, today, our market share of A shares on our exchange versus onshore China is about 5%. Secondly, the inclusion rate of China in MSCI equity is about 2.5%, meaning there is no asymptote here. It's all about increased activity in Asian markets, higher volatility, very idiosyncratic moves between markets. There is no Asian lump, China is China, India is India, Taiwan is Taiwan. How quickly can this grow? When I look back at Taiwan, 5 years ago when we did the migration, the notional contract of our Taiwan contract was 40,000. Today, this month, it's 100,000. That's just AI and TSMC. So it's not a static portfolio. And in fact, in this current world order in capital markets, I think we are so well placed because we have currency, we have equity, we have commodities, and we're making a start on a new -- entirely new derivatives category, which is the perpetual payout. It's not about crypto. It's about that payout. Boon Chye Loh: I will reinforce Mike's view. Given the unpredictable and very uncertain environment, this is really an environment where I think investors are more actively managing macro risk, which then translate into asset class risk management. If you look at the IMF 2026 outlook, 4 of the top 10 countries that will contribute to global growth in 2026 comes from Asia. Obviously, the top 2 being China and India, and there's collectively, the 4 countries is going to contribute about 50% of GDP growth. The second question is any pricing levers for securities market without reflecting competitiveness? Our focus is really to broaden market participation, increase the number of stocks number -- increase the liquidity or number of stocks beyond the STI, more products, better post trade with the broker custody arrangement for the investors who choose to do so. And if that continues to create the flywheel, I think that's better for the overall market in terms of our activity. Any questions here in the audience? If not, we take 1. Yes, Harsh, and then we have 1 from online. Harsh Modi: A couple of follow-ups. You touched on, Mike, on the [indiscernible] futures as a contract, and it's more a proof of concept. Where are we in that journey? And how -- by when do you think you can get enough of data or comfort to then broaden out into, let's say, gold or some other contracts? Hsien-Min Syn: The design choice of what we delivered was to go through existing rails because that's how you address your current customer network. But there are 2 specific things that need further adoption. One is clearly setting up the fact that it's not -- it's an indefinite future. It keeps rolling. And it has a daily funding, right? So these are the 2 important things. And we needed to wait for the right asset class to come along where there was an ecosystem that said, I can do this. So the evidence that we have since launch for Bitcoin and [ Ethe ] has been very promising. It's mostly luck because of the environment. So what we've seen is that the most important thing to track is the micro structure. How liquid is it? And actually, the results are very encouraging. Most of the volume is in Asian hours, hypothesis, number one. 70% of the stuff trades in Asia, the trading happens out of Asia, that's what we've seen. Number two, the funding rate is actually tracking the nontraditional crypto exchanges. It is not tracking the U.S. ETFs. It is not tracking the U.S. Bitcoin futures, meaning it is the regulated mirror of what you're seeing on the unregulated exchanges. So that is very promising. Thirdly, this funding rate is very responsive. It went up a lot when Bitcoin went to 85,000, 87,000, and guess what, in the past week or so, it is now negative. So it works. It does what it says on the tin. Our task here going forward is to get more institutions, clearing members and primes to onboard this onto their shelf, right? We already have a number of pioneer technology vendors and clearing members, and they are very crypto-native in nature, but we need to hit the mass customer network where our strength lies. Boon Chye Loh: We'll take 2 more questions. One here and then 1 online. Unknown Attendee: I am [indiscernible] The Business Times. I wanted to circle back on the IPO pipeline that you mentioned. So would you say it's better than the first half of your financial year? Pol de Win: I would say the pipeline has improved, yes. That's what we said. Notwithstanding the good momentum that we are carrying across from the first half of the financial year. But you need to understand, right, these things never happen in a straight line. There's a bit of seasonality in IPO activity as well. So it's normal for the first quarter to be a little bit more quiet as companies prepare our full year financials. But overall, as we look -- continue to look at that sort of medium-term window, we're very, very confident. Unknown Attendee: All right. I also wanted to clarify whether do you see like more mean bought applicants or more catalyst applicants? Pol de Win: Quite equally split. Unknown Attendee: And actually, last year, you said that 2025 was a transitional year for the [ board ], right? So do you think -- how do you describe 2026 then? Boon Chye Loh: Transitional year? Unknown Attendee: It's transitional year. That's what Pol said last year. Pol de Win: Yes. So I mean it was very clear. If you look at the calendar year 2025, the first half and the second half were 2 different worlds. We're now in the new world, and we'll keep building up on that momentum. I think if you just generally look at market conditions that are out there, pretty favorable and not just for us, that is globally, but I think there are certainly elements that play to the strength of us here in Singapore and of Asia as a region. We see the supply coming through, right? There is many, many companies out there in this region that fit right in our sweet spot that need to create liquidity for their shareholders that need capital for growth. So -- from a supply perspective. And then we've, of course, worked tremendously hard with many people here in the ecosystem in identifying some of the pain points and coming up with these initiatives that have been rolled out following the review group that I think are going to be very meaningful in creating an even better environment for us. And I think the deployment of EQDP funds is a very good example of that. The regulatory changes that we've started to make and indeed also the global listing board, for example. Unknown Attendee: I have another question for Boon Chye. It would be very quick. For the Equity Market Implementation Committee, do you have any more details you can disclose at this point? Boon Chye Loh: Not at this point, we hope in the weeks ahead to announce the formation of the -- to announce the committee members and then lay out our plans forward. Liana Chue: One last quick question, I think, maybe for Boon Gin. Could you kindly elaborate on the reduction of port lot size from 100 shares to 10 shares? Will it extend beyond the initial companies that have been identified so far? And that's from a private banking sector. Yao Loong Ng: Yes. So I think we have put out that console and taking into balance the various factors, we think that we start off with $10. And I think that is going to be a good start because it represents companies or blue chip companies that can be more accessible to a wider population. I would say that the unitization way of breaking down the ballot size, it's not new to us. We did that in the ETF market in 2022. And we have seen quite good activities in ETF market clearly, and we have seen how investors are able to access the higher-priced ETFs and being able to do that. I mean, GOL is an example. It is trading about SGD 600. So we have seen activities in that. And I think that has helped. Of course, I won't be able to definitely extrapolate, but I think making our stock market accessible with -- for higher price shares to a much broader population is part of our goal for higher retail participation in this market. Boon Chye Loh: Okay. With that thank you very much, everyone, for your presence and participation. Thank you.
Akira Shimada: Thank you for participating today. I am Shimada, President of NTT, Inc. I will now explain the financial results for the 9 months ended December 31, 2025. The consolidated financial results for Q3 FY 2025 show increased revenue and profit year-on-year. Operating revenue reached new record high levels in Q3. Although operating revenue was impacted negatively by approximately JPY 55 billion due to foreign exchange as a result of expansion of enterprise business across group companies and increase in revenue by transferring data centers for REIT, operating revenue increased by JPY 371.3 billion year-on-year to JPY 10,421 billion. Regarding EBITDA, while there were cost investments at DOCOMO to reinforce its customer base and to implement measures to improve mobile network quality due to increased profits from the expansion of enterprise business at the group companies and transferring data centers for REIT, EBITDA increased by JPY 104.8 billion year-on-year to JPY 2,657.3 billion, and operating profit increased by JPY 57.9 billion year-on-year to JPY 1,457.1 billion. Profit driven by a rise in operating profit and other factors increased by JPY 75.4 billion year-on-year to JPY 926.1 billion. As for operating revenue and operating profit by segment, in the Integrated ICT business segment, Consumer Communications business declined due to factors, including reduced mobile communication service revenue. However, growth in smart life business centered on finance services and enterprise business led to an increase in operating revenue year-on-year. Despite profit growth in smart life business and enterprise business, because of cost to reinforce the customer base and improved network quality, operating profit declined year-on-year. As a result of measures to reinforce customer base, sales capability is steadily improving and MNP was positive during Q3. In the Global Solutions business segment, despite an approximately JPY 55 billion negative impact from foreign exchange rates, driven by business growth domestically and internationally and transferring data centers for a REIT, operating revenue and operating profit increased year-on-year. In the Regional Communications business segment, although there was a decline in legacy business revenue due to factors such as growth in enterprise business and the fiber optic business revenue, operating revenue and operating profit increased year-on-year. Net adds in fiber optic service increased year-on-year due to strengthened sales of 10 giga plan and comprehensive bundled service for condominiums. In Others, such as Real Estate, Energy, et cetera, due to expansion in office, commercial and residential businesses within NTT Urban Solutions, operating revenue increased year-on-year. Next, I will explain the full year financial results forecast. In order to reflect the revised forecast of DOCOMO and NTT DATA Group, we have revised downward the consolidated forecast for NTT this fiscal year. Details will be explained later by each company. Regarding DOCOMO, amid intensifying and prolonged competition requiring greater-than-expected investment to reinforce its customer base, it is necessary to make sure to continue implementing key measures for future growth, such as measures to reinforce customer base and improve network quality. As a result, operating profit has been revised downward by JPY 83 billion. Particularly with respect to DATA GROUP, reflecting the realized profits of gain on the transfer of data centers for REIT based on market environment exchange rate fluctuation, the operating profit was revised downward to JPY 26 billion. Particularly at DOCOMO, intensified competitive environment is expected to continue in addition to the achievement of the results by strengthening of customer base and improvement of mobile network quality, we endeavor to recover performance by accelerating efforts through growth in smart life business, focusing on finance and enterprise business and cost reduction through fundamental review on organization and business processes. The summary of fiscal year 2025 financial result forecast by company is shown on the slide. Next, I would like to go over 4 topics. First, let me talk about the mass production of photonics-electronic convergence devices. The switches using photonics electronics convergence devices through collaboration with supply chain partners, including Broadcom and Accton Technology will begin commercial provision within FY 2026. Furthermore, for the mass production of photonics-electronics convergence devices, innovative device is continuously preparing to increase production volume per line through automation of assembly, mounting and inspection processes to expand production lines in response to demand. Through these efforts, up to 30,000 units production per month will be feasible, and we would like to proactively cater to the demands of hyperscalers and cloud operators. Next is social implementation of AI, integrating digital and physical domain. Till now, NTT has been promoting introductory support to respond extensively to globally major LLM in addition to the development and provision of genuinely Japan-made LLM tsuzumi. The order amount for our AI business for FY 2023 Q3 was JPY 147.8 billion for the entire group, far exceeding the pace of achieving annual target of JPY 150 billion. Currently, initiatives at Toyota Motors, Mujin and Trial Holdings are making progress. And while we continue to collaborate with the leading companies of each industry domestically and overseas, we will accelerate the social implementation of AI that integrates digital and physical domains. Next, I will talk about exhibition at MWC Barcelona 2026. At MWC Barcelona 2026 to be held in Barcelona in March, photonics unlocks an intelligent power optimized future is our key message. After 7 years, we will jointly exhibit as NTT Group. I will deliver a keynote speech on March 4 and speak about our efforts to reduce power consumption through optical technology centered on IOWN, such as photonics-electronics convergence devices and optical quantum computers. Please come to the event. On the progress under medium-term management strategy, our efforts since November is shown on the slide. This concludes my presentation. Thank you for your attention. Operator: First, we will accept questions from people in this room. [Operator Instructions] Are there any questions? The person -- the left in the back as seen from my side. Unknown Analyst: [ Nippon Kanakia ], [indiscernible] is my name. My first question is, fiscal year-end DOCOMO 3G is going to end. And so there's this milestone. And before this milestone, are there any comments? And on a related note, DOCOMO, operating profit and full year guidance, there are to be revised downward. And in the current fiscal year, customer base reinforcement is to be accelerated. And towards the next fiscal year, do you think this trend will continue, this accelerated trend will continue? These are the 2 questions I have. Akira Shimada: Thank you for the questions. First of all, fiscal year-end, there is the 3G milestone. And towards this, vis-a-vis 3G customers, we are making sure that we recommend the 4G or 5G to them. And in addition, handset device discounts are also offered. We are making sure these measures are steadily taken. But ultimately, about 2 million subscriptions, I think, will end up remaining and most are IoT-related subscriptions are likely to remain. And therefore, to actual users, we would like to explain in detail, respond meticulously so that they can migrate as much as possible to 5G. And DOCOMO, their most important mission now is to maintain and expand the customer base and quality improvement has to be made further. These are the 2 main challenges of DOCOMO. And this fiscal year, they are making utmost effort in this regard. And next fiscal year, this effort is to continue. And 35% has to be met by all means, I may have mentioned. And the message was not to reduce share to below 35%. That was the message I wanted to get across, to make it easy to understand. But maintaining DOCOMO's current share is important for the future, whether it be finance service or entertainment in order to offer value-added services. This kind of customer base should not be deteriorated any further. And we have to be able to offer value-added service to a variety of customers as much as possible. And for that purpose, we have to expand our customer base. This concludes my response. Operator: Next question, please. The person at the left. Yasuhiro Kobayashi: From Yomiuri Shimbun. My name is Kobayashi. I have 2 questions. The first one is on IOWN. Photonics-electronics convergence devices, mass production will be commercialized. And what is the scale of sales? That is what I would like to know. And with AI, the order amount will be JPY 148.7 billion. But in terms of net sales, how will that translate to be? Akira Shimada: Starting from the photonics-electronics convergence device, at this point in time, we cannot state net sales. That is because the price negotiation is ongoing at the moment. If I state figures, you will be able to arrive at the unit price. So I would like to refrain from responding to that question. AI, JPY 148.7 billion -- JPY 147.8 billion. Some of them are early processes or some of the orders are in the order of JPY 10 billion, and the period will be slightly longer. So in principle, within 6 months or so, they will be booked as sales, but some of them would require a few years. Next fiscal year, we are anticipating the half sales from there. So we are already entering into the fiscal year and some of them are order placed in the first quarter. Operator: Next question, the person in the middle, wearing blue shirt -- navy jacket, please. Unknown Analyst: Nikkan Kogyo Shimbun, [ Shimada ] is my name. I have 2 questions. First, downward revision of guidance. I take a look at the reason for vision and DOCOMO's intensifying and the prolonged competition environment as well as network improvement -- the network quality improvement that is incurring cost. I want to know a bit detail about the reason. Sales promotion, much more than expected. There's more cost incurred for sales provision. Why is that? It was network quality improvement, base station construction cost is increasing much more than expected. I want to know in more detail the reason for the revision. Akira Shimada: First, quality improvement. It's mainly investment. Of course, to a certain extent, there is cost incurred. But rather, we have a plan and about JPY 50 billion per year, there's increase in investment. And that is how we will respond, mainly speaking. And cost is increasing because of the sales promotion cost. And the point is residual value is set when handsets are offered to customers. But when it comes to customer percentage or customer rate, there are more customers than expected that return their handsets, and we had to provision for that. And there's that. And in the case of DOCOMO, I think details will be explained by DOCOMO. And sales promotion is being conducted by competitors as well. And under such circumstance in Q3, the 3 months as well as in January, they are facing difficulty and they have to respond to the extent possible, and that is incurring cost. Unknown Analyst: And the second question, wage hike, spring wage negotiations have started towards a wage hike. And under such circumstances, wage hike, Mr. Shimada, what is your thinking about the wage hike and the price pass-through cost reduction? How are you intending to secure a source of funds for wage increase? Akira Shimada: Basically, 12 years in a row, we have been conducting a wage hike already. So it's important that we continue this wage hike. However, when it comes to the level of wage hike, we have to negotiate with the unions, and it depends on the outcome of negotiation. It's true that cost, there's various kind of cost increasing and labor cost is increasing as well. And the services that we offer, conducting a price hike might have to be necessary. But as I mentioned, particularly in mobile, intensified competition continues. In that sense, in various ways, we have to try to reduce cost and increase efficiency, and we have to introduce AI. By taking these various measures, we have to absorb increasing cost. That is what we have to do for the time being. And if possible with the understanding of customers, if we can increase unit price in various ways, that will be desirable. Operator: Then to my right, the person in the second row. Unknown Analyst: [ Koyashima ] from Kyodo News. I have 2 questions. The first question is about Rapidus. There's additional investment, and I would like to confirm the fact. And what is the expectation to Rapidus? And the second one is TEPCO, they are requesting for external partners. And data center and AI, there are some areas you excel, but do you have the intention to participate? Or do you have interest? Akira Shimada: Starting from Rapidus investment, I would like to refrain from making comment. Please ask the question to Rapidus. But on the other hand, with Rapidus, we have much expectation. Photonics-electronics convergence device, as you saw in the materials, at around PEC-3, we should be able to work together. And together with the President Koike, we have been speaking and Rapidus has a front-end process and the back-end process, and they want to have the full initiative. So in the back-end process, something like a PEC-3 will be embedded so that the product value will be enhanced. So we would like to participate in that effort. And about TEPCO, we do not know the details at all. So we would like to refrain from making comment. My apologies for that. Operator: Next question. The person behind the previous person. Unknown Analyst: NHK, [ Toma ] is my name. About DOCOMO, DOCOMO has a finance service. They're trying to strengthen finance business. And Mr. Shimada, in your interview and so forth, you talked about the concept of setting up a holding company. And what is the progress of this concept, the aim, timing, et cetera? At this point in time, what is the status? Akira Shimada: Thank you for the question. Holding company or holding company and operating company for finance service, I've wanted to set up this kind of company, and I've said that in various occasions. And if possible and if the environment allows, from around April of this year, we want to set up this company. And of course, our M&A -- well, DOCOMO SMTB, Sumishin Bank, and Monex and DOCOMO Finance. And these M&A partners will belong to the holding company and there's d CARD, d-Barai , d PAYMENT and a company that can handle all kinds of finance services that we want to set up. And for one thing, FSA, we dialogue with FSA and finance-related governance matters would have to be clarified, and that's one purpose. And MIC, Ministry of Internal Affairs and Communication have been our regulatory authority, but finance business will be within the realm of JFSA. So we have to be able to respond sufficiently to JFSA-related matters. And if things proceed as scheduled around the summer, we do want to change this kind of a structure. Unknown Analyst: By the way, DOCOMO, as you explained, there's the competitive environment and there are cost-related matters and finance-related business, bringing them together. And by so doing, do you think the company -- the group can recover and grow further? Akira Shimada: First, we have to reinforce customer base. And in order to do that, finance business is important as well as entertainment as well as new venue business, as I mentioned in my explanation, and we want to offer these kinds of services as value-added service to the customers. And of course, for that, we have to be able to collaborate well. And details, if you ask Mr. Maeda, he may not be available to respond in detail, but at some kind of a timing, we do want to create an opportunity so that we can explain about DOCOMO is intending to do. At a certain timing, I think we'll be able to explain in detail. Operator: We would like to entertain one more question from the floor. The person at the front row, please. Unknown Attendee: Free writer, [ Sano ]. I have one question. The other day, NEC from the announced withdrawal from the existing base station business, and you made the investment in 2020, and you have been trying to expand to now. And I understand that the business would continue, but NET (sic) [ NEC ] is going to downsize this business. And what is the perception of NTT as a shareholder of the company? Akira Shimada: Well, NEC on the existing base stations, I have been speaking with President Morita, and he will continue to do that. And what is used for the services such as the equipment and the software of NEC, we do not have any concern over that. But on the other hand, from that perspective, in 5G, domestic vendors are not so competitive, which is unfortunate. So in the next plan or for the new service deployment, domestic vendors to produce good products so that it will be desirable for us to use again. So we would like to look forward to that. So specifically, are you considering to have any actions -- specific actions we do not have from our side. Operator: We will now respond to questions from reporters participating online. [Operator Instructions] Are there any questions? No questions? Since there are no questions from people participating online, we would like to ask any -- if there are any questions among the people in the room, the person in the right-hand side, please. Unknown Analyst: Toyo Keizai, [ Chaima ] is my name. Downward revision of guidance in relation to that, once again, I want to know that I think a substantial factor is concerning DOCOMO. And compared with the initial guidance, you made efforts for sales promotion, but other companies were making effort in sales promotion as well. As a result, the competition intensified and things are not going as planned. Well, what specifically was different -- is different compared with the initial guidance? And bearing that in mind, next fiscal year by segment, including Integrated ICT segment and DOCOMO, what is your current prospect as much as you can share with us? Akira Shimada: What prospect? Unknown Analyst: Performance forecast for each segment. Akira Shimada: First, sales promotion -- concerning sales promotion, actually, Q2, DOCOMO lost in terms of MNP competition, 0.5, we stopped that service. And as a result, there was a decrease in volume. And after that, we should not intensify competition too much. That is what we have to agree upon with our competitors, but still, our competition is not slowing down, moderating, not moderating. And last year, from the second half of the year, we made a lot of effort towards sales promotion. And this year, we thought the competition will settle down. That was what I was expecting. But in reality, competition rather is intensifying further, not moderating, which means we had to respond sufficiently in this kind of situation, and we should not be defeated, and that is why this current situation is continuing. And we've all spent a lot of cost, all main players in the industry. So next fiscal year onwards, what is the situation likely to be? It's very difficult to forecast. But if there is a competition, we have to win. So we have to continue our effort. If there is competition, we have to continue our effort. And by segment, DOCOMO segment, is that what you want to know? Microphone was not on. Next fiscal year, we have to prepare our next fiscal year's plan. It's not fully prepared. And DOCOMO, at least this year will be the bottom for DOCOMO. However, quality improvement about 20% growth every year and number of chats is increasing because of increased video usage. We have to respond to these needs so that we can ensure customer satisfaction. So we do have to continue our effort to improve communication quality. And NTT East and West, enterprise business and the [ smart life ] business of NTT West and so forth, they are recording solid performance and stable performance, and we think we can stably continue these businesses. End of next fiscal year, or this year or next month or so, fixed telephone, we would like to explain. I think there will be an opportunity for us to explain about what to do with our fixed phone business. And NTT DATA Group, they are enjoying organic growth. And globally, in order to grow further, what should be done. And NTT DATA's midterm plan is to be reviewed. When we announce our financial results for this fiscal year, we have to think about what to do with our midterm plan, and we want to be able to use NTT DATA so that we can enjoy synergy for the group as a whole. So that is what we are considering to do going forward. Does that answer your question? Operator: Moving on to the next question. The person at the front row. Unknown Analyst: [ Kita Watch ], my name is [ Sekiguchi ]. On DOCOMO's business, this is related to downward revision. What is the view on capital expenditure, especially next fiscal year? To what extent are you going to tolerate the increase of investment? Today, when I look at the materials from DOCOMO, the capital expenditure is going to increase by JPY 32.7 billion. And now how do you evaluate JPY 56.5 billion? You mentioned that the performance is now bottoming out as an expression. But this capital expenditure, how do you evaluate? And after next fiscal year, how are you going to increase or decrease? Can you share your view? Akira Shimada: It may be better to ask the question to President Maeda. The increase of base stations, capital expenditure will continue. And as I mentioned, quality will be secured. That is important. But on the other hand, this year, venue-related investment is quite significant. So smart life investment will not be so high next year. Basically, large venues have been established quite significantly this year. So totally, we're expecting to see the drop according to our understanding. Operator: Next question, the person in the second row from the front. Yuka Nakao: Kyodo News, Nakao is my name. In the presentation material, AI, social implementation. Social implementation of AI, I have a question about this topic. And in each industry, you want to collaborate with leading companies to implement AI. And continuation from this, what areas do you expect after this, any future prospect? And do you want to work on transportation and retail industries and so forth? And in relation to that, AI, there are various use cases and social implementation is likely to proceed more and more. On the other hand, some companies seem to be taking a wait-and-see mood and how much money should they spend and what part should they increase efficiency in? There are some companies who have not been able to make this decision, and that is what I actually feel. And President Shimada, what is your perspective on this? And in order to accelerate social implementation of AI in the NTT Group, is there anything that NTT will work on as -- in the group as a whole? Akira Shimada: What we explained today is for digital and physical, connecting digital and the physical domain and physical domain has written this Toyota, Mujin and Trial. LLM, not the LM foundation model, but rather the quantitative model -- numerical model. Numerical model related to AI would have to be combined and not just foundational model because factories should not make any mistake in their manufacturing. So LLM is a language model. So mistakes do tend to occur. However, what's written here, everything that's written here should not make any mistakes. If there are mistakes, there will be accidents and incidents. We have to be able to create a model that does not make any mistakes. And for that, we need both technologies, and that's why we decided to share this example. And globally -- and before globally, in Japan, there's tsuzumi. And there are about 2,000 inquiries for tsuzumi from customers and mainly speaking, local governments, finance and medical and health industries because there's data that cannot be made open, cannot be made into Open AI. These are the entities that are inquiring and showing interest in tsuzumi. Private and sovereign related aspects, we think are likely to increase going forward. In that sense, in Europe, NTT DATA in Europe, there's Mistral. There's a lot of demand there. And in that sense, sovereign related AI, we think we'll see an increase in demand. And what's selling most is agile Open AI in our case as well. But rather, we want to be multifaceted and open. And the AI that can be applied by customers, we want to offer consulting on and support implementation. That is what's desirable for us. Depending upon how customers use AI, there are different kinds of features of AI that can be used. And I think various kinds of evolution will take place in the future. But in particular, private-related demand, I think, will increase in particular. Operator: The person who asked the questions earlier may raise questions as well. We would like to take 1 to 2 more questions. To my right. Unknown Analyst: [ Nikin ] of [ Financial or Trade Magazine ]. And with respect to tsuzumi domestically -- domestic LLM. And you mentioned about the increase of private and there may be increase in finance, but with 3 mega banks rather than domestic companies, they may be using large-scale AI from overseas. But the regional banks who do not want to employ cost, are you planning to stress small and midsized financial institutions, including regional banks? Do you have any thoughts? Akira Shimada: I would assume that the financial institutions and as to where the AI will be provided, the choices will be different. Large financial institutions with LLM with large parameters, some will be introducing them or it may be more closed area where they would like to cater to their needs. So the real large LLM will be used in certain locations and a relatively smaller scale in the closed data environment, there may be both opportunities. So rather than scale, it's how it's going to be used that would determine the choice. We do have inquiries after the local government, financial institution is next. So we have the inquiries, and we are receiving quite extensively. There are many sections. And by section, I believe the inquiries are being made. Does that answer your question? Operator: The person in the back with a dark colored jacket, please. Unknown Analyst: This is [ Taksuki ] from [indiscernible]. Sorry for the second time. And first about the interest rate environment. On a year-on-year basis, interest-bearing debt in order to expand businesses increase in interest-bearing debt and the CapEx in the case of a company, I think will be costly. As from these 2 perspectives, interest rate hike, how will that impact your company's business? That's my first question. And my second question is the depreciation of the Japanese yen and the foreign exchange rate, how will your group be affected by the foreign exchange rate? NTT DATA, data center REIT because of Japanese yen depreciation, there might be more business coming in, or from both positive and negative perspective, how will you be impacted by depreciation of the Japanese yen? If you could please comment on these points. Akira Shimada: What do you personally think and what I think as a company happen to be different. My personal perspective is different from company's perspective. Interest rate in Japan, how should I say, gradually is increasing. And I think that's taken for granted. As a person with common sense, I expect that to happen. But of course, I'm responsible for the company's business. And from that perspective, the lower the interest rate, the better. However, on the other hand, data center business, thanks to people's cooperation, there's a lot of return. So even if we bear interest rate, there's a growth potential, we'll be able to absorb that. So we're not so worried there. And depreciation of the Japanese yen or foreign exchange rate impact ends up being positive, which is helpful for us. But the foreign exchange rate, minimum foreign rate -- exchange rate volatility is the best. And the dollar and Japanese yen and dollar and euro relationship, the relationship among various currencies is becoming more complicated. And when it comes to currency or foreign exchange rate, it's best to maintain a stable situation without so much fluctuation. Operator: Then we would like to take one last question. Does anyone have any questions? The person over there. Unknown Analyst: Nikkei xTECH, my name is [ Morioka ]. NTT DATA Group is now wholly owned subsidiary, and you spoke about the synergy. But currently, I believe it is under review. But compared to the initial stage, are you expecting to see more synergy? Is there anything that you can share with us? Akira Shimada: Yes. Thank you for the question. As I have been mentioning initially, synergy is something that we need to anticipate. But more than that, DATA's growth will be even more important. This is both organic and inorganic. Within NTT Group, SI business accounts for roughly 40% and substantively rather than the synergy inorganic would have even greater effect. Midterm plan is something that we need to review and DATA's midterm strategy will be considered as a large positioning, of course, including synergy. But rather than synergy, non-synergy will be greater. This is as I have been mentioning from the outset. Thank you. Operator: It is now time to close the NTT, Inc. press conference. Next, there will be NTT DOCOMO Group's press conference. If you could please wait a while. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Tae Hee Kim: Good afternoon. I am Tae-hee Kim, IRO of SK Telecom. Let us begin the earnings conference call for fiscal year 2025. Today, we will first deliver a presentation on the financial and business highlights, followed by a Q&A session. Please note that all forward-looking statements are subject to change depending on various factors, such as market and management situations. Let me now present our CFO. Jong-Seok Park: Good afternoon. This is Jong-seok Park, CFO of SK Telecom. It is my first time to greet to investors and shareholders as CFO. I wish you a happy new year, and I also wish all of you good health and happiness in the new year. In 2025, SK Telecom put priority on expanding operational improvements across the company and monetizing AI business and made strenuous efforts to strengthen fundamental business competitiveness and secure a foundation for new growth drivers. However, the cybersecurity incident and its subsequent developments also led us to a period of careful reflection, realizing that understanding and innovating on customer value, which is the essence of our business, is a prerequisite for a sustainable future. We will do our utmost to build SK Telecom with strong fundamentals grounded in the trust of our customers. Let me now report on the financial results for fiscal year 2025. Consolidated revenue posted KRW 17.099.2 trillion, down 4.7% year-on-year due to sales of subsidiaries, net decline in subscribers following the cybersecurity incident and implementation of the Accountability and Commitment Program, including tariff discounts. Operating income reported KRW 1.073.2 trillion, down 41.1% year-over-year, on the back of the decline in revenue, costs related to the cybersecurity incident, including USIM replacements, and costs incurred during business restructuring at the end of 2025. Net income came in at KRW 375.1 billion, down 73% year-over-year, mainly due to penalty payments arising from the cybersecurity incident. Let me report on shareholder return. The financial impact of the cybersecurity incident persisted into the fourth quarter and substantial costs were incurred in the process of business portfolio restructuring. As a result, the company decided not to pay out quarterly dividend for the fourth quarter. Accordingly, the Board of Directors resolved to set the DPS for fiscal year 2025 at KRW 1,660 including the quarterly dividends already paid, which will be finalized after being approved at the Annual General Shareholders Meeting in March. We will strive to restore our financial performance to return to previous dividend payout levels. Next, let me report on the current status and future directions of our telecom business and AI business. In 2025, our MNO business focused on addressing changes to the business environment caused by the cybersecurity incident. In 2026, with our priority on customer value innovation, we will strive to adhere to fundamental principles and standards in all areas, including quality, safety and security and to fully regain our customers' trust. We aim to improve our products and channels and achieve operational optimization centered on customer lifetime value to regain fundamental business competitiveness and become the #1 service provider from the customer's perspective. Through this, we will also ensure that our financial performance recovers to previous levels. For AI business, we focused on solidifying a foundation for new growth in 2025. Starting this year, we plan to concentrate on areas where we excel to achieve tangible results. In 2025, AIDC revenue continued a 2-digit growth trend, thanks to the increase in utilization rates of Gasan and Yangju data centers and the acquisition of Pangyo data center. Also, construction of Ulsan AIDC has been underway since September last year. This year, we aim to accelerate growth by actively developing business expansion opportunities through business scale up with an additional data center in the Seoul metropolitan region. We plan to create new possibilities through in-house development and external partnerships for the AIDC solution business, which was launched to create synergies with AIDC business. Also, we will scale up the undersea cable business initiated in 2025. Furthermore, we aim to enhance efficiency and productivity of AI agent business and B2B AI business to produce meaningful outcomes. We plan to secure preferential opportunities to participate in various projects through our own AI Foundation Model Project, which is in its second phase. SK Telecom is determined to improve MNO's business fundamentals by strengthening core competitiveness in all business areas centered on customer value and to restore profitability by producing AI business results driven by AI data centers. We ask for the continued support and interest of our investors and analysts as we work to turn this crisis into an opportunity to restore our customers' trust. Thank you. Tae Hee Kim: Now we would like to begin the Q&A session. Operator: [Operator Instructions] The first question will be provided by Jae-min Ahn from NH Investment & Securities. Jae-min Ahn: I'm Ahn Jae-min from NH Investment & Securities. I can see that we now have new CFO, COO as well as IRO. So there are new members to the management. And I believe that the market has high expectations upon this change. And so congratulations to all of you, and I hope that there will be good results coming from this management this year. I'd like to ask you two questions. The first question is that we would like to get some color on our dividend policy for 2026. Last year, due to some sluggish business performance, the size of the dividend payout to shareholders was reduced. So what can we expect in terms of dividend payout for 2026 as well as the possibility of earnings normalization? And my second question has to do with the overall strategic directions and priorities for the new management this coming year. Jong-Seok Park: Thank you for your questions. First, I'd like to answer your question on this year's earnings outlook as well as dividend payout direction. First of all, to comment on 2025 earnings performance, I understand that many people would like to know whether we can return to the pre-cybersecurity incident earnings levels. Due to sales of certain noncore subsidiaries and decline in MNO subscribers, revenue did not recover to the 2024 levels. However, in terms of operating income, we aim to return to the 2024 level as much as possible by improving profitability of the telecom business and improving self-sustainability of the AI business. We will utilize AI across the telecom business, including marketing and network, to boost productivity and improve profitability. Also, we plan to focus on striking a balance between cost and benefit when it comes to subscriber acquisition. For AI business, we plan to continue to focus on areas where we can make meaningful earnings contribution. In particular, we will pursue meaningful expansion of data center business to create new revenue streams and improve profitability through economies of scale. Now let me comment on the dividend payout outlook in connection to earnings expectation. First of all, we sincerely apologize to our shareholders for not being able to pay the yearly and year-end dividend in the fourth quarter following the third quarter. The cybersecurity incident has had direct financial impact and one-off costs were incurred in the process of restructuring our business portfolio and organization in 2025. Please understand that we had to reduce the size of the annual dividend payout for these reasons. Our number one priority in 2026 is to restore earnings through the measures that I mentioned earlier, and we will do our best to return the previous dividend payout levels. We will also consider other measures to increase shareholder value such as tax-free dividend to restore the trust of our shareholders and investors and to ensure that SK Telecom is a company that people want to invest in. More details will be discussed at the Board in consideration of business performance, financial positions and funds for growth investments to achieve a balance in overall capital allocation. Now I'd like to comment on the key strategic priorities for the new management. So our priority for this year is to strengthen practical and substantial competitiveness in both telecom and AI business. And for this, we plan to pursue three main strategic directions: first of all, restore market leadership through customer value innovation. We will place priority on customer value, which is the essence of our business, based on which we are currently redesigning all elements of our telecom business including products, memberships and channels to offer real value that customers want. We will share more details in the future. Second, we will innovate business productivity through A.X acceleration. We will apply AI in all areas including marketing, network and customer touch points to improve customer experience and boost productivity. We will advance AI-based lifetime value modeling to provide personalized offerings and to use AI to automate network operations including design, construction and operation. Third, we will enhance sustainability of our AI business by focusing on our core strengths. We will pivot according to changing business environment to focus on areas where we excel and improve profitability through cost structure improvement. AI data centers are already a strong growth driver for SK Telecom. We will quickly build the Ulsan AIDC and plan to add another data center in the Seoul region to scale up the AIDC business and create new business models to offer diverse solutions related to AIDCs. So to sum up, we will focus on strengthening core business competitiveness in all business areas centered on customer value and demonstrate how SK Telecom will make another leap forward. Operator: The following question will be presented by Tae-hyun Kim from IBK Investment & Securities. Tae Hyun Kim: I am Kim Tae-hyun from IBK Investment & Securities. I would like to ask two questions. First of all, there's a lot of interest in the market about the value of the equity stake that you have in Anthropic. And I would also like to understand whether you're planning to liquidate your equity stake going forward. The second question has to do with your proprietary foundational model project. What is the strength that SK Telecom has in this regard? And what are some of the potential business opportunities we can expect going forward? Jong-Seok Park: Thank you for your questions. I'd like to answer the first question on our equity stake in Anthropic. And then the Head of AI Strategy Planning will address your second question on our own foundation model project. First, let me comment on the current status and future plans regarding our equity stake in Anthropic. First of all, please understand that we cannot disclose accurate details on shareholding ratio and value at the time of change due to confidentiality clauses in the contract. However, our invested assets are regularly revalued and reflected in the business report. So the 2025 business report to be disclosed very soon will have updates on our equity stake. We understand that the market is quite interested in a possible equity disposal or equity valuation, but please understand that no decisions have been made in this regard, and there's nothing that we can share at this point in time about the possibility of using it as part of funds for dividend. Now I'd like to hand over to the Head of AI Strategy Planning to comment on the second question. Dong-hee Choi: I'm Choi Dong-hee, Head of AI Strategy Planning. Let me answer your question on our competitiveness in the foundation model and business opportunities. The A.X K1 that SK Telecom is developing together with the consortium members is Korea's first hyperscale AI model with more than 500 billion parameters. This model is recognized as possessing differentiated competitiveness as it can provide high-quality responses in consideration of cultural context because it is developed using the largest Korean data set. We expect that A.X K1 will create a lot of business opportunities for both B2C and B2B business. For B2C, we plan to add the model to A., which has more than 10 million users, to ensure that a large number of customers can access the model. We also plan to add references through Liner, a member of the consortium. For B2B, we plan to add this model to A. Biz for work productivity enhancement and provide a model to our manufacturing affiliates, such as SK hynix and SK Innovation, to strengthen their competitiveness. Within the consortium, we plan to expand the use of the model to vertical services such as KRAFTON. We will continue to develop this hyperscale model in a cost-effective manner with government support. If we are selected as 1 of the top 2 at the end of 2026, we expect that we can secure preferential opportunities to participate in various projects, such as national B2C projects to maximize benefits of AI, AX projects to enhance industrial competitiveness and productivity and projects to upgrade systems and services in the public sector. Operator: The following question will be presented by Hoi-jae Kim from Daishin Securities. H.J. Kim: I'm Kim Hoi-jae from Daishin Securities. I'd like to ask you two questions regarding your MNO business. Due to the waivering of cancellation fee recently by your competitor, I can see that there was some impact on your business results. For instance, LG U+ has demonstrated that they have seen an increase in their MNO subscriber base as well as MNO revenue in 2025, thanks to this development. So I'd like to understand to what extent you benefited from this trend for SK Telecom as well. And I'd also like to understand your subscriber target for 2026 as well as MNO revenue outlook. My second question is that you have now new members in the MNO management as well as the company management. So what will be the key areas that you will focus on in your MNO business in 2026? Jong-Seok Park: Thank you for your questions. Regarding your two questions on the MNO business, I'd like to turn over to our Head of MNO Support. Byeong Chan Bai: I am Bai Byeong-chan, Head of MNO Support. Let me address your questions on the impact of KT's cancellation fee waivers as well as our win-back target for 2026. With the cancellation fee waivers by our competitor, the carrier switching market expanded temporarily in the beginning of the year. However, since then, we are seeing an overall market stabilization trend. A large share of customers who joined SK Telecom during that period were voluntary win-back customers who returned after having switched to another carrier last year following the cybersecurity incident. We believe that the customer appreciation package that includes substantial benefits such as subscription tenure, restoration and membership benefits as well as diverse measures to strengthen our security has been effective in restoring the trust of our customers. Going forward, we will not rely on disruptive marketing competition for short-term gains, but rather focus on strengthening core business competitiveness through customer value innovation to continue to expand our customer base. So to this end, we are currently working on restructuring our product offerings and market operations. And as soon as they are ready and become available, we will share more concrete directions and results with the market and our subscribers. Now let me comment on our MNO revenue outlook for 2026 and strategies to recover our subscriber base. We have started the new year under rather challenging circumstances due to the year-over-year decline in handset subscribers. And throughout 2026, we will strive to minimize revenue impact by winning back subscribers and implement various measures to create growth by developing new customer segments. However, despite these measures that we have in plan, with the prolonged impact of customer attrition, it is challenging to bring revenue back to the pre-cybersecurity incident level. So for MNO business this year, we plan to focus on boosting profitability. We will reorganize our products and channels to cater to customer preferences and improve cost efficiency through optimized operations based on customer lifetime value. In addition, we will use AI to further improve our operations including products, marketing and network operation and create a productivity-based business structure to enhance customer value and maximize performance relative to input. So through these efforts in 2026, we aim to restore the profitability of the MNO business and build a structural foundation for medium and long-term growth. Operator: There are no questions in the queue right now. Tae Hee Kim: With no further questions, we would like to conclude the earnings conference call for 2025 for SK Telecom. If there are additional inquiries or questions, please feel free to contact IR. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Hanna Jaakkola: Dear all, warmly welcome virtually to Helsinki, and thank you for tuning in for Kesko's Full Year 2025 Release Call. Today's headline is Kesko's results improved. Net sales grew in all divisions, and it outlines 2025 well. In this presentation, we are also presenting 2026 guidance as well as dividend proposal for the Annual General Meeting. Today's agenda is the following: President and CEO, Jorma Rauhala, will give the full year and Q4 presentation. We have here with us our business division Presidents, Ari Akseli for Grocery Trade; Sami Kiiski for Building and Technical Trade; and Johanna Ali for Car Trade as well as CFO, Anu Hamalainen. After Jorma's presentation, we have time for questions, both by phone and via chat function. All the materials related to full year and Q4 can be found at our website, kesko.fi under Investors. My name is Hanna Jaakkola, I'm responsible for IR at Kesko. I will be at your service after the presentation for your questions and discussions. But now Jorma, the stage is yours, please. Jorma Rauhala: Thank you, Hanna. Ladies and gentlemen, welcome also on my behalf to this release call. I'm Jorma Rauhala, and I have now the pleasure to present Kesko's full year and Q4 results. Yes, Kesko's result improved, net sales grew in all divisions, is our headline, and it describes our 2025 well. Towards the end of the year, we saw a turnaround in performance as the third quarter result improved and growth continued in the fourth quarter. Now I will give an overview of our business performance and open up elements behind the result. I'll also present the guidance and outlook for 2026 and the dividend proposal to the Annual General Meeting. Kesko's comparable operating profit improved and net sales grew in all divisions. This is a great achievement, especially taking into account last year's market situation and low consumer confidence. In Grocery Trade, we saw an upturn in market share. Profitability was strong despite investments in price, quality and network. In Building and Technical Trade, comparable operating profit grew despite a challenging market. In Denmark, we achieved strong market position through acquisitions. In Car Trade, market position grew stronger and comparable operating profit increased significantly. Kesko estimates that its 2026 comparable operating profit will amount to EUR 650 million to EUR 750 million. In 2026, operating environment and profit are estimated to improve in all divisions and all operating countries. We execute our growth strategy and strong growth investments will continue. Dividend proposal to the Annual General Meeting is in line with dividend policy, EUR 0.90 per share, payout ratio 84%. Net sales for 2025 totaled over EUR 12.5 billion, and it increased by 2.3% in comparable terms. Net sales increased in all divisions in both comparable terms and in reported figures. Comparable operating profit for last year was EUR 654.9 million. It increased by EUR 4.8 million. Operating margin was 5.3%. Operating profit increased in Building and Technical Trade and Car Trade and decreased in Grocery Trade. Operating margin for Grocery Trade was 6.5%, which is clearly above 6%. For Car Trade, it was 6.1%. For Building and Technical Trade, operating margin was 3.8%, which is a good result in low cycle. Return on capital employed was 10.4%. Return on capital employed increased in Car Trade, was down in Building and Technical Trade and in Grocery Trade compared to 2024. Financial position. The amount of net debt was impacted by investments in store sites and acquisitions. Cash flow from operating activities was EUR 880 million, and it was affected by the change in the Food Market Act in 1st of July, which shortened the payment terms. The estimated negative impact of the payment term change to cash flow was approximately EUR 100 million. Capital expenditure totaled EUR 735.7 million. I'll open up the investments on the next page. Interest-bearing net debt increased year-on-year as a result of investments in acquisition and store site network. Net debt to EBITDA was 1.6, which is clearly below our financial target of 2.5. Capital expenditure totaled EUR 735.7 million. We continued the investments in growth and the main CapEx in 2025 were 3 acquisitions in Denmark, store site investments in Grocery Trade and the construction of Onnela, Onninen and K-Auto logistics center in Hyvinkaa, Finland. Expenses. Expenses have increased mainly due to acquisitions. It is good to bear in mind that we gained some 760 new employees in Denmark last year through acquisitions. Expenses, excluding the acquisition, were up by only 1.6%. This is a good achievement, taking into consideration the salary increases in all our operating countries in 2025. Also, cost ratio improved slightly. And now to Q4 results. We saw good net sales development in all divisions. The performance in all divisions was in line with the expectation we had at the beginning of the quarter. Net sales in Q4 totaled over EUR 3.2 billion. It was up by 3.1% in comparable terms. The net sales grew in Grocery Trade by 3%, in Building and Technical Trade by 2.9% and Car Trade by 4.4%. Net sales grew by 2.9% on a comparable terms in Finland and by 3.9% in the other operating countries. In Q4, comparable operating profit was at EUR 174.8 (sic) [174.6] million and operating margin was 5.4%. Comparable operating profit increased in Car Trade and Building and Technical Trade and decreased in Grocery Trade. And now to Grocery Trade in Q4: upturn in market share, profit at a good level. In Q4, like I said earlier, division's net sales increased and comparable operating profit was slightly down. The total grocery market in Finland grew by 2.7%. K Group grocery sales were up by 4.2%. K Group grocery store chains gained market share clearly in Q4, but also in H2 2025. In Q4, all our grocery chains won over market share in their segments. In '25, K-Citymarket won market share in the hypermarket segment. Customer flows continue to grow, thanks to the price program and campaigns. Customer satisfaction was clearly up for all our grocery chains. Kespro's net sales, up by 0.4%. And again, Kespro gained market share as it did for the whole '25. K-Citymarket nonfood sales were down by 0.4%. Online grocery sales were up by 6.6%. General grocery price inflation in Finland was approximately 1.8%, but the price development in K Group stores was only 1.1%, especially thanks to our price program. Demand for quality products and services increased in our grocery stores, which may indicate a positive change in consumer behavior. I'm very pleased that we saw the turn in market share development last year. The change can be clearly seen in the graph on this page. Also in January, good sales development continued. Our strategy is focusing on quality, price, and network is working. When it comes to quality, we have done significant efforts to raise quality level together with key retailers. Store-specific business ideas are at the core. Special focus is on fruits and vegetables, bread and nonfood. Our digital reach has risen to a new level. We reached digitally nearly 2 million customers, and the number has increased by over 20% in 2025. This is very crucial to us as media and data business has grown significantly and offers us earnings streams. Our price program launched in January last year. It's a long-term program, and we will continue executing it. This is also a joint effort with retailers. Also, active campaign is continuous as well as personalized offers, and we can see increased customer flows. Our net investments will continue. In 2025, we opened or renewed 60 stores, including 2 new K-Citymarket stores. Network net impact on our market share was still clearly negative in 2025 despite new store openings. In 2026, the network impact is expected to be neutral. The network will start supporting market share development gradually in upcoming years. Annual investments in the store network will be around EUR 200 million to EUR 250 million going forward. Building and Technical Trade in Q4: cycle is gradually recovering, sales and profit grew stronger. In Building and Technical Trade, net sales increased and profit improved in Q4. Market demand continued to be weak, especially in new housing construction. It is good to note that the market has been very difficult and many of our competitors are struggling. In that light, our 3.8% EBIT margin is strong. Net sales grew and profit improved clearly in both technical trade and building and home improvement trade. In Q4, we could see signs of sales margin returning to normal level throughout the division. In Finland, K-Rauta's result was strong compared to the markets. In Onninen, Finland, the Q3 growth trend in sales continued and profit close to comparison period level. In Norway, sales for Byggmakker and Onninen were close to comparison period level and profit improved for both. In Denmark, the sales development for Davidsen was good. Integration of acquired companies were completed technically and then work to increase sales and improve profitability continues. In Sweden, K-Bygg store conversions were completed. Credit risk is well under control. Write-downs of overdue trade receivables totaled EUR 0.1 million. Share of result from Kesko Senukai was EUR 12.1 million. In '25, share of result from Kesko was EUR 19.5 million, EUR 1.4 million below the 2024 figure. For Building and Technical Trade, profit improvements in 2025 came from countries outside Finland. This is important since nearly 60% of Building and Technical Trade division sales come outside Finland. In Finland, both K-Rauta and Onninen are strong market leaders. In Sweden, the operations made losses, closure of B2C-focused K-Rauta chain and the conversion of 8 stores to K-Bygg did impact profits negatively. In Norway, in 2025, there was a significant profit improvement for both Byggmakker and Onninen. Onninen's market share increased in Norway. In Denmark, Davidsen has now a strong market position. Integration-related costs impacted results. In 2025, the PPA costs related to the acquisitions were EUR 5.7 million in Denmark. In Poland and the Baltic countries, Onninen has a good market position and stable profitability. In this picture, we can see K-Rauta's and Onninen's sales development in Finland since 2019, quarter-by-quarter. Both have strong market shares. K-Rauta is the market leader in building and home improvement business in Finland, and Onninen in technical trade. This picture describes the whole market pretty well. K-Rauta's sales development turned black to black figures in Q4. Onninen sales continued to grow in Q4. And then to the Car Trade in Q4: strong performance continued in a challenging market. Net sales and comparable operating profit increased even though the market remained challenging. Market demand for new cars was still muted. Q4, first registration of passenger cars and vans were down by 2%. First registration of brands represented by Kesko increased by 3.5% in Q4. Our good development is a result of the extensive product and service portfolio and constant improvement of operational excellence. Market trend in sales of used cars from dealerships were up by 1.8%, and our used car sales were up by 13.3%. Also, service sales increased. We are targeting to grow, especially in damage repairs and the servicing of cars 5 years or older. In sports trade, net sales and comparable operating profit decreased, but market share grew. And then to profit guidance and outlook. Profit guidance for 2026. Kesko Group's profit guidance is given for the year 2026 in comparison with the year 2025. Kesko's operating environment is estimated to improve in 2026 but still remain somewhat challenging. Kesko's comparable operating profit is estimated to improve in 2026. Kesko estimates that its 2026 comparable operating profit will amount to EUR 650 million to EUR 750 million. Key uncertainties impacting Kesko's outlook are developments in consumer confidence and investment appetites as well as geopolitical crises and tensions. Outlook for 2026. The operating environment for Kesko is estimated to improve in 2026 in all divisions and all operating countries. Kesko's comparable operating profit is also estimated to improve in 2026 in all divisions and all operating countries. In Grocery Trade, B2C trade is estimated to pick up and the foodservice business to remain stable. In 2026, the comparable operating margin for the Grocery Trade division is estimated to stay clearly above 6% despite the investments in price and the store site network. The comparable operating profit for the Grocery Trade division is estimated to improve in 2026 compared to 2025. In Building and Technical Trade, the cycle is expected to improve moderately in 2026 from an exceptionally low level. The comparable operating result for the Building and Technical Trade division is estimated to improve in 2026 compared to 2025 in all Kesko operating countries. In the car trade market, new car sales are expected to remain muted compared to long-term levels, but to nonetheless grow compared to 2025. The net sales and comparable operating profit for Kesko's Car Trade division are estimated to improve in 2026 compared to 2025. Finally, the dividend proposal for AGM. Board of Directors is proposing a dividend of EUR 0.90 per share to the Annual General Meeting. It is proposed to be paid again in 4 installments. This proposed dividend represents 84% of the comparable EPS. Strong investments in growth will continue. Proposal is in line with our dividend policy to pay 60% to 100% of comparable earnings per share as dividend. Some words to summarize my presentation and Kesko's year 2025. Nearly all businesses gained market share in 2025. In Grocery Trade, market share turned around in H2. Customer visits have increased and customer satisfaction has improved clearly. Strategy execution continues: quality, price and the store site network. In Building and Technical Trade, sales increased clearly. Onella Logistics Center is now in use. Construction cycle is strengthening moderately. In Car Trade, sales development in new and used cars as well as services were good. Also, sports trade outperformed the market. All divisions are well positioned for further market strengthening. Thank you for your attention. This was my presentation. I guess it's time for questions now. Hanna Jaakkola: Thank you, Jorma, for your presentation. And now it's time for questions. So we will take first the questions from the conference call line and then from the -- via chat function. And please note that if you are posing questions through the chat function, there is a slight delay. So be sure to post your questions so that we have time to take the questions. Operator: [Operator Instructions] The next question comes from Maria Wikstrom from SEB. Maria Wikstrom: This is Maria Wikstrom from SEB. I had 3 questions. I'll take them one by one. And I'll start with the guidance and the assumptions behind your guidance as you guide for adjusted EBIT in the range of EUR 650 million to EUR 750 million, and the low end of the guidance range is slightly below 2025 EBIT. So what would need to happen for you actually to hit the low end of the guidance range, so the results would not grow in '26 compared to '25? Jorma Rauhala: Thank you, Maria. Good question. And I think that, of course, the main topic or issue is the consumer confidence. We believe that the market situation will improve in all countries, all divisions, but very moderately. And of course, if that would happen, let's say, that the market wouldn't improve at all, that would be the case. But like I said, we believe -- and of course, we believe that the market will improve this year, and that's -- we have this EUR 100 million range, EUR 650 million to EUR 750 million. And the biggest question is consumer confidence. Maria Wikstrom: And then my outlook -- my next question is on the outlook of the Building and Technical Trade, and if you can be more specific market by market. So which of the markets you see the biggest recovery happening in 2026? And if you could a little bit discuss the outlook on the different geographies in Building and Technical Trade. Jorma Rauhala: Yes. Maybe I can start with a few words, but Sami, you can continue then. But of course, all in all, market outlook is quite similar in all countries. But of course, we have also some differences, like in Norway, interest rate is still high. And if you look at Sweden, the market is quite okay, but we have our own issues, let's say, so with K-Rauta, but now it's kind of implemented this change. But please, Sami, continue. Sami Kiiski: So thank you, Maria. Like Jorma said, I think biggest worry overall is, of course, consumer confidence and that we see in all our operating countries that, that is weak. But to answer your question, where we see the positive signs, of course, Denmark, we still believe will be the strong. Of course, consumer confidence there also is low. Sweden, we believe that it's going to be better also for Sweden, I mean overall market for 2026. And of course, still, if we look at the forecast, what we have, for example, from Forecon, still we see that Finland should be also getting better gradually, of course. And of course, I think overall, all the markets are going for better now, but of course, this new construction and particularly new residential construction is something that we need to follow carefully, and then we will see whether the bigger improvement will come or not. But overall, I would say that we are well positioned when the growth starts. And of course, this Q4 was already positive for us. So I'm very happy about our performance in Q4 overall. And of course, we saw already that the market is getting gradually better, but I think we were also in many markets doing better than the competition. Maria Wikstrom: May I just have a follow-up here, given that the December sales figure for Building and Technical Trade in Finland was surprisingly strong, up 7%. So is there something like extraordinary, so thinking that, I mean people bought more before the new price list or something like that? Or is this really like showing the early signs of a recovery in the Finnish B&T? Sami Kiiski: Maybe a little bit too early to say the big picture, but of course, it's getting better. And like I said, we show that we are doing much better than the market, both in technical trade, but also with K-Rauta here in Finland. And also, I think this is now particularly important that you have good availability and that we have been also building up all the time or keeping that in the good level. So yes, I think nothing so special there. Our performance was good and also market getting gradually better also. Jorma Rauhala: And of course, we can say that there is a consolidation happening in Finnish technical trade business. And I think that we managed to gain market share quite nicely, latter part of the year, especially quarter 4 and maybe December. Of course, December, you have Christmas time and not so many selling days, but it was a strong one. Sami Kiiski: That's true. We gained market share with Onninen through Q3, Q4. But I would say it's also the market condition and also the -- our sales push, I would say, then availability and then, of course, this consolidation. Maria Wikstrom: And then my final question is on capital allocation. So if you could talk about the investment needs for '26 and then your view on M&A, if we should expect more M&A during this year? Jorma Rauhala: Yes. So all in all, our CapEx, something around EUR 400 million this year. And like I said, it's clear that we will implement this grocery store site network strategy, and it means EUR 200 million, EUR 250 million also this year. And of course, our strategy is that we are seeking growth in Building and Technical Trade, especially through acquisitions, but not any comments on that one. But of course, we are working daily also with that topic. Operator: The next question comes from Miika Ihamaki from DNB Carnegie. Miika Ihamaki: It's Miika here. Can you elaborate a little bit more on the drivers behind profitability decline in Grocery Trade. So we know that some of your competitors began aggressively cutting also prices again late last year. So my first question is that would you consider this is typical behavior in the market? Or does it reflect intensified competition potentially in response to the fact that you started gaining market share? And in this context, do you see that you needed to respond more aggressively on pricing? And then finally, what is your assumption of the impact of price investments on Grocery Trade profitability into 2026? Jorma Rauhala: Thank you. And all in all, I have to say that I'm very, very pleased what comes to our grocery division. We have to remember that what was our issue has been, let's say, some years now is that we have lost market share. In 2024 spring, we decided that we have to stop lose market share and start to gain market share. And now we have done that. At the same time, we say that the EBIT level should be clearly above 6%. And of course, we have done that also. But Ari, you can continue with how competitors have reacted. And of course, they have. Ari Akseli: Yes. Thank you, Miika. Excellent question. And of course, there is very hard competition all the time in the retail market, especially in the grocery side. But based on the current development of our market share, we have prices good enough now in the market, and we are gaining market share. So we're, all the time, checking around what is the price level and do the necessary actions. But at the same time, we are able to keep the profitability level clearly above 6%. Jorma Rauhala: And about -- he asked also this year how we will continue, but we will continue our strategy and to have the store site network, quality and pricing. And it's so good that we kind of share this topic with our retailers that we really understand that we have to continue with this path because we saw now the results. But Ari, do you have anything to add about this year or pricing program? Ari Akseli: Yes. We just can say that we will continue at the same level. But we also put more actions to the target offers for the customers, especially not just the basket prices, but we will add on target prices. And good part for that is that also the supplier side will support that. And the store owners are very happy with the current strategy. So we will continue this. And this will be the first year when we have like a neutral effect of the store network. Last year, we had very negative effect and still we were able to gain market share. And January has continued strong about sales side. Jorma Rauhala: And last year -- a year ago, we stated that we will invest together with retailers maximum EUR 50 million when it comes to our price program. Now we have announced -- we haven't announced any certain amount on that one. But definitely, we can continue our price program, and we are also ready to react if needed. Miika Ihamaki: Thank you. Just on the assumption that you continue the campaigns or targeted marketing investments, price investments, now we saw that the profitability declined, you still had a strong growth in grocery. But can you still elaborate on the key assumptions underpinning that the Grocery Trade profit will actually grow this year? Jorma Rauhala: Let's see. Of course, we are -- we believe that the whole market will grow and also our business will grow and our target is to gain market share. And when it comes to EBIT level, it's still very valid that clearly above 6% is our target and the 6.5% last year was that, very nicely. Unknown Executive: Maybe to add that, last year, also due to the low consumer confidence we had, Kespro's EBIT did decline. So if the consumer confidence picks up, there is a possibility that, that will support the margins in Grocery Trade as well. Ari Akseli: Yes. Another part of that nonfoods business in the Citymarkets, because there was not winter in December, it has very strong [ EBIT ] for the profitability of the clothing side and sports goods. So that's one of the reasons behind the results in Q4, especially in December. Hanna Jaakkola: Thank you. No further questions from the conference call line. Neither I don't have any questions from the chat function. So short and sweet. Thank you, everybody, for the good discussions, especially Miika and Maria. And I wish you all very good, and unfortunately very cold, February day. Thank you. Jorma Rauhala: Thank you.