加载中...
共找到 17,080 条相关资讯
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.
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.]
Fredrik Ruben: Good morning, and welcome to this earnings call, where we will mainly cover the fourth quarter of 2025, summarizing our business then in October, November and December and also some comments regarding the full year of 2025. I am Fredrik Ruben, I am the CEO of the Dynavox Group. Linda Tybring: I'm Linda Tybring, and I'm the CFO of Dynavox, and I will cover the financials at the end. Fredrik Ruben: Yes. So for those of you who have participated in these calls before, you will be familiar that we'll start with a quick recap about what Dynavox Group does, and then we will summarize the main takeaways from the quarter and the full year. We will dive deeper into the financials, and thereafter, there will be a Q&A session. And you can submit questions during the Q&A session in the chat function here in or you can ask them live if you have been given prior notice to our team. And of course, we always welcome offline questions sent by e-mail to the above e-mail address, which is linda.tybring@dynavoxgroup.com. All right. So a brief overview of Dynavox Group. First and foremost, it's important to reiterate our mission and our vision, which I know is very dear not only to now our over 1,000 colleagues around the world, but also to our ecosystem of partners and investors. And our vision is a world where everyone can communicate, and we will contribute to this via focusing on our mission, which reads to empower people with disabilities to do what they once did or never thought possible. And this also summarizes 2 of our main user stories, the do what you once did, that may be a person who lived a normal life until a diagnosis such as ALS, which rendered her unable to control the body or communicate like before. The other story is the never thought possible, and that can refer to the child diagnosed at an early age with a condition such as autism or cerebral palsy, where thanks to our solution, he can do much more than the world around him ever thought possible. On the picture here, you see Lane from Lawrenceburg in Kentucky in the U.S. and she's one of our amazing users diagnosed with cerebral palsy and is using -- she's a great example of this. So the market that we serve remains hugely underserved. We estimate some 50 million people have a condition so grave, they simply cannot communicate unless they have a solution like ours. And every year, about 2 million people are being diagnosed, and yet we estimate that only some 2% of those are actually being helped and the rest remain silent. And the main reason for this spells lack of awareness also among the professionals and the prescribers task to assist these users and poor health care reimbursement systems. We operate with a global footprint. Today, some 3/4 of our business stems out of the U.S., largely because of a reasonably well functioning funding system established some 20, 30 years ago. But our products are also sold in more than 65 markets around the world, of which 11 are markets where we sell directly, while the others are served by a network of some 100 reseller partners. Our own staff is distributed in a similar way as the revenue, meaning that some 60% or so of our staff are based in North America with our U.S. headquarters in Pittsburgh in Pennsylvania. And our second largest office is our headquarter here in Stockholm, but we have branch offices in several European countries as well as in Suzhou in China, in Adelaide in Australia. As of today, we are just north of 1,000 employees in total. We provide a comprehensive portfolio of solutions ranging from, a, the content and the language system, such as the world's leading library of communication symbols and they're called PCS and the leading solutions for off-the-shelf or custom-made synthetic voices of the highest quality with a large diversity of languages, ages and ethnicities. Then we also do highly sophisticated communication software tailored to the type of user, which, of course, can vary greatly based on the need of that individual. Then we develop and design devices with cutting-edge technology and medically certified durability, including communication aids controlled via eye tracking and accessories such as the Rehadapt mounts. We have a services portfolio to help our users through the complexity of obtaining and getting funding for solutions. And then last but not least, we are there to help our users, the therapies, the caregivers through a global team of support resources. Then as mentioned, we operate this model globally, and it's important to note that each piece is critically important and also a significant differentiator for us, making us absolutely unique. Our go-to-market model is predominantly as prescribed aids, that means that some 90% of our revenue comes from public or private insurance providers. And this also means that we have solid paying customers and have always been resilient towards changes in the overall economic climate. But now we will go back at focusing on the main topic of today, namely the earnings report for the fourth quarter 2025. If I would be looking at the highlights, we had another strong quarter when it comes to revenue growth. The growth compared to the same quarter previous year sums up to 31% after adjusting for the currency effects. And this marks a further acceleration of an already strong trajectory over the past 4 years. The demand for our solutions remains high, proving the solidity of our underlying business, obviously, but we also see robust growth across all geographies and markets. We continue seeing increased growth in the touch control product portfolio, which typically then serves younger users with autism. However, in the quarter, we also continued to see good traction in the eye-gaze controlled solutions, serving users with more complex needs. Our EBIT came in at SEK 103 million, and this includes nonrecurring costs of roughly SEK 17 million in the quarter, and that implies then, of course, an even stronger underlying profitability. In November, we moved our entire North American headquarters and logistics hub to a brand-new location from where you will see pictures during this presentation, including on this one. And then last but not least, on December 23, we entered into an agreement to acquire all the shares of our Italian reselling partner, SR Labs Healthcare, and I will come back to that in a little bit. If we then instead look at the full year of 2025, we can conclude that it was a solid regarding our top line growth. In local currencies, the growth was 34%. Our profitability improved in the year. The EBIT grew by 11%. Earnings per share grew by 13%. And this really proves the case that our business is continuing to scale quite well. And the fundamental factor behind this is, again, the hugely underserved potential in the market that we address. The growth in profitability during 2025 should be seen in the light of the investments that hit our P&L with around SEK 100 million in total of nonrecurring nature related to 2 main projects. First, the new ERP system that was successfully launched in North America on July 1, which represents some 3/4 of our business. And this new system lays the foundation for a modern, highly digitalized and scalable backbone. And then in November, we finalized the consolidation of the product and development organization into a central hub in Stockholm, reducing our U.S.-based team by some 50 FTE and in parallel, building up an even larger team here in Stockholm. And as a company with a clear focus on innovation, having our products and development function concentrated in one location enables further scalability and resilience. Another important way to scale and grow our business is to expand our direct market and the presence there. More than 70% of our revenue from Europe and the rest of the world comes from markets where we have direct presence. In 2025, we completed the acquisition of former reseller partners, Cenomy in France and RehaMedia in Germany. And as mentioned, on December 23, we announced our third acquisition for the year, this time in Italy, where we agreed to acquire our reselling partner, SR Labs Healthcare. The company reported revenue of approximately EUR 3 million in 2024, and we are paying the current owner EUR 4.2 million in cash at closing. And the closing is expected during the next half year when we look forward to welcoming some 10 amazing new colleagues to our team. But now I hand over to you, Linda, to take us deeper into the financials. Linda Tybring: Thank you, Fredrik. So let's start with Q4. Revenue for the fourth quarter came in at SEK 677 million, a 31% year-on-year growth after adjusting for the currency effect. Recent acquisitions contributed with 3% and the organic growth was a solid 27%. And this marks another chapter in our 4-year strike of robust growth and consistent execution. Currency fluctuations had 15% negative impact on revenue, hence, the reported revenue growth was 16%. Sales continued to grow across all our markets. Also in previous quarters, we continue to see growth among younger users with autism using handheld touch control devices. At the same time, they continue to see good traction in our eye-gaze control solutions, serving users with more complex needs. The gross margin ended up at 69%, a decrease of 1.1 percentage points and the gross margin was at the same time, negatively affected by currency fluctuation, resulting in SEK 13 million loss, but also somewhat strengthened by sales growth and the addition of new direct markets contributed an extra layer of the gross margin. So EBIT for the quarter was SEK 103 million and the EBIT margin was 15.2%. Our OpEx increased with 17% organically, and the OpEx increase was affected by factors such as staff increases, mainly within the sales and marketing organization. In total, we added 155 FTEs, including M&A versus last year. During the quarter, as Fredrik already mentioned, we continue to invest in new systems and tools to strengthen scalability. The total nonrecurring spend related to this in the quarter was SEK 6 million, which was SEK 4 million lower than prior year. Operating expense was also affected by nonrecurring costs related to the restructuring cost in the product and development organization. The total nonrecurring spend in the quarter was SEK 8 million, which was SEK 6 million higher than prior year. Both these 2 investments are in line with the announced strategic plan. The development of the Tobii Dynavox Group share price has rendered in increased cost for employee long-term incentive programs of SEK 3 million compared to fourth quarter last year. All in all, nonrecurring costs in the quarter sums up to SEK 17 million, but this was partly offset by operating income that was positively impacted by SEK 6 million related to adjustments of earn-out liabilities. In addition, currency effects both from lower exchange rates versus prior year and together with transactional timing effects had a negative impact of SEK 36 million on EBIT for the period. Net R&D costs decreased by SEK 3 million, and this includes nonrecurring cost of SEK 8 million related to the restructuring within research and development organization. If we look at the basic earnings per share, it totaled at SEK 0.72 per share to be compared with the last year's SEK 0.51 per share. So to the full year 2025 financials, Revenue for the year came in at SEK 2.467 billion, a 25% year-on-year growth. Excluding currency effects, revenue grew by 34%. Acquisition contributed to 2% and the organic growth was a solid 32%. As with the quarter, we see growth across the board in not just regions, but also products and user group. We also see the trend where markets where we go direct grew stronger. The gross margin ended up at 68%, a decrease of 0.34 percentage points, and this was negatively impacted by the currency effect of about SEK 31 million, and this relates to that inventory purchase in U.S. dollar at a higher exchange rate, resulting in a loss up on sale due to the strengthening of SEK. At the same time, the margin was strengthened by additional of new markets, which contributed to an extra layer of gross margin. EBIT for 2024 was SEK 254 million, corresponding to a margin of 10.3% versus 11.6% last year. Our OpEx increased organically with 27% versus prior year. The OpEx increase mainly relates to staff increases in the sales and marketing organization and salary adjustment that came into force in April 1. During the period, we continue to invest in systems and tools to strengthen scalability. These nonrecurring costs contributed approximately with SEK 28 million to the cost increase with a total cost of SEK 46 million in the period. Operating expenses was also affected by the nonrecurring cost of approximately SEK 41 million related to the restructuring of product and development organization. The cost of the long-term incentive program increased by SEK 18 million, driven by the share price development during the year. The amount also includes a nonrecurring cost of SEK 5 million related to historical long-term incentive costs. To summarize, a total of nonrecurring costs amounted to SEK 106 million. We should also say that currency effect, both from the lower exchange rates versus prior year and transactional timing effects had a negative impact of SEK 78 million on EBIT for the period, an impact of 3 percentage points on EBIT. R&D expenses had a negative impact on EBIT of SEK 61 million compared with corresponding period last year. This includes nonrecurring costs of SEK 35 million related to the restructuring within the research and development organization. Of course, we are very happy with our revenue growth and how we delivered on our strategic investment. Adjusted for this, we are now seeing an EBIT in line with our financial target. For the quarter, cash flow after continuous investment was positive with SEK 46 million and cash at hand at the end of the quarter was SEK 195 million. Net debt was SEK 909 million, and the total unused credit facility at the end of the period was SEK 300 million. The net debt over last 12 months EBITDA was 1.7x. Those are numbers. Fredrik, back to you. Fredrik Ruben: Great. Thank you, Linda. A lot of numbers. But on the other hand, we're also summarizing both the quarter and the year. So before we open up for questions, I'd like to reiterate the main takeaways and bring further nuance to our performance and outlook. We continue our strong trajectory, and that's a trend that started early in the spring of 2022. As we said, the revenue grew by 31% adjusted for currency, which, of course, is highly satisfactory. And going forward, we are clearly meeting tougher comps. As noted as well, the strengthened SEK to the U.S. dollar poses headwinds, both on revenue and earnings. But we still saw that sales continue to grow across all markets. We continue to see the growing adoption among younger users, typically with autism. At the same time, we also see good traction in the eye-gaze control solutions, serving users with more complex needs. Our profitability was negatively affected by nonrecurring costs totaling some SEK 100 million in the year or over 4 percentage points. And that relates to the long-term investments that focus on building a more robust company and a more resilient company. And obviously, the strengthened SEK and the weaker dollar post significant headwinds. Our operations infrastructure got a significant upgrade with the opening of our brand-new and modern offices and operating hub in Pittsburgh, Pennsylvania, serving our entire North American market, and that represents some 3/4 of our business. We continue to expand our direct market presence by agreeing to acquire our Italian reseller partner, SR Labs Healthcare. The overall exposure to import tariffs to the U.S. is limited since our products generally are classified as medically certified assisted devices and that exempts them from tariffs under the so-called Nairobi protocol. While the recent U.S. government shutdown and general uncertainty on policies had no apparent impact on our business, we acknowledge the broader societal effects that this may cause and may cause some slowdown to the business, but the financial impacts are quite difficult to quantify at this point. It continues, obviously, to be a very fluid situation in and around the U.S., and we continue to monitor all macroeconomic and policy change developments very closely. All in all, we remain confident there is ample opportunity for growth over a long period of time given the low penetration of communication aids, and we continue our efforts in helping more users by expanding and service a market that is largely underpenetrated. As we have learned from the history, it will never ever be a straight path forward, but our past performance solidifies our long-term confidence. Our current financial targets were communicated in February of 2024 and then expressed with a time horizon of 3 to 4 years. The first target to, on average, grow revenue by 20% per year adjusted for currency effects, but includes contributions from acquisitions. And in local currency, the fourth quarter growth for 2025 was 31%, which means that we've found a revenue growth momentum to build on. The market we serve remains hugely underserved, but also quite immature. With the example of growth levers such as sales team expansion, adding direct markets and operational excellence, we continue to build our growth journey. The second target is to deliver an annual EBIT margin that reaches and exceeds 15%. And we have proven to build strong growth with incrementally improving profitability, and we need to continue to invest, obviously, in the future growth with improvements in scale. And the recipe for us is quite simple, continued revenue growth, high and stable gross margins and then a total operating expense that increased at a lower pace than the revenue growth. And as a consequence, we see good opportunity to further leverage our revenue growth translates to reaching and exceeding an EBIT margin of 15%. Last but not least, the dividend policy. So we do have an attractive cash flow profile. And given the growth opportunities, we need to maintain a capital structure that enables strategic flexibility to pursue growth investment, and that obviously includes acquisitions. But it's still expected that over time... Operator: Let's try with Jakob instead. So -- do we have Jakob on the line? Jakob Lembke: Yes, I'm on the line. Operator: Good. So please ask your question. Jakob Lembke: My first question is on the sort of growth outlook you see. Obviously, very good momentum here continuing in Q4. But given that now that from Q1, you are facing these more tougher comparables, do you still see that you can sustain a sort of 20-plus organic growth momentum? Fredrik Ruben: I think you're absolutely right, Jakob. By the way, sorry for the technical issues. This is Fredrik. You're absolutely right. We are seeing tougher comps. And without kind of talking too much into the future, we also remain confident in our long-term predictions, and that is expressed as we believe in an annual growth of 20% adjusted for currencies and contributions from acquisitions. So we're making no change to the outlook. we have never been in a situation where the current growth has been something we have commented on in more detail. Operator: Any more questions? Jakob Lembke: Yes. Another question, if you can elaborate on the development in your U.S. sales force during the last year, sort of how much it has grown from the beginning of 2025 to where you are now and also what trends you're seeing in sales force efficiency? Fredrik Ruben: Sure. Can I hand over to Linda to maybe elaborate on that? Linda Tybring: I mean we have added more feet on the street, over 20 people in the sales organization or solution consultant as we call them, are -- have been added during the year. We also see an improvement in efficiency for our sales organization on a good trajectory, which is a really good sign considering how many people we have added during the past year. So that's great. Fredrik Ruben: And that equates to roughly 20% or is it? Linda Tybring: It's about 10%. Fredrik Ruben: Sorry, the growth in terms of number of FTEs. Linda Tybring: Yes, that's about 20% increase. Fredrik Ruben: Yes. Operator: Good. Any further questions? Jakob Lembke: Yes. Then I'm also wondering a bit on your balance sheet. I mean, it's good to see the dividend here you announced today. But given the stronger profitability, I guess we will come down to quite low leverage level here towards the end of 2026. So just what are your thoughts on how you will use the balance sheet going forward? Linda Tybring: I mean we should always prioritize and make sure that we look at future investments, it could be M&A, et cetera. So we need to make sure that we have excess cash for that. But if we -- for the future, I mean, now we have a good situation, and that's why we decided on doing a dividend this year. Fredrik Ruben: I think it's also important to stress the fact that given the type of business that we're in, the type of payers that we are, as a company, we should carry a certain leverage. And we obviously feel quite confident in the ranges where we're currently operating. But that can change with market interest rates and whatnot. But obviously, we feel quite confident at the leverage rate that we're on and hence, doing the dividend. Jakob Lembke: Maybe I can just take one more and then I'll get back. Operator: A quick one. Jakob Lembke: Yes, just if you can comment on the situation with RAM memory prices and if you see any impact on gross margin or ability to deliver. Fredrik Ruben: Sure. So just for everybody to understand, the prices for high-technology memory chips has gone down dramatically, typically associated with the AI boom. We do have memory chips in our products. And yes, we have seen that the memory prices have gone up, but you should see that in the light of 2 things. First of all, we don't use the highest specs memory chips that you typically use in AI computing, et cetera. So we're not really in that market. And the other part is that the bill of material cost for the memory chip per se in our products is very, very small. So even if you would look like a doubling of memory chip price, et cetera, it only would affect some tens of percentage points on our gross margin for our products. So we are -- with a 70% or so gross margin, the bill of material cost for a specific component doesn't actually affect us all that much. Operator: Good. Thank you so much. I think we also have Daniel Djurberg from Handelsbanken. Daniel Djurberg: Congrats on a great report, I think. And also thanks for the clarification for some analysts on the COGS side. I have a question on -- you mentioned the Nairobi Protocol. Have you seen any policy impact or changes so far? I have looked myself, I haven't found anything. Fredrik Ruben: No. Linda Tybring: No. Daniel Djurberg: Good. Another question in the autumn on the close down, you were quite safe out due to prepayments. Is something changed this time and this prepayment thing that could be that it could be a larger impact directly given the close down? Fredrik Ruben: We didn't see any direct impact of the close down, and that's because the system is -- there are buffers, as you alluded to in the system. But I need to stress the fact that this type of close down, and I would also say if you go up in the helicopter and look at the general uncertainty in the U.S. society, it will and have some sort of impact on us. It's affecting schools. It's affecting the life for our own staff and societies at large. It's, however, super difficult for us to quantify exactly what that meant in terms of dollars. But I would be wrong saying that we are unaffected largely. But there's nothing that we can really point out or quantify. Daniel Djurberg: Super. And also in terms of ramping up sales force, can you comment a bit on the efficiency on the number of prescribers and so on that this sales force can help, i.e., your indirect sales force more or less? Fredrik Ruben: So 3 factors. The first one is the number of reps that we have in the field. And as we said in the previous question, that increased by roughly 20% or so or 20 people to be exact in the U.S. last year. At the same time, we did see an improvement in kind of revenue per rep or sales rep efficiency. The third element is something that I believe we have talked about before, which is the number of prescribers in the market that prescribe 4 or more devices per year. And here, too, we saw an uptick compared to last year. I actually don't have the number, but I would say that there were probably a double-digit percentage, perhaps low in number of prescribers that are for the lack of a better word, good at your job or et cetera. And that's, of course, a fantastic growth lever because they carry our water, and they typically have more successful patients. Daniel Djurberg: Perfect. And if I may, very last question on the competitive landscape. Have you seen any larger changes for example, your U.K. competitor, Smartbox was acquired there and also you say something about PRC in the U.S., given these are private companies, it's hard to judge from the outside. Fredrik Ruben: The short answer is no. I think it's largely business as usual. If you look at the acquisition of Smartbox that was announced, not yet closed, I believe. That's merely an ownership change. And that's potentially good. We have no opinion about that. And you did also see that PRC did acquire 2 small software companies typically focusing on other markets than their home market, U.S. But again, this doesn't affect our day-to-day life. Operator: Thank you, Daniel. And then we will turn to Kevin, who has posted a question in the chat asking you increase R&D every year. Will this increase indefinitely? Or will it flatten out more and get quarterly consistent over time? Fredrik Ruben: Linda? Linda Tybring: So I mean, during 2025, we have talked about the strategic move that we have done from the U.S. to Sweden, which means in 2025, our R&D spend has been very high because of a lot of nonrecurring costs. What we see over time is that we will not increase our R&D spend in relation to revenue. So that will over time go down. And also why we did this move was to -- for the same amount of money that we spend in 2024 or in Q4 2024, we will actually hire more people. So we will get an efficiency in adding more capacity for the same amount of money. So over time, this will go up. But of course, we need to add a couple of heads every year, but it's not significant from a SEK 1 million increase perspective. Operator: Good. And he continues also, Kevin, all the quarterly reports for 2025, you have expressed that the demand has been basically the same in Q1, Q2, Q3. What did it look like for Q4? Fredrik Ruben: The same. Operator: The same. Fredrik Ruben: Yes. Operator: Good. So let's see now if we have, Phillip. Unknown Analyst: All right. Most of my questions have been covered, but I was just wondering, has the U.S. reimbursement rate increased going into 2026? Linda Tybring: Yes. They have communicated a 1.9% increase in December that we will start to evaluate during the year or implement during the year. But as historically, this takes some time for us because we need to update overall appendixes to our agreements with the funding bodies across the U.S. Fredrik Ruben: But it's a good question because as many fear with the current political, it didn't go down. And it's typically associated with inflation. I think this just under 2% increase of reimbursement rates underscores that. Unknown Analyst: And then I was also wondering about Tobii, they reported the other day, and it was quite a disappointment. And does it have any effect on you about their performance and their ability to deliver products to you? Fredrik Ruben: No. Unknown Analyst: Short answer, okay. Fredrik Ruben: It's obviously a complex topic, but we are in a position where it doesn't affect us. Linda Tybring: And we have a lot of stock when it comes to Tobii components. That's part of the prepurchase we did during the summer. Operator: Thank you, Phillip. We also have another question from Jessica at Redeye. So adjusted for nonrecurring costs of SEK 17 million, the EBIT margin reached 18% in Q4, which sits well above your long-term target of 15%. Now that the restructuring of the R&D organization is complete, how do you view the ability to maintain this elevated margin level throughout 2026? Fredrik Ruben: First of all, Jessica, is that the profitability or margin target is expressed as exceeding 15%. So our target is not 15%. It's exceeding 15%. And we remain confident that that's a level where this company should be able to deliver. With that said, we're also going to make sure that we make the appropriate investments so that we don't build a card house that could implode here. We want to build something very, very solid and resilient. Linda Tybring: We should also remember that Q4 is our strongest quarter. So profitability grow -- both revenue and profitability can increase during -- quarter during the year. Operator: Good. And actually, I see that Kevin had a follow-up question on the R&D that he asked. Would your EBIT margin and therefore, your results have been better next year, all are the same since they have been a onetime cost? Fredrik Ruben: Yes. That's mathematics. Operator: Good. Good to confirm. I think by that, let's see. There was one more here also from Kevin. And another question about the demand. That the demand is so consistently high, 32% excluding currency. Can I get some history regarding this, more in regards to if you have seen this demand historically and what may or may not affect this? Fredrik Ruben: Sure. And it's actually quite a complex topic because we are operating in an industry where we are also not only providing the products and the solution, we're also there to create the awareness. So our long-term initiatives on educating prescribers, being active at universities, creating more and more successful use, et cetera, that is a very, very slow-moving ship. And it's quite difficult to kind of exactly calculate the impact from when one of our colleagues were out in the speak teaching a prescriber how to do their job until that translates into revenue growth. So I would say we are responsible for the growth because we and some of our industry peers, we largely create the market. Exactly to predict which percentage points that will end up in is genuinely hard. But we feel obviously that we've found the momentum, but I expect that it will be a bumpy road. Sometimes we will have very strong growth and sometimes we will have weaker growth. But if you zoom out a little bit and look at the overall curve over longer periods of time, we are obviously quite confident in long-term growth. And when I say long term, I'm probably more talking decades than quarters. Operator: With that, all the questions have been asked, and we concluded. Fredrik Ruben: All right. Thank you, everybody, for listening in. We apologize for the technical mess up that happened. But obviously, we were able to hear the voices of some of our dear analysts and followers. So something worked. We will now continue to work. And next time we have a session like this will be on April 24. It's a Friday, and then we will conclude the first quarter of 2026 in our earnings. Thank you very much. Linda Tybring: Thank you.
Operator: Welcome to Nordic Semiconductor's Q4 2025 Presentation. [Operator Instructions] This call is being recorded. I will now hand it over to Stale. Please begin. Stale Ytterdal: Thank you, Kjell, and good morning, everyone. Please note that this presentation is being recorded and will be accessible on the Nordic website in the Investor Relations section. Additionally, for those of you who missed the release, you can find the earnings press release, quarterly report, and presentation material also on our IR website. With me today, we have the CEO, Vegard Wollan; and our CFO, Pal Elstad. They will share details about our recent financial performance and updates on key business developments. Following the presentation, we will move on to Q&A segment. [Operator Instructions]. As a reminder, this presentation includes forward-looking statements that come with inherent risks and uncertainties. Actual outcome may differ materially from those statements expressed and implied. We highly recommend reviewing our detailed Q 4 quarterly report and the 2024 annual report for a deeper understanding of the risks and uncertainties that could impact our business operations. With that, I will now hand the microphone over to our CEO, Vegard Wollan. Vegard Wollan: Thank you, Stale, and good morning, everyone. Today, I'm going to quickly go through the main points of the quarter, then leaving the word for Pal to take you through the financials before I'm returning with my review of 2025 and how we see ourselves progressing towards our long-term goals and ambitions. So let's start with the headline figures of the fourth quarter. Revenue amounted to $170 million in the fourth quarter, an increase of 13% year-on-year. As expected, revenue declined somewhat from our third to the fourth quarter, and the revenue ended in a higher end of our guiding range. The year-over-year growth was on par with what we saw in the third quarter and reflects that our strong competitive position enable us to benefit from the market improvement throughout 2025. We see growth both in short range and in long range, and among both large key customers and in the broad market. In terms of end-user markets, we saw continued growth in the Industrial and Healthcare segment, with more modest year-on-year growth in the Consumer segment. This is roughly the same picture as we saw in the third quarter. Gross margin was 55% in the quarter, but as Pal will get back to with more details, this included some reversal of an inventory write-down we took last year. If we exclude that, we still see healthy gross margin levels of 52%, a clear improvement from Q4 2024 and on par with the previous quarter. The product and customer mix is improving and cloud services revenues after the acquisition of Memfault also contributes positively. Reported EBITDA was $15 million, and adjusted EBITDA, $13 million. This excludes the positive effect of the reversed write-down, partly offset by the quarterly noncash cost effect related to the Memfault acquisition. The top 10 customer share of our revenue has stabilized at 57%, meaning that revenue has grown equally strong among our key customers and in the broad market over the past year. Revenue in 2025 exceeds the 2022 peak level for our top 10 customers, showing our strong relationships and developments with these customers. We will see many more exciting products coming out from these collaborations in the quarters and years to come. As we have said repeatedly over the past year, it has been a key priority for us to regain momentum also in the broad market. And the revenue in this customer segment is still around 1/3 below peak levels, though we see gradually improving revenue also here. We remain the clear design win leader when we look at the Bluetooth Low Energy end product certifications, with 32% of the design certifications in both Q4 and for the full year 2025. This is about 3, 4x as many designs as our closest competitor. And please note that this is counting of certifications that does not differ between high and lower volume products. So you cannot translate this directly to revenue. The NRF 54 is now beginning to have a meaningful impact and accounted for about 15% of certifications in Q4. This will continue to increase going forward. Turning to our products. I would like to highlight some recent product news. The first is the nRF54LV10A, which we have specifically designed for next-generation healthcare wearables such as biosensors and glucose monitors. These products are typically powered by silver oxide coin cell batteries, using lower voltages, and ultra-low power is crucial. Compared to the previous 52 series generation, we achieved between a 30% to 50% lower power consumption while increasing the performance substantially, and this new product positions us perfectly for these high-volume markets. At the CES in Las Vegas in January, we also introduced another great addition to the nRF54 series. Many applications require local data processing to save bandwidth cost and energy consumption. Other requirements for local processing are applications where you need low latency and on-site response in milliseconds without a round-trip to the cloud or other devices. Our new nRF54LM20B chip goes a long way in meeting those demands. This is the first SoC integrating our Axon neural processing unit, a very fast and energy-efficient hardware AI accelerator. The Axon NPU is built on technology we acquired with the acquisition of Atlazo a couple of years back, and it offers 7x faster performance and 8x better energy efficiency compared to our -- compared to today's competing technologies. Following the acquisition of Neuton.AI last year, we offer a complete ultralow power Edge AI solution, which, in addition to the 54LM20B chip, includes pre-optimized Neuton models, which are 10x smaller, faster, and more efficient than competing solutions, and the Nordic Edge AI lab, which simplifies development of custom Neuton models based on customer data. The Neuton models and the Nordic Edge AI lab are ideal for all Nordic SoCs, also including our long-range modules and products. Altogether, this offering dramatically lowered the barrier to bringing AI to battery-powered IoT devices at the edge. We are uniquely positioned to serve the next wave of AI-powered IoT growth across wearables, healthcare devices, and smart sensors. Within the long-range area, we have seen positive development last year. And besides the stronger commercial development in the cellular operation, one of the most exciting things that has been the qualification of our technology on satellite networks, positioning us as a leading technology and solutions provider within satellite-enabled IoT connectivity. In the fourth quarter, our nRF9151 module was certified for Skylo's satellite network, and we have now established connectivity across multiple leading satellite operators such as Iridium, Myriota, Sateliot, and OQ Technology, in addition to Skylo. Many customers just want a single solution that just works everywhere, also beyond cellular network coverage, and with seamless coverage across both satellite and cellular networks. We can offer true global IoT connectivity on land, on sea, all around the globe. We're looking forward to the next chapter in our long-range business unit with the launch of the nRF92 approaching this year. With that, I'll hand over to Por to take you through the financials before I will return with a wrap-up of our developments through '25 and into 2026. Pål Elstad: Thank you, Veg. So as Vegard mentioned, revenue amounted to $170 million in the fourth quarter of 2025, a 13% increase from the same quarter in 2024. Full-year revenue was a strong 31% increase to $668 million. The revenue growth reflects Nordic has retained a strong competitive position in the recovering short-range market, built a gradually stronger position in both cellular and satellite within long-range, and added cloud services revenue with the strategic acquisition of Memfault. The short-range business remains the main revenue driver in absolute terms, growing by 13% to $158 million or 93% of revenue. Compared to last quarter, revenue is down 5%. The revenue level demonstrates the persistent competitive strength of Nordic's product portfolio in the NRF 52 and 53 series of Bluetooth Low Energy products. Revenue contribution from the new and groundbreaking nRF54 series products was limited in 2025 and will start to contribute meaningfully to revenue from 2026 onwards. Long-range revenue amounted to $8.7 million in Q4, representing an increase of 25% compared to the fourth quarter of 2024 and a decline of 11% compared to the previous quarter. The year-on-year increase reflects higher demand on the back end -- back of the 151 launch late 2024 with sales to a broader set of industrial verticals. The growth also reflects increasing cloud services revenue after the acquisition of Memfault, which has performed in line with expectations out plan in connection with the acquisition. The other category includes early-stage businesses in PMIC and Wi-Fi, ASIC components, and development tool sales. While the technology development in Wi-Fi and PMIC is progressing as planned, these business units are still in an early commercial phase and therefore, included in other. Turning to the end-user markets. We see that industrial and healthcare is driving growth in the quarter. Industrial and Healthcare is now 37% of the total and increased 20% compared to the same period last year, and more or less flat compared to last quarter. Part of this is because of strong growth we're seeing in long-range, including services, which for the most part goes to industrial customers. However, we have previously said that revenue in industrial and health care still is dependent on a relatively small number of customers, and revenue reflects high sales to individual key customers also in this quarter. Consumer revenue was flat year-on-year with tough comparable from high Q4 last year when we saw especially strong performance in PC accessories. Turning to gross profit or gross margin. Gross profit was $93 million in Q4, up from $73.8 million in Q4 2024. The reported gross margin increased to 54.9% from 49.1% last year. As Vegard mentioned, reported gross margin included a partial reversal of a write-down of cellular products made in Q2 2024, which had a positive effect of $5 million in the quarter. We have been able to sell more of the old material than originally expected. Adjusted for reversals of the write-down, the gross margin was 52%, reflecting a 2.9 percentage points improvement over the fourth quarter 2024, or marginally up compared to last quarter. This improvement was primarily driven by changes in customer and product mix, higher sales in the broad market, and a positive contribution from cloud services. We maintain our long-term ambition to keep gross margins above 50%. Yes. Looking at our operating model, the revenue increase of 13% translated into a 20% increase in adjusted gross profit. However, our R&D efforts are also increasing with the ongoing product renewal process and increased activity to deliver on our long-term growth ambitions. Overall, R&D costs increased by 24% to $50 million in the quarter, with the strongest increase in short range due to very high development activity with new nRF54 products. Long-range R&D also increased significantly ahead of the upcoming launch of new products there. We have spent close to 30% of revenue on R&D. And as we talked about last time, the SG&A has also increased in connection with the ongoing product releases and more activity. Summing up, the adjusted EBITDA increased slightly in absolute terms, but declined slightly as a percentage of revenue. For the full year 2025, the adjusted EBITDA increased from $8 million last year to $67 million this year, with adjusted EBITDA margin increasing from 2% to 10%. As earlier communicated, our operating model is set up with a long-term ambition to move towards an EBITDA margin of 25%, which will require both continued revenue growth and a decline in long-term R&D costs to 15% to 20% of revenue, and also a similar reduction in SG&A. Turning to cash costs. So total cash operating expenses were $80 million in Q4 '25 compared to $70 million in Q4 2024 and compared to $75 million last quarter. As we talked about last quarter, we are doing a lot of efforts with the new products, which drives costs up. This increase in cash operating expenses mainly reflect payroll expenses, which increased to $53.6 million from $46 million in Q4 '24. Of the increase, approximately $2 million relates to net salary adjustments, higher salary, and about around $4 million relates to the Memfault and Neuton.AI acquisition. The remaining increase is driven by higher bonus accruals and FX. Nordic is exposed to currency fluctuations, mainly USD, euro, compared to the U.S. dollars. Compared to previous year, changes in these exchange rates increased quarterly operating expenses by approximately $3.7 million. The payroll increase from last quarter is mainly explained by Q3 lower due to vacations. The total number of Nordic employees at the end of Q4 was 1,431, including 59 employees that joined the acquisitions of Neuton and Memfault in Q3. This corresponds to an organic increase of 1% and a total increase of 5% compared to the end of 2024. There is increase in other OpEx is driven by high activity in Q4, including several tape-outs for new products. There are some moving parts here, but overall, we expect a similar cash cost level in Q1. CapEx this quarter was $5 million, up from $3.5 million last year, but down from $6.6 million last quarter. CapEx on this slide is purchase of equipment and software and does not include capitalized R&D. CapEx investments are irregular, and this quarter should be viewed in the context of the broader trend over recent quarters. CapEx intensity last 12 months at 3.4% of revenue. Current CapEx is mainly supply chain capacity, supporting ongoing new product introductions. Turning to cash flow. You can see that we had a neutral cash flow during Q4. This was mainly achieved by an EBITDA adjusted for capitalization of $9.1 million, offset by higher working capital. The main increase in net working capital this quarter comes from higher receivables and inventories, offset by higher accounts payable. Inventories increased by $12 million to $155 million and was driven by our strategic build of inventories. Net working capital at the low 22%. Finally, before handing the word back to Vegard, we can have a look at our near-term outlook, where we are looking for solid revenue between $175 million to $195 million in the first quarter of 2026. We reported an adjusted gross margin of 52% in Q4 and expect the gross margin to remain above 50% also in the first quarter. With that, I'll hand the floor over to Vegard for some closing remarks. Thank you. Vegard Wollan: Thank you, Pal. Let me round off with a few concluding remarks on our development through 2025. I think 2025 was a good year for Nordic, and we demonstrated solid progress operationally, strategically, and financially. First, operationally, on our Capital Markets Day back in 2024, we highlighted that our portfolio renewal program and launches of innovative new products would be crucial to drive our future growth. On that note, I'm very happy to see that we are progressing very well with the new products and launches we are making. First, in short range, we have now announced 7 SoCs in the market-leading nRF54 Series product family since we launched the first chip about 15 months ago. These 7 unique SoCs meet a wide range of different customer requirements and applications. We have launched high-performance SoCs with multi-core MCUs, rich on memory and features, and entry-level SoCs for more cost-constrained applications. And finally, fit-for-purpose products such as the low-voltage SoC I talked about earlier today for the health care market. This is actually slightly ahead of what we committed to, and we'll continue to roll out new products this year. In long range, we have broadened our addressable market and gained traction in key verticals by introducing the nRF9151 in the second half of 2024. And as I mentioned earlier today, we see strong momentum after we launched the leading technology, enabling true global coverage with satellite networks. We are also approaching the launch of the new nRF92 SoC on the 22-nanometer technology platform with higher performance, more integration, lower power consumption, lower cost, which is another great milestone coming up. PMIC and Wi-Fi are still small revenue-wise, but are also making good progress. We added 2 new PMICs in 2025 and expect to launch more in 2026. The design win pipeline is growing very well. In Wi-Fi, our offering has centered around the nRF70 series, which is positioned as a Wi-Fi companion chip to our other SoCs. The next-generation nRF71 will build on the same integrated architecture as the nRF54 series on the 22-nanometer platform and will be the first Nordic Wi-Fi SoC built in-house, both hardware and software. nRF71 is expected to significantly expand our addressable market, and we expect to launch this towards the end of the year. Strategically, we are transitioning from a hardware company to a complete solutions provider with chips -- from chips all the way to the cloud and aftermarket services. This enables our customers to focus on what they are best at, to design end-user products, application-specific software, apps, and the end-user interface. On the left side, you see the hardware pillar where our world-leading energy-efficient hardware SoCs. In the middle pillar, you see the software layer, which is becoming increasingly important as the complexity of our customer products increases. We have market-leading connectivity software stacks, our nRF Connect SDK software platform, and the new AI functionality, which I just covered. And finally, the services pillar, building on our Memfault acquisition last year, we now provide full device life cycle management capabilities. Our customers increasingly need technology that enables them to securely monitor, maintain, and update millions of their devices in the field throughout their lifetimes. This is not longer just a nice-to-have. New regulatory frameworks such as the EU Cyber Resilience Act and the U.S. Cyber Trust Mark require secure-by-design products, continuous vulnerability management, and reliable over-the-air updates. These mandates begin to take effect from 2027 and fundamentally change what our customers must comply to. Nordic has had an early start with our NRF cloud offering, and the integration of Memfault's cloud life cycle management solution significantly strengthens this position across all our connectivity technologies. Together, we provide a complete low-power optimized path for observability, diagnostics, and secure over-the-air firmware updates at scale. This combination of hardware, software and services puts Nordic in a unique position to deliver solutions to our customers' technical requirements and their regulatory obligations. This forms a truly differentiated end-to-end solution in the market. At last, we have financially progressed. I called my intro at the CMD in 2024, driving growth and restoring profitability. I believe the numbers for 2025 overall show that we are moving in the right direction, also financially. Revenue increased by 31% to $668 million in 2025, which was stronger than we anticipated going into the year. Full year 2025 gross profit amounted to $346 million, an increase of 43% from $242 million in 2024. Reported EBITDA increased from negative $5 million in 2024 to a positive $66 million or 10% margin in 2025. While we still have a way to go, I would say we are overall on track towards the long-term financial ambitions we have outlined, which are to grow revenue by more than 20% on average from 2024 through 2030 and to move towards the 25% EBITDA margin. With that, I think it's time to open for questions. So over to you, Stale. Stale Ytterdal: Thank you, Vegard. [Operator Instructions]. With that, I will now hand it over to our operator, Kjell, to begin the Q&A session. Operator: [Operator Instructions] The first question is from the line of Christoffer Bjønsson from DNB. Christoffer Bjørnsen: Congrats on the great quarter and the strong guide. I think just one thing we wanted to understand a bit better is you're now guiding Q1 growth around 20% on midpoint versus the quarter last year, you called out particularly strong orders that seemed a bit out of the ordinary for some key customers and also compared to the typical seasonality, you're kind of up 9% on the midpoint in Q1 on the guidance versus typically it's supposed to be down around high single digits. So anything you could say to help us understand like how much of that is just getting back to normal and market recovery and stuff like that versus if there could be any pull forward of people trying to get ahead of a potential shortage of components or any other abnormal things that we should keep in mind for our estimates for the rest of the year shape for the rest of the year? Vegard Wollan: Yes. Thanks, Christoffer. Good question. Yes, I think as I said, when we saw the revenue increase by 31% in '25, that's stronger than we had expected. So the market recovery from lower levels in '24 continued throughout 2025, and the strengthening continued towards the end of last year and into this year, which is reflected in our guidance. And through lots of dialogue and engagement with many customers, I think we have seen that quite some customers are now indicating they were selling more than they had forecasted in Q4. So that's clearly a positive. I think it's also clear that some customers are now, to some degree, a bit worried about shortages in certain areas, as you commented on, Christoffer, such as memory and potentially other components, which -- and this concern is related to potentially the spreading over to other components. So I don't think we can rule out that there could be an element of restocking of inventories happening. But also it's clear that our customers have had increased sales of their products in Q4 compared to their original forecasting. Christoffer Bjørnsen: Just a quick follow-up on the numbers. On the OpEx side, can you just help us a bit understand your plans for '26? For '25, you had pretty cautious plans to try to keep it flattish on kind of a like-for-like basis. But now with this momentum, should we expect like a material step-up? Or is '25 going to be like a year where we see operating leverage and OpEx will grow double-digit? Vegard Wollan: Yes. So as I mentioned, we are investing heavily, and we are growing the product line and business. But we did a quite big step-up in the second half of the year. So I'm foreseeing that going into 2026. So as I said, Q1, pretty close to what we see in Q4. But a little bit caution on the U.S. dollar, which is weakening, which will have -- will probably be offsetting this slightly. So I would say, more or less the same levels as in Q4 going into Q1. Operator: The next question is from the line of Harry Blaiklock from UBS. Harry Blaiklock: Maybe just following up on that Christoffer's question on Q1. Wondering whether you can call out kind of any particular areas of strength, whether across kind of Tier 1 versus broad market, consumer versus industrial healthcare, or any particular regions? Anything you can give there would be super helpful. Vegard Wollan: I think overall, we see some strengthening continuing gradually in all our segments at the moment, both geographically, our market segments, as well as our technologies. So it is across the broad board as expected. And while still not contributing materially, we are also very confident and optimistic, positive on all of our new product launches, which is truly what we are focusing at, at the moment. And it's very energizing to see the products and the wins we have on new products at the moment. Harry Blaiklock: Great. And then for my follow-up, over the last few days, you would have seen the news about one of your U.S. peers being acquired. Wondering whether you could just give a quick assessment of how that impacts the IoT connectivity segment and the competitive environment, how you're thinking about that? Vegard Wollan: Yes. Thank you. I think it's generally just to comment first, it's a very interesting proof point and recognition as such a large player as TI values the wireless connectivity IoT market and recognizes that it's an important and growing market in the semiconductor space. I also want to add, we have respected Silicon Labs as a good competitor. Having said that, we are very confident in our competitive position at the moment, probably more so than ever. And with all the new and great products we are releasing nowadays, these products are competing very effectively in the growing IoT market. Clearly, we are -- and I'm especially thinking of the leadership position we are taking on our 22-nanometer SoCs, and it's a great execution happening in the Nordic engineering teams when we now launch this unique, innovative, very, very leading products at the moment. Operator: The next question is from the line of Craig McDowell from JPMorgan. Craig Mcdowell: My first question was just in the context of higher DRAM pricing. Just what you're seeing in terms of customer conversations in terms of launching nRF54 series. Is there any risk that actually customers aren't accepting a new sort of potentially higher-priced connectivity chip in the context of sort of seeing higher DRAM pricing? Any risk of destocking there? That would be my first question. Pål Elstad: It's really hard to -- what the customers see in relation to the 54, I guess, the higher price on the 54. Lower pricing. Vegard Wollan: Yes. I think we haven't shared so much on any details of that, which we will continue to do, obviously, also for competitive reasons. And our market and value pricing, clearly, we are focusing on value pricing in Nordic as we have a leading value proposition, which we offer to our customers, particularly with the combination of software, services, and everything we deliver on the technology platform. If you think specifically of the 54 series, I think it's also clear that we are expanding our addressable market and our reach by the portfolio and the broader family we are bringing to market. So from the high-end products in the 54 series, which is, of course, quite a lot higher performance than previous products in the 52, 53 family. But also we are expanding in entry-level products. And the ASPs we are seeing in that picture are varying quite a lot, I think, is generally what we see. I think good news, which we see is that lots of customers require more compute power at the edge. They require more software, more functionality, and are very often upgrading also to a more powerful Nordic SoC when they either update or develop new products. Craig Mcdowell: Just my follow-up. You referred to sort of risk of supply tightness or constraints. Can you just remind us of the sort of terms with your fab partners for your own supply? Vegard Wollan: Yes. Of course. Our major foundry partners are TSMC and GlobalFoundries, working extremely closely and well with both of them, and in close partnerships, strong partnerships, and we are getting excellent support from them. Clearly, as we are also ramping up manufacturing, as you can see, there is a bit of tightening in certain elements of the supply chain happening at the moment. We are not constrained on that, but we are working, monitoring, and assessing that situation very closely. But overall, we have very strong support and are able to increase our manufacturing at the moment, as we are currently doing. Operator: The next question is from Om Bakhda from Jefferies. Om Bakhda: You mentioned that AI bolt-on that you sort of at the end of H1 last year is sort of key to being a compute solutions provider. And through the quarter, we've seen headlines around possible Apple wearable and maybe some more traction in this AI space. And so through the quarter, have you seen renewed interest and engagement on the wearable piece or any projects that you're sort of working on that could be announced later in the year? Vegard Wollan: Yes. I think, unfortunately, we only heard the last half of your question, but I think it was related to our traction within Edge AI, which is obviously an area we are focusing a lot at. And I would say we are clearly seeing very solid positive increased traction, both on our hardware side as well as our solutions side. The LM20 family, actually both the A and the B has very solid traction at the moment, so without and with hardware acceleration as people also need to utilize these NPU capabilities to speed up their computing at the edge for the reasons I mentioned, either bandwidth reasons, energy consumptions, latency times or just a requirement for local decision-making at the edge node device. So we are clearly seeing very positive traction on the hardware side. And similarly, I would say on the Nordic AI labs with the pre. And maybe just to add to that, when we launch these things, it's also generally such that then you have the broad market applicability. So we see a multitude of customers using them. Typically, with us, that means that we have had some key customers also using them for a quarter or a couple of quarters prior to that. Om Bakhda: And then just on your revenues [Technical Difficulty]. Vegard Wollan: Okay. I think the question was on the Memfault revenue. We don't comment on the revenue. But back when we did the acquisition, we said that Memfault had an ARR of around $7 million, and we're expecting a 50% growth in 2025. And then as I said, the development has been as planned since the closing. So we're very happy with that team and that acquisition. Operator: The next question is from the line of Martin Jungfleisch from BNP Paribas. Martin Jungfleisch: 2 small follow-ups, please. The first one is really on the Q1 guidance. I mean, it implies around 9% growth at the midpoint. Can you just disclose if there's any larger positive mix or price impact already in from the nRF54, and if that increasing share in the mix could be an acceleration of revenue growth over the next couple of quarters? Vegard Wollan: Yes. It's a great question, and we understand the interest there, but we are not breaking out the revenue for the nRF54 series. What we have said is that we have now broadened out our product offering in that space. We have had a certain time of design wins of the design win activity with the earliest launched products, while momentum is growing and increasing for the more recently launched products. And we also see in the Bluetooth SIG certifications, it's starting to become slightly meaningful as a contribution, which means that we are clearly delivering to what we have said we were in '26. This is going to gradually start to become more meaningful as a revenue contributor for Nordic. Martin Jungfleisch: Okay. And as a follow-up, it's also on the foundry side of things. There's some reports that TSMC is raising prices in some mature nodes, and they may even shut down some certain older nodes. I mean just how are you affected here? Is that something that you're seeing that TSMC or raising prices? And if so, I mean, could you potentially pull more volumes towards GlobalFoundries, TSMC is raising prices or even shutting down more than not? Vegard Wollan: Yes. Thank you. I think we appreciate the interest in that area, and we see media coverage and even some speculations on some of these data points. I think the only thing we can say there is that we are working extremely closely with our supply chain and foundry partners, obviously, and within that, obviously, with TSMC as well, such that we are confident in having support in the coming time for our customers and manufacturing. And of course, there is also a bit of flexibility between the picture, as we are now having multiple sources and multiple technologies, 55 nano and 22 nano, et cetera. So that is also a picture we are working and monitoring, and planning for on a multiyear basis. Operator: The next question is from Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: Coming back to the broad market, which remains 35% or 30% below the peak. Have you made any kind of progress to reaccelerate the expansion on the broad market? Is there any specific progress there? And specifically in China, how the situation is evolving there? Do you see a bit of more market traction there? And where is competition happening in China? First question. Vegard Wollan: Yes. Thanks, Sébastien. Great question. I think to cover it quickly, and take the last one first. I think in China, we see that market growing similarly as other markets for Nordic at the moment. So it's growing, but it's growing at the pace we are growing. So same percentage of our growth is coming from China, plus or minus. That's the approximate situation. Broad market, lots of activity, lots of action we are taking in that space at the moment, and have done that now for quite some time. We are seeing the results. A lot of that is also related to new product launches, which I talked about because new products create energy, create momentum, and create activity. And fortunately, I can confirm that we are seeing that amongst our distribution partners, which is great, though things take a little time for designing in industrialization, qualification, certifications, et cetera, before customers launch their product. So it's part of what we expect to see growing also throughout this year. Sébastien Sztabowicz: And coming back to the story of the question around the inventory replenishment, where do you see the inventories at your main distributor partner today? Have you seen any kind of rebuilding at the distributor level? Or it is more at the end customer that is happening right now? Vegard Wollan: Yes. I think our distributor inventory levels at the end of last year, we are probably somewhat on the lean side. And for Nordic, we continuously aim to keep inventory at healthy, balanced levels to be supporting our customers and their needs at all times with more SKUs and more products coming up at the moment as well. But yes, that's probably. Pål Elstad: And on end customers, we see that most larger customers have been in a balanced situation for quite some time, and you can read that on reports. Some of them even have low inventories. And then we also saw in Q4 that broad market customers are at normalized levels, and then we see that in the replenishment levels, et cetera, they have. So healthy inventory levels. Operator: Time is running fast here. And in the interest of time, I will hand it back to Stale for any further announcements. Stale Ytterdal: Thank you, Kjell. We will conclude today's session. I have one announcement. Nordic will conduct 2 post Q4 2025 result Q&A group calls with analysts and investors. The first call will be for the U.S. investors and will be hosted by Bank of America and is scheduled today, Thursday, at 5:00 p.m. The second group call for European investors will take place tomorrow, Friday, and will be hosted by ODDO. This call will be attended by CEO, Vegard, and CFO, Pal, and will be moderated by the covering analysts at each brokerage. For details on how to register, please visit the IR calendar on our website. With that, I will now close today's Q&A session and hand over to Vegard for final remarks. Vegard Wollan: Thank you, everyone. Thanks for joining us, and this concludes today's call. Thank you. Pål Elstad: Thank you.
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.
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: 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.
Operator: Good morning, ladies and gentlemen, and welcome to Siemens Healthineers Conference Call. As a reminder, this conference is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on Page 2 of the Siemens Healthineers presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are, therefore, subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Marc Koebernick, Head of Investor Relations. Please go ahead, sir. Marc Koebernick: Thank you, operator. Good morning, and welcome, everyone, to our Q1 earnings call for fiscal 2026. I'd like to thank each one of you for joining us today. At 7:00 this morning, we published our Q1 2026 results. All related material for today's results release are available on the IR section of the Siemens Healthineers web page. In a moment, we'll hear directly from our CEO, Bernd Montag; and our CFO, Jochen Schmitz. And after the presentation, we will have a Q&A session. [Operator Instructions] All the more so as we have quite a tight schedule today with our Annual Shareholders Meeting starting at 10. Additionally, please note that a full transcript and recording of today's call will be made available on our Investor Relations web page shortly after the session ends. And again, thank you for being here. And now I'd like to turn it over to our CEO, Bernd Montag. Bernhard Montag: Thanks, Marc, and also a warm welcome from my side. Let me start with a brief look at key takeaways from the last quarter. Firstly, we had a good start into fiscal year 2026 and confirm our outlook. Notably, the synergetic part of our portfolio, Imaging and Precision Therapy showed strong underlying operational performance in the quarter, especially in light of substantial headwinds from tariffs and foreign exchange. However, Diagnostics was affected by material market challenges in China that we did not foresee to their full extent. Secondly, we are fully on track with our preparations for the deconsolidation from Siemens AG. We began the preparation for the demerger agreement and the refinancing necessitated by the planned deconsolidation. In this context, we received a strong investment-grade rating from Moody's, a clear milestone for our financial independence that demonstrates our financial strength and the resilience of our business model. And finally, the Elevating Health Globally strategy we presented at our Capital Market Day in November is gaining traction with very good feedback from customers and partners. Before diving deeper into the progress on strategy execution, let me give you my read of the quarterly print. Imaging and Precision Therapy is performing very well. Fundamentals are fully intact. Strong 6% growth, a decent equipment book-to-bill of 1.12 and an operational margin expansion that could broadly compensate for tariffs and FX. That's really an achievement. Diagnostics recorded a revenue decline of 3%. The Diagnostics business in China is challenged by material market changes primarily due to volume-based procurement, but also reimbursement reductions. Since VBP is primarily price driven, it does not just lead to a decline in revenue, but to a significant loss in profit at the same time. The reimbursement reductions impact primarily volume, which means another drag on revenue and conversion on top of VBP. In the Americas, on the other hand, Diagnostics is operationally growing again compared to previous years. This growth shows that the Atellica portfolio is gaining traction in our biggest diagnostics market, while dilution from our shrinking legacy is, as expected, still holding back growth. Overall, the Atellica franchise has grown by roughly 20% in Q1, like in recent years and is now at almost 70% of sales in the important core lab solution business. In Brazil, the Diagnostics team renewed the contract with a large strategic diagnostics customer, a major force in the industry whose decisions have an influence on the market, one of the consolidators. Not only was the team able to retain the customer, but the customer is now adding additional analyzers beyond the existing contract, a testament to the strong demand for the Atellica franchise in the industry. Jochen will run you through the financials later. Now let me briefly recap the key elements of our strategy. What moves the world the most when it comes to health care are the noncommunicable diseases or NCDs. These are neurodegenerative diseases such as Alzheimer's, cardiovascular diseases, stroke and cancer. The NCDs are responsible for 75% of all deaths worldwide and are precisely the diseases on which our innovations and growth initiatives are predicated. Our triangle of patient winning, precision therapy and health care AI is what it needs to fight the most threatening diseases from earlier detection to the right diagnosis to the right therapy selection and planning to the personalized minimally invasive treatment and all this at scale by using health care AI. This is exactly what we showcased at RSNA with a series of new launches underscoring our unique clinical relevance. Our AI-driven Syngo.CT Coronary Cockpit tool quantifies plaque data and enables deeper insights for intervention planning and treatment by the physician. This AI-powered software is designed to automatically segment and label coronary arteries as well as to visualize and quantify plaque types for the entire coronary vascular tree or individual lesions. Combined with the innovations like our Photon Counting CT and dual source technology, it offers unprecedented clarity and speed of decision-making. In precision therapy, real-time imaging is key for conducting precise and safe interventions. We move MRI into the interventional suite, offering new clinical opportunities in image-guided interventions. This XL MRI system with its excellent soft tissue contrast provides high-performance imaging without ionizing radiation and with exceptional patient access. And last but not least, there's our all-new family of angiography systems. It comes, for example, with an AI-powered reduction of image noise in real time for crisp, high-resolution images and this at the lowest reasonable dose possible. Now let me come to our second superpower, our unmatched regional organization. Our customer-specific organization is very much local, whether it is in all parts of Europe, in Malaysia, in the U.S.A. or in China. Our company's strength can be found in all these places. We have the broadest and at the same time, also the deepest portfolio. We know how to address departments and medical subspecialties, and we know how to address the C level. With our intimate knowledge of the local situation and our access to the global standard of care, we are perfectly positioned to support our customers to overcome their challenges. How do we translate this into additional business? Firstly, we further expand our footprint in value partnerships, create even more long-term partnerships and become even more relevant to our customers. Secondly, drive clinical transformation along our strength in fighting the NCDs with value programs. Here, we are working -- we are giving support to rethink how workflows, technology and staffing work together, for example, by helping our customers to build a theranostics practice or supporting them to optimize their radiology department or to set up a stroke center. And finally, we plan to further increase impact in emerging countries. Let me give you some examples of how we are progressing on the next slide. Next to a series of other value partnerships, we entered a new 10-year value partnership with Onvida in January, a provider for health care in Southern Arizona. This value partnership includes a $55 million capital equipment commitment and it is expected to exceed the $100 million in total value over the term, inclusive of service and solutions. It is a nice example of how we can improve rural health and quality of care in a long-term collaboration. It ensures clinical excellence and access to advanced diagnostic imaging therapeutic technology and corresponding services from maintenance to consulting. For our value programs, we see here a strong deal funnel building up, particularly for cancer treatment programs. And when it comes to increasing impact in emerging markets, we see very good momentum. Vietnam was outstanding, delivering a very strong start with 45 systems across 18 hospitals and clinics, including 2 Photon Counting CT systems in the single month of December. With this, I would like to hand over to Jochen. Jochen Schmitz: Thank you, Bernhard, and also good morning from my side. Before I start, since this fiscal year, we have a new reporting structure. Just as a small recap, there are 2 main changes. Firstly, Varian, Advanced Therapies and ultrasound are forming the Precision Therapy segment. Secondly, the internal suppliers for the segments, the so-called tech centers which were part of the Imaging segment before, moved to central items as they serve all segments. Now let me share some color on our financial performance in Q1, starting with the Imaging segment. In Imaging, our Photon Counting CT and our Radiopharmaceuticals business continued to drive growth again this quarter, resulting in an imaging revenue growth of 5.7%. Two short technical remarks. Firstly, on top line, we strengthened the European footprint of the radiopharmaceutical business by an acquisition from Novartis, a transaction that we successfully closed in our Q1 of last fiscal year. For comparability reasons, the acquired revenue is from now on included in our comparable revenue growth number. Secondly, on Imaging's adjusted EBIT margin, prior year quarter had a negative impact from special items, which amounted to roughly 50 basis points in the new structure. Imaging's adjusted EBIT margin of 21.6% is a result of strong operational margin expansion. Taking out prior year quarter's negative special items and this year's headwind of around 200 basis points from tariffs and foreign exchange leads to an operational margin expansion north of 100 basis points. Now over to our segment Precision Therapy. Precision Therapy started the fiscal year with strong growth of 5.9% against a tougher comp of 8% growth in the prior year quarter. Varian has significantly contributed with 9% growth, while Advanced Therapies had as disclosed a softer start. Let me remind you that we will continue to provide you in our financial disclosure, the segment there in Varian for revenue and margin. In Precision Therapy, we saw an outstanding operational margin expansion of almost 400 basis points driven by good conversion and a favorable business mix across the board. The operational margin expansion excludes the headwinds from tariffs and foreign exchange as well as a positive special item this quarter. The margin benefited from these special items by around 100 basis points. The most notable item was a catch-up booking related to software revenue recognition in Varian. And now let's complete the segment run-through with Diagnostics. Diagnostics had a weak start due to major structural changes in the China market. The first is volume-based procurement that we repeatedly pointed out as a major headwind with regard to revenue growth, especially for the first half in fiscal year 2026. VBP essentially sets new price levels with a 1:1 impact on profit. Additionally, the diagnostics sector in China faces material market challenges now impacting volume due to reimbursement reductions impacting our diagnostic portfolio. This led to a muted demand and was another drag on the Q1 revenue line on top of VBP. Outside China, our Diagnostic business posted stable revenues, though the weak diagnostic performance in Q1 is primarily due to the current challenges in the Chinese market. The revenue decline due to China obviously led to significant negative conversion missing in the EBIT line. The margin had another drag from a particular high instrument share. Bernd already mentioned a large deal in Brazil, which, for example, led to high instrument placements in Q1, which, as you know, in a razor, razor blade business model are always an investment into the field and consequently have a temporary dilutive effect on the bottom line. And now to conclude, let's have a look at the group. Let's start with the top line. The 6% growth in Imaging and Precision Therapy and the 3% decline in Diagnostics add up to a solid 3.8%. Noteworthy in the regions are the Americas, which grew with 9%, continuing the excellent growth we saw also in the quarters before. China, on the other hand, declined by 5%, which was exclusively due to the steep decline in Diagnostics. Imaging and Precision Therapy in China were flattish with a positive prefix. Operationally, we saw a strong earnings performance in Q1, which offset the significant headwinds from tariffs and foreign exchange in this quarter completely. While the disclosed adjusted EBIT margin was 15%, i.e., flattish year-over-year, -- excluding the headwinds from foreign exchange and tariffs, the margin expanded operationally by 200 basis points. Adjusted EPS was down by 3%. And excluding the headwinds from tariffs and foreign exchange on the EPS line, EPS grew by around 17% year-over-year. So the 3 main drivers this quarter are strong operational earnings performance, tariffs and foreign exchange headwind, just as we showed in our waterfall chart for EPS in the fiscal year 2026. On the left side, you see the waterfall chart for EPS in fiscal year 2026 as of our Q4 earnings call from last November. Let's go through the main moving parts, starting with foreign exchange. We expect foreign exchange to be a headwind in every quarter this fiscal year. So the around $0.04 this quarter are in line with the around EUR $0.15 we expect for the full fiscal year. Now tariffs. Tariffs are also in line with what we expected last November. The year-over-year tariff headwind will predominantly impact the first half of the year. So the headwind of around EUR 0.06 in Q1 is also in line with the around EUR 0.15 we expect for the full fiscal year. We expect significantly lower headwinds from tariffs in the second half, in particular, because of the increased tariff rates from 10% to 15% in the course of the second half. Having gone through foreign exchange and tariffs, this leaves us with our underlying operational performance on the EPS bridge. Adjusted EPS in Q1 was year-over-year down by EUR 0.02. Taking out the total headwind of EUR 0.10 from foreign exchange and tariffs brings us to around EUR 0.08 of operational earnings improvement in Q1. This was driven, as said, by the strong earnings performance of Imaging and Precision Therapy, which more than compensated for the weak margins of Diagnostics in Q1. The EUR 0.08 operational improvements show 2 things. First, we are in a good position for the around EUR 0.25 improvement we expected for the full fiscal year. And second, we continue to consistently improve our margins operationally every quarter, which brings me to the next slide. In Q1, we grew year-over-year revenues ex foreign exchange again after growing revenues each quarter for several years in a row, a strong testament to our revenue growth performance. Now I will show the margin development in 2 different views. This one includes tariffs and foreign exchange. And on the next slide, excluding only tariffs. What you see on this slide is that the margins were holding up well despite tariffs. Q3 fiscal 2025, the first quarter which was impacted by tariffs, still saw year-over-year expansion. Q4 margins was only slightly down, and the margin this quarter was on a prior year quarter level despite tariffs and as we all know, foreign exchange headwinds. On the next slide, you see margin development excluding tariffs. And you see consistent margin expansion, both sequentially and year-over-year. Why do we show this slide? We expect to fully mitigate the impact of tariffs over the next 3 years. Tariffs will be a longer but only temporary drag on the margin. And consequently, the ex tariff margin development is the long-term reference for our operational earnings strength, a strong proof point that we consistently turn our revenue growth into earnings growth. And this brings me to the outlook for fiscal year 2026. We confirm our outlook for fiscal year 2026, both for revenue growth and for adjusted EPS. We are fully aware that the picture on segment level is mixed this quarter, but especially the strong performance in our synergistic core of Imaging and Precision Therapy is a strong proof point to confirm our outlook for fiscal year 2026. Before I close, let me share our latest views on Q2. We expect revenue growth for the group in Q2 to be below our outlook range of 5% to 6%. Similarly, as in Q1, we expect Diagnostics to continue to face market challenges in China in Q2, resulting in a revenue decline also in Q2. In Q2, we additionally faced tough comps in China. Diagnostics revenue in China rose strongly in prior year's Q2, the only quarter in China last year with growth in Diagnostics. Due to these tough comps in China, we expect the revenue decline of the segment to be even more pronounced in Q2 than in Q1. We expect Imaging and Precision Therapy growth in Q2 to be around the assumptions for fiscal year 2026, means mid-single digits and mid- to high single digits, respectively. Due to tariffs and foreign exchange, we expect margins in all segments in Q2 to be below the prior year quarter. Bear in mind that the Imaging margin in Q2 2025 was the highest in the last fiscal year with a disclosed tailwind from a positive special item. Also, when you look at margins sequentially this year, the Precision Therapy margin in Q1 also had positive special items. So we would expect a margin decline in Precision Therapy year-over-year due to tariffs and foreign exchange and quarter-over-quarter due to special items in Q1. For Diagnostics, we would expect sequential margin improvement from normalizing mix. However, with missing conversion from year-over-year declining revenue due to ongoing market challenges in China and tariff headwinds, still a clear margin decline year-over-year. And with this, I hand back to you, Marc. Marc Koebernick: Yes. Thanks, Jochen. So let's go over to Q&A. Marc Koebernick: [Operator Instructions] First caller on the line would be Veronika Dubajova from Citi. Veronika Dubajova: I want to obviously talk about Diagnostics. And Jochen, I'm just curious to get your thoughts, given the structural changes that you are seeing in the business. So how is your thinking about the long-term margin potential for Diagnostics changing? Do you still think we can get to a mid-teens margin here or towards a mid-teens margin? Or does what you're seeing in China fundamentally alter that trajectory? And then maybe if you could also kind of touch upon your expectation for Diagnostics also for the full year '26. I think the prior guidance divisionally had been for minor margin expansion. I was hoping we could get an update on that. Jochen Schmitz: Yes. Thanks, Veronika, for 2 obvious questions, I would say. First of all, on -- and let me start with the second question. It was clear and that was also -- or we started, I would say, also the guidance for this that the first half for Diagnostics will be a tough one because of missing -- luckily missing volume-based procurement last year in the first half and then being exposed to it in the second half. Therefore, it was clear that the first half will be weaker than the second half. So this has not changed. Obviously, Q1 because of also the trajectory and what we have seen in the market was a bit more pronounced, negatively pronounced than initially assumed. And this might also lead potentially to that we might need to change the assumption slightly on Diagnostics going forward for this fiscal year. But a bit too early to tell. And I think it's important to note, that's why we also, I would say, wholeheartedly confirmed our outlook and we saw a super strong start profitability-wise in the synergistic core. Therefore, we feel very good about the outlook. Now coming to your first question was more the midterm outlook on Diagnostics. I think when we look at the trajectory at the plans we have and also at the relevance this China business meanwhile only have or has for Diagnostics, we still feel that the midterm guidance we have out there for Diagnostics is a valid one. The current China revenue portion in Diagnostics is meanwhile down to 7%, 8%. And I think we will hopefully reach this year then the new baseline in the business. We will also adjust, obviously, according to the baseline, our footprint accordingly. And I'm pretty sure that we will be able to get to midterm margins despite the fact that we see maybe a different baseline in China. Marc Koebernick: We move on to Graham Doyle from UBS. Graham Doyle: Just 2 quick ones. You called out PETNET and PCCT in terms of driving imaging. Is there any way of quantifying how much of a benefit that's been in the numbers in Q1 so we can think about that going forward? And then just your overall message on China, excluding Diagnostics, what are you seeing? Because it looks to me like the market was probably down in the second half and some of your peers are finding it a little more difficult than you are. So just a good sense of what you're seeing on the Imaging and Varian portfolios in particular. Bernhard Montag: Maybe, Graham, I start with the forbidden second question, yes. because Marc asked for one question, but that's why it's not a forbidden question. So I mean, on China, we -- ex Diagnostics, we are -- we feel comfortable with what we projected when entering the year of more or less flat development. We are happy with the market share development, which is maybe also a bit of the difference to what you heard from others. But we also don't see a reason to change to a more positive outlook. So the kind of prudent assumption of a flat volume development in China is in the synergetic core is what we stick to, and we basically also see confirmed so far. Jochen Schmitz: To your first question, Graham, Imaging grew 5.7%. What we highlight, that's the logic we have, grows faster than 5.7%. That is why we highlight things, what is overproportionately growing. And obviously, the Photon Counting CT with us being, I would say, clearly ahead of the camp having a portfolio of offerings is giving a nice tailwind to the growth trajectory in CT. And we are very happy with what we see. On PETNET, we had a very strong quarter. As you know, this is solely in Q1, solely driven by the United States because we have not baked in the comparable revenue numbers in Q1 yet for Europe because that is coming only starting 12 months after closing. And you also can see then -- you saw also the strong Americas numbers. They are partially also driven by the nice, I would say, growth in the procedure-based businesses, which goes even beyond PETNET, which is also the nice growth rate we see in ultrasound-based catheters and even in our smallest portion or portfolio item in procedure-based business, which is Interventional Oncology. So we are very happy with what we see here. And the growth rates in PETNET are clearly double digit. Marc Koebernick: So moving on to the next caller in the queue, that will be Hassan from Barclays. Hassan Al-Wakeel: Another on margins, but on the core business, given the strong start despite the 100 basis points one-off. Can you elaborate on the Varian one-off and how you're thinking about the building blocks for margins for the rest of the year in the core given tariff headwinds and whether your divisional margin outlook for Precision Therapy and Imaging that you outlined in the CMD of minor margin declines remain? Jochen Schmitz: Hassan, I might repeat more or less with the different -- with the opposite prefix my statement to Diagnostics beforehand. I think obviously, a good start, a very good start is helping everything we wanted to achieve in Imaging and Precision Therapy on top and bottom line. And as the start in Diagnostics was exactly the opposite, I think we will need to think that through and see what the next quarter exactly will bring. And then we might need to update the assumptions, which are -- which forming the basis for the outlook. After Q1, for us, the main message is that we see us very, very strong in our core that we see an unfortunate, but from our standpoint, temporary and ring-fenced issue for diagnostic in China and that the combination of both will, first of all, allow us to confirm our company outlook at this point in time. And it also gives us, I would say, a lot of optimism looking even into the midterm and our midterm ambition. Marc Koebernick: Moving on to next one in the line that would be Julien Ouaddour from Bank of America. Julien Ouaddour: So my question is on Imaging margin. So adjusted for the effect of the tariff plus the special items, I think the margin would have been up 120 bps in Q1, which is basically well above your midterm target you just issued some months ago. I'm just wondering if the main drivers are -- I mean, the one that you're basically exiting today, the Photon Counting CT and the PETNETs, given, I mean, fast growth on one side and the accretive profile for the margin on the -- on the other side? And how should we think about the coming quarters given these trends are just very likely to continue? And because you say Diagnostics is maybe a little bit softer on margin versus initial expectations, would you say Imaging and PT could offset it? And I mean that's why you're keeping the guidance unchanged. Jochen Schmitz: I'll start with the second one. I think you are totally right. So when you have 80% of your portfolio performing better and 20% revenue-wise, weaker, I think that's more or less, and you are early in the year with the first quarter, then you can -- that's, I would say, the main rationale behind us confirming our outlook. So that is clear. When -- I'm sure we talk since 8 years about imaging margins and that they also sometimes fluctuate a bit quarter-by-quarter on always very high level, industry-leading in every regard. And this quarter was a decent mix quarter, but the margin was 21.6% will be not the highest for the year. That's not what it is. But it will be -- it was a good start. We are very happy with what we've seen. But I think it would also be not prudent to assume that we now will, every quarter, improve margins by underlying by 120 basis points. That's not what it is. Is Photon Counting CT per se helping on the margin expansion? Yes, it is. PETNET is not necessarily a huge margin tailwind because here you know we don't own the IP. We manufacture and distribute this. We have a completely different P&L profile in that business, significantly lower gross margin, but also a very, very significantly lower OpEx portion in there so that the margins are more or less in PETNET, slightly better than the average, but not much. Marc Koebernick: Moving on in the queue to David Adlington from JPMorgan. David Adlington: Just maybe on Varian. Given the fact you confirmed you're launching a new product in September, I just wondered if you're expecting a bit of an air pocket on U.S. orders between now and then as customers wait on the new system. Bernhard Montag: I mean the short answer is no. And we will also see to some extent, but I want to be a bit careful to not disclose too much when it comes to the new product or new technology because in a way, it's also a question, is it a product? Or is it a new -- a complete new philosophy of treatment? So it's -- and Varian has a very strong track record when it comes to taking care of existing customers of installed base. So it is a topic which we don't really see and where we also know how to -- where the team knows quite well how to handle this. So -- and in the end, I mean, a topic where you also don't need to be, let's say, too concerned is that typically the time between orders and revenue on the Varian side is pretty long, so that the current revenue line is pretty much secured with the orders we have in-house, and then we can still have a discussion with customers who have issued orders once the new technology is announced, whether they want to stick with the original scope of their order or whether they want to convert, which potentially also comes with a price. Jochen Schmitz: And David, as one data point, book-to-bill in Q1 in Varian equipment book-to-bill, which is exactly referring to what you're asking for was very healthy again. Marc Koebernick: Next one in the queue would be Julien Dormois from Jefferies. Julien Dormois: Hope you can hear me okay. My question is related to Diagnostics. Obviously, a new round of challenges coming now this time from China. Could we just get a sense of what is your commitment to the business for the mid- to long run, given this new round of challenges and obviously, difficult financials once again coming from the division? Bernhard Montag: Yes. Julien, I mean, I want to qualify a little bit the new round of challenges. I mean we knew that China is -- or the transition in China is a topic for our Diagnostics business as much as it is a topic for all competitors and peers in the market. It's a process, which lasts a couple of quarters. And that is not changing, let's say, materially how we look at diagnostics and how we look at Diagnostics, I think we have also indicated at the Capital Market Day, we have, as part of the transformation program, verticalized the business, meaning it steers its own sales and service as a vertical entity. We have been also very clear that there is a synergetic core of Siemens Healthineers around the strategic triangle comprising the 2 businesses, Imaging and Precision therapy and that we want to give Diagnostics even more freedom after that successful transformation with now 70% Atellica revenue in the core lab, 20% growth rate to further verticalize its structure to then also create optionalities. And we will take it from there. It is very clear. This is a business within -- this is a business with its own logic. And we want to run it as independently as possible. And there is, of course, optionality in the long run, whether we are the better owner or not. And when I say the synergies are limited, I'm kind of indicating how we are thinking. Marc Koebernick: Moving on to Hugo from Exane. Hugo Solvet: Just a quick follow-up on a previous question, but focused on China operation. You made comments that you would be looking at streamlining the China businesses. Does it mean that you will be just keen to make that more efficient across all businesses or reassessing whether operating the 3 businesses in China still makes sense? And I guess how far would you be willing to go? And if you can give us a sense of the value of the Chinese assets on the balance sheet? Bernhard Montag: So first of all, there was no comment regarding China at all and our commitment to -- yes. Okay. So I mean the only topic, which maybe Jochen was commenting on, I mean, since in Diagnostics, the Chinese -- let's say, the volume in the Chinese market is going to a significantly lower level, we are also adjusting our go-to-market structure. And on the other hand, I mean, there is also an opportunity for efficiency because the more volume-based procurement, the less, let's say, retail "go-to-market" you need. Otherwise, we are happy with 8,000 employees in China. We have about 1,000 R&D employees in China, about 10% of our workforce generating about, I don't know, 12%, 11%, 12% of revenues. We are confident and we see it also we had that in our assumption for the midterm targets that China will slowly return to growth. We baked in an assumption of 5% growth into the midterm targets, which is the midterm as defined as the period of '27 to 2030. And I hope that answers the question. Jochen Schmitz: And maybe just because of your second part of the question, assets and so on and so on. I think we need to differentiate between 2 things. And my comment was more related to what Bernd answered. It was the China market, and we need -- obviously, we do this in every market. If market dynamics do change, we adjust the way and the resources we put or we assign to those markets or employ to those markets. China is also a significant value add location for us. And this is also -- we do not plan here any changes. And therefore, this is only related to the go-to-market in Diagnostics. Marc Koebernick: Moving on to the next caller. That will be Natalia from RBC. Natalia Webster: It's a follow-up on the Precision Therapy side. You talked to the strong Varian performance and the weaker Advanced Therapies as expected. Are you able to talk a bit more around the drivers of the strong underlying Varian margin improvement there in Q1 and sort of what the positive business mix is that you referred to? And then just to touch on the Advanced Therapy side, if you're able to talk around any sort of initial feedback you're getting ahead of the new Advanced Therapy portfolio launch. Jochen Schmitz: I'll start with Varian. When we had -- people tend to forget quickly. We had also not a super strong Q4 from a top line perspective, you might recall. It was only between 1% and 2%. We have now a very strong 9% growth in Varian as discussed back then and also kind of promised because we knew what is coming. Secondly, we had -- we referred to a good mix. Good mix comes in different forms and fashions. Depends often where you can recognize revenue in which countries because price levels do vary. It comes with different products do have different margins. I would say also the -- in particular, in Varian, how much, so to say, aftersales business, if you want to use that term, you have, how much of upgrades you can bring into the field, HyperSight, RapidArc Dynamic, other pieces, which have different margin profiles. The relative strength in the quarter of service growth can play a role relative to equipment growth because in Varian, the margin delta between equipment and service is more pronounced than it is in Imaging. And these are factors which all went in this quarter into a positive direction and helped us to show in the second quarter in a row, a very nice margin north of 19%. But we need to be careful that we don't expect this to happen all the time because as we also highlighted, there was a positive one-timer in that. We quantified that with 100 basis points. Varian is about 60% of the segment. Therefore, it was -- the 100 basis points were Varian related. Therefore, it's for Varian in itself, even higher than 100 basis points. Bernhard Montag: Yes. And regarding the AT portfolio, I'm very, very positive and about the feedback we get from customers. Basically 2 topics which really stand out. I mean, on the one hand, there is a lot of positive feedback for the depth of optimizing clinical workflows of really understanding how physicians work, how seamless the systems are optimized for whether it is stroke or whether it is spine surgery. The one topic which even stands out more is this so-called OPTIQ AI, which is the AI-based denoising of the images, which allows to produce unseen image quality at much lower dose. So you can either use it to get the same type of image quality at much lower dose, which in this case, in AT means lower dose to the patient, but also lower dose for the operator or much more detail. And maybe as a remark in general because we often discuss what is -- how do we monetize AI. So what this points toward is also what we see in MR, for example, that this combination of bringing AI to improve system performance like we do with Deep Resolve and our MAGNETOM Free and technology is what we also now have transferred to AT, and it is differentiating the products and really making a big difference. Marc Koebernick: So moving on to basically the last caller for today. We need to cut it short, as I already indicated earlier on. It's Falko from Deutsche Bank. So, Falko, please go ahead. Falko Friedrichs: Another European medtech company told us -- told the market yesterday that they expect an update on the Section 232 list for medtech products over the next 1 to 2 months. Is that something that you have also heard? Is there anything you could share with us in that regard? Bernhard Montag: Short answer, no, we don't have any, let's say, tangible news in this regard. Jochen Schmitz: I would also be -- I think this is I would say, difficult territory per se to make predictions about those things. And therefore, I think we should be cautious and we should live with and then manage the outcomes we see. That does not mean that we are not supporting our position. And the position is unchanged in the entire industry that trade barriers are ultimately to the detriment of patient and the health care system that if we are here maybe reluctant to predict anything, it's not that we don't work on the right things in the background. But I think it is prudent to not predict what the outcomes might be. Sorry for this. Marc Koebernick: Good. Thanks, Falko. So that brings us to the end of our call. Thanks for the good questions. Thanks for tuning in again. We'll be on virtual roadshow in the next few days and especially Monday, Tuesday, Wednesday. And of course, we have several conferences coming up in London, Miami. And if we don't meet each other or hear each other in between, we'll at latest hear from each other with our Q2 reporting in May. So bye-bye. Operator: That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. A recording of this conference call will be available on the Investor Relations section of the Siemens Healthineers website.
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.
Jann-Boje Meinecke: Good morning, and welcome to our Q4 results presentation. As usual, Christian, our CEO; and PC, our CFO, will walk us through the performance and key developments in the quarter. This time, we will also spend a bit of time on AI to share our perspective, and we know it's a topic which many of you are interested in. Afterwards, we will, as usual, have a Q&A session with financial analysts, which you can join by Microsoft Teams. So please go to the website and find the link. Let me then just show the disclaimer slide to go through. And then Christian, the floor is yours. Christian Halvorsen: Thank you very much, Jann-Boje. And good morning, everyone. Very happy to be here to present our Q4 results today. But I -- just quickly, I wanted to take a moment first to reflect on our 2025 results as a whole. Because 2025 was a defining year for Vend, it was a year where we delivered on key strategic priorities and where we made good progress towards our financial targets and a year where we fundamentally reshaped this company. Vend now is a much simplified marketplace company with a leaner cost base and with a sharp focus on our 4 Nordic verticals. And I'll come back to this in just a little bit. . The results that we present for the fourth quarter today are strong. They demonstrate the resilience of our business, and they come as a result of targeted efforts in line with our strategy. Group revenues remained rather stable at NOK 1,510 million, this reflects, on one hand, anticipated headwinds, both in advertising and soft volumes in Jobs. But at the same time, disciplined focus on monetization and ARPA was very strong with the 15% to 20% growth in several of our key segments. The growth in Classifieds revenues, combined then with the disciplined cost management, delivered exceptional results in terms of profitability, and group EBITDA rose with 53% year-on-year and ended up at NOK 491 million. This represents a margin expansion of 12 percentage points to 32%. Let me also mention that the EBITDA for the full year increased 30% compared to 2024. And I think this is a good opportunity to thank my team and all our fantastic employees for their efforts to make this achievement possible. Now in the last quarter of the year, we also continued our simplification agenda. We sold our skilled marketplace portfolio, also several of our venture investments, and we removed the dual class share structure, and that means that we are now operating with this one share one vote system. We also reached a major technical milestone in November with the migration of Blocket to our common Aurora platform. I'll also mention this a little bit more in detail in a few minutes. Finally, reflecting our solid financial position and confidence in our trajectory, we launched a new NOK 2 billion share buyback program in Q4 and last evening, the Board also resolved to propose increasing the ordinary dividend for 2025 to NOK 2.5 per share compared to NOK 2.25 last year. In November 2024, we presented our strategic agenda at the Capital Markets Day in Barcelona. And today, I'd like to give a summary of our progress on this plan since then. And I already touched upon some of the simplification measures that we have done with our organization. Now first of all, our cost level is significantly reduced. If we look at our OpEx to sales ratio excluding COGS, that has improved by 8 percentage points from 65% to 57% compared to the baseline we presented at the CMD. We have now also found homes -- new homes for most of our noncore assets. And I also want to say that the sales progress for delivery is progressing well. We've simplified the company structure materially. The separation from Schibsted Media has been completed. And as mentioned, we no longer have this dual-class share structure. As mentioned at CMD, verticalization is really the essence of our growth strategy. We have successfully executed on a number of, let's say, vertical-specific product and pricing initiatives that has resulted in a strong ARPA growth. And we have rolled out our transactional Recommerce model to all our markets. And the transition to one common platform is also on track with the Blocket transition in November. On the expansion part, we continue to scale our transactional models in mobility and real estate. And we have seen strong growth in both Nettbil, AutoVex and Qasa through last year. In Finland, we reached the #1 position in real estate. And our focus now is to translate that leadership into a sustainable category leadership with stronger monetization. And last, but certainly not least, we have also forcefully executed on our capital allocation agenda, and we have returned close to NOK 8 billion to shareholders in 2025 alone, and our share buyback program is continuing into '26 as well. So now I'd like to just tell a few more comments to the platform transition. This is the slide we showed at CMD and moving all our marketplaces, except Oikotie to a common Aurora platform is something we see has several benefits. It unlocks cost efficiencies. It supports our long-term monetization agenda because it means that we can roll out pricing and product innovations and structures simultaneously and uniformly across all our markets. I would also say that it's a key to scaling our AI initiatives. It means that we can develop things once and then rapidly roll out those with few or no adaptations in all markets. And I said, this is the chart that we showed at the CMD. It shows that we still have some things to do. But all our main brands, except FINN in Norway and Bilbasen in Denmark are now on the common platform. And I also want here to remind everyone that Aurora, the common platform, is built on the FINN technology, and the FINN business logic. And that means that the upcoming FINN transition is of a different nature. It's a more tech transition which then leads to the shutdown of the old legacy FINN platform. And that means that there are no kind of planned changes to the user interface or the product experience, which means that this is an initiative that carries low business risk. Then I'd like to spend a few minutes on Blocket in Sweden. And Blocket continues to come from a position of strength. It's a well-known and highly loved brand in Sweden with lots of engagement across categories. And I think that is a very important context for what we've seen through this platform transition. Blocket -- our Blocket users really care about the Blocket brand and product. And many of the users have long-established habits, particularly in vehicles. So on November 18, we completed the platform transition for Blocket. And as in previous transitions in Finland and Denmark, we did expect that there would be some user and dealer reactions to changes in the product and in the user journeys. But it's fair to say that the reactions we have seen have been stronger. They have been more widespread than we expected. And we are also seeing some of that in the engagement on the site afterwards. Early on, we did experience some technical issues with data and ad statistics to dealers. But I also want to mention that these issues were quickly identified, quickly resolved, but they do explain in part some of the initial reactions from the dealers. If we then look at the metrics. On the professional side, the number of professional sellers, the number of professional car ads is in line with last year. Leads are slightly down, but that is also partly due to seasonality, but on the private side, new car ads are down around 27%. We've also seen that the user satisfaction has recovered more slowly than what we experienced in Tori and in DBA when we did those transitions. But it's also important to say that conversion is better in the new product compared to the old Blocket product. And that explains why, for example, dealer leads and Recommerce transactions are much less affected than the overall traffic on the site. And I also want to say that we have seen improvements on these key metrics since the beginning of this year. Of course, improving the Blocket situation is a top priority for Vend as we enter this year. And we are working continuously to roll out product improvements. We have a particular focus on the app experience, on the search and on the ad insertion for private ads. And of course, also, we are in parallel in continuous dialogue with both users and customers. We have increased our support as one example. And from a commercial perspective, we have postponed the planned price increases to later in the first half of 2026. And our goal is to be a long-term partner with the car industry. And this initiative has been very well received by our customers. So our overall objective is quite clear when it comes to Blocket, stabilize usage, stabilize customer satisfaction and then kind of restore and build on the momentum from having a shared platform. Then I'd like to turn to AI. And I'll begin here by reminding you of the incredibly strong positions that we have across the Nordics. The brands that we operate are 2 household brands. They're known and used by almost everyone in our markets. FINN, of course, is in a complete league of its own with 99% unaided awareness and close to 30 visits per capita every single month. And I really think this matters in an AI context because it means that our brands are really destinations in their own right. They're not dependent on traffic from other sources, whether that is from Google, social media or other sources, users come directly to our sites. And importantly also, traffic from AI platforms today is negligible, even when users use AI tools, they still go directly to our sites to act on that. And that direct relationship with users is really visible. When you look at our engagement metrics, for example, 70% to 80% of our users are logged in, half of them are even identified with electronic IDs. So we know exactly who they are. More than half of our traffic comes through our apps, which is really the channel that is the most engaging. And this combination of trusted brands, direct traffic, deep user relationships is something that is extremely difficult to replicate, and what we believe is an incredibly strong starting point in this new AI world. And it is really against this backdrop that we are, as we've said many times before, very excited about the opportunities that come from AI to improve the user and customer experiences. And we truly believe that we have the right assets to build winning AI products in the features. And in particular, I would say that we see 3 structural advantages that we have. First, it's about the unique data that we have. This is our most important strategic assets. And we truly believe that the most powerful AI products come from combining, let's say, general-purpose models with deep structured and domain-specific data. And this is exactly what we have in our company. Of course, we will take active measures to protect this data. And the approach we will take will vary somewhat across verticals and brands depending on the strength of those. And it's also something that we will experiment with and adapt as we see the landscape evolves over time. Now the second structural advantage is the vertical focus. Our marketplaces really support quite complex, high stakes and long-running user journeys. And -- this is really something that makes them particularly well suited for tailored AI solutions. And we will work, in particular with securing ad supply, improving discovery and matching and supporting better decisions for users and customers. And thirdly, we benefit from scale. Common Nordic platform allows us to build once and roll out to all our markets. And already 18 months ago, we built up our department of AI that ensures that we have specialist competence across the organization. And then finally, I just want to mention again that we don't foresee any AI investments beyond the financial guidance that we have given. So turning to data. And as mentioned, this is what we believe is a decisive differentiator when it comes to building the winning AI products. Of course, the actual data varies somewhat from vertical to vertical, but it broadly falls into these 4 categories. First, it's real-time ad data, and unlike e-commerce, as an example, all our objects are unique, and they are constantly changing. That means that the global AI platforms, if they're going to -- if they want this data, they either have to rely on crawled snapshots, which are quite quickly outdated or they have to rely on, let's say, on-demand lookups, which are slow. And both these approaches lead to a weaker user experience than what we can provide natively on our sites. Secondly, we have aggregated and enriched data, which should build from both the ads and also the user behavior. These can be things like price insights, demand trends, popularity signals things and models that are proprietary to us and also quite difficult for these other parties to replicate. And thirdly, we have a deep personal and behavioral data, of course, AI platforms will also know a lot about you as a person, but we truly believe that we have the most detailed insight into the intent that people have in our verticals. And then fourth, we have transactional data. This is an area that is growing quite rapidly for us. Data from Fiks Ferdig, in Recommerce from Smidig Bilhandel, in Mobility Nettbil and so on. This really reflects actual transactions between people, including what you have bought at what price and so on. And altogether, this data is quite unique, I would say. It's something that we continuously develop and evolve, because this is what we believe will allow us to build the most personalized, the most accurate products for our users and customers. As I mentioned, we established the central department of AI more than 18 months ago. And since then, we have developed, rolled out and tested a range of different AI features across the company, as you can see on this page. But I would also like to say that it is still early days. There isn't any established best practice out there yet. And our goal and priority is to experiment, to learn and then to scale what we see working. And we will, in particular, focus our efforts on a few areas. It's about securing and improving the quality of ads. It's about improving discovery and matching and it's about providing users and customers with the best decision support. And I thought it would be useful actually to show Jobs as an example because this is the vertical where we so far have launched the most AI features, and where we have also seen quite solid improvements in key metrics. And what we really see in Jobs is that the user and customer needs, they actually differ by stage of their journey, and as you can see also on this page, in the consideration phase, for example, when you're early, candidates explore more, let's say, the range of options that they have based on preferences they might have with regards to how they want to have their life or how they think about their career and so on. Then when you come into the more active search phase, the experience becomes more tailored towards more concrete job opportunities. And then finally, when the candidate has found a relevant and attractive job, we use JobMatch to analyze the fit at that individual role level, helping that candidate make a decision whether this is the right opportunity or not for them. And I really think that this -- overall, these vertically tailored products that we build on unique data will outperform more generic AI platforms in delivering the best user experience for these kind of use cases. And we are confident that we will be able to develop these tailored AI products. I think we have a history where we have shown that we are willing to innovate and we take that mindset with us also into the AI era, and we go into that shift with a quite strong position, I would say. So let's move to the more, let's say, regular part of the presentation, and let's start with Mobility. Here, ARPA growth remained strong across all markets and segments in Q4. Professional ARPA was up double digit in every market. It was particularly strong in Norway. And that was following the package launch and also in Denmark, following price adjustments that we made both in January and in August of '25. Private ARPA also showed solid momentum, most notably in Sweden. This was driven by upselling by the value-based pricing and new packages. And Denmark was softer year-on-year, and that came as a result of the reversion of to freemium for cars below NOK 50,000. If we then turn to volumes. And here, we have already shared the volumes for October and November in our presilent newsletter in December. So I think you should know the general direction. In Norway, professional volumes declined. That was mainly due to weakness in the sub verticals, both motorcycles, caravans, which is a reflection of the macro environment. Cars, however, remained stable. Private volumes in Norway was increasing quite a lot, and this was driven by the tax changes regarding electric vehicles starting in January of '26. Then in Sweden and also as we have mentioned on the previous slides, volumes were impacted by the platform transition. Professional volumes also declined, but this was due to the business model change that we have mentioned before in heavy machinery from -- where we went from a subscription to a paper ad model. Cars was broadly flat in volume. And private volumes were down broadly across our categories. Then in Denmark, the market still remains a healthy market. That means fast sell-through rates. And that in the model that we had in '25, reduces the average daily listings for professionals. And the decline in private volumes reflects the introduction of the listing fees that we have mentioned before. If we then move to the financials. Revenues in Mobility increased 11% in Q4 and supported by the strong ARPA growth, Classifieds grew 12%, and the transactional business model delivered 23% growth, and this was driven by a strong quarter in both Nettbil and in AutoVex. Finally, I would say, advertising returned to growth in Q4, where we saw 3% year-on-year growth following the declines that we have seen previously. OpEx excluding COGS increased only slightly, and this is despite the continued investments in the transactional business and in our core product and platform. And then overall, EBITDA increased 21% over Q4 last year, and this results in a 54% margin. Moving then to real estate. In Norway, ARPA increased 22% year-on-year. This was driven primarily by residential for sale, which delivered a 21% ARPA growth in Q4. And for the full year, ARPA in residential for sale was 12% growth. And in Finland, ARPA increased 12% year-on-year in Q4, and it was supported by underlying drivers that we have also discussed before, price increases, mix effects between for sale and rentals, and also continued growth in upsell. Turning to volumes. In Norway, residential for sale actually returned to growth in Q4, and that was after a decline in the quarter before. So we saw 3% year-on-year growth here. And this capped an exceptionally strong year for residential for sale, where ad volumes reached an all-time high, ending up 6% for the full year. Total volumes for Norway declined 4%, and this was driven by lower activity in the rental segment together with commercial and leisure homes. And in Finland, total volumes were down 4% year-on-year. Residential for sale actually grew, but rental volumes continued to decline further, which is a reflection of the ongoing market dynamics in Finland. So in total then, Classifieds revenues grew 15% in Q4. This was driven by the strong ARPA growth and also the high volumes in residential for sale in Norway. The transactional business led by Qasa and HomeQ in Sweden continued to develop well also. And here, transactional revenues were up 31%. And these businesses, of course, they continue still to be smaller in absolute terms, but they are actually becoming now increasingly so and a meaningful contributor to the growth in real estate. And then on costs, OpEx excluding COGS declined 4% year-on-year, and this is despite the marketing investments that we're doing in Finland, which I think reflects the solid cost control that we have in real estate. And overall then, as a result, EBITDA reached NOK 123 million in the quarter, and that is up 60% from the year before. Then we have Jobs. Here, Jobs continued to deliver exceptional ARPA growth of 21%. This was, as before, driven by our segmented price model by adjustments to volume discounts and better upsell of distribution products. Same pattern as before, also volumes continued to decline due to challenging macro, and again, I just want to say that if we compare our volumes to, let's say, the available numbers from Statistics Norway, our numbers reflect what we see in the total national market. Then in Norway, Jobs delivered 7% underlying revenue growth in Q4 and that means that the strong ARPA growth more than offset the 11% decline in volume. And OpEx, excluding COGS, decreased 22%, and this is primarily a reflection of the exits from Sweden and Finland as well as some FTE reductions in Norway. And in total, then EBITDA grew 33%, and this resulted in an EBITDA margin of 56%. And then finally, we have Recommerce. And here, we saw transacted gross merchandise value continue to grow. Finland, in particular, delivered solid GMV growth in Q4. Well, as mentioned before, Blocket's GMV declined and this was a reflection of the temporary impact of the platform transition. In Norway, we also saw transactional volume growth. That improved to 15% year-on-year, and take rates remained solid across all markets, which is a reflection of the scalability of the model that we have in Recommerce. And in total, Recommerce revenues then increased 4%. That means that the strong transactional growth and the private growth offset a 19% decline in advertising as well as the continued phaseout of low-margin and noncore revenue streams. Transactional revenues grew by 23% and we also had a continued improvement in the transactional gross margin. This was supported by both lower COGS as well as pricing initiatives. And here, it's worthwhile to remind everyone that in Q4 last year, we had a one-off of NOK 10 million in a VAT accrual that reduced the reported transactional revenues. That means that the underlying year-on-year growth in transactional revenues and in the total revenues for Recommerce then will be somewhat lower than what you see reported here. And OpEx, excluding COGS declined 6% year-on-year, driven by both FTE reductions and increased AI automation. And EBITDA then improved to minus NOK 44 million, which is an equivalent to 16 percentage points margin improvement. And with that, I will conclude my section and hand it over to PC to go through the financials in some more detail. Per Morland: Thank you, Christian. Good morning, and welcome, everyone. Let's move to the financials for Q4. In total, revenues on a constant currency basis ended 1% below Q4 last year. This is driven by decline in the Other/HQ segment, offset by solid underlying revenue growth in Mobility, Real Estate, Jobs and Recommerce. Total EBITDA ended at NOK 491 million, 53% up compared to last year, driven by positive developments in all verticals. Christian has already covered the vertical performance, but let me give you some additional insights for the Other/HQ segment. The year-on-year decrease in revenues in Other/HQ was, as earlier quarters, driven by a change in allocation model, combined with revenue decline following the termination of the TSA revenues linked to the split with Schibsted Media. At the end of 2025, TSA with Schibsted Media were fully terminated. Other/HQ had an EBITDA of minus NOK 76 million in the quarter compared to a loss of minus NOK 71 million in the same quarter last year. We have accelerated our cost reductions and delivered ahead of our original plan, but we're not fully able to offset the declining revenues in the quarter. Now let's look closer at the cost development in the quarter. As before, this slide shows OpEx, excluding COGS. During the second half of 2025, we have been able to accelerate the cost takeout ahead of our original plan. This is a combination of earlier termination of the TSA agreements with Schibsted Media, but also a somewhat higher-than-planned cost takeout across our organization. In total, OpEx, excluding COGS, in the quarter declined by 17% compared to last year. Personnel costs were down 11% year-on-year, driven by significant FTE reductions, mainly from the downsizing process that was executed in 2024, combined with closing our jobs positions in Finland and in Sweden, but also ongoing FTE management throughout the year. Total workforce continues to decline, slightly down and now stand at 1,669 FTEs. Total marketing costs were down 15% year-on-year, driven by the job exits, partly offset by higher marketing costs in Real Estate and Recommerce. Other cost has decreased 26%, driven by general cost reductions in addition to the mentioned termination of the TSAs with Schibsted Media. Overall, this resulted in more than a 10 percentage point improvement in OpEx, excluding COGS over revenue from 67% in Q4 last year to 57% in Q4 2025. Our operating profit for the quarter increased to NOK 234 million from a loss of almost NOK 1.4 billion last year that was impacted by the impairment in Finland. Adjusted for impairments recognized in 2024, the positive development in operating profit reflects the improved EBITDA, but also somewhat lower depreciation and amortization costs and lower net other expenses. The reduction in other expenses is mainly due to lower costs related to restructuring and separation. The fair value of our 14% stake in Adevinta has decreased from NOK 18.9 billion in Q3 to NOK 16.1 billion now at the end of Q4. Based on the updated valuation, a loss of NOK 2.8 billion was recognized as financial expense in the quarter. The decrease is due to multiple contractions in the industry, partly offset by improved performance in Adevinta. Our valuation methodology is kept totally unchanged. In totality, net loss for the group ended at minus NOK 2.5 billion. Now let's move to the cash flow from continuing operations in Q4. Cash flow from operating activities ended at NOK 555 million compared to NOK 245 million in the previous year. The increase is driven by the improved EBITDA, but also positively impacted by lower restructuring payments, positive development in working capital, lower taxes paid, partly offset by some increased net interest expenses. Cash flow from investing activities ended at positive NOK 68 million, mainly related to the proceeds from sales activities linked to our venture portfolio, offset by CapEx of NOK 137 million in the quarter. And finally, cash flow from financing activities ended at minus NOK 1.2 billion, which includes repayment of interest-bearing bonds of NOK 681 million in the quarter and the share buybacks of NOK 448 million. With our solid operational cash flow and significant divestments during 2025, we have, in accordance with our principles for capital allocation, returned a material amount to our shareholders throughout the year. We have paid out cash dividends of more than NOK 1 billion. Additionally, we have bought back own shares amounting to almost NOK 7 billion throughout ordinary share buyback programs, but also the reverse book bill that we executed in June. Despite these significant distributions, we ended the year with a net cash position of NOK 210 million. During 2025, we have repurchased Vend bonds for NOK 753 million, of which NOK 681 million in the quarter. As of 30th of January 2025, we have around NOK 1.1 billion remaining of our ongoing NOK 2 billion share buyback program. The Board has decided to propose an ordinary dividend for 2025 of NOK 2.50 or around NOK 537 million to be resolved at the upcoming Annual General Meeting in April. This is fully in line with our policy of paying a progressive dividend and a slight increase from the levels of NOK 2.25 in '24 and NOK 2.0 in 2023. The scope rating of BBB+ with a stable outlook confirms Vend as a solid investment-grade company. Now let's take a step back and look at our medium-term targets and how we are performing. Despite 2025 being a transition year, we have made solid progress towards the medium-term targets. At the CMD in November 2024, we highlighted ARPA improvements and transactional revenues as our key growth drivers. In 2025, ARPA has improved significantly across mobility, real estate and jobs. Transactional revenues within Recommerce, Real Estate, Rental and Mobility has increased more than 20%. In 2025, the strong underlying growth was partly offset by decisions to close down revenue streams, the separation from Schibsted Media and some volume headwinds. The announced and partly implemented product, packaging, go-to-market initiatives for 2026 across all our verticals are expected to support revenue growth in line with our medium-term targets. Despite somewhat muted revenue growth, the vertical EBITDA margin has improved significantly throughout the year. Mobility, Real Estate and Jobs already have EBITDA margins around the medium-term target levels and Recommerce shows significant progress towards becoming -- having positive margins in the medium term. Looking at our cost development, we are pleased to report strong progress against our targets. OpEx, excluding COGS over revenues, ended at 57% in '25 compared to 65% at the time of the CMD. CapEx ended at 8% compared to 9% at the same time period. The improvements in these ratios have been delivered on broadly flat revenues, showing a significant cost reduction. Going forward, revenue growth is expected to be the main driver for further ratio improvements towards the targeted levels. Wrapping up, I'd like to reiterate that our strategy, our medium-term targets and our capital allocation principles that we presented at the Capital Markets Day remain unchanged. As we enter 2026, we have a sustained ARPA momentum across our verticals, reflecting our go-to-market initiatives. And as I mentioned, we expect these actions to support revenue growth in the verticals in line with our medium-term targets. Visibility on volume remain limited. At the same time, the underlying health and resilience in our marketplaces is strong. In Other/HQ, we expect revenues to be reduced by around NOK 300 million compared to 2025, primarily reflected the termination of the TSAs, but also effects related to the ongoing divestments of our noncore assets. On cost, following the accelerated delivery of cost reduction in 2025, we expect our absolute cost base, excluding COGS, to remain broadly stable in 2026 compared to 2025. Overall, we remain committed and confident in our ability to deliver on the medium-term financial targets, supported by our growth initiatives, a simpler portfolio, continued platform consolidation and a sustained cost discipline. And with that, thank you for joining, and let me hand over to Jann-Boje to take us through the Q&A. Jann-Boje Meinecke: Thanks, PC. I can see. Many of you are reconnected here on Teams. And first up is Hakon from Kepler Cheuvreux. Hakon Nelson: Two questions from me today. With the Blocket migration now completed and stabilization phase underway, when do you expect Aurora to start contributing more clearly to revenue or cost efficiency? And also on the Adevinta valuation, it was revised down due to peer multiple compression. Should we interpret this as a purely market driven? Or have there been any changes in underlying assumption we should be aware of in the period? Christian Halvorsen: es. So I can take the Blocket question first. So yes, the migration of our sites to a common platform is a key pillar of our strategy, contributing both to cost efficiency and to revenue growth, as you say. And I would say that now that we have most of our major sites on this, it is already a driver to, let's say, increased innovation capacity and so on. So -- but we have also before said that most of the cost efficiency of it will come in '27. Per Morland: And then on your second question, as I mentioned in my section, the modeling and the valuation model is the same. It's entirely due to market factors. It's actually offset a bit by improved underlying assumptions related to Adevinta. Jann-Boje Meinecke: Thanks, Hakon. Then next in line, we have Will Packer from BNP. William Packer: Three from me, please. Firstly, could we talk about your plans on ChatGPT integration? We've seen the likes of Scout and Hemnet sort of submit apps for the forthcoming app launch in Europe. I suppose your position is potentially a little bit different because of the huge traffic from FINN generalist. So any kind of insight as to how you're thinking about that strategic question would be useful. Obviously, the context that traffic is very low currently is very clear. Secondly, in the context of all the noise around AI, I think it's fair to say that the Jobs segment is in particular focus. And could we just talk a little bit about the sustained weak inventory trends? So if I look at the Norwegian economy, we've seen 3 years of solid GDP growth, especially in '24 and '25. We've seen low unemployment, and yet we've seen a double-digit CAGR and decline in FINN Jobs inventory. Is that just because genuinely, there has been a 10% per annum reduction in available new jobs? To me, that sounds surprising. Is there some underlying market share loss or alternatives? Just some kind of commentary there would be helpful. And then on a related note, it feels like AI is not necessarily having a productivity positive impact within the job segment. You've got talk about AI slop tsunami, AI applications, AI job screening is not making the market more efficient. How do you see that as an opportunity for FINN Jobs? How can you exploit that? Just a little bit of color there would be helpful. Christian Halvorsen: Yes. First, on the ChatGPT question. I think we have extremely strong confidence in the strength of our positions. And based on that, we don't see it as the -- let's say, that it's necessary to be the first mover on having an app in ChatGPT. But we are -- so that means we don't have any current plans of launching ChatGPT app. That doesn't mean that we're not evaluating it. We are evaluating various options for, let's say, controlled data distribution through these AI platforms, and that includes apps as one option also. So let's see where we end. We are following the evolution and yes, we will come back to that later. Then on Jobs, first on the volume part, it's important to remember that there was a huge boom with COVID. And it has actually been a negative trajectory since then. And we are now back to volumes that are more, let's say, in line with the volumes that were before the COVID boom. If we follow our volumes compared to, let's say, the national statistics, they are very much in line. So there are no indications that we are losing market share as such. And in fact, if you look at many of the parameters that we have, let's say, in unaided awareness and things like that, we are actually coming out stronger in the Jobs area than we did before. Then on a more broad question around how will, let's say, the overall job market evolve with AI and so on? And what kind of opportunities does that mean for us? Well, it's hard to kind of say in general how the job market will evolve. But I actually see many opportunities for us to leverage AI to make the entire job market more effective. It provides a lot of new tools to be better and more targeted at matching consumers and recruiters in a very good way. I think the tools that we showed were indicative of that. And we actually get a lot more insight into candidate preferences as an example. Jann-Boje Meinecke: Thanks, Christian. And then next in line, we have Giles from Jefferies. Giles Thorne: So it was a question back on the AI and thank you for the comments on the content today. It'd be useful to hear -- I guess it's a different way of asking the same question around Jobs, but it would be interesting to hear you talk about how you see the risk and the opportunity, I suppose, for each of your 4 verticals, which vertical are you most worried about, which are you most excited about? And the second question then is on Tradera launching in Mobility. And if we look over to Spain, obviously, Wallapop has been very successful disrupting, using Recommerce as a platform to disrupt [ coaches ] in Mobility. So I'd like to hear why it will be different for you in Sweden, especially given the recent [ botched ] migration. And then lastly, and I think it's probably a short answer and we will instinctively know, but the shuttering of Wheelaway, it feels a little bit odd because you had the playbook from AutoVex, you got the dominant position in mobility. It was the asset-light model. It just feels odd that you would choose to shutter this one at all. So a bit more on your decision there. Christian Halvorsen: Yes. Those were quite big and broad questions. But on the first one, on the, let's say, the strength of the different verticals in the AI era. I'm not going to say that one is stronger than the other. I think they all have their different strengths. In general, I would say that they all support, as I also mentioned in my introduction, quite complex and, let's say, high-risk transactions for users that also take a long time. And as such, they are very suitable for quite specific AI solutions as we mentioned. I also want to say that, for example, in many of our verticals like in Mobility and in Recommerce, we have a strong element of consumer content, private content, which is also strengthening the position in the AI, let's say, era because that is kind of harder for these platforms to get hold of. So yes, so I think they all have their strengths. Then Tradera. Yes, we have heard that Tradera is launching a car site. We haven't seen it yet. So I think it's too early to say anything about that, but we are confident in the strength of the Blocket position. It is still a very, very strong brand and has a very strong traffic situation as well. So we are confident in that. Jann-Boje Meinecke: And then Wheelaway. Christian Halvorsen: And Wheelaway was the last question. And yes, we shut down Wheelaway after attempting to approach the Swedish market with the C2B model. We had to conclude that the competition in the Swedish market was a lot tougher than we expected. And that also many of the car dealers have a quite, let's say, mature approach themselves to how they source private cars, which made it harder to kind of enter with that kind of model in the Swedish market. Jann-Boje Meinecke: Thanks for good questions, Giles. And then we have Markus from SEB. Markus Bjerke: So 2 questions from me as well. So digging a bit more on the OpEx side here into 2026 and your comments on flat costs. If I look at the Q4 level and try to adjust for seasonality and even some inflation, considering you don't have these TSA costs, et cetera, why shouldn't cost be substantially down in 2026 given the level that you are exiting 2025? What are the offsetting factors? That's the first one. And then if you can also elaborate a bit more in Jobs would be helpful on the ARPA growth there. It's very high. You mentioned some changes to the discount model and some upselling, but is there any mix here? Or how should we think about the ARPA into 2026 in jobs? Per Morland: So I'll start on the cost side. Yes. So you are correct. We are now guiding on a broadly stable OpEx, excluding COGS base in '26 compared to 2025. And I think, as you also mentioned, you need to remember there are seasonality if you look at the sequential development on a quarterly basis, particularly from Q3 into Q4. But also remember that a lot of the, let's say, the positive development we've had in '25 is either connected to us serving the TSAs that is no longer there. So that will not repeat itself in '26. But also, we did a lot of measures in '24, both on downsizing and shutting down jobs that we haven't -- we don't have a similar initiative executed in 2025. So just keep those in mind. We will continue to work on our cost agenda. We will continue to implement structural cost initiatives. We will continue to push and leverage AI to become more productive. And we expect, as we have said before, that we will be fewer FTEs also going forward. And then a bit later, you will also start to see more effect coming from the platform transition. So I think that's the combination of those efficiencies will be likely offset by general cost inflation. And also, we are investing into our growth businesses that has been mentioned by Christian, as you also can see partly in the numbers in Q4. Christian Halvorsen: And on the jobs ARPA, I think we have to separate '25 and '26. '25 is very much driven by 3 factors. One is kind of a general price increase. The second is changes to the volume discount structure. And the third is better upsell of distribution products. There could be some mix effects also from quarter-to-quarter, but that is not driving the kind of the big numbers here. Those 3 are the main drivers. Then going into '26, there will be a slightly different drivers. It will be a more modest, let's say, price increase in line with the CPI adjustment. There will be some changes to the volume discounts also here. But let's say, the new distribution product, the Plus product that we have launched in the market will have a bigger, let's say, impact. And overall, you should expect a somewhat more modest ARPA growth in '26 than what we have seen in '25, but in line with our guidance. Jann-Boje Meinecke: Thanks, Markus. Then next, we have Silvia from Deutsche Bank. Silvia Cuneo: I would also like to ask 3 questions. The first is on the Blocket platform transition. Could you provide more specific insights into the current volume trends since the start of 2026? And what is your expected time line for accelerated growth from the announced platform? Is there any risk related to this, the price increase could be delayed further into H2? Then the second question is a follow-up on the guidance for costs that you were just discussing. So while you guided for the cost base to remain broadly stable in 2026, can you also comment on your prior message about the temporary EBITDA headwind that you expected for this year. Has anything changed on this front? And can you perhaps share more color on your expectations for HQ in 2026? And also perhaps about the COGS, just a reminder of how to think about the gross margin development as you further expand into transactions? And then finally, just on the Advertising revenue trends. The Q4 results still showed a diverse picture for advertising revenues. So I wanted to ask if you could share your updated outlook for Advertising revenue growth in 2026 in light of the current macro environment and as the TSA agreement expired. Christian Halvorsen: Yes. On Blocket first and what we see into this year, I think just a reminder first that on, let's say, the professional volumes and also professional sellers, it's kind of broadly stable, right? So it's in the private side, the private ads that we see a decline. That decline, we also see going into '26 that continues from '25. But it's also fair to say that with all the, let's say, initiatives and product improvements and so on that we have done, we also see, let's say, an improvement week-over-week since the beginning of the year. So at the current time, we don't expect any, let's say, further delays in the price increases. We have said that they will come later in the first half of this year. Then I also take the advertising thing. So we saw in Q4 that it came back to growth in Mobility for the first time, still a decline in Recommerce. Going into this year, I think the trend will continue, but it is hard to predict, as we have also said before. But for example, we could expect, let's say, going into the year that for Recommerce, it is broadly, let's say, on a stable level as what we saw in Q4. Per Morland: And then on your second question, there was multiple questions in that, but let me start. On the HQ Other segment, in Q3, we gave an update that we -- given the significant revenue reduction in '26 compared to '25, we could see a negative drag up to NOK 100 million in '26 compared to '25. Now that we have a bit more information and we have seen quite a good progress already in Q4, we have somewhat increased visibility. We still don't have perfect information because we're still exiting some of our companies. But if I'm going to give you kind of an updated assessment from my side, I gave you the revenue we expect to be around NOK 300 million lower on an annual basis. That has not materially changed. But then I think given our cost progress as of now, I think a better update now will be up to NOK 50 million drag is what you could expect for that segment in '26. Then you have a question around COGS. Remember that the main part of our COGS is related to the transactional revenues, particularly then in Recommerce. So we haven't given specific guidance and color on that, but you can see the trends in the data that we have provided for '25. And then as transactional revenues growing in Recommerce, you should also increase COGS in a similar way, right? But we have been able to improve the margins on that in '25, and we will continue to try to do that also going forward. Then you asked about second half. I'm not going to give you any more color on the phasing of the cost development throughout 2026. Jann-Boje Meinecke: Thanks, Silvia. Then back to Oslo. We have [indiscernible] from Arctic. Can you hear us? Unknown Analyst: I have 2 questions. So the first is with regards to Blocket and the delayed price increases for 2026. How should we kind of -- is this due to the pushback? And how should we look at this going for the rest of 2026? And my second is related to Adevinta. So Adevinta has quite some leverage now. And given that the value fell approximately 15% quarter-over-quarter, how should we bridge this? Because given the leverage, I would assume that the value would have dropped approximately 30%. So some more color on the performance and maybe leverage as well. Christian Halvorsen: First on Blocket. I want to say that we have worked a lot with our car dealers. Before we made the transition, we had a lot of, let's say, positive engagement and so on from the car dealers going into this and still have. Then, of course, as I also mentioned in my presentation, there have been reactions. There have been some issues that happened as we launched on the new platform. And we felt that in this situation, it is better to have a long-term view on the, let's say, the partnership that we have with the car industry and don't push ahead on this pricing agenda, but rather kind of just push it a little bit forward in time to -- and still do it, of course, but kind of make sure that we stabilize and we prioritize delivering value to our customers at this point in time. And this has been very positively received by the car dealers. So it's part of our building trust and, let's say, Net Promoter Score and so on over time with the industry. Per Morland: And then on Adevinta, I cannot give you too much details on the questions. But just to sort of be clear that our model is the same as before. As I also said in my comments that the contraction of the multiples also reflecting the leverage situation is a clear negative in the quarter compared to Q3, but that this is somewhat offset by underlying improvements in the performance of Adevinta. And that is coming from both closing on a strong 2025, but also increased visibility and confidence into the performance now as we have entered 2026. And then remember, we do evaluation now on a combination of the multiples of '25 and '26 and also looking at both EBITDA and also EBITDA minus CapEx. I cannot give you more color on the leverage situation at Adevinta other than what was communicated in Q2 last year. Jann-Boje Meinecke: Thanks, PC, and thanks for the questions. Then there's a hand from you, Giles. I don't know if it's a new or old one. It seems like it's an old hand from you, Giles. And then I don't see any further questions, and we can round up for today. So thank you very much for joining. Christian Halvorsen: Thank you.
Björn Tibell: Good morning, everyone, and welcome to the presentation of ASSA ABLOY's Q4 report for 2025. My name is Bjorn Tibell. I'm heading Investor Relations. And joining me here in the studio are ASSA ABLOY's CEO, Nico Delvaux; and our CFO, Erik Pieder. We will now, as usual, start this conference with a short summary of the report and then open up for your questions. And with that, I'd like to hand over to you, Nico. Nico Delvaux: Thanks, Bjorn, and also good morning from my side. We can report a strong end of a very good year for ASSA ABLOY. We had a good organic sales development in Q4, an organic growth of 4%. We have strong growth in Global Tech and Americas, good sales growth in EMEIA and in Entrance Systems and a sales decline in APAC, mainly again related to depressing market situation in Greater China. A good organic sales complemented with also good growth through acquisitions, net 3%. And then strong operational execution with a record EBIT margin of 16.8% in the quarter and an operating leverage of 80 basis points. Good work done on the working capital side, also giving us a strong cash flow and a cash conversion of 137% in the quarter. Also this quarter, again, the shift from mechanical to electromechanical continues, and we have seen an electromechanical organic sales growth of 8% in our regional divisions. We've been also active on the acquisition front in this quarter with seven acquisitions complete. If we look a little bit into the numbers, sales north of SEK 38 billion, 4% organic, like I mentioned, 3% net acquisition, and then unfortunately, hit in a strong way by FX, mainly weak dollar versus strong SEK. So 10% negative effect on top line. Therefore, sales top line minus 3%. And EBITA margin also at record level of 17.9%, and we see the gap between EBIT and EBITA further growing as we continue to buy quality technology companies. It's important to look also at that 17.9% EBITA margin. And the EBIT margin, like I mentioned, 16.8%, 30 bps up, and EBIT at SEK 6.5 billion. Look a little bit in the world, I would say I can say the same as I said in previous quarters. We continue to see a good momentum on the nonresidential side, on the commercial side in our three main areas, in North America, in Europe and in Oceania as well on the normal commercial side as on the institutional side. Whereas also in all three, we continue to see more weakness on the residential side. And there is two markets we have seen a pickup on residential that is in Sweden and in New Zealand. In New Zealand, we see good recovery as well on new build as on R&R. In Sweden, we see that recovery mainly on the R&R side, not on the new build side. That's the two markets that start to cut interest rates first. So we will have to wait a little bit longer for Europe on the ECB-related countries to see that recovery. And the same thing is true in the U.S. where interest rates stay around at 6%. And you know that 72% of the households in the U.S. that have a loan on their houses have an interest rate below 5%. So there is still that gap. On a positive note, we see -- that's an interesting statistic that 55% of the houses in North America are older than 40 years. So that R&R really should start to kick in on the -- hopefully in the near future. You see the numbers by region. Another important vertical for us is the logistics vertical, where we see a recovery in North America, not really a V recovery, more a U kind of recovery, slower recovery, which in a way is also easier from an operational perspective. Unfortunately, we don't see that same recovery in Europe. As a matter of fact, we believe that logistics market in Europe is even further down. So our numbers, plus 4% in North America; plus 12%, very strong Latam; and plus 3% organic growth in Europe; minus 2% in Africa; strong Australia and New Zealand, plus 8%; and then a very mixed picture in Asia, where we have seen good growth in the rest of Asia and higher double-digit negative growth in Greater China. A couple of highlights. This new product. It's a new range of garage door openers that we sell under different brands also under the Kwikset brand, and integrating this garage door opener in the home automation ecosystem from Kwikset together with our digital door locks. Very good collaboration between the Americas division and the Entrance Systems division. And also good to see that in a, you could say, a more mature market with mature products, our R&D team still found ways to really differentiate. We've announced a unique security feature. So quite excited about this new product range. A couple of project wins. Circle K in Germany, Entrance Systems won a service contract from around 2,000 industrial doors. Comcast U.S., our new recent acquisition, InVue in Global Solutions, equipped their stores with a total of 17,000 units for secure display of their electronic equipment. And then here in Stockholm, HID, public transport, access to metro bus lines, trains, interesting project. And just to clarify, this is not the wrong picture. It's just a picture with a lot of ice on our reader, and that's one of the reasons why we were chosen for this project, our capability for our equipment to work in extreme weather conditions. So I'm also quite happy with that project. So you see now that since 4 quarters, we have seen an acceleration of our organic growth, also an acceleration of our organic volume growth, and we continue to complement that organic growth with good growth through acquisitions. Our sales is up 65% over the last 5 years. And then our operating margin, well within the 16% to 17% bracket on a 12-month moving trend at 16.2%, and an EBITA margin even above that bandwidth at 17.2%. Therefore, also a good operating income, 107% up compared to 5 years ago. As mentioned, we continue to be active on the acquisition front with seven acquisitions completed in the quarter, 23 acquisitions over the full year. They represent an annualized sales of around SEK 6 billion. If we highlight two of them: Sargent and Greenleaf, an acquisition for the Americas division, a U.S. manufacturer of high security mechanical and electronic locking solutions and safe hardware, really strengthening our access portfolio for the Americas. They had a sales of SEK 430 million last year. And then International Door Products, IDP, U.S. manufacturer of standard and custom fire-rated steel door frames and doors. Also for the Americas division, complementing nicely our door offering. They had a sales of SEK 220 million last year. If we then zoom into the different divisions, starting with EMEIA. EMEIA had a very strong Q4 with an organic sales growth of 4%, with strong sales growth in the Nordics and in Central Europe, good sales growth in Middle East, India and Africa. Sales declined in U.K./Ireland and South Europe. U.K./Ireland, mainly related to delay on the commercial project because some new government legislation. And then inside Europe, mainly because of France where the residential market remains challenging. Also very good EBIT margin at 15.3%, with good operating leverage helped by FX 90 basis points accretion. It's the only division that profits from the stronger SEK. And then M&A dilutive 50 basis points. That's mainly related to transactions of acquisitions we did in EMEIA, so more you could say one-offs. Americas, another very strong quarter for the Americas with an organic sales growth of 5%. We have a strong high single-digit sales growth for the North America Non-Residential segment. Good sales growth in Latam, and then a stable sales development for the North America Residential segment. Strong EBIT margin at 17.9%, with an excellent operating leverage of 120 basis points. And then dilution, 50 basis points FX, dollar-SEK again, and M&A dilution also 50 basis points. Also here, mainly related to the acquisition-related costs that -- for the two acquisitions that I showed earlier, so some more one-offs, you could say. APAC, an organic sales decline of 2%, with a good sales growth in Pacific, Northeast Asia and a sales decline in Greater China and Southeast Asia. Greater China, Southeast Asia is really a mixed different picture. Greater China, high double-digit negative growth, and Southeast Asia, high double-digit positive growth. A good improvement of the EBIT margin at 7.6% versus 5.4% last year. Excellent operating leverage, and also here, hit by currency, 70 basis points. Then we go to Global Tech, I would say extremely good quarter for Global Tech, with an organic sales growth of 9%, with strong performance as well in HID as in Global Solutions, and then also a very strong EBIT margin at 18.9%, with good operating leverage despite a strong hit of FX, 90 basis points, and a small accretion on M&A of 20 basis points, that's mainly linked to InVue. And then last but not least, Entrance Systems, a bit lower organic sales of only 2%, where we've seen strong sales growth in Pedestrian, good sales growth in Doors & Automation, but stable sales in Industrial and Perimeter Security, and good but lower sales growth in service. And then still strong execution with an EBIT margin of 18%. And a very good operating leverage, I would say, despite only 2% organic sales of 90 bps. FX hit us with 40 basis points and M&A has been neutral. And with that, I give the word to Erik, our CFO, for some more details on the financial numbers. Erik Pieder: Thank you, Nico. And a very good morning from my side as well. I think you've heard a lot about the quarterly numbers from Nico. So if I focus a bit on the full year. On sales, we were up with 1%. If we then dissect that, 3% organic growth for the full year. We reached our target when it comes to acquired net growth of 5%, but then we were hit by the currencies for the full year 2025 with minus 7%. You see here the FX calculation that we did end of December, where we then for Q1, thought that -- I mean, when we did the calculation was minus 11%. Now end of January, we are for the first quarter in our calculation, minus 13%. And for the full year, we are at minus 8%. EBIT full year, we are up with 2%. EBITA margin for the full year, up with 10 basis points. And on EBIT, we are at the same level. Income before tax, net income and EPS, we are up with 2% for the full year. We had -- as mentioned before by Nico, we had a strong cash flow. Okay, we're a bit also there hit by the currency. So we are minus 2% in actual value. But of course, if you look on our cash conversion, it was 137% in the quarter. And for the full year, we were at 106%. Return on capital employed, minus 20 basis points year-on-year. We have now added, as we have talked a lot like on the Capital Market Day about the Operational Value Added or OVA. For me, I think it's a very good measurement because you combine the income statement with the balance sheet. So what you do is that you take your EBIT and then you deduct the interest rate on your capital employed. We also include goodwill there. And our weighted average cost of capital or our interest rate there that we use are 8%. And as you can see, we are at the same level end of 2024 as we -- we are at the same level at the end of 2025 as what we were end of 2024. If we look on the bridge, dissect first the 4% organic growth. We had a weak 3% on price, and consequentially then, you get a strong 1% that you have on volume. The flow-through, very good at almost 40% or an accretion of 80 basis points. This comes from the, let's say, the difference between price cost, which I will show you on the next slide. We had MFP savings in the quarter of roughly SEK 180 million. And then you have other operational efficiencies as well. The currencies, you've seen on the top line, minus 10%, but you also see that it has a negative impact because of the dollar versus the SEK, also on the bottom line. This quarter, it was 30 basis points. And this is something that will continue at least on the same level, I believe, in the quarters to come. But if you take acquisitions aside, we reached actually an EBIT margin in the quarter of 17%. The acquisitions are slightly dilutive. It comes mainly from acquisition -- costs of acquisitions that were closed during the quarter. If we then move to the next slide, direct material continues to sort of -- we continue there to have a tailwind versus last year. So we were 70 basis points better than a year ago. The mix impact of that is roughly 20 basis points. So if I call it the true sort of -- the true impact is 50 basis points. It's positive to see that the conversion cost is, also this quarter, better than what it was a year ago with 30 basis points. You can see for the full year, we are actually 20 basis points better than the year before. This, of course, comes with when we can have volume growth, you see it immediately that we can sort of have a positive conversion. SG&A, negative with 50 basis points, but this comes from investment in R&D as well as investments in our sales organization. Cash flow. We are now for the third year in a row, we have a cash conversion above 100%. This year, it ended at 106%. We sort of continue to do a good net working capital management. If you look between the years, you would see that CapEx, that it looks at least slightly higher this year than what it was a year ago, but that is due to that last year we had some divestments or sell -- we sold some buildings in EMEIA as well as in APAC. But all in all, I mean, a cash conversion of 137% in the quarter is strong. If you look on the gearing, continue to sort of have a positive trend here. If you compare versus last year, we are down from -- on the net debt to equity from 65% to 63%. And on net debt versus EBITDA from 2.3 to 2.2 (sic) [ 2.1 ]. So we still have a very strong financial position and we can continue with our acquisition strategy going forward. If we look on the earnings per share, as mentioned before, it's up versus last year. We will propose a dividend. The Board has proposed a dividend that, of course, needs to be approved by the AGM of SEK 6.4. And if you look on the dividend of percentage of EPS, it's over a period since 2020, it's at 43%, and the EPS growth -- yearly growth is 14%. And with that, I hand it back to Nico for some concluding remarks. Nico Delvaux: Thanks, Erik. So like we said, a very strong end of a very good 2025. We have very strong execution in, you will agree with me, challenging market conditions. So a good organic sales growth of 4%, complemented with good growth through acquisitions of 3%. A record EBITA and EBIT margin in the quarter, an EBIT margin of 16.8% with excellent operating leverage, and then also very good working capital management, giving us a strong operating cash flow and a very strong cash conversion. Like Erik mentioned, the Board then proposes a dividend of SEK 6.4 per share that we propose to, again, pay out in two equal tranches like we have done in recent years. And then last but not least, Bjorn has asked me to remind you that there is, at least for those that are interested, a sustainability seminar on March 20, where you can also find the registration link on this slide. So as a conclusion, I think 2025 was a good year. And again, what we always say is that whatever the market conditions come to us, our decentralized model, our proven strategy, we are convinced that we will also continue to deliver good results going forward, whatever market conditions come to us. And with that, I give the word back to Bjorn for Q&A. Björn Tibell: Thank you, Nico. Well, yes, that means it's time to open up for your questions. And as usual, could we ask you to limit yourself to one question and one follow-up. And when we've been through the list, then we can start over again with you can register yourself to ask a question again. So with that, operator, it means that we're ready to kick off the Q&A. Please go ahead. Operator: [Operator Instructions] The first question comes from the line of Daniela Costa from Goldman Sachs. Daniela Costa: I'll ask them one at a time. But mainly starting out in terms of sort of where we've seen some strong steel moves, especially in the U.S. We have also seen PPI of locks going up. There's FX. Can you talk a little bit about how you see the cadence of these potential headwinds or tailwinds from raw materials and FX panning out throughout the year? And also, you mentioned U.S. resi is stable, maybe also comment on that. Nico Delvaux: Perhaps if we start with market conditions, if I understood the question correctly, Daniela, so we -- like I mentioned earlier, we continue to see good momentum on the nonresidential side, especially on the institutional side. But our spec business, for instance, was again double digit up in Q4 with most, if not all, verticals showing positive growth. And again, our more important verticals, education, K-12, universities and health care, driving that growth. So on the commercial side, we remain positive, and was also translated in a high single-digit growth in Q4. The residential side, like I mentioned earlier, remains more challenging. We definitely believe that the residential market has bottomed out. And that from here on, hopefully, confidently, we will start to see some recovery. We don't believe that we will see the recovery on the short term on new builds because of the gap on the interest rate mainly. But the fact that the housing installed base, so to speak, starts to age, should lead sooner than later to some recovery on the R&R side. And if you can believe the economists that forecast the future, they at least start to see some recovery in the R&R side already this year. And then the other thing on the logistics vertical in the U.S., as we mentioned, we have seen a recovery, not a V recovery, but a slower U recovery. In a way, we are happy with the slower U recovery because that helps you also on the operational side to ramp up in a more easy way. When it comes to some headwinds. Of course, yes, some natural things that we can't change. We had quite some bad weather, as you know, also in January that affected temporary, I think, to a certain extent, the business. That, of course, should just be a temporary thing and I'm quite confident that if you look over the quarter, longer period that, that will not be significant. US dollar-SEK, we can only look back at the past and see where currencies stand today. We don't know how they will evolve in the future. But like Erik mentioned, they will continue to have a very important effect on the top line. He mentioned the number in the call. It will also have a more important negative effect on the bottom line definitely now in Q1. You've seen it was 30 basis points in Q4. We believe it might, and it will be even a bit higher now in Q1. And going forward, we will see what happens with the currencies. Daniela Costa: And then on the steel side? Nico Delvaux: Yes, right. If you look at material indexes in general, I think they are going up in a significant way, copper, zinc, nickel. Steel has been more stable, and you know that we are most exposed to steel. But we will do like we have done in the past. I mean if material indexes go up, we will try to compensate them through price increases. We have already increased -- announced price increases end of last year and beginning of this year. And we will see. If the market follows, we obviously will continue to do price increases, and we are confident that we will be able, like we did in the past, compensate for material increases through price increases and defend the margin. Daniela Costa: Perfect. My follow-up is just on your comment now. You're right on the 16% to 17% that you want to be on the long run margin at the top end of that. What would have to happen to see you above that? Is that something that you definitely don't want to go above because M&A will always dilute you back? Or would you have to see it for a number of years above it, and then you would consider changing the target? Is there a possibility that at some point you would consider increasing the target? Or you rule that out given the structure of the business model? Nico Delvaux: I would say let's not answer hypothetical questions. I think let's work hard first to get more higher up into that bandwidth. That's also what we have said in the Capital Markets Day. We are today at 16.2%. We have the ambition to get more comfortable in that bandwidth, perhaps also more to the higher end. And of course, there is a couple of main drivers there. Clearly, if you take the Americas, we have our residential business, where we have said that within the first 5 years after the acquisition of HHI, we will realize $100 million bottom line synergies. If that happens, we can bring HHI to that 16% EBIT margin, including PPA and so on. So that is definitely is something that, over time, will move the needle for the Americas division. Of course, we will need some help of the recovery of the market for achieving that. I think the second important driver is SKIDATA, where we know that we bought SKIDATA at very low single-digit margin and where we have the ambition to bring it to, let's say, around 14% over the first 5 years. If that also happens, then, of course, also because it's a EUR 300 million business that also has a more important effect on the margin. And the third one, as we mentioned at several occasions, we still believe that we have upside on the EMEIA margin, where over time, that should come closer to that 16%. So I would say that are the three main drivers that should help us to further improve EBIT margin. Operator: The next question comes from the line of Andre Kukhnin from UBS. Andre Kukhnin: Can I just start with a follow-up on the -- so on the pricing intentions for 2026, can you tell us at this stage what we should be thinking about with current raw materials and FX for pricing for 2026? Nico Delvaux: So like you rightly said, it will depend a bit on where material indexes go going forward. And under the assumption that tariffs stay where they are today because also that seems to be moving target, I think you should calculate with a price somewhere, I would say, between 1.5% and 2%. Of course, we live in a slightly higher inflationary world than, let's say, prior to COVID. Prior to COVID, our price component was perhaps a low 1%. This obviously should be a little bit higher with higher inflation. And then we have, of course, some price carryover from last year still on -- mainly on the tariff side. Andre Kukhnin: And can I just ask about the demand trends as you started the year compared to kind of the exit run rate of Q4. I think you've covered the U.S. but if we could just go around maybe EMEIA and Asia on kind of which way we're trending as we go into the year. And I guess part of that, could you comment on the specified activity in EMEIA as well, please? Nico Delvaux: Yes. So I mentioned already for North America that we have seen double-digit growth of spec quotations. The same is true in EMEIA, and we have seen high single-digit spec growth for Oceania. So on the spec side, we continue to see good momentum. I would say the answer is the same as we gave the last 3, 4 quarters. So a good healthy commercial activity level I think also translated in good organic growth in all three regions. And a comment on the residential side would be also similar still, yes, definitely bottomed out, but no real recovery yet for the residential market. With the exception, like I mentioned earlier, for New Zealand, a smaller country, and then Sweden, where we have seen the recovery in the R&R side, but don't see the real recovery yet on the new build side. Operator: The next question comes from the line of Gael de-Bray from Deutsche Bank. Gael de-Bray: The first one is on the M&A side. I mean, I think that based on the already announced acquisitions, the M&A contribution that's baked in for 2026 is just around 1%, which is lower than it was at this point in the previous 2 or 3 years, I think. So I'm wondering if you could provide any -- a bit more color on the M&A pipeline and perhaps a range of the potential M&A contribution for 2026? Nico Delvaux: So it's true that the carryover on the M&A side is 1% for the full year. It's around 3% for Q1. We have an active M&A pipeline. As you know, we have identified more than 900 potential targets. We are not talking to all of them, but we are talking to many of them. We are confident we will continue to close some of the acquisitions we are talking to in the coming months and quarters so that growth through acquisition for the year will go up. And as you know, we have the ambition to grow through acquisitions 5% per year over a business cycle. We realized that 5% last year. We will do our best to come as close as possible to the 5% or so this year. Like I mentioned, we have high activity then. To close the deals, you depend on two parties. Both parties have to agree. But we are happy, never satisfied, but happy with what we have in pipeline for the time being. Gael de-Bray: Okay. And the second question is on the organic growth dynamics or more specifically on the volume momentum. So I think it was around 1%-ish this quarter. So roughly the same as in the previous 3 quarters, really. So I guess my question is whether you kind of see any signs of acceleration going into 2026 or whether that's too early. And if basically, you're comfortable with the consensus expectations for volume growth of 3% to 4% in 2026? Nico Delvaux: But it was not really the same over the last 3 quarters. If you look 3 quarters back, it was very low, 1%. In Q2, it was closer to 1%. And now in Q3, it was above 3%. So you see an acceleration of the volume growth. It's true that you don't see an acceleration to 2%, 3%, 4%, whatever. But at least you see an acceleration over the last 3 quarters. Then of course, going forward, if you now look in Q1, the comparison is more difficult than in Q4, because I think last year, in Q1, we grew 2%, where in Q4, we had a slight negative growth. So that is one difference. And I think market conditions, like I mentioned earlier, are still very similar. So there's two things to take into consideration if you look now for organic growth in Q1. Operator: The next question comes from the line of James Moore from Rothschild. James Moore: Nico, I don't know if you mentioned it earlier, my line was dead for the moment. And Elmech, is it possible to talk about the organic growth speed in the quarter for the global and the regional picture? And then I have a follow-up I'll come back to. Nico Delvaux: Yes, the organic growth for the geographical divisions in the quarter was at 8%, with good contribution from all three regions. And the growth for Global Tech was higher, around double digit. James Moore: And I wondered if you could talk about the opportunities and the threats of the Aliro smart lock digital key wireless ultra-wideband near-field standards that are coming. I mean, I see pluses and minuses, and I wondered if you could help us navigate it in the sense that it enables digital smartphone key wallets, and maybe that helps with Elmech adoption. But is there a risk? And how should we think about the loss of proprietary ecosystem lock-ins with crossband interoperability? Does it commoditize the software layers? Do you worry about Apple and Google becoming gatekeepers? Just trying to think about what this means. Nico Delvaux: I think you should -- if you look at our Elmech business, which is around, what is it, 32% of sales. If you look at that part, more than 90% is on the nonresidential side, on the commercial side. And of course, all the things you talk about have an effect in the first place on the residential side. And on the residential side, those standards, we see it as an opportunity because, like you said, it will accelerate adaptation. And I mean, really as one of the strong players in this field, if you see an acceleration of that market, we will obviously profit from it together with the other players in the market. And then if we can do a good job and come with more innovative products and wider product ranges, then hopefully, confidently, we will also take a bigger part of that market. James Moore: Great. Lastly, I wondered if you could just talk a little bit about software recurring? It's obviously been a great growth engine. Does that continue in the quarter? And do you feel happy with the pace going forward? Nico Delvaux: You know that I can be happy but never satisfied, and that is the same, James, with recurring revenue. I think we see recurring Software-as-a-Service as the fastest growing, you could say, product or solution. That continues. When I started back in 2018, recurring revenue was around 2% of top line. Today, it's close to 6% of top line. So very strong acceleration and relatively becoming more and more important, and you know that you also make very good margins on that type of business. You see that as well in the geographical divisions and then also mainly in Global Tech as well on the HID side as on the Global Solutions side. And as we move more and more from mechanical to electromechanical, on, I would say, the nonresidential commercial side, we get more and more opportunities for that Software-as-a-Service. So we are confident that we will be able to continue that trend also for the foreseeable future. Operator: The next question comes from the line of Lush Mahendrarajah from JPMorgan. Lushanthan Mahendrarajah: It's on Entrance Systems and just a commentary around perimeter security and sort of the stable development there. And I think maybe that's sort of a slight change of toe versus sort of Q3, and I guess, particularly given sort of data center growth, I thought that was an area that benefited. So just kind to understand, I guess, what you're seeing there in the quarter. Nico Delvaux: I didn't understand the question. Björn Tibell: Data centers, how that's impacting Entrance, I think. Nico Delvaux: So as we also mentioned on the Capital Markets Day, data centers today represents around 1% of our top line sales. And if you consider that data centers are growing 50%, you pick the number, that means that data centers can give us an extra 0.5% organic growth. That 0.5% organic growth comes in the geographical divisions because they sell doors and door hardware to data centers. But the one most exposed, which will profit the most, is indeed perimeter security because they do all the fencing around the data centers and they have done also a very good job in coming with vertical-specific solution around fencing for data centers. The quarter had been a little bit weaker from an organic growth perspective. It's more a timing issue and a more difficult comparison with last year. If you look to perimeter security, they have been growing close to double digit for the last 2, 3 years. And we are confident now, not only with the data centers, but also with need for fencing around high security applications and also with warehouses coming back that perimeter security growth will also continue now this year. Lushanthan Mahendrarajah: And just as a follow-up on the Entrance Systems margin as well, obviously, strong performance there. I mean, is there something going on there with the steel component and maybe some of your competitors importing more of their steel? Have you been able to sort of price a bit better and take some of that margin? Nico Delvaux: So yes, Entrance Systems is exposed in an important way to steel and I would say, aluminum. And there, the same answer as before. If material indexes go up for steel and aluminum, we will increase prices and try to compensate for those cost increases through price increases with the ambition to maintain margins. Operator: The next question comes from the line of Vivek Midha from Citi. Vivek Midha: My main question is on EMEIA. Nice to see that the growth recovery is continuing, led by the Nordics. You mentioned that Southern Europe remains relatively weak within EMEIA. Can you maybe talk about whether you see any visibility on a recovery there, the sort of expectations on the shape of any recovery? Nico Delvaux: So if you take EMEIA, I think we have two important growth drivers, that is North Europe with Finland and Sweden, in particular. And then we have the DACH region with German, in particular. I think both are also profiting from the NIS2 legislation, cybersecurity legislation, but you also have to improve your physical security. And we see this is a European legislation that then has to be translated into a local law in the different countries. But you see that Germany and the Nordics are perhaps a little bit ahead of the other countries. And you see more activity there. So that NIS2 is an important driver in those two markets. And then like I mentioned, in Sweden, of course, you have, to a certain extent, the recovery on the residential side. What is also a good driver in EMEIA is emerging markets. So India and Middle East, Africa, and some markets in East Europe. Two challenging markets are the U.K., but we have said at a couple of occasions that we were confident that they had bottomed out and that we would see a recovery. We still believe that is the case. On the commercial side, there is a challenge with some of the legislation -- government legislation that has changed, and therefore, some of the bigger projects are on hold. Once those are released, we are confident we will see that growth on the commercial side for U.K. and therefore, that recovery that we mentioned already a couple of quarters ago. If you take South Europe, it's little bit a mixed picture, where Spain, Portugal and Italy, to a certain extent, show good results. It's mainly France that is down. France is also in Europe, one of the countries where we are most exposed to the residential business, and it's still the residential business that is challenging in France. There again, we believe we are confident that we see light at the end of the tunnel and that in the foreseeable future, we should start to see recovery of that business in France. Vivek Midha: And my follow-up is just a quick one on one of the small divisions. But in APAC, actually, quite a good margin print. I think it might be the best margin for the full year since 2019. Do you see a path to recovery to a 10% margin over the midterm here? Nico Delvaux: Yes. I think because if you look at APAC, again, you should make a difference between Greater China and the rest of APAC. I would say the rest of APAC has margins, let's say, similar to EMEIA, whereas in Greater China also last year, we had a small loss. And as in the mix, Greater China becomes also less important and the rest becomes more important. And as in the rest, we also continue to see good operational efficiency gains. Yes, we aim to further increase that margin for APAC. Over time, I think it should be possible to go to double-digit also in APAC. Operator: The next question comes from the line of Aron Ceccarelli from Bank of America. Aron Ceccarelli: My first one is on U.S. residential. You talked about the market bottoming out. I was wondering if you can provide a little bit of an idea of how pricing within different part of the market? If you can talk a little bit about perhaps the Kwikset brand versus Baldwin, it would be great. And also talk a little bit how the pipeline is shaping up as we enter the first part of the year. Nico Delvaux: Yes. So first on the market, to repeat what I said before, we don't believe that we will see, on the short term, a recovery on the new build because of the gap on the interest -- mortgage rates, where perhaps we are a bit more positive on the R&R side because of different facts. And the main fact what I said earlier is that 55% of the houses in the U.S. are more than 40 years old, so sooner or later, that R&R has to come back. And there for us, as a strong market leader in that field, it's very difficult to do better than the market. What we try to do is come with a lot of new product development. If you take, for instance, the Kwikset brand, on the digital side, I think we launched, over the last 6 months, more products than Kwikset had launched over the last 5 years. So really a very strong acceleration of new product development. And I would say the most extreme example is the digital side for Kwikset, but we are doing the same thing for Baldwin and for all the other verticals on the residential side. And that's also an indirect way, obviously, to get price increases through into the market. Because if you can come with a new product that you then also can develop at a lower cost, you can create a new price positioning for that in the market. That's not directly calculated in our price, but it's obviously an indirect way to increase prices. And that is also translated in our bottom line where we continue our trajectory to the ambition that we have set over time of 16%. Again, there, it would -- that will not be possible if we don't see the recovery also of the market and get a little bit help of the market because only the synergies, the $100 million bottom line synergies that we have identified, will not do it. Because if you look at the top line today, we are 60%, 70% below the peak from some years ago. That's also why we have taken extra measures in the residential segment in North America last year. We took out and we had to take out, unfortunately, more than 1,500 people to adapt our cost to the local reality and defending and further improving our margin. And that's things that we will continue to do now. Also this year, we will adapt our cost structure to whatever top line we will see. Aron Ceccarelli: And my follow-up is on Global Tech. The organic growth was very strong in Q4 despite the 2-year stack was relatively easy. But can you unpack perhaps the main drivers behind the performance? I would like to understand if you're seeing a tangible market share gains or our performance is mainly coming from white space opportunities created by new technology adoption? Nico Delvaux: If you look at the two main business in Global Tech, on the HID side, we have PACS. PACS after all the turbulences with semiconductor shortages, recovery and so on, I would say is back on that, I call it, decent growth path. So mid-single-digit growth, steady growth with good profitability, and we believe that it's going to continue. But what's good in HID is that we have seen very good growth for the other verticals, the smaller verticals where we invest a lot in feet on the street, a lot in R&D to make them significant bigger, then also helping them on the margin side. And so we have seen good development of those verticals in the quarter. And the same is true for Global Solutions, where obviously, hospitality is the biggest vertical where we have also seen a good continued high single-digit growth momentum, but where also the other verticals delivered on a high level in the other business areas -- segments delivered on a high level in the quarter, contributing even more to the overall organic growth. So you could say, in that sense, it was all stars aligned from an organic growth perspective for the different business areas as well in HID and in Global Solutions. Operator: The next question comes from the line of Rizk Maidi from Jefferies. Rizk Maidi: Just going to start with a follow-up on the hospitality side. I think some of your peers have flagged that U.S. hotel occupancies have dropped, and this is affecting the appetite of hotels to invest into their own assets. So I'm just wondering whether it's something you're seeing or not? Nico Delvaux: We have seen good momentum of our hospitality business around the world and also in the U.S. So we have seen good growth of our business in U.S. in the quarter. Rizk Maidi: Perfect. And then second one is just if we could elaborate on the -- your pricing commentary. How much did you achieve in the U.S. out of, I think, the 3% to 4% sort of targeted? And if you could just give us a split of that 1.5% to 2% for full year '26%, how much of that is carryover versus incremental price increases? Nico Delvaux: So as Erik mentioned, our price component in Q4 was a low 3% for the group. And obviously, a good part of that has been related to tariff compensation, and tariff compensation is only in the U.S. So the two or the three divisions that had a higher price component than the group average are obviously Americas, Entrance Systems and HID because they have relatively important part of their business in the U.S. So the price increase for Americas was a little bit higher than the average for the group. We've always said that on the tariff side, price in the U.S. should be around, let's say, 3%, prefers a little bit higher than 3%. We now have seen that it's a little bit lower than 3% because we were able to further move parts, subassemblies and products to more tariff favorable destinations. So if you calculate with, let's say, 1.5% tariff impact for the full year 2025 on group level, and if you take into account that most of that has come in Q2, Q3, then you can also see what that gives us now in 2026. And then the rest of the 1.5% to 2% I mentioned for the full year is then the normal price increases that we do at the beginning of the year to compensate for general inflation, material inflation, labor inflation, you name it. And then depending on where material indexes go, we will continue to try to increase prices as we go. Operator: [Operator Instructions] The next question comes from the line of Andreas Koski from BNP Paribas. Andreas Koski: I just want to follow up on the price discussion here because when I look at your price development through 2025 and now your comment about new price increases at the end of last year and the beginning of this year, I get to a price component in the beginning of 2026 of around or even above 3%, again, which means the price component at the end of the year must be around 1% to get to 1.5% to 2% for the full year. Is that the right thinking? Or what am I missing? Nico Delvaux: I think in global terms, I think it's a good thinking. It's more or less in line with how we see things then. Again, everything will depend how costs evolve going forward and how successful we are or not in realizing the price increases that we have announced and are announcing and that should kick in later in the quarter. Andreas Koski: Understood. And if -- I mean, in 2025, you've had a very strong drop-through -- organic drop-through of around 50% for the full year and it was close to 40% now in the fourth quarter, which was also a very good number. But if volumes will account for a larger share of organic growth in 2026, what do you think is a reasonable drop-through for you? Do you think that should come down towards 30%? Or what is a good guess? Nico Delvaux: I think everything depends on organic volume growth, and there is most probably somewhere an ideal organic volume growth where you get the best volume leverage. And that's most probably somewhere around perhaps 2%, 3% because if it's lower, it's more difficult to compensate for inflation. If it's much higher, you put too much pressure on your supply chain, on your factory, you have to work with over time, you have to expedite deliveries and so on. So most probably that 2%, 3% organic volume growth is an ideal place to be. And if you are there in normal conditions, drop-through around that 30% should be realistic, yes. Andreas Koski: And if -- okay, Bjorn, to squeeze in one just follow-up because you mentioned that comps will now become more difficult in Q1 and that market conditions are still very similar. Normally, you get the question how the current quarter has started. But does your comments around the tougher comps mean that you are now seeing slower organic growth in Q1 '26 compared to Q4 '25? What are you seeing? Nico Delvaux: Yes, perhaps on how that the quarter started, how January started, it's a bit difficult to compare. Of course, January had one working day less. If you compensate for that, January was a little bit lower than Q4. And that was mainly, we believe, linked to two things. The weather conditions in general and the weather conditions in the U.S., in particular. We believe this is a temporary thing. And over the quarter, we don't think that is going to be a significant reason. And the second reason was that we have a more important factory in Berlin. And you know that there was a sabotage -- electrical sabotage in Berlin that they were without current. Our factory was without current for 5 days. We could not produce an invoice for 5 days, had a negative effect in January. But again, there, this will pick up, and we don't think that it's going to be a notable negative thing in the quarter. So that is on how the year started. On -- the comment on the comparisons is as well top line as bottom line. Like we mentioned, we had a strong organic growth in Q1 last year than in Q4 the year before. Therefore, the comparison is more difficult. But also bottom line, the comment was always there because we have the normal seasonality, but we also want to highlight that now with SKIDATA coming in, we have a much higher seasonality. SKIDATA will give an extra around 50 basis points seasonality in Q1, negative seasonality in Q1. And then like we mentioned on the currency side, which will have an important negative effect in Q1 top line but also bottom line. And that's perhaps the two deviations if you look at historical numbers. Björn Tibell: So I think we have time for one more question. Operator: The next question is from the line of Andre Kukhnin from UBS. Andre Kukhnin: Well, just on SKIDATA, when you said 50 bps, is that at the group level? Is that EMEIA? Nico Delvaux: That's on group level. Andre Kukhnin: Okay. And I just also wanted to ask about the Americas dilution to margin from M&A through the year looks like 90 basis points. And I think from discussions before, I understand this is mainly investments in the Level Lock acquisition where you're rolling out that technology across bigger brands. Could you just comment on how that's going and what the outlook is for 2026? I noticed that dilution has kind of come down a bit or quite a bit in Q4 versus the prior quarter's run rate. Does that mean you're kind of now at the run rate of investment? And what kind of payback do you expect in 2026? Nico Delvaux: Yes. So if you take Q4, the acquisition -- the dilution of acquisitions in Q4 in the Americas has nothing to do with Level Lock because we own it now more than a year. And so therefore, Level Lock is in the organic part. The dilution in Q4 is mainly transactional related costs for the two acquisitions that we also mentioned in the presentation. So you could say it's more one-off type of thing, whereas it's true that Level Lock has around 100 bps dilution for the Americas. Level Lock -- it's fair to say that we are not entirely happy with the performance of Level Lock after the acquisition. We are struggling a little bit on getting the sales up in line with our expectations. We have been taking measures to do that because we should see more sales as well on the residential side as on the light commercial side, and we have put now the right resources in place and the right focus in place to do that, but that was a bit later than anticipated. And I think we have also been perhaps a bit too slow in adapting the cost to a lower top line because we, on one side, wanted to continue and finalize some of the R&D projects that they are working on because we have bought them in the first place as a, let's say, R&D machine coming with very exciting new products. And on the other hand, we wanted to understand first a little bit better the commercial momentum. So we have now taken actions also on the cost side. So that dilution should gradually reduce now over the coming quarters. But it will remain dilutive for the quarters to come. Björn Tibell: It's time for us to round up. Thank you, Andre, and thanks, everyone, for your participation. We -- if there are any follow-up questions, please feel welcome to reach out to us at Investor Relations. And we look also forward to meeting and seeing many of you in the coming weeks. Thank you again, and have a good day. Nico Delvaux: Thank you. Erik Pieder: Thank you.
Mirko Hurmerinta: Good morning, everyone, and welcome to Sampo Group's Conference Call on Full Year 2025 Results. My name is Mirko Hurmerinta, Investor Relations Manager at Sampo. I'm joined on the call by Group CEO, Morten Thorsrud; Group CFO, Knut-Arne Alsaker; and Lars Kufall Beck, Group CFO as of the beginning of April. The call will include a short presentation by Morten and Lars, followed by Q&A. A recording of the call will later be available at sampo.com. With that, I hand over to Morten. Please go ahead. Morten Thorsrud: Thanks, Mirko, and warmly welcome from my side as well. Sampo delivered another strong year in 2025, marked by consistent execution, robust profitability and solid momentum across our Private and SME segments. We achieved a like-for-like growth of 8%, combined with disciplined underwriting, a benign claims environment and continued efficiency gains, supported even by Topdanmark synergies. This resulted in an underwriting profit of EUR 1.5 billion. Our Investment portfolio also performed strongly, driven by both NOBA's contribution and solid returns from the regular investment portfolio. Operating EPS reached EUR 0.50, and the Board has proposed a regular dividend of EUR 0.36 per share, a 6% increase year-on-year. Sampo remains committed to delivering substantial value to its shareholders, and today, we also announced an adjustment to our distribution policy, which Lars will elaborate on shortly. Our underwriting results grew by 13%, actually for the third consecutive year, representing then more than 40% cumulative growth over this period. The main driver of this performance has been organic growth with consistent strong momentum in our Private and SME segments. I will return to the Private business shortly. In SME, customer adoption of digital services is following the same pattern as we've seen in the retail market, exactly as anticipated and planned for. As a result, top line growth has accelerated. SME premiums grew by 7% in 2025 compared to 5% in 2024 and 4% in 2023. Last year, we added more than 3,200 new commercial customers, predominantly SMEs, while maintaining high and stable retention. Part of the underwriting improvement reflects favorable weather and large claims outcomes, but the underlying trend remains strong. We continue to offset claims inflation through disciplined pricing. 2025 was also the first year of delivering synergies from integrating Topdanmark into our pan-Nordic platform. We achieved run rate synergies of EUR 37 million, ahead of the original EUR 24 million target for the year, though largely due to timing effects. We remain firmly committed to our EUR 140 million target for 2028. However, now, of course, with increased confidence. Let's turn to our Retail business, beginning then with Private Nordic. Private Nordic has delivered strong and sustained growth, and the momentum throughout 2025 reinforces the competitive strength of our modern remote distribution model. Like-for-like growth reached approximately 9%, with solid performance across all major product lines. Personal Insurance continued to stand out, growing 11%, as we added 30,000 new insured individuals in 2025. The outlook in this area remains highly positive, supported by rising demand for services that complement public healthcare. In digital sales, we reached our operational target of EUR 175 million 1 year ahead of schedule, demonstrating the increasing significance of this channel. Our digital capabilities, combined with our scale and technical expertise, also reinforce our position in partnership channels. In 2025, we renewed all major partnerships across all markets, including in the Swedish mobility sector. This underscores our position as the preferred partner to the automotive industry and provides valuable insight into motor industry trends. It's particularly encouraging to see that we also secured 4 new mobility agreements in Denmark, reflecting how our strengthened position in the market is now transforming our ability to compete for and win new partnerships. Turning then to Private UK. In 2025, we delivered 13% like-for-like premium growth, supported by a 16% increase in policy count. However, motor pricing continued to soften throughout the year. While we have captured the growth opportunities available to us, we have also scaled back activity in line with market pricing trends. This was reflected in a slower policy growth trajectory in the second half of the year. We continue to view the U.K. market as rational, but achieving our target margins has naturally become more challenging in the current pricing environment. Despite this, we remain highly confident in our long-term prospects in the U.K. In recent years, we have consistently demonstrated our ability to balance growth and profitability, and we are continuing to invest in proprietary data, pricing sophistication and enhanced digital capabilities. Underwriting discipline remains paramount, for example. We will continue to target business in the U.K. that fits within our 88% to 90% combined ratio ambition. In the softer phase of the cycle, this means operating more towards the upper end of the range. With that, moving from the insurance operations to investments and the balance sheet, and I'll hand over to Lars to comment a little bit on that. Lars Kufall Beck: Thank you so much, Morten. In 2025, Sampo delivered a strong investment income on the back of strong returns across both fixed income and equities. Our fixed income portfolio continued to provide a stable interest income, also slightly down year-on-year. The mark-to-market yield is still slightly below the running yield, which implies that a small further reduction is expected in 2026, assuming, of course, no material swings in the interest rate environment. However, the main driver for our strong investment income in 2025 and for the fourth quarter as well was our stake in NOBA. Following the successful IPO of NOBA, we saw a EUR 540 million gain, of which EUR 173 million came in Q4. Beyond NOBA, equities in our portfolio performed well in 2025, where we continue to benefit from being exposed to this asset class. If we look ahead into 2026 in terms of investment strategy, we are being quite cautious about deploying new money at this point in time, given the tight spreads, high equity valuations and the geopolitical uncertainty we see. Talking about capital generation and capital management, Sampo runs a highly cash-generative business and a very strong balance sheet. Our solvency stood at 174% at year-end, but it is cast on a very strong basis with the symmetric adjustment materially higher than a year ago and with benefits from further NOBA sell-downs and the Danish partial internal model change to come. In total, Sampo generated EUR 1.5 billion of deployable capital in 2025, bringing our cumulative capital generation in the strategic period to date to EUR 3.5 billion. This puts us well on track for the more than EUR 5.5 billion target we have set for the 2024 to 2026 period. In 2026, we see deployable capital generation being driven mainly by our operating profits. But on top of that, we do have effects from the partial internal model for Denmark and potential NOBA sell-down. The regulatory process around the Danish partial internal model has taken a little bit longer than originally anticipated. However, nothing has changed with the estimated EUR 60 million to EUR 90 million SCR benefit expected, in which we remain very confident. On NOBA, we are currently in a lock up, but we will, of course, look for opportunities to sell down our stake further, assuming we can do so at an attractive valuation. When it comes to buybacks, funded by disposals, in our last Capital Markets Day, we said that we would distribute up to EUR 500 million, which means that there is EUR 350 million to go after the latest buyback. Beyond that, we will take a closer look at the excess capital position when that times come. Remember, we want to maintain a very strong balance sheet with a solid liquidity buffer in our holdco. Shifting from capital generation to capital distribution. This morning, we announced an update to our distribution policy, enabling us to provide an attractive mix of dividends and share buybacks going forward. Firstly, it's important to note that this affects only the mix of capital returns, not the total amount of capital to be returned to shareholders. We stay committed to a very strong capital discipline, where we, in a normal year, expect to return around 90% of our operating result to shareholders through dividends and buybacks. Secondly, Sampo remains committed to distribute a reliable and progressive regular dividend. And in a normal year, the majority of our operating results will continue to be redistributed through dividends, but effectively, we are lowering the dividend payout ratio floor from 70% to 60%. We believe buybacks offer an efficient way to invest in our steadily growing business, and we know that a lot of our shareholders agree with this. At the same time, we continue to offer growing progressive dividends for more income-oriented investors. Looking ahead, we aim to grow the regular dividend broadly in line with the EUR 0.02 annual increase that you have seen since 2020. That's all from my side for now, and back to you, Morten. Morten Thorsrud: Good. So looking ahead to 2026, we expect the strong trends across our business to continue. Organic growth will remain the primary driver of underwriting profit, and we maintain a positive outlook. We guide for insurance revenue in the range of EUR 9.5 billion to EUR 9.8 billion, corresponding to 5% to 8% growth. In areas where competition is tightening, such as the U.K. and large corporate segment, you can continue to expect disciplined execution from us. On margins, the planned 40 basis points improvement in the Nordic operating cost ratio is expected to be the main driver of profitability. Our outlook on underwriting result is set to EUR 1,485 million to EUR 1,600 million. As always, our outlook is set with an element of caution. The lower end of the range reflects uncertainty related to weather conditions, including a somewhat harsh winter to date and potentially spillover impact from the storm Johannes that occurred late in 2026. Overall, I'm very pleased with Sampo's performance in 2025 and the momentum that we carry into 2026. This gives me strong confidence in our ability to continue delivering excellent results and shareholder value. Mirko Hurmerinta: Thank you, Morten and Lars. Operator, we are now ready for questions. Operator: [Operator Instructions] The next question comes from David Barma from Bank of America. David Barma: Firstly, on the U.K., please. Could you run us through the drivers of the deterioration in the margin in the quarter? And to what extent the weather impacted this, please? And then secondly, staying on the U.K., policy count growth seems to have accelerated in motor in Q4. Can you explain how you see the balance today between margin and volume? And maybe if you could give us some indication as to how pricing has developed since the end of the year when I think we were still seeing double-digit average pricing drop year-on-year? And then lastly, a more theoretical question. A big topic so far this year has been the increased threats of the faster growth in self-driving vehicles and trials appear to have been particularly focused on your market, so the U.K. and the Nordics until now. Would you be able to share your thoughts on this and how the Sampo Group might be preparing for a faster evolving auto insurance market landscape than maybe we realized? Morten Thorsrud: Good. So 3 large questions in a way at the very start here. First, to the U.K. margins. Fourth quarter is, of course, a quarter where we move a little bit into winter-type effects also in the U.K. So it's natural to see a little bit increase in frequency in the fourth quarter. We are landing firmly within our range -- operating ratio range with 89.2% for the full year. But again, fourth quarter, naturally a little bit more motor claims due to weather. Then, there is also a small impact from us strengthening reserves a little bit on the home side. There's been a bit of subsidence claims in the U.K. in 2025, and we wanted to be sure that we had as conservative reserves on the home side, as we have on the rest of the business. So we also added a little bit there in the fourth quarter. When it comes to policy count and pricing development, policy growth came down clearly in the U.K. during the year. So fairly strong in Q1, coming down then a little bit in Q2. And Q3, Q4 being clearly softer in terms of policy growth, but we still continued to see a growth in also number of policies. Obviously, the reason for growth coming down is, again, that prices have come down over the last year, more so in the first half of 2025. And then second half of '25 has been more a sideways movement. And that is, broadly speaking, also the situation that we see now in the beginning of '26. Always important to, I think, underline that this is quite a rational behavior from the market. Pricing was clearly overshooting a bit towards the end of 2024. So it's quite a rational and natural move in the market. And when it comes to autonomous vehicles, one can spend hours debating this. Perhaps some few reflections. First of all, safer cars, safer roads is, of course, nothing new. Over the last 15 years or so, we've seen a 40% to 60% decrease in fatalities in the Nordic region, which means that we have -- which, of course, is a very good development for the society as such. And also, for us, where we've seen a sharp reduction in bodily injury claims. And at the same time, this has been more than offset by an increase in frequency, and in particular, severity on the small- and medium-sized claims. And we see this in particular with newer cars. Cars with a lot of technology are far more expensive to repair than cars without, of course, this technology. If you see -- look at the market, like Norway, for instance, where you have 30% of the fleet now being fully EVs, we see that the repair cost of those are significantly higher than the repair cost of the older cars. And perhaps one should underline is nothing -- it's not really driven by the fact that these are EVs, but it's driven more by the fact that these are modern cars with a lot of technology. With autonomous vehicles, one could expect that claims frequency, when it comes to collisions, of course, could come down. Then, one should bear in mind that collision is just one of the items that we cover. Looking again at Norwegian statistics, collision claims account for about 30% of claims cost, which means about 20% of claims -- of premiums. And there are a lot of other claims types. That one, of course, need to bear in mind, and that is not affected by reduced frequency on the collision side. Then, I think also, one need to just bear in mind that with the new cars with more technology, you need to repair them to a larger degree than before. So if you had a small damage on your bumper in an old car, you didn't really need to repair it or you could just do some paint work. In the new cars, and of course, in the future autonomous vehicles, you need to repair these damages, and you need to repair them throughout the lifetime of the car. So I think there are sort of many effects here one can debate. I think we look upon this as an exciting and good opportunity for us because I think this will somehow differentiate between the excellent players. Motor insurance is becoming a more complex type of business now with all of this technology and with large variations in repair costs on different models. So perhaps a long answer, but I wanted to sort of give you a little bit also on the context around this. David Barma: Yes, that's very helpful. Operator: The next question comes from Vash Gosalia from Goldman Sachs. Vash Gosalia: I had 2 questions. One was just on the Nordic region and more specifically, in Norway. Would love to understand how much of a pricing benefit do you continue to see in Norway, one? But then in general, are you able to talk to us a little bit about how do you plan to grow in the broader Nordic region? And where is the growth in top line going to come from? That's the first one. The second one, just circling back to the U.K. a little bit, trying to understand your sort of targets versus your margin guidance. So obviously, you have the 20% to 25% CAGR underwriting result target that you have, but now with margins worsening, should we be a bit more sort of flexible on that? Or would you continue to be more flexible on that? Or how would you meet that target? It would just be great to understand that. And sorry, if I could just squeeze in a third one, just a little bit on your investment. In the past, I remember you had spoken about re-risking in Topdanmark. Is that still something you would look to do? Morten Thorsrud: Yes, I'll start with the Nordic region and pricing. We continue to have a situation where price increases are clearly higher in Norway compared to the other countries. Coming down a little bit over the last couple of quarters, but still clearly being higher in Norway compared to the other countries. Then, also pricing overall in the Nordics is still on a somewhat elevated level. So we definitely see support on the topline from price actions still throughout the Nordics. When it comes to growth in the Nordics in the future, our expectation is that it's quite broad-based. We have an excellent competitive position, and what I would say, a superior operating model in the private segment, a highly digital, modern operating model that I expect that we should be able to capitalize on going forward as, again, the market is gradually becoming more and more digital. We have an excellent position in the mobility market, where we many times have talked about the Swedish market in particular that should represent a good growth opportunity for us when that market is turning and Swedes are starting to buy cars again. We have built up also a very competitive distribution service model in SME. So that is also a good opportunity for us. And then we continue to point out sort of the personal insurance market as a market with strong underlying growth, where we continue to see double-digit growth and maybe we continue to have good outlook for the future. So it's quite broad-based when it comes to the growth expectations in the Nordics. Then, on the U.K. margin, I'm not sure if I fully got your question. Yes, perhaps, Knut-Arne, if you... Knut Alsaker: Sure, Morten. Morten alluded to the operating range that we want to have in the U.K., 88% to 90%, and indicated that where we are today with pricing, it's more likely that it's going to be in the upper end than the lower end of that range, which again then translate into the operating ambition we have for the U.K., which is a 20% to 25% average growth in the underwriting profit. And with that condition and the upper end of the combined ratio range for '26, we still confirm the 20% to 25% average underwriting profit growth, but it will be reasonable to assume that it would be more in the lower end than the upper end of that particular range. Morten Thorsrud: Good. So hopefully that was clear. And then, you had a question on derisking in Topdanmark. We're not doing any derisking, not in the Topdanmark portfolio, nor sort of in any other parts of our business. We did quite a lot of derisking in industrial and partially also in commercial throughout, yes, second half of 2024 and well into and throughout 2025. But that process is now concluded. So no further plans of doing any derisking, not in the Topdanmark portfolio or for the previous Topdanmark portfolio nor elsewhere in the business. Vash Gosalia: I'm sorry. So just on the Topdanmark bit, so my question was actually more related to the investment portfolio in Topdanmark. I remember, I think it was last quarter or the quarter prior, you were talking about actually increasing your allocation to corporate credit or higher-risk investments. So I'm just curious, do you still plan to do that with the Topdanmark investment portfolio? Or is that no longer the case given what you've already said about the spreads in the market and the geopolitical uncertainty, et cetera? Sorry, that was my question around Topdanmark. Knut Alsaker: All right. It's Knut-Arne here again. I'll take that on investments. That is still the plan. We're slowly, but gradually changing the fixed income portfolio away from Danish covered bonds to high grade, not necessarily high-risk corporate euro as well fixed income instruments. That's a process that started, but not completed. And one of the reasons for that is that we don't want to rush into that transition by buying assets at prices that we think are too high. So it's still the plan, and it started. I wouldn't necessarily say that, that is re-risking at large our fixed income portfolio, and it's not a process which will significantly change in any way the capital we deploy to market risk. Operator: The next question comes from Hans Rettedal Christiansen from Danske Bank. Hans Rettedal Christiansen: So I had a few questions. Maybe first just starting on the premium growth expectations for 2026. And sort of elaborating a little bit on the overall guidance that you're giving, specifically interested to hear what sort of Swedish new car sales that you're embedding in the overall guidance for 2026? And secondly, also if you're still confident in the sort of over 10% growth overall for the Nordic region that you said in Q3? Morten Thorsrud: Yes. Premium growth, as we indicated with the outlook, we expect insurance revenue to grow with 5% to 10%. So I think that gives an indication on our growth expectations overall. And I think, as we have alluded to, more favorable development in the Nordic region than in the U.K., at least now in the very beginning of 2026. When it comes to Swedish new car sales, we have not put any significant increase in our sort of base assumption, so, of course, again, if new car sales is picking up, that could be an upside for us, but we have expected a rather stable situation sort of when creating the plan. Yes. Mirko Hurmerinta: Just a quick one. Hans, it's Mirko here. The 10% you are referring in Q3, that is the ambition for Personal Insurance, not Private Nordic. Hans Rettedal Christiansen: Got it. And then just to follow up on it, can you maybe just elaborate a bit on the sort of what is your assumptions underlying the kind of 5% to 10% range given that it's quite wide? Morten Thorsrud: Well, of course, again, a large proportion of this will continue to come from price increases. But we do expect to see also a certain growth in number of customers. We saw a growth in number of customers both in private and commercial throughout 2025. We continue to expect that. And then, again, as Mirko alluded to, of course, more growth in certain parts of the business, like personal risk products, where we see consistently growth above 10% now for quite a long period, and we expect that to also continue into 2026. Knut Alsaker: And if I should just add to Morten's comment, Hans, I think you asked for the range in the insurance revenue outlook. It's, of course, the beginning of the year, where we think it's reasonable to have a slightly wider range in the outlook than what we usually end up with at the end of the year for natural reasons. And one of the drivers for that range and the lower end of that range is what Morten alluded to earlier also in his introduction in terms of staying disciplined, not least in the U.K. market. So pricing development in the U.K. market will also impact where we -- as one factor where we end up in that range towards the end of the year. Hans Rettedal Christiansen: Got it. That's very helpful. And just 2 final ones, quick ones on the updates that you're planning for Q1, both on capital and synergies. So on the first one on the update on distribution policy, how do you plan on sort of the timing of share buybacks throughout the year in this sort of updated policy? And is it also so that excess capital is still going to be distributed in the form of share buybacks in this policy? And then, on the synergy update that you're planning in Q1, just looking at the Slide #12 in the presentation, the wording is sort of a phasing of synergies that you want to update on. So should we take this to mean that you're sort of -- you haven't seen any more synergies or potential for synergies, but more so that it's kind of 2028 synergies coming earlier than expected? Morten Thorsrud: Yes. I'll hand the one on capital and buybacks to Lars, and then, I can comment on the synergies after that. So Lars please go ahead. Lars Kufall Beck: Yes. Thanks a lot. On your question about timing and update of the policy, as we are saying, we will revert this year in connection with our Q1 results, i.e., in May. And we expect actually also going forward to do that at that point in time. We believe that is the right time in the year. It will allow us to do potential buybacks after the ex-dividend period. I think what we are confirming here is our strict -- as I said, initially, our strict capital discipline that we will return in a normal year 90% of the operating profit to our shareholders with a split that is potentially a little bit different from the past, lowering the floor from dividends from 70% to 60%, but confirming and reconfirming the majority come as dividend, and then, an option to do share buybacks on top of that. But as I said, important to stress our commitment to delivering a progressive dividend going forward as well. Morten Thorsrud: Then, on the synergy update, as you all have seen, we are reporting EUR 37 million in run rate synergies realized already at the end of 2025, which is well ahead of the plan that was EUR 24 million at the end of 2025. So we are front-loading the synergy capture quite a bit, and we thought that it would make sense to update on sort of the timing of the synergies, again, in connection with the Q1 result. We still remain committed and believe in the EUR 140 million in total synergies. But again, obviously, we have been able to realize the synergies somewhat quicker than anticipated. Operator: The next question comes from Ulrik Zurcher from Nordea. Ulrik Zürcher: Just wondering one clarification I have. The base case, should that be an improvement in the underlying risk ratio in the Nordics in '26, just given all the pricing actions and still relatively hard market? And then question number two, I think you described the low-end risk of your underwriting result outlook quite well. But what would be some key factors needed to hit the higher end of that outlook? Morten Thorsrud: Yes. When it comes to combined ratio improvement, the main driver on the combined ratio, I remember that you asked about the risk ratio, but the combined ratio is still the 40 basis points efficiency improvement in the Nordic cost ratio. And we indicated that is expected to be also the main driver of underlying profitability going forward, alluding then to perhaps a somewhat smaller risk ratio improvements. We produced a 30 basis points risk ratio improvement this year. But expect that to come somewhat down, and we expect, again, the combined ratio more to be supported by the cost ratio improvement with the 40 basis points. When it comes to the outlook, in a way, you could say on the insurance result, we have produced a 13% growth now 3 consecutive years. However, one should bear in mind that there was a benign large claims and weather situation in 2025. And if you shave off that, then the outlook is actually consistent with 5% to 13% increase in insurance service results. The upper part of that, of course, would assume that we have, again, a favorable -- somewhat favorable development in large claims and also in weather. And, of course, then the lower end would assume the opposite. This is after all insurance, and we are after all still exposed to large claims and weather. Ulrik Zürcher: Yes. That makes sense. And just on the underlying risk ratio or underlying, as you said, because it's very hard to picture that we won't see an improvement in private lines, for example, given all the repricing that's been going on. Is that correct? Is this more of a commercial or industrial segment where it could be more difficult to improve the risk ratio? Morten Thorsrud: I think could be the situation. I think, obviously, sort of U.K. now, I mean, if you start there, a little bit softer. We indicated that we still stick to our 88% to 90% operating ratio target, but perhaps in the soft market, you operate more towards the upper end of that. Then, yes, we've seen very good development in private, also SME, where we've seen good underlying improvement. And then also on the large corporate side, it's a little bit softer market. So I think it's reasonable to expect that more positive sort of view on private SME and a bit more cautious view on large corporate and the U.K. Operator: The next question comes from Jaakko Tyrvainen from SEB. Jaakko Tyrväinen: Jaakko from SEB. I would like to follow up on the discussion on SSD or autonomous driving possible market disruption going forward. What are you seeing as a kind of a key barrier entries for possible new competition in your home markets? And how you are seeing Sampo positioning in terms of your very good digital capabilities versus the so-called pure-play digital players that you see outside your home markets? Morten Thorsrud: Yes. I think to put it very simply, the main barrier of entry when it comes to motor is that all of these cars need to be repaired. It's a very physical operation in reality. So if you want to insure cars in the Nordics or in the U.K., you need to be able to handle all of the damages, all of the repair throughout the entire region. You need to provide roadside assistance, you need to sort of provide services sort of changing in screens. You need to repair the collisions and so forth and so forth. So I think sometimes people forget about that, that although a large part of the insurance industry is digital, also a very large part of it is highly physical, and that, in particular, goes for motor. So I think regardless of how the insurances are distributed, you basically need a service on the ground that to me will very much look and smell like an insurance company to put it like that. Jaakko Tyrväinen: Excellent. All of my other questions have been already asked. Operator: The next question comes from Vinit Malhotra from Mediobanca. Vinit Malhotra: My one main question would be on this new dividend policy or new payout policy. I mean, isn't it usually that the market looks as a dividend as a signal, which you're more committed and -- not you, but our company is more committed to and buybacks being more flexible? Could you just talk a little bit about why you felt the need to bring in a little bit more flexibility within the same, say, 90% payout approach? So that's my first question. Second question is just on the Nordics and the autonomous vehicle debate. I mean, is -- we've seen obviously 2 forces. One is the new car sales falling for many years, which have changed the -- have kind of increased the fleet age, but also lots of new adoption by customers. So do you see that there is a risk here that the adoption of new autonomous vehicles could be much faster even though the price point might be higher, of course? So just curious what you think about the adoption rate of customers to new autonomous vehicles? Morten Thorsrud: Yes. I'll leave to Lars to debate a little bit about the dividend policy, and then, I can ponder a bit around the AVs again. Lars Kufall Beck: Yes, absolutely. Thanks a lot. Thanks for the question. I think, again, reiterating that what we are changing here is merely a potential floor for the dividend payout ratio. We reconfirm and confirm that we want to and aim to deliver a progressive, stable, growing dividend over time that then represents at least this 60% of operating profits. Lowering the floor simply gives us the opportunity and the flexibility to ensure that we can deliver that. And that's basically why we're doing it to ensure that 70% doesn't become a constraint and that we continue to deliver an attractive capital redistribution to shareholders in the form of dividends -- ordinary dividends and buybacks. Morten Thorsrud: Good. And when it comes to adoption of new car and new technology in the Nordic motor industry, I think it's a rather scattered picture in a way. When we talk about low new car sales, we are then pointing at Sweden. If you then look to a country like Norway, the new car sales has been very high for a number of years now with a very high adoption of new technology, and in particular, EVs. So if you look at 2025, more than 95% of all new passenger cars were fully EVs in Norway. And if you look at the stock, more than 30% of the stock of passenger cars in Norway are now EVs. So in that market, that leads us to be in a quick adoption of new technology. So it's quite a different situation from market to market. Obviously, the Norwegian situation has been fueled by incentives given by sort of -- through sort of lowering taxes on the EVs compared to other cars. So I think it's hard to say something about adoption rates of new cars, new technology. I think for us, again, it's more underlying that I think that we're well positioned to handle this. And again, that the trend that we see is making motor insurance actually a little bit more complicated, and again, favors the big players that have a lot of data, a lot of insight and that can act in a smart way in a landscape that is changing. So for us, we look upon this as a good opportunity to really utilize our skills in full. Operator: The next question comes from Michele Ballatore from KBW. Michele Ballatore: I mean, they are both on the new capital management policies -- policy. I'm sorry, but I'm quite confused. I mean, so you have a 90% payout as a target of your operating earnings. And you are referring to 70% on the dividend. I believe this is the cash portion of the dividend. And you said that you don't want this to become a constraint, but why should this be a constraint? I mean, can you maybe help me understanding the dynamics here? So this is the first. The second question is about the operating EPS growth target. I mean, obviously -- I mean, we're going to see the -- let's say, the share count dropping a little bit more than expected now. So how should we think about this 9%? I mean, is this 9% -- how much of share buyback are included in your mind on this target? Or should we assume there is probably upside to the EPS -- operating EPS from this? Lars Kufall Beck: Yes. If I take the first one, thanks, I think the whole idea for us is to deliver a dividend per share that is secure and gradually growing while we leave a little bit more headroom for doing share buybacks to be funded by our operating earnings in the future and not just the one-offs like the asset sale that we have done over the recent year. We believe that makes sure that we have a mix of capital return that's attractive to our shareholder base. And if you assume that earnings developed nicely, you can expect our dividend to grow in a very similar way to what it has done over the recent years if we have -- where we have increased the dividend per share by EUR 0.02 per year for 5 consecutive years now. And should we have a bad year, we do aim to keep the EPS stable. So that, in other words, means that we aim to have a progressive dividend of at least 60% of operating earnings and then top that up with potential buybacks. And whether it's 70% this year, it's a payout ratio of 71%, 70% plus/minus, has not been an option with the historical policy that we have had, and that's why we're doing the change. But as I said, and we are pretty clear on our guidance that our plan is to grow dividend in a very similar way to what you have seen over the last few years. Morten Thorsrud: Yes. And then, on the operating EPS growth, yes, our target for the period 2024 to 2026, so this strategic period, is above 9% for the period, annual growth. We, of course, do expect some buybacks in this year. But we also said that we will come back to more information about that after Q1. But of course, as you all understand, there is still a bit of capital to be distributed from the 2025 earnings. And then also sort of we need to look into other sources for capital redistribution and to be used that by buybacks. Again, we'll get back to that in Q1, sort of where we can give a more firm answer on it. Operator: The next question comes from Vash Gosalia from Goldman Sachs. Vash Gosalia: Just one quick question on something you mentioned. So you were saying you expect some drag from the large corporate or the industrial segment. Are you able to share with us what kind of price decreases you saw in that book at the 1/1 renewals? So just trying to get a sense of how much do you think -- how much we should think that will impact your risk ratio? Morten Thorsrud: No, I think we definitely didn't use the word drag. I think we continue to expect excellent profitability also in the large corporate segment. However, I think the comment was more about underlying improvements. We delivered a strong combined ratio for the large corporate segment in 2025 and expect to be able to do so also in 2026. Of course, always bearing in mind that this part of the business is a little bit more exposed to large claims. And then, the comment was more about price increases, that price increases in the large corporate segment. That market is definitely a little bit softer. So it's not reasonable to believe strong underlying improvement, but that's not -- that's absolutely not the same as saying that it will be a drag. We continue to expect solid profitability on the large corporate side. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Mirko Hurmerinta: All right. Thank you very much. That concludes the call for today. Thank you for listening in.
Operator: Ladies and gentlemen, thank you for standing by, and I'd like to welcome you to Banco Santander-Chile's Fourth Quarter 2025 Earnings Conference Call on the 5th of February 2026. [Operator Instructions] So with this, I would now like to pass the line to Patricia Perez, the Chief Financial Officer. Please go ahead. Patricia Pallacan: Good morning, everyone, and welcome to Banco Santander-Chile's Fourth Quarter 2025 Results Webcast and Conference Call. This is Patricia Perez, CFO, and I'm joined today by Cristian Vicuna, Head of Strategy and Investor Relations; Lorena Palomeque, our Economist. Thank you all for joining us today as we review our performance and results for the fourth quarter. Lorena will begin with an overview of the economic environment followed by Cristian, who will walk you through our strategic priorities and fourth quarter results. We will then conclude with a Q&A session. Lorena Palomeque: Thank you. Throughout 2025, Chile's macroeconomic environment continued to improve gradually after several years of significant adjustments, inflation maintaining a clear downward trend and continued converging towards targets, which allows monetary policy to move away from a clearly restrictive stance. As a result, financial conditions became progressively more supportive, helping to stabilize economic activity. Here on Slide 4, we can see the regulatory and policy environment. A key development in 2025 was the implementation of the mortgage subsidy law, aimed to lowering effective borrowing costs and supporting the recovery of housing demand. This measure is particularly relevant in a context where affordability constraints and higher interest rates have significantly affected mortgage origination in previous years. While the impact is gradual, it represents an important step towards reactivating a strategic sector for the economy. In parallel, there were important advances in the regulatory modernization agenda. Progress on the fintech and open finance law established the foundations for greater asset portability, a stronger competition among financial institutions and increased innovation in digital financial services. Over time, this framework should enhance efficiency, improve customer outcomes and support the development of new financial solutions while maintaining appropriate risk management standards. In addition, initiatives such as the sectoral permits law are designed to simplify and eliminate redundant regulatory approvals. By reducing administrative complexity and execution risk, these measures aim to lower barriers to investments and accelerate project development. Together with a continued focus on fiscal adjustment and spending efficiency, they contribute to a more predictable and sustainable policy framework. The new administration will assume office in March 2026 with an agenda that includes 3 economic policy initiatives that may provide additional stimulus to economic activity in the period ahead. Based on public communications, we expect an emphasis on large-scale investment projects alongside efforts to simplify permitting process and technical requirements in order to reactivate key sectors of the economy. These measures could have positive spillovers for construction activity, household supply and private investment more broadly. Another potential initiative is a reduction in the corporate tax rate. Currently, Chile's corporate tax rate stand at 27% and President-elect, Kast has indicated an initial target of reducing it to 23%. This would help improve competitiveness and attract domestic and foreign investment. Any such changes would likely be phased in over several years to mitigate fiscal impact. In parallel, the administration has highlighted the importance of improving spending efficiency and strengthening fiscal sustainability through enhanced budget allocation and expenditure review processes. It is important to note that the implementation of these initiatives will depend on congressional approval. While the new administration is close to achieving a majority, legislative dynamics will play a key role in shaping the scope, timing and final design of any policy changes. As we can see on Slide 5, one of the most encouraging developments in recent months has been the improvement in confidence. Business confidence followed a steady upward trend and moved gradually into optimistic territory at the beginning of 2026, also differences across sectors persist. Commerce confidence is now firmly in positive territory, while construction, one of the sectors most negatively affected since the onset of the pandemic, has shown a significant improvement in recent months. This matters because confidence is a key leading indicator for investment and credit demand. What we are observing is an economy that is gradually shifting from a defensive stance towards a more constructive mindset, in which companies begin to reactivate investment decisions and households may start to incorporate this improved environment in their financial planning. On Slide 6, we can see how the economy has been performing and what we expect for the coming years. Chile remained on a growth trajectory despite a challenging external environment and a still fragile labor market. The economy is estimated to have expanded by 2.3% in 2025, driven by a recovery in domestic demand. In particular, economic activity benefited from a strong increase in investment driven by the execution of larger-scale investment projects in the mining and energy sectors. In contrast, residential construction remains under pressure, meanwhile private consumption recovered gradually over the year. Regarding inflation, after the application associated with the adjustment of electricity tariffs at the beginning of the year, the consumer price index followed a downward trajectory, closing the year at 3.5%. With inflation expectations well [ anchored ] in the medium term and a limited outlook, the Central Bank continued its normalization process, lowered the monetary policy rate to 4.5% in December 2025 and gradually approaching its neutral level. The labor market gained some traction over the course of the year. Also vulnerabilities remain. During the first half of the year, job creation was limited, but this shifted in the second half when employment began to increase. As a result, the unemployment rate closed the year at 8%, averaging 8.5% over the year, the same level as in 2024. For the next year, we expect labor market conditions to improve gradually as activity recovers. Looking ahead to 2026, inflation is expected to remain marginally below the 3% target, while an additional cut to the monetary policy rate is anticipated in the first half of the year, taking it to an estimated neutral level of 4.25%. Economic activity is projected to expand between 2.1% and 2.4%, broadly in line with trend growth before picking up in 2027. So even as global risk remains elevated amid geopolitical tensions and increasing economic fragmentation, the local outlook appears more constructive. At the domestic level, expectation of a more market credit policy environment, combined with regulatory simplification and a stronger focus on competitiveness and investment should translate into an improvement in business client. This environment is supportive of a gradually recovery in credit demand as confidence improves and financial conditions ease. Importantly, this recovery is likely to be more balanced and sustainable than in previous cycles, supported by stronger macro fundamentals and a more resilient financial system. I will now hand over to Cristian for the rest of the presentation. Cristian Vicuna: Thank you, Lorena. On Slide 7, we outlined our strategy to create value for all our stakeholders entered in our vision of being a digital bank with Work Cafe. Our focus remains on attracting and activating new clients, understanding their needs and deepening engagement. We continue to target more than 5 million clients by 2026 while steadily increasing our active customers. At the same time, we're building a global platform that leverages artificial intelligence and process automation to scale efficiently. This supports lower cost per active client and reinforces operational excellence. Our goal is to sustain an efficiency ratio in the mid-30s or better, reflecting a disciplined and digital operating model. We are also broadening our transactional and noncredit fee-generating services. This supports double-digit fee growth and best-in-class recurrence, defined as fee income over structural operating expenses. As our client base grows, activity levels continue to increase, particularly in payments. Our digital ecosystem encourages frequent and seamless interactions, strengthening engagement and loyalty. This growth is supported by strong CET1 levels, ensuring that expansion remains sound, responsible and aligned with regulatory expectations. Together, this strategy position us to deliver attractive value creation with ROEs above 20% and a dividend payout ratio of between 60% to 70%. On Slide 8, we can already see how our strategy over the last few years has succeeded in changing our income mix and creating a more efficient and profitable bank. Our key measure of value creation has been the strong growth in ROE, which has increased by more than 6 percentage points, more than double the improvement seen in the industry while maintaining solid capital ratios throughout the implementation of Basel III. This has been supported by a 4 percentage point improvement in efficiency compared to 1 percentage point for the industry, reflecting disciplined cost control and the successful execution of our digital transformation. At the same time, fee income has increased from 15% to 21% participation of our total revenues, driven by client growth and the expansion of noncredit services, including digital accounts, cards, asset management, brokerage and acquiring. Industry revenue composition has remained broadly unchanged. This shift has driven our recurrence ratio to the best-in-class levels now above 63%, well ahead of peers. We're very proud of the success of our study had so far. As you will see later on, we are enthusiastic about the evolution of our results in the coming year. Now in Slide 10, we will take a closer look at the results this year. As of December, the bank generated net income of CLP 1,053 billion, up 23% year-on-year. This resulted in a return on average equity of 23.5% and an efficiency ratio of 36%. Growth was supported by a 9% increase in fee income and an 8% rise in financial transactions. Mutual funds grew 7% and the recurrence ratio reached 63.7% year-to-date. Net interest income, including the adjusted income increased 11% year-on-year, while NIMs remained stable at 4%. Our capital CET1 ratio stands at 11%, and we are provisioning a 60% dividend payout to be paid in April next year. We also began 2026 with a successful $500 million 5-year 144A issuance at a rate of 4.55%. During the year, we received several important recognitions, Euromoney, Latin Finance and The Banker named us the Best Bank in Chile, while Global Finance recognized us as Best Bank for SMEs. We also strengthened our sustainability profile with our MSCI ESG rating improving from A to AA and our sustainability score improving to 15.4 levels. On Slide 11, we show the evolution of the quarterly ROE. We have consistently maintained ROEs above 21% even in quarters with lower inflation. In the most recent quarters, new variation was 0.61% and ROE reached 21.9%. On a yearly basis, net interest income increased 10.9%, driven by a lower cost of funding, which improved by approximately 100 basis points year-on-year. As a result, year-to-date NIM reached 4%. Slide 12 highlights the continued expansion of our client base and its impact on fee generation. We now serve close to 4.6 million clients with 58% active and approximately 2.3 million digital clients accessing our platform monthly. Current accounts increased 9% year-on-year, supporting 5% growth in active clients and 7% growth in total clients. This translated into a 15% increase in credit card transactions and a 7% increase in mutual fund volumes. Client satisfaction remains high across our products. We also continue to expand our corporate footprint, increasing business current accounts by 19% over the last 12 months, driven by simple business account and integrated payment solutions through Getnet. As shown on the right-hand table, higher client activity translated into 8.5% year-on-year growth in fees and financial transaction income with cards, Getnet, account fees and mutual funds showing strong momentum. On Slide 13, the income growth and disciplined cost control supported strong operating metrics. The efficiency ratio reached 36%, the best in the Chilean banking industry in 2025, while the recurrence ratio reached 63.7%, meaning more than 60% of our expenses are covered by fee generation. Operating expenses increased temporarily in early 2025 due to cloud migration costs. For the full year, operating expenses grew just 1.6%. In the quarter, total core expenses declined 1%, driven by lower administrative costs, reduced data processing expenses and the appreciation of the Chilean peso. Overall, we continue to deliver best-in-class efficiency and recurrence. At the same time, we are evolving our branch network towards the Work Cafe format, improving efficiency and customer experience supported by continued enhancements to our digital platforms. On Slide 14, we show an overview of our cost of risk and asset quality. As in prior quarters, cost of credit remains above the historical average. The bank has been actively managing different parts of the portfolio, increasing loan duration that is reflected in increasing the impaired loan ratio, while our nonperforming loans with 90 days over or more has stabilized. On Slide 15, we can see that the CET1 ratio reached 11% in December, far above our minimum requirement of 9.08% for December 2025 and demonstrating about 50 basis points of capital creation since December 2024. This was driven by our income generation in '25 and considers a 60% dividend provision of our 2025 profit and a 2% increase in risk-weighted assets. Our capital ratios are now fully loaded with complete implementation of capital deductions in the Basel III Chilean framework. In January of 2026, the regulator published the current Pillar 2 charges for the Chilean banks, where we were assigned a Pillar 2 charge of 13 basis points. This is a reduction from the original 25 basis points that were assigned last year, demonstrating our solid management. Of the 13 basis points of Pillar 2 charges, about 8% must be met with core equity Tier 1 capital. So on Slide 17, we show our guidance for 2026. For this year, we're expecting a GDP growth of a low 2%, as Lorena already mentioned, with a UF variation just below the 2.9% and an average monetary policy rate of around 4.3%. We anticipate a more favorable business environment this year, supporting mid-single-digit loan growth with a stronger rebound in the second half of the year. Despite the slightly lower inflation, loan growth and slightly lower rates will help to sustain our NIMs on 4% levels, while our fees and financial transactions should grow mid- to high single digits. This does not include any impact for a further interchange fee reduction, which is yet to be defined by the interchange fee commission. Our efficiencies should remain around the mid-30s, while our cost of credit should continue to improve gradually to reach around 1.3% for the full year. Based on these assumptions, our expectation for 2026 are for an ROE within the range of 22% to 24%, highlighting the strong profitability of Santander Chile. With this, I finish the presentation, and we can start the Q&A session. Operator: [Operator Instructions] Our first question is from Ernesto Gabilondo from Bank of America. Ernesto María Gabilondo Márquez: My first question will be on the economic and political outlook. So we have been hearing that there could be the possibility to reduce the statutory tax rate and also to reduce the credit cap limit. So any color on what you are hearing also will be very helpful. And then my second question is on your loan growth expectations. You were guiding between mid-single digit around that. Just wondered if you can break down in terms of how much we expect for each segment, also very useful. And for my last question is in the sale of Getnet. I don't know if you can provide more details on the implications behind that. I don't know if you obtain an amount of cash from this transaction. So any more details will be helpful. Cristian Vicuna: Thank you, Ernesto, for the questions. So I'll pass the word first to Lorena for the economic political outlook. And then Patricia will comment on asset expansion. I'll get the last question from Getnet. Lorena Palomeque: Yes. For the political and economic outlook, it's important to say that we correct growth projections for 2026 and '27 mainly due to -- for one side, improvement of copper prices process and better performance of trading process and of course, the dynamic of internal demand. But in the political side, we expect that the new government will have a transition period and the tax reduction could take some time. So we expect the effect more in the 2027 and in the second half of this year than in the short term. Cristian Vicuna: Right. Regarding the credit card limit discussion, we believe that, that's going to take longer to get discussed in Congress. So we don't expect anything going on in 2026 regarding that change. It will be welcome news for the industry and for the bancarization of the Chilean economy in general terms, but I believe it's going to take a while for that to get discussed. Patricia Pallacan: Ernesto, regarding the loan growth for this year, as Cristian mentioned, our guidance for this year is to be around mid-single digits, both for the industry and our bank. Assumptions behind this guidance are consistent with a macro that improves gradually within the year. First of all, on the consumer side, we are seeing steady growth in auto lending. The weaker demand still for installment loans that we are expecting to improve during the year. Regarding commercial portfolio, we already have seen a reactivation in investment in mining and better investment cycle together with recent improvements in confidence, as Lorena showed us. However, this has not yet translated into stronger growth. But during the year, this should boost commercial lending, especially in large companies and other parts of the economy as well and also help to drive higher consumer lending. And finally, regarding mortgages, we have also seen gradual improvement in the demand during the year, in line with better conditions in the Construction segment, also the mortgage subsidy launched in May last year. And going forward, we are expecting better trends, especially in the affluent segment. All in all, we think we are well positioned in terms of liquidity and capital as well to support a higher growth scenario. And in addition, we also think we benefit from the scale and synergy generated by being part of Santander Group, leveraging shared platforms and international market expertise from the global and local teams as well. Cristian Vicuna: Thanks. And regarding the Getnet question, so we had a shareholders meeting last week that considered an offer from Getnet Payments to acquire the minority stake of Getnet Chile in order to formalize a strategic partnership. The main goal is to strengthen the Getnet Chile position in a payments market that we believe is increasingly competitive, both technologically and requiring global integration. Bringing in a large international player will allow us to access those capabilities such as continuous innovation, scale, globally proven functions and the international network that opens new business opportunity for our acquiring operation. It's very relevant that we are keeping control and the majority of the Board, ensuring business continuity, indebtedness, strategic continuity while managing the business. And at the same time, we are adding a partner that accelerates growth and strengthen the efficiency and leadership for the next stage that we're seeing on the market. So we think this is a decision to strengthen Getnet's future and create value that will benefit all shareholders. Regarding the Construction, included an initial payment of CLP 68 billion and a service agreement under which Banco Santander provides infrastructure, staff equipment and data processing to sell Getnet solutions. And Santander will receive -- Santander Chile will receive the equivalent of 10% of the net operating revenues for the next year with an automatic extension of that contract for additional 3 years. So all in all, we assess about 65% to 70% of the total net income of Getnet will go straight to Banco Santander Chile. So the impact in terms of P&L is negligible. And well, we had the meeting last week. So the transaction was approved with -- the quorum was very close to 95% of total shares, and it was approved by close to 87% of the participant. Out of those, 29% were minority shareholders and the majority of the minority shareholders voted in favor of the transaction. Change in regulation requires that all shareholders must vote on the shareholders' meeting to achieve the quorum required by the law. So that's why the group also was forced to vote, but we had a very strong support from the minority base of shareholders. So that's pretty much regarding Getnet. Operator: Our next question is from Lindsey Shema from Goldman Sachs. Lindsey Marie Shema: Cristian and Lorena, just first, your 2026 guidance implies a slight improvement in cost of risk. Just want to hear where you see that coming from and your projections for asset quality throughout the year? And then my second question is just we saw expenses falling year-over-year in this fourth quarter. And you mentioned some efficiency improvements you've been doing that can lower your efficiency ratio long term. So just wanted to get some more color on improvements you've been making there and how you see expense growth progressing going forward? Cristian Vicuna: Thank you, Lindsey, for your questions. Regarding risk, well, 2025 was on the neighborhood of the 1.4% cost of risk for this operation, and we are expecting that to improve to levels of 1.3% area. We did a relevant job in terms of improving NPLs in the commercial portfolio last year. And apart from the agro sector, we don't expect many, many new pieces of information from that part of the portfolio. So all in all, we are seeing a more sustainable and controlled cost of risk looking forward. In terms of -- we saw a slight pickup, as I already mentioned, in December figures due more to seasonality and the start of the summer holidays that put some pressure on the collection teams by contactability, but nothing that we are seeing a very concerning. And at the same time, the mortgage portfolio, which has been increasing in [indiscernible] is not going to pass through as cost of risk, and we expect this to start improving this year gradually. It's going to take a while because the judicial process of collections is taking longer. But all in all, we don't expect this to pass through to cost of risk. So that's why we are more comfortable guiding a slight improvement this year. And to your question on expenses, the way to look at this is that we aim to control the growth in our expense base by trying to deliver inflation expansion or inflation plus 1%. That's what we're seeing in the long term as an internal target. We are addressing this through a strong transformation in our technological platforms, improving efficiency, getting rid of routinary tasks that can be avoided and implementing new solutions and new technologies, and we are delivering some initial things on artificial intelligence that are probably going to allow us to sustain on these trends. We are not expecting very relevant changes in the network size of us. So just slight modifications, maybe opening 1 or 2 new formats with Work Cafe and renovating some part of the legacy branch that we still have some 90 branches over there. But to your point regarding the improvement in the final part of the year, well, there was a relevant peso appreciation. And about 25% of our administrative expenses are linked to euro and U.S. dollar currencies. So that's also explaining a little, but it's also part of the whole story of how we are trying to achieve the best levels of efficiency in the industry. So thank you. Operator: Our next question is from Yuri Fernandes from JPMorgan. Yuri Fernandes: A quick one, just on the guidance, just checking if the guidance includes the reduction on Getnet stake. I know it's small, but if you can remind us what is the relevance for ROE and especially for the non-NII guidance this year, I guess you grew your fees closer to high single. I think the guidance shows a little bit of a slowdown, but not sure if this is Getnet or maybe [ mutual ] funds that were also very strong, maybe being a little bit more normalized. So just trying to understand if the guidance reflects Getnet. I understand you still need to deconsolidate. So maybe you still consolidate 10% of Getnet for a few more quarters, but just trying to get some color on this. And on your presentation -- go ahead, and I can ask another one later. Cristian Vicuna: Okay. So well, regarding your questions, and thank you for that. In terms of the fee figures, you're not going to see any changes. Well, you're going to see an increase in the final part of the P&L in the minority stake in the net income assigned to minority shareholders, right? So that's where you're going to see an increase in that line that will be an effect that it's less than 1% of the total P&L of the company through the sale of this subsidiary. So it's nothing that's going to be seen as material in terms of ROE. Well, consistently, this should be on the neighborhood of 20 bps of ROE. So we are not changing guidance for this matter. It's included in the 22% to 24% range. So do you have another question, Yuri? Yuri Fernandes: Yes. No, no, that's clear. So basically, it's -- and sorry for that, it should be a minority interest, the delta here. I have just another follow-up on the SME business. On Slide 13, Cristian, you showed the EPS of SMEs and you point to 37. And you are the first here, probably you are the best one. But 37% looks a little bit low for NPS. So just checking if the number is correct and if this is the real number, if you're happy with this number or if you are working to improve, that would be... Cristian Vicuna: No, in general terms, SME NPS in the local industry, it's slower, slower and it's in the area of the 33% to 37% range for most of our peers. We track this with the same methodology consistently along the years. So nothing has changed on that side. We are trying to get to levels closer to 50%, but the reality of the industry here in Chile is that, all in all, NPSs in the SME area are to be lower. Yuri Fernandes: Okay. And my final one here, just a broad one regarding the parent company and Santander Chile. Do you see any other business area where there could be synergies and optionalities similar to Getnet? Just trying to understand if we could see further partnerships like on investment bank. We already have, I guess, insurance, right, and asset management. But just trying to understand if there are other areas that could be synergies with the parent. Cristian Vicuna: So all in all, as a group and their operations in Chile, I think pretty much most of the pieces are in place. So you mentioned Santander Asset Management. We already have and we acquired from a previous partner a couple of years ago. And actually, we control, too, the Santander Consumer Finance operation. That's another subsidiary of the bank. We, of course, lever the partnership with the Santander Group through all the alliances that we can show as a very, very effective and with great results in terms of the amount of new brands that we cover through the auto lender. So that's a good example of one area where we are tapping into the group resources. And the other part is a direct acquisition that the Santander Group did in Chile and that was announced in January where the group purchased an annuities company from principal. This is subject to regulatory approvals, and we expect those to -- that operation to be fulfilled by mid this year, so very close to third quarter. And well, there are some natural components between annuities companies in the Chilean market and banks as we banks tend to originate longer. We have a very good capability of originate longer assets, but it's getting more expensive for us to store them. And those assets are quite interesting for companies like the one that was recently announced to be acquired. So I think that's pretty much the state of the art. We don't expect many moving parts going forward and the group needs to integrate this new acquired operation into the area of control. So that's what I... Yuri Fernandes: No, no, that's clear. On annuities, can the local banks on annuity companies in Chile or you can't... Cristian Vicuna: No, no. Capital from banks have not been completely isolated from annuities companies. So we have to remain -- we have to control those business completely separate, and that's why it was the Santander Group that purchased that company. Operator: Our next question is from Neha Agarwala from HSBC. Neha Agarwala: We are hearing about some discussions around removing interest rate caps for consumer lending. And given that you've been historically very strong in the mass market segment, how do you weigh that opportunity? And also if you have any clarity as per that discussions? And how could that impact Santander Chile? I'll ask my next question later. Cristian Vicuna: Thank you for the question. Interest rate caps have relevant limits on the ability in Chilean banks to charge interest rates to customers. So credit cards are capped at 40%, and the typical auto lender will be lending on the area of 20% to 22% and so on. So it's a sign on different sorts of products, sizes of the credit and durations. There is an early discussion regarding whether the system needs amendments on the definition of interest rate caps. But it's too early to say when this discussion is going to go from the government to the economic commissions in Congress to be discussed. So we don't expect pretty much this thing getting approved this year. We think it's too early to tell. We need first for the Kast administration to take office. And then they will announce what the schedule is going to be like and what their priorities are going to be. We believe that it will be or it would be good news in terms of general bancarization access, especially for the part of the mass market. But we don't expect news to come on that front too soon. Neha Agarwala: Perfect. Very clear. And regarding your loan growth expectation, we are expecting the Kast administration to take office. And after that, maybe we could see a pickup in investments in general, which could improve the sentiment and the loan growth. Is that scenario already incorporated into your guidance? Or could that pose a little bit of upside risk, mostly in the second half? Cristian Vicuna: So pretty much what we're seeing is a low 2% year, so something 2.3% in that area. So 1x that plus inflation places you on the low 5% area. We're expecting something between 5% and 6% for the year. Remember that Kast administration will take office in March 11. So we don't expect structural changes to be made at least until the second quarter, maybe more skewed to the final part of the year. So the pickup that we are expecting in terms of growth for the economy in general are more skewed to the final part of 2026 and into 2027. Neha Agarwala: And you account for that in your forecast, right? Cristian Vicuna: Yes. Yes. That's what we are considering in the forecast. Operator: [Operator Instructions]Our next question is from Ewald Stark from BICE. Ewald Stark Bittencourt: I have 2 questions. The first one is if you can provide any details regarding your expectations for risk-weighted assets density for the year-end? And the second is regarding sensitivity to inflation. It seems like sensitivity to inflation has decreased based on monthly financial results. Those are my 2 questions. Well, what do you expect going forward regarding net income from indexation units relative to inflation? Patricia Pallacan: Okay. Thanks, Ewald, for your question. Regarding the risk-weighted assets for this year and the density with a mid-single-digit growth in loans during this year, we are expecting consistent with that scenario, a growth in risk-weighted assets around 2% for this year. That will keep the density within this level, assuming that the proportion of the growth is what we already mentioned in our loan growth projections, right? So that is our base scenario for RWAs. Regarding inflation for this year, we are considering an average exposure to inflation of around CLP 8.5 billion, which means around 15 basis points of sensitivity to every 100 basis point inflation, right? So it is true that by the end of the year, last year, we reduced our exposure given the low CPI rate that we have. The average for this year will be around CLP 8.5 billion in our base scenario. Cristian Vicuna: Could you clarify what you mean by the net income from indexation? Ewald Stark Bittencourt: Well, if you decompose net interest margin -- well, the NII, the NII is composed of 2 main elements, interest and the component of inflation, yes. Cristian Vicuna: Yes. So regarding the readjustment part of the NII that you're mentioning, as Patricia already mentioned, we are carrying about a 15 basis point sensitivity per 100 percentage -- 100 basis points of inflation movement, right? So that's pretty much in the area of the CLP 8 billion along inflation. So pretax, it will mean about $80 million per 100 basis points of inflation. Ewald Stark Bittencourt: Perfect. And let me check if I got this right. So you expect risk-weighted assets density to mildly decrease throughout the year because they are going to increase by 2%, while assets will be growing by close to 5%, given your expectations for loan growth? Patricia Pallacan: Yes, right. If we assume that -- if we assume that our density maintained during the year, an increase of 5% in loan portfolio will imply around 2.5% of risk-weighted assets growth during the year. Operator: We have a follow-up from Yuri from JPMorgan. Yuri Fernandes: Just going back to the Getnet, a curiosity I have here regarding the appraisal report, and I know it's not the company, right? But some of the appraisals, they had a little bit -- in our view, a little bit conservative revenue CAGRs ahead, right? I guess revenue for Getnet should be growing 5% until 2035, like net income decreasing minus 15% CAGR until 2035. Just to understand like is this the view of the company? Like should we -- when we see your fee guidance and this thinking about the total for Getnet, should we assume like even more competitive environment, changing industry, this is the reality, like should Getnet grow revenues at 5% going forward? Cristian Vicuna: So well, you mentioned -- well, that's for the long run, in terms of whatever was in the different documents displayed some stronger still growth in the first 2 years. But actually, to your point, we believe that the industry is facing relevant transformations, right? So on the one side, some very -- some recent news have talked about how Transbank now can renegotiate all the fees structure that were locked in by some court rulings. So that will create a relevant pickup in terms of competition from the largest player in the industry. At the same time, we've seen some M&A happening of Itau and the initiation of the acquiring operation of Banco de Chile. And as such -- and we also saw the Chilean Central Bank authorizing the chamber of payments that will provide functionality for instant payments in a similar way to PI for the start-up environment. And all of this is on the umbrella of upcoming changes in the regulation that are already approved such as the open finance law. So we are seeing a super intensive change in the way the industry is configurated. We are seeing a relevant increase in competition. And as such, we expect that the economic drivers that were part of the success of the growth of Getnet for the last 4 years are changing as we speak in terms of -- now we'll be competing with more and more relevant competitors and not only an incumbent that had the hands locked by some court rulings. This is why we believe that it was the right time to incorporate the strategic partnership with PagoNxt to support the efficiency and the growth prospects of Getnet through the capability to enter into some cross-border transactions that we can get through this partnership. So that's pretty much the main key beliefs that are behind the transactions. And that we have been seeing materializing in the last 2 to 3 months. Thank you, Yuri. Yuri Fernandes: No, no, that's a good answer, Cristian. So basically, maybe the near term is still doing fine, but competition is building up. So who knows what's going to happen, but it's likely that maybe we're going to see a more challenging environment for Getnet. I guess that's the summary, right? Cristian Vicuna: Yes. Yes. That's it. Operator: It looks like we have no further questions. I will now hand it back to the Santander Chile for the closing remarks. Patricia Pallacan: Thank you all very much for taking the time to participate in today's call. We look forward to speaking with you again soon. Operator: We'll now be closing all the lines. Thank you, and have a nice day. Lorena Palomeque: Thank you. Cristian Vicuna: Thank you.
Operator: Welcome to CellaVision Q4 Report 2025. [Operator Instructions] Now I will hand the conference over to CEO, Simon Ostergaard. Please go ahead. Simon Østergaard: Thank you very much, and thank you very much out there for dialing in for CellaVision's quarterly report Q4 2025, which obviously also includes the consolidated results from the entire 2025. A lot of good things have happened. And first of all, I want to formally welcome our newly appointed CFO, Monica Jonsson, who is with me today to participate and, of course, explain our business. Monica has been with us since autumn, and she was formally appointed CFO with CellaVision on December 12. So that was the first good news. Hopping into the quarter in brief, the Q4 in brief, we have entitled our quarterly report as a solid quarter driven by strong performance in Americas. So it's particularly in Americas. However, we also see a pretty strong performance in EMEA, while the quarter has been somewhat soft in APAC, and we will unfold that throughout the -- today's call. We landed the quarter with net sales that increased by 5.6% to a revenue stream of SEK 197 million, which translates into an organic growth of 12.2% given our headwind on the FX of minus 6.6%. So double-digit growth throughout this quarter. This translates into an EBITDA contribution of SEK 65 million, equivalent to 33 percentage points. In terms of the business, we will go into the business and explain both our P&L, our regional split, give some highlights there and of course, also cut it across the different product families. But I also want to give a little bit of insight as to our progress on our strategic direction. We accomplished a key milestone by getting CE Mark for our new applications for bone marrow aspirates. So this is a Class C product that is now registered according to the EU IVDR, which allows us to start launching the product this year or pretty much in the quarter we're in. We can talk more about this a little bit later. We have also -- as we've noticed in our latest report, we've also been working on a significant software upgrade for our hematology instruments. This has been successfully validated at a customer site. So this really allows to upgrade our fleet with a modern and user-friendly interface, some new features, including also higher speed on the new DI-90 -- DI-60s that comes up. Furthermore, I also want to emphasize that the -- since we are coming to the year-end, the Board of Directors proposes to increase our dividend from SEK 2.5 per share last year to SEK 2.75 per share. So this is what will be proposed at the Annual General Meeting taking place on the 28th of April. If we zoom in on the financial development for Q4, I've mentioned our revenue. And then if we hop in -- so on the left-hand side, we have the quarter we are reporting today, the comparable quarter, and then we've consolidated the entire full year report with a compare from 2024 to the very right-hand side. For the quarter, our gross margin was 67%. So a little bit lower than normal, a little bit hit by software, especially from APAC, but also FX also takes us down a little bit here. Operating expenses landed at 39%. And EBITDA, I've talked about the SEK 65 million that is 33%, which is above our target of 30%. And then we -- on the R&D side, which is really very strategic for us, we've increased our R&D spends over the -- within this strategic period. So we're at 19% and up against the compare, it drops from 22%. So it's actually SEK 37 million in total R&D spend. But maybe I can ask you, Monica, to comment on our capitalization and also -- maybe also our principles for capitalization that might be appropriate. Monica Jonsson: Sure. So during the quarter, we capitalized SEK 15 million in R&D costs. And as you can see then that we capitalized more or less half of the R&D spend. And what is not capitalized is mainly related to projects that are in an early stage and also product care. And you will see during 2026 that we will start capitalizing some of the projects that are maturing and also start depreciating some projects that we are launching products such as bone marrow. Simon Østergaard: Excellent. So the -- so on the cash flow side, operating cash flow of SEK 51 million, so slightly increased with SEK 5 million versus our comparable quarter and a total cash flow of SEK 30 million. So going from the operating to the total, the majority of that is really the cash that we invest and capitalize in R&D. That's what sits there. We have low -- very low financing activities. So we have hardly any debt, and we end the year with a balance sheet that contains a cash position of SEK 180 million -- SEK 188 million, sorry. All right. Yes. So I could say that here, we are also showing the full year results. So we landed the plane or the year of SEK 759 million, which is an organic growth of 9% over the year and a gross margin of 68%. And that provides a total cash flow of SEK 40 million. So obviously, we've paid out dividends, and we have also capitalized a considerable amount of R&D cost of SEK 67 million throughout the year. So that is the main components that brings us to this total cash flow of SEK 40 million. Right, let's move on. Let's try and look at the regional performance across the 3 regions, Americas, so North and South EMEA, including the Middle East and APAC. So our performance was very strong in America, in fact, all-time high with SEK 90 million. That is an organic growth of [ 50% ] throughout the quarter, also 50%, but then the headwind of currency effects. So organic, 58%. Very strong momentum in Americas, especially in the U.S., which you may also -- by Sysmex in their last couple of reports, Sysmex being our main strategic partner. So that is kind of the business that is elevated as [Technical Difficulty] our joint momentum. It is fair to say that it's extremely high, and that is also due to the presidential election in [ Q4 this year ]. I think that's a fair comment to provide the full picture. For EMEA, we had -- there, we also saw an increase in both in small and large systems. And we obviously also had a contribution from reagents, but they actually impacted negative this quarter. There is -- that is a euro business. So we are primarily [ impacted by ] currency. And then there's a little bit of phasing on there. But I can talk more to reagent in a second. On APAC, we landed sort of in -- we -- typically in APAC, we have high fluctuations depending on whether we ship to APAC, in particular, China or not. And here, we landed in a pretty reasonable quarter, SEK 28 million. However, it does represent an organic decline or growth of minus 40%. And that is also due to a strong comparable quarter. You may recall that we had a, let's call it, a one-off tender delivery for New South Wales in Q4 last year, which is why we organically declined so much because it's a reasonable quarter where we've seen deliverables going both to China and to Southeast Asia, a little bit spread. So -- and then we continue to see growth of the -- our expansion into APAC throughout this -- a lot of countries, of course, smaller volumes, but we are building our position with the RAL stains across APAC. And if I cut the same numbers per product family, instruments, reagents, software and others. Here, you do see that our total instrument revenue was SEK 126 million, and we talked about the U.S. and the other elements. But it gives us a growth of 8%. For reagents, we actually were flat or minus 2% on the total business -- on the total business for the quarter, which translates into 6% growth on the year. So organically, around 9%. EMEA decreased slightly. And as I said, that is primarily currency. I would say though that we -- our hematology, which is the growing portfolio we have, what we -- what does not relate to the hematology labs and then the hematology reagents. Hematology reagents, which is the bulk of the business, like 2/3 of the business, it grows 10% for the majority of it, which is for Europe. And in APAC, where we've started to expand with our hematology reagents. There, we also had solid growth, but though smaller numbers. But we grew on the quarter from SEK 1.4 million to SEK 2 million with -- up against the comparable. And that pretty much more than doubled our revenue in APAC on the year. For software and others, we had declining growth for -- I should say software and others. It contains both spare parts, of course, software and also consumables such as oil, but it also entails the currency effect, which impacted our numbers considerable from a comparable position here. Specifically on the software, we were low in the compare and there was a major contribution from APAC due to the large tender we provided last year, where we also -- that also entailed a considerable amount of software. So this is also why we see the decline. Key takeaways, as we say, the fourth quarter is driven by strong performance in Americas. We said we landed our year with 9% organic growth. And in fact, if I really look at where we work and how we work with our strategic partner organizations, our core strategy, it works. We are growing double-digit with these -- both partner organizations across the world. However, we have some product -- some product lines like non-hematology other products that has taken our organic growth a little bit down. But our direction is paying off. And that also -- that is also consistent with -- that also applies to our Power of Focus strategy that we communicated in 2022. Here, we invested a very ambitious investment program in R&D and innovation. And one of the levers was a new lever of entering what we call the specialty analysis arena. So more applications to assist the hematology labs out there to diagnose blood-based disorders. The first product is out. That is the product for bone marrow, as I initially said. So we do believe that now we can start building the market for assisting the lymphomas and leukemias out there in the hematology lab and adjacent labs where they utilize this hematology solution or this bone marrow solution. So we are starting to launch. First, campaign-wise, there will be training of our partner organizations. There will be building of a funnel, and then there will be evaluations of -- and really for the health care professional to see how it assists their workflows. And then we do expect that we -- in the, let's say, the second half of the year, we will start seeing revenues from this product from Europe. And then we are, of course, also on that note, aiming for getting into the U.S., but more about that later. As mentioned also when we teed up the call, we have a major milestone in launching the software upgrade that delivers this faster and smarter workflow and cutting-edge user experience for the hematology labs. And actually for the new DI-60 systems, that is integrated with the hematology line of Sysmex. It offers an improved integration, but it also entails an improved throughput. So the number of blood samples that can be deployed will increase on the new DI-60s. So we believe we are well positioned to continue our journey in assisting the mid- and high-volume labs. So very important key takeaway is repeating back to our Power of Focus, where we in early 2020 -- or in spring 2022, we acquired the exclusive rights to -- IP rights to a patent portfolio that was invented by Caltech. And we have deployed and further developed our technology in our hands. And as you can see in the way we communicate, we're extremely confident that this will really support our next-generation hematology analyzers that are part of this major investment program that CellaVision has gone through and is going through. And furthermore, we are also very clear on our ambitions to expand and deploy our capabilities for adjacent areas. And here, we are also confident to say that we truly believe that the way we go about pursuing our vision of really pushing the evolution of microscopy, we have a disruptive microscopy solution in our hands. And we believe that, that is something we will continue to invest in, and we will also pursue future partnerships that can help us commercialize these technologies in the future. So with that, taken together, the -- I do believe we ended 2025 on a pretty strong note with 9% organic growth given everything that have happened. And I'm actually very proud of the team given the fact that we've done this with our existing portfolio, and we are seeing now that our innovation program pays off, and we are starting to start launching all these new opportunities, which we are very confident will be a profound platform for future growth. With that, we will close this session and enter the Q&A. Operator: [Operator Instructions] The next question comes from Ulrik Trattner from DNB Carnegie. Ulrik Trattner: A few questions on my end. First of all, and I apologize, I struggle a little bit with the sound, maybe it was just me. So it might be things that you already addressed. But if I can start off with the DC-1 and the DC-1 momentum, particularly in the U.S. And you sound like current trading and what you did see throughout Q4 was really improving. Is that something -- what do you derive that from? Are you seeing that there is sort of increased capacity from the labs to expand and invest versus last year or the reasoning behind the current sort of situation and demand flow? Simon Østergaard: No, fair. And thanks for your question, Ulrik. I think we see a momentum also given the softness we experienced a year ago, then gradually over the last half of 2025. We've seen positive momentum communicated externally by Sysmex and what -- how the market is operating on the large lab segment. And we've seen that translate into that also entails our solution, our integrated solution. And at the same time, we have seen the interest, let's say, come back on the DC-1. And I think what is happening, and this is also something we are really starting to position the targeted opportunities for the integrated health networks in the U.S. So there, having the labs that can digitalize the satellite labs, that is the value proposition. So there's one story around the workflow for the individual labs. But then what we are really seeing resonates in the U.S., because they are digitalized to a relatively high degree, that is attaching these IHNs or the integrated health networks to distant satellite hospitals. And this is where we believe there is a market that is, I shouldn't say untouched because we have certainly placed DC-1s, but the opportunities is much larger than what we have placed so far. Ulrik Trattner: That's great. And for the last few years, we have seen this prolonged order to installation trend. Has there been any shifts sort of in that being shortened here? Or is it still the same situation? Simon Østergaard: No, I think typically, from orders are placed, let's say, in the U.S., it is our belief and understanding that, that is pretty much a phase of 2 to 6 months. Then we have been in a situation where it probably was longer. And now it seems like we're somewhat back to that kind of up to half a year. And that's because hospital places the order with Sysmex, and then there is an installation project starting up. So that means that everyone, IT, et cetera, has to come together and then all the equipment, the cell counter, including CellaVision's cell morphology analyzer needs to be in place. So this is why from the orders of Sysmex to that, that is about this -- up to half a year. And then it varies. We saw the tender we talked about in Australia that took 5 years. So it does vary. There are deviations to this rule of thumb. Ulrik Trattner: And this -- you touched upon this now with sort of the software, I noted as sort of software and others in your report, had a bit of weakness here in Q4 affecting the product mix. And as you alluded to the sort of larger tender in Australia, and now you're rolling out an updated version. What to expect from that segment? I guess you would assume some big price increases for software heading into '26 versus '25. Simon Østergaard: Actually, that's not how we position this. We position this solution as part of the -- both the new DI-60s. So we want to be competitive and protect the installed base, also the replacement market. So this is not an upgrade where we charge. It's part of the DI-60 system. But what it does, it also allows the health network. So if you take a given hospital with the satellite hospitals, et cetera, they -- if they upgrade to this software version called 7.2, then all their entire fleet, including the old instruments, will all of a sudden be utilizing a new user interface with the improvements that we are launching in the software. So this is a way to really provide additional customer experience prior to our next generation coming out. So we have sort of considered that's a better proposition as opposed to starting a price, we would rather increase right prices when we come out with new hardware. Ulrik Trattner: Okay. So that would entail that there is no price increase of the DI-60 either. It's just... Simon Østergaard: No, there will be price increases on the instruments, but we will not sort of take the route of just charging for software. We believe we have a better -- we will capture the growth from the instrument placement instead. Ulrik Trattner: And then just an accounting question here and just to double check if my sort of maths about sort of aligned with yours. Because capitalized R&D historically has had an effect on the gross margin side. So I'm -- and now when you're rolling out the bone marrow application, I'm approximately at a 1 percentage point headwind on the gross margin on the back of starting to depreciate that. Does that sound fair? Monica Jonsson: Yes, that sounds reasonable. Ulrik Trattner: Great. Short answer, I like it. And then last question on my end before going back into the queue. If you can provide some more granularity on the rollout of the bone marrow application and the methanol-free reagents throughout sort of '26? And going to the bone marrow, is there -- I know that you say that you will do a launch here in Q1, but is there any conferences here in the near term where you're going to do more of a broad-based launch as well as how does the training of Sysmex personnel going? Simon Østergaard: Great question. Yes. So for the bone marrow, you're absolutely right. We'll start sort of the SoMe campaign in this quarter in March. We will -- we are in the process of training the Sysmex reps. And once that is done, then we will, of course, start to position our solutions in the -- in Europe across the different countries. There will be demos in the different individual labs, and then it's commercially available. With regards to conferences, we'll do the big launch at the ISLH later in May. That's in May. So that's the big conference where we sort of give the splash. And then we will also be present at [ ACP ] later in the year. But ISLH is the biggest launch sort of event. Coming back to the quarter here in Q4, I just want to express my appreciation also for our partner organization who has been with us on site here with Sysmex, where we have presented the bone marrows and then we actually obtained the bone marrow CE Mark before Christmas as opposed to Q1 as we had pointed. But that is kudos to the team for actually driving this to be in our hands a little bit earlier, but also to Sysmex who are really welcoming this significant product. On the methanol-free, I can also --you -- right, you also asked about methanol-free, right? Ulrik Trattner: Yes. Simon Østergaard: Yes. The story around the methanol-free stain is that -- so we've been selling our -- our reagent revenue is primarily the classic stains. And now we have this methanol-free stain. We've had it for years, in fact. But now there is an opportunity for the methanol-free to be running on the SP-50, so the smearing and staining device of Sysmex. And that has opened up for the opportunity to globalize [ methanol-free ]. So this is -- this will be available. It is available in Europe. But this is also the opportunity to enter the U.S. where we have hardly been selling any reagents. So this is obviously the plan. We are currently in the U.S. We are current, let's say, tweaking the protocol, so the actual stain resembles what is preferred in the American market, right, right, Giemsa stains. So it's still methanol-free, but there is a little bit of trick going on there, and then we plan to launch it this year. So this is the plan together with Sysmex. That is the game plan for to get into Americas or the U.S. Operator: The next question comes from Ludvig Lundgren from Nordea. Ludvig Lundgren: Yes. So I have a few, and I'll take them one by one. So starting off on order intake, I believe you said you have a very strong order intake in Americas from the networks. So I just wonder if it's possible to, in some way, quantify the book-to-bill here in the quarter and whether the strong order intake, is it fair to expect this to translate to strong instrument placements also in H1 '26? Simon Østergaard: Yes. So in general, there is a momentum in the Americas and especially in the U.S. So it's early days, and we don't typically disclose our order book for the current quarter. Having said that, I see no reason why the momentum for Americas should vanish. So I think we're in a reasonable solid situation there from what we hear from the market situation. Ludvig Lundgren: Okay. Great. And then I had a question on gross margins as well, a bit of a follow-up. So softer here in the quarter. And I just wonder like if it's possible to quantify how much of this relates to FX and how much of this relates to the softer software sales and the weaker product mix from that, like in rough terms would be great. Monica Jonsson: Yes. Comparing to last year, it's a lot of FX and somewhat product mix. Exact relation here, I will not disclose, but a little more FX than product mix. Ludvig Lundgren: Okay. Great. And then a final one from my side on gross R&D. You talked a bit about it here, but I just wonder like it was down to SEK 37 million, down 9% year-over-year, I believe. Like why was it down this quarter? And like how should we think about this R&D -- gross R&D level looking into '26? Is SEK 37 million a reasonable level to extrapolate? Monica Jonsson: Yes. Actually, we see some decline in R&D spending in Q3 and Q4 versus last year's Q4, Q1 and Q2, and that is mainly due to the phase of one of our biggest projects where we had a lot of buying of consumables during Q4, Q1 and Q2. And then due to the phase of the project, we do not have that in Q3 and Q4. And then also, we have released some consultants that worked on the software upgrade project after the Q2. But what we see going forward, we will see continued high R&D costs actually in 2026. We have many interesting projects that we are working on. So I would expect more in line with Q1, Q2, Q3 levels also during 2026. So Q4 is not significant what you will expect for the next year -- for this year. So more in line with the quarters. Ludvig Lundgren: Understood. Yes. And just a follow-up on that, like what is a fair capitalization rate to expect on these projects then in '26? Monica Jonsson: Yes, more or less at the same level. We'll see. Ludvig Lundgren: Higher or lower. Yes. Okay. Simon Østergaard: Probably the same level. The projects that Monica elaborated, some of them will be early stage, which means that we don't capitalize. And then some of them will actually make it throughout our development model, and they will cross the line and start being capitalized. So there's a little bit of balance. Monica Jonsson: And then we have a few that were capitalized up until Q4 that are now depreciating. So that is then evening out. Simon Østergaard: Yes. Operator: The next question comes from Simon Larsson from Danske Bank. Simon Larsson: Yes. I think most of the questions have been asked and answered already. But maybe just to clarify, did you say that we should expect, Simon, some contribution from the bone marrow application in EU here during the fiscal year in H2? Was that correct? Simon Østergaard: Yes. It's -- so we're building up the funnel, but we do expect that -- so the question is how long time does it take for the labs to evaluate it before they place the order and we ship to Sysmex. However, we are positive that we should start selling and see invoices, so to speak, in the second half and in particular, in Q4. That's our ambition, definitely. Simon Larsson: Yes. Yes. I think also this was touched upon before, but on the methanol-free [ reagents ], obviously now available in EU with Sysmex. Is this more also a second half thing? Or could we see something here already in first half? Simon Østergaard: Yes. I think for EU, I think the methanol-free stain represents a growth opportunity in general because it's a better value proposition. However, given the market share we have on the route and there is markets where we have a very low market share where there's plenty to do and there's markets where we have very high market share. But we will cannibalize a little bit in Europe. So that's my point that we may transfer certain classic stain customers to methanol-free in Europe. In the U.S., we expect that we will gain share as we start pushing this because there, we have 0 market share. We own the market together with Sysmex, but reagent-wise, this is when we start with the methanol-free. So there, we will gradually gain customers as they convert their engines and the line is down, then we expect to place methanol-free stains gradually. That contribution for 2026 is probably somewhat limited because it's also depending on the launch and then there is a phase where the customer would like to try it out. So therefore, we would be a little bit conservative on estimates for contribution from methanol-free in the U.S. I hope that explains the situation, Simon. Simon Larsson: Yes, yes, definitely. And could you remind us roughly the difference in price between the methanol-free stain and the legacy stains from RAL, just in the case of cannibalization, I mean, what's like the net effect can be? Simon Østergaard: No, I'm not going to go to the pricing piece also for competitive reasons. But there will be a little bit of a lift. But I would say -- remember, this is -- the hematology reagents are a little bit commoditized. It's high volume, but it's not sophisticated chemistry. So we will raise the price, but it's -- you cannot go for extra sort of top margins in this market. Simon Larsson: No, no, that's understood. My final question relates to the FPM technology. You sound quite upbeat in the CEO letter, I think, around it and the prospects. So I was just a bit curious to learn about sort of what a potential partner could look like? Do you expect that to happen within the hematology market where you are present already today with your current existing partners? Or could this also be a new partner in an adjacent area? Just high level, if you could say anything about that. Simon Østergaard: No, I think, yes, high level, I'd say definitely the position we have where we lead the hematology space, we are very confident, and I'm glad that I transmit the positive and confident attitude because that's what we have. So we are very -- we are now at a stage where we are confident to protect and grow our business in the hematology arena. The adjacent areas, this is where we've also, throughout 2025, matured the technology to a level, so that we've talked about cytology, we've talked about pathology. We're confident that we can actually build instruments for those segments. But there are other adjacent areas in the clinical space and in the research space, where we believe that the FPM technology, given the image quality, given also the speed, but the depth of focus. And there are a number of features where we believe we can disrupt those segments. Those will be players in the microbiology arena, in the hematology/cytology -- sorry, in the pathology/cytology arena and in the life science space. So now we're in a situation where we can engage more, let's say, fundamental and more substantially with partners because they can see what we can, and it's not just IP rights that we have acquired. So that's why we are pushing our communication a little bit further because we are confident that we sit on a disruptive microscopy solution here. And of course, we are looking forward to disclose partners or improvements as we go along. So yes, so that's, of course, our goal. Operator: The next question comes from Christian Lee from Pareto Securities. Christian Lee: Yes. I have one follow-up regarding the order intake. You mentioned that you reached record levels in the quarter from larger integrated networks in the U.S. Did you deliver most of it in Q4? Simon Østergaard: Yes. Yes, that may be worthwhile sort of communicating that the order intake, it is also shipped. And then we believe we still have momentum for Americas. So yes. What you see is what is shipped, that's what we booked for Q4. So that is correct. Christian Lee: All right. But do you see any risk of inventory buildup impacting Q1 in the U.S.? Simon Østergaard: In the U.S., I'd say roughly speaking, maybe a little bit for smaller instruments, but not necessarily for the larger instruments. Christian Lee: All right. And could you please give us some comment on the outlook in the other regions regarding the instruments? Simon Østergaard: Yes. I mean, I think that's along the lines of what we've said with the momentum we've seen in the different regions. So we believe that translates into orders. Now the business is fluctuating a little bit. And for Americas, we have relatively good visibility. It's a little bit harder for us for Europe because it's a consolidation of orders that comes from multiple countries via [ separating ] via the supply chain of Sysmex and then it comes to us. So there, we actually have less visibility. What we hear is that there is -- this is what we communicate and we have seen it over the last couple of years that there's a fundamental interest and -- for our solutions. And we see no reason why that shouldn't stop. And then, of course, we may have some fluctuations per quarter. But fundamentally, we believe we're in a pretty good situation also now that we are launching new software, et cetera. That makes us believe in the future. APAC, I would say we think we have good opportunities, incremental business in Australia and New Zealand. There could be some opportunities also in Japan. And then as you know, we are now manufacturing our integrated system in China. So that allows us to participate in domestic tenders where you have to be a domestic player and our products is registered in China as a -- being a Chinese -- coming from a Chinese legal entity. So over time, we still believe in China. However, we also know that this is where our competitive -- our competitor is strong. So we're up against that in China. But it's a huge market. So we believe that there's certainly a position for Sysmex elevation out there. Operator: The next question comes from Ludvig Lundgren from Nordea. Ludvig Lundgren: Yes. Just another follow-up on the reagent side. So that was a bit weaker in Q4 when comparing to Q3, but Q3 was, of course, very strong. So I just wonder like is an average of this a fair assumption going ahead? Or like what would you say is the run rate of reagents currently? Simon Østergaard: No, I agree. I think Q4 was a little bit weak, both on the hematology side, even it was 10% organically, but we were flat, if not negative on the non-hematology proportion. So we had a big tender where we expected -- we've been working on that throughout the year, where we didn't ship products. So we were a little bit negative on that. So I think Q4 stands out as somewhat of a soft quarter on the reagents, and we expect it to bounce back and especially with the growth coming from the hematology where -- which represent approximately 2/3 of our reagent business. Ludvig Lundgren: Okay. Great. And a follow-up to that, like what is a fair growth rate that you would expect for the hematology business? Like can this grow double digits looking into... Simon Østergaard: Yes. I'd say historically, we've been landing at probably lower double-digit for the hematology. And I see no reason why we should -- it's a considerable business. So it takes more to change the growth, so to speak. However, with the gradual increase, we've seen the 80% growth we have on the hematology side in APAC. However, it's a small contribution, obviously. Total revenue out there this year was SEK 9 million. But still, it's growing. And then as we start over the next coming years to get into the U.S., I think that's where we can probably even more ambitious of getting higher growth rates for the company in the revenue bucket because this is really incremental growth that comes in, while we still believe that we have opportunities to grow double-digit in Europe, where we have a profound footprint. It's really a big thing for us that we can finally enter the U.S. given the fact that our -- the Sysmex smearing device can now host the methanol-free stain. So it is exciting for the coming years to start and build that market. Ludvig Lundgren: And would you expect some incremental sales in the U.S. already in '26 from this? Simon Østergaard: Yes, I would expect it, but I don't want to overdo it. I would say that I'm much more -- if I can see traction from the ones starting to use methanol-free, that would be our -- really our goal, but it will translate into some revenue, but it's at the end of the year, I would expect. So that would put us in a situation where it's confirmed in the market, and that gives us a good platform to -- for growth contribution in '27. I think that's the way to look at it. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Simon Østergaard: Yes. Thank you very much. And again, thank you, everybody, who called in and not the least to the good questions that gave us a meaningful report out here today for 2025. I want to sort of finish up the call by saying that I think what we have demonstrated throughout the previous year, both on commercial arena, but also on our investments and the organization's ability to translate the investments into to meet very, very crucial strategic milestones. That means we are set up to continue our position of leading digital cell morphology into the future. So thanks to our team for the relentless effort that you all do. But also thanks to our strategic partner organizations spanning from Japan and all across all regions around the world. I think that is key. And then finally, I also want to send my sincere thanks to our entire group of hematology professionals who are actually using our solutions on a daily basis. And amongst that segment, a special thanks to the ones who are providing us with feedback to our development programs and/or who has participated in our clinical validations, which has been a considerable part of the investments. But again, the good example is the bone marrow CE Mark that we, of course, want to leverage for a global product. So I really -- a big thanks to our employees, our partners and our professionals that we work with as customers. So with that, thanks for dialing in, and we are looking forward to actually be back with the interim report on the 24th of April. And then we have our Annual General Meeting for the April 28. So thank you very much.
Operator: Greetings. Welcome to Gladstone Capital Corporation First Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Mr. David Gladstone, Chief Executive Officer. Thank you, sir. You may begin. David Gladstone: Thank you, Sherry. That was nice. And this is Gladstone Capital's quarter ending 12/31/2025. Call, and thank you all for calling in. We are always happy to talk to our shareholders and analysts and welcome the opportunity to provide updates on our company and answer any questions. Before we get to this quarter's results, Catherine Gerkis, our Director of Investor Relations and ESG, will provide a brief disclosure regarding certain regulatory matters that we have to adhere to. Go ahead, Catherine. Catherine Gerkis: Good morning. Today's call may include forward-looking statements. Nicole Schaltenbrand: Which are based on management's estimates, assumptions, and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filings, which you can find on the Investors page of our website gladstonecapital.com. We assume no obligation to update any of these statements unless required by law. Please visit our website for a copy of our Form 10-Q and earnings press release for more detailed information. You can also sign up for our email notification service and find information on how to contact our Investor Relations department. Now, I will turn the call over to Gladstone Capital's President, Bob Marcotte. Bob Marcotte: Good morning. Thank you, Catherine. I will cover the highlights for the quarter and conclude with some comments on our near-term outlook for the company. Beginning with our last quarter's results, fundings last quarter totaled $99.1 million and included two new private equity-sponsored investments totaling $37.8 million and $61.3 million of additional advances to existing portfolio companies. Exits and prepayments declined relative to the past couple of quarters to $52.8 million, so net originations were $46.3 million for the quarter. Interest income for the period rose to $23.9 million as the increase in average earning assets offset the 30 basis point decline in the average SOFR rates compared to last quarter as our weighted average debt yield came in at 12.2% for the period. Interest and financing costs increased $200,000 on higher average bank borrowings incurred to complete the fixed-rate note refinancings last quarter and higher average investment balance. In addition, net management fees rose $600,000 with the increase in average assets and lower origination fee credits. So net investment income came in at $11.3 million for the period. Net realized gains were $300,000 as the exit of our remaining equity in Sokol more than offset the $1.4 million write-off associated with the unamortized costs with the note refinancing completed last quarter. Unrealized losses rose to $5.3 million last quarter and were concentrated in three investment positions impacted by the recent government shutdown or where we have replaced senior management and are expecting significant improvements over the balance of 2026. With respect to the portfolio, the portfolio growth for the period did not have a material impact on our investment mix or spread profile as first lien debt and total debt investments came in at 73.91% of the portfolio cost respectively. As of the end of the quarter, our three non-earning asset debt investments were unchanged with a cost basis of $28.8 million or $13.2 million at fair value or 1.6%. In addition, PIK income for the quarter rose to $2.3 million or 9.6% of interest income. However, we also collected $2.8 million of PIK for the period, so our accrued PIK balance declined accordingly. Since the end of the quarter, we have experienced one significant prepayment of Vets Choice in the amount of $42.8 million, which also generated a large prepayment fee of $855,000 on the period. And to date, we have funded an additional $6 million senior debt investment in a precision machining business. Although earning assets have declined since the end of last quarter, our current pipeline of late-stage deals which have been vetted, awarded, or in the diligence or documentation is quite robust at over $100 million and should more than offset the recent repayments. The level of near-term investment opportunities we are working through in what is traditionally a slow Q1 is frankly a bit surprising. I would attribute this investment activity to the resilience of the lower middle market deal flows and the growth prospects within our existing portfolio. We ended the quarter with a conservative leverage position and net debt at a modest 93% of NAV, and have increased our floating rate bank borrowings to better match our asset rate sensitivity while bringing down our net funding costs as short-term interest rates ease and we reduce our unused facility fees accordingly. Our current line of credit facility totals $365 million and net of the recent repayments, our borrowing availability is more than $150 million, which is more than ample to support our near-term investment activities. And now I will turn the call over to Nicole Schaltenbrand, our CFO, to provide some details on the Fund's financial results for the quarter. Nicole Schaltenbrand: Thanks, Bob. Good morning. During the December quarter, interest income rose $100,000 or 1% to $23.9 million as the average earning assets rose $20.3 million or 3%, while the weighted average yield on our interest-bearing portfolio declined 30 basis points to 12.2% for the period. Total investment income was $24.5 million on higher interest earnings, and fee income rose $400,000 from last quarter. Total expenses rose $800,000 or 6% versus the prior quarter as interest expenses rose $200,000 with increased bank borrowings, and net management fees rose $600,000 on higher average investments, and lower deal closing fees credits. Net investment income for the quarter declined to $11.3 million or $0.50 per share. The net increase in net assets resulting from operations was $5.5 million or $0.24 per share for the quarter ended December 31. As impacted by the realized and unrealized valuation depreciation covered by Bob earlier. Moving over to the balance sheet. As of December 31, total assets rose to $923 million consisting primarily of $903 million in investments in fair value. And $20 million in cash and other assets. Liabilities rose $20 million quarter over quarter to $445 million as of December 31, with the increase in LLC borrowings to call and repay our $150 million of 5.18% notes previously due January 2026, and our $57 million of 7.34% notes previously due in 2028. And to fund our net originations. The remaining balance of our liabilities consists primarily of $149.5 million of 5.78% convertible debt due 2030, $50 million of 3.5% notes due May 2027, and $29 million of 6.25% perpetual preferred stock. As of December 31, net assets declined $4.7 million to $477 million and NAV per share declined from $21.34 to $21.13. Our gross leverage as of December 31 rose to 93.3% of net assets. Monthly distributions for February and March will be $0.15 per common share, which is an annual run rate of $1.80 per share. The board will meet in April to determine the monthly distributions to common stockholders for the following quarter. At the current distribution rate for our common stock and with the common stock price at about $20.44 per share yesterday, the distribution run rate is now producing a yield of about 8.8%. And now, I will turn it back to David to conclude. David Gladstone: Well, thank you. That was a good summary and solid quarter for Gladstone Capital again. The team for Gladstone Capital continues to deliver attractive net originations and growth with a very healthy backlog of attractive growth-oriented lower middle market companies. The company has a strong balance sheet, ample bank lines, and capacity to grow our investment portfolio to deliver more dividends to our shareholders. And delivery of net interest margins required to sustain the shareholders' dividends. And now open the questions up. And operator, if you will come on and tell us what to do. Operator: Our first question is from Eric Zwick with Lucid Capital Markets. Please proceed. Eric Zwick: Thank you. Good morning. I apologize in advance for any background noise. I'm traveling today. But wanted to start with a question. During your prepared remarks, you mentioned increasing the usage of the revolver due to the floating rate function there. Curious if you could just talk a little bit on the loans to what extent you use floors and how many of those are at their floors now, just kind of given the SOFR curve would indicate that the market is expecting some more reductions in the base rates. Nicole Schaltenbrand: Yes. The majority of our variable rate loans do have floors. We are not obviously at those floors yet. So as interest rates decline, our interest income will decline. That's part of the reason why for our strategy right now, we do intend to rely on our floating rate debt somewhat more. Bob Marcotte: And Eric, one way to think about this is, I think we were very direct at we're not experiencing much in the way of spread compression last quarter, so competition is not driving it. And if you look at the big picture, based upon our average margin, our bank spread, and our marginal fees and costs, our general feeling is we can absorb most of the decrease and still be able to sustain the underlying dividend as we did this quarter. The other thing that's happening is last year we ran a very high commitment fees. We were very low in our utilization of lines. And if you compare the roughly $2.6 million of line commitment fees we paid last year, we're currently at a run rate that's closer to $1 million. So there's about $1 million, almost $1.6 million of savings that we will see from increasing utilization of our line fees. So we have a number of things that we are working to try to mitigate what might be the headwinds of lower rates if that were to evolve. Eric Zwick: That was very helpful. Thank you. And next one for me, just looking at the investment in IMX Power Holdings, just curious if you are seeing in your origination funnel more opportunities for AI and data center-related opportunities and just how you kind of view this trend, if it's likely a longer-term trend or if you're watching it more cautiously, just curious on your take there. Bob Marcotte: We do not directly invest in data centers. That's a big boys game of what we've Google's announcement today? $180 billion or whatever the number was. We used to do that that's not really something that we see in the lower middle market. We do see some of the spend from those projects coming through in our portfolio. It might be bus bars that are going into data centers that, frankly, IMX does make. And, you know, certainly, are construction or HVAC or air handling services that might come through to some of those segments. We are very cautious about the sustainability. There's an awful lot of folks jumping into that market. And we are watching the reliance on that end of the market as we think about the play. But we are not directly investing what I would say is a significant reliance on the continuation of that investment spend. That's just not where our companies particularly play. Eric Zwick: Got it. Thank you. And last one for me. You noted the increase in PIK. It's kind of gone up over the past couple of quarters. Could you just kind of generally talk about what's driving that? Is it certain companies that performance has slowed a little bit? Or are they just looking for some cash flow flexibility for investment opportunities? Wondering if you could talk a little bit about that. Bob Marcotte: There's a couple of credits that are in that category. One, which is undergoing a more systematic or scaling up of the underlying business and the working capital consumption that is behind that growth is stressing the free cash flows and given the underlying business performance we provided them the flexibility in the case of PIK. Obviously, we are closely monitoring the EBITDA and the enterprise value as we increase our exposure to that situation. And feel that we are more than adequately covered. In the second one, the company is in the process of liquidating a portion of their underlying business that has been underperforming. And the proceeds are more than ample to cover some of the accumulation of that PIK exposure. And we expect that company to be in a position to deleverage as it unloads a portion of its investment activity. So it's a case-by-case basis. We focus on what's the right move for the business. And what's the terminal exit for getting out from underneath that PIK exposure. That we focus on. And those two credits are by far the dominant portion of what's there. As you will note, we did exit a deal last quarter where we did have some accumulated PIK and we recouped it. So our strategy of working with our credits and getting that money back and getting them cash paying is obviously a consistent part of how we work with our credits. Eric Zwick: Thank you for taking my questions today. David Gladstone: Next question. Operator: Our next question is from Christopher Nolan with Ladenburg Thalmann. Please proceed. Christopher Nolan: Hi, thanks for taking my question. Why did the diluted share count change quarter over quarter so much? Nicole Schaltenbrand: So part of that is because, just the accounting requirement for how you do the calculation in the initial period. So the only thing that's impacting our diluted shares is the convertible debt. So we do a calculation to show on the gift converted method you know, what it would be. But that's really the only factor coming into play there. Christopher Nolan: Okay. So that's gonna be dissolved continuing, issue not an issue, but just that increased dilution share counts is gonna be sustained as long as convertible debt around? Nicole Schaltenbrand: That's correct. Yes. And the conversion price? Bob Marcotte: And the conversion price will only change if we do additional supplemental distribution. That change, we expect to be very, very inconsequential, though. Nicole Schaltenbrand: Great. Then, think that issue can be settled with cash or stock as the case may be. So there's a lot of flexibility. It's more of a disclosure requirement frankly than a practical expectation that we would ever issue that amount of shares. That's exactly right. Christopher Nolan: Okay. Just a more broad and more strategic question. Have you guys given that you're sort of co-located near Washington DC, have you heard anything in terms of updates for the regulatory structures affecting BDCs, specifically the AFFE rule? Any sort of consideration of altering that? Bob Marcotte: AFFE has been under discussion for what seven or ten years now. Obviously, there's a general relaxation in the market. But I don't think there's anything particularly concrete. And frankly, I think it's a two-stage process even if it were relieved it doesn't mean that it's going to very quickly change the way the index is our underlying calculation. So it would take probably a number of years to roll out whatever might come. So even of the view that, it will take us several years before something were to become effective. So, frankly, not counting on that as much as we would like it to improve the liquidity in our shares and expansion of our investor base. I don't think we're operating in the presumption that's a short-term issue. Christopher Nolan: Great. Thanks for the color, Bob. Nicole Schaltenbrand: Next question. Operator: Our next question is from Robert Dodd with Raymond James. Please proceed. Robert Dodd: Hi, everyone, and congrats on the quarter. On the discussion of the pipeline, sounds obviously quite positive for this quarter. And you said activity surprising. How much is any of that actually kind of spillover from Q4? Or are these deals that kind of came to you in with January launches, so to speak, with the expectation they'd always be a March deal? And then the kind of the second part to that question, sorry, Ronald, is what are you seeing in the very early stage? Do you expect that remain robust kind of through the middle or a whole year? Or is this just kind of a surprising bump in the March? Bob Marcotte: Good question, Robert. Yes, there's definitely a few of those deals that spilled over. I would generally say in today's marketplace, given volatility, you know, trade flows, tariffs, I think, most of the private equity that we're working with is pretty you know, pretty vigilant on diligence and diligence periods can take time. Some of the transactions we're working on, you know, have been in the works for probably three quarters now. So there's definitely probably half of that spillover are transactions that, folks are doing multiple rounds of quality of earnings and reviews of those businesses. Before they're actually pulling the trigger and executing on that. I would say that, obviously, the general downward trends in rates combined with better clarity in terms of certain industries is a positive. I mean, for example, you know, it just takes a while for, things like defense contracts or mint, you know, precision manufacturing businesses to see the pipeline activity, understand where the long-term trends are to acquire the machinery to support, some of those programs. So a number of our businesses at the moment are in that category of, you know, strong domestic growth, precision manufacturing, reshoring production capabilities, and are now getting around to the point of either acquiring businesses to achieve those objectives or investing in their own assets to expand. So I would say carryover is meaningful, but there's a consistent build of domestic manufacturing for some of these private equity-owned businesses to capitalize on the reshoring trend that started last year. Robert Dodd: Got it. Got it. I thank you for that color. One kind of sort of related. I think one of the issues you pointed out too for the unrealized depreciation what there was of it was, with shutdown impact. And, obviously, you've historically had, you know, been, you know, done a fair amount of work with businesses that work for the federal government or do work for the federal government, at least. Has your appetite for that kind of business softened? I mean, you know, this the number of government shutdowns is obviously up versus you know, historic norms over the last couple of years. And it doesn't have necessarily great confidence that we won't continue to see sporadic shutdowns at a greater cadence than we've seen in the past. So just is that kind of segment as appealing to you as it has been in the past given those kind of risks? Bob Marcotte: Robert, the situation that I referenced that shutdown was implicated or impacted was a very unique circumstance. Generally speaking, we don't do government contracts. I mean, they're manufacturing stuff on long-term munitions or aircraft or platforms. And there's better visibility. Short-term government services is not a core focus for the business. That said, we do have a company in the portfolio that actually, believe it or not, does dredging activity that works for the army corps of engineers that is general recurring maintenance, maintaining, you know, ports and, and clearances for vessels. And the fact of the matter was there was an interruption or disruption in the army corps contracting for general maintenance services. And it caused a bit of a hole. Now that has already been corrected. Believe it or not, obviously, whatever builds up and whatever dredging activity is going to have to be caught up down the road if it wasn't done last quarter. So that business is not permanently impacted. And it will need to be maintained on a go-forward basis. It just happened in one quarter they stopped spending. That is not the usual, and that is not the norm for our business. And I don't think that that's a permanent impairment of this company in any way, shape, or form. Robert Dodd: Got it. Thank you. One last one, if I can. I mean, you know, EG's saw, some more, stress in the equity piece of that, which is pretty small. But can you give us any color on is that still going through the transition? And you mentioned one of the businesses has additional management transitions. I don't know if that's EG's again. But, you know, how's the workout on that progressing? I mean, just because the equity went down doesn't mean it's not on track, but, you know, any color there? Bob Marcotte: I think there's a combination of factors on that one. Obviously, if you were to research it, you'll figure out that it's an Arizona-based company, so it tends to be seasonal. And selling quick service and selling frozen drinks is not a big thing in the winter. So you tend to have weak quarters. The other thing that I will note, and this may be indicative of other credit out there, things that are in border states or heavily Hispanic areas are facing significant downdraft associated with elevated ICE activities. So population, spend, you know, economic drivers are all being impacted. I would say, as much as we have confidence in the team and some of the challenges that are naturally associated with QSR type businesses, they are moving forward. They are evolving the business. There are some incremental headwinds, and I don't think we expected early last year when we went through the restructuring and took that business over. Management is continuing to perform, but some of these headwinds were unanticipated, and we are doing our best to accelerate the changes in cost structure in order to see our way through some of the incremental challenges. So it's still a work in process. The company has launched a new menu and some offerings which we think are going to drive traffic in 2026. And we will see as that evolves in the spring. But that's a little bit probably more than you wanted to hear about what's going on in that business, but we're working it. Robert Dodd: I always love the extra detail there. Thank you. Bob Marcotte: Okay. Do we have any other questions? Operator: Yes, we do. We have a question from Sean-Paul Aaron Adams with B. Riley Securities. Please proceed. Sean-Paul Aaron Adams: Tagging off Eric's question, do you currently have an estimate of remaining SOFR exposure and basis points before the majority of your embedded floors kicked in? You talked about spreads not being a material impact for the quarter, so just trying to highlight the pure base rate exposure? Bob Marcotte: I think our average what's our average floor? Probably one twenty? Nicole Schaltenbrand: Yeah. Or one twenty. Bob Marcotte: Yeah. So the right now, what was average SOFR last quarter is three ninety? Nicole Schaltenbrand: Mhmm. Bob Marcotte: Yeah. Average SOFR last quarter is roughly three ninety, so we're roughly running what is about three seventy today. Average floor is probably about one twenty five. So we've got some, you know, material move potentially on that. You know, my comment before was you know, if you eliminate you know, if you just focus on what our average spread is, what our bank line spread is, is, and what our marginal management fee and costs are, you net down to about a $250,000 plus or minus spread, ignoring the underlying base rate, And if we were to close $150,000,000 a $100,000,000, that's 2 and a half million of incremental net interest margin. If you look at our rate sensitivity, if we I think it's back at the tail end of our our queue. I think down 50 basis points. I think the sensitivity was about $2,400,000 So we could more than offset the first 50 basis points. As we get past that, we would need to dig into one, fees which are excluded from that calculation. Or the the additional commitment fee savings that I referred to. So we're working through the challenges We're down 100 basis points. That's a $5,300,000 down on potential rate exposure given our current portfolio. Frankly, that's about as far as we've been thinking and planning given the current current rate outlook. But we certainly are well positioned to absorb at least the first 50 and probably 75. Beyond that, we'd obviously take take additional actions to to to support the dividend. And as you recognize, we obviously have some additional coverage based on current economics and portfolio. So think we're monitoring that downward exposure and have a variety of levers that we're currently using to manage that. And support the dividend going forward. When we reset the dividend last quarter, we were looking out with you know, some of these sensitivities in mind and feel pretty confident that we've got the coverage that we need for the near term. Sean-Paul Aaron Adams: Got it. Really appreciate the color. Thank you. David Gladstone: Okay. Do we have one more question? Operator: There are no further questions at this time. David Gladstone: Oh, shucks. We like questions. So there'll be more next time. Thank you all. That's the end of this meeting. Operator: Thank you. This will conclude today's conference. You may disconnect at this time and thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to The Allstate Corporation's Fourth Quarter Earnings Investor Call. At this time, all participants are in listen-only mode. After prepared remarks, there will be a question and answer session. To ask a question during the session, you will need to press star 1. If your question has been answered and you would like to remove yourself from the queue, simply press star 11 again. Please limit your inquiry to one question and one follow-up. As a reminder, please be aware that this call is being recorded. And now I would like to introduce your host for today's program, Allister Gobin, Head of Investor Relations. Please go ahead, sir. Allister Gobin: Good morning, everyone. Welcome to The Allstate Corporation's fourth quarter 2025 earnings call. Yesterday, following the close of the market, we issued our news release and investor supplement and posted related materials on our website at allstateinvestors.com. Today, our management team will discuss how The Allstate Corporation is creating shareholder value. Then we will open up the line for your questions. As noted on the first slide of the presentation, our discussion will include non-GAAP measures for which there are reconciliations provided in the news release and investor supplement. We will also make forward-looking statements about The Allstate Corporation's operations. Actual results may differ materially from those statements, so please refer to our 2024 10-Ks and other public filings for more information on potential risks. Our 10-Ks for 2025 will be published later this month. And now I will turn it over to Tom. Thomas Joseph Wilson: Good morning. Thank you for investing time in The Allstate Corporation. Today, we are going to cover financial results and how The Allstate Corporation is successfully addressing insurance affordability. So let's start on slide two. The Allstate Corporation's strategy has two components, as shown on the left: increase personal property liability market share and expand protection provided to customers. On the right are performance highlights. The Allstate Corporation improved auto and homeowners insurance affordability for millions of customers in 2025. Results benefited from the transformative growth initiatives, which generated strong financial results and increasing growth of property liability policies in force. Shareholders were provided $2.2 billion of cash returns last year, the dividend has been increased, and a $4 billion share repurchase program will be initiated. Slide three is an overview of The Allstate Corporation's financial results. Total revenues increased to $17.3 billion for the fourth quarter and $67.7 billion for the year. Net income applicable to common shareholders was $3.8 billion for the quarter and $10.2 billion for the year. Adjusted net income was $3.8 billion or $14.31 per common share for the fourth quarter and $9.3 billion for 2025, $34.83 per share. The lower table provides a reconciliation of net income for the fourth quarter to the prior year quarter. In 2024, we earned $1.9 billion. The three primary drivers of increased income were better underwriting losses, lower catastrophes, and the benefit of reserve releases from prior years and adjustments within 2025. Net income for the quarter was $3.8 billion. Now let's discuss our success in improving affordability while maintaining margins before going through the details of this performance with Mario, Jess, and John. Slide four discusses the levers to improve insurance auto insurance affordability at the industry level. And then we will go through The Allstate Corporation's actions. In summary, improving affordability will require a focus on costs, not profits. Let's go through the math. The pie chart on the left shows a composition of auto insurance industry costs from 2020 to 2025. Physical damage costs are to repair and replace vehicles and represent the largest share of costs at 43%. Injury costs are 34% of premiums, and expenses are 23%. Over the last five years, industry underwriting income was close to zero. To improve affordability, then costs must be lowered. Some costs move with inflation, other cost reductions will require legislation or regulatory changes. So physical damage costs have increased 47% over the past five years. Now a portion of this was because used car prices rose 43% during the pandemic, which drove up the cost to replace and repair vehicles. That inflation has started to reverse, which will improve affordability since insurance is a cost-plus product. The second largest driver of cost is bodily injury claims, which are when our customers get sued by people that are injured in an auto accident. These costs have increased 52% over the last five years due to more attorney involvement and higher settlements. Tort reform has reduced litigation in Florida, which has enabled the top five insurance companies in the state to request rate reductions of 5.9% in 2025. Consumers will benefit if states like New York and others work to reduce what I would call fender bender litigation, say you barely touch somebody and they sue you, and then also work to control exorbitant damage costs. For example, in New York, the average bodily injury settlement is twice that of Florida and the countrywide average. Louisiana and Georgia have recently addressed this, which we are hopeful will reduce the cost of suits against our customers. Uninsured and underinsured motorists' costs increased 72%, which means responsible drivers are now carrying more of the load. This can be mitigated by enforcement of laws requiring insurance coverage and raising mandatory coverage limits. Changing laws or regulations so that insurance companies lose money at the underwriting level will not create a stable and affordable set of choices for consumers. The Allstate Corporation is successfully addressing the issue of insurance affordability with customers as shown on slide five. Customer value has been improved by using renewal processes for auto and homeowners insurance to optimize coverages and discounts. The Show Allstate Customers Value Every Day or SAVE program reduced 7.8 million customers' premiums by 17% on average by adjusting coverage and other changes in 2025. We continue to roll out new auto and homeowners affordable, simple, and connected insurance products. Auto insurance rates for the ASC price were reduced in 32 states with an average reduction of 9%. We also expanded direct purchase options, have lower prices. Jess is going to go through the impact of this on this year's earnings, which was substantial in terms of the top line, but we managed margins well. Operational excellence also supports affordability while maintaining margins. The transformative growth initiative has lowered expenses. Improving claims processes also enable us to offer lower prices. So The Allstate Corporation's strategy is to deliver strong results while successfully adapting to a changing external environment. Mario will now provide an update on the Transformative Growth Initiative to increase property liability market share. Mario Rizzo: Thanks, Tom. Let's move to Slide six, which shows how The Allstate Corporation has benefited from transformative growth. In the top left, you can see the progress made on competitive prices. We've reduced the adjusted expense ratio by 6.6 points since 2018, which allows us to offer lower auto and homeowners insurance prices while maintaining margins. We also increased the sophistication and precision of pricing models, enabling more accurate pricing. The Allstate Corporation now has the broadest distribution in the industry. Customers can shop for Allstate coverage through Allstate agents, independent agents, and directly by phone or via the web. We acquired National General in 2021 to strengthen independent agent channel capabilities and nonstandard auto insurance offering. We increased direct sales using the Allstate brand and improved Allstate agent productivity. Enhanced the product portfolio by introducing the affordable, simple, and connected auto insurance product in 43 states and the new homeowners insurance product in 31 states. We also have ASC renters available in 30 states. In the independent agent channel, Custom 360 auto and homeowners insurance products are available in 36 states. These new products create value for customers by improving affordability, broadening our risk appetite, and expanding availability for consumers. Sophisticated marketing has enhanced acquisition capabilities and economics. Marketing investment increased to $2.1 billion in 2025, up from $900 million in 2019, enabling us to effectively reach more consumers with a more competitive price and better customer experience. At the bottom of the slide, you can see the results. Personal lines new business increased from 5.5 million in 2019 to 11.6 million in 2025, more than doubling. New business is now also balanced between Allstate agents, independent agents, and the direct channel. Total personal lines policies in force increased from 33.5 million to 38.1 million with a more balanced distribution across channels. These proof points demonstrate that transformative growth is working. Turning to slide seven, we are now into phases four and five of transformative growth, focusing on rolling out new platforms and decommissioning the existing ones. In these phases, we continue to broadly focus on the five components of transformative growth shown in the gray boxes in the middle of the page. As we scale the new model and retire legacy technology and processes. Now let's turn to slide eight to discuss protection services. The protection services segment is comprised of five businesses: protection plans, dealer services, roadside assistance, Arity, and identity protection, where protection is embedded in other offerings. In 2025, the protection services segment grew policies in force by 3.3% to 172 million, while revenue increased 11.7% to $3.3 billion for the year. Adjusted net income was $218 million in the quarter or for the year. Policy growth in this segment was led by protection plans, which continues to expand both domestically and internationally, as you can see on the lower right. Domestic revenue increased 8.1% over the prior year quarter, while international revenue increased 39.7%. The business generated $49 million in adjusted net income in this quarter, up 32.4% from the prior year quarter. Now I'll turn it over to Jess to discuss the property liability business. Jesse Edward Merten: Alright. Thank you, Mario. Starting with slide nine, the property liability business generated strong results in 2025. The table on the left shows full year 2025 results. Premiums earned increased 4.4% in auto insurance and 15% in homeowners insurance with auto policy growth of 2.3% and homeowners policy growth of 2.5%. At the bottom of the table, you can see that the auto combined ratio improved by 10 points compared to the prior year. This is due to strong underlying performance as well as lower catastrophes and favorable prior year reserve releases. Excluding the benefit of reserve changes and lower catastrophes, the auto insurance combined ratio was about 90. The homeowners insurance combined ratio of 84.4 reflects continued strong underlying performance and lower catastrophe losses when compared to last year. For the full year 2025, auto insurance generated $5.7 billion of underwriting income and homeowners insurance generated $2.4 billion. The right side of this slide shows earned premium impacts of actions taken to improve affordability, which are included in our financial results. The chart shows the cumulative auto insurance earned premium impact from rate decreases and save actions taken through 2025. By the end of the year, the total impact was $810 million, or approximately 2% of 2025 auto earned premiums. Improved affordability supports growth. Turning now to slide 10. Auto claims process improvements are helping to offset increasing loss costs, support increased affordability, and contributed to favorable reserve adjustments. On the left side is an overview of improvements that we have made to physical damage claim processes. These processes are being enhanced by optimizing the method of inspection, focusing on adjuster training, and using advanced computing capabilities. On the right, you can see what we are doing to manage injury costs. We redesigned our operating model to accelerate payments to injured parties where appropriate. Utilizing new tools and quality assurance processes to enhance claim handling, predictive models are also being used to identify potentially injured parties earlier in the process to resolve claims promptly and control liability. On slide 11, you can see that auto insurance growth accelerated and broadened geographically in 2025. These graphs show the distribution of policy growth by state and percentage of premiums written. For example, on the right-hand chart, you can see that at the end of 2025, less than 30% of premium were in states that were not growing. Staying on that chart and moving to the second blue bar from the right, 14 states were growing policies in force by four to 10% and represented more than 30% of premiums. Comparing the left graph for 2024 to the right graph for 2025 shows a reduction in red bars, higher blue growth bars, and a shift towards the right, which is higher growth. We now have 20 states growing policies by at least 4% and are growing in 38 states that represent more than 70% of countrywide written premium. Turning to slide 12, the homeowners insurance business continues to grow and generate industry-leading returns. Premiums earned have increased each year since 2021. Policies in force have also grown steadily, supported by expanded distribution and new products. We target a low nineties recorded combined ratio for homeowners and an underlying combined ratio in the low to mid-sixties. The underlying combined ratio for 2025 was 57.9, which demonstrates the effectiveness of our differentiated model with advanced risk selection, new products, pricing sophistication, and efficient claims handling. The recorded combined ratio was 84.4, which is well below the industry average. The Allstate Corporation's average combined ratio over the last ten years was 92. This business remains a competitive advantage and growth opportunity for The Allstate Corporation. With that, I'll turn it over to John. John Dugenske: Thanks, Jess. Good morning, everyone. Let's turn to Slide 13 to discuss the investment portfolio. The portfolio continued to perform well with net investment income rising to $3.4 billion in 2025, more than $350 million higher year over year while maintaining strong risk discipline. Over the past twelve months, total portfolio carrying value increased approximately $73 billion to $83 billion due to operating and investment cash flows. That growth combined with higher fixed income yields led to a meaningful increase in investment income. From a return perspective, market-based assets generated a 6.1% total return, materially higher than last year due to increased bond prices from lower interest rates and higher equity returns. Performance-based investments delivered a 5.8% return, down slightly year over year consistent with broader performance in private markets. During the year, we took several deliberate actions as private markets adjust to a tighter capital and liquidity backdrop in 2025. This included selling approximately $270 million of fund net interest in the secondary market, accelerating and deepening expectations for financial reporting, and moderating new commitments in response to lower industry-wide distributions. Wrap up with slide 14, an overview of The Allstate Corporation's significant cash returns to shareholders. In 2025, The Allstate Corporation paid over $2.2 billion in common shareholder dividends and share repurchases. The quarterly stock dividend will increase by 8% to $1.08 per share payable in cash on 04/01/2026 to stockholders of record at the close of business on 03/02/2026. Additionally, a $4 billion share repurchase program has been authorized and execution will begin upon completion of the existing $1.5 billion share repurchase program, which will be completed in 2026. In the last five years, The Allstate Corporation has purchased 18% of common shares outstanding, and in the last ten years, The Allstate Corporation has purchased 39% of shares outstanding. Let's move to questions. Operator: Certainly. And our first question comes from the line of Charles Gregory Peters from Raymond James. Your question, please. Charles Gregory Peters: Good morning, everyone. So I would like to, for the first question, focus on the regulatory and legislative changes slide. And I know there's been some attention in the marketplace to certain states announcing a more proactive approach towards rate relief for their consumers. I also recognize that this is very much a state-by-state process for you guys. So I was wondering if you could provide us some color on how the regulatory environment, how you think it might change for you guys in terms of what regulators might ask you to do over the next 24 months or so, in terms of rate relief? Thomas Joseph Wilson: Thank you for the question, Greg. Predicting politics is probably should get on Polymarket to do that. So first, I would say the numbers we showed are countrywide numbers. So this issue of affordability for consumers is an issue everywhere. So our SAVE program, we were everywhere. Every state, we go after every customer. They all care about the amount of money. And the costs have increased a lot recently. Obviously, accelerated by the pandemic on physical damage, but then underneath that, for a long time, has been the bodily injury cause, where if you make a mistake and you run into somebody and bash them in the side of the car, you do not feel like you should be sued for, you know, $100,000. And so that I am hopeful that what this will do is put the attention on that needs to change. People do not need to be paying for lawyers in fender bender lawsuits. And so this is really an issue everywhere in the country. As I mentioned, Florida has done some really good work, and it's turned into benefits for customers. So, you know, Florida should be acknowledged. States are starting to get this. There's been a long-standing discussion between us regulators and the trial attorney as to what's fair and right. And we obviously think that our customers should pay less for litigation against them. And we would like to see everybody take this on. Charles Gregory Peters: Okay. I guess it's related to this. I was I thought the slide that Slide 11 where you talked about your in-force growth as you're dealing with I think you said you lowered prices for 7.8 million customers in 2025. And you highlighted where you're growing. You know, we're hearing in the marketplace that certain mutuals and other companies might be getting more aggressive in the marketplace around auto and home. So maybe you could step back and give us some perspective on the competitive landscape as you see it today. Both in auto and home across the country? Thomas Joseph Wilson: It does seem to be people looking for, you know, what's lurking around the corner. Let me talk about competition. We've always been in a highly competitive market in all of our products. So this is nothing new. Sometimes it changes as you point out, by state. Sometimes it changes by company. But the way in which you compete is very broad. You understand this. First, you have to have a product that's differentiated. You have to have an attractive price. You have to have a great brand. You have to have broad access. And you have to advertising is a game of precision scale these days. And transformative growth that Mario went to addresses all of those. So we've been at this for a while. If you look by product then, and you say, okay. In auto insurance, we have three really aggressive competitors. They've been the same three competitors for a while, Progressive, GEICO, and State Farm. Progressive, as you know, well has been growing rapidly. GEICO's lost a couple of points in market share. And State Farm picked up, but not quite that amount of market share gain. So volume tends to go. They just pointed out there's a bunch of states where we think we're picking up share. So if you're over four points, there's not 4% more cars in The United States in total or in any of the states. If you're over four points, you're picking up market share. So our transformative growth plan has helped us pick up market share. Homeowners is kind of the same, but a little different. Because about half of the business is done by mutual. So as you point out, they have different profit requirements. That said, we've been able to grow that business. It's what we think is higher than market share with a fair amount of constraints on catastrophe losses. And earn economic rents better than the industry by a large margin. So we feel really good about continuing to compete in auto insurance. Continuing to compete in home insurance. In fact, we think home insurance has more growth potential. We think we can dial up growth. And so Jess and Mario may want to comment on these two. So specialty lines, we all do not talk much about it. Any other some specialty lines insurers which have valuations which seem relatively large compared to us. And yet when I look at our growth, our size, our scale, like where everybody's good in many ways, better. And then in our protection plans business, that's also a highly competitive business. So we didn't get Walmart and Home Depot because we're no good. We got it because we compete on the things I was talking about. Mario already talked about international, but maybe you guys want to comment on what you're seeing at the ground level in auto and home and then in protection plan. Mario Rizzo: Yeah, sure. So, you know, I think, Greg, where I would start is, Mario covered transformative growth. And when I think about the competitive environment, really go back to all of the efforts and investments we've made in transformative growth. So think focusing on affordability, this isn't the first we've been focused on affordability. It's in ASC. Affordable, Simple, and Connected. And we've rolled out a significant number of states with that new product. We continue to drive down expenses and focus on claims, again, to lower costs. Marketing sophistication makes us better able to compete in this environment. And then, you know, the broad platform that we have, the broadest platform in the industry, exclusive agents, independent agents, and direct business, allows us to compete differently in all the different product lines that Tom went through. So I feel good about the investment. And I think when you go through the lines, the results show that. So as Tom said on slide 11, we showed if six states growing greater than ten percent fourteen from four to 10%. So that's 20% or sorry. 20 states that are picking up share. We have 38 states growing in total, and they make up about 70% of our premium. So in the auto line, we're showing proof that transformative growth works. If I flip to home, homeowners insurance is growing in 36 states. We've got ASC in 31 of those states, and we had some significant launches in the back half of the year. The reason that's important is we can better compete on a direct basis in homeowners when we have the ASD product. We see great traction, and I think we've proven that that's a product that can be sold on a direct basis when we get ASC into the market. We're seeing very good trends and elevated production levels particularly on the web in the homeowners line. And then as Tom said, it's good to give one of our specialty lines renters some attention. We have, I think Mario mentioned, 30 states in ASC, the renter's line is growing faster than auto and home. So we're picking up share in growing the renters line, and we're doing it all at profitable levels. So continues to run below target profitability. So as I look across those lines, and there's other specialty lines we could talk about. But I think we're seeing the results of investing in transformative growth. We're seeing the results of the system working to help position us competitively, to your question, to continue to win. So that's kind of my view of the Property Liability business. Mario Rizzo: Yeah. And Greg, the only thing I'd add on protection plans. We've grown that to be a $2.3 billion business. And we've done it in a variety of ways. First, as Tom mentioned, it is a highly competitive business, both in terms of incumbents and new entrants into the market. But we've been able to leverage the capabilities at Allstate Protection Plans to add new partners, like Tom mentioned, with Home Depot and Walmart. And a number of those logos that you saw on the slide that I covered. We've expanded into new categories and new appliances, and furniture. And so we've seen growth there. And then we've been able to expand geographically. Our business in Europe is expanding rapidly with some very large mobile carriers and consumer electronic carriers as well within Europe. And there's opportunity for us in Asia Pacific as well. So the playbook has been to continue to leverage capabilities, enhance our capabilities, and use that to expand in a number of different ways in what is a very competitive market. And we've been really successful at doing that. Charles Gregory Peters: Got it. Thanks for the additional detail. Operator: Thank you. And our next question comes from the line of Yaron Kinar from Mizuho. Your question, please. Yaron Kinar: Thank you. Good morning. Maybe to stick on particularly remain on the subject of PIF, for auto PIF, does slide 11 include the decrease in the legacy insurance and Encompass policies? And when do you expect that drag to end? Jesse Edward Merten: So to make sure I get the question, are you about the overall numbers or the active brands numbers that would put? Yaron Kinar: I guess my question is, is Slide 11 just for active brands? Or does it also include the drag from the other the Esurance and Encompass policies? Jesse Edward Merten: Yeah. Yaron, this is Jess. It includes the enact the enact brands as well. So to the extent we're losing policies, that's reflected in this chart. Thomas Joseph Wilson: Yeah. We hold ourselves accountable for total growth. We've united to mean, we do show the active brands because people found that interest. I think active brands are 3.3%. But, you know, we should be accountable for overall growth. Yaron Kinar: Okay. And when do you expect that drag from the nonactive brands to attend? Thomas Joseph Wilson: That's not I would look at the chart just showed that showed by state. And the another question is, how do we get some of those red states into the blue states? And we're working on all those. We have we've had some good movement in one state recently, but we still have a couple of other states that we need to make some change on. So it's less about the brands. So shutting down those old brands is really part of TGA cutting costs. If we just don't need all the technology, the separate advertising, I would cut all the stuff out. That's how we're getting expensive now. So and we try to roll some of that business into the Allstate brand. So I would really focus on it Yaron, from a state standpoint and say, do we have those reds all become blue and shift the blue even farther to the right? So we're picking up share everywhere. The other thing that you can watch your own is the rollout of custom 360. Right? So when we roll in custom 360, it is in 36 states. At the end of the year. And so as you watch us continue to roll that out, that is effectively, that's what replaces the Encompass brand. So that's something you can keep an eye on as well. Yaron Kinar: Thank you. And then shifting gears about to the regulatory and legislative changes. Just one question I have and I don't know if it's something you've discussed with the relevant parties, is a two or even three-year look back to determine excess profitability too short of a time period? Thomas Joseph Wilson: I think it was by line. Right? So homeowners would be a longer period of time because you have catastrophes that go. I guess, though, my general reaction is I don't know what excess profits mean. Right? Like, so in the homeowners business, the industry loses money. And so if the if legislators or regulators want customers to pay less, having the insurance industry as a total lose money is not the right way to go. That's the message we're trying to say. Like, you can't ask companies to give up more of their capital to support lower prices, because that's not sustainable, because they only have so much capital. And then you look at us and you say, we do better than the industry in profitability in homeowners. I don't think there's excess. I just think we're better. And so we have better products, better costs, better that and so I'm sort of not in the camp of people should be thinking about x profits. I'm like, let's get cost down. Totally agree with that. And the way to get cost down are to address cost. Because we're a cost-plus industry. Not to go after what some people might perceive to be excess rents. We it's a highly competitive market. Earn every dollar legitimately we make in homeowners because we're good at and our customers still get great value. Yaron Kinar: Thank you. Operator: Thank you. And our next question comes from the line of Rob Cox from Goldman Sachs. Your question, please. Rob Cox: So my first question is just on you know, new business penalty. I think The Allstate Corporation's mix of growth here is coming more from new business than on average historically. So I'm curious how the new business penalty has trended relative to your expectations if we should expect margins to potentially normalize quicker than in past cycles because of all the new apps growth? Thomas Joseph Wilson: I'll make a couple of overall comments, and then Jess can jump in here. First, with the increasing pricing sophistication, you have, I would just say, in general, less new business penalty you can be much more precise about what you charge people. So we're much more sophisticated pricing. That said, you do sometimes, when you have acquisition costs, you've got to spend money. And advertising to get people in. It does cost more money to get a new customer than to keep a customer. And so it does there is some penalty there. It depends by the type of business you bring. So a lot of our growth in the last couple of years has been driven by expanding in the higher risk drivers or what's traditionally called nonstandard. Business. And that has a smaller new business penalty because it's gonna hang around less. So you're looking at it in terms of lifetime value of cost. That said, we feel very comfortable we can grow with transformative growth, increase market share, and still earn our attractive and target margins. The system works, like the math works, to grow and handle whatever the new business penalty is, whether that's nonstandard or standard on. Just anything you wanna add to that? Jesse Edward Merten: No. I would just say that, you know, it's a state-by-state evaluation that we do. We're aware of both mix of business. As Tom said, the nonstandard or the high-risk business is priced to make money right away. So we can focus on mix of businesses. We look at potential new business penalty. You also have seen we've lowered ASC rates in 32 states. Right? So we're managing overall profitability on a state-by-state basis considering both target margins and what potential new business penalty would project out. But overall, I would say it's something that we're very focused on, again, in a granular state level. Rob Cox: Thank you. That makes sense. And then just to follow-up on know, specifically independent agents channel. I think so the growth in the IA channel new apps quarter over quarter, which is somewhat of a step change from historical seasonality from what we can tell. And you've got a number of factors improving growth. But I was hoping you could just walk through the primary drivers of the improvement in new apps specifically within the IA channel. Thomas Joseph Wilson: I'll provide some overview, and then Jess can jump in. First, I would say, wouldn't really look at the US by quarter, by channel. I've found so I'm gonna take you up minute, and then Jess can talk about what's going on. In the future. So transformative growth was maintain the productivity of the Allstate agents, and we've done that. We're spreading more new business through Allstate agents. With fewer of them. So productivity is actually up. We have dramatic growth in both direct and independent Asia. Mario and I were talking about, I think we're right, like, five times in direct what we used to write when we get before we got started. So it's a 500% increase direct. And those are big numbers. It's not off like writing one policy. And you can see that in the chart that Mario showed. The independent agent business, we also expanded quite rapidly. In part, that was, of course, because we bought National General because we were in the independent agent business, so we just weren't that good at it. So we bought them. They made us a lot better. We then expanded the nonstandard business by a number of states, so that drove some growth. And there's lots of room to grow in the independent agent channel as Justin mentioned with 360. So that's the overview. What would you do? Is there something specific you think talk about relative to the quarter or maybe the prospects for IA? Jesse Edward Merten: I would focus on the process prospects. I think specific to the quarter, we continue to see really good balance. Across all distribution channels. So to your point, Tom, I don't think focusing on one quarterly trend is as important as overall production and the balance that we get EA, IA, and direct. A lot of the growth in the channel has been the higher risk drivers and, you know, or nonstandard. And we're continuing to focus as we look into 2026 of both rolling out the new Custom 360 product, but we're doing other things to make sure that we engage independent agents in the middle market standard and preferred segment where we still believe there's a huge opportunity where we can compete with best-in-class products and engage them differently beyond just the high-risk drivers. And so, you know, I look at both strength in production in Q4 as a positive, but I look forward to what we're doing in 2026 to continue to see growth in IA beyond the higher risk driver segment. Maybe and this, I think, will tie together with Bryce comment and what Jess just said. And which is competition. But let's go down to a state level. Let's take state a, and Jess has got a team working on that state A. And let's say that there's nobody that the exclusive agent competition doesn't really have much of a presence here. So we have we can hit hard on our exclusive agent presence, expand it, and off we go. Let's say that we wanna then compete with GEICO in that market, and we can ramp up our direct stuff. So we have the same thing is true with independent agents. And once we broaden that portfolio to independent agents besides just being nonstandard, and having what are more traditional mainstream Custom 360 products. So we have many ways to compete at an individual level with all the different carriers, and nobody has all those levers. Doesn't mean we're gonna win in every state doesn't mean everybody should go home. But it does mean we feel very comfortable about the balance of ways we have to compete from distribution sophisticated pricing, really good advertising, low expenses. We have plenty of ways we can grow. Rob Cox: Thank you. Operator: Thank you. And our next question comes from the line of Bob Huang from Morgan Stanley. Your question, please. Bob Huang: Hi, good morning. I want to throw a little bit of a curveball here. Autonomous driving, it's been an increasingly more topical discussion. Just curious on your thing like, your view on the pace of the technological development there and then how that could potentially impact personal auto just from a like, is it more of a threat? Is it more of an opportunity? How you're thinking about it? How you're positioning it? That's your first question. Thomas Joseph Wilson: So on autonomous driving, I would say it's a curveball we've been watching for about fifteen years. And that's a good thing because we've been at it for fifteen years. So we've been in telematics. We now have over 2 billion miles of data. You need that kind of data to be able to adjust to what autonomous driving can do what different cars can do. So autonomous driving is, think of it as almost like safer driving. And so you have fully autonomous might be the safest because we take people completely out of it. But there are steps along the way. So you're seeing that in the declines in frequency. And so whether that's the little light on the side of your rear or your side view mirror or that's the beep beep thing when you're backing up or the camera. There's lots of things that have impacted frequency. Now what that has also done, though, is increased severity. Because replacing all the equipment is not cheap. So as we've been modeling that out for fifteen years, we've been watching it. We think there is potential that it will continue to get safer. Frequency go down, we'll see what happens with severity. I think eventually we'll figure out how to engineer these cars not be as expensive as they are today. But in all that case, feel like there's as long as we're ahead in pricing, we're very sophisticated, we're involved in telematics, we're watching the data, and then we'll be fine. In terms of the pace of change, one of the things that's different about this technology change than some other technology changes. So if you go to, like, the software and AI and stuff like that, that can happen very rapidly. Here you get $4 trillion in hardware, and you got to turn over that hardware. It doesn't mean the hardware can't be turned over. It just takes $4 trillion to it as opposed to I'm gonna unplug this piece of software because I can use AI to program. So the pace of change will come but it's at a curveball pace where you can watch it so you can hit it. Bob Huang: Got it. Really appreciate that. So as long as the curveball you're seeing, hopefully, it's a home run. Maybe on that severity point. Yeah. A model of our share. Yeah. For sure. So but maybe on that severity point. Right? Like, if I look at your slide, on essentially, like, the cost split between physical damage, injury, and expenses, obviously, bodily injury is about a third of that. If we're believers that autonomous is gonna reduce frequency, on the point of severity, shouldn't theoretically we see an improvement in severity? So it like, pretty immediately. Like, how do you think about the parts cost versus the bodily injury component of that? Autonomous cars? Yes, sir. Thomas Joseph Wilson: Yeah. Okay. Yeah. I just want to make sure I got the question right. Actually, the severity goes up. Because you have pure small fender benders. So you don't back into the pole when you're at the grocery store. And so you don't have $1,000. So that said, if you're going 75 miles an hour, the autonomous safe driving stuff doesn't really help much. So we've actually seen the bodily injury severity go up. It's a little hard to parse and to do it back at impossible to do attribution as to whether that's because people were driving faster. We know that from our telematics data that people are driving faster, and so there's more severe action. But we can't say how much of the fifty some percent was due to that versus how much is just due to the fact that attorneys are very aggressive in getting to anybody who's been in an accident and saying, I can represent you and give you some money. It doesn't cost you anything. So most people buy that. We have to figure out how we control that cost, but I can't give you an attribution of how much was because of runaway tort cost and how much is just people going faster and driving into more severe accidents. Bob Huang: Okay. Thank you very much. Really appreciate that. Operator: Thank you. And our next question comes from the line of Elyse Greenspan from Wells Fargo. Your question, please. Elyse Greenspan: Hi. Thanks. My first question on I just wanted to start with capital. You guys announced a new buyback program that's higher than the last authorization. So just trying to get a sense of you know, is the priority now just to take, you know, excess capital and use it for share repurchase or you know, are you you know, is M&A, I guess, further down the list in terms of capital priorities right now? Just looking to get an update there. Thomas Joseph Wilson: The priority, Elyse, sorry. I'm hearing an echo. The priority, Elyse, would be to maximize the amount of money we create for shareholders from that capital. And first is just organic growth. So we look at capital, like, first, and just start to grow auto home, get the multiple rerate, that should drive the stock up just on the multiple rerate. Forget the fact that you're earning more money on capital. And we're getting exceptionally high returns in our business as you can see in the future. Would always be, you know, have a three on it? No. But is that still way higher than the S&P 500? A 100%. So we feel very good about the organic growth in that driving business. Second, then we say, well, what are the things? Where are we a better owner of a business? So when we bought SquareTrade, we were a better owner. You and they were better for us when we bought National General. We were a better owner. So and that's where we're leveraging our skills, our capabilities. And then we say, okay. Well, where are we in cap we are long capital now. We think with the $4 billion share repurchase, we're still long capital. We have plenty of cap we've always had a lot of capital. So and we feel like this is a way to give that cash back shareholders so they can deploy it in a way that gives them the kind of returns we're able to get with somebody else. If we think we can get higher than that, we will. But we also think the stock is so cheap that it's a really good deal for those shareholders. Who wanna hang with us. And you can increase your ownership. And as John pointed out, we've helped people those people who stayed with us increase their ownership dramatically. Since I've been here, think we've bought back over 80% this year. So we're happy that those people wanna sell, then that's fine. Those who believe in the story, we think there's huge shareholder returns coming here. Elyse Greenspan: Thanks. And then my question in auto, right, the average growth premiums written per policy turned negative in the fourth quarter. I know you guys have been taking less price, right, but there's still been positive price running through the book. Right? If I look at the disclosure in the supplement. So I'm just trying to tie those two figures and then you know, just more color on why that, you know, premium's written. Inflected negatively in the quarter? Thomas Joseph Wilson: It's a complicated piece of analysis to do. Because you have both the rates you talked about. You also have the mix the coverages, the state levels, and so, you know, if you look at what a nonstandard policy generates versus standard. So it's complicated. But I under I think where you're going is what should you be thinking about terms of profitability. With the average premiums going down? And I would say, I would go back to the slide that just showed where we've reduced prices this year. By over $800 million in this year. We still earn great returns. So we're focused on giving customers the most affordable price we can still getting our target margins. We obviously had a combined ratio that was better than our target margin this year. So do I think that the combined ratio will drift up over time? Yes. And that's because we're gonna grow fast. Operator: Thank you. And our next question comes from the line of Joshua Shanker from Bank of America. Your question, please. Joshua Shanker: Yeah. Thank you. Elyse, who is super smart, asked the first part of my question, but I wanted to go into the second part. One thought that I had is maybe premium per policy is coming down because of The Allstate Corporation's flexibility and maybe people are buying down coverage. I want to know if that's true. And if that's true, does that help retention, which has been weak? And it doesn't seem to be necessarily getting better so far? I guess it's a bit complicated. Is there something to that effect going on? Thomas Joseph Wilson: Let me address for a couple of points and maybe Jess or Mario wanna jump in here. First, I would just and maybe this is defensive, but I wouldn't call a retention weak. I would say, you know, compare it to some of the other companies, and it's better. Other places, it's not as good. It's like I'd like to have, you know, some other companies retention as well, but we are working on retention. You are correct in that price does impact retention. Which is why we went back and did the save program. And we'll do the same program again this year. Like, we're very happy with this results. We also have an effort coming up, which is to move people from what we would call our classic Allstate brand products, those pre-affordable, simple, connected. And move them into affordable, simple, connected, which we think will also help us from a lifetime value retention. It might mess up the numbers a little bit because somebody shows up at a different stuff, but we are focused on trying to improve retention to that point. Coverage does matter. We want our customers to have the right amount of coverage, not too little, not too much. The SAVE program helps us go back to and say, hey. What's different in your life? Is your teenager no longer at home? Do you have a different car? Do you want to have a higher deductible? Do you need lower limits because of where you're at now? And in terms of financial position. So it does make a difference. We but we so, for example, we have found in the direct channel in one particular state that high net worth people are still buying lower coverage because that's what they want. They can choose. So and we've had good growth. It was up. So coverage is a good tool but you wanna make sure you're serving your customers well. Anything you guys would add to I mean, I would double down. That's the essence of save was to do exactly what you described. Right? So it's to look at coverages, look at available discounts, that's gonna drive down average premium, but we're adjusting the risk and we're putting the policy terms what you know, where it makes sense for our customers. And so with 7.8 million customers, save more than 5%. They save on average of 17 and that's through exactly what you're getting at. I think it's really, again, getting at the essence of what that program was meant to do. If we go back to where we report to, so we just showed this slide of $800 million of reduction in premium. And I know you all know this, but keep in mind that that's different than what we're doing rate increases. And we showed you the rate increases coming through. In this case, your loss costs go down some too. So it's not dollar for dollar that you lose that in the bottom line. Joshua Shanker: So I wanna that you said that retention is good. And maybe it is, but I have a theory that I wanna play out here that we're not going back to the retentions of the pre-pandemic era. That the shopping behaviors have permanently changed because affordable and connected works so well. That people can constantly change their price and change their coverages, and that means going to different auto insurers. Are we in a new future where retentions are naturally going to be lower than they've been in the past? Thomas Joseph Wilson: Stamping is up. And not everybody shops switches. But shopping is up. So I would say, yes. You would expect to see retention. And so I think that's true. The question is, how many of them do you keep? And that's what happens in the industry. So building an ongoing connection, so think connected part should not be underlooked to save as part of being connected. So if you feel like you have a relationship, you're much less likely to shop. I would point out a couple of things. One, while shopping is up, our new business is up much bigger than that. Which shows that our advertising and broad distribution are working in this competitive environment. So even though people are shopping more, we got more places they can go. And we're more sophisticated about buying it. And I would just come back to one thing I said our retention wasn't weak. It's not as good as I want it to be. And that's a message for our team less than you. Joshua Shanker: Thank you. Operator: Thank you. And our next question comes from the line of Michael Zaremski from BMO. Your question, please. Michael Zaremski: Hey, Greg. Good morning. I wanted to maybe focus on Slide 10. Auto claims process improvements, which have you know, clearly been supporting profitability in a big way. Maybe high level, you know, you've been working on auto claim process improvements for many years now. Trying to understand, you know, what base bonding are we in? You know, AI, I'm sure, is helping it. Is it will the benefits are they are is The Allstate Corporation more of a first mover, or this is proprietary to you all? Or, you know, are you using third parties and industry will eventually catch up over time? Just trying to understand, where we are on the journey. Jesse Edward Merten: So this is Jess. I would like the baseball innings analogy. You have to pause on that one and figure out exactly where I would put us middle innings in the journey. Certainly not early innings, but not done. I think there's a lot that and we have a I would argue a best-in-class claims organization that's really focused on the right things. As you could see, on the page in the slide deck. That doesn't mean we fully implemented all of the AI-enabled technologies. It doesn't mean that we're not going to continue to focus on quality. We have great leadership that is gonna continue to sort of push along the journey of getting even better and lowering those costs. If I look competitively, you mentioned is it largely outsourced? Is it something that others will catch up on? I don't believe it is. This is proprietary to The Allstate Corporation. We're not leveraging third-party insights or technology. We obviously bring the outside in when we look at third-party trends to make decisions. But it's not like this is something someone else can pick up and buy from another vendor. This is our organization pushing for operational excellence, for claims quality, and continuing to sort of focus on how we can be better each and every year. So I would put it middle innings with the later innings probably be where being where you really see the benefit of artificial intelligence and the insights and tools that we can use to improve in the claims organization. Is that helpful? Michael Zaremski: Yes. You know, I guess, yeah, I'm just I guess I asked not trying to spoon feed because of the underlying loss ratio true up. I guess, some investors are saying it's too good to be true, but, you know, clearly, you know, some of it's just you you guys are doing a better job than others. Thomas Joseph Wilson: I would think about switching I think about claims as think of claims kind of as a river money. And at top, you have us. And at the bottom, have customers. And we have to get them the money. So if it goes down that river, lots of people dip into the river and, like, take money out. So it's and it's constantly changing. They're like, the banks are changing. So, you know, where the banks are and the rocks go over. And so you get attorneys who are doing something new. You've got car companies who decide they want to give away the razor and sell the blade and sell their parts a lot higher. So you just you're constantly adapting. So I think Jess is right here. This is like this is like the never-ending game. Right? You're just in the question is, is your team good? They have the processes? Do they have the data? Do they have, you know, the measurement and the discipline to do what you need to do. And we're good at it. Did we have to get better at it because of what happened in the pandemic? Yeah. Because when prices go up that rapidly, the old way in which you can control the river has to be different. So I think it's just it's an ongoing thing, and so you're buying capabilities at claims as opposed to a specific set of processes. Michael Zaremski: That's helpful. My follow-up I think, is Slide four of the deck talking about kind of what really could bend the needle on affordability, I think as an insurance specialist, we get it. But I'm just you know, the powers that be don't always see the forest for the trees in the short run. So just curious, are there potential legislative changes in certain states that if things were enacted, and I'm sure you all in the APCIAR, you know, in discussions with those folks. But if they were enacted, that could you know, would change the course of your strategy in a or, you know, not just you all, but the industry in a material way? Or is this more kind of noise that ebbs and flows as, you know, now we're in a softer market and things should, you know, should ebb as, affordability gets better. Thomas Joseph Wilson: Well, affordability is a real issue for every politician these days. Whether they're talking about food or insurance. We tend not to be on the highest order of what people think about in terms of affordability. But it is important to them, and it has become more important as costs have gone up. I think the blow for freedom for consumers is tort reform. Like, it's just about time that yeah. And you're starting to see some states taken on, states that I would have said you know, ten years ago, were more controlled by the plaintiff bar than they appear to be today. And I gave the example of Florida, great moves. I like what they're doing in Louisiana. Georgia's doing some things. Politicians are smart. Like they know how to do it. And so if they're looking at the same chart, they're going to say, okay. My voters want cheaper insurance. How am I gonna get it for them? And they might not think about ten-year cycle. They're certainly gonna think about a four or five-year cycle. And this is one where can make a difference really fast. Michael Zaremski: Thank you. Operator: Thank you. And our next question comes from the line of David Motemaden from Evercore ISI. Your question, please. David Motemaden: Hey, thanks for fitting me in here. Just a question on Slide 11. Sort of on just New York and New Jersey, where that fits into these, you know, these different buckets here in terms of how much, you know, I think those were a drag. I'm assuming those are still a drag. I'm wondering how much. And then, also, I think last quarter, you had mentioned considering opening up underwriting guidelines there further. Even without getting the new product approved. I'm wondering where you guys are at there. Thomas Joseph Wilson: I'll make an overall comment. Jess can talk about what's going on in New Jersey and New York. First, we don't identify our problem in children, nor do we do performance evaluations in public. So we're not going to call out which states are in which category. And we also don't necessarily wanna let our competitors know where we're not growing as well. But that said, those are two states, which we talked about before. You're correct. That we need to move to Moranbros. Did you want to talk about what's going on in New Jersey and New York? Jesse Edward Merten: Yeah. I think, you know, the headline in both states is we're making money in those states, which is a good thing. Not growing, but we're making money. That is step one. We have, as you mentioned, loosened up some of our underwriting restrictions, but the key to getting back to growth in both New York and New Jersey is new product approvals specifically our affordable, simple, and connected product, which will allow us to really open up with the best product in market and get back to growth. On the plus side, New Jersey, we recently got approval for implementation of the ASC product, ASC auto product, in February. So we're gonna be with the new product in market. Now that takes some time, obviously, to get momentum, but that's a very positive sign in the state of New Jersey. New York, we're waiting for approval for the ASC products. So we'll be a little bit slower. We're hopeful that we see that relatively soon. We're actively engaged with the department and answering questions. But that's going to be critical to us getting back to a growth trajectory in the state of New York. So we're working hard with the regulators to get our products approved so we can get the best solutions to customers. And in the meantime, back to making, profit in those states. So that's kinda where we're at. Thomas Joseph Wilson: So, first, thank you for spending time with us. We're gonna keep creating value for both our customers and our shareholders. It's a combination of an aggressive growth strategy and great operational execution. So we'll talk to you next quarter. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Jukka Miettinen: Good afternoon, everybody. Welcome to discuss Neste's Q4 results that were published this morning. My name is Jukka Miettinen. I'm VP for Investor Relations at Neste. Here with me, we have our President and CEO, Heikki Malinen; and our CFO, Eeva Sipila. We are referring to the presentation that was launched today on our website early this morning. In the presentation, we will go through the key highlights, for example, our Q4 financial performance and the status of our key focus areas, including the performance improvement program and the progress towards our financial targets. We will be also discussing the key regulatory developments, key opportunities and uncertainties in the market as well as the outlook. We will have time for discussions with all of you. And please pay attention to the disclaimer as we will be making forward-looking statements in this call. With these remarks, I would like to hand over to our President and CEO, Heikki Malinen. Heikki, please. Heikki Malinen: Thank you, Jukka. Good morning, good afternoon to everybody. Welcome also to this call on my behalf. Really looking forward to discussing with you about 2025 results, the last quarter and also how this year will work. Okay. So let's start with a couple of slides here. First, I want to show you -- I want to start with discussing the key figures. But before I do that, let me just make a few comments to provide you with a bigger picture on how I see the situation at Neste after having been in charge of the company now for a bit over 1.25 year. I think overall, if we look at 2025, we had a good year. We have been able to achieve a financial turnaround compared to where we were just a few years ago. I'm very pleased about the fact that in 2025, all of our businesses performed better. Each of them had their own successes. I want to highlight in the area of RP, specifically that we were able to increase our volumes from 3.7 million to 4.1 million tons of sales. In OP, I'm specifically pleased by the operational performance of the Porvoo refinery. If you look at the utilization of the OP business, which is mainly Porvoo, we achieved 90% at the -- in the fourth quarter, which actually is one of the best years we've had operationally in Porvoo's history. And we were luckily, of course, then able to capture the cracks -- spike in cracks in the fourth quarter. Marketing and sales, we rarely talk about that, but still, they were able to improve their results by 10%, and they actually launched some very exciting new retail concepts here in the Finnish market, which have been received very well by retail and business consumers. We also met our financial targets for 2025. I was especially pleased that the performance improvement program, that Eeva will go through in more detail, performed really well. In fact, it performed better than I expected. I've done a number of these during my career, and I was really positively surprised how well the Neste team delivered on multiple areas very systematically, quickly and very efficiently. So a big hats off to the Neste team for what they did. On the regulatory front, the year was filled with all kinds of rumors and expectations. But in the end, I think the tailwinds are supporting Neste, both in Europe, gradually in the United States as well with the RVO. And then we're starting to see initial green sprouts, so to speak, when it comes to SAF in Asia. And last but not least, I think overall, where we are today, we have a good foundation then to perform better in 2026. But then looking at Neste in a bit more detail, I always start with safety. This is the #1 subject here in the company. Every meeting starts with safety. On the left-hand side, you can see our total recordable injury frequency rate. This really is people safety calculated on a per 1 million tons -- we were -- 1 million hours worked. We were able to reduce it a bit. We have a long way to go here. I think we have all the means and tools and skills to bring this down. We just need more systematic and discipline. But I'm not happy with the number. We can do much better. On the right-hand side, we see process safety, which in the past has been pretty tough for Neste in some areas. But overall, if you look at last year, we made good progress. We are not yet at first quartile, we need to go lower, but still, I'm very pleased with how the year ended. 0.9 is a big improvement from the past. And one piece of information, which is not shown in the slide, but which I want to mention specifically is that in the Rotterdam capacity growth project, our expansion, we actually have had a very good safety year as well, good progress. And considering how large and undertaking Rotterdam is, and we have thousands of people on the site, so far, we've done well. Of course, the work continues. Then a few numbers from last year 2025. Our comparable EBITDA was EUR 1.683 billion, over EUR 400 million improvement vis-a-vis the previous year. I was very pleased with that. On the other hand, you can see the term. The sales margins on renewable products, $411 per ton. We were impacted by the term deals from the fourth quarter of 2024. They did impact that number in the second half. And in the final quarter, we saw prices rise, but we did have that overhang as we often do when we term a part of the business annually. And then on the right-hand side, maybe I want to highlight the SAF volume. We doubled it to 867,000 tons, pretty much, I would say, at a level which is sort of reasonable given the amount of volume being sold overall. As we know, the renewable -- let's say, the SAF mandates have not risen as rapidly as we had hoped, but still over 800,000 delivered to our customers. Then on the fourth quarter, our -- shown on the bottom left-hand side, our EBITDA for the fourth quarter was EUR 601 million. We had a very strong finish to the year on multiple fronts. As I said, all of our businesses performed better than the year before. And so of course, we're very pleased with that. Free cash flow in the last quarter was exceptionally strong, EUR 809 million. Eeva will talk about the balance sheet further. I think overall, I can say as far as the balance sheet is concerned that, that 40% leverage that we set at the beginning of the year as an absolute cap, well, I think looking at the number, we can say that we're clearly now in much better shape than we were in the past. Maybe [indiscernible] we're in clear waters, but clearly, the direction of travel is very positive. So good on that front. The work continues, of course, into this year. We have a number of major things we are working on. The performance improvement program, as discussed already, and Eeva will go through in more detail, delivered EUR 376 million. So we actually achieved, on a run rate basis, more than what we had set out as a target for the 2-year program. So we've really done extremely well. What I want to do here is now that we will report to you -- we're actually going to continue this program for another year, for '26, and then we will, in '27, move more into continuous-improvement type of a mode. We are not setting new public targets for this year, but we will continue reporting to you on a quarterly basis how the work continues. What I can say is that after having observed the work for 1 year, I see there's still good potential to raise that number even more. So you will then get reports on a quarterly basis, and we'll then see where we end up after 2026, what the total final tally is. Rotterdam is a big undertaking. I go there almost every 6 weeks. During my last visit, I was impressed by the good work people are doing there. It's very, very busy, very intense, a lot of people there. They're making good progress. But as I said, 2027 is then the big year for the startup. And then finally, operationally, we continue to work to increase our own production to make more advancements there and also to be commercially successful. And then, of course, gradually get ready for the Rotterdam launch in '27. So those are some topics on the agenda of the company. We will be happy to discuss these with you in a moment when we get to the Q&A. Now let me hand it over to Eeva to talk about the financials. Thank you. Eeva Sipila: Good afternoon on my behalf as well. And I'll start with the renewables market. This slide shows the reference margin development of renewable diesel. And as you can clearly see, the fourth quarter was better than the previous quarters of '25. We have a bit of a sliding down effect during the quarter and then a small sort of jump at the year-end, quite typical in a way that some late buying tightening the market, which again then typically also in early January of this year has then eased back. So in this sort of a supportive market environment, our EBITDA on a comparable basis reached EUR 601 million. In Renewable Products, we had a maintenance-heavy quarter, but higher sales volumes and margins offset the higher net production costs. In Oil Products, solid utilization, and the November spike in gas oil market prices supported profitability. And finally, Marketing & Services, we saw a nice sales volume increase in Finland and Estonia. Looking at the sort of full year 2025. So we reached almost EUR 1.7 billion in comparable EBITDA and really thanks to higher sales volume and lower costs, as you see on the right-hand side graph. Like Heikki already mentioned, all the business areas improved from the previous year, and we're very pleased with that. The performance improvement program, indeed, 1 year ahead of schedule, so exceeding EUR 350 million by the end of '25 instead of the original target, which was only end of this current year. Very pleased with that. Of the EUR 376 million, that is the run rate in the P&L of 2025, there is EUR 172 million that have come through. And this is just purely from the fact that, obviously, the run rate is ahead as the program started after a few months into the year and then getting sort of all activities ramped up and before there is that annual effect, it takes -- comes then with -- over the coming quarters. Like Heikki said, very pleased with the amount of activities and kind of actions and the overall engagement of the Neste team in improving our competitiveness. So we're absolutely pushing forward. 75% of what we've achieved so far has come really from cost reduction and the big elements being general procurement and logistics, and then 25% coming from margin and volume optimization. Then a bit more detail into the quarterly performance by segment. So starting with Renewable Products. So indeed, despite significant maintenance activities in the quarter, the sales volume reached 1.1 million tons and our commercial team did -- worked very hard to -- for this. The comparable EBITDA came pretty close to the third quarter level, which was always going to be a tough target since that was one of more sort of solid operations. But as you can well see, so sales volumes, margins supporting, and then really the maintenance cost visible in fixed costs dragging the result down. But sort of -- no sort of surprises there per se. Moving to Oil Products. High utilization, we are very proud of this. And especially now in Q4, this was really worth a lot of money for us because the market prices in diesel cracks really went up to almost $30 a barrel. And of course, there being agile and really on top of the market and being able to leverage that opportunity was very, very important in reaching the EUR 321 million for the quarter. And indeed, our refining margin of over $20 is something we're very pleased and did require, as I said, quite a spike in the market price, but good -- really good work from the team here. And with all the volatility that we can expect to continue in the global oil markets, I think this agility continues to be something that we're focusing a lot on in our performance management. Marketing & Services also did well, EUR 28 million. Unit margins were seasonally weaker. And then the fixed costs were also higher. We have a bit more higher investments ongoing in IT and then also the new retail Huili concept here in the Finnish retail market. But good work on the sales volumes from the team and then supporting the result on to the other direction. Moving then to cash flow, and this certainly increased markedly. Obviously, improved results helped but also a lot of good work on the net working capital side. EUR 809 million was the cash flow for the quarter, and this then resulted in a full year cash flow before financing activities of EUR 759 million. And this really despite cash out investments being EUR 260 million in the quarter, so a bit higher than the previous 2 quarters, the Rotterdam expansion and then the additional maintenance work behind that, a slightly higher figure. And as we've said earlier, the Rotterdam investment will keep our investment level high also in '26. And then we have the Porvoo refinery turnaround coming up every 2.5 years, and this is now the time it comes. And so that, of course, adds to the CapEx, but we are guiding on cash out investments to be between EUR 1 billion and EUR 1.2 billion. So very -- I would say, very well in line with what we said a year back. And still on the net working capital, so maybe a few words. So on the inventory side, you'll remember, we were very clear that fourth quarter will be one of reduced inventories as we really push out the pre-maintenance buildup that we had to do in Q3, which hurt cash flow at that time, succeeded in that. But in addition, we had a lot of focus on AP and also AR. And I think, again, the sort of team did very well on that, and we're certainly very, very pleased with the outcome. And this then leads to us being well on track with our financial targets. So as Heikki already mentioned, leverage is clearly now below the 40%, and the other financial target on the performance improvement also being accomplished. Now work continues on both of these areas, and we have a lot of things we can and need to do still at Neste to improve, but successful delivery in any case for '25. And with that, handing back to you, Heikki. Jukka Miettinen: Thank you, Eeva. So let's then talk a bit about regulatory matters. On this list, there's a lot of text here. Sorry for that. We wanted to give you a full compendium of all the things we see happening on the regulatory front, both in North America, Europe and Asia for the different products. I think just the fact that the list is quite long and much longer than we had earlier sends a message that now things are happening here again. What's particularly interesting on the right-hand side is how much activity we see across all of Asia. Yes, there are small numbers, there are small mandates, 1%, 2%. In some countries, they're more on SAF for international flights, not for domestic flights. But still, Singapore has taken the lead with Japan, and now other countries are following. In Europe, of course, for us, the big thing is the implementation of the Renewable Energy Directive III and specifically what that does to Germany. Since we last have spoken -- or since we last spoke, the process has continued in Germany. Now they are in parliamentary review in the Bundestag, and we hope in the coming months then to get a final resolution. But so far, so good. Direction of travel is positive. And as we estimate by the end of the decade, the volume of renewable diesel should go from 5 million to over 10 million-plus tons in Europe. And of course, for us, at Neste, where we can produce both SAF and RD in our refinery. So this is really good news. And then in Europe, of course, the mandates will rise in 2030. We are going to continue discussion with the European Union to make sure that, that really then materializes. So overall, very good. And in the U.S., we're waiting for more news on the RVO renewable volume obligation decision, which was part of the big beautiful bill. And also there, we should hopefully get some more news towards the end of the first quarter. Focus areas for this year. I already talked about these a little bit. But if I just sort of summarize, still what's on my and my team's agenda, so really continuing with the performance improvement program. There's a lot of activity. I've been positively surprised how much team Neste actually is able to do on this front. Maximization of our asset utilization. Here, I would say that we have our work -- we still have work to do, I need to put more efforts into predictive maintenance, make sure that we really prepare for our turnarounds really well. We get maintenance done on time and on budget. And this year, in particular, we have the big TA coming in Porvoo in the fourth quarter or towards the fourth quarter. It's a very big undertaking, but we are monitoring that carefully. So far, what I've seen, I feel good about the preparatory work. And we also do external benchmarking to see how well we're getting ready. So -- and that benchmarking data also indicates that the team has done good work, and we're -- we will be prepared then for the turnaround. And then Rotterdam already, we discussed. It is moving according to plan at the moment. Market opportunities overall. Our world in renewables is -- can be a bit volatile from time to time. As said already, a lot of positive things happening now on the regulatory front. Let's see how those get implemented, but still the tailwind is clearly more positive. The big unknown for us is Chinese SAF volumes, how much will come into Europe. We know there's volume coming. I need to wait and see for the customs data to get a better view on that. We continue to work on SAF, antidumping duties to make sure we have a level playing field on SAF. And then on uncertainties, maybe I want to highlight the feedstock prices. Of course, in our business, feedstocks account for a very large share of the variable costs. So depending on how they progress for animal fats and UCO and then for the Annex IX feedstocks will be critical to then determining the final margin of our products because we have -- we can hedge these costs to some degree, but not fully. And then I think on geopolitics and trade, otherwise, I don't see anything particularly new happening on that front that would impact Neste at the moment. So that pretty much is that story. Then in terms of dividend. Our Board recommends to the Annual General Meeting that the dividend would be kept at the same level as last year. So that is EUR 0.20 overall. And then finally, the outlook for this fiscal year. So renewable product sales volumes in 2026 are expected to be approximately at the same level as in 2025. Oil Products' sales volumes in 2026 are expected to be lower than 2025 due to the planned maintenance turnaround at the Porvoo refinery. So those are our key messages at this stage, and I think we will hand it over to the operator, right, and take your questions. So thank you very much. Operator: [Operator Instructions] The next question comes from Alejandro Vigil from Santander. Alejandro Vigil: The first one is about the outlook for '26. Of course, you are talking about this guidance of volumes flat year-on-year. And I'm wondering something is going on in terms of utilization rates or why you see this flattish performance year-on-year? That's the first question. And the second is regarding profitability. We have seen in the last couple of quarters, EBITDA in the Renewable Products division of about EUR 250 million, EUR 270 million per quarter. This is a good indication of the current status of the market in terms of margins for Neste in this division? Heikki Malinen: So if I take the outlook and if you talk about the profitability. So well, I would say that at the moment, with respect to our refinery, so we are running fairly close to the capacity we have at the moment that we can get out. We are constantly optimizing and trying to squeeze out more. But in our situation, any debottlenecking that we can do to get more out will have to happen during the turnarounds. And the next opportunity for debottlenecking will be end of this year, early 2027, when we have the next turnarounds in Rotterdam and Singapore. So you cannot do debottlenecking until you have done a certain amount of engineering and you've ordered different types of equipment and pipes, et cetera. So there's always delays to how quickly you can do the turnarounds and debottlenecking. So that will be a story more towards the end of this year, early next year. And then Rotterdam, of course, will then be the big volume increase, and that will come in 2027. So that is the situation. And as I said, we are trying to squeeze out safely and reliably as much as possible, but we have to overcome those debottlenecking challenges first. Eeva Sipila: And Alejandro, on your profitability development question. There, so obviously, sales market prices are important. We've had tailwind that we see continuing. At the same time, if you look at feedstock prices '25 versus '24, they were higher. So it's -- we need to continue to work really on finding the right feedstock and really utilizing the whole global network that we have to maximize the margins. But importantly, then obviously, is the performance improvement program. A lot of the actions are RP focused. And we -- as mentioned, we have more in the pipeline just from a sort of timing perspective, but still working on new actions. So we're certainly very focused on improving the profitability at RP. I think we've -- this is not a level where we're yet satisfied in any way. Operator: The next question comes from Paul Redman from BNP Paribas. Paul Redman: Yes, 2, please. The first one is just back to sales volumes. Could you just be clear? You used to provide a breakout of weeks by refinery of how much turnaround activity will go on in the year. Could you just go through each refinery, just highlighting how many weeks' turnaround you're expecting in 2026? Or as you just mentioned, Rotterdam or Singapore possibly in 2027? And then secondly, I have a question about -- it's a bit longer term. So when we look beyond 2026, you previously guided to a material reduction in CapEx post 2026 as the Rotterdam facility comes online. If margins continue to be strong, the balance sheet will degear. How do you think about financial priorities post 2026? Heikki Malinen: Okay. So I will give -- I will start and let Eeva continue. So in terms of this fiscal year, so we have these catalyst changes pretty much every year. And I cannot really give you an exact week number here yet for the turnaround in Rotterdam or in Singapore because they will also include debottlenecking work. So it isn't just the pure catalyst change, but there will be others. But the Rotterdam TA will be at the end of -- sometime in the fourth quarter. And then Singapore will start Line 2. Now that's the first TA on Line 2 in Singapore, that will be starting probably -- as it was this time, mid-December-ish, somewhere there, and it will flow then into the first quarter. But the exact date still will depend a bit also on the holiday season in Singapore with Chinese New Year, et cetera. So -- but anyway, roughly there. So Singapore more into the '27-ish, and that will also include then debottlenecking work, which has to be done. Now then to your question about beyond '26 and CapEx and how we're thinking about that, so maybe Eeva? Eeva Sipila: Yes, financial priorities post '26, Paul, I think it was. So no news here really. Deleveraging is the one word I would say that, obviously, whilst we now had good cash flow and we've clearly turned the corner in leverage, the amount of gross debt remains high and this year being still a sort of CapEx-intensive year, is not going to sort of fundamentally change that. So then as we go into '27, '28, that's really sort of the main focus. And of course, in order then that to build ourselves a stronger balance sheet then that we have more optionality a few years after that. Operator: The next question comes from Henri Patricot from UBS. Henri Patricot: I have 2 questions, please. The first one is just another follow-up on the volumes for this year because, Heikki, you mentioned that you're running fairly close to capacity at the moment, but your utilization rate last year was 73%, and Neste used to run much closer to full capacity. Are you saying that we should assume that full utilization would be close to this sort of level because of the frequency of the catalyst changes? Or is there some upside to that utilization rate over the next couple of years? And then secondly, on the sales structure for 2026. Can you give us an update on the term contracts for this year? Where did you end up in terms of the split between term sales versus spot? And any comment you can make on how this term premium looks in '26 versus '25? Heikki Malinen: Yes. Thank you. Thank you very much for those questions. Yes, the utilization level, I would like to see that also higher. So -- but that will require some more work in the refineries. There's also a bit of how much do we swing between RD and SAF. So last year, we made over 870,000 ton-ish of SAF. So how much we are swinging back and forth between that also impact the utilization. It isn't just a -- although we're happy about the flexibility, getting -- putting the SAF lines on also impacts a bit the utilization. So the more we can run with 1 grade, RD in particular, that helps that. So -- but we are going to try to improve that further and then do some more debottlenecking. Then in terms of the term contracts, I said in the last call, I said that we would take our time and not rush. Well, in the end, then we did ultimately then go and term about 60%, roughly, about the same level as the year before. So about that. Anything you want to add, Eeva? Eeva Sipila: Well, maybe just to mention, Henri, on the premium, so significantly higher than a year back. Obviously, the market situation was healthy. And thanks to that, that actually was behind our decision to term that much. I mean, originally, we -- I think we discussed also with you that we'd aim a bit higher. But when the market was as good as it was, we felt it was the best decision for shareholder value. Operator: The next question comes from Adnan Dhanani from RBC. Adnan Dhanani: Two for me, please. Just the first one on your CapEx. You were able to lower your guidance a couple of times last year and still end up spending less than the final guidance at the end of the year. Just can we get some color on the moving parts there? Is that just a phasing thing? And if so, could that mean that this year's spend could be towards the higher end of the range you provided? And then secondly, on your performance improvement program, obviously, very solid results so far. You've noted that the work continues in 2026. Are you able to provide any color on how much further upside there could be beyond the EUR 376 million that's already been achieved? Heikki Malinen: Yes. Thank you. Maybe I'll take the second one first, and then Eeva can take a crack on the first one. On the performance improvement program, the -- we had the 4 modules which were -- there's the efficient organization, which has been done. There were items on procurements or sourcing. A lot of work has happened. Some of it will flow also into this year. There's the commercial piece. There's -- we've had -- we've optimized our logistics and terminal networks. We've closed some terminals, which had very low utilization. So that -- a bunch of that work has been done. On the refinery side, there, we do see a lot of further opportunity. That module has been slower to progress because the changes we need to make to these lines, some of them may need some money or they just need some design work, and it just takes more time to do these adjustments, let's say, safely, plus it's just simply more complex work. So we will continue focusing especially on the refinery side in '26. We are not going to set -- give you any guidance or estimate on the upside. As I said, I only can state that I'm really pleased with what we've accomplished this year. We're going to continue focusing particularly on the upside on refineries, and we will then report on a quarterly basis and try to provide you as much color as we can. That is the current way we're going to move forward. And then in terms of the CapEx, so anything you would like to say regarding... Eeva Sipila: Yes. Certainly, I think it's not a sort of untypical phenomena that you have a bit of slipping. I wouldn't say that it was more than a few tens of millions. So indeed, we were expecting that, that slipped. Now the estimate is based on what we kind of have currently. And yes, then obviously, we've given a range just because there are some uncertainties. And I'm comfortable with the range, but indeed, I think it's a typical phenomenon, sometimes really difficult to estimate exactly right then on how the sort of payments then go out, but not a big thing for last year. Operator: The next question comes from Artem Beletski from SEB. Artem Beletski: So I have 2 to be asked. So the first one is relating to renewables volume outlook for this year and basically split between RD and SAF. Is it fair to assume that there will be growth in RD, and maybe SAF volumes coming down, just looking at the market fundamentals currently and the SAF market being pressured by import volumes coming from China? And then the second question is relating to Q4 fixed cost. What it comes to renewables? So there has been quite significant increase sequentially, I think, more than EUR 30 million. How big portion of it was related to this maintenance activity happening in the quarter? And maybe you can provide some guidelines for this year as well? Heikki Malinen: Thank you, Artem. So I'll take a crack at the first one, and then Eeva can talk about the fixed costs. So yes, last year, we sold -- it was 3.5 -- hold on -- 870,000 on the SAF, if I remember correctly, and then the rest was RD. I think I said on the call last time that if the SAF market doesn't develop well, then we have always the option to sell RD, and that is what we will do. So we are constantly optimizing and depending on the -- what really makes sense financially for our shareholders, we will run the refineries according to that. So it is possible that this year, we'll have a bit less SAF. But let's see, it's early. We're just in January, and let's see how the markets -- what happens with the imports, we really don't know yet very well. We don't have any data yet really for '26. And then based on that, we'll have to make the choice. But we will go with what really maximizes the value for the company. Eeva Sipila: And then on the fixed cost item, so indeed, the growth in fixed cost was really all around maintenance. And looking into '26, so we'll have a similar phenomena that obviously, we have some of the performance improvement savings coming through in the fixed cost, and that's supportive. But then at the same time, we will be increasing somewhat the money spent on maintenance for the obvious reason that we do want to sort of max out on the utilization and reach a better utilization, as Heikki already mentioned. So that will probably mean that in a way, net-net, there's not much improvement in fixed cost per se to be expected. But of course, we're very focused on all elements on the margin, then to sort of improve profitability, nevertheless. Fixed cost, relatively speaking, is not the main item. Operator: The next question comes from Henry Tarr from Berenberg. Henry Tarr: The first one is just on premiums and margins. So I think you talked about higher premiums into the term contracts. Obviously, there are lots of push and pull factors, et cetera, driving margins in the renewables business. But as we stand here today, then looking into 2026, does it make sense as a starting point to think about the sort of second half levels from last year being a good base as we think about modeling renewable products? I think that's my first question. Eeva Sipila: Well, I think that if you use the second half as a reference, it wasn't that maybe impressive in the beginning [ on ]. So I would say that we are aiming to sort of -- aiming upwards on that. But like you rightly say, so obviously, the premium we fixed is dependent also how -- what happens on the feedstock side and how we're able to optimize. But I think it's fair to say that our ambition is higher and hence, the higher term rate. Heikki Malinen: I think the feedstock pricing is, of course, really critical here for the final margins. Henry Tarr: Yes. And that's probably my second question then, which is, what are the key sort of drivers and risks that you see for this year on feedstock? Heikki Malinen: We try to buy from all jurisdictions. Globally, we're continuing to expand our reach, both for animal fat for UCO. And what's been really interesting, of course, now with the new RED III requirements is these Annex IX feedstocks. I think we're well positioned -- actually pretty well positioned on these Annex IX feedstocks, which I think is -- could become an asset here as we go forward, but let's see. And then in terms of UCO, what I think is playing here a lot into the equation is how much will Chinese demand be, hard to predict and then also what happens with the RIN, the RIN 50% in North America. So I think those are the 2 maybe triggers which could then impact both UCO and animal fat prices. And then, of course, how much supply of animal fat is available, particularly out of Australia. So I think those are the sort of dimensions or things which are moving the market. But as I said, I think overall, we're probably -- we're the largest buyer of these feedstocks globally, and we have a good sourcing organization. I think we're very well on the pulse of the market, and we have multiple sources to buy from. If one area looks more expensive, we then always have the opportunity to look for other sources. I think that is an advantage. Feedstocks are really critical in this industry. Operator: Next question comes from Nash Cui from Barclays. Naisheng Cui: Two questions, please. The first one is a follow-up on term sales. I just want to clarify on the ability to lock the margin. From your previous answers, am I right to understand that you can lock the sales price, but not the fixed stock price, so we can still see a bit of volatility on the margin? Then my second question is on one of your peers' comments, your other European energy peer CEO mentioned some bearish comment on SAF mandate. I wonder what's your view on that? Heikki Malinen: Well, do you want to comment on the hedging? Eeva Sipila: Yes, sure. So indeed, I think, Nash, the challenge on the feedstock side is that not all of those products can really be hedged. They are not open transparent market. So more on the -- where you can hedge is then on the sort of soya, palm side, and that means that there's certain limitations when we sort of term a sale. But of course, we sort of -- they do, over time, usually sort of have a correlation and then we sort of try to optimize based on the sort of experience we've built on how to do so. But indeed, there is a certain open position and hence, our cautiousness on the commenting on the final sales margin. Heikki Malinen: Regarding your question about the SAF mandate. So I said before that at least based on the conversations I've had and we've had with the European Union, they are pretty committed to implementing the SAF mandates for 2030. I mean between now and 2030, nothing specifically will happen. There will be a review probably somewhere between now and 2030 about these mandates. I know the airlines are, of course, pushing back and trying to move the 6% into the longer-term future. But as I said, our indication is that the mandates are going to grow and [ 6 ] is the number that's been -- which has been decided. I'm very pleased with what we're seeing in Asia. Gradually starting to see mandates coming there as well. I think that's a very positive sign. If Asia now starts to move forward, why would Europe then suddenly move backward, especially when Europe has been the one really pushing for SAF to start off with. So if we hear something different, we will report to you, but I'm not aware of anything that would derail the 2030 program, at least not at the moment. Operator: The next question comes from Alice Winograd from Morgan Stanley. Alice Bergier Winograd: Just one for me, please. So you said about 60% of sales were termed. Can you give maybe a breakdown between Europe and the U.S. within the term sales? Because the EU margins have been extremely high for the better part of the second half, I think, upwards of $900 per ton. So if there's any indication that a lot of these term sales are in Europe as opposed to the U.S., this has some read across to margins, right? So I appreciate any color you can give. Heikki Malinen: Alice, thank you for your question. Unfortunately, we only provide information on the aggregated number of terms across the region. So we do not break that out by markets in more specific detail. So sorry about that. But thanks for your question. Operator: The next question comes from IIris Theman from DNB Carnegie. Iiris Theman: I have 2 questions, please. So the first one is related to renewable diesel prices, which have come slightly down from Q4 over the past 2 to 3 weeks. So what has been driving prices lower? And do you see any drivers that could affect prices for the remainder of Q1. Yes, so this is my first question. And the second question is related to your utilization rates in RP. So I think previously, you highlighted the 80% utilization rate as a good proxy for this year in RP, while now it seems to be 75% or something like that. So is there anything that has changed since the Q3 presentation when you highlighted this 80% proxy? Did you, for example, have a longer maintenance in Rotterdam or Singapore that basically has impacted your volumes this year? Heikki Malinen: So thank you, IIris, for your questions. On the RD prices, on the last few weeks -- I cannot report anything in particular. I think partially it can be also a bit sentiment driven, how these mandates are coming into play. But I think overall, I cannot report anything specific about that. I think what is good is that the level is, of course, much higher for us compared to where we were last year. I think we've now gotten to a more, let's say, healthy level. And I think for Neste, that is what's really critical here. On the utilization level, as I said earlier, we feel that we have more work to do in terms of these refineries. At the moment, we are running at a level which is fairly close to -- well, let's say, that is the performance of the day, if I would say, so forth. Part of our PIP program, our performance improvement program, specifically focuses on getting more improvements out of the refineries. And therefore, we want to also get that number up. But that is the health of the refinery at the moment. Regarding the turnarounds that you referred to, Singapore, I think, is very close to starting, if not starting, and both turnarounds have been done. We don't comment specifically on the individual turnarounds per se, but both of them have been now been completed. Operator: The next question comes from Christopher Kuplent from BofA. Christopher Kuplent: I'm afraid I'm going to keep asking about turnarounds. I'm going to focus on Porvoo and the Oil Products division. As far as I can recall, this used to be a 4-year cadence for major turnarounds. I think the last one we had was in Q2 of 2024. And maybe it's my recollection that's off, but I thought it was -- next going to be in 2027, which was already, to me, earlier than the usual 4-year cadence. And you're now, as far as I can tell, telling us that, that 2027 may actually happen in 2026. So I wonder, not whether you can give us the exact week when it's happening, but I wonder what your thinking is behind reducing the cadence and what can explain the more regular turnarounds and shutdowns? And lastly, again, this is not about a turnaround, but about Rotterdam and the ramp-up that we're looking forward to for 2027. Can you give us an insight into how fast you think that ramp-up can happen once you've gone through the latest rounds of debottlenecking by the end of this year and you then bring the new units online? Is this a 3-month process, a 24-month process, 12 months? What's a reasonable expectation for the speed of that ramp-up, please? Heikki Malinen: Thank you very much. I think the first question is easier for me to answer. It's a good question. The reason why we have gone to a more frequent turnaround is very straightforward. Here in Finland in the Nordic markets, what we have concluded is that the 4-year cycle is just simply too big a turnaround to pull off safely and reliably. We have -- there are certain sort of limitations on how much workers and contractors we can actually physically get into this fairly small market. And therefore, we've concluded that breaking it into more smaller parts simply makes the turnaround more manageable. This is purely driven by efficiency and safety and productivity rather than anything particularly different. So it will be a bit smaller scope, but then more frequency. So then -- yes, so the 2.5-year cycle is what is the way that our engineers have concluded is the safest and most efficient way to do it. Obviously, I cannot tell you the exact day when we're starting. We will report back to you on that later. But we are spending a lot of time really to do our utmost to get this turnaround to be good. The previous turnaround we had actually was quite successful. If you look at the performance at Porvoo, I think part of the explanation why we've done so well is that in terms of utilization is that the previous turnaround was done really well. So taking learnings from the previous one into the '26 program, hopefully will then yield good results. Regarding Rotterdam ramp-up, unfortunately, here, I cannot give you any information yet. We're so in the midst of building the refinery. You know we are 1 year late from the initial schedule that was published, I think, in summer of 2022, if I remember. And so there's still a fair amount of work to do. I think probably -- well, let's see when we are closer to startup and when we are in that phase, we will then start telling you more about the ramp-up curve. But at the moment, unfortunately, I cannot -- I don't have any meaningful information to share with you. So sorry about that. Operator: The next question comes from Yulia Bocharnikova from Goldman Sachs. Yulia Bocharnikova: I have 2, please. First on SAF. So given we see currently SAF trading at discount to RD, is it correct to assume that 100% of SAF should be sold on term contracts? And if you could give any clarification if there is any premium of SAF to RD in terms of prices in term contracts? And the second one on hedging. So you mentioned there is still palm oil or soybean hedging. Is my understanding correct that if we further see lower diesel prices and higher palm oil prices, that would result in a positive hedging impact in Q1 '26? Heikki Malinen: So let me address the first one and then on hedging, Eeva. So indeed, you are right that -- the SAF is trading unfortunately, at a discount to RD. I mean, SAF should be trading at a premium because it's -- obviously, it's a more advanced product and more higher value-added product, but that's how the market is today. I can't comment on the particular prices or how we do the terms. The only thing which I would just say is, what I said earlier is that when we look at the SAF business for us, we pretty much optimize it based on what creates more value for us. And depending on the commercial returns, we will then adjust our lines accordingly. That's really all I want to say about the SAF commercial aspects. Hedging then, please. Eeva Sipila: Yes. I would say, Yulia, that higher diesel is better both in RP and OP kind of irrespective of hedging. Now obviously, that can sort of have some impact. But -- so I would -- in that sense, their conclusion maybe is a bit sort of too focused on the palm oil side. So the diesel component is important in both businesses. And of course, what we've seen so far in the quarter is a healthy level of diesel prices even if we're not sort of where we were in that sort of November spike. Operator: The next question comes from Matti Kaurola from OP Corporate Bank. Matti Kaurola: 2 questions. First, regarding your production flexibility. So could you open up your kind of flexibility to produce more SAF in case the market is recovering. So how easy the switches do? Are we speaking about like S&OP horizon, like 1 quarter or something like that? And then the second one is regarding trade policy. So could you help me to understand why the ADDs to our Chinese SAF is pending because it's -- I mean, the case pretty much the same, then with RD aside where we already have those ADDs in place. Heikki Malinen: Thank you, Matti. I'm sorry, at least I had some difficulty in hearing the... Eeva Sipila: Yes. The first question for Matti was around how easy it is to switch between RD... Heikki Malinen: Yes. That's what I got. What about the second question? Eeva Sipila: And the second was on trade policy that's why -- I believe, Matti, you asked that why don't -- why are we yet to see any ADDs on SAF, that the case would be similar to RD and when we only have RD. Matti Kaurola: Exactly, exactly. The production is happening in the same facility. Heikki Malinen: Right. Okay. So very good. So on production flexibility, so it is -- the advantage of our production system is that we can fairly quickly move back and forth in the lines. It is something in our system. I mean, these lines do have that flexibility. But of course, we only do it if we think it is financially viable. The switch is -- we're not talking of very long lead times to go from one product to another. So I don't know if I have much else to say there. Anything you want to add on the flexibility? Eeva Sipila: No, no. Heikki Malinen: And then on the trade policy, yes, we are actively working with the European Union on this. But European Union takes its -- they have their own procedures. They have their own methods and approaches on how they review these things. They have to do a lot of data collection. And sometimes it just takes time to get the data for them to do the actual calculations on potential injury. So we don't have a deep insight into how the processes work inside the union, but we are hopeful that in 2026, we actually could see some progress. So we will report back to you at the moment we know that the European Union is moving forward. I really hope they will make a decision this year. I really hope so. Operator: The next question comes from Alastair Syme from Citi. There are no more questions at this time. So I hand the conference back to the speakers. Heikki Malinen: Okay. Well, thank you for your questions. Thanks for taking the time to discuss with us about 2025 and 2026 outlook. I want to really summarize our presentation with 4 main points. Looking at last year, I'm very happy with how we were able to deliver the financial turnaround compared to 2024. As you've heard, really phenomenally good success on the improvement program, really very happy with exceeding the targets. And I believe there's more to come, and we will report to you on a quarterly basis. Regulatory development looks to be favorable. And as referring to Matti's question about SAF, antidumping duties, hopefully, we can report something on that as well in '26. And really, I believe we have a good foundation. There is still opportunity to improve the company, and we are working towards getting full asset utilization in place in 2026 and then '27, Rotterdam 2 is coming. So with those messages, both from Eeva, me and Jukka, I wish you all a very good day and look forward to seeing you then after Q1. Take care.
Operator: Good morning, and welcome to the Everest Group Limited Fourth Quarter of 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matthew Rohrmann, Senior Vice President, Head of Investor Relations. Please go ahead. Matthew Rohrmann: Thanks, Drew. Good morning, everyone, and welcome to the Everest Group Limited Fourth Quarter of 2025 Earnings Conference Call. The Everest executives leading today's call are Jim Williamson, President and CEO; and Mark Kociancic, Executive Vice President and CFO. We're also joined by other members of the Everest management team. Before we begin, I'll preface the comments by noting that on today's call, we will include forward-looking statements. Actual results may differ materially, and we undertake no obligation to publicly update forward-looking statements. Management comments regarding estimates, projections and future results are subject to the risks, uncertainties and assumptions as noted in Everest's SEC filings. Management may also refer to certain non-GAAP financial measures. Available explanations and reconciliations to GAAP can be found in the earnings release, investor presentation and financial supplement on our website. With that, I'll turn the call over to Jim. James Williamson: Thanks, Matt, and good morning, everyone. Before getting into the quarter, let me provide a brief summary of the strategic steps we took in 2025. During the course of the year, we simplified the company, reduced reserve risk, reshaped the portfolio and strengthened the balance sheet. Despite reserving actions and costs associated with implementing our $1.2 billion adverse development cover and the divestiture of our commercial retail business, we generated an operating ROE of 12.4% and a TSR of 13.1%. We also made significant strides in strengthening the management team with several new world-class executives joining us in critical roles. Today, Everest is better positioned to drive improved performance and consistent returns. We have more work to do, and the entire Everest team is focused squarely on the rigorous execution of our business plan to ensure we achieve our financial and strategic objectives. Turning to the quarter. Gross written premiums were $4.3 billion, down year-over-year, driven primarily by the sale of the commercial retail business and deliberate underwriting actions in both businesses, particularly in U.S. casualty lines. Net investment income was $562 million, up meaningfully from prior year, driven by growth in the fixed income portfolio and strong performance from limited partnerships. Investment income continues to be a durable contributor to earnings. The combined ratio for the quarter was 98.4%, including $216 million of catastrophe losses and $122 million of ADC premium. Excluding those impacts, the attritional combined ratio was 89.9%, reflecting the underlying strength of the book and our focus on margin development. Now for our segment results. Our fourth quarter reporting is consistent with prior quarters with operating results presented for reinsurance and insurance. Mark will provide details regarding future segmentation. The reinsurance business performed well in the quarter with strong underwriting discipline applied consistently across geographies and lines. The division generated $255 million of underwriting income in the quarter. Our ongoing portfolio discipline in reinsurance is the driver of our strong underlying performance. For example, since we began deliberately resizing our casualty portfolio in January of 2024, we have come off over $1.2 billion in premium. This same discipline carried into the January 1 reinsurance renewals. As expected, market conditions softened across many lines in the Jan 1 renewals with property cat rates down an average of 10% globally while remaining above our required technical price. As has been the case in past renewals, our preferred market position allowed us to shape our signings to maximize expected profitability. We bound over $6.3 billion of premium at Jan 1, down just under 1% over expiring. Terms and conditions and attachment points largely held, which is a sign of underlying market discipline. Total property limit deployed decreased for the first time since 2022 with a modest 2% reduction. Capacity deployment was selective. We retained over 95% of our in-force premium with our top-tier accounts while deliberately reducing exposure to less profitable deals. We continue to see attractive opportunities in Asia, including in our new India branch as well as in targeted specialty lines. The global development of data centers, supporting energy capacity and other infrastructure investments has helped propel and diversify the development of our specialty book, which is now approximately $2 billion in premium with an attritional loss ratio in the mid-80s. Our Mt. Logan third-party capital business is also performing well with over $2.5 billion of AUM as of January 1. We have an excellent pipeline of investor interest in Mt. Logan across multiple lines of business, and I would expect Logan to assume a more prominent role in our capital mix over time. Overall, the Everest Reinsurance team once again did an excellent job navigating a more challenging market. Moving to insurance. As I discussed during our Q3 earnings call, we completed our one renewal casualty remediation in North America as planned and are seeing indications those efforts are improving book performance. In addition, in October, we sold the renewal rights to our European, U.S. and Asian commercial retail insurance businesses to AIG for a total consideration of $426 million, including the transition services agreement. Since then, we have been working closely with AIG to transition that portfolio. Pricing in the insurance book remained strong in Q4. North American casualty pricing continues to exceed average loss trend with GL, auto and umbrella excess increasing, in some cases, as much as 20%. This was somewhat offset by declining rates in property, which were down 11%, but remain above required technical price. While the retail divestiture will create modest short-term pressure on our group expense ratio, we expect it to subside in coming quarters back to levels where we've historically operated. I think it's worth spending a moment to outline the scope and strategy of our global Wholesale and Specialty platform. This business competes in attractive markets where the capabilities needed for success closely align with our reinsurance treaty business. Both businesses require expertise-driven underwriting discipline, limited but strong distribution relationships, dynamic capital management and strong supporting claims and technology capabilities. This focus will allow us to further sharpen our execution and efficiency to benefit our clients and shareholders. At year-end 2025, gross written premium for our go-forward Global Wholesale and Specialty business was $3.6 billion, including $1.2 billion in facultative, which we have reported in this and prior years as part of our reinsurance business. Also included in this business is Syndicate 2786 in our London market business, Evolution, our U.S. E&S platform, U.S. programs and a range of specialty underwriting units in areas like marine, aviation, political risk, surety and Accident and Health. These businesses are relatively mature with established underwriting franchises and proven risk selection. The platform is positioned to generate reasonable underwriting profits even as we select more prudent loss picks going forward. We expect additional mix improvement to increase underwriting profitability over the course of 2026. Since announcing our retail divestiture in October, we've quickly assembled the go-forward management team of Global Wholesale Specialty, now led by segment CEO, Jason Keen. Jason has deep experience running profitable specialty insurance businesses around the world, and he's already positioning Global Wholesale and Specialty for improved performance. We expect this business to become a more significant share of Everest's earnings mix over time. Finally, a word on reserves and capital management. As Mark will share in more detail in a moment, we've completed all our reserve studies for the year. In reinsurance, we believe the overall division position is robust, driven by short tail and specialty lines. In insurance, we believe prudent loss picks in the most recent accident years, coupled with our previous actions and the cover provided by our ADC, dramatically improved and stabilized our overall position despite the ongoing challenges posed by the abuse of the U.S. legal system. And I'll end with capital management. To speak plainly, Everest stock price does not reflect the value of our firm, either in terms of current book value or the strong potential earnings of the company going forward. As long as that's the case, we will prioritize share repurchases as a use of excess capital. In Q4, we repurchased $400 million of shares and a further $100 million in January of 2026. And with that, I'll turn the call over to Mark. Mark Kociancic: Thank you, Jim, and good morning, everyone. As Jim mentioned, 2025 was a transformational year at Everest. We took significant steps to improve the return profile of our business and strengthen our balance sheet, while at the same time, returning capital to shareholders. Everest delivered a solid fourth quarter, generating $549 million of net operating income, an operating return on equity of 14.2% and an annualized total shareholder return of 13.1%. Our results this quarter reflect the strength of the contributions from both underwriting and our investment portfolio. There are several onetime moving parts that include the premium cost associated with the adverse development cover, the sale of the renewal rights to our commercial retail insurance business and the preliminary onetime charge associated with the exit of that business. And I'll discuss each of these items in detail in a few minutes. Starting with group results. Everest reported fourth quarter gross written premiums of $4.3 billion, representing an 8.6% decrease in constant dollars, while excluding reinstatement premiums from the prior year quarter. This was largely driven by targeted reductions in U.S. casualty lines as well as the impact of our announced exit of the commercial retail insurance business. The combined ratio was 98.4% for the quarter, and this includes approximately $122 million or 3.2 points on the group combined ratio from premium consideration Everest paid for the second layer of the adverse development cover we announced in the quarter. The premium consideration was split between $105 million in the Insurance segment underwriting results with the remaining $17 million in the other segment and is recorded in the prior year loss expense line of the financials. Catastrophe losses contributed 5.6 points to the group combined ratio, largely driven by Hurricane Melissa and other midsized events globally. The group attritional loss ratio improved 3.7 points to 60.2% in the quarter, largely driven by improved loss experience while we continue our prudent approach to setting initial loss picks in U.S. casualty lines. The attritional combined ratio improved 1.7 points to 89.9% when excluding the impact of $68 million in profit commissions related to prior year loss reserve releases in mortgage lines from fourth quarter 2024. The commission ratio improved to 22.4% in the quarter, while the underwriting-related expense ratio increased 1 point to 7.2%, and the increase was primarily driven by lower casualty net earned premium growth and several onetime costs in our insurance business, which I'll speak to shortly. In the other income line, we recognized a net benefit of $127.3 million associated with the sale of the commercial retail insurance renewal rights to AIG in the quarter. And this consists of $289 million of revenues and fees, offset by charges of $162 million. As I previously noted, we expect there will be approximately $150 million of restructuring charges throughout 2026 associated with our exit from the commercial retail insurance business. And this includes approximately $80 million of real estate-related costs that we expect to incur in the fourth quarter of 2026, which we'll look to mitigate where possible. These costs will be reflected in our other income and expense line within operating income and will not impact the combined ratio. In our Other segment, we expect approximately a $10 million monthly net expense benefit from AIG in each of the first 9 months of the year. Net earned premium associated with the commercial retail insurance business will continue to earn through the other segment before diminishing to a small amount around year-end. Given these dynamics, the combined ratio will likely fluctuate during the year as earned premium rolls off and general expenses diminish throughout the year. We expect the other segment to run at a combined ratio above 110% in 2026, driven primarily by higher expenses as we transition the commercial retail insurance book to AIG. Moving to reinsurance. Gross written premiums decreased 3.6% in constant dollars versus the prior year quarter when adjusting for reinstatement premiums during the quarter, and we grew 10.1% in property cat XOL when excluding reinstatement premiums and continued to expand in Global Specialty lines while remaining disciplined in casualty lines. The combined ratio increased 80 basis points from the prior year to 91.2%. The attritional combined ratio increased 90 basis points to 84.6% when excluding the impact of $68 million in profit commissions associated with favorable mortgage reserve development from the prior year fourth quarter. And moving to Insurance. Gross premiums written decreased 20.1% in constant dollars to $1.1 billion. Growth in Accident & Health and other specialty was more than offset by the lower retention and new business in our commercial retail business as a result of the announced renewal rights transaction in October. The underwriting-related expense ratio was 21.5%, with the increase driven by reduced casualty earned premium growth as well as onetime restructuring impacts that contributed 1.2 points to the increase relating primarily to accelerated IT project depreciation. The commission ratio increased 1.5 points to 14.1%, with the increase largely driven by mix. The attritional loss ratio improved to 68.6% this quarter, while at the same time, we remain disciplined in our approach to setting and sustaining prudent loss picks in our U.S. casualty lines portfolio, given the elevated risk environment due to social inflation. There were several large energy losses in the market that impacted our wholesale business in Q4, leading to an elevated insurance attritional loss ratio. In addition to the premium consideration for the second layer of the adverse development cover, this led to an elevated combined ratio in our go-forward global Wholesale and Specialty Insurance business in the quarter. Now moving to our other segment with the announcement of the renewal rights transaction of our commercial retail insurance business, we will report 3 segments beginning in 2026. Our treaty reinsurance business, our global Wholesale and Specialty Insurance business, which includes facultative business and our other segment, which will encompass the exited commercial retail business. We expect to disseminate the historical resegmentation following the filing of the 2025 Form 10-K. Now moving to reserves. All material reserve studies were completed during the third quarter, and our fourth quarter reserve roll forwards and review process yielded immaterial net movements for the 3 segments. Overall, we continue to see evidence of improved underwriting results in our insurance U.S. liability lines from the remediation process. We continue to maintain elevated loss picks in 2026 for U.S. liability lines as we did in 2025, given the uncertainty of the environment. Rate remains in excess of loss trend for U.S. casualty lines, and we expect that U.S. casualty lines will continue to represent a smaller portion of our reinsurance and insurance premium writings in 2026 year-over-year. Moving on to investments. Net investment income increased to $562 million for the quarter, and this was driven by higher assets under management and strong alternative asset returns, which generated $125 million of net investment income in the quarter versus $41 million in the prior year quarter. Overall, our book yield remained flat at 4.5%, and our current new money yield is approximately 4.7%. We continue to have a short asset duration of approximately 3.4 years and the fixed income portfolio benefits from an average credit rating of AA-. For the fourth quarter of 2025, our operating income tax rate was 19.7%, which was above our working assumption of 17% to 18% for the year due to higher income associated with the proceeds from the renewal rights transaction, and the full year operating effective tax rate was 16.3%. Operating cash flow for the quarter of negative $398 million decreased from $780 million in the prior year fourth quarter, primarily driven by the consideration paid for the adverse development cover in the quarter. Shareholders' equity ended the quarter at $15.5 billion. Book value per share ended the quarter at $379.83, an improvement of 20.1% from year-end 2024 when adjusted for dividends of $8 per share year-to-date. In the fourth quarter, we repurchased 1.2 million shares, amounting to approximately $400 million at an average share price of $320.59 per share. For the full year, we repurchased 2.4 million shares, amounting to approximately $800 million at an average share price of $333 per share. Looking ahead to 2026, we repurchased an additional $100 million of common shares this past January, and we continue to view share repurchases very attractively and plan to continue share buybacks in Q1 and in 2026 as a whole, given the return profile of our businesses and the expected capital release from the renewal rights transaction that will be unlocked over time. As mentioned on the third quarter call, we consider $200 million as a quarterly floor for common share repurchases and expect to have a willingness to exceed this amount, conditions permitting, as you saw in the fourth quarter. And with that, I'll turn the call back over to Matt. Matthew Rohrmann: Thanks, Mark. Drew, we're now ready to open the line for questions [Operator Instructions]. Operator: [Operator Instructions] The first question comes from Gregory Peters with Raymond James. Charles Peters: So I want to focus on the expense ratio. And I know you called out that it's going to be higher as you work through some of the restructuring initiatives. in '26. But what's the final destination if you look forward for the global Wholesale and Specialty business when we think about the expense ratio? And there's the 2 pieces, right, the commission and then the other underwriting expense. Just wondering what that kind of looks like going forward. Mark Kociancic: Greg, it's Mark here. So let me unpack this a bit for you. I think for the -- let me just speak to the group first. A bit elevated as a result of moving parts we have here with the retail insurance transaction. So 6% to 7% is what we expect for the year. I think ultimately, that has to be on the lower end of 6% as we enter into 2027. With respect to Global Wholesale and Specialty, we'll get into that more when we have the resegmentation in the -- probably in March or late February when we release the resegmentation statements to the market via 8-K. I do think the expense ratio for GW&S will be significantly lower than the current insurance segment, and that's still going to be lower end of double digits. You're probably going to be in the 12%, 13% type percent to start. And I believe that, that will improve over time as we benefit from scaling the businesses and becoming a bit more efficient. So I would expect that to move during 2026 and then settle into 2027 into a more mature level. Charles Peters: Perfect. And then just stepping back, a lot of breathless rhetoric in the marketplace about price action in reinsurance. And it feels like when we go into the June renewal season that there could be further pressure on reinsurance pricing. So if you could just provide us some perspective on how you think that might change the portfolio. And I noticed in your comments, Jim, you said it's still -- you're still getting rate adequacy where you choose to participate. And I'm just wondering if you anticipate changing your approach in different layers as the market continues to evolve. James Williamson: Yes. Thanks for the question. I mean I think, first of all, as a general expectation, given what we saw at Jan 1 from a supply-demand perspective, I would sort of expect the rest of this year to be similar to the 1/1 renewal with rates on property cat down in that, whatever, 10% to 15% range that various folks are reporting. I think that's a reasonable expectation. Florida will be an interesting dynamic. I mean there is a clear dependence on reinsurance capacity to serve that market, which I think will help buoy the demand side of the equation. At the same time, it's pretty clear to us now in our data, and I think we've been quite conservative about this, that the reforms in Florida are working, and we're seeing it clearly playing out in our data, and I think others will be as well. So I'm not going to give you a point estimate on how those 2 factors intersect other than to say I think there could be some reasons to suspect it may be down a little bit more than what we saw at 1/1. And then in terms of the return estimates of the business, it's above where we sort of require the return on capital for property cat to be to continue to write the business at scale. We feel good about that. We haven't really changed our layer approach much. I think if you dissect our PMLs, you might see a little bit of upward movement in the lower return periods. That's really an inflationary factor more than us trading down in the stack. We like our positioning. We tend to play what I'd sort of call in the middle of most U&L programs. We usually avoid the really remote tail positions because we don't feel like we get paid enough. And then further down, you get too close to loss. So I think we're in a good spot. I don't really suspect we'll change it much as we go forward. Operator: Next question comes from Alex Scott with Barclays. Taylor Scott: Could you comment a bit just about rate adequacy and how it compares to 2022, I think, is an interesting conversation. When you consider those expectations for rate through the rest of the year, where does that kind of shake you out relative to '22? Do you still find the market attractive to grow? How should we think about how you'll shift your market share in property cat in particular, as this unfolds? James Williamson: Yes. Good question, Alex. Look, I would say that from a rate adequacy perspective, return on capital, we -- I like property cat better today than I would have in 2022. And certainly, you saw us cutting back in '22 pretty meaningfully, which I think was the right move, particularly in light of the cat losses that occurred toward the end of that year. And then in addition to rate, what's also really critical to keep in mind is structurally how programs are crafted today is much more advantageous, I think, to the reinsurance market relative to program structures like aggregates, the lowdown covers are gone. We're not participating in those. So feeling much better about returns given where we sit right now. In terms of market share view, I think you've hopefully heard me say repeatedly, that's just not something we think a whole lot about. We look to place ourselves on the right programs, the right clients, shift the book as the economics shift. But if I were to step back from all that, I would sort of assume, and I think you heard my comments in the prepared remarks about what we did at Jan 1, we did take a little bit of capacity off the table. I wouldn't necessarily be surprised if that's a theme for 2026. And if others are willing to write more at lower prices, then our -- I guess, our absolute market share would decline slightly. But it's really on the margins and the profit-generating capacity of the book we're writing now, I think, is very favorable. Taylor Scott: Got it. And then next on capital deployment. You obviously have ramped up the buybacks. Could you talk about your capital position currently, how you're thinking about it? And just as you're potentially pulling a little bit of capacity off the table, what will that mean for how you approach buybacks in '26? Mark Kociancic: Capital position is very strong right now. So you've got several impacts to your point. So first of all is we want to keep, obviously, the A+ financial strength rating of the company, execute the strategic plan. I suspect this will be a lower growth type year versus previous years in the marketplace. So there will be less pressure to support significant growth. And given the profitability expectations, ROE, I expect to generate significant levels of net income this year. So these are all positives for creating even more excess capital. Combine that with what I would consider to be expected capital releases in the back half of the year as a result of the renewal rights transaction. I think that adds even more excess capital for repatriation purposes. And then you can get into where are we? We're trading at a discount to book. So it's very attractive no matter what to do the buybacks. And you saw us step on the gas in Q4. We'll continue that Q1. And for the rest of '26, we continue to see that as very attractive and probably the best use of excess capital in 2026. Operator: The next question comes from Meyer Shields with KBW. Meyer Shields: I want to follow up on the capital question. Basically, hoping you can describe your openness to additional retroactive reinsurance transactions for the future other segment and maybe a sense as to how much capital is currently supporting reserves that will be in that segment once you've resegmented everything? James Williamson: Sure, Meyer. Thanks for the question. I would think about it this way. The ADC, obviously, that we executed in 2025 was about creating certainty around reserves. And I think that's something that I put in the done column. So not really looking at additional ADCs for that purpose. But at the same time, I think particularly given the growth of the other segment with the runoff of the retail business, I think there could be interesting opportunities for us to leverage transactions as a way of managing and freeing up capital. The reserve balance in the other segment is going to grow meaningfully, obviously, with the resegmentation. And so we have now a dedicated CEO of our runoff business, and I know that he's actively looking at ways to optimize the capital stack of that unit. And so I wouldn't be surprised if we find creative ways to further optimize the way we're using our capital to support that runoff. Mark Kociancic: Just to add to the capital question on reserves, Meyer. So I think we've got or will have approximately $1 billion supporting the bulk of those reserves. And I would expect it to start to diminish most likely in H2 as the renewal rights transaction matures and we start to run off the earned premium that you'll see in the other segment in Q1 and Q2, it will start to approach a much smaller number, plus the paydowns on the reserves will start to release that capital. So I think we'll get meaningful portions of that in the back half of the year, first part of next year. And then there's a good chunk of those reserves that are longer tail in nature. So that $1 billion or thereabouts will take some time to fully run off several years given the nature of casualty, but there should be a nice slug from essentially July 1 this year into next year that frees up. Meyer Shields: Okay. That's very helpful. Second question, I'm just unclear. In the slide deck where you talked about the ambitions for the Global Specialty and Wholesale -- or Global Wholesale and Specialty unit, it talks about a high 90s attritional combined ratio going to mid-90s. Is the mid-90s an attritional number or an all-in number? James Williamson: Yes, that would be -- I mean, I would think about it as that business sort of stabilizes in 2026 as being sort of an all-in view. Now it's not a heavy cat business. So the gap between attritional and total combined ratio is certainly nowhere near what you would expect out of our reinsurance business. But I would think about that as an all-in number. Mark Kociancic: And part of that shift, Meyer, is mix of business composition in GWS. You will see more short-tail emphasis in the premium composition in 2026 versus some of the historical results. And I think when we get to the resegmentation discussions next month, we'll put more color into this when we discuss it. Operator: The next question comes from Josh Shanker with Bank of America. Joshua Shanker: I want to follow up a little on Alex's question. January 1 renewals is really a discussion for the next conference call, but we can see a little bit with PMLs, you gave us your January 1 PML disclosure, and they are down as a percentage of equity as capital is up, which means that you're taking less risk. Can you opine a little bit on how we might think about property premium underwritings in 1Q versus 1Q '25? If your exposure is down, maybe premium is down a good bit as well? James Williamson: Yes, sure, Josh. I mean I think I wouldn't be surprised if you start to see the growth that we've had over the last couple of years in total property premium begin to subside. Now you got to keep in mind, our Q1 print is going to include a lot of recognition of premium that was written in 2025, and we had a lot of growth in the middle of the year in particular. So I'm not going to give you a point expectation around up, down or sideways around that. What I would say is in terms of total risk, I think we're getting paid really well. Program structures are good. Rate levels remain above adequacy. We're taking some chips off the table really around the margins as we evaluate programs to ensure they're all hitting our hurdle rates. And I expect that to continue during the course of 2026. Joshua Shanker: And shifting gears to the insurance section segment. If we think 3 years into the future, how big of an insurance underwriter is Everest? And is that a business where Everest can consistently be profitable at a smaller size? James Williamson: Yes. I think, Josh, I think if this industry has learned one lesson, not just in our own experience, but many, many others, is setting growth objectives, long-term growth objectives, size is not the way to measure these businesses. Bottom line profit is the way to measure these businesses. And my expectations for that business in '26 and in every year going forward is that it makes underwriting profits and strong returns on capital. Now that said, we are a relatively modest sized player in a very large pool. And I think we have a great management team. We've got great products. We're well represented among our distribution partners. I think the divestiture of retail further strengthens us with many of our distribution partners. And so there's going to be a lot of opportunity, and we'll certainly take advantage of it. But I'll reiterate, just so we're all crystal clear, that will be viewed through the lens of how do we drive underwriting income growth, not how do we create a bigger top line. I do think we could be quite relevant. But again, always harkening back to that bottom line result is the measure that matters. Joshua Shanker: In a few core lines or will you have an expansive appetite? James Williamson: Well, I think -- I mean, I think we have a reasonably broad appetite. We have a lot of capability. As I described, we've got our London market business, our U.S. E&S business, highly specialized underwriting units in a variety of segments. So I think we're broad that way. But if you look underneath the covers, in each of the areas we're choosing to underwrite, we have a lot of depth and capability. So I would characterize it as across the entire business, lots of variety, but in our individual underwrites, it's quite [indiscernible] and deep. And we would rather write more risks in areas we really understand and try to find ways to write new different risks. And some of the examples I cited earlier, for example, take our U.S. E&S business. We have a really nice expertise in construction and engineering. And that's an area where we're leaning in. We're taking advantage of all of the development you're seeing around data centers, energy, infrastructure. And so I'd rather go deeper on that and get really honed as opposed to find new greenfields to conquer. Operator: The next question comes from Michael Zaremski with BMO. Michael Zaremski: I guess my first question just around the catastrophes. Just thinking very high level, if this year was somewhat of a below average cat year, maybe disagree with that, at about $800 or so million of cats, and we'll see how that develops. Would a normal year be kind of like double that level? Or just trying to get a sense, I think the cat level was a little bit higher than expected in 4Q. So I just want to understand, given all the mix positioning, if we should kind of be toggling up the absolute cats by a very material amount for just kind of normal '26 or '27. James Williamson: Yes, Mike, I think using the word normal with respect to cats is always a challenge. I think if you look at the total loss content in the industry, and there's a variety of estimates out there, 2025 was sort of what I would call an expected. It's the new normal year. You had -- and I've seen a variety of estimates, but a lot of them coalesce around $110 billion, $120 billion, $130 billion of industry loss. I call that a pretty hefty cat loss year, and I think that's pretty normal these days. So I think our cat performance kind of made sense given that backdrop. And I don't really think of Q4 as elevated for us. I think if you look globally, I think a lot of times, we over-index the United States, and we didn't have a landfalling hurricane in the U.S. in the fourth quarter. But there were a lot of things going on around the world. We're a lead cat underwriter in Latin America and the Caribbean region. We had a cat 5 hurricane roll through the Caribbean. We had major storms and hail in Australia, flooding in Southeast Asia. So a lot of things happened in the fourth quarter. When I look at our market share relative to those events and the profitability of the underlying books that we're taking those risks, I feel really good about all that. So I wouldn't expect any sort of dramatic change in our approach to the cat load as we go forward other than to say the one thing to always keep in mind is as we've divested retail insurance, there's earned premium associated with that, that goes away. So you get a little bit of a movement in the denominator. But I think the numerator is relatively consistent year-over-year. Michael Zaremski: Okay. That's great color. Maybe just switching gears to capital management. I think you guys have been clear that at this valuation level, buybacks will continue to be the main source of capital contribution for shareholders. But I guess given the top line is shrinking, unless we're doing the math wrong, it appears -- including with the money you're going to get from AIG and et cetera, it appears that you guys can do billions more buyback than the consensus is estimating at least starting in the back half of the year. So maybe more of a comment, but -- than a question, but maybe it would help if you eventually decided to kind of maybe give us a little bit more guidance specifically on buybacks as the year progresses to the extent valuation remains lower, hopefully doesn't. Mark Kociancic: Yes. I think, look, there are several points that you made that I think are very good fundamentals for increasing buybacks. I certainly don't think a normal payout ratio of the 40% to 50% range is applicable for 2026 environment. I think that you're going to see something more elevated, particularly with the discounted share price and the general lack of intensity coming from the growth in the business. So for me, those are great backdrops to promote even more buyback. And we'll communicate more when we have more. There's still significant risk out there. You've got the wind season. You've got -- obviously, you've got standard risks like reserves, regulatory, potential opportunities, growth, et cetera. But I think the fundamental baseline is that, yes, there will be elevated capital management with all of the fundamentals we see right now, and we'll just take it one quarter at a time and try to increase the level of value that we're providing to shareholders as we buy back. Operator: The next question comes from Brian Meredith with UBS. Brian Meredith: Jim, I'm just curious, we're seeing a lot of M&A happening right now in the P&C industry, and it's pretty typical for this part of the cycle. Is that something that you're thinking about to maybe bolster your global -- or your specialty businesses, parts you can add on? And clearly, you've got the excess capital to do it right now. James Williamson: Sure, Brian. Thanks for the question. Look, I think the first thing you have to keep in mind is where we left the last question, which is right now, we have a very compelling return on capital available to us with de minimis risk, which is repurchasing our own shares. And so anything we would do on an inorganic basis would have to compete with that value proposition, and that's a pretty high bar. That said, if the right thing became available and it made sense and it really advanced our strategic goals, it's certainly an option. We certainly have the firepower to do it. And we have a team now that has expertise from prior companies executing a variety of M&A transactions and doing it well and most importantly, understands how to do integration. But if you were to see us do something, I think I could safely characterize whatever it might be is small. It would have to be on our existing strategy path. We're not going to go off and do something that's in new markets, and it would be relatively low risk, and it would have to add some capabilities, some distribution, a platform that would be too difficult to build on our own. So it's a very, very high bar. Brian Meredith: Great. That's helpful. And then I guess second question, just back on the reinsurance business. Thinking about 2026 here and kind of what's going on with property cat. Property pro rata, what's kind of the appetite there? Do you think that maybe expands a little bit here as a percentage of the overall mix, just particularly given Florida and some of the attractive homeowners returns you're seeing there now? James Williamson: Yes. We've had a really great run in property pro rata. Our team has done an outstanding job of selecting the right clients. Those programs, I think, are very well structured in terms of event limits that help to really minimize the amount of property cat exposure you need to take relative to available profit. So that's all working toward the good. I think -- the thing we keep an eye on, obviously, is underlying rates in the property insurance market are starting to come down. And so you'll see us be very thoughtful. I think that's playing through in our numbers now. We were down very, very slightly year-over-year in property pro rata. So we like the portfolio. If additional opportunities present themselves, we could certainly lean into them. I'd say right now that we do have a little bit of bias to commercial and a little bit of bias to E&S. So I wouldn't necessarily expect a huge expansion into homeowners, and we'll see how the year plays out. Operator: The next question comes from Elyse Greenspan with Wells Fargo. Elyse Greenspan: My first question, I wanted to spend more time on some of the color you provided around January 1. So you said that price was -- in property cat, sorry, price was down 10%. But your book, I believe, you said was down 1%. Can you just comment, I guess, what enabled you, I guess, to show a good differential versus the market? And then where did you see those better opportunities to drive that to put your book only down 1%? Was that in the U.S., Europe? Just trying to get some additional context there. James Williamson: Sure. Elyse, let me just make sure I clarify the numbers that we're using. So the minus 10% is that was our book, our rate change. So we were down 10 points of rate, 1 point of premium. So if you look at our total GWP -- and by the way, that's not just property cat, that's for all lines of business, including pro rata, specialty, which we saw some great opportunities, casualty, et cetera. The total book premium, book premium was down 1%. And then we slightly reduced our total deployed property cat capacity in response to the 10% decrease. Now I think based on what I'm hearing from certainly some of the broker indices, maybe some of our esteemed competitors who have reported, I still think our 10% is a good number. I think we outmaneuvered, frankly, the market to sort of control it. I think a lot of people are more in the low teens. And I think that's a testament to our market position. I think if we look at where property cat pricing is right now, there's a lot of attractive opportunity around the world. Clearly, I think the U.S., particularly Southeast U.S. is the best priced peak zone, but there's good business to be had around the world, and we were active pursuing those opportunities globally. So there was really no one region where we said, okay, we want to double down here because of where it's priced relative to others. It's a pretty broad-based opportunity. Elyse Greenspan: And my second one, I guess, I just want to, I guess, cross reference some of the data points you guys gave on the new insurance segment and just make sure the -- I guess, the right sound bite is out there. Because I think in the prepared remarks, you guys had mentioned that it's $2 billion in premium, the specialty book with an attritional loss ratio in the mid-80s. And then I think the slides mentioned an attritional combined ratio in the mid-90s. I would think the expense ratio differential would be greater than 10% -- so I'm just trying to tie those points and maybe that specialty attritional was not a loss, but a combined ratio. If you could just help me there. James Williamson: Sure. Sure, Elyse. Yes. So the $2 billion -- when I was talking about specialty, the $2 billion specialty book, that's our reinsurance specialty book. And that's an attritional combined in the mid-80s. It's been an excellent business for us. We've grown that meaningfully. That's different than our Global Wholesale and Specialty business, our insurance business going forward, which is -- if you look at where it would have landed in 2025, it's $3.6 billion in premium, $1.2 billion facultative -- of that is facultative. And we would expect that for a whole year basis of 2026 to sort of fall in that mid-90s range and an all-in basis. So hopefully, that squares the circle for you in terms of the numbers. Operator: The next question comes from David Motemaden with Evercore ISI. David Motemaden: I had a question just on the OpEx expense ratio, the 6% to 7% mark that you had called out that you expect for the year. And I guess it's going to work down to 6%, I think you said by the end of the year. I was hoping you could just size for us the stranded overhead associated with the renewal rights deal. And I know you guys have a restructuring program out there, too. But just so we can sort of think about the dollar amount of stranded overhead associated with that deal and then just sort of track that throughout the course of the year as you guys whittle that down? Mark Kociancic: David, I think -- so a few points I want to put on the table here. I think we're going to be on the elevated side of 6% to 7% at the beginning of the year. I think it will trend downwards towards the lower end of 6%. I don't think it will be 6.0%, for example. Clearly, there's got to be a transition of the renewal rights to AIG throughout 2026, and we're planning for that. We'll obviously have commensurate corporate expenses with the remaining business. And the costs associated with the exited retail insurance business will eventually diminish significantly throughout the year as the business is transitioned over to AIG. So that type of expense load last year would have been in the low $400 million range. So I would expect that to diminish significantly throughout the year as we transition on a quarterly basis to AIG. What are we going to be left with by the end of the year? I would estimate we would be somewhere closer to the $50 million type range, maybe a bit above. But the real issue is we're going to have an other segment or a legacy type segment for a significant period of time. There will be an associated run rate general expense with that, which will become clearer towards the back half of the year. And the expense reduction for the retail insurance unit, I think, is also subject to making sure, first of all, that we fulfill our obligations on the renewal rights transfer and that we properly treat the employees, et cetera, that are exiting the company over time. So a lot of moving parts here, but we have a clear set of objectives that we're trying to achieve in 2026. David Motemaden: Great. I appreciate that detail. And maybe just one other one. So it sounded like there were immaterial net movements on the reserve side. I see the $2 million favorable in reinsurance, so I wanted to focus there. Anything -- any other changes around the casualty reinsurance reserves in the fourth quarter that you guys want to call out from like a gross basis that maybe were offset by releases elsewhere? Mark Kociancic: No, nothing material. The bulk of the work was done in Q3. We feel -- I think Jim alluded to this in his prepared remarks, very good about the reinsurance reserves in terms of embedded margin that we see, particularly in shorter tail lines. So we believe we have still a very meaningful amount and an increased amount year-over-year. Feel good about casualty. So yes, we're adequate right now. Operator: The next question comes from Ryan Tunis with Cantor. Ryan Tunis: Just one for me. Just on capital management, listening to your remarks, it does sound like you think that there might be some excess and that could potentially be deployable at some point in time. But should we be thinking about any drawdown of that excess as more of a '27, '28 event? Or could that potentially be something that we do later on in '26? Mark Kociancic: I think later in '26 is certainly on the table. We have to see how the claims pay out, for example, making sure that the renewal rights are transferred the way we believe they will be in 2026 and then making sure that capital is fungible for buyback, all solvable problems. And obviously, whatever events that may impact us during the year can be handled within our existing capital stack. But you saw what we did in the fourth quarter. I think we were quite committed to buybacks given the fundamentals. From my standpoint, I see a strong commitment to buybacks. As Jim alluded to, it's a very attractive return profile for the company. You'll see us emphasize that Q1 and for the remainder of the year. And as soon as we can -- we feel better about unlocking some of those expected benefits on the transaction, for example, that will be a natural place to look. We'll go right after the buyback. Operator: The next question comes from Tracy Benguigui with Wolfe Research. Tracy Benguigui: I have a follow-up on the lower PMLs to equity at 1/1. Was that just a consequence of deliberately reducing the exposure to less profitable deals that you mentioned? Or are you looking to improve capital efficiency like lowering your PML to equity targets? James Williamson: Sure, Tracy. Happy to unpack that for you. I mean the first thing to keep in mind, and this is critical, we have plenty of capital to fuel whatever cat underwriting we'd like to do. It's really a function of the market opportunities we're seeing. And so you -- and certainly mentioned this regarding the January 1 renewal, we did start to take some chips off the table, while the overall available return in property cat remains comfortably above sort of our target. Individual deals, given the rate decreases, sometimes don't meet our standards, and that's why we're cutting back a bit there. The other thing that's happening under the covers is, as I mentioned in my prepared remarks, we've also had some really nice fundraising in Mt. Logan. So there's a little bit of a hedging component to it as well, where we're ceding a little bit more premium and hence, PML to third-party investors, which we find attractive, and it certainly helps to boost our returns. And I think as a rough estimate for what's going to happen over the next year, I think those themes will continue to play out on both sides. Tracy Benguigui: Okay. Great. You also, I think, made a comment that social inflation drove several large energy losses in your wholesale business that led to elevated insurance attritional loss ratio in the quarter. Was that more episodic? Or do you see these pressures persisting over having a longer-lasting impact on your attritional loss ratios? I'm just trying to square some of your earlier comments about insurance casualty pricing ahead of loss trend. James Williamson: Yes. So the -- I want to separate -- there are really 2 separate items. Social inflation is a persistent reality in the U.S. casualty market across both divisions. It's something we've spent a lot of time assessing, understanding we underwrite against that reality, which is why we've reduced our casualty book in both divisions. That's separate from Mark's comment regarding energy losses in the fourth quarter, which were not casualty losses. Those are just -- we just happen to have as will happen in our industry, we just had a little spike of multiple unrelated, mostly refining losses where you had large explosions at refineries. Thankfully, that seems to be one area of our business that doesn't have social inflation in it. So 2 unrelated factors that happened to be mentioned in the same part of the script. Operator: This concludes the question-and-answer session and the Everest Group Limited Fourth Quarter of 2025 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to the Essex Property Trust Fourth Quarter 2025 Earnings Call. As a reminder, today's conference is being recorded. Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties. Forward-looking statements are made based on current expectations, assumptions and beliefs as well as information available to the company at this time. A number of factors could cause actual results to differ materially from those anticipated. Further information about these risks can be found on the company's filings with the SEC. It is now my pleasure to introduce your host, Ms. Angela Kleiman, President and Chief Executive Officer for Essex Property Trust. Thank you. You may begin. Angela Kleiman: Good morning. Welcome to Essex's fourth quarter earnings call. Barb Pak will follow with prepared remarks, and Roland Burns is here for Q&A. Today, I will cover highlights of our fourth quarter and full year performance for 2025, provide our outlook for 2026 and conclude with an update on the transaction market. '25 played out generally in line with our initial macro forecast for the U.S. with job growth moderating throughout the year. Within this environment, we achieved full year same-store revenue growth at the high end and FFO per share growth above the midpoint of our guidance range. I'm particularly pleased with the well coordinated efforts between our property operations and corporate teams to drive results, especially in other income growth and improving delinquency recovery to near pre-COVID levels. From a market perspective, two key factors contributed to our performance in 2025. First, Northern California outperformed expectations as a result of expansion in the technology sector, favorable migration trends and limited housing supply. Second, rent growth across most Essex markets outperformed the U.S. average, demonstrating the significant advantage of limited housing supply even in a soft employment environment. Turning to the fourth quarter property operations. The results were generally consistent with our expectations with 1.9% blended lease rate growth in the fourth quarter. Occupancy increased by 20 basis points sequentially to 96.3% and concessions averaged approximately one week, which is typical for this period. Within the portfolio, Los Angeles delivered the best occupancy improvement, increasing 70 basis points sequentially, a good indication that this market continues to progress towards stabilization. As for regional performance, Northern California was our best region followed by Seattle then Southern California. Moving on to our 2026 outlook. Consensus expectations for the broader U.S. point to slow but stable economic growth. Further, employment trends are expected to remain consistent with what we have seen recently with major employers maintaining a cautious approach to hiring. Against this backdrop, our base case assumes the current level of demand continues in 2026. On the supply side, we forecast total new housing supply to decline by approximately 20% year-over-year. Accordingly, we anticipate steady West Coast fundamentals to deliver solid blended rent growth above the U.S. average and at a level comparable to 2025 with the Essex markets to be led by Northern California, followed by Seattle and lastly, Southern California. In terms of scenarios, local uncertainty continues to weigh on the economy and job growth and represents the primary driver of low end of our guidance range. This uncertainty has contributed to a measured hiring environment, which has tempered near-term acceleration in demand. On the other hand, we see a path to the high end of our guidance range if hiring trends improve modestly. Given historically low levels of new housing supply across our markets, even a small inflection in demand could have an outsized impact on fundamentals. While broader expectations call for mute hiring internationally, we believe Northern regions are better positioned. Activities in the technology sector remains constructive with companies expanding office footprints and investments in artificial intelligence continuing. In addition, these markets should continue to benefit from ongoing return to office enforcements. In summary, the favorable supply backdrop across West Coast multifamily markets combined with the continued recovery in Northern California, reinforces our outlook for our markets to outperform over the long term. Turning to the investment market. Activities in our market remains healthy with $12.6 billion of non-portfolio institutional multifamily transactions in 2025, a substantial increase of 43% compared to 2024. Improving operating fundamentals and minimal forward-looking supply deliveries led to a significant sentiment shift to the West Coast, resulting in deeper bidder pools and cap rate compression, especially in Northern California and Seattle. Generally, cap rates for the highly sought after submarkets, which represents approximately 1/3 of the total deal volume occurred in the low 4% range and cap rates for the remaining 2/3 occurred in the mid-4% range. Lastly, Essex has been the largest investor in Northern California over the past two years. With the majority of our acquisitions transacted ahead of the cap rate compression, resulting in significant NAV appreciation. Looking forward to 2026, we will continue to evaluate all opportunities and allocate capital with a disciplined focus on creating shareholder value. With that, I'll turn the call over to Barb. Barb Pak: Thanks, Angela. Today, I will briefly discuss 2025 results, the key components to our 2026 guidance, followed by comments on funding needs and the balance sheet. We are pleased with our fourth quarter and full year results as we were able to achieve same property revenue growth of 3.3%, which was at the high end of our most recent guidance range and 30 basis points ahead of our original projections for the year. The outperformance in the fourth quarter was driven by lower concessions, higher occupancy and other income. Turning to the key drivers of our 2026 outlook. The components of our full year same property revenue midpoint of 2.4% is outlined on the chart on Page S-16.1 of the supplemental. There are three key drivers of revenue growth this year. First, as anticipated, our earn-in based on our 2025 results will contribute 85 basis points to growth. Second, our guidance assumes a blended lease rate growth of 2.5% at the midpoint. As Angela noted, our outlook for market rent growth is based on tempered job growth, which is partially offset by a meaningful reduction in new supply. As such, this should allow us to achieve similar blended net effective rent growth as last year. And third, we expect 30 basis points contribution from other income. Moving to operating expenses. We forecast 3% same property expense growth at the midpoint, which is the lowest rate of expense growth we have seen in several years. There are a couple of factors contributing to this outcome. First, we expect controllable expenses to increase around 2%, which reflects the continued benefits of our operating model. Second, we expect insurance costs to be down around 5% on a year-over-year basis as the property insurance market has continued to improve over the past year. These benefits will be partially offset by increases in utilities and property taxes. As a result, same-property NOI growth is forecasted to increase 2.1% at the midpoint. As for 2026 core FFO per share, we expect growth to be flat on a year-over-year basis. The drivers of our forecasts are illustrated on S-16.2 of the supplemental. While we expect solid top line performance and growth in net operating income, it is being offset by recent and expected redemptions within our structured finance portfolio, which are contributing to a 1.8% headwind to growth. This reduction to FFO reflects a conservative modeling approach, which excludes any redemption proceeds and minimal income from the 2026 maturities. We expect 2026 to be the final year of structured finance-related headwinds due to the substantial reduction in the size of this book over the past several years. We are pleased to have strategically reallocated redemption proceeds into higher growth fee simple acquisitions in Northern California, which provides better risk-adjusted returns. Lastly, a few comments on the balance sheet. We are well positioned from a funding perspective as our free cash flow covers our dividend and all planned capital expenditures and development plans for the year. In addition, our finance team has done a great job proactively reducing our near-term maturity risk, with a portion of our 2026 maturities accounted for via the bond offering we did in December with strong credit metrics over $1.7 billion in liquidity and ample sources of capital available, the company is well positioned. I will now turn the call back to the operator for questions. Operator: [Operator Instructions] Our first question comes from the line of Jamie Feldman with Wells Fargo. James Feldman: Great. Maybe just -- I mean there's been so much movement in the tech market in the last couple of weeks. As you think about demand for your assets, especially in Northern California, I mean what are your latest thoughts on what we should be watching in terms of where the risk is, where the growth is? And what are you seeing on the ground in terms of changes? And I guess we could ask the same question about Seattle. Angela Kleiman: Jamie, thanks for your question. Northern California is in a very interesting position at this point in time because we had talked about the potential recovery and it's finally starting to take hold. So it's an exciting time for us from that perspective. And in terms of -- we're watching a couple of things. I think it's fair to acknowledge that the jobs environment broadly across the U.S. has been soft, and that relates to my comment on Seattle in a second. But in Northern California, it's done fine. And we look at a couple of things, job openings of the top 20 tech companies. And from that perspective, it's done well in that when we looked at 2025, it ticked up above pre-COVID levels around the second quarter. But then if we treat it in the fourth quarter. Though it's not too inconsistent from a seasonal norm. But it is an indication that this market is not robust when it comes to jobs, but it is stable and it's doing fine. And so with that backdrop, when we look forward, we are seeing a couple of activities that gives us encouragement that this area is going to continue to improve. And when we look at, for example, VC funding in the fourth quarter, it's at the highest level for over 4 years, and it increased by 91%. So almost doubled quarter-over-quarter. And over 65% of that spending is in the Bay Area. Now that doesn't mean that there's going to be job acceleration tomorrow, but it is a great sign of growth to come. And when we look at office absorption, another indicator, we're seeing positive absorption for the first time in all three major markets in our northern region, San Francisco, San Jose and Seattle. So that's the backdrop. In Seattle, I have to acknowledge that in the fourth quarter, it was soft. It performed -- they did not achieve the expectations that we had planned in terms of the rent growth and the lease numbers. We had several corporate announcements in terms of layoffs. But having said that, looking forward in Seattle, we still like the fundamentals. Supply is down by 30% in that market. And other than in addition to the positive office absorption, we're also seeing additional leasing activities with -- by OpenAI. They quadrupled their space in Seattle. And so with -- and additionally, we have return to office tailwind in Seattle. Amazon starts enforcing return to office in January, Microsoft starts return to office in Q1. So there's a path to the high end of our range. And I just want to note that with the backdrop of the employment landscape, there is an element of unpredictability with that because it's highly influenced by public policy and public policy so far has tempered job growth. And so that's an environment which we are in, and we do have to be sensitive to that. James Feldman: Okay. And then can you talk about what you're thinking on new and renewal blends for the year? Angela Kleiman: Yes, of course. So we're assuming that our blends at this point is going to come in similar to 2025 at about 2.5%. And that's because, as I mentioned earlier, we're assuming that demand is generally flat going forward. So what that means in renewal is that -- and I'll give you a range because that's probably more relevant because different markets behave differently. So under the new leases, we're assuming somewhere around flat to 2% and the renewals around 3% to 4% for the year. So not too different from last year. Operator: Our next question comes from the line of Nick Yulico with Scotiabank. Nicholas Yulico: I guess, first off, I just wanted to ask about Los Angeles. You talked about occupancy picking up there in the fourth quarter. Where is that market now in terms of where you're hoping it to be on occupancy and to be able to drive rental pricing a little bit better this year. Maybe you can just talk a little bit more about how you're expecting L.A. to perform this year. Angela Kleiman: Nick, yes, on L.A., what we've seen is a steady increase or improvement in occupancy. So that's good, especially -- we all know that the jobs environment has been quite soft. And where we are today, if you look at economic occupancy, which is the financial occupancy we report less than delinquency. In the fourth quarter, this market sits at 94.7%. So we're just so close to stabilization of 95%. And compared to last quarter, I'm sorry, compared to third quarter, 94% economic and, of course, second quarter, 93.8%. So it's been steadily improving, which is fantastic. And what we're seeing next year in 2026 is that supply decreases by 20% in this market. So we are hopeful that we will move towards this 95% stabilization sooner rather than later. But having said that, once again, the timing is not so much in our control because the eviction processing time line is what really drives our ability to move that delinquency number. And so we try to take a more prudent approach on that front, but it's moving in the right direction. Nicholas Yulico: Okay. And then second question is just on San Francisco and I guess, the Bay Area broadly. I know -- I think some of the strong rent growth we've seen from the market data has been helped by removing concessions from that market. And so there was a comp issue, I think, helping the numbers. Does that become like a headwind this year in terms of us just thinking about like how San Francisco rent growth could look this year versus last year? Angela Kleiman: Yes. Nick, I think on the concession, the margin, it could be a result of hangover from previous supply pressures. But what we're seeing concession level in this market is not too different from historical averages, and it's not a factor when it comes to the uplift in San Francisco. It's really been more of a recovery story. We are finally at a point where San Francisco as a market is somewhere around 9% above pre-COVID level. And if you look at where it should be, it should be somewhere around 20% above pre-COVID levels. So it's still in the recovery phase. And so it's less of a concessionary story hiccup. Operator: Our next question comes from the line of Eric Wolfe with Citi. Nicholas Joseph: It's Nick Joseph here with Eric. There were reports, I guess, last week about a large Southern California portfolio coming on to the market. So curious where you see buyer cap rates today and, I guess, across your markets, but maybe specific to Southern California if there's any differences between the regions? And then just broader your thoughts on kind of external growth and capital allocation coming into this year. Rylan Burns: Nick, Rylan here. I'll start on the comment on the portfolio in Southern California. In general, not going to go into details. I don't really want to comment on a live transaction. But for background, there's been approximately $11 billion of transactions in Southern California over the past two years. The majority of the transactions last year occurred in that 4.5% to 4.75% cap rate range. So this is a healthy environment where there's a lot of capital coming in that I think they're going to do quite well. Obviously, we look at everything that comes through our markets, so we will be evaluating. And if there's an opportunity to create value, you would expect us to participate there. In terms of just bigger picture -- sorry, go ahead, Nick. Yes. Nicholas Joseph: No. Go ahead. Rylan Burns: Yes. Capital allocation, just a reminder of our broader philosophy, right? So for investment criteria, we have three things that we're looking to solve for: one, FFO per share accretion; two, per share accretion; and looking for opportunities that are better growth profile than the rest of our portfolio. And our strategy, which is unchanged, is to allocate capital to those investments that offer the highest potential accretion relative to the cost of capital. So we're going to continue, as we've done for this team been here in the past 5 years and over the past 30 years to look for those opportunities where we can drive the highest potential accretion. Nicholas Joseph: And so for that 4.5% to 4.7% you quoted, is that buyer or seller? And how wide is that spread typically? Rylan Burns: That's buyer cap rates. Those are economic cap rates on in-place rents. Obviously, seller, it really depends on when the asset was purchased and what the tax base is involved. That's where you'll see some difference between buyer and seller cap rates in Southern California. Nicholas Joseph: Got it. And then just in terms of the capital allocation, just given where the stock is trading today, how do buybacks play into the stack of opportunity just given where you're seeing cap rates versus where the implied cap rate for the stock is? Angela Kleiman: Nick, it's a good question. And it's a calculation that we go through on a regular basis. And so I want to start with everything is on the table: buybacks, prefer equity, development, acquisition, all of the above. And when we think about buyback, we also look at the yield that we can generate from a straight acquisitions or development and the growth thereof. So there's an IR consideration. Based on the stock today, which is in the mid $255, it's kind of a close tie across the board, if you will. And so then we need to look at how do we create value for the company. And I just want to point to that what we've done, when we directed capital deployment for fee simple properties in Northern California over the past 1.5 years, it's done well for us even though our stock was trading in this range because those assets ended up generating portfolio-leading rent growth with cap rate compression, we really provided -- produced a lot of appreciation of these assets and the shareholder value. And so we have to consider that fact. And also, if you look at if we had done the buyback, say, 6 months ago, well the stock has gotten cheaper. So not as attractive. And so there's a lot of things that we really -- we do consider and I hope that you realize that we do try to be very thoughtful about it. And you've seen us buy back stock in big chunks when it makes sense to do so. Operator: Our next question comes from the line of Steve Sakwa with Evercore ISI. Steve Sakwa: I think, Angela, you had mentioned that renewals would be in the 3% to 4% range for the year. I'm just curious, what have you experienced thus far kind of in the January, February and presumably March time frame? Angela Kleiman: Steve, right now, our renewal is looking at around 4-ish to mid-4% for February, March. And so we're pretty much on track. Steve Sakwa: And are you doing a lot of discounting? Are you pretty much getting what you're asking for? Or is there a gap between kind of what you ask and what you achieved? Angela Kleiman: So far, the negotiation is somewhere between 30 to 50 basis points. So it's -- to us, that point to just a normal stabilized environment. Steve Sakwa: Great. And then, I guess, following up on the capital allocation discussion, you talked about sort of acquisitions and buybacks. But I think in the release, you explicitly said you would not have any development starts. So I'm just curious where would development pencil, if you were to start one? And I guess, what does that mean about costs having to come down or rents having to grow in order to get to a yield that makes sense to you? Rylan Burns: Steve, this is Rylan. We -- currently in our development pipeline, right, we have two land sites that we continue to move -- work forward with, but they're not expected to start in 2026. Our team underwrote probably about 100 land sites last year, and none of them really made sense from an economic perspective. So you really need to see land sellers take a reduction in their expectation on land prices to make the numbers work today and/or you're going to have to see 10%-plus rent growth for some of these deals to make economic sense. So we're closer. We have our own pipeline that we continue to work forward to. And if we can find something at a significant premium to the transaction rate where we feel comfortable for the risk that we'd be taking in development, we'd happily step in. We do think there's going to be some opportunities on the development side. We're just trying to make sure we're getting the best risk-adjusted returns. Steve Sakwa: And sorry, just what would you need on that? Is that a 6%? Is that 6.5%? Is that 5.5% in your markets? Rylan Burns: Yes. As I said, depending on the submarket in Northern California, as Angela mentioned, where the transaction market feels like it's shaking in that 4.25% type range. Something close to 6%, I think would definitely be worth the risk. If we have clear visibility on entitlements, we knew exactly what we're going to build. We felt good about the land basis. Those are the types of opportunities that we would jump at. Operator: Our next question comes from the line of Brad Heffern with RBC Capital Markets. Brad Heffern: Another question on L.A. Obviously, you're seeing some improvements there. Can you talk about if the guidance assumes a significant improvement in performance year-over-year? And if not, when do you expect L.A. to become more of a positive contributor? Angela Kleiman: Brad, we are assuming that L.A. continues to improve gradually. And so we are hopeful that by year-end next year that if we turn to a normal delinquency rate, long term for L.A. is a little elevated than our typical portfolio average, but that's okay. That's what we expected. So we do have that baked in. The potential upside really comes from the general jobs environment for -- especially with supply going down, certainly, there's opportunities there with L.A. Brad Heffern: Okay. Got it. And then on the immigration front, has there been any sort of noticeable impact on demand or anything that you can see on your dashboards just from the lack of immigration? Angela Kleiman: We have not seen any direct impact from the immigration front. I think -- I'm assuming you're talking about international migration. What we have seen is it's generally returned to pre-COVID historical norm, and activities are at a normalized level. And when we look at legislation -- that impact that really is like an H-1B, we certainly haven't seen any adverse impact from that. In fact, that continues to be viewed as a positive. And there are certain carve-outs for students and et cetera, that really should not hurt our business. Operator: Our next question comes from the line of Jana Galan with Bank of America. Jana Galan: This year, there's a mayoral election in L.A. and an election for Governor in California as well as a number of proposals that could impact real estate. I'm curious if you can kind of let us know what you're watching from a policy front that could potentially be beneficial for rental housing. Angela Kleiman: Jana, thanks for your question. It's an interesting situation here in that we've seen California slowly migrate away from these extreme liberal policies, which has been actually good for the overall economy and the voter population as well. So there's been a couple of proposals that were more under extreme end, and we were pleased to see that those proposals actually were not successful. So that's a good indication. What we're watching on the margin, of course, is the outcome, and we don't have any more insight to the election than what's publicly available. But what we can tell is that from the sentiment is that the general view is people want to have a normal function and economy. And these extreme measures have not been well received. Jana Galan: And then on the structured finance book, now that it's kind of rightsized or will be at the end of '26. Just going forward, how should we think about modeling the growth here? Barb Pak: Yes, it's Barb. That's a good question. So how you should think about it is at the end of the year, our book value is $330 million, but what is in our guidance for '26 is $175 million that we are having income on that's hitting our numbers. And that is a 3-year maturity. So there will be future redemptions, but it will be much more manageable over the next three years. And we are looking for new opportunities to backfill. We obviously want to make sure the there are appropriate risk-adjusted returns, but it is a much more stable book than what we've had two to three years ago. So I think if you take the $175 million, that will get you a stable number going forward. Operator: Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Austin Wurschmidt: Just going back to L.A. for a minute. Are you guys seeing conditions, I guess, broadly in your submarkets stabilize and rent growth may be approaching an inflection or was this more of a strategic approach on your part to build occupancy back to a stabilized level and everything you're seeing is kind of specific to your portfolio? Angela Kleiman: Austin, that's a good question. It's more Essex' operational strategy driven with how we are operating in L.A. But ultimately, our goal is, of course, to maximize revenues. And so in an environment where you don't have stabilized occupancy, it's just -- you really don't have pricing power. And so it's critical to focus on delinquency, which I think our team has done an exceptional job and focus on building occupancy. And once we get to that 95% occupancy -- stabilized economic occupancy for our portfolio, then we will have some pricing power. Austin Wurschmidt: Got it. And then just going back, I mean, does that speak a little bit to the negative 2.4% new lease rate growth in the fourth quarter and maybe what was the driver of that? Because it did seem that was a little lower than it's been in many years outside the COVID period? And have you started to see that reaccelerate into the new year given that occupancy is now in a better position even than it was a year ago at this time? Angela Kleiman: Yes, that's a good question. That new lease rate is driven by the weakness in Seattle and weakness in San Diego more due to supply. L.A. was more -- is not as exciting. It was a little -- well, it's still negative. Okay. It's all not great on that front. Never mind. I think looking forward, there are a couple of things happening with the supply decreasing. And also the environment in L.A. stabilizing is certainly that it should turn -- is just starting to turn. Operator: Our next question comes from the line of John Kim with BMO Capital Markets. John Kim: On the new lease growth rate expectations of flat to 2%. I'm wondering what your thoughts were on cadence? Last year, it peaked in the first quarter at 1%, and I'm wondering if you expect a similar dynamic this year? And as part of that, I was wondering if you could share your new lease rate growth in January. Angela Kleiman: So that's a good question. In terms of cadence, we do assume that 2026 is going to be pretty moderate. We're not expecting say, first half to be significantly greater than second half and vice versa. And that's really driven by our view that job -- the current job environment is going to continue just because both political uncertainty. And keep in mind, we have a midyear -- midterm election in the second half, and we don't know how public policy is going to behave in light of that. So it built in, kind of, some of those unknowns. As far as January numbers, I don't -- I mean I don't think it's all that productive to talk about that because December and January are always, always the worst period in our business because of seasonality. And it's not going to point to anything relevant with what's going to happen for the rest of the year. John Kim: Okay. And Angela, in the past, meaning last year, you talked about happily trading out of Southern California or would you sell Southern California and buying in Northern California based on Rylan's commentary about being perhaps a little bit more opportunistic and the occupancy improvement you saw in L.A. this quarter, is that trade still the case? Or are you more agnostic on markets? Angela Kleiman: Well, at this point -- well, let me start with we -- our view has always been there's a price for everything. And in an environment where cap rates are all generally consistent throughout our markets. We certainly would want to deploy capital in a market where we believe has an elevated level of rent growth ahead of us, which is Northern California. So if you look at the current environment, if all cap rates remain generally in line in Northern California is still a more compelling place to deploy capital because it's just -- it's in the recovery space. But once you start seeing a gap between -- among the cap rates in the different submarkets, then it's a different calculation. And so we're going to have to look at that holistically rather than just based on a specific number. John Kim: And how much should that gap be in your mind? Angela Kleiman: Well, it depends on the growth. And it really is more submarket driven. So for example, when I say Northern California, we certainly wouldn't invest in Mountainview at the same cap rate as we would invest in Oakland. And so I wish I could give you a finite number because that will make everyone's life so much easier. But it really depends on the growth rate of that specific asset, which has a lot to do with how it's managed and what's going in the submarket. And it's just not as simple as a one data set that fits all situation. Operator: Our next question comes from the line of Haendel St. Juste with Mizuho Securities. Haendel St. Juste: A couple of follow-ups for me. First, I guess I want to go back to the blends. I know you talked quite a bit about it, but I just wanted to clarify a few things. I guess by our math, it looks like your outlook for blended rents for the year implies a slight decel in the back half of the year, which seems pretty unlike your peers who are embedding an acceleration in the second half. So first, is that fair? And then second, can you comment on what your expectations are for market rate growth by key regions for this year? Angela Kleiman: Haendel, sure thing, and thanks for your question. I'm not sure where you're seeing a decel in the second half, maybe we can sync up after call because we're modeling pretty much a consistent rate and what we typically assume is that first quarter and fourth quarter blends are at the lowest level and then second and third quarter blends are higher. And so they kind of offset each other as far as the market rents by market. It's actually in an environment of low growth, it's not all that different from our blend. So last year, our market rents landed in the mid-2s and we're assuming that in 2026, market rents will be very similar. And we're assuming Northern California to be on the higher end, say, in the mid 3s to 4 range and Seattle in the mid-2s and Southern California in the mid-1s. Haendel St. Juste: Got it. That's helpful. And I guess to your point on the blend, maybe it's not decel, but certainly, there's not an acceleration required in the back half of the year like your peers. Second question, I wanted to talk a little bit about Southern California, but ex L.A. Obviously, you know L.A. is going to be a bit challenged near term, but curious how you're thinking about the prospects for Orange County and San Diego near term? And then maybe sprinkling a question on L.A., how you would think of L.A. growth over the next few years? You mentioned cap rates generally being kind of in that sub 5-ish range. But curious how you think an IRR for a L.A. portfolio would look like. Angela Kleiman: Good questions. Ryland will talk about the cap rates. In terms of Southern California, we're assuming that -- I mean, sorry, in San Diego and Orange County performed similar to this year. It's really more driven by the fact that we view the job growth to be generally constant and supply from what we see in San Diego, it's about at the same level and Orange County, it's slightly elevated, but not in such a huge magnitude that it's going to drive a significant movement. So stable, not very exciting, but kind of -- is more of the same for Orange County and San Diego. Rylan Burns: Haendel, I'll jump in on the IRR expectations. I think where we've seen a lot of transactions in Southern California with our growth expectations in these markets. We've seen market clearing trades, I would say, in the low 7 IRR type range. Again, a wide variety depending on the asset and the business plan for some of these assets. But we think we've been able to achieve much better returns in our submarket selection in Northern California. So that's where we've really been focused. Now if any of those assumptions were to change as it relates to the going-in cap rate the business plan on a specific asset and/or the growth rates, then you would see us change our capital allocation priorities. But that's where it's been trending in 2025, I'd say. Operator: Our next question comes from the line of Alexander Goldfarb with Piper Sandler. Alexander Goldfarb: Two questions. First, Angela, you guys have -- you outlined what you expect advocacy costs in your guidance, although it's not part of core FFO, it's just part of NAREIT FFO, but given that advocacy is sort of a recurring part of operating assets and real estate in California, would these expenses just be a normal part of the business, like not -- it's core to the business of being in California, no different than insurance costs, earthquake costs or any of that in California or weather costs, et cetera. So just curious about that because I would think, especially as people are contemplating that other portfolio in Southern California, the regulatory costs are part of the calculus of how they look at whether or not to invest. Barb Pak: Alex, it's Barb. So in terms of the advocacy costs or the political costs that we had, we had $2 million in 2025. We have not specifically outlined what the cost will be in '26. We've provided a number, but it does include other legal fees that are outside of our normal core operations. So we don't expect there to be significant advocacy costs in 2026. There will be a small amount, but we don't see them as necessarily reoccurring. They can be lumpy from year-to-year when we have a big ballot measure, we're not expecting a lot on the advocacy front in 2026. Alexander Goldfarb: Okay. And then Ryland, -- just in looking at deal flow, it seems like 2021 was a banner year for ultra-low rate deals that may not have hit their pro forma and maybe have it coming back for debt maturities or restructuring in the next year or two. Do you see a lot of these deals coming to the market to trade? Or as you guys take a look at these deals that are having issues, most of them seem to be resolved internally between the existing sponsor and the lenders. I'm just trying to figure out if the 2021 vintage is going to create opportunity for you guys or if it's going to be one of these where most of the stuff gets resolved on its own. Rylan Burns: Alex, I think you're correct in that there were a lot of deals done at very low cap rates in 2021, and most of them were funded 5-year debt as typical. So in theory, there should be a lot of deals coming to market that have lost an attractive debt rate there. However, as you also acknowledge, there is a lot of debt capital out there looking to report in the multifamily space. So I think there's been a lot of deals being done between lenders and sponsors. And we really have not seen any indications of distressed sales coming to our market. The other thing to keep in mind is that Southern California, in particular, has done fairly well relative to the rest of the country over the past 5 years. So NOIs are up and these -- they've created value in many cases. So I'm not anticipating a significant onslaught of distress in '26 for the reasons you mentioned. One general really favorable lending environment. And then two, performance has done okay. Operator: Our next question comes from the line of Wes Golladay with Baird. Wesley Golladay: This quarter, you took control of an asset in Los Angeles tied to the preferred portfolio. Can you talk about when you expect that asset to stabilize, if it hasn't? And was it much of a drag on earnings this year? Rylan Burns: Wes, this is Ryland here. Yes, this is a unique asset. It's -- we expect this to stabilize in the mid-5 range. There was no impact to the economics last year. We just took management of it at the end of last year. Going in, it's probably a low to mid-4 cap. The previous sponsor had a unique business model where a certain portion of the units were rented is fully furnished short-term rentals, which had not done well elevated delinquency and a little bit higher controllable expenses. So putting it onto our platform with no assumption of significant rent growth on that asset, we are very confident we're going to be able to get this to a mid-5 by the end of the year. Operator: Our next question comes from the line of Michael Goldsmith with UBS. Michael Goldsmith: First question is on the legislative front. Are you seeing anything that may be related to the so-called junk fees or Essex' ability to continue to grow non-rental income? Angela Kleiman: Michael, we have looked at our practices as it relates to other fees, and we've also utilized consultants to make sure they have our practices are in compliance and so we don't expect that to be -- to have a meaningful impact to our business. Michael Goldsmith: Got it. And then just as a follow-up, have you seen any changes in the pace of move-ins from outside of Essex's core markets? Angela Kleiman: Would you repeat that question, sorry? Michael Goldsmith: Have you seen any change in the pace of move-ins from -- into Essex' market from outside markets. The pace of move-ins into the market. Angela Kleiman: Sorry. Good question. We have seen an increase in the migration trends, especially in our northern region. And -- but I do want to caution you on the immigration numbers in that this is really driven more probably by return to office. It's not driven by robust job hiring environment. And so -- but so far, it's showing positive and it's been a nice little tailwind for us. Operator: Our next question comes from the line of Julian Blouin with Goldman Sachs. Julien Blouin: I just want to go back to Seattle. You mentioned the return to office plans for Amazon and Microsoft. But then on the other hand, both of those companies have announced corporate layoffs there by the thousands over the past 6 months. I guess, what is your sense of how that push and pull will sort of play out this year? Can the RTO benefit really outweigh the continued layoffs we've seen? Angela Kleiman: Yes, that's a good question, and that's really -- as far as how we judge or how we decide on setting our guidance, right, what does that mean? How long does it take? What we have seen with Seattle, in particular, is that it moves quickly. So yes, there's layoffs offset by return to office, but Seattle also has -- having a 30% reduction in supply. And so absent of, say, additional job growth, for example, this market should stay just fine if not slightly better than last year, but it's going to do just fine. But secondly, when we look at the layoffs, we do dig into the reason for the layoffs because that really matter. So when we look at the reasons for layoffs with the large companies and including Amazon, the reasons cited are they're either eliminating nonprofitable businesses, for example, Amazon Fresh, pivoting to Whole Foods or they're expanding. They're putting in -- they're investing to expand into new business units or expand the business. And so the layoffs are not because of distress. And that's actually a good reason for layoffs. And additional data points to that, of course, the increased office absorption and increase in office leasing activity, all these data points together point to that. This is still a good vibrant market to be in. Julien Blouin: No, that's very helpful. Maybe digging into the South Bay as well, just in light of the fears that are out there around sort of AI native companies disrupting legacy tech and software. On the face of it, the South Bay is also one of those sort of more legacy tech or software-heavy markets where companies have been announcing corporate layoffs and had sort of less of that AI native HQ benefit that maybe San Francisco has. Why do you think the South Bay is sort of holding up so well while Seattle has maybe struggled a little bit more? Angela Kleiman: Well, I think the South bay market is a much deeper market than Seattle. And even though, keep in mind, there is some disruption that we would expect from AI. But when you look at what's happening there, so if you're talking about disruption in -- by cloud or coworker, for example. It's creating a demand and increase in usage in Agentic AI. And so you're going from one application that may be deprecated, but there's an expansion in another. And this is all happening still within the same submarket and so that's one of the foundational benefits of this market and having that concentration of all these tech companies there. Operator: Our next question comes from the line of Linda Tsai with Jefferies. Linda Yu Tsai: In 2026, do you expect any year-over-year changes in tax expenses from Seattle and Washington state due to the Seattle Shield initiative and B&O surcharge? Barb Pak: This is Barb. I mean we have baked in a Seattle tax increase this year into our guidance in the high single-digit range. But that -- and that encompasses kind of everything that you talked about. But that's what we're assuming this year, which is a big change from what we saw in 2025, where we had a pretty meaningful reduction in taxes. Linda Yu Tsai: What would be the dollar amount? Barb Pak: I don't have that off the top of my head. I can follow up with you after. Operator: Our next question comes from the line of John Pawlowski with Green Street. John Pawlowski: I had a follow-up to the return to office discussion from a few questions ago. I would have thought work patterns are normalized by now. Amazon's policy has been in effect, 5 days a week. It's been in effect, I think, for a year now. Has your local team seen a real second winds of demand to start the year, either in Seattle or the Bay Area or it's more of you're hoping that the positive momentum in the market continues gradually over time? Angela Kleiman: John, our expectation is based on what we've seen actually happened on the ground. And what we have seen happening on the ground is that a company announces a return to office policy. And some employers would comply and some will not, for various reasons. And it is not until they announce enforcement that people -- all -- everyone starts to come back to the office. And that happened with Essex as well. We had announced it and left people to get used to it. And then three quarters later, we announced that we're going to check key cards, for example, and everybody came back. And so our expectation is that this is going to play out similarly. And Amazon actually announced that they're starting enforcement in January. They're doing that for a reason. And I don't think -- I don't believe that their population would behave drastically different than the norm. John Pawlowski: Okay. And then drilling into Seattle again. Obviously, it takes a little bit of time for layoffs to get announced, severance policies, et cetera, to actually flow through the housing decisions and people moving out. So in your Seattle portfolio, are you seeing a real uptick in notices to move out? Can you share any kind of forward-looking [ blendedly ] spread expectation just given the lag between the layoff announcements and the actual decisions renters make? Angela Kleiman: Well, first of all, typically, when there's a layoff, there's the public announcement and there's the private conversations. And employees don't typically find out that they're getting laid off publicly. There's [ a human ] conversation and people typically make decisions, their housing decisions 45 days in advance of a job change event. And so our view is that the bulk of that layoff impact already has been felt in the fourth quarter and some spillover in January and less so in February. And when we look at our leasing activities and our blended renewal rate, they're not all that different from historical patterns for Seattle. So I'm not -- we're not expecting a second shoe to drop, if you will, because of the layoff announcements. John Pawlowski: Okay. So blended spreads for the first half of this year in Seattle, do you expect not to look meaningfully different than the second half of last year? Angela Kleiman: Correct. And I would say the whole year because we're not expecting a huge difference between first half and second half in 2026. And then the one other data point I'll point to is that Seattle supply is declining by 30%. And so that will also benefit the market. Operator: Our next question comes from the line of Rich Hightower with Barclays. Richard Hightower: Just one from me. I just want to go back to Barb's comment in the prepared comments about the -- I guess, the conservatism baked into the idea that the structured investment redemptions would not be redeployed and that's basically what's embedded in the guidance at this point in time. I mean, I guess, how conservative is that view? And is it conservative to the point of being a little bit unrealistic based on kind of what's in the pipeline and sort of the real underlying expectations for those redemption proceeds? Barb Pak: Rich, it's a good question. So what makes '26 unique in terms of our redemption profile is 90% of the redemptions we expect back are tied to two assets. So they're large redemptions, which do move the needle in the guidance. And on one of them, we did stop accrual in the fourth quarter. We did a third-party valuation on it. And we're fine from a valuation perspective today. But if we keep accruing, we felt we got a bit stretched. So we did the prudent thing and we stopped accruing. And then on the other one, we're just in discussions with the sponsor at this time. And so we -- given we don't know the final outcome, we decided to not assume any redemption proceeds. There's no further downside in the guidance from these two assets. There will -- and could be upside, but we don't know until we get further along in our discussions, what that will be. Operator: Our next question comes from the line of Alex Kim with Zelman & Associates. Alex Kim: Just a quick one for me. I wanted to talk about the delinquencies and they look to be near pre-COVID trend line. Do you anticipate further improvement even below pre-COVID norms? And could you quantify how much of a contribution is embedded into that 30 basis point tailwind from the other income bucket for your full year same-store revenue growth guidance? Barb Pak: Yes. This is Barb. So we are pleased with how much progress we've made on the delinquency front over the last two years. We're at 50 basis points, we're about 10 basis points off of our historical pre-COVID average so we're really close. And to Angela's earlier point, it's really tied to L.A., where eviction courts are still -- the processing times are still slightly elevated relative to pre-COVID averages. So we haven't baked any meaningful benefit in from delinquency in 2026. We've gotten the bulk of our delinquency benefit already in the prior years. We're still trying to get back there on the L.A. front. And maybe by year-end, we could, but it's not going to move the needle like it did in '25 from that perspective. Operator: Our final question comes from the line of Omotayo Okusanya with Deutsche Bank. Omotayo Okusanya: I wondered if you could talk a little bit about technology initiatives you guys are still undertaking to help with things like customer satisfaction, customer retention, rent growth, operating expense management and just kind of what benefits from that are being built into your 2026 guidance? Angela Kleiman: It's a good question. From a technology perspective, we do have a variety of initiatives in our pipeline, both top line and, of course, some on the bottom line benefits. On the sales and leasing front, it's really more AI focused. And of course, on the bottom line, as it relates to expenses, there's some expense management opportunities and technology that we are implementing. Having said that, you'll see that other income contributions from these initiatives are fantastic, but they are lumpy. And when we start something, it usually takes a year or two to really monetize the opportunity. And so I'll give you an example. Last year, we had a nice pickup. And one of the reasons was EV parking, and that was rolled out in 2024. We captured the bulk of the benefit in '25, and there's some residual in '26, and that's a reasonable cadence. So we are not baking anything new from this year because this year is a pilot rollout phase, and we're going to see how the pilot performs before we assess the rollout and the ultimate economic benefit for future years. Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session, and we'll conclude our call today. Thank you for your interest and participation. You may now disconnect your lines.
Operator: Good morning, and thank you for standing by. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to turn the call over to Whit Kincaid. Whit Kincaid: Good morning, everyone. Thank you for joining us for Mueller Water Products First Quarter conference call. Yesterday afternoon, we issued our press release reporting results of operations for the quarter ended December 31, 2025. A copy of the press release is available on our website, muellerwaterproducts.com. I have joined this morning by Martie Zakas, our Chief Executive Officer; Paul McAndrew, our President and Chief Operating Officer; and Melissa Rasmussen, our Chief Financial Officer. Following our prepared remarks, we will address questions related to the information covered on the call. As a reminder, please keep to one question and a follow-up and then return to the queue. This morning's call is being recorded and webcast live on the Internet. We have also posted slides on our website to accompany today's discussion. They also address forward-looking statements and our non-GAAP disclosure requirements. At this time, please refer to Slide 2. This slide identifies non-GAAP financial measures referenced in our press release, on our slides and on this call. It discloses the reasons why we believe these measures provide useful information to investors. Reconciliations between non-GAAP and GAAP financial measures are included in the supplemental information within our press release and on our website. Slide 3 addresses forward-looking statements made on this call. This slide includes cautionary information identifying important factors that could cause actual results to differ materially from those included in forward-looking statements. Please review Slides 2 and 3 in their entirety. During this call, all references to a specific year or quarter, unless specified otherwise, refer to our fiscal year, which ends the 30th of September. A replay of this morning's call will be available for 30 days at 1-800-814-6745. The archived webcast and corresponding slides will be available for at least 90 days on the Investor Relations section of our website. I'll now turn the call over to Martie. Marietta Zakas: Thanks, Whit. Good morning, everyone. Thank you for joining our First Quarter Earnings Call. As a reminder, this is my last week as Mueller's CEO. After my opening remarks, I will hand the call over to Paul to provide an overview of our performance followed by Melissa, who will go over our first quarter financial results and discuss our increased guidance for 2026. It has been the highlight of my career to lead this talented team, an extraordinary company with its rich legacy and iconic brands. The sense of fulfillment I feel in what the entire Mueller team has accomplished together is beyond words. It's thanks to their hard work and unwavering dedication that we have become the successful company we are today. Mueller plays a critical and essential role as a leader in water infrastructure products and solutions every day. I have great confidence that Paul, the leadership team and all our talented employees will build on our positive momentum. I believe our performance this quarter and over the last few years is just the beginning. I look forward to seeing Paul and the entire Mueller team write the next chapter in Mueller's winning legacy. I'll now turn it over to Paul. Paul McAndrew: Thanks, Martie. Good morning, everyone. Before reviewing our performance, I want to start by recognizing Martie and thank her for her incredible leadership. With nearly 2 decades of dedicated service, she has shaped Mueller into the company we are today. I am grateful that she will continue to guide us as a senior adviser through the end of the year. Since joining Mueller more than 3 years ago, I have witnessed firsthand the passion, expertise and commitment of our team members. I believe we are in the early stages of our transformation. We have improved operational execution, strengthened relationships with our stakeholders and delivered outstanding results, all while navigating a challenging external environment. I am pleased with the great start to our fiscal year. We delivered net sales growth of 4.6% in the quarter, supported by resilient end markets and our focus on delivering outstanding customer service. Our operations and supply chain teams executed well as manufacturing efficiencies more than offset the impact from higher tariffs and inflationary pressures, driving year-over-year gross margin expansion. This includes the expected benefits from efficiencies associated with the transition to our new brass foundry. These improvements led to first quarter records for net sales, gross margin, adjusted EBITDA and adjusted EBITDA margin. During the quarter, we generated $44 million of free cash flow and continued our balanced approach to cash allocation. We invested approximately $17 million in capital expenditures and returned approximately $16 million to shareholders through our quarterly dividend payment and share repurchases. We are raising our fiscal 2026 guidance, reflecting our strong first quarter results and current views for the rest of the year. Our end market expectations are consistent with our prior guidance. We anticipate that healthy municipal repair and replacement activity and strong growth in project-related work using specialty valves will more than offset slower new residential construction activity. Our operations and supply chain teams continue to work with suppliers to manage the ongoing tariffs and inflationary pressures, mainly related to brass. With this in mind, we recently announced price actions across most product lines. We are on track to deliver another year of gross and adjusted EBITDA margin expansion, supported by our operational and commercial initiatives. Overall, I am excited about our team's strong performance this quarter. We expect that our ongoing investments in our commercial and operational capabilities, together with strategic capital expenditures will enable us to increase capacity, achieve sustained margin expansion and deliver long-term value creation. I am grateful for our dedicated employees who serve our stakeholders with relentless drive and passion. With that, I'll turn it over to Melissa, who will take us through the financials. Melissa Rasmussen: Thanks, Paul, and good morning, everyone. We are pleased to report a great start to the year with consolidated net sales increasing 4.6% to $318.2 million, surpassing last year's strong first quarter performance. This growth was driven primarily by higher pricing across most product lines, partially offset by slightly lower volumes. Gross profit for the quarter increased 16.3% to $119.8 million and gross margin expanded 380 basis points to 37.6%. The improvement in gross profit was primarily driven by higher pricing and manufacturing efficiencies as well as inventory and other asset write-downs at WFS in the prior year period that did not recur. Manufacturing efficiencies largely resulted from the expected benefits associated with the closure of our legacy brass foundry last year. These benefits were partially offset by higher tariffs and ongoing inflationary pressures. Total SG&A expenses for the quarter of $59.8 million increased $5.9 million compared with the prior year, reflecting higher personnel costs, inflationary pressures and unfavorable foreign currency impacts. Operating income increased 19.6% in the quarter to $56.7 million compared with the prior year. Operating income included $3.3 million of strategic reorganization and other charges, which have been excluded from adjusted results along with the inventory and other asset write-downs at WFS. Turning now to our consolidated non-GAAP results for the quarter. Adjusted operating income increased 14.5% in the first quarter to $60 million driven by higher pricing and continued manufacturing efficiencies, partially offset by increased tariffs, inflationary pressures and higher SG&A expenses. Adjusted operating margin expanded 170 basis points year-over-year to 18.9%. Adjusted EBITDA reached a first quarter record of $72.1 million an increase of 13.5% compared to the prior year quarter. Adjusted EBITDA margin expanded 180 basis points year-over-year to 22.7% marking a new first quarter record. Over the last 12 months, adjusted EBITDA was $335 million or 23.2% of net sales, a 90 basis point improvement compared with the prior 12-month period. Net interest expense of $1 million declined $0.6 million, reflecting higher interest income. Adjusted net income per diluted share increased by 16% year-over-year to $0.29, setting another first quarter record. Moving on to quarterly segment performance, starting with WFS. Net sales decreased 0.9% to $173 million, primarily reflecting lower volumes of service brass products, which were partially offset by higher pricing across most product lines and increased volumes of specialty valves. Adjusted operating income increased 28% to $49.4 million. The increase reflects benefits from manufacturing efficiencies and higher pricing, which more than offset increased tariffs, inflationary pressures, lower volumes and higher SG&A expenses. Adjusted EBITDA grew 26.4% to $56.5 million and adjusted EBITDA margin expanded 710 basis points to 32.7% compared with 25.6% in the prior year period. WFS set a new record for quarterly adjusted EBITDA margin. I'll now move to quarterly results for WMS. Net sales increased 12% to $145.2 million, driven by higher pricing across most product lines and strong volume growth of hydrants. The benefits were partially offset by lower volumes for natural gas distribution and repair products. Adjusted operating income decreased 11.2% to $24.5 million. The decline reflects increased tariffs, manufacturing inefficiencies, higher SG&A expenses, inflationary pressures and unfavorable foreign currency. These headwinds more than offset the benefits from higher pricing and hydrant volume growth. Adjusted EBITDA in the quarter decreased 9.5% to $29.5 million and adjusted EBITDA margin contracted 480 basis points to 20.3%. Moving on to cash flow. Net cash provided by operating activities for the 3-month period was $61.2 million, an increase of $7.1 million compared with the prior year. The improvement was primarily driven by higher net income and noncash adjustments, partially offset by changes in working capital and other assets and liabilities. Capital expenditures through the first 3 months of the year increased to $17.2 million compared with $11.9 million in the prior year, reflecting continued investments in our iron foundries. Free cash flow for the period increased $1.8 million to $44 million and was 96% of adjusted net income, in line with our expectations. We ended the quarter with $452 million of total debt and $460 million of cash and cash equivalents. Our balance sheet remains strong and flexible with no debt maturities until June 2029 and $450 million of senior notes at a 4% fixed interest rate. We had no borrowings under our ABL and ended the quarter with $623 million of total liquidity, including $164 million of availability under the ABL. As a result, we continue to maintain ample liquidity, capacity and financial flexibility to support our strategic priorities, including pursuing acquisitions. I will now review our updated outlook for fiscal 2026. We are raising our full year guidance for consolidated net sales by $20 million at the midpoint of the range. Our net sales growth is now expected to be between 2.8% and 4.2% year-over-year, reflecting our strong first quarter performance and our current expectations for end market demand orders and price realization, which includes expected benefits from our recently announced price actions across most product lines. We are also increasing our annual adjusted EBITDA guidance by $10 million at the midpoint to a new range of $355 million and $360 million. At the midpoint, our updated guidance range represents an adjusted EBITDA margin of more than 24%, an improvement of more than 100 basis points year-over-year. We are maintaining our expectations for total SG&A expenses. We continue to expect our second half adjusted EBITDA margin to be higher than the first half of the year largely driven by seasonality of net sales. Additionally, we expect the benefits from our recently announced price actions will start to phase in the coming months, benefiting gross margins in the second half of the year. We are reaffirming our expectations for capital expenditures to be between $60 million and $65 million and continue to expect free cash flow to exceed 85% of adjusted net income for the year. With that, I'll turn it back to Paul for closing comments. Paul McAndrew: Thanks, Melissa. I want to provide a few closing comments before opening it up for Q&A. We are excited about our start to the year as we continue to execute well despite the challenging external environment. We are pleased to be raising our annual guidance at this point in the year. We are benefiting from our strategic capital investments and improving commercial and operational execution. We are confident that we can build on our momentum to accelerate net sales growth and expand our margins further. I want to thank all our employees worldwide for the extraordinary commitment and passion and supporting our customers and communities. They are the reason for our success and why Mueller has been a trusted partner for over a century. That concludes our comments. Operator, please open the line up for questions. Operator: [Operator Instructions] Brian Lee with Goldman Sachs. Tyler Bisset: This is Tyler Bisset on for Brian. So you guys took revenue guidance up for the year, reflecting the 1Q results and price increases so far. So can you quantify how much you guys have raised prices so far this year and how that compares to prior years? Should we think about this revised guidance is almost entirely due to the higher prices? Or are you seeing improved demand across any key areas of your business? Paul McAndrew: So as we said in our prior guidance, it didn't include our annual price increase, which we recently announced, which we will see the main benefit in Q3 -- our fiscal Q3. Prior guidance included the prior year price increase, plus the tariff price increase that we put in effect, which really took effect in Q4 of the prior fiscal year. So in your question, yes, the majority of the increased growth in our guidance is predominantly price related. Tyler Bisset: All right. And then I guess just like in relation to that, on Water Flow, you guys saw a nice pickup in margins, and you called out manufacturing efficiencies and favorable pricing. So can you break down the impact from those 2 items and how you expect margins to trend for the balance of the year? Melissa Rasmussen: Sure. With Water Flow, I want to remind you that we had mentioned last year that we would expect to see a benefit as we close the legacy brass foundry. We saw a benefit in the second half of last year, and we expect to see a benefit from that in the first half of this year. So we benefited from the closure of the iron foundry in first quarter. And that was the largest impact. And like I said, you'll see that again through second quarter. With the -- we did have -- sorry, we had some impact related to tariffs and we'll continue to expect to see that as well. The tariffs will start to lap in the second half of the year as they started to really impact us as a whole in third quarter of last year. Operator: Our next caller is Deane Dray with RBC Capital Markets. Deane Dray: Can I start with, once again, congratulating, Martie. I wish you all the best, and truly, you're leaving the company in really good hands. It isn't often that you see smooth leadership transitions. It's nice when it happens. And I just wanted to call that out and again, wish you all the best. Marietta Zakas: Great. Well, look, thank you, Deane. And I think just echoing what you said, I think everything was structured to ensure that it was a very smooth CEO transition, and I think things are going very, very well and look forward to Paul and the leadership team taking this company forward. Deane Dray: Terrific. And then just for Melissa, can you size for us the inflation pressures? And just to clarify, you said that the price increases should more than offset those pressures as they stand today? Melissa Rasmussen: Yes. As the price increases, we do expect to be price positive -- price/cost positive for the full year. For inflation, we typically see a low single-digit range of inflation. However, since the tariffs went into effect last year, that's more than doubled. In our guidance, we have incorporated an approximately 3% impact from the tariffs as we netted out the efficiencies that we expected to gain from that. So a 3% impact is what we're seeing related to the tariffs. Deane Dray: Great. And then just the second question, has there been any update on your assumptions regarding residential lot development, just kind of activity there? What's the expectation? Paul McAndrew: Deane, there's been no change in our assumption. We still anticipate that high single-digit range of slowdown in residential construction we track external reports. We look at the public homebuilders and they kind of all aligned in what we are guiding to there on the decline in housing starts. But I think if you think about positive though, given the low inventory on homes, the population demographics, we could see land and housing activity increase, particularly if rates lower, and we are ready to support that activity. Operator: [Operator Instructions] Our next caller is Bryan Blair with Oppenheimer. Bryan Blair: And I'll echo Deane's sentiments. Congrats, Martie, you're definitely leaving Mueller in a very solid place. Marietta Zakas: Very good. Thanks, Bryan. Bryan Blair: I have a couple of higher-level questions. Paul, you had mentioned that Mueller's transformation remains kind of early innings, early stages. Maybe offer a little more color on that. What are the next steps in the team's journey? And what does that mean for through-the-cycle growth prospects, margin entitlement, any of those kind of key metrics? Paul McAndrew: Bryan, we've really improved our commercial and operational investments over the last few years and bringing a lot more discipline to the organization, which you can kind of see how we've been achieving our results and our margin expansion. I think looking forward, the capital expenditures that we got laid out in our iron foundries for domestic capability is going to drive further capacity and further efficiencies for further margin expansion. And then just continuing that strategy of how we interact with our customers, either through digitally or in terms of our training programs, our whole commercial team segued with the operational investments. And we are well positioned with our specialty valve portfolio to capture the project work that's related to that product line. So overall, continue our commercial operational initiatives and drive capacity and margin expansion with our capital investments. Bryan Blair: Okay. Understood. That all makes sense. And how about capital deployment? I think it's fair to say that your team is in a better position, has the rights to deploy capital more so than any time in Mueller's history. Balance sheet is in great shape, generating pretty solid cash flow. So it would be great to hear the funnel development, thoughts on actionability, the kinds of assets of greatest interest, if and when they're available. Paul McAndrew: Yes. Great point, Bryan. We are in a much more better position now our improved momentum on execution, acquisitions are more of a priority for us. We continue to evaluate the funnel, evaluating opportunities with a strong focus on drinking water and wastewater and infrastructure exposure where we can drive synergies with our operations and our commercial teams, it is a priority of ours. Melissa Rasmussen: And Bryan, I'll add on related to the capital as far as our capital expenditures. We had expressed that we will begin spending 4% to 5% of net sales in the next couple of years. And Paul's earlier point, that is related to our iron foundries and investing in domestic capabilities and to drive efficiencies and increase capacity across the board. Bryan Blair: Understood. I was more focused on inorganic or M&A deployment with the follow-up question, but I completely understand that the higher return is on the organic side, and you have that path forward. Thanks again. Operator: And the last question comes from Joseph Giordano with TD Cowen. Michael Anastasiou: This is Michael on for Joe. So just wondering, can you just run through your exposures? Maybe help us get a better understanding of the repair and replace contribution in the quarter, new builds, gas and tech such as meters and leak detection, understanding that for the quarter would be helpful. And then as we look towards the remainder of the year, maybe just help us contextualize those assumptions and guidance. Melissa Rasmussen: Sure. The quarter, we had a strong quarter, grew by 4.6%, and that was related to higher pricing across most of our product lines and slightly lower volumes. We did see volume growth in specialty and hydrants and that more than offset -- was offset by a decrease in service brass and natural gas and repair. We continue to expect to see resilient end markets. Paul had mentioned earlier that we will continue to expect to see a decrease in the residential outlook, but strong performance in the residential or the municipal market. And then how it flows to guidance we can -- as far as the overall guidance report, we expect that we'll see growth on a consolidated basis for each subsequent quarter for the year. We do expect that, that will be driven by slightly positive volumes at the midpoint and price realization in the low to mid-single digits. We'll see normalized seasonality and that, again, will be healthy municipal and strong growth in specialty valves, offset slightly by the residential impact. Michael Anastasiou: Great. And any way you could just drill down a little bit more deeply on like the growth rates for those particular markets assumed in the guide? I know you mentioned kind of from a high-level qualitative perspective, but just trying to help us understand how we can kind of underwrite into the end of the year. Melissa Rasmussen: Yes. For the markets, we do expect to see a high single-digit decrease in the residential construction market, and that is going to be offset by the municipal repair and replacement growth that's going to be in the low to mid-single-digit range and the project-related work with our specialty valves, which we expect to see in the mid- to high single-digit range. Operator: And at this time, we are showing no further questions. I will turn the call back over to you for closing comments. Paul McAndrew: Thank you, operator. And thanks to everyone who joined us on our call today. We are very pleased with how we started this year with a record first quarter results while facing a challenging external environment, including the expected impact from higher tariffs. Our increased annual guidance reflects the confidence we have in our commercial and operational capabilities as well as the resilience of our end markets. We're excited to be in a position to expand sales, our margins for a third consecutive year, especially given the external environment. We believe we're in the early stages of our transformation. I want to once again thank our dedicated team members who have been and always will be the driving force behind our success. Thank you all, and we look forward to speaking with you again on our second quarter results when they're announced in early May. And with that, operator, please conclude the call. Operator: Thank you. This concludes today's conference. You may disconnect at this time, and have a great rest of your day.