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Operator: Good afternoon, and welcome to the Beazer Homes Earnings Conference Call for the First Quarter Ended December 31, 2025. Today's call is being recorded, and a replay will be available on the company's website later today. In addition, PowerPoint slides intended to accompany this call are available in the Investor Relations section of the company's website at www.beazer.com. At this point, I will turn the call over to David Goldberg, Senior Vice President and Chief Financial Officer. David Goldberg: Thank you. Good afternoon, and welcome to the Beazer Homes conference call discussing our results for the first quarter of fiscal '26. Joining me today is Allan Merrill, our Chairman and Chief Executive Officer. After our prepared commentary, we will open up the line, and Allan and I will be happy to take your questions. Before we begin, you should be aware that during this call, we will be making forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors described in our SEC filings, which may cause actual results to differ materially from our projections. Any forward-looking statement speaks only as of the date the statement is made. We do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is simply not possible to predict all such factors. I will now turn the call over to Allan. Allan Merrill: Thank you, Dave, and thank you for joining us on our call this afternoon. We began fiscal '26 in a stubbornly soft demand environment, but stayed focused on actions within our control that can drive timely and measurable progress toward our 2026 and multiyear goals. Our efforts were concentrated on proving the value of our differentiation, reducing direct construction costs and enhancing balance sheet efficiency. While most metrics came in at or below our expectations, the December quarter is always our slowest and we have plenty of time to make up for the shortfall. While caution is certainly warranted, we have paths to grow both full year EBITDA and book value per share. Here's how. First, since mid-December, we've seen better traffic and buyer engagement. In fact, January sales pace has been in line with the prior year after 8 quarters of year-over-year pace compression. Second, we have tangible catalysts in place that will drive higher homebuilding margins in the back half of the year. And third, we're managing our balance sheet and land spend to accelerate highly accretive share repurchases. Let's take these one at a time. On sales, we're not just hoping market conditions continue to improve. We're also benefiting from the new branding and lead generation efforts we launched in the fall. The focus of our Enjoy the Great Indoors message is a more comfortable and healthier home and dramatically lower utility bills. This is a message other builders can't deliver and it amounts to thousands of dollars in savings per year for most customers. We're also extending our leadership in utility savings by introducing solar included homes in many communities. This makes the full potential of 0 energy ready homes and easy reality for our buyers. No complicated sizing decisions, no cumbersome leases or guessing at payback periods. From day 1, our solar included homes reduce monthly utility bills to a little more than a basic service charge. Now there are two keys for making solar work for homeowners without tax credits or incentives. First, you must significantly reduce a home's energy consumption in order to shrink the size of the system. All of our homes do this. Second, you have to eliminate the many inefficiencies that have existed in residential solar business models. Working with our partners, we've been able to reduce installation costs for more than $4 per kilowatt hour to less than $2, and we know we can drive it even lower. Results thus far are promising. Homebuyer enthusiasm has been strong and margins in our fully solar communities are among the very best in the company. This is exactly the kind of offering that separates us from other builders in meeting the affordability challenge. On profitability, last quarter, we laid out a series of specific catalysts for about 300 basis points of margin expansion between the first quarter and year-end. And these remain firmly intact. So far, we've reduced labor and material construction costs by more than $10,000 per home or nearly 200 basis points, which should be reflected in our third and fourth quarter results. By the fourth quarter, we expect another 100 basis points of margin expansion from the combination of positive mix shifts within our existing communities and the increase in contributions of new communities. These newer communities, which we have defined as those that started selling in or after April 2025 were just over 10% of first quarter revenue, but are projected to account for about 50% of fourth quarter revenue. ASPs and margins on sales in these communities are both substantially above existing communities. Finally, we're seeing a modest shift toward to-be-built sales so far this year, which if sustained would be another margin catalyst. Turning to capital allocation. Our strategy remains disciplined and aligned with our multiyear goals. Within our portfolio, we continue to sell nonstrategic assets in submarkets that no longer match our differentiated product strategy or were intended for sale when we bought them. We now expect around $150 million in proceeds, increasing balance sheet efficiency and freeing up capital for higher return uses, particularly share repurchases. During the first quarter, we bought back $15 million of stock, bringing our trailing 12-month total to $48 million or about 7% of our shares. We have $72 million remaining on our share repurchase authorization, and we expect to fully execute it this year. Selling land above book value to fund share buybacks below book value is obviously highly accretive for shareholders. Of course, we evaluate all of our actions through the lens of achieving our multiyear goals for growth, deleveraging and book value per share accretion. With 168 communities at quarter end and 23,500 active lots under control, we remain on track to reach our greater than 200 community count goal by the end of fiscal '27 even accounting for the impact of our planned asset sales. We are committed to deleveraging to the low 30% range by the end of fiscal '27. With our plan to accelerate share repurchase activity, however, net leverage is likely to be flat year-over-year at or just under 40% at our fiscal year-end. Finally, book value per share finished the quarter above $41, up versus last year. Our goal remains to generate a double-digit CAGR in book value per share through the end of fiscal '27 through both profitability and share repurchases. Allocating $72 million to share repurchases through the rest of this year will certainly drive book value per share growth. Even in a challenging market, we're determined to move profitability and returns higher, by capitalizing on our differentiated product strategy, reducing labor and material costs, driving toward a higher-margin community mix and allocating capital to maximize shareholder value. With that, I'll turn the call to Dave. David Goldberg: Thanks, Allan. During the first quarter, we sold 763 homes with a pace of 1.5 sales per community per month. While part of this weakness reflected a continued tough market, we also chose not to chase volume as many of our peers discounted homes into their year-end. Our average active community count continued to grow, reaching 167, up 4% year-over-year. Our homebuilding revenue was $359.7 million with 700 homes closed at an average selling price of $514,000. Homebuilding gross margin was reported at 14%, though this included a litigation-related charge arising from an attached product community that began in 2014. Excluding the charge, which represented about 180 basis points, our homebuilding gross margin would have been about -- would have been 15.8% in line with our guidance. Looking at our mix, specs represented 70% of our closings, but only 61% of our sales. If the trend toward more to-be-built homes continues, it would add to margin in the back half of the year. SG&A was $65 million, in line with our expectations. Taxes represented a $1.5 million expense despite our pretax loss. This reflected our projected annual effective tax rate applied to our quarterly results. All told, first quarter adjusted EBITDA was negative $11.2 million and the diluted loss per share was $1.13, which again included a $6.4 million pretax or $0.23 per share impact of litigation-related charge. Now let's walk through our second quarter expectations. We expect to sell approximately 1,100 homes comparable to last year. We expect to finish Q2 with about 165 active communities, another quarter with a year-over-year increase. We anticipate closing about 800 homes with an ASP around $520,000 to $525,000. Adjusted homebuilding gross margin should be relatively flat sequentially, excluding the impact of the litigation-related charge. SG&A total dollar spend should be about flat versus the prior year quarter. From a land sale perspective, we expect to generate about $30 million of revenue. This should result in total adjusted EBITDA of around $5 million, including gains from land sales. Interest amortized as a percent of homebuilding revenue should be about 3%. Taxes are projected to be an expense of approximately $1 million, similar to Q1. This should result in a net loss of about $0.75 per diluted share. Depending on the prices paid for repurchase shares, we ought to be able to offset most, if not all, of the loss in book value per share by quarter end. Last quarter, we established the goal of generating growth in EBITDA for the full year. While the sales miss in our seasonally slowest first quarter certainly didn't help, we are still working to achieve this goal, excluding the impact of a litigation-related charge. Operationally, here's what needs to happen in the back half of the year. I'll start with the factors where we have higher visibility and more control of our outcomes. First, our average selling price will need to reach $565,000 in the second half, which is in line with our current backlog ASP propelled by our newer communities. Second, the direct cost actions and positive mix shifts Allan outlined will need to materialize and drive 3 points of adjusted homebuilding gross margin expansion by the fourth quarter. Third, we need to keep growth in SG&A under $25 million for the full year. And fourth, we'll need to execute the $150 million of land sales we've discussed. We have very good visibility on these transactions and anticipate they will generate a double-digit EBITDA margin in the aggregate. There are two other factors that will determine whether we can achieve EBITDA growth both of which depend on market conditions and competitive activity. Incentives will need to remain consistent with current levels for each community type, and we need to deliver a sales pace above 2.5% in Q3 and Q4 on a gradually increasing community count. Admittedly, we have not achieved this pace in the last 2 years, but it's a level well below historical trends. It's not going to be easy, but we do have a path to achieving EBITDA growth this year. Independent of whether we reach our EBITDA growth goal in 2026, we still expect to grow book value per share at year-end by 5% to 10% as we execute the remaining $72 million of our buyback authorization. At current prices, our full repurchase capacity represents more than 10% of the company, which would bring our total buyback to nearly 20% over an 18-month period. Because of the strength of our land position, we expect to do this and still finish fiscal '26 with a net leverage at or below 40%. We are focused on maintaining a strong balance sheet. At quarter end, we had more than $340 million of total liquidity, including $121 million of unrestricted cash and $222 million of revolver availability and no maturities until October 2027. As we said, net leverage will be flat this year as we balance our allocation of capital against our multiyear goals. During the first quarter, we spent $181 million on land acquisition and development and generated $3 million in land sale proceeds. At quarter end, our active controlled lot position was approximately 23,500 with 61% of our lots under option contracts. Over the last several years, we built a very strong land position, allowing us to maintain our growth poster even while selling nonstrategic assets. We anticipate our land sales will be above book value in the aggregate demonstrating that even if assets that no longer fit our strategy are worth more than what we paid for them. With that, I'll now turn the call back over to Allan. Allan Merrill: Thanks, Dave. To wrap up, I just want to reiterate two key takeaways. First, it was a slower start to fiscal '26 than we would have liked. But the first quarter is a small piece of the picture, and we still have a path to full year EBITDA growth. We're seeing green shoots for the spring selling season, and we've got very good visibility on margin catalysts, ASP growth and profitable land sales into the back half of the year. Whether we're able to achieve our goal will depend on stability and normalization in market conditions, but we're working very hard to make it happen. Second, we're fully committed to driving book value per share growth this year, independent of EBITDA growth. By realigning our land portfolio to accelerate share repurchases, we know we can create significant shareholder value. Let me just finish by thanking our team for their ongoing efforts to create value for our customers, partners, shareholders, and, of course, each other. With that, I'll turn the call over to the operator to take us into Q&A. Operator: [Operator Instructions] Our first question is from Alex Rygiel of Texas Capital Securities. Alexander Rygiel: Is your repurchase plan contingent on the timing of the $150 million profitable land sales? David Goldberg: No, I mean, not really, Alex. I mean, obviously, we're not going to do all at once. We talked about that we would be over the timing of the year, but it's not contingent on specifically the timing of the land sales. Alexander Rygiel: Helpful. And then generally speaking, sort of what is that gross margin spread between a build-to-order versus a spec home? Allan Merrill: It depends widely, but it has always been in the 4% or 5% range, and I would say that's probably gotten a little wider in the last year. I don't have the exact percentage because, of course, you're comparing apples and oranges between geographies and communities. But it's 400- or 500-plus. Alexander Rygiel: And then lastly, as it relates to sort of the favorable commentary about traffic in kind of the latter half of December and January. Do you see there -- is that kind of solely based upon interest rates sort of pulling back a little bit here? Or is it just because of a better mix? What are some of the reasons that you believe are driving that improved traffic? Allan Merrill: I think there are a couple of things going on. The very last slide in the appendix of our slides is a chart that we've shown for years, which is the affordability math looking at monthly mortgage payments as a percentage of income. And what's been happening slowly, I mean, imperceptibly looked at day-to-day, but it's very obvious when you look at it over years is rates have moved down a little bit. Home prices have stabilized or on a net basis have come down. Incomes have kept moving forward, so we're a lot closer to that low 20% affordability band that has characterized really healthy housing demand. So I think that we shouldn't overlook that is going on in the background. And we can get excited about rates doing this or that on a day-to-day basis, but the trend that has been underway over the last year has been very positive and improving affordability. It's still elevated, but it's getting a lot closer. Then I think the second part is just what you said, as we go from 10% of our revenue in the first quarter to 50% of our revenue in our newest communities just the demand patterns. And we talked about it before we launched them. We've talked about it since we've launched them. We've seen very good traction with communities that were purpose-built with our super high efficiency, our zero energy ready homes and an increasing share with solar included. A combination of things I think we're doing in this improving affordability backdrop, is, I think, what's contributing to what we've seen from a traffic and sales progression over the last month. Operator: Our next question comes from Julio Romero of Sidoti & Company. Julio Romero: On your introduction of solar included homes, when do you expect those homes to begin to flow through orders and closings? And then any color you can provide and how accretive those homes are expected to be to either sales or profitability? Allan Merrill: Well, right now, they're not a huge percentage of our closings, but we've got a couple of markets, and I'd highlight Las Vegas. There is some risk, I'll be wrong by a single community, but we basically had solar included across our attached and detached product in Las Vegas for the last couple of years. And that's really where we've been able to get after the supply chain and the installation protocols and sort of ring out what I call some of the excesses from the traditional solar residential solar business models. We've expanded that into Phoenix. And of course, we've got our big greenhouse community here in Georgia, the largest solar included community in the state. We've got it in a very big community in South Carolina that we're launching next month. So I think we're trending towards 20% of our business at the end of the year will be in solar included communities, but it's in our sales and closings now. In terms of the mix, all I would say is that solar included communities definitely have higher margins than not just the average, but even of similar generation communities, like they are accretive. But it's a small enough sample size that I think we start getting into basis points and they could get dangerous, but this has helped. I wanted -- having been enthused about this, and I am, I want to be a little cautious about the fact that this is also a function, the adoption of this is going to relate to utility providers and their posture vis-a-vis rooftop solar. What we've seen in the last year or 2 is kind of a 180 in some municipalities and with some public power companies where electricity demand has surged and we've all heard about data centers. And as that's happened, it has changed the dialogue with these utility providers, where all of a sudden, what had looked like competition becomes a little bit of a savior for them because now they have an opportunity for new communities to be much more self-sufficient or closer to self-sufficient, which takes some of the pressure off of the demands that they're experiencing. Now we all know that the rate of growth in electricity demand is not evenly spread, but in markets where you're seeing significant growth in demand for power, and I would point out Western markets, including Arizona, we have definitely benefited from and are changing the conversation with utility providers because that's one of the bottlenecks, right? They have to be willing and they are not just net metering things. We don't really worry about net metering, but what are the hookup charges? What are the barriers to getting your permits. And I think we are finding a more and more receptive environment, but it isn't going to be everything all at once. Julio Romero: Very helpful. And you noted that your to-be-built mix was trending favorably in 1Q orders relative to the mix in your closings. Can you talk about the drivers of that positive mix trend and if that's expected to continue trending towards... David Goldberg: I think, a, it has to do with some of our newer communities that are drawing a lot of attention. I also think the fact that inventory is coming down is creating some buyers who are willing to wait because it's not everything about get me the house immediately. I think it's probably a combination of those two factors more than anything else. Operator: The next question comes from Natalie Kulasekere of Zelman & Associates. Natalie Kulasekere: So last quarter, you mentioned that you're looking at a closings growth of 5% to 10% for fiscal 2026. And pardon me if I missed this on the call, but how exactly are you looking at it now? Are you still expecting to grow closings this year? And if so, what does it depend on? David Goldberg: Yes. Nate, what I would say is, obviously, some of it will depend on what happens in the selling season and what happens in the next 90 days. But our focus is really about our path to executing growth in EBITDA and book value per share. And we know that we have a path to go do so. And as I said in my comments, we're kind of independent of what happens from the EBITDA growth perspective. We're going to go and grow book value per share and it's to increase land sales and a little less spend, and we think that's really accretive for our shareholders. Natalie Kulasekere: Okay. And I guess my next -- just one quick follow-up. I'm just trying to figure out what happened in the first quarter. Was it particular markets that were underperforming? Or did you just see weakness across all your divisions as a whole? Allan Merrill: So we had two or three divisions where sales pace was up in the first quarter, but it means we had a dozen or more of that sales pace was flat or down. So it was pretty broad-based. But I want to put it in a little bit of context. We're probably between 100 and 150 sales short of where we thought we would be, which is less than one home per community over the course of the quarter. The other thing, and it's why I said what I said about a path, first quarter normally represents about 15% of our order volume and 10 or 15 whatever percent miss on that, it's 2% or 3% of our total orders for the year. And we know that. We know this every December, in particular, we get into this dynamic where people are discounting like crazy to hit their fiscal year-end goals. . And I understand it, but this was a year where we just decided this was not the time to be particularly aggressive and go toe to toe. And honestly, based on how the December traffic and the sales environment has changed, I'm pretty glad we didn't go ultra low in December to try and get an extra 100 sales because the repercussion across communities over the balance of the year would have been pretty significant. Operator: [Operator Instructions] Our next question comes from Tyler Batory of Oppenheimer & Company. Tyler Batory: I wanted to circle back on the guide and really the commentary about sales pace in particular in the back half in terms of the 2.5% there. Do you think that's achievable in the current backdrop? Do you think there needs to be a little bit of an improvement in the macro to hit that? And just kind of remind us what gives you confidence that there's going to be this ramp in the second half of the year versus the first half? David Goldberg: Well, look, Tyler, we certainly think it's achievable. I mean Allan kind of talked about what was happening in January and late December and improving buyer engagement, seeing more traffic, the receptivity to our Enjoy the Great Outdoors messaging. Is it what we did in '24 and '25? No. You're absolutely correct. It would be -- the last years haven't shown that. But if you look at historical trends, that's actually below what we used -- what we've done in Q3, Q4. So we think in a more normalized market with inventory levels coming down, some improvement in buyer demand that we've seen already into January, if that persists, it certainly is an achievable level. Look, I said in my remarks, and I think it's clear to say we have a path. It's not easy. It's not an easy path, but we clearly have a path. But our focus is on how we grow book value per share and get that EBITDA growth. Tyler Batory: Okay. And then my follow-up, thinking about the gross margin progression here, you're flat quarter-over-quarter, Q2 versus Q1, and Q1 was a little short of what you had guided to previously. So just talk a little bit about the shortfall in Q1 and the moving pieces sequentially into Q2? And then just remind us and help us think about the progression in terms of the ramp in gross margin in the back half? David Goldberg: So let's talk about it. First, I don't need to pick a bone, but I would tell you, we said we'd be about 16.8 -- we've got 16%, excuse me. Ex the litigation charge was 15.8%. So it feels pretty close to about 16%. I mean that feels pretty close to me. In terms of queue, what's really happening in the back half of the year that's causing that change we tried to outline it. And look, it's not about incentives going down or us assuming the market gets better. Incentives do go down because of mix shift because we have newer communities coming online. We have some higher-priced existing communities that are delivering more homes, and we have those direct cost savings that we have very good visibility to in our new starts. So it's very similar to what we said last year -- last quarter, excuse me, Tyler, last quarter about the 300 basis points. We still have good visibility into it. We obviously aren't trying to make a prediction on incentives of what happens in the back half of the year. But if incentives on like products stay the same, we've got some good improvement coming through in the back half. Tyler Batory: Okay. And then last one for me. In terms of some of these newer communities, 10% of revenue in Q1, just remind us the ASP or margin premium on those communities compared with the other 90% of revenue that was coming through in Q1? Allan Merrill: Well, you're starting to see it in the backlog ASP. I think backlog ASP is around $560 thousand. And that backlog are to be built from those newer communities. So that's giving you a flavor for what is going to happen to ASP in the back half of the year as those newer communities represent 50% or more of our revenue. On the margin progression, it's a couple of hundred basis points. I mean it is definitely material. And so moving from 10% to 50% on our revenue, picking up that kind of margin lift in addition to what we're seeing on the direct cost side, that's where our confidence in the movement of 300 basis points in margin comes from. David Goldberg: I would just add to that, Tyler. We don't give out specific ASP and backlog on new versus existing, but I would tell you, it is significantly higher. Operator: Our next question comes from Rohit Seth of B. Riley Securities. Rohit Seth: Just on the litigation expense, was that a onetime charge or is it ongoing? David Goldberg: That is a onetime charge. As we mentioned in the remarks and had to do with the community that we started construction in 2014, it's not our current product. It's not a repeating charge. It is a onetime charge. Rohit Seth: Okay. And where do you guys stand now on incentives? What was the change into the... David Goldberg: Yes. We don't give the exact incentive numbers out. It's not something we publish. But I think it's safe to say that the margin degradation that you saw from Q4 to Q1 was in part because of higher incentives around mix. Rohit Seth: Okay. And with the industry looking at clear inventory in the December quarter, you guys opted not to go that route. How is your inventory position heading into the new year? Allan Merrill: It's very healthy. We've got a combined spec position of in the 6s per community, down from in the 7s. So it's a little bit lighter like everybody else's. The finished inventory, I think, is in great spot for the spring selling season. So it's lower, but I think it gives us an opportunity. I mean we really focus on what our production universe is as we think about tracking down profitability for the year. And I think the combination of better cycle times and the inventory position we have today give us the unit inventory that -- or the unit universe that can drive the EBITDA growth path that we described. Rohit Seth: Okay. And if demand were to snap back, what are your cycle times now? Are you guys are well positioned to ramp back up pretty quickly? Allan Merrill: Yes. In the first quarter, we added a little over 2 calendar weeks or reduced our cycle time by about 2 calendar weeks. And I think in the starts in this next quarter, we'll get a little bit more. And when I think about that year-over-year, I really think about what's the last day of our fiscal year that we can sell a to-be-built home and still get it started and closed by the end of our fiscal year. And gosh, in the middle of COVID, that cutoff date was like in January. And we've been slowly pushing it further out as we've been reducing cycle time. And in most of our markets now, we're in April or May. And that really helps, right? That's the way -- it's maybe not a perfect way to think about it, but it's like adding 2 weeks to your fiscal year if you compress cycle time by 2 weeks because you've got the opportunity for that additional period to make those sales that you can get started and closed. Rohit Seth: Okay. And then final question, with the government talking about intervening in the housing market. For you guys and your customers, what do you think would be more impactful, something on the rate side or the down payment side? Allan Merrill: That's an interesting question. I mean every buyer has got their own environment. We've been really focused on affordability, this math on the slide that I referred to. So I think a combination of wage growth and monthly payment reduction, and that's why we're so focused on utility savings and mortgage rate savings and all of the things that we do, I think that's probably more important for our buyers than down payment assistance. Operator: I show no further questions. David Goldberg: Okay. I want to thank everybody for joining us on our call this quarter, and we will talk to you in 3 months. Thank you very much. This concludes today's call. Operator: Thank you. This does conclude today's conference. You may disconnect at this time. Thank you, and have a good day.
Operator: Good afternoon, and thank you for standing by. Welcome to the Deckers Brands Third Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] I would now like to remind everyone that this conference call is being recorded. I will now turn the call over to Erinn Kohler, Vice President of Investor Relations and Corporate Planning. Please go ahead. Erinn Kohler: Hello, and thank you, everyone, for joining us today. On the call is Stefano Caroti, President and Chief Executive Officer; and Steve Fasching, Chief Financial Officer. Before we begin, I would like to remind everyone of the company's safe harbor policy. Please note that certain statements made on this call are forward-looking statements within the meaning of the federal securities laws, which are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today, other than statements of historical fact, are forward-looking statements and include statements regarding our ability to respond to the dynamic macroeconomic environment and the impacts on our business and operating results, including as a result of changes to global trade policy, tariffs, pricing actions and mitigation strategies and fluctuations in foreign currency exchange rates. Our current and long-term strategic objectives, including continued international expansion, the performance of our brands and demand for our products; anticipated impacts from our brand, product, marketing, marketplace and distribution strategies, product development plans and the timing of product launches; changes in consumer behavior, including in response to price increases, our ability to acquire new consumers and gain share in a dynamic consumer environment; our ability to achieve our financial outlook, including anticipated revenues, product mix, margin, expenses, inventory levels, promotional activity, anticipated rate of full price selling and earnings per share; and our capital allocation strategy, including the potential repurchase of shares. Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any results predicted, assumed or implied by the forward-looking statements. The company has explained some of these risks and uncertainties in its SEC filings, including in the Risk Factors section of its annual report on Form 10-K and quarterly reports on Form 10-Q. Except as required by law or the listing rules of the New York Stock Exchange, the company expressly disclaims any intent or obligation to update any forward-looking statements. On this call, management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including constant currency. For example, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open through the current and prior reporting periods. The company believes that these non-GAAP financial measures are important indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results. Please review our earnings release published today for additional information regarding our non-GAAP financial measures. With that, I'll now turn it over to Stefano. Stefano Caroti: Thanks, Erinn. Good afternoon, everyone, and thank you for joining today's call. Deckers delivered an outstanding third quarter performance, underscored by a strong composition of results that demonstrate robust global demand for our brands, fueling an increased outlook for fiscal year 2026. For the third quarter, we delivered $1.96 billion of revenue, representing a 7% increase versus the prior year. Global HOKA and UGG performance was exceptional, with revenue increasing by 18% and 5% versus last year, respectively, and each brand delivering balanced growth across DTC and wholesale. From a regional perspective, HOKA and UGG collectively drove third quarter revenue increases of 15% in international markets, reflecting continued momentum from the first half and 5% in the United States, demonstrating positive inflection relative to the first half based on our effective marketplace management initiatives. This result exceeded our expectations for both brands. Importantly, it was achieved while maintaining high levels of full price selling and demonstrated resilient price elasticity. As a result, Deckers preserved strong gross margins, which contributed to an 11% increase in our third quarter diluted earnings per share, a record $3.33. As I reflect on our progress this year and our focus to build brands for long-term sustainable growth, I'm extremely pleased with our performance over the first 9 months of this fiscal year, which contributed to total company revenue increasing 10%, HOKA revenue growing 16%, UGG revenue growing 8% and diluted earnings per share increasing 13%. Decker's year-to-date fiscal results and raised outlook demonstrate our commitment to generate shareholder value through sustained growth in revenue and earnings per share, bolstered by our share repurchase program and fortified balance sheet. Now in the final quarter of this fiscal year and looking into the next, I'm confident that we'll continue to execute on our strategic plan and deliver compelling results through the sustained strong momentum of our global brands. Steve will provide specific details on our updated guidance and third quarter performance later in the call. But first, I'll share some brand-specific highlights from the third quarter. Starting with UGG. Global UGG revenue in the third quarter increased 5% versus last year to a record $1.3 billion. UGG continues to be top of mind for consumers, growing its leadership position as a premium lifestyle brand through a combination of purposeful consumer-informed product creation that celebrates recognizable brand codes, broadening the dimensions of category acceptance and an elevated global marketplace aligned to our target consumer segments, where the brand is able to build connections and community through a tailored yet consistent brand identity. As discussed on our last call, in response to the ongoing rise in consumer demand for the UGG brand, we strategically allocated additional products to the wholesale channel prior to peak season. The results indicate that this approach has proven effective. Our strategic execution enabled improved in-stock positions for our wholesale partners, boosting fall sales and as planned, we effectively address late season demand through our direct-to-consumer channels. In terms of the UGG brand's third quarter performance across channels, DTC revenue increased 5% versus last year and wholesale revenue grew 4% compared to last year. From a direct-to-consumer perspective, our marketplace teams around the globe work closely across different departments to fill consumer demand, both in retail locations and online. Through these efforts, we drove meaningful growth in UGG Rewards membership, e-mail subscribers and retain consumers, providing ample opportunity to further strengthen consumer connections and drive repeat purchases in the future. During the quarter, we also used our DTC channel to test products with speed to market, strategically pulling forward targeted new silhouettes to generate early reads at a time where UGG historically has the greatest attention from consumers. Our new Quill franchise was a standout success through this initiative. By sharing performance insights with our wholesale partners for products like the Quill, we are able to accelerate the global expansion and adoption of new offerings. UGG has firmly positioned itself as the top premium lifestyle brand in the global market. Our ongoing goal is to further enhance UGG's presence at every consumer touch point through consistent product presentation that highlights our distinctive brand identity. While we focus on improving the consumer experience in our direct-to-consumer channels, we're also collaborating very closely with our retail partners to elevate the brand through intentional product offerings that support year-round wearability in our men's initiative. By planning strategically for shared growth, we sustain strong partnerships and nurture future opportunities, all while ensuring marketplace scarcity for UGG remains healthy. We're especially proud of how our retail partners supported the UGG brand during the holiday season, strengthening consumer connections and raising awareness and adoption across categories. Overall, this was an exceptionally well-executed third quarter and holiday season for the UGG brand. Our marketing teams did a brilliant job leveraging product collaborations, brand activations and ambassadors to drive UGG brand heat, including a feel house experience in New York City, celebrating the UGG SACAI product collaboration, pop-ups in Chicago and Berlin that featured the UGG Palace product collaboration and new male brand ambassadors across sport and pop culture in China, contributing to our strongest men's regional performance. Globally, the men's category performed very well as we continue to see healthy adoption of popular all-gender products like the Tasman, Ultra Mini and Lowmel. As well as men'-specific styles like the Weather Hybrid collection that spans across multiple silhouettes. Overall product performance was positively influenced by robust consumer response to newness, which underscores the growing demand for UGG and its diversified product range across various categories. Iconic UGG franchises continue to benefit from the addition of complementary styles such as the new Tazelle and Classic Micro, helping fuel growth for the brand with the latter even placing among the 10 best-selling styles this quarter. We also made notable progress with products aimed at supporting the UGG brand's 365 initiative. The Lowmel franchise continued to expand UGG's presence in the lifestyle sneaker segment, more than doubling its revenue this quarter and ranking among the brand's top 5 best sellers. As we approach the fourth quarter, our priority is to finish another successful year by boosting interest in new product launches that align with our brand strategies, including the Minimel, an all-new low-profile spring sneaker with/the Lowmel collection, the Otzo, an all-new Clog with a sleeker aesthetic that features elevated materials and new fashion sandal silhouettes within the Golden collection. Congratulations to Anne and the entire UGG team on a fantastic fall season and holiday quarter. We are excited for what's to come as we continue to expand consumer reach and category acceptance of our compelling product assortment and grow this amazing brand around the world. Speaking of amazing brands, let's shift to HOKA. Global HOKA revenue in the third quarter increased 18% versus last year to $629 million. This growth included strength in both DTC and wholesale with gains in the U.S. as well as international markets. The strong performance was driven by broader consumer adoption of the HOKA brand's innovative and versatile products, especially as we've refined our approach to managing the global marketplace. This helped achieve balanced growth across channels as DTC revenue increased 19% versus last year and wholesale revenue grew 18% compared to last year. As we continue to build this brand and introduce new products to the market, we are proactively maintaining a healthy pull model of demand across all channels. This approach aligns with our long-term objectives of achieving growth in every channel and region. While some fluctuations in channel growth may occur as we make strategic adjustments to distribution, we remain committed to creating a more balanced business over time as demonstrated by HOKA's performance this quarter. We continue to incorporate insights from consumers and learnings from the marketplace to refine how we go to market. A notable initiative this quarter has been our HOKA membership program, which enhanced consumer loyalty by delivering a distinct and differentiated customer experience. Our revamped membership program now includes exclusive and early product access, select opportunities for special discounts and rewards for higher purchase frequency. Though we are still early in the development of the HOKA membership program with additional consumer engagement drivers and differentiation in the pipeline for next year, we're already seeing a benefit in revenue per consumer, units per transaction and multi-category purchasing from HOKA members relative to the average consumer. These members' key performance indicators are directly contributing to our positive results, helping drive an acceleration of the HOKA brand's DTC growth in the third quarter compared to the first half of the fiscal year. In the U.S., DTC returned to healthy growth in the quarter with a meaningful improvement of new consumer acquisition online compared to what HOKA experienced earlier this year. In addition, as we look ahead to future product transitions, we see an opportunity to more effectively utilize our higher-margin DTC channel to strategically manage end-of-season inventory in a controlled manner as we tightly manage wholesale marketplace inventories to ensure a clean environment for future launches. The HOKA brand's improved DTC performance demonstrates the effectiveness of our loyalty marketing tactics, which have enabled us to enhance the consumer's journey increase brand affinity, build lasting relationships and increase customer lifetime value for a growing base of consumers. At the same time, we remain focused on driving strong performance with HOKA in the wholesale channel. We believe it's very important for HOKA to compete in a multi-brand environment, particularly in the performance category where innovation is critical to success. Our partners remain an important destination for consumers to experience the HOKA brand's unique blend of technology, geometry and premium materials directly on their feet. HOKA has continued to perform very well in the wholesale channel globally, driving healthy levels of full price sell-through and gaining additional market share. In the U.S., according to Circana, HOKA's market share increased significantly in the road running category above $140 for the 3 months ending in December. This growth further establishes HOKA as a top brand in the segment and demonstrates the strength of our full price sell-through. In Europe, the pace of sell-out continues to drive record levels of reorders with our top strategic customers averaging 90% sell-through, which is fueling future season demand. We attribute the HOKA brand's market share expansion to 3 main factors: compelling innovative products that resonate with consumers, enhanced global brand awareness and recognition and increased brand access in more locations. These developments have opened the door for a wider range of consumers to connect with the brand, not just for performance-related reasons. With more people choosing to wear HOKA as part of their active lifestyle wardrobe, the brand is well positioned to take advantage of this growing trend. HOKA is proactively advancing its lifestyle strategy, identifying this segment as a significant opportunity in terms of product development and expansion through wholesale distribution, account segmentation and differentiation. As the lifestyle category evolves, HOKA is positioned to leverage the company's global expertise in this area. As HOKA continues to tap into significant lifestyle opportunities, it's important to acknowledge the valuable growth potential within our established categories. Our main global marketplace priorities for HOKA include enhancing the brand's premium position through product innovation, engaging authentically with consumers through strategic product segmentation and expanding the brand's reach while maintaining performance integrity. As we look at wholesale distribution in the U.S. market, run specialty remains our priority segment to introduce and engage consumers with HOKA brand's innovative performance products. Our aim here is to uphold HOKA's performance credibility by continuing to lead in this segment. In sporting goods, HOKA is present in roughly half of the targeted stores we consider potential distribution points. We also see more opportunities to expand shelf space and market share in existing doors as we continue to diversify our product offering. The biggest opportunity for HOKA's expansion in the U.S. lies within the athletic specialty segment, where we are currently represented in only about 1/4 of the stores we believe will be relevant for the brand moving forward. Internationally, we're much earlier in the process of expanding HOKA's distribution. In Europe, we're making steady progress in building awareness and marketplace presence. We still have room for door and market share expansion in the European run specialty segment, where we continue to climb in brand ranking throughout various countries in the region, having captured around 80% of the opportunity we see for this segment. Furthermore, HOKA has reached approximately 40% of the European sporting goods destinations considered relevant for the brand and is available in less than 20% of suitable athletic specialty stores in the region. This illustrates the significant opportunity that remains for attractive distribution expansion. In Asia, our primary area of focus remains China, where we operate mainly through a mix of company-owned and partner-run mono-brand retail stores. Typically, we keep a 2:1 ratio of wholesale partner locations to company-owned retail stores. Currently, we occupy a little less than 1/3 of the potential we see over the next several years. All of this to say, we continue to see meaningful untapped global opportunities for HOKA. We're building this brand for the long term, and we'll continue to take a methodical approach to global expansion, maintaining a full model of demand while gradually improving the balance between DTC and wholesale channels. Our ongoing progress in international markets, along with positive developments in our U.S. operations makes us very optimistic about HOKA's promising future. From a product perspective, top franchises continue to perform very well, and we are now operating in a much cleaner global marketplace relative to a year ago. The brand's launch of Gaviota 6 is off to a great start, further bolstering our positioning in the stability category alongside the positive reception of the Arahi 8. HOKA has a number of exciting product updates to come in the fourth quarter across our key strategic priorities of winning in road, dominating trail and igniting lifestyle. The category has 2 key product stories launching in Q4. Our Pinnacle racing shoe, the Cielo X1 3.0, which is the fastest and lightest racing shoe HOKA has ever created and our completely redesigned Mach 7, crafted for responsive daily runs with tempo. Beyond the Road segment, we eagerly anticipate the launch of Speedgoat 7, which is designed to build HOKA's legacy in the trail category by offering an exceptional underfoot experience across diverse terrains. In lifestyle, we are excited to announce the launch of our first fully integrated marketing campaign for this category, featuring new ambassador partnerships, global brand experiences and products that connect with well-known HOKA franchises. Congratulations to the whole HOKA team on a well-executed quarter. We look forward to closing out the year with these exciting product launches to come. I am really proud of the success our entire team has delivered this year, and I'm even more excited for what lies ahead as I look at the opportunities for the next year and beyond. We intend to continue driving healthy profitable growth for both UGG and HOKA. We expect HOKA to remain our fast-growing brand with significant potential for international expansion and consistent progress in the U.S., supported by effective marketplace management. At the same time, we also expect the UGG brand to continue driving growth across DTC and wholesale through its men's and 365 product initiatives, similarly led by international regions alongside continued growth in the U.S. Given these growth opportunities, our disciplined management of the global marketplace to sustain strong full price sales and our strategic investments leveraging portfolio synergies, I'm confident that Deckers will continue to be a leader in our space. Thanks, everyone. Over to Steve for more details on our third quarter financial results and an update to our fiscal year '26 guidance. Steve Fasching: Thanks, Stefano, and good afternoon, everyone. Our third quarter performance exceeded expectations and demonstrated robust momentum of the UGG and HOKA brands. For the third quarter, UGG drove solid growth to deliver its largest quarter in history with balanced increases across channels and regions. HOKA delivered another quarter of strong global growth with this quarter being balanced across DTC and wholesale. HOKA growth was led by international and included meaningful contributions from the U.S. market, highlighted by the positive inflection of the U.S. DTC business. These results are a testament to the exceptional strength of our premium brands within the U.S. and internationally as our disciplined approach to marketplace management, combined with innovative product and an elevated consumer experience led to high levels of full price selling and exceptional performance during the holiday season. Now let's get into the details of the third quarter results. Third quarter fiscal 2026 revenue was $1.96 billion, representing a 7% increase as compared to the prior year. Revenue growth in the quarter was primarily driven by HOKA, which increased 18% versus last year to deliver $629 million, adding $98 million of incremental revenue over the prior year. As anticipated, HOKA performance benefited from another sequential improvement in the U.S. DTC business, which delivered healthy growth in the quarter, contributing to a more balanced result across DTC and wholesale. UGG increased 5% versus last year to deliver record quarterly revenue of $1.3 billion, adding $61 million of incremental revenue over the prior year. UGG growth also benefited from improved global DTC performance, which inflected to positive growth following a more pressured first half. Gross margin for the third quarter was 59.8%, which was better than we had expected for the quarter, primarily due to a lower-than-expected impact from increased tariffs, reflecting the timing of inventory flows and the mix of inventory sold through during the quarter, benefiting from lower tariff inventory in the pipeline. Larger benefits from our pricing actions, primarily attributable to the UGG brand and though above last year, we had slightly lower promotions than planned for the quarter. In achieving this result, both UGG and HOKA maintained a very healthy level of full price selling with each achieving an average selling price slightly above the prior year and HOKA delivering gross margin expansion in the quarter, contributing to our better-than-expected result. SG&A dollar spend in the third quarter was $557 million, up 4% versus last year's $535 million as we continue investing in key areas of the business. As a percentage of revenue, SG&A was 28.5%, which is 80 basis points below last year's rate of 29.3% with leverage primarily driven by favorable impacts from foreign currency exchange rate remeasurement. Our tax rate for the quarter was 23.3%, which compares to 21.8% for the prior year. These results culminated in a record diluted earnings per share of $3.33 for the quarter, which is $0.33 above last year's $3 diluted earnings per share, representing EPS growth of 11%. Turning to our balance sheet. At December 31, 2025, we ended December with $2.1 billion of cash and equivalents. Inventory was $633 million, up 10% versus the same point in time last year and includes tariffs paid on inventory received this year. And during the period, we had no outstanding borrowings. In the third quarter, we repurchased approximately $349 million worth of shares at an average price of $92.36. Through the first 9 months of fiscal year 2026, we have repurchased approximately 8 million shares, representing more than 5% of shares outstanding at the beginning of this fiscal year. As of December 31, 2025, the company had approximately $1.8 billion remaining authorized for share repurchases. And given our strong cash flow and cash balance and in consideration of the current market valuation, we remain committed to continue returning value to shareholders through our share repurchase program. In fiscal year 2026, we are on track to repurchase more than $1 billion in total by the end of the year, which is expected to contribute more than $0.20 of diluted earnings per share improvement. Now moving into our updated guidance for fiscal year 2026. Based on the strength of our brand's performance in the third quarter, we are increasing our full year revenue expectations to a range of $5.4 billion to $5.425 billion. For HOKA specifically, we've raised our expectation now reflecting mid-teens revenue growth versus last year. And for UGG, we now expect revenue to increase mid-single digits versus last year, which is at the high end of our prior guidance. Gross margin is now expected to be approximately 57%, which is 100 basis points above our prior guidance, primarily due to lower than previously anticipated net impact from tariffs. We still expect SG&A to be approximately 34.5% of revenue as we continue to make investments that support the long-term growth and opportunities ahead for UGG and HOKA. Our operating margin is now expected to be approximately 22.5%, which is 100 basis points above our prior guidance and remains best-in-class. We still expect an effective tax rate of approximately 23%. These updates and the continued benefits from both year-to-date and projected fourth quarter share repurchase result in a raise to our expected diluted earnings per share, which is now in the range of $6.80 to $6.85, representing a 7% to 8% increase over last year's record EPS. Regarding tariffs, based on the robust pricing power of our brands, which has not materially impacted demand to date, combined with a lower-than-expected blended tariff rate in Q3, we now expect the unmitigated tariff impact on fiscal year 2026 to be approximately $110 million. As a result of our better-than-expected price action benefits and the favorable timing of inventory sold, we now estimate a net tariff impact of approximately $25 million. Please note, this does not represent a full year impact if tariffs remain in place moving forward. Our increased full year 2026 guidance includes the following assumptions for the fourth quarter. HOKA is expected to deliver 13% to 14% growth, representing the brand's largest ever quarterly revenue based on the momentum from international regions and continued U.S. growth with both contributing to global market share gains. UGG revenue is assumed to be roughly flat to last year as some orders previously planned for Q4 shipped earlier in Q3 with the total of both quarters contributing to the brand's increased outlook for the year. Our implied gross margin assumes an approximate 200 basis point headwind, the entirety of which is expected to come from the net pressure from tariffs. Note that this is projected to be our largest quarterly net impact from tariffs in fiscal year 2026 on a rate basis as we anticipate the full 20% burden in Q4 and slightly more deleverage in our SG&A spend in the quarter as we continue to make investments while taking advantage of our overall improved outlook. We believe these targeted variable investments will help us continue to carry momentum into FY '27. As Stefano touched on, we have a high degree of confidence in our brands to continue delivering exceptional results into next fiscal year. Specifically, we believe Deckers has the ability to continue delivering meaningful revenue growth paired with a top-tier operating margin beyond this year, through operating a pull model of demand, maintaining a well-managed global marketplace that drives high levels of full price selling, utilizing shared service synergies across brands as we invest to add capabilities and remaining disciplined in our approach to portfolio management, focusing on investments in areas that we see the highest long-term returns. In closing, we are proud of the outstanding results achieved in the third quarter as our in-demand brands drove record quarterly revenue and earnings per share. UGG and HOKA are operating at a high level across the global marketplace. And I, along with the rest of our leadership team, remain confident in our ability to deliver on our increased guidance for fiscal year 2026 and continue driving healthy growth over the long term. With that, I'll hand the call back to Stefano for his final remarks. Stefano Caroti: Thank you, Steve. Deckers performed very well in the quarter, achieving record results that highlight the strength of our brands in the global marketplace. During the holiday season, UGG and HOKA drove consistent growth across channels, demonstrating success in both international markets and in the U.S. through compelling and innovative products that are meeting the demands of our consumers. Deckers has once again demonstrated resilience, gaining share and improving growth momentum in the current environment. We have visibility to continued growth, both domestically and internationally, and this gives us the confidence to raise our full year outlook. We are very proud of our company's ability to guide for another year of robust and profitable growth through our powerful differentiated brands that are operating in growing segments of the global marketplace. UGG and HOKA are both actively scaling their respective addressable audiences through category expansion, giving each brand ample opportunity to gain market share, grow in underpenetrated markets and capture new consumers globally. They remain highly complementary, allowing us to benefit from shared synergies and knowledge expertise across the organization as we maintain our best-in-class profitability profile. Before we close, I want to once again express my sincere gratitude for the tremendous work of our dedicated global teams and all we've accomplished thus far in this fiscal year 2026. In December, the Wall Street Journal recognized Deckers as one of the best managed companies of 2025, an honor made possible by the collective efforts of our employees who are the driving force behind what makes our company so special. Thank you all for joining today's call, and thank you to our shareholders for your continued support. With that, I'll turn the call over to the operator for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Jay Sole of UBS Financial. Jay Sole: Stefano, it sounds like HOKA really had a terrific quarter. It sounds like that you've seen an acceleration in the business from last quarter to this quarter. Can you maybe just dive into what has changed? What has driven the improvement? You talked a lot about product. I think you mentioned the Gaviota, the Arahi. There's a lot of newness out there. You mentioned the Cielo, the Mach, Stinson, some of these other things that have popped up. Is it product? Is it marketing? Is it just maintaining a very strong full price sell-through mentality? Maybe just explain to us what has gotten better? And do you see it as sustainable going forward? Stefano Caroti: Yes. First of all, I do see it sustainable going forward. I think we had a few learnings last year. We decided to space out key franchise launches with tightened inventories of outgoing styles, and we better leverage our DTC channel to move closeouts in a controlled manner. We see opportunity across every region every channel in every category of our business this year. So I feel confident that this trajectory will continue. Steve Fasching: Yes. I think, Jay, just to add on to that, too. I think what's also encouraging in some of where we're seeing acceleration is with some of the new product that we introduced last year, performing very well with consumers. So recall that we had some of our big franchise updates last year, early last year, and we've continued to see consumers engage with those updates quite a bit. Stefano Caroti: Yes. And as you mentioned, Jay, Gaviota 5 is off to a great start on the back of a successful Arahi introduction. Now we're a meaningful player in the stability category. Transport 2, again, launched last week, but off to a good start. Cielo X1 3.0, our fastest and lightest shoe to date, launched today, and it's already our best-selling style online. So I feel very good about the product pipeline coming. Jay Sole: Got it. Maybe if I can just follow up on that. You talked about lifestyle in your prepared remarks. I think you mentioned you're going to do a new ad campaign. Can you talk a little bit more about where lifestyle is today, what your projection is for how that business will develop? And with all the new stuff that you're talking about, Machs, Speedgoats, Cielo, Gaviota, Arahi, Stinson and Transport, I mean, how much is the diversification of the product line really changed the mix of the business from just Bondi and Clifton? Can you give us a sense of that as well? Those are really the 2 questions. Stefano Caroti: That is really one of our aims. We have boosted capabilities, as you know, across innovation, design, color and lifestyle. And this is helping us more effectively segment the marketplace and also differentiate DTC. Performance, however, remains at the core of what the brand is. And as you know, the lifestyle consumer has adopted many performance styles. At the same time, we do view this category as a huge opportunity for the brand. And I'm really encouraged by what is coming. Early reads on some of the products we launched in Q4 is very positive. [ Stinson ] 7, Bondi Mary Jane, Speed loafer are performing very well. And as I look ahead, the team has done a great job in clarifying the line architecture, simplifying designs and also hit more commercial price points. So I do believe that we have a good runway also in lifestyle going forward. Operator: Your next question comes from the line of Peter McGoldrick of Stifel. Peter McGoldrick: I was interested in the channel strategy for the UGG brand. It's encouraging to see both channels grow in tandem in the key sell-through quarter. Given the shift in strategy to prioritize retail partner in-stocks for fiscal '26, I'm curious how we should think of your plans to manage the UGG brand in fiscal '27 on a wholesale versus DTC basis. Stefano Caroti: Potential for the UGG brand across all channels. all regions and all categories. So you should continue to see a balanced growth in the UGG portfolio. We're very happy with what the brand has delivered in terms of newness. Our 365 offering has been very well received. Our -- we're now playing legitimately in the sneaker category with the Lowmel. And our classic products continue to perform very well. So you should expect continued segmentation of the marketplace, continued differentiation and growth across all channels, markets and categories. Steve Fasching: Yes. And I think, Peter, also, as you looked at this year in terms of channel strategy, I think the important thing to recall is a couple of things. that impacted timing, especially around the wholesale channel distribution. So recall, in Europe, we had a distribution center move. So we were shipping earlier product to avoid disruption on some of that business logistics change in Europe. And then I think with the strong demand that we saw coming out of last year, we saw strong wholesale orders and then reorders. And so much of those customers wanted product earlier this year. That's why you were seeing a shift of the wholesale growth more to the first half of the year. And that was really more of an indication of the strength of the demand of the UGG brand coming up to our biggest season. And so what that allowed us to do was shift more focus to DTC. So very encouraging to see how that channel played out during the course of the year because, again, we're not managing just every quarter. We're managing the business for the long run and for the season. So what's very encouraging is how well the season did. And I think some of the dynamics that you saw play out between quarters was just a way of managing the increasing demand that we're seeing for the brand. Peter McGoldrick: I appreciate that. And Steve, a follow-up for you on DTC performance. Nice to see the consolidated inflection. I'm curious how we should consider this moving forward? It seems like you've got some nice structural contributors from HOKA membership, and then we're looking at easier comparisons. Can you help us think about assumptions for traffic, conversion, ticket and basket embedded in the outlook? Steve Fasching: Yes. So we continue to see improvements. So I think encouraged with what we saw, consistent with what we've been saying for the past few quarters in terms of an expectation that we would see momentum and improvements in the DTC performance. You're seeing that continue in the current quarter that we just reported, and we're continuing to look for improvements going forward. So I think encouraged with everything that we've said. I think the other highlight was some of the things that we talked about in prepared remarks, which improved DTC and I think importantly, drove gross margin improvement on the HOKA brand, right? So it shows that the work that we're doing to improve the business, draw more full-priced consumers in and bring them through the DTC channel is working, and we'll continue to build on that. Operator: Your next question comes from the line of Laurent Vasilescu of BNP Paribas. Laurent Vasilescu: I wanted to follow up on Peter's Steve. The HOKA guide of 13% to 14%, this is despite a very, very easy compare. Any considerations there on that front? Is it just conservatism? I think you mentioned in your prepared remarks, maybe with Stefano, going forward, there's fluctuations in channel growth that may make strategic decisions. Can you maybe unpack a little bit more for the audience? Steve Fasching: Yes, sure. I'll start on that. I think the point there, right, is how we're managing both our brands for long-term sustainable growth, right? And so we're not going to get hung up on kind of quarterly compares if we believe it's kind of detrimental to the brand. So if we look at what happened this year, right, as I talked about with Peter's question in terms of how we were flowing inventory into the channel, we're making sure that we have the appropriate amount of inventory with the demand that we're seeing, but also setting up an opportunity to continue to grow our DTC, right, with a long-term target of improving the proportion of our DTC business overall, which will take several years. It's an important marketplace management setup of how you get there. And I think that's what you're seeing play out this year is a focus on balancing some of that wholesale demand out, fulfilling it a little bit earlier, placing then a little bit more emphasis on DTC growth as we get into the selling or bigger selling seasons. And that works, right? And so as we look going forward, it's about maintaining that. One of the positive things, I think, that we see is when we have these strong quarters, it's a signal of the consumer demand that's out there, right? And the demand for our brands is very strong. What it also does is it encourages some wholesale accounts to order bigger and order earlier, and we'll take advantage of that. And that's where that will play out. But again, we have a very keen focus on how we continue to develop our DTC business. You've seen some of the improvements that we've made and how that's driving more consumer engagement and more full-price consumer engagement for us. Laurent Vasilescu: Very, very helpful. And then as a follow-up second question here. I think on the last call, it was noted that you have strong spring/summer order for HOKA. I think today, I think you talked about meaningful growth. Curious to know what your order books look like. If you can maybe unpack that a little bit more in terms of dimension, like in terms of how do we think about the growth rates there because you mentioned meaningful growth. And did I hear this correctly, Steve, that you anticipate UGG to grow next year for fiscal '27? Was that in the prepared remarks? Steve Fasching: Sure. I'll take a shot at the first one, and then Stefano, you can jump in. Yes, we're anticipating growth for UGG in FY '27. I think through the quarter that we just delivered is a demonstration of how well the UGG brand resonates with consumers across the globe, including the U.S. So even as we continue to get bigger, the demand continues to grow for this brand. And so yes, we see UGG continuing to grow in FY '27. Stefano Caroti: Yes. And to the order book, we're not going to provide today fiscal '27 guidance, but I'm pleased with how the order books are coming in for both brands, especially for HOKA, given the fact that HOKA books a bit early fall than UGG does. Typically, wholesalers wait for the holiday season to end given how big that season is for UGG to place orders in early spring. And -- but we have visibility through the first 3 quarters of next year, and we're very encouraged by how the order book is developing globally. Operator: Your next question comes from the line of Paul Lejuez of Citi. Paul Lejuez: Curious within the HOKA wholesale business, if you can talk about sell-through by channel, specialty running, sporting goods, athletic specialty, what you saw this quarter? And I'm curious if you've seen any change quarter-to-date. Stefano Caroti: No major changes. Throughout the fall season, sell-through continued to outpace sell-in, which is a good indicator of brand health in the marketplace. All our major introductions for the season and the color updates on our 2 biggest franchise continue to perform well. In the athletic specialty space, our performance product has actually outperformed our lifestyle product. But in one of the 2 leading athletic specialty retailers for the month of December, we're the #2 brand in the doors we're in. So the brand is performing well really across channels. Paul Lejuez: Can you talk about the sell-through at the sporting goods channel as well? Stefano Caroti: Very similar -- my comment was for the -- for all channels. So generally speaking, yes, we continue to perform well across all channels, across every market. Paul Lejuez: Got it. And then just one follow-up. I think last quarter, you had some cautionary comments about the U.S. consumer. Just curious about your outlook for the consumer, just given that we've just got through the holiday season, how that might influence or inform how you're thinking about growth for each brand in the U.S. next year. Stefano Caroti: Yes, that's fair. We've been cautious about the economy and the consumer, but never about our brands. So the brands did show up, and this increases our optimism going into next year. Steve Fasching: Yes. I think, Paul, just on that, I think as Stefano said, our comments in prior quarters more has been just watching especially the U.S. consumer as we've seen very strong growth internationally. We knew our brands are well positioned. And I think we even said that on the call last quarter, which was, hey, if the consumer shows up, we expect our brands to do well. And that's exactly what happened. So even in the current environment, I think we see consumers choosing and buying the brands that they want. And again, with our performance, this is just an indication of the resonance that our brand has with consumers. And so that really gives us confidence going into next year. Operator: Your next question comes from the line of Sam Poser of Williams Trading. Samuel Poser: Aaron, I'm sorry, we can't go through our normal stuff. We already got all the info. Can you hear me? Steve Fasching: Yes, we can hear you. Samuel Poser: Okay. All right. A couple of questions. Can you give us some idea of how the domestic DTC business was for HOKA and for UGG? Stefano Caroti: Both UGG and HOKA performed well indeed. Steve Fasching: And I think continuing -- yes, continuing to grow positively inflecting, right, which is kind of what we said on the call. So again, as we said at the beginning of last year, we expected sequential improvement. We've delivered sequential improvement, and we've positively inflected in the U.S. Samuel Poser: So is that -- I mean, you're up 19% with your DTC. Does that mean U.S. was up like 8% and you were -- or I mean, can you give us a little warmer? And then was the UGG DTC business up in the U.S.? Steve Fasching: Yes. So both were up. Stefano Caroti: Brands were up, yes. Samuel Poser: Okay. And then you talked about lifestyle. And then, Stefano, but you mentioned like with athletic specialty, how they were doing better with performance products. How do you define lifestyle? I mean, because a lot of product over the years has -- so the product has run over the years has just always hit the it's a gray area, what's lifestyle and what's performance sometimes based on how consumers respond. So how do you define lifestyle? Stefano Caroti: We define lifestyle as product created by our category, right? But to your point, we're treating performance products also in a lifestyle manner that have been adopted by our Flex specialty distribution, and those have performed very well. So... Steve Fasching: Yes. And I think, Sam, just on that a little bit, right? I think to your point on kind of the gray area nature is we build performance product. But clearly, we have people wearing it once they experience kind of the comfort of HOKA for lifestyle applications. So we have performance shoes that are being worn in lifestyle applications. When we talk about the further lifestyle ability, it's more around the improvement on certain styles or designs where we can further amplify our ability to get into a lifestyle category. Clearly, people are wearing -- individuals, consumers are wearing HOKA product for lifestyle. That is giving us more permission to move more aggressively into a lifestyle-defined category. Samuel Poser: And one last thing. Back to the breakout, the regional breakout. Based on the information you gave us about DTC, that implies that 1 of the 2 brands, HOKA or UGG was down, the wholesale business was down in the quarter. Could we assume that, that was HOKA just because of the amount of Bondi that you shipped? Steve Fasching: No. Yes. So just to clarify on that, no, both UGG and HOKA were up. If you'll see on the press release, part of what's driving the decline is the phaseout of the Koolaburra brand. And so that's where you're seeing decline. So if you refer back to the press release, you'll see where we've broken out kind of the 3 categories, the declines there are driven by the phaseout of Koolaburra. UGG and HOKA were all positive. Samuel Poser: In both geographies? Stefano Caroti: Yes. Operator: Your next question comes from the line of Rick Patel of Raymond James. Rakesh Patel: I also have a question on HOKA U.S. DTC. So you've touched on the numbers, but can you help us understand what drove the positive inflection in Q3 relative to the first half? Because you previously alluded to consumers preferring to shop in person for new products and this weighed on D2C in the first half. So just curious what's changed in the go-to-market strategy to drive the positive outcome in Q3 as we evaluate the durability of this DTC growth. Stefano Caroti: One of the main reasons, Rick, has been the HOKA membership program that has helped us improve revenue per customer, units per transaction, multi-category purchases and relative to the average customer. That was one of the main reasons for our success. and the fact that there was less noise in the marketplace of outgoing styles. If you recall last year with the Bondi transition, and there was a lot of product in the marketplace. This year, the marketplace is a lot cleaner, and we benefited from it. Steve Fasching: Yes. And I think, Rick, to the point you made where we were saying people were finding the updates, right? People were more familiar with the updates. So as we moved into Q3, and this was part of our comment on the sequential improvements, as people became more familiar with the product having been in the market, they were responding, right, to the updates. That's to my earlier one of the questions where I talked about what's driven confidence for us is the consumer engagement with our updates. And so yes, it's Clifton, Bondis, Arahis, it's other styles, too. But that it speaks to consumers coming back to us directly through improvements through the membership program and engaging with us to buy that product. So there are a number of things there that are embedded. It's product improvement... Stefano Caroti: Exclusives, early drops, and that has definitely helped our DTC business. Rakesh Patel: Great. And then can you also help us think about the opportunity for HOKA pricing? I think the increase you took last year was a bit lower than what competitors have done. So do you see room to take pricing higher? And if so, is that a near-term event? Stefano Caroti: Selectively and strategically, as we've done, we have some price increases hitting the spring and some more in the fall. We typically, when we upgrade the product, we price it up. that has been our approach and has served us well so far. Steve Fasching: Yes. And I think the quarter demonstrates that we have more pricing power, and that's something that we can always look at. Operator: Your last question comes from the line of Dana Telsey of Telsey Advisory Group. Dana Telsey: As you think about the DTC channel, any difference by brand of e-commerce and stores? And what are your plans for opening stores this year? And then just on the wholesale channel, any more color on any specific retailers that's been working? And did you have any exposure to SAC? Stefano Caroti: On the latter, no, we have little or no exposure to SAC. Both channels, retail and e-commerce performed well. And your third question was sort of related to DTC -- on wholesale. We're very happy with really the performance of the brand really across all retailers. Journeys had a good run with the brand. Foot Locker is performing well with the brand. ESG is performing well with the brand. Run specialty continues to perform well with the brand, and we are together with Brooks, #1, 2 in the run specialty channel. So generally, the brand has performed in a balanced way across the wholesale portfolio. In the U.S. Operator: There are no further questions at this time. With that, ladies and gentlemen, concludes today's call. We thank you for participating. You may now disconnect your lines.
Operator: Good morning. This is Laura, welcoming you to ING's 4Q 2025 Conference Call. Before handing this conference call over to Steven van Rijswijk, Chief Executive Officer of ING Group, let me first say that today's comments may include forward-looking statements such as statements regarding future developments in our business, expectations for our future financial performance and any statement not involving a historical fact. Actual results may differ materially from those projected in any forward-looking statement. A discussion of factors that may cause actual results to differ from those in any forward-looking statement is contained in our public filings, including our most recent annual report on Form 20-F filed with the United States Securities and Exchange Commission and our earnings press release as posted on our website today. Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation of an offer to buy any securities. Good morning, Steven. Over to you. Steven van Rijswijk: Thank you very much, operator. Good morning, and welcome to our results call for the fourth quarter of 2025. I hope you're all well, and thank you for joining us today. As usual, I'm joined by our CRO, Ljiljana Cortan; and our CFO, Tanate Phutrakul. And today, I'm proud to walk you through another year of outstanding commercial growth and financial performance driven by [audio gap] and I will also share our updated and upgraded outlook for 2027, which further underlines the strength and resilience of our business. After that, Tanate will give you more insight into our income and cost expectations for 2026 and present the quarterly financials. And as always, we will be happy to take your questions at the end of the call. And with that, let's now move to Slide 2. This slide highlights the continued commercial momentum we saw in the fourth quarter with outstanding growth across all key markets. We added more than 350,000 mobile primary customers during the quarter, bringing total growth for the year to over 1 million, fully in line with the ambitious target we set at our Capital Markets Day. Loan growth was also robust with absolute growth doubling versus the prior year and resulting in an 8.3% increase since the start of the year. In the fourth quarter alone, Retail Banking delivered EUR 10.1 billion in net core lending growth, driven mainly by residential mortgages. Wholesale Banking added EUR 10.3 billion, supported by strong demand in lending and working capital solutions as our clients' financing needs increased. We also saw healthy deposit development. Core deposits rose by EUR 38.1 billion for the full year or 5.5%. In the fourth quarter, Retail Banking contributed EUR 11.3 billion, benefiting from targeted campaigns and normal seasonal inflows and Wholesale Banking recorded a small net outflow, mainly due to lower short-term balances in our cash pooling activities. Fee income also continued the positive trends. For the full year, fees grew by 15%, supported by continued customer growth and increased cross-sell, essentially doing more business with more customers. And the fourth quarter also included a one-off benefit of EUR 66 million. All of this translated into very solid financial results. Our return on equity for 2025 was 13.2%, well above the guidance provided at the start of the year. And finally, we remain fully committed to supporting our clients in their sustainability transitions. Our total sustainability volume mobilized reached EUR 166 billion for the year, representing a 28% increase versus 2024. Now let's move to the next slide to look at how the commercial momentum drove our financial performance. On Slide 3, you can see that commercial NII remained very strong at EUR 15.3 billion. This result was supported by the significant increase in customer balances, both on the lending side and in liabilities. The volume growth largely offset the expected margin normalization. Fee income was also strong, increasing 15% compared to 2024, and they now account for 20% of total income. And this reflects structural drivers such as customer growth and increased cross-sell. Investment products performed particularly well with strong increases across all metrics, the number of customers, assets under management and the number of trades. And taken together, the strong NII and fee performance fueled total income growth, which reached a record level for the third consecutive year. And with that, let's now move to Slide 4. On this slide, we highlight actions taken to strengthen operational leverage, reinforcing our disciplined approach to cost management. We continue to invest in growth and diversification while increasingly leveraging new technologies. We were able to offset these investments by enhanced operational efficiency as the model becomes more scalable. In 2025, for example, we reduced customer friction by increasing the share of customer journeys handled without any manual intervention. We also introduced our chatbot in several retail markets, providing customers with faster and more accurate answers in their questions and resulting in annual savings as a large part of the chats are resolved without any human support. These improvements have contributed to a customer experience that is highly appreciated as reflected in our strong NPS positions across all markets. In retail banking, we maintained our #1 position in 5 out of 10 markets. And in Wholesale Banking, we achieved an NPS of 77, demonstrating both the quality of our client service and the value of our continued investments in expertise and sector knowledge. And our investments in scalability are also translating into higher efficiency, and this is visible in our FTE over customer balances ratio, which has improved by more than 7% since 2023. Then we move to Slide 5, where we show how our robust commercial growth, strong development of total income and proactive cost measures have resulted in strong capital generation. Over the past year, we delivered more than EUR 6.3 billion in net profit, contributing almost 2 percentage points to our CET1 ratio. And of this EUR 6.3 billion, 50% is distributed as a regular cash dividend, offering shareholders an attractive and predictable cash yield. Around 50% of the capital we generated has been used to fund profitable growth across our markets, and this percentage would even have been higher without the steps we took to optimize capital efficiency in Wholesale Banking, such as the 2 SRT transactions completed in November. Finally, we announced additional distributions to a total amount of EUR 3.6 billion, which also helped bring our CET1 ratio closer to our target level. And on the next slide, I will show how these distributions have resulted in a higher, highly attractive shareholder return. And then we move to Slide 6, where we summarize the total distributions to shareholders, and I will build on what I just discussed. In line with the distribution policy, we have consistently paid cash dividends and have been executing share buybacks for several years. Together, these actions have consistently delivered a highly attractive yield, including in 2025, a year in which our share price increased by almost 60%. The share buyback program we announced in November is currently underway and is expected to be completed in April 2026. And in addition, we paid out EUR 500 million in cash earlier in January, which helps us to meet the cash hurdle for this year, now finalized at EUR 3.3 billion. Looking ahead, we remain fully committed to delivering strong shareholder returns, and we will provide an update on our capital planning with our first quarter 2026 results. And now starting on Slide 8, I will guide you through how our strategy continues to accelerate growth, increase impact and deliver value. Now on this slide, I'm talking about Slide 8, we highlight our key strategic priorities supporting our Growing the Difference strategy, building on our successes over the past years. Firstly, we will continue to grow and diversify our income by adding more customers and doing more business with them. And a good example is the further expansion of our investment product offering. We have also introduced a subscription model for retail clients in Romania, and we will roll out this concept in other markets as well, which will help grow income from daily banking services. Our affluent customer base continues to grow rapidly, and we see further growth potential, and we're targeting this with dedicated propositions designed specifically for their needs. We're also stepping up our engagement with younger generations. For example, we introduced new products for Gen Z, including an investment fund focused on improving financial awareness within this group. And in business banking, we successfully launched our propositions in Italy and Germany, where we are seeing strong and ongoing customer growth. And in Wholesale Banking, we are expanding our range of fee-generating capital-light products to support sustainable and diversified revenue growth. Now secondly, we will further improve our operational leverage by scaling processes, people and technology while maintaining strict cost discipline to further utilization and scale of Gen AI will enhance efficiency and will help us to reach our FTE over customer balances target ahead of schedule. Finally, we remain firmly focused on generating strong capital going forward, and our allocation priorities are well defined in that regard. We will maintain an attractive shareholder return supported by a 50% payout policy. Secondly, we will continue to invest in value-accretive growth, diversify income streams as fund the loan book and a capital-efficient way and consider M&A opportunities that meet our criteria. And thirdly, we will return any capital structurally above our CET1 target to shareholders. We will also further increase the capital we allocate to retail banking and optimize the capital usage in the Wholesale Bank and note that we have already increased the capital allocated to retail banking to 54%. And with our strategy, we are confident in our ability to become the best European bank. And with this confidence, we have raised our expectations for the coming years. And then we move to Slide 9. And then I'll present our outlook for '26 and '27. And for 2026, we expect total income of around EUR 24 billion, and this outlook is supported by continued volume growth and an anticipated 5% to 10% increase in fee income. Total operating expenses, excluding internals -- sorry, incidentals are projected to be in the range of EUR 12.6 billion to EUR 12.8 billion. We will continue to manage our CET1 capital ratio at a target of around 13%. And in addition, we will transition from a return on equity metric to return on tangible equity. And for the full year 2026, we expect an ROE of 14% and ROTE to be higher than 14% and note that the delta between the 2 metrics was around 40 basis points, 40 basis points in 2025. Then looking ahead at 2027, we are introducing a new outlook for total income. We now expect it to exceed EUR 25 billion, which is at the upper end of our previous target range. This income number includes a higher fee income outlook, which we now expect to exceed EUR 5 billion in 2027. And we've moved away from the cost/income ratio and instead provide a clear hard outlook for operating expenses, again, excluding incidentals of around EUR 13 billion, 13. And this reinforces our continued focus on cost discipline and operational efficiency. And taken together, this outlook translates into a return on equity of 15% and a return on tangible equity of more than 15%. And now I'll hand over to Tanate, who will give more insight on our outlook for 2026 and who will walk you through the fourth quarter financial results in more detail, starting on Slide 10. Tanate Phutrakul: Thank you, Steven. As this is the last time I'll talk you through these numbers as the CFO of ING, I'm very pleased that I can close on such a strong result and provide you with an upgraded outlook. On Slide 10, let's start with commercial NII, which will benefit from increasing support from the replication portfolio. We also assume continued customer balance growth of around 5% per year, above the guidance that we gave at Capital Markets Day and reflecting the commercial momentum in our franchises. The liability margin is expected to be at the lower end of the 100 and 110 basis point range, while the lending margin is assumed to remain stable compared to the fourth quarter. Fees are expected to grow by a further 5% to 10%, building on the strong performance we achieved in 2025. All other income is expected to be around TRY 2.8 billion, excluding incidental items. This is driven by continued strong performance in financial markets, while in treasury, we expect less income from foreign currency hedging given the current lower interest rate differential between the euro and other currencies such as the U.S. dollar and the Turkish lira. Based on the current rate environment, taking 2024 last quarter as a run rate would be a fair starting point. Taken together, total income is expected to reach around EUR 24 billion in '26. And then on the next page, I'll walk you through the drivers behind the expected cost development. We expect total annual cost to be in the range of EUR 11.6 billion to 11.8 billion, excluding incidental and regulatory costs. The main driver of the increase remains inflationary pressure, which will again predominantly impact staff expenses. We will also continue to make selective investment to support business growth and further improve efficiency, as Steven highlighted earlier. These investment costs will be more than offset by operational efficiencies driven by increased scalability of our processes, people and technology, further utilization and scaling of Gen AI and continued optimization of our footprint. Given the strong income outlook, this modest cost growth results in a positive jaw for the year. Now let's move to the quarterly financials starting on Slide 13. On Slide 13, you can see that our commercial NII increased driven by very strong volume growth and a slightly higher lending margin, while the liability margin remained stable. Fee income continues its upward trend, driven by customer growth and strong performance in investment products and insurance. This is more than offset by lower fee income in wholesale lending. As a reminder, fee income in the fourth quarter included a EUR 66 million one-off in Germany. All other income was supported by continued strong results in financial markets, although seasonally lower compared to the previous quarters. As a whole, total income came in 7% higher than the same period last year. Now moving to Slide 14, where we will show the development of customer balances. As you can see, we delivered another quarter of strong loan growth across both retail and wholesale banking. Net core lending increased by EUR 20 billion. Retail banking contributed EUR 10.1 billion, driven by continued mortgage growth. increases across both business lending and consumer lending portfolios. Wholesale Banking also posted strong growth of AED 10.3 billion, reflecting strong performance in lending and somewhat elevated client demand in working capital solutions. On the liability side, core deposit increased by 9.5 billion. Retail banking drove the bulk of the growth, particularly in the Netherlands, Spain and Poland, which benefited from targeted campaigns and seasonal inflows. Wholesale Banking saw a small net outflow as increased deposit volume in PCM were more than offset by lower short-term balances in our cash pooling business. The other category of deposits were impacted by seasonal reductions in treasury. On Slide 15, you can see that the commercial NII grew by more than EUR 100 million quarter-on-quarter and was almost 5% higher than last year. Lending NII was up EUR 75 million in the fourth quarter, driven by volume growth and a 1 basis point improvement in lending margin to 126 basis points. The liability NII also increased by EUR 30 million, supported by sustained volume growth in retail banking and higher net interest income from our cash pooling business and PCM in Wholesale Banking. Turning to Slide 16. Fee growth remained strong, increasing 22% year-on-year. Excluding the EUR 66 million one-off retail banking fees in Germany, fees grew by 17% compared to last year. This was driven by structural factors such as continued customer growth, significantly higher insurance fees and increase in daily banking fees. Investment products also performed really well across several metrics. For example, 9% growth in customers, 16% growth in assets under management, of which roughly half came from net inflows and 22% more trades. Although wholesale banking fees decreased sequentially, wholesale still delivered a strong quarter, supported by solid results in Financial Markets and Corporate Finance. Slide 17 shows the development of all other income. Income in Financial Market is mostly driven by client activity. We continue to support our clients through volatile market conditions, mostly with foreign exchange and interest rate management. Treasury was impacted by lower results from foreign currency hedging. Next, Slide 18. Expenses, excluding regulatory support growth. The decrease is mainly driven by structural savings from previous restructuring and VAT refunds recognized in the fourth quarter. These effects more than compensated for wage inflation and ongoing investments in customer acquisition and product development, including expanding our offering for new customer segment. Regulatory costs include the annual Dutch bank tax, which is always fully recognized in fourth quarter and then allocated across segments. Incidental item related mostly to restructuring provision for planned FTE reductions in corporate staff and retail banking. Once these are fully implemented, these measures are expected to generate approximately EUR 100 million in annualized cost savings. When excluding these incidental items, we ended the year with expense below the outlook range we provided earlier. Now let's move on to risk costs on the next slide. Total risk costs were EUR 365 million in the quarter, equivalent to 20 basis points of average customer lending. This is in line with our through-the-cycle average. Net addition to Stage 3 provision amounts to EUR 389 million, mainly driven by individual Stage 3 provisioning for a number of new and existing funds in the wholesale bank. This was partly offset by releases of existing provision due to repayments, secondary market sales and structural improvements. As a result, the Stage 3 ratio increased slightly. For Stage 1 and Stage 2, we recorded a net release of $24 million, reflecting a partial release of management overlays and updated macroeconomic forecast. Overall, we remain confident in the strength and quality of our loan book. On Slide 20, we show the development of our core Tier 1 ratio, which declined compared to last quarter. Core Tier 1 decreased, reflecting the 1.6 billion distribution that was partly offset by the inclusion of our quarterly net profit. Risk-weighted assets increased by USD 4.5 billion this quarter. Credit risk-weighted assets rose by 1.5 billion, excluding FX impact, driven by volume growth. This was offset by the risk-weighted asset relief from 2 SRT transaction executed in November. Operational risk-weighted asset increased by EUR 2.2 billion, while market risk-weighted asset increased by EUR 0.5 billion. We'll pay a final cash dividend of EUR 0.736 per share on the 24th of April 2026, subject to our Annual General Meeting's approval. Now I hand back to Steven to wrap up today's presentation. Steven van Rijswijk: Yes. Thank you, Tanate. And for the ones who have been here longer with us, this is Tanate's last analyst presentation. We have been knowing each other today for more than 25 years, and we've been in the Board together already for 7 years and more. So thank you very much for working with us all these years. Tanate will still be with us until the AGM of 2025, which will take place in April. But I just want to take the opportunity also here to thank Tanate, also for the friendship, also for the leadership and the sharp mind that you have here with us. And I'll come sure visit you when you're back in Thailand at some point. So prepare for that. Now we move to Q&A, but let me recap the key takeaways from today's presentation. We have delivered another strong quarter end year, successfully executing our strategy, accelerating growth, increasing impact and delivering value. We achieved a record total income for the third consecutive year. We maintained cost discipline and operational efficiency gains, and they more than offset our investments in business growth. And we delivered another strong year of capital generation and returns, enabling continued attractive shareholder distributions. And with our strategy, we remain confident in our ability to stay on track to become the best European bank. And with this confidence, we have upgraded our expectations for the coming years with a very strong outlook for 2026 and a more ambitious but realistic outlook for 2027. And with that, I would like to open the floor for Q&A. Operator, back to you. Operator: [Operator Instructions] We will now take our first question from Benoit Petrarque of Kepler Cheuvreu. All the best. I guess you will not miss the Dutch winter, but in Thailand. Benoit Petrarque: So it's an interesting time to live actually. It's the first quarter I actually see the volume growth benefiting fully the commercial NII as the negative effect of lower interest rates is getting smaller. I was wondering on the guidance of EUR 25 billion total income, what type of assumption do you take on growth? I think you've put somewhere in the slide 5% volume growth. I was wondering if that's the right number, given you are growing actually more than 5%. And also second question is on liability margin assumptions in your more than EUR 25 billion total income. Wondering where you stand on '27 on liability margin. And then maybe on Wholesale Banking, where are you on the risk-weighted assets growth plan for the wholesale? I think you were planning some optimization there. But I do see wholesale growing quite sharply again in the fourth quarter. So where do you see growth in wholesale going forward? Steven van Rijswijk: All right. I'll take -- thanks, Benoit. And yes, Tanate, for sure, will not miss the Dutch winter. Neither would I, by the way, if I would go to Thailand. But in any case, I'm here. If we look -- I will talk about the question about RWA and Wholesale Banking and also -- and then Tanate will talk about the NII and the growth for '26 and '27. So if you look at Wholesale Banking there we have been seeing good lending growth in the second half of this year, and the pipelines are also filled well now. So we want to continue to grow there as well. At the same time, to your point, we did 2 SRTs in November that had an impact of around 12 basis points on our CET1. For '26 and '27, by the way, we want to continue to do these SRTs. So we have just started with our more improvements that we have been making. So the first ones we did at the end of last year. This year, we continue to do SRTs, and we expect that to have an impact -- a positive impact on CET1 of 15 to 20 basis points, so a bit higher than we realized over 2025. Tanate? Tanate Phutrakul: Yes. Thanks, Benoit. I think in terms of the major assumptions we use in terms of giving out outlook, we have assumed 5% balance growth, and you say that, that is potentially conservative given what you see in Q4. I think what Q4 shows us is it gives us more confidence in achieving our target. That would be the first answer. The second one is really what curve did we use in terms of our projection. We use the December curve to do that projection, which is quite constructive in our view. And then the third margins. I think the 3 impacts that you see is really the continued reduction in the short-term replication negative impact on our results, the continued positive accretion because of long-term replication and the effect of deposit rate cuts that happened in 2025 that affects '26 and will continue to be accretive going into '27 as well. Our forecast for liability margin is on the lower end of the 100 to 110 basis points. Benoit Petrarque: This is also for '27? Tanate Phutrakul: I think we don't give that outlook there. But I think if you see the replication on Page 30 that we show, the momentum continues to accrete in '26 and '27. Operator: And we'll now take our next question from Benjamin Goy of Deutsche Bank. Benjamin Goy: My first question is on loans versus deposit growth. So another strong quarter of loan growth in particular, and I think it's the third quarter where your core lending growth has clearly outperformed core deposit growth. Is that something that you need to work on to be more balanced? Or are you happy to increase your loans faster as there are opportunities? And then secondly, on the costs, for the underlying cost guidance, but there has been historically a bit of incidentals every year. Should that now be smaller than in '25 going forward? Or what's best to assume for the incident that come on top of the cost guidance? Steven van Rijswijk: Yes. I think that on the loans versus deposit growth, I mean, if you look at 2025, the loan growth was about 8%. The deposit growth was about 6%, so EUR 57 billion against about EUR 38 billion. We've also seen years where that was the other way around. In the end, you want to balance the balance sheet. So long term, we want to approximately have same growth over a longer period with loans and with deposits. But 1 year can be a bit higher in loans and 1 year can be a bit higher in deposits. I think on both sides of the balance sheet, we see continued good growth with people continuing saving. Also, if you look at the deposit growth projections macroeconomically in the markets in which we are active, we continue to see that. And we do see significant loan growth in the different segments in which we're operating, most notably mortgages. But there, in the end, we want to balance the balance sheet, and we will always work on that. When we talk about the incidentals, yes, look, we will -- we continue to work on our cost discipline as we do. So on the one hand, we want to grow our customers, and we want to grow and diversify the activities in which we are active. And you've seen us doing that. We invest in more specific segmentation in existing retail segments. We have been rolling out business banking, for example, in Germany and Italy. We have been investing in diversifying our capital-light income in wholesale banking and transaction services and in financial markets. At the same time, we have seen since 2023, our FTE over balances decreased with 7%, and we believe we can reach our target that we gave in the Capital Markets Day in '24 of a decrease of 10% earlier than we anticipated what we then said in 2027. So we'll work towards this year. So we will work on both levers. But we always do this in a buy-side thing. So what you've seen, for example, with restructuring costs in 2025, those restructuring costs should deliver us a benefit of EUR 100 million in 2026. And each time that we have a process or area where we can realize better servers, better process optimization, better digitization, better use of Gen AI, then we will announce it because I just want to make sure that front to back, once we announce it, we can execute and we can execute while continuing to grow, and that's how we have been operating for the past 5 years, and we will continue to do so. Operator: And we'll now move on to our next question from Giulia Miotto of Morgan Stanley. Giulia Miotto: Thank you for your patience answering our questions and all the best for the life after ING. But now I have 2 questions, please. So the cost outlook beyond '26, '26 looks quite a bit better. I think it's encouraging to see operating jaws being able to grow the costs much less than the revenues. Should we expect this trend to continue also in 2027? Consensus has got 3% year-on-year growth. I guess, I don't know what we are seeing could suggest something better than that. And then separately, Steven, I wanted to pick your brain on M&A. We have seen some headlines on Romania, but also Spain and Italy have been in focus in your comments, although we don't see much actions. So any comments on what you're thinking strategically on the M&A front? Steven van Rijswijk: All right. On M&A. So look, we show good growth. You see that both in existing activities and also in diversification on the various fronts, both in lending and in fees, by the way, on investment products and insurance. Still, and I've said this before, we've also started with filling in the blanks in countries where we don't have all activities, such as business banking and private banking and certain types of investments in asset management in certain countries. Still, if we can accelerate that growth by means of acquisitions, then we will look at it. You've seen us taking a financial stake in private banking of [indiscernible] last year. In the fourth quarter, we announced buying the majority and thereby in the end 100% of an asset manager in Poland, integrating that asset manager into ING, we bought that from Goldman Sachs, the 55%. And we continue to look. We don't comment on individual markets. Also in Romania, what I can say is that the business is successful. We have been increasing the numbers of customers that we serve. We have been growing, again, also lending deposits and fees. And we have a very strong return on equity there. We consider ourselves one of the most successful, if not most successful bank in that country. But also there, if we can have opportunities to increase scale or add segments that we do not have, we will look at that as in any other market. And then the caveat, it needs to fit. It needs to add to that local scale and diversification, and we want it also to be accretive for shareholders, and that's the construct in which we're working and which we are willing to consider M&A. Tanate, the jaws. Tanate Phutrakul: Yes. I think given the outlook, we have now turned the corner in terms of positive jaw for '26, and we're confident that we'll continue that positive jaw in 2027. If you look at the 3 drivers of our cost growth in '27, the first one is inflation impact, which we expect that the stickiness of inflation impact should moderate in '27 compared to '26. We will continue to invest in our franchise in client acquisition. In fact, if we can do more, we would do more in terms of accelerating our client acquisition. We have some big programs in terms of investment, financial market infrastructure, payment capabilities, investing in segments that we are not currently present, as Steven has mentioned. And if you have seen in our '26 guidance, we upgraded our ambition in terms of cost reduction from 2% to 3%. So that trend is expected to continue into 2027 as well. Giulia Miotto: So I take away that probably growth will be more modest than what is to be expected in '27? Tanate Phutrakul: You can do your analysis, Giulia. We've given our guidance. Steven van Rijswijk: Tanate Didn't even blink when he asked that question. Operator: And we'll now move on to our next question from Tarik El Mejjad of Bank of America. Tarik El Mejjad: Tanate, thanks for the very interesting interactions we had all these many years and good luck for what's to come. Just from my side, 2 quick questions, please. With a follow-up one on the liability margins more in 2027. I mean just trying to back solve a bit what market expects, assuming asset margin are quite stable or growing a bit the volumes, we can put your assumptions with even some extra buffers and replicate portfolio, we kind of understand now how it works and so on. It's just the -- in my view, is it fair really to think that the gap between -- I mean the downside potential risk is for the market expect consensus is too optimistic, perhaps, assumptions of rate cuts or no rate raise in the core saving deposits in '27? Because if you use the forward curve as of December, clearly, you would also take a view on what's your ability to navigate the core savings deposits in Netherlands and other markets. And the second question is on costs is more really to want to understand how you think about the investments because, I mean, you have some headroom now created on the revenue side, higher growth and very comfortable to reach your targets. And then on the cost, the pressure from salary negotiation should come down with inflation. So that extra headroom, I want to understand how you think about the next 2 years in terms of investments in AI and tech. I mean, yes, you have the machine learning and with the compliance aspect, the Gen AI that you've already started to roll out with some early benefits we see. But what about the next step in AI and tech? And how much of more investments needed to deliver your ambition on that front? Steven van Rijswijk: Let me take the question, Tarik, on AI and then Tanate will talk about the margins. Look, I mean, we do clearly see benefits of AI coming through. I mean we have been working with AI already for a decade and then with Gen AI, we work with that in the last couple of years. But there, you see both on, let's say, the -- on the client side and on the operational leverage side benefits coming through. And let me give you a few examples. If you look at [ PI ] onboarding, the STP increased last year from 66% to 79%. So that means that close to 90% of our private individual clients were onboarding through STP. We do end-to-end [indiscernible] delivery. We increased that approvals with 11% last year. So the time to [indiscernible], therefore, improved. We do about 60 million in customer lending without manual intervention. So you see a number of customer benefits coming through. When we talk specifically about GenAI and also in chatbot, we have better scores, CSAT scores, which are sort of satisfaction scores for our customers. So we do see benefits coming through for GenAI, both on the revenue side, doing more with our customers and having more satisfied customers and on the operational leverage. We do that in 5 areas at current. So we took the 5 big wins that we see starting with contact centers, in IT, coding, in lending, in personalized marketing and in KYC. So those are the big areas. We do these benefits, we see them coming through. Every quarter, you see announcement, you've seen announcements whereby we say, okay, what impact does it have on our staff, what impact does it have on our operations? And you see it also coming through in FTE over balances. And we're actually quite optimistic on the impact it will have on our operational leverage going forward for '26 and also in 2027. And we will make announcements as we move along and when we can say this is now the next step that we will take, including, of course, good reskilling of our staff and making sure we can grow and continue to grow our franchise sustainably. Tanate Phutrakul: And Tarik, to your second question, I think we also see based on the December curve that the accretion and replication in '26 going to '27 and '28 are quite strong. The real debate is what -- how do you balance that additional revenue in terms of margins and in terms of mix, right? And what we see is that we are looking at the dynamics of maintaining growth in customer growth in volumes and making sure that we take into account the level of competition we see in the market. And if you look pre negative rates environment, ING operated on a liability margin of around 90 to 100 basis points. We have updated our guidance to 100 to 110. And we think we're comfortable with that rate given the balanced dynamics of growth, competition and to be remaining competitive while at the same time, being accretive to our shareholders. Tarik El Mejjad: I mean I don't want to put words in your mouth, but basically, to deliver on the consensus or market numbers means that market has to be much more bullish on the volume growth and lending and probably be less positive on the margin side. But I'm just trying to reconcile a bit what your guidance outlook, which is very helpful versus where market is positioned. Operator: And we'll now take our next question from Delphine Lee of JPMorgan. Delphine Lee: Also I want to take the opportunity to send my best wishes to Nate, thank you for everything. So my 2 questions. First of all, sorry, I just want to follow up on Tarik and other questions around NII. But -- so if we look at your guidance for 2026, which implies about EUR 600 million increases for liability margins. But if you look at the repricing actions that you've done in '25, I mean, the impact on '26 is already EUR 700 million. And then on top of that, you have some small benefits from -- well, your replicating income as well on '26 more, but like still. So I'm just kind of wondering like what is your current assumption and in terms of the deposit cost and deposit pass-through from 42% in Q4? And if you could just sort of elaborate a little bit on what are you seeing on competition on deposits at the moment? What do you expect for '26 and onwards? My second question is on cost. So you've done a good job of trying to kind of contain a little bit of inflation with the savings. I'm just trying -- just trying to understand a little bit if 2%, 3% is really kind of like the run rate that we should expect like even beyond '27. Is that something that you're trying to achieve in the long run? Yes, just trying to understand a little bit the moving parts of that cost number, you've provided this for '26, but even beyond that, like what are the savings? You've mentioned a couple of benefits from FTE reductions, but just kind of trying to quantify a little bit what else can we expect in the long run? Steven van Rijswijk: All right. Thank you very much. I think that on the costs, you see the effects of our digitalization and scalability now really seeing take shape. And we saw that now also in the fourth quarter, but also I'm pointing again at FTE over balances. You also now see that when we look at 2026 about the operational leverage and efficiencies that we have compared to the increase in investments. So the operational efficiencies are higher, and that's where we want to be. We want to make sure that when we make additional investments, we can have operational leverage that is higher than that. So that's maybe a little bit of direction to give you or guidance to give you in terms of where we want to end up. And indeed, therefore, you will see in '26 and '27 improved cost to income to what we have been showing and positive jaws territory that we have now been gotten into and I want to stay in that territory. And at the same time, we continue to want to grow our investments where we can grow our clients for long-term clients and shareholder benefit. But that's a bit of guidance towards the cost. Then Tanate, on the deposit cost of margins? Tanate Phutrakul: I think we gave a bit of detail on Page 20 of our presentation showing the movements in terms of commercial NII. I think the lending NII is driven by basically stable margin and approximately 5% loan growth. And similarly, for liability NII, we also assume 5% liability growth. Of that EUR 600 million we show, part of it is due to volume, about half. The other half is through the improvement in margins. As you say, the replication is getting better, but there's some short-term impact that still need to feed through our numbers and the EUR 700 million is factored into that guidance. Operator: And we'll now take our next question from Namita Samtani of Barclays. Namita Samtani: The first question I have is on German retail. There's quite a lot of cost growth in 2025 there. I think it's around 11% year-on-year, and it's a lot higher than other regions. So I wondered what are you exactly spending on in Germany? And is this defensive spend given the new players entering the market? And then I think about your liability margin, which is, of course, at group level, but are you telling us that we're at peak earnings for Germany in retail given high expense spend and [indiscernible] spend to gather deposits? And my second question, based on your updated '27 targets today, the cost to income implied in '27 is maybe 51%, 52%. It's hardly a standout amongst European banks, even ABN is now going to below 55%. I just wondered, given the digital model ING has or aspires to have and the use of AI, what's holding the group back from delivering a better cost to income target? Steven van Rijswijk: Yes. Thank you very much. On the cost to income side, our main opportunity is to grow our revenues, our revenues over our client balances, our diversification in Wholesale Banking, our revenues over RWA and as a result, but that's then a consequence of it also that will have a positive impact on our cost to income. But what we need to do, that's why our strategy is called Grow the Difference is grow our revenues because that's where we can make the biggest difference in further improving our returns and then indirectly also our cost to income. And so the digital model has brought us a lot in terms of presence in markets, but that's why we're talking about doing new activities in these markets or doing more with customers in these markets because that is the next step in our evolution, what we're currently doing. Tanate? Tanate Phutrakul: Yes. The German cost/income ratio is a robust one despite the increase in investments that we make in Germany. One thing that you have to remember is that the client growth that we have, 1 million customer per year, a very significant portion comes from Germany, which is our main market. So that's why the investments in client acquisition, in creating new products, creating new segments is very strong in Germany. very, very much like the rest of ING seeing a turnaround in terms of the momentum in terms of revenue and cost in Germany. And we do expect that the positive jaw will return to Germany in 2026, while continuing to invest in our franchise, both in terms of the fundamental platforms as well as client acquisition. Operator: And we'll now take our next question from Cyril Toutounji of BNP Paribas. Cyril Toutounji: So I've got 2. One on lending margin. So we had an improvement this quarter, which is welcome and I think pretty good news. And you're saying it's due to mortgages. I'm just curious in which market has happened? And if you can give us more indication whether this can continue maybe a bit? And the second one would be on deposit campaigns. Can you update us on the ongoing campaigns right now? And I don't know if you can give this indication as well, but should we expect more or less campaigns versus the 2025 run rate? Steven van Rijswijk: Yes. Thank you, Cyril. I'll take the question on deposit campaigns and Tanate talks about the lending margin. So yes, about the deposit campaigns, look, we have these campaigns regularly. We had them also in the fourth quarter with Black Friday in some markets or in Germany, as they call it Black Friday. So we will continue these campaigns, and we typically see that there's a good response in getting either new money from existing clients or getting new clients in. And then typically, we see that we get money to stick to around 2/3 of the money that after campaigns will stick with ING and therefore, we can gain new primary customers and increase our deposit levels. So for us, that works well. And what we work on every time is we make them more bespoke to certain customer segments and we make them more data-driven, so we can target them more and more. So we are very happy with the approach we've taken. We are confident about what we are doing, and we will keep on having these campaigns and we make them more bespoke about a year. Tanate, about the margins? Tanate Phutrakul: Yes, So I think we are also pleased to see that we have stabilized our lending margin and that it's improved by 1 basis point. And to your specific questions on mortgage margin, it's been stable or increasing across the board. I think some of the markets where the new production margins are improving is in Belgium, increasing in Germany, increasing in Italy and Spain. So it's quite widespread in terms of margin improvement, but we do see a bit of pressure in terms of new production margin in the Netherlands. Operator: We'll now take our next question from Johan Ekblom of UBS. Johan Ekblom: Thank you for everything, Tanate, and best of luck. Just most questions have been answered. But at the Capital Markets Day, we spoke a lot about the business banking opportunities, and I guess, in particular, in Germany. How should we, from the outside, try and measure your success there? Because it's very difficult to track where you are in terms of the rollout and I guess also when you are expecting to see volumes start to come through in a more meaningful way. So any update on kind of how the business banking rollout in Germany is going would be much appreciated. Steven van Rijswijk: Yes. Thank you very much, Johan. Indeed, business banking is one of the levers that we pull to diversify. To give you a few data points, we -- the third largest growth we had in business banking customers in terms of number of customers this year was Germany. So that already shows you that we're starting to grow quite well in Germany. It starts from a very small base, obviously, because we started from virtually 0. So that's one. Two, we also get very good deposits in from our business banking customers in Germany, so also there. So increasingly, that will become more sizable. But compared to our business banking franchises in the Netherlands and Belgium, for example, of course, it is very minimal because we have EUR 114 billion business banking lending book. And in Germany, we're just starting. So that will take time. But it is almost like you saw with the insurance fees there you see in the fee income line, as an example, it was not even a separate fee line. And there you see step by step by step, it's almost like a snowball. We do more and more and more. And at some point, it will become a sizable business, and that's also what we see happening in business banking in Germany. Operator: And we'll take our next question from Shrey Srivastava of Citi. Shrey Srivastava: Thank you, Tanate, for answering all the questions over the previous quarters. I just want to look more top down because obviously, following on from previous questions, we've talked about the upside on the replicating income versus your guided liability margin still at 100 to 110 basis points. A, is your sort of 5% volume growth guidance predicated on further deposit campaigns to get you within this 100 to 110 basis points? Or is any sort of upside to volume growth from that incremental to the 5%? And secondly, what are sort of the hurdle rates you have in mind when thinking about going forward with a new deposit campaign? Because obviously, as you've heard sort of many of us to get from the assumptions we have when plugging your replicating income into the model to the liability margin of 110 basis points would require some sort of pretty significant deposit campaigns. So what are some of the things you think about when deciding to give up that short-term upside for sort of longer-term growth? Steven van Rijswijk: All right. Tanate, can you give the elements of our replication income or lease liability margin again? Tanate Phutrakul: Yes. I think the 5% deposit growth, I think it's a good base number, right? And I think you look in the context of 2025, where the growth is around 5%. So that trend line, we expect to continue despite competition, despite quantitative tightening. So I think it's a good number to assume 5% growth. Does campaign play a big role in that? It continues to be the case, right, that we have campaigns in many markets we operate in. We continue to use that as a tool, but we also get additional flows coming into the bank all the time. And what I look at really is the growth in our primary customer, the intensity of which we have a relationship with our customer is there. And I think looking at the replication, it's still the 3 moving parts, right? It's really the impact of the short-term replication still having a tail impact is continued accretion of long-term replication coming through and the actions that we would take in terms of rate increases or decreases over time. And I think we like to reiterate that we don't give guidance for '27 in terms of liability margin, but we expect it to operate in '26 at the lower end of the 100 to 110, and we're comfortable that we can achieve our target with that guidance. Operator: And we'll take our next question from [ Seamus Murphy ] of [indiscernible] Seamus Murphy: Sorry, I'm coming back again to a lot of the questions that have been asked in one sense just in terms of the guidance. So I suppose you've guided 16 to -- sorry, EUR 16.3 billion to EUR 16.5 billion for commercial NII in 2026. But in Q4, it was [ EUR 3.928 ] billion. So that suggests an exit rate of just over EUR 4 billion into Q1 2026. That's already in the bag. And if I annualize that, I'm kind of getting EUR 16.2 billion at the start of the year, just before anything else happens and the upper end of your guidance, therefore, only needs 2% growth to achieve the 16.5%. And obviously, we have -- so I suppose question one, is there anything wrong with the math as you start the year that you have kind of EUR 16.2 billion of NII heading into the -- sorry, EUR 16.2 billion into this year at the start? And the second question then is, obviously, we have growth, so there's only limited growth needed. But the second question then is, you mentioned earlier on the call that the long end of the replication portfolio is a positive further into '26 and '27. Two things have happened. Your current account balances have grown EUR 5 billion, I think, to [ EUR 175 billion ] now. And secondly is that, obviously, the curve has deepened. So it would be super useful if you could tell us how much the long end of the replication portfolio will contribute in '26 and '27. And the last question, I asked this also on the Q3 call because it's becoming more and more important for banks, I think, is that do you expect FTEs to fall as we look into '27 and '28 at the group level? Steven van Rijswijk: Thanks, Seamus, for your questions. Well, we do expect FTE over balances to fall. So this is about, of course, a continuous focus on growth and then on a marginal basis, doing that with less marginal cost. And that's why we use the metric FTE over balances, whereby we continuously accept -- sorry, see an improvement or expect an improvement based on our digitalization and AI and GenAI and better process management as we have been doing over the past years. And that trend we see continuing. At the same time, we want to grow because we need to diversify and grow our revenues over our balances and our RWA. But from an FTE over balancing perspective, we should see further improvements. Tanate, how does it work with that? Tanate Phutrakul: Yes, Seamus, we will see each other in London, so we can go into a bit more detail. But I think it's a dangerous game to take Q4 and then extrapolating it. But I think if I look at full year to full year, the impact is over EUR 1 billion, right? That's a 7% growth in net interest income, which I think is a strong number and strong guidance. And I also -- we don't give replicated income in such details of how much the long end would contribute, except that we have disclosed in our presentation that 55% of our replication is long dated. And I also noted the fact that the drive of our primary customer is driving increasing current account and that increasing current account means better margin. So we do recognize that. Operator: [Operator Instructions] And we'll now move on to our next question from Anke Reingen of RBC. Anke Reingen: But firstly, thank you very much, Tanate,and all the best. And then to questions. So firstly, can you just talk a bit about your expectation on lending volume growth in 2026? I guess the 5% applies here as well, but I suppose, Q3, Q4, you've seen very strong growth. So where do you see sort of like the mix falling into 2026? I mean I hear your margin comment, but maybe just more a bit in terms of the mix. And then you commented earlier on about the SRTs of 15 basis points benefit. Can you just clarify, is that per year? Or is that over the 2 years, '26 and '27... Steven van Rijswijk: Thank you very much, Anke, for your questions. If you look at the SRTs, the impact in '25 was 12 basis points and that impact remains there. So once we have taken, let's say, the first loss piece of our balance sheet, it will remain [indiscernible] of our balance sheet. But in '26, we're going to do an additional number of SRTs that should benefit an additional 15 to 20 basis points on our CET1. And we, of course, will then also continue for '27 and thereafter. But on those years, we haven't yet given guidance. When we talk about lending growth, we see good growth across the board, like you've seen in the third and the fourth quarter that both in and mortgages and in Business Banking and Wholesale Banking, we continue to see good growth. The pipelines are good. Clearly, especially with the underlying macro drivers, there is shortage of housing in many of the markets in which we operate, in this case in the Netherlands, that is the case in Belgium, that is in Germany. That is the case in Spain. We are -- we have a total mortgage book of EUR 370 billion. So we are a top 3 mortgage provider in the region in Europe. And in many of the markets in which we are active, we see there are good macroeconomic fundamentals to continue that growth, low unemployment levels, good salary increase over the past couple of years, shortage of housing, lower number of people in individual households, so an increase in the number of households and those fundamentals continue to be there. And that's why that is going to be a significant driver of the loan growth in 2026 and '27. Operator: And we'll now take our next question from Matthew Clark of Mediobanca. Jonathan Matthew Clark: So firstly, coming back to this EUR 25 billion target for 2027 revenues or greater than EUR 25 billion. I mean, are you trying to talk down consensus there, which is EUR 25.8 billion, I think? Or do you think that's still consistent with the greater than component of that target? So I just want to understand your thinking for framing that target that way against the context of a higher consensus? And then secondly, on wholesale lending, why is now the right time for you to be putting your foot down on wholesale lending? What's changed in terms of risk reward, et cetera? And I guess asking that in the context of an uptick in credit losses on wholesale this quarter. Steven van Rijswijk: Yes. Thank you very much. Well, let me put it this way for 2027. So we said that the revenues are larger than EUR 25 billion. So we are confident about our growth, and we're also confident about '27. So don't forget the larger then sign in EUR 25 billion for '27, but yes, that's where we currently are. And we're very comfortable with that level. When you talk about Wholesale Bank lending, well, look, we had slow quarters in the first half of 2025, and then it picked up very well in the second half of the year. In the end, what we want to realize in Wholesale Banking is higher revenues over RWA and a higher return over RWA. And in that regard, we have been investing and we are continuing to invest in Transaction Services and Financial Markets. That will help us to drive the diversification in Wholesale Banking and do more with our customers next to lending, but lending, of course, is also good. And secondly, we're attacking, let's say, our capital there. Our capital was about 50-50 in '24. Now we said for '27, we had a target of 55% in retail and then 45% in Wholesale Banking. It's already at 54% for retail and 46% for Wholesale Banking. So we're on a good path quicker than we initially anticipated. And that's why we continue also to work on the SRTs to make sure that also on the capital side in Wholesale Banking, we can do more with less capital to help with return going up. So it's not a particular focus on lending alone. In the end, we're focused on return. Operator: And we'll now take our next question from Farquhar Murray of Autonomous. Farquhar Murray: Obviously, congratulations, Tanate and best wishes for the future. Coming back to the day job though for now, 2 questions, if I may. Firstly, please, can you reconcile the indication of EUR 0.4 billion of hedging tailwinds into '26 of 4Q with kind of flat replicating income on a year-on-year basis on Slide 29. Is that simply a matter of how things came through in the quarters? And perhaps can you just flesh that out through '25 and into '26? And also, is there a quarterly pattern to that hedging impact and also maybe the short-term effects you mentioned earlier? And then secondly, if we look last year, lending outpaced deposits, if we look at the 8% versus the 5% I know you said the kind of planning assumption as a kind of balanced 5%, but what's your general sense about where customer demand is at present? Steven van Rijswijk: I think that -- so on the customer demand at present, I mean, we -- actually, we do see continued good mortgage growth, again, because we see the macroeconomic elements that we saw in there, we see them continuing. And therefore, if you look at the number of houses being sold last year in a number of our main markets in the Netherlands, Belgium and Germany, they all have increased. And also, we see increases in a number of these housing markets to continue in 2026 and '27. So again, we're very positive towards that end. I think in business banking, we have also been improving our processes, and therefore, we've made it easier for our customers to borrow with us. So I think there, it's also an improvement of capabilities that we have had and by the way, rolling out business banking step by step by step in Germany, Italy and potentially also in other markets that we're looking at. We've spoken about Spain before. And then in Wholesale Banking, it's always more lumpy, funny enough, whereby you do see geopolitical uncertainty on the one hand and the PMI index being relatively low, we've seen sort of a catch-up demand of Wholesale Banking lending in the third and fourth quarter. The pipeline is still good. Yes, probably that Wholesale Banking in that sense is always a bit more choppy in terms of growth than the other elements. But the main consistent element in the lending growth sits in the mortgage side. Then on the hedging tailwinds, there, I want to give the floor to Tanate. Tanate Phutrakul: Thank you very much, Farquhar. I think what we see is that if you look at our quarterly commercial NII, it reached a trough in Q2, improved from EUR 3.7 billion to EUR 3.8 billion and from EUR 3.8 billion to EUR 3.9 billion during the course. So you already see signs of that replication impact. I think what the EUR 400 million refers to is the fact that the short end pressure that we see is decreasing. We see the fact that in Q4, we also have the benefit of the rate cuts already materializing into the numbers and that 55% of the long end is already positive. So it's a combination of all these 3 factors that drives the EUR 400 million tailwind. Operator: And we'll now take our next question from Chris Hallam of Goldman Sachs International. Chris Hallam: I just have one question left. And obviously, good luck, Tanate. I'm sure you're going to miss all these questions on replicating income and liability margins when you're relaxing in Thailand. But just on this question on the corporate side, you talked about increasing levels of working capital lending and lower deposits. Are those 2 points linked, i.e., are corporate customers building up working capital and therefore, draining their cash balances in anticipation of higher activity later in the year? And if so, how long should that working capital cycle last for? And would we notice any impact on NII through this year as and when it reverses, either on the lending margin or on the liability margin? Steven van Rijswijk: Yes. Thanks, Chris. And yes, Tanate will miss those questions. But luckily, we have Ida Lerner, our new CFO, and she already told me yesterday, said she's really looking forward to all these questions. So next quarter, you can expect her to answer these. On the working capital side, yes, I mean, on the wholesale side, you saw that EUR 10.3 billion lending and working capital solutions growth. So part was indeed working capital solutions. That had to do with a couple of large deals, very large companies doing very large deals, and we were leading those deals. So that doesn't necessarily have a link with each other that those are, let's say, seasonal swings that sometimes you have and sometimes you don't have. Clearly, those working capital solutions deals because they are typically short term and self-liquidating or collateralized or they have a borrowing base behind it. They have lower margins. But we have many of these. And so that doesn't have a particular big impact on the lending margin. When we talk about the cash pooling business, that's the pooling both in our payments and cash management and the notional pooling business, typically, clients at the end of the year, they will consolidate their positions and net them off. And because they net them off, they net them off in our accounts, and therefore, you see a lower amount coming in there. So a seasonal pattern. Operator: There are no further questions in queue. I will now hand it back to Steven Van Rijswijk for closing remarks. Steven van Rijswijk: Yes. Thank you very much. I think we can -- we are very proud of our 2025 numbers and also very confident about '26 and '27, hence, the improved and heightened outlook. And I want to thank you for all your questions and observations today, and again, Tanate, for the fantastic collaboration, and you are a great friend and a great colleague. Thanks very much, everybody, and I hope you have a great Thursday. Operator: Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.